AIG Hawaii Ins. Co., Inc. v. Vicente

NAKAYAMA Justice,

dissenting.

I disagree both with the approach the majority takes in analyzing whether Bateman had the implied permission of Corpuz to operate the insured vehicle (the Mazda or the car) and its conclusion that because Corpuz “did not place ‘complete dominion’ over the insured vehicle in Aida[,]” Bateman “could not have driven the insured vehicle with the implied permission of Corpuz.” Majority at 1046-1047 (emphasis in original). Accordingly, I respectfully dissent from the majority opinion.

A

I agree with the majority that by force of Hawai'i Revised Statutes (HRS) §§ 431;10C-301(a)(2) (Supp.1992) and 287-25(2) (1985), the omnibus clause of the AIG policy extends coverage to any person using the Mazda with the express or implied permission of the named insured, i.e., Corpuz. Id. at 1043. I also agree that on the record before us Cor-puz did not give Bateman express permission to use the car, and, therefore, the question narrows to whether “Bateman was operating the insured vehicle with Corpuz’s implied permission.” Id. at 1043. I disagree, however, that Corpuz’s instruction to Aida not to allow anyone else to drive the car is outcome-dispositive” on the question of implied permission. Id. at 1044.

As I read the majority opinion, it establishes a rule of law that when a named insured prohibits persons other than the first permittee from operating the insured vehicle, implied permission cannot be found in favor of a second permittee—at least in the absence of facts showing that the named insured has implicitly revoked his/her prohibition by knowingly acquiescing in the second permittee’s use. In my view, such a strict rule is inconsistent with the legislative purpose of our statutes requiring liability insurance contracts to extend coverage to persons using the insured vehicle with the express or implied permission of the named insured, i.e., HRS §§ 431:10C-301(a)(2) and 287-25(2). Those statutes were designed primarily to avoid uncompensated losses to innocent parties injured by otherwise uninsured drivers. See Columbia Casualty Co. v. Hoohuli, 50 Haw. 212, 215 n. 2, 437 P.2d 99, 102 n. 2 (1968). To effectuate that fundamental purpose, the inquiry into whether a second per-mittee has implied permission to use the insured vehicle must take into account factors other than whether the named insured has restricted the use of the vehicle to the first permittee.

B.

Like the majority, I believe that Hoohuli, supra, provides the proper analytical framework for deciding the issue before us. I disagree, however, with the manner in which the majority applies Hoohuli in this case.

*258The question in Hoohuli was whether the omnibus clause extended coverage to the operator of an insured vehicle (the second per-mittee) who used the vehicle in a manner prohibited by his employer (the first permit-tee). In answering that question in the affirmative, the Hoohuli court recognized that the construction of a statutorily imposed omnibus clause required a balancing of competing interests:

By extending coverage, the omnibus clause protects the named insured, the permittee who may be uninsured otherwise, and the innocent party injured by an otherwise uninsured permittee. Clearly these interests would support the broadest possible construction.... On the other hand, the legislatively required omnibus clause infringes on the insurer’s right to select its risks. The clause shifts to the named insured the right to select additional insureds which the insurer may have declined to cover. Moreover, in selecting the additional insured, the named insured may be unconcerned with the additional insured’s “insurability.” These reasons would support a relatively narrow construction.

Id. at 217-218, 437 P.2d at 104.

Mindful that “[t]he purpose of expanded coverage through statutory imposition of the omnibus clause is to avoid the loss to innocent parties injured at the hands of otherwise uninsured drivers,” id. at 215, n. 2, 437 P.2d at 102 n. 2, the court held that the balance among the competing interests should be struck in favor of the innocent victims, the permittees and the named insured. It therefore “concludfed] that the benefits from extended coverage justif[y] an expansive interpretation of the omnibus clause.” Id. at 218, 437 P.2d at 105. However, in consideration of the contrary interests of the insurer, the court also held that the expansive interpretation of an omnibus clause was subject to a “limit of reasonableness.” Id. at 219, 437 P.2d at 105.

Applying the “expansive, yet reasonable” inteipretation of the omnibus clause, the court adopted a test that would allow a finding of implied permission—i.e., coverage under the omnibus clause—notwithstanding a second permittee’s failure to abide by the use limitations imposed by the first permittee:

[Wjith a showing that the vehicle was placed in the hands of the operator by consent, a presumption arises that the particular use to which the vehicle was being put was within the scope of that consent as measured by law. The overcoming of this presumption requires evidence establishing that consent had been expressly withdrawn prior to the actual use, or that the actual use was so far afield from the purpose of the loan of the vehicle as to amount to, at best, a temporary tortious conversion.

Id. at 219, 437 P.2d at 105 (quoting American Fiduciary Co. v. North Brit. & Merc. Ins. Co., 124 Vt. 271, 275, 204 A.2d 110, 113 (1964)).

Hoohuli, then, holds that a second permit-tee’s failure to strictly adhere to the use limitations imposed by the first permittee does not preclude a finding of implied permission under the omnibus clause. Instead, implied permission to use the insured vehicle will be found as long as the use violation amounts to something less than “a temporary tortious conversion[,]” or a “gross deviation” from the scope of permission given by the first permittee (or the named insured). Id., 50 Haw. at 219-20, 437 P.2d at 105-06. Stated differently, under Hoohuli, the fact that the second permittee has ignored or was otherwise unaware of the first permittee’s order not to use the insured vehicle in a certain manner is not “outcome-dispositive” on the question of implied permission.

The majority endorses Hoohuli as “corn trolling.”1 Majority at 1046. Having done *259so, however, the majority then follows with a complete non sequitur, reaching a result and creating a rule of law that are directly at odds with the principles set forth in Hoohuli. The majority states that

it is undisputed that, when Corpuz granted Aida permission to drive the insured vehicle, he explicitly instructed her not to allow others to drive the vehicle. Corpuz, therefore, did not place “complete dominion” over the insured vehicle in Aida. The scope of Corpuz’s permission to Aida, the first permittee, was limited, and inasmuch as a “second permittee is limited ... by the scope of permission from the named insured to the first permittee,” [Hoohuli, 50 Haw.] at 220, 437 P.2d at 105, the scope of permission allegedly accorded Bateman, the purported second permittee, by Aida, the first permittee, was correspondingly limited; thus, Bateman could not have driven the insured vehicle with the implied permission of Corpuz. In other words, on the record before us, Bateman cannot possibly be a permissive user and cannot possibly be a “covered person” entitled to coverage under the AIG policy issued to Corpuz.

Majority at 1046-1047 (emphases in original).

As I read the majority’s holding, it establishes a rule of law that once the named insured restricts the use of the insured vehicle to the first permittee—ie., gives the first permittee less than “complete dominion” over the vehicle—there can be no finding of implied permission in favor of a second per-mittee. In other words, under the majority’s holding, any deviation from the named insured’s express restriction as to who is permitted to use the insured vehicle precludes coverage under the omnibus clause. I cannot square that rule—which sounds to me like the “strict” rule expressly rejected by Hoohuli—with the principles' set forth in Hoohuli. Hoohuli holds, as the majority acknowledges, that the statutory omnibus clause mandates coverage even in cases where the second permittee ignores the specific orders of the first permittee or the named insured, as long as the violation falls short of a “gross deviation” from those orders.

In adopting a rule that makes the restrictions imposed by the named insured or the first permittee outcome-dispositive, the majority construes the omnibus clause in a way that protects the interests of the insurer. Although Hoohuli recognizes the importance of the insurer’s interests in construing the omnibus clause, it plainly holds that they are to be weighed against the interests of the permittee and the innocent injured party. 50 Haw. at 218, 437 P.2d at 104. Indeed, as noted above, Hoohuli holds that the interests of the permittee and the innocent party are to be given predominant weight. Id. Hoo-huli further noted that the permittee and the innocent injured party might be entitled to even greater protection—i.e., an even more expansive interpretation of the omnibus clause—were the legislature “to enact a mandatory insurance law.” Id. at 219 n. 4, 437 P.2d at 105 n. 4. The legislature has since done so. See Act 347, 1987 Haw.Sess.Laws 148-179.

Despite its professed adherence to the “controlling” principles of Hoohuli, the majority fails even to mention, no less weigh heavily, the interests of the permittee and the innocent injured party in adopting its construction of the omnibus clause. As a result, under the majority’s holding,

a borrower of an insured automobile from its ostensible owner is denied financial protection solely on the basis of communications, unbeknown to him, between the actual owner and the first permittee. Furthermore, because of these private communications the motoring public is denied financial protection against losses caused by a driver who is otherwise legally and properly in possession of an insured automobile.

Gillen v. Globe Indemnity Co., 377 F.2d 328, 333 (8th Cir.1967). Those consequences are directly contrary to the legislative purpose of the statutes requiring the inclusion of omnibus clauses in liability contracts.

In my view, the approach outlined in Gil-len, supra, better harmonizes with the statu*260tory purpose of the omnibus clause and is more in line with the principles outlined in Hoohuli. Gillen states that, even in the face of express prohibitions against the loaning of the insured vehicle, implied permission from the named insured in favor a second permit-tee can be found

[i]f the first permittee is actually in the car, or the car is being used for the benefit of the first permittee or of the named insured, or if the first permittee has an equivalent of equitable title and had unfettered control over the daily use of the car outside of the surveillance of the named insured, or if the named insured is aware of past violations of instructions but allows the permittee to retain possession, or when an emergency arises[.]

Id. at 332.

By taking, into account factors other than the express prohibition by the named insured and focusing to a large extent on the apparent authority of the first permittee to delegate the named insured’s permission to use the vehicle, the Gillen approach allows for coverage under the omnibus clause in a relatively wide variety of circumstances. At the same time, however, it places reasonable limits on when implied permission can be found, notwithstanding a named insured’s prohibition against the loaning of the insured vehicle. In other words, it does not adopt “the broadest possible construction” of the omnibus clause, Hoohuli, 50 Haw. at 218, 437 P.2d at 104, and therefore takes into account, albeit- to a lesser extent than the majority’s approach would, the interests of the insurer.

Rather than directly joining the issue and addressing the merits of the Gillen approach, the majority attempts to dismiss Gillen on the ground that, in surveying the law existing at the time, the United States Court of Appeals for the Eighth Circuit cited to cases applying the so-called “initial permission” rule. The majority therefore contends that I “ostensibly advocate[ ] the adoption of a position expressly rejected in Hoohuli.” Majority at 1047.

The simple answer to that charge is that, under any fair reading, the Gillen approach, on its face, falls far short of the initial permission rule rejected in Hoohuli. As described in Hoohuli, the initial permission rule provides that, “if the permittee is given permission to use the car, regardless of express or implied restrictions on his operation, he is covered for any subsequent use short of theft or the like.” 50 Haw. at 216, 437 P.2d at 105. Plainly, the Gillen approach does not mandate coverage under the omnibus clause “regardless of express or implied restrictions” as to who may operate the insured vehicle.2 It simply requires a court, when construing the scope of the omnibus clause, not to give dispositive weight to the express or implied restrictions imposed by the named insured (or the first permittee), but to consider several other highly relevant factors. I believe that that approach is far more consistent with Hoohuli’s “expansive, yet reasonable” construction of the statutory omnibus clause than is the “complete dominion” or “strict” rule adopted by the majority.

I also believe that the majority ignores the implications of its holding, which, contrary to the suggestion at the end of the opinion, is quite broad in scope. Consider, for instance, the effect of the majority’s “complete dominion” rule on a variation of the facts of this case. Assume all of the facts of this case, except that, rather than driving Aida home from work when the accident with Vicente occurred, assume that Bateman was driving her to the hospital because of a medical emergency. Under the majority’s “complete dominion” test a court would be compelled to find, as a matter of law, that Bateman did not have Corpuz’s implied permission to drive the Mazda, even if he did so to save Aida’s life. It seems to me that such a harsh *261result is not only unwise on policy grounds, but is simply absurd.3

In my view, then, the Gillen approach strikes the balance among the competing interests counseled by Hoohuli—i.e., it gives “an expansive interpretation” to the omnibus clause within the “limit[s] of reasonableness!;.]” 50 Haw. at 218-19, 437 P.2d at 105. Accordingly, I believe that we should follow the Gillen approach in this jurisdiction.

C.

Under the Gillen approach, the record before us contains evidence to. support the granting of summary judgment in favor of Vicente. There is no dispute that: (i) Aida had Corpuz’s permission to use the Mazda; (ii) Aida was in the car at the time of the accident; (iii) Aida gave permission to Bate-man to operate the vehicle; and (iv) the car was being used for Aida’s benefit. Under Gillen, those undisputed facts establish implied permission, despite Corpuz’s express instruction that no one but Aida was permitted to drive the car.

D.

Because I believe that the trial court was correct in its assessment and ruling, I would affirm the award of summary in favor of Vicente, and therefore I respectfully dissent from the majority opinion.

. Hoohuli, of course, addressed a slightly different permissive use question than the one presented in the case at bar. As noted, in Hoohuli, the second permittee had permission to operate the insured vehicle, but used it in a manner prohibited by the first permittee. Here, the second per-mittee, Bateman, violated the named insured’s, Corpuz's, instruction as to who was allowed to operate the vehicle. I agree with the majority that, notwithstanding these differences, the principles set forth in Hoohuli are controlling in this case. Nevertheless, because the specific question posed in this case is distinct from the one in Hoohuli, the "temporary tortious conversion” or the "gross deviation” test adopted in Hoohuli must be adapted to apply to the facts of this case. *259The specific test I would adopt, the Gillen approach, is discussed infra.

. If, as the majority contends, the Gillen approach is the equivalent of the initial permission rule that was rejected in Hoohuli, how does the majority explain Gillen’s holding that there was no coverage under the omnibus clause? There are no facts in Gillen suggesting that Gillen's (the second permittee) operation of the insured vehicle, which was in direct violation of the named insured’s express restrictions, amounted to "theft or the like.” Under the initial permission rule, those facts would require coverage. Under the Gillen approach they did not. That, I believe, conclusively demonstrates that the initial permission rule and the Gillen approach are not one and the same.

. Coverage under the omnibus clause could, of course, be found in such a situation if this court were to carve out some exception to the holding in this case. Even assuming that this court were inclined to recognize ad hoc exceptions to the "complete dominion” rule, in my view, that would undermine the only real virtue of the rule—¿.e., the certainty of its application. As the majority acknowledges, one of the reasons Hoo-huli itself rejected the strict rule was that its "alleged high degree of certainty ... turns out to be illusory because of the exceptions which seem to evolve.” Hoohuli, 50 Haw. at 218, 437 P.2d at 105.