Ohio Casualty Ins. Co. v. Pennsylvania Nat. Mut. Cas. Ins. Co.

• Decision Date: 17 February 1965
• Docket Number: Civ. A. No. 15567.
• Citation: 238 F. Supp. 706
• Parties: The OHIO CASUALTY INSURANCE COMPANY, a body corporate, Plaintiff, v. PENNSYLVANIA NATIONAL MUTUAL CASUALTY INSURANCE COMPANY, a body corporate, and Morton D. Goldman, a minor, by William Goldman, his father and next friend, and William Goldman, Jacqueline Marie Krasauskas, infant, and John W. Krasauskas, father and next friend, Defendants.
• Court: U.S. District Court — District of Maryland

238 F. Supp. 706

The OHIO CASUALTY INSURANCE COMPANY, a body corporate, Plaintiff, v. PENNSYLVANIA NATIONAL MUTUAL CASUALTY INSURANCE COMPANY, a body corporate, and Morton D. Goldman, a minor, by William Goldman, his father and next friend, and William Goldman, Jacqueline Marie Krasauskas, infant, and John W. Krasauskas, father and next friend, Defendants.

Civ. A. No. 15567.

United States District Court D. Maryland.

February 17, 1965.

Robert E. Coughlan, Jr., and Alva P. Weaver, III, Baltimore, Md., for plaintiff.

Donald L. Allewalt, Baltimore, Md., for Pennsylvania National Mutual Casualty Ins. Co., defendant.

Stanley Klavan, Silver Spring, Md., for Jacqueline Marie Krasauskas, Infant and John W. Krasauskas, father and next friend.

WINTER, District Judge:

The Ohio Casualty Insurance Company ("Ohio") seeks a declaratory judgment that a policy of insurance of Pennsylvania National Mutual Casualty Insurance Company ("Pennsylvania") is applicable to an automobile accident which occurred on Sunday, November 3, 1963, at two A. M. The vehicle with which the case is concerned is a 1961 Ford Falcon automobile, owned by Mrs. Mary W. Shackert, to whom Pennsylvania issued a policy as the named insured, with an endorsement extending certain additional coverages to her minor son, Charles Schackert. At the time of the accident the vehicle was operated by Andrew Poffel, a friend and former classmate of the son. Ohio also seeks to recover counsel fees and expenses which it has incurred to date in defense of personal injury claims asserted by Morton David Goldman and Jacqueline Marie Krasauskas — the latter being a passenger in Mrs. Schackert's car at the time when it was being operated by Poffel.

The parties have stipulated that prompt notice of personal injury claims was given to Pennsylvania, that Pennsylvania investigated but disclaimed liability as to Poffel, that if the Pennsylvania policy is applicable, Pennsylvania, as between Ohio and Pennsylvania, is the primary insurer up to the limits of its policy, and Ohio is the excess insurer, and that if its policy is applicable, Pennsylvania is liable to Ohio for $975.70, counsel fees and expenses.

A decision of the case involves a construction of the following provisions of the Pennsylvania policy, in the light of the facts proved by the depositions of Mrs. Schackert, her son and Poffel. Pennsylvania's policy provides that the insurance which it affords shall extend to "persons insured," defined as:

"Persons Insured. The following are insureds under Part 1 Liability:

(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, and

(3) any other person or organization but only with respect to his or its liability because of acts or omissions of an insured under (a)(1) or (2) above." (emphasis supplied)

Since Poffel was not a named insured, or residing in Mrs. Schackert's household, the specific question to be decided is whether Poffel was "* * * using such automobile with the permission of the named insured * * *." Since Poffel had no express permission from Mrs. Schackert, it must be determined if he had implied permission, i. e., whether Schackert, the first permittee, could authorize Poffel, the second permittee, to use the vehicle, under the following facts:

Mrs. Schackert and her son reside in Baltimore County. Schackert went to high school with Poffel and, after graduation, they both matriculated at the University of Maryland, College Park, Maryland, and were roommates during their freshman year. Schackert failed to meet the academic standards of the University at the close of his freshman year and his attendance at the University was terminated. During the following school year he went to the campus of the University of Maryland during the week-end of November 2 and 3, 1963 to attend a football game and homecoming events, and stayed with his former roommate, Poffel.

Mrs. Schackert gave her son specific permission to take the vehicle to College Park for the week-end. No express limitation was placed on his use of the vehicle. He had had continuing general permission to use it at any time that his mother was not using it; he was employed; he made contributions to the family expenses; and he bought gasoline for the car from time to time.

After a football game on the Saturday of the weekend, Schackert and Poffel were on a "double date." Schackert drove the young lady who was his "date" to her home, then Poffel requested Schackert's permission to use the automobile to take Miss Krasauskas to her home. The permission was given; Schackert did not accompany them; and while driving the vehicle Poffel was involved in an accident which gave rise to the personal injury claims.

Mrs. Schackert had known Poffel as a friend of her son over a period of six years. She had never been requested to give, nor given, permission to let Poffel operate her automobile. She was not aware that her son ever permitted anyone else to operate the motor vehicle when it was entrusted to his use, but, at least on this occasion, she did not tell her son "not to let anyone else drive the car."

At the outset, consideration must be given to the law to be applied. In the exercise of diversity jurisdiction a district court looks to the law of the state in which the court sits to determine what conflict of laws rule is applicable, Ohio Casualty Insurance Company v. Ross, 222 F.Supp. 292 (D.C.Md.1963). Maryland law is that an insurer's liability under an automobile liability policy is to be determined in accordance with the law of the place where the contract was entered into, and where the contract provides, as does Pennsylvania's policy in the instant case, that it is not valid until countersigned by "* * * a duly authorized representative of the company," the place of countersigning is held to be the place of making the contract, Ohio Casualty Insurance Company v. Ross, supra, (p. 295). The copy of Pennsylvania's policy in evidence here does not show what duly authorized representative of Pennsylvania counter-signed the policy, but the parties make no contentions on this possible issue, and it will be assumed that, in accordance with Annotated Code of Maryland, Article 48A, § 59, the policy was counter-signed by a licensed agent resident in Maryland, that, hence, it was counter-signed in Maryland, and that Maryland law applies.

This conclusion leads to additional problems, because there is no direct decision of the Maryland Court of Appeals deciding whether, or under what circumstances, a second permittee becomes an insured under an omnibus clause, although, on facts tantalizingly similar to those found in the case at bar, the Maryland Court of Appeals has found coverage under policy provisions concededly not applicable here, and has declined to rule on whether coverage might have been found on the theory advanced in this case, Melvin v. American Automobile Insurance Company, 232 Md. 476, 194 A.2d 269 (1963). See also, Hardware Mutual Casualty Company v. Mitnick, 180 Md. 604, 26 A.2d 393 (1942). The function of this Court, therefore, is to make an informed prediction of what the Maryland law will be when the matter is decided by the Maryland Court of Appeals.

An analysis of three decisions of the United States Court of Appeals for the Fourth Circuit leads this Court to the conclusion that Schackert, under the general and specific permission given by his mother, legally could and did authorize Poffel to use the car, so that Poffel is deemed to have used the car with the permission of the named insured and, hence, is an insured under Pennsylvania's policy. These decisions are: Utica Mutual Insurance Company v. Rollason, 246 F.2d 105 (4 Cir.1957), and two earlier decisions on which it relies, Chatfield v. Farm Bureau Mut. Auto. Ins. Co., 208 F.2d 250 (4 Cir.1953), and Harrison v. Carroll, 139 F.2d 427 (4 Cir.1943). In the Utica case, which concerned the law of Virginia, the question was whether the district judge correctly refused to direct a verdict on the issue of whether an employee whose employer had provided him with an automobile had implied authority to permit his son to drive the vehicle. The father lent the car to his two sons for social purposes and while it was operated by one an accident occurred, which gave...