Butler v. Bonner & Barnewall, Inc.

• Decision Date: 24 July 1970
• Citation: 56 N.J. 567,267 A.2d 527
• Parties: Margaret BUTLER and William Butler, Plaintiffs-Respondents and Cross-Appellants, v. BONNER & BARNEWALL, INC., a corporation, Defendant. Mary BUENAGA, Defendant-Third-Party Plaintiff-Respondent and Cross-Appellant, v. PEERLESS INSURANCE COMPANY, Third-Party Defendant-Appellant and Respondent, and Ohio Casualty Insurance Group and West American Insurance Co., Third-Party Defendants-Respondents.
• Court: New Jersey Supreme Court

Page 567

56 N.J. 567

267 A.2d 527

Margaret BUTLER and William Butler, Plaintiffs-Respondents and Cross-Appellants, v. BONNER & BARNEWALL, INC., a corporation, Defendant.

Mary BUENAGA, Defendant-Third-Party Plaintiff-Respondent and Cross-Appellant, v. PEERLESS INSURANCE COMPANY, Third-Party Defendant-Appellant and Respondent, and Ohio Casualty Insurance Group and West American Insurance

Co., Third-Party Defendants-Respondents.

Supreme Court of New Jersey.

Argued May 5, 1970.

Decided July 24, 1970.

Marshall Selikoff, Newark, for Peerless Ins. Co. (Jung, Selikoff, Rathman & Dwyer, Newark, attorneys, Marshall Selikoff, Newark, of counsel, John R. Zimmerman, Newark, on the brief).

Hugh J. O'Gorman, So. Orange, for Mary Buenaga (Cunneen & O'Gorman, So. Orange, attorneys, Hugh J. O'Gorman, of counsel and on the brief).

Arthur J. Messineo, Jr., Garfield, for Margaret Butler and William Butler (Messineo & Messineo, Garfield, attorneys, Arthur J. Messineo, Jr., Garfield, of counsel, Dennis P. LaHiff, Garfield, on the brief).

Robert E. Monaghan, Newark, for Ohio Cas. Ins. Group and West American Ins. Co. (Schneider & Morgan, Newark, attorneys, Robert E. Monaghan, of counsel).

The opinion of the court was delivered by

HALL, J.

This complicated controversy about automobile liability insurance coverage arose out of a one car accident on May 5, 1967 in which plaintiff Margaret Butler sustained personal injuries. She was a passenger in a car driven by defendant-third-party plaintiff Mary Buenaga and owned by defendant Bonner and Barnewall, Inc. (Bonner), a processing concern which employed Mrs. Buenaga's husband as a salesman. The car had been furnished to him by the company and he was permitted to keep it at his home. The vehicle was not being used for business purposes at the time of the accident; the two ladies were on their way to a personal social gathering. A few weeks later Mrs. Butler and her husband, Per quod, sued Mrs. Buenaga and Bonner for her injuries and consequential damages. The latter cross-claimed against Mrs. Buenaga for property damage to the car.

Bonner had a general liability insurance policy issued by third-party defendant Peerless Insurance Co. (Peerless) covering its operations, including automobiles owned by it. Also insured under the policy was 'any other person while using an owned automobile * * * with the permission of the named insured (Bonner), provided his actual operation or (if he is not operating) his other actual use thereof is within the scope of such permission. * * *' Mrs. Buenaga sent the suit papers to Peerless to defend for her, which promptly declined to do so on the ground that at the time of the accident she was an 'unauthorized operator of the insured vehicle, and said vehicle was being operated by you without the knowledge, permission or consent of our named assured (Bonner).' The proofs in the record on behalf of Peerless show both oral and written admonitions from the president of Bonner to Mr. Buenaga that the car was not to be driven by anyone but himself, said to have been occasioned by Bonner's inquiry of its insurance broker allegedly resulting in the advice that the policy coverage did not extend to any other operation or use and that the premium cost would be much higher if use or operation by other than employees was allowed. The proofs on behalf of Mrs. Buenaga showed, on the contrary, oral permission by the president for her to operate the car occasionally for personal or family use and knowledge by him of such use. This conflict in the evidence has not been judicially resolved during the course of the litigation to date.

Mrs. Buenaga's husband also owned a personal car which was insured by a 'Family Automobile Combination Policy' issued to him by third-party defendant Ohio Casualty Insurance Group and West American Insurance Co. (Ohio). Its policy contained rather confusing provisions relating to persons insured in connection with non-owned automobiles. It defined 'Named Insureds' as 'the individual named in Item 1 of the declarations (Mr. Buenaga) and also includes his spouse, if a resident of the same household (Mrs. Buenaga).' 'Non-Owned Automobile' was defined as 'an automobile or trailer not owned by or furnished for the regular use of either the named insured or any relative, other than a temporary substitute automobile.' Coverage as to non-owned automobiles was accorded to:

'1. the named insured,

2. any relative, but only with respect to a private passenger automobile or trailer, provided the actual use thereof is with the permission of the owner.'

When Peerless refused to defend, Mrs. Buenaga sent the suit papers to Ohio, which at first undertook the defense. After making an investigation, it advised--reasonably, we believe, with respect to any claim of estoppel--that it would not continue the defense by reason of non-coverage, stating:

We have now completed our investigation of the claim and said investigation reveals that at the time of the happening of this accident, you were operating a motor vehicle furnished to your husband for his regular use by his employer, Bonner and Barnewall, Inc. Your policy of insurance specifically provides that there is no coverage for you as respects to any automobile furnished for the regular use of either you or any member of your household. We therefore regret to inform you that there is no coverage afforded under you policy of insurance for the claim presented against you.

Mrs. Buenaga thereupon engaged a personal attorney who filed the third-party complaint against Peerless and Ohio in separate counts. Each count asserted that Mrs. Buenaga was covered under the policy issued by that insurer and sought a declaration of coverage, a direction to defend the negligence action and to pay any resulting judgment, and a money award to pay all Mrs. Buenaga's costs and attorney fees incurred in the defense of the negligence action and 'the prosecution of this policy action as well.' The answer of each insurer denied coverage. Peerless filed a cross-claim against Ohio for contribution and for indemnification, the latter on the basis that if Peerless was held to have coverage, Ohio had it too and Ohio's coverage was primary. Ohio asserted in its answer that if it were held to have coverage, Peerless also had it and Ohio's was excess. Plaintiffs Butler have participated in the third-party action and their negligence suit has lain dormant in the meantime.

Mrs. Buenaga moved for summary judgment against both insurers and the present consolidated appeals derive from the Law Division's rulings on that motion. The proofs on the motion comprised the pleadings, answers to interrogatories (not included in the appendix), the depositions of Mr. and Mrs. Buenaga and the president of Bonner and the insurance policies. The trial court held that the Peerless policy covered, regardless of whether Mrs. Buenaga's operation of the car had been prohibited or permitted by Bonner, and so it was obligated to defend, pay any judgment (within the policy limits) and reimburse Mrs. Buenaga for reasonable legal fees and expenses incurred. No proofs were presented or conclusion stated as to the amount of such reimbursement. ¹ The court also held that the car involved in the accident was within the 'regular use' exception of the Ohio policy and so that company had no coverage and no liability. The Buenaga motion for summary judgment against Ohio was therefore denied. Thereupon Ohio's counsel made an oral motion to dismiss the third-party complaint and Peerless' cross-claim against it, which was immediately granted.

Peerless appealed to the Appellate Division from all aspects of the trial court's action. Mrs. Buenaga cross-appealed from the rulings in favor of Ohio. The Butlers took the same position as Mrs. Buenaga. ² The Appellate Division affirmed, 107 N.J.Super. 80, 257 A.2d 2 (1969) (sub nom. Butler v. Buenaga).

Peerless petitioned for certification and Mrs. Buenaga and the Butlers cross-petitioned. All three applications were granted. 55 N.J. 168, 259 A.2d 918 (1969). ³ In this court Peerless urges that its policy does not afford coverage, and the lower tribunals were wrong in deciding to the contrary, but that the Ohio contract does cover and so the third-party complaint and its cross-claim against Ohio should not have been dismissed. Mrs. Buenaga contends, as do the Butlers, that both the Peerless and Ohio policies cover. Ohio takes the view that only the Peerless contract furnishes coverage and so the determination that its policy did not was correct.

As to the Peerless policy, the controversy is essential one of law--whether Matits v. Nationwide Mutual Ins. Co., 33 N.J. 488, 166 A.2d 345 (1960), and its progeny or the earlier decision in Baesler v. Globe Indemnity Co., 33 N.J. 148, 162 A.2d 854 (1960), is controlling. Baesler held that where the car owner had expressly prohibited the initial permittee from allowing others to use or drive the insured car, there was no coverage when that prohibition had been violated. Matits thereafter adopted the 'initial permission rule' in this state and held that 'if a person is given permission to use a motor vehicle in the first instance, any subsequent use short of theft or the like while it remains in his possession, though not within the contemplation of the parties, is a permissive use within the terms of a standard omnibus clause in an automobile liability insurance policy.' 33 N.J. at 496--497, 166 A.2d at 349. The more restrictive omnibus clause in the Peerless policy must be deemed to have only the same legal connotations as the clause in Matits. Selected Risks Indemnity Co. v. Zullo, 48 N.J. 362, 225 A.2d 570 (1966). The lower courts in the case at bar found that Matits controlled and that Baesler was distinguishable, thereby making of no consequence in this connection the conflict in the proofs as to the extent of the permission granted by the president of Bonner.

Any doubt...