Opinion
NOT TO BE PUBLISHED IN THE OFFICIAL REPORTS
APPEAL from a judgment of the Superior Court of Kern CountySuper. Ct. No. CV-257506, Louis P. Etcheverry, Judge.
Selman Breitman, Neil H. Selman, Jan L. Pocaterra, and Karen C. Ahearn for Plaintiff and Appellant.
Law Offices of Young & Nichols, Steve W. Nichols and Todd A. Gall for Defendants and Respondents.
DAWSON, J.
The questions presented in this insurance coverage dispute are (1) whether the “conspicuous, plain and clear” standard recently reiterated in Haynes v. Farmers Ins. Exchange (2004) 32 Cal.4th 1198, 1202 (Haynes) applies to a limitation on permissive user auto coverage that was inserted in a commercial garage policy pursuant to Insurance Code section 11580.1, subdivision (d); and (2) if that standard does apply, whether the limitation, as it appeared in the policy here at issue, satisfied it. We agree with the trial court’s conclusion that Haynes is controlling: the standard applied and was not satisfied.
Subsequent statutory references are to the Insurance Code unless otherwise specified.
FACTUAL AND PROCEDURAL HISTORIES
The parties agree that the facts are undisputed and that this appeal presents questions of law only. The facts set forth here are taken from the parties’ stipulation of facts and from a certified copy of the insurance policy at issue, both of which were submitted to the trial court.
Miguel Quintero and Hilda Castro bought a car from BMW of Bakersfield (the dealer) on March 7, 2004. They drove the car away the same day. The dealer did not, however, complete the paperwork to transfer ownership of the car until March 26, 2004.
Mario Quintero, Miguel’s brother, borrowed the car with Miguel’s permission on March 20, 2004. Mario was involved in an accident with a truck driven by Steven Lusty Peel. Both drivers were killed.
Peel’s survivors filed a lawsuit alleging that Mario Quintero’s negligence caused the accident. The defendants included the dealer, Miguel Quintero, Hilda Castro, and the estate of Mario Quintero.
The dealer had an insurance policy, Commercial Garage Policy No. 49-98169-01, issued by Sentry Select Insurance Company (Sentry), with a per-accident coverage limit of $500,000. As required by law (see § 11580.1, subd. (b)(4)), this policy covered permissive users of vehicles owned by the dealer. A permissive user is any person who uses an insured vehicle with the express or implied permission of the named insured, provided the use is within the scope of the permission. (Ibid.)
Anticipating a claim against the policy, Sentry filed the present action against Peel’s survivors, the estate of Mario Quintero, Miguel Quintero, Jose Quintero and Hilda Castro. It sought a declaratory judgment that the policy did not cover the loss. While admitting that Mario Quintero was a permissive user and therefore an insured under the policy, it alleged that a coverage limitation in the policy meant there was no coverage for this accident. This provision stated that for “anyone required by law to be an ‘insured’”—a category that includes permissive users—the policy will pay no more than is “needed to comply with the minimum limits provision of the law in the jurisdiction” where the accident occurred. It further stated that, if the accident is covered by any other insurance, the Sentry policy will pay “only the amount needed to comply with these minimum limits after the other insurance is exhausted.” These provisions were included in the policy pursuant to section 11580.1, subdivision (d)(2), which allows policies issued to car dealerships and similar businesses to include these limitations for drivers other than named insureds. Miguel Quintero and Hilda Castro had an auto insurance policy providing the minimum required bodily injury liability coverage—$15,000 per person and $30,000 per accident (see Veh. Code, § 16056)—so Sentry asserted that its policy provided no coverage at all.
Sentry and Peel’s survivors agreed to resolve the declaratory judgment action by means of cross-motions for summary judgment based on stipulated facts. Miguel Quintero, Jose Quintero, Hilda Castro, and the estate of Mario Quintero agreed to be bound by the trial court’s decision on the cross-motions.
The trial court ruled that the permissive user limitation was invalid. It accepted defendants’ contention that a limitation of this kind must be conspicuous, plain, and clear and that Sentry’s policy did not satisfy that standard. More specifically, the court determined “that the purported limitation did not comply with the legal requirement that any attempt to limit or take away coverage be conspicuously placed in the policy.” The court granted defendants’ motion for summary judgment and denied Sentry’s motion for summary judgment.
DISCUSSION
Sentry now argues (1) that the trial court erred in requiring the limitation to be conspicuous, plain, and clear and (2) that, in any event, it was conspicuous, plain, and clear. Because the case was decided on cross-motions for summary judgment based on stipulated facts, we are confronted only with legal questions of the effect of the policy’s language; we review the trial court’s decision on these questions de novo. (Powerine Oil Co., Inc. v. Superior Court (2005) 37 Cal.4th 377, 390; Haynes, supra, 32 Cal.4th at p. 1205.) We will take the two questions in order.
I. Applicability of the “conspicuous, plain and clear” standard
Our Supreme Court reaffirmed the “conspicuous, plain and clear” standard—a doctrine of long standing—in Haynes in 2004. Citing case law beginning in 1962, the court explained the doctrine as follows:
“In the insurance context, ‘we begin with the fundamental principle that an insurer cannot escape its basic duty to insure by means of an exclusionary clause that is unclear. As we have declared time and again, “any exception to the performance of the basic underlying obligation must be so stated as clearly to apprise the insured of its effect.”’ [Citation.] Coverage may be limited by a valid endorsement and, if a conflict exists between the main body of the policy and an endorsement, the endorsement prevails. [Citation.] But to be enforceable, any provision that takes away or limits coverage reasonably expected by an insured must be ‘conspicuous, plain and clear.’ [Citation.] Thus, any such limitation must be placed and printed so that it will attract the reader’s attention. Such a provision also must be stated precisely and understandably, in words that are part of the working vocabulary of the average layperson. [Citations.] The burden of making coverage exceptions and limitations conspicuous, plain and clear rests with the insurer. [Citations.]” (Haynes, supra, 32 Cal.4th at p. 1204.)
We will first explain why the standard set forth in Haynes applies to this case, then we will turn to Sentry’s efforts to distinguish Haynes and to show that the standard does not apply.
A. The standard applies in this case
To determine whether the standard applies here, we must decide whether the permissive user limitation was a “provision that takes away or limits coverage reasonably expected by an insured.” (Haynes, supra, 32 Cal.4th at p. 1204.) The insured whose reasonable expectations are in question is the policyholder, BMW of Bakersfield. Sentry’s briefs repeatedly state that Mario Quintero, Miguel Quintero, and Hilda Castro would not reasonably have expected coverage, but this is not the correct inquiry. Like this case, Haynes involved a purported limitation on permissive user coverage. (Id. at p. 1202.) The court examined the reasonable expectations of the car owner to whom the policy was issued, not the reasonable expectations of the permissive user who was involved in the accident. (Id. at pp. 1213-1215.) It referred to the reasonable expectations of the “contracting party” and the “policyholder.” (Id. at pp. 1213, 1214.)
In Haynes, the court determined the reasonable expectations of the policyholder by examining the policy. First, it discussed the relevant statutes. It observed that section 11580.1, subdivision (b)(4) requires automobile insurance policies to provide the same amount of coverage to permissive users that it provides to named insureds, while section 11580.1, subdivision (a) provides that this requirement does not apply if the policy limits exceed the minimum statutory requirements for bodily injury liability coverage of $15,000 per person and $30,000 per accident. The policy at issue had limits of $250,000 per person and $500,000 per accident, so the policy could legally limit permissive user coverage to $15,000/$30,000, as it purported to do. “But Farmers [i.e., the insurer] included ‘[a]ny person using your insured car’ within its definition of ‘Insured person,’ thus raising a reasonable expectation that permissive user coverage would be coextensive with that for other insureds.” (Haynes, supra, 32 Cal.4th at p. 1213, italics added.) This meant that “any limitation on permissive user coverage, to be enforceable, was required to be conspicuous, plain and clear.” (Ibid.) The inclusion of permissive users in the definition of insured persons was the factor that gave rise to a reasonable expectation of coverage coextensive with the coverage for other insureds. Neither the fact that a statutory exception permitted the limitation nor the actual inclusion of the limitation in the policy defeated the policyholder’s reasonable expectation of permissive user coverage up to the policy limits.
The present case is closely analogous to Haynes. Like section 11580.1, subdivision (a), subdivision (d) creates exceptions to the requirement of permissive user coverage. One of these exceptions is that “a policy issued to a named insured engaged in the business of leasing vehicles for those vehicles that are leased for a term in excess of six months, or selling, repairing, servicing, delivering, testing, road-testing, parking, or storing automobiles” may provide that “coverage shall not apply to any person other than the named insured or his or her agent or employee, except to the extent that the limits of liability of any other valid and collectible insurance available to that person are not equal to the limits of liability specified in subdivision (a) of Section 16056 of the Vehicle Code [i.e., for bodily injury, the $15,000/$30,000 limit].” (§ 11580.1, subd. (d)(2).) In other words, car dealerships and similar businesses may have policies that limit permissive user coverage to any difference between the statutory minimums and the amount collectible under other insurance covering the permissive user. The Sentry policy here had a limit of $500,000, but section 11580.1, subdivision (d)(2) means it could legally limit permissive user coverage for bodily injury to $15,000 per accident and $30,000 per person minus any other collectible coverage, as it purported to do.
Just as in Haynes, however, the definition of the term “insureds” in Sentry’s policy included permissive users. This definition included “[a]nyone else required by law to be an insured while using a covered ‘auto’ you own, hire or borrow, if the use is within the scope of your permission.” As we have noted, permissive users are required by law to be insureds. The reasoning of Haynes compels the conclusion that this raises an objectively reasonable expectation that permissive user coverage would be coextensive with the coverage for other insureds. Therefore, the limitation is enforceable only if it was conspicuous, plain, and clear.
B. Sentry’s legislative intent argument
Sentry’s primary argument against the application of Haynes and the “conspicuous, plain and clear” standard is that applying the standard conflicts with the Legislature’s intent in enacting section 11580.1, subdivision (d)(2). Sentry expresses its view in several different ways: The “conspicuous, plain and clear” standard is not appropriate because “the Sentry Commercial Garage Policy language comports with the language of the Legislature” in section 11580.1, subdivision (d)(2); the Legislature meant section 11580.1, subdivision (d)(2) “to shield automotive business insureds and their carriers from overexposure to liability,” so a ruling invalidating the limitation “effectively abrogates the right of the Legislature to enact public policy without the interference of the judiciary”; and the trial court’s application of the standard “infringe[d] upon the Legislature’s power to guide public policy.”
According to Sentry, the present language of section 11580.1, subdivision (d)(2) is the end product of a series of amendments prompted by a series of California Supreme Court decisions—beginning with Interinsurance Exchange v. Ohio Cas. Ins. Co. (1962) 58 Cal.2d 142—that had thwarted legislative efforts to make permissive user limitations available. Any ruling reducing the availability of permissive user limitations in any way, Sentry contends, undermines the Legislature’s effort. “For more than forty years,” Sentry states, “when the judiciary has attempted to infringe upon the ability of auto dealership insureds to limit this [permissive user liability] exposure, the Legislature has stepped in ….” Sentry has attempted to support its position by requesting judicial notice of a set of legislative history documents.
The defect in Sentry’s argument is that section 11580.1, subdivision (d)(2) has nothing to do with how a provision limiting permissive user coverage must appear in a policy to be enforceable. It simply authorizes the inclusion of such a provision. That the Legislature intended to authorize that is undisputed and could not reasonably be disputed. This does not imply that the Legislature intended such provisions to be enforceable even if they are inconspicuous, not plain, or unclear.
The statute and the legislative history submitted by Sentry contain no suggestion that the Legislature had any view one way or the other on this question. The first case cited in Haynes for the “conspicuous, plain and clear” standard is Steven v. Fidelity & Casualty Co. (1962) 58 Cal.2d 862, 878. (Haynes, supra, 32 Cal.4th at p. 1204.) Sentry’s brief discusses amendments to section 11580.1, subdivision (d)(2) reacting to cases decided as late as 1973. If the Legislature wanted to prevent the application of the “conspicuous, plain and clear” standard to permissive user limitations drafted pursuant to section 11580.1, subdivision (d)(2), it has had many years in which to do so.
In light of this, we deny Sentry’s request for judicial notice. The request included two repealed statutes, one bill, one enrolled bill report, and seven letters to Governors Edmund G. Brown and Ronald Reagan from various legislators, regulators, and interested parties. Sentry does not contend that any of these are subject to mandatory judicial notice under Evidence Code section 451 or 459, so we will assume they are, at most, subject to permissive judicial notice under Evidence Code section 452. An appellate court may deny judicial notice of materials falling within Evidence Code section 452 if the materials are irrelevant. (Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1089, fn. 4.) We have reviewed the submitted items and found that none of them contain anything bearing on whether a limiting provision authorized by section 11580.1, subdivision (d)(2) need or need not be conspicuous, plain, and clear. We therefore deny judicial notice on the ground that the submitted materials are irrelevant.
It is also significant that the Haynes court was confronted with a statute that clearly allowed a permissive user limitation—section 11580.1, subdivision (a), which states that the requirement of permissive user coverage coextensive with named-insured coverage does not apply to policies providing coverage greater than the statutory minimums—just as we are. The Supreme Court did not think this made the “conspicuous, plain and clear” standard inapplicable. Sentry asserts that section 11580.1, subdivision (a) is different from section 11580.1, subdivision (d)(2) because it contains less detail about the type of coverage limitation it permits. This difference has no bearing on whether the “conspicuous, plain and clear” standard should be applied to policies containing the limitation. The Haynes court’s application of the standard to a coverage limitation authorized by statute supports its application to a similarly authorized limitation in this case.
Finally, Sentry cites section 11580.05, which declares that “the public policy of this state in regard to provisions authorized or required to be included in policies affording automobile liability insurance … shall be as stated in this article” and “this article expresses the total public policy of this state respecting the content of such policies ….” We are not free to conclude, as Sentry urges, that this provision means we cannot apply the “conspicuous, plain and clear” standard to the coverage limitation at issue here because applying it would amount to imposition of a court-created public policy. To say that would be tantamount to saying Haynes was wrongly decided, which we have no authority to do.
For all these reasons, we reject Sentry’s argument that applying the “conspicuous, plain and clear” standard in this case contravenes the intent of the Legislature.
C. Sentry’s argument on the reasonable expectations of the policyholder
Sentry argues that the “conspicuous, plain and clear” standard is inapplicable because a car dealership would not reasonably expect its insurance to cover permissive users for liability up to the same limits as those that apply to the dealership and its employees. This is so, Sentry says, because dealers know it would be prohibitively expensive to provide coverage up to the usual limits for all their customers who are test-driving cars for sale or driving loaner cars while their cars are being serviced. Even if this coverage could be affordably obtained, dealers would not wish to pay for it. While individual policyholders might want substantial permissive user coverage to cover friends and family, car dealers have no similar wish to cover their customers.
Under Haynes, however, these subjective expectations of policyholders are not the relevant consideration. In Haynes, the Supreme Court considered the insurer’s argument that individual consumers do not expect coverage above the statutory minimums for permissive users because they generally would not want to bear the cost of that coverage. (Haynes, supra, 32 Cal.4th at p. 1213.) The court rejected this notion, asserting, among other things, that the correct inquiry involves an examination of the expectations reasonably set up by the policy, not speculation about what policyholders’ abstract preferences may be. “‘It is not our role to speculate on the policyholder’s abstract expectations, but rather to consider reasonable expectations defined by the insurer’s policy language.’ [Citation.]” (Id. at p. 1214.) Further, the parts of the policy we are to look at for this stage of the analysis are the basic clauses saying who is insured, for what risks, and up to what limits—not the challenged limitations or exclusions themselves. (See id. at pp. 1213, 1214-1215.)
As applied here, this reasoning means our task is not to consider whether car dealers probably want permissive user coverage without the type of limitation Sentry’s policy contained, or whether they probably think they have it after reading the entire policy. It is to determine—as we did earlier in this opinion—whether the policy’s language, apart from the challenged limitation itself, raises a reasonable expectation of coverage. Just as in Haynes, the policy here does raise this expectation because it defines permissive users as insureds and initially sets forth coverage limits without stating that those limits apply only to other insureds, not to permissive users. That is why the limitation is required to be conspicuous, plain, and clear.
D. Sentry’s argument on commercial versus consumer policies
Next, Sentry contends that the “conspicuous, plain and clear” standard should not be applied because the commercial garage policy was a commercial policy issued to a business, not an ordinary automobile policy issued to an individual. A purchaser of a commercial policy should not be considered a layperson, Sentry asserts, because such a policyholder is usually more sophisticated than a purchaser of an individual policy and more likely to rely on advice of counsel or of an insurance expert. Because of this, a commercial policyholder does not need the protection of the “conspicuous, plain and clear” standard, which thus should not be applied. We disagree.
There is no authority for the claim that the “conspicuous, plain and clear” standard does not apply to commercial policies and ample authority that it does. This court applied it to a commercial general liability (CGL) policy recently in Essex Ins. Co. v. City of Bakersfield (2007) 154 Cal.App.4th 696. Essex Insurance Company issued a CGL policy to the City of Bakersfield, covering a city fund raising event held on private property. (Id. at p. 699.) An accident involving a car and a tractor-trailer occurred at the entrance to the property’s parking lot. (Id. at pp. 699-700.) Alleging that a dangerous condition on the property caused the accident, the driver of the car sued the city, which made a claim against the policy. (Id. at pp. 700-701, 702.) Essex denied the claim on the basis of two policy provisions excluding coverage for liability for bodily injury arising from the use of an automobile. (Id. at pp. 701-702, 706.) The city filed a coverage lawsuit against Essex, in which Essex prevailed on a motion for summary judgment. (Id. at pp. 702-703.) We reversed, stating that any provision excluding or limiting coverage reasonably expected by the insured must be conspicuous, plain, and clear. (Id. at pp. 699, 705.) Relying on Haynes, we concluded that the city had a reasonable expectation of coverage based on the policy’s coverage provisions and that the exclusions did not plainly and clearly exclude coverage of liability arising from all auto accidents. (Essex Ins. Co. v. City of Bakersfield, supra, at pp. 705-706, 707.)
There are many other examples of cases in which California courts applied the “conspicuous, plain and clear” standard to commercial insurance policies. (See 2 Witkin, Summary of Cal. Law (10th ed. 2005) Insurance, § 65, pp. 107-110 [collecting cases applying “conspicuous, plain and clear” standard].) Sentry’s claim that the “conspicuous, plain and clear” standard does not apply to exclusions and limitations in commercial policies is untenable.
E. Sentry’s remaining arguments
Sentry next argues that the Haynes standard should not be applied to invalidate the permissive user limitation because the result would be a windfall to Peel’s survivors. A windfall is “any unexpected acquisition, gain, or stroke of good luck.” (Webster’s New World Dict. (2d college ed. 1982) p. 1629.) Compensation for damages paid through an insurance policy lacking a legally valid limitation for those damages and otherwise legally required to cover them is not a windfall. Sentry’s argument is based on the view that no one expected coverage because no one knew the dealer had failed to transfer ownership. But the only relevant expectation, as we have explained, is the policyholder’s objectively reasonable expectation of coverage based on the coverage provisions of the policy. Here, the policyholder would have an objectively reasonable expectation that permissive users were covered to the same extent as other insureds. It is undisputed that Mario Quintero was a permissive user of an insured vehicle at the time of the accident. The reason why he was one—the policyholder’s delay in transferring title—can confer no immunity from liability on the insurer.
Sentry also asserts that applying the “conspicuous, plain and clear” standard to commercial garage policies will have a severe impact on the market for those policies and on the economics of commercial garages. Applying the standard to these policies will make the policies prohibitively expensive or prevent car dealers from allowing test-drives and providing loaner cars. This contention has no merit. The application of the standard will not prevent any insurer from drafting a policy with a valid permissive user limitation. The limitation simply must be conspicuous, plain, and clear.
Finally, Sentry observes that permissive user limitations drafted pursuant to section 11580.1, subdivision (d)(2) and a predecessor statute were enforced in Tilley v. Truck Ins. Exchange (1978) 84 Cal.App.3d 263, 265-266, Cal-Farm Ins. Companies v. Fireman’s Fund American Ins. Companies (1972) 25 Cal.App.3d 1063, 1068, 1074, Truck Ins. Exch. v. Wilshire Ins. Co. (1970) 8 Cal.App.3d 553, 558-560, and National Emblem Ins. Co. v. Rios (1969) 275 Cal.App.2d 70, 74. These cases are not on point, for none of them considered whether the limitation was, or was required to be, conspicuous, plain, and clear. A case is not authority for a proposition it did not consider. (Ginns v. Savage (1964) 61 Cal.2d 520, 524, fn. 2.)
II. Application of the standard
Having determined that the “conspicuous, plain and clear” standard is applicable, we consider next whether the permissive user limitation in Sentry’s policy satisfied the standard. As the insurer, Sentry had the burden of making sure the policy satisfied the standard. (Haynes, supra, 32 Cal.4th at p. 1204.) For the reasons that follow, we conclude that it failed to do so.
The policy, titled commercial garage policy, is 89 pages long and consists of many separately paginated documents. As presented in the certified copy submitted with Sentry’s motion for summary judgment, the documents were in the following order:
DOCUMENT TITLE
PAGES
Commercial Garage Declarations
6
Additional Insured/Loss Payable Schedule
1
California Changes
1
California Uninsured MotoristsCoverage—Bodily Injury
7
Exclusion of Certified Acts of Terrorism
1
Broad Form Products Coverage
1
Garage Locations and Operations MedicalPayments Coverage
1
Fellow Employee Bodily Injury
1
Mexico Coverage—Limited
2
Garage Coverage Form
34
Exclusion of Autos Loaned to Schools
1
Dealers Drive away Collision Coverage
1
Operations Defense Costs—AdditionalInsurance
5
False Pretense Coverage
3
Broadened Garage Coverage Endorsement
7
Auto Medical Payments Coverage
2
Loss Payable Clause
1
Employment Practices Endorsement
4
Broad Form Completed Operations
1
Nuclear Energy Liability ExclusionEndorsement (Broad Form)
3
California Changes—Cancellation andNonrenewal
6
The first page of the commercial garage declarations document (which is also the first page of the policy) sets forth the coverage limits in a three-column table. The first column describes the type of coverage, the second contains a numerical symbol for the category of covered automobiles, and the third states the coverage limit in dollars. The first row of this table shows that the limit for liability coverage for automobiles classified as “21” is $500,000 per accident for “Garage Operations.” Many pages later, on the first page of the Garage Coverage Form, the code “21” is defined as “Any ‘Auto.’” “Auto” and “Garage Operations,” which appear in quotation marks throughout the policy, are defined still later. The parties agree that all this means the per-accident coverage limit for cars owned by the dealer is $500,000.
Twenty pages after the coverage limits table, on page five of the Garage Coverage Form, begins paragraph 3 of section II, subdivision A of that form, titled “WHO IS AN INSURED.” Subparagraph a.(5) of this paragraph defines the following as an insured: “Anyone else required by law to be an insured while using a covered ‘auto’ you own, hire or borrow, if the use is within the scope of your permission.” The parties agree that this means permissive users are insureds, as required by section 11580.1, subdivision (b)(4).
On page 13 of the Garage Coverage Form begins subdivision C of section II, titled “LIMIT OF INSURANCE.” Below this, on page 14, is paragraph 3 of section II, subdivision C, titled “LIMIT OF INSURANCE—‘GARAGE OPERATIONS’—COVERED ‘AUTOS.’” Paragraph 3 begins:
“For ‘accidents’ resulting from ‘garage operations’ involving the ownership, maintenance or use of covered ‘autos’, the following applies ….”
Five paragraphs of text follow. The second of these reads:
“For ‘contract drivers’ and anyone required by law to be an ‘insured’ for the use of a covered ‘auto’, the most we will pay for all damages resulting from one ‘accident’ involving a covered ‘auto’ is that portion of the Each ‘Accident’ Limit of Insurance—‘Garage Operations’—Covered ‘Autos’ needed to comply with the minimum limits provision of the law in the jurisdiction where the ‘accident’ took place. When there is other insurance applicable to the ‘accident’, we will pay only the amount needed to comply with these minimum limits after the other insurance is exhausted.”
This is the section 11580.1, subdivision (d)(2) permissive user limitation, which, as we have said, was required to be conspicuous, plain, and clear.
There are key similarities between this and the permissive user limitation in the policy in Haynes. The insurer there relied on something called endorsement S9064, in which the permissive user limitation appeared. (Haynes, supra, 32 Cal.4th at pp. 1205, 1206.) The declarations page listed this alphanumeric designation (S9064) along with the designations of 10 other endorsements. The declarations page contained no indication, however, of what endorsement S9064 said and no other indication that coverage of permissive users was less than coverage of named insureds. (Id. at pp. 1206-1207.) The Supreme Court stated: “[N]o reason appears why the actual dollar coverages for permissive users could not have been placed with the policy coverages on the declarations page, where one would expect an insured to look to determine the policy limits.” (Id. at p. 1206.)
The reader could only find the permissive user limitation by turning the pages until reaching “the policy’s 24th page—after perusing pages containing language relating, inter alia, to ‘MEXICO COVERAGE,’ ‘BUSINESS USE,’ AND ‘CUSTOMIZING EQUIPMENT,’ along with a page ‘LEFT INTENTIONALLY BLANK.’” On the 24th page appeared the heading “‘PART I—LIABILITY—PERMISSIVE USER LIMITATION.’” (Haynes, supra, 32 Cal.4th at p. 1207.) The term “permissive user” was not defined in the policy, “so its significance might … escape the average lay reader notwithstanding the capitalization.” The word “limitation,” similarly, might not convey to a lay reader that the amount of liability coverage was limited. The text of the limitation itself 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.’” All these factors together meant the limitation was not “‘positioned in a place and printed in a form which would attract a reader’s attention’” and therefore was not conspicuous within the meaning of the standard. (Ibid.)
The permissive user limitation at issue in the present case also fails the test of conspicuousness. It was even less conspicuous than the one in Haynes. As in Haynes, there was no indication on the declarations page that coverage for permissive users was less than $500,000 per accident. The heading “LIMIT OF INSURANCE” finally appears 34 pages into the policy, but this heading still does not alert the reader that coverage for permissive users is limited. The text of the limitation is not bolded, italicized, or otherwise distinguished from the surrounding text. The paragraph relating to permissive users is one of several under the heading; it has no subheading of its own. Within the paragraph, permissive users are not mentioned by that name or any equivalent a layperson might grasp. Instead, the text merely refers to “anyone required by law to be an ‘insured.’”
Sentry asserts that the limitation did not need to be mentioned on the declarations page in this case because, unlike in Haynes, the declaration “page” here was several pages long. “Placing the limiting language for permissive users on the declarations page would not render it any more conspicuous in this instance” than not doing so, Sentry says. We disagree. Whether set forth on a single page or several, the declarations are “where one would expect an insured to look to determine the policy limits.” (Haynes, supra, 32 Cal.4th at p. 1206.)
Sentry also argues that the heading “LIMIT OF INSURANCE” rendered the limitation conspicuous. As we have said, this heading did not draw attention to the fact that there was a limitation on coverage of permissive users. Finally, Sentry says the policy here, unlike the one in Haynes, cannot be faulted for failing to define “permissive user” because it does not use that term. As we have stated, the reference to “anyone required by law to be an ‘insured’” instead of “permissive user” rendered the limitation less conspicuous, not more so.
Sentry also claims that “the limiting language in Sentry’s Commercial Garage Policy is distinguished from the rest of the policy print.” This is simply not the case. The limitation is set forth in one of five paragraphs under the heading “LIMIT OF INSURANCE—‘GARAGE OPERATIONS’—COVERED ‘AUTOS.’” The paragraph is set in print identical to that of the surrounding paragraphs, has no subheading of its own, and is not distinguished from the surrounding text in any other way.
We need not decide whether the permissive user limitation in Sentry’s policy also failed to be plain and clear. We conclude that the limitation fails to satisfy the Haynes standard on the basis of the conspicuousness element alone.
Sentry claims the trial court ruled that the permissive user limitation was plain and clear, though not conspicuous. It is not clear that this is correct. The court’s written order stated only that the limitation was not conspicuous. It said nothing at all about plainness or clarity.
Defendants make an alternative argument that the endorsement called “CALIFORNIA CHANGES” nullified the permissive user limitation or else rendered the policy ambiguous, thus necessitating construction in favor of coverage. We will not discuss this issue.
DISPOSITION
The judgment is affirmed. Sentry’s request for judicial notice filed on March 19, 2007, and its amended request for judicial notice filed on April 26, 2007, are denied.
Defendants shall recover their costs on appeal.
WE CONCUR:CORNELL, Acting P.J., GOMES, J.
After the court announced its ruling at the hearing on the motions for summary judgment, however, Sentry’s counsel asked if the ruling was based only on the issue of conspicuousness. The court replied: “Only on the basis of conspicuousness. I have told counsel that as to the plain and clear I felt that BMW could understand that language.” The court may or may not have intended this as a ruling on plainness and clarity; the absence of any discussion of those elements in the written ruling tends to show the court intended no ruling on those elements one way or the other. We, in any event, express no opinion about the clarity or plainness of the limitation.