Elliott Leases Cars, Inc. v. Quigley

• Decision Date: 24 May 1977
• Docket Number: No. 75-134-A,75-134-A
• Citation: 118 R.I. 321,373 A.2d 810
• Parties: ELLIOTT LEASES CARS, INC. v. Emmy L. QUIGLEY. ppeal.
• Court: Rhode Island Supreme Court

Page 810

373 A.2d 810

118 R.I. 321

ELLIOTT LEASES CARS, INC. v. Emmy L. QUIGLEY.

No. 75-134-Appeal.

Supreme Court of Rhode Island.

May 24, 1977.

[118 R.I. 335] Lovett & Linder, Ltd., Stephen G. Linder, Providence, for plaintiff.

Pucci & Goldin, Samuel A. Olevson, Providence, for defendant.

OPINION

DORIS, Justice.

Elliott Leases Cars, Inc. (plaintiff) brings this civil action to recover from Emmy L. Quigley (defendant) the cost of repairs to the plaintiff's automobile. The case was heard on stipulated facts by a Superior Court justice, sitting without a jury, on appeal from a judgment for the plaintiff rendered in District Court. The Superior Court justice entered judgment for the plaintiff, and the defendant now appeals. For the reasons which follow, we hold that the defendant's appeal must be sustained.

The plaintiff is a corporation engaged in the business of leasing automobiles. In March 1971, John Quigley, in his capacity as president of Rhode Island Buckle, Inc., leased an automobile from plaintiff. The defendant is the wife of an officer of said corporation. While driving the car with her husband's permission, defendant was involved in an accident. The defendant's negligence was stipulated to be the cause of the accident. The plaintiff brought suit against defendant for the total cost of repairing the car. The defendant denied liability on the ground that the lease contract obligated plaintiff to provide collision insurance for the benefit of defendant. The Superior Court justice, citing an explicit exemption contained in the contract, ruled that there was no obligation to provide collision insurance for accidents caused by the negligence of the operator of the leased automobile, and accordingly found defendant liable.

The issue before us on appeal is thus one of contract interpretation. We must decide first whether plaintiff was under a contractual duty to provide collision insurance without regard to negligence. If we find such a duty, we must then decide whether defendant may claim the benefit of such insurance.

I

The contractual relationship between plaintiff and defendant was embodied in two documents: a lease agreement, and a document entitled 'Automobile Leasing Order.' Both documents were standard forms prepared by plaintiff. Both dealt with the lease of the automobile in question. Each on its face appeared to recite all the terms of the transaction. Each was signed by both John Quigley and by plaintiff. Both were executed on March 22, 1971. Thus it is obvious that we cannot look to only one document or the other; the two together form the contract. To ascertain the scope of the agreement between the parties, we must construe each document in light of the other. 3 Corbin, Contracts § 549 at 188 (1960).

The document which bore the boldface heading 'Automobile Leasing Order' (the leasing order) was a single printed page in the nature of a summary of the transaction. The body of that document contained a description of the leased vehicle, the monthly rental rate and the mileage charge. It also contained a list of 18 items which were followed by a check mark in one of two columns; the first column was headed 'HERE IS WHAT ELLIOTT PROVIDES', and the second, 'HERE IS WHAT CUSTOMER PAYS FOR.' Included in the items to be paid for by plaintiff was the following: 'ACCIDENT REPAIRS-100/deduct-Due to Collision (or Upset) per Accident.' The defendant argues that this term constituted a promise on the part of plaintiff to provide collision insurance without regard to negligence.

The plaintiff argues in reply that the second document, the lease agreement, explicitly negated any obligation to provide insurance for accidents caused by the negligence of the driver of the leased car. The lease agreement consisted of 28 provisions in small print covering two full pages. Clause 2 of that agreement, upon which plaintiff relies, provided in part as follows:

'Insurance and Indemnity. Lessee further agrees, with respect to each leased automobile, to:

(a) Pay for any loss of or damage to the automobile not caused by employees of Elliott Leases Cars, Inc., hereinafter called 'loss', to the extent of the actual amount thereof, or $100.00, whichever is the lesser, in the case of each loss except that:

(i) If the loss is the result of any violation of the terms or conditions of this agreement or the result of careless reckless or abusive handling of the automobile * * * Lessee shall be liable for the full amount of the loss without regard to the limitation of $100.00 * * *.'

The case thus turns on the correct interpretation of these two provisions. Although the subject of this contract was the lease of an automobile, a significant part of the contract concerned insurance. The provision here in question related to insurance, as did 7 of the 18 items in the leasing order. For these reasons, and because the contract was, like most insurance contracts, a 'form' contract that had many clauses prepared by the insurer and offered on a take-it-or-leave-it basis, we feel that the appropriate interpretive principles are those normally applicable to insurance contracts.

In interpreting such contracts the terms used should be given their plain, ordinary and usual meaning. Aldcroft v. Fidelity & Cas. Co., 106 R.I. 311, 259 A.2d 408 (1969). If there remains any doubt, the terms should be read in the sense which the insurer had reason to believe they would be interpreted by the ordinary reader and purchaser. The test to be applied is not what the insurer intended by his words, but what the ordinary reader and purchaser would have understood them to mean. Goldstein v. Occidental Life Ins. Co., 108 R.I. 154, 273 A.2d 318 (1971); Joslin v. Aetna Life Ins. Co., 67 R.I. 261, 21 A.2d 550 (1941). In this case, the leasing order provided that plaintiff would pay for 'accident repairs' caused by collision or upset, subject to a $100 deductible. The ordinary reader would not assume that an unqualified promise of this nature only covered accidents not caused by the negligence of the operator of the automobile. Indeed just the opposite is true. Collision insurance is generally understood to cover whatever accidents occur, regardless of the negligence of the operator. An exclusion which limits coverage to nonnegligent accidents significantly reduces the scope of the insurance. Not only does it reduce the total number of accidents covered, but it eliminates coverage in precisely those cases in which it is most needed-that is, where there may be no negligent tortfeasor from whom the insured may recover. The ordinary reader of the leasing order provision would therefore assume that collision insurance was provided without regard to negligence.

The context in which this provision appeared would be likely to strengthen this impression. The leasing order described seven separate categories of insurance which plaintiff was to provide: physical damage insurance to cover 'fire, theft and comprehensive' and to cover collision or upset; accident repairs due to fire and theft, due to collision or upset ($100 deductible), and due to glass breakage ($25 deductible); personal liability insurance in the amount of '$100,000/$300,000'; and property damage insurance in the amount of $50,000. The latter amount was typewritten, the original printed figure of $25,000 having been cancelled by a series of typewritten 'X's'. The abundant detail and the apparent case with which insurance coverage was described would suggest that all relevant terms were included. The ordinary reader, in the face of such detail, would be warranted in concluding that any significant limitation on collision insurance would have been explicitly noted. This is particularly true where, as here, such a limitation could be very easily expressed, as for example by the insertion of the word 'nonnegligent' in the relevant provision. We therefore conclude that the provision in the leasing order concerning collision insurance must be interpreted as a promise by plaintiff to provide collision insurance without regard to the negligence of the operator of the leased vehicle.

Having reached this conclusion, however, we find ourselves faced with an additional problem of interpretation. As noted above, the leasing order and the lease agreement must be construed together. There is no doubt that the lease agreement, even when read as it would be by the ordinary reader, quite clearly and unequivocally purports to exclude negligently caused accidents from the collision insurance coverage. We are thus faced with a situation where a prominent provision of the contract which would lead the average reader to reasonably conclude that he was insured against certain risks was explicitly contradicted by an admittedly unequivocal provision contained in the fine print of a less apparent provision.

One well-accepted mode of analysis used in the resolution of conflicting contract provisions is that a general provision must yield to a more specific one. E.g., Greene v. Cheetham, 293 F.2d 933, 936 (2d Cir. 1961); National Ins. Underwriters v. Carter, 17 Cal.3d 380, 131 Cal.Rptr. 42, 551 P.2d 362 (1976). In the present case the provision in the leasing order which provided for insurance was much less specific than the conflicting exclusionary clause in the lease agreement. Applying the above rule, the exclusionary clause should control.

However, we do not think that rule appropriate in this situation. The rationale behind it is that when parties deal with particular objects or situations, they are more likely to know what they are talking about and to say what they mean. 3 Corbin, Contracts § 547 at 176-78 (1960). While this inference may be valid in situations where the contract is the result of an actual bargaining process, to suppose that such an inference may be made in this case is unrealistic. The defendant did not play any part in drafting the general or the specific provision. Both were...