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Car Rental Shifting Clause Validity


FOR PUBLICATION

UNITED STATES COURT OF APPEALS

FOR THE NINTH CIRCUIT

ALLSTATE INSURANCE COMPANY,
                                                     No. 96-15506
Plaintiff-Appellant,
                                                     D.C. No.
v.
                                                     CV 95-0049 HG
ALAMO RENT-A-CAR, INC.,
Defendant-Appellee.


MICHAEL E. KANESHIRO; HAWAIIAN
INSURANCE AND GUARANTY                                No. 96-15655
COMPANY, LTD.,
                                                     D.C. No.
Plaintiffs-Appellants,
                                                     CV 95-0676 DAE
v.
                                                     ORDER RE
ALAMO RENT-A-CAR, INC.;                               CERTIFIED
CONTINENTAL INSURANCE COMPANY,                        QUESTION
Defendants-Appellees.


Appeals from the United States District Court
for the District of Hawaii
Helen Gillmor and David A. Ezra,
District Judges, Presiding


Argued and Submitted
May 9, 1997*--Honolulu, Hawaii
Submission Withdrawn May 16, 1997
Resubmitted January 21, 1998
_________________________________________________________________


*No. 96-15506 was submitted without oral argument, the panel having
unanimously found the case suitable for decision without oral argument.
Fed. R. App. P. 34(a); Ninth Cir. R. 34-4.


                               1541


Filed February 24, 1998

Before: Cynthia Holcomb Hall, Stephen S. Trott** and
A. Wallace Tashima, Circuit Judges.


_________________________________________________________________

ORDER

The primary issue involved in these diversity cases is the
validity of Alamo Rent-A-Car's "Shifting Clause, " which
shifts primary responsibility for liability insurance coverage
from itself, and its insurer, to the automobile renter, and his
or her insurer. Because this is an unresolved question of state
law, we certify it to the Hawaii Supreme Court for its consid-
eration.


BACKGROUND

No. 96-15506

Keith R. Douglas rented a car from Alamo and was
involved in an accident in which several of his passengers and
the driver of the other car were allegedly injured. They made
claims against Douglas. Alamo denied liability coverage,
relying on the Shifting Clause contained in its rental agree-
ment, which provides:


      Unless contrary to state law or otherwise provided
      by this agreement, if there is no other valid and col-
      lectible insurance, whether primary, excess or con-
      tingent, available to the renter (or any authorized
      driver while operating the car) sufficient to meet
_________________________________________________________________
**The panel assigned to these cases, as originally constituted, included
Judge Norris. However, Judge Norris resigned before the cases were
resubmitted for decision and Judge Trott has been drawn in his place.
Judge Trott has been furnished with copies of all of the briefs and the
records, as well as an audiotape of the oral argument in No. 96-15655.


                               1542


      minimum financial responsibility law requirements,
      then . . . Alamo shall provide protection against lia-
      bility for bodily injury, death or property damage to
      others up to the minimum financial responsibility
      limits required by applicable law . . . .


Alamo contends that the Shifting Clause shifts the primary
duty to defend and to indemnify Douglas for any accident-
related injuries from Alamo to Allstate, Douglas' personal
insurance carrier. Allstate contends that the Shifting Clause is
invalid under Hawaii's No-Fault Law which, according to
Allstate, requires the owner of a motor vehicle to provide the
coverage required by the Law. See Haw. Rev. Stat.
S 431:10C-104. The district court determined that Douglas
had other insurance available and granted summary judgment
in favor of Alamo.


No. 96-15655

Michael E. Kaneshiro was also involved in an accident
while driving an automobile he had rented from Alamo. The
driver of the other car sued him for personal injury in Hawaii
state court. Kaneshiro tendered the defense of the action to
Alamo and Alamo's insurer, Continental. They refused to
defend. Kaneshiro then filed this action. Here, too, Alamo
relies on a similar Shifting Clause:


      If there is no other valid and collectible insurance,
      whether primary, excess, or contingent, available to
      the renter . . . then Alamo's vehicle liability policy
      shall pay damages not to exceed minimum limits
      required by applicable state law. This amends the
      "liability insurance" paragraph on the reverse side;
      all other terms not in conflict with the above remain
      in effect.1
_________________________________________________________________
1 The "liability insurance" paragraph on the reverse side of the rental
agreement stated:


                               1543


Kaneshiro, likewise, contends, inter alia, that this Shifting
Clause violates Hawaii's No-Fault Law. The district court
granted summary judgment in favor of Alamo and Continen-
tal. Kaneshiro v. Alamo Rent-A-Car, Inc., 906 F. Supp. 554
(D. Haw. 1995), 909 F. Supp. 752 (D. Haw. 1996).


DISCUSSION

Hawaii's No-Fault Law sets a "baseline, minimum level of
automobile liability insurance protection" and attempts to
assure that "every car on the road [has] the basic minimal no-
fault coverage." Pacific Int'l Servs. Corp v. Hurip, 873 P.2d
88, 96 (Haw. 1994). To this end, the statute provides:


      Every owner of a motor vehicle . . . shall obtain a
      no-fault policy upon such vehicle which provides the
      coverage required by this article and shall maintain
      the no-fault policy at all times . . . .


Haw. Rev. Stat. S 431:10C-104(b). That insurance must cover
not only the owner, but also "any operator using the motor
vehicle with the express or implied permission of the named
insured." Haw. Rev. Stat. S 431:10C-301(a)(2). The unre-
solved issue is whether Alamo's Shifting Clause violates
these provisions of the No-Fault Law. The Hawaii Supreme
Court has not spoken on the issue. Nor is there unanimity
among other jurisdictions which have addressed the issue.
Compare Hertz Corp. v. State Farm Mut. Ins. Co., 1998 WL
_________________________________________________________________
      You [Alamo] provide me [the renter] with liability insurance or
      protection that will cover bodily injury, death, or property dam-
      age only up to the minimum financial responsibility required by
      state law. I agree that any amounts over this minimum shall be
      covered by me or my liability policy and I will indemnify you for
      any losses that exceed the minimum limits. I can see a copy of
      your policy or self-insurance certificate at your rental office. ALL

      TERMS AND CONDITIONS OF THE P0LICY ARE INCOR-
      PORATED INTO THIS AGREEMENT.


                               1544


30419 (Minn. 1998) (burden shifting not legal); State Farm
Mut. Auto. Ins. Co. v. Enterprise Leasing Co., 549 N.W.2d
345 (Mich. 1996) (same); State Farm Mut. Auto. Ins. Co. v.
Clarendon Nat'l Ins. Co., 604 A.2d 384 (Del. 1992) (burden
shifting inconsistent with policy underlying no-fault statute);
with Kattoura v. Patel, 619 A.2d 1031 (N.J. 1993) (burden
shifting legal); Irvin v. Rhodes, 929 S.W.2d 829 (Mo.App.
1996) (same).


"We do not think it is appropriate to substitute our judg-
ment on the interpretation of a Hawaii statute for the judg-
ment of the Hawaii Supreme Court." Smith v. Cutter
Biological, Inc., 911 F.2d 374, 375 (9th Cir. 1990). Accord-
ingly, we certify the following question to the Hawaii
Supreme Court, pursuant to its discretionary authority under
Hawaii Rule of Appellate Procedure 13:


      Can the owner of a motor vehicle, who is in the
      business of renting its motor vehicles to others, ful-
      fill its minumum liability coverage obligation under
      the No-Fault Law by providing in its rental agree-
      ments that any liability insurance available to the
      renter is primary and that the owner's own liability
      insurance is secondary?


We note that "[o]ur phrasing of the question[ ] should not
restrict the court's consideration of the problems and issues
involved. `The court may reformulate the relevant state law
questions as it perceives them to be, in light of the contentions
of the parties.' " Id. at 376 (quoting Toner v. Lederle Lab.,
779 F.2d 1429, 1433 (9th Cir. 1986)). If the Hawaii Supreme
Court declines to accept certification, for any reason, we will,
of course, "resolve the issues according to our understanding
of Hawaii law." Id.


The Clerk shall forthwith transmit a certified copy of this
Order to the Clerk of the Hawaii Supreme Court. Haw. R.
App. P. 13. The parties shall notify the Clerk of this court


                               1545


within one week after the Hawaii Supreme Court accepts or
rejects certification and within one week after that court
issues its opinion. The panel retains jurisdiction over any fur-
ther proceedings in this court.


                               1546

*** Any law, statute, regulation or other precedent is subject to change at any time ***

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