The California Court of Appeal, Sixth Appellate District, reversed the trial court's decision in favor of American International Underwriters, Inc. ("AIU") and against American Guarantee and Liability Insurance Co. ("American") on cross-motions for summary judgment that coverage for "[t]he owner or anyone else from whom you hire or borrow a covered 'auto' that is a 'trailer'" extended to independent contractors over whom the named insured exercised no dominion or control.
Denbeste Transportation, Inc. ("Denbeste") subcontracted with Double D Transportation Company ("Double D") to remove soil from an excavation site. Double D, in turn, entered into a subhaul agreement with James D. Camara ("Camara"). Both Double D and Camara were acting as independent contractors under the agreements.
Camara ran over and severely injured Christopher Torgerson while driving Camara's own tractor connected to a Double D trailer. Torgerson sued Camara, Denbeste, Double D and others for negligence.
AIU, which had issued an umbrella policy to Double D, and American, which had issued a commercial auto policy to Denbeste, contributed $1,450,000 each towards a global settlement on behalf of "all of its insureds involved in the Action." AIU and American reserved their rights to pursue each other.
AIU then sued American for equitable contribution, equitable subrogation, equitable indemnity, and declaratory relief. American filed a cross-complaint. AIU maintained it was an excess insurer, whereas American provided primary coverage for Camara, Double D, and Denbeste. American argued neither Double D, nor Camara was an insured under the Denbeste policy.
The American policy covered Denbeste for liability arising out of property damage or bodily injury resulting from the use of a covered "auto." The term "auto" included "ANY 'AUTOS,'" "HIRED 'AUTOS' ONLY," and "NONOWNED 'AUTOS' ONLY." Hired autos were those "you lease, hire, rent or borrow," while nonowned autos were those the policyholder did not own, lease, hire, rent or borrow, but which "are used in connection with your business." The term "auto" included trailers.
The American policy defined "who is an insured" to include "b. Anyone else while using with your permission a covered 'auto' you own, hire or borrow . . . [? ] c. The owner or anyone else from whom you hire or borrow a covered 'auto' that is a 'trailer' while the 'trailer is connected to another covered 'auto' that is a power unit . . . [? ] e. Anyone liable for the conduct of an 'insured' described above but only to the extent of that liability."
The American policy stated that coverage was primary "for any covered 'auto' while hired or borrowed by you and used exclusively in your business as a 'trucker' and pursuant to operating rights granted to you by a public authority."
At issue was whether these provisions covered Camara and Double D on a primary basis. The parties filed cross-motions for summary judgment. The trial court granted AIU's motion and denied American's motion in its entirety, finding that Double D was an insured under the American policy "as the owner from whom Denbeste Transportation hired a covered 'auto' that is a 'trailer.'"
Reversing the trial court, the Court of Appeal cited Civil Code §1925 which defines "hiring" as synonymous with renting – that is, "a contract by which one gives to another the temporary possession and use of property, other than money, for reward, and the latter agrees to return the same to the former at a future time." The chief characteristic of a renting or leasing, the court held, is the giving up of possession to the hirer so that the hirer and not the owner uses and controls the rented property.
Finding no "hiring" in the arrangement with Double D, the Court of Appeal explained that Denbeste did not assume possession of or exercise dominion and control over Double D's trailer or Camara's tractor.
The Court of Appeal also found Denbeste did not "borrow" the trailer or tractor, as the term "borrower" means someone who, with the permission of the owner, has temporary possession and use of the property for his own purposes. The Court of Appeal noted possession connoted the right to exercise dominion and control.
In reaching its conclusion, the Court of Appeal distinguished Travelers Indemnity Company v. Swearinger (1985) 169 Cal.App.3d 779, in which the court held the term "borrow" meant "temporary use of (something not one's own)" and did not require a finding the borrower had possession, dominion or control.
This opinion is not final. It may be withdrawn from publication, modified on rehearing, or review may be granted by the California Supreme Court. These events would render the opinion unavailable for use as legal authority.
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