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Hervey v. Mercury Casualty Co.

June 17, 2010

LAUREN N. HERVEY, PLAINTIFF AND APPELLANT,
v.
MERCURY CASUALTY COMPANY, DEFENDANT AND RESPONDENT.



APPEAL from an order of the Superior Court of the County of Los Angeles, William F. Highberger, Judge. Affirmed. (Los Angeles County Super. Ct. No. BC398264)

The opinion of the court was delivered by: Mosk, J.

CERTIFIED FOR PUBLICATION

INTRODUCTION

Plaintiff and appellant Lauren N. Hervey (Hervey) purchased an automobile insurance policy from defendant and respondent Mercury Casualty Company (Mercury). Hervey alleges Mercury breached the policy by offsetting uninsured motorist payments due her for injuries suffered in an automobile accident with the amount Mercury paid Hervey under the medical expense coverage in the same policy for the same accident. According to Hervey, Mercury took the offset notwithstanding the title of the medical expense coverage endorsement: "MEDICAL EXPENSE--NO EXCESS, NO REIMBURSEMENT." The operative terms of that endorsement deleted only the medical expense payments offset or reimbursement provisions from liability recoveries from those responsible for the accident. The medical expense endorsement did not delete the offset or reimbursement provision contained in the uninsured motorist section of the policy, the provision upon which Mercury relied for its right of offset for medical expense payments made by Mercury. We hold that the trial court properly sustained without leave to amend Mercury's demurrer to Hervey's class action complaint because the policy was not reasonably susceptible to Hervey's interpretation of it.

BACKGROUND

As this appeal arises from an order sustaining a demurrer without leave to amend, the facts are taken from those alleged in the complaint and those judicially noticed.

Hervey purchased from Mercury automobile insurance that included medical expense coverage. The medical expense endorsement contains, inter alia, the following language: "This endorsement forms part of the policy shown below, all other terms and conditions of this policy remain unchanged . . . . MEDICAL EXPENSE--NO EXCESS, NO REIMBURSEMENT. Condition 3 of Part II and Exclusion (J), Part II are hereby deleted from the policy." The policy declaration page specifies $5,000 medical expense coverage, and the box entitled "No Excess No Reimbursement" is checked.

The provision deleted by the medical expense endorsement in Part II ["EXPENSES FOR MEDICAL SERVICES-CONDITIONS"], condition 3 of the policy, provides in part, "Reimbursement Agreement--Offset Provisions: If payment is made under this coverage [Expenses for Medical Services], to or on behalf of any person, such person agrees to reimburse the company to the extent of such payment from the proceeds of (a): any settlement or judgment that may result from the exercise of any rights of recovery of such person against any party that such person claims is responsible for bodily injury to the person for which payment under medical expense coverage has been made. (b) any payment received or to be received by or on behalf of an injured person under the provisions of any (1) automobile or premises insurance affording benefits for medical expenses, (2) individual blanket or group accident, disability or hospitalization insurance, (3) medical, surgical, hospital or funeral service, benefits or reimbursement plan, (4) workers' compensation or disability benefits law or any similar law."

The medical expense endorsement also deleted Exclusion (j) of Part II, which excludes from coverage, "expenses payable under this part, if the expenses are paid, payable or eligible for payment under the terms and conditions of any (1) automobile or premises insurance affording benefits for medical expenses, (2) individual, blanket, or group accident, disability or hospitalization insurance, (3) medical or surgical reimbursement plan, (4) non-profit association or corporation plan providing hospital, surgical, medical or similar benefits to participants, enrollees or members. No payment shall be made, under this part until claim for the expenses incurred shall have been first submitted to the benefit providers listed in (1) thru (4) above, and such providers have paid their limit of payment or furnished their applicable limit of service and the insured furnishes a written statement from the provider(s) as proof. No payment shall be made, under this part for medical expenses incurred which the insured is not required to pay"

Focusing on the exclusions in the medical expense endorsement, the parties dispute the continuing applicability of Part IV (UNINSURED MOTORISTS COVERAGE--UNDERINSURED MOTORISTS COVERAGE), Condition 4(c), which states, "If the insured has valid and collectible automobile medical payment insurance available to him or her, the damages which the insured shall be entitled to recover from the owner or operator of the uninsured motor vehicle shall be reduced for purposes of uninsured motorist coverage by the amounts paid or due to be paid under the automobile medical payment insurance."

Hervey was involved in an automobile accident caused by an uninsured driver. Hervey claimed under the medical expense coverage, and Mercury paid, medical expenses she incurred as a result of the injuries she received in the accident. Thereafter, Hervey claimed amounts under the uninsured motorist section of her policy for the injuries she suffered as a result of the same accident caused by the uninsured driver. Mercury agreed to settle the uninsured motorist claim, but took the position that it would offset against any amount payable for uninsured motorist coverage the amount it paid Hervey under the medical expense coverage.

Hervey's complaint is on her own behalf and on behalf of a class composed of all similarly situated insureds who had medical coverage under a Mercury automobile policy. Hervey alleged claims for breach of contract, declaratory relief, and a violation of Business and Professions Code section 17200 et seq.--the Unfair Competition Law. Mercury demurred and moved to strike the complaint. Mercury also requested judicial notice of the specimen policy and endorsement issued to Hervey, to which request Hervey objected. Hervey, in opposition to Mercury's demurrer and motion, requested judicial notice of her demand for inspection and Mercury's response, which response included Mercury's specimen insurance policy and endorsement. The trial court denied Mercury's request for judicial notice, but granted Hervey's request. The trial court then sustained Mercury's demurrer without leave to amend, deemed the motion to strike moot, and ruled that each side was to bear her or its own costs and attorney fees. Thereafter, the trial court entered judgment in favor of Mercury, and Hervey timely filed a notice of appeal.

DISCUSSION

A. Standard of ...


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