Columbia Cas. Co. v. Hoohuli

• Decision Date: 22 January 1968
• Docket Number: No. 4551,4551
• Parties: COLUMBIA CASUALTY COMPANY, Plaintiff-Appellee, v. Joseph HOOHULI, Jr., Patrick Yamada, James S. Yamada, Mineko T. Yamada and Shoichi Nakamura, and Mid-Pack Trucking, Inc. and United States Fidelity and Guaranty Company, Defendants-Appellants.
• Court: Hawaii Supreme Court

Page 99

437 P.2d 99

50 Haw. 212

COLUMBIA CASUALTY COMPANY, Plaintiff-Appellee, v. Joseph HOOHULI, Jr., Patrick Yamada, James S. Yamada, Mineko

T. Yamada and Shoichi Nakamura, and Mid-Pack

Trucking, Inc. and United States

Fidelity and Guaranty Company,

Defendants-Appellants.

No. 4551.

Supreme Court of Hawai'i.

Jan. 22, 1968.

Syllabus by the Court

1. In determining whether an employee's use of his employer's motor vehicle is covered by the omnibus clause in an insurance contract, the express or implied scope of permission and not the scope of employment is determinative.

2. The purpose of the omnibus clause is to protect not only the named insured, but also an otherwise uninsured person operating the named insured's vehicle with permission, and a person injured by such permittee.

3. A presumption that a driver was operating a vehicle with permission at the time of an accident arises upon a showing that the driver originally was expressly or impliedly authorized by the named insured to drive it.

4. The presumption of permission may be rebutted only by showing that permission to use the vehicle was withdrawn or that the actual use constituted a temporary tortious conversion.

Morris P. Skinner, Honolulu (Skinner, Bennett & Ornelles, Honolulu, of counsel) for defendants-appellants.

Dennis E. W. O'Connor, Honolulu (Robertson, Castle & Anthony, honolulu, of counsel) for plaintiff-appellee.

Before RICHARDSON, C. J., and MIZUHA, MARUMOTO, ABE, and LEVINSON, JJ.

LEVINSON, Justice.

Wallace Yamamoto owned a dump truck which he had insured with Appellant United States Fidelity & Guaranty Co. (hereinafter 'U. S. F. & G.'). The policy contained the standard omnibus clause extending coverage of the policy to

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.

The policy covered the truck for 'COMMERCIAL' use, defined as 'icluding occasional use for personal, pleasure, family and other business purposes.'

Yamamoto leased the truck to appellant, Mid-Pac Trucking, Inc. (hereinafter 'Mid-Pac'). The lease was not placed in evidence, but the parties stipulated that 'Mid-Pac had full control and authority over this truck on the day of the accident.' The trial court found that the lease gave Mid-Pac 'full use and control of the truck and legal responsibility for it.'

Appellee Joseph Hoohuli had been employed by Mid-Pac to drive a truck for fourteen or fifteen months before the day of the accident. On Saturday, January 9, 1960, he drove the Yamamoto truck to a Mid-Pac work site on Kalanianaole Highway. He remained at the site until 9:30 a. m. Before Hoohuli left, the Mid-Pac employee in charge told him to drive the truck back to the yard and have the shop foreman send out a replacement. As he drove on Waialae Avenue, along the route prescribed by Mid-Pac, toward the yard, some friends drove by the truck and called to him. Hoohuli stopped the truck, and when his friends told him they were going to the beach, he decided to join them in their car. He parked the truck on a side street lees than a mile from Waialae Avenue, between Kaimuki and Diamond Head.

They remained at the beach until after sundown. The friends drove Hoohuli back to the truck around 8 p. m., and he then started to return it to the Mid-Pac yard. After driving the truck one or two blocks, Hoohuli noticed that the braking system was losing air pressure and stopped to call a repairman. The truck began rolling down a hill, and he jumped back into it to try to get it under control. The brakes failed and Hoohuli could not prevent the truck from going onto the sidewalk and running into a house. , the appellees Patrick Yamada, James Yamada, Mineko Yamada, and Shoichi Nakamura filed suit against Hoohuli and Mid-Pac for personal injuries and property damages alleged to have been sustained as a result of the accident.

Columbia Casualty Co., an insurance company with a policy covering Hoohuli's personally owned automobile, brought this action seeking a declaratory judgment that it was not liable either to defend Hoohuli or to pay any judgment rendered against him as a result of the accident. It joined as defendants Hoohuli, U. S. F. & G., Mid-Pac, and the four plaintiffs in the damage action. Mid-Pac and U.S.F. & G. jointly filed a cross-claim and counter-claim for a declaratory judgment that Hoohuli was not operating the truck with the permission of the named insured or owner, that he was not operating the truck within the scope of his employement, and that neither U. S. F. & G. nor Mid-Pac has a duty to pay any judgment which may be rendered against Hoohuli arising out of the accident.

The trial court found that Columbia Casualty was not liable under its policy and granted it judgment accordingly. There was no appeal from that judgment. The trial court found that Hoohuli was not acting within the scope of his employment at the time of the accident. The court also found that Hoohuli was not driving with Mid-Pac's permission since he had been told not to use the truck for pleasure. It did conclude, however, that Hoohuli was driving with Yamamoto's implied permission. Therefore, it concluded that U. S. F. & G. is obligated to defend Hoohuli and pay any judgment rendered against him up to the limits of the Yamamoto policy. From that judgment, Mid-Pac and U. S. F. & G. appealed.

At the outset we must recognize that we are construing a clause in an insurance contract in conjunction with a statute. R.L.H.1955, § 160-103(b) requires in part that every liability insurance policy

Shall insure the person mamed therein and any other person, as insured, using any such motor vehicle or motor vehicles with the express or implied permission of such named insured * * *.

The provision of the statute and the contract clause are not identical. The contract clause provides that 'actual use' must be with 'permission' whereas the statute provides only that 'use' must be with 'express or implied permission'. If the terms are construed to have different meanings, which for the most part they have not been, e. g., Collins v. New York Cas. Co., 140 W. Va. 1, 13, 82 S.E.2d 288, 296 (1954), the statutory terms take precedence. The policy itself recognizes the priority to be accorded the statute.

25. Terms of Policy Conformed to Statute. Terms of this policy which are in conflict with the statutes of the State wherein this policy is issued are hereby amended to conform to such statutes.

Therefore, we must look to the purposes the statute serves as well as to the intent of the parties to the contract.

U. S. F. & G. can be held liable only if Hoohuli was driving the truck at the time of the accident with the express or implied permission of the named insured, Wallace Yamamoto. Whether Hoohuli was acting within the scope of his employment is not the primary test of omnibus clause coverage. Obviously, in a specific case a named insured-employer may give his employee the use of an automobile with permission co-extensive with the scope of employment. Perhaps in that case the scope of employment, as a matter of fact, will also be the scope of permission, Hooper v. Maryland Cas. Co., 233 N.C. 154, 63 S.E.2d 128 (1951). ¹ The policy considerations which determine when an employer will be charged with the acts of his employee are completely different from the policy considerations involved in determining whether an employee is covered by the omnibus clause in an insurance contract. ²

Cases construing the exact provision in other jurisdictions are legion. Generally, they have been interpreted as falling within one of three categories. One group has been construed as applying a 'strict' or 'conversion' rule, e. g., State Farm Mut. Auto. Ins. Co. v. Cook, 186 Va. 658, 43 S.E.2d 863, 5 A.L.R.2d 594 (1947). This approach requires that the scope of permission include the precise use to which the permittee is putting the automobile at the time of the accident for the permittee to be operating with the named insured's permission. A second group has been construed as applying a 'liberal' or 'initial permission' rule, e. g., Matits v. Nationwide Mut. Ins. Co., 33 N.J. 488, 166 A.2d 345 (1960). Under this approach, if the permittee is given permission to use the car, regardless of express or implied restrictions on his operation, he is covered for any subsequent use short of theft or the like. A third group has been construed as applying a 'moderate' or 'minor deviation' rule, e. g., Collins v. New York Cas. Co., 140 W.Va. 1, 82 S.E.2d 288 (1954). Under this approach, the permittee is covered under the omnibus clause if the use at the time of the accident is no more than a slight deviation from the scope of permission actually given.

As in the case of most legal 'rules', the dividing lines between the three often blur. Courts applying the strict rule may disregard 'immaterial' deviations, whereas courts applying the initial permission rule sometimes recede in the fact of gross deviations contrary to express restriction. In some cases, courts applying the minor deviation rule have moved toward a broad construction of what is 'minor' ant therefore appear in some cases to apply the initial permission rule. In others, 'minor' has been construed so narrowly as to appear to apply the strict rule. See generally 5 A.L.R.2d 600 and Supplement. Two courts recently expressing dissatisfaction with this tripartite classification have added a fourth approach, the 'major deviation' rule, Ryan v. Western Pac. Ins. Co., 242 Or. 84, 408 P.2d 84 (1965); American Fid. Co. v. North British Merc. Ins. Co., 124 Vt. 271, 204 A.2d 110 (1964).

Blind adherence to legal rules constitutes an abrogation of the judicial function. Such blind adherence may result as much from adoption of a rule without adequate analysis as from application of a precedent without examination of its claim to...