Ryan v. Knoller
| Decision Date | 25 June 1997 |
| Docket Number | No. 95-727-A,95-727-A |
| Citation | 695 A.2d 990 |
| Parties | Kevin D. RYAN et al. v. Christopher KNOLLER et al. v. INDEMNITY INSURANCE COMPANY OF NORTH AMERICA v. WORLDWIDE UNDERWRITERS INSURANCE COMPANY. ppeal. |
| Court | Rhode Island Supreme Court |
Stephen A. Izzi, Providence, for Plaintiff.
Thomas R. Bender, Providence, for Defendant.
Before WEISBERGER, C.J., and LEDERBERG, BOURCIER, FLANDERS, and GOLDBERG, JJ.
This matter comes before us on the appeal of the fourth-party defendant, Worldwide Underwriters Insurance Company (Worldwide), from a final judgment entered in favor of the third-party defendant, fourth-party plaintiff, Indemnity Insurance Company of North America (Indemnity), on the cross-motions for summary judgment filed by both Worldwide and Indemnity in the Superior Court.
On August 20, 1993, in Newport, Rhode Island, Suzanne Arechavala (Arechavala) entered into a rental agreement with International Car Rental, Inc. (International). The agreement provided for the rental of a Chrysler LeBaron. Arechavala was listed as the "renter" in the agreement. Christopher Knoller (Knoller) was listed as an "additional driver" in that same rental agreement. By the terms of the rental agreement, the additional driver was permitted to drive the rented vehicle if he or she was "named on the face of this Agreement." Both Arechavala's and Knoller's names and license numbers were listed on the face of the rental agreement.
International was insured under an insurance liability policy issued by Indemnity. Although International was the named insured under that policy, the policy also insured "[a]nyone else while using with your permission a covered 'auto' you own, hire or borrow." The person using, with International's permission, a car owned by International was designated a rentee under the terms of the Indemnity policy. Specifically, a rentee was defined as "a holder of a 'rental agreement' which provides for the holder's use of an automobile for a period of less than twelve months." The Indemnity policy specifically did not provide protection to a rentee "when a 'rental auto['] is used or operated in violation of the terms and conditions of the 'rental agreement.' " Thus, the Indemnity policy incorporated by reference the intoxication exclusion provision contained in the rental agreement among International and Arechavala and Knoller. The Indemnity policy provided coverage in the amount of $25,000 per person and $50,000 per accident for insureds other than the named insured, International. The Indemnity policy attempted to limit its coverage by stating that "the limit of liability provided the 'rentee' is excess insurance over any other liability insurance available."
On August 23, 1993, while under the influence of alcohol, Knoller drove, with Arechavala's consent, the motor vehicle rented from International. While driving the rental vehicle, Knoller was involved in a motor vehicle accident with Kevin Ryan (Ryan) and Lisa Young (Young), which resulted in bodily injury to Ryan and to Young. As a result of the accident with Knoller, Ryan and Young filed a personal injury action against Knoller, Arechavala, and International.
In addition to the Indemnity policy, the rental vehicle was also insured under a policy issued to Knoller by Worldwide. Among other protections, that policy provided coverage to Knoller, as the named insured, whenever he drove a vehicle that he did not own. The monetary limits of the Worldwide policy were $100,000 per person and $300,000 for each occurrence, but Worldwide also attempted to limit its coverage further by providing that "the insurance with respect to a * * * non-owned automobile shall be excess insurance over any other valid and collectible insurance."
Worldwide entered its appearance on behalf of Knoller in the personal injury action commenced by Ryan and Young. Worldwide also filed a third-party complaint against Indemnity, alleging that Indemnity, in breach of its policy terms, failed to provide Knoller with a defense in the personal injury action. Indemnity responded by filing a cross-claim against Knoller for contribution and indemnification.
On April 21, 1995, Indemnity and Worldwide settled with Ryan and Young for a total of $92,500. The personal injury complaint was dismissed with prejudice on May 16, 1995. Indemnity contributed $50,000 toward the settlement amount, and Worldwide contributed the balance, but Indemnity's contribution was subject to an agreement that there would be a further determination of the respective rights and obligations of Worldwide and Indemnity.
Indemnity, with the consent of Worldwide, filed a fourth-party complaint for declaratory judgment against Worldwide. Knoller's third-party claim against Indemnity and Indemnity's cross-claim against Knoller were both dismissed. Indemnity and Worldwide filed cross-motions for summary judgment based on an agreed statement of facts. A hearing on those motions was held on November 6, 1995. The trial justice entered final judgment in favor of Indemnity on November 27, 1995.
The trial justice concluded that an "additional driver" was included within the definition of rentee as set forth in Indemnity's policy and that the intoxication exclusion was valid and not against public policy. The trial justice also determined that Worldwide was the primary carrier. Worldwide filed its notice of appeal on November 30, 1995.
Worldwide asserts that the intoxication exclusion provision in the rental agreement between International and Knoller is void as against public policy because it purports to restrict or limit statutorily mandated insurance coverage and that, as a result, Knoller is entitled to coverage under the Indemnity policy. We agree. In circumstances in which the purpose of statutorily required insurance coverage is intended for the protection of the public, that purpose may not be thwarted by permitting an insurer to avail itself of technical defenses included in its policy relating to conditions whose performance is wholly beyond the ability of the injured person to control. See, e.g., Royal Indemnity Co. v. Olmstead, 193 F.2d 451 (9th Cir.1951); John P. Ludington, Annotation, State Regulation of Motor Vehicle Rental ("You-Drive") Business, 60 A.L.R.4th 784 (1988).
The Rhode Island General Assembly has expressed a strong public policy in favor of insurance coverage for motor vehicle rental companies. Pursuant to G.L.1956 chapter 34 of title 31, owners of rental vehicles in Rhode Island must file proof of financial responsibility with the Registry of Motor Vehicles before the registry can register the rental vehicles and before the rental vehicle company can lawfully rent any of its motor vehicles. Section 31-34-1. A certificate of self-insurance issued pursuant to G.L.1956 § 31-33-9 is not sufficient to satisfy the requirements of § 31-34-1. See Miles-Un-Ltd., Inc. v. Fanning, 624 A.2d 843 (R.I.1993).
That statutory scheme requiring proof of financial responsibility by rental vehicle companies demonstrates that the "General Assembly chose to require owners of rental vehicles to comply with a more rigorous standard for proving financial responsibility than normal operators of motor vehicles," thereby expressing a policy in this state in favor of insurance coverage by rental vehicle companies. 1 Miles-Un-Ltd, 624 A.2d at 848. Permitting the enforcement of an intoxication exclusion provision would be contrary to that strong policy in favor of coverage. Accordingly, we conclude that such an exclusion provision contained in a rental vehicle company's rental agreement and incorporated by reference into the insurance policy covering those rental vehicles is against the public policy of this state and will be considered void. 2
The overwhelming majority of jurisdictions that have considered the validity of intoxication exclusion provisions have also concluded that such provisions are void as against public policy. The most often-cited case involving an intoxication exclusion provision is Allstate Insurance Co. v. Sullivan, 643 S.W.2d 21 (Mo.Ct.App.1982). In Allstate the defendant, Sullivan rented an automobile from Budget Rent A Car (Budget) at St. Louis Municipal Airport. The rental agreement contained a provision, like the provision in International's rental agreement, that the rental vehicle should not be operated "[w]hile under the influence of intoxicants or narcotics." Id. at 22. The insurance policy between Budget and its insurer, Allstate, provided that there would be coverage for any person operating a rental vehicle with Budget's permission as long as that operation was "within the scope of such permission." Id. Sullivan was then involved in an accident while he was intoxicated. The court there concluded that because Missouri had enacted a Motor Vehicle Safety Responsibility Law, it was the public policy of that state to "assure financial remuneration for damages sustained through the negligent operation of motor vehicles on the public highways of this state not only by the owners of such automobiles but also by all persons using such vehicles with the owner's permission,...
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