Insurance Coverage & Bad Faith Newsletter - Summer 2021

Allied Premier Insurance v. United Financial Casualty Company

(Certified Question to California Supreme Court Regarding Whether Commercial Auto Policy Continues In Force, Absent Notice to DMV of Cancellation of Certificate of Insurance)

(July 2021) - In Allied Premier Ins. v. United Financial Cas. Co., 991 F.3d 1070 (9th Cir. March 22, 2021), the United States Ninth Circuit Court of Appeals certified the following question to the California Supreme Court arising out of an equitable contribution action filed by United Financial Casualty Company (“United”) against Allied Premier Insurance (“Allied”) seeking reimbursement of half of a settlement of an underlying wrongful death action filed against insured, Jose Porras (“Porras”), a commercial truck driver operating in California:

Under California’s Motor Carriers of Property Permit Act. Cal. Veh. Code §§ 34600 et seq., does a commercial automobile insurance policy continue in full force and effect until the insurer cancels the corresponding Certificate of Insurance on file with the California Department of Motor Vehicles, regardless of the insurance policy’s stated expiration date?

The dispute between United and Allied arose out of United’s failure to cancel a Certificate of Insurance on file with the California Department of Motor Vehicles (DMV) as proof of insurance for Porass’ commercial trucking operations. United insured Porrass from April 12, 2014 to April 12, 2015. The policy expired on April 12, 2015 and Porrass became insured under a commercial auto policy issued by Allied. United had filed a Certificate of Insurance in the DMV as required by California Motor Carriers of Property Permit Act, Cal. Vehicle Code sections 34600 et seq. (“MCPPA”), as did Allied. However, when United’s policy expired, United failed to file a notice of cancellation of the Certificate of Insurance as required by the MCPPA. Subsequently, Porrass was involved in a two-vehicle accident wherein the driver of the other vehicle was killed. Subsequently, a wrongful death action was filed against Porrass, and Allied settled the lawsuit for $1 million. Allied then filed an equitable contribution action against United arguing that its insurance remained in effect as it had failed to provide notice of cancellation of the Certificate of Insurance to the DMV as required by the MCPPA. Allied relied on the California Supreme Court’s decision in Transamerica v. Tab Transportation, 12 Cal. 4th 389 (1995) holding that a commercial auto policy remained in force indefinitely until the California Public Utilities Commission (“PUC”) received notice of cancellation of the policy. The MCPPA replaced the PUC in 1996. Significantly, the MCPPA changed the filing and cancellation requirements related to insurance by requiring the filing of a Certificate of Insurance with the DMV and requiring notice of cancellation of the Certificate of Insurance.

According to Allied, under the California Supreme Court’s holding in Transamerica, United’s policy remained in place indefinitely until it provided the DMV with notice of the cancellation of the Certificate of Insurance on file with the DMV. On the other hand, United contended that its failure to provide notice of cancellation of the Certificate of Insurance to the DMV did not obviate the expiration of its policy, such that coverage was not afforded indefinitely and its policy did not afford coverage for the vehicle accident settlement funded by Allied. According to United, the cancellation requirement only existed in instances where the commercial trucker failed to secure insurance, such that an insurer is required to afford coverage to injured third parties, much like as required by the federal statutory scheme for regulation of interstate commercial trucking. Here, because Porrass was insured under a subsequent policy, the United policy was not required to provide coverage for the vehicle accident.

In certifying the above question to the California Supreme Court, the Court of Appeals reasoned as follows:

Although United’s position gives effect to the modified statutory text and prevents Allied from reaping a windfall, it is unclear if the California Supreme Court would deem the federal rule applicable to California’s regulatory scheme. The federal regulatory scheme is similar, but not identical, to California’s. And there is no indication in the MCPPA’s text, or in any other source of California law, that the Certificate of Insurance has been understood as a surety obligation. Accordingly, we remain uncertain as to how the California Supreme Court would address this issue.

It appears to this court that there is no clearly controlling precedent of the California Supreme Court or the California Courts of Appeal establishing the meaning of the statutory provisions disputed here. The interpretation selected will have significant public policy implications for California, extending far beyond the two parties to this case. Indeed, resolution of this question of statutory interpretation may impact the scope and operation of California’s regulatory scheme protecting California drivers and other members of the public from the prospect of injury by uninsured or underinsured commercial drivers.

Accordingly, “considerations of comity and federalism,” Mendoza v. Fonseca McElroy Grinding Co., 913 F.3d 911, 912 (9th Cir. 2019) (internal citation omitted), prompt us to seek guidance from the California Supreme Court, which remains the primary “expositor[]” of California law, including the MCPPA, England v. La. State Bd. of Med. Exam’rs, 375 U.S. 411, 415. 84 S. Ct. 461, 11 L. Ed. 2d 440 (1964). Cf. Pino v. United States, 507 F.3d 1233, 1236 (10th Cir 2007) (“In making the assessment whether to certify, we . . . seek to give meaning and respect to the federal character of our judicial system, recognizing that the judicial policy of a state should be decided when possible by state, not federal, courts.”). We therefore request that the California Supreme Court accept and decide the certified question.

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