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ALLSTATE INS. CO. v. SNAPPY CAR RENTAL

August 25, 1998

ALLSTATE INSURANCE COMPANY, Plaintiff, against SNAPPY CAR RENTAL, INC. and ELRAC INC., Defendants.


The opinion of the court was delivered by: MOTLEY

MEMORANDUM OPINION

 Motley, J:

 Plaintiff, Allstate Insurance Company ("Allstate"), commenced the above-captioned action on June 25, 1996 against defendants, Snappy Car Rental, Inc. ("Snappy") and ELRAC, Inc. ("ELRAC"), seeking declaratory relief pursuant to 28 U.S.C. § 2201.

 On October 16, 1996, both Snappy and ELRAC filed motions for summary judgment pursuant to Rule 56(b) of the Federal Rules of Civil Procedure. Allstate filed a cross-motion for summary judgment. This case was reassigned to this judge from Judge Allen G. Schwartz on June 26, 1997.

 For the reasons set forth below, the court hereby denies both Snappy's and ELRAC's motions for summary judgment, and hereby grants Allstate's cross-motion for summary judgment.

 I. FACTS

 Allstate is a corporation organized under the laws of the State of Illinois, with its principal place of business in Northbrook, Illinois. Snappy is a corporation organized under the laws of the State of Ohio, with its principal place of business in Tulsa, Oklahoma. ELRAC is a corporation organized under the laws of the State of Delaware, with its principal place of business in Hackensack, New Jersey. Both Snappy and ELRAC are licensed to and, in fact, do transact the business of renting vehicles for hire in the State of New York. There is, therefore, no issue of either jurisdiction or venue.

 A. The Snappy Action

 Allstate issued an automobile policy to Richard Hoelderlin ("Hoelderlin") for the policy period of May 13, 1993 to November 13, 1993. Allstate also issued a "Rental Vehicle Coverage Endorsement" in connection with the Hoelderlin policy which provides coverage for the insured's obligations in the event of damage or loss of any rental vehicle.

 Hoelderlin rented an automobile from Snappy on April 26, 1993, and executed a rental agreement ("Snappy Rental Agreement") which contains the following two provisions:

 
A. I represent to You that I have a valid policy of automobile liability insurance in force for bodily injury or death of another, and for property damage. You are relying upon My representation about My automobile insurance, and You are not providing automobile liability insurance, or any other form of insurance covering the Car, to Me or to any other person using or riding in the Car while it is on rent to Me.
 
B. I and all Authorized Renters will defend, indemnify, and hold You harmless from all claims, liabilities, and expenses for bodily injury, death or property damage, arising out of the use, operation or possession of the Car by anyone while the Car is on rent to Me.

 On May 18, 1993, an automobile accident involving Hoelderlin and Otis Bowles, Jr. ("Bowles") occurred in Queens, New York. At the time of the accident, Hoelderlin was operating the automobile rented from Snappy.

 On February 6, 1995, Bowles filed a complaint in the Supreme Court of the State of New York, County of Queens, against Snappy and Hoelderlin, alleging that the rental vehicle Hoelderlin was operating "rear ended" Bowles' vehicle, causing Bowles to suffer ...


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