85 Hawai'i 243, Budget Rent-A-Car Systems, Inc. v. Ricardo, RENT-A-CAR
| Decision Date | 16 June 1997 |
| Docket Number | RENT-A-CAR,No. 19738,19738 |
| Citation | 942 P.2d 507 |
| Parties | 85 Hawai'i 243 BUDGETSYSTEMS, INC., Plaintiff-Appellant, v. Clemente C. RICARDO and Robert Gates, Defendants-Appellees. |
| Court | Hawaii Supreme Court |
Kathy M. Sarria (Carleton B. Reid of Reid, Richards & Miyagi, with her on the briefs), Honolulu, for plaintiff-appellant Budget Rent-A-Car Systems, Inc.
Tracy G. Chinen (Lance S. Au of Rush Moore Craven Sutton Morry & Beh, with him on the brief), Honolulu, for defendant-appellee Clemente C. Ricardo.
Roy J. Bell, III, Honolulu, for defendant-appellee Robert Gates.
Before MOON, C.J., and KLEIN, LEVINSON, NAKAYAMA and RAMIL, JJ. KLEIN, Justice.
This declaratory relief action arose out of a one-car accident that took place on Ahukini Road on the island of Kauai. Clemente Ricardo, driving a Ford Mustang that he had rented from Budget Rent-A-Car Systems, collided with a telephone pole, resulting in injuries to the passenger, Robert Gates. Relying on language in its rental agreement with Ricardo that denies liability if the renter drives while under the influence of alcohol, Budget filed this action seeking a declaratory judgment that it had no obligation to defend or indemnify Ricardo for any claims arising out of the accident because he was drunk at the time. The trial court ruled in favor of Ricardo on public policy grounds and awarded attorney's fees and costs. We affirm in part and reverse in part.
Following the October 30, 1992, accident, Ricardo was given a blood test at Wilcox Memorial Hospital, which revealed a blood alcohol content of .24 percent. The back of the rental agreement signed by Ricardo contained, in paragraph 5(B), the following restriction: "Vehicle will not be used or operated by anyone ... [w]hile intoxicated or under the influence of any drugs or other substances which would impair driving ability[.]" The rental agreement purported to deny liability coverage in case of violation of this and other use restrictions.
Gates filed a personal injury action against Ricardo and Legends Nightclub. Budget filed this Complaint for Declaratory Relief on April 15, 1994, against Ricardo and Gates, alleging that Ricardo was in violation of paragraph 5(B) of the rental agreement and was therefore not entitled to defense or indemnification by Budget against any claims arising out of the October 1992 accident. Motions for summary judgment were filed by both Budget and Ricardo. On June 29, 1995, the circuit court denied Budget's motion and granted Ricardo's. The court ruled that the intoxication use restriction in paragraph 5(B) was in violation of public policy and that Budget had a duty to defend and indemnify Ricardo.
Gates and Ricardo then requested and were awarded attorneys' fees and costs pursuant to Hawai'i Revised Statutes (HRS) §§ 431:10-242 and 431:10C-105 (1993). Budget's Motion for Leave to Amend Complaint was denied. 1 Following entry of judgment, Budget brought this timely appeal.
A. Standard of Review
Under the Hawai'i Rules of Civil Procedure (HRCP), summary judgment should be entered "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." HRCP Rule 56 (1993). The evidence should be viewed in the light most favorable to the non-moving party. Maguire v. Hilton Hotels Corp., 79 Hawai'i 110, 112, 899 P.2d 393, 395 (1995). On appeal, an order of summary judgment is reviewed de novo under the same standard. Harris v. DeSoto, 80 Hawai'i 425, 431, 911 P.2d 60, 66 (1996).
B. A Self-Insured Car Rental Agency's Attempt To Limit Its
Liability Through An Intoxication Restriction In
Its Rental Agreement Violates Public Policy
Budget claims that it is not contractually obligated to defend or indemnify Ricardo because he was operating the vehicle while intoxicated, which is in violation of the express terms of Ricardo's rental agreement with Budget. On the back of the rental agreement signed by Ricardo is found the following paragraph:
5) USE RESTRICTIONS: Vehicle will not be used or operated by anyone:
A. Who intentionally or as a result of wilful or wanton misconduct damages the Vehicle B. While intoxicated or under the influence of any drugs or other substances which would impair driving ability;
C. While engaged in any speed contest or training activity;
D. Who obtains the Vehicle with fraudulent or false information;
E. While committing or involved in a crime that could be charged as a felony;
F. To carry persons or property for hire or to push or tow anything;
G. Who is an unauthorized driver;
H. Outside the continental United States, without the specific authorization of the renting location;
I. On other than regularly maintained roadways, or unpaved roads;
J. Fails to report theft, vandalism or any accident to the renting location and police authority within 24 hours; or
K. Allows another person, including any Authorized Driver, to come into possession of the Vehicle, or the keys to the Vehicle, and the Vehicle is not returned on the due back date;
L. To carry hazardous or explosive substances; or
M. To transport a weight which is in excess of the maximum payload capacity for the vehicle;
N. Who does not know how to drive a stick shift vehicle (if Vehicle has a stick shift transmission);
O. In or through the structure of any underpass or other object where there is insufficient clearance, whether of height or width;
P. Who causes damage to the freight box resulting from inadequately secured cargo; or Improper Loading (Truck and Van only);
Q. Who drives on Route 200 (Saddle Road) Hawaii, except for government renters with official duty orders.
Liability coverage is limited, in the agreement's following paragraph, so as not to apply if there is a violation of any of these seventeen use restrictions. While Ricardo declined the "loss damage waiver" offered (at $12.99 a day) by Budget on the front of the agreement, a clause on the back declares that "[i]f Renter accepts LDW but violates a use restriction provided in Paragraph 5, LDW is voided and Renter will be responsible for loss of or damage to the Vehicle as if Renter declined LDW." 2
Since 1974, Hawai'i has operated under a statewide system of mandatory no-fault insurance. The purpose of the Motor Vehicle Insurance Law, HRS Chapter 431, Article 10C (1993), is set out in § 431:10C-102:
(a) The purpose of this article is to:
(1) Create a system of reparations for accidental harm and loss arising from motor vehicle accidents;
(2) Compensate these damages without regard to fault; and
(3) Limit tort liability for these accidents.
(b) To effectuate this system of motor vehicle insurance and to encourage participation by all drivers in the motor vehicle insurance system:
(1) Those uninsured drivers who try to obtain the privilege of driving a motor vehicle without the concomitant responsibility of an ability to compensate adequately those who are injured as a result of a motor vehicle accident are to be dealt with more severely ...
(Emphasis added). As expressed in the legislative history, the legislature, in passing this no-fault insurance system into law, was
of the belief that a basic, comprehensive, equitable and reasonably priced auto insurance policy must satisfy each of the following criteria:
(1) Provide for a speedy, adequate and equitable reparation for those injured or otherwise victimized (2) Provide for the stabilization and reduction of motor vehicle liability insurance premium rates;
(3) Provide insurance coverage for all who require it, at a cost within the reach of every licensed driver;
(4) Provide for a compulsory insurance system;
(5) Provide for adequate regulatory control.
Hse. Conf. Comm. Rep. No. 13, in 1973 House Journal, at 1219; see also Sen. Conf. Comm. Rep. No. 4, in 1973 Senate Journal, at 635. With this intention, the legislature enacted, inter alia, HRS § 431:10C-104 (1993):
Conditions of operation and registration of motor vehicles. (a) ... [N]o person shall operate or use a motor vehicle upon any public street, road or highway of this State at any time unless such motor vehicle is insured at all times under a no-fault policy.
(b) Every owner of a motor vehicle used or operated at any time upon any public street, road or highway of this State shall obtain a no-fault policy upon such vehicle which provides the coverage required by this article and shall maintain the no-fault policy at all times for the entire motor vehicle registration period.
The basic no-fault policy requirement is outlined in HRS § 431:10C-301(a) (1993):
Required motor vehicle policy coverage (a) In order to meet the requirements of a no-fault policy as provided in this article, an insurance policy covering a motor vehicle shall provide:
(1) Coverage specified in section 431:10C-304; and
(2) Insurance to pay on behalf of the owner or any operator of the insured motor vehicle using the motor vehicle with the express or implied permission of the named insured, sums which the owner or operator may legally be obligated to pay for injury, death, or damage to property of others ... which arise out of the ownership, operation, maintenance, or use of the motor vehicle[.]
The operation of a vehicle not covered under either a no-fault policy or an approved certificate of self-insurance can lead to penalties, including fines, suspension of vehicle registration, and imprisonment. See HRS §§ 431:10C-104(c) and 431:10C-117 (1993); Hawai'i Administrative Rules (HAR) § 16-23-2 (1993).
The only exception to this sweeping mandate of a no-fault insurance policy on all vehicles is for qualified self-insurers:
The motor vehicle insurance required by section 431:10C-104 may be satisfied by any owner of a motor vehicle if:
(1) Such owner provides a surety bond, proof of qualifications as self...
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