Insurance_garage owner's policy_coverage by driver's policy
The trial court erred in a declaratory judgment action by
declaring defendant responsible for primary coverage in an action
arising from an automobile collision involving a loaner vehicle
where the garage owner's policy issued by defendant provided
coverage if the customer had “no other available insurance” and
the person to whom the vehicle was loaned and the driver at the
time of the accident both had liability coverage.
Jones, Garland & Peterman, PLLC, by T. Russell Peterman, Jr.
for plaintiff-appellants.
Barber & Wilson, P.A., by Andrew H.D. Wilson, for
defendant/third-party plaintiff-appellant.
Wallace, Morris & Barwick, P.A., by P.C. Barwick, Jr., for
defendant-appellee Atlantic Casualty Insurance Company.
Ennis, Newton & Baynard, P.A., by Stephen C. Baynard, for
defendant-appellee Universal Insurance Company.
GREENE, Judge.
The Cincinnati Insurance Company (Defendant) appeals an order
(the Order) filed 24 April 2000 declaring Defendant to be
responsible for providing primary liability coverage up to its
policy limits and underinsured motorist coverage in the amount of
$25,000.00 per person and $50,000.00 per accident to Chiquita B.
Moore, as Administratrix of the Estate of Jeffrey Moore (Moore),deceased, and Otis Eugene Chapman (Chapman) (collectively,
Plaintiffs); Plaintiffs also appeal the Order based on the amount
of underinsured motorist coverage.
On 21 June 1995, Moore purchased a 1991 Subaru Loyale station
wagon (the Subaru) from Alcoke Auto Center, LLC d/b/a New Bern
Pontiac Mazda (Alcoke) in New Bern, North Carolina. Shortly after
purchasing the Subaru, Moore began experiencing mechanical problems
with the vehicle. These problems were caused by the vehicle having
been previously wrecked, a fact unknown by Moore. On or about 6
September 1995, Alcoke agreed to repair the Subaru, with Alcoke and
Moore equally bearing the costs of the repairs. While the Subaru
was being repaired, Alcoke provided Moore with a loaner vehicle to
drive (the loaner vehicle) that was covered under a garage
liability insurance policy provided to Alcoke by Defendant.
On 11 September 1995, after several return visits to Alcoke,
Moore returned to the dealership to see if the Subaru had been
repaired. According to Chapman, after Moore informed Alcoke he
would be making a trip to New York, an Alcoke representative “said
it was all right . . . since they had [Moore's] car.” On 11
September 1995, Moore, as the driver, along with Chapman and David
Earl Sanders (Sanders), as passengers, drove the loaner vehicle to
New York City. The three men left New York to return to New Bern
on 12 September 1995 at approximately 4:30 p.m. At the time the
men left New York, Moore was driving the loaner vehicle; sometime
during the return trip to New Bern, however, Sanders began driving
while Moore rested in the back seat of the loaner vehicle. At
approximately 3:45 a.m. on 13 September 1995, the loaner vehiclecollided with an “eighteen-wheeler tractor-trailer” at the
intersection of US 70 Business and US 70 By-Pass in Johnston
County, North Carolina. Moore and Sanders died as a result of the
incident, and Chapman was seriously injured. The N.C. Highway
Patrol investigated the incident scene and determined Sanders was
solely at fault for causing the incident.
In a letter dated 19 December 1995, in response to a demand
package sent by Plaintiffs, Defendant denied liability coverage for
the collision stating the loaner vehicle “was to be driven in the
New Bern area with [Moore] being the only driver. . . . The driver
of the [loaner] vehicle at the time of the accident was [Sanders],
an unauthorized driver.”
On 26 January 1996, Plaintiffs filed a complaint against
Defendant seeking a judgment declaring: the rights of the parties
with respect to Defendant's policy of insurance covering the loaner
vehicle; that Defendant provide Plaintiffs with compensation for
the wrongful death and personal injuries arising out of the 13
September 1995 incident; the limits of automobile liability
coverage provided by Defendant; Defendant responsible for any
judgment entered in civil actions arising out of the 13 September
1995 incident; and Defendant has a duty to defend the estate of
Sanders and Alcoke as a result of the 13 September 1995 collision.
Defendant answered and denied the allegations in Plaintiffs'
complaint.
On 12 September 1997, with the leave of the trial court,
Defendant filed a third-party complaint against Atlantic Casualty
Insurance Company (Atlantic), Universal Insurance Company(Universal), Integon Indemnity Corporation, and Salem Underwriters,
Inc.
(See footnote 1)
Atlantic had issued an insurance policy to Sanders (Sanders'
liability policy) with limits of liability in the amount of
$25,000.00 per person and $50,000.00 per accident. Sanders'
liability policy provided:
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 be
excess over any other collectible insurance.
Universal had issued an insurance policy to Moore (Moore's
liability policy) with limits of liability in the amount of
$25,000.00 per person and $50,000.00 per accident. Moore's
liability policy covered “[a]ny auto . . . not owned by [him] while
used as a temporary substitute” for his vehicle if it was out of
normal use due to: breakdown; repair; servicing; loss; or
destruction. An “insured” under Moore's policy was anyone using
his “covered auto.” With respect to coverage for vehicles not
owned by Moore, Moore's liability policy stated “any insurance we
provide for a vehicle you do not own shall be excess over any other
collectible insurance.”
At a bench trial held on 9 August 1999, Morris Randolph Hinton
(Hinton), a field claims manager with Defendant, testified Alcoke
was the named insured in a garage owner's liability policy
provided by Defendant (Alcoke's policy). Under Alcoke's policy, an
insured for a covered auto included: (2) Anyone . . . while using wit
h your
permission a covered “auto” you own, hire
or borrow except:
. . . .
(d) Your customers, if your business is
shown in the Declarations as an
“auto” dealership. However, if a
customer of yours:
(i) Has no other ava
ilable
insurance (whether primary,
excess or contingent), they are
an “insured” but only up to the
compulsory or financial
responsibility law limits where
the covered “auto” is
principally garaged.
(ii) Has other avail
able insurance
(whether primary, excess or
contingent) less than the
compulsory or financial
responsibility law limits where
the covered “auto” is
principally garaged, they are
an “insured” only for the
amount by which the compulsory
or financial responsibility law
limits exceed the limits of
their other insurance.
In Hinton's opinion, Sanders was not an “insured” under Alcoke's
policy because (1) Sanders was driving the loaner vehicle without
the permission of Alcoke, and (2) Sanders was not a customer of
Alcoke.
In an order filed 24 April 2000, the trial court declared, in
pertinent part, that:
(4) [Moore's liability policy] would
. . . provide the primary excess coverage
. . . upon exhaustion of the liability limits
of the policy issued by [Defendant] . . . .
(See footnote 2)
(5) [Sanders' liability policy] . . .
will provide secondary excess liability
coverage[.]
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