Insurance Co. of North America v. Atlantic National Ins. Co.

• Decision Date: 24 March 1964
• Docket Number: No. 9086.,9086.
• Citation: 329 F.2d 769
• Parties: INSURANCE COMPANY OF NORTH AMERICA, Appellant, v. ATLANTIC NATIONAL INSURANCE COMPANY and Peter H. Ros, Appellees.
• Court: U.S. Court of Appeals — Fourth Circuit

329 F.2d 769 (1964)

INSURANCE COMPANY OF NORTH AMERICA, Appellant, v. ATLANTIC NATIONAL INSURANCE COMPANY and Peter H. Ros, Appellees.

No. 9086.

United States Court of Appeals Fourth Circuit.

Argued October 2, 1963.

Decided March 24, 1964.

Aubrey R. Bowles, Jr., Richmond, Va. (Jack N. Herod, and Bowles, Boyd & Herod, Richmond, Va., on brief), for appellant.

Edward A. Marks, Jr., Richmond, Va. (Sands, Anderson, Marks & Clarke, Richmond, Va., on brief), for appellees.

Before SOBELOFF, Chief Judge, BOREMAN, Circuit Judge, and R. D. WATKINS, District Judge.

BOREMAN, Circuit Judge:

Which of two insurance policies affords primary coverage with respect to damages claimed to have been sustained in an automobile accident, and which of the two insurance companies involved herein is obligated to defend one Peter H. Ros, the operator of the sole automobile involved in the accident? These are the questions to be determined on this appeal. This action for declaratory judgment was brought by Insurance Company of North America, hereinafter referred to as North America, against Atlantic National Insurance Company, hereinafter referred to as Atlantic, and Peter H. Ros.

Upon a stipulation of pertinent facts the two insurance companies submitted the determination of the controversy to the District Court and that court, by a written memorandum opinion filed May 8, 1963, rendered its decision and entered judgment in favor of Atlantic, in effect declaring that the policy issued by Atlantic does not provide coverage to Peter H. Ros for the accident and that the policy issued by North America's predecessor, admittedly binding on North America, does provide such coverage, thereby requiring North America to defend and indemnify Peter H. Ros with respect to the accident. It is from this judgment that North America has appealed.

The pertinent facts are not in dispute. On June 1, 1960, one Salvador Ros rented an automobile from the Hertz Corporation in New York City, the terms of which rental were set forth in a written agreement entered into and executed at that time and place. The agreement provided that the automobile was not to be removed from the State of New York without the written consent of Hertz. Such consent was not obtained.

Having obtained possession of the automobile, Salvador Ros entrusted the use thereof to his son, Peter H. Ros, one of the defendants below, who removed the automobile from New York and, on June 2, 1960, while operating it in Virginia, was involved in the accident out of which this controversy arises and in which Robert C. Friborg, a passenger in the rented automobile, claims to have sustained injuries. Consequently, Friborg, an infant, and his father have instituted actions against Peter H. Ros in the Circuit Court of Goochland County, Virginia, for claimed medical expenses, personal injuries and resulting loss of services. Apparently there was another passenger in the rented automobile at the time of the accident who also has asserted a claim for bodily injuries.

There was in effect at the time of the accident a liability insurance policy issued sued by Atlantic to Hertz which, under certain circumstances, covered the rented vehicle and Peter H. Ros. However, there was specifically excluded from the coverage of said policy any liability of Peter H. Ros (as a member of the immediate family of the renter) (1) with respect to bodily injury of any person riding as guest or passenger in the rented automobile; and (2) with respect to any bodily injury or property damage caused by the rented automobile while being operated in violation of any of the terms of the rental agreement.

In effect also at the time of the accident was a family automobile insurance policy, issued to Salvador Ros by North America, covering any liability of Peter H. Ros, the son of Salvador, but providing that the insurance with respect to a nonowned automobile "shall be excess insurance over any other valid and collectible insurance."

Following the accident Atlantic, in an ostensive attempt to comply with Va.Code § 46.1-451(a) (Michie 1958),¹ filed with the Commissioner of Motor Vehicles a form entitled "Notice of Policy Under the Virginia Motor Vehicle Safety Responsibility Act," which form, commonly known and hereinafter referred to as "SR 21", purported to convey notice that the Atlantic policy was in effect at the time of the accident, that it applied to Peter H. Ros and the Hertz Corporation and was "a standard provisions automobile liability policy in form approved by the State Corporation Commission or an automobile liability policy acceptable to that Commission as substantially the equivalent of a standard provisions automobile liability policy, * * *." The parties have stipulated that the Virginia State Corporation Commission has never approved any automobile liability insurance policy for issuance in Virginia which contains exclusions with respect to liability to passengers or to liability when a vehicle is operated in violation of a rental agreement. It follows, therefore, that the Atlantic policy was neither a "standard provisions automobile liability policy" nor "substantially the equivalent" thereof. At the time the claimed liability was incurred, the automobile was being operated by Peter H. Ros in violation of the provision of the rental agreement prohibiting its removal from the State of New York without written permission; and the liability asserted, agreed by all concerned to be the only possible type of liability incurred in the accident, is with respect to bodily injury of persons riding as passengers in the rented automobile. In denying liability Atlantic relies upon these two specific exclusion clauses contained in its policy.

North America contends that Atlantic waived or is estopped to rely upon such exclusions by filing the SR 21 in which Atlantic represented that, on the date of the accident, it had in effect a policy at least substantially equivalent to a Virginia standard provisions automobile liability policy (impliedly thereby asserting that the policy contained no such exclusions as Atlantic now relies upon) and represented that such policy applied to Peter H. Ros.

Certain provisions of the Virginia Motor Vehicle Responsibility Act (Code 1950, §§ 46.1-388 to 46.1-514) are here involved. Section 46.1-449² provides in effect that after an operator of a motor vehicle has been involved in an accident, the Commissioner of Motor Vehicles shall suspend the operator's license and registration certificate unless the operator furnishes security sufficient to satisfy any judgment which may be rendered against him. The next two sections of the Act³ provide in effect (1) that such suspension of driving privileges shall not be imposed upon the operator of a motor vehicle registered in some state other than Virginia (such as the automobile involved in the instant case) if the owner had in effect with respect to the motor vehicle involved an automobile liability policy acceptable to the State Corporation Commission as substantially the equivalent of a Virginia "standard provisions automobile liability policy"; and (2) that upon receipt of notice of the accident, the insurance carrier involved shall determine whether or not the policy was applicable to any such liability as may have been incurred by the operator and shall thereupon file with the Motor Vehicles Commissioner a written notice respecting its determination in that regard. Form SR 21 was, of course, designed to implement the latter provision. There is, however, no indication in the statutes, here pertinent, of any legislative intent to give the filing of the required notice the effect of binding the insurance company irrevocably to the matters represented by it in such notice.

At the time the court below rendered its decision and at the time this case was argued before us, the Supreme Court of Appeals of Virginia had rendered no decision concerning the effect of the filing of an SR 21. Subsequently, on December 2, 1963, the Virginia court handed down two decisions which deal with certain phases of the question. See Virginia Farm Bureau Mutual Insurance Co. v. Saccio, 204 Va. 769, 133 S.E.2d 268; Virginia Mut. Ins. Co. v. State Farm Mut. Auto. Ins. Co., 204 Va. 783, 133 S.E.2d 277. After obtaining permission, the parties hereto filed additional briefs which present divergent views as to the interpretation of these decisions and their applicability to the issues raised in the instant case.

Counsel for North America contend that these decisions have no applicability here and provide no support for Atlantic's defensive position. In each of those cases the policy involved was a standard provisions policy in form approved in Virginia and the insurer filed the form SR 21 following an accident; thus the representations in the SR 21 forms that the policies were standard provisions policies were true. In the case at bar, the SR 21 representation that Atlantic's policy was a standard provisions policy or its equivalent was not true. It is readily apparent that there are these factual distinctions between the Virginia cases and the case at bar. However, we think that a careful analysis of the holding in each of the Virginia decisions may be helpful.

In Virginia Farm Bureau Mutual Insurance Co. v. Saccio, supra, it was held that an insurer which had issued an automobile liability policy pursuant to Virginia's "assigned risk plan"⁴ may declare the policy void ab initio for fraud in its procurement and that the previous filing of the SR 21 form by the insurer upon receipt of notice of the accident, and without later undertaking to withdraw such form, did not estop insurer from setting up a subsequent policy cancellation as a defense to the claim of an injured person who had obtained a judgment against the insured. There the trial court had ruled, as a matter of law, that the filing of the SR 21 form, standing alone, did effect such an estoppel. The court...