Home Ins. Co. v. Phillips

• Decision Date: 20 January 1993
• Docket Number: No. 92-0635,92-0635
• Parties: The HOME INSURANCE COMPANY, Plaintiff-Respondent, v. Edward PHILLIPS, Sandra Phillips, and Bradley W. Phillips, a minor, Defendants-Appellants, Kevin C. Rench and Maryland Casualty Company, Defendants. . Oral Argument
• Court: Wisconsin Court of Appeals

Page 193

499 N.W.2d 193

175 Wis.2d 104

The HOME INSURANCE COMPANY, Plaintiff-Respondent, v. Edward PHILLIPS, Sandra Phillips, and Bradley W. Phillips, a minor, Defendants-Appellants Kevin C. Rench and Maryland Casualty Company, Defendants.

No. 92-0635.

Court of Appeals of Wisconsin.

Oral Argument Jan. 20, 1993.

Opinion Released March 3, 1993.

Opinion Filed March 3, 1993.

Before NETTESHEIM, P.J., and BROWN and SNYDER, JJ.

BROWN, Judge.

Edward and Sandra Phillips and their minor son Bradley appeal from a declaratory judgment in favor of The Home Insurance Company. The issue is: Under Arps v. Seelow, 163 Wis.2d 645, 472 N.W.2d 542 (Ct.App.1991), and sec. 632.32, Stats., can an adult member of a car owner's household give himself or herself permission to use the car when the head of the household's business is the named insured on the policy covering the car? We conclude that the owner of a car should be treated as the named insured for the purpose of awarding third-party coverage. We therefore reverse the judgment. Our holding is confined to situations such as this case, when the named insured is a corporation and the insurer knows that the automobiles are owned by its employees and are used by the employees' families for personal purposes.

The factual background of this case is brief. Bradley Phillips was injured when a Mazda automobile in which he was riding collided with a tree. Kevin Rench was driving the car, which was owned by his father Quentin Rench. The car was insured under a Home Insurance commercial automobile policy listing Racine Industries/Von Schrader Company (Racine Industries) as the "named insured." Quentin is the president and CEO of Racine Industries. Home was aware that Quentin owned the Mazda. It listed the car as a "covered auto" in the policy, and listed Kevin as a driver of the Mazda. Kevin lived at home with his parents, but was over eighteen years old at the time of the accident.

Home filed a declaratory judgment action seeking a determination as to coverage for Bradley's injuries. The Phillips filed a counterclaim alleging coverage. Both parties then filed motions for summary judgment. Home argued that Bradley's injuries were not covered under the policy because Kevin was not driving a "covered auto" that was owned, hired or borrowed by Racine Industries. Home also asserted that Racine Industries, as the named insured on the policy, was the only entity with authority to grant Kevin permission to drive the Mazda. Home contended that because Racine Industries did not give Kevin permission, coverage for Bradley's injuries should be denied.

In contrast, the Phillips argued first that coverage was mandated because Home could not deny covering injuries to innocent third parties on the basis of a misrepresentation as to the true owner of the Mazda. Related to this, the Phillips argued that Home should be estopped from denying coverage because it knew that Quentin Rench owned the Mazda. Home also knew that the Mazda was kept for the personal use of the Rench family. The Phillips asserted that permission from Home should be implied from all of the surrounding circumstances. Finally, the Phillips argued that Bradley should be covered because Kevin was an adult member of the Rench household. They asked the trial court to find as a matter of law that Kevin did not require permission from anyone to use the Mazda.

The trial court granted the Phillips' motion in part. It ruled that the Mazda was a "covered auto" and that Bradley could not be denied coverage on the basis of any alleged misrepresentation. However, the trial court stated that "there [were] ... substantial issues of material fact both as to the issue of whether permission was given by Kevin's father or parents and also whether permission was given by Racine Industries."

Prior to trial, both sides moved in limine to exclude any reference to evidence relating to permission by Racine Industries. The trial court granted those motions. The Phillips also moved for a ruling that as a matter of law Kevin did not need his parents' permission to drive the Mazda because he was an adult member of the Rench household. They based their argument on sec. 632.32, Stats., and on Arps v. Seelow, 163 Wis.2d 645, 472 N.W.2d 542 (Ct.App.1991). The trial court denied the Phillips' motion, stating:

[Section 632.32, Stats.,] still requires--sub. section (5)--for it to be applicable, no matter how broadly we construe, it still requires that the adult member be an adult member of the insured's household. Now, in the factual context that we are dealing with here, it is impossible for there to be anyone who is an adult member of the insured's household because the insured is the corporation.

....

Now, that Motion would be denied. I am satisfied that Kevin Rench could not have given himself permission to operate the motor vehicle; since the true owner and members of his household are not the persons [named insureds] referred to in [sec. 632.32(5), Stats.]

The case went to trial on the sole issue of whether Kevin's parents gave him permission to drive the Mazda. The Phillips moved for a directed verdict at the close of evidence, which was denied. The jury answered special verdict questions indicating that Kevin did have parental permission to drive the Mazda on the night of the accident. However, the jury determined that Kevin had exceeded the scope of that permission. The Phillips again raised the Arps case in their postverdict motion for judgment not withstanding the verdict, and the trial court denied their motion. The court then entered a declaratory judgment denying Bradley coverage.

The Phillips now appeal and assert errors pertaining to the trial court's rulings on the summary judgment, directed verdict, and judgment not withstanding the verdict motions. Because we decide that summary judgment should have been entered in favor of the Phillips, we do not address the other asserted errors. We will incorporate additional facts as they are necessary to our discussion.

Summary judgment is an appropriate method by which to determine insurance policy coverage. State Farm Mut. Auto. Ins. Co. v. Kelly, 132 Wis.2d 187, 189, 389 N.W.2d 838, 839 (Ct.App.1986). Summary judgment may be granted when no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Id. at 190, 389 N.W.2d at 839; sec. 802.08(2), Stats. Our review is de novo, without deference to the trial court. St. John's Home v. Continental Casualty Co., 147 Wis.2d 764, 782, 434 N.W.2d 112, 119 (Ct.App.1988).

In this case, the issue raised at the summary judgment stage was whether Kevin had permission to drive the Mazda on the night of the accident. The Phillips asked the trial court to find coverage as a matter of law because Kevin is an adult member of the Rench household. The only facts pertinent to this issue are undisputed: Kevin was an adult at the time of the accident, and he was a member of the Rench household. The remaining question involves application of the omnibus insurance statute, sec. 632.32, Stats., to the facts of this case. This is a question of law that we review de novo. See State Farm, 132 Wis.2d at 190, 389 N.W.2d at 839; Dipasquale v. American Family Ins. Co., 168 Wis.2d 75, 78-79, 483 N.W.2d 231, 233 (Ct.App.1992).

Section 632.32, Stats., states in relevant part:

(3) REQUIRED PROVISIONS. Except as provided in sub. (5), every policy subject to this section issued to an owner shall provide that:

(a) Coverage provided to the named insured applies in the same manner and under the same provisions to any person using any motor vehicle described in the policy when the use is for purposes and in the manner described in the policy.

(b) Coverage extends to any person legally responsible for the use of the motor vehicle.

....

(5) PERMISSIBLE PROVISIONS. (a) A policy may limit coverage to use that is with the permission of the named insured or, if the insured is an individual, to use that is with the permission of the named insured or an adult member of that insured's household other than a chauffeur or domestic servant. The permission is effective even if it violates s. 343.45(2) and even if the use is not authorized by law. [Emphasis added.]

Section 632.32 is a remedial statute, and must be construed broadly so as to increase rather than to limit coverage. Derusha v. Iowa Nat'l Mut. Ins. Co., 49 Wis.2d 220, 223, 181 N.W.2d 481, 483 (1970). The main purpose of sec. 632.32(3) is to assure insurance coverage for accident victims. Nordahl v. Peterson, 68 Wis.2d 538, 551, 229 N.W.2d 682, 689 (1975). Section 632.32(3) and (5) must be read together to dictate that "adult members of the household must be deemed capable of giving themselves permission to drive." Arps, 163 Wis.2d at 649, 472 N.W.2d at 543.

The parties do not dispute that the intent of sec. 632.32, Stats., is to provide protection to injured people. Where the parties differ is in the interpretation of the permissive use clause, sec. 632.32(5). Home argues that the disjunctive clauses in subsection (5) should be strictly read; because the named insured on the policy at issue was a corporation, not an individual, the "adult member of that insured's household" language cannot apply. In contrast, the Phillips urge a broader reading of "named insured." They assert that when the named insured is a corporation that...