Nationwide General Ins. Co. v. Government Employees Ins. Co.

• Decision Date: 07 December 1989
• Citation: 566 A.2d 1117,81 Md.App. 104
• Parties: NATIONWIDE GENERAL INSURANCE COMPANY, et al. v. GOVERNMENT EMPLOYEES INSURANCE CO., et al. 537 Sept. Term 1989.
• Court: Court of Special Appeals of Maryland

Page 104

81 Md.App. 104

566 A.2d 1117

NATIONWIDE GENERAL INSURANCE COMPANY, et al. v. GOVERNMENT EMPLOYEES INSURANCE CO., et al.

537 Sept. Term 1989.

Court of Special Appeals of Maryland.

Dec. 7, 1989.

Ronald H. Jarashow (Franch & Jarashow, P.A. on the brief), Annapolis, for appellants.

Allen W. Cohen (Cohen, Bennett & Greene, P.A. on the brief for appellee, GEICO), Annapolis, John F.X. Costello (McCarthy, Bacon, Costello & Stephens, Landover, Patrick J. Callahan and Callahan & Callahan of Crofton, on the brief), for appellees, John and Nancy Bonnar.

Argued before WILNER, ROSALYN B. BELL, WENNER, JJ.

ROSALYN B. BELL, Judge.

This appeal from a decision of the Circuit Court for Anne Arundel County takes us once again into the arena insurance companies battle over which company is required to provide a defense, primary coverage, or any coverage at all Nationwide filed a complaint, seeking a declaratory judgment that GEICO be required to provide primary coverage and a defense for Stephen. Mr. Bonnar and Nancy (the Bonnars) counterclaimed, seeking a declaration that Nationwide provide insurance coverage under the policy Nationwide had issued to Stephen's father. On a summary judgment but after trial, the court dismissed the Bonnars' counterclaim because there was no justiciable controversy. The court also found that GEICO had no obligation to defend or provide coverage. Nationwide and Stephen (hereinafter referred to as Nationwide) jointly appealed. ²

                for a successor permittee under an omnibus clause. 1  Before presenting the issues, we must establish the relationship between the parties.   John Bonnar purchased a car on which his daughter Nancy was to make some of the payments out of her earnings.   Mr. Bonnar insured the car with Government Employees Insurance Company (GEICO).   Nancy was a permitted driver under the policy.   Stephen Hughes, Nancy's boyfriend, was not expressly permitted to drive the car by Mr. Bonnar, but was granted permission on occasion by Nancy.   Stephen's father was [566 A.2d 1118] insured by Nationwide General Insurance Company (Nationwide).   The accident occurred on March 20, 1987 on the way to school while Stephen was driving and Nancy was sitting on the console between the seats.   Nancy had specific permission to drive the car to school.   Stephen had picked up his friend Sean Fohner, who sat in the passenger seat
                

Nationwide complains that GEICO should have been required to provide coverage and defense, presenting the issues as:

--Whether the court erred in failing to find that Stephen, as a second permittee, was an insured since Nancy, the first permittee who was present in the car, was "using" the car with permission of the named insured, under the first sentence of paragraph 2 of the GEICO policy.

--Whether "actual use" of the automobile was within the scope of a permitted purpose under the second sentence of paragraph 2.

--Whether the court erred in not finding GEICO's omnibus clause was ambiguous and void since it was against public policy.

We agree with Nationwide that the trial court applied the wrong definition of "use," and that Stephen was, in fact, a permitted user of the vehicle. Since we hold that Stephen fulfilled the first permission requirement, and the court found that the actual use, the second "permission" requirement, was within the scope of that permission, we reverse the judgment. We hold that Stephen Hughes is an insured under section two of the GEICO policy and GEICO owes him primary coverage. Because we hold that Stephen is covered under this section, we need not address Nationwide's claims of coverage alleged because Nancy was using the car with her father's permission and is "any other person" under the second paragraph of "Persons Insured." ³ Similarly, we need not address Stephen's coverage under section three of the GEICO policy or the invalidity of the omnibus clause.

FACTS

In August 1986, Mr. Bonnar purchased a 1986 Pontiac Fiero. He bought the car primarily for Nancy to go to and from school after she obtained her driver's license, which she did in December of 1986. It is undisputed that Mr. Bonnar told Nancy on numerous occasions that she was not to let anyone else drive the car. He specifically instructed her that Stephen was not to drive. Mr. Bonnar also explicitly told Nancy that the two-seater vehicle was not to carry more than two people, including the driver, in it. It is also clear that Mr. Bonnar was the owner of the car. The title was in his name and, although Nancy made a portion of the payments, Mr. Bonnar was ultimately responsible for the payments on and the maintenance of the vehicle.

In her deposition, Nancy testified that she had told Stephen that her father did not want him driving the car; that the car really belonged to her father; and that Mr. Bonnar refused to add Stephen's name to the insurance policy. After the accident, Stephen moved Nancy to the driver's seat. ⁴

Mr. Bonnar insured the vehicle with GEICO; he was the "insured person" under the policy. The policy also provided for coverage of other persons as set forth by the omnibus clause which stated in pertinent part:

"PERSONS INSURED

Who is covered

Section I applies to the following as insured with regard to an owned auto:

1. you and your relatives;

2. any other person using the auto with your permission. The actual use must be within the scope of that permission;

3. any other person or organization for his or its liability because of acts or omissions of an insured under 1 or 2 above." (Emphasis added.)

Nationwide alleges that this clause extended coverage to Stephen. We agree and explain.

OMNIBUS CLAUSE COVERAGE

Before we look at the instant case further, we review the relevant Maryland case law as it developed. Zurich Insurance Co. v. Monarch Insurance Co. of Ohio, 247 Md. 3, 230 A.2d 330 (1967), noted the division of authorities regarding whether a second permittee is deemed to be using the vehicle with the permission of the named insured. The Court of Appeals cited then Federal District Court Judge Winter's (now on the United States Court of Appeals for the Fourth Circuit) prediction in Ohio Casualty Insurance Co. v. Pennsylvania National Mutual Casualty Insurance Co., 238 F.Supp. 706 (D.Md.1965), aff'd, 352 F.2d 308 (4th Cir.1965) (per curiam), that the Court of Appeals would extend coverage to second permittees. Judge Winter based his prediction on Melvin v. American Automobile Insurance Co., 232 Md. 476, 194 A.2d 269 (1963), and Hardware Mutual Casualty Co. v. Mitnick, 180 Md. 604, 26 A.2d 393 (1942). Melvin involved the extension of coverage to a second permittee based on policy language affording such to "[a]ny other person ... legally responsible for the use of" an automobile. The Court of Appeals reversed the trial court and extended coverage to the second permittee. In Mitnick, the Court of Appeals held that using a car includes a borrower's making use of it by riding while driven by another. Mitnick, 180 Md. at 607, 26 A.2d 393. In Zurich, however, the Court declined to fulfill the prophecy of Ohio Casualty. The Zurich Court distinguished Mitnick where it had extended coverage. It held that in Zurich since the second permittee had his girlfriend with him in the front seat, while the initial permittee sat in the back, the "benefit of the use of the car inured to [the second permittee]." Zurich, 247 Md. at 10, 230 A.2d 330. Thus, coverage was denied.

In 1969, the Court of Appeals decided three cases in this area: American Home Assurance Co. v. Erie Insurance In Cohen, the policy coverage depended on whether the actual use of the automobile was by the named insured or such spouse or with the permission of either. The mother owned the car and gave the keys to her son with the understanding that a friend, not the son, would drive. The son was driving at the time of the accident. The Court held "that the use ... made by [the son] was not within the scope of the permission granted and was not the particular use contemplated when the permission was granted." Cohen, 255 Md. at 349, 258 A.2d 225. The Court of Appeals affirmed the decision of the trial court and held that American Home was not responsible for the defense of the son who drove without permission.

                Exchange, 252 Md. 116, 248 A.2d 887 (1969), Cohen v. American Home Assurance Co., 255 Md. 334, 258 A.2d 225 (1969), and Goodwin v. Home Indemnity Co., 255 Md. 364, 258 A.2d 220 (1969).   In Erie Insurance Exchange, the policy provided coverage for any other person using the car with the insured's permission and where the "actual operation" of the vehicle was within the scope of the permission.   The sole issue on appeal was whether the permittee operated the car within the scope of the permission granted.   The Court had no trouble in holding that, while the use of the vehicle was originally permitted, the actual operation was not (the accident occurred two and one-half hours after the driver borrowed it for a trip that was not to have taken more than 45 minutes, and the permittee had not yet picked up his wife which was his intended purpose)
                

Goodwin, decided the same day as Cohen, involved a dispute over a policy provision. The parties had stipulated that the actual operation of the vehicle must be within the scope of permission given by the named insured. On appeal, this stipulation was said to be error because the policy language protected any person using the automobile provided the actual use thereof was with the permission of the named insured. The Goodwin Court said it did not matter which language was operative. The permission granted to the permittee was for a repair pick up on Saturday morning Then, in Maryland Indemnity Insurance Co. v. Kornke, 21 Md.App. 178, 196-97, 319 A.2d 603 (1974), this Court changed the tide of decisions which refused to extend coverage to permittees and second permittees. In Kornke, an 18-year-old son lived at home with his parents. He...