Hearty v. Harris, 90-C-0937

Citation574 So.2d 1234
Decision Date28 January 1991
Docket NumberNo. 90-C-0937,90-C-0937
PartiesLouis L. HEARTY, et al. v. Russlane HARRIS, et al. 574 So.2d 1234
CourtSupreme Court of Louisiana

Bradford R. Roberts, II, Michael E. Botnick, for Louis L. Hearty & Leo R. Bias plaintiff-applicant.

James L. Donovan, Jr., Donovan & Lawlwer, for Diversified Services Inc. d/b/a Budget Rent A Car of N.O. defendant-respondent.

COLE, Justice.

The issue in this case is whether a self-insured rental car agency, which enters into a rental agreement insuring against liability only the renter and one named additional driver, is mandated by public policy to provide omnibus coverage insuring other persons using the vehicle with the express or implied permission of the renter. Plaintiffs seek to assess liability for damages arising out of an accident involving a driver not named in the agreement.

I. Facts and Procedural History

On October 13, 1986, Nathaniel E. Willis rented an automobile from Budget Rent-A-Car. Budget's vehicles are self-insured in accordance with La.R.S. 32:1042. The rental agreement listed Willis as the "Renter" and Gerald Elwood as an "Additional Driver." Both Willis and Elwood signed the agreement which provided:

USE OF RENTED VEHICLE BY DRIVER OTHER THAN ONE SPECIFICALLY QUALIFIED AND IDENTIFIED ON THIS CONTRACT WILL CANCEL AND TERMINATE INSURANCE COVERAGE; AND IN THE EVENT OF DAMAGE TO RENTED VEHICLE, OTHER PERSONS, OR PROPERTY, THE RENTER WILL BECOME LIABLE TO BUDGET/SEARS RENT A CAR FOR ALL COST, EXPENSES, CLAIMS, LOSSES AND ATTORNEY'S FEES.

The back of the agreement provided in pertinent part as follows:

2. The following restrictions are cumulative and each shall apply to every use, operation or driving of vehicle. Under no circumstances shall vehicle be used, operated or driven by any person:

* * * * * *

(g) By any person other than (1) the Renter who signed this agreement, or (2) any additional driver who signed this agreement.

* * * * * *

7. BUDGET/SEARS agrees to provide to the renter, and additional driver, liability coverage within limits of liability equal to the minimum limits required by the compulsory motor vehicle liability security law, (or so called 'financial responsibility law') of the state in which the vehicle is rented. As a condition for this coverage, Renter and driver agree to comply with, and be bound by, all terms, conditions, limitations, and restrictions related to said coverage.... The insurance coverage referred to in this paragraph 7 does not apply:

* * * * * *

(e) While said vehicle is used, driven or operated in violation of the provisions of paragraph 2 ... (g), hereof.

This paragraph 7 constitutes the entire agreement between BUDGET/SEARS and the Renter and driver regarding the terms and conditions of the insurance provided by BUDGET/SEARS to the Renter and driver and no alteration thereof shall be valid unless agreed to by BUDGET/SEARS, in writing. If any provisions of this paragraph shall be found to be unlawful, unenforceable, or contrary to public policy, then that portion of this paragraph which is unlawful, or unenforceable, or contrary to public policy shall be modified to provide the minimum amount of insurance coverage necessary to comply with the law or public policy, and the remainder of this paragraph shall remain in full force and effect.

On October 20, 1986, the vehicle in which the plaintiffs, Louis L. Hearty and Leo R. Bias, were traveling was struck by the leased vehicle. At the time of the accident, the rental car was driven and solely occupied by the defendant, Russlane Harris. The plaintiffs filed suit against Harris, Elwood, 1 and Budget. Specifically, the plaintiffs alleged Harris was operating the vehicle with the express and/or implied permission of the vehicle's owner and/or lessee.

Budget filed a motion for summary judgment based on the provisions in the rental agreement which provided for termination and cancellation of liability insurance coverage if the vehicle was driven by any person not specified as a renter or additional driver. The trial court heard the motion on April 7, 1989 and granted summary judgment dismissing the plaintiffs' claims against Budget on April 20, 1989.

The Court of Appeal, Fourth Circuit, affirmed. Hearty v. Harris, 559 So.2d 884 (La.App. 4th Cir.1990). The appellate court found the omnibus-insured analysis, used in previous cases in which coverage had been found to exist despite provisions in the rental agreement which prohibited operation of a leased vehicle by an unauthorized driver, was inapplicable in the instant case. The Fourth Circuit distinguished the prior cases because Budget was self-insured. 2 Additionally, the appellate court found the prohibitory language in the rental agreement to clearly evidence the lack of permission on the part of Budget for Harris to operate the vehicle. Although the Fourth Circuit recognized the plaintiffs' allegation of an employer-employee relationship between Willis and Harris, the court refused to consider this allegation because the amended petition was not filed until after the trial court had granted Budget's motion for summary judgment. 3

II. Jurisprudential Background

In Normand v. Hertz Corp., 254 La. 1075, 229 So.2d 104 (1969), we concluded an omnibus clause in Hertz's insurance policy did not apply to a driver who was not listed as a qualified driver in the rental agreement. However, in Jones v. Breaux, 289 So.2d 110 (La.1974), we overruled Normand, and held a non-named driver could fall under the omnibus clause in the rental agency's insurance policy under certain circumstances. In Jones, the rental car was operated by an unauthorized driver in violation of a provision in the lease agreement which prohibited use except by the lessee or others named in the agreement. We held the rental agreement, which limited the application of the omnibus insured clause contained in the lessor's insurance policy, changed the contract of insurance in violation of La.R.S. 22:628. 4 Thus, the lessor's policy, which included an omnibus clause, was found to supersede the provisions in the rental agreement which attempted to avoid liability arising from the unauthorized use of the car. We went on to find the unauthorized driver was covered under the omnibus clause because she had the lessee's permission to operate the vehicle.

We agree with the appellate court that the instant case is distinguishable from Jones. Obviously, the existence of the lessor's insurance policy in Jones played an important role in the outcome of the case, as the omnibus clause contained in the lessor's policy was the major reason behind the court's refusal to honor the prohibitory provisions in the rental agreement. 5 Thus, the Jones decision and its progeny provide little insight into this case involving a self-insured rental agency because there is no lessor's liability policy.

We add it is questionable whether the Jones holding is viable today because its reasoning is no longer accurate based on changes in the statutory law. The Court of Appeal, Third Circuit, in Whittington v. Sowela Technical Institute, 438 So.2d 236 (La.App. 3rd Cir.), writ denied, 443 So.2d 591 (La.1983), suggested the Jones holding was overruled by a 1977 amendment of La.R.S. 22:628 which allowed insurance contracts to incorporate by reference terms of another policy. Accordingly, the Whittington court enforced a provision in the rental agreement which limited liability coverage afforded by the lessor's insurer to the liability limits provided in the lessee's personal automobile liability insurance policy.

With the exception of Whittington, the appellate courts of this state have skirted the legal issue concerning the validity of unambiguous provisions in rental agreements which prohibit operation by unauthorized drivers. Instead, the lower courts have treated this legal issue as a factual one by enforcing specific prohibitions when the unauthorized driver operated the vehicle without the lessee's permission, while holding the same prohibitions unenforceable when the unauthorized driver had the lessee's implied or express permission to operate the vehicle. 6 Absent statutory regulations to the contrary, there would appear to be no basis for the lower courts' disregard of the unambiguous restrictive language in the rental contracts.

III. The Louisiana Motor Vehicle Safety Responsibility Law
A. The Nature of Self-insurance

Having concluded the prior jurisprudence involving the liability of rental agencies when the leased automobile is driven by an unauthorized driver in violation of the lease agreement offers us little guidance, a discussion of the nature of self-insurance under Louisiana law is necessary. The Louisiana Motor Vehicle Safety Responsibility Law 7 (LMVSRL) provides a mandatory, comprehensive scheme for the protection of the public from damage caused by motor vehicles. At the heart of this statutory scheme is the decision to attach the financial protection to the vehicle rather than to the operator. 8

Pursuant to La.R.S. 32:861(A), the owner of every motor vehicle registered in the state of Louisiana (with the exception of certain classifications of vehicles) is prospectively required to maintain proof of financial responsibility by: (1) purchasing a motor vehicle liability policy with limits which conform to the requirements of La.R.S. 32:900(B)(2) or a binder for the same; (2) posting a motor vehicle liability bond which satisfies the requirements of La.R.S. 32:861(B); (3) depositing with the state treasurer sufficient cash and securities under the provisions of La.R.S. 32:861(C); or (4) obtaining a certificate of self-insurance in accordance with the terms of La.R.S. 32:1042.

It is important to understand that self-insurance is, in actuality, not insurance at all. It is merely one of the four methods by which an owner of a motor vehicle is allowed to meet the requirements of the LMVSRL. Pursuant to La.R.S. 32:1042, any person who is the...

To continue reading

Request your trial
81 cases
  • Marcus v. Hanover Ins. Co., Inc.
    • United States
    • Supreme Court of Louisiana
    • 4 Junio 1999
    ......3 Simms v. Butler, 97-0416, p. 2 (La.12/2/97), 702 So.2d 686, 687 ; Hearty v. Harris, 574 So.2d 1234, 1237 (La.1991) . This statutory scheme is intended to attach financial protection to the vehicle rather than to the ......
  • NEW HAMPSHIRE INDEM v. BUDGET RENT-A-CAR
    • United States
    • Court of Appeals of Washington
    • 11 Diciembre 2001
    ......        3. Budget also relies on cases from other jurisdictions to support its claim. See Hearty v. Harris, 574 So.2d 1234 (La.1991); Cordova v. ......
  • Taylor v. Rowell
    • United States
    • Supreme Court of Louisiana
    • 18 Mayo 1999
    ......Hearty v. Harris, 574 So.2d 1234 (La.1991); Seaton v. Kelly, 339 So.2d 731 (La.1976); Guedry v. Fromenthal, 633 So.2d 287, 289 (La.App. 1st Cir.1993); ......
  • Aguillard v. Auction Management Corp.
    • United States
    • Supreme Court of Louisiana
    • 29 Junio 2005
    ......Conoco, Inc., 504 So.2d 833, 840 (La.1987)(Watson, J., dissenting in part and concurring in part) ; Hearty v. Harris, 574 So.2d 1234, 1248 (La.1991)(Watson, J., dissenting) ; Lejano v. Bandak, 97-0388 (La.12/12/97), 705 So.2d 158, 172 (on ......
  • Request a trial to view additional results
1 books & journal articles

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT