U.S. Fidelity & Guar. Co. v. Budget Rent-A-Car Systems, Inc., RENT-A-CAR

• Decision Date: 01 December 1992
• Docket Number: RENT-A-CAR,No. 91SC739,91SC739
• Citation: 842 P.2d 208
• Parties: UNITED STATES FIDELITY & GUARANTY COMPANY, as Subrogee of Jewish Community Center and Fran Sterling, Petitioner, v. BUDGETSYSTEMS, INC., Respondent.
• Court: Colorado Supreme Court

Page 208

842 P.2d 208

UNITED STATES FIDELITY & GUARANTY COMPANY, as Subrogee of Jewish Community Center and Fran Sterling, Petitioner, v. BUDGET RENT-A-CAR SYSTEMS, INC., Respondent.

No. 91SC739.

Supreme Court of Colorado En Banc.

Dec. 1, 1992.

Rehearing Denied Jan. 11, 1993.

Dickinson, Everstine & Prud'Homme, Michelle R. Prud'Homme, Denver, for petitioner.

Richard W. Laugesen, Laird Campbell, Denver, amici curiae.

Cooper & Kelley, P.C., Elizabeth A. Starrs, John R. Mann, Denver, for respondent.

Justice MULLARKEY delivered the Opinion of the Court.

We granted certiorari to determine whether the court of appeals, in United States Fidelity & Guaranty Co. v. Budget Rent-A-Car Systems, Inc., 829 P.2d 478 (Colo.App.1991), erred in holding that an automobile rental company's rental agreement, providing for liability and other automobile insurance coverages required by the Colorado Automobile Reparations Act, and the lessee's automobile insurance carrier were co-primary insurers, and whether the court of appeals erred in apportioning liability based upon policy limits. We disagree with the court of appeals' interpretation of the rental agreement and, accordingly, reverse and return this case to the court of appeals with directions to remand it to the district court for further proceedings consistent with this opinion. Because of our disposition of this issue, we do not address the question of the proper method to apportion liability between two co-primary insurers.

I.

On August 6, 1986, Fran Sterling, an employee of the Jewish Community Center ("JCC"), was driving a van with several children in it when she was involved in an accident. JCC had rented the van from respondent, Budget Rent-A-Car Systems ("Budget"). Two of the children, Leo Elliott and Ken Broman, were seriously injured in the accident.

Budget, a self-insurer, ¹ pursuant to section 10-4-716, 4A C.R.S. (1987), originally Petitioner, United States Fidelity & Guaranty Company ("USF & G"), was JCC's automobile insurer. USF & G investigated the loss. Although it believed that it was required only to provide excess coverage to JCC, USF & G realized that the loss was in excess of Budget's limits, which were the state mandatory minimum of $25,000 per person, and $50,000 per accident. USF & G settled the claims of the two children for $148,328.68, and filed an action as subrogee for Fran Sterling and JCC against Budget for contribution or equitable apportionment, seeking the $50,000 liability limit from Budget.

refused to provide liability insurance coverage to JCC on the children's claims because the driver of the van was only twenty years old. Budget asserted that this violated the "Authorized Driver" provision of the rental agreement between JCC and Budget (the "Rental Agreement"). ² According to the Rental Agreement, a driver was required to be at least twenty-one years of age to be an "Authorized Driver."

In the trial court, USF & G moved for summary judgment and Budget moved for a determination of law, both as to the primacy of Budget's and USF & G's liability coverage. The trial court, finding that the Budget Rental Agreement and the USF & G insurance policies contained mutually repugnant excess insurance clauses, held that Budget and USF & G were co-primary insurers and apportioned equally the loss up to the lower policy's limits. ³ The court of appeals, in United States Fidelity & Guaranty Co. v. Budget Rent-A-Car Systems, Inc., 829 P.2d 478 (Colo.App.1991), affirmed the trial court's ruling that the two were co-primary insurers, but held that the loss should be apportioned proportionately to the policy limits. USF & G's policy limits were $1,000,000, while Budget's limits were $50,000. Under this apportionment, Budget, whose $50,000 limit is 1/21st of the total combined liability limit, would be required to reimburse USF & G $7,063.27, which is 1/21st of the total loss.

USF & G petitioned this court for certiorari on both the primacy issue and the apportionment issue. We reverse the judgment of the court of appeals and hold that Budget's coverage is purely primary in this case and that USF & G's coverage is purely excess. Because of our disposition of this issue, we need not reach the issue of the proper apportionment of liability between co-primary insurers.

II.

At issue is the interpretation of two contracts, the Budget Rental Agreement, ⁴ and the USF & G insurance In the "Other Insurance" ⁶ section of the USF & G policy, the policy provides, in relevant part:

                policy. 5  The proper construction of unambiguous contracts is a question of law, and the determinations of the court of appeals and the trial court are not binding on this court.  Pepcol Mfg. Co. v. Denver Union Corp., 687 P.2d 1310, 1313-14 (Colo.1984);  Robert A. McNeil Corp. v. Paul, 757 P.2d 165, 166 (Colo.App.1988).  Where the terms of a contract are ambiguous, they must be strictly construed against the party drafting the contract.  American Family Mut. Ins. Co. v. Johnson, 816 P.2d 952, 953 (Colo.1991);  Green Shoe Mfg. Co. v. Farber, 712 P.2d 1014, 1016 (Colo.1986)
                

1. For any covered auto you own this policy provides primary insurance. For any covered auto you don't own, the insurance provided by this policy is excess over any other collectible insurance.[ ⁷]

(Emphasis in original.) This provision unambiguously provides that the USF & G policy provides excess insurance coverage over any collectible insurance for automobiles covered by the policy which are not owned by the insured person. There is no question that the van involved in the accident was a covered automobile under the USF & G policy. The van, however, was not owned by JCC, so the USF & G policy provides only excess coverage for the accident at issue here.

The Budget Rental Agreement provides, in relevant part:

6) LIABILITY INSURANCE: IF THERE IS NO VIOLATION OF ANY OF THE USE RESTRICTIONS IN PARAGRAPH 5 ABOVE, Renter and any Authorized Driver shall, while operating the Vehicle, be provided with liability coverage in accordance with the standard provisions of a Basic Automobile Liability Insurance Policy or in accordance with the requirements of a qualified self-insurer instead of such coverage, for protection against liability for causing bodily injury (including death) and property damage with one of the following applicable coverage limits:

--coverage limits which are required by the state financial responsibility law or other legal responsibility where this rental transaction takes place; OR

--coverage limits of $100,000 for each person, but not more than $300,000 for each occurrence, and property damage limits of up to $25,000 for each occurrence if Renter, at time of rental, possessed valid Budget Corp Rate credentials or Sears Checklist Charge Card credentials.

A. All coverages automatically conform to the basic requirements of any "No-Fault" law which may be applicable.

RENTER WAIVES UNINSURED AND UNDERINSURED MOTORIST, SUPPLEMENTAL NO-FAULT AND OTHER OPTIONAL COVERAGES.

B. If any coverages herein cannot be excluded or waived, Renter agrees that such coverages shall be automatically reduced to the minimum requirements of any financial responsibility or other applicable law and that such coverages shall be excess to any other applicable insurance.

C. Renter agrees to cooperate fully in the investigation and defense of and to deliver to the renting location every document relating to any accident, claim or lawsuit.

D. Renter will defend and indemnify the renting location, Budget and Sears from all loss, liability and expense in excess of the coverages available under the terms of this Agreement.

The outcome of this case is determined by the correct interpretation of this provision of the Rental Agreement.

Budget does not argue before this court that there was a violation of any use restriction in paragraph 5 of the Rental Agreement. ⁸ See Bukulmez v. Hertz Corp., 710 P.2d 1117, 1120 (Colo.App.1985), rev'd on other grounds sub nom. Blue Cross v. Bukulmez, 736 P.2d 834 (Colo.1987) ("[O]nce the owner has knowledge that the car will be driven on public highways and gives permission for it to be so driven, coverage is required under the [Colorado Auto Accident Reparations] Act, unless the exclusions of § 10-4-712, C.R.S., apply."). Because this condition is fulfilled, JCC and any "Authorized Driver" ⁹ are provided with automobile liability insurance coverage, in accordance with either the standard provisions of a basic automobile liability insurance policy or the requirements of a qualified self-insurer. See § 10-4-716, 4A C.R.S. (1987); see also § 10-4-705(1), 4A C.R.S. (1987) ("Every owner of a motor vehicle who ... knowingly permits the operation of the motor vehicle on the public highways of this state shall have in full force and effect a complying policy under the terms of this part 7...."). According to the Rental Agreement, the coverage limits provided to JCC were the state mandatory minimum limits of $25,000 per person and $50,000 per occurrence. § 10-4-706, 4A C.R.S. (1987).

Colorado requires uninsured (and underinsured) motorist coverage, but such coverage may be waived in writing. § 10-4-609(1), 4A C.R.S. (1987). Colorado does not require supplemental no-fault or other optional coverages. Pursuant to subparagraph At the center of this case is the interpretation of subparagraph 6(B) of the Rental Agreement. According to the court of appeals, this is an all-purpose "other insurance" clause. The trial court, however, followed a different rationale. It agreed with Budget's argument that the excess clause of 6(B) applied only because, although the Authorized Driver provision was violated, the Colorado Auto Accident Reparations Act ¹⁰ did not permit such liability coverage to be waived or excluded based on JCC's violation of the Rental Agreement. This argument has not been made before this court. ¹¹ Because Budget now has conceded that Fran Sterling was an "Authorized Driver," the...