Allstate Ins. Co. v. Federal Ins. Co.

• Decision Date: 16 October 1974
• Docket Number: No. 56,56
• Citation: Allstate Ins. Co. v. Federal Ins. Co., 23 Md.App. 105, 326 A.2d 29 (Md. App. 1974)
• Parties: ALLSTATE INSURANCE COMPANY et al. v. FEDERAL INSURANCE COMPANY et al.
• Court: Court of Special Appeals of Maryland

Page 105

23 Md.App. 105

326 A.2d 29

ALLSTATE INSURANCE COMPANY et al. v. FEDERAL INSURANCE COMPANY et al.

No. 56.

Court of Special Appeals of Maryland.

Oct. 16, 1974.

F. Gray Goudy and Herbert Burgunder, Jr., Baltimore, for appellants-cross-appellees.

Delverne A. Dressel, Emanuel H. Horn, with whom were Dickerson, Nice, Sokol & Horn, Baltimore, and Hal C. B. Clagett and Sasscer, Clagett, Channing & Bucher, Upper Marlboro, on the brief, for appellees-cross-appellants.

William L. Kaplan, Hyattsville, with whom were Feissner, Kaplan, Smith, Joseph, Greenwald & Laake, Hyattsville, for appellees Bill N. and Katherine Fragnol.

Samuel O. Jackson, Jr., Baltimore, with whom were Max R. Israelson, Israelson, Pines & Jackson, P. A. and Louis F. Friedman and Miles & Friedman, Baltimore, for appellee Sarah E. Allison.

Argued before THOMPSON, GILBERT and MENCHINE, JJ.

GILBERT, Judge.

On January 10, 1972 a Cadillac, operated in a southerly direction on the Baltimore-Washington Parkway, apparently went out of control, crossed the median strip situate between the north and southbound lanes of the Parkway, and entered the northbound lane. A four car collision occurred. A number of personal injury and property claims arose against the then driver of the Cadillac, its owner, a company licensed by the Interstate Commerce Commission to transport, for a fee, motor vehicles from New York to Florida, and the individual who had contracted with the carrier to drive the vehicle to Florida.

The direct result of the multiplicity of tort actions brought against the alleged tort-feasors is that the insurance carriers for the defendants have been unable to agree as to which of them is cast in the role of primary insurer.

Max Schwartz (Schwartz), the owner of the Cadillac, together with his insurance carrier, Federal Insurance Company (Federal), filed, in the Circuit Court for Prince George's County, a petition for a declaratory decree. The petition joined (1) the common carrier Dominick Spinelli, trading as Direct Way Auto Shippers (Spinelli), (2) Allstate Insurance Company (Allstate), the insurance carrier for Spinelli, (3) Market Insurance Company (Market), the admitted excess coverage carrier for Spinelli, (4) the contract driver of the vehicle, Richard C. Frank (Frank), (5) the person who was driving the car at the time of the collision, James J. Straz (Straz), and (6) various persons whose claims arose out of the accident.

The record reflects that Schwartz was desirous of spending some time in Florida. In response to a newspaper advertisement he contacted Spinelli, who agreed to have Schwartz's vehicle driven to Florida for a charge made in accordance with the tariff promulgated by the Interstate Commerce Commission (ICC). Schwartz executed a Bill of Lading in which he agreed to pay Spinelli ninety dollars. Fifty dollars was paid to Spinelli at the time of execution of the Bill of Lading, and the balance was to be paid in Florida upon the delivery of the automobile. Schwartz further agreed that his vehicle was insured by a responsible automobile insurance carrier.

At the same time that the newspaper advertisement for the solicitation of business was appearing in the New York Times, another advertisement was placed by Spinelli in The Village Voice. The Village Voice advertisement solicited persons to drive motor vehicles to Florida. Frank answered that advertisement and agreed to drive Schwartz's Cadillac to its destination. By the terms of Frank's written agreement with Spinelli, Frank paid forty dollars to Spinelli. Spinelli was then in receipt of the total ninety dollars tariff. Frank was, upon arrival in Florida, to collect from Schwartz the forty dollars balance and to keep the same. Patently Frank's only payment was free transportation, but he was responsible for gas and oil used in the course of the trip. ¹

Frank had arranged with two other persons, Straz and Katherine Fragnoli, to travel with him to Florida. There is a conflict in the depositions filed in this proceeding as to whether either Schwartz or Spinelli knew that other persons would accompany Frank. In any event, the Bill of Lading provided that the carrier might transport persons other than the driver if the same was not done for hire. Frank, Straz and Fragnoli had agreed amongst themselves that they would share equally the cost of the drive to Florida. No one paid Spinelli to ride in the Cadillac and the 'for hire' exception is not before us. Frank drove the Cadillac from New York to somewhere in New Jersey where Straz took over the driving, and, as we have previously stated, he was the driver at the time of the incident giving rise to the instant litigation.

Allstate and Spinelli argue that because Straz was driving the Schwartz vehicle with the permission of Schwartz, Federal is responsible for primary coverage under its policy, and Allstate is responsible only for any excess over and above Federal's policy limits. Schwartz and Federal take a different view. They contend that Allstate is the insurer responsible for primary coverage because of its ICC endorsement on the policy issued to Spinelli. Secondly, Federal and Schwartz assert that Straz drove the vehicle without the consent, expressed or implied, of Schwartz, and Straz's driving was unauthorized. Ergo, Federal argues that it is not responsible for primary coverage and, in fact, is not even responsible for excess coverage.

Judge James F. Couch, Jr. held Allstate responsible for primary coverage, and Market, by virtue of its policy with Allstate, liable to the limits of its policy for any excess. Federal, Judge Couch ruled, is liable for any excess sum, to the limits of its policy, that may be required for settlements or satisfaction of the judgments arising from the personal injuries or property claims if they exceed the combined policy limits of Allstate and Market. Allstate and Federal take issue with the judgment of the trial court, and both have appealed to this Court. We conclude, however, for the reasons stated infra, that Judge Couch was substantially correct, and we accordingly affirm the judgment as herein modified.

At the outset of our discussion we note that one of the parties to this litigation filed a 'Notice of Intent to Rely Upon Foreign Law', 'Uniform Judicial Notice of Foreign Law Act.' See Courts and Judicial Proceedings Article, §§ 10-501 to 10-507. But, whether the case is governed by the law of the State of New York, i. e., where the agreement between Spinelli and Schwartz was made; New Jersey, where Federal's policy to Schwartz was 'countersigned'; or Maryland, where the accident actually happened, does not present any difficulty. All three of the jurisdictions follow the principle that insurance coverage exists where, as here, the use of the vehicle at the time of the accident was within the scope of the permission granted. Cohen v. Am. Home Assurance Co., 255 Md. 334, 258 A.2d 225 (1969); Hanover Insurance Co. v. Miesemer, 42 Misc.2d 881, 249 N.Y.S.2d 87 (1964); Indemnity Ins. Co. v. Metropolitan Cas. Ins. Co. of N. Y., 33 N.J. 507, 166 A.2d 355 (1960).

Federal argues that its policy does not provide coverage because Straz was operating the Schwartz vehicle without the permission of Schwartz, the named insured. It points to the terms of its policy, which in pertinent part provides '1. The first paragraph of 'Persons Insured' is amended to read: Persons Insured

The following the insureds under Part 1:

(a) with respect to the owned automobile,

(1) the named insured and any resident of the same household,

(2) any other person using such automobile with the permission of the named insured, provided his actual operation or (if he is not operating) his other actual use thereof is within the scope of such permission, and

(3) any other person or organization but only with respect to his or its liability because of acts or omissions of an insured under (a)(1) or (2) above; . . .'

(Emphasis supplied).

The policy further provided:

'If the insured has other insurance against a loss covered by Part 1 of this policy, the company shall not be liable under this policy for a greater proportion of such loss than the applicable limit of liability stated in the declarations bears to the total applicable limit of liability of all valid and collectible insurance against such loss; provided, however, the insurance with respect to a temporary substitute automobile or nonowned automobile, shall be excess insurance under any other valid and collectible insurance.'

Federal reads the above quoted language to mean that it is not responsible as either primary or excess carrier.

We however, agree with Allstate that Federal afforded coverage to Frank and Straz because both were 'permissive' drivers. Frank's permission was obtained by implication as a result of the Bill of Lading signed by Schwartz, while Straz's authority to drive Schwartz's vehicle is derived through Frank. Frank's grant of authority to Straz conferred upon Straz the permission necessary to bring Straz within Federal's coverage. In Maryland Indem. Ins. v. Kornke, 21 Md.App. 178, 319 A.2d 603 (1974) we discussed a situation wherein a minor son was given permission by his father to operate the father's automobile. The father specifically forbade his son's allowing anyone else to drive the car. The son was injured in an attempt to fix the motor vehicle, and he, notwithstanding his father's admonition relating to someone else's driving the car, allowed Lynanne Hampshire to drive. While operating the vehicle, Miss Hampshire struck a bridge abutment. Maryland Indemnity maintained that Nationwide, Miss Hampshire's insurance carrier, was primarily responsible because Miss Hampshire was operating the Kornke vehicle without the expressed or implied permission of the owner. It contended that Mr. Kornke's instructions to his son that no one else drive the car other than the son precluded coverage by Maryland Indemnity. Judge Moor...