Opinion
C.A. No. 02C-03-019
Date Submitted: July 19, 2002
Date Decided: October 31, 2002
H. Clay Davis III, Esquire H. Clay Davis III, P.A.
Daniel P. Bennett, Esquire Heckler Frabizzio
Dear Counsel:
This is my decision on Plaintiffs' Motion for Declaratory Judgment in this insurance coverage dispute. For the reasons set forth herein, Plaintiffs' Motion for Declaratory Judgment is granted.
FACTUAL BACKGROUND
Plaintiffs Tiwanda Miller ("Miller") and Myles Andrews, Miller's infant son, were injured in an automobile accident on November 27, 2001. Miller, who rear-ended another vehicle, was not an automobile insurance policyholder. At the time of the accident, Miller was driving a 1994 Chrysler LeBaron (the "Vehicle") rented from Value Auto Rental, LLC ("Value Auto"). When Miller initially rented the Vehicle from Value Auto, Value Auto's rental agreement included a disclaimer limiting Value Auto's insurance liability to the minimum required by law and making Value Auto's liability secondary to any other policy covering the Vehicle's occupants. The section in the rental agreement where Miller's insurance coverage information should have appeared was not completed. Also, the rental agreement named Ronald Andrews ("Andrews") as an additional authorized driver of the Vehicle. Plaintiffs resided in Andrews' home at the time of the accident and Andrews had an automobile insurance policy issued by United Services Automobile Association (the "USAA Policy").
The rental agreement's disclaimer stated:
Rentor provides liability coverage for persons using the Vehicle with the permission of rentor . . . in accordance with the provisions of an automobile liability insurance policy with limits equal to the minimum requirements of any applicable state financial responsibility law or other similar law or statute. All coverages afforded under this Agreement are applicable only after all other valid and collectible insurance (whether primary or contingent) has been paid and exhausted to the full limits of all such policies. Unless required by law, the policy does not include No-Fault, Supplemental No-Fault, Uninsured-Under Insured Motorists coverage or other optional coverages and Renter hereby rejects such coverage to the extent provided by law. Where such coverages are required by law, they are provided at the minimum required limit.
Value Auto insured the Vehicle with Fidelity Guaranty Insurance Underwriters ("Fidelity"). Plaintiffs sought compensation for their medical expenses from Fidelity, but Fidelity denied Plaintiffs' claims, alleging that it was secondarily liable to Miller's primary insurer. In their Complaint, Plaintiffs contend that Fidelity, as the Vehicle's insurer, is obligated to pay for Plaintiffs' accident-related expenses. Plaintiffs argue that Fidelity's decision to deny their claims was made without a rational basis and in bad faith. Therefore, Plaintiffs seek a declaratory judgment awarding them $5,625.73 in damages, future medical expenses, punitive damages, statutory damages under 21 Del. C. § 2118, interest, attorney's fees, and costs.
Miller seeks $2,265.73 for her own medical expenses and $3,360 for Myles Andrews' medical expenses.
Fidelity attacks Plaintiffs' claims on two grounds. First, Fidelity alleges that Value Auto's insurance coverage complied with 21 Del. C. § 6102. According to Fidelity, Value Auto's adherence to these statutory requirements bars Plaintiffs' recovery. Second, Fidelity argues that Plaintiffs should have sought compensation from USAA before seeking compensation from Fidelity.
Plaintiffs, in their Motion for Declaratory Judgment, contend that the insurer of a rental automobile must extend insurance coverage to the occupants of an insured automobile who are injured during an accident. Plaintiffs allege that Fidelity's denial of coverage is wrongful on three grounds. First, Plaintiffs argue that owners of Delaware-registered automobiles are required by statute to provide insurance coverage for their automobiles. 21 Del. C. § 2118(a). This coverage protects the automobile occupants if they are injured in an accident. 21 Del. C. § 2118(a)(2)c. Thus, Fidelity, as the Vehicle owner's insurer, must cover Plaintiffs' accident-related financial losses. Second, Plaintiffs contend they are uninsured. Plaintiffs concede that they resided in an insured's household at the time of the accident, but Plaintiffs maintain that the USAA Policy does not cover their claims. According to Plaintiffs, Delaware law does not require an insurer to cover members of an insured's household injured while occupying a Delaware-registered automobile not owned by the insured. Because the Vehicle was registered in Delaware, Plaintiffs argue that the USAA Policy does not cover their injuries. Third, Plaintiffs contend that Schwartz v. Centennial Ins. Co., Del. Ch., C.A. No. 5350, Hartnett, V.C. (Mar. 6, 1979), a case relied upon by Fidelity, is irrelevant to this dispute. Plaintiffs claim Schwartz is not controlling because the Court of Chancery only examined whether the owner or driver's insurance provided personal injury protection to the injured.
Schwartz held that rental car companies cannot be forced to provide insurance to all vehicle renters.
In response, Fidelity maintains that an automobile rental agency may transfer the obligation of insuring an automobile to a renter. Defending its use of Schwartz, Fidelity contends that 21 Del. C. § 2118 allows an automobile owner to shift this burden if the automobile remains insured. Fidelity acknowledges that if the Court finds Plaintiffs uninsured, Value Auto could not have disclaimed its insurance coverage and Fidelity will be liable for Plaintiffs' injuries. Lastly, Fidelity maintains that the USAA Policy covers Plaintiffs. First, Fidelity argues that § 2118 establishes the minimum coverage required by law, not mandatory exclusions from coverage. Fidelity asserts a need to examine the USAA Policy to determine the extent of the policy's coverage and whether Plaintiffs, as members of Andrews' household, are covered. Second, Fidelity believes that an examination of the USAA Policy's automobile rental coverage is necessary.
STANDARD OF REVIEW
The principles that govern the grant of a motion for summary judgment apply to the grant of a motion for summary declaratory judgment. Harleysville Mut. Ins. Co. v. Five Points Fire Co. No. 1, Inc., 444 A.2d 304, 305 (Del.Super. 1982). Summary judgment may be granted only when no material issues of fact exist, and the moving party bears the burden of establishing the non-existence of material issues of fact. Moore v. Sizemore, 405 A.2d 679, 680 (Del. 1970). Once the moving party meets its burden, the burden shifts to the non-moving party to establish the existence of material issues of fact. Id. at 681. This Court will now determine whether summary judgment is appropriate in this case.
DISCUSSION
To determine whether Fidelity, as the insurer of the Vehicle, must compensate Plaintiffs for injuries suffered while occupying the Vehicle, the Court must examine 21 Del. C. § 2118 and 6102. Donegal Mut. Ins. Co. v. Delaware Cadillac, Inc., Del. Super., C.A. No. 95C-09-094, 1996, Babiarz, J. (Feb. 25, 1997), at 2. The General Assembly enacted § 2118 "to protect the public from injury by uninsured motorists by requiring that at least minimum insurance coverage be available for the benefit of each person injured in a motor vehicle accident." Schwartz v. Centennial Ins. Co., supra, at 9. Thus, § 2118(a) stipulates that "[n]o owner of a motor vehicle registered in this State . . . shall operate or authorize any other person to operate such vehicle unless the owner has insurance on such motor vehicle." This coverage must include "[c]ompensation to injured persons for reasonable and necessary expenses." 21 Del. C. § 2118(a)(2)a. The coverage required by § 2118 "shall be applicable to each person occupying [the insured] motor vehicle." 21 Del. C. § 2118(a)(2)(c). The courts of this State have broadly interpreted § 2118, State Farm Mut. Auto. Ins. Co. v. Wagamon, 541 A.2d 557, 560 (Del. 1988), as recovery rights under § 2118 are provided regardless of fault. Gray v. Allstate Ins. Co., 668 A.2d 778, 779 (Del.Super. 1995).
Title 21, Chapter 29, which requires that all motor vehicle owners carry liability insurance for their vehicles, is expressly inapplicable to rental vehicles. 21 Del. C. § 2901.
An exception was created for self-insured vehicles that meet the requirements of § 2904. Self-insurance is not at issue in this dispute.
21 Del. C. § 6102 was enacted to provide a financial responsibility law specifically applicable to rental automobiles. Donegal Mut. Ins. Co. v. Delaware Cadillac, Inc., supra, at 3. Similar to § 2118(a), § 6102(a) requires owners of rental automobiles to provide insurance for their automobiles. Together §§ 2118 and 6102 stand for the proposition that "[t]he owner of a rental vehicle is initially responsible for insuring the vehicle, up to the stated limits, unless it shifts this responsibility to the renter." Zurich Am. Ins. Co. v. Alamo Rent-A-Car, Inc., Del. Super, C.A. No. 96C-11-163, 1998, Babiarz, J. (Mar. 29, 1999), at 3; accord Ingerson v. Gikas, 759 F. Supp. 180, 181 (D.Del. 1991).
21 Del. C. § 6102(a) states in part:
The owner of a motor vehicle who is engaged in the business of renting motor vehicles without drivers, who rents any such vehicle without a driver to another, otherwise than as a part of a bona fide transaction involving the sale of such motor vehicle, and permits the renter to operate the vehicle upon the highways and who does not carry or cause to be carried public liability insurance . . . shall be jointly and severally liable with the renter for any damages caused by the negligence of the latter in operating the vehicles and for any damages caused by the negligence of renting the vehicle from the owner.
§ 6102(a) also establishes the minimum liability coverage that rental vehicle owners must carry. Plaintiffs have not alleged that the amount of coverage provided by Value Auto is insufficient.
An automobile rental agency may shift the responsibility of insuring an automobile to the renter "by ensuring that the renter carries his or her own insurance," Zurich at 3, and providing the renter with notice of the waiver. When an automobile rental agency desires to shift responsibility, "the lessor merely has the duty to make certain that the insurance is in effect." Schwartz at 9. Insurance must be carried by the renter and
21 Del. C. § 6102(c) provides:
The policy of insurance referred to in subsection (a) of this section shall inure to the benefit of any person operating the rented vehicle by or with the permission of the person so renting it in the same manner and under the same conditions and to the same extent as to the renter. The insurance policy or policies above referred to need not cover any liability incurred by the renter of any such vehicle to any passenger in such vehicle, provided the owner, upon renting any such vehicle to another without a driver, gives to the renter a written notice of the fact that such policy or policies do not cover the liability which the renter may incur on account of the renter's negligence in the operation of such vehicle to any passenger in such vehicle.
a mere inquiry [by the rentor concerning the renter's insurance] is not sufficient to meet the statutory obligation. The overriding public policy concern is that insurance coverage be available. The Legislative intent would be subverted if the obligation were discharged by a mere inquiry where . . . the result might be that no coverage is in fact available.
Stewart v. Selner, Del. Super., C.A. No. 88C-JL-4-1-CV, 1988, Del Pesco, J. (Jan. 11, 1989), at 4. Value Auto has not presented any evidence that it complied with this obligation. In fact, the evidence shows that Value Auto never "took steps to guarantee that [the renter] actually had insurance before renting the cars," Gikas, 759 F. Supp. at 181-82, as the insurance section of the rental agreement is blank. Thus, Value Auto did not shift its burden of insuring the Vehicle and Fidelity remained the Vehicle's primary insurer.
CONCLUSION
Plaintiffs' Motion for Declaratory Judgement is granted for the reasons previously stated. In light of the relief requested, further proceedings are required to determine the sums to which Plaintiffs are entitled. The parties should contact Case Scheduling to arrange a scheduling conference on this matter.
IT IS SO ORDERED.