Hartford Ins Co. of the Midwest v. Halt

• Decision Date: 12 July 1996
• Docket Number: No. 2,2
• Parties: HARTFORD INSURANCE COMPANY OF THE MIDWEST, Appellant, v. James S. HALT, Kathleen M. Pfeiffer, Individually and as Parent and Natural Guardian of Nicole M. Tatarski, an Infant, Julie Molino, an Infant, by Bruno Molino, Her Father and Natural Guardian, Bruno Molino, Individually, Stephen J. Niedziela, an Infant, by Stephen J. Niedziela, Jr., His Father and Natural Guardian, Stephen J. Niedziela, Jr., Individually, Barbara M. Lamm and David Lamm, Respondents. (Appeal)
• Court: New York Supreme Court — Appellate Division

Page 589

646 N.Y.S.2d 589

223 A.D.2d 204

HARTFORD INSURANCE COMPANY OF THE MIDWEST, Appellant, v. James S. HALT, Kathleen M. Pfeiffer, Individually and as Parent and Natural Guardian of Nicole M. Tatarski, an Infant, Julie Molino, an Infant, by Bruno Molino, Her Father and Natural Guardian, Bruno Molino, Individually, Stephen J Niedziela, an Infant, by Stephen J. Niedziela, Jr., His Father and Natural Guardian, Stephen J. Niedziela, Jr. Individually, Barbara M. Lamm and David Lamm, Respondents (Appeal No. 2.)

Supreme Court, Appellate Division,

Fourth Department.

July 12, 1996.

Smith, Murphy & Schoepperle by Frank Godson, Buffalo, for Hartford Ins. Co. of the Midwest.

Davis, Augello, Matteliano & Gersten, LLP by William A. Gersten, Buffalo, for James Halt.

Smith, Keller, Miner & O'Shea by R. Charles Miner, Buffalo, for Kathleen Pfeiffer.

Weissfeld & Weissfeld by Adrian R. Weissfeld, Buffalo, for Bruno Molino.

Paul William Beltz, P.C. by Kevin Sullivan, Buffalo, for Stephen J. Niedziela.

Miserendino, Celniker, Seegert & Estoff, P.C. by Philip Celniker, Buffalo, for Barbara M. Lamm and David Lamm.

Before DENMAN, P.J., and PINE, CALLAHAN, BALIO and DAVIS, JJ.

DENMAN, Presiding Justice.

These appeals require us to decide whether the entitlement exclusion of an automobile liability policy that excludes coverage to "any person * * * [u]sing a vehicle without a reasonable belief that that person is entitled to do so" is applicable to a "family member" of the insured. We hold that the policy unambiguously excludes liability coverage for a "family member" who uses the vehicle without permission. We thus overrule our decision in Paychex, Inc. v. Covenant Ins. Co., 156 A.D.2d 936, 549 N.Y.S.2d 237.

FACTS

Effective April 1, 1993, plaintiff, Hartford Insurance Company of the Midwest, issued an automobile policy to its named insured, Susan Latt, covering her 1985 Ford Ranger pick-up truck. The policy provides:

" INSURING AGREEMENT

A. We will pay damages for bodily injury or property damage for which any insured becomes legally responsible because of an auto accident.

* * * * * *

B. Insured as used in this Part means:

1. You or any family member for the ownership, maintenance or use of any auto or trailer.

2. Any person using your covered auto."

The policy defines "Family Member" as "a person related to you by blood, marriage or adoption who is a resident of your household". The policy contains a number of "Exclusions", including Exclusion A.8., which provides:

"We do not provide Liability Coverage for any person * * * [u]sing a vehicle without a reasonable belief that that person is entitled to do so."

The issue of coverage is raised with respect to use of the 1985 Ford pick-up by James S. Halt, Susan Latt's son, on April 9, 1993, when it collided with another vehicle, resulting in injuries to the occupants of both vehicles. It is incontrovertible on this record that use of the vehicle by Halt at the time of the accident was without the permission of his mother and stepfather, in whose household he was residing. The record establishes that, while his parents were away on vacation, and while Halt was staying with a friend, Halt broke into his parents' house, searched for the truck keys (which had been hidden), and took the truck against his parents' express wishes.

As a result of the incident, Halt's mother lodged a criminal complaint against Halt for burglary and unauthorized use of a motor vehicle. Ultimately, Halt pleaded guilty to a reduced charge of petit larceny. Halt also pleaded guilty to a charge of driving without a license. In addition, personal injury actions were instituted by or on behalf of the five injured occupants of both vehicles against Halt as driver and Susan Latt as owner of the 1985 Ford. Subsequently, following consolidation of those actions, Susan Latt obtained summary judgment dismissing all claims against her on the ground that Halt was not using the vehicle with her express or implied permission.

In the interim, plaintiff disclaimed coverage and commenced this action seeking a declaration that it is not obligated to defend or indemnify Halt in the underlying action. The basis for plaintiff's disclaimer was the provision excluding "coverage for any person * * * [u]sing [the] vehicle without a reasonable belief that that person is entitled to do so." The complaint named as defendants all parties to the underlying action.

In his answer, Halt denied that he was operating the vehicle without permission, although that fact is incontrovertible on this record and Halt would be collaterally estopped from relitigating that issue after his mother obtained summary judgment on that basis. Further, Halt raised as an affirmative defense that he was a "family member" of the insured, as that term is defined in the policy, because he was residing in the household of his mother at the time of the accident. Halt contended that he thus is covered under the policy regardless of lack of permission and that plaintiff must defend and indemnify him.

Plaintiff moved for summary judgment declaring that it has no obligation to defend or indemnify Halt. Plaintiff alleged that Halt Halt opposed plaintiff's motion and cross-moved for summary judgment declaring that plaintiff is obligated to defend and indemnify him in the underlying action. Halt also sought reimbursement for the reasonable costs and attorney's fees incurred in defending the declaratory judgment action. Halt contended that he was a "family member", that "family members" and other "persons" constitute mutually exclusive classes under the policy, and that his use of the vehicle without permission thus does not exclude him from coverage. In making that argument, Halt relied on this Court's decision in Paychex, Inc. v. Covenant Ins. Co., supra. The remaining defendants (plaintiffs in the underlying action) joined in opposition to plaintiff's motion and in support of Halt's cross motion.

had neither permission to use the vehicle nor a reasonable belief that he was entitled to operate it, and therefore is not covered. Plaintiff also contended, for the first time, that Halt was not a "family member" of the insured because he was not residing with her on the date of the accident. ¹

Supreme Court, relying on Paychex, denied plaintiff's motion and granted Halt's cross motion. In a judgment (denominated order and judgment), the court declared that plaintiff is obligated to defend and indemnify Halt in the underlying action. In a separate order, the court declared that plaintiff must reimburse Halt for the costs of defending the declaratory judgment action.

ISSUE

On appeal, plaintiff contends that the court should have declared that plaintiff is not obligated to defend and indemnify Halt under his mother's policy. That issue of contractual interpretation turns on whether Halt, as a "family member" of the insured, is necessarily covered under the policy, or whether he is excluded from coverage under the entitlement exclusion, which states, "We do not provide Liability Coverage for any person * * * [u]sing a vehicle without a reasonable belief that that person is entitled to do so." The question is whether a "family member" is a "person" within the meaning of the exclusion, or whether the phrases "family member" and "any person" define mutually exclusive classes.

PRECEDENTS

We decided precisely that issue in Paychex, Inc. v. Covenant Ins. Co., supra, which is indistinguishable from this case with respect to both the relevant facts and the policy language. There, we affirmed an order granting summary judgment declaring that the insurer was obligated to defend and indemnify the insured's son, reasoning:

"The exclusion may be construed to refer solely to the second definition of 'covered person', namely, '[a]ny person using [the] covered auto'. Thus, a 'family member' would still be a 'covered person' even though he might be a person using the automobile without a reasonable belief that he was entitled to do so (see, Meridian Mut. Ins. Co. v. Cox, 541 N.E.2d 959 [Ind.App.]; Economy Fire & Cas. Co. v. Kubik, 142 Ill.App.3d 906 , 492 N.E.2d 504). The terms of the policy are at least ambiguous, and any ambiguity should be resolved in favor of the policyholder and against the insurer (see, Venigalla v. Penn Mut. Ins. Co., 130 A.D.2d 974, 515 N.Y.S.2d 939, lv dismissed 70 N.Y.2d 747, 519 N.Y.S.2d 1034, 514 N.E.2d 392)" (Paychex, Inc. v. Covenant Ins. Co., supra, at 937, 549 N.Y.S.2d 237).

Our decision in Paychex is the only New York case on point. However, numerous out-of-State cases deal with this issue (see generally, Annotation, Application of Automobile Insurance "Entitlement" Exclusion to Family Member, 25 ALR5th 60). For the most part, those cases involve policy language indistinguishable from that at issue here. A minority of courts have interpreted that language as providing coverage in these circumstances. Besides our Paychex decision The vast majority of courts considering the issue have reached a contrary result, i.e., that the policy unambiguously excludes coverage for anyone, including a "family member", who uses the vehicle without permission (see, Newell v. Nationwide Mut. Ins. Co., 334 N.C. 391, 432 S.E.2d 284; Allied Group Ins. Co. v. Allstate Ins. Co., 123 Idaho 733, 852 P.2d 485; Estate of Ge Yang v. General Cas. Co., 185 Wis.2d 919, 520 N.W.2d 291 [unpublished decision--text at 1994 WL 269281], review denied 524 N.W.2d 142; Harlan v. Valley Ins. Co., 128 Or.App. 128, 875 P.2d 471, review denied 319 Or. 407, 879 P.2d 1285; Cincinnati Ins. Co. v. Plummer, 213 Ga.App. 265, 444 S.E.2d 378; Hanover Ins. Co. v. Locke, 35 Mass.App.Ct. 679, 624 N.E.2d 615; Kelly v. Threshermen's Mut. Ins. Co., 176 Wis.2d 513, 502 N.W.2d 618 [unpublished decision--text at 1993 WL 98770]; Omaha Prop. & Cas. Ins. Co. v. Johnson, 866 S.W.2d 539 [Tenn.App.]; State Farm Mut. Auto. Ins. Co. v. Casualty Reciprocal Exch., 600 So.2d 106 [La.App.] Omni Ins. Co....