Opinion
February 8, 1999
Appeal from the Supreme Court, Nassau County (McCarty, J.).
Ordered that the judgment is reversed insofar as appealed from, on the law, with costs, that branch of the plaintiff's motion which was for summary judgment against the appellant is denied, so much of the order dated July 8, 1996, as granted that branch of the plaintiff's motion which was for summary judgment against the appellant is vacated, and, upon searching the record, summary judgment is granted to the appellant and it is declared that (1) the appellant is not obligated to indemnify the plaintiff for sums, including attorney's fees and costs, expended in the settlement of a personal injury claim, and (2) the appellant's policy of insurance does not constitute primary insurance.
In November 1990 the defendant Karl P. Mehlinger rented a car from the plaintiff ELRAC, Inc. (hereinafter ELRAC), to use while his van was being repaired. Mehlinger signed a rental agreement in which he agreed to indemnify and hold ELRAC harmless from any claims and liabilities arising from his "use, operation, or possession" of the rented car. ELRAC agreed, inter alia, that in the event of third-party claims arising from the use of the rented car, it would extend its own insurance to Mehlinger if there was no other insurance available to him.
During the early evening hours of Saturday, November 24, 1990, after ELRAC had closed for the weekend and while Mehlinger still had the rental car in his possession, he retrieved his van from the repair shop. Since the rental agency was closed, and, in any event, Mehlinger had agreed to return the rental car by Monday, November 26, 1990, he did not attempt to return the car that weekend. Instead, he loaned the rental car to a friend who, on Sunday, November 25, 1990, accidentally struck and killed a pedestrian while driving the rental car.
The decedent's estate commenced an action against the driver, Mehlinger, and ELRAC. Eventually, ELRAC settled that action for $100,000, and, thereafter, it commenced the present action for declaratory relief, seeking a declaration that Mehlinger was required to indemnify it under the rental agreement. ELRAC also sought a declaration that the defendant Commercial Union Insurance Co. (hereinafter Commercial) was required to indemnify it as the primary insurer, pursuant to a policy of automobile insurance which Commercial had issued to Mehlinger. ELRAC claimed that Commercial was required to provide coverage for its rental car since the car was a "temporary substitute" vehicle, defined in relevant part in the Commercial policy as, "[a]ny auto * * * you do not own while used as a temporary substitute for any other vehicle described in this definition which is out of normal use because of its * * * repair".
ELRAC moved for summary judgment against Mehlinger and Commercial, and the court granted summary judgment in favor of ELRAC to the extent of declaring that Commercial was the primary insurer, and that Commercial was obligated to indemnify ELRAC for the costs of defending and settling the underlying lawsuit. Subsequently, judgment was entered in favor of ELRAC and against Commercial; the complaint and any cross claims insofar as asserted against Mehlinger were dismissed. On appeal, Commercial contends that it was not obligated to indemnify ELRAC because at the time the accident occurred, the rental car was no longer being used as a temporary substitute vehicle for which coverage was available. We agree.
The purpose of a substitution clause is to afford continuous coverage to the insured during the period that a vehicle scheduled under the policy is out of commission, and at the same time limit the risk of the insurer to one operating automobile at a time for a single, fair premium ( see, VanMinos v. Merkley, 48 A.D.2d 281, 285; 12 Couch, Insurance § 45:219, at 512 [2d ed]). The protection is limited to the occasional or infrequent use of a vehicle not owned by the insured; it is not intended as a substitute for insurance on vehicles regularly used by the insured ( see, Liberty Mut. Ins. Co. v. Sentry Ins., 130 A.D.2d 629, 630, rearg granted 135 A.D.2d 508; see also, Federal Ins. Co. v. Allstate Ins. Co., 111 A.D.2d 146, 147). The significant question in the present case is whether Mehlinger's van, expressly designated as the insured vehicle under the Commercial insurance policy, was "out of normal use" as that term may be construed in the context of the "temporary substitute" provision of the policy.
It is undisputed that Mehlinger rented the car from ELRAC with the intention of using it while his own vehicle, the van insured by Commercial, was being repaired. When Mehlinger loaned the rental car to his friend once he had retrieved the van, however, he indicated his intention to resume regular use of his own vehicle. At that point, the "temporary substitute" provision of Commercial's policy ceased to serve its purpose, and coverage for the van, as the policy's designated vehicle, was restored. Under the circumstances of this case, we will not require Commercial to insure the rental car in addition to the originally designated vehicle, as this would unnecessarily extend Commercial's liability beyond the obvious intent of the insurance policy ( see, Government Empls. Ins. Co. v. Kligler, 42 N.Y.2d 863; see also, VanMinos v. Merkley, 48 A.D.2d, supra, at 285), and expose it to unlimited liability.
Upon searching the record, therefore, we grant summary judgment to Commercial, and enter a declaration that it was not the primary insurer of ELRAC's rental car, and that it was not obligated to indemnify ELRAC ( see, Lanza v. Wagner, 11 N.Y.2d 317, 334, cert denied 371 U.S. 901).
In light of our determination, it is unnecessary to address Commercial's remaining contention.
Joy, J. P., Friedmann, Krausman and Luciano, JJ., concur.