Avis Rent A Car Sys. v. McDavid

Nebraska Supreme Court Online Library
www.nebraska.gov/apps-courts-epub/
02/10/2023 09:07 AM CST
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Nebraska Supreme Court Advance Sheets
313 Nebraska Reports
AVIS RENT A CAR SYS. V. MCDAVID
Cite as 313 Neb. 479Avis Rent A Car System, Inc., appellee,
v. Roynetta McDavid, appellant.
___ N.W.2d ___
Filed February 10, 2023. No. S-22-147.
1. Summary Judgment: Appeal and Error. An appellate court reviews
the district court’s grant of summary judgment de novo, viewing the
record in the light most favorable to the nonmoving party and drawing
all reasonable inferences in that party’s favor.
2. Summary Judgment: Jurisdiction: Appeal and Error. When review-
ing cross-motions for summary judgment, an appellate court acquires
jurisdiction over both motions and may determine the controversy that
is the subject of those motions; an appellate court may also specify the
issues as to which questions of fact remain and direct further proceed-
ings as the court deems necessary.
3. Contracts. The interpretation of a contract and whether the contract is
ambiguous are questions of law.
4. Judgments: Appeal and Error. An appellate court independently
reviews questions of law decided by a lower court.
5. Contracts. The court must accord clear terms their plain and ordinary
meaning as an ordinary or reasonable person would understand them.
6. ____. The fact that the parties have suggested opposite meanings of a
disputed instrument does not necessarily compel the conclusion that the
instrument is ambiguous.
7. Appeal and Error. An appellate court is not obligated to engage in an
analysis that is not necessary to adjudicate the case and controversy
before it.
Appeal from the District Court for Douglas County: W.
Russell Bowie III, Judge. Reversed and remanded with
directions.
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AVIS RENT A CAR SYS. V. MCDAVID
Cite as 313 Neb. 479Sean P. Rensch, of Rensch & Rensch Law, P.C., L.L.O., for
appellant.
Joel M. Carney and Andrew J. McElmeel, of Goosmann
Law Firm, P.L.C., for appellee.
Heavican, C.J., Miller-Lerman, Cassel, Stacy, Funke,
Papik, and Freudenberg, JJ.
Papik, J.
Roynetta McDavid rented a car from Avis Rent A Car
System, Inc. (Avis), in Nebraska to take a trip to Tennessee
with her mother and sister. The rental did not go as planned.
The trouble started after the traveling party reached Tennessee,
where McDavid’s sister, despite McDavid’s admonition to the
contrary, drove the car and was involved in a collision in
which passengers in another car were injured. Things got more
complicated for McDavid when Avis paid the injured parties
just over $40,000 and began demanding that McDavid reim-
burse it, contending that an indemnification provision in her
rental agreement required her to do so. After McDavid failed
to pay, Avis filed a lawsuit and obtained summary judgment
against McDavid. In this appeal filed by McDavid, however,
we find that the district court erred and that it is McDavid who
is entitled to summary judgment. Accordingly, we reverse the
judgment and remand the cause with directions to enter sum-
mary judgment in favor of McDavid.
BACKGROUND
Factual History.
McDavid rented a car from Avis pursuant to a car rental
agreement. Under the agreement, McDavid was the only
authorized driver of the car. McDavid, a Nebraska resident,
planned to drive with her mother and sister to visit another
sister who lived in Tennessee. According to McDavid, she
communicated to her traveling companions that they could not
drive the car.
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Nebraska Supreme Court Advance Sheets
313 Nebraska Reports
AVIS RENT A CAR SYS. V. MCDAVID
Cite as 313 Neb. 479Despite McDavid’s instructions, while in Tennessee and
while McDavid was asleep, McDavid’s sister drove the car
to a friend’s house. During her return, McDavid’s sister was
involved in an accident with another vehicle. Three passengers
in the other vehicle were injured in the collision.
The parties injured in the accident filed a lawsuit against
McDavid’s sister in Tennessee state court. Avis was not named
as a defendant, but it paid the injured parties a total of $40,100.
The injured parties executed a release of their claims against
Avis, McDavid, and McDavid’s sister.
Sedgwick, an entity that provides “claims administration
services” for Avis, subsequently sent letters to McDavid
demanding that she pay Avis $40,100. The letters stated that
Sedgwick had determined that the car McDavid rented was
“involved in an at fault accident”; that Avis had paid the
injured parties; and that under the rental agreement, McDavid
was responsible for reimbursing Avis. When McDavid did not
pay, Avis sued her.
Procedural History.
Avis’ lawsuit alleged that by failing to pay Avis $40,100,
McDavid breached the rental agreement’s indemnification pro-
vision. As relevant here, the rental agreement provided:
You shall defend, indemnify, and hold [Avis], our parent
and affiliated companies harmless from all losses, liabili-
ties, damages, injuries, claims, demands, awards, costs,
attorney fees, and other expenses incurred by [Avis] in
any manner from this rental transaction or from the use
of the car by you or any person, including claims of, or
liabilities to, third parties.
Avis asserted that under this language, McDavid was respon-
sible for reimbursing it for “bodily injury payments” that Avis
had made.
Both Avis and McDavid eventually moved for summary
judgment. The summary judgment evidence was consist­
ent with the factual history recited above. Avis offered no
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AVIS RENT A CAR SYS. V. MCDAVID
Cite as 313 Neb. 479evidence that the injured parties had ever sued or made any
demand against it or that otherwise explained why it paid
the injured parties. At the summary judgment hearing, Avis
acknowledged that it was not seeking payment for damages to
its rental car.
The district court granted summary judgment to Avis and
entered judgment against McDavid for $40,100. McDavid
timely appealed, and we moved the case to our docket.
ASSIGNMENTS OF ERROR
McDavid assigns, condensed and restated, that the district
court erred in two ways when it denied summary judgment
to her and granted summary judgment to Avis. She contends
that the district court erred (1) by finding that she was obli-
gated to indemnify Avis under the rental agreement and (2)
by rejecting her argument that, to the extent the rental agree-
ment required McDavid to indemnify Avis, it was void against
public policy.
STANDARD OF REVIEW
[1] An appellate court reviews the district court’s grant of
summary judgment de novo, viewing the record in the light
most favorable to the nonmoving party and drawing all reason-
able inferences in that party’s favor. Heist v. Nebraska Dept. of
Corr. Servs., 312 Neb. 480, 979 N.W.2d 772 (2022).
[2] When reviewing cross-motions for summary judgment,
an appellate court acquires jurisdiction over both motions and
may determine the controversy that is the subject of those
motions; an appellate court may also specify the issues as to
which questions of fact remain and direct further proceedings
as the court deems necessary. Johnson v. Nelson, 290 Neb. 703,
861 N.W.2d 705 (2015).
[3,4] The interpretation of a contract and whether the con-
tract is ambiguous are questions of law. Timberlake v. Douglas
County, 291 Neb. 387, 865 N.W.2d 788 (2015). An appellate
court independently reviews questions of law decided by a
lower court. Id.- 483 -
Nebraska Supreme Court Advance Sheets
313 Nebraska Reports
AVIS RENT A CAR SYS. V. MCDAVID
Cite as 313 Neb. 479ANALYSIS
McDavid’s primary argument on appeal is that Avis cannot
show that the indemnification provision of the rental agree-
ment required her to reimburse Avis for the amounts it paid the
parties injured in the car accident. She contends that the rental
agreement obligated her to indemnify Avis only if Avis was
legally obligated to pay the injured parties, but that Avis has
not shown that it was liable. We consider this argument below,
but first review general principles regarding indemnification
that are relevant to this case.
General Principles Regarding Indemnification.
Indemnification involves the complete shifting of the cost of
an injury from one party to another. See Kuhn v. Wells Fargo
Bank of Neb., 278 Neb. 428, 771 N.W.2d 103 (2009). An obli-
gation to indemnify may arise by law or by contractual agree-
ment. See id.An obligation to indemnify arises by operation of law when
one party is compelled to pay money which in justice another
ought to pay. See Jacobs Engr. Group v. ConAgra Foods, 301
Neb. 38, 917 N.W.2d 435 (2018). So, for example, we have
recognized that a party has a claim for indemnification if it
pays a common liability that, as between itself and another
party, is altogether the responsibility of the other party. See
United Gen. Title Ins. Co. v. Malone, 289 Neb. 1006, 858
N.W.2d 196 (2015). See, also, Hiway 20 Terminal, Inc. v.
Tri-County Agri-Supply, Inc., 232 Neb. 763, 770, 443 N.W.2d
872, 877 (1989) (“[i]ndemnity will be allowed where the
indemnitee has incurred liability to a third person because of
negligent reliance upon the care that the indemnitor should
have exercised”).
As the foregoing discussion illustrates, whether the party
seeking indemnity paid a third party under legal obligation is
a central question in determining if an obligation to indem-
nify arises by operation of law. This has obvious ramifica-
tions when a party claims a right to indemnity by operation
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AVIS RENT A CAR SYS. V. MCDAVID
Cite as 313 Neb. 479of law after settling a claim with a third party. In that circum-
stance, a party seeking indemnity must generally prove that it
was actually liable for the underlying claim. See, e.g., Pennant
Service Co., Inc. v. True Oil Co., 249 P.3d 698, 704 (Wyo.
2011) (“the indemnitee must not be a mere volunteer who has
settled the underlying claim when there was no exposure to
legal liability that obligated him or her to do so”); Grinnell
Mut. Co. v. Center Mut. Ins. Co., 658 N.W.2d 363, 378 (N.D.
2003) (“[g]enerally, an indemnitee who settles a claim before
judgment must prove that it was not a volunteer, but was
actually liable, in order to recover indemnity”); McNally &
Nimergood v. Neumann-Kiewit, 648 N.W.2d 564, 574 (Iowa
2002) (“if an indemnitee had no liability for the loss in the
inception, then any payment made by the indemnitee is con-
sidered purely voluntary and not subject to indemnification”).
See, also, 42 C.J.S. Indemnity § 47 at 194 (2017) (“[a]n indem-
nitee who settles a claim before judgment generally must prove
actual liability in order to recover indemnity . . .”).
Many courts have recognized an exception to the general
rule that a settling party must show actual liability in order to
be entitled to common-law indemnity. This exception applies
in cases in which the would-be indemnitor is provided notice
of the underlying claim against the indemnitee and declines an
opportunity to assume the defense. See, Pennant Service Co.,
Inc., supra; Grinnell Mut. Co., supra; Valloric v. Dravo Corp.,
178 W. Va. 14, 357 S.E.2d 207 (1987) (collecting cases). But
in order for this exception to apply, the party seeking indem-
nity must still show that it was potentially liable and that the
settlement amount was reasonable in light of that potential
liability. See, Pennant Service Co., Inc., supra; Grinnell Mut.
Co., supra; Valloric, supra. See, also, 42 C.J.S., supra.
While these rules govern indemnification obligations
imposed by law, parties are free to create separate or addi-
tional indemnification obligations by agreement. See Kuhn
v. Wells Fargo Bank of Neb., 278 Neb. 428, 771 N.W.2d 103(2009). So, for example, parties can, by contract, “alter the
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313 Nebraska Reports
AVIS RENT A CAR SYS. V. MCDAVID
Cite as 313 Neb. 479common law rules on indemnity by calling for indemnification
in the absence of underlying liability between the indemnitee
and the injured party.” McNally & Nimergood, 648 N.W.2d at
575. Avis appears to take the position that the parties did so
in the rental agreement at issue in this case. We turn to that
question now.
The Rental Agreement.
The parties take divergent positions on whether the indem-
nification provision in the rental agreement modifies the
common-law rule that would generally require Avis to estab-
lish its liability to the injured parties in order to receive
indemnity from McDavid. Although its position is not entirely
spelled out, Avis seems to contend that under the rental agree-
ment, it is entitled to indemnification for any amounts it chose
to pay third parties related to McDavid’s rental of its vehicle
without regard to whether Avis was actually, or even poten-
tially, liable to make such payments. Indeed, at oral argument,
counsel for Avis claimed that Avis would not only be entitled
to be indemnified for payments Avis voluntarily made to oth-
ers arising out of McDavid’s rental, but also that it would be
entitled to indemnification even if those payments were made
by mistake. As for McDavid, she contends that Avis must
show that it was liable to the injured parties in order to be
entitled to recovery under the indemnification provision of the
rental agreement.
[5,6] We interpret contractual indemnification provi-
sions in the same fashion we interpret other contracts. See
Jacobs Engr. Group v. ConAgra Foods, 301 Neb. 38, 66,
917 N.W.2d 435, 458 (2018) (“[a]n indemnity agreement is a
contract to be construed according to the principles generally
applied in construction or interpretation of other contracts”).
Accordingly, we briefly recount some general principles of
contractual interpretation we will apply here. A contract writ-
ten in clear and unambiguous language must be enforced
according to its terms. See Benjamin v. Bierman, 305 Neb.
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313 Nebraska Reports
AVIS RENT A CAR SYS. V. MCDAVID
Cite as 313 Neb. 479879, 943 N.W.2d 283 (2020). The court must accord clear
terms their plain and ordinary meaning as an ordinary or
reasonable person would understand them. Id. The fact that
the parties have suggested opposite meanings of a disputed
instrument does not necessarily compel the conclusion that
the instrument is ambiguous. Id.Avis does not point to any language in the rental agree-
ment showing that McDavid agreed to indemnify it for any
amounts it voluntarily chose to pay others related to her rental,
irrespective of whether Avis faced liability. Neither do we
discern any such language. McDavid’s position, on the other
hand, finds support in the indemnification provision’s use of
the word “incurred.” Recall that the indemnification provi-
sion quoted above obligates McDavid to indemnify Avis for
“expenses incurred by [Avis] in any manner from this rental
transaction or from the use of the car by you or any person.”
(Emphasis supplied.)
There is ample authority supporting the proposition that one
“incurs” an expense only when there is a legal obligation to pay
it. Both legal and lay dictionaries’ definitions of “incur” refer-
ence concepts of liability or obligation. Black’s Law Dictionary
defines “incur” as “[t]o suffer or bring on oneself (a liability
or expense).” Black’s Law Dictionary 917 (11th ed. 2019). A
lay dictionary offers a similar meaning: to “become liable or
subject to.” Webster’s Third New International Dictionary of
the English Language, Unabridged 1146 (1993).
Cases interpreting the word “incur” are consistent with
these dictionary definitions. This court, in interpreting a con-
tract almost 50 years ago, observed that “[o]rdinarily the term
‘incurred’ is construed to mean that one has become obligated
or liable for the expense involved.” Hollister v. Government
Emp. Ins. Co., 192 Neb. 687, 689, 224 N.W.2d 164, 165
(1974). Another court was “impressed with the unreality of
the position that [a party] has incurred any expense” when the
payment made was not “ever demanded, insisted upon or even
expected.” Hoffman v. Travelers Indem. Co. of America, 144
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AVIS RENT A CAR SYS. V. MCDAVID
Cite as 313 Neb. 479So. 3d 993, 999 (La. 2014), (internal quotation marks omit-
ted). Multiple federal courts have noted, in interpreting federal
tax laws, that “‘expenses are not incurred unless there has
arisen a legal obligation to pay them.’” Stern-Slegman-Prins
Co. v. Commissioner of Int. Rev., 79 F.2d 289, 291 (8th Cir.
1935), quoting Bauer Bros. Co. v. Commissioner of Internal
Revenue, 46 F.2d 874 (6th Cir. 1931). Similar interpretations
of the word “incur” in other contexts are not difficult to find.
See, e.g., Musaelian v. Adams, 45 Cal. 4th 512, 517, 198 P.3d
560, 562, 87 Cal. Rptr. 3d 475, 478 (2009) (“the ordinary
and usual meaning of the word ‘incur’ is to ‘become liable,’”
quoting Trope v. Katz, 11 Cal. 4th 274, 902 P.2d 259, 45 Cal.
Rptr. 2d 241 (1995)); Nagy v. Lumbermens Mutual Casualty
Company, 100 R.I. 734, 737, 219 A.2d 396, 399 (1966) (“[t]he
word ‘incurred’ means to become liable for and it connotes an
assumption of an obligation to pay”). Perhaps most pertinent
for our purposes, a federal district court concluded, in a case
that involved a car rental indemnity agreement nearly identical
to the one at issue here, that “incurred” “refer[s] to obliga-
tions that [the car rental company] became liable for or subject
to as a consequence of its rental of the motor vehicle and not
to include voluntary payments.” Enterprise Rent-A-Car Co. of
Boston, LLC v. Maynard, No. 2:11-cv-00047-JAW, 2012 WL
1681970, at *7 n.4 (D. Me. May 14, 2012).
Because the word “incurred” carries with it notions of
liability and obligation, we find that the indemnity provision
in the rental agreement cannot reasonably be interpreted in
the manner Avis suggests. Instead, we find that the agree-
ment required Avis to demonstrate, at a minimum, that it was
potentially liable to the injured parties. We therefore proceed
to consider whether Avis demonstrated that it was actually or
potentially liable to the injured parties.
Avis’ Liability.
In some cases, a court might begin its assessment of the
actual or potential liability of a party seeking indemnity by
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AVIS RENT A CAR SYS. V. MCDAVID
Cite as 313 Neb. 479evaluating whether there was evidence to support theories of
recovery asserted by the party or parties with whom a settle-
ment was reached. See, e.g., Chicago Ins. Co. v. Archdiocese
of St. Louis, 740 F.3d 1197 (8th Cir. 2014). In this case, how-
ever, we have no evidence that the injured parties sued or
even made a demand of Avis, much less that they asserted any
specific theory of Avis’ liability. Neither has Avis identified a
legal theory upon which it could have been found liable to the
injured parties. Avis’ brief did not mention any basis for liabil-
ity, and its counsel admitted at oral argument that he could not
identify any theory under which Avis could possibly have been
liable to the injured parties.
To be sure, there is evidence that Avis owned a car that
was involved in the accident that injured three people in
Tennessee. But even if it is assumed that the driver of a car
owned by Avis, McDavid’s sister, was at fault for the accident
and resulting injuries, that alone could not result in liability
to Avis. Because the injuries at issue occurred in Tennessee,
Tennessee tort law governs claims arising from that event.
See O’Brien v. Cessna Aircraft Co., 298 Neb. 109, 140, 903
N.W.2d 432, 459 (2017) (“‘[i]n an action for a personal
injury, the local law of the state where the injury occurred
determines the rights and liabilities of the parties . . .’”),
quoting Restatement (Second) of Conflict of Laws § 146
(1971). The Tennessee Supreme Court has explained, how-
ever, that there is “no Tennessee statute or reported appellate
decision imposing vicarious liability on a car rental company
arising out of the operation of its vehicles by a rental cus-
tomer.” Martin v. Powers, 505 S.W.3d 512, 523 (Tenn. 2016).
And even if Tennessee law imposed vicarious liability, the
Tennessee Supreme Court, like many other courts, has recog-
nized that a federal statute known as the Graves Amendment,
see 49 U.S.C. § 30106 (2018), would preempt any state law
holding a car rental company like Avis vicariously liable for
the actions of those driving its car. See Martin, supra. See,
also, Carton v. General Motor Acceptance Corp., 611 F.3d
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AVIS RENT A CAR SYS. V. MCDAVID
Cite as 313 Neb. 479451 (8th Cir. 2010); Puerini v. LaPierre, 208 A.3d 1157 (R.I.
2019) (collecting cases).
We find additional support for our conclusion that Avis
cannot demonstrate liability in Enterprise Rent-A-Car Co. of
Boston, LLC v. Maynard, No. 2:11-cv-00047-JAW, 2012 WL
1681970 (D. Me. May 14, 2012), a federal district court case
we discussed above. In that case, much like this one, the court
found that a car rental company that was seeking indemnity
for payments it made to a party injured in an accident involv-
ing one of its vehicles was not entitled to indemnity, because
the car rental company could not show that it was liable to the
party with whom it settled.
Even assuming that Avis could establish a right to indemnity
by showing that it was potentially liable to the injured parties,
it would fare no better. In the absence of any viable theory
of liability, there is no basis to find that Avis was potentially
liable to the injured parties in any amount. See, e.g., Chicago
Ins. Co., supra (holding that party seeking indemnification
could not show potential liability where governing law did not
permit claimant’s recovery). And even if there were a viable
theory of liability, there is no evidence that would allow for a
determination that the amount of the settlement was reasonable
in light of Avis’ potential liability.
Resolution.
To summarize, we find that the contractual indemnification
provision was unambiguous in requiring that Avis demonstrate,
at the very least, potential liability to the injured parties. We
find no evidence in the record, however, by which a reasonable
trier of fact could find that Avis was actually or potentially
liable. Accordingly, we find that the district court erred in
granting summary judgment to Avis and in denying summary
judgment to McDavid.
[7] Because we find that McDavid was entitled to sum-
mary judgment on the grounds that Avis failed to demonstrate
a right to indemnity under the rental agreement, we need not
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AVIS RENT A CAR SYS. V. MCDAVID
Cite as 313 Neb. 479and do not address McDavid’s alternative assignment of error
contending that to the extent the rental agreement required
her to indemnify Avis, it was void against public policy. An
appellate court is not obligated to engage in an analysis that is
not necessary to adjudicate the case and controversy before it.
Cain v. Lymber, 306 Neb. 820, 947 N.W.2d 541 (2020).
CONCLUSION
Because the district court erred in granting summary judg-
ment to Avis and in denying summary judgment to McDavid,
we reverse the judgment and remand the cause with directions
to enter summary judgment in favor of McDavid.
Reversed and remanded with directions.