Introduction

In Allied Premier Insurance v. United Financial Casualty Company, the California Supreme Court reviewed the following question: Under California’s Motor Carriers of Property Permit Act (Veh. Code, § 34600 et seq.; “the Act”), “does a commercial automobile insurance policy continue in full force and effect until the insurer cancels the corresponding Certificate of Insurance on file with the Department of Motor Vehicles, regardless of the insurance policy’s stated expiration date?”[1] The Court ruled the answer is no.[2]

What is an Active Certificate of Insurance?

Under the Act, a motor carrier cannot drive on public highways “without securing a DMV permit, which requires proof of the carrier’s financial responsibility.”[3] A carrier can comply with that requirement by “obtaining a policy of insurance and submitting a certificate of insurance to the DMV.”[4] The Act requires the insurer to give the DMV a 30-day notice of cancellation of the certificate of insurance.[5]

Facts of the Incident

Commercial trucker Jose Porras was a motor carrier.[6] On May 2, 2013, United Financial Casualty Company (“United”) began insuring Porras under a commercial automobile insurance policy.[7] United filed a certificate of insurance, as required by the Act, identifying itself as the insurer and Porras as the insured.[8]

United provided coverage for Porras from May 2, 2013 through April 12, 2015.[9] During the time period, United filed three certificates of insurance and two cancellation notices, one of which the DMV returned to United as an “incomplete filing.”[10] Toward the end of the policy period, United filed a cancellation notice with the DMV, which stated that if the policy “was not renewed, it would lapse on the date provided.”[11]

United submitted its final cancellation notice on February 6, 2015, informing the DMV that the policy and certificate of insurance would be cancelled either 30 days after the DMV received the notice, or on April 12, 2015, whichever was later.[12] On April 13, 2015, Allied Premier Insurance (“Allied”) began to insure Porras.[13]

On September 1, 2015, Porras was driving a truck covered by the Allied policy when he caused a motor vehicle accident, resulting in the death of Jennifer Jones.[14] Jones’ parents sued Porras for wrongful death.[15] Allied retained counsel to defend Porras and it settled the parents’ claim for its policy limits of $1 million.[16]

After the settlement, Allied sued United, seeking reimbursement for half the amount it paid to Jones’ parents.[17] Allied argued that because one of United’s cancellation notices was rejected by the DMV, “United continued to have an active certificate of insurance on file with the DMV.”[18] According to Allied, this meant United’s policy was active on the date of Porras’ car accident.[19]

The District Court’s Ruling

The federal district court granted summary judgment in favor of Allied, finding that, because United “failed properly to submit a Notice of Cancellation, its policy remained in effect on the date of the accident, even though [the policy] may have lapsed under its own terms or been cancelled by the parties.”[20] The district court relied on Transamerica Ins. Co. v. Tab Transportation, Inc, but Transamerica interpreted a different statutory scheme.[21] Transamerica applied the Act’s predecessor, the Highway Carriers’ Act of 1951 (“HCA”).[22]

In Transamerica, the California Supreme Court ruled the HCA had created an exception to the general rule that an insurance company “incurs no liability for an accident that occurs after the policy period has ended.”[23] The court noted coverage provided by an insurance policy under the HCA “could not be canceled, regardless of its expiration date, without written notice of the policy’s cancellation to the [Public Utilities Commission].”[24] The statutory language in the HCA specifically prohibited cancelling the insurance policy without notice to the Public Utilities Commission.[25] However, there is no such language in the Act. Under the Act, only the certificate of insurance remains active until it is cancelled.[26] The Act does not say that the insurance policy remains active after the period identified in the policy.[27]

The California Supreme Court’s Holding

Although the Act prohibits cancellation of a certificate of insurance without notice to the DMV, the Act does not prevent cancellation of an insurance policy under the terms stated in the policy.[28] The Act does not state that a policy remains active until the certificate of insurance is canceled.[29] Thus, the Court held that “an uncancelled certificate of insurance that remains on file with the DMV does not cause the corresponding insurance policy to remain in effect in perpetuity.”[30]

Takeaways

As a result of this case, insurance carriers will need to be mindful that an insurance policy is valid until the term stated in the policy. An active certificate of insurance on file at the DMV does not determine whether an insurance company owes coverage to its insured. Only the terms stated in the underlying insurance policy determine an insurance company’s obligation to its insured.

Further, this case only pertains to claims for equitable contribution and subrogation between two insurance companies. It does not affect insured motor carriers in their underlying lawsuits. As such, this case does not affect an insured motor carrier being compensated under an insurance policy for personal injuries.

This case will not reduce or increase the number of motor carrier personal injury lawsuits. However, this case will likely reduce the number of lawsuits for equitable contribution and subrogation between two insurance companies, because an insurance carrier will no longer be able to seek reimbursement based on an active certificate of insurance. An insurance carrier will need to prove that the underlying policy was active in order to be reimbursed.

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Sources

[1] Allied Premier Ins. v. United Fin. Cas. Co., 532 P.3d 708, 710 (Cal. 2023).

[2] Ibid.

[3] Cal. Veh. Code §§ 34620, subd. (a), 34630, subd. (a).

[4] Cal. Veh. Code § 34631.5, subd. (b)(1).

[5] Cal. Veh. Code § 34630(b).

[6] Allied Premier Ins., supra, 532 P.3d at 711.

[7] Ibid.

[8] Ibid.

[9] Allied Premier Ins., supra, 532 P.3d at 712.

[10] Ibid.

[11] Ibid.

[12] Allied Premier Ins., supra, 532 P.3d at 713.

[13] Ibid.

[14] Ibid.

[15] Ibid.

[16] Ibid.

[17] Ibid.

[18] Ibid.

[19] Ibid.

[20]  Allied Premier Ins., supra, 532 P.3d at 713.

[21] Allied Premier Ins., supra, 532 P.3d at 714.

[22] Ibid.

[23] Allied Premier Ins., supra, 532 P.3d at 716.

[24] Ibid.

[25] Ibid.

[26] Allied Premier Ins., supra, 532 P.3d at 716.

[27] Ibid.

[28] Allied Premier Ins., supra, 532 P.3d at 717.

[29] Allied Premier Ins., supra, 532 P.3d at 721.

[30] Allied Premier Ins., supra, 532 P.3d at 718.