Matits v. Nationwide Mutual Insurance

The opinion of the court was delivered by

Proctor, J.

This case concerns coverage under the omnibus clause of an automobile liability insurance policy issued by the defendant, Nationwide Mutual Insurance Co.

On October 26, 1956 an automobile owned by Mrs. Hilda Yelasco and driven by Mrs. Betty Mae Hoerner collided with an automobile owned by Elizabeth Slodzinski and driven by her husband, Anthony Slodzinski, in which John Matits was a passenger. Matits and Elizabeth and Anthony Slodzinski instituted actions for personal injuries and property damage against Mrs. Hoerner and Mrs. Yelasco. The actions against Mrs. Yelasco were dismissed, it being agreed that Mrs. Hoerner was not the former’s agent at the time of the collision. Trial of the consolidated actions against Mrs. Hoerner resulted in judgments in favor of Matits for $25,000, and in favor of Elizabeth and Anthony Slodzinski for $875 and $500 respectively.

At the time of the collision, Mrs. Yelasco was the named assured in an automobile liability insurance policy issued by Nationwide and covering the automobile driven by Mrs. Hoerner. Under the terms of that policy, Nationwide extended coverage to Hilda Yelasco, her spouse, and “any person or organization legally responsible for the use of the described automobile provided the actual use was with the permission of the policyholder or such spouse.” This is the standard omnibus clause found in most automobile liability insurance policies. Mts. Hoerner was covered under a similar policy issued by plaintiff Allstate Insurance Co., on another automobile but extending to occasional operation by her of a vehicle other than the one insured. Nationwide refused to defend Mrs. Hoerner on the ground that, in light of the circumstances under which she was driving the car at the time of the collision, she was not covered by the Yelasco policy. Allstate defended Mrs. Hoerner and, after judg*491ment against her, paid $10,000, the full coverage of its policy, to Matits. Matits and the Slodzinskis instituted the present actions to collect from Nationwide the amounts outstanding on the Hoerner judgments. Allstate sued Nationwide for $972.80, the expenses incurred defending Mrs. Hoerner. These actions were consolidated for trial, and the amounts sued for are not in dispute.

Nationwide concedes that it was the primary insurer and that therefore, if its policy covered -Mrs. Hoerner, it must pay all plaintiffs. The undisputed facts brought out at the trial are as follows:

The Velascos and Hoerners were next-door neighbors in Ramsey, New Jersey. On October 25, 1956, in the early evening, Mr. Velasco loaned his wife’s car to Mrs. Hoerner so that she could visit her mother who was ill in Hawthorne, New Jersey. Mrs. Hoerner arrived in Hawthorne about 8:00 p. m. After a short visit with her mother, she drove in search of her sister to the Crane House, a tavern and restaurant in Paterson. At Hawthorne, Paterson is in the opposite direction from Ramsey. Mrs. Hoerner had a few highballs at the Crane House and then drove to the Flamingo Bar in Paterson. She stayed at the Flamingo for a short time, and then returned to the Crane House; she then paid a second visit to the Flamingo; and finally, a third visit to the Crane House. Just before midnight, she left the Crane House to drive home and, shortly thereafter, was involved in the collision with the Slodzinski car in Paterson.

Plaintiffs and defendant disagree as to the time limit imposed by Mr. Velasco on Mrs. Hoerner’s use of the car, and the time and content of a telephone call made by Mrs. Hoerner to Mr. Velasco after her departure from her mother’s house and before the collision. Velasco testified that when he gave permission to use the car he told Mrs. Hoerner to return it within an hour. Mrs. Hoerner testified that there was no time limit on her use of the ear. She further testified that at about 11:00 p. m. she telephoned Velasco and told him that she was “going to be a little late” and asked *492“would lie mind if she kept the car a little longer,” to which he replied, “Certainly; as long as * * * [she] returned the car before three o’clock that morning.” Mr. Velasco testified that Mrs. Hoerner called about 9 :30 p. m. and that upon being informed by her that she was going to stop and have a drink, he said, “* * * you better get right home because I need the car * * * your husband will be home soon and if he knows that you have been drinking you are going to get it.”

The trial court, finding that Mr. Velasco had given initial permission to Mrs. Hoerner to use the car, held that Mrs. Hoerner was an additional insured under Nationwide’s policy and that “the fact of [her] later deviation is unimportant.” Accordingly, he deemed it unnecessary to resolve the above-mentioned factual issues and entered judgment for all plaintiffs. The Appellate Division unanimously affirmed, stating that “in the absence of a gross deviation from the permitted use the permittee will not be denied the benefit of the insurance to the detriment of the injured,” and holding that “the trial court correctly concluded that Mrs. Hoerner’s use of the Velasco vehicle did not so deviate from the permission granted to her as to deprive her of the coverage under the policy.” 59 N. J. Super. 373 (1960). We granted Nationwide’s petition for certification. 32 N. J. 350 (1960).

According to the terms of the omnibus clause in Nationwide’s policy, Mrs. Hoerner was covered as an additional assured if her “use” of the Velasco car at the time of the collision was with the “permission” of Mr. or Mrs. Velasco. When Mrs. Hoerner left her mother’s home in Hawthorne to drive to the Crane House and the Flamingo Bar in Paterson, she deviated from the purpose for which she borrowed the Velasco car. The question for decision is whether her deviation vitiated Velasco’s initial permission so as to deprive her of coverage under defendant’s policy. Courts faced with this question have adopted one of three views: (1) The liberal or so-called “initial permission” rule that if a person has permission to use an automobile in the first *493instance, any subsequent use while it remains in his possession though not within the contemplation of the parties is a permissive use within the terms of the omnibus clause; for eases so holding, see Annotations 72 A. L. R. 1375, 1405-09 (1931); 106 A. L. R. 1251, 1262 (1937) ; 126 A. L. R. 544, 553-55 (1940); 5 A. L. R. 2d 600, 629-36 (1949); (2) the moderate or “minor deviation” rule that the permittee is covered under the omnibus clause so long as his deviation from the permissive use is minor in nature; Annotations 72 A. L. R., supra, at pp. 1401-03; 106 A. L. R., supra, at p. 1259; 126 A. L. R., supra, at p. 552; 5 A. L. R. 2d, supra, at pp. 636-43; and (3) the strict or “conversion” rule that any deviation from the time, place or purpose specified by the person granting permission is sufficient to take the permittee outside the coverage of the omnibus clause; Annotations 72 A. L. R., supra, at pp. 1403-05; 106 A. L. R., supra, at pp. 1260-62; 126 A. L. R., supra, at pp. 552-53; 5 A. L. R. 2d, supra, 626-29. For additional authorities discussing these rules, see 7 Appleman, Insurance 169-181 (1942) ; Putman, “The Standard Automobile Policy: What Persons and Which Vehicles are Covered,” 11 Ark. L. Rev. 20 (1956-57); Ashlock, “Automobile Liability Insurance: The Omnibus Clause,” 46 Iowa L. Rev. 84, 102-118 (1960).

The trial court and the Appellate Division in the present case both relied on Rikowski v. Fidelity & Casualty Company, 117 N. J. L. 407 (E. & A. 1937), to conclude differently as to the applicable New Jersey law. The trial court interpreted Bilcoivslci as adopting the initial permission rule. Since Mr. Velasco undisputedly gave permission to Mrs. Hoerner to use the car in the first instance, the trial court, applying that rule, found that Mrs. Hoerner, without regard to the extent of her deviation, was an additional assured. The Appellate Division apparently interpreted Bilcowslci as adopting the minor deviation rule. It affirmed the judgments below, however, because it regarded the trial court as having found Mrs. Hoerner’s deviation was not so gross as to deprive her of coverage under the policy. 59 N. J. Super., at *494p. 382. These divergent views of applicable New Jersey law understandably derive from ambiguity in the Rilcowslci holding. The facts in that case were these: A chauffeur drove his employer to a department store. There was no place to park in the immediate vicinity. The employer told the chauffeur to find a parking place and return within an hour. An accident occurred within a half hour about two miles from the department store while the chauffeur was driving some friends to their home. The court held that the omnibus clause in an insurance liability policy issued to the employer covered the chauffeur.

The nature of the deviation in Rilcowslci and the language of the Court of Errors and Appeals suggest adherence to the minor deviation rule. The deviation from the permissive use does not appear to have been gross and the court’s conclusion was "that under the facts of the case and within the meaning of the policy such deviation from instructions as the evidence discloses did not serve to end the driver’s permission to operate the car.” On the other hand, the court in Rikowski relied primarily on Dickinson v. Maryland Casualty Co., 101 Conn. 369, 125 A. 866, 41 A. L. R. 500 (Sup. Ct. Err. 1924), which is frequently cited as the leading case supporting the initial permission rule. See, e. g., Garland v. Audubon Insurance Company, 119 So. 2d 530, 539 (La. Ct. App. 1960); Annotations 126 A. L. R., supra, at p. 553; 5 A. L. R. 2d, supra, at p. 630; Note, 83 U. Pa. L. Rev. 765, at p. 768 (1935). But see Ashlock, op. cit., supra, at p. 106.

The facts in Dickinson in many respects resemble those in the present case. There an automobile was loaned so that the borrower could drive home to change his clothes. He was told to “hurry back.” Instead of driving home, the borrower stopped in a saloon to get a drink. While there, he picked up some friends and while driving one of them home, in an opposite direction from the borrower’s home, visited at least one other saloon for drinks. Shortly thereafter, the borrower was driving to a corner where he could *495see the city hall clock in order to determine whether he still had time to drive to his home when the car struck a tree, killing one of the occupants. The issue before the court was whether the borrower was an additional assured under the owner’s automobile liability policy. The court, construing an omnibus clause similar to the one in the present case, said [101 Conn. 369, 125 A. 868] : “Does this language mean the permission to use the car or the permission to use the car in a specified manner and for a specified purpose ? These are the two constructions which confront us * * Eollowing the well-established rule that the provisions of an insurance policy are construed strictly against the insurer, the court adopted the construction that permission to use the car in the first instance made the borrower an additional assured. The court rejected the construction that permission was circumscribed by the use of the car in a specified manner or for a specified purpose.

The citation in Rikowski of Dickinson suggest that our former Court of Errors and Appeals was adopting the initial permission rule. The Rikowski case has been so interpreted. See, e. g., Konrad v. Hartford Accident & Indemnity Company, 11 Ill. App. 2d 503, 137 N. E. 2d 855 (App. Ct. 1956); Annotation 5 A. L. R. 2d, supra, at p. 629; Miller, “The Omnibus Clause,” 15 Tul. L. Rev. 422, 427, n. 34 (1941). And the rationale of the Rikowski decision reenforces such an interpretation. The court there noted that the Motor Vehicle Financial Responsibility Law then in effect, P. L. 1929, c. 116, R. S. 39:6-1 to 22, represented legislative adoption of a public policy “looking towards the collectibility of damages wrongfully inflicted in the operation of motor vehicles.” To effectuate such legislative policy the court interpreted the omnibus clause broadly. Additionally, it noted that since automobile liability insurance contracts are written solely by the insurer and in face of the legislative purpose to benefit persons injured, such contracts are to be construed liberally in favor of the injured. See, Costanzo v. Pennsylvania Threshermen, etc., Ins. Co., 30 N. J. 262, *496at p. 268 (1959); Eggerding v. Bicknell, 20 N. J. 106, at p. 113 (1955). These reasons support the initial permission rule and are even more persuasive today. In 1952, the Legislature enacted a far more comprehensive scheme of motor vehicle legislation designed to assure that persons who cause automobile accidents are able to answer financially to their innocent victims. Motor Vehicle Security-Responsibility Law, N. J. S. A. 39:6-23 to 60; Unsatisfied Claim and Judgment Fund Law, N. J. S. A. 39:6-61 to 91; Motor Vehicle Liability Security Fund Law, N. J. S. A. 39:6-92 to 104. For a discussion of the genesis, operation, and purpose of these statutes, see Molnar, “New Jersey’s Answer to Financially Irresponsible Motorists,” 1955 Insurance Law Journal 729; Gaffney, “The Motorist, His Victim and The State,” 25 State Government 266 (1952). A legislative policy so comprehensively implemented demands an even broader interpretation of the omnibus clause than the interpretation based upon the policy of the Legislature at the time of the Rilcowslci decision. The “initial permission” rule is based on a broad interpretation of the omnibus clause. E. g., Dickinson v. Maryland Casualty Co., supra. The “conversion” and “minor deviation” rules are based on narrower interpretations of the clause. E. g., Johnson v. American Automobile Ins. Co., 131 Me. 288, 161 A. 496 (Sup. Jud. Ct. 1932); Denny v. Royal Indemnity Co., 26 Ohio App. 566, 159 N. E. 107 (Ct. App. 1927). It is our view that these latter rules making coverage turn on the scope of permission given in the first instance render coverage uncertain in many cases, foster litigation as to the existence or extent of any alleged deviations, and ultimately inhibit achievement of the legislative goal. We think that the “initial permission” rule best effectuates the legislative policy of providing certain and maximum coverage, and is consistent with the language of the standard omnibus clause in automobile liability insurance policies.

Accordingly, we hold that if a person is given permission to use a motor vehicle in the first instance, any *497subsequent use short of theft or the like while it remains in his possession, though not within the contemplation of the parties, is a permissive use within the terms of a standard omnibus clause in an automobile liability insurance policy. Mr. Velasco gave Mrs. Hoerner permission to use his wife’s automobile to visit her mother. Velasco’s initial permission made Mrs. Hoerner an additional assured and her subsequent deviation from the purpose for which she borrowed the vehicle did not annul the protection afforded her and the injured plaintiffs by the omnibus clause of Nationwide’s policy.

Our holding is not contrary to Nicholas v. Independence Indemnity Co., 11 N. J. Misc. 344 (Sup. Ct. 1933); Penza v. Century Indemnity Co., 119 N. J. L. 446 (E. & A. 1938) and Baesler v. Globe Indemnity Co., 33 N. J. 148 (1960). Without expressing approval or disapproval of Nicholas and Penza, it is sufficient to say that these cases are entirely inapposite to the question here presented. Neither involved a deviation from a permitted use. Both had to do with a retaking of an automobile after permission to use it had expired — a retaking which the court in Penza characterized as unlawful. In both cases the court found that there was no permission to use the automobile in the first instance. Indeed, the court in Penza took pains to emphasize this fact as a ground for distinguishing the case from Rilcowslci. It said: “AVe do not regard this as a case involving an initial permission to use an automobile and a ‘slight,’ or any other kind of deviation therefrom.” Penza, supra, 119 N. J. L., at p. 451. The court went on to say that if the driver had deviated from a permitted use there might well have been coverage under Rilcowslci. Baesler is also readily distinguishable from the present case. There we held that coverage did not extend to a person who was expressly prohibited by the named insured from using the automobile. The case did not involve deviation from an initially permitted use.

Affirmed.