American Universal Ins. Co. v. Dykhouse

• Citation: 326 F.2d 694
• Decision Date: 17 January 1964
• Docket Number: No. 17414.,17414.
• Parties: AMERICAN UNIVERSAL INSURANCE COMPANY, a Corporation, Appellant, v. Emerson J. DYKHOUSE, Administrator of the Estate of Donald B. Sharp, Deceased, Frank Dieren, Gary Dieren, Alfred Vogel, Evelyn Vogel, Marilyn Vogel, and Motor Vehicle Casualty Company of Elmhurst, Illinois, Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

326 F.2d 694 (1964)

AMERICAN UNIVERSAL INSURANCE COMPANY, a Corporation, Appellant, v. Emerson J. DYKHOUSE, Administrator of the Estate of Donald B. Sharp, Deceased, Frank Dieren, Gary Dieren, Alfred Vogel, Evelyn Vogel, Marilyn Vogel, and Motor Vehicle Casualty Company of Elmhurst, Illinois, Appellees.

No. 17414.

United States Court of Appeals Eighth Circuit.

January 17, 1964.

George F. Madsen, Sioux City, Iowa, made argument for appellant and filed brief with John J. Vizintos, Sioux City, Iowa, of counsel, Shull, Marshall, Mayne, Marks & Vizintos, Sioux City, Iowa.

Louis L. Corcoran, Sibley, Iowa, made argument for appellees except Motor Vehicle Casualty Company of Elmhurst, Illinois and filed brief with Earl H. Fisher, Rock Rapids, Iowa, of counsel, Fisher & DeWaay, Rock Rapids, Iowa. Clyde Putnam, Jr., Des Moines, Iowa, filed appearance form for Motor Vehicle Casualty Co. of Elmhurst, Illinois but did not file brief, or make argument.

Before VAN OOSTERHOUT, MATTHES and MEHAFFY, Circuit Judges.

MATTHES, Circuit Judge.

In this diversity action, American Universal Insurance Company (appellant) sought a declaratory judgment relieving it of any obligation, under an insurance policy issued by it to the State of South Dakota, Department of Agriculture, to defend litigation or respond for damages arising out of an accident involving a state-owned automobile described in the policy. Donald B. Sharp, an employee of the Department of Agriculture, State of South Dakota, was driving the automobile and was killed in the collision. Gary Dieren and Marilyn Vogel, occupants of the other automobile, were injured and they — along with their parents — instituted lawsuits to recover damages. The Dieren's, Vogel's, and Sharp's administrator are the defendants (appellees) in this declaratory judgment action.¹

The District Court for the Northern District of Iowa held that appellant "is liable to the Estate of Donald B. Sharp, in the event of judgment against the Estate, if any, pursuant to provisions of said policy," and appellant has perfected an appeal to this court. The opinion of the trial court is reported at 219 F.Supp. 62 (1963).

The principal question which this litigation presents is whether employee Sharp was driving the insured automobile with the permission or consent of his employer, the named insured, at the time of the collision. This being a fact issue Rule 52(a), Fed.R.Civ.P. is applicable, and the findings of the trial court should not be set aside unless it is clearly demonstrated that they are without evidentiary support or were induced by an erroneous view of the law.² Hartford Accident and Indemnity Company v. Shaw, 8 Cir., 273 F.2d 133, 137 (1959).

It is equally fundamental that in our consideration of the sufficiency of the evidence we are required to accord to the prevailing party the benefit of all reasonable inferences which can be drawn from the evidence. Hartford Accident and Indemnity Company v. Shaw, supra, 273 F.2d at 137.

The pertinent facts were established by stipulation of the parties and by evidence in the main uncontroverted.

The policy — covering a period from July 19, 1960, to July 19, 1961, — named "State of South Dakota, Department of Agriculture" as the insured; it protected against both bodily injury and property damage liability; it covered the state-owned automobile involved in the collision; it provided that the insured automobile was to be used for "pleasure and business" purposes; and it designated that the automobile was to be principally garaged in Pierre, South Dakota.

The definition of the insured, the omnibus clause of the policy reads in part:

"With respect to the insurance for bodily injury liability and for property damage liability the unqualified word `insured\' includes the named insured and, if the named insured is an individual, his spouse if a resident of the same household, and also includes any person while using the automobile and any person or organization legally responsible for the use thereof, provided the actual use of the automobile is by the named insured or such spouse or with the permission of either."

Since June 2, 1959, Sharp had been an egg and dairy inspector for the Department of Agriculture, State of South Dakota. The automobile involved in the collision had been assigned to him for use in connection with his duties. It had not been garaged in Pierre, South Dakota, but was kept at Sharp's home when not in use. It was stipulated that Sharp had permission of his superiors to attend the convention of Food, Drug, Feed and Fertilizer Control Officials to be held at the Sheraton-Cataract Hotel in Sioux Falls, South Dakota, on July 26 and 27, 1960; that Sharp had permission to drive the automobile which he used in connection with his duties from his home in Highmore, South Dakota, to Sioux Falls, South Dakota, for the purpose of attending the convention.

Sharp left his home in the state-owned automobile at approximately 7 o'clock a. m. on July 25, drove his wife to her sister's home in Pierre, South Dakota, left to drive back to his home in Highmore at about 1 o'clock p. m., and at about 2 o'clock p. m. left Highmore for the convention at Sioux Falls. That evening the automobile was involved in the collision in the State of Iowa, about 2½ miles southeast of the Iowa-South Dakota state line and approximately 16 or 17 miles southeast of Sioux Falls, South Dakota. Sharp's automobile was headed eastwardly on the highway at the time of the collision.

One Mr. Hilleshiem, who was Secretary of Agriculture of the State of South Dakota on July 25, 1960, testified that he instructed Sharp to attend the Sioux Falls convention, instructed him to drive the state-owned automobile to the convention; that he "did not tell them inspectors where they were to stay, or where they had to stay at this convention * * * they could stay where they wanted to;" that he did not plan the route for the inspectors to take in traveling to Sioux Falls and that they could take "any route they chose." Hilleshiem further testified that Sharp was not required to be in Sioux Falls at any particular time before the convention convened on the morning of July 26.

There is a lack of unanimity among the authorities as to the legal test or theory to be applied in determining whether an automobile involved in an accident was being driven with the permission or consent of the named insured at the time of the accident within the meaning of the so-called omnibus clause of a policy. See and compare, Anno., 5 A.L.R.2d 600, 622, et seq.; 7 Appleman, Insurance Law and Practice, §§ 4366-4368 (1962); Stoll v. Hawkeye Cas. Co. of Des Moines, Iowa, 8 Cir., 193 F.2d 255, 259 (1952).

The theories that have emanated from the decisions are categorized by the above authorities into three groups, viz.: (1) the strict or conversion rule; (2) the liberal rule; and (3) the moderate or minor deviation rule.

Under (1), the vehicle must be used for a purpose reasonably within the scope of the permission granted, within the time and geographical limits imposed or contemplated by the parties. 7 Appleman, Insurance Law and Practice, § 4367; 5 A.L.R.2d §§ 10, 12. Under (2), if the employee received permission in the first instance from the named insured to take the vehicle, any use thereof while it remains in the employee's possession is "with permission" though that use may be for a purpose not contemplated by the named insured when he parted with possession of the vehicle. 7 Appleman, Insurance Law and Practice, § 4366; 5 A.L.R.2d §§ 10, 13. Under (3), a slight deviation from the scope of the permission granted will not be sufficient to exclude the employee from coverage under the omnibus clause, but a material deviation constitutes a use without the permission of the employer. 7 Appleman, Insurance Law and Practice, § 4368; 5 A.L.R.2d §§ 10, 15.

The parties agree that the Supreme Court of South Dakota has not as yet indicated which, if any, of the foregoing rules it will adopt.³ But, for the approach taken by the South Dakota Supreme Court to a related problem, see Alberts v. Mutual Service Casualty Insurance Co., S.D., 123 N.W.2d 96 (1963). In Stoll v. Hawkeye Cas. Co. of Des...