APPEAL from a judgment of the Superior Court of Los Angeles County, Judith A. Vander Lans, Judge. Reversed with directions. (Los Angeles County Super. Ct. No. NC037014).
The opinion of the court was delivered by: Croskey, J.
CERTIFIED FOR PUBLICATION
Superior Dispatch, Inc. (Superior), appeals a summary judgment in favor of its insurer, Insurance Corporation of New York (Inscorp). The trial court granted summary judgment based on a one-year contractual limitations provision in the policy and concluded that Inscorp‟s failure to notify Superior of the provision did not support an equitable estoppel to assert the provision. Superior‟s principal contention on appeal is that Inscorp had a duty to notify Superior of the contractual limitations provision under a Department of Insurance regulation (Cal. Code Regs., tit. 10, § 2695.4, subd. (a)),*fn1 and that Inscorp is equitably estopped from asserting the limitations period because it failed to provide the required notice. Superior also challenges the sustaining of a demurrer to its fraud count and the striking of its punitive damages allegations.
We conclude that section 2695.4, subdivision (a) requires an insurer to notify its insured claimant of contractual limitations provisions and other policy provisions that may apply to the claim, regardless of whether the insured is represented by counsel. An insurer‟s failure to notify its insured of a contractual limitations provision establishes an equitable estoppel to rely on the provision if the insured had no actual knowledge of the provision and the insured‟s failure to discover the provision by other means was reasonable. Inscorp failed to show the absence of a triable issue of fact as to equitable estoppel and therefore is not entitled to summary judgment based on the contractual limitations period. We also conclude that Superior adequately alleges a count for fraudulent concealment and grounds for punitive damages. We therefore reverse the judgment with directions.
FACTUAL AND PROCEDURAL BACKGROUND
Superior is a trucking company that provides drayage and other short-haul services. RSI Insurance Brokers, Inc. (RSI), acting on behalf of Superior, submitted an application for insurance to Crump Underwriting Services, Inc. (Crump), acting on behalf of Inscorp. The application stated that Superior was a common carrier, identified the commodities hauled as "P[r]oduce," "food goods & canned foods beer/wine," "textiles," and "paper products," and listed the percentage of each, totaling 100 percent.
Inscorp, through Crump, issued an insurance policy to Superior in August 2002. The policy included coverage forms entitled "Truckers Coverage Form," "Motor Truck Cargo Owners and Truckmens Form" (Cargo Coverage Form), and "Commercial General Liability Coverage Form."
The Truckers Coverage Form provided coverage for both liability and property damage relating to designated " "autos.‟ " The liability coverage extended to "all sums an "insured‟ legally must pay as damages because of "bodily injury‟ or "property damage‟ to which this insurance applies, caused by an "accident‟ and resulting from the ownership, maintenance or use of a covered "auto‟." Among the coverage form exclusions was an exclusion for damage to property in the insured‟s care, custody, or control. The coverage form stated, " "Auto‟ means a land motor vehicle, "trailer‟ or semitrailer designed for travel on public roads but does not include "mobile equipment‟." The term " "mobile equipment‟ " was defined to include principally vehicles designed for use off of public roads, vehicles on crawler treads, vehicles permanently attached to construction equipment, and vehicles used primarily for purposes other than the transportation of persons or cargo.
The Cargo Coverage Form provided liability coverage relating to loss of or damage to cargo in transit. It also provided optional property damage coverage, but that option was not selected. The coverage form stated: "This policy covers the legal liability of the Insured as a common or contract carrier under tariff documents, bills or [sic] lading or shipping receipts issued by the Insured, for direct loss or damage caused by any of the perils specified herein to lawful goods and merchandise consisting principally of CONTAINERIZED FREIGHT, PRODUCE, CANNED GOODS, BEER & WINE, PAPER PRODUCTS, TEXTILES in transit while loaded for shipment in or
on vehicles described herein...."*fn2
The capitalized language was typed onto blank lines on the printed form. The coverage form exclusions stated that the cargo coverage did not cover "Autos."*fn3 The coverage form did not define that term. The coverage form conditions included a one-year contractual limitations provision.*fn4 An "All Risk Endorsement" modifying the Cargo Coverage Form stated that the liability coverage was extended to a broad category of risks, but expressly excluded "Autos." The endorsement likewise did not define that term.
The Commercial General Liability Coverage Form provided coverage for "those sums that the insured becomes legally obligated to pay as damages because of "bodily injury‟ or "property damage‟ to which this insurance applies." It also provided coverage for " "personal and advertising injury‟ " and certain medical expenses. The exclusions stated that the coverage form did not provide coverage for " "[b]odily injury‟ " or " "property damage‟ " arising out of the use of any " "auto‟ " owned or operated by the insured or the use or transportation of " "mobile equipment,‟ " or coverage for " "[p]roperty damage‟ " to personal property in the insured‟s care, custody, or control. The coverage form stated: " "Auto‟ means a land motor vehicle, trailer or semitrailer designed for travel on public roads, including any attached machinery or equipment. But "auto‟ does not include "mobile equipment.‟ "
The first page of the Truckers Coverage Form and Commercial General Liability Coverage Form each stated that "words and phrases that appear in quotation marks have special meaning." The Cargo Coverage Form did not so state, and no words or phrases appeared in quotation marks on that form. The Common Policy Conditions stated that all coverage parts were subject to several conditions. Those conditions did not include any definition of terms.
Matson Navigation Company (Matson) hired Superior to carry freight by truck from a terminal at the Port of Los Angeles to another location. The freight included a dump truck on a flat rack trailer. The cab of the dump truck struck an overpass on July 10, 2003, while the trailer was passing under the bridge. Matson notified Superior that its customer had rejected the dump truck, and demanded payment from Superior for its full value pursuant to the terms of its contract with Superior.
Superior submitted a claim to Inscorp on July 17, 2003. Inscorp‟s claims adjuster, Fleming & Hall Administrators, Inc. (F & H), sent a letter to Superior on November 5, 2003, stating that the claim was denied. The letter stated that there was no property damage coverage under the Truckers Coverage Form because the dump truck was in Superior‟s care, custody, or control when it was damaged. The letter stated that there was no liability coverage under the Commercial General Liability Coverage Form for the same reason and also because that coverage form excluded "autos" from coverage. The letter stated that there was no coverage under the Cargo Coverage Form because the Cargo Coverage Form also excluded "autos." Inscorp did not receive the letter at that time, apparently because it was misaddressed. F & H sent a copy of the letter by fax to RSI on November 21, 2003, and Superior received the letter on that date. The letter did not notify Superior of the one-year contractual limitations provision.
RSI‟s notes indicate that on November 12, 2003, someone from RSI contacted Reginald Smith of Crump, who purportedly indicated that "he likes to give F & H the chance to rectify. He provided me w/ the name of the Program Mgr., Sherry Healy xt 3109. I said I would contact her to discuss & see if... resolution could be arrived at."
Superior retained legal counsel. Danh T. Luu, an attorney, sent a letter to F & H on January 7, 2004, challenging the claim denial and alleging that the denial was in bad faith. RSI also corresponded with Inscorp on January 13, 2004, urging it to reconsider the denial.
Raul L. Martinez, as counsel for Inscorp, sent a letter to Luu on February 11, 2004. The letter stated: "We have reviewed the coverage position taken by our client on this claim, as well as your letter of January 7, 2004. However, please be advised that we concur with our client‟s determination that there is no coverage under the policy for this loss." The letter explained counsel‟s position that the dump truck was an "auto" and therefore was excluded under the policy. The letter also stated that counsel was "prepared to defend our client‟s position on coverage regarding this claim," and that Inscorp had instructed counsel to file a declaratory relief action, if necessary. The letter did not refer to the one-year contractual limitations provision. Luu never responded to the letter.
RSI continued to seek payment of the claim on Superior‟s behalf. George Estok of Crump stated in correspondence with Mike Tatum of RSI on March 17, 2004, in response to a phone message: "[O]ur defense counsel did send a denial letter to the insured‟s attorney and we have not gotten a response. We suggest that you discuss this matter with the insured‟s attorney. Sorry that I can‟t be of more help." RSI‟s notes also indicate that someone from RSI contacted Sherry Healy of F & H on March 18, 2004, "to ask for a formal denial." The notes state, "She said one had been issued to the insds atty & she is waiting for a response frm... the insds atty. She will fax a copy of the denial." There apparently was no further significant communication until Superior filed its complaint in this action.
3. Complaint, Demurrer, and Motion to Strike
Superior filed a complaint against Inscorp and RSI on May 20, 2005, and filed its fourth amended complaint in December 2006. Superior alleges that it became contractually liable to Matson for damage to "containerized freight" that it was carrying for Matson when part of the load struck a bridge. It alleges that the Cargo Coverage Form provides coverage for its liability, that Inscorp failed to adequately investigate the claim, and that the denial of its claim was wrongful and in bad faith. It also alleges that Inscorp failed to provide notice of the one-year contractual limitations provision at any time, that Superior had no actual knowledge of the provision, that Inscorp is equitably estopped from relying on the provision, and that the contractual limitations period was equitably tolled.
Superior also alleges that the insurance application submitted by RSI "did not accurately describe [Superior‟s] business" and that Superior did not review or approve the contents of the application. It alleges that the information listed on the application concerning the commodities hauled was "false." Superior alleges that RSI initially submitted an unsigned application to Crump and later obtained Superior‟s signature on a single page, which Superior subsequently discovered was the last page of an application.
Superior alleges counts for (1) breach of the insurance contract, against Inscorp; (2) breach of the implied covenant of good faith and fair dealing, against Inscorp; (3) breach of an oral, implied-in-fact, and partly written contract, against RSI; (4) negligence and negligent misrepresentation/concealment, against RSI; (5) breach of fiduciary duty/constructive fraud, against RSI; (6) fraud, against both defendants; and (7) unfair competition (Bus. & Prof. Code, § 17200 et seq.), against both defendants. Superior alleges in the fraud count that Inscorp concealed its lack of familiarity with the drayage business and falsely advertised itself as competent in this line of insurance. Superior alleges in the unfair competition count that Inscorp falsely advertised and made misrepresentations concerning its ...