Passamano v. Travelers Indem. Co., RENT-A-CAR

Decision Date11 October 1994
Docket Number92SC155,Nos. 92SC80,RENT-A-CAR,s. 92SC80
Citation882 P.2d 1312
PartiesAntonio PASSAMANO, Petitioner, v. TRAVELERS INDEMNITY COMPANY, an Illinois corporation; National Car Rental Systems, Inc., a Delaware corporation; and North-West Leasing Corporation, a Colorado corporation, Respondents. Cecil KENT and Chuck Brown, Petitioners, v. BUDGETSYSTEMS, INC., Respondent.
CourtColorado Supreme Court

Fish & Coles, D. Bruce Coles, Denver, for petitioner in No. 92SC80.

Montgomery, Green, Jarvis, Kolodny & Markusson, John T. Van Voorhis, Denver, for respondents in No. 92SC80.

Wilcox & Ogden, Ralph Ogden, Denver, for petitioners in No. 92SC155.

Burg & Eldredge, P.C., Matthew R. Giacomini, Scott J. Eldredge, John A. Scruggs, Denver, for respondent in No. 92SC155.

Justice KIRSHBAUM delivered the Opinion of the Court.

In Passamano v. Travelers Indemnity Co., National Car Rental Systems, and North-West Leasing Corp., 835 P.2d 514 (Colo.App.1991), the Colorado Court of Appeals affirmed the trial court's summary judgment in favor of the respondents, Travelers Indemnity Company (Travelers), National Car Rental Systems (National), and North-West Leasing Corporation (North-West), and against the petitioner, Antonio Passamano (Passamano). Passamano filed a civil action seeking reformation of an agreement between North-West and Passamano to require the respondents to provide liability insurance coverage for injuries Passamano sustained when a car he rented from North-West collided with a vehicle driven by an uninsured motorist. The trial court concluded that the agreement did not constitute a contract of insurance for purposes of the provisions of section 10-4- 609(1), 4A C.R.S. (1994), 1 permitting a named insured of an automobile liability insurance policy to reject uninsured and underinsured motorist coverage.

In Kent v. Budget Rent-A-Car Systems, Inc., the trial court entered a summary judgment against petitioners, Cecil Kent and Chuck Brown, and in favor of respondent, Budget Rent-A-Car Systems (Budget). Kent and Brown filed a civil action seeking reformation of an agreement between Budget and Kent by requiring Budget to provide uninsured motorist coverage for injuries the petitioners received in an accident involving a car rented to Kent by Budget and a vehicle driven by an uninsured motorist. The trial court apparently adopted Budget's argument that as a self-insurer it was not required to offer uninsured motorist coverage. Kent and Brown appealed the trial court's order to the court of appeals and also filed a petition with this court for certiorari review before judgment, pursuant to C.A.R. 50. Having granted both petitions, we reverse the judgment of the court of appeals in Passamano and the judgment of the trial court in Kent. 2


On March 9, 1987, Passamano rented an automobile in Vail, Colorado, from North-West, a National licensee, pursuant to an agreement containing several options with respect to insurance coverage. At the time, North-West was a party to a liability insurance policy issued by Travelers covering North-West's vehicles. When purchasing the Travelers policy in effect at the time Passamano was injured, North-West rejected uninsured motorist coverage.

Prior to executing the agreement on March 9, 1987, Passamano and North-West's agent discussed the type of vehicle to be rented and the terms of the agreement, including provisions permitting purchase of "personal accident insurance" and a "collision damage waiver." 3 Passamano elected to purchase the collision damage waiver and elected not to purchase personal accident insurance. There was no discussion of uninsured motorist coverage.

The agreement contains the following relevant provisions pertaining to liability insurance:


Authorized Driver is covered by an automobile liability insurance policy or qualified self-insurance arrangements, on a primary basis in respect to other insurance, for bodily injury or death (limits $100,000 each person, $300,000 each accident) and for property damage (limit $25,000) for each accident arising from use of Vehicle as permitted by this Agreement. Minimum Mandatory No Fault coverage as required by applicable law, is also provided. Company will not provide "Uninsured Motorist" coverage, "Underinsured Motorist" coverage or supplementary "No Fault" unless such coverages are required to be provided by applicable law and cannot be rejected. If required, and not rejectable the limits will be the minimum required by law.

The Authorized Drivers will indemnify and hold harmless National Car Rental from and against all loss, liability and expense in excess of the limits of liability as indicated in this Agreement, as a result of bodily injury, death or property damage caused by, or arising out of, the use or operation of the rental Vehicle.

Authorized Drivers insured under the policy agree to comply with and be bound by all its terms, conditions, limitations and restrictions, which are made a part of the Agreement by reference. Evidence of this insurance is available for inspection at the Company's Home Office.

An Authorized Driver will immediately report any accident to the Company at the location where the Vehicle was rented and will also deliver to the Company at that location every summons, complaint or paper of any kind received by Authorized Driver in any way relating to an accident involving the Vehicle while rented under this Agreement. An Authorized Driver will not aid or encourage the filing of any claim as a result of any accident and will cooperate fully with the Company and its insurer in the investigation and defense of any claim or lawsuit....

The agreement also contains the following provision pertaining to the option for obtaining a collision damage waiver:

(b) CDW--If you elect to accept and pay Collision Damage Waiver as indicated on Page 2 and Authorized Driver complies with all terms and conditions of this Agreement, you are relieved from liability for damages to Vehicle caused by collision. THIS COLLISION DAMAGE WAIVER IS NOT INSURANCE.

These provisions appear on the back side of the two-sided agreement and are printed in a small type-size. North-West agents did not furnish Passamano with a copy of the rental agreement prior to the initiation of negotiations concerning the renting of the vehicle.

While driving the car on March 10, 1987, near Leadville, Colorado, Passamano was involved in an accident caused by the negligence of an uninsured motorist. Passamano sustained serious injuries, including several broken bones and permanent loss of vision in his left eye; required lengthy hospitalization; and was absent from work for over six months. He subsequently filed suit against the respondents.

In his amended complaint, Passamano alleged that the agreement was in effect a contract of insurance; that with regard to such contract the defendants are in effect the insurer and he, Passamano, is the named insured; and that the defendants violated section 10-4-609(1) by failing to offer him uninsured motorist coverage. Passamano also alleged that Travelers was the insurer of North-West for the risk covered by the liability insurance provided to Passamano by the agreement; that North-West's rejection of uninsured motorist coverage under the Travelers policy violated public policy and the legislative intent in adopting section 10-4-609(1); that the agreement is unconscionable because it fails to state that North-West had rejected uninsured motorist coverage and because under the circumstances, including the format of the agreement and the conduct of North-West's agents, Passamano was not given a meaningful opportunity to read the entire agreement; and that the respondents' conduct was unconscionable in failing to offer Passamano an opportunity to purchase uninsured motorist coverage.

The defendants filed a motion for summary judgment. They argued that because North-West was the named insured under the contract of insurance executed by North-West and Travelers, only North-West had authority under section 10-4-609(1) to reject uninsured motorist coverage. The defendants also argued that the agreement between North-West and Passamano does not constitute a contract of insurance and that Colorado does not require a rental car agency to provide uninsured motorist coverage to its customers.

The trial court granted defendant's motion for summary judgment. Relying on this court's decision in Davis v. M.L.G. Corporation 712 P.2d 985 (Colo.1986), the trial court determined that the agreement between Passamano and North-West is a bailment contract, not a contract of insurance. The trial court also determined that under the insurance policy issued to North-West by Travelers, North-West is the named insured and Passamano is an additional insured. The trial court concluded that Passamano had no authority to acquire or reject uninsured motorist coverage, and further concluded that the conduct of North-West and the terms and format of the rental agreement were not unconscionable.

On appeal, the court of appeals affirmed the trial court's summary judgment. The court of appeals concluded that in general an agreement for the lease of a vehicle from a car rental agency creates a bailment contract for the mutual benefit of the parties and that the language of the agreement executed by Passamano demonstrates that the agreement did not constitute a contract of insurance. Passamano, 835 P.2d at 515-16. The court of appeals agreed with the trial court that North-West was the named insured for purposes of the requirements of section 10-4-609(1) and that the rental agreement was not unconscionable.


On February 27, 1989, Kent rented an automobile from Budget in Denver, Colorado. The agreement contained the following relevant provisions:


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