United Financial Casualty Company v. Joshua A. Smith et al

Filing 86

Order by Hon. James Donato granting 74 Motion for Summary Judgment. (jdlc1S, COURT STAFF) (Filed on 4/11/2017)

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1 2 3 4 UNITED STATES DISTRICT COURT 5 NORTHERN DISTRICT OF CALIFORNIA 6 7 UNITED FINANCIAL CASUALTY COMPANY, 8 Plaintiff, 9 Case No. 16-cv-03733-JD ORDER RE SUMMARY JUDGMENT v. 10 JOSHUA SMITH, et al., United States District Court Northern District of California 11 Defendants. 12 13 United Financial Casualty Company (“UFCC”) brought this declaratory judgment action 14 for a determination of its obligations in an underlying California state lawsuit based on a 15 commercial auto insurance policy issued to defendant Joshua Smith. The underlying case 16 involves a car accident on August 5, 2014, in which Joshua’s son, Brenton Smith, was driving his 17 1999 Subaru back home from the beach with friends. Brenton worked for his father’s concrete 18 company and had his work tools in the car. The main dispute is whether the “non-owned auto” 19 provision in Joshua’s commercial policy covered the Subaru at the time of the accident. 20 Several of the defendants named by UFCC defaulted, including Brenton, Joshua, Jennie 21 Smith, Joshua’s business entities (Smith’s Concrete, Inc. and/or Smiths Concrete Construction, 22 Inc.), and Lariza Gonzalez. Dkt. Nos. 36, 37, 44, 76. UFCC filed a motion for summary 23 judgment against the two remaining defendants, Nathan Richard and Chonondra Gialdini, who 24 were injured passengers and are the plaintiffs in the state action. Dkt. No. 74. The motion is 25 granted. 26 27 28 BACKGROUND Joshua Smith is a licensed cement contractor and the owner of Smiths Concrete Construction, Inc., which he incorporated as a business in 2013. Joshua Smith Dep. (Dkt. No. 74- 1 2) at 10:3-11:8. At the time of the accident, the company had approximately 10-14 employees, 2 including his son Brenton Smith who worked as a cement mason. Id. at 14:5-15:6, 20:1-4. The 3 employees used their own vehicles to get to jobsites and were required to have their own masonry 4 tools. Id. at 20:5-24. Brenton drove his 1999 Subaru for this purpose and generally kept his tools 5 in his car at all times during the work week, even during personal use. Dkt. No. 71 ¶¶ 5-7. He 6 was a registered owner of the 1999 Subaru, along with his mother Jennie Smith. Id. ¶ 4. On August 5, 2014, Brenton was working at a jobsite for Smiths Concrete Construction, 7 8 Inc. Id. ¶ 8. He left work around 2:00 p.m. and drove home where he lived with his parents in 9 Ukiah. Id. ¶¶ 8-9. Later that night, he went to a beach near Fort Bragg with friends in his Subaru. Id. ¶ 15. Before midnight, Brenton drove Chonondra Gialdini, Nathan Richard, and Lariza 11 United States District Court Northern District of California 10 Gonzalez home from the beach. Id. ¶¶ 19-20. He lost control of the Subaru and it crashed. Id. ¶ 12 21. He was not working when he left for the beach, at the beach, or on his way back to Ukiah 13 before the accident. Id. ¶¶ 13, 18, 24. At the scene of the accident, Brenton reported to a 14 California Highway Patrol officer that the weight of the tools and equipment in the Subaru 15 “caused the car to bottom out.” Id. ¶ 25. In 2015, Richard and Gialdini filed personal injury lawsuits in Mendocino County Superior 16 17 Court against Joshua, Jennie, Brenton, and Smiths Concrete Construction, Inc. Id. ¶¶ 29-30; see 18 also Dkt. No. 71-2 at 1-7. The cases have been consolidated for all purposes and are referred to 19 here as the Richard litigation. Dkt. No. 71 ¶ 31. On the day of the accident, Joshua Smith carried a commercial auto insurance policy 20 21 issued by UFCC. Id. ¶ 2. Joshua was the only named insured on the declarations page. Id.; Dkt. 22 No. 71-1 at 5. The scheduled insured vehicles on the policy were a 2000 Ford F350, a 2011 23 Dodge Ram 3500, and a 1998 Chevrolet C3500/K3500. Dkt. No. 71-1 at 6. The rated drivers on 24 the policy included Joshua, Jennie, and Jeremiah Douglas. Id. Under the liability coverage part of 25 the policy, UFCC promised to defend and indemnify an “insured” against bodily injury and 26 property damage claims arising out of the ownership, maintenance or use of an “insured auto.” Id. 27 at 16. 28 2 Joshua added an Employer’s Non-Ownership Liability Endorsement so that the definition 1 2 of an “insured auto” was modified to include a “non-owned auto.” Id. at 38-39. A “non-owned 3 auto” is defined as: 7 an auto that you do not own, lease, hire, rent, or borrow, and that is used in connection with your business. This includes autos owned by your employees, partners (if you are a partnership), members (if you are a limited liability company), or members of their households, but only while such autos are used in your business or your personal affairs. 8 Id. at 39. “You,” “your” and “yours” refer to the named insured shown on the declarations page, 9 Joshua Smith. Id. at 15 ¶ 17. 4 5 6 UFCC filed this action for a declaration that it has no duty to defend or indemnify the 10 United States District Court Northern District of California 11 Smith family members or the corporate entities against claims arising out of the car accident. Dkt. 12 Nos. 1, 55. Richard and Gialdini filed counterclaims seeking competing declarations. Dkt. Nos. 13 20, 66. DISCUSSION 14 15 The parties’ primary dispute is whether the “non-owned auto” provision covered the 1999 16 Subaru at the time of the accident. A plain reading of the policy language shows that it does not. 17 Insurance policies are a species of contract, and they are construed by the “tried and true 18 rules” of California contract interpretation. See Compass Ins. Co. v. Univ. Mech. & Eng’g 19 Contractors, Inc., No. 14-cv-04295-JD, 2016 WL 1169312, at *2 (N.D. Cal. Mar. 25, 2016). The 20 “non-owned auto” provision is a common feature in commercial insurance policies and is meant to 21 “provide employers with protection from liability based on the doctrine of respondeat superior 22 arising out of an employee’s commission of a tort while using their own personal vehicles in the 23 employer’s business.” Union Standard Ins. Co. v. Hobbs Rental Corp., 566 F.3d 950, 954 (10th 24 Cir. 2009) (internal quotation omitted). 25 The UFCC provision here covers “autos owned by [Joshua Smith’s] employees … but only 26 while such autos are used in [Joshua Smith’s] business or [Joshua Smith’s] personal affairs.” Dkt. 27 No. 71-1 at 39. There is no dispute that the Subaru was at times used “in connection with” Joshua 28 Smith’s business, as Brenton used it to carry tools and get himself to and from jobsites. But 3 1 defendants’ effort to stretch that fact for coverage of an accident related to an after-hours party 2 goes too far. The phrase “in connection with” must be read in context with the entire provision. 3 See Compass, 2016 WL 1169312, at *2. Other courts have read similar clauses to mean “while 4 performing company-related work,” Hobbs, 566 F.3d at 953, “to be engaged in [the policy- 5 holder’s] business,” State Farm Fire & Cas. Co. v. Lezina, 168 F. Supp. 3d 900, 905-06 (E.D. La. 6 2016) (internal quotation omitted), or while “acting in” the employer’s affairs, Pham v. Hartford 7 Fire Ins. Co., 419 F.3d 286, 290 (4th Cir. 2005). These are common-sense readings of ordinary 8 words, and they lead to the conclusion that UFCC’s coverage obligations extend no further than 9 autos used for Joshua’s business or personal affairs at the time damages arise. 10 Even assuming purely for discussion and in defendants’ favor that Brenton was employed United States District Court Northern District of California 11 by his father, rather than by Smiths Concrete Construction, Inc., there can be no serious dispute 12 that he was not performing work for Joshua’s business or Joshua’s personal affairs when the 13 accident occurred. Brenton was driving home with friends from a party at the beach. There is no 14 evidence that Brenton went to the beach at Joshua’s request. There is no evidence that Joshua 15 instructed all employees to carry tools in their cars at all times for his convenience or that 16 employees were on call 24 hours a day. Brenton was engaged solely in a personal social outing, 17 and so the Subaru was not “used in” the business or personal affairs of his employer at the time of 18 accident. See Lincoln Gen. Ins. Co. v. Gateway Sec. Servs., Inc., No. 06-cv-01143-OWW, 2007 19 WL 3203020, at *10-13 (E.D. Cal. Oct. 29, 2007). 20 Defendants’ focus on the presence of work tools in the Subaru is misdirected. That the 21 tools Brenton carried were used for Joshua’s business does not mean that the Subaru was being 22 used for the business. To hold otherwise would effectively rewrite the non-owned auto 23 endorsement to extend coverage in a way that neither party anticipated or bargained for. And 24 defendants did not present any case law supporting the theory that an employee’s decision to keep 25 work tools in his personal car means that car is engaged in the employer’s business at all times. 26 Richard’s suggestion that UFCC is on the hook on “community property” grounds is 27 equally misplaced. See Dkt. No. 80 at 10. Richards says that Brenton was an “insured” because 28 Joshua was an owner of the Subaru under California community property law and because 4 1 Brenton was driving the Subaru permissively. Id. Under the UFCC policy, “insured” includes 2 “[a]ny person while using, with your permission, and within the scope of that permission, an 3 insured auto you own, hire, or borrow except … [t]he owner …” Dkt. No. 71-1 at 16. But the 4 undisputed facts show that Brenton was a registered co-owner of the car, and so could not have 5 been an “insured” or given permission from Joshua to drive the car. See Venne v. Standard 6 Accident Ins. Co., 171 Cal. App. 2d 242, 246 (1959); see also Bohannon v. Aetna Cas. & Sur. Co., 7 166 Cal. App. 3d 1172, 1176 (1985). 8 Summary judgment is granted and UFCC has no duty to defend or indemnify in the 9 Richard litigation under the commercial auto policy. See Dkt. No. 71-2 at 1-7; Dkt. No. 71-1; see also Compass, 2016 WL 1169312, at *5-6. Judgment will be entered for UFCC. The case is 11 United States District Court Northern District of California 10 closed. 12 13 IT IS SO ORDERED. Dated: April 11, 2017 14 JAMES DONATO United States District Judge 15 16 17 18 19 20 21 22 23 24 25 26 27 28 5

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