American Motorists Ins. Co. v. Samson

• Decision Date: 24 April 1979
• Docket Number: No. 78-1805,78-1805
• Citation: 596 F.2d 804
• Parties: AMERICAN MOTORISTS INSURANCE COMPANY, Appellee, v. Richard A. SAMSON, Richard C. Samson, Dakota Rental and Sales, Inc., Rhonda L. Turner, a minor by and through her parent and natural guardian, LeRoy Turner, and LeRoy Turner, Individually, Appellants.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 804

596 F.2d 804

AMERICAN MOTORISTS INSURANCE COMPANY, Appellee, v. Richard A. SAMSON, Richard C. Samson, Dakota Rental and Sales, Inc., Rhonda L. Turner, a minor by and through her parent and natural guardian LeRoy Turner, and LeRoy Turner Individually Appellants.

No. 78-1805.

United States Court of Appeals Eighth Circuit.

Submitted April 19, 1979.

Decided April 24, 1979.

Wickham Corwin, Conmy, Feste & Bossart, Ltd., Fargo, N. D., for appellants. Timothy Q. Davies, Nilles, Hansen, Selbo, Magill & Davies, Ltd., Fargo, N. D., and Maurice G. McCormick, Vogel, Brantner, Kelly, Knutson, Weir & Bye, Fargo, N. D., on brief.

James L. Lamb, Degnan, McElroy, Lamb, Camrud, Maddock & Olson, Ltd., Grand Forks, N. D., for appellee. Gerald J. Haga, Grand Forks, N. D., on brief.

Before ROSS, STEPHENSON and HENLEY, Circuit Judges.

HENLEY, Circuit Judge.

This diversity case is before us on an appeal by defendants from a declaratory judgment in favor of the plaintiff by the United States District Court for the District of North Dakota (The Honorable Paul Benson, Chief Judge). The district court held that plaintiff, American Motorists Insurance Company, is not obligated to the defendants on the basis of a standard automobile policy issued by plaintiff to AVCO Financial Services of North Dakota, a North Dakota corporation which maintains an office in the City of Fargo and which is engaged in the business of making consumer loans, including loans secured by liens on automobiles. ¹ The suit arises out of an accident that occurred on October 4, 1973 in Fargo which involved a Dodge Charger automobile, which in general was covered by the policy issued to AVCO, and a bicycle being operated at the time by Rhonda L. Turner, a minor, whose father and natural guardian is LeRoy Turner. Ms. Turner was injured in the accident. The automobile was being operated at the time by another minor, Richard A. or "Rick" Samson, the son of Richard C. Samson, who at the time was an employee of a used car sales and automobile rental business identified as Thrifty Rent-A-Car of Fargo, Inc., hereinafter referred to as "Thrifty." ² After the accident Thrifty was succeeded in business by another North Dakota corporation known as Dakota Rental and Sales, Inc. (Dakota).

In the course of its business AVCO has occasion from time to time to foreclose liens on or repossess vehicles on which it has loaned money and to resell them. Prior to October 3, 1973 AVCO had had dealings with Thrifty, and the local manager of AVCO, Gary Wendel, was well acquainted with Samson.

AVCO had made a loan secured by a lien on the Dodge Charger here involved; the debtor had defaulted on the obligation, and by October 3, 1973 AVCO had rightfully repossessed the vehicle and had a right to sell it. On that date Wendel took the car to the Thrifty lot and discussed with Samson the purchase of the vehicle by Thrifty. Samson was not prepared to purchase the car for Thrifty but suggested that it be left on the lot "on consignment," and that Thrifty would undertake to sell the car for AVCO. There may be some question as to the restrictions placed on the use of the car while it was in the possession of Thrifty; Wendel did advise Samson that "kids" should not be permitted to "hot rod" the car.

It seems evident that Samson was interested in purchasing the car personally; he drove it to his home on the evening of October 3, kept it there overnight, and left it there when he went back to work on October 4. He does not appear to have either given his son Rick permission to drive the car or to have forbidden him to drive it. The district court found that Rick was a relatively inexperienced driver.

In the course of the day Rick asked his mother (not his father) for permission to drive the car to the barbershop so that he might get a haircut. Mrs. Samson granted the permission and Rick started on his journey in the course of which he collided with the bicycle being ridden by the Turner girl.

After the accident Mr. Samson returned the car to AVCO and made a bid on it that AVCO declined to accept, and AVCO resumed possession of the car which it disposed of later. Samson did not advise AVCO of the happening of the accident, and AVCO and the insurance company did not learn of the occurrence until more than three years after the accident occurred.

In due course Rhonda Turner and her father filed suit in the District Court of Cass County, North Dakota, a suit in which both the Samsons, AVCO, and Dakota, which by that time had succeeded Thrifty in business, were all named as defendants. Rhonda Turner sought compensation for her own injuries, and her father sought compensation for the damages that he had sustained as a result of his daughter's injuries. The underlying theory of the Turners was that the accident was the result of negligence on the part of Rick Samson in the operation of the vehicle; that when the accident occurred he was "test driving" the vehicle, and that not only he but also all of the other defendants were liable for the damages proximately resulting from the alleged negligence of Rick.

It is inferable that in due course AVCO called on the insurance company to provide it with a defense to the action in the state court and to pay up to the limits of the policy any judgment that the Turners might obtain against the named insured. It also appears that the other parties to the state court litigation took the position that the Samsons, father and son, and Dakota were "omnibus insureds" under the policy and were entitled to the policy protection to the same extent as was AVCO.

Thereafter, the insurance company commenced this action against the Samsons, the Turners, and Dakota. While admitting its policy obligations to AVCO, which was not named as a party defendant, the defendant denied liability to any of the other parties and prayed for a declaratory judgment to the effect that no such liability existed. 28 U.S.C. § 2201. Federal diversity jurisdiction is established.

The policy issued by the company contained an "extended coverage" or "omnibus insured" clause which included in the definition of "insured" not only the named insured but also any person or organization legally responsible for the use of the vehicle provided that the actual use at the time of the accident was "by the named insured or with his permission."

In its complaint the plaintiff denied that Rick Samson was operating the car with the permission of AVCO, either express or implied, and the plaintiff further alleged reliance in part on an exclusion appearing in the "extended coverage" or "omnibus" clause to the effect that the clause in question would not apply to any person or organization, or to any agent or employee thereof, operating "an automobile sales agency, repair shop, service station, storage garage or public parking place with respect to any occurrence arising out of the operation" of the vehicle. And it was alleged that at the time of the accident Rick Samson and his father were operating an automobile sales agency.

The plaintiff prayed for appropriate declaratory relief and asked that the action pending in the state court be stayed until this case should be decided.

The several defendants filed answers, and the Samsons filed a counterclaim specifically claiming policy protection with respect to the Samson-Turner accident and subsequent suit. The Samsons, the Turners, and Dakota have in general taken common ground...