Philadelphia Indem. Ins. Co. v. Carco Rentals, Inc.

• Decision Date: 16 April 1996
• Docket Number: Civil No. 95-2141.
• Citation: 923 F. Supp. 1143
• Parties: PHILADELPHIA INDEMNITY INSURANCE COMPANY, Plaintiff, v. CARCO RENTALS, INC., d/b/a Hertz Rent-a-Car, Licensee, Defendant, Reliance Insurance Company, Intervenor.
• Court: U.S. District Court — Western District of Arkansas

923 F. Supp. 1143

PHILADELPHIA INDEMNITY INSURANCE COMPANY, Plaintiff, v. CARCO RENTALS, INC., d/b/a Hertz Rent-a-Car, Licensee, Defendant, Reliance Insurance Company, Intervenor.

Civil No. 95-2141.

United States District Court, W.D. Arkansas, Fort Smith Division.

April 16, 1996.

COPYRIGHT MATERIAL OMITTED

Beverly A. Rowlett, Huckabay, Munson, Rowlett & Tilley, Little Rock, AR, James E. Green, Jr., Lipe, Green, Paschal, Trump & Bragg, Tulsa, OK, for plaintiff.

James M. Dunn, Warner & Smith, Fort Smith, AR, for Campbell Hardage.

Ben T. Barry, Pryor, Barry, Smith, Karber & Alford, Fort Smith, AR, for Carco.

MEMORANDUM OPINION

H. FRANKLIN WATERS, Chief Judge.

This is an action for declaratory judgment filed by Philadelphia Indemnity Insurance Company (hereinafter Philadelphia). Philadelphia seeks a declaration that there is no duty to defend and no coverage under the policy at issue for any injuries sustained or death resulting from an automobile accident that occurred on September 10, 1994. The case is currently before the court on cross-motions for summary judgment filed by Philadelphia and by Reliance Insurance Company (hereinafter Reliance).¹ The facts underlying the current dispute are essentially undisputed.

Summary Judgment Standard.

Summary judgment is appropriate only when there is no genuine issue of material fact, so that the dispute may be decided on purely legal grounds. Holloway v. Lockhart, 813 F.2d 874 (8th Cir.1987); Fed.R.Civ.P. 56. The Supreme Court has issued the following guidelines for trial courts to determine whether this standard has been satisfied.

The inquiry performed is the threshold inquiry of determining whether there is a need for trial — whether, in other words, there are genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party.

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250, 106 S.Ct. 2505, 2511, 91 L.Ed.2d 202 (1986). See also AgriStor Leasing v. Farrow, 826 F.2d 732 (8th Cir.1987); Niagara of Wisconsin Paper Corp. v. Paper Industry Union — Management Pension Fund, 800 F.2d 742, 746 (8th Cir.1986).

The Eighth Circuit Court of Appeals has advised trial courts that summary judgments should be cautiously invoked so that no person will be improperly deprived of a trial of disputed factual issues. Inland Oil & Transport Co. v. United States, 600 F.2d 725 (8th Cir.1979), cert. denied, 444 U.S. 991, 100 S.Ct. 522, 62 L.Ed.2d 420 (1979). In Counts v. MK-Ferguson Co., 862 F.2d 1338 (8th Cir.1988), the court, reviewing the burdens of the respective parties, stated:

The burden on the party moving for summary judgment is only to demonstrate, i.e., `to point out to the District Court,' that the record does not disclose a genuine dispute on a material fact. It is enough for the movant to bring up the fact that the record does not contain such an issue and to identify that part of the record which bears out his assertion. Once this is done, his burden is discharged, and, if the record in fact bears out the claim that no genuine dispute exists on any material fact, it is then the respondent's burden to set forth affirmative evidence, specific facts, showing that there is a genuine dispute on that issue. If the respondent fails to carry that burden, summary judgment should be granted.

Id. at 1339, quoting, City of Mt. Pleasant v. Associated Elec. Coop., Inc., 838 F.2d 268, 273-74 (8th Cir.1988) (citations omitted) (brackets in original).

However, the Court of Appeals for this circuit has also held that the court, in ruling on the motion for summary judgment, must give the non-moving party "the benefit of the reasonable inferences that can be drawn from the underlying facts." Fischer v. NWA, Inc., 883 F.2d 594, 598 (8th Cir.1989) (citing Trnka v. Elanco Products Co., 709 F.2d 1223 (8th Cir.1983), cert. denied, 495 U.S. 947, 110 S.Ct. 2205, 109 L.Ed.2d 531 (1990).

Background.

On September 10, 1994, Neil Nash (Nash), an employee of Campbell Hardage, Inc., flew to Ft. Smith, Arkansas. When he arrived in Ft. Smith, Nash rented a car from Carco Carriage Corporation d/b/a Hertz Rent-a-Car (hereinafter Carco). Nash was traveling on business to Wortz Biscuit Company in Poteau, Oklahoma, to work on machinery.

Carco maintained on its rental cars the minimum statutorily mandated liability limits required by the states in which it operated. This basic liability protection was provided through National Casualty Company. Carco also made available to its customers for a specified purchase price supplemental liability insurance (referred to as SLI or LIS coverage). The supplemental liability insurance coverage contained $1,000,000 limits. In actuality, the amount of coverage was the difference between the dollar amount of the coverage provided by the basic policy, the minimum statutory limits in the given state, and $1,000,000. Carco also offered its rental customers a loss damage waiver (LDW), personal accident insurance (PAI), and a fuel option.

The supplemental liability insurance was provided by Philadelphia through an arrangement with Fact, Inc. Fact, Inc., is a trade association of Hertz franchisees and is listed as the policyholder.² However, under the terms of the policy only the rental customers purchasing the supplemental coverage were insureds. Carco is a member of Fact, Inc. Philadelphia submitted the SLI policy to the Arkansas State Insurance Commission for review and approval prior to September 10, 1994. The actual approval did not occur until September 18, 1994.

Customers were made aware of the availability of this supplemental insurance as part of the rental process. Specifically, Carco rental agents were trained to ask customers whether they wanted to obtain additional or supplemental liability protection.

Philadelphia provided training to Hertz franchisees' counter personnel regarding the solicitation of the sale of supplemental liability insurance to Hertz customers. Such training was conducted in Ft. Smith, on July 12, 1994. As part of the training, Philadelphia provided workbooks regarding the insurance.

In accordance with this practice, Tracie Johnston, the Carco rental agent working on September 10, 1994, indicates it was her procedure to hand the customer the pamphlet on the insurance when she asked the customer if he wanted the additional insurance. Her normal procedure was to open the pamphlet and read along with the customer.

The pamphlet entitled "Liability Insurance Supplement" describes the insurance as "excess automobile liability insurance" which provides coverage "for claims made by third parties for bodily injury and property damage caused by the use of a rental vehicle as permitted by the terms of the Rental Agreement." Under the caption "How Does LIS Affect Your Own Automobile Insurance," the pamphlet indicates the "liability protection provided by the Rental Agreement together with LIS is primary, so your own automobile insurance policy will not be called on to contribute unless and until the liability protection provided by the Rental Agreement and LIS is exhausted or does not apply."

Under the caption "What Exclusions Apply to LIS?," the pamphlet states

The program contains exclusions. All exclusions can be found in the excess automobile liability insurance policies. Example copies of the policies are available upon request at all participating locations. Some of the LIS exclusions are the same as those found in most automobile liability insurance policies. The following additional exclusions are brought to your attention since they are not customarily found in automobile insurance policies, but are contained in the excess automobile insurance liability policies, and therefore in LIS:

1. There is no protection if you or any Authorized Driver use or permit the use of the rental vehicle in violation of the terms of the Rental Agreement.

The customer must either decline or accept the additional coverage. The rental agent then makes a computerized notation on the rental record of the acceptance or denial. The rental agent also enters information from the customer's driver license and credit card prior to printing the rental record. The rental record from Nash's rental was printed at 10:54 a.m. on September 10, 1994.

The rental record is a one page computer generated document which contains the above indicated information as well as information regarding the rate charged and the vehicle rented. The rental record contains a place for the customer to initial and sign the document. The customer signs the rental record below a statement, in all capital letters, which indicates in part that by "signing this agreement you agree and understand the above and all terms, conditions and your obligations shown on the folder (LGN1900005) delivered to you with this rental record."

In accordance with this practice, the rental agent, Tracie Johnston, asked Nash whether he wanted to purchase supplemental liability insurance. Nash indicated he did. When he opted to purchase this coverage he was enrolled as an insured.

There is no indication that Nash asked to see a copy of the supplemental insurance policy. If he had made such a request, the Ft. Smith rental office did not have a copy although Carco's Fayetteville office did have a laminated copy of the policy. Carco as a Fact, Inc., member had specifically agreed to provide specimen copies of the supplemental liability insurance coverage at every counter.

Once the rental record was signed and initialled by Nash, Ms. Johnston folded it and placed it and the pamphlet describing the supplemental liability insurance inside a jacket or folder that contained the terms and conditions of the rental and gave these items to Nash. In addition to containing the terms and conditions or the rental, the jacket contains spaces to record the stall, license number, model, etc., regarding the car, has toll free numbers, return information,...