Van Vonno v. Hertz Corp.

• Decision Date: 24 December 1992
• Docket Number: No. 59190-3,59190-3
• Citation: 841 P.2d 1244,120 Wn.2d 416
• Court: Washington Supreme Court
• Parties: Nicolaas W. VAN VONNO, individually, and as Personal Representative of the Estates of Carol M. Van Vonno and Laurel A. Van Vonno, deceased, and as Guardian ad Litem for Nicolaas J. Van Vonno, a minor, Respondent, v. The HERTZ CORPORATION, a Delaware corporation, Appellant, and William J. Krush and Lori L. Krush, husband and wife, individually and their marital community, Defendants.

Page 416

120 Wn.2d 416

841 P.2d 1244

Nicolaas W. VAN VONNO, individually, and as Personal Representative of the Estates of Carol M. Van Vonno and Laurel A. Van Vonno, deceased, and as Guardian ad Litem for Nicolaas J. Van Vonno, a minor, Respondent, v. The HERTZ CORPORATION, a Delaware corporation, Appellant and William J. Krush and Lori L. Krush, husband and wife individually and their marital community, Defendants.

No. 59190-3.

Supreme Court of Washington En Banc.

Dec. 24, 1992.

Reconsideration Denied Feb. 26, 1993.

Bullivant, Houser, Bailey, Pendergrass & Hoffman, R. Daniel Lindahl, Portland, Or., for appellant.

Landerholm, Memovich, Lansverk & Whitesides, Inc., P.S., Jackson H. Welch, Duane Lansverk, Vancouver, for respondent.

DOLLIVER, Justice.

Defendant Hertz Corporation challenges a summary judgment holding it liable to plaintiff Nicolaas Van Vonno for greater than the statutory minimum amount of uninsured motorist (UM) coverage and for personal injury protection (PIP) benefits. Applying Oregon law, the trial court found Hertz subject to the statutes governing a "motor vehicle liability policy." We affirm.

On July 10, 1988, Van Vonno rented an automobile at the Portland, Oregon International Airport from Hertz. Van Vonno signed a rental agreement containing the following provision:

Hertz will indemnify, hold harmless, and defend You ... FROM AND AGAINST LIABILITY TO THIRD PARTIES, EXCLUDING ANY OF YOUR ... FAMILY MEMBERS RELATED BY BLOOD, MARRIAGE OR ADOPTION RESIDING WITH YOU ... For bodily injury the limits of this protection are $25,000 for each person, $50,000 for each accident, ... unless other limits are shown on the Front ... which accident results from the use of the Car as permitted by this Agreement. This protection shall conform to the basic requirements of any applicable "No Fault" law BUT DOES NOT INCLUDE "UNINSURED MOTORIST", "UNDERINSURED MOTORISTS", SUPPLEMENTARY "NO FAULT" OR ANY OTHER OPTIONAL COVERAGE. TO THE EXTENT PERMITTED BY LAW, HERTZ AND YOU HEREBY REJECT THE INCLUSION OF ANY SUCH COVERAGE. In the event that such coverage is imposed, by operation of law, for the benefit of persons other than You or any Authorized Operators, then the limits of such coverage shall be the minimum required by the law of the jurisdiction in which the accident occurred....

(Italics ours.) Rental Agreement para. 10(a); Clerk's Papers (CP), at 40. Van Vonno's employer, the Harris Corporation, had previously executed an agreement with Hertz to provide greater liability protection. The supplemental agreement required Hertz to provide Harris employees protection up to $100,000 per person and $300,000 per accident.

Hertz did not purchase an insurance policy to cover its potential liability. Instead, Hertz obtained a certificate of self-insurance from the Oregon Department of Motor Vehicles by establishing it possessed the ability to pay potential judgments. See Or.Rev.Stat. 806.130(2)(a) (1989).

On July 23, 1988, a collision in Clark County, Washington involving the rented vehicle caused the deaths of Van Vonno's wife and daughter, and seriously injured Van Vonno and his son. Van Vonno sued both Hertz and William J. Krush, the driver of the other car involved in the collision.

The trial court entered a default judgment against Krush, finding him negligent and the proximate cause of the accident. The trial court also determined no liability policy covered Krush or his vehicle. The trial court had previously granted a summary judgment, holding Hertz liable to Van Vonno under the rental agreement for both uninsured motorist coverage and personal injury protection benefits. In November 1990, the trial court entered final judgment against Hertz for $312,000 plus costs. Hertz appealed to Division Two of the Court of Appeals, which certified the case for transfer to this Court under RAP 4.2 and RCW 2.06.030.

Neither party disputes the absence of issues of material fact. Hence, we need only determine whether as a matter of law Van Vonno should receive uninsured motorist coverage or personal injury protection benefits or both from Hertz. CR 56(c).

Van Vonno and Hertz correctly assert Oregon law governs the rights and responsibilities of the parties. Washington has adopted the significant relationship approach to resolving both tort and contract choice of law issues. Johnson v. Spider Staging Corp., 87 Wash.2d 577, 580-82, 555 P.2d 997 (1976); Potlatch 1 Fed. Credit Union v. Kennedy, 76 Wash.2d 806, 809-10, 459 P.2d 32 (1969); see Restatement (Second) of Conflict of Laws § 188 (1971). Hertz, however, contends Washington, not Oregon, lawdetermines the amount of uninsured motorist coverage Van Vonno may recover. We disagree.

Paragraph 10(a) of the rental agreement stipulates Hertz will provide the minimum uninsured motorist protection required by the state in which the accident occurred. The rental agreement thereby creates a loophole. Under the contract, Washington law applies; however, the Washington underinsured motorist (UIM) statute, RCW 48.22.030, does not govern the rental vehicle because it was not registered or principally garaged in Washington. We will not give effect to this quasi choice-of-law provision. The quasi choice-of-law clause seeks to take unjust advantage of a state's inability to legislate with regard to vehicles registered outside its borders. In evaluating whether Hertz owes coverage and if so, how much, we will apply Oregon law.

The Oregon Vehicle Code defines the offense of "driving uninsured" as operating a motor vehicle in Oregon without either motor vehicle liability insurance or other satisfactory proof of financial responsibility. Or.Rev.Stat. (ORS) 806.010(1) (Supp.1992). A person owning more than 25 vehicles may satisfy Oregon's financial responsibility requirement by qualifying as a self-insurer. A self-insurer must

[a]gree to pay the same amounts with respect to an accident occurring while the certificate is in force that an insurer would be obligated to pay under a motor vehicle liability insurance policy, including uninsured motorist coverage and liability coverage to at least the limits specified in ORS 806.070.

(Italics ours.) ORS 806.130(3) (1989). ORS 806.070(2) specifies $25,000 per person and $50,000 per accident as the minimum required payment of a judgment.

A person may also satisfy Oregon's financial responsibility requirement by procuring a motor vehicle liability policy, which must provide uninsured motorist coverage if the policy is either issued for delivery in Oregon or issued by an insurer doing business in Oregon to cover a vehicle principally used or garaged in Oregon. ORS 742.502(1) (Supp.1992) (formerly ORS 743.789(1)). Oregon further mandates:

The insurer issuing such policy shall offer one or more options of uninsured motorist coverage larger than the amounts prescribed to meet the requirements of ORS 806.070 up to the limits provided under the policy for motor vehicle bodily injury liability insurance....

ORS 742.502(2). The Oregon Court of Appeals has held insurers must provide their insureds an affirmative choice whether to obtain greater than the statutory minimum amount of uninsured motorist coverage. White v. Safeco Ins. Co. of Am., 68 Or.App. 11, 15, 680 P.2d 700, review denied, 297 Or. 492, 683 P.2d 1373 (1984). The remedy for failure to comply with ORS 742.502(2) is reformation of the insurance contract to include uninsured motorist coverage up to the same limits as the liability protection. Zuber v. Safeco Ins. Co. of Am., 96 Or.App. 596, 602, 773 P.2d 800 (1989) (citing Blizzard v. State Farm Auto. Ins. Co., 86 Or.App. 56, 61, 738 P.2d 983, review denied, 304 Or. 149, 743 P.2d 166 (1987)).

Oregon's rigorous definition of the term "offer" and harsh remedy for violations of ORS 742.502(2) comport with the purpose of the legislation: to protect innocent victims of vehicular accidents. Cf. Rhone v. Louis, 282 Or. 693, 697, 580 P.2d 549 (1978). Washington similarly requires insurers to comply strictly with the UM/UIM statutes. In Finney v. Farmers Ins. Co., 92 Wash.2d 748, 600 P.2d 1272 (1979), this court observed:

RCW 48.22.030 is to be liberally construed in order to provide broad protection against financially irresponsible motorists. The purpose of the statute is to allow an injured party to recover those damages which would have been received had the responsible party maintained liability insurance.

(Citations omitted.) Finney, 92 Wash.2d at 751, 600 P.2d 1272. Keeping in mind the strong policy in favor of individuals injured by uninsured motorists, we now turn to the arguments of the parties.

Van Vonno contends Hertz owes uninsured motorist coverage up to the $300,000 per accident liability limit specified in the supplemental agreement between Hertz and Van Vonno's employer. Van Vonno argues Hertz issued a "motor vehicle liability policy" when Hertz executed the rental agreement in which it agreed to indemnify and hold Van Vonno harmless from liability to third parties. According to Van Vonno, Hertz did not "offer" uninsured motorist coverage as mandated by Oregon law, and the court should therefore reform the rental agreement to provide UM protection of up to $100,000 per person and $300,000 per accident.

Hertz reads ORS 742.502(2) as applying only to an "insurer" issuing a "motor vehicle liability policy" and argues it is not an insurer but rather a "self-insurer," subject only to the $25,000 per person, $50,000 per accident limits prescribed by ORS 806.130. According to Hertz, agreeing to indemnify a non-employee does not convert a self-insurer into an insurer. Hertz asserts Oregon law mandated the inclusion of the indemnity provisions and thus, Van Vonno did not bargain for, nor purchase, the liability protection. As a result, Hertz concludes the rental agreement did not constitute a motor vehicle liability policy, and ORS 742.502 did not require Hertz to offer Van Vonno more than the minimum uninsured...