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Transamerica Ins. Co. v. Tab Transportation12/29/1995
KENNARD, J.:
A 1989 collision between an Amtrak train and a truck owned by a licensed highway carrier, Tab Transportation, Inc. (hereafter Tab), caused the deaths of three persons and injured several others, resulting in $6 million in legal claims for wrongful death, personal injury , and property damage against Tab. Tab sought recovery under three insurance policies issued by different insurers for different policy periods. Pertinent here is a $500,000 one-year liability policy issued by Transamerica Insurance Company (hereafter Transamerica).
Under the terms of the Transamerica policy, coverage commenced on February 1, 1980, and ended on February 1, 1981. Ordinarily, an insurance company incurs no liability for an accident that occurs after the policy period has ended. But this is not an ordinary case, as explained briefly below.
Highway carriers licensed in California are subject to a regulatory scheme administered by the Public Utilities Commission (hereafter PUC), requiring them to obtain adequate liability insurance and to submit proof thereof to the PUC. Underlying this requirement is the recognition of the need to protect the public "'against ruinous carrier competition and such possible attendant evils as . . . inadequate insurance . . . .'[Citation.]" ( Samson v. Transamerica Ins. Co. (1981) 30 Cal. 3d 220, 233, 178 Cal. Rptr. 343, 636 P.2d 32.)
To ensure that the public is so protected at all times, the regulatory scheme requires -- by means of a standard PUC form endorsement attached to the policy -- that a liability policy issued to a highway carrier continue "in full force and effect until canceled," by giving 30 days' written notice to the PUC. The effect of attaching the endorsement to the policy, as we held in Samson v. Transamerica Ins. Co., supra, 30 Cal. 3d 220, 231, is to automatically incorporate the provisions of the endorsement into the policy. Here, incorporation of the provisions of the endorsement into the Transamerica policy converted it from a one-year term policy that covered the period from February 1, 1980, until February 1, 1981, to a policy that remained continuously in effect until canceled. Because Transamerica failed to give the PUC the required notice of cancelation when there was no policy renewal by Tab, the policy was still in effect and thus provided coverage for Tab at the time of the 1989 accident.
Transamerica, however, is entitled to reimbursement from Tab for any payments made under the policy. The reason is this: The standard form endorsement just mentioned states that the highway carrier "agrees" to reimburse the insurer for any payment the insurer would not have been obligated to make under the provisions of the policy "except for the agreement contained in endorsement." Because, as explained earlier, Transamerica would not have been liable for the damages incurred in the 1989 accident under the policy it issued to Tab "except for the agreement contained in endorsement" (that its policy remain in effect until canceled by written notification to the PUC), Transamerica has a right to indemnity from Tab.
I
Tab is a commercial trucking company regulated by the PUC under the Highway Carriers' Act. (Pub. Util. Code, §§ 3501, 3511.) The statutory scheme requires highway carriers such as Tab to maintain liability protection in specified amounts ( § 3631) and to provide the PUC with proof of such protection ( § 3632). Such proof may be established by filing a "certificate of insurance" with the PUC. ( § 3633.)
In 1980, to comply with the insurance requirements of the Highway Carriers
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