Davis v. DeFrank

• Decision Date: 15 January 1970
• Citation: 33 A.D.2d 236,306 N.Y.S.2d 827
• Parties: Virginia DAVIS, an infant by her parent Charles G. Davis and Charles G. Davis, Individually, Plaintiffs, v. William D. DeFRANK, Respondent, Monroe Auto Sales, Appellant.
• Court: New York Supreme Court — Appellate Division

Page 827

306 N.Y.S.2d 827

33 A.D.2d 236

Virginia DAVIS, an infant by her parent Charles G. Davis and Charles G. Davis, Individually, Plaintiffs, v. William D. DeFRANK, Respondent, Monroe Auto Sales, Appellant.

Supreme Court, Appellate Division, Fourth Department.

Jan. 15, 1970.

Chamberlain, D'Amanda, Bauman, Chatman & Oppenheimer, Rochester, for appellant; Louis D'Amanda, Rochester, of counsel.

Fix, Spindelman, Turk & Himelein, Rochester, for respondent; Meyer Fix, Rochester, of counsel.

Before GOLDMAN, P.J., and DEL VECCHIO, WITMER, GABRIELLI and BASTOW, JJ.

OPINION

GOLDMAN, Presiding Justice.

In March 1965 one DeFrank, a prospective purchaser, was permitted by Monroe Auto Sales Corporation (Monroe) to test-drive one of its Mercedes-Benz automobiles. In the course of the test-drive, DeFrank, who had three passengers in the car, collided with another vehicle. The jury determined that the accident was the result of the negligence of DeFrank. The passengers and the other driver were injured and have secured verdicts totalling $16,598 against DeFrank and Monroe. The parties stipulated that the cross-claim by Monroe against DeFrank, and the question of insurance coverage, should be decided by the trial court without jury. The trial court granted judgment over in favor of DeFrank and determined that Monroe's insurance 'is prime insurance for all of the judgments' awarded plaintiffs in the main action.

Although one of the injured parties and the negligent driver are the named parties, on this appeal the real parties in interest are the two insurance carriers: Monroe's insurer, Globe Indemnity Company (Globe), which is the actual appellant, and DeFrank's insurer, Empire Mutual Insurance Company (Empire) which, in the posture of this appeal, is the respondent. This controversy, involving the financial liability between two insurance companies upon policies written by them, presents a question of law which has not yet been reviewed by an appellate court in this State.

The resolution of the issue before us turns upon the provisions of the two policies. Both policies contained the same clauses with one exception. The policy schematic of the coverage is as follows:

                MONROE-OWNER                        DE FRANK-DRIVER
                   (Globe)                              (Empire)
                ------------                        ---------------
                PRIMARY--Named Insured              PRIMARY--Named Insured
                ---------------------               ---------------------
                OMNIBUS--Additional Insured:        OMNIBUS--Additional Insured
                driver, S. 167 (2)                  driver, S. 167 (2)
                Ins. L.                             Ins. L
                ---------------------------         ---------------------------
                OTHER INSURANCE--Drive              OTHER INSURANCE--Drive
                Other Car Coverage                  Other Car Coverage
                ---------------------               ---------------------
                "Excess", if other                  "Excess", if other
                Insurance while driving             Insurance while driving
                non-owned vehicle.                  non-owned vehicle
                                                    LIMITATION OF COVERAGE
                LIMITATION OF COVERAGE              ----------------------
                FOR CERTAIN INSUREDS--
                ---------------------
                No coverage of driver (not          No exclusion of coverage for
                named insured) if other insurance,  named insured while operating
                either primary or excess.           garage owned vehicle
                

The Empire (DeFrank) policy provides that the carrier will pay 'all sums which the insured shall become legally obligated to pay' arising from 'the use of the owned or any non-owned automobile * * *'. The policy further provides, under the title 'Other Insurance', that Empire shall be liable only up to the proportion that its limit of liability bears to the limit of liability of all valid and collectible insurance against such loss. The policy contains an excess clause which states:

'* * * provided, however, the insurance with respect to a temporary substitute automobile or non-owned automobile shall be excess insurance over any other valid and collectible insurance.'

The Globe (Monroe) policy, in defining 'Persons Insured', under the title 'Limited Coverage for Certain Insureds (Garage)' provides for coverage of persons using the insured automobile with the insured's permission. In defining the persons to be included within this group, the policy contains a no liability clause which states:

'* * * any other person, But only if no other valid and collectible automobile liability insurance, either primary or excess, with limits of liability at least equal to the minimum specified by the state financial responsibility law * * * is available to such person.' (emphasis supplied)

It is the effect to be given this clause that presents the central problem of this case.

The use of these differing clauses in these policies is another, and indeed striking, example of the conflict which arises so frequently between insurance carriers which try to limit their coverage as much as possible, short of making the contract unattractive to customers, and yet stay within the public policy of the Insurance Department of the State. We start with the fact that the State, by permitting the no liability provision to be included in the policy, has tacitly approved it.

The most recent Court of Appeals decision dealing with the question of coverage as between two carriers is Federal Ins. Co. v. Atlantic Nat. Ins. Co., 25 N.Y.2d 71, 302 N.Y.S.2d 769, 250 N.E.2d 193. That case, however, is distinguishable from the instant one, for in Federal Ins. there was a conflict between two excess clauses, neither policy having a no liability provision. In Federal Ins. both policies had the same purpose--making coverage excess--thus the problem of mutual repugnance, discussed by Chief Judge Fuld at page 76, 302 N.Y.S.2d at page 772, 250 N.E.2d at page 195, was presented. In our case the Empire (DeFrank) policy makes its coverage excess over other insurance, while the Globe (Monroe) policy avoids liability if there is other insurance, primary or excess. In its examination of whether there is any public policy favoring the placing of the liability as between the insurer of the owner and the insurer of the driver, Federal Ins. is helpful in this statement from page 77, 302 N.Y.S.2d page 772, 250 N.E.2d page 195:

'On the one hand, it might be argued that Hertz ought to bear the full cost of accidents as a proper cost of its car rental business while, on the other hand, one could say that imposing the loss on the driver induces greater care by threatening accident-prone drivers with increased premiums or loss of coverage. Such considerations indicate the absence of a clearly demonstrable result from an insurance underwriting point of view. Consequently, we must give effect to the parties' private law as reflected in their binding contractual arrangement.' (emphasis supplied)

We can find no policy which overrides the unambiguous no liability clause in the Globe (Monroe) contract. We start, of course, with the uncontrovertible fact that the sole tortfeasor, the principal and only party who caused the plaintiffs' damage, was the operator of the automobile. Monroe, except for ownership of the vehicle, played no part whatsoever in the injuries to the plaintiffs. Our primary concern should be for the innocent victims of the driver's carelessness and they will be fully compensated. It has been argued that Insurance Law § 167 and Vehicle and Traffic Law § 388 mandate a different result. Indeed it has recently been held by Special Term in Mills v. Liberty Mut. Ins. Co., 60 Misc.2d 1085, 304 N.Y.S.2d 801, that any provision contrary to 11 New York Codes, Rules and Regulations 60.1, which requires an owner's policy to contain coverage when the vehicle is used with permission of the named insured, is void (60 Misc.2d 1085, 1089, 304 N.Y.S.2d 806). We...