Facts: Corlett, a Maine resident, leased a truck owned by Ryder from its rental agency in Idaho.
Corlett executed a rental agreement for the vehicle which listed Brown as an additional driver.
The rental agreement included a provision stating that liability coverage "will not exceed the minimum financial responsibility limits and/or minimum no fault benefits required by applicable law[.]"
Approximately a week later, while driving the rented Ryder truck to Maine, Brown fell asleep at the wheel, causing a collision in New Hampshire with a vehicle operated by the plaintiff, Warner.
At the time of the accident, Ryder was covered by an insurance policy issued by Frontier Insurance Company. That policy included business auto coverage and covered Corlett and Brown as permissive users of a Ryder vehicle. Defendant Clarendon was Frontier's reinsurer.
Ryder's policy provided for $2 million in liability coverage, but included several endorsements applicable to coverage available under the policy to a 'rentee' or driver as an insured under an auto rental contract. The endorsements provided in pertinent part as follows:
STAR-2: "The coverage provided by this policy is primary insurance with respect to the 'rentee' or driver as an 'insured' under an 'auto' rental contract but only with respect to the limit of insurance required under the Financial Responsibility law for the state in which the 'auto' is rented."
STAR-3: "It is agreed that the coverage provided by this policy is primary insurance with respect to the 'rentee' or driver as an 'insured' under an 'auto' rental contract.
STAR-7: "The insurance coverage provided by this policy to a 'rentee' is subject to the terms, conditions, restrictions, and limitations contained in the rental agreement between [Ryder] and such 'rentee'".
Frontier's third party administrator took the position that liability coverage was limited to $25,000 - the amount of liability coverage required by the financial responsibility statutes in both Idaho and New Hampshire. Warner filed a petition for declaratory judgment, claiming entitlement to $2 million in coverage.
The parties filed cross-motions for summary judgment. Warner argued that STAR-2 and STAR-3 were contradictory, and created an ambiguity that must be construed against Clarendon resulting in $2 million coverage per defendant. Clarendon argued that under STAR-7 coverage was limited to $25,000 - the financial responsibility limits in New Hampshire, Idaho and Maine. The trial court granted Clarendon's motion for summary judgment, ruling that coverage was limited to $25,000, and was excess to any other insurance available to Corlett and Brown.
Warner appealed, claiming that the trial court erred in: 1) ruling that coverage was limited to $25,000; 2) ruling that STAR-7 is unambiguous and consistent with applicable financial responsibility law; and 3) failing to apply the financial responsibility law of Florida, Ryder's home state.
The Court held that even if STAR-2 and STAR-3 created an ambiguity, STAR-7 unambiguously provided that the policy coverage, which would include the provisions contained within STAR-3, were subject to the terms, restrictions and limitations of the rental agreement which limited the amount of coverage to the minimum financial responsibility limits under the applicable law.
The Court also rejected Warner's argument that STAR-7 was a "step-down" provision that violated the provisions of RSA 264:14, II, which requires attachment of a notice to the policy clearly explaining any reduction in coverages. The Court held that the statutory provisions did not apply because the policy was not issued under RSA 264:14, nor was the truck registered or principally garaged in New Hampshire.
Finally, the Court ruled that the references to "applicable law" in the rental agreement did not require application of Florida's financial responsibility law and, therefore, the court did not err in ruling that coverage was limited to $25,000, the amount required under the financial responsibility laws of Idaho, New Hampshire and Maine.