Court Opinion

ID: 9795263
Source: CourtListenerOpinion
Date Created: 2023-08-31 03:24:02.38906+00
Date Added: 2024-06-11T08:28:25.162596
License: Public Domain

BAXTER, J.
I respectfully dissent.
Like many insurance policies, William Gallahair’s “E-Z Reader Car Policy” incorporates several preprinted policy forms and endorsements that are *1216identified on the declarations page. (Croskey et al., Cal. Practice Guide: Insurance Litigation (The Rutter Group 2002) f 3:66, pp. 3-12 to 3-13.) Among the several endorsements the declarations page identifies is endorsement S9064, which expressly amends the policy to limit the insurer’s liability for permissive users to the statutorily required minimum of $15,000 per person, $30,000 per occurrence for bodily injury, and $5,000 for property damage. (See Ins. Code, § 11580.1; Veh. Code, § 16056, subd. (a).) The question here is whether the permissive user limitation is valid and enforceable. I believe it is: the limitation appears conspicuously in the endorsement, and its language is plain and clear.
An endorsement is an amendment to or modification of an existing insurance policy. (Adams v. Explorer Ins. Co. (2003) 107 Cal.App.4th 438, 451 [132 Cal.Rptr.2d 24].) Some endorsements make changes that are relatively minor, while others “ ‘can add or delete “additional insureds” and additional “insured locations” to those listed on the declarations page, substantially changing the risks and premiums.’ ” (Id. at p. 450, quoting Croskey et al., Cal. Practice Guide: Insurance Litigation, supra, f 3:188, p. 3-50.) Whether located in an endorsement or elsewhere in a policy, a provision that purports to exclude or substantially limit liability must be conspicuous, plain, and clear to be effective. (Thompson v. Occidental Life Ins. Co. (1973) 9 Cal.3d 904, 921 [109 Cal.Rptr. 473, 513 P.2d 353]; Ponder v. Blue Cross of Southern California (1983) 145 Cal.App.3d 709, 719 [193 Cal.Rptr. 632] (Ponder).) To be conspicuous, plain, and clear, a limiting provision “must be positioned in a place and printed in a form which would attract a reader’s attention,” and its substance “must be stated in words that convey the proper meaning to persons expected to read the contract.” (Ponder, supra, 145 Cal.App.3d at p. 719.)
It bears emphasis that a policy provision limiting liability is not invalid simply because it could have been made easier to find. (See National Auto. & Casualty Ins. Co. v. Stewart (1990) 223 Cal.App.3d 452, 460 [272 Cal.Rptr. 625].) Thus, a coverage provision in the text of an insurance policy need not expressly reference the provisions that modify or limit it (Zubia v. Farmers Ins. Exchange (1993) 14 Cal.App.4th 790, 796 [18 Cal.Rptr.2d 65]), and a limiting provision need not be mentioned on the declarations page of a policy in order to be valid (Merrill & Seeley, Inc. v. Admiral Ins. Co. (1990) 225 Cal.App.3d 624, 631 [275 Cal.Rptr. 280]; Estate of Murphy (1978) 82 Cal.App.3d 304, 307-309 [147 Cal.Rptr. 258]). Instead, the controlling concern is whether the insuring document, construed as a whole, puts the average insured on reasonable notice of its provisions and limitations. (See Feurzeig v. Insurance Co. of the West (1997) 59 Cal.App.4th 1276, 1282-1283 [69 Cal.Rptr.2d 629].)
*1217In determining whether an insurance policy provides reasonable notice of a lawful limiting provision, we assume the insured reads the entire policy. (See Fields v. Blue Shield of California (1985) 163 Cal.App.3d 570, 578-579 [209 Cal.Rptr. 781] [insured has a duty to read the policy and is bound by all of its conspicuous, plain, and clear provisions].) Significantly, the provisions of an endorsement prevail over conflicting provisions in the body of the policy, if the relevant language of the endorsement is conspicuous and free from ambiguity. (Jane D. v. Ordinary Mutual (1995) 32 Cal.App.4th 643, 651 [38 Cal.Rptr.2d 131]; see Aerojet-General Corp. v. Transport Indemnity Co. (1997) 17 Cal.4th 38, 50, fn. 4 [70 Cal.Rptr.2d 118, 948 P.2d 909]; Continental Cas. Co. v. Phoenix Constr. Co. (1956) 46 Cal.2d 423, 431 [296 P.2d 801]; Estate of Murphy, supra, 82 Cal.App.3d at p. 309.)
These rules have been applied as follows. Provisions purporting to limit or exclude liability have been invalidated as inconspicuous when placed on an overcrowded page, or in a “dense pack” format, or in a section bearing no clear heading or relationship to the insuring clause and concealed in fine print. (See Cal-Farm Ins. Co. v. TAC Exterminators, Inc. (1985) 172 Cal.App.3d 564, 577 [218 Cal.Rptr. 407], and cases cited therein.) Likewise, terms have been found ambiguous where they could be interpreted to have more than one meaning. (E.g., Safeco Ins. Co. v. Robert S. (2001) 26 Cal.4th 758, 765-766 [110 Cal.Rptr.2d 844, 28 P.3d 889]; Gyler v. Mission Ins. Co. (1973) 10 Cal.3d 216, 219 [110 Cal.Rptr. 139, 514 P.2d 1219].)
Conversely, an exclusionary clause in the same size print and intensity as the rest of the policy and appearing under an appropriate heading was found conspicuous as a matter of law (National Ins. Underwriters v. Carter (1976) 17 Cal.3d 380, 384-385 [131 Cal.Rptr. 42, 551 P.2d 362]), even though it appeared 21 paragraphs after the insuring clause and was the last of eight exclusions (id. at p. 390 (cone. & dis. opn. of Tobriner, J.)). Another exclusion was found conspicuous, even though it appeared on an attached page, where the declarations page stated coverage was “AS PER FORM ATTACHED.” (Merrill & Seeley, Inc. v. Admiral Ins. Co., supra, 225 Cal.App.3d at p. 631.) Similarly, a clause excepting liability for third party negligence was held enforceable where (1) it appeared in a single-page attachment to a policy that was entitled “Amendatory Endorsement,” was in a type of a reasonable size, and was located in a subsection having a bolded, all-capitalized subheading entitled “Specifically Excepted Perils,” and (2) the language of the exclusionary provision was sufficiently precise and understandable. (Palub v. Hartford Underwriters Ins. Co. (2001) 92 Cal.App.4th 645, 652 [112 Cal.Rptr.2d 270].) Moreover, policy language is never deemed ambiguous in the abstract; rather, a provision may be found ambiguous only in the context of the policy and the circumstances at issue. (Bay Cities Paving & Grading, Inc. v. Lawyers’ Mutual Ins. Co. (1993) 5 Cal.4th 854, 867 [21 *1218Cal.Rptr. 2d 691, 855 P.2d 1263]; see California Casualty Ins. Co. v. Northland Ins. Co. (1996) 48 Cal.App.4th 1682, 1694 [56 Cal.Rptr.2d 434].)
As set forth below, the terms of Gallahair’s E-Z Reader Car Policy, I believe, more than meet the foregoing standards for effectuating a valid and enforceable limitation on the insurer’s liability.
First, the declarations page of the E-Z Reader Car Policy expressly lists S9064 as an endorsement to the policy.
Following the declarations page but preceding the main body of the policy is a one-page letter written to the insured from “Your Farmers Agent.” The second paragraph of that letter states in full: “The accompanying Declarations Page shows your current coverages resulting from the recent changes made to your policy. Please review your policy changes and file them in a safe place with your original policy documents.”
Following that letter but also preceding the main body of the policy is a page entitled “Index of Policy Provisions.” The index identifies the multiple parts of the policy, including “PART I—LIABILITY,” and explicitly states: “ANY ADDITIONAL PROVISIONS AFFECTING YOUR POLICY ARE ATTACHED AS ‘ENDORSEMENTS.’ This policy is a legal contract between you (the policyholder) and us (the Company). IT CONTAINS CERTAIN EXCLUSIONS. READ YOUR POLICY CAREFULLY.” Thus, the index puts the insured on reasonable notice that any attached endorsements may affect the policy provisions that follow.
Turning to endorsement S9064 itself, we see it is comprised of a single page with the fully capitalized title: “PART I—LIABILITY—PERMISSIVE USER LIMITATION.” There is no dispute that the endorsement’s terms appear in readily legible print; indeed, the print size and intensity of the endorsement’s text is the same as the policy’s main text. The endorsement sets forth the permissive user limitation as follows: “It is agreed that PART I—LIABILITY of Your E-Z Reader Car Policy, Your E-Z Reader Motorcycle Policy and Your Motor Home Plus Policy is amended as follows: ...[!] To Your E-Z Reader Car Policy, Your E-Z Reader Motorcycle Policy and Your Motor Home Plus Policy, the following is added to the ‘Limits of Liability’ and ‘Other Insurance’ sections: [f] We will provide insurance for an Insured person, other than you, a family member or a listed driver, but only up to the minimum required limits of your state’s Financial Responsibility Law of $15,000 per person and $30,000 per occurrence for bodily injury, and $5,000 for property damage.” The balance of the endorsement consists of an amended definition of “Insured person,” a term which appears in the permissive user limitation and elsewhere in the “LIABILITY” section of Gallahair’s *1219policy, and a definition of “Listed Driver,” a new term that the permissive user limitation utilizes. At the end of the endorsement, set apart in its own paragraph, is the following admonishment to the insured: “This endorsement is part of your policy. It supersedes and controls anything to the contrary. It is otherwise subject to all other terms of the policy.”1
In sum, endorsement S9064 appears on its own page as a separate attachment to the policy. The declarations page lists the endorsement by number, and the insurance policy explicitly informs the insured in two prominent places that the endorsements attached to the policy affect its provisions. The fully capitalized title of endorsement S9064 makes it crystal clear that the endorsement purports to limit the insurer’s liability for permissive users. Within the endorsement, the provision that specifically limits liability for permissive users to the legally authorized minimum of $15,000 per person, $30,000 per occurrence for bodily injury, and $5,000 for property damage, appears in its own separate paragraph in print of the same size and intensity of the policy’s main text, thus making the provision obvious and distinct, as well as readily legible. The limiting provision is not phrased in esoteric or technical terms, but in language easily understood by a person of average intelligence and experience.
Given the physical characteristics of endorsement S9064, as well as its conspicuous title and plain wording, I find that the endorsement and the permissive user limitation contained therein satisfy the requirements for a valid and enforceable limitation of liability. (See Palub v. Hartford Underwriters Ins. Co., supra, 92 Cal.App.4th at p. 652.)
To support its contrary conclusion, the majority points out that Jauregui v. Mid-Century Ins. Co. (1991) 1 Cal.App.4th 1544 [3 Cal.Rptr.2d 21] (Jauregui) and Thompson v. Mercury Casualty Co. (2000) 84 Cal.App.4th 90 [100 Cal.Rptr.2d 596] (Thompson) both considered permissive user limitations and found them invalid. Those decisions, however, did not involve endorsements and did not criticize the limiting language at issue here. If anything, they support, rather than undermine, my view that the limitation in endorsement S9064 is effective.
*1220In Jauregui, the permissive user limitation appeared only in the “Other Insurance” section of the main body of the policy; it was not in a separate endorsement as in Gallahair’s policy. Because the provision was placed under a heading that was unrelated to its subject and was surrounded by language having nothing to do with exclusions or limitations on coverage, Jauregui found it inconspicuous as a matter of law. (Jauregui, supra, 1 Cal.App.4th at pp. 1549-1550.) Here, however, the insurer is not seeking enforcement of the permissive user limitation based on its location in the “Other Insurance” section of Gallahair’s E-Z Reader Car Policy. Rather, the insurer relies on the fact that endorsement S9064 expressly amends the policy to add the limitation to the exact location in the policy where the Jauregui court thought such a provision could most easily be found by an insured—in the liability section of the policy entitled “PART I—LIABILITY,” under the most relevant possible subheading entitled “Limits of Liability.” (See Jauregui, supra, 1 Cal.App.4th at p. 1549.) Furthermore, endorsement S9064 specifically addresses the Jauregui court’s additional concern over the plainness and clarity of the limiting provision’s language by explicitly referring to “the minimum required limits of your state’s Financial Responsibility Law of $15,000 per person and $30,000 per occurrence for bodily injury, and $5,000 for property damage.” (See Jauregui, supra, 1 Cal.App.4th at pp. 1550-1552.)
Similarly, the permissive user limitation in Thompson was not in a separate endorsement. Instead, it appeared inconspicuously on the last page of a multipage policy in an unnumbered section that was entitled “Conditions” and contained “30 random and unrelated subsections.” (Thompson, supra, 84 Cal.App.4th at p. 97.) The limitation was specified as “Condition 23” in that section, but its language was “not bolded, italicized, enlarged, underlined, in different font, capitalized, boxed, set apart, or in any other way distinguished from the rest of the fine print.” (Ibid.) In stark contrast to the provision in Thompson, the permissive user limitation in Gallahair’s policy is located in a clearly titled, legibly printed, single-page endorsement that unambiguously instructs the insured to add the plainly worded limitation to the Limits of Liability section of the policy, exactly where such limitation belongs. (See Jauregui, supra, 1 Cal.App.4th at p. 1549.)
Additionally, the majority concludes that “burying the permissive user limitation” among several other provisions of the same print size and intensity “renders it inconspicuous and potentially confusing to the average lay reader.” (Maj. opn., ante, at p. 1209.) But no “burying” is in evidence *1221here. Endorsement S9064 is a single-page attachment that displays a fully capitalized title calling ample attention to the fact that it contains a permissive user limitation. The limitation itself is set forth in its own paragraph. More to the point, the other provisions listed in the endorsement serve to define certain terms that are used in the permissivé user limitation, i.e., “Insured person” and “Listed Driver.” (See appendix.) I find it beyond comprehension that the majority criticizes endorsement S9064 for its inclusion of such definitions.
Finally, the majority surmises that the average lay reader would not necessarily understand the significance of the permissive user endorsement because the title term “permissive user” is not defined anywhere in the policy. (Maj. opn., ante, at p. 1211.) But the fact that a term is not defined in the policy does not render it ambiguous. (Foster-Gardner, Inc. v. National Union Fire Ins. Co. (1998) 18 Cal.4th 857, 868 [77 Cal.Rptr.2d 107, 959 P.2d 265].) Nothing about the term, moreover, suggests that the average insured would have difficulty understanding its likely application in situations where, as here, the insured grants a friend permission to use his or her car. Contrary to the majority’s suggestion otherwise, the permissive user provision is not ambiguous in the context of the policy or the circumstances at issue. (Bay Cities Paving & Grading, Inc. v. Lawyers’ Mutual Ins. Co., supra, 5 Cal.4th at p. 867; see California Casualty Ins. Co. v. Northland Ins. Co., supra, 48 Cal.App.4th at p. 1694.)2
To summarize, I believe the permissive user limitation contained in endorsement S9064 is conspicuous, plain, and clear. Unlike the majority, I would find the limitation valid and enforceable in the circumstances before us.
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 Attached as an appendix to this opinion is a copy of endorsement S9064, which the parties submitted in their joint appendix on appeal. The parties do not indicate who made the handwritten markings that appear on the endorsement and offer no explanation for their presence.

 Because endorsement S9064 directs the insured to also add the permissive user limitation to the “Other Insurance” section of the policy, the majority finds the endorsement “may erroneously cause the insured to believe the limitation applies only if the policyholder has other insurance.” (Maj. opn., ante, at p. 1207, italics added.) Not so. If anything, adding the limiting provision both to the “Limits of Liability” section and to the “Other Insurance” section makes clear to the average insured that the limitation applies at all times, regardless whether other insurance is involved.