Facts

Plaintiff's named insured, L &L Logistics and Warehousing, rented a Freightliner truck from Penske Truck Leasing because one of its vehicles was out of service. As part of the rental agreement, Penske required L & L to select from one of two options: (1) purchase "Penske Provides Coverage," which is Penske's insurance, for $20 per day; or (2) provide liability coverage for themselves and for Penske with a limit of at least $1,000,000. L & L opted to purchase "Penske Provides Coverage" because it was more convenient than arranging insurance for Penske. Penske agreed that it would provide the "Customer and any Authorized Operator" with insurance in accordance with the "standard provisions of a basic automobile liability insurance as required in the jurisdiction in which the Vehicle is operated...with limits as required by the state financial responsibility law or other applicable statute." L & L's employee while driving the rented Freightliner was involved in a traffic accident with Melba Fernandez who sued for bodily injuries.
After the accident, Penske conceded its coverage was primary but that the coverage L & L purchased only provided basic automobile liability insurance coverage with limits of $15,000/$30,000. State Farm disagreed and contended that the rental agreement required Penske provide at least $750,000 in primary coverage which is the minimum required for motor carriers who operate vehicles over 10,000 lbs. State Farm brought a declaratory relief action to determine the amount of coverage provided to L & L and whether L & L was also covered under Penske's own commercial motor vehicle policy issued by Old Republic. The action was removed to federal court and each side filed cross-motions for summary judgment.

PLAINTIFF'S CONTENTIONS: Plaintiff contended California statutory law was read into the agreement, and included Vehicle Code Section 3461.5, which required motor carriers of property who operated a commercial vehicle to be insured with a liability coverage limit of $750,000 for a combined single limit, for bodily injuries, death of one or more persons, or for damage to or destruction of property, unless one of the Vehicle Code Section 3461.5 exceptions applied. Therefore Plaintiff contended because L & L Logistics and Warehousing, Inc. was a licensed motor carrier that operated a commercial vehicle at the time of the accident, accompanied by a Gross Vehicle Weight Rating in excess of 10,000 lbs., the minimum statutory coverage Defendants were obligated to provide was $750,000. This was supported by the language of the rental agreement which required Penske to provide limits of coverage "as required by the state financial responsibility law or other applicable statute." Lastly, Plaintiff contended the Old Republic policy also covered L & L, but on a co-excess basis with State Farm.

DEFENDANTS' CONTENTIONS: Defendants denied the contentions and contended the liability coverage limit for injury to one person was only $15,000 rather than the $750,000 coverage amount required by statute for the commercial vehicle rented by L & L Logistics and Warehousing, Inc., in 2017.

Result

The court ruled in favor of Plaintiff State Farm and granted its motion for summary judgment.