Indemnity Ins. Co. of North America v. Metropolitan Cas. Ins. Co. of N. Y.

• Decision Date: 05 December 1960
• Docket Number: No. A--18,A--18
• Citation: 166 A.2d 355,33 N.J. 507
• Parties: INDEMNITY INSURANCE COMPANY OF NORTH AMERICA, a corporation, et al., Plaintiffs-Appellants, v. METROPOLITAN CASUALTY INSURANCE COMPANY OF NEW YORK, a corporation, et al., Defendants-Respondents.
• Court: New Jersey Supreme Court

Page 507

33 N.J. 507

166 A.2d 355

INDEMNITY INSURANCE COMPANY OF NORTH AMERICA, a corporation et al., Plaintiffs-Appellants, v. METROPOLITAN CASUALTY INSURANCE COMPANY OF NEW YORK, a corporation, et al., Defendants-Respondents.

No. A--18.

Supreme Court of New Jersey.

Argued Sept. 27, 1960.

Decided Dec. 5, 1960.

Philip M. Lustbader, Newark, for plaintiffs-appellants (Schneider, Lustbader & Morgan, Newark, attorneys; Henry G. Morgan and Gerald M. Zashin, Newark, on the brief).

Frank P. Zimmer, Asbury Park, for defendants-respondents (Zimmer & Selikoff, Asbury Park, attorneys).

The opinion of the court was delivered by

PROCTOR, J.

This case concerns coverage under the omnibus clause of an automobile liability insurance policy issued by the defendant, Metropolitan Casualty Insurance Company of New York. The question for decision is whether such omnibus coverage extends to a person who in effect was expressly prohibited by the named insured from operating the latter's car, but who nonetheless operated the car while it was being used for a purpose permitted by the named insured.

On September 29, 1955 an automobile owned by Jennie Calandriello and driven by Domenic B. Acerra, Jr., in which Benjamin E. Smith, Fred J. Duncan, James Moyers, and Bruno Talerico were passengers, collided with a tree. Acerra and Smith were killed; the other occupants were injured. Consolidated actions brought by Duncan, Moyers, Talerico and the Administratrix ad pros of Smith resulted in judgments totalling $29,500 against the executrix of Acerra's estate.

At the time of the collision, Mrs. Calandriello was the named insured in an automobile liability policy issued by Metropolitan covering her automobile. 'Insured' is defined in the omnibus clause of that policy to include 'the named insured and * * * any person while using the automobile and any person or organization responsible for the use thereof, provided the actual use of the automobile is by the named insured or with his permission.' Acerra was the named insured under a similar policy issued by plaintiff Indemnity Insurance Company of North America, covering his own automobile but extending coverage to operation by him of a vehicle other than his own. The present action was instituted in the Superior Court, Chancery Division, for a declaratory judgment to determine whether Indemnity or Metropolitan is liable under its policy to pay the tort judgments against Acerra's estate. These judgments have already been paid under a stipulation between the parties. The trial court's holding that Metropolitan is the primary insurer is not challenged on this appeal. Therefore, if Metropolitan's policy covers Acerra, Metropolitan is liable; if Metropolitan's policy does not cover Acerra, Indemnity is liable.

The facts developed at the trial are as follows: Mrs. Calandriello and her husband were sole stockholders in Seacoast Liquor Distributors, Inc., a wholesale beer distributor located in Monmouth County. As part of its sales-promotion program, Seacoast regularly had its salesmen take customers and their employees and friends on tours of the Schmidt's Brewery in Philadelphia. Mrs. Calandriello's automobile was often used with her permission to transport the visitors to and from the brewery. A tour was arranged for September 29, 1955; and on that morning, Smith, a Seacoast salesman, drove Acerra, Talerico, Moyers, and Duncan--all residents of Red Bank and vicinity--in Mrs. Calandriello's automobile to the Schmidt's Brewery in Philadelphia. Mrs. Calandriello knew that Acerra was going on the tour. She gave Smith the keys on the morning of September 29 and, although she said nothing at that time about who was to drive, she had on prior occasions told Smith that only he was to operate her car.

At Philadelphia, the visitors took a guided tour of the brewery. In the late afternoon they started home for Red Bank with Smith driving. En route, they made two stops. When they left the second stop, a tavern in Colt's Neck, Acerra was driving with Smith seated at his right. The trial court found that Acerra took the wheel with Smith's permission. While the car was proceeding in an easterly direction on Newman Springs Road towards Red Bank, it left the highway and struck a tree.

Defendant Metropolitan contended that Acerra was not an insured under the omnibus clause of its policy, because Acerra did not have Mrs. Calandriello's permission to operate her automobile.

The trial court construed the omnibus clause to require only that the use of the car at the time of the accident be permitted by the named insured. Accordingly, the trial court decided that it was immaterial whether Mrs. Calandriello had permitted Acerra to operate her car, and therefore unnecessary to resolve the factual question whether Mrs. Calandriello's prior instruction to Smith not to let anyone else operate her car applied to Acerra on the day of the accident. Since it was undisputed that Acerra was using the car for a permitted purpose, i.e., to transport the sales-promotion party to and from the brewery, the trial court held that Acerra was insured under Metropolitan's policy and entered judgment for plaintiff Indemnity. 53 N.J.Super. 90, 146 A.2d 692 (Ch.Div.1958). The Appellate Division reversed and remanded on the ground that the opinion of this court in Costanzo v. Pennsylvania Threshermen, etc., Ins. Co., 30 N.J. 262, 152 A.2d 589 (1959), requires that the trial court make a factual determination whether Acerra was driving the car with the express or implied permission of Mrs. Calandriello. 59 N.J.Super. 547, 158 A.2d 425 (1960). We granted Indemnity's petition for certification. 32 N.J. 353, 160 A.2d 849 (1960).

In Costanzo, we held that a sailor-associate of a boy whose father loaned the latter a car was an additional insured under the omnibus clause of the father's automobile liability insurance policy. At the time of the accident, the son was a passenger in the car and his sailor-associate was driving. We noted that the father permitted the son to use the car at a naval camp far distant from his home; that the son frequently used the car for social engagements at and away from home; that the son often allowed others to drive without objection by the father; and that the father neither expressly authorized nor forbade his son to allow others to drive the car. The foregoing facts all indicated that the father gave his son a broad permissive use of the car which we held necessarily included authority to delegate its operation to others while the son was a passenger. The Appellate Division in the present case interpreted Costanzo to mean that in every case where someone other than the named insured's permittee is operating the car it is necessary to determine whether the insured's permittee had authority to delegate operation, and that if the named insured expressly or impliedly forbade such operation there would be no coverage. We did not intend to so hold. Since the facts in Costanzo clearly indicated that the father authorized his son to delegate operation to others, it was unnecessary for us to determine whether authority to delegate was essential for coverage. We expressed no opinion about that matter or about the effect of an express or implied prohibition of operation by others on omnibus coverage. Costanzo therefore is not applicable to the facts of the present case.

The factual situation in the present case was anticipated by this court in the recent case of Baesler v. Globe Indemnity Co., 33 N.J. 148, 162 A.2d 854 (1960). There, the named insured loaned his car to his nephew for the latter's general use but expressly forbade its use by others. The nephew gave the car to a friend for a social engagement and the accident occurred when the nephew was not in the car. We held that the nephew's friend was not covered under the omnibus clause--similar to the one in the present case--in the uncle's automobile liability insurance policy. During the course of our opinion we distinguished between Use and Operation of an automobile. We pointed out that under the standard omnibus clause, coverage depends upon whether the Use, not Operation, of the automobile was permitted by the named insured. We noted that the nephew had delegated the Use of the car to his friend in violation of the uncle's express prohibition of Use by others. We distinguished such a case from one where the named insured forbade his permittee to allow anyone else to Operate the insured vehicle, and the permittee violated tht instruction, but the Use to which the vehicle was being put was a permitted one. That case is now before us. For purposes of this opinion, we assume that Mrs. Calandriello's prior instructions to Smith not to allow anyone else to Operate the car applied to Acerra on the day of the accident.

We have recently noted that the language of the standard omnibus clause in an automobile liability insurance contract is to be construed broadly in favor of the insured and injured to effectuate a strong legislative policy of assuring financial protection for innocent victims of automobile accidents. Matits v. Nationwide Mutual Ins. Co., 33 N.J. 488, 166 A.2d 345 (1960); see also Costanzo v. Pennsylvania Threshermen, etc., Ins. Co., supra, 30 N.J. at p. 268, 152 A.2d 589; Eggerding v. Bicknell, 20 N.J. 106, at p. 113, 118 A.2d 820 (1955); Rikowski v. Fidelity & Casualty Company, 117 N.J.L. 407, at p. 410, 189 A. 102 (E. & A.1937) affirming 116 N.J.L. 503, 185 A. 473 (Sup.Cit.1936). This legislative policy is most recently evidenced by the comprehensive scheme of New Jersey motor vehicle legislation enacted in 1952. Motor Vehicle Security-Responsibility Law, N.J.S.A....