Behlmann Pontiac GMC Truck, Inc., Plaintiff/Appellant, v. Stephen R. Harbin, Defendant/Respondent.

This slip opinion is subject to revision and may not reflect the final opinion adopted by the Court. Opinion Missouri Court of Appeals Eastern District Case Style: Behlmann Pontiac GMC Truck, Inc., Plaintiff/Appellant, v. Stephen R. Harbin, Defendant/Respondent. Case Number: 74286 Handdown Date: 04/06/1999 Appeal From: Circuit Court of St. Louis County, Hon. Carolyn C. Whittington Counsel for Appellant: Sanford Goffstein Counsel for Respondent: Peter N. Leritz Opinion Summary: Behlmann Pontiac/GMC Truck, Inc. ("Behlmann") appeals from a summary judgment of the Circuit Court of St. Louis County which denied Behlmann's subrogation claim against Stephen Harbin ("Harbin") after determining that Harbin was an insured under Behlmann's own garage insurance policy. Behlmann contends that Harbin was not insured under that policy for damages sustained to Behlmann's own automobile while Harbin was test driving it. REVERSED AND REMANDED. Division One holds: Behlmann is not barred by the "no subrogation rule" from subrogating against Harbin because (1) the damages incurred in Harbin's accident were not covered under Behlmann's policy, and (2) Behlmann was not required by Missouri law to be covered under that policy. Citation: Opinion Author: Clifford H. Ahrens, Judge Opinion Vote: REVERSED AND REMANDED. Pudlowski, P.J., and Crandall J., concur. Opinion: Behlmann Pontiac/GMC Truck, Inc. ("Behlmann") appeals from a summary judgment of the Circuit Court of St. Louis County which denied Behlmann's subrogation claim against Stephen Harbin ("Harbin") after determining that Harbin

was an insured under Behlmann's own garage insurance policy. Behlmann contends that Harbin was not insured under that policy for damages sustained to Behlmann's own automobile while Harbin was test driving it. We reverse and remand. The basic facts of this case are straightforward and not in dispute. Behlmann is in the business of selling new and used automobiles. On or about June 23, 1996, Behlmann provided a Chevrolet Blazer to Harbin to test drive. Harbin was involved in an accident while driving the Blazer and the car sustained extensive damages. Behlmann was insured by Universal Underwriters Group ("Universal") at the time of these events. Behlmann submitted a claim to Universal and Universal paid the claim. Universal then filed a subrogation action in the name of Behlmann to recover damages from Harbin. In Harbin's motion for summary judgment, he asserted that since he was an insured under the Universal policy, Universal could not subrogate against him. The trial court granted Harbin's motion, holding that Behlmann could not recover because Harbin was an insured under Behlmann's own policy. Behlmann appeals. Behlmann argues on appeal that the trial court erred in granting summary judgment in favor of Harbin because (1) Harbin was not an insured under the Universal policy and therefore the "no subrogation rule" is inapplicable, and (2) such a result would be in direct contravention of Missouri's "demonstrator statute." Since this is an appeal from a summary judgment, our review is essentially de novo. ITT Commercial Fin. Corp. v. Mid-America Marine Supply Corp., 854 S.W.2d 371, 376 (Mo. banc 1993). The propriety of summary judgment is an issue of law. Id. We test the propriety of the summary judgment using the same criteria the trial court employs to determine the propriety of sustaining the motion initially. Id. We first address Behlmann's claim that the trial court erred because Harbin was not "an insured" under the Universal policy. It asserts that since Harbin was not an insured under the Universal policy, the "no subrogation rule" does not apply and Behlmann may attempt to recover from Harbin. In Missouri, the "no subrogation rule" states that an insurance company cannot attempt to recover, as a subrogee, from a coinsured covered under that policy when the coinsured's negligent act occasioned the loss (unless there is design or fraud on the part of the coinsured). Sherwood Medical Co. v. B.P.S. Guard Services, Inc., 882 S.W.2d 160, 162 (Mo. App. 1994). Harbin argues that since he was in fact insured under the terms of the Universal policy, and he was also required by law to be an insured under the Universal policy as a result of Missouri's permissive user statute, Universal cannot seek subrogation from him. We first consider the terms of the Universal policy. Section 500 of the Universal garage policy reads, in pertinent

part: We will pay all sums the INSURED [Harbin] legally must pay as DAMAGES ... because of INJURY to which this insurance applies, caused by an OCCURRENCE arising out of GARAGE OPERATIONS OR AUTO HAZARD. "AUTO HAZARD" means the ownership, maintenance, or use of any AUTO YOU own or which is in YOUR care, custody or control and: (1) used for the purpose of GARAGE OPERATIONS; (2) used principally in GARAGE OPERATIONS with occasional use for other business or nonbusiness purposes; (3)furnished for the use of any person or organization. Section 500 defines who is an "insured" as follows: With respect to the AUTO HAZARD: (1) YOU; (2) Any of YOUR partners, paid employees, directors, stockholders, executive officers, a member of their household or a member of YOUR household, while using an AUTO covered by the Coverage Part, or when legally responsible for its use. The actual use of the AUTO must be by YOU or within the scope of YOUR permission; (3) Any CONTRACT DRIVER; (4) Any other person or organization required by law to be an INSURED while using an AUTO covered by this Coverage Part within the scope of YOUR [Behlmann's] permission. Harbin argues that he falls under category (4) and is therefore an insured under Section 500 of the Universal policy. However, the policy contains several explicit exclusions from coverage. In particular, exclusion (j) provides that the insurance does not apply to "INJURY ... to: (1) personal property, including AUTOS, owned by, rented or leased to, used by, in the care, custody or control of, or being transported by the INSURED [Behlmann]." Since the issue before us is damage to an automobile owned by Behlmann, section 500 of the Universal policy by its terms does not apply. Section 300 of the policy states, in pertinent part: WE will pay for LOSS of or to a COVERED AUTO from any cause, including sums an INSURED legally must pay as damages as a result of LOSS to a CUSTOMER'S AUTO, except as stated otherwise in the declarations or excluded. WHO IS AN INSURED – With respect to LOSS under the Coverage Part (1)YOU; and (2)YOUR partners, paid employees, directors, executive officers, and stockholders while acting within the scope of their duties as such with respect to a CUSTOMER'S AUTO. This section of the policy explicitly addresses damages to automobiles owned by Behlmann. However, Harbin is not considered an insured under this section either, since he does not fall into either of the two categories under the heading "WHO IS AN INSURED." We next examine Missouri's "permissive user statute," a section of Missouri's Motor Vehicle Financial Responsibility Law. This statute reads, in part: [An automobile] owner's policy of liability insurance: ... shall insure the person named therein and any other person, as insured, using such vehicle or motor vehicles with the express or implied permission of such named insured, against loss from the liability imposed by law for damages arising out of the ownership, maintenance or use of such motor vehicle ... as follows: ... ten thousand dollars because of injury to or destruction of property of others in one accident.

Section 303.190.2(2) RSMo 1994 (emphasis added). Harbin argues this statute requires Harbin to be an insured under Behlmann's policy since Harbin was using the automobile with Behlmann's express permission. Missouri's Motor Vehicle Financial Responsibility Law does not require Behlmann to carry coverage to insure against this type of accident. The permissive user statute requires Behlmann to insure against liability incurred "because of injury to or destruction of property of others." Once again, the issue before us is whether the Universal policy covers the damage Harbin caused to an automobile owned by the insured, Behlmann. As a result, in addition to damages such as these being excluded under the express terms of Behlmann's policy, Behlmann is also not required by section 303.190.2(2) to carry insurance against them. Harbin contends that under this court's holding in George Walsh Chevrolet, Inc. v. Dieters, 864 S.W.2d 934 (Mo. App. 1993), Harbin would indeed be "an insured" under the Universal policy. In that case the automobile dealership, George Walsh, loaned a car to Dieters for him to drive in a parade. While Dieters was driving, he was involved in an accident. Dieters was killed and George Walsh's car suffered damages. George Walsh was covered by a garage insurance policy similar to the one Behlmann had. This court held that Dieters was an insured under the policy. George Walsh, 864 S.W.2d at 935-36. The case at bar is distinguishable from George Walsh, however. First of all, a claim based on policy exclusion (j) was apparently not raised in George Walsh. As mentioned above, this section of the Universal policy excludes injuries to automobiles owned by the insured. Furthermore, Missouri's "demonstrator statute" clearly addresses the issues in the case at bar and was not contemplated in George Walsh. This statute reads as follows, in pertinent part: Every motor vehicle liability insurance policy insuring a motor vehicle licensed in this state must extend its liability coverage to include any other motor vehicle operated by the insured individual if the other motor vehicle is loaned, with or without consideration, to the insured individual for demonstration purposes ... and if the other motor vehicle is loaned by a person, firm, or corporation engaged in the business of selling, repairing, or servicing motor vehicles. Such extension of liability coverage must include coverage for damage to the loaned vehicle. Section 379.201 RSMo 1994 (emphasis added). Harbin was using the automobile owned by Behlmann "for demonstration purposes" so he was required to have liability insurance that included "coverage for damage to the loaned vehicle." While the permissive user statute does not require Harbin to be insured under Behlmann's policy for this type of accident, the demonstrator statute explicitly requires Harbin to carry his own insurance for just such an occurrence. See Rader v. Johnson, 910 S.W.2d 280, 284 (Mo. App. 1995).

We hold that the damages incurred in Harbin's accident are neither covered under Behlmann's Universal insurance policy nor required by Missouri law to be covered under that policy. Reversed and remanded for further proceedings consistent with this opinion. Separate Opinion: None This slip opinion is subject to revision and may not reflect the final opinion adopted by the Court.