Hertz Corp. v. Federal Ins. Co.

• Decision Date: 14 July 1998
• Docket Number: No. 15846,15846
• Citation: 713 A.2d 820,245 Conn. 374
• Parties: HERTZ CORPORATION v. FEDERAL INSURANCE COMPANY et al.
• Court: Connecticut Supreme Court

Page 820

713 A.2d 820

245 Conn. 374

HERTZ CORPORATION v. FEDERAL INSURANCE COMPANY et al.

No. 15846.

Supreme Court of Connecticut.

Argued June 2, 1998.

Decided July 14, 1998.

Jon Berk, with whom was Claudia A. Baio, Hartford, for appellants (named defendant et al.).

Daniel P. Scapellati, with whom was James M. Celentano, Hartford, for appellee (plaintiff).

Before CALLAHAN, C.J., and BORDEN, NORCOTT, KATZ and PALMER, JJ.

KATZ, Associate Justice.

The sole issue on appeal is whether the liability insurance coverage provided by the plaintiff automobile rental agency pursuant to a rental contract applies as primary coverage or as secondary coverage attaching only after the insured's personal automobile policy issued by the defendant has been exhausted. ¹ We conclude that it applies as secondary coverage.

The following facts are undisputed. On June 26, 1994, the defendant Joan B. Berkowitz rented an automobile from the plaintiff, the Hertz Corporation (Hertz). The rental agreement provided Berkowitz with minimum liability coverage of $20,000/$40,000 and offered Berkowitz an option to purchase a liability insurance supplement, which she declined. ²

While operating the Hertz rental automobile on June 27, 1994, Berkowitz collided with a vehicle owned and operated by the defendant Catherine Prentice Deutsch, who thereafter filed an action against Hertz and Berkowitz, claiming money damages for personal injuries arising out of that accident. Hertz provided reimbursement to Deutsch for the property damage she sustained as a result of the accident. When Hertz learned that Berkowitz was an insured under a personal automobile policy issued to her by the named defendant, Federal Insurance Company (Federal), it demanded that Federal acknowledge and accept primary liability obligations pursuant to that policy. ³ After Federal refused to accept primary insurance coverage responsibilities for the claims asserted against Berkowitz, Hertz brought this declaratory judgment action against Federal, seeking to establish that Federal's coverage was primary. Hertz filed a motion for summary judgment declaring that Berkowitz was entitled to liability coverage under the Federal policy and that any liability coverage under Hertz' rental contract should be declared excess. Federal, in addition to a memorandum in opposition to Hertz' motion, filed a cross motion for summary judgment seeking a declaration that the coverage afforded under Hertz' rental contract rather than the coverage under its policy with Berkowitz was in fact primary. The motions for summary judgment were argued before the trial court on August 18, 1997, and, in a memorandum of decision dated October 22, 1997, the court found that Hertz' coverage was excess and, accordingly, rendered judgment in favor of Hertz. The trial court based its decision on the fact that Hertz was self-insured, as permitted by General Statutes § 38a-371, and concluded that self-insurance is not "other insurance" as that term is used in the Federal policy. See footnote 3 of this opinion. ⁴

On November 7, 1997, Federal appealed to the Appellate Court from the trial court's judgment. ⁵ We transferred the appeal to this court pursuant to General Statutes § 51-199 and Practice Book § 4023, now Practice Book (1998 Rev.) § 65-1. The sole issue on appeal is whether the liability protection afforded under the Hertz contract is excess to the insurance coverage provided by Federal. ⁶ Although for reasons different from those articulated by the trial court, we affirm the judgment.

We begin our discussion with some fundamental legal principles. The first pertains to the standard of review of the trial court's decision rendering summary judgment. The second pertains to the manner in which the terms of an insurance contract are to be construed.

"The standards governing our review of a trial court's decision to grant a motion for summary judgment are well established. Practice Book § 384 [now Practice Book (1998 Rev.) § 17-49] provides that summary judgment shall be rendered forthwith if the pleadings, affidavits and any other proof submitted show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.... Miller v. United Technologies Corp., 233 Conn. 732, 744-45, 660 A.2d 810 (1995). In deciding a motion for summary judgment, the trial court must view the evidence in the light most favorable to the nonmoving party.... Id., at 745, 660 A.2d 810. The party seeking summary judgment has the burden of showing the absence of any genuine issue [of] material facts which, under applicable principles of substantive law, entitle him to a judgment as a matter of law; D.H.R. Construction Co. v. Donnelly, 180 Conn. 430, 434, 429 A.2d 908 (1980); and the party opposing such a motion must provide an evidentiary foundation to demonstrate the existence of a genuine issue of material fact. Practice Book § 381 [now Practice Book (1998 Rev.) § 17-46].... Suarez v. Dickmont Plastics Corp., 229 Conn. 99, 105, 639 A.2d 507 (1994)." (Internal quotation marks omitted.) Doty v. Mucci, 238 Conn. 800, 805-806, 679 A.2d 945 (1996).

The standard of review of the terms of an insurance contract is also well settled. "Under our law, the terms of an insurance policy are to be construed according to the general rules of contract construction. See, e.g., Weingarten v. Allstate Ins. Co., 169 Conn. 502, 509-10, 363 A.2d 1055 [ (1975), overruled in part on other grounds, Streitweiser v. Middlesex Mutual Assurance Co., 219 Conn. 371, 593 A.2d 498 (1991) ]; A.M. Larson Co. v. Lawlor Ins. Agency, Inc., 153 Conn. 618, 622, 220 A.2d 32 [1966]. The determinative question is the intent of the parties, that is, what coverage the ... [plaintiff] expected to receive and what the defendant was to provide, as disclosed by the provisions of the policy. Marcolini v. Allstate Ins. Co., 160 Conn. 280, 283, 278 A.2d 796 [1971]. If the terms of the policy are clear and unambiguous, then the language, from which the intention of the parties is to be deduced, must be accorded its natural and ordinary meaning. Weingarten v. Allstate Ins. Co., supra, at 509, 363 A.2d 1055. However, [w]hen the words of an insurance contract are, without violence, susceptible of two [equally responsible] interpretations, that which will sustain the claim and cover the loss must, in preference, be adopted. Raffel v. Travelers Indemnity Co., 141 Conn. 389, 392, 106 A.2d 716 [1954]; see also 4[S.] Williston, Contracts (3d Ed. [1961] ) § 621.... Griswold v. Union Labor Life Ins. Co., 186 Conn. 507, 512-13, 442 A.2d 920 (1982); see Hammer v. Lumberman's Mutual Casualty Co., 214 Conn. 573, 583-84, 573 A.2d 699 (1990)." (Internal quotation marks omitted.) Heyman Associates No. 1 v. Ins. Co. of Pennsylvania, 231 Conn. 756, 769, 653 A.2d 122 (1995).

Applying these principles to the facts of this case, we conclude that the Federal policy provides primary coverage. We begin with the Federal policy, which, in relation to other insurance, provides that "[w]hen other liability insurance applies to covered damages, we will pay our share ... [which] is the proportion that our amount of coverage bears to the total of all applicable amounts of coverage. However, for non-owned motorized land vehicles, this insurance is excess over any other insurance, except that written specifically to cover excess over the amount of coverage in this policy." (Emphasis added.) Therefore, if there is other insurance written specifically to cover excess coverage, Federal will provide primary coverage.

In executing the rental agreement, Berkowitz expressly declined the liability insurance supplement offered by Hertz and explicitly agreed that Hertz' insurance would be secondary. The rental agreement executed by Berkowitz provided: "[Liability insurance supplement] declined--Hertz liability protection is secondary." As evidenced by her initials, Berkowitz acknowledged and accepted the terms of the rental agreement that any insurance providing coverage to her or to an authorized operator would be primary up to the limits of such insurance. As further evidenced by her signature, Berkowitz agreed to the following terms and conditions, which were printed in capital letters in the rental agreement: "If you do not purchase liability insurance supplement ... your insurance and the insurance of the operator of the car will be primary. This means that Hertz will not grant any defense or indemnity protection under this paragraph if either you or the operator of the car are covered by any valid and collectible automobile insurance, whether primary, excess or contingent, with limits at least equal to the minimum required by the applicable state financial responsibility law." (Emphasis added.) Hertz' liability protection, therefore, was provided expressly as secondary protection, written specifically to cover liability in excess of the coverage provided by Berkowitz' personal automobile policy--in this case, the Federal policy.

Federal argues that Berkowitz could not contract unilaterally with Hertz to shift primary liability coverage and bind Federal as her primary insurer. See State Farm Mutual Automobile Ins. Co. v. Enterprise Leasing Co., 452 Mich. 25, 35-36, 549 N.W.2d 345 (1996). More specifically, Federal asserts that by signing the rental agreement, Berkowitz unilaterally shifted the prioritization of liability coverage from Hertz to Federal. This argument mischaracterizes the operative policies. The rental agreement does not provide that Federal's coverage must be primary. Rather, it is by virtue of Federal's own policy language that its coverage is primary with respect to policies, such as that provided by Hertz, which are written specifically to provide excess liability coverage. Indeed, as Hertz points out in its brief, this is no different than if Berkowitz had elected to purchase an umbrella policy from an entity other than...