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Encompass Insurance Company v. Coast National Insurance Company

(Act of rescuing person from wrecked vehicle constitutes “use” under automobile insurance policies.)

In Encompass Ins. Co. v. Coast National Ins. Co., 764 F.3d 981 (9th Cir. August 13, 2014), the United States Ninth Circuit Court of Appeals affirmed the underlying judgment in favor of Encompass in connection with a contribution lawsuit filed against Mid-Century Ins. Co. (“Mid-Century”) and Coast National Insurance Company (“Coast National”). The parties’ dispute arose out of an underlying automobile accident, wherein the passenger, Alexandra Van Horn, in a car driven by a man named, Anthony Glen Watson, was pulled from the car after Watson had lost control of his vehicle. The car ran off the road and crashed into a light pole. A second car which was not involved in the crash, stopped at the scene of the accident to render aid. A woman named, Lisa Torti, was a passenger in the second car. Torti saw Van Horn inside the wrecked car, and allegedly feared that Van Horn might be in danger. As such, Torti grabbed Van Horn and physically removed her from Watson’s car. Van Horn suffered spinal injuries after the car accident and became a paraplegic. Van Horn sued Torti in California State Court alleging that Torti caused Van Horn’s injuries when she removed Van Horn from Watson’s car.

At the time of the accident, Torti was insured under a “Package Policy” including car insurance and personal excess liability insurance issued by Encompass Insurance Company. Torti tendered her defense against Van Horn’s lawsuit to Encompass.  Encompass accepted the tender and assumed responsibility for Torti’s defense.

Torti also tendered her defense to two additional insurance companies, Mid-Century and Coast National. Mid-Century had issued a car insurance policy to Torti affording coverage for bodily injury to any person arising out of the “use of a private passenger car.” The Mid-Century policy afforded coverage to Torti in connection with her own car. However, the policy also afforded coverage to Torti for use of any other private passenger car if such “use” was with the permission of the owner. Thus, if Torti “used” Watson’s car with Watson’s permission when she removed Van Horn from Watson’s car, the Mid-Century policy covered Torti.

Coast National had issued a car insurance policy to Watson, the driver of the car that crashed. The Coast National policy covered liability for personal injuries for which any insured becomes legally responsible because of an accident. The policy insured not only Watson, but also any person using Watson’s covered auto with Watson’s permission. Thus, if Torti “used” Watson’s car with Watson’s permission when she removed Van Horn from Watson’s car, the Coast National policy also covered Torti.

Both Mid-Century and Coast National denied Torti’s tenders of defense and indemnity of the Van Horn lawsuit. Ultimately, such lawsuit settled for $4 million. The settlement was paid by Encompass. Subsequently, Encompass filed a lawsuit for contribution against Mid-Century and Coast National arguing that both of the companies afforded coverage to Torti for the underlying Van Horn accident. Subsequently, the District Court entered judgment in favor of Mid-Century and Coast National reasoning that Torti did not use Watson’s car when she removed Van Horn from that car. The District Court did not reach the issue of permission.

In reversing the District Court’s decision, the Court of Appeals held that Torti had, indeed, used Watson’s car when she removed Van Horn from that car. The parties did not dispute that Torti “unloaded” Van Horn from Watson’s car. Hence, the Court of Appeals focused on whether the “unloading” of Van Horn qualified as the use of Watson’s vehicle. Finding in favor of Encompass, the Court of Appeals reasoned as follows:

. . . Thus, to determine whether "unloading" a motor vehicle constitutes "use" of that motor vehicle as defined in the insurance policies at issue here, we must determine whether the California Insurance Code defines "unloading" a motor vehicle as "use" of that motor vehicle.

The text of the California Insurance Code makes clear that "unloading" a motor vehicle constitutes "use" of that motor vehicle. The California Insurance Code provides, in relevant part: "The term 'use' when applied to a motor vehicle shall only mean operating, maintaining, loading, or unloading a motor vehicle." Cal. Ins. Code § 11580.06(g) (emphasis added). Section 11580.06(g) unambiguously equates the "unloading" of a motor vehicle with the "use" of a motor vehicle, and our inquiry should end there. See Kavanaugh v. W. Sonoma Cnty. Union High Sch. Dist., 29 Cal. 4th 911, 129 Cal. Rptr. 2d 811, 62 P.3d 54, 59 (Cal. 2003) ("If the language of the statute is not ambiguous, the plain meaning controls . . . .").

As one would expect from the text of section 11580.06(g), California courts consistently define "use" of a vehicle to include "unloading."See Scottsdale Ins. Co. v. State Farm Mut. Auto. Ins. Co., 130 Cal. App. 4th 890, 30 Cal. Rptr. 3d 606, 613 (Cal. Ct. App. 2005) ("As a matter of law, was using the insured truck if he was 'operating, maintaining, loading, or unloading' it.") (citing Cal. Ins. Code § 11580.06(g)); City of Los Angeles v. Allianz Ins. Co., 125 Cal. App. 4th 287, 22 Cal. Rptr. 3d 716, 719-20 (Cal. Ct. App. 2004) ("The City contends it was a 'user' of the truck under the controlling case law, which holds that 'use' of a vehicle includes its loading and unloading. From this principle, which is correct . . . .") (internal citation omitted); Nat'l Am. Ins. Co. v. Coburn, 209 Cal. App. 3d 914, 257 Cal. Rptr. 591, 596 n.2 (Cal. Ct. App. 1989) ("[T]he 'use' of a vehicle includes its loading (and unloading)."). We can find no case adopting the dissent's theory that, under section 11580.06(g), "the unloading of a vehicle constitutes use of the vehicle only when the unloading is part of the user's act of availing herself of the vehicle." Dissenting Opinion at 14. On the contrary, California courts have consistently said that "unloading" a vehicle — without more — constitutes "use."

Based on the above-analysis, the Court of Appeals concluded as follows:

In short, the plain text of section 11580.06(g) equates "unloading" a vehicle with "use" of that vehicle. Today, after the enactment of section 11580.06(g), California courts consistently define "use" of a vehicle to include "unloading" that vehicle. Even before the enactment of section 11580.06(g), California courts defined "use" of a vehicle to include "unloading" that vehicle — suggesting that Travelers can be reconciled with this definition, to whatever extent Travelers remains controlling after the enactment of section 11580.06(g). And unlike the dissent, we see no basis for confining this definition of "use" to commercial vehicles. Thus, we conclude that unloading a vehicle constitutes "use" of that vehicle, under California law

. . .

To be sure, the idea that Torti "used" Watson's car is counterintuitive: unloading an injured passenger is not the way most people "use" a car. But we are not asked to decide what "use" of a car means to most people: we are asked to decide what "use" of a car means in the insurance policies at issue here. Insurance policies are free to define words in idiosyncratic ways. See, e.g., Bennett v. State Farm Mut. Auto. Ins. Co., 731 F.3d 584, 585 (6th Cir. 2013) (pedestrian was an "occupant" of a vehicle, within the meaning of the relevant insurance policy, when a traffic collision threw her onto the vehicle's hood). This remains true when the words used in an insurance policy are defined by statute, rather than by private parties. "[L]egislatures, too, are free to be unorthodox."Lopez v. Gonzales, 549 U.S. 47, 54, 127 S. Ct. 625, 166 L. Ed. 2d 462 (2006).

As used in Mid-Century's and Coast National's insurance policies, the term "use" is defined by California Insurance Code § 11580.06(g). As defined by California Insurance Code § 11580.06(g), "use" of an automobile includes unloading that automobile. Thus, Torti "used" Watson's car when she unloaded Van Horn from that car.

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