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Merchants Mutual Insurance Co. v. Maine Bonding & Casualty Co.
Citations: 596 A.2d 1009; 1991 Me. LEXIS 322
Court: Supreme Judicial Court of Maine; September 26, 1991; Maine; State Supreme Court
The Superior Court ruled in favor of Merchants Mutual Insurance Co. in a dispute over the "replacement automobile" clause of an automobile insurance policy issued by Maine Bonding Casualty Co. The case arose after a collision involving Richard Bellino's vehicle, resulting in fatal injuries to Neil Powers and serious injuries to his passengers. Merchants paid the Powers family's claims and subsequently sought $40,000 from Maine Bonding under Bellino's policy. The policy, effective from November 21, 1980, to November 21, 1981, defined "owned automobile" to include vehicles acquired during the policy period that replace a previously owned vehicle. During the policy year, Bellino purchased a 1969 Plymouth hardtop as an additional vehicle while retaining a 1968 Plymouth convertible. After a fire rendered the 1968 Plymouth inoperable, the court determined that the 1969 Plymouth qualified as a replacement automobile under the policy. Maine Bonding's stipulation indicated that if coverage existed, a judgment should be entered for the full policy limit. The court concluded that, following the destruction of the 1968 Plymouth, Bellino had only one vehicle, which mandated coverage under the policy’s terms. The appeal centers on confirming that the 1969 Plymouth met the policy's conditions for coverage as a replacement automobile, with the court affirming the Superior Court's judgment. The second condition for coverage under the insurance policy is satisfied if the second automobile replaces an owned vehicle as described. The key issue is whether Bellino’s 1969 Plymouth replaced the described 1968 Plymouth by the time of the accident on July 5, 1981. Jurisprudence in many states indicates that for a vehicle to qualify as a replacement, the described vehicle must be disposed of or inoperable. The rationale is that courts permit coverage under the policy when only one operable vehicle is insured, minimizing the insurer's risk of double exposure. In this case, the 1968 Plymouth became inoperable due to fire on June 27, 1981, making the 1969 Plymouth the sole operable vehicle. Maine Bonding argued that, even if the 1968 Plymouth had been operable, Bellino would have used the 1969 Plymouth, thus it was not a replacement. However, the court ruled that hypothetical actions do not affect the determination of replacement based on actual circumstances. Maine Bonding also contended that the 1969 Plymouth could not be considered an "owned automobile" since Bellino did not acquire it intending to replace the 1968 Plymouth. The court rejected this claim, noting that the policy language clearly states that a vehicle qualifies as "owned" if it is acquired during the policy period and replaces a described automobile. By July 5, 1981, the 1969 Plymouth met the conditions of the policy, thus qualifying for coverage as an "owned automobile." The court affirmed the judgment in favor of coverage.