United Services Automobile Association v. Russom

Decision Date26 February 1957
Docket NumberNo. 16298.,16298.
Citation241 F.2d 296
PartiesUNITED SERVICES AUTOMOBILE ASSOCIATION, Appellant, v. James B. RUSSOM et al., Appellees.
CourtU.S. Court of Appeals — Fifth Circuit

C. W. Trueheart, San Antonio, Tex., Trueheart, McMillan, Russell & Westbrook, San Antonio, Tex., for appellant.

Josh H. Groce, San Antonio, Tex., Eskridge, Groce & Hebdon, San Antonio, Tex., of counsel, for appellees.

Before CAMERON, JONES and BROWN, Circuit Judges.

JOHN R. BROWN, Circuit Judge.

The insurer, United Services Automobile Association, asserting, as it has frequently but unsuccessfully in these family automobile situations, United Services Automobile Association v. Preferred Accident Insurance Co., 10 Cir., 190 F.2d 404; United Services Automobile Association v. Zeller, Tex.Civ.App., 135 S.W. 2d 161, error dismissed, judgment correct, that use of the car was not with permission of the named assured, denies liability outright. But unwilling, perhaps in keeping with the military status of its clientele, to put its trust altogether in this Maginot Line, it, as do so many others, Maryland Casualty Co. v. Southern Farm Bureau Casualty Insurance Co., 5 Cir., 235 F.2d 679; Continental Casualty Co. v. Suttenfield, 5 Cir., 236 F.2d 433, falls back on fluid defenses the effect of which is to say that it is not liable because another is, or partially is. And, like General Insurance Co. of America v. Western Fire & Casualty Co., 5 Cir., 241 F.2d 289, all but forgotten is the accident1 between Enslen and the Russoms which set these intermeshing cogs in motion. For now concern is whether United's2 policy protects Enslen as an additional assured under the Omnibus Clause; and if it does, whether it must bear the loss altogether or can parcel all or part of it out to Enslen's insurer, Standard,3 especially since Standard was the moving figure4 in the disposition of the Ohio suits and, as lender under a loan receipt,5 is a substantial beneficiary of the jury verdict and judgment below against United.

In the course of its defenses, United takes us on a spirited, nationwide juridical conflicts bus ride as it proceeds from Ohio to Texas, Texas to Ohio, to Kentucky, and back to Ohio stopping en route only long enough to take on, as passengers, favorable local jurisprudence but departing quickly lest unfavorable and unwanted principles might come aboard.

Beginning our fast travels, this time to Ohio, United's contention that Enslen did not have Col. Critchfield's permission to use the car is, in this midtwentieth automotive century, almost a feudal recrudescence. For despite the fact that the 1948 Oldsmobile was the Critchfield family car for use by both husband and wife and was loaned from time to time by Mrs. Critchfield with the Colonel's acquiescence to friends and relatives for temporary trips, United insists that the Colonel had never expressly clothed his wife with authority to allow others to use it, and Ohio, as a matter of law, declares that the named assured cannot impliedly authorize his permittee to allow sub-permittees to use the vehicle.

The claim is unsupported by facts and, if Ohio law applies, it does not impose this unrealistic result. Enslen was no stranger to the Critchfield household. Indeed, they had an acute interest in him as did he in the 1948 Oldsmobile. A few days before, about January 9, 1950, he had answered the Critchfield's classified ad offering this car for sale at which time the Colonel allowed him to take it on a short demonstration drive. A day or so later, he returned and, in the Colonel's absence, obtained Mrs. Critchfield's permission to demonstrate the car to his family for a couple of hours. Colonel Critchfield learned of this but never chastised or rebuked his wife or indicated, any more than would any other contemporary husband, that his wife had exceeded the scope of her employment, agency, or authority. Subsequently, a bargain was struck, Enslen gave the Colonel a $250.00 check as a down payment, and the next day Enslen and the Colonel drove the car to a bank to arrange financing. As some delay was encountered in financing, the car was to remain with the Critchfields until the transaction was closed. On the day of the accident, desiring to obtain a new set of tires for this car (he intended to use the Critchfield old tires on his present automobile to enhance its resale value), Enslen sought, and obtained, Mrs. Critchfield's permission to drive the car to Cincinnati to buy some specially advertised tires. On this trip, the accident occurred. When Colonel Critchfield returned a few days later, he reported the accident to United on the assumption that Enslen, using the car under these circumstances, was covered. Use by Enslen was further ratified since title was subsequently transferred formally to Enslen January 26, 1950.

If this does not compel, at least it amply supports, the jury special findings that in lending the car to Enslen, Mrs. Critchfield "had the implied authority of her husband to permit * * * Enslen to use * * *" it and Enslen's use of the car was "* * * with the implied permission of Colonel Critchfield."

If Ohio6 law is the governing standard, then Fox v. Crawford, Ohio App., 80 N.E.2d 187, 189, does not, as United insists, forbid implied authorization. Portions of the opinion perhaps declare that the named assured may only give express permission to a user to allow others to use the car. But from the opinion as a whole, it is clear that all the case stands for is that authority in the permittee to allow use by a sub-permittee will not be implied merely from the original grant of permission by the named assured. But it does not remotely hold that authority may not be implied. For it recognizes that it is but a question of agency and "* * * authority to act for * * * named assured may be implied, as in other agencies, by acts and conduct, but in order to bind * * * the named assured by * * * the permittee's acts his authorization must be express, implied or subsequently ratified by * * * the named assured * * *"; and in this process, the named assured can "* * * signify her permission to use the insured automobile by a course of conduct, or * * * mere silence to bring * * * the sub-permittee within the omnibus clause * * *" so long as "* * * such implied permission * * * was by act or conduct of * * * the named insured, and * * * amounted to her intended selection of him as such driver * * *." And see Marolt v. Lisitz, 94 Ohio App. 298, 115 N.E.2d 169, 175; West v. McNamara, 159 Ohio St. 187, 111 N.E.2d 909.

Ohio then fits in with the general principle that whether the named assured authorized the permittee to allow others to use the vehicle is to be measured in a realistic way in which, once established, implied permission has exactly the same significant force as one expressly made with more elaborate formality. Indiana Lumbermen's Mutual Ins. Co. v. Janes, 5 Cir., 230 F.2d 500; Pennsylvania Thresherman & Farmers' Mut. Cas. Ins. Co. v. Crapet, 5 Cir., 199 F.2d 850; United Services Automobile Association v. Preferred Accident Insurance Co., 10 Cir., 190 F.2d 404; United Services Automobile Association v. Zeller, Tex.Civ.App., 135 S.W.2d 161, error dismissed, judgment correct; Robinson v. Fidelity & Casualty Co. of New York, 190 Va. 368, 57 S.E.2d 93; Drake v. General Accident, 88 Ga.App. 408, 77 S.E.2d 71; 7 Appleman's Insurance Law and Practice, Sec. 4365.

A fact some underwriters are reluctant to appreciate is that, by the Omnibus Clause, the insurer has committed to the named assured a wide capacity to determine to whom and under what circumstances coverage will be extended. Uncertainty, on the proofs, as to whether the assured has impliedly given his consent to the particular use does not weaken the decisive effect of it once that fact has been judicially determined.

Enslen was, therefore, an assured and entitled, as of right, to defense by United.

But here United, now dissatisfied with Ohio, resumes its perambulations on this scenic-conflicts tour. The immediate cause is its contention that disposition of the Ohio litigation, note 4, supra, was in reality a mere settlement and not an actual trial required by the No-action Clause7 of the policy. Fearing that Ranallo v. Hinman Bros. Const. Co., D.C.Ohio, 49 F.Supp. 920, affirmed Buckeye Union Casualty Co. v. Ranallo, 6 Cir., 135 F.2d 921, certiorari denied 320 U.S. 745, 64 S.Ct. 47, 88 L. Ed. 442, establishes for Ohio too loose a practice or that Section 9510-4 of the Ohio Code of 1948 may give an absolute statutory right to a judgment creditor to proceed directly against the underwriter, it speeds swiftly to Dallas, Texas, to obtain the benefit of Wright v. Allstate Ins. Co., Tex.Civ.App., 285 S.W. 2d 376, error refused, NRE, while carefully avoiding San Antonio, the situs of its home office, because of Great American Indemnity Co. v. McMenamin, Tex. Civ.App., 134 S.W.2d 734, writ of error dismissed, correct judgment, which it classes along with Ranallo. United asserts that the testimony8 of Enslen's (Standard's) Ohio counsel, inferentially rejected by the Court below as conclusions purporting to alter the judicial record of a judgment after trial, shows that this was but a voluntary settlement.

Both Ranallo and McMenamin indicate strongly that if, in good faith, the ultimate decision is left to the Judge, if it is he who, on evidence offered, must determine whether judgment goes for plaintiff or defendant, and who then must fix the amount of the award, it is not the less adversary if counsel states that no appeal will be taken if judgment does not exceed an indicated amount. But we need not determine either the rule of conflicts or substantive law. For United, having breached, as we hold, its unconditional contractual obligation to defend, cannot hold the assured (or those deriving through him) to performance of a contract term that envisages a continuation, not...

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