Court Opinion

ID: 9749451
Source: CourtListenerOpinion
Date Created: 2023-08-27 16:43:56.415776+00
Date Added: 2024-06-11T07:25:48.919913
License: Public Domain

SIMONS, Acting P. J., Dissenting.
I respectfully dissent.
Haynes v. Farmers Ins. Exchange (2004) 32 Cal.4th 1198 [13 Cal.Rptr.3d 68, 89 P.3d 381] (Haynes) is the leading California Supreme Court case on the interpretation of automobile insurance policy provisions limiting the coverage provided to permissive users of the insured vehicle. As the majority recognizes, Haynes held that such a coverage limitation is effective only if the applicable permissive user provision was not only conspicuous,1 but also plain and clear. (Haynes, at p. 1211.) In construing the policy before it, Haynes determined that laymen do not “necessarily” understand the term “permissive user” unless it is further defined in the policy. (Ibid.) Haynes also *404concluded that a statement that insurance coverage for permissive users is limited to that required by the “Financial Responsibility Law” is insufficient to notify the insured of the dollar limits resulting from that reduction in coverage. (Id. at p. 1205, citing Jauregui v. Mid-Century Ins. Co. (1991) 1 Cal.App.4th 1544, 1547 [3 Cal.Rptr.2d 21] (Jauregui).)
Haynes concluded its discussion of the plain and clear requirement with a footnote that frames the analysis in this case: “We do not. . . suggest that [the insurer] necessarily must correct all of the identified deficiencies in order to render a permissive user limitation enforceable in future cases. Nor have we the expertise to dictate the precise wording or placement of such a limitation an insurer must adopt in order to satisfy the established legal standard. Indeed, ‘we do not rewrite any provision of any contract, including the standard policy underlying any individual policy, for any purpose.’ [Citations.] There may be a number of ways for [the insurer] to correct the problem.” (Haynes, supra, 32 Cal.4th at p. 1212, fn. 9.) Respondent Financial Indemnity Company concedes that the Policy was drafted post-Haynes to comply with the requirements set forth in that case regarding a coverage reduction for permissive users. Has respondent succeeded in that task? I would conclude it has not and reverse.
Respondent and the majority rely principally on the reduction in coverage language on page 3 and page 7. When an insurer wishes to limit coverage, “ ‘[t]he language itself must be plain and clear. [Citation.] “This means more than the traditional requirement that contract terms be ‘unambiguous.’ Precision is not enough. Understandability is also required.” ’ ” (Haynes, supra, 32 Cal.4th at p. 1211, fn. omitted, quoting Jauregui, supra, 1 Cal.App.4th at p. 1550.)
The coverage limitation on page 7 states that if the Policy “provides coverage that exceeds the minimum limits required by [California’s] Financial Responsibility Law,” “then such amounts in excess of the minimum limits shall not apply to a loss where the operation, maintenance or use of your insured car is by a person other than you, a relative, and an agent or employee of you or a relative in the course and scope of their agency or employment. However, this limitation/reduction does not apply to any liability incurred by you or a relative.” In Jauregui, the policy stated, “ ‘We will provide insurance for an insured person, other than you or a family member, up to the limits of the Financial Responsibility Law only.’ ” (Jauregui, supra, 1 Cal.App.4th at p. 1547.) The Court of Appeal determined that the average policyholder could not be expected to know that the Financial Responsibility Law provided limits of $15,000 per person or that the Financial Responsibility Law is contained within section 16000 et seq. of the Vehicle Code; therefore, the permissive user limitation was not plain and clear. (Jauregui, at pp. 1551-1552.)
*405The reduction in coverage language on page 7 is different, but not any more plain and clear, than the reduction in coverage language in Jauregui. The majority says the ruling in Jauregui rested on the fact that “it was necessary to look outside the terms of the policy itself to determine the restricted policy coverage limits which would apply. (Jauregui, supra, 1 Cal.App.4th at p. 1552.) ... [f] In the Policy before us it is unnecessary to go outside the document in order to determine the extent of the coverage provided.” (Maj. opn., ante, at p. 401.) It then distinguishes Jauregui by focusing on the language in the Policy’s insuring agreement on page 3 in an attempt to bolster its conclusion that the Policy’s permissive user coverage reduction limitation is enforceable.
However, the majority’s attempt to distinguish Jauregui and find the limitation language plain and clear is inadequate under Haynes. If, on page 7, the Policy set out the dollar limits imposed on the coverage of permissive users by the Policy’s reference to the Financial Responsibility Law or referred the insured to some other Policy provision (for example, p. 3) that provided this explanation, it would clearly pass the Haynes test. But page 3 and page 7 do not cross-reference each other. A reasonable insured, aware of the language on page 3 and page 7, would not likely conclude that the reduction in coverage language on page 7 defines a “permissive user,” since the reduction in coverage language on page 7 does not utilize that term. And, a reasonable insured is not likely to conclude that the dollar limits, which appear on page 3, refer to the California Financial Responsibility Law, since the page 3 language does not refer to that statute.
Moreover, the reduction language in the insuring agreement on page 3, itself, is not plain and clear. It provides: “The limits shown on the Declarations page are subject to reduction to the state mandatory minimum of $15,000 each person, $30,000 each accident, and $5,000 for property damage, when there is a permissive user of the ‘insured vehicle’.” This provision clearly sets out the dollar limitations imposed on coverage for permissive users, but, as Haynes explains, the italicized term would not necessarily be understood by the average layperson. “Although the term ‘permissive user’ appears in the title of the endorsement containing the limitation, the term is nowhere defined, neither in the policy nor the endorsement, for the average lay reader. While an attorney or an insurance professional likely could deduce from close examination of the entire document that permissive user refers to ‘an insured person, other than you, a family member or a listed driver’ (the phrase that appears in the permissive user limitation itself) . . . , the average lay reader encountering the term in the title of [the] endorsement . . . would not necessarily understand its significance.” (Haynes, supra, 32 Cal.4th at p. 1211.) As in Haynes, “permissive user” is not defined anywhere in the Policy.
*406The majority correctly notes that Haynes’s conclusion that the permissive user provision lacked clarity stemmed not only from the failure to define that term but from other factors as well. (Maj. opn., ante, at pp. 401-402.) But although the Policy improves upon the language in the Haynes policy, it is still not plain and clear and, therefore, it is unenforceable.
Respondent, the Policy’s drafter, is not held to a standard of perfection. But it is not enough that respondent wrote a policy that is better than the policies in Haynes and Jauregui. Respondent could have placed the applicable dollar reduction in coverage on the declarations page, but did not. Respondent could have spelled out the dollar limitations in California’s Financial Responsibility Law referred to on page 7 or defined “permissive user” in the Policy, but did not. Respondent could have provided the insured some express link between the provisions on page 3 and page 7, but did not. Or it could have selected “a[ny] number of ways ... to correct the problem” Haynes identified (Haynes, supra, 32 Cal.4th at p. 1212, fn. 9), but did not. I would reverse and oblige it to try again.

 Because I believe that the reduction in coverage language in the Policy (see maj. opn., ante, at p. 392 & fn. 3 [description of the “Policy”]) is not plain and clear, I do not address the question of whether the permissive user language on page 3 of the Policy (hereafter page 3) is conspicuous, except to point out that it is troubling that the Policy repeatedly directs the insured to reduction in coverage language on page 7 of the Policy (hereafter page 7) (and once to p. 11 of the Policy), without ever referring the insured to page 3.