National Mut. Ins. Co. v. Eward

• Decision Date: 28 December 1987
• Docket Number: No. 29A04-8611-CV-336,29A04-8611-CV-336
• Citation: 517 N.E.2d 95
• Parties: NATIONAL MUTUAL INSURANCE COMPANY, Appellant, v. Steven M. EWARD, Darrell Jones and Jack A. McClees Painting, Appellees.
• Court: Indiana Appellate Court

Page 95

517 N.E.2d 95

NATIONAL MUTUAL INSURANCE COMPANY, Appellant, v. Steven M. EWARD, Darrell Jones and Jack A. McClees Painting Appellees.

No. 29A04-8611-CV-336.

Court of Appeals of Indiana,

Fourth District.

Dec. 28, 1987.

Robert A. Smith, Jane Magnus D'Alesandro, Lewis, Bowman, St. Clair & Wagner, Indianapolis, for appellant.

Stephen Gerald Gray, Indianapolis, for appellees.

MILLER, Presiding Judge.

Darrell D. Jones (Jones) sued Steven M. Eward (Eward) to recover for injuries he sustained when he was struck by a Chevrolet van that Eward was driving. National Mutual Insurance Company (National), the insurer of the van, then filed a complaint for a declaratory judgment against Eward, asking the court to determine (1) whether Eward was an insured under its automobile liability policy issued to Jack A. McClees Painting (McClees), (2) whether Jones's injuries resulted from an "accident" as that term was defined in the policy, and (3) whether it was obligated to defend and indemnify Eward in Jones's action against him. When Eward did not answer the complaint, National obtained a default judgment. Later, however, Jones moved to have the default judgment set aside and to intervene in the action, and the trial court granted his motions. The trial court allowed National to amend its complaint to add McClees, its insured, as a defendant. After trial, the trial court found that Eward was an insured because he had implied permission to use McClees's van, that Jones's injuries did result from an accident, and that National was obligated to defend and to indemnify Eward. National now appeals alleging the trial court erred by (1) finding Eward was an insured, (2) finding Jones's injuries resulted from an accident, and (3) denying National's motion under Trial Rule 8(D) to have all matters deemed admitted as to Jones because Jones did not file an answer to its amended complaint.

We affirm.

FACTS

Jones was a painting foreman for McClees. When Jones was offered another job in late summer, 1984, McClees gave him the use of a company van as an inducement to stay on. At that time McClees did not place any restrictions on how Jones could use the van, and Jones agreed to take care of minor repairs. Jones drove the van to and from work, used it for dates, and considered it his own since he had no other automobile. He paid for the gas, and even paid for a tire and repairs to the radiator.

Later, McClees told Jones he did not want anyone to drink alcohol and drive the van. After stating that restriction, however, McClees took the entire work crew out for food and alcoholic drinks. McClees knew that on occasion Jones and another crew member would stop for beer after work, and the van was Jones's only vehicle.

Jones was out drinking alcohol with Jack Eward, the brother of Steven Eward, on September 28, 1984 and during the early morning hours of the next day. Steven Eward joined them, and because he was the least intoxicated of the three, Jones asked him to drive the van. When they left a

tavern Eward again drove the van. Realizing that he had left Jones behind on the sidewalk, he backed up the van to allow Jones to get in, and the van struck Jones.

DECISION

National first contends the trial court erred in finding Eward had implied permission to drive the van and was therefore an insured under its policy because McClees, the named insured, had never met Eward. It was Jones, instead, who gave permission to Eward. National cites the case of Standard Mutual Insurance Company v. Pavelka (S.D.Ind.1983) 580 F.Supp. 224, as authority for its proposition that to be an insured Eward must have had express permission from McClees, not Jones. National points out that its policy contains the following limitation on coverage:

"D. WHO IS INSURED

1. You are insured for any covered auto.

2. Anyone else is an insured while using with your permission a covered auto you own, hire, or borrow.... [Emphasis in original.]"

The policy also defines "you" and "your" as "the person or organization shown as the named insured...." National states its limitation is similar to one that was construed in Pavelka, and, because the Pavelka court found there was no implied permission to friends of the original permittee, the trial court erred in concluding Eward, a second permittee, had implied permission. We disagree.

In Pavelka, an insurance company also sought a declaratory judgment to ascertain its liability under a policy, but the facts in Pavelka are quite different from those in this case. There, the named insured gave permission to his son, but explicitly told him he could not allow anyone else to drive. The son, however, took several friends to a party and left the keys in the unlocked car. Without the son's knowledge, two of his friends took the car and were involved in a wreck. The driver was killed and the passenger was injured. The insurance company claimed the driver and the passenger were not insured, but the defendants argued that coverage existed via implied consent because the son had allowed the driver and another to use the car previously.

The Pavelka court examined the policy which, in part, provided:

"Persons Insured--The following are insured 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."

The court noted that Indiana law does not require insurance policies to cover the liability of permissive users. Thus, because the policy covered the named insured and any other person using the vehicle with his permission, the policy was broader than required. ¹ Still, the court observed that only the named insured could give permission. To say the son's friends had implied permission would give broader coverage than was allowed in the contract. The court said it must acknowledge the limitation on coverage because the son's friends had neither the express nor the implied permission of the named insured; in fact, he expressly forbade his son to allow anyone else to drive.

Here, however, Eward contends that the trial court correctly found he was insured because he had the implied consent of McClees, and we agree. Eward directs our attention to the case of Arnold v. State Farm Mutual Automobile Ins. Co., (7th Cir.1958) 260 F.2d 161, in which the court construed an omnibus clause that was almost identical to the one in this case. The Arnold court noted that, under Indiana law, a policy that contains an omnibus clause extends coverage to a permittee of the owner. Further, the court observed that the supreme court had held coverage was properly extended to a second permittee under an omnibus clause in a case in which there was implied consent by the owner to a friend of the original permittee. Id. (citing American Employers' Ins. Co. v. Cornell (1948) 225 Ind. 559, 76 N.E.2d 562.) In Cornell, as here, the omnibus clause did not require that the permission of the named insured be expressly given. The Cornell court found that express permission was unnecessary, and implied permission was sufficient to bring a second permittee within the protection of the policy. Id. In Arnold and Cornell, as here, the insured did not expressly or impliedly prohibit the first permittee from allowing another to drive, as was done in Pavelka. Here, McClees initially placed no restrictions on how Jones could use the van. Therefore, under Indiana law, the trial court could properly conclude Eward had implied permission, and that he came under the protection of the policy.

National argues, too, that for a second permittee to come within protection, he must have been using the vehicle for the benefit of the first permittee, and the use must have been within the scope of permission given to the first permittee. National claims that Eward was not acting for the benefit of Jones at the time of the incident because Eward was by then equally as intoxicated as Jones, and Eward's use was not within the scope of permission McClees gave to Jones. National contends that the trial court erred in finding McClees had waived his restriction on driving the van while drinking alcohol. National relies on the case of Home Mutual Insurance Co. v. Automobile Underwriters, Inc. (S.D.Ind.1967) 261 F.Supp. 402, to support its propositions. But National's reliance on Home Mutual is misplaced because the omnibus clause at issue was substantially different from the one here.

The omnibus clause in Home Mutual specifically included a proviso that the permittee's "actual operation or (if he is not operating) his other actual use thereof is within the scope of such permission." Id. at 404. In other words, the insurer incorporated specific language in the clause to narrow the scope of coverage so as to exclude a permittee who used the vehicle for a purpose other than the one the owner intended. The Home Mutual court noted that the insurer had obviously added this language to avoid the consequences of Arnold, wherein a permittee was found to be insured when he had substantially deviated from the owner's purpose. The Home Mutual court also observed that Arnold had discussed two types of situations in which a liberal construction of omnibus clauses would be appropriate: (1) when the first permittee has deviated from the use intended by the owner, and (2) when the first permittee has delivered the vehicle to a second permittee. In the latter instance coverage may be implied to the second permittee so long as the owner did not expressly forbid such delegation. Id.

In this case the undisputed fact is that McClees did not expressly prohibit Jones from allowing others to drive the van, and the trial court was correct to conclude Eward had implied permission. Arnold, supra; Cornell, supra. Further, under Arnold, the fact that a...