Unisun Ins. Co. v. Hertz Rental Corp., 2071
| Decision Date | 14 June 1993 |
| Docket Number | No. 2071,2071 |
| Citation | 436 S.E.2d 182,312 S.C. 549 |
| Court | South Carolina Court of Appeals |
| Parties | UNISUN INSURANCE COMPANY, f/k/a American Mutual Fire Insurance Company, Respondent/Appellant, v. HERTZ RENTAL CORPORATION and Fireman's Fund Insurance Company, William F. York, and Glenda H. York, Appellants/Respondents. and The HERTZ CORPORATION, Appellant/Respondent, v. UNISUN INSURANCE COMPANY, William F. York and Glenda H. York, Respondents/Appellants. . Heard |
Robert H. Hood, John K. Blincow, Jr., and Joseph C. Wilson, IV, all of Hood Law Firm, Charleston, for appellant/respondent Hertz. Daniel E. Henderson, Ridgeland, for appellant/respondent York.
Marvin C. Jones and Christy Scott Stephens, both of Bogoslow & Jones, Walterboro, for respondent/appellant Unisun.
This is a declaratory judgment action to determine insurance coverage. The Hertz Corporation, a corporation doing business in the State of New York, rented a car to Christopher Hodge, a resident of New York. The rental contract was executed in New York and the car was registered in New York. Two days later Kendall Gilliem, also a New York resident, was involved in an accident with William and Glenda York while driving the rented car in South Carolina. Hertz alleges that Hodge permitted Gilliem to drive the car.
The Yorks sued Hodge, Gilliem and Hertz to recover for their personal injuries. They alleged negligence by Hertz for allowing Hodge and Gilliem to drive the car, and negligence by Hodge in entrusting the car to Gilliem. They also alleged Gilliem was negligent in operating the car. Hertz, a self insurer, and its excess carrier, Fireman's Fund, alleged they had no duty to defend the suit, because Gilliem was an unauthorized and prohibited driver under the car rental agreement. Unisun insured the York's vehicle. The policy included uninsured motorist coverage. Unisun therefore entered the action to provide a defense for Hodge and Gilliem.
Unisun then brought a declaratory judgment action against Hertz and Fireman's Fund seeking determination of the coverage issue. On a motion for summary judgment, the circuit court held that Hertz owed coverage to Hodge and Gilliem. Hertz appeals. The court also held that Unisun was not entitled to reimbursement from Hertz for the cost of providing the defense for Hodge and Gilliem. Unisun cross appeals this ruling. We affirm in part and reverse and remand in part.
Hertz first argues that the court erred in applying the law of New York to determine the issue of coverage. We discern no error.
Unless the parties agree to a different rule, the validity and interpretation of a contract is ordinarily to be determined by the law of the state in which the contract was made. Touro v. Cassin, 10 S.C.L. (1 Nott & McC.) 173 (1818). A contract of insurance is governed by the law of the state in which application for insurance was made, the policy delivered, and the contract formed. Barkley v. International Mutual Insurance Co., 227 S.C. 38, 86 S.E.2d 602 (1955).
In this case, the determinative issue is whether the car rental agreement between Hertz and Hodge excluded insurance coverage for the accident in question--a question of the law of contracts. The agreement was executed in New York by a resident of New York with a corporation doing business in New York. The subject matter of the contract was an automobile registered in New York. Hertz performed the contract in New York by delivering the car there. Since New York was the state in which the contract was made, the law of New York governs the interpretation and legal effect of its provisions. 1
Hertz next contends that even if New York law applies, the court erred in holding that it provided insurance coverage in this case. The car rental agreement provided:
You and the following persons, with Your permission ("Authorized Operators"), may operate the Car: Your spouse, employer, employees, or fellow employees incidental to their business duties.... No other persons are permitted to operate the Car unless all such persons appear at the time of rental and sign an Additional Authorized Operator form. All Authorized Operators must be at least 25 years old and have a valid driver's license....
The agreement also stated:
(a) PERMIT THE USE OF THE CAR BY ANY ONE OTHER THAN AN AUTHORIZED OPERATOR....
Finally, the agreement provided:
Hertz will indemnify, hold harmless, and defend You and any Authorized Operators FROM AND AGAINST LIABILITY TO THIRD PARTIES....
For bodily injury and property damage the limits of this protection, including owner's liability, are the same as the minimum limits required by the automobile financial responsibility law of the jurisdiction in which the accident occurs ... (not to exceed $100,000 per person and $300,000 each accident and $25,000 for property damage for each accident,) which accident results from the use of the Car as permitted by this Agreement. * * * * In the event that such coverage is imposed, by operation of law, then the limits of such coverage shall be the minimum required by the law of the jurisdiction in which the accident occurred. Hertz warrants that the protection described in this paragraph is primary with respect to any insurance coverage You or any Authorized Operators may have.
It is undisputed that Gilliem was 17 years old and did not have a valid driver's license. He did not appear at the time of the rental and sign an Additional Authorized Operator form. Hertz, therefore, contends that he was not authorized to operate the car and that Hodge breached the car rental agreement and voided all insurance coverage by permitting him to drive it.
This case is controlled by the decision of the New York Court of Appeals in Motor Vehicle Accident Indemnification Corporation v. Continental National American Group Co., 35 N.Y.2d 260, 319 N.E.2d 182, 360 N.Y.S.2d 859 (1974). In that case, the Court of Appeals held that an insurer issuing a standard liability policy to an automobile rental company may not disclaim coverage for the negligence of a person operating a rental car with the permission of the lessee, even though the car rental agreement forbids any person except the lessee or...
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