State Farm Mut. Auto. Ins. Co. v. Penske Truck Leasing Co.

NOT FOR PUBLICATION

Submitted June 15, 2021 ^* Anchorage, Alaska

Appeal from the United States District Court for the Central District of California No. 2:20-cv-01342-SVW-PVC Stephen V. Wilson, District Judge, Presiding

Before: RAWLINSON, CHRISTEN, and R. NELSON, Circuit Judges.

MEMORANDUM ^[*]

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In the district court, State Farm Mutual Automobile Insurance Co. sought declaratory relief establishing that Penske Truck Leasing Co. and Old Republic Insurance Co. (collectively, "Defendants") are required to provide primary liability coverage to L&L subject to a combined single liability limit of $750, 000. We affirm the district court's order granting summary judgment to State Farm.

"We review de novo the district court's order granting summary judgment and its interpretation of state law." Diaz v. Kubler Corp., 785 F.3d 1326, 1329 (9th Cir. 2015) (citations omitted). We view the evidence in the light most favorable to the party opposing the summary judgment motion. Tabares v. City of Huntington Beach, 988 F.3d 1119, 1124 (9th Cir. 2021). In interpreting California law, we follow the California Supreme Court's decisions. Diaz, 785 F.3d at 1329. If there is no applicable California Supreme Court decision, we rely on state appellate court opinions, statutes and treatises. Id.

We start with the language of the Rental Agreement. United Nat'l Ins. Co. v. Spectrum Worldwide, Inc., 555 F.3d 772, 776 (9th Cir. 2009). "The clear and explicit meaning of the[] provisions, interpreted in their ordinary and popular sense, unless used by the parties in a technical sense or a special meaning is given to them by usage[, ] controls judicial interpretation." Bay Cities Paving & Grading, Inc. v. Lawyers' Mut. Ins. Co., 855 P.2d 1263, 1270 (Cal. 1993) (internal quotation

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marks and citations omitted). California courts "construe [insurance policies] as would a reasonable layperson, not an expert, attorney, or a historian." E.M.M.I. Inc. v. Zurich Am. Ins. Co., 84 P.3d 385, 391 n.2 (Cal. 2004) (citation omitted). "A provision will be considered ambiguous when it is capable of two or more constructions, both of which are reasonable." Int'l Bhd. of Teamsters v. NASA Servs., Inc., 957 F.3d 1038, 1044 (9th Cir. 2020) (quoting MacKinnon v. Truck Ins. Exch., 73 P.3d 1205, 1213 (Cal. 2003)).

We agree with the district court that the Penske Provides Coverage insurance provision is ambiguous. A layperson could reasonably interpret this provision in two ways: first, to cover the commercial vehicle being rented, as State Farm urges; or second, to cover non-commercial vehicles irrelevant to this transaction, as Defendants urge.

Defendants argue "basic automobile liability insurance" is unambiguous as a term of art defined by state code. But we are interpreting a contract, not a statute, and the contract did not use "basic automobile liability insurance" "in a technical sense" or give it "special meaning." See Bay Cities, 855 P.2d at 1270. The contract's proviso "with limits as required by the state financial responsibility law or other applicable statute" does not define "basic automobile liability insurance" or specify it is a term of art, and there are financial responsibility laws and statutes applicable to both commercial and personal vehicles. See E.M.M.I. Inc., 84 P.3d at 390;

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Utah Prop. & Cas. Ins. Guar. Assn. v. United Servs. Auto. Assn., 230 Cal.App.3d 1010, 1021 (Ct. App. 1991) ("Laypersons cannot be expected to know of statutory limitations or exclusions on coverage not contained in their insurance policies.").

The term "basic automobile liability insurance" is ambiguous because "it is not defined in the policy and . . . a layperson's understanding would differ from the legal definition of the term." Lunsford v. Am. Guarantee & Liab. Ins. Co., 18 F.3d 653, 654 (9th Cir. 1994) (citations omitted). Indeed, Defendants themselves repeatedly refer to L&L's commercial vehicle policy with State Farm of $1 million liability coverage as "an automobile liability policy." If Defendants' "attorney[s]" and "insurance expert[s]" use the term "automobile liability" insurance interchangeably to cover commercial vehicles, a layperson would most likely do so as well. See Crane v. State Farm Fire & Casualty Co., 485 P.2d 1129, 1130 (Cal. 1971).

The contract as a whole also shows the insurance provision to be ambiguous. Bay Cities, 855 P.2d at 1271. The cover of the policy declares in bold font that it is for commercial rentals, and the Penske Provides Coverage insurance provision is in the Commercial Rental section. A layperson could think that the Penske Provides Coverage "basic automobile liability insurance" covers commercial vehicles in an amount comparable to the alternative $1, 000, 000 Customer Provides

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insurance requirement, which the Agreement presents as the only other option in the very next subsection. Defendants' view "basic automobile liability insurance" as covering an amount appropriate only for Household Rentals, but that would be both legally inadequate and practically pointless for a Commercial Rental. We conclude that the cases cited by Defendants (including an unpublished California Court of Appeal decision) are inapt due to varying factual and legal differences.

The dissent relies on an unpublished California Court of Appeal case, Golden Eagle Ins. Corp. v. Penske Truck Leasing Co., No. E062118, 2015 WL 5320546 (Cal.Ct.App. Sept. 14, 2015), to argue that we misconstrue California law. But California prohibits other courts from citing its unpublished cases. See Credit Suisse First Bos. Corp. v. Grunwald, 400 F.3d 1119, 1126 n.8 (9th Cir. 2005) (citing Cal. Rules of Court 8.1115(a)) ("Under California Rules of Court . . . an unpublished opinion cannot be cited to or relied on by other courts."); Cal. Rules of Court 8.1115(a) (with exceptions not relevant here, "an opinion of a California Court of Appeal or superior court appellate division that is not certified for publication or ordered published must not be cited or relied on by a court or a party in any other action."). As such, it would be improper for our court to rely upon this unpublished, uncitable case. That California courts have occasionally ignored their own rule, as the dissent points out, is no reason to assume that they would regularly do so, or adopt the reasoning of the unpublished decision in

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Golden Eagle. And because California litigants and courts cannot rely on or cite to it, the absence of comment on it from the California courts is similarly unconvincing.

Ultimately, we do not apply a presumption that California courts will follow an unpublished appellate court opinion, as we do with a published opinion of a state appellate court. See Ryman v. Sears, Roebuck & Co., 505 F.3d 993, 994-95 (9th Cir. 2007) ("[W]here there is no convincing evidence that the state supreme court would decide differently, a federal court is obligated to follow the decisions of the state's intermediate appellate courts.") (quoting Vestar Dev. II, LLC v. Gen. Dynamics Corp., 249 F.3d 958, 960 (9th Cir. 2001) (internal quotation marks omitted)). As the dissent points out, we are not precluded from considering the unpublished opinion. But given our interpretation of other, published California court decisions, the unpublished decision in Golden Eagle is not a conclusive indication of how California courts would rule in a precedential opinion, and we therefore decline to rely on it here.

There was no genuine dispute that L&L customarily relied on Penske Provides Coverage to insure its rentals of commercial vehicles; L&L did not need a minimal personal vehicle policy; L&L was never told that Penske Provides Coverage limited coverage to a certain amount; and the Penske Provides Coverage

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$20 per day fee was 320% more expensive than the State Farm Policy's commercial vehicle coverage policy per day average.

Moreover, "ambiguous language is construed against the party who caused the uncertainty to exist. In the insurance context, we generally resolve ambiguities in favor of coverage." AIU Ins. Co. v. Superior Ct., 799 P.2d 1253, 1264 (Cal. 1990) (citation omitted). Even accepting Defendants' arguments that L&L's objectively reasonable expectations were undeterminable, summary judgment in favor of State Farm was still proper. Int'l Bhd. of Teamsters, 957 F.3d at 1042 (citations omitted). Because the language here is ambiguous, we affirm the district court's order granting summary judgment for State Farm.

AFFIRMED.

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Rawlinson, Circuit Judge, dissenting:

This appeal involves the application of California law. In that circumstance, we are bound to follow precedent from the California Supreme Court. See Norcia v. Samsung Telecomm. Am., LLC, 845 F.3d 1279, 1284 (9th Cir. 2017). In the absence of precedent from the Supreme Court, it is our task to predict how the California Supreme Court would address the issue. See id. In making this prediction, we give credence to rulings from the California Court of Appeal. See Oakland Bulk & Oversized Terminal, LLC v. City of Oakland, 960 F.3d 603, 610-11 (9th Cir. 2020). Because the majority disposition diverges from this established approach, I respectfully dissent.

This case involves contractual interpretation. The contract clause at issue was part of a transaction between Penske and a commercial customer who rented a freightliner truck. The contract provided in pertinent part:

Penske Provides Coverage. If Customer elects Penske Liability Coverage, Penske agrees to