Farmers Ins. Exchange v. Smith

• Citation: 485 P.2d 866,15 Ariz.App. 42
• Decision Date: 15 June 1971
• Docket Number: No. 2,CA-CIV,2
• Parties: FARMERS INSURANCE EXCHANGE, Appellant, v. Lysle E. SMITH and Amy Lee Smith, husband and wife, Appellees. 913.
• Court: Arizona Court of Appeals

Page 866

485 P.2d 866

15 Ariz.App. 42

FARMERS INSURANCE EXCHANGE, Appellant, v. Lysle E. SMITH and Amy Lee Smith, husband and wife, Appellees.

No. 2 CA-CIV 913.

Court of Appeals of Arizona, Division 2.

June 15, 1971.

Rehearing Denied July 14, 1971.

Chandler Tullar, Udall & Richmond by D. Burr Udall, Tucson, for appellant.

Russo, Cox & Dickerson, P.C. by Vernon F. Dickerson, Tucson, for appellees.

KRUCKER, Chief Judge.

This appeal challenges the correctness of a declaratory judgment in favor of the appellees as to insurance coverage under a policy issued to them by the appellant. The parties shall hereinafter be referred to as the Smiths and Farmers.

The Smiths were injured in an automobile accident occurring in Pima County, Arizona, on April 21, 1968, when their vehicle collided with one driven by an uninsured motorist. At the time of the accident, the Smiths had an automobile policy issued by Farmers which provided uninsured motorist coverage and described certain vehicles.

At the time they purchased the policy in November, 1966, the Smiths owned two vehicles which were covered under the policy: a 1961 Rambler and a 1959 Volkswagen. On December 23, 1967, they purchased a 1964 Buick Skylark and requested their insurance agent to transfer the insurance coverage from the Volkswagen to the Buick. The uninsured motorist coverage was added at this time. The Volkswagen was kept at the Smiths' home and they maintained title to it. They had always been its registered owners and were such at the time of the accident in question. The Volkswagen was properly licensed but was not driven after December 23, 1967, until the day of the accident and at no time prior to the date of the accident had the Smiths requested coverage for the Volkswagen.

During the four months that the Volkswagen remained in the Smiths' yard, it developed a flat tire, a dead battery and a broken left-front headlight. On April 21, 1968, Mr. Smith spent two to three hours working on the car, repaired the tire and activated the battery.

After December 23, 1967, the Smiths attempted, but unsuccessfully, to sell the Volkswagen and then decided to sell the Rambler. On April 20, 1968, they orally agreed to sell the Rambler to Miss Nancy Luce. Although the Smiths considered the Rambler 'sold' to Miss Luce, the sale in fact was to be effected on Monday, April 22nd. The Smiths did not thereafter drive the Rambler.

On Sunday, April 21, the day of the accident in question, Mr. Smith signed the certificate of title and left it with Mrs. Smith to co-sign and get notarized so that it could be turned over to Miss Luce on Monday when she paid the purchase price. They intended to call their insurance agent on Monday to change the policy coverage on the Rambler to the Volkswagen. Since Mr. Smith intended to use the Volkswagen on Monday to drive to work, he made the above-described repairs and took Mrs. Smith out for a ride in the Volkswagen to try it out. During this ride, the subject accident occurred. Due to the seriousness of their injuries, the Smiths were hospitalized and unable to transact any business for a period of time. Miss Luce acquired the Rambler on April 30, 1968, and the insurance on it was not cancelled until about a month later.

The sole question on appeal is whether the Volkswagen was a 'newly acquired automobile' within the purview of the insurance policy, which in its pertinent part reads as follows:

'Newly Acquired Automobile means an automobile, ownership of which is acquired by the named insured, (a) if it replaces the described automobile and the named insured notifies the Company within thirty days following the date of such acquisition or within the policy term then current, whichever is the longer period of time, or (b) if it is an additional automobile and the Company insures all automobiles owned by the named insured on the date of such acquisition and the named insured notifies the Company within 30 days thereafter; but the insurance with respect to the newly acquired automobile does not apply to any loss against which the named insured has other collectible insurance. The named insured shall pay any additional premium required.'

The question presented here is one of first impression in this State, but a number of other jurisdictions have construed a like policy provision in varying factual contexts. With only two exceptions, every court which has considered this provision has held that it is not ambiguous and that in order to be 'newly acquired' within its plain meaning, an automobile must have been acquired after the commencement of the policy period and must replace the automobile described in the policy. See, Lynam v. Employers Liability Assurance Corp., 218 F.Supp. 383 (D.Del.1963), aff'd 331 F.2d 757 (3d Cir. 1964); Yenowine v. State Farm Mutual Automobile Ins. Co., 342 F.2d 957 (6th Cir. 1965), cert. denied, 382 U.S. 830, 86 S.Ct. 68, 15 L.Ed.2d 74 (1965); Brown v. State Farm Mutual Automobile Ins. Co., 306 S.W.2d 836 (Ky.App.1957); Country Mutual Ins. Co. v. Murray, 97 Ill.App.2d 61, 239 N.E.2d 498 (1968); Adams v. Bartel, 129 N.W.2d 755 (N.D.1964); Howe v. Crumley, Jones & Crumley Co., 44 Ohio L.Abs. 115, 57 N.E.2d 415 (Ohio App.1944); State Farm Mutual Automobile Ins. Co. v. Shaffer, 250 N.C. 45, 108 S.E.2d 49 (1959); Utilities Ins. Co. v. Wilson, 207 Okl. 574, 251 P.2d 175 (1952); Coleman v. Atlantic National Ins. Co., 166 So.2d 620 (Fla.App.1964); Marquez v. Dairyland Mutual Ins. Co., 78 N.M. 269, 430 P.2d 766 (1967); Dike v. American Family Mutual Ins. Co., 284 Minn. 412, 170 N.W.2d 563 (1969); ¹ Mahaffey v. State Farm Mutual...