Insurance Co. of North America v. Avis Rent-A-Car System, Inc., RENT-A-CAR

• Decision Date: 12 May 1977
• Docket Number: No. 49795,RENT-A-CAR,49795
• Citation: 348 So.2d 1149
• Parties: INSURANCE COMPANY OF NORTH AMERICA, Plaintiff-Appellee, v. AVISSYSTEM, INC., Defendants-Appellants.
• Court: Florida Supreme Court

Page 1149

348 So.2d 1149

INSURANCE COMPANY OF NORTH AMERICA, Plaintiff-Appellee, v. AVIS RENT-A-CAR SYSTEM, INC., Defendants-Appellants.

No. 49795.

Supreme Court of Florida.

May 12, 1977.

Rehearing Denied July 29, 1977.

John G. Poole, Jr. of the Law Offices of Charles C. Papy, Jr., Coral Gables, and Jeanne Heyward, Miami, for plaintiff/appellee.

James E. Tribble, of Blackwell, Walker, Gray, Powers, Flick & Hoehl, Miami, for defendants/appellants.

ENGLAND, Justice.

Pursuant to Florida Appellate Rule 4.61, the United States Court of Appeals for the Fifth Circuit, has certified to us a question of law concerning indemnification as between insurance companies for the financial loss resulting from the negligent operation of a rented motor vehicle. This case arose after two insurance carriers, Liberty Mutual Insurance Company, for Avis Rent-A-Car System, Inc., and Insurance Company of North America (INA), for the lessee, had settled for $350,000 the liability of their insureds to the estate of an individual who had been killed as a result of the negligent operation of a vehicle owned by Avis. This lawsuit began in the United States District Court for the Southern District of Florida, where Avis' carrier was found to be responsible for the full $350,000 payment under applicable Florida law. On appeal the Court of Appeals certified to us the following relevant facts (some of which were stipulated) and question:

" 'On June 27, 1969, AVIS . . . leased a 1969 Chevrolet Station Wagon owned by AVIS to Camp Ocala, Inc. . . . On July 26, 1969, during the time of the lease, . . . (the) Wagon was being operated by one Jane C. Spitzer with the consent and permission of Camp Ocala, Inc. Jane C. Spitzer was an employee of Camp Ocala, Inc., and was operating the . . . Wagon within the course and scope of her employment with Camp Ocala, Inc.

'On July 26, 1969, Jane C. Spitzer . . . collided with another vehicle resulting in serious personal injury to Martha L. Rubenstein, a minor, who was riding as a passenger in the Chevrolet Station Wagon being operated by Jane C. Spitzer. Martha Rubenstein was a camper at Camp Ocala, Inc.

'Subsequently, Martha L. Rubenstein and her father, Arthur Rubenstein, brought suit . . . against Camp Ocala, Inc., and AVIS . . . .

'At the time of the accident, the Defendant LIBERTY MUTUAL . . . insured AVIS under a liability insurance policy . . .. (INA) insured Camp Ocala, Inc., under a liability insurance policy. . . .

'LIBERTY MUTUAL defended both AVIS and Camp Ocala. . . .

'Just prior to the Rubenstein case coming to trial, a settlement of that action was reached for the sum of $350,000.00. The settlement sum was agreed to by both LIBERTY MUTUAL and INA without prejudice to either company litigating their respective rights under the policies at a later time. . . .'

LIBERTY MUTUAL and INA contributed to the $350,000.00 Rubenstein settlement as follows:

'INA in the present action now seeks to recover back the $200,000.00. . . .'

AVIS is provided with general bodily injury liability coverage in the amounts of $500,000/$1,000,000. By way of endorsement to said policy, any rentee is provided with reduced limits of liability protection to coincide with the specific terms of the standard rental agreement. These limits are $100,000/$300,000.

On the basis of these facts, the (trial) Court framed the issue as follows:

'Would AVIS (and hence its insurer, LIBERTY MUTUAL) have been entitled to maintain an action for indemnity against Camp Ocala (and hence its insurer, INA) for all sums which AVIS would have been liable to pay to the Rubensteins, in excess of $100,000.00?'

In answering this question in the negative, the (trial) Court viewed Florida law as establishing the principle that the carrier for the owner is primarily liable and has no right of indemnification from the driver of the vehicle or its carrier. The Court based this view on Roth v. Old Republic Insurance Co., 269 So.2d 3 (Fla.1972), which, the (trial) Court believed, had derogated the authority of the line of Florida cases which this Court had relied on in Hertz Corporation v. Ralph M. Parsons Co., 419 F.2d 783 (5th Cir. 1969)."

At the outset we are urged by Avis to rephrase the question certified to us, but we do not find that essential to our determinations as to the right of indemnification or the legal limitations on Avis' attempt to restrict its tort liability. We would answer the question posed in the affirmative, with the obvious limitation that Avis could not recover from Camp Ocala's insurer more than the policy limit set in the contract between Camp Ocala and INA. Our reasons follow.

In Hertz Corp. v. Ralph M. Parsons Co., 419 F.2d 783 (5th Cir. 1969), the court applied Florida law to hold that the lessor-owner of a motor vehicle may obtain indemnification from a lessee who employed the negligent driver, ¹ on the ground that the vicarious liability of the employer is primary and that of the owner secondary, for damages in excess of the insurance protection afforded the lessee-driver by the terms of the parties' rental contract. ² The financial effect of that decision was to charge to the lessor-owner's carrier the full amount due as a result of a driver's negligence up to the limit of the policy provided the driver in the rental contract, and to charge all in excess of that limit to the negligent lessee's carrier (the carrier for the negligent driver's employer) up to the policy limits of the lessee's insurance contract. Presumably, although the point is not discussed in the Hertz case, any amount paid by the lessor-owner's carrier which is not indemnified by the driver's (or his employer's) carrier could be collected from the driver (or his employer) personally.

Hertz, it will be noted, involved multiple layers of insurance for a driver's negligence, just as were available in this case. One layer is provided under the rental agreement to the lessee from the owner's carrier ($300,000 in the Hertz case and $100,000 here); another layer is provided to the lessee-employer from its own carrier (an unstated amount above $25,000 in the Hertz case and $200,000 here); a third layer is provided to the owner from its carrier ($950,000 in the Hertz case and $500,000 here); and a fourth layer is provided to the individual driver from his or her carrier ($20,000 in the Hertz case and an unknown or nonexistent amount here ³).

Roth v. Old Republic Insurance Co., 269 So.2d 3 (Fla.1972), involved an indemnification claim between insurance carriers similar to the one now before us. This Court there held that insurance provided to the lessee as a part of the rental agreement with the owner places primary financial responsibility on the owner's carrier and bars indemnification from the negligent driver to that extent. The feature of Roth which distinguished it from prior cases saying the same thing ⁴ was the fact that the negligent driver in Roth was not the lessee and under the rental agreement had no permission from the owner to operate the vehicle. The decision in Roth is simply a re-affirmation of the principal that, because of our financial responsibility law and without regard to the procedural posture of the lawsuit, ⁵ the owner's carrier is liable for the damages caused by the vehicle in the course of its intended use, in accordance with the agreement to insure made a part of the rental contract, no matter who happens to be driving the vehicle. ⁶

Roth, it will be noted, did not involve multiple layers of insurance coverage. The insurance coverage provided to the lessee by the owner's carrier as part of the car rental contract was apparently greater than the loss for which the owner was held responsible. ⁷

Against this background we turn to the contentions of the parties in this case. Liberty Mutual argues that the financial responsibility laws of the state ⁸ were designed to protect members of the public from losses resulting from the ownership and operation of motor vehicles, up to specified minimum amounts per person and per accident. It contends that the policy which it sold to Avis, providing for primary coverage for a lessee's negligence up to $100,000 per person and for alternate or overlapping coverage for Avis's negligence up to $500,000 per person, protected the public well beyond the minimum limits of the statute. Liberty Mutual argues that, since it would be responsible to the full extent of $500,000 per person for Avis' negligence or for Avis' responsibility under the dangerous instrumentality doctrine for the negligent operation of a rented vehicle, more than adequate protection is provided to the public. It contends that its indemnification rights for payments in excess of coverage furnished to lessees in no way derogates the public policy served by the statute, so that a $100,000 primary coverage for lessees (or any other amount not less than statutory minimums) is and ought to be contractually permissible. In other words, Liberty Mutual suggests that nothing in Roth or any other Florida precedent bars its right to obtain indemnification from the negligent driver of a motor vehicle or the driver's employer (or their insurers) to the extent of amounts paid out in excess of the primary $100,000 coverage furnished by the...