Lewandowski v. National Grange Mut. Ins. Co.

• Decision Date: 22 April 1977
• Citation: 149 N.J.Super. 591,374 A.2d 489
• Parties: Frank LEW ANDOWSKI, Plaintiff, v. NATIONAL GRANGE MUTUAL INSURANCE CO., Defendant.
• Court: New Jersey Superior Court

Page 591

149 N.J.Super. 591

374 A.2d 489

Frank LEW ANDOWSKI, Plaintiff, v. NATIONAL GRANGE MUTUAL INSURANCE CO., Defendant.

Superior Court of New Jersey,

Law Division.

April 22, 1977.

Stanley W. Greenfield, Elizabeth, for plaintiff (Stanley W. Greenfield and Douglas C. Greenfield, Elizabeth, attorneys; Stanley W. Greenfield, on the brief).

Thomas E. Lenney, Newark, for defendant (Robert F. Colquhoun, Bloomfield, attorney; Thomas E. Lenney, Newark, on the brief).

WEISS, J.D.C., Temporarily Assigned.

Plaintiff seeks to have defendant's policy of insurance cover a judgment previously entered against an operator of a motor vehicle which was insured by defendant. The facts which bring this suit before the court are as follows:

In early June 1971 Ricardo Osborne, a resident of Brooklyn, New York, brought his 1967 Plymouth to a service station in Staten Island, New York, for repair. When Osborne learned that James Sarjeant, an employee of the service station, had been seen driving the car in Staten Island, he phoned Sarjeant, telling him, 'My car is in the service station to be fixed and not to be driven.' Subsequent to this conversation, and unknown to Osborne, Sarjeant drove the car to New Jersey contrary to the above instructions.

A police report which has been stipulated as part of the record reveals that Sarjeant was involved in an accident at about 4:22 a.m. in Clark, New Jersey, on Sunday, July 4, 1971, with plaintiff Frank Lewandowski, a resident of Clark. The report indicates that the car driven by Sarjeant,

* * * was observed at the Winfield Traffic Circle heading West on Stiles St. at a high rate of speed, where upon it was chased by a Linden Patrol car. It later headed North on Valley Road where a Rahway Patrol car joined the chase. Upon approaching the curve near Union County Parkway, (Sarjeant) lost control of vehicle skidding sideways into the Southbound lane striking (the Lewandowski vehicle) which was heading South on Valley Rd.

Lewandowski brought actions against the owner Osborne, and the driver Sarjeant. The suit against Osborne was dismissed upon defendant's motion for summary judgment on the grounds that the driver was not operating the vehicle as the agent, servant or employee of the owner at the time of the accident in question. The suit against Sarjeant resulted in a $15,980 judgment for plaintiff. This action was commenced by Lewandowski, seeking to have Sarjeant declared an insured under the liability policy issued by defendant National Grange Mutual Insurance Co. covering Osborne's car.

Whether Sarjeant is an insured under the policy depends upon the effect given the omnibus clause which states in pertinent part,

III DEFINITION OF INSURED--(a) With respect to the insurance for bodily injury liability and for property damage liability the unqualified word 'insured' includes * * * any person while using the automobile and any person or organization legally responsible for the use thereof, provided the actual use of the automobile is by the named insured or * * * spouse or with the permission of either. The insurance with respect to any person or organization other than the named insured or such spouse does not apply:

(1) to any person or organization, or to any agent or employee thereof, operating an automobile sales agency, repair shop, service station, storage garage or public parking place, with respect to any accident arising out of the operation thereof, * * *

Specifically, two questions arise: (1) Is the garageman's exclusion contained in the above subsection enforceable and, if so, does it preclude coverage here, and (2) was Sargeant's operation of the car with 'permission' as the term is used in the above section?

I

(1) In Selected Risks Ins. Co. v. Zullo, 48 N.J. 362, 225 A.2d 570 (1966), it was held that any policy submitted to obtain the advantages of registering an insured motor vehicle must have the broad form omnibus coverage set forth in N.J.S.A. 39:6--46(a), extending coverage in accordance with Matits v. Nationwide Mutual Ins. Co., 33 N.J. 488, 166 A.2d 345 (1960). Purported omnibus restrictions wold be automatically amended to conform to the statutory standard by N.J.S.A. 39:6--46(a). In Unsatisfied Claim & Judgment Fund Bd. v. Clifton, 117 N.J.Super. 5, 283 A.2d 350 (1971), the Appellate Division, following Zullo, supra, held that to the extent a clause excluding garagemen from coverage has the effect of limiting the omnibus coverage required by N.J.S.A. 39:6--46, the clause is invalid.

Although the Motor Vehicle Responsibility Law clearly sets forth the public policy of the State, the Zullo court (48 N.J. at 374, 225 A.2d 570) explicitly avoided the question of whether its holding could be based upon public policy apart from the specific statutory requirements. The present case involves a policy written in New York covering a New York car. Subsequent analysis will show that the question as to whether the Clifton result could be based entirely upon the strong public policy of New Jersey need not be reached.

(2) It is well settled that New Jersey follows the 'initial permission' rule in determining whether the insurer is liable for damage caused by a permissive user. Matits v. Nationwide Mutual Ins. Co., supra; Odolecki v. Hartford Acc. & Indem. Co., 55 N.J. 542, 264 A.2d 38 (1970). Thus, once the driver is given permission to use the car initially, Any use short of theft or the like, even though beyond the scope of permission or contrary to specific instructions, is a permissive use. See Odolecki v. Hartford Acc. & Indem. Co., supra at 496--497, 264 A.2d 38.

When Osborne gave a set of keys to the service station attendant, permission to drive was impliedly granted. In Butler v. Bonner & Barnewall, Inc., 56 N.J. 567, 267 A.2d 527 (1970), the court stated,

We concluded (in Odolecki) that once an owner voluntarily hands over the keys to his car, the extent of permission he actually granted, either with regard to scope of use or limitation of operator, is irrelevant. (at 574, 267 A.2d at 531)

Thus, once Osborne impliedly granted permission to operate his car, the later restrictions on the scope of permitted use contained in his telephone conversation with Sarjeant were of no effect in limiting the liability of National Grange.

State Farm Mut. Auto Ins. Co. v. Travelers Ins. Co., 57 N.J. 174, 270 A.2d 625 (1970), involved a question of scope of permission in a similar factual setting. There a car was left for repair with an automobile dealer and was subsequently involved in an accident while being driven by an employee of the dealer. The court stated:

Even if we assume that * * * (the driver) was not road-testing the car at the time of the accident, but was using it for his personal transportation, and even if we make the further assumption that the need to roadtest the car had terminated with the completion of repairs, the most that can be said is that * * * (the driver) deviated from the initial permission in terms of both time and purpose. Yet as we have already stated, such deviations are irrelevant. (at 179, 270 A.2d at 627)

National Grange has made no suggestion that this case involves 'theft or the like.' There is no evidence that Sarjeant was guilty of criminal conduct in obtaining the car or intended to permanently deprive Osborne of his car. Thus, if New Jersey law were to be applied, the finding that there was permissive use is inescapable.

II

Counsel submitted this case to the court on stipulated facts, arguing New Jersey law. In light of the preceding analysis and the finding of this court that Sarjeant's use of Osborne's car was unrelated to the operation of the service station or the repair of the car, it is clear that were New Jersey law to be applied, National Grange would be liable for the judgment recovered against the driver of the insured automobile. Buzzone v. Hartford Acc. & Indem. Co., 23 N.J. 447, 129 A.2d 561 (1957), however, requires that the law of New York be used in determining the obligations imposed by a contract of insurance executed in that state. Buzzone involved a New Jersey accident in which New Jersey victims were injured by a New York driver. The question presented to the court was whether coverage would be imposed when the insured failed to comply with the New York Financial Responsibility Law by certifying the policy. New Jersey law required no such certification and would, therefore, have deprived the insurer the defenses based upon the fraud of the driver. The court, distinguishing the rights and obligations arising out of the contract from those stemming from the tortious conduct, stated that the law of the place of the contract would generally control in the former inquiry even though the law of the place of the accident would control in the latter.

We think it too settled to be questioned that the rights and liabilities of the insurer under the policy and the statutory impact thereon are to be determined by the law of the state where the contract was made. 'The question of what is the obligation imposed by a contract of insurance, what are its terms and provisions, has usually rightly been held to be governed by the law of the place of contracting.' 2 Beale on Conflict of Laws, sec. 346.4, p. 1210 (1935). (at 452)

See also, Maryland Cas. Co. v. Jacek, 156 F.Supp. 43, 44 (D.N.J.1957).

The Buzzone court emphasized that the foreign driver would not be given any immunity not allowed a resident in his position. As in Buzzone, the question here is not whether the nonresident driver is liable for the damages he negligently causes on our highways. He is. 'The question is whether that driver's insurer, who has a valid defense under the law applicable to the insurance contract, may assert it in our courts.' Id., 23 N.J. at 457, 129 A.2d at 566.

Although it had been urged that New Jersey had a strong interest in guarding the welfare of its citizens by applying New Jersey law, Buzzone v. Hartford Acc. & Indem....