Hertz Corp. v. Government Employees Ins. Co.

• Decision Date: 01 December 1998
• Citation: 683 N.Y.S.2d 483,250 A.D.2d 181
• Parties: , 1998 N.Y. Slip Op. 10,573 The HERTZ CORPORATION, Plaintiff-Respondent, v. The GOVERNMENT EMPLOYEES INSURANCE COMPANY, Defendant-Appellant, and Lois Giles, et al., Defendants.
• Court: New York Supreme Court — Appellate Division

Page 483

683 N.Y.S.2d 483

250 A.D.2d 181, 1998 N.Y. Slip Op. 10,573

The HERTZ CORPORATION, Plaintiff-Respondent, v. The GOVERNMENT EMPLOYEES INSURANCE COMPANY, Defendant-Appellant and Lois Giles, et al., Defendants.

Supreme Court, Appellate Division,

First Department.

Dec. 1, 1998.

Joel M. Simon, of counsel (Smith Mazure Director Wilkins Young Yagerman & Tarallo, P.C., attorneys) for plaintiff-respondent.

E. Richard Rimmels, Jr., of counsel (Montfort, Healy, McGuire & Salley, attorneys) for defendant-appellant.

E. LEO MILONAS, J.P., EUGENE NARDELLI, MILTON L. WILLIAMS, ANGELA M. MAZZARELLI, JJ.

WILLIAMS, J.

On August 7, 1990, Lois Giles and her aunt, Pecola Stringer, rented a van from the Hertz Corporation for 10 days in order to transport family members to a family reunion in Georgia. At the Hertz rental location on West 77th Street in Manhattan, it was determined that the rental would be placed on Ms. Giles' credit card since Ms. Stringer's credit card limit had been reached. At the time of the rental, Ms. Giles had decided that she would not be able to attend the reunion and so advised the Hertz representative. She further advised the representative that she wished to list two authorized additional drivers on the rental agreement, Ms. Stringer and William Brundage. Since Mr. Brundage was not physically present, she was told that he could not be listed as an additional driver, hence only Ms. Stringer was listed. Both Giles and Stringer signed the agreement in their respective capacities.

After renting the van, Ms. Giles went to work and Ms. Stringer picked up family members Brundage, her husband James Stringer, Ernest Baker and Susie Baker and they set out on the trip to Georgia. Mr. Brundage took the wheel shortly thereafter and, while driving on the New Jersey Turnpike, turned his head to retrieve a soda from a cooler. At this point, the van hit the shoulder of the road, flipped into the air for a distance of approximately 19 feet, slid on its roof for another 62 feet, hit the guardrail on the left shoulder of the road, spun and mounted the guardrail, then slid for another 45 feet before finally coming to rest on its roof. The two passengers who were ejected from the vehicle, James Stringer and Susie Baker, died at the scene. Ms. Stringer and Ernest Baker were critically injured, and the driver, Mr. Brundage, was taken to the hospital, treated and released.

Pecola Stringer, Ernest Baker, and the Estates of James Stringer and Susie Baker brought an action in Supreme Court, Bronx County against Brundage and Hertz. Hertz entered into a settlement with the plaintiffs that was allocated among them as follows: Pecola Stringer--$1,100,000; Ernest Baker--$25,000; the Estate of James Stringer--$25,000; and the Estate of Susie Baker--$250,000.

Prior to the settlement, Hertz sought to coordinate the settlement by including the various insurance carriers involved. Ms. Stringer's insurance carrier, the Empire Insurance Group, contributed $150,000.00, which included a $50,000 combined single limit for bodily injury and a $50,000/$100,000 death benefit. However, Ms. Giles's insurer, defendant GEICO, refused to participate in the defense of the lawsuit or to contribute to the settlement, disclaiming coverage on the ground that the injuries did not arise from the ownership, maintenance or use of the vehicle by Ms. Giles. Upon GEICO's refusal, Hertz, as owner of the vehicle, paid the balance of the settlements.

In this action, initiated in Supreme Court, New York County, Hertz moved for summary judgment seeking from GEICO the maximum bodily injury benefit under the Gileses' policy, $300,000, plus the maximum supplemental death benefit, $100,000, as well as interest and GEICO's proportional share of Hertz's expenses in defending the underlying personal injury action. Justice Kapnick granted Hertz's motion, relying on Brabender v. Northern Assurance Company of America, 65 F.3d 269 (2nd Cir. 1995), in reasoning that the injuries incurred resulted from Giles's "use" of the vehicle and that she had "personal control" of it for the purposes for which it was rented, that pursuant to its policy, GEICO was obligated to cover Giles, its insured, and that, therefore, Hertz was entitled to indemnification from GEICO for its settlement costs in excess of its liability pursuant to the rental agreement, which was limited to the New Jersey statutory minimum insurance requirement of $15,000/$30,000. Justice Kapnick rejected GEICO's contention that Hertz's settlement with Pecola Stringer was a voluntary overpayment and that GEICO was therefore absolved from liability, holding that Morris v. Snappy Car Rental, 84 N.Y.2d 21, 614 N.Y.S.2d 362, 637 N.E.2d 253, which recognized the validity of excess indemnity clauses in car rental agreements The principal issue raised by this appeal is whether Lois Giles is legally responsible for the operation or "use" of the Hertz vehicle in question, despite her absence from the vehicle at the time of the accident, thereby creating liability in her insurer GEICO for the indemnification of Hertz. If such liability is established, also at issue is whether GEICO may be held liable for contribution to Hertz' alleged voluntary settlements with the accident victims.

was inapplicable to this case, having been decided two years after the settlement of the underlying Bronx action. Justice Kapnick concluded that GEICO's policy rendered it liable in the amount of $400,000 and that GEICO was liable for interest on the principal amount plus a proportional share of the defense costs of the underlying Bronx action.

It is unquestioned that Hertz, as owner of the vehicle, was liable pursuant to New York Vehicle and Traffic Law 388(1):

Every owner of a vehicle used or operated in this state shall be liable and responsible for death or injuries to person or property resulting from negligence in the use or operation of such vehicle, in the business of such owner or otherwise, by any person using or operating the same with the permission, express or implied, of such owner.

The Hertz rental agreement provides that:

(a) Hertz will indemnify, hold harmless, and defend You and any Authorized Operators FROM AND AGAINST LIABILITY TO THIRD PARTIES, EXCLUDING ANY OF YOUR OR ANY AUTHORIZED OPERATOR'S FAMILY MEMBERS RELATED BY BLOOD, MARRIAGE OR ADOPTION, RESIDING WITH YOU OR THEM. For bodily injury and property damage the limits of this protection, including owner's liability, are the same as the minimum limits required by the automobile financial responsibility law of the jurisdiction in which the accident occurred ... ¹

(b) You and all Authorized Operators will indemnify and hold Hertz its agents and employees harmless from and against any loss, liability and expense in excess of the limits or beyond the scope of the protection provided for above, arising from the use or possession of the car by You or any Authorized Operators or with Your, his or her permission.

The relevant provisions of the GEICO policy issued to the Giles family provide bodily injury coverage in the amount of $300,000 per person/$300,000 per occurrence. It classifies the Hertz van as a "non-owned" vehicle, i.e., "an automobile ... not owned by or furnished for the regular use of either you [the insured] or a relative". The coverage provided for such a vehicle is as follows:

1. you [the insured] and your relatives when using a private passenger auto or trailer. Such use must be with the permission, or reasonably believe to be with the permission, of the owner and within the scope of that permission;

2. a person or organization, not owning or hiring the auto, regarding his or its liability because of acts or omissions of an insured under 1 above ...

LOSSES WE WILL PAY FOR YOU

... we will pay damages which an insured becomes legally obligated to pay because of:

1. bodily injury, sustained by a person ... arising out of the ownership, maintenance or use ... of the owned auto or an non-owned auto. We will defend any suit for damages payable under the terms of this policy even if the claim or suit is groundless. We may investigate and settle any claim or suit.

LIMITS OF LIABILITY

4. We will provide supplemental limits of liability of $50,000 if a bodily injury results in the death of any one person in any one accident and subject to the limit for any one person, $100,000 for bodily injury that results in the death of two or more persons in any one accident.

These limits of liability will be reduced as follows:

(a) For the death of one person, the $50,000 limit shall be reduced by any amount paid to or on behalf of that person under the Bodily Injury Liability coverage of this policy

(b) For the death of two or more persons, and subject to the limitations in (a) above, the $100,000...