National Farmers Union Property & Casualty Co. v. Lukins

• Citation: 329 F.2d 564
• Decision Date: 03 April 1964
• Docket Number: No. 17480.,17480.
• Parties: NATIONAL FARMERS UNION PROPERTY & CASUALTY COMPANY, a Foreign Corporation, Appellant, v. Inga LUKINS et al., Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (8th Circuit)

329 F.2d 564 (1964)

NATIONAL FARMERS UNION PROPERTY & CASUALTY COMPANY, a Foreign Corporation, Appellant, v. Inga LUKINS et al., Appellees.

No. 17480.

United States Court of Appeals Eighth Circuit.

April 3, 1964.

James L. Hansen, of Letnes, Hansen & Murray, Grand Forks, N. D., for appellant.

Robert Vaaler, of Stokes, Vaaler, Gillig & Warcup, Grand Forks, N. D., for appellees.

Before VAN OOSTERHOUT, RIDGE and MEHAFFY, Circuit Judges.

VAN OOSTERHOUT, Circuit Judge.

Plaintiff National Farmers Union Property & Casualty Company, hereinafter called Farmers Union, appeals from an adverse judgment in a declaratory judgment action it brought pursuant to 28 U.S.C.A. § 2201 to obtain a determination that it is not obligated under the omnibus clause of an automobile liability policy issued to B. O. Tande covering his 1949 Cadillac for injuries caused by the negligent operation of said automobile by Lola Sandbeck on May 13, 1961. Defendants are Lola Sandbeck, a granddaughter of the named insured, State Farm Mutual Automobile Insurance Company, the insurer of a liability insurance policy upon a car owned by Lola Sandbeck which afforded protection with respect to operation of non-owned automobiles, and Inga Lukins and Elmer Lukins, who claim damages as a result of the negligent operation of the Tande automobile by Lola Sandbeck.

Jurisdiction, based upon diversity of citizenship and the requisite amount, is established. It is agreed that the insurance policy is a North Dakota contract and that North Dakota law controls.

The policy issued by Farmers Union to Mr. Tande, covering his Cadillac automobile, is valid and was in effect at the time of the involved accident. The dispute arises with respect to the omnibus clause. The pertinent portion of the omnibus clause provides coverage with respect to Mr. Tande's automobile for "(2) any other person using such automobile, provided the actual use thereof is with the permission of the named insured."

The controlling issue is whether Lola Sandbeck was operating Mr. Tande's Cadillac with Mr. Tande's permission on May 13, 1961. Farmers Union thus states the issue: "We are faced with the problem of whether a sub-permittee is covered under a policy of liability insurance in the State of North Dakota and if so, is there any restriction on this coverage under varying factual situations." It then states the general rule to be that quoted by the district court in Sunshine Mut. Ins. Co. v. Mai, D.C.N.D., 169 F. Supp. 702, aff'd on appeal sub nom. Peterson v. Sunshine Mut. Ins. Co., 8 Cir., 273 F.2d 53, which reads:

"`It has generally been held that where A, the owner of an automobile, gives general permission to B to use the automobile and B gives permission to C to use the automobile solely for C\'s purpose, benefit, or advantage, and the automobile is involved in an accident while being so used by C, such use is not with the permission of the named insured\' Samuels v. American Automobile Ins. Co., 10 Cir., 150 F.2d 221, 223, 160 A.L.R. 1191, (quoted with approval in United Services Automobile Ass\'n v. Preferred Acc. Ins. Co., supra 10 Cir., 190 F.2d 404, and referred to therein as being the general rule)." 169 F.Supp. 702, 705.

In Persellin v. State Auto. Ins. Ass'n, 75 N.D. 716, 32 N.W.2d 644, the closest North Dakota case bearing upon our present problem, omnibus coverage was held to exist on the insured car where the original permittee as an occupant was being driven by another person at the request of the first permittee but without express permission or knowledge on the part of the named insured. The North Dakota court states:

"Thus if the user of the automobile has the permission of the named insured to use and if such user is using the automobile for a permitted purpose at the time a legal liability is incurred, then the user and any other person legally responsible for the use are insured persons under the policy. We see no other reasonable construction." 32 N.W.2d 644, 647.

This language is quoted and approved in Peterson v. Sunshine Mut. Ins. Co. In that case we also said:

"A permittee can, of course, use or share in the use of an automobile without actually driving it, and, under North Dakota law as announced in the Persellin case, make anyone he asks to drive it for him legally responsible for the use of the automobile and therefore an additional insured under an `omnibus clause\' of a liability policy." 273 F.2d 53, 55-56.

In Peterson, the trial court found as a fact that the second permittee was not using the car for any purpose of the original permittee and upon that basis found no coverage under the...