Harleysville Insurance v. Rosenbaum

Davidson, J., delivered the opinion of the Court. On 3 January 1974, in the Circuit Court for Howard County, the appellee, Stephen D. Rosenbaum, filed a suit for a declaratory judgment against the appellants, Victor John Williams, 1 Harleysville Insurance Company,, and the appellee, the Maryland Automobile Insurance Fund (the Fund). Rosenbaum sought a declaratory judgment, insofar as here relevant, that either Williams was an insured under a policy of insurance issued to him by Harleysville and was entitled to coverage for liability which might result from an automobile accident on 24 March 1973, 2 or that Williams was an uninsured motorist, so that the Fund would be responsible for any such liability. The case was tried on 16 July 1974 before Judge T. Hunt Mayfield, sitting without a jury.

On 2 December 1974, Judge Mayfield entered an order declaring that on 24 March 1973, Williams was insured by Harleysville, and was entitled to coverage with respect to the accident which occurred on that date. Harleysville’s motion for a new trial was denied on 14 January 1975, and on 13 February this appeal was filed. The record shows that on 28 June 1972, Harleysville issued ⁷⁷ a policy of automobile liability insurance to Williams. The insurance policy provided in pertinent part: “Definitions. . . ‘owned automobile’ means (a) a private passenger, farm or utility automobile described in this policy for which a specific premium charge indicates that coverage is afforded, (c) a private passenger, farm or utility automobile ownership of which is acquired by the named insured during the policy period, provided (1) it replaces an owned automobile as defined in (a) above, or (2) the company insures all private passenger, farm and utility automobiles owned by the named insured on the date of such acquisition and the named insured notifies the company during the policy period or within 30 days after the date of such acquisition of his election to make this and no other policy issued by the company applicable to such automobile ...” (emphasis added).

The policy covered a six month period and described Williams’ 1966 Plymouth as the only “owned automobile.” On 1 December 1972, Williams purchased a 1970 Chevrolet. There was evidence to show that at the time of purchase, one of the car dealer’s employees called Harleysville’s agent. On 28 December, the policy of insurance was renewed for a second six months without a change in the description of the insured automobile. On 24 March 1973, Williams was involved in an automobile accident while driving the Chevrolet.

The lower court found that at the time of that accident the Chevrolet was a replacement for the Plymouth, and was the insured vehicle. ⁷⁸ I The appellant contends that the trial court’s finding that the Chevrolet was a replacement vehicle within the meaning of subsection (c) (1) of the definition of “owned automobile” as set forth above, is erroneous because Williams acquired and used the Chevrolet while he owned and could use the Plymouth. We do not agree. The Court of Appeals has held that a finding on the question of whether a newly acquired automobile is a “replacement” for an owned automobile described in an insurance policy is one of fact, which will not be reversed unless clearly erroneous. 3 That Court has also held that evidence which shows directly or supports a rational inference that the owned automobile described in the policy was inoperable at the time of the acquisition of another car, is sufficient to support the finding that the newly acquired car was a “replacement.” 4 There was evidence here to show that the Plymouth was inoperable and was towed to the dealer’s lot when the Chevrolet was purchased in December, 1972, and that it stayed on the lot without license plates “maybe for six months,” and was “no good, of no value ... a five dollar car,” and was finally given away to “Jerry’s Auto Parts.” In addition, there was evidence to show that Williams had “only operated one car at a time.” There was also evidence to show that Williams applied for new license tags for the Plymouth on 5 April 1973, certifying that Harleysville insured that car, and that on 20 April 1973, Williams was involved in an accident while driving the Plymouth. The evidence was sufficient to support findings that the Plymouth was inoperable and was not owned by Williams on 24 March 1973, and was subsequently reacquired by Williams.

The trial court’s finding that on 24 March 1973, ⁷⁹ the Chevrolet was a replacement automobile covered by the policy was not clearly erroneous. II The appellant next contends that the trial court’s finding that the Chevrolet was a replacement automobile is erroneous because the Chevrolet was not acquired by Williams during the policy period as required by subsection (c) of the definition of “owned automobile” set forth above. Again we do not agree. In Maryland Indemnity and Fire Insurance Exchange v. Steers, 5 the insured, in December, 1955, was issued an automobile liability insurance policy, covering bodily injury and property damage liability, for a one year period.

The policy designated an Oldsmobile as the insured automobile. Before April, 1956, the Oldsmobile became inoperable. Nevertheless, on 1 April, the insured renewed its license plates because he expected to “get it running again.” In May, the insured purchased a Dodge, which he thereafter used, leaving the Oldsmobile “standing in the street,” still licensed. In December, 1956, the insured was issued a renewal insurance policy, which repeated the designation of the Oldsmobile as the insured automobile.

In March, 1957, the insured renewed the license plates on the Dodge but failed to renew those on the Oldsmobile, which then became legally, as well as physically, inoperable. Later that same month, the insured bought a Ford, and transferred the license plates from the Dodge to the Ford. He did not then notify the insurer of the transfer. The insured bought a Pontiac in October, 1957, which he never registered or operated.

In November, 1957, the insured was involved in an automobile accident while operating the Ford. He reported the accident to the insurer, and one week later caused the insurer to designate the Ford as the insured automobile in place of the Oldsmobile. In the Court of Appeals, the insurer asserted nonliability ⁸⁰ on the ground, in relevant part, that the designation in the renewal policy, of the Oldsmobile as the insured car was a misrepresentation by the insured as to the identity of the insured car. It maintained that consequently the policy was void from the date of renewal.

The Court found that even if the designation of the Oldsmobile on the renewal policy were a “misrepresentation,” it was not “material” to the risk of property damage or bodily injury liability, which was the extent of the policy coverage. The Court said: “Most important of all, we think, is the fact that the insurance policy itself contained a provision which made it applicable to any newly acquired vehicle which replaced an insured automobile, and provided that the liability insurance thereby afforded and here involved should become effective as to the newly acquired automobile without notice of the replacement.” 6 Thus the Court held that under an insurance policy which does not require notice of the replacement of the designated automobile, coverage is not terminated because the policy is renewed after the designated automobile has been replaced. In reaching this result, the Court recognized that the kind of car is immaterial to the insurer’s risk of liability to a third person for property damage and bodily injury, when it said: “[IJnsofar as liability insurance was concerned, Indemnity was almost, if not completely, indifferent to the substitution under the policy of an automobile acquired as a replacement for the vehicle already described.” 7 Harleysville contends that Maryland Indemnity is inapplicable. It asserts that under its policy notice of replacement is required.

Here, unlike Maryland Indemnity, the policy does not expressly provide that “notice is not required ... if the newly acquired automobile replaces an owned automobile covered by this policy.” Subsection (c) (1) ⁸¹ set forth above, applicable to replacement automobiles, contains no express provision relating to notice. Subsection (c) (2) set forth above, applicable to additional automobiles only when the company insures all automobiles owned by the insured, requires notice within the policy period or 30 days of acquisition. Because (c) (1) is separated from (c) (2) by the disjunctive word “or,” the notice requirement does not apply to replacement of the designated automobile. The policy is clear and unambiguous.

Here, as in Maryland Indemnity, the policy contains no requirement of notice that the designated automobile has been replaced. Harleysville next contends that Maryland Indemnity is inapplicable because under its policy the replacement automobile must have been “acquired . . . during the policy period,” a requirement not present in the policy considered in that case. It asserts that since the Chevrolet was purchased during the policy period from 28 June to 28 December 1972, it was not insured as a replacement automobile during the renewal period from 28 December 1972 to 28 June 1973, because it was not acquired during that period. We do not agree.

Courts of other states have recognized that the language “acquired during the policy period” does not preclude an automobile acquired in a given policy period from being insured in a renewal period. In cases involving policy provisions similar to (c) (2) set forth above, courts have held that if the required notice has been given, an additional automobile acquired in a given period is insured in a renewal period, even though the additional automobile is not designated in the renewal policy. 8 The underlying rationale of these cases is that once the insured has done all that ⁸² is required of him, the newly acquired automobile is insured just as if it were described in the policy. Thus when that policy is renewed, the newly acquired automobile is the insured automobile, 9 even though not so designated in the renewal policy. Applying this rationale to the instant case produces a clear result.

Here the insured’s policy did not require notice of the acquisition of a replacement automobile. Nor did it require anything else in order for the insured to obtain coverage for a replacement automobile. Since there was nothing required of the insured, the Chevrolet became the insured automobile on the day of its acquisition, when it became the replacement for the Plymouth, and remained the insured automobile when the policy was renewed. Further support for