Unreported / Non-Citable
Background
In February 2016, Theresa Kendall rented a car from Avis and purchased optional additional liability insurance (ALI) provided by Ace American Insurance Co. While driving under the influence of alcohol, Kendall collided with Michael Gouin, causing his death; she was later convicted of vehicular manslaughter while intoxicated. Michael's parents filed a wrongful death action against Kendall and Avis, and in 2020 Michael's mother secured a default judgment against Kendall for approximately $1.9 million. She assigned her rights in the judgment to Michael's sister, Michelle Gouin, and Kendall assigned her rights against Ace and Avis to Michelle.
In 2022, Michelle sued Ace and Avis, alleging breach of the implied covenant of good faith and fair dealing, breach of contract, and recovery of a judgment under Insurance Code section 11580. Her claims were predicated on the allegation that the Ace policy provided primary automobile liability insurance to Kendall. Ace moved for summary judgment, arguing that its policy contained an intoxication exclusion that was valid in an excess policy. Michelle cross-moved for summary adjudication, contending the exclusion was unenforceable because the Ace policy operated as a primary policy, not an excess policy.
The trial court denied both motions, finding triable issues of fact regarding which rental agreement Kendall signed, whether Avis provided underlying insurance coverage, whether the Ace policy was primary or secondary, whether the intoxication exclusion was enforceable, whether Avis's certificate of self-insurance covered Kendall, and whether Avis's settlement was paid on its own behalf. Ace petitioned the Court of Appeal for a writ of mandate.
The Court’s Holding
The Court of Appeal granted the petition. It held that all but one of the purported factual disputes identified by the trial court were actually issues of policy interpretation and hence pure questions of law, such as whether the Ace policy operates as a primary or excess policy and whether the intoxication exclusion is enforceable. The only genuinely factual issue—which rental agreement Kendall signed—was not actually disputed, because Ace assumed for purposes of its motion that the operative rental agreement was the version attached to its answer.
Analyzing the policy's plain language, the court concluded the Ace policy was an excess policy. The policy was titled 'Excess Rental Liability Policy,' its insuring agreement provided that Ace would pay sums 'in excess of those payable under the terms of the Underlying Protection,' and it defined 'Underlying Protection' as including 'an approved program of self-insurance' meeting minimum motor vehicle liability requirements. It was undisputed that Avis had an approved self-insurance program providing primary coverage of $15,000 per person and $30,000 per collision to California renters who purchased ALI. The court rejected Michelle's argument that the rental agreement's disclaimer of insurance made the Ace policy primary: the policy was excess to qualifying self-insurance, not 'excess to nothing.'
Because the Ace policy was an excess policy, the intoxication exclusion was enforceable; Insurance Code section 11580.1's limits on permissible exclusions apply to primary policies, not excess policies backed by underlying insurance or self-insurance at statutory minimums. The court directed the trial court to vacate its order denying summary judgment, grant Ace's motion, and enter judgment in favor of Ace, and lifted the stay of trial court proceedings.
Key Takeaways
- An excess insurance policy's intoxication exclusion is enforceable when the policy requires underlying insurance or self-insurance equal to or greater than the statutory minimum coverage.
- Whether an insurance policy is primary or excess is a question of law determined by the policy's plain language, not a factual dispute for the trier of fact.
- A rental car company's approved program of self-insurance can constitute 'underlying protection' making an additional liability policy excess, even if the rental agreement itself states it provides no insurance.
- Trial courts must distinguish genuine factual disputes from legal questions of policy interpretation when ruling on summary judgment motions.
- A movant's assumption of a particular contract version for purposes of summary judgment can eliminate a purported factual dispute about which version applies.
Why It Matters
This decision clarifies that excess insurers can enforce intoxication exclusions even when the rental agreement disclaims providing insurance, so long as the policy defines 'underlying protection' to include self-insurance and the rental company maintains an approved self-insurance program. The ruling also reinforces that courts must carefully distinguish factual disputes from legal questions of policy interpretation at summary judgment.
The case demonstrates the strategic importance of a party's assumptions in summary judgment practice: by assuming the operative rental agreement was the version attached to its answer, Ace eliminated the only potential factual dispute and allowed the appellate court to resolve the case on purely legal grounds, providing guidance for insurers and policyholders on exclusions in layered excess insurance structures.