Court Opinion

ID: 9790837
Source: CourtListenerOpinion
Date Created: 2023-08-31 02:00:13.15014+00
Date Added: 2024-06-11T07:37:31.947264
License: Public Domain

CORCORAN, Justice,
dissenting.
I respectfully dissent. The issue is not whether A.R.S. § 28-324 establishes different liability standards for car rental agencies that self-insure. It does not. The issue is not whether Budget is liable to pay damages to the third party injured by Schwindt’s daughter’s negligence. It is. The only issue before us is whether Budget may recover damages from Herbert Schwindt, the lessee, for his breach of the rental agreement.
I believe that Budget may recover, provided it shows the usual requisites for a *41breach of contract claim, i.e., the existence of a contract, the breach of that contract, and damages flowing from the breach. Neither the existence of a contract nor the breach of that contract is in dispute. This leaves the damages requirement, which I believe is easily satisfied.
Arizona has long held that damages for breach of contract are those damages which arise naturally from the breach itself or which may reasonably be supposed to have been within the contemplation of the parties at the time they entered the contract.
All American School Supply Co. v. Slavens, 125 Ariz. 231, 233, 609 P.2d 46, 48 (1980) (emphasis added). I can hardly think of a case that better illustrates the damages referred to in the emphasized language in Slavens. Unquestionably, the very reason that Schwindt’s daughter was not authorized to drive the car was because the parties contemplated that she was a less experienced driver, and therefore more prone to be involved in an accident, than Schwindt himself. Unfortunately, history proved them to be correct.
Under the majority’s reasoning, the lessee of a motor vehicle is insulated from liability even for the most deliberate, egregious violations of the lease agreement. Under the majority opinion, the lessee has no liability to the lessor even if the minor to whom he entrusts the car in violation of his contract is 5 years old and driving under the influence of alcohol. Because this strained construction is contrary to public policy and insults common sense, I dissent.
I note first that the majority opinion deals, in part, with non-issues. A substantial portion of the majority opinion is devoted to the “issue” of Budget’s liability to third parties under § 28-324. But the case presents no such issue. Budget has always admitted its liability to the injured third party under § 28-324, and has long ago satisfied that liability. Budget argues that, having satisfied its statutory duty, it is now entitled to sue for damages that arise from the lessee’s breach of contract. The majority clouds the real issue by casting it, in part, in terms of Budget's statutory duty to insure against its renter’s negligence,, an issue not presented.
The majority states that “[gjeneral principles of insurance law prevent a casualty insurer from seeking indemnification from its insured.” This is certainly true, but only as to risks the casualty insurer has either contractually or, as in this case, statutorily assumed. And Budget has neither contractually nor statutorily assumed the risk of damages caused by Schwindt’s breach of contract; it has only assumed the risk of damages caused by a renter’s negligence. A.R.S. § 28-324 (rental car agency must insure renter against liability “arising from his negligence”) (emphasis added). Thus, contrary to the majority’s opinion, Budget has not attempted to “contract away its statutorily-imposed risk by inserting in its rental agreement restrictive clauses that narrow the statutory requirements.”
The majority relies on Roth v. Old Republic Ins. Co., 269 So.2d 3 (Fla.1972), for the proposition that “Budget cannot escape the onus of its statutory role as insurer by seeking reimbursement for an insured loss through a breach of contract action against its insured.” Roth, however, did not address the breach of contract issue presented in this case. Moreover, the 4-3 majority in Roth based its no-indemnification rule on Florida’s public policy as reflected in an earlier Florida case, and the majority here chooses to ignore public policy entirely in favor of engaging in an exercise of “insurance” vs. “surety” semantics.
I consider such an exercise inappropriate in this case, and the conclusion derived therefrom simply wrong. I agree with the dissent in Roth who said,
The majority opinion would destroy valid contractual rights between contracting parties which are guaranteed by the Constitution and our holdings. The parties have the right to contract; rates will vary with the terms thereof. These fundamental rights—on both sides, as to each party and his carrier—must be held inviolate, so long as ...
Roth, 269 So.2d at 7 (Dekle, J., dissenting).
The majority also relies on Fidelity General Ins. Co. v. Nelsen Steel & Wire Co., *42132 Ill.App.2d 635, 270 N.E.2d 616 (1971), for the view that the rental car agency is precluded from recovering for breach of contract because such recovery would allegedly nullify the required insurance coverage. Although I agree that a broad, boilerplate indemnification clause such as the one involved in Fidelity might well be properly held to be unenforceable, no such indemnification clause is involved in the instant case. Instead, Budget’s rental agent expressly informed Mr. Schwindt that his minor daughter was not authorized to drive, and Mr. Schwindt expressly agreed not to let her do so. This is a far cry from the boilerplate indemnification provision at issue in Fidelity, and the majority’s reliance on that case simply is not persuasive.
I fail to see how public policy is advanced by granting immunity to those who intentionally entrust automobiles to inexperienced, unsafe, underage drivers. It seems to me that public policy dictates a result exactly opposite of that reached by the majority.5 I believe the court of appeals correctly decided the limited issue presented in this case. I would adopt and apply its opinion.

. The majority cites A.R.S. § 28-1170(H) for the proposition that had the legislature intended for Budget to be merely a surety, it could have so provided. Having chosen to ignore public policy and focus instead on the difference between an insurer and a surety, the majority fails to see that § 28-1170(H) actually suggests that allowing Budget’s breach of contract action to proceed is in accord with public policy. Section 28-1170(H) seems to me to sanction reasonable contract terms between the insurer and its insured "so long as they do not prevent liability to third parties.” See Roth, 269 So.2d at 7 (Dekle, J., dissenting).