Buntin v. Continental Ins. Co.

• Decision Date: 03 July 1978
• Docket Number: No. 77-2424,77-2424
• Citation: 583 F.2d 1201
• Parties: Norman BUNTIN, Appellant, v. CONTINENTAL INSURANCE CO.
• Court: U.S. Court of Appeals — Third Circuit

Page 1201

583 F.2d 1201

Norman BUNTIN, Appellant, v. CONTINENTAL INSURANCE CO.

No. 77-2424.

United States Court of Appeals Third Circuit.

Argued April 24, 1978.

Decided July 3, 1978.

Robert A. Ellison, Christiansted, Thomas Alkon, Isherwood, Colianni, Alkon & Barnard, Christiansted, St. Croix, V. I., for appellant.

Merwin, Alexander & O'Brien, Christiansted, St. Croix, V. I., for appellee; R. Eric Moore, Christiansted, St. Croix, V. I., of counsel.

Before GIBBONS, GARTH and HIGGINBOTHAM, Circuit Judges.

OPINION OF THE COURT

GARTH, Circuit Judge.

This appeal arises out of a suit on an insurance policy. The district court denied the plaintiff's motion for summary judgment and granted the defendant's cross-motion for summary judgment, holding that the plaintiff was excluded from the policy's coverage. We reverse.

I

On July 4, 1975, Preferred Rentals, Inc. ("Preferred"), a St. Croix, V.I. car rental agency insured by the defendant Continental Insurance Co. ("Continental"), rented a car to Marion Edwards ("rentee"). Two days later, on July 6, Edwards met Clement Richardson and the plaintiff Norman Buntin in a Christiansted bar. The three then decided to drive to Frederiksted. Edwards asked Buntin to drive his rented car, since Edwards was unfamiliar with the Virgin Islands practice of driving on the left-hand side of the road. While en route Buntin collided with an oncoming car. Edwards was killed and Richardson was seriously injured.

In April, 1976, actions were filed against Buntin by Richardson and by Edwards's estate. Buntin notified Continental, the insurer of the rental car, and tendered to it the defense of the two actions. Continental disclaimed coverage and declined to defend Buntin, on the ground that Buntin was not an insured under the policy.

Both cases against Buntin were consolidated and, after proceeding to trial, judgment was entered in favor of Richardson and Edwards's estate, and against Buntin, in the amounts of $26,500 (plus interest and attorneys' fees) and $165,000 (plus interest and attorneys' fees) respectively. After the entry of these judgments, several settlement attempts were transmitted to Continental. However, Continental continued to disclaim coverage and to deny any liability on its part. Buntin eventually brought this action against Continental, alleging a breach of Continental's obligations under the insurance policy.

The district court held that, by its terms, an endorsement to the policy excluded Buntin from coverage. Since there was no material factual dispute, the district court on September 27, 1977 denied Buntin's motion for summary judgment and granted Continental's cross-motion for summary judgment. This appeal followed.

II

This dispute essentially involves two provisions of Preferred's insurance policy with Continental. The policy at issue is a standard automobile liability insurance policy. Paragraph III of the policy, entitled "Definition of Insured", provides in relevant 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. . . .

This clause is known as the "omnibus clause" and is standard in automobile liability insurance policies. The "named insured" is Preferred, the rental agency.

Endorsement No. 2, attached as a rider to the policy, and made a part thereof, provides in paragraph 1(a):

1. Definition of Insured Subject otherwise to the provisions of the Definition of Insured agreement of the policy

(a) the insurance with respect to any driverless car applies only to the named insured and rentee and, while used for business purposes of the rentee, and employer or employee of the rentee;

Paragraph 7 of the Endorsement then provides that " '(d)riverless car' means an automobile of the private passenger type while rented without the named insured or a chauffeur of the named insured in attendance." ¹

Also relevant is Paragraph 8 of the Rental Agreement, which provides that the "Lessor provides liability insurance for Customer (Edwards) and any Authorized Operator described herein in accordance with the standard provisions of a Basic Automobile Liability Insurance Policy. . . . The permissive use of Vehicle by Customer or any Authorized Operator is expressly limited by . . . conditions on the reverse side hereof. . . ." It is provided on the reverse side of the Rental Agreement that:

Customer agrees not to permit use of Vehicle by any other person without obtaining Lessor's prior written consent. Vehicle shall NOT be operated by any person except Customer and the following Authorized Operators who must be validly licensed to drive and have Customer's prior permission; persons 21 or over who are members of Customer's immediate family and permanently reside in Customer's household; the employer, partner, executive officer, or a regular employee of Customer; additional authorized operator(s) identified above.

The issue, then, is whether Buntin is included within the coverage of the omnibus clause, or whether he is excluded by Endorsement 2. ²

III

A

Clearly, Buntin was not given express permission to operate the rental vehicle by Preferred, the named insured. Nonetheless, apart from Endorsement No. 2, Buntin would be an additional insured under the omnibus clause. Courts have generally held ³ that the driver of a vehicle, operating that vehicle with the permission of the named insured's permittee, is an additional insured within the terms of an omnibus clause, where the insured vehicle is being used for a permitted purpose, even though the named insured did not expressly authorize the driver to use the vehicle. Thus, if an automobile is being used with the permission of the named insured, a driver of the vehicle, though not the person expressly authorized to use the car by the named insured, is an additional insured since the driver is legally responsible for the car's use. See, e. g., Maryland Casualty Co. v. Marshbank, 226 F.2d 637 (3d Cir. 1955); Great American Insurance Co. v. Anderson, 395 F.2d 913 (6th Cir. 1968); Persellin v. State Automobile Insurance Association, 32 N.W.2d 644 (N.D.1948); State Farm Mutual Automobile Insurance Co. v. Allstate Insurance Co., 154 W.Va. 448, 175 S.E.2d 478 (1970); Couch on Insurance 2d §§ 45:291, 293; 7 Appleman, Insurance Law and Practice, §§ 4353-61, 4453 (West 1962 & Cum.Supp.1972 & 1977 Supp.). See also Grant v. Knepper, 245 N.Y. 158, 156 N.E. 650 (1927) (Cardozo, J.).

The case of Persellin v. State Automobile Insurance Association, supra, is instructive. In that case, the owner of an automobile (the named insured) turned the car over to Shapiro for his use. One evening Shapiro had his friend Persellin and two female friends in the car as his guests. At one point Shapiro asked Persellin to drive. An accident occurred and one of the women sued Persellin, who in turn sued the insurer. Faced with an almost identical omnibus clause, the court noted that the clause included within its definition of an "insured person" two classes of persons: (1) persons using the automobile, and (2) persons legally responsible for the automobile's use, provided the actual use of the automobile is with the permission of the named insured. The court held that Persellin was an additional insured, reasoning that:

(I)t is clear upon the evening in question Shapiro was using the automobile to transport his friends in pursuit of recreation and pleasure. The fact that he asked one of his guests to drive does not negate this conclusion. He was present at all times. It was for him to say, if he wished, where, when and how the automobile should be driven.

32 N.W.2d at 646.

Similarly, in Maryland Casualty Co. v. Marshbank, supra, the named insured's son, in the presence of the son's friend Charles, requested his father's permission to use the automobile for the purpose of taking some friends to a movie. The father, the named insured, gave his permission. The son took the car, and, while travelling to the theatre, turned the wheel over to Charles. While Charles was driving the car was involved in a collision with two other cars, and two friends, also guests in the car, were seriously injured. The insurer sued seeking a declaratory judgment as to its liability under a policy containing an omnibus clause. This court held that Charles was an additional insured. Judge Maris reasoned:

As the basis for a contrary conclusion the plaintiff seeks to read the term "use of the automobile" as contained in the policy definition as the equivalent of "operation of the automobile" and on this premise it argues that Marshbank did not give permission to Charles to operate his automobile. . . . The fallacy in the plaintiff's position is that the words "use" and "operation", which it seeks to equate as synonymous, are in this setting words of quite different meaning. For the "use" of an automobile by an individual involves its employment for some purpose or object of the user while its "operation" by him involves his direction and control of its mechanism as its driver for the purpose of propelling it as a vehicle. It is perfectly clear that an automobile is being used by an individual who is traveling in it regardless of whether it is being operated by him or by another.

226 F.2d at 639. Also, See Great American Insurance Co. v. Anderson, supra, which applied the Marshbank approach to a rented car situation. In Anderson, a rental car company (the named insured) rented a car to the lessee, who then permitted his brother to drive while he continued to ride in the car as a passenger. After an accident occurred the lessee sued his...