State Farm Mutual Automobile Insurance v. Universal Underwriters Insurance

⁵⁹² McWilliams, J., delivered the opinion of the Court. On 19 March 1969 the Reverend Eugene B. Ruane was driving a new Chevrolet automobile owned by The Park Circle Motor Company. Since he had been considering the purchase of it he had been allowed to take it out for a trial run. While so occupied he collided with an automobile owned and operated by Leah Ida Friedman who thereafter sued both the owner (Park Circle) and the driver (Ruane).

The owner was insured by the appellee (Universal), the driver by the appellant (State Farm). Universal refused to defend Ruane saying its policy affords him no coverage. Since State Farm felt the same way about its policy it sought a declaratory judgment. The trial judge, Carter, J., decided Universal’s policy, in these circumstances, afforded no protection to Ruane and that Universal was under no obligation to defend him.

State Farm has appealed. Judge Carter filed with his order declaring the rights and duties of the parties a comprehensive and well-reasoned opinion which we adopt as the opinion of this Court. The reporter is directed to print it in the report of this case. Judgmen t affirmed.

Costs to be paid by the appellant. MEMORANDUM OPINION OF JUDGE JOSEPH L. CARTER State Farm Mutual Automobile Insurance Company, hereinafter referred to as “State Farm,” has brought this suit seeking a declaration of its rights and obligations under an automobile liability policy and the responsibilities of Universal Underwriters Insurance Company, hereinafter referred to as “Universal,” which issued a Garage Liability Policy, to the Park Circle Motor Company (Park Circle). Included as parties are the Reverend Eugene B. Ruane (Ruane), the Named Insured in the State Farm policy, and Leah Ida Friedman, who alleges she was injured in an automobile collision on March 19, 1969, due to the negligence of Ruane while “test driving” an automobile owned by Park Circle. ⁵⁹³ By way of additional background, the agreed facts disclosed the following: on March 19, 1969, Ruane drove his 1964 Ford automobile to Park Circle where he intended to negotiate the purchase of a newT model automobile. As he wished to “test drive” a 1969 automobile, Park Circle loaned him an automobile to be returned on the same date.

It was this automobile Ruane was driving at the time of the collision, which occurred at approximately 5:10 p.m. There was neither a consideration paid for the use of the 1969 automobile nor any rental agreement between Ruane and Park Circle. It was agreed that Ruane was not the agent, servant or employee of Park Circle at the time he took temporary possession of the automobile or at any time while he was “test driving” the automobile. It is also agreed that State Farm’s policy contained coverage limits of at least those required under the Motor Vehicle Financial Responsibility Law on the date of the accident.

As a result of the aforementioned collision, Leah Ida Friedman has instituted suit against Park Circle and Ruane in the Superior Court of Baltimore City and Park Circle has instituted suit against Ruane seeking recovery of damages to the 1969 automobile. This latter suit was initially filed in the People’s Court of Baltimore City and resulted in a judgment on June 25, 1970, from which judgment an appeal has been filed on behalf of Ruane which is presently pending in the Baltimore City Court. State Farm by this proceeding specifically asks the court to determine, with respect to the claims filed as a result of the automobile accident, whether its policy or that of Universal affords primary coverage and which insurance company owes a defense to Ruane. State Farm has abandoned its contention in the petition that its policy does not afford coverage to its insured, Ruane, in connection with the claim of Park Circle for damage to its automobile.

In resolving this controversy, the terms and provisions of each insurance policy must be examined. The Court of Appeals has held, in interpreting insurance contracts, “the words are to be given their customary and normal meaning.” ⁵⁹⁴ State Farm Mutual Automobile Insurance Co. v. Treas, 254 Md. 615, 619 , 255 A. 2d 296 (1969). State Farm’s policy provides coverage to its named insured, Ruane, for bodily injury and property damage liability “caused by accident arising out of the ownership, maintenance or use ... of the owned automobile,” which is described as the 1964 Ford automobile previously mentioned. Its policy extends coverage to its named insured, for the same premium, while its insured is driving a “temporary substitute automobile” or a “non-owned” automobile.

With respect to either, its policy provides: “14. Other Insurance. “All of the aforegoing provisions and all coverages are subject to the following: “.. . (b) The insurance with respect to a temporary substitute automobile, a trailer and a non-owned automobile shall be excess over other collectible insurance.” It is not contended by State Farm its policy does not extend coverage to Ruane while he was driving the 1969 automobile, but it is urged that any insurance afforded by it would be excess over other collectible insurance and that Universal’s policy is primary and it would have the obligation to defend him in any proceedings. The policy of insurance issued to Park Circle by Universal provided: “II Garage Liability Coverage G — Bodily Injury Liability Coverage H — Property Damage Liability . . . pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of G. Bodily injury or H. property damage to which this insurance applies, caused by occurrence and arising out of garage operations, including only the automobile hazard for which insurance is afforded as indicated in the schedule ⁵⁹⁵ The policy by its terms, further provided: “V Persons Insured Each of the following is an insured under this insurance to the extent set forth below: Under the Garage Bodily Injury and Property Damage Liability Coverages: (1) the named insured: (3) with respect to the automobile hazard: . . .

(b) Any other person while actually using an automobile covered by this policy with the permission of the named insured, provided that such other person (a) has no automobile liability insurance policy of his (her) own, either primary or excess, or (b) is not included in ‘Persons Insured’ or ‘Definition of Insured’ in any other insurance policy, either primary or excess. Insurance afforded by this sub-paragraph (c) shall not exceed the minimum limits of liability specified in the Financial Responsibility Law of the state in which the accident occurs. However, if such person has another policy available but said other policy has limits of liability less than the minimum limits specified in the Financial Responsibility Law of the state in which the accident occurs, then the policy to which this endorsement is attached shall apply only as excess insurance for the difference between said minimum limits and the limits under said other policy.” It is the contention of Universal that its policy is not “other collectible insurance” as its policy did not extend coverage to Ruane as he had an “automobile liability insurance policy of his own” issued by State Farm affording him both “primary and excess coverage” in an amount at least equal to the Financial Responsibility Laws of the State of Maryland. This provision, specifically limiting coverage to persons ⁵⁹⁶ having no automobile liability insurance or insufficient limits under applicable financial responsibility laws is generally termed either as the “Limited Additional Insured (L.A.I. provision),” or the “limited Coverage for Certain Insureds” provision.

State Farm has characterized this clause as an “escape clause”; however, the Court is of the view that it is in reality “no liability” or an “exclusion” or a “limited additional interest” clause, and even if an “escape clause” the result reached would be the same. Counsel for State Farm and Universal have submitted helpful briefs in support of their respective contentions. State Farm contends that Zurich Insurance Company v. Continental Casualty Company, et. al., 239 Md. 421 , 212 A. 2d 96 (1965) is determinative of the present controversy. There, Brockway Motor Trucks, a used-truck dealer, provided a truck to Delta Chemical Company, in connection with its sale for the purpose of a test drive.

While in Delta’s possession and being driven by its employee, Galloway, it collided with Burke. Continental Casualty Company, the automobile liability insurer of Delta Chemical, settled the claim of Burke and brought suit against Zurich Insurance Company, the