Rocky Mountain Fire & Cas. Co. v. Allstate Ins. Co.

• Decision Date: 10 September 1970
• Docket Number: No. 1,CA-CIV,1
• Citation: 474 P.2d 38,13 Ariz. App. 31
• Parties: ROCKY MOUNTAIN FIRE & CASUALTY COMPANY, a Washington corporation, Appellant, v. ALLSTATE INSURANCE COMPANY, an Illinois corporation, Paul E. Quinlan and Dortha Quinlan, his wife, and Michael D. Foster, Administrator for the Estate of James J. McGowan, Deceased, Appellees. 1178.
• Court: Arizona Court of Appeals

Page 38

474 P.2d 38

13 Ariz.App. 31

ROCKY MOUNTAIN FIRE & CASUALTY COMPANY, a Washington corporation, Appellant, v.ALLSTATE INSURANCE COMPANY, an Illinois corporation, Paul E. Quinlan and Dortha Quinlan, his wife, and Michael D. Foster, Administrator for the Estate of James J. McGowan, Deceased, Appellees.

No. 1 CA-CIV 1178.

Court of Appeals of Arizona, Division 1, Department B.

Sept. 10, 1970.

Rehearing Denied Dec. 2, 1970.

Burch, Cracchiolo, Levie & Guyer, by Dan Cracchiolo, Phoenix, for appellant.

Moore, Romley, Kaplan, Robbins & Green, by Craig R. Kepner, Phoenix, for Allstate Ins. Co.

Hunter, Bartlett, Penn & Lerch, by Wm. Penn, Phoenix, for Quinlan.

S. R. Hutchison, Phoenix, for Quinlan and Foster.

JACOBSON, Judge.

We are called upon in this appeal from a declaratory judgment entered by the Superior Court of Maricopa County, to determine as between two different insurance companies, the effect of an 'escape clause' in one policy and an 'excess insurance clause' in another policy where both policies may provide coverage to one insured.

Plaintiff-appellant, ROCKY MOUNTAIN FIRE & CASUALTY COMPANY, hereinafter referred to as 'Rocky Mountain', brought a declaratory judgment action against defendant-appellee, ALLSTATE INSURANCE COMPANY, hereinafter referred to as 'Allstate', and others seeking a determination of the duties and liabilities of the two insurers arising out of an automobile accident.

There is no factual dispute present in this case.On March 1, 1968, RAYMOND E. HODGSON, dba RAY's AUTO BODY SHOP, was insured by Rocky Mountain under a garage liability insurance policy.This policy afforded coverage under certain circumstances to garage customers using 'loaner' automobiles owned by Hodgson.The Rocky Mountain garage liability policy contained the following clause:

'In consideration of the reduced rate of premium made applicable to the Garage Laibility Insurance, it is agreed that garage customers are not insureds with respect to the automobile hazard except in accordance with the following additional provisions:

'1.If there is other valid and collectible insurance, Whether primary, excess or contingent, available to the garage customer and the limits of such insurance are sufficient to pay damages up to the amount of the applicable financial responsibility limit, no damages are collectible under this policy.'(emphasis added.)

This type of provision is known in the insurance business as a 'non-liability' or an 'escape' clause.On March 1, 1968, James J. McGowan left his automobile at Ray's Auto Body Shop for repairs and was loaned an automobile for his use while the necessary repairs were being performed on his automobile.This 'loaner' automobile was a vehicle named in the Rocky Mountain policy.McGowan, while driving the loaner automobile was involved in an accident involving another automobile being driven by appellee, PAUL E. QUINLAN, which resulted in the death of Mr. McGowan.At the time of the accident Mr. McGowan was insured by Allstate, whose policy provided coverage to McGowan while using a substitute automobile.The Allstate policy contained the following provision:

'(The insurance) with respect to a temporary substitute automobile or a non-owned automobile shall be Excess over any other collectible insurance.'(emphasis added)

This type of provision is known in the insurance business as an 'excess clause.'

A suit for damages was subsequently brought against the estate of McGowan by appellee Quinlan.The two insurance companies were unable to agree as to which policy afforded primary coverage and which company had the duty to provide a defense to the Quinlan action.Accordingly, the declaratory judgment action was instituted.

On cross-motions for summary judgment, the trial court held that Rocky Mountain was primarily liable up to the limits of its particular policy and owed the duty of defense to the then pending personal injury action.It further held that Allstate was liable only for any judgment in excess of the limits of the Rocky Mountain policy.Rocky Mountain has appealed from this judgment.

The various positions of the parties are set forth as follows:

Rocky Mountain:

Rocky Mountain first tacitly agrees that an 'escape' clause which is couched in general language will not prevail over an 'excess' clause and would render the insurer having the escape clause primarily liable in a confrontation between two such insurance policy clauses.SeeAnnot.46 A.L.R.2d 1163.

However, Rocky Mountain contends that since its escape clause is couched in specific language excluding coverage in the event excess insurance is available to a garage customer and since this exclusion is tied specifically to the existence or non-existence of other insurance in amounts necessary to satisfy the Financial Responsibility Act of the State of Arizona, there is 'other collectible insurance'(under the terms of the Allstate policy) and therefore Rocky Mountain is not laible.In support of this position, Rocky Mountain cites the cases of Indiana Lumbermen's Mutual Insurance Company v. Mitchell, 409 F.2d 392(7th Cir.1969)(applyingIllinois Law);United States Fidelity & Guaranty Company v. Dixie Auto Insurance Company, 292 F.Supp. 554(N.D. Ala.1968)aff'd403 F.2d 717(5th Cir.1968);Faltersack v. Vanden Boogaard, 39 Wis.2d 64, 158 N.W.2d 322(1968);Government Employees Insurance Co. v. Globe Indemnity Co., 415 S.W.2d 581(Ky.1967);Allstate Ins. Co. v. Shelby Mutual Ins. Co., 269 N.C. 341, 152 S.E.2d 436(1967);Continental Cas. Co. v. Weekes, 74 So.2d 367(Fla.1954);See7 Am.Jur.2dAutomobile Insurance§ 202.

Allstate:

Allstate counters with the argument that the Rocky Mountain escape clause is a limitation of the omnibus insured section of the Financial Responsibility Act of Arizona and is therefore void, Citing Mills v. Liberty Mutual Ins. Co., 60 Misc.2d 1085, 304 N.Y.S.2d 801(1969);American Motorists Ins. Co. v. Kaplan, 209 Va. 53, 161 S.E.2d 675(1968).

Moreover, Allstate argues that contrary to the case law cited by Rocky Mountain even a specific escape clause will not prevail over an excess clause and, therefore, Rocky Mountain is primarily liable.In support of this position, Allstate relies on Fed. Ins. Co. v. Prestemon, 278 Minn. 218, 153[13 Ariz.App. 34] N.W.2d 429 (1967);Bituminous Cas. Corp. v. Andersen, 184 Neb. 670, 171 N.W.2d 175(1969).

Quinlan:

Appellee Quinlan presents a third alternative for the court's consideration, arguing that under a fact situation as present here, both the escape clause of the Rocky Mountain policy and the excess clause of the Allstate policy are legally ineffectual and therefore the liabilities under the policies should be prorated between the two insurers.In support of this contention he cites Lincombe v. State Farm Mutual Automobile Insurance Co., 166 So.2d 920(La.App.1964);Hardware Deal. Mut. F. Ins. Co. v. Farmers Ins. Exchange, 444 S.W.2d 583(Tex.1969);United Services Auto Assoc. v. Hartford Acc. and Ind. Co., 220 Tenn. 120, 414 S.W.2d 836(1967);Oregon Auto Ins. Co. v. United States Fidelity & Guaranty Co., 195 F.2d 958(9th Cir.1952).A fourth alternative can conceivably be added to the alternative dispositions of this case suggested by the parties, that is, since both policies on their face would limit coverage if 'other insurance' is available, neither policy provides coverage and neither insurance company is liable.The fact that neither insurer suggests this option must be taken as an acknowledgment that McGowan at the time of the accident had insurance coverage, the only question being who must provide that coverage and the corollary duty of defense of the action against McGowan's estate.

We turn first to Allstate's contention that the escape clause of the Rocky Mountain policy is void under the Financial Responsibility Act.

The entire 'other insurance' clause of the Rocky Mountain policy provides as follows:

'In consideration of the reduced rate of premium made applicable to the Garage Liability Insurance, it is agreed that garage customers are not insureds with respect to the automobile hazard except in accordance with the following additional provisions:

'1.If there is other valid and collectible insurance, whether primary, excess or contingent, available to the garage customer and the limits of such insurance are sufficient to pay damages up to the amount of the applicable financial responsibility limit, no damages are collectible under this policy.

'2.If there is other valid and collectible insurance available to the garage customer, whether primary, excess or contingent, and the limits of such insurance are insufficient to pay damages up to the amount of the applicable financial responsibility limit, then this insurance shall apply to the excess of damages up to such limit.

'3.If there is no other valid and collectible insurance, whether primary, excess or contingent, available to the garage customer, this insurance shall apply but the amount of damages payable under this policy shall not exceed the applicable financial responsibility limit.'

It is apparent that this 'other insurance' clause is in fact three separate clauses: (1) Where other insurance is available up to limits set by the Financial Responsibility Act(now $10,000.00 for an individual claim in Arizona) it is an 'escape' clause.(2) Where the other insurance does not provide sufficient coverage to comply with the Financial Responsibility Act, it is an 'excess' clause.(3) Where no other insurance is available it provides coverage up to the limits of the Financial Responsibility Act.

Section 28--1170 of the Financial Responsibility Act, 9 A.R.S.(1956), provides as follows:

'B.The owner's policy of liability insurance must comply with the following requirements:

'2.It shall insure the person named therein And any other person, as insured using the motor vehicle or motor vehicles with the express or implied permission of the named...