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HomeMy WebLinkAbout99-0865 civilATHENA LOUISE LAWYER ·IN THE COURT OF COMMON PLEAS OF ·CUMBERLAND COUNTY, PENNSYLVANIA V. ' LIBERTY MUTUAL INSU~NCE ' NO. 99-0865 CIVIL COMPANY Vo DONEGAL MUTUAL INSURANCE COMPANY · CIVIL ACTION- LAW I~IBERTY MUTUAL INSURANCE COMPANY BEFORE BAYLEY, GUIDO, JJ, ORDER OF COURT AND NOW, this ~ ~ ~ day of JUNE, 2000, for the reasons stated in the accompanying opinion, the Motion for Summary Judgment filed by Defendant Liberty Mutual Insurance Company is GRANTED. William P. Douglas, Esquire For the Plaintiff By the Edward E. Guido, J. William C. Foster, Esquire For Liberty Mutual Ins. Co. Daniel K. Deardorff, Esquire For Donegal Mutual Ins. Co. :sld ATHENA LOUISE LAWYER · IN THE COURT OF COMMON PLEAS OF · CUMBERLAND COUNTY, PENNSYLVANIA V,' · LIBERTY MUTUAL INSURANCE · NO. 99-0865 CIVIL TERM COMPANY and DONEGAL MUTUAL INSURANCE COMPANY · · CIVIL ACTION- LAW IN RE' MOTION FOR SUMMARY JUDGMENT OF DEFENDANT LIBERTY MUTUAL IN S URAN C E C 0 MP ANY, BEFORE BAYLEY, GUIDO, JJ. OPINION AND ORDER OF COURT On February 16, 1999, plaintiff commenced the instant action by complaint. Each defendant filed a timely motion for summary judgment. Currently before us is the motion of Defendant Liberty Mutual Insurance Company (hereinafter "Liberty Mutual").~ The parties have briefed and argued their respective positions. This matter is now ready for disposition. _FACTUAL BACKGROUND .. What follows is a recitation of the facts viewed in the light most favorable to the plaintiff as the non-moving party. On May 21, 1997, Richard Schrieb, Jr. (hereinafter "Schrieb") rented a van from Bethlehem Ford Rent-A-Car (hereinafter "Bethlehem Ford") pursuant to a written rental agreement.2 Paragraph 2 of the rental agreement specifically provided that "(t)he vehicle shall NOT be used: (1) for the transportation of ~ Summary judgment has previously been granted in favor of Defendant Donegal Mutual Insurance Company. 2 Paragraph 4 of Defendant Liberty Mumal's Motion for Summary Judgment and Plaintiff's Answer thereto. 99-0865 CIVIL TERM persons for compensation." (emphasis is original).3 Paragraph 5 of the agreement went on to provide as follows: Vehicle insurance. Licensee provides liability insurance coverage for persons using the vehicle with the permission of the Licensee as provided for in Paragraph (?) hereof, (and not otherwise) in accordance with the provisions of an automobile liability insurance policy with limits of $100,000 per person, $300,000 per accident, for bodily injury including death and $100,000 property damage per accident. Unless required by law, the policy does not include no-fault Supplemental no-fault, Uninsured~nderinsured Motorists coverage or other optional coverages. Where such coverages are required by law, they are provided at the minimum required limits, and shall be applicable only after all other valid and collectible insurance has been paid or exhausted to the full limits of all such policies. LICENSEE'S POLICY SHALL NOT APPLY: (1) to any obligation for which the Customer or any driver of the Vehicle or the employer of either or any insurance carder, may be held liable under any Worker's compensation or disability benefits of similar law; (2) to any obligation assumed by the Customer or any driver under any express or implied contract; (3) to any liability of Customer or any driver or any employer of either arising while the Vehicle is being used in violation of the terms and provisions of this agreement; (4) unless otherwise required by law, to medical payments required by persons sustaining injuries while tiding or alighting from or getting into or out of the vehicle. (emphasis added).4 On the morning of May 23, 1997 Schrieb and several passengers embarked from Allentown on their way to a NASCAR race in Charlotte, North Carolina.5 In response to various advertisements, each of the passengers had booked a package tour (including ... 6 Schrieb identified himself to the passengers as transportation) to the NASCAR event. the driver for the tour.7 All of the passengers, including plaintiff, had paid money for the tour package,s 3 Exhibit B to Defendant Liberty Mutual's Motion for Summary Judgment. 4 Exhibit B to Defendant Liberty Mutual's Motion for Summary Judgment. 5 Exhibits G & H to Defendant Liberty Mutual's Motion for Summary Judgment. 6 Exhibit G & H to Defendant Liberty Mutual's Motion for Summary Judgment. 7 Deposition of Timothy Connell, Exhibit H to Defendant Liberty Mutual's Motion for Summary Judgment. 8 Paragraphs 14-16 of Defendant Liberty Mutual's Motion for Summary Judgment and Plaintiff's Answer thereto. See ~ Exhibits G & H. 99-0865 CIVIL TERM While en route to the NASCAR event, Schrieb lost control of the van and it overturned.9 Plaintiff was injured in the accident and filed a separate action against Schrieb.l° The van was insured by Bethlehem Ford pursuant to a Business Auto policy issued by Defendant Liberty Mutual.~ Schrieb requested that Defendant Liberty Mutual provide a defense to the action filed against him by plaintiff. Liberty Mutual responded by denying coverage under the policy.~2 Defendant Liberty Mutual set forth the basis for its denial of coverage in a letter to Schrieb as follows' The Business Auto policy includes as an insured "anyone else while using with [Bethlehem Ford's] permission" a covered auto Bethlehem Ford owns. The rental agreement expressly stated that the vehicle will not be used "for the transportation of persons for compensation." Our investigation disclosed that you were using the rental vehicle to transport persons to a NASCAR racing event, for a fee. Your use of the rental vehicle to transport persons for compensation was without Bethlehem Ford's permission. As a result, you are not an insured under their Business Auto policy. If you believe our understanding of the facts is incorrect, please let me know as soon as possible.~3 Schrieb settled the underlying action with plaintiff for $600,000 and an assignment of his fights against defendants.TM In addition, as part of the assignment, plaintiff agreed not to pursue any further claims against Schheb.~5 By virtue of said 9 Paragraph 2 of Defendant Liberty Mumal's Motion for Summary Judgment and Plaintiff's Answer thereto. l0 Paragraphs 3 and 6 of Defendant Liberty Mumal's Motion for Summary Judgment and Plaintiff's Answer thereto. _See also Exhibits G & H. ~ Paragraph 5 of Defendant Liberty Mumal's Motion for Summary Judgment and Plaintiff's Answer thereto. ~2 Paragraph 7 of Defendant Liberty Mumal's Motion for Summary Judgment and Plaintiff's Answer thereto. ~3 Exhibit D to Defendant Liberty Mumal's Motion for Summary Judgment and Plaintiff's Answer thereto. 14 Exhibit E to Defendant Liberty Mumal's Motion for Summary Judgment and Plaintiff's Answer thereto. 25 Exhibit E to Defendant Liberty Mumal's Motion for Summary Judgment and Plaintiff's Answer thereto. 99-0865 CIVIL TERM assignment, plaintiff brought the instant action against defendants for breach of contract and for bad faith. ~ 6 DISCUSSION Defendant's motion for summary judgment is based upon Pa. Rule of Civil Procedure 1035.2 which provides as follows: After the relevant pleadings are closed, but within such time as not to unreasonably delay trial, any party may move for summary judgment in whole or in part as a matter of law (1) whenever there is no genuine issue of any material fact as to a necessary element of the cause of action or defense which could be established by additional discovery or expert report, or (2) if, after the completion of discovery relevant to the motion, including the production of expert reports, an adverse party who will bear the burden of proof at trial has failed to produce evidence of facts essential to the cause of action or defense which in a jury trial would require the issues to be submitted to a jury. In determining whether to grant a motion for summary judgment we must examine the record in the light most favorable to the non-moving party. ~Ertel v. Patriot-News Co., 544 Pa. 93,674 A.2d 1038 (1996). All doubts as to the existence of a genuine issue of material fact must be resolved against the moving party. Id. Summary judgment may ,.. only be granted in cases that are clear and free from doubt. Hoffman v. Brandywine.. Ho_.q_~., 443 Pa. Super. 245, 661 A.2d 397 (1995). In the instant case, there is no dispute that the passengers in the van had paid for transportation to and from the NASCAR event. Therefore, Schrieb was operating the vehicle in violation of the rental agreement. Furthermore, the rental agreement clearly put him on notice that Bethlehem Ford would not provide insurance coverage at times when the vehicle was being used in violation of the agreement. 16 The bad faith claim is based upon 42 Pa. C.S.A. § 8371. 99-0865 CIVIL TERM Plaintiff argues that public policy precludes a car rental company from limiting liability coverage in its rental agreement. In support of her position she cites the case of Donegal Mutual Ins. Co, v, Long, 387 Pa. Super. 574, 564 A.2d 937 (1989). In Doneea! the Superior Court invalidated, on public policy grounds, a clause which excluded liability coverage if the rented vehicle was operated by an intoxicated driver. Admittedly, the following language in Doneea! could be read to support plaintiff's public policy argument: We find that public policy expressed in Mowery v. Prudential Property & Casualty Ins. Co., 369 Pa. Super. 494, 502, 535 A.2d 658, 663 (1988), appeal denied 518 Pa. 641,542 A.2d 1370 (1988): "The purpose of the Motor Vehicle Responsibility Law is to require owners of registered vehicles to be financially responsible." The clause in the rental agreement which excludes coverage for liability arising from the operation of the vehicle while under the influence of drags or alcohol is inimical to this purpose. If the clause were permitted to stand, the owners of rental vehicles would have an avenue to avoid their financial responsibility to the victims of accidents whenever the driver of the leased vehicle was intoxicated or sometimes when he was negligent.~? 564 A.2d 937, 943-944. Prior to the Donegal decision, but after the accident which gave rise to the controversy, the Pennsylvania State Legislature had passed an amendment to the Motor ,.~ ~8 which would have been dispositive of that case. Vehicle Financial Responsibility Law As the Court noted: Section 1724 of the Act, effective July 1, 1986, provides' (a) General rule. Insurance benefits may not be denied solely because the driver of the insured motor vehicle is determined to be under the influence of drags or intoxicating beverages at the time of the accident for which benefits are sought. 17 The rental agreement in Donegal also denied coverage if liability arose from the driver's violation of the motor vehicle code of any state where the vehicle was driven. la 75 Pa.C.S.A. § 1701 et seq. 99-0865 CIVIL TERM (b) Contract exclusions. Provisions of an insurance policy which exclude insurance benefits if the insured causes a vehicular accident while under the influence of drugs or intoxicating beverages at the time of the accident are void. The legislative history of this provision establishes that Section 1724 was enacted primarily to prohibit rental car agencies from excluding in their rental agreements coverage for liability arising from the intoxication of the driver- in essence, the very clause at issue on this appeal. We may not, of course, invalidate the exclusion in the Genway-Jones rental agreement pursuant to Section 1724. To do so would grant retroactive effect to this section. No statute may be retroactively applied "unless clearly and manifestly intended" for such application by the legislature. This does not prohibit us, however, from considering the trial court's ruling and Donegal's argument that the exclusion clause was invalid at the time of the accident on the grounds that it violated public policy. (citations and footnotes omitted). 564 A.2d 937, 942. The narrow holding in Doneeal is that public policy dictates against any provision in a rental car agreement which excludes insurance coverage if the driver causes an accident while intoxicated. We may not extend that holding, as plaintiff asks us to do, to declare all exclusionary language in rental car agreements to be invalid. This is especially tree in situations, such as the one before us, where the vehicle is used for a purpose or by a person specifically prohibited by the agreement. .. In Searfoss v, Avis, 349 Pa. Super. 482, 503 A.2d 950 (1986) the Superior Court faced a situation very similar to that in the case at bar. I,t upheld the lower court's refusal to extend insurance coverage where the vehicle was being used in violation of the rental agreement. In Powell v. Walker, 428 Pa. Super. 31,630 A.2d 16 (1993) the Superior Court was faced with a rental agreement which contained language which is almost identical to 99-0865 CIVIL TERM to Mr. Walker rented a vehicle which specifically the language at issue in this case. prohibited the transportation of persons for hire. At the time he rented it, he fully intended to use it as a commercial taxi. However, the vehicle was not being used for commercial purposes at the time of the accident. While Mr. Walker was afforded liability coverage, the Superior Court cited Searfoss v.Avis Rent-A-Car Systems, Inc.., which held that the provision in the rental agreement limiting coverage to permitted uses was valid. The Court reasoned as follows' Relying upon Searfoss v. Avis Rent-A-Car Systems, Inc., 349 Pa. Super. 482, 503 A.2d 950 (1986), appellant first argues that Walker was not a permissive user of the rental vehicle which he was driving at the time of the accident .... Appellant recognizes that the facts of record do not establish that appellant ever actually used the car for business purposes. · · · In Searfoss, supra,... (o)ne of the terms of the rental agreement provided that family members could drive the rented car but only if they were "... at least twenty-one years old ...."Id. at 485,503 A.2d at 951. We enforced the unambiguous terms of the agreement and held that lessee's son was not permitted to use the rental car. Therefore, the liability coverage provided by the rental company which applied only to permissive users, did not indemnify the son. Id. at 489, 503 A.2d at 953. In the instant case, there was no impermissive use. Walker was driving the car for personal use when the accident occurred. The instant case differs from Searfoss, supra because in Searfoss, the car was being used in clear violation of the rental agreement. Instantly, at the time of the accident, the car was not being used in violation of the rental agreement. 630 A.2d 18-19. ~9 Paragraph 1 of the Powell agreement provided, inter alia, that the rented vehicle could not be used "for transportation of person for hire... ". While the agreement obligated the rental company to provide liability insurance, it went on to state that · Such policy shall not apply... (3) to any liability of Lessee or any driver, or any employer of either, arising while the vehicle is being used in violation of any of the limitations set forth in Paragraph 1, above .... 630 A.2d 17-18. 99-0865 CIVIL TERM In view of the above, we cannot accept plaintiffs argument that the broad language of Donega! requires us to invalidate the applicable portions of the rental car agreement as against public policy. Rather, we are bound by the holding of Searfoss as referred to in Powe!l. which requires us to enforce the clear and unambiguous terms of the rental agreement. As a result, Defendant Liberty Mutual is not required to offer coverage to Schrieb. Since plaintiff stands in Schrieb's shoes by virtue of the assignment, her action under the policy must fail.2° For the reasons set forth above, we are constrained to grant the motion for summary judgment of Defendant Liberty Mutual. QRDER OF COURT AND NOW, this day of JUNE, 2000, for the reasons stated in the accompanying opinion, the Motion for Summary Judgment filed by Defendant Liberty Mutual Insurance Company is GRANTED. By the Court, William P. Douglas, Esquire For the Plaintiff /s/Edward E. Guido Edward E. Guido, J. William C. Foster, Esquire For Liberty Mutual Ins. Co. Daniel K. Deardorff, Esquire For Donegal Mutual Ins. Co. :sld 20 Since Schrieb was not an insured under Defendant Liberty's policy, the action for bad faith pursuant to 42 Pa. C.S.A. § 8371 must also fail.