Hawkeye–sec. Ins. Co. v. Bunch

• Decision Date: 07 July 2011
• Docket Number: No. 10–3261.,10–3261.
• Parties: HAWKEYE–SECURITY INSURANCE COMPANY; The Midwestern Indemnity Company, Appellees,v.Donald A. BUNCH, Patricia A. Bunch, Appellants.
• Court: U.S. Court of Appeals — Eighth Circuit

643 F.3d 646

HAWKEYE–SECURITY INSURANCE COMPANY; The Midwestern Indemnity Company, Appellees,

v.Donald A. BUNCH, Patricia A. Bunch, Appellants.

No. 10–3261.

United States Court of Appeals, Eighth Circuit.

Submitted: June 14, 2011.Filed: July 7, 2011.

Stephen H. Ringkamp, argued, Mark J. Becker, on the brief, St. Louis, MO, for appellant.Russell F. Watters, argued, Timothy J. Wolf and Patrick A. Bousquet, on the brief, St. Louis, MO, for appellee.Before MURPHY and SMITH, Circuit Judges, and READE,¹ District Judge.MURPHY, Circuit Judge.

Midwestern Indemnity Company and Hawkeye–Security Insurance Company brought this declaratory judgment action seeking a determination that there was no coverage for an accident involving a company car driven by Daniel Brandt and injuring Donald Bunch. Donald and his wife Patricia were both employed by the insured, The Installers Company (Installers). She had limited permission to drive the company car, but she had asked an intoxicated Brandt to drive her husband on a personal errand in violation of company policies. The case was tried to the district court ² which ruled in favor of the insurers, and the Bunches appeal. We affirm.

I.

Total Lock & Security, Inc. (Total Lock) and its sister company Installers install commercial locks. Total Lock and Installers maintained insurance policies with Midwestern Indemnity Company (Midwestern) and Hawkeye–Security Insurance Company (Hawkeye) for several vehicles that were used by employees while traveling for business, including the car that was damaged in the present case. Michele Fogerty was the sole owner and president of both companies. Installers employed Donald and Patricia Bunch at the time of the accident. The district court also found that Brandt was an employee of Installers on the date of the accident despite being on leave from work.

Installers had several policies related to company vehicles at the time of the accident. Employees were prohibited from using vehicles for personal reasons except when out of town on business, when returning late at night from an out of town job, or when explicitly authorized. There was to be no driving after drinking, and employees were prohibited from allowing an unauthorized person to drive a company vehicle. While none of these policies were in writing, the district court found that they had been orally communicated and were known by all employees.

Employees did not have free use of company vehicles while at home in St. Louis. In fact Donald Bunch's authority to drive company vehicles had been revoked before the accident because he had failed to disclose a citation for driving while intoxicated when he was hired. After that revocation, only Patricia was permitted to drive company vehicles when the couple was issued a company car for a work assignment.

The Bunches had been out of town on a business road trip for seven or eight months before the accident. After they returned to St. Louis late on November 21, 2007, Patricia Bunch had authorization to take a vehicle home, keep it at their residence until after Thanksgiving, and use it to purchase food for the holiday. The Bunches went to the Total Lock office on November 23 to meet with Fogerty. During that meeting Fogerty authorized Patricia to take the company car for required maintenance and to fill it with gas. She instructed Patricia Bunch to leave it parked at the Bunches' home until they left town the following week for their next job. Fogerty testified that she had not authorized personal use of the company car over the weekend and that the Bunches agreed to that restriction. The district court heard conflicting testimony on this point from the Bunches. Patricia Bunch stated that “Fogerty didn't tell [her] anything,” but Donald testified that she gave them “permission for full use of that vehicle for all personal reasons.” The district court gave little weight to that testimony, however, for it found that neither Bunch seemed “constrained by their oath” and both “appeared willing to say anything to advance” their claims.

On November 26, while the Bunches were still in St. Louis, Patricia Bunch asked Brandt to drive her husband on a personal errand to deliver leftover Thanksgiving food to his mother. Brandt agreed even though he knew that he did not have permission from their employer. He was not working on the day of the accident, no one at the company authorized him to drive the car, and he had been drinking alcohol. Unfortunately Brandt was involved in an accident which left Donald Bunch with severe injuries characterized as “incomplete quadriplegia.”

An officer at the accident scene reported that Brandt was obviously intoxicated. At trial a forensic toxicologist testified that Brandt likely had “over seven and one half beers” in his body at the time of the accident. Patricia Bunch testified that she knew of the company rule against drinking and driving but that she was unaware that Brandt had been drinking. The district court found that Brandt had consumed at least fifteen cans of alcohol on the day of the accident and that the Bunches were aware that Brandt had been drinking.

Total Lock and Installers had a primary insurance policy with Midwestern and an umbrella policy with Hawkeye. The liability policy provided coverage to “[y]ou for any covered ‘auto’ ” and “[a]nyone else while using with your permission a covered ‘auto’ you own, hire or borrow....” “You” referred to the named insureds in the policy which were listed as Total Lock and Installers. There was also underinsured and uninsured motorist coverage, but that coverage did not extend to “[a]nyone using a vehicle without a reasonable belief that the person is entitled to do so.”

Midwestern and Hawkeye sought a declaratory judgment that Brandt was not entitled to liability coverage and that Donald Bunch was not entitled to uninsured motorists coverage. The Bunches counterclaimed, seeking a declaration that liability, underinsured, and uninsured coverage existed. After trial the court found that no liability insurance coverage existed because Brandt had not had express or implied permission to use the car and Donald Bunch was not covered by the uninsured and underinsured motorists coverage. The Bunches appeal, asserting that liability coverage exists because Brandt had permission from Patricia Bunch to use the vehicle and that the uninsured and underinsured sections of the policy are ambiguous.

We review a district court's findings of fact in a court trial for clear error and its conclusions of law de novo. Eckert v. Titan Tire Corp., 514 F.3d 801, 804 (8th Cir.2008). In this diversity action we use Missouri state law to construe insurance policies, and questions about the interpretation of an insurance policy are reviewed de novo. Brake Landscaping & Lawncare, Inc. v. Hawkeye–Sec. Ins. Co. et al., 625 F.3d 1019, 1022 (8th Cir.2010).

II.

The first issue raised by the Bunches is whether liability coverage extended to Brandt. The liability policy covers “[a]nyone ... using with your permission a covered ‘auto’ ...” under a section commonly known as an omnibus clause. Such permission may be express or implied. Express permission exists when the named insured or someone with authority “directly and distinctly” gave such permission. Shelter Mut. Ins. Co. v. See et al., 46 S.W.3d 65, 67 (Mo.Ct.App.2001). Implied permission is derived from facts and circumstances and “may be the result of a common practice or course of conduct whereby the owner acquiesces in the practice of another operating his automobile.” Id. It is also possible for a “second permittee” to use the vehicle by either express or implied permission from the named insured. See State Farm Fire & Cas. Co. v. Ricks et al., 902 S.W.2d 323, 325 (Mo.Ct.App.1995). In making a coverage determination a court “will not add language to a policy,” and any ambiguity should be resolved against the insurer. Burns v. Smith et al., 303 S.W.3d 505, 511 (Mo.2010).

The district court found that Brandt did not have express or implied permission to use the vehicle because he had never received permission from Total Lock or Installers, Patricia Bunch had not been authorized to give him permission, and he had violated company policy against drinking and driving. The Bunches do not dispute that Brandt did not have permission from Total Lock or Installers. Instead, they argue that the district court erred in denying liability coverage because Patricia Bunch had the authority to give permission to Brandt and she did give it.

The Bunches first contend that Patricia Bunch, acting as a “Named Insured,” could give permission to Brandt because the policy did not specify who at Total Lock and Installers could grant permission. This argument is unavailing. The policy lists Total Lock and Installers as the named insureds, and permission must come from the named insured “or someone having authority to bind him in that respect.” Hanover Ins. Co. v. Abchal et al., 375 S.W.2d 605, 609 (Mo.Ct.App.1964). There was no evidence that Patricia Bunch had authority to bind the company. She therefore could not qualify as a named insured to give Brandt permission to drive the vehicle on behalf of the company.

We are not persuaded that Fogerty's authorization to Patricia Bunch enabled her to give Brandt permission to drive the vehicle as a second permittee. Under Missouri law a second permittee must obtain express or implied permission to use the vehicle from the named insured. U.S. Fidelity & Guar. Co. v. Safeco Ins. Co. of Am. et al., 522 S.W.2d 809, 816 (Mo.1975). Coverage may in some instances extend to second permittees if the first permittee had unfettered control over the car and the second permittee uses the car in a manner impliedly permitted by the owner. Universal Underwriters Ins. Co. v. Davis et al., 697 S.W.2d 189, 193 (Mo.Ct.App.1985). Missouri courts have been reluctant to find implied permission for a second permittee in...