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White v. Howard

Decided: May 1, 1990.

NANCY MACCLUGGAGE WHITE, PLAINTIFF,
v.
CYNTHIA HOWARD AND AGENCY RENT-A-CAR, DEFENDANTS. CYNTHIA HOWARD AND ALLSTATE INSURANCE COMPANY, THIRD-PARTY PLAINTIFFS-RESPONDENTS AND CROSS-APPELLANTS, V. AGENCY RENT-A-CAR, THIRD-PARTY DEFENDANT-APPELLANT AND CROSS-RESPONDENT



On appeal from the Superior Court of New Jersey, Law Division, Bergen County.

Gaulkin, Dreier and Scalera. The opinion of the court was delivered by Dreier, J.A.D.

Dreier

After plaintiff's personal injury claim against defendant Howard was settled, Howard pursued her cross-claim for indemnity against Agency Rent-A-Car (Agency) from which she had leased the car she was driving at the time of the accident with plaintiff. Her insurer, Allstate Insurance Company (Allstate), joined in the matter; then she and Allstate filed a third-party complaint against Agency for a declaratory judgment that Agency, not Allstate, was responsible to the extent of its coverage to indemnify Howard for the settlement and cost of defense of plaintiff's claim. The amount of the settlement, $20,000, is not in dispute.

Judge David Follender granted a summary judgment to Allstate from which Agency appeals. The judge determined that Agency, a certified self-insurer under the New Jersey motor

vehicle security-responsibility law, must act as defendant Howard's primary insurer and reimburse Allstate for the first $15,000 Allstate paid in settlement of plaintiff's claim. Furthermore, he awarded legal fees to Allstate in the amount of $3,214.38 to cover the fees and expenses Allstate incurred in defending the underlying tort claim. He denied Allstate's application for fees relating to the third-party declaratory judgment action. Allstate has cross-appealed from the denial of the latter legal fees.

The facts in this case are unusual only insofar as Agency's mode of doing business differs from the usual car rental format. Agency does not lease cars to all members of the public. It restricts its customers to owners of other vehicles whose cars are lost, stolen or, as here, under repair, and whose insurance contracts cover temporary substitute vehicles as additional insured vehicles. The rental contract signed by Howard required that she have her own liability insurance coverage covering her operation of Agency's vehicle:

THIS VEHICLE IS COVERED FOR PHYSICAL DAMAGE ONLY. INSURANCE COVERAGE FOR LIABILITY AND DAMAGE TO PROPERTY OF OTHERS IS TO BE PROVIDED BY CUSTOMER'S EXISTING INSURANCE UNDER THE TEMPORARY SUBSTITUTE PROVISIONS.

7. Customer represents and warrants that he has a valid policy of automobile liability insurance in force at the time of this rental and further represents and warrants that he shall maintain said policy of automobile liability insurance in force during the term of this rental. Lessor relying on said warranty and representation is not providing Liability-Property Damage automobile insurance or medical expense coverage to the Customer or any other person using or riding in said Vehicle.*fn1

Agency asserts that it had reduced its rental fee to reflect the fact that it does not supply its lessees with liability coverage,

but rather looks to the lessee's own contract of insurance. Furthermore, Agency verified that the contract was in effect and that it covered the replacement vehicle. When Howard entered into the contract, her Allstate policy specifically provided coverage for an automobile "used as a temporary substitute" while the originally insured vehicle "is out of normal use because of . . . repair." The Allstate policy, however, contains an additional clause concerning which Agency made no inquiry:

If there is other applicable liability insurance we will pay only our share of the loss. Our share is the proportion that our limit of liability bears to the total of all applicable limits. However, any insurance we provide for a vehicle you do not own shall ...


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