National Farmers UP & C. Co. v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 26 December 1967
• Docket Number: Civ. No. 2706.
• Citation: 277 F. Supp. 542
• Parties: NATIONAL FARMERS UNION PROPERTY AND CASUALTY COMPANY, a corporation, Plaintiff, v. STATE FARM MUTUAL AUTO INSURANCE COMPANY, a corporation, Judy Sharon Madsen, by Anna Madsen, her guardian ad litem, Patricia Draeger, and Daniel McMillan, Defendants.
• Court: U.S. District Court — District of Montana

277 F. Supp. 542

NATIONAL FARMERS UNION PROPERTY AND CASUALTY COMPANY, a corporation, Plaintiff, v. STATE FARM MUTUAL AUTO INSURANCE COMPANY, a corporation, Judy Sharon Madsen, by Anna Madsen, her guardian ad litem, Patricia Draeger, and Daniel McMillan, Defendants.

Civ. No. 2706.

United States District Court D. Montana, Havre-Glasgow Division.

December 26, 1967.

Smith & Emmons, Great Falls, Mont., for plaintiff.

Hughes & Bennett, Helena, Mont., for defendants.

ORDER AND MEMORANDUM OPINION

JAMESON, Chief Judge.

This is an action for declaratory judgment to determine whether the plaintiff or the defendant State Farm Mutual Auto Insurance Company has the obligation to defend a personal injury action in state court in which Judy Sharon Madsen, by Anna Madsen, her guardian ad litem, is plaintiff and Patricia Draeger and Dennis McMillan are defendants, arising out of an accident which occurred on October 14, 1966. The case was tried before the court without a jury on October 16, 1967, and both parties have filed post trial briefs. There is little dispute in the revelant facts.

Herbert Freier, a well drilling contractor, resides on the north edge of Havre, with his wife and two daughters, Sharon and Barbara. The Freiers own three motor vehicles—a pickup used by Mr. Freier in his work, an Oldsmobile sedan used primarily by Mrs. Freier in going to and from her work, and a 1962 Chevrolet Impala. This vehicle, sometimes called a Super Sport, was white, with red interior, bucket seats, and manual floor shift.

The Chevrolet Impala was purchased on July 5, 1966, and title was taken in the names of Mr. and Mrs. Freier. It was admittedly purchased, however, for the use of the daughters. Sharon entered college in Bozeman, Montana, in September. Thereafter Barbara treated the car as her own. She used it in going to and from school and school functions, and on trips to town. She had her own set of keys and was not required to ask permission from the parents to use the car. If she had permission to go anywhere, she had permission to use the car. Mrs. Freier testified that she had driven the car only once because she did not like the floor gear shift. Mr. Freier had driven it on a few occasions.

Both parents had instructed Barbara that she was not to allow anyone else to drive the car. It is clear that this instruction was not followed on several occasions prior to the October 14 accident. The car was very attractive to Barbara and her friends, who constantly importuned her to permit them to drive. Usually she permitted them to drive the car for a short period of time in "cruising the drag" on Havre streets, with Barbara in the car. On one or two occasions friends were permitted to drive when Barbara was not in the car herself. Mr. and Mrs. Freier and Barbara all testified that neither Mr. nor Mrs. Freier was aware of the fact that Barbara had permitted her friends to drive the car.

October 14, 1966, was homecoming day at Havre High School, with numerous festivities, including a parade. Patricia Draeger was in charge of the arrangements for the parade. Barbara Freier and her friend Zora Hellebust were desirous of riding horses in the parade. Prior attempts to obtain horses had failed. On the morning of the parade Barbara asked Patricia to help her get a horse. Patricia testified that she told Judy Madsen of the desire of Barbara and Zora to ride in the parade, and Judy offered the use of two horses which were kept a short distance north of Havre. Barbara testified that both she and Patricia asked Judy about the horses. Judy testified that Patricia talked to her and that Patricia or Barbara asked if horses could be borrowed for the homecoming parade for the use of Barbara and Zora. Through another student, Jane Sterrett, arrangements were made to obtain a horse trailer from the Sterrett residence.

Both Barbara and Patricia had cars at school. Patricia's stationwagon had a trailer hitch on it, and there was no hitch on Barbara's car. Accordingly the girls used Patricia's car to get the trailer and horses. Accompanied by Judy they went first to the Sterrett place, where the trailer was attached to the stationwagon by Mrs. Sterrett with the use of a jack. The horses were then transported to the Ruby residence about four blocks from the high school, unloaded and placed in a barn. Later Patricia saddled the horses, while Barbara and Zora held them.

Shortly before the parade started, Patricia, Barbara and Zora went to the Ruby place, and Barbara, Zora and Rick Ruby left for the parade on their horses. The horse trailer was still attached to the Draeger car and could not be removed manually. Barbara gave Patricia permission to take the Chevrolet Impala to drive to the parade. Barbara did not recall whether Patricia asked to use the car or "I simply told her she could use it". It was agreed that they would meet at the Ruby place after the parade ended.

After the parade Patricia drove to the Ruby place, but found no one there. She started back toward town and met Rick Ruby riding toward his home. He told her that Barbara and Zora had ridden up toward the college (Northern Montana College). Meanwhile Judy Madsen had driven her car to the Ruby residence. After waiting a few minutes longer, Patricia, Judy and Rick Ruby left in the Impala to look for Barbara and Zora. Patricia and Judy were anxious to return the horses. Judy testified, however, that they were "worried about the people" rather than the horses.

In any event, Patricia, Judy and Rick undertook the trip to look for Barbara, Zora and the horses. On this trip a collision occurred with a vehicle driven by Daniel McMillan, which resulted in the action Judy Madsen instituted for personal injuries against Patricia and McMillan.

Mrs. Freier testified that Barbara had the use of the car the day of the parade with her permission. Mrs. Freier attended the parade and saw Barbara riding a horse. She had known in advance of Barbara's desire to ride in the parade but thought she was going to ride Rick Ruby's horse. She did not know of the arrangements made the morning of the parade for use of the Madsen horse, after Rick Ruby decided to ride his horse.

The plaintiff, National Farmers Union Property & Casualty Company, had issued an automobile liability policy to Patricia's father, Alfred V. Draeger. The defendant, State Farm Mutual Auto Insurance Company, had issued a policy to Barbara's father, Herbert Freier. It is admitted that Patricia is covered by her father's policy. Plaintiff contends, however, that State Farm's policy afforded primary coverage to Patricia, and that the coverage afforded by plaintiff's policy is "excess" by reason of the provision that "the insurance with respect to a * * * non-owned automobile shall be excess insurance over any other valid and collectible insurance". State Farm contends that Patricia was not an insured under its policy at the time of the accident and the policy did not afford her "valid and collectible insurance", and hence that she was insured only under the National Farmers policy.

The word "insured" as used in the State Farm policy, under bodily injury liability and property damage liability, includes:

(1) "the named insured" (Herbert Freier)

(2) "if the named insured is a person or persons, also includes his or their spouse(s), if a resident of the same household

(3) "If residents of the same household, the relatives of the first person named in the declarations, or of his spouse"

(4) "any other person while using the owned automobile, provided the operation and the actual use of such automobile are with the permission of the named insured or such spouse and are within the scope of such permission"; and

(5) "* * * any person or organization legally responsible for the use of such owned automobile by an insured as defined under the four sections above.

Plaintiff contends that Patricia Draeger was an insured under provisions (3), (4) and (5) for the following reasons:

1. Express permission from Barbara Freier.

2. Implied permission or consent by Herbert Freier, named insured, and Mrs. Herbert Freier.

3. Operation of the Impala for the "benefit, advantage and use" of Barbara Freier.

4. Patricia Draeger was legally responsible for the use of the Impala as an extension of the actual permitted use from Barbara Freier.

Defendant State Farm contends (1) that Patricia was not using the Freier automobile with the permission either express or implied, of the named insured or his spouse; and (2) that she was not a person legally responsible for the use of the automobile by an insured.

Counsel for both parties have submitted extensive and helpful briefs, which set forth the divergent views in the construction of the so-called "omnibus clause" of automobile liability policies.

We start with the premise that an "omnibus clause, for reasons of public policy, is to be liberally construed". State Farm Mutual Automobile Insurance Company v. Williamson, 9 Cir. 1964, 331 F.2d 517, 519. The court continued by quoting with approval the following statement from Jurd v. Pacific Indemnity Company, 1962, 57 Cal.2d 669, 703, 21 Cal.Rptr. 793, 795, 371 P.2d 569, 571:

"Provisions for omnibus coverage in an automobile liability insurance policy reflects a legislative policy to protect the public when a motor vehicle is operated by one other than the insured owner with his consent. * * * In those jurisdictions where the insertion of an omnibus clause is required by statute in a liability insurance policy, it is liberally construed so as to effectuate the manifest public policy of broadening the insurance coverage."

Montana has such a statute.¹

The general rules to be applied in construing an omnibus clause were well summarized in 7 Am.Jur. 431, Automobile Insurance, Section 116, as follows:

"It has been frequently stated that, as a general rule, the permission given by the named insured to another to use the named insured's car does not authorize the

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