Beck Motors, Inc. v. Federal Mut. Ins. Co.

• Decision Date: 13 June 1969
• Docket Number: No. 33289,33289
• Citation: 443 S.W.2d 200
• Parties: BECK MOTORS, INCORPORATED, a Corporation, Plaintiff-Respondent, v. FEDERAL MUTUAL INSURANCE COMPANY, a Corporation, Defendant-Appellant.
• Court: Missouri Court of Appeals

Page 200

443 S.W.2d 200

BECK MOTORS, INCORPORATED, a Corporation, Plaintiff-Respondent, v. FEDERAL MUTUAL INSURANCE COMPANY, a Corporation, Defendant-Appellant.

No. 33289.

St. Louis Court of Appeals, Missouri.

June 13, 1969.

Hendren & Andrae, Jefferson City, Kelly Pool, and Charles H. Howard, Jefferson City (Brief), for defendant-appellant.

Graham & Hawkins, Robert L. Hawkins, Jr., Jefferson City, for plaintiff-respondent.

GERALD M. SMITH, Commissioner.

This is an appeal from a judgment entered in a court-tried case in favor of plaintiff-respondent. Specifically, it involves what constitutes a replacement vehicle in the automatic coverage provision of an automobile insurance policy. Both parties in their excellent briefs state this is a matter of first impression in this state and our independent research supports such conclusion.

The facts are basically undisputed. The policy involved was originally issued on November 12, 1964, expiring January 25, 1965, and was extended to a time after October 1, 1966, the date of the accident. The policy was issued to Wilbur A. Beck, d/b/a Beck Motors, Inc., a Chrysler-Plymouth automobile dealership. The only coverage provided was comprehensive and collision or upset on a 1965 Dodge. By various endorsements the automobile covered was changed periodically, the last such endorsement prior to October 1, 1966, described a 1967 Plymouth, and was effective September 28, 1966. This endorsement was superseded by another endorsement effective October 2, 1966, describing a 1966 Dodge, which had been demolished in a one-car accident on October 1, 1966. The issue here is whether the 1966 Dodge had replaced the 1967 Plymouth on October 1. The declarations of the policy, made a part thereof, show the named insured (Mr. Beck) and Clarence A. Reinsch as the operators of the vehicle. Mr. Reinsch is described as a salesman and the declarations state he would operate the vehicle seventy-five per cent of the time. In August or September, 1966, Mr. Reinsch, who was in fact sales manager of plaintiff, terminated his full time employment with plaintiff, and was replaced as sales manager by Mike Hoffman. No change was made in the declarations to delineate Hoffman as a driver of the insured vehicle. It was the custom of plaintiff to furnish the sales manager with an automobile for his use, and when that vehicle was sold, a different car would be furnished. When such different car was furnished, the plaintiff would request a change in the car listed in the policy, and the change would be shown by endorsement. In addition to the sales manager, the plaintiff was accustomed to furnishing an automobile to Bill Garrison. Garrison worked for the bank at which Beck transacted business. Although delineated a lease by plaintiff, the arrangement between plaintiff and Garrison was oral, was not for a fixed term, and required Garrison to pay all expenses, upkeep, gas, oil, and any service required to care for the automobile. Garrison also was to obtain insurance on the automobile and to pay any expense not covered by warranty. When plaintiff had an opportunity to sell the car being used by Garrison, the latter would relinquish it and receive in its place another car from plaintiff's stock. The car used by Garrison was operated with plaintiff's dealer plates, as was the car furnished the sales manager. In return for the use of the car furnished by plaintiff (for which he paid plaintiff nothing) Garrison did the bank work for plaintiff, assisted in repossessions, and would urge friends and acquaintances who saw or rode in his car to patronize plaintiff if they liked the car. The arrangement between plaintiff and Garrison and the custom in regard to the sales manager was known to the general agent of defendant who wrote the insurance.

On September 28, 1966, an opportunity arose to sell the automobile then being driven by Garrison. In keeping with the agreement between Garrison and plaintiff, plaintiff picked up the car Garrison was driving and left in its place the 1967 Plymouth listed in the September 28, 1966, endorsement to the policy involved, which car had earlier that day been furnished to Hoffman. Thereafter and until October 1, 1966, Hoffman was not furnished a car by plaintiff and used his own. On October 1, 1966, plaintiff acquired in trade a 1966 Dodge which was turned over immediately to Hoffman. On the way home, Hoffman was killed and the car demolished when it ran off the road. Defendant refused payment under the collision coverage on the sole basis that the vehicle demolished was not covered by its policy of insurance. Plaintiff owned approximately 200 to 250 automobiles at the time of the accident; it did not have fleet coverage; and it had eight dealer plates used interchangeably on the cars owned by it.

The Circuit entered its judgment for plaintiff for the full value of the vehicle less the deductible amount and defendant appeals. We reverse.

The issue before us is the meaning of 'replace' in the following policy provision:

'(a) Automobile. * * * the word 'automobile' means:

(4) Newly acquired Automobile--an automobile, ownership of which is acquired by the named insured or his spouse if a resident of the same household, if (i) it replaces an automobile owned by either and covered by this policy, or the company insures all automobiles owned by the named insured and such spouse on the date of its delivery, and (ii) the named insured or such spouse notifies the company within thirty days following such delivery date; * * *.'

Although the policy is issued to 'Wilbur A. Beck d/b/a Beck Motors, Inc.' the pleadings and interrogatory answers of both parties establish that the policy was intended to cover loss to the corporation which in fact owned the car described. In view of the admissions of the parties in this regard, and having in mind the not uncommon error of treating a corporation and its sole (or nearly so) stockholder as the same entity, we treat the contract here as if it had been issued to Beck Motors, Inc., the plaintiff.

Defendant does not dispute that plaintiff owned the 1966 Dodge. Plaintiff does not contend that the defendant insures all automobiles owned by it nor does plaintiff contend that it notified the defendant of the change of vehicles prior to the accident. The parties submit this case for determination solely on whether the 1966 Dodge replaced the 1967 Plymouth within the language of the policy. Although giving deference to the trial court's factual determinations, we must review the record de novo. Particularly here, where the evidence is not in dispute, and only one witness having testified, no conflict in the testimony exists. We also approach this matter with due deference to the rules of interpretation of insurance contracts that plain and unambiguous language must be given its plain meaning; that where the language is susceptible to two interpretations, provisions limiting coverage will be construed most strongly against the insurer; and that ambiguity does not authorize a perversion of the language or the rewriting of a contract. Brugioni v. Maryland Casualty Co., Mo., 382 S.W.2d 707(2--4); Hughes v. Great American Ins. Co., Mo.App., 427 S.W.2d 266(2--6).

In the absence of a replacement provision in an automobile comprehensive or collision policy, the policy will not cover damage to a vehicle other than the one described in the policy. Hoffman v. Illinois Nat. Casualty Co., 7 Cir., 159 F.2d 564. The frequent exchange, purchase and sale of cars by the populace generally created the need for a provision to allow continuous coverage under policies of insurance when a sale or exchange of the described vehicle occurs. The provision now before us is the result of that need. Its purpose is to permit the automatic extension of coverage to a car not specified by the policy, where that vehicle is acquired to replace the vehicle described, and allows the insured a reasonable time (here 30 days) to notify the company of the new vehicle to be covered. It was not intended and cannot be construed to provide coverage for additional vehicles not listed in the policy and used interchangeably by the insured with the listed vehicle.

Although the provision here has not been interpreted or construed by the Missouri appellate courts, it has been exposed to judicial scrutiny in other jurisdictions. The most commonly accepted definition of what constitutes a replacement vehicle is found in State Farm Mutual Automobile Ins. Co. v. Shaffer, 250 N.C. 45, 108 S.E.2d 49, where the court stated:

'It is our opinion that the replacement vehicle is one (1) the ownership of which has been acquired after the issuance of the policy, and (2) during the policy period, and (3) it must replace the car...