Federated Mut. Ins. Co. v. Davis By and Through Davis, Civil Action No. 3:94CV375LN.

• Decision Date: 29 June 1995
• Docket Number: Civil Action No. 3:94CV375LN.
• Parties: FEDERATED MUTUAL INSURANCE COMPANY, Plaintiff, v. Corey DAVIS, a Minor, By and Through His Parents And Next Friends, Benny DAVIS and Susan Davis; Benny Davis and Susan Davis, in their Individual Capacities; Wanda Leslie, Individually and as Administratrix of Rodney Long, a Minor, Deceased, and as a Personal Representative of the Legal Heirs of Rodney Long; and State Farm Mutual Automobile Insurance Company, Defendants.
• Court: U.S. District Court — Southern District of Mississippi

919 F. Supp. 1001

FEDERATED MUTUAL INSURANCE COMPANY, Plaintiff, v. Corey DAVIS, a Minor, By and Through His Parents And Next Friends, Benny DAVIS and Susan Davis; Benny Davis and Susan Davis, in their Individual Capacities; Wanda Leslie, Individually and as Administratrix of Rodney Long, a Minor, Deceased, and as a Personal Representative of the Legal Heirs of Rodney Long; and State Farm Mutual Automobile Insurance Company, Defendants.

Civil Action No. 3:94CV375LN.

United States District Court, S.D. Mississippi, Jackson Division.

June 29, 1995.

J. Wyatt Hazard, Paul V. Ott, Daniel, Coker, Horton & Bell, Jackson, MS, for plaintiff.

William Scott Collins, Mitchell, McNutt, Threadgill, Smith & Sams, Tupelo, MS; Daniel K. Tucker, Lesle Langston, Langston, Michael & Bowen, Booneville, MS, for defendants.

MEMORANDUM OPINION AND ORDER

TOM S. LEE, District Judge.

In this declaratory judgment action, the plaintiff, Federated Guaranty Insurance Company (Federated), has moved for summary judgment. Separate cross-motions for summary judgment have been filed by defendants Corey, Susan and Bennie Davis and their insurer, State Farm Mutual Automobile Insurance Company (State Farm), and by defendant Wanda Leslie. The court has considered the parties' motions, and concludes that summary judgment should be granted for Federated, and that the cross-motions of defendants should be denied.

Federated brought this action seeking a declaration that it has no liability to the defendants under certain policies of automobile insurance. The facts which precipitated this action are as follows. In October 1992, Harry Anthony, the owner and president of Tupelo Ford Tractor, Inc., purchased a 1993 Acura Integra in anticipation of his daughter Christi's upcoming fifteenth birthday. He titled the car to the company, as he did with all of his family and business vehicles and, contemporaneously with his purchase, he had the Acura added to the automobile insurance policies maintained by his business. In particular, at that time, Federated had in force two policies providing coverage for Tupelo Ford Tractor, a commercial general liability policy with limits of $500,000, and a commercial umbrella liability policy providing excess coverage of $1,000,000. Additionally, Anthony had in effect a personal umbrella liability policy.

After obtaining her driver's license in December 1992, Christi became the principal driver of the Acura. She drove the car primarily to and from school and school functions, but was allowed to go other places in the car if she first obtained her father's permission. On the evening of Saturday, March 27, 1993, Christi asked and was given permission by her father to go out in the car. After she and a friend drove around town in the car for awhile, they stopped at an Amoco station where they ran into some friends from school, Corey Davis and Rodney Long. Corey asked Christi if he could drive the Acura, and Christi allowed him to do so, in disregard of a standing instruction from her father that she not let anyone else drive the car. Corey and Rodney left the Amoco station in the Acura and began riding around town; Christi left with friends in another car. While driving the Acura, Corey lost control of the car and it flipped; Rodney was thrown from the car and killed.

At the time of the accident, Corey Davis was insured under a State Farm policy issued to his parents, Benny and Susan Davis, which provided liability limits of $50,000 per person. State Farm and Federated were both notified of the accident, and Federated immediately began an investigation. On March 31, its representative interviewed Harry Anthony and obtained the pertinent facts about the accident and how Corey Davis had come to be driving the car. Following that conversation, Federated hired an independent adjusting firm, which in early April 1993 secured statements from Christi Anthony and Corey Davis about the events on the night of the accident.

Subsequently, in late April, upon inquiry from a State Farm claims representative, Federated advised that a serious coverage question was presented. However, the following month, Federated offered Rodney Long's mother, Wanda Leslie, $100,000 to settle any claim relating to Rodney's death. Mrs. Leslie did not accept the offer, but instead communicated with an attorney, who commenced negotiations on her behalf with Federated toward a settlement of her claim. Several months later, on October 26, 1993, Federated wrote to Mrs. Leslie's attorney extending an offer to settle the claim for $200,000. But just over a week later, Federated rescinded all settlement offers. No reason was initially given for Federated's about face, but Mrs. Leslie's attorney states that shortly thereafter, he was told by Federated that it was taking the position that Corey Davis was not an insured under its policy.

In March 1994, Mrs. Leslie filed suit in state court against the Davises, the Anthonys and Tupelo Ford Tractor seeking $4,300,000 in damages for her son's wrongful death. Federated is defending her negligent entrust claim against the Anthonys and Tupelo Ford Tractor without any reservation of rights. However, while Federated has also assumed the defense of the Davises, it has done so under a reservation of rights.

The coverage issue presented by this case is whether Corey Davis, the operator of the insured vehicle at the time of the accident, was an additional insured within the terms of the omnibus clause of Federated's policy. Federated's commercial general liability policy defines "insureds" to include the named insured and "anyone else while using with your permission a covered auto."¹ The umbrella policy follows form and includes as insureds "any additional insured included in `underlying insurance', but only to the extent that insurance is provided to such additional insured thereunder." Likewise, the personal umbrella liability policy purports to cover the named insured and "any person using an `auto' ... with your permission...." Federated contends that Corey Davis' operation of the Acura does not fit within these definitions of "insured" since Harry Anthony, the owner of the car and named insured, had neither expressly nor impliedly permitted his use of the car. There is no evidence that Harry Anthony allowed Corey Davis to drive the car. And the court concludes that the undisputed facts of record do not justify an inference that Davis was using the insured vehicle with the implied permission of Mr. Anthony. Thus, his use of the automobile was not covered by the policy.

The parties are in agreement that in order for Corey Davis to be an insured under the omnibus clause of Federated's policies, he must either have had Harry Anthony's express or implied permission.² The Mississippi Supreme Court has resolved issues relating to the coverage of omnibus clauses, i.e., permissive use cases, according to the following general principles:

The "general rule" that a permittee may not allow a third party to "use" the named insured's car has generally been held not to preclude recovery under the omnibus clause where (1) the original permittee is riding in the car with the second permittee at the time of the accident, or (2) the second permittee, in using the vehicle is serving some purpose of the original permittee. The courts generally reason that under such circumstances the second permittee is "operating" the car for the "use of the first permittee" and that such "use" is within the coverage of the omnibus clause.

United States Fidelity & Guar. Co. v. Stafford, 253 So.2d 388, 392 (Miss.1971) (quoting 7 Am.Jur. Automobile Insurance § 117 (1963)). Moreover,

It is recognized as a general rule that use of an automobile by a third person is not protected where the owner has expressly forbidden it. Where, however, the first permittee has "broad and unfettered domination" over the insured automobile, under certain circumstances permission of the insured may be implied. In particular, this is true where the operation by the second permittee serves some purpose of the first permittee.

Id. (quoting National Farmers Union Property & Casualty Co. v. State Farm Mut. Auto. Ins. Co., 277 F.Supp. 542 (D.Mont. 1967)).

Applying these rules, the court in Stafford held that the omnibus clause covered the operation of an insured vehicle by a second permittee who, at the time of the accident, was racing the automobile with the express permission of the insured's son, who was a passenger in the car. Though the owner/insured insisted that he had ordered his son not to race or let anyone else drive the car, there was considerable testimony that his son had, in fact, allowed others to drive the car on numerous occasions, and that his father knew of this practice but had raised no objection when he had seen others driving the car. The court found this evidence sufficient to justify the jury's finding that the insured impliedly gave his permission to the second permittee's use by not restricting use of the car solely to his son.

The court also found coverage in State Farm Mutual Automobile Insurance Co. v. Moore, 289 So.2d 909 (Miss.1974), for an accident that occurred when the named insured's son allowed a friend to drive the insured automobile. In Moore, Mr. Arnold purchased a car for the use of his seventeen-year-old son. He titled the car in his own name, had the license tag issued in his name, and added the car to his State Farm policy, advising State Farm that he had bought the car for the use of his son, who would be the principal driver. He "turned the car over" to his son, who had the only set of keys. Mr. Arnold told his son more than once not to let anyone else drive the car, but in disregard of his father's instructions and without his father's knowledge, the son did let other students drive the car. On the night of the accident, the son went with some friends to the Barnett Reservoir. Not wanting to drive the car back to town...