Champlain Cas. Co. v. Agency Rent-A-Car, Inc., RENT-A-CA

Docket NºINC
Citation716 A.2d 810, 168 Vt. 91
Case DateJune 12, 1998
CourtUnited States State Supreme Court of Vermont

Page 810

716 A.2d 810

No. 97-101.
Supreme Court of Vermont.
June 12, 1998.

Page 811

Paul R. Bowles, Montpelier, and Steven A. Bredice, Essex Junction, of Hill, Unsworth, Barra & Bowles, for Plaintiff-Appellant.

John P. Cain and Lori Reuschel Choiniere of McCormick, Fitzpatrick, Kasper & Burchard, P.C., Burlington, for Defendant-Appellee.


DOOLEY, Justice.

Plaintiff Champlain Casualty Company of Vermont appeals a Washington Superior Court order granting summary judgment to defendant Agency Rent-A-Car, in a dispute over liability for damages caused by the lessee of one of Agency's vehicles. Champlain is the lessee's insurer under a comprehensive automobile liability policy. The trial court held that Agency's self-insurance obligation, created to comply with Vermont's Motor Vehicle Financial Responsibility Law, 23 V.S.A. §§ 800-810, does not constitute "other collectible insurance" and consequently, Champlain is responsible for providing primary liability coverage. Champlain appeals. We affirm, but on grounds different from those employed by the trial court.

The facts of this case are largely undisputed. On November 9, 1993, Alex Roberts of Stowe, Vermont, rented a car from Agency and signed a rental contract. While driving the rented car, Roberts collided with a vehicle driven by Patricia Alley. Roberts died as a result of injuries he suffered in the crash. Alley was injured, and she and her husband later filed suit against Roberts and his estate.

The parties in the underlying suit looked to both Champlain and Agency to defend and indemnify. This led to the litigation before us, in which Champlain sought a declaratory judgment that Agency was obligated to defend and pay any claim against Roberts' estate. Agency responded that Champlain had the duty to defend and indemnify.

Champlain's responsibility is based on a comprehensive automobile liability insurance policy it issued to Roberts. The policy covered Roberts' operation of a nonowned automobile, but stated that:

If there is other applicable similar insurance we will pay only our share of the loss. Our share is the proportion that our limit of liability bears to the total of all applicable limits. However, any insurance we provide with respect to a vehicle you do not own shall be excess over any other collectible insurance.

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Agency's responsibility is based on Vermont's financial responsibility law. No owner of an automobile may permit the operation of the vehicle upon the highways of the state without having in effect an automobile liability policy or bond, in the amount specified in the statute and covering persons killed or injured in an accident and property damage. See 23 V.S.A. § 800(a). In lieu thereof, the owner may file self-insurance in the amount of $100,000. See id. § 801(c). The Commissioner of Motor Vehicles may issue a self-insurance certificate to a person when the Commissioner is satisfied that the person has "at least $100,000.00 of unencumbered net worth." Id. The statute goes on to provide:

A certificate of self-insurance obtained by a self-insurer shall insure every person operating a motor vehicle, owned by said self-insurer, with his express or implied permission, against loss within statutory limits from the liability imposed by law upon such person arising out of the operation of said motor vehicle and shall be for the benefit of any person suffering personal injuries or property damage arising out of the use of such motor vehicle with such express or implied permission.


Agency obtained a certificate of self-insurance from the Commissioner of Motor Vehicles. Agency does not offer insurance to those who rent cars from it. In fact, the rental agreement entered into between Roberts and Agency required that Roberts have his own liability insurance covering his operation of Agency's vehicle. The rental agreement provided that Roberts' "valid and collectible liability and personal injury protection insurance coverage maintained with Champlain shall be primary." The agreement explained that Agency was self-insured and provided:

If required by the financial responsibility laws of the state in which this agreement was executed the company shall settle or defend, up to the minimum limits required for any one rental vehicle per occurrence, as it considers appropriate, any claim or suit for bodily injury and/or property damage arising out of the authorized use of this vehicle by the renter, renter's spouse or listed additional licensed driver.... These protections, if required, shall be excess over any self-insurance certificate, surety bond, financial responsibility bond, cash deposit, or insurance policy or benefit including but not limited to: health and accident, medical, dental insurance and/or disability benefit available to any individual making a claim under this agreement.

Champlain argues that the "other collectible insurance" clause contained in its policy with Roberts made Agency the primary insurer. Alternatively, it argues that both it and Agency should be treated as excess carriers, and the loss should be apportioned between them. Meanwhile, Agency argues that its self-insurance status is not "other collectible insurance," and, as a result, Champlain is responsible for primary coverage. Alternatively, it argues that even if the "other collectible insurance" clause applies, the nature of its relationship with Roberts is such that its liability should be secondary. The trial court agreed with Agency's first argument holding that self-insurance is not insurance for purposes of Champlain's "other collectible insurance" clause. Thus, the court determined that Champlain was the primary insurance provider, requiring Champlain to defend and indemnify the estate of Alex Roberts up to its policy limits, before Agency is required to indemnify under the financial responsibility laws.

Both parties have framed the issue in this case as whether self-insurance is "other collectible insurance." As the briefing reflects, other jurisdictions are split on this issue. Compare White v. Howard, 240 N.J.Super. 427, 573 A.2d 513, 514 (A.D.1990) (self-insurance by rental agency was same as an insurance policy covering vehicle); Hartford Casualty Ins. Co. v. Budget Rent-A-Car Systems, 796 S.W.2d 763, 769 (Tex.Ct.App.--Dallas 1990) (self-insurance program constituted other valid and available insurance); Hillegass v. Landwehr, 176 Wis.2d 76, 499 N.W.2d 652, 656 (1993) (self-insurer provided insurance under other insurance clause in the driver's policy); with Quick v. National Auto Credit, 65 F.3d 741, 743 (8th Cir.1995) (qualification as self-insurer under state financial responsibility law did not constitute other

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valid and collectible insurance); Farmers Ins. Co. v. Snappy Car Rental, Inc., 128 Or.App. 516, 876 P.2d 833, 837 (1994) (certificate of self-insurance does not constitute other valid and collectible insurance); Home Indemnity Co. v. Humble Oil & Refining Co., 314 S.W.2d 861, 866 (Tex.Civ.App.1958) (certificate of self-insurance does not constitute other collectible insurance). The arguments of the parties tend to paint with a broad brush, suggesting that self-insurance is a form of insurance, see Hillegass, 499 N.W.2d at 655 (self-insurance is just a form of insurance), or alternatively, the antithesis of insurance, see State v. Continental Cas. Co., 126 Idaho 178, 879 P.2d 1111, 1116 (1994) (because self-insurance does not involve a transfer of the risk of loss, it is not insurance). These labels are generally unhelpful because we are dealing with a situation where the self-insurer has some obligation to pay for the consequences of another person's negligence, here the lessee of the car, and is not directly liable. Thus, the question is whether the relationship between the self-insurer and the tortfeasor can be described as insurance. Viewed from this perspective, there is far less disagreement in the cases than a superficial perusal would suggest.

The Texas cases provide good examples of relevant factors. Home Indemnity is perhaps the leading case for the proposition that self-insurance is not insurance for purposes of an "other collectible insurance" clause. See 314 S.W.2d at 865. In that case, the defendant was an employer and the tortfeasor was an employee who was driving a company-owned vehicle, but on personal business. Texas financial responsibility laws required certain vehicle owners to provide financial responsibility by insurance or, in certain circumstances, by a certificate of self-insurance. Defendant had such a certificate which obligated it to "pay the same judgments and in the same amounts that an insurer would have been obligated to pay." Id. at 864. The court noted, however, that this obligation did not equal the obligation of an insurer under the standard Texas automobile liability policy. The court found this distinction determinative:

A Standard policy calls for the assumption of many obligations other than the payment of a judgment rendered against the insured--among which, and probably the most important, is to indemnify the insured against loss, even as against his own negligence. The guarantee by a self-insurer to pay any judgment that an insurance carrier would have to pay can operate...

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