OCEAN ACCIDENT & GUARANTY CORPORATION v. Schroeder

• Decision Date: 17 April 1931
• Docket Number: No. 5664.,5664.
• Parties: OCEAN ACCIDENT & GUARANTY CORPORATION, Limited, v. SCHROEDER.
• Court: U.S. Court of Appeals — Sixth Circuit

48 F.2d 727 (1931)

OCEAN ACCIDENT & GUARANTY CORPORATION, Limited, v. SCHROEDER.

No. 5664.

Circuit Court of Appeals, Sixth Circuit.

April 17, 1931.

S. D. L. Jackson, Jr., of Toledo, Ohio (Tracy, Chapman & Welles, of Toledo, Ohio, on the brief), for appellant.

Lee H. Schminck, of Toledo, Ohio (H. Thane Bauman and James H. Baker, both of Adrian, Mich., on the brief), for appellee.

Before MOORMAN, HICKS, and HICKENLOOPER, Circuit Judges.

HICKENLOOPER, Circuit Judge.

This is an action brought under Ohio General Code, § 9510-4 by the administrator of one killed in an automobile accident to recover against an alleged insurer. Appellant issued its policy of public liability automobile insurance to the Rentacar Company of Toledo, Ohio, which company was engaged in the business of renting so-called "driverless" cars to members of the public. By special indorsement No. 1 coverage was extended "to indemnify in the same manner and under the same conditions as the named Assured is indemnified thereunder any person or persons hiring `driverless' cars from the named Assured * * * but the coverage is not hereby extended to any individual to whom the recorded hirer of a car may extend permission to use it." By another special indorsement (No. 3) it was provided that, notwithstanding special indorsement No. 1, "it is understood and agreed that in the event that the person hiring an automobile from the Assured violates any of the provisions of the contract entered into with the Assured at the time the car is rented, this policy shall not cover such additional Assured on account of said violation."¹ It was in contemplation of the parties that insurance by the renters of cars was to be optional with them, and if they elected to take it a fee was charged and collected therefor. The sole question here presented is whether one George C. Arend, who rented a car on November 17, 1925, and then elected to accept insurance coverage, was in fact covered by appellant's policy, or whether he was to be excluded from the protection of such policy because of violation of his contract with the Rentacar Company. The pertinent parts of the contract between Arend and the Rentacar Company are printed in the margin.²

As a matter of fact Arend never could and never did drive the cars he rented. There is evidence that on the occasion of his first rental, some twenty-one months before, he was asked who intended to drive. His reply was that his companion, a Mr. Dugan, would drive, to which the representative of the company responded, "Oh, you are just renting the car." Cars were rented by Arend from time to time thereafter, and on each such occasion Arend brought with him a capable driver, usually a Thomas F. Kaucher, who was seen by representatives of the company to drive the car out and later return it, no question being raised at any time as to the propriety of such action.

The only contention now urged by appellant is that the written contract, comprising both the policy with its several indorsements and the agreement between Arend and the Rentacar Company, must be regarded as the sole contract between the parties, that the terms of such contract may not be varied by parol, but are binding upon Arend as written, and that by the terms of indorsement No. 3 Arend had forfeited his insurance, if any he ever had (1) because of breach of the representation that he was an "experienced driver," and (2) because of breach of the provision that he would not "sublet car nor permit anyone else to drive same." Obviously, if Arend could not recover upon the policy, the injured person could not do so by subrogation to Arend's rights. Stacey v. Fidelity & Casualty Co. of N. Y., 114 Ohio St. 633, 151 N. E. 718.

It is not contended that the provision in the Rentacar contract that the lessee would operate the car "in a careful and prudent manner" was effective to eliminate insurance protection in all cases of simple negligence. Perhaps there would be an implied fraud in selling a policy which in no case could cover the principal purpose for which it was manifestly sold; but be that as it may, counsel distinctly disclaimed this aspect of defense at the oral argument, and it...