Robinson v. Coia

WECKER, J.A.D.,

dissenting.

I respectfully dissent. I conclude that Avis Rent A Car Systems, Inc. (Avis), as a self-insured car rental company, owes its rental customer, Richard Brown, Jr. (and the public), the minimum mandatory liability coverage as set forth in its rental agreement, the same coverage required for all New Jersey auto insurance policies pursuant to N.J.S.A. 39:6A-3.1 I also conclude that the “other insurance” clause of the rental agreement is effective. Because Brown’s contracts with both Avis and his own carrier contain “other insurance” clauses, making the Avis coverage excess when the driver is insured under another policy, the two insurers (Brown’s personal carrier and Avis as a self-insured) are co-primary and share liability equally between them.

I reason that so long as New Jersey permits car rental companies to self-insure for their renters’ liability to third parties, see N.J.S.A. 39:6-52 and N.J.S.A. 45:21-8; and so long as New Jersey does not require auto insurance policies issued to New Jersey car rental companies to provide primary coverage for their renters’ liability, see Cosmopolitan Mut. Ins. Co. v. Continental Cas. Co., 28 N.J. 554, 563, 147 A.2d 529 (1959), there is no reason for this court to invalidate the coverage limits of the rental agreement and to impose upon the self-insured car rental company an obligation *348to provide more than would be required if the company had purchased a minimum insurance policy.2

In Cosmopolitan, supra, 28 N.J. at 554, 147 A.2d 529, the Supreme Court noted that the statutory requirement, “that one engaged in the business of renting motor vehicles shall file ... a policy of liability insurance,” serves the purpose of “protect[ing] the public from the irresponsibility of persons operating hired motor vehicles on our highways.” Id. at 563, 147 A.2d 529. “The statute does not require that a policy issued in compliance therewith be primary insurance.” Ibid. (Emphasis added). Moreover, “[t]he question of whether the particular insurance is primary or excess is not a public matter but merely a concern of the insurance companies which have extended coverage to the risk.” Ibid.

I do not share the majority’s view, and see no reason to hold, that the contract between Avis and Brown, stating that the coverage provided by Avis shall be limited to the statutorily-required mínimums ($15,000/$30,000/5,000) and shall be excess to Brown’s personal policy coverage, is ineffective or unenforceable. That contract provides the renter with a clear, unambiguous statement of the coverage he is getting, as well as its limits. Whether that protection comes from an independent insurance carrier (as it would if the car he rented happened to be one registered in New Jersey) or from Avis as a self-insurer, should make no difference. The contract and not an insurance policy is provided to the renter, and the contract gives notice of the dollar limits of coverage to be provided, irrespective of the source.

The question before us is essentially the same question we addressed in Agency Rent-A-Car, Inc. v. Indemnity Ins. Co., 268 N.J.Super. 319, 324, 633 A.2d 975 (App.Div.1993): Does Ry*349der/P.I.E. Nationwide, Inc. v. Harbor Bay Corp., Inc., 119 N.J. 402, 575 A.2d 416 (1990), compel the conclusion that the self-insured car rental company cannot, by contract with the renter, limit the amount and terms of its coverage to the same mínimums required (and terms permitted) for a rental company that purchases a policy of insurance? The majority concludes that Avis’s contract with its customer cannot define the terms of its self-insurance obligation. I disagree.

In Agency Rent-A-Car, upholding the car rental company’s contractual limitation of coverage to the statutory minimum, Judge Dreier quoted Ryder, supra, 119 N.J. at 413, 575 A.2d 416: “ ‘[A] self-insurance certificate [is treated] as the equivalent of a policy of insurance.’ ” Judge Dreier continued:

N.J.SA. 45:21-3 (as amended) defines the mandatory liability of a self-insured motor vehicle lessor. Plaintiff is entitled to utilize these limits. Furthermore, plaintiff is entitled to establish and abide by contractual limitations for indemnification to the extent they are not inimical with the law. See Allstate Ins. Co. v. Royal Globe Ins. Co., 195 N.J.Super. 598, 606, 481 A.2d 298 (App.Div.1984).
>[268 N.J.Super, at 324-25, 633 A.2d 975.]

We concluded that the rental company’s self-insurance was therefore “subject to the $15,000/$30,000/$5,000 limits established by its contract [with the renter] and by N.J.S.A 45:21-3, as amended by N.J.S.A 39:6A-3.” 268 N.J.Super. at 325, 633 A.2d 975.

We explained in Agency Rent-A-Car that N.J.S.A 45:21-2 and -8, read together, permit a car rental company to self-insure in order to provide the required liability insurance on cars it rents out; N.J.SA 45:21-3 sets forth the minimum amounts required for such liability insurance; and because by definition there is no insurance policy setting forth those limits, a contract between the rental company and the renter is effective to do so. I see no reason to reach a different result here.

In Ryder, the Court held that a self-insurer’s liability for an additional insured in “loading and unloading” cases was not limited to the minimum amount of compulsory motor vehicle insurance. I conclude as we did in Agency Rent-A-Car that Ryder is distinguishable.

*350In determining whether Ryder precludes the car rental company from limiting the amount and terms — not the fact — of coverage here, I have reviewed the Court’s reasoning in Ryder. The Court first noted that Ryder’s obligation to cover an additional insured in a loading and unloading case can arise from the express language of an insurance policy; but the obligation to provide coverage for an accident in the course of loading and unloading arises by statute where use of a motor vehicle is involved, and its scope therefore cannot be limited by contract. 119 N.J. at 407-08, 575 A.2d 416 (citing Bellafronte v. General Motors Corp., 151 N.J.Super. 377, 376 A.2d 1294 (App.Div.), certif. denied, 75 N.J. 533, 384 A.2d 513 (1977)). Still referring to liability for loading and unloading involving use of a motor vehicle, the court said:

Because of statutorily-imposed omnibus requirements, any contractual attempt to exclude coverage for an additional insured will be held invalid. Moreover, all parties subject to omnibus coverage requirements — both self-insurers and those with liability policies — must provide coverage. What Bellafronte does not address, however, is the limitation, if any, on the amount of coverage that an insurer must provide in the context of a loading and unloading accident.[3]
>[119 N.J. at 408, 575 A.2d 416.]

Justice Garibaldi, writing for the Court in Ryder, continued:

Our cases construing liability policies do not suggest that minimum amounts of compulsory liability insurance, N.J.S.A. 39:6B-1, limit an insurer’s coverage obligation for loading and unloading accidents. Moreover, common sense dictates that an insurer’s liability, having contractual and statutory roots, and not stemming from its own negligence, is not unlimited. Rather, our cases suggest that the limit of an insurer’s liability is the amount of that insurer’s liability policy.
>[Id at 408-09, 575 A.2d 416 (emphasis added).]

The Court recognized that the insurance policy, and not the statute setting the minimum required motor vehicle insurance coverage, determines the limit of an insurer’s liability. Ibid. By *351definition, a self-insured has no policy to which to point for a declaration of its coverage limits or terms.

The Court therefore looked to N.J.S.A. 39:6-52, the self-insurance statute, and case law, to determine the amount of coverage owed by the self-insured party. Id. at 409, 575 A.2d 416. The Court noted that “[w]ith respect to omnibus coverage requirements, New Jersey courts have held that a self-insurer’s coverage obligations are co-extensive with the obligations of those possessing liability policies.” Id. at 410, 575 A.2d 416. The Court explicitly noted that the basis for that conclusion “was the view that with respect to the scope of coverage obligations, a certificate of self-insurance is the functional equivalent of a policy of insurance.” Id. at 411, 575 A.2d 416. The examples cited by the Court related to the type of coverage and persons covered; not to the amount of the coverage.

Unlike Avis in this case, Ryder was not a car rental company. Thus in Ryder the Court did not have before it the question that is before us: whether a rental company can by contract limit the amount and terms of self-insured liability coverage it provides to its customer. Nor did it address the question whether by contract with its customer, Harbor Bay, the self-insured Ryder could have effectively limited its mandated (though self-insured) coverage for loading and unloading accidents. The car rental company here does not rely upon the rationale that the Court explicitly rejected in Ryder, that is, “that Ryder’s indemnity bond [submitted in support of its application for approved self-insured status] is evidence of the extent of its liability.” 119 N.J. at 413, 575 A.2d 416. I conclude that Ryder is not determinative here.

The majority finds the provision in the car rental agreement defining its coverage as excess to be “a violation of public policy.” Op. at 342, 848 A.2d at 891. I fail to see any public policy that is violated, so long as auto insurance policies issued to car rental companies are permitted to provide excess coverage in cases where “other insurance” is available to the driver. Nor do I perceive the evil that my colleagues perceive. There is no improp*352er shifting of burdens, a proposition for which the majority cites White v. Howard, 240 N.J.Super. 427, 573 A.2d 513 (App.Div.), certif. denied, 122 N.J. 339, 585 A.2d 354 (1990). White is distinguishable, in that the self-insured rental company in that case issued a contract that purported to provide no coverage to renters, rather than the statutory minimum coverage. Indeed, if White stood for the proposition for which the majority cites that case, its author, who also wrote our opinion in Agency, presumably would have acknowledged a change of heart.

The majority relies upon several cases that reject as an “illegal escape clause” certain attempts by an insurance company or a self-insured to exclude coverage entirely to a particular class of persons. E.g., Ambrosio v. Affordable Auto Rental, Inc., 307 N.J.Super. 114, 704 A.2d 572 (App.Div.1998) (excluding renters with their own mandatory minimum insurance from the definition of an “insured”); Selective Ins. Co. v. Charter Risk Retention Group Ins. Co., 261 N.J.Super. 1, 617 A.2d 664 (App.Div.1992) (limiting coverage to the “owner interest,” thereby excluding all coverage for renters). Op. at 343-45, 848 A.2d at 892-93. The circumstances in those cases are not comparable to those before us. The Avis contract does not attempt to exclude coverage for any class of persons which otherwise would be authorized to drive the rental car. Nor does the Avis contract “restrict or avoid the mandatory omnibus coverage required by statute,” as the majority concludes. Op. at 344, 848 A.2d at 893. Avis’s contractual limitation of liability cannot fairly be deemed an “illegal escape clause,” as in Ambrosio, Selective, Rao v. Universal Underwriters Ins. Co., 228 N.J.Super. 396, 549 A.2d 1259 (App.Div.1988) (insurance policy issued to car rental company cannot preclude all coverage for renters who have their own insurance; such a provision is an illegal escape clause), or Allstate Ins. Co. v. Royal Globe Ins. Co., 195 N.J.Super. 598, 481 A.2d 298 (App.Div.1984) (insurance policy provision limiting class of drivers covered was unenforceable).

*353The majority quotes a South Dakota case, Auto Owners Ins. Co. v. Enterprise Rent-A-Car Co.—Midwest, 663 N.W.2d 208, 211 (S.Dak.2003): “[Those] who choose to self-insure are held to the same duties as those who do not.” I agree. But they are not fairly held to a greater duty just because they choose to carry the risk themselves rather than purchase an insurance policy. In that South Dakota case, the self-insured car rental company was required by statute to provide primary coverage up to the mandatory minimum. Thus its rental contract purporting to provide only excess coverage was ineffective.

To the extent that the rationale behind New Jersey’s insurance requirement and the allowable self-insurance alternative is to protect the public, the rule the majority adopts does not seem likely to serve that interest. The net effect of applying Ryder to this car rental company is to force the company to purchase auto insurance for all vehicles rented in New Jersey. We can assume the company will purchase only the minimum required amounts (as it now does for its New Jersey registered cars). Thus neither an injured third party nor the renter’s insurance carrier will gain anything over what each would have under the rule I would adopt. The insurance industry, however, will have increased its market, and the premium costs4 are likely to be passed on to the auto renting public.

I would treat Avis’s self-insurance, on terms provided by its contract with its customers, on a par with an actual insurance policy. The net result in this case is that Avis’s coverage (by statute and contract) and Brown’s coverage (by the Farmers’ insurance policy), each of which includes an “other insurance” clause that effectively defines its coverage as excess, are “mutually repugnant.” See Cosmopolitan, supra, 28 N.J. at 562, 147 A.2d 529, and Universal Underwriters Ins. Co. v. CNA Ins. Co., 308 N.J.Super. 415, 418-19, 706 A.2d 217 (App.Div.1998). Each there*354fore would “shar[e] the payment of liability equally until the limit of the smaller policy is exhausted.” 308 N.J.Super. at 419, 706 A.2d 217. See also Hanco v. Sisoukraj, 364 N.J.Super. 41, 46, 834 A.2d 443 (App.Div.2003) (two insurance policies, both excess, are treated as co-primary and share liability equally). By honoring the “other insurance” provision of the driver’s own policy, and holding that the self-insurer and the driver’s carrier share liability equally, the majority’s concern — that “Avis escapes any responsibility for providing insurance coverage if the renter has other liability insurance available” — is obviated.

I would reverse.

Brown’s personal auto insurance carrier, Farmers Insurance Company, is the real party in interest, having provided a defense and paid the settlement of plaintiffs’ claim against Brown. Because the settlement was well below the mandatory minimum, the amount of self-insured coverage is not directly in issue.

We are told that the car Brown rented in New Jersey was registered in Pennsylvania; that Avis self-insures its Pennsylvania registered cars pursuant to Pennsylvania motor vehicle and insurance laws; and that Avis cars registered in New Jersey are covered by an insurance policy issued by CNA which provides the minimum mandatory $15,000/$30,000/$5,000 coverage.

That obligation to cover loading and unloading when motor vehicle "use” is involved, is now found in N.J.S.A. 39:6B-1 and 39:6A-3. See Pisaneschi v. Turner Constr. Co., 345 N.J.Super. 336, 343, 785 A.2d 50 (App.Div.2001) (citing Kennedy v. Jefferson Smurfit Co., 147 N.J. 394, 403, 688 A.2d 89 (1997)). Ryder cited N.J.S.A. 39:6-46(a), repealed by L. 1979, c. 169, § 5, effective August 9, 1979, which Bellafronte relied upon, along with NJ.S.A. 39:6B-1, for the proposition that mandatory coverage for "use" of a motor vehicle included loading and unloading the vehicle.

If the costs of ''self-insuring" exceeded the premiums that would be due, car rental companies likely would not choose to self-insure.