Mercury Insurance v. Pearson (169 Cal. App. 4th 1064, 2008)

Opinion

MARGULIES, J.

David Douglas Pearson was struck by an uninsured motorist while crossing an intersection on foot. Pearson was listed as an additional driver under an automobile insurance policy issued by the Mercury Insurance Company (Mercury) to Pearson’s fiancée as the named insured. Asserting that the uninsured motorist provisions of the policy did not cover Pearson for injuries suffered in a pedestrian accident, Mercury denied coverage for Pearson. Mercury sued Pearson for declaratory relief and Pearson cross-claimed against Mercury and the insurance agents who procured the policy. Following Mercury’s demurrer and motion for judgment on the pleadings, the trial court granted judgment in favor of Mercury.

On appeal, Pearson contends that (1) Mercury’s insurance policy is ambiguous and created a reasonable expectation of coverage on his part, and (2) he should be permitted to amend his cross-complaint to allege causes of action against Mercury for vicarious liability and reformation of the policy. Finding no merit in these contentions, we affirm.

I. BACKGROUND

On October 22, 2005, Pearson and his fiancée, Susan Hyung, were struck by a speeding car driven by an uninsured motorist as they attempted to walk across an intersection at a crosswalk. Hyung died from her injuries and Pearson was badly injured. Pearson had purchased an automobile insurance policy issued by Mercury (the policy) covering Hyung and himself, which was in force at the time of the accident. Hyung was designated as the “named insured” in the policy. The policy’s declarations page listed Pearson and Hyung as “drivers,” and a “Designated Persons Endorsement” to the policy specified that Pearson was an additional person insured under the bodily injury coverage of the policy.

Hyung’s heirs made a claim under the uninsured motorist coverage of the policy. Mercury paid its full per-person limit of $100,000 on the Hyung claim. Pearson also made a claim for uninsured motorist benefits under the policy. Mercury denied Pearson’s claim on the grounds that (1) the uninsured motorist benefits under the policy only applied to “named insureds” or their spouses, or to relatives living in their household, unless the accident occurred “in or upon entering into or alighting from an insured motor vehicle”; and (2) Pearson did not qualify for uninsured motorist benefits because he was a pedestrian when the accident occurred and was not Hyung’s spouse or her relative living in the same household.

Mercury sued Pearson for declaratory relief that Pearson was not entitled to uninsured motorist benefits under the policy. Pearson cross-complained against Mercury, insurance agent, Jim Schoensiegel, and Vicencia & Buckley Insurance Services, Inc., an insurance agency (hereafter Vicencia), alleging causes of action for declaratory relief and reformation, breach of insurance contract, breach of the implied covenant of good faith and fair dealing, professional negligence, and breach of contract. Mercury demurred on the grounds that (1) as a matter of law, the policy did not provide uninsured motorist coverage for Pearson; (2) Pearson’s claim for breach of the implied covenant of good faith and fair dealing also failed because there was no coverage under the policy; and (3) Pearson’s causes of action for professional negligence and breach of contract failed to state a claim against Mercury.

The trial court sustained Mercury’s demurrer without leave to amend. Because the issue of coverage framed by its original complaint was still before the court, Mercury followed its demurrer with a motion for judgment on the pleadings, which was also granted. Pearson timely appealed from the ensuing judgment against him and in favor of Mercury.

n. DISCUSSION

Pearson contends that (1) ambiguities in the policy language and the Designated Persons Endorsement show that his coverage was coextensive with Hyung’s; and (2) in the alternative, the judgment should be reversed to permit him to proceed on theories of vicarious liability and/or reformation of the policy.

A. Policy Ambiguity

1. Relevant Policy Provisions

The relevant provisions of the policy are as follows:

Under the capitalized heading, “IMPORTANT NOTICE,” appearing on a separate page immediately following the cover page of the policy, is the following text: “Unless drivers residing with the Insured are NAMED in the declarations, coverage may not be afforded. If you desire coverage for drivers other than those shown, request your agent/broker to have your policy amended to list the additional drivers.”

Parts I, II, III, and IV of the policy provide coverage for defense and indemnity with respect to third party bodily injury and property damage liability claims (Part I), medical services (Part II), vehicular damage (Part III), and damages caused by uninsured motorists (Part IV). Parts I, II, and IV each contain separate clauses specifying the persons who are insured under them, while Part III specifies the vehicles that it covers. Under Part I, the persons insured include, with respect to accidents involving automobiles listed in the policy, the named insured or named insured’s spouse who resides with the named insured, persons listed as drivers in the policy declarations, persons using an owned automobile with the permission of the named insured, and persons residing with the permissive user if related to him or her by blood, marriage, or adoption. With respect to automobiles not listed in the policy, Part I affords coverage to the named insured or named insured’s spouse who resides with the named insured, and to relatives who reside with the named insured and are listed as drivers in the policy declarations.

Part II affords medical expense coverage to the named insured, each relative of the named insured who lives with the named insured and sustains bodily injury while occupying a listed automobile or who, as a pedestrian, sustains injury caused by a moving automobile, any other person injured while occupying a listed automobile if driven by the named insured, a relative who lives with the named insured, or a person driving with the named insured’s permission.

The uninsured motorist coverage provisions, contained in Part IV of the policy, state that Mercury will “pay all sums which the insured . . . shall be legally entitled to recover as damages from the owner, or operator of an uninsured motor vehicle because of bodily injury, sustained by the insured, caused by accident and arising out of the ownership, maintenance or use of such uninsured motor vehicles.” Immediately below the description of uninsured motorist coverage provided by the policy is a list of definitions. The policy defines the unqualified term “Insured” for purposes of Part IV to include (1) “the named insured and the spouse of the named insured and while residents of the same household, relatives of either while occupants of a motor vehicle or otherwise”; and (2) any other person “while in or upon or entering into or alighting from an insured motor vehicle.” This definition mirrors statutory definitions required by Insurance Code section 11580.2.

The policy also contained a Designated Persons Endorsement. This endorsement listed Pearson as a “designated person,” and amended the definition of “Persons Insured” in Part I of the policy to include “the person(s) designated by name in this endorsement.” Immediately below the language amending the policy, the endorsement includes the following four sentences, each set apart in a separate paragraph: “It is agreed that the designated person(s) resides with the ‘Named Insured,’ but is not a ‘relative’ as the words ‘Named Insured,’ and ‘relative’ are defined in the policy, [f] This policy does not provide coverage for any motor vehicle owned by, or acquired from, or available for the regular use of, a person(s) residing with the Named Insured unless such person(s) is occupying a motor vehicle listed in the policy declarations, [f] The uninsured motorist coverage does not provide coverage for bodily injury sustained by a resident of the same household as the Named Insured, who is not a relative, unless such person(s) is occupying a motor vehicle listed in the policy declarations. [