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Universal Underwriters Insurance v. Dairyland Mutual Insurance
Citations: 102 Ariz. 518; 433 P.2d 966; 1967 Ariz. LEXIS 307Docket: No. 8999-PR
Court: Arizona Supreme Court; November 24, 1967; Arizona; State Supreme Court
Thomas Nugent, Jr. was injured in an automobile accident involving a vehicle owned by Justine Meyer and operated by Eugene Jones, an employee of Fletcher Jones Phoenix, who had possession for repairs. Meyer had automobile insurance with Dairyland Mutual Insurance Company, which included coverage for anyone using the vehicle with permission. However, Dairyland refused to defend in the subsequent lawsuit. Universal Underwriters, which insured Fletcher Jones Phoenix, took on the defense and settled the case. Universal Underwriters then sued Dairyland to recover the settlement amount, including attorney fees and defense costs. The trial court ruled in favor of Dairyland, and this decision was upheld by the Court of Appeals. Dairyland's policy included an exclusion for accidents involving any employee operating a vehicle in connection with an automobile sales agency or repair shop, which they argued indicated no coverage existed at the time of the accident. However, the court referenced previous rulings, notably Jenkins v. Mayflower, which established that such exclusionary clauses are invalid in Arizona. Universal's policy stated that coverage for non-owned vehicles would be excess over any other valid insurance, asserting that it only assumed liability after Dairyland’s coverage was exhausted. The court found no conflict between the two insurance policies and applied the principle from Dairyland Mutual Insurance Co. v. Andersen, indicating that Dairyland's policy limits of $10,000 per individual and $20,000 per accident were applicable. Universal claimed Dairyland acted in bad faith by not defending or paying the judgment, seeking the full $30,000 paid to settle the claim. The court acknowledged Dairyland's obligation of good faith to its insured but determined that there was no direct contractual relationship between the two insurance companies. Under established principles, when two insurers cover the same risk, the one compelled to pay can seek contribution from the other. The court reversed the superior court's judgment and instructed to enter a judgment against Dairyland in favor of Universal for $10,000 plus interest from the date of payment, along with attorney fees and defense costs. Justices Bernstein, McFarland, Udall, and Lockwood concurred.