Motor Club Fire & Cas. Co. v. New Jersey Mfrs. Ins. Co.

• Decision Date: 13 June 1977
• Citation: 73 N.J. 425,375 A.2d 639
• Parties: MOTOR CLUB FIRE & CASUALTY COMPANY, Plaintiff-Respondent & Cross-Appellant, v. NEW JERSEY MANUFACTURERS INSURANCE COMPANY, Defendant-Respondent, and Frances Scibetta, Defendant-Appellant.
• Court: New Jersey Supreme Court

Page 425

73 N.J. 425

375 A.2d 639

MOTOR CLUB FIRE & CASUALTY COMPANY, Plaintiff-Respondent &amp Cross-Appellant, v. NEW JERSEY MANUFACTURERS INSURANCE COMPANY, Defendant-Respondent and Frances Scibetta, Defendant-Appellant.

Supreme Court of New Jersey.

Argued Feb. 23, 1977.

Decided June 13, 1977.

Judson L. Levin, Newark, for appellant Frances Scibetta.

Jerome S. Lieb, Morristown, for respondent and cross-appellant Motor Club Fire & Cas. Co. (Lieb, Teich & Berlin, Morristown, attorneys).

Richard D. Catenacci, Newark, for respondent N. J. Mfrs. Ins. Co. (McElroy, Connell, Foley & Geiser, Newark, attorneys).

The opinion of the court was delivered by

CARTON, P. J. A. D., Temporarily Assigned.

This matter, which comes before us for the second time, involves a question of coverage under an omnibus clause of an automobile liability insurance policy. As a result of an evenly divided vote, we affirmed the Appellate Division's judgment that the policy provided no coverage for Nicholas Scibetta, the driver of the vehicle. 135 N.J.Super. 362, 343 A.2d 473 (App.Div.1975), aff'd by equally divided court, 71 N.J. 352, 365 A.2d 195 (1976). In order to resolve this important issue, we granted rehearing, 74 N.J. 256, 377 A.2d 652 (1976).

The salient facts, although unusual, are clear and essentially undisputed.

Jennie Leonard, owner of a vehicle insured by New Jersey Manufacturers Insurance Company ("New Jersey Manufacturers"), lived in West Caldwell next door to the Scibetta family. Mr. and Mrs. Scibetta lived with their son Nick, a 37-year-old toolmaker, who was suffering from an emotional disorder apparently brought on by the news that his younger brother had contracted Hodgkin's disease. Accordingly, Nick had taken a leave of absence from work. He also owned an automobile, insured by Motor Club Fire and Casualty Company ("Motor Club"). That policy covered Nick as driver of his car or any other automobile.

On August 26, 1971, Jennie Leonard spent the afternoon at the Scibetta residence with Nick and his mother. Mrs. Leonard and Mrs. Scibetta were concerned about Nick's mental health. Mrs. Leonard suggested that Nick be taken to a doctor, and she volunteered to help arrange an appointment for Nick with a psychiatrist. After making several fruitless telephone calls, Mrs. Leonard made a 6:00 P.M. appointment for Nick with a Dr. Cuzzo in West Caldwell.

Although Dr. Cuzzo's office was located in the same town as the Leonard and Scibetta residences, Mrs. Leonard was unfamiliar with the exact location of the doctor's office, and she therefore decided to make a "trial run" to his office at about 3:00 P.M. Mrs. Scibetta endorsed this plan, and agreed to accompany Mrs. Leonard. Although Nick was initially reluctant to go, eventually he was persuaded to join the two women. Nick offered to drive the women in his car, but because Mrs. Leonard's car was more conveniently positioned in the Scibetta driveway, they took her car. Mrs. Leonard testified that had Nick's vehicle been in the more convenient location, he would have driven. Mrs. Leonard drove, with Mrs. Scibetta seated next to her, and Nick positioned in the right front seat by the passenger's window.

After becoming lost and asking for directions, Mrs. Leonard stopped at an angled intersection on Bloomfield Avenue and waited for a pause in the traffic. Suddenly Nick began climbing across the front, over his mother. He grabbed the steering wheel, telling Mrs. Leonard to get out of the car. Mrs. Leonard, stunned and frightened by Nick's actions and expression, pressed down the emergency brake and exited from the driver's side onto a traffic island in the street. Mrs. Leonard testified at trial: "I knew I had to get out * * * (b)ecause he was practically in the seat there and I knew he had the wheel." Mrs. Scibetta unsuccessfully pleaded with her son to desist. Nick succeeded in crawling across the front seat, took the wheel, and drove onto Bloomfield Avenue. Almost immediately, the automobile struck the rear of another car, went out of control, and crashed into an office building. Mrs. Scibetta was severely injured.

Motor Club, Nick's insurer, instituted an action for declaratory judgment on the issue of primary coverage, naming Nick, his mother and father, Jennie Leonard, New Jersey Manufacturers, the owner of the vehicle struck by the Leonard car, and the owners of the office building as defendants. In the action Motor Club sought to determine whether Nick was covered by either Motor Club or New Jersey Manufacturers. If he was covered by both companies, it sought a judgment declaring New Jersey Manufacturers primarily responsible. Mrs. Scibetta answered that Nick was driving with Jennie Leonard's permission and that, as a result, New Jersey Manufacturers was primarily liable. New Jersey Manufacturers denied that the Leonard policy covered Nick because his use of the vehicle was "tantamount to theft," and therefore without Mrs. Leonard's permission.

The New Jersey Manufacturers policy issued to Mrs. Leonard provided, under the heading, "PART 1 LIABILITY," sub-heading, "Coverage A Bodily Injury Liability; Coverage B Property Damage Liability," coverage for bodily injury "sustained by any person * * * arising out of the ownership, maintenance or use of the owned vehicle * * *." Under the sub-heading, "Persons Insured," the policy reads:

The following are insureds under Part 1:

(a) with respect to the owned automobile,

(1) the named insured and any resident of the same household,

(2) any other person using such automobile with the permission of the named insured, provided his actual operation or (if he is not operating) his other actual use thereof is within the scope of such permission,

* * *

As will be discussed in detail later in this opinion, this Court has held that every automobile liability policy offered as proof of financial responsibility must have coverage no more restricted than that mandated in the Motor Vehicle Security-Responsibility Law, N.J.S.A. 39:6-46, which provides:

Liability policies; requirements

A motor vehicle liability policy furnished as proof of financial responsibility as provided herein shall be a policy of liability insurance issued by an insurance carrier authorized to transact business in this State or, in the case of a person not eligible for insurance under the automobile Assigned Risk Plan, by an eligible surplus lines insurer to the person therein named as insured, or in the case of a nonresident, by an insurance carrier authorized to transact business in any of the states or provinces hereinafter stated. The policy shall:

(a) Designate, by explicit description or appropriate reference, all motor vehicles with respect to which coverage is intended to be granted thereby, and insure the insured named therein and any other person using or responsible for the use of any such motor vehicle with the express or implied consent of the insured, against loss from the liability imposed upon the insured or other person by law, for injury to or the death of a person, other than a person who is covered, as respects the injury or death, by any workmen's compensation law, or damage to property, except property of others in charge of the insured or the insured's employees, growing out of the maintenance, use or operation of the motor vehicle in the United States of America;

* * *. (Emphasis added)

As interpreted by the trial court, the New Jersey Manufacturers policy issued to Mrs. Leonard and the applicable statute rendered New Jersey Manufacturers primarily liable. The court reasoned that, at the outset of the journey, Nick was a passenger /user of the vehicle with Mrs. Leonard's permission and that Nick's use continued until the accident, although "converted or extended" into actual operation of the vehicle. The trial court did not expressly rule on the assertion that Mrs. Leonard gave Nick her permission to operate the car but found liability on the theory of agency.

The Appellate Division reversed the trial court's determination that the New Jersey Manufacturers policy afforded primary coverage to Nick as operator of Mrs. Leonard's car. The Appellate Division viewed the "substantial issue" in the case to be whether the New Jersey Manufacturers policy covered Nick when his initial use of the car as a passenger was permitted, but was followed by his operation of the car without the owner's express permission. 135 N.J.Super. at 368-69, 343 A.2d 473. The court reviewed cases construing "use" as distinct from "operation," and concluded that New Jersey Manufacturers' omnibus clause, which was framed to preclude coverage of the insured vehicle when driven without the owner's permission, did not illegally depart from the statutorily required omnibus clause. Describing Nick's actions as effecting "a coerced ouster of the owner from the automobile," 135 N.J.Super. at 371, 343 A.2d at 478, the court, exercising its original jurisdiction found that Nick did not have Mrs. Leonard's permission to operate the car, and concluded that "the initial use was superseded by an unauthorized seizure and operation." Id. The Appellate Division ruled that it was not "unreasonable" under the statute and the policy language to permit New Jersey Manufacturers to deny coverage under the Leonard policy for the injuries resulting from Nick's operation of the Leonard vehicle. Id.

The meaning and scope of the coverage provisions in Mrs. Leonard's policy must be considered in light of our courts' expansive view of the coverage provided by the standard omnibus clause. The leading case is Matits v. Nationwide Mutual Ins. Co., 33 N.J. 488, 166 A.2d 345 (1960), where this Court, after reviewing various approaches taken by other jurisdictions for determining the coverage available to persons other than the named insured under such a provision, adopted the broadest and most liberal approach, known as the "initial permission rule." The Court formulated this rule in these...