Allstate Ins. Co. v. RJT Enterprises, Inc.

• Decision Date: 23 January 1997
• Docket Number: No. 85396,85396
• Citation: 692 So.2d 142
• Parties: 22 Fla. L. Weekly S49 ALLSTATE INSURANCE COMPANY, Petitioner, v. RJT ENTERPRISES, INC., etc., Respondent.
• Court: Florida Supreme Court

Page 142

692 So.2d 142

22 Fla. L. Weekly S49

ALLSTATE INSURANCE COMPANY, Petitioner, v. RJT ENTERPRISES, INC., etc., Respondent.

No. 85396.

Supreme Court of Florida.

Jan. 23, 1997.

Rehearing Denied April 25, 1997.

Lori J. Caldwell and Darryl L. Gavin of Rumberger, Kirk & Caldwell, Orlando, for Petitioner.

Mark A. Morrow of the Law Offices of Ronald E. Solomon, P.A., and Nancy Little Hoffmann of Nancy Little Hoffmann, P.A., Fort Lauderdale, for Respondent.

OVERTON, Justice.

We have for review RJT Enterprises, Inc. v. Allstate Insurance Co., 650 So.2d 56 (Fla. 4th DCA 1994), in which the district court was confronted with the situation where a lessee accepted responsibility for providing "primary coverage" to the extent of the lessee's policy limits. The district court held that the lessee's responsibility also included a duty, through the lessee's insurer, to defend the lessor. It then certified the following question as one of great public importance:

ASSUMING THAT THE RENTER'S INSURER OWES A DUTY OF DEFENSE AND INDEMNIFICATION TO ITS INSURED, THE RENTER, DOES THE RENTER'S INSURER OWE THE RENTAL AGENCY, A NON INSURED UNDER THE POLICY, ANY DUTY OF

DEFENSE AND/OR INDEMNIFICATION?

Id. at 59. We have jurisdiction. Art. V, § 3(b)(4), Fla. Const. We find it is appropriate to rephrase the certified question as follows:

DID THE LEGISLATURE INTEND TO ALLOW MOTOR VEHICLE LESSORS TO SHIFT THE DUTY TO DEFEND TO THE LESSEE'S INSURER IN SITUATIONS WHERE THE INSURER OF THE LESSEE HAS A DUTY TO DEFEND ITS INSURED AND ITS INSURED HAS CONTRACTED WITH THE LESSOR TO PROVIDE PRIMARY INSURANCE COVERAGE TO THE EXTENT OF THE LIMITS OF THE LESSEE'S POLICY?

We answer the rephrased question in the negative and, for the reasons expressed, we quash the district court's decision. First, we find that the duty to defend is a responsibility separate and distinct from the duty to provide primary insurance coverage (indemnification). Second, we find that the legislature did not intend to burden the insurers of lessees with the duty to defend lessors not named in (and, indeed, expressly excluded from) the insured's policy. Finally, we conclude that the legislature has created solely a mechanism by which lessors may shift to lessees the duty to provide primary insurance coverage (indemnification) to the extent of the financial responsibility requirements of the law.

The holding suggested by the dissent would likely result in dramatically increased insurance rates for Floridians. Such an outcome was clearly not intended by the legislature. It must be understood that, in many cases, the cost of defense greatly exceeds (as in this case) the cost of indemnification. In cases where the lessee's insurer did not contract to either indemnify or defend the lessor of the automobile, we find that reading the subject legislative act broadly results in a major policy change. Certainly the legislature has authorized the shift, from the lessor to the lessee, of the responsibility for primary indemnification. There is no indication that the duty to defend, a strictly contractual duty, can also be shifted in express violation of the contract between the lessee and the lessee's insurer. The approach forwarded by the dissent turns a blind eye to the prospect of, at best, substantially increased insurance rates for the citizens of Florida and, at worst, substantially decreased availability of insurance offering any coverage for leased automobiles. In the absence of a clear directive from the legislature, this Court should not impose such monumental costs on the citizens of Florida. We turn to the specific facts of the instant case.

The record reflects the following. RJT Enterprises, Inc., is a rental car agency. In March of 1987, it leased an automobile to John Weinerth. Weinerth had automobile insurance through Allstate Insurance Company (Allstate). The language in the Allstate policy expressly excluded from coverage the owner (lessor) of the automobile leased by its insured. Weinerth's rental agreement with RJT contained this language:

You are hereby notified that by signing this contract below you agree that your own liability and personal injury protection insurance, if any, will provide primary insurance coverage up to its full policy limits. I have read the terms and conditions of this contract and agree to them.

(Emphasis added.) Weinerth signed the rental agreement. Then, in April of 1987, Weinerth was involved in an automobile accident with Isaiah Young. In the ensuing action brought by Young against Weinerth and the rental car agency, Allstate refused to provide a defense for RJT. Allstate settled with Young for the policy limits of $10,000. Young pursued his action against RJT. RJT had to provide its own defense. Young recovered no further judgment from RJT. RJT now claims that it is entitled to reimbursement for attorney fees and costs (exhibits indicate fees and costs in excess of $30,000) incurred in defending itself against the action pursued by Young. The trial court ruled in favor of Allstate. The Fourth District Court of Appeal reversed.

The applicable statute is found in section 627.7263 of the Florida Statutes (1985). That statute reads:

627.7263 Rental and leasing driver's insurance to be primary; exception.-- (1) The valid and collectible liability insurance or personal injury protection insurance providing coverage for the lessor of a motor vehicle for rent or lease shall be primary unless otherwise stated in bold type on the face of the rental or lease agreement. Such insurance shall be primary for the limits of liability and personal injury coverage as required by ss. 324.021(7) and 627.736.

(2) Each rental or lease agreement between the lessee and the lessor shall contain a provision on the face of the agreement, stated in bold type, informing the lessee of the provisions of subsection (1) and shall provide a space for the name of the lessee's insurance company if the lessor's insurance is not to be primary.

As previously noted, the agreement between the rental car agency and Weinerth included a provision making Weinerth's insurance the primary coverage for the leased vehicle. That language was clearly authorized by the provisions of section 627.7263. The terms of the lessee's Allstate insurance contract expressly excluded the owner (such as the rental car agency) of the leased automobile.

Allstate, in this action, does not challenge the legislature's ability to authorize a shift in primary coverage. In fact, many cases have recognized the propriety of such a shift in situations where the correct contractual language was used. In Grant v. New Hampshire Insurance Co., 613 So.2d 466, 470 (Fla.1993), we stated: "Section 627.7263 merely allows the lessor of a Florida-registered motor vehicle to shift the burden of providing primary liability coverage to the lessee's insurance carrier when the lessee in fact has a primary liability insurance carrier." See also Southeastern Fidelity Ins. Co. v. Cole, 493 So.2d 445, 446 (Fla.1986); State Farm Mut. Auto. Ins. Co. v. Lindo's Rent-A-Car, Inc., 588 So.2d 36, 37 (Fla. 5th DCA 1991); International Ins. Co. v. Ryder Truck Rental, Inc., 555 So.2d 1250, 1251 (Fla. 3d DCA 1989), review denied, 564 So.2d 487 (Fla.1990).

We agree with Allstate's contention that the legislature never intended, through the statutory language of section 627.7263, to allow lessors to shift the duty to defend. It appears that the district court's finding that Allstate had a duty to defend in this case was based on the belief that the duty to provide "primary coverage" always includes a duty to defend. We reject this conclusion. In fact, the duty to defend has no roots in the common law. It is purely a statutory or contractual duty. Argonaut Ins. Co. v. Maryland Casualty Co., 372 So.2d 960, 963 (Fla. 3d DCA 1979).

Interestingly, in a reverse factual situation, the Fourth District Court of Appeal did not accept its own reasoning in this case. In Budget Rent A Car Systems, Inc. v. Taylor, 626 So.2d 976 (Fla. 4th DCA 1993), the Fourth District was confronted with a situation in which the lessor was responsible for primary coverage under the rental contract with the lessee. In that case, the lessor was a self-insurer. A claim was filed against both Budget and Taylor. Budget provided Taylor with a defense prior to settling the claim for $10,000. Budget obtained a partial release for Taylor to the extent of the $10,000 settlement. Taylor claimed that Budget owed him a defense beyond the $10,000 settlement. Contrary to the analysis in this case, the Fourth District held that, in the circumstances in Taylor, Budget owed Taylor no defense. It stated:

It seems to us that if there is no contractual duty to defend in the parties' contract then there is no duty to defend. The fact that Budget furnished both itself and Taylor a defense to the extent of Budget's coverage does not mean it must continue defending Taylor, regardless of the extent of Taylor's exposure....

We, thus, find Taylor suffered no prejudice. In fact, he received more than he was entitled to, i.e., a free defense of his liability to the extent of the coverage he purchased.

Id. at 979. We reiterate...