5th Feb 2015
After years of judicial straining to reconcile the oftentimes impeding interests of automobile liability insurers, their insureds and the State’s interest by way of a general public policy making owners of motor vehicles financially responsible to those injured by them in the operation of such vehicles, the Legislature announced the public policy “in regard to provisions authorized or required to be included in policies affording automobile liability insurance”. [Insurance Code § 11580.05; Farmers Ins. v. Cocking (1981) 29 Cal. 3d 383, 388; Mercury Cas. v. Chu (2014) 229 Cal. App. 4th 1432, 1443] Concurrently with the adoption of § 11580.05, the Legislature also enacted Insurance Code § 11580.1, carefully delineating the minimum required coverages of, and the extent of permitted exclusions to coverage in, policies of automobile liability insurance issued in this state. [Mercury Cas. v. Chu (2014) 229 Cal. App. 4th 1432, 1444]
Insurance Code § 11580.1(c) – exclusions
Insurance Code § 11580.1(c) lists the ONLY PERMISSIBLE exclusions from coverage allowed under California law for an automobile liability insurance policy. “Any exclusion not expressly authorized by section 11580.1 is therefore impermissible and invalid. [Mercury Cas. v. Chu (2014) 229 Cal. App. 4th 1432, 1444 citing CSAA v. Gong (1984) 162 Cal. App. 3d 518, 528] Insurance Code § 11580.1(c) provides:
“[T]he insurance afforded by any policy of automobile liability insurance to which subdivision (a) applies, including the insurer’s obligation to defend, may, by appropriate policy provision, be made inapplicable to any or all of the following:
(1) Liability assumed by the insured under contract. See § A104 ASSUMED BY THE INSURED.
(2) Liability for bodily injury or property damage caused intentionally by or at the direction of the insured. See § E54 EXPECTED OR INTENDED ACT FROM STANDPOINT OF INSURED; § I58 INTENTIONAL ACT.
(3) Liability imposed upon or assumed by the insured under any workers’ compensation law. See § W25 WORKERS’ COMPENSATION; § E14 EMPLOYER’S LIABILITY INSURANCE.
(4) Liability for bodily injury to any employee of the insured arising out of and in the course of his or her employment. See § E13.03 EMPLOYER’S DUTY TO DEFEND EMPLOYEE; § H11 HIRED AUTO LIABILITY COVERAGE; § C128 COURSE AND SCOPE OF EMPLOYMENT.
(5) Liability for bodily injury to an insured or liability for bodily injury to an insured whenever the ultimate benefits of that indemnification accrue directly or indirectly to an insured. See § F12 FAMILY EXCLUSION [§ F12:1 Automobile policy]; R61 RESIDENT OF SAME HOUSEHOLD [§ R61:2 Resident-relative exclusion].
(6) Liability for damage to property owned, rented to, transported by, or in the charge of, an insured. A motor vehicle operated by an insured shall be considered to be property in the charge of an insured. See § P110 PROPERTY OWNED, RENTED, TRANSPORTED BY OR IN THE CHARGE OF THE INSURED.
(7) Liability for any bodily injury or property damage with respect to which insurance is or can be afforded under a nuclear energy liability policy.
(8) Any motor vehicle or class of motor vehicles, as described or designated in the policy, with respect to which coverage is explicitly excluded, in whole or in part.
“The” insured – “an” insured
The eight (8) permitted exclusions in section 11580.1(c), refer to “the” insured and “an” insured. These two terms are further defined in Insurance Code § 11580.1(c)(8) as follows:
“The” insured as used in paragraphs (1), (2), (3), and (4) described in Insurance Code § 11580.1(d) means only that insured under the policy against whom the particular claim is made or suit brought. “An” insured as used in paragraphs (5) and (6) shall mean any insured under the policy including those persons who would have otherwise been included within the policy’s definition of an insured but, by agreement, are subject to the limitations of paragraph (1) (d) [designated driver exclusion].” [Mercury Cas. v. Chu (2014) 229 Cal. App. 4th 1432, 1445] See discussion § I48 INSURED [§ I48:1 – I48:2]; § E49 EXCLUSIONS [§ E49:17 Automobile exclusions permitted by statute: Insurance Code § 11580.1(c)].
Non-relative-residents not excluded under Insurance Code § 11580.1(c)
Non-relative residents, inhabiting the same dwelling as the named insured, are not excluded by the resident-relative exclusion in an automobile policy. [Mercury Cas. v. Chu (2014) 229 Cal. App. 4th 1432, 1451 (Farmers Ins. Exchange v. Cocking (1981) 29 Cal. 3d 383 opinion limited to “relatives”)]
This result exists even though the automobile liability policy language specifies that “residents other than those” described as relatives or persons listed in the policy are excluded. [Mercury Cas. v. Chu (2014) 229 Cal. App. 4th 1432, 1451] See § P120 PUBLIC POLICY [§ P120:4 Policies contrary to public policy as expressed in a “statute”].
Such non-relatives not excluded by Insurance Code § 11580.1(c) includes:
1. college roommates
2. temporary co-habitators
3. complete strangers. [Mercury Cas. v. Chu (2014) 229 Cal. App.4th 1432, 1451] See § F12 FAMILY EXCLUSION [§ F12:1.1].
Automobile rental agreement is a primary insurance policy; requirement that exclusion in “rental agreement” cannot exceed exclusions imposed by Insurance Code § 11580.1
A rental agreement is considered by the law to be a liability insurance policy. A rental agreement being an automobile liability insurance policy must comply with Insurance Code § 11580.1. [Hertz Corp. v. Home Ins. Co. (1993) 14 Cal. App. 4th 1071, 1077-1078] The rental agreement contained a “prohibited use of the car” paragraph stating that the car may not be used by anyone under the influence of alcohol or other intoxicants such as drugs. The court held that the exclusion for driving while intoxicated was unenforceable in that Insurance Code § 11580.1 did not permit an insurer under a primary automobile insurance policy to exclude accidents caused by an intoxicated driver. Accordingly, to the extent that the exclusion purported to exclude coverage under Hertz’s primary insurance agreement, it was “void”. [Hertz Corp. v. Home Ins. Co. (1993) 14 Cal. App. 4th 1071, 1078] See § I46 INSURANCE POLICY [§ I46:6].
For other discussions regarding various subjects relating to automobile liability insurance policies contained in Mr. Cornblum’s legal text CALIFORNIA INSURANCE LAW DICTIONARY AND DESK REFERENCE see the following sections:
§ A4 ACCIDENT
§ C40 COLLATERAL SOURCE RULE
§ 42 COLLISION COVERAGE
§ C76 COMPREHENSIVE AUTOMOBILE COVERAGE
§ D8 DECLARATIONS PAGE
§ D43 DIMINUTION IN VALUE
§ F22 FINANCIAL RESPONSIBILITY LAW
§ M29.03 MEDICAL EXPENSES INCURRED VS. DISCOUNTED MEDICAL EXPENSE AMOUNTS
§ M31 MEDICAL PAY REIMBURSEMENT TO FIRST PARTY AUTOMOBILE INSURER
§ P32 PERMISSIVE USE
§ P33 PER PERSON/PER OCCURRENCE
§ P56 POLICY LIMITS DEMAND
§ P57 POLICY LIMITS DISCLOSURE
§ P61 POLICY TERM (PERIOD)
§ P78 PRIMARY/EXCESS INSURANCE
§ T12 TERRITORIAL COVERAGE UNDER AUTOMOBILE POLICY
§ U9 UNDER-INSURED MOTOR VEHICLE
§ U18 UNINSURED MOTOR VEHICLE
References in bold are to Mr. Cornblum’s legal text CALIFORNIA INSURANCE LAW DICTIONARY AND DESK REFERENCE (2014), published by ThomsonReuters (1-800-344-5008). Those with WestLaw can search using the database CAINLAWDDR.