Federal Ins. Co. v. Allstate Ins. Co.

• Decision Date: 08 July 1975
• Docket Number: No. 234,234
• Citation: Federal Ins. Co. v. Allstate Ins. Co., 275 Md. 460, 341 A.2d 399 (Md. 1975)
• Parties: FEDERAL INSURANCE COMPANY et al. v. ALLSTATE INSURANCE COMPANY et al.
• Court: Maryland Court of Appeals

Page 460

275 Md. 460

341 A.2d 399

FEDERAL INSURANCE COMPANY et al. v.ALLSTATE INSURANCE COMPANY et al.

No. 234.

Court of Appeals of Maryland.

July 8, 1975.

Delverne A. Dressel(Emanuel H. Horn and Dickerson, Nice, Sokol & Horn, Baltimore, and Hal C. B. Clagett and Sasscer, Clagett, Channing & Bucher, Upper Marlboro, on the brief), for appellants.

F. Gray Goudy, Baltimore, for Allstate Ins. Co., and Market Ins. Co. and by Samuel O. Jackson, Jr., Baltimore (Max R. Israelson, Israelson, Pines & Jackson, P. A., Louis F. Friedman and Miles & Friedman, Baltimore, on the brief), for Sarah E. Allison.

Argued before MURPHY, C. J., and SINGLEY, SMITH, DIGGES, LEVINE, ELDRIDGE and O'DONNELL, JJ.

LEVINE, Judge.

This appeal arises primarily from a dispute between two automobile liability insurers over who should bear the initial brunt of several personal injury claims.A third insurance company is also embroiled, but its fortunes ride on the outcome of the main contest.The case commenced with an action for declaratory judgment filed in the Circuit Court for Prince George's County by appellants, Federal Insurance Company(Federal), and its named insured, Max Schwartz(Schwartz), against appellees, Allstate Insurance Company(Allstate), Market Insurance Company(Market), and a number of individuals whose identities will be developed during the course of this opinion.

The trial judge (Couch, J.) fastened responsibility on the insurance companies in this order: first, primary coverage on Allstate; next, Market for excess to the full extent of its policy limits; and finally, Federal to the extent that any judgments might exceed the combined limits of the Allstate and Market policies.On appeal, the Court of Special Appeals held in Allstate Ins. Co. v. Federal Ins. Co., 23 Md.App. 105, 326 A.2d 29(1974), that the trial court had been substantially correct, but modified the priorities between the insurers.Because this case presents important questions pertaining to automobile liability insurance not previously decided by this Court, we granted a Writ of Certiorari.

In early January of 1972, Max Schwartz, a resident of Brooklyn, New York, was planning a winter vacation in Florida.Desiring to have his Cadillac automobile with him during his visit, he made arrangements to have it transported by one of the appellees herein, Dominick Spinelli, trading as Direct Way Auto Shippers (Direct Way), a carrier authorized by the Interstate Commerce Commission(the I.C.C.) to engage in the business known in the motor carrier industry as a 'driveaway service.'Schwartz contacted Direct Way in response to an advertisement in the New York Times soliciting potential automobile shippers.For this service, Schwartz agreed to pay Direct Way the sum of $90 pursuant to the tariff which the latter had filed with the I.C.C.

The transaction was evidenced by a bill of lading in which Schwartz, as the shipper, 'guarantee(d)' that his automobile was insured 'for coverages of ten thousand to twenty thousand dollars for bodily injuries . . ..'In addition, he consented to have 'the driver . . . transport persons authorized by the carrier, but not for hire.'(emphasis added).The last provision is the only reference in the bill of lading to anyone but 'the driver.'Direct Way, as the carrier, agreed that it would 'obtain and provide a licensed driver to drive the vehicle to the indicated destination.'In addition to the bill of lading, Schwartz and Direct Way executed a 'shipping order form & freight bill.'At the very top is the inscription "Ship the Fully Insured Direct Way."Elsewhere there appears the following: 'Direct Way covers your automobile with complete insurance protection.This includes public liability . . ..'(all emphasis added).As with the bill of lading, all references to the driver are in the singular.

Simultaneously with the appearance of the advertisement in the New York Times, Direct Way was sponsoring a solicitation for automobile drivers in 'The Village Voice,' a publication aimed at young adults who might be interested in lowbudget transportation to Florida.¹Another of the appellees, Richard C. Frank(Frank), responded to this advertisement, and signified his wish to drive an automobile owned by one of Direct Way's customers to Florida.The 'DRIVER AGREEMENT AND INSTRUCTIONS' WHICh hE signED also refErs To the driver consistently in the singular, and does not make any mention of other persons, either as possible occupants or as operators of the automobile being transported.

On January 8, 1972, Schwartz's automobile was picked up at his home by a Direct Way employee who checked its condition before issuing the bill of lading.²The employee acknowledges that nothing was said to Schwartz about other persons, in addition to the 'contract' driver, being in the car.Indeed, as we have indicated, he insists that these matters were not even discussed.

On January 10, Frank, unaccompanied by anyone alse, took delivery of the Schwartz automobile from Direct Way's manager at the latter's residence.He was allotted four days in which to deliver the car to its Florida destination.There was never any discussion between him and any of the Direct Way personnel concerning the possible presence of other occupants-including additional drivers-in the automobile.This means that Direct Way neither granted Frank permission to have other drivers or passengers, nor prohibited him from doing so.

As it happened, Frank picked up his girl friend and James Straz(Straz), another appellee, immediately on obtaining possession of the automobile in accordance with plans that had been made several weeks before.Those prearrangements included an agreement to share travel expenses.The three then departed for Florida with Frank at the wheel.Near the southern end of the New Jersey Turnpike, he was relieved by Straz.While the latter was driving through Prince George's County on the Baltimore-Washington Parkway, the car apparently went out of control and crossed the median strip, resulting in a four-car collision and a bevy of personal injury claims.The remaining appellees are persons making such claims.

On the date of the accident, Schwartz carried an automobile insurance policy with Federal, which included the Cadillac as an 'owned automobile,' specifying maximum limits of $100,000 for 'each person' and $300,000 for 'each occurrence.'The policy contained a 'persons insured' provision which, in relevant part, states:

'The following are insured under Part I:

'(a) with respect to the owned automobile,

'(1) the named insured and any resident of the same household,

'(2) any other person using such automobile with the permission of the named insured, provided his actual operation or (if he is not operating) his other actual use thereof is within the scope of such permission, and

'(3) any other person or organization but only with respect to his or its liability because of acts or omissions of an insured under (a)(1) or (2) above;'(emphasis added).

Elsewhere, the policy contains an 'Other Insurance' clause which states:

'If the insured has other insurance against a loss covered by Part I of this policy the company shall not be liable under this policy for a greater proportion of such loss than the applicable limit of liability stated in the declarations bears to the total applicable limit of liability of all valid and collectible insurance against such loss; . . .'

At this same time, Direct Way held two insurance policies.The first, issued by Allstate, specifies maximum limits of liability in the sums of $50,000 for 'Each Person' and $100,000 for 'Each Occurrence.'By its express terms, the policy was written in contemplation of Direct Way's operation as an interstate motor carrier.This policy contains a 'persons insured' provision which states in relevant part:

'Each of the following is an Insured under this insurance to the extent set forth below:

'(a) the Named insured;

'(b) any partner or executive officer thereof, but with respect to a non-owned automobile only while such automobile is being used in the business of the Named Insured;

'(c) any other person while using an owned automobile or a hired automobile with the permission of the Named Insured, provided his actual operation or (if he is not operating) his other actual use thereof is within the scope of such permission . . ..

'(d) any other person or organization but only with respect to his or its liability because of acts or omissions of an Insured under (a), (b) or (c) above.

'None of the following is an Insured:

'(ii) the owner or lessee (of whom the Named Insured is a sub-lessee) of a hired automobile or the owner of a non-owned automobile, or any agent or employee of any such owner or lessee;'(emphasis added).

The Allstate policy also contains this clause:

'Excess Insurance-Hired and Non-Owned Automobiles

'With respect to a hired automobile or a non-owned automobile, this insurance shall be excess insurance over any other valid and collectible insurance to the Insured.'

In addition to these provisions in the basic policy, Allstate issued an endorsement in compliance with I.C.C. regulations, which provides as follows:

'In consideration of the premium stated in the policy to which this endorsement is attached, the Company hereby agrees to pay, within the limits of liability hereinafter provided, any final judgment recovered against the insured for bodily injury to or death of any person, or loss of or damage to property of others . . . resulting from negligence in the operation, maintenance, or use of motor vehicles under certificate of public convenience and necessity or permit issued to the insured by the Interstate Commerce Commission, . . .

'Within the limits of liability hereinafter provided it is further understood and agreed that no condition, provision, stipulation, or limitation contained in the policy, or any other endorsement thereon or violation thereof,...