Appeal by defendant from judgment entered 9 April 1997 by Judge Russell Lanier in New Hanover County Superior Court. Heard in the Court of Appeals 26 February 1998.
The opinion of the court was delivered by: Lewis, Judge.
Bennie Prince rented a car from plaintiff and accidentally drove it into Chinita Murphy's Buick. Ms. Murphy and her passengers were injured and the Buick was damaged. The accident took place in Wilmington, North Carolina.
At the time of the accident, Mr. Prince was the named insured of an automobile insurance policy issued by defendant New South Insurance Company ("New South"). The New South policy reads, PART A -- LIABILITY COVERAGE INSURING AGREEMENT We will pay damages for bodily injury or property damage for which any insured becomes legally responsible because of an auto accident. . . .
"Insured" as used in this Part means:
1. You . . . for the ownership, maintenance, or use of any auto . . . .
If there is other applicable auto medical payments insurance we will pay only our share of the loss. Our share is the proportion that our limit of liability bears to the total of all applicable limits. However, any insurance we provide with respect to a vehicle you do not own shall be excess over any other collectible auto insurance providing payments for medical or funeral expenses.
The rental agreement between Mr. Prince and plaintiff, The Hertz Corporation ("Hertz"), states, 10. LIABILITY PROTECTION
(a) Within the limits stated in this paragraph, Hertz will indemnify, hold harmless, and defend you . . . FROM AND AGAINST LIABILITY TO THIRD PARTIES . . . . THE LIMITS OF THIS PROTECTION, INCLUDING OWNER'S LIABILITY, ARE THE SAME AS THE MINIMUM LIMITS REQUIRED BY THE AUTOMOBILE FINANCIAL RESPONSIBILITY LAW OF THE JURISDICTION IN WHICH THE ACCIDENT OCCURS . . . .
(b) IF YOU DO NOT PURCHASE LIABILITY INSURANCE SUPPLEMENT (LIS) . . . AT THE COMMENCEMENT OF THE RENTAL, YOUR INSURANCE COVERAGE WILL BE PRIMARY, WHICH MEANS THAT PROTECTION PROVIDED BY HERTZ BY THIS PARAGRAPH WILL BE SECONDARY, AND NOT IN ADDITION TO, ANY VALID AND COLLECTIBLE INSURANCE THAT PROVIDES COVERAGE FOR YOU . . . . IF SECONDARY PROTECTION IS EXTENDED BY HERTZ, THE PROTECTION WILL BE SELF-INSURED BY HERTZ AND WILL BE EXTENDED UNDER THE SAME TERMS AND CONDITIONS AS STATED IN PARAGRAPH 10(a) ABOVE.
Mr. Prince did not purchase the supplementary "LIS" insurance mentioned in the rental agreement.
Ms. Murphy and her passengers brought claims for damages against Mr. Prince. New South denied that its policy covered these claims and refused to settle them or defend Prince against them. Subsequently, Hertz paid $8,703.15 to settle the claims and sued New South to recover its expenses. Hertz prevailed in a bench trial and New South appeals.
We hold that the New South policy, and not the Hertz rental agreement, provides coverage for the claims against Mr. Prince. We therefore affirm.
In North Carolina, there are two statutes that require Hertz to insure the lessees of its vehicles. The first obligates motor vehicle ...