Gillen v. Globe Indemnity Company

• Decision Date: 16 May 1967
• Docket Number: No. 18550.,18550.
• Citation: 377 F.2d 328
• Parties: Larry GILLEN et al., Appellants, v. GLOBE INDEMNITY COMPANY, Appellee.
• Court: U.S. Court of Appeals — Eighth Circuit

377 F.2d 328 (1967)

Larry GILLEN et al., Appellants, v. GLOBE INDEMNITY COMPANY, Appellee.

No. 18550.

United States Court of Appeals Eighth Circuit.

May 16, 1967.

Fletcher Jackson, Howell, Price & Worsham, Little Rock, Ark., for appellants, Gene Worsham, Howell, Price & Worsham, Little Rock, Ark., and G. Thomas Eisele, Little Rock, Ark., on the brief.

James D. Storey, Little Rock, Ark., for appellee, Globe Indemnity Co.

No brief filed and no argument made for appellees, Carl F. Garrison and Suzy Garrison.

Before BLACKMUN, MEHAFFY and GIBSON, Circuit Judges.

FLOYD R. GIBSON, Circuit Judge.

This is an appeal from the United States District Court for the Eastern District of Arkansas, and concerns the question of insurance coverage afforded a permittee of the named insured's general bailee under an omnibus insured clause. In a declaratory judgment action based upon diversity of citizenship the District Court, seeking to apply Arkansas law, decided that plaintiff, Globe Indemnity Company, was not obligated to defend an Arkansas state court action arising from an automobile collision between one, Larry Gillen, the permittee of the named insured's daughter, and one, Fred Mikoleit. Gillen and Mikoleit appeal from that decision.

There is very little dispute as to the facts of this case. Carl F. Garrison purchased a 1961 Chevrolet automobile, which was paid for by him and titled in his name. Garrison, on April 16, 1965, applied for, and was issued as the named insured, a personal liability policy on the automobile by appellee, Globe Indemnity Company. It was clear, however, that he purchased the car primarily for the use of his seventeen year old daughter, Suzy, who lived at home and used the car primarily to drive to and from school. This fact was known to the insurer and noted by it on the policy application.

The policy provided coverage, in addition to the named insured and household members, to "any other person using such automobile with the permission of the named insured, * * *." Though Suzy had general permission to use the insured automobile at her discretion, Mr. Garrison had instructed her not to allow anyone else to drive the car. This instruction was generally followed by Suzy, and to Mr. Garrison's knowledge Suzy abided by this admonition.

Suzy had a boy friend, Larry Gillen. Larry was attempting to obtain summer employment and had arranged to have an interview with Suzy's father, Mr. Garrison. The night before the interview was to take place Larry stayed with the parents of Suzy's girl friend. On the morning of the scheduled interview Suzy drove the insured car to her girl friend's house to pick up Larry. Larry, however, was not satisfied with his appearance and suggested that Suzy loan him the insured automobile so that he could drive to his home several miles away and change his clothes. He stated that he would drive back to Suzy's home, pick up Suzy, and they would go together to Mr. Garrison's place of business. Suzy reluctantly consented to the plan and allowed Larry to drive the car to his home.¹ While driving alone back to Suzy's house, Larry collided with an automobile driven by Fred Mikoleit. Mikoleit filed a personal injury action in an Arkansas state court against Larry. Thereafter, the insurer of the Garrison automobile, Globe Indemnity Company, filed a complaint in the Federal District Court asking for a declaration that the automobile was being driven without the permission of the named insured, Carl F. Garrison, and consequently no coverage was afforded Larry Gillen under the policy, and that it had no duty to defend the state court action against Gillen. The case was tried without a jury before the Honorable Gordon E. Young. Judge Young granted plaintiff the declaration which it sought. Larry Gillen and Fred Mikoleit, the adverse parties in the state court action and co-defendants in this action, appeal this determination in favor of Globe Indemnity Company.

Simply stated in review, the facts are these: The policy in question provides protection to anyone using the automobile with the permission of the named insured. Garrison was the legal owner and named insured, and Suzy, his daughter, was the general permittee of Garrison. Without the express consent of Garrison and contrary to his instructions, Suzy permitted Larry, her boy friend, to use the insured car on an errand personal to him. While Larry was driving the insured car it collided with the Mikoleit vehicle.

The legal issue arising from these facts is simply this: Can Larry be said to have had "permission" of the named insured to drive this car? Or more precisely, under the exact facts of this case, is the permission given by the named insured to his daughter allowing her to use the car sufficient consent to make Larry's use of the car within the permission of the named insured?

A reading of the face of the policy clearly requires as a condition of coverage, "permission of the named insured." Thus the person seeking protection of such a clause must show that permission to drive the insured automobile was granted to him by the named insured. 7 Appleman, Insurance Law & Practice, § 4364. At first glance this may seem to be an impossible task for a second permittee who may have no connection whatsoever with the named insured. This apparently is made even more difficult by the basic rule which states that permission by the named insured allowing another to use his car does not, of itself, authorize this person to allow a third party to drive the car. Sunshine Mutual Insurance Co. v. Mai, 169 F.Supp. 702, 705 (D.N.D., 1959), affd. sub nom. Peterson v. Sunshine Mutual Insurance Company, 273 F.2d 53 (8 Cir. 1959); Krebsbach v. Miller, 22 Wis.2d 171, 125 N.W.2d 408 (1963); 7 Appleman, Insurance Law & Practice, § 4361, pp. 284-288; 7 Am.Jur.2d Automobile Insurance § 116, p. 431; annot. 4 A.L.R.3rd 10, 17.

However, the initial appearance of harshness and rigidity of this general rule has been ameliorated in a large number of cases by the courts' ability to discover some form of "permission" flowing from the named insured to the second permittee.

In a few cases there is some form of express authority from the named insured to the first permittee, authorizing this permittee to loan the automobile to third persons. What appears to be a majority of the cases would hold that the third person's use with the permission of the first permittee having express authority to loan the automobile is use with permission of the named insured. Davis v. St. Paul-Mercury Indemnity Company, 294 F.2d 641 (4 Cir. 1961); Odden v. Union Indemnity Co., 156 Wash. 10, 286 P. 59, 72 A.L.R. 1363 (1930); Mercer Casualty Co. of Celina, Ohio v. Kreamer, 105 Ind.App. 358, 11 N.E.2d 84 (1937). See also the dictum to this effect in Hays v. Country Mutual Insurance Company, 28 Ill.2d 601, 192 N.E.2d 855, 859 (1963); Anderson v. Adams, 148 So.2d 347, 351 (La.App.1962); Dodson v. Sisco, 134 F.Supp. 313, 317 (W.D.Ark., 1955). However, a few cases apply a very strict interpretation of "permission" and hold that the right to grant "permission" to use the insured auto is a personal right of the named insured which cannot be delegated to a permittee. "Permission," to be effective, must come directly from the named insured. Howell v. Accident & Casualty Ins. Co., 32 Tenn.App. 83, 221 S.W.2d 901 (1949); Fox v. Crawford, 80 N.E.2d 187 (Ohio App., 1947).

A much more common situation arises when the named insured allows another a relatively unrestricted use of the car but is silent as to whether the permittee is authorized to allow third parties to use it. A large number of cases, perhaps a majority, hold that a relatively unrestricted permission to use the insured automobile carries with it an implied authority from the named insured to allow third persons to use the car consistent with the original permission. The first permittee with unrestricted authority to use the car is said to have been placed in the shoes of the named insured, and the permission of the first permittee is deemed to be the permission of the named insured for the purposes of omnibus coverage. State Farm Mutual Auto Insurance Company v. Automobile Underwriters, Inc., 371 F.2d 999 (7 Cir. 1967); Pennsylvania Thresherman & Farmers' Mut. Cas. Ins. Co. v. Crapet, 199 F.2d 850 (5 Cir. 1952); United Services Automobile Ass'n v. Preferred Acc. Ins. Co. of N. Y., 190 F.2d 404 (10 Cir. 1951); Ohio Casualty Insurance Company v. Pennsylvania National Mutual Casualty Insurance Company, 238 F.Supp. 706 (D.Md.1965), affd., 352 F. 2d 308 (4 Cir. 1965); Hinchey v. National Surety Company, 99 N.H. 373, 111 A.2d 827 (1955); Krebsbach v. Miller, 22 Wis.2d 171, 125 N.W.2d 408 (1963); Baesler v. Globe Indemnity Co., 33 N.J. 148, 162 A.2d 854, 857 (1960) (dictum). However, there may be no such implication of authority when the first permittee's use is severely restricted as to time and place. Horn, By and Through Godwin v. Allied Mutual Casualty Company, 272 F.2d 76 (10 Cir. 1959); Anderson v. Adams, 148 So.2d 347 (La.App., 1962); Harper v. Hartford Accident & Indemnity Company, 14 Wis.2d 500, 111 N.W.2d 480 (1961).

Furthermore, an almost equal number of cases apply a strict and more narrow approach to the problem. These cases point out that the risk of the insurance company cannot be expanded by implying in the first permittee the power to supply the permission of the named insured, and that authority to delegate the use of an automobile to a third person is not a normal incident of even unlimited permission to use the automobile. Peterson v. Sunshine Mutual Insurance Company, 273 F.2d 53 (8 Cir. 1959) (applying N.D. law); Duff v. Alliance Mutual Casualty Company, 296 F.2d 506 (10 Cir. 1961); Ewing v. Colorado Farm Mutual Casualty Co., 133 Colo. 447, 296 P.2d 1040 (1956); Volk v. Cacchione, 395 Pa. 636, 150 A.2d 849 (1959); Hunton v. McCarvel, 65 Wash.2d 242, 396 P.2d 639 (1964). See, annot. 160 A.L.R. 1195, 1206...