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Williams v. American Home Assurance Co.

Decided: November 16, 1972.


Lewis, Carton and Mintz. The opinion of the court was delivered by Carton, J.A.D.


[121 NJSuper Page 353] The issue on this appeal is whether coverage is provided to the driver of a rented vehicle against damage claims by passengers under a liability insurance policy filed pursuant to the Motor Vehicle Rental Statute, N.J.S.A. 45:21-1 et seq.

There is no substantial dispute as to the salient facts. Defendant Chrysler Leasing Corp. owned a Plymouth sedan which it leased to defendant Econo-Car International, Inc., which in turn leased it to defendant Econo-Car of Jersey City, a corporation.

Defendant William Stewart, on March 26, 1965, rented the Plymouth from Econo-Car of Jersey City under a written rental agreement which referred to certain insurance protection provided by virtue of the rental agreement. When he applied for the rental Stewart stated that he had a valid New Jersey driver's license when, in fact, and unknown to him, his license had been revoked a short time previously for failure to respond to a summons in a traffic violation. In the application for the rental he did not list any other person as an intended driver of the vehicle. Accordingly, the attendant at the rental agency informed him that no one else was authorized to drive the vehicle.

At the time of the making of the rental agreement there was in force an insurance policy issued by defendant American Home Assurance Co., which was made applicable to all vehicles owned by Chrysler Leasing Corp., leased to Econo-Car International, and rented, held for rental or used for business purposes by the latter or its authorized dealers. This document is a blanket policy, apparently intended to be applicable on a nationwide basis, and has as its basic instrument the printed standard combination automobile policy, appended to which are numerous endorsements.

On March 29, three days after renting the car, Stewart permitted Mary Williams to drive. There is nothing in the record to indicate that she was made aware of the rental arrangements. While Mary Williams was driving the car, accompanied by Stewart who sat in the front seat, it struck a utility pole. At that time Mary Williams had no driver's license, although it appears that she had procured a learner's permit about seven months earlier which had been renewed several times but had expired some four weeks before the accident.

Also riding in the car were passengers Helen James, Edward James and Susan Tynes, who sustained personal injuries in the accident. They brought actions against the driver to recover for these injuries. That litigation precipitated the present declaratory judgment action by Williams to determine the extent of the coverage afforded to her by the insurance policy.

The action proceeded against defendant American Home Assurance Co. only, the case being dismissed by consent as to defendants Chrysler, Econo-Car International and Econo-Car of Jersey City. The action was also dismissed as to Stewart, who had not been served with process. No one appeared on behalf of the passengers in the personal injury actions and trial thereof was stayed pending determination of the coverage issue.

After a trial by the court without a jury, the trial judge expressed the opinion that Williams was not afforded protection under either the terms of the policy required to be filed by N.J.S.A. 45:21-1 et seq. or under the considerably broader language of the policy actually filed.

Specifically, the trial judge ruled that Williams was neither an agent nor a servant of lessee Stewart and consequently did not fall within the language of the statute which mandated that the filed policy "shall provide for the payment * * * of any final judgment recovered by any person on account of the ownership, maintenance and use of such motor vehicle by either the owner or the lessee or bailee, his agent or servant * * *." (Emphasis added). Since determination of this appeal proceeds on other grounds, we need not decide whether, in the factual context presented here, Williams might be considered the agent of Stewart for purposes of the statute.

The trial judge held that although the insurance company was bound by the provisions of the policy broader in scope than those mandated by the statute, Williams was not covered because she was not an insured as defined in the policy. He held, further, that even if Williams came within

the category of an insured, Stewart's misrepresentations that he was a licensed driver and that only he would drive the car voided the policy and relieved the insurer of any responsibility to either Stewart or Williams. With respect to the injured passengers, he concluded that the mandatory noncancellability clause in the policy did not bar the insurer from cancelling the policy on account of Stewart's misrepresentations, for the reason that the statute did not extend protection to occupants of the rented car.

The trial judge correctly held that the carrier was bound by the terms of its contract despite the fact that coverage was provided therein greater than required by the statute. That determination is based upon the sound principle that a statute requiring an insurer to file a policy providing certain mandatory coverage should not have the effect of relieving the insurer of obligations it has expressly contracted for. Cosmopolitan Mutual Ins. Co. v. Continental Cas. Co. , 28 N.J. 554 (1959).

In our view, however, the trial judge took too narrow a view of the obligation of the insurance company to the driver of the car and the injured passengers under the policy provisions and those of the rental agreement. Consideration of the question whether the driver of the car was an insured and, if so, the further question whether the policy was rendered void because of misrepresentations by Stewart, requires a detailed scrutiny, not only of the policy provisions, but also of the rental arrangements through which the policy was made applicable to persons renting the car.

When Stewart applied to Econo-Car of Jersey City to rent the car he stated to its representative that he was a licensed driver and then exhibited his 1965 New Jersey driver's license. The representative requested additional information, on the basis of which she filled in certain spaces on the application card and he completed others. This card makes no reference to the name of the lessor. On one side appears Stewart's name and incidental information relating to his employment and personal description. At the foot

of the card, just above Stewart's signature, appears the following:

The foregoing representations are made under the pains and penalties of perjury for the purpose of obtaining automobile rental service, and I will notify the company if I change my place of employment.

The other side of the card contains a number of boxes for additional information, but the only one filled out contains Stewart's New Jersey driver's license number and ...

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