UNISUN INSURANCE CO. v. HERTZ RENTAL CORP.
8/23/1993
This is a declaratory judgment action to determine insurance coverage. The Hertz Corporation, a corporation doing business in the State of New York, rented a car to Christopher Hodge, a resident of New York. The rental contract was executed in New York and the car was registered in New York. Two days later Kendall Gilliem, also a New York resident, was involved in an accident with William and Glenda York while driving the rented car in South Carolina. Hertz alleges that Hodge permitted Gilliem to drive the car.
The Yorks sued Hodge, Gilliem and Hertz to recover for their personal injuries. They alleged negligence by Hertz for allowing Hodge and Gilliem to drive the car, and negligence by Hodge in entrusting the car to Gilliem. They also alleged Gilliem was negligent in operating the car. Hertz, a self insurer, and its excess carrier, Fireman's Fund, alleged they had no duty to defend the suit, because Gilliem was an unauthorized and prohibited driver under the car rental agreement. Unisun insured the York's vehicle. The policy included uninsured motorist coverage. Unisun therefore entered the action to provide a defense for Hodge and Gilliem.
Unisun then brought a declaratory judgment action against Hertz and Fireman's Fund seeking determination of the coverage issue. On a motion for summary judgment, the circuit court held that Hertz owed coverage to Hodge and Gilliem. Hertz appeals. The court also held that Unisun was not entitled to reimbursement from Hertz for the cost of providing the defense for Hodge and Gilliem. Unisun cross appeals this ruling. We affirm in part and reverse and remand in part.
I.
Hertz first argues that the court erred in applying the law of New York to determine the issue of coverage. We discern no error.
Unless the parties agree to a different rule, the validity and interpretation of a contract is ordinarily to be determined by the law of the state in which the contract
In this case, the determinative issue is whether the car rental agreement between Hertz and Hodge excluded insurance coverage for the accident in question — a question of the law of contracts. The agreement was executed in New York by a resident of New York with a corporation doing business in New York. The subject matter of the contract was an automobile registered in New York. Hertz performed the contract in New York by delivering the car there. Since New York was the state in which the contract was made, the law of New York governs the interpretation and legal effect of its provisions.
II.
Hertz next contends that even if New York law applies, the court erred in holding that it provided insurance coverage in this case. The car rental agreement provided:
You and the following persons, with your
permission ("Authorized Operators"), may
operate the Car: Your spouse, employer,
employees, or fellow employees incidental to
their business duties . . . . No other
persons are permitted to operate the Car
unless all such persons appear at the time of
rental and sign an Additional Authorized
Operator form. All Authorized Operators must
be at least 25 years old and have a valid
driver's license . . . .
The agreement also stated:
ANY USE OF THE CAR AS PROHIBITED BELOW WILL
BREACH THIS AGREEMENT . . . AND MAKE
Finally, the agreement provided:
Hertz will indemnify, hold harmless, and
defend You and any Authorized Operators FROM
AND AGAINST LIABILITY TO THIRD PARTIES . . . .
For bodily injury and property damage the
limits of this protection, including o
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