National Indemnity Co. v. Giampapa ( 1965 )

Finley, J.

We are here concerned with the construction to be given the “newly acquired automobile” provision in a policy of indemnity insurance.

Percy Killmer, while driving a 1956 Ford (purchased in March 1960), was involved (March 15, 1961) in a collision with a truck owned and driven by Vincent Giampapa, who, thereafter, brought an action for damages against Mr. and Mrs. Killmer. The Killmers tendered the defense to his insurance company, National Indemnity Company, Inc., which defense was accepted with a reservation of rights. Giampapa recovered a judgment for $3,000 and costs against the Killmers.

The insurance company then brought a declaratory-judgment action against the Killmers and Giampapas, praying for a judgment that it was not liable to pay the judgment against the Killmers in consequence of the collision with the Giampapa truck. From a judgment dismissing the action with prejudice, this appeal is taken.

Killmer had purchased an automobile-liability-insurance policy from the appellant, covering a 1949 Cadillac as the “Described Automobile,” with a policy period extending from September 16, 1960, to September 16, 1961. We note and emphasize as follows that: the coverage was limited to an obligation by the company to pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of “bodily injury” and

“. . . injury to or destruction of property, . . . caused by accident and arising out of the ownership, maintenance or use of the automobile;” in short, a protection for other users of the highway to whom the insured driver might become liable for bodily injuries or property damage.

On or about March 11, 1961, the 1949 Cadillac became inoperable. Killmer thereafter began using the 1956 Ford automobile which, as indicated, he had owned when he acquired the policy of insurance designating the 1949 Cadillac as the insured vehicle. No notice was given to the company that Killmer desired to substitute the 1956 Ford for the 1949 Cadillac as the “Described Automobile,” until after the collision with the Giampapa truck.

The Killmers and Giampapas rely on the following portion of the liability policy:

“(1) Described Automobile—the motor vehicle . . . described in this policy . . .

“(4) Newly Acquired Automobile—an automobile, ownership of which is acquired by the named insured or his spouse if a resident of the same household, if (i) it replaces an automobile owned by either and covered by this policy, . . . and (ii) the named insured or such spouse notifies the company within thirty days following such delivery date; but such notice is not required under coverages A, B and division 1 of coverage C if the newly acquired automobile replaces an owned automobile covered by this policy. ...”

Any conditions relative to notice under (ii) may be immediately removed from any consideration since the coverage was only under A (Bodily Injury) and B (Property Damage), and notice to the company in such a situation is expressly waived by the quoted terms of the policy. The failure of Killmer to notify the company of his replacement of the 1949 Cadillac with the 1956 Ford until after the collision with the Giampapa truck consequently has no bearing on the issue of the liability of the insurance company.

Under the facts, as stated, and under the explicit findings of the trial court, Killmer did not commence his use of the 1956 Ford until March 11, 1961, which was after the 1949 Cadillac became inoperable, and, furthermore, the 1956 Ford was then his only operable car. There is no question here of the insurance being used to cover two operable cars.

It is the purpose of such policies, on the one hand, to protect other users of the highways and, on the other hand, to limit the liability of the insurance company to the operation of one car by the insured. Where an insured possesses several operable cars, there would always be the possibility that he could claim to have replaced the “Described Automobile” with whatever car he happened to be driving when he became involved in an accident. The cases, consequently, hold that in the absence of the notice of a replacement of the “Described Automobile,” if provided by the policy, there can be no replacement with another car so long as the “Described Automobile” is owned by the insured and remains operable. Mitcham v. Travelers Ind. Co. (C.C.A. 4th 1942), 127 F. (2d) 27. That is, the insured must have either disposed of the car or it must be inoperable (some cases such as State Farm Mut. Auto. Ins. Co. v. Shaffer (1959), 250 N.C. 45, 108 S.E. (2d) 49, indicate that if ownership is retained it must be incapable of further service).

In the instant case the unchallenged finding of the trial court is that the “Described Automobile” (the 1949 Cadillac) became inoperable on March 11, 1961. It is undisputed that the transmission had gone out; it was never used again and was junked.

In this connection the trial court also found that:

“ . . . Also, on or about March 11, 1961, the defendant, Percy Killmer began using a 1956 Ford, which automobile he had owned for a year prior. He had been working upon the body of said Ford for many months and such automobile had become usable and was used after the 1949 Cadillac had become inoperable.” (Italics ours.)

There is no suggestion that Killmer had any other operable car than the 1956 Ford after the “Described Automobile,” i.e., the 1949 Cadillac, became inoperable. There was no basis for an implication that the insurance company could have been liable under the policy for more than one operable car, because Killmer’s activities were in fact limited to a one-car operation. The 1949 Cadillac was the “Described Automobile” until it became inoperable, and, thereafter, a specifically identifiable replacement, i.e., the 1956 Ford, came into the picture for the first time. Just when the Ford became operable is not clear. The trial court found that Killmer

“ . . . had been working upon the body of said Ford for many months and such automobile had become usable and was used after the 1949 Cadillac had become inoperable.”

The distinctive feature here is that the 1956 Ford did not come under the policy coverage until it replaced the “Described Automobile,” i.e., the 1949 Cadillac which had become permanently inoperable. Thereupon, the Cadillac was not covered, the Ford was, under the literal meaning and effect of the provisions of the insurance policy.

The insurance company resists liability on the basis that more than a replacement of one car by another is involved; and that the 1956 Ford was not and could not be a “newly acquired automobile” because it was owned by the Killmers at the time the insurance policy was secured with the 1949 Cadillac being designated as the “Described Automobile.”

Concededly, there is support for this position, notably in Brown v. State Farm Mut. Auto. Ins. Co. (Ky. 1957), 306 S. W. (2d) 836. In that case the facts were stated as follows:

“ . . . On June 13,1955, the Company issued appellant an indemnity policy on his 1948 Studebaker automobile. On the day the policy was issued appellant also owned a 1947 Ford automobile, as well as a 2-ton Ford Truck, neither of which was covered by the policy. The Ford car had no engine in it on the day the policy was issued and could not be operated. In July 1955, appellant purchased a new motor for this Ford and on or about August 15th, his Studebaker became inoperable and he ceased driving it on that date. He had an engine installed in his Ford car, put it in driving condition and began using it. He did not operate his Studebaker thereafter and had its engine removed.

“On or about August 25, 1955, while driving this Ford appellant had an accident in which three persons riding with him were injured. Immediately after this accident he notified the Company thereof and requested it to defend him against any suits the injured persons might bring. ...” (pp. 836-837)

The insurance company refused to recognize any liability, and the Court of Appeals of Kentucky sustained that position stating:

“By no stretch of the imagination did appellant comply with the terms of the policy when he attempted to substitute the Ford car he owned at the time the policy was issued for the Studebaker, covered by the policy. When the policy gave appellant the right to replace his Studebaker with a ‘newly acquired automobile * * * if the named insured notifies the company within thirty days following the date of its delivery to him,’ certainly it was within the contemplation of the parties that the replacement must be a car the insured would acquire in the future and not one he owned at the time the policy was issued to him.

“. . . In replacing the Studebaker with the Ford appellant did not comply with the terms of the policy. Had the Company known he was replacing the Studebaker with an old Ford he owned at the time the policy was issued on the Studebaker, it might have refused permission for him to do so, as it had a right to do under the policy. Manifestly, appellant could not replace the Studebaker with the Ford without notifying the Company and affording it an opportunity to raise the premium, as the policy provided it might do.” (pp. 837-838)

We do not consider the case just cited and quoted as controlling. We are not advised by the opinion of the extent of the coverage in the policy in that case (clearly notice of a substitution of cars was not waived), and from the paragraph last quoted it would appear that the company could have refused permission to make the replacement and could have raised the premium. We have no such situation in the instant case. As to it, the insurance company specifically waived the requirement of notice of a replacement of the described car where the coverage was limited to “Bodily Injury Liability” and “Property Damage Liability.” It is conceded that there was no question of any increase of' premium involved in the substitution of the 1956 Ford for the 1949 Cadillac. Obviously, insofar as liability insurance was concerned, the company in the instant case was not concerned with what car was substituted if there was actually a replacement of the car described in the policy which had become inoperable.

We think that the Kentucky court, along with others, puts an interpretation on “newly acquired” which is not warranted by either the purpose of the policy, the contemplation of the parties, or the wording of the definition of the “newly acquired automobile” contained in the policy. We quoted that definition earlier in the opinion and repeat it again:

“(4) Newly Acquired Automobile — an automobile, ownership of which is acquired by the named insured or his spouse if a resident of the same household, if (i) it replaces an automobile owned by either and covered by this policy, . . . and (ii) the named insured or such spouse notifies the company within thirty days following such delivery date; but such notice is not required under coverages A, B and division 1 of coverage C if the newly acquired automobile replaces an owned automobile covered by this policy.

The term “Newly Acquired” in the caption does suggest an automobile acquired subsequent to the insurance policy, but the definition of that term does not support the suggestion; it is simply an automobile

“. . . ownership of which is acquired by the named insured ... if ... it replaces an automobile . . . covered by this policy. . . . ”

The date of the acquisition of the 1956 Ford seems to us to be immaterial in the contemplation of the contracting parties (the insured and the insurer) if, in fact, the automobile clearly or actually replaces a “Described Automobile” which has been sold or which has become inoperable. As said in Thompson v. State Auto. Mut. Ins. Co., 122 W. Va. 551, 558, 11 S. E. (2d) 849, 852 (1940),

“. . . A caption should never of itself be taken to override the intention of the parties to an insurance policy as shown by the provisions and clauses inserted thereunder. . . . ”

Thus, on the basis of the foregoing discussion, our holding herein that Killmer’s 1956 Ford was within the policy coverage is dictated by logic, by reason, and by good public policy. It is supported by Boston Ins. Co. v. Smith (D.C.A. Fla. 1963), 149 So. (2d) 68, and by statements in Thompson v. State Auto. Mut. Ins. Co., supra, and Maryland Indem. & Fire Ins. Exchange v. Steers, 221 Md. 380, 157 A. (2d) 803 (1960)¹. In the latter case, the court had before it for consideration the identical policy language with which we are concerned and the same liability coverage, i.e., bodily injury and property damage.

In fine, this appeal presents two factors or considerations for analysis, evaluation and determination: It concerns (a) a factual dispute and (b) the language of pertinent provision of the contract of insurance. As to (a), the trial court has determined the facts and made specific findings. There is no exception as to the pertinent findings. Under Thorndike v. Hesperian Orchards, Inc. 54 Wn. (2d) 570, 343 P. (2d) 183 (1959), we must accept the findings as verities, and we do so. As to (b), the pertinent provisions of the policy are less than unambiguous, and, if doubt exists, should be construed in favor of the insured, and we do so, under our decisions in Carroll v. The Union Labor Life Ins. Co., ante p. 513, 398 P. (2d) 164 (1964); Washington Restaurant Corp. v. General Ins. Co. of America, 64 Wn. (2d) 150, 390 P. (2d) 970 (1964); Lawrence v. Northwest Cas. Co., 50 Wn. (2d) 282, 311 P. (2d) 670 (1957); Christensen v. Sterling Ins. Co., 46 Wn. (2d) 713, 284 P. (2d) 287 (1955).

The judgment is affirmed.

Rosellini, C. J., Donworth, Hunter, Hamilton, and Hale, JJ., concur.

1 In the Maryland Indemnity case, when the policy was issued in December 1955, the insured owned a 1946 Oldsmobile which was the “Described Automobile.” Sometime prior to April 1956, that car became inoperative, and, after using public transportation for several weeks, the insured purchased, on May 15, 1956, a 1946 Dodge; but this change was not brought to the attention of the insurer. When the renewal policy was issued in December 1956, the 1946 Oldsmobile still appeared as the “Described Automobile.” In March 1957, the insured sold the Dodge and bought a 1955 Ford, transferring the license plate from the Dodge to the Ford. In November 1957, the insured, while driving the Ford, was involved in a collision. It was held that the failure to notify the company of the replacement of the Oldsmobile, as the “Described Automobile,” by the Dodge, and of the Dodge by the Ford, was immaterial under the terms of the policy, and that the Dodge and then the Ford had been newly acquired cars and replacements under the policy.