Arnold v. State Farm Mutual Automobile Ins. Co., IP 56-C-63.

Citation158 F. Supp. 1
Decision Date15 January 1958
Docket NumberNo. IP 56-C-63.,IP 56-C-63.
PartiesHorace A. ARNOLD, as Administrator of the Estate of Robert Eugene Arnold v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY.
CourtUnited States District Courts. 7th Circuit. United States District Court (Southern District of Indiana)

Townsend & Townsend, Earl C. Townsend, Jr. and John F. Townsend, Indianapolis, Ind., for plaintiff.

Kivett & Kivett, Joseph L. Kivett, Indianapolis, Ind., for defendant.

STECKLER, Chief Judge.

This cause came on for trial before the court on December 9, 1957. At the conclusion of all the evidence on December 10, 1957, the court directed the jury to return a verdict for the plaintiff. Since the decision which prompted the court to direct a verdict for the plaintiff has aroused considerable interest on the part of the Indiana bar in general, due to the absence of clear, succinct decisions of Indiana courts on the precise legal issues involved, the court has deemed it advisable to set out at some length the reasoning which underlay said decision.

A brief summary of the facts of the case, as presented by the record, is as follows: James V. Ray was the operator of two farms, which will be referred to in this summary as Farm No. 1 and Farm No. 2. Farm No. 2 was located about two and one-half miles away from Farm No. 1, the latter being the situs of the Ray home. Ray was the owner of a certain 1950 G.M.C. truck, which was used in connection with his farming activities. Lowell Leroy Gibbons was employed by Ray as a general farm laborer. On the morning of July 27, 1952, Ray's wife, acting on the instructions of her husband, who was ill, gave Gibbons the keys to the truck in order for him to drive it to Farm No. 2 and feed and water certain livestock. A few days prior to the morning here involved, Gibbons had conferred with Ray about looking after the farm chores on both farms during Ray's confinement, and it was generally understood that Gibbons would use the truck in that connection. Pursuant to his general instructions and after obtaining the keys from Mrs. Ray, Gibbons drove the truck over to Farm No. 2. There he watered the livestock, though he did not feed them, and then he decided to drive the truck to the Town of Bridgeport, Indiana, which was located approximately fifteen miles away. While in Bridgeport, Gibbons contacted a bootlegger from whom he purchased some whiskey. After consuming a portion of his newly acquired whiskey, Gibbons commenced the journey back to the Ray homestead, taking one or two drinks while on the way back to the farm. While passing through the Town of Plainfield, Indiana, on his way back to the Ray home, Gibbons was involved in a collision with a bicycle ridden by plaintiff's fourteen year old son. Plaintiff's son was killed. Plaintiff then brought an action for wrongful death against Gibbons in the Hendricks Circuit Court, Hendricks County, Indiana, and recovered therefrom a default judgment for $15,000.

The evidence also showed that Ray had been ill for about a week prior to the day of the accident; that during this time Gibbons had been permitted to use the truck in question daily in the performance of his duties. The evidence also showed that on one other occasion, Gibbons had been permitted to take the truck to a certain grain elevator located several miles away from the Ray homestead.

With respect to the truck, Ray was insured by the defendant by a policy of insurance containing a so-called "omnibus clause," which provided, in Section III of the policy as follows:

"With respect to the insurance for bodily injury liability, for property damage liability, and for medical payments the unqualified word `insured' includes the named insured 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 with his permission." (Emphasis added.)

Plaintiff brought this action on his judgment to collect under the insurance policy quoted from, his theory being that at the time of the accident out of which the judgment resulted, Gibbons was operating the truck with the permission of Ray, the named insured referred to in the quotation from the policy, and was therefore an additional insured himself under the same policy by virtue of the extended coverage afforded by said omnibus clause.

There was no dispute during the trial over the question of whether Gibbons had the permission of Ray to use the truck at the time Gibbons first embarked on his fatal journey. In fact, counsel for defendant tacitly conceded that Gibbons had the initial permission of Ray at the time he left the Ray farm. The theory of the defendant's defense was, in essence, based upon two propositions of law. First, the defendant contended that the instant case was governed by a line of Indiana cases construing a statute1 which requires that omnibus clauses be inserted in all automobile insurance policies issued in Indiana. The cases so relied upon by defendant are Spicklemeier v. T. H. Mastin & Co.,2 Shadow v. Standard Accident Insurance Co.,3 Culley v. Farm Bureau Mutual Insurance Co.4 and American Employers' Ins. Co. v. Cornell.5 These cases take the position that the omnibus clause provision of the statute was only designed to protect the owner of a vehicle and that said statutory provision could not be read into a policy so as to extend the coverage of the policy to a permittee. The Spicklemeier, Shadow and Culley cases all arose on facts wherein there were no express omnibus clauses in the policies of insurance sued upon. In those three cases, the plaintiffs were contending that despite the lack of express omnibus clauses in the policies in question, the effect of the statute was to "write in" such clauses, and that therefore the permittees were covered by the policies just as effectively as they would be were express omnibus clauses present in the policies. That the Indiana courts have limited the "public policy" doctrine set forth in the Spicklemeier, Shadow and Culley decisions to cases arising on fact situations wherein there is no express omnibus clause in the policy is indicated by the case of Mercer Casualty Co. of Celina, Ohio v. Kreamer,6 and the case of American Employers' Insurance Co. v. Cornell.7 In the Kreamer and Cornell cases, omnibus clauses were found in each of the insurance policies through which coverage for the permittee was sought. In both cases, the Indiana courts held that the permittees were covered by the policies by virtue of the omnibus clauses found therein. Thus the current status of Indiana law on this point may be found summed up in the opinion of Judge Young in American Employers' Insurance Co. v. Cornell.8 Stated briefly, the court reaffirmed the holdings of the Spicklemeier, Shadow and Culley cases, as regards the statute. But then it went on to say that the statute was not applicable in the case before it since there was an express omnibus clause in the insurance policy sued upon therein. The court then proceeded to hold that the coverage of the policy was extended to cover the permittee there in question. The inevitable inference which arises as a result of this decision is that the concept of restricted coverage laid down by the Spicklemeier, Shadow and Culley cases and reaffirmed in the Cornell case is limited in its application to cases wherein no omnibus clause is found in the policy itself and wherein the plaintiff contends that such a clause has, in effect, been written in by the legislature due to the statute noted.9 Since the insurance policy sued upon in the action before this court contained an express omnibus clause, the court rejected the contention of defendant State Farm Mutual Automobile Insurance Co. urging application of the doctrine set forth by the Spicklemeier line of cases and applied instead the principles enunciated in the Kreamer and Cornell cases, which, on the facts, were more closely in point.

Having thus determined that under Indiana law a permittee was not excluded from coverage under an insurance policy containing an express omnibus clause, the court was then confronted with the second proposition put forth by defendant in its defense. This proposition asserted that even if permittees were within the coverage of a policy by virtue of the extended coverage afforded by an omnibus clause, Gibbons could not qualify as such a permittee for the reason that, in deviating from the use of the truck contemplated by Ray at the time permission was given, the initial permission was, in effect, terminated, thus removing Gibbons from the permittee status at the time of the accident. Apparently the courts of this nation have referred to a permission as having "terminated" where either of two possible situations are present. One such situation is where a permittee takes a vehicle with permission, uses it, returns it, and then without securing permission again, retakes the vehicle. In that situation the permission is said to have terminated when the vehicle was returned.10 The other situation arises where the permittee is given permission to use the vehicle for a limited period of time and the actual period of use grossly exceeds the period contemplated when initial permission was granted.11 Neither of these situations is shown by the evidence to have existed in the instant case nor have counsel so contended. Hence, it may be inferred that in using the word "terminated," defendant was actually contending that the deviation from the use reasonably contemplated by Ray in granting permission initially was such that said initial permission was, in effect, voided by implication, the result being that Gibbons was not a permittee at the time and place of the accident and therefore was not covered by the policy. With initial permission conceded, the court's task was to ascertain what rule the Indiana courts follow with regard to deviations from the purpose and use for which the initial permission...

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2 cases
  • Arnold v. State Farm Mutual Automobile Ins. Co.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (7th Circuit)
    • November 19, 1958
    ...of the issues at this point, and we adopt the outline set out in Judge Steckler's memorandum opinion in the district court, 1958, 158 F.Supp. 1, 2, as "James V. Ray was the operator of two farms, which will be referred to in this summary as Farm No. 1 and Farm No. 2. Farm No. 2 was located ......
  • State Farm Mut. Auto. Ins. Co. v. Automobile Underwriters, Inc.
    • United States
    • U.S. District Court — Southern District of Indiana
    • June 21, 1966
    ...the Illinois courts would follow the "liberal rule" in the second permittee situation. In the case of Arnold v. State Farm Mutual Automobile Insurance Company, 158 F.Supp. 1 (D.C.S.D.Ind.), aff'd 260 F.2d 161 (7th Cir.1958), this court held, again in the absence of controlling Indiana case ......

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