Allstate Ins. Co. v. Sandler, Civ. A. No. 89-3548.

• Decision Date: 19 December 1990
• Docket Number: Civ. A. No. 89-3548.
• Citation: 753 F. Supp. 573
• Parties: ALLSTATE INSURANCE COMPANY v. Leslie N. SANDLER, Karen Sandler, Marguerite Delmar, Melissa Delmar, Mary D. Palmer, Gerard D. Palmer, J.C. Penney Casualty Ins. Co., and Government Employees Ins. Co.
• Court: U.S. District Court — Eastern District of Pennsylvania

753 F. Supp. 573

ALLSTATE INSURANCE COMPANY v. Leslie N. SANDLER, Karen Sandler, Marguerite Delmar, Melissa Delmar, Mary D. Palmer, Gerard D. Palmer, J.C. Penney Casualty Ins. Co., and Government Employees Ins. Co.

Civ. A. No. 89-3548.

United States District Court, E.D. Pennsylvania.

December 19, 1990.

William Kennedy, White & Williams, Philadelphia, Pa., for Allstate Ins. Co.

Marc Robert Steinberg, Rubin, Glickman & Steinberg, P.C., Lansdale, Pa., for Leslie N. and Karen Sandler.

Kim R. Plouffe, German, Gallagher & Murtagh, Philadelphia, Pa., for Mary D. and Gerard D. Palmer.

John W. Walter, Marshall, Dennehey, Warner, Coleman & Goggin, Philadelphia, Pa., for J.C. Penney.

MEMORANDUM

RAYMOND J. BRODERICK, District Judge.

Government Employees Insurance Company (GEICO) seeks a declaration that it need not defend or indemnify Melissa Delmar in a state tort suit under the automotive insurance policy it issued to Marguerite Delmar, who is the named insured and Melissa's mother. The uncontested facts are as follows. In early 1985, Gerard Palmer gave his daughter Mary Palmer blanket permission to use the family car, an Oldsmobile station wagon. He expressly told Mary, however, that she, and only she, was to operate the automobile. Mary used the station wagon virtually every day. On October 27, 1985, Mary allowed her friend, Melissa Delmar, to drive the car, even though Melissa did not have a license or a learner's permit. With Melissa behind the wheel, the two were involved in an auto accident with Leslie Sandler. Sandler and his wife then brought a negligence action against Mr. Palmer, Melissa, and Mary in the Pennsylvania Court of Common Pleas.

GEICO's policy covers the named insured and the named insured's resident relatives when driving a non-owned automobile. The use, however, "must be with the permission, or reasonably believed to be with the permission, of the owner, and within the scope of that permission." GEICO contends that because Melissa neither had nor reasonably believed that she had Mr. Palmer's permission to operate the station wagon, she is not a "person insured" within the meaning of its policy.

This Court has held previously that Mr. Palmer did not give Melissa express or implied permission to drive the car, Allstate Ins. Co. v. Sandler, Civ. No. 89-3548, slip op. at 3-4, 1990 WL 40723 (E.D.Pa. Mar. 30, 1990), and, as Melissa herself recently has acknowledged, she was aware that Mr. Palmer had forbidden others to drive the auto and that her action on October 27, 1985 was contrary to his instructions. There is no question that Melissa did not believe that her use of the station wagon was with Mr. Palmer's consent. On the other hand, the record before the Court also reveals that Melissa had Mary's permission to operate the car at the time of the accident. Although it is not apparent precisely what words Mary spoke to transmit her consent, Mary was a passenger in the auto, and Melissa's use was at the very least with Mary's knowledge and acquiescence. The issue, then, is whether Mary was the "owner" of the car as that term is employed in GEICO's policy.

All concerned agree that Pennsylvania law governs this action. Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), and its progeny require a federal court sitting in diversity to apply state substantive law, which includes the authoritative pronouncements of the state's highest judicial tribunal. In the absence of such guidance, the Court must predict how that court would rule if the issue were presented to it. Hospital Support Serv. v. Kemper Group, 889 F.2d 1311, 1313 (3d Cir.1989). The Third Circuit has stated:

To make this prognostication, we are not inflexibly confined by dicta or by lower state court decisions, although we should look to such statements as indicia of how the state's highest court might decide. The policies underlying the applicable legal doctrines, the doctrinal trends indicated by these policies, and the decisions of other courts may also inform our analysis. In addition, we may consult treatises, the Restatement, and the works of scholarly commentators.

Pennsylvania Glass Sand Corp. v. Caterpillar Tractor Co., 652 F.2d 1165, 1167 (3d Cir.1981); see also West v. AT & T Co., 311 U.S. 223, 236-37, 61 S.Ct. 179, 183, 85 L.Ed. 139 (1940).

Although GEICO's policy does not define the word "owner," it urges the Court to construe the term as meaning the titleholder of the car. There is no reason for such a crabbed interpretation. As the Eight Circuit has noted, the "plain and reasonable meaning" of that word "as applied to motor vehicles includes not only absolute estates but also includes estates less than absolute." Powell v. Home Indem. Co., 343 F.2d 856, 859 (8th Cir.1965). This is true under Pennsylvania law as well. "The certificate of title is in no way controlling on the question of ownership" of an automobile, but "is merely some evidence of it." Folmar v. Hartford Accident & Indem. Co., 242 Pa.Super. 350, 363 A.2d 1304, 1307 (1976). Car ownership is defined in part by additional characteristics, such as possession, dominion, use, and benefit. Id. Further, insurance carriers added the limitation "with the permission of the owner" to non-owned automobile clauses in order to defeat liability for harm or damage caused when their insureds' relatives are driving stolen cars—a purpose which can readily be accomplished without restricting the term "owner" to encompass merely the individual who holds legal title to the car. Carlsson v. Pennsylvania Gen. Ins. Co., 214 Pa.Super. 479, 257 A.2d 861, 864 (1969), aff'd mem., 438 Pa. 553, 265 A.2d 520 (1970).

Even if one were to assert that the word is fairly susceptible to more than one meaning, the broader sense would have to prevail. Rules of construction in Pennsylvania mandate that any ambiguity in the policy "`be construed against the insurer, and in a manner which is more favorable to coverage.'" Houghton v. American Guaranty Life Ins. Co., 692 F.2d 289, 291 (3d Cir.1982) (quoting Butin v. Continental Ins. Co., 583 F.2d 1201, 1207 (3d Cir. 1978)). Accord Mohn v. American Casualty Co., 458 Pa. 576, 326 A.2d 346, 351 (1974); Cohen v. Erie Indem. Co., 288 Pa. Super. 445, 432 A.2d 596, 599, 600 (1981). After all, GEICO could have drafted the policy more narrowly if it had wished its terms to be understood in the most restrictive sense.

For these or similar reasons, many courts have concluded that, under nonowned automobile clauses, the "owner" is not only one who holds legal title, but also one who has "dominion or possession of the automobile and is capable of transferring lawful possession to another." Phillips v. Government Employees Ins. Co., 258 F.Supp. 114, 117 (E.D.Tenn.1966) (applying Tennessee law), rev'd, 395 F.2d 166 (6th Cir.1968). Indeed, in Phillips, the record titleholder had expressly instructed his son not to permit anyone else to drive the car except in an emergency. For a non-urgent reason, the son loaned the car to a friend, who was then involved in a collision. After determining that the use was without the titleholder's consent, the Court nonetheless held that the son, because he had lawful control of the automobile at the time he permitted his friend to take it, was the "owner" of the car within the meaning of GEICO's non-owned automobile provision. Accordingly, the driver's operation was "with the permission of the owner" and the insurance company had a duty to defend him in the underlying tort suit.

Although the Sixth Circuit disagreed with the Phillips decision and reversed, 395 F.2d 166 (6th Cir.1968), courts in several jurisdictions have adopted views identical or similar to the one advocated by the district court. See, e.g., American Mut. Liab. Ins. Co. v. Milwaukee Ins. Co., 283 Ala. 414, 218 So.2d 129, 132 (1969); Government Employees Ins. Co. v. Kinyon, 119 Cal.App.3d 213, 173 Cal.Rptr. 805, 809-10 (1981); Maryland Casualty Co. v. Iowa Nat'l Mut. Ins. Co., 54 Ill.2d 333, 297 N.E.2d 163, 167-68 (1973); Western States Mut. Ins. Co. v. Verucchi, 38 Ill.App.3d 266, 347 N.E.2d 63, 65-66 (1976); Employers Commercial Union Ins. Co. v. Bertrand, 306 So.2d 426, 429-31 (La.App. 1975); Johnson v. Aetna Casualty and Sur. Co., 274 So.2d 769, 773 (La.App.1973); United States Fidelity & Guar. Co. v. Safeco Ins. Co., 522 S.W.2d 809, 817-18 (Mo.1975); State Farm Mut. Auto. Ins. Co. v. Zurich Amer. Ins. Co., 118 N.J.Super. 84, 286 A.2d 517, 522-23 (1972), aff'd in part, 62 N.J. 155, 299 A.2d 704 (1973); Republic Ins. Co. v. Luna, 539 S.W.2d 69, 70-71 (Tex.Civ.App.1975); Farmers Ins. Co. v. USF & G Co., 13 Wash.App. 836, 537 P.2d 839, 843-44 (1975). This includes Carlsson, supra, the only Pennsylvania decision to address explicitly the issue whether the term "owner" in a non-owned auto clause is limited to the titleholder. The Superior Court quoted the district judge's opinion in Phillips at length and with approval. The Court predicts that the Pennsylvania Supreme Court, which affirmed Carlsson by memorandum opinion, would do so as well.

On the facts presented here, Melissa...