Putman v. Insurance Co. of North America

• Decision Date: 30 October 1987
• Docket Number: No. DC86-169-S-D.,DC86-169-S-D.
• Parties: Don Neal PUTMAN and Annie Ruth Putman, Individually and as Parents, Natural Guardians, and Next Friends of Angela K. Putman, a Minor, Plaintiffs, v. INSURANCE COMPANY OF NORTH AMERICA, Defendant.
• Court: U.S. District Court — Northern District of Mississippi

673 F. Supp. 171

Don Neal PUTMAN and Annie Ruth Putman, Individually and as Parents, Natural Guardians, and Next Friends of Angela K. Putman, a Minor, Plaintiffs, v. INSURANCE COMPANY OF NORTH AMERICA, Defendant.

No. DC86-169-S-D.

United States District Court, N.D. Mississippi, Delta Division.

October 30, 1987.

Richard T. Phillips, Smith, Phillips & Mitchell, Batesville, Miss., for plaintiffs.

L.F. Sams, Jr., Thomas D. Murry, Mitchell, McNutt, Bush, LaGrone & Sams, Tupelo, Miss., for defendant.

OPINION

SENTER, Chief Judge.

This cause arises from an automobile accident occurring at the intersection of Detter Street and Dunlap Street in Batesville, Mississippi, at 9:30 p.m. on March 10, 1984. John J. Allen (age 16) was driving a maroon 1980 Malibu owned by his father, Everette A. Allen. Three other teenagers were passengers in the car. They were Robert Lee York (age 17), Lisa Hudson (age 17), and Angela Putman (age 16).

Everette Allen was the sole proprietor franchisee of the McDonald's hamburger chain in Batesville. All four teenagers in the accident were present or former employees of the franchise. The Malibu automobile was frequently used to run errands in the conduct of the business. John Allen drove the vehicle for this purpose on many occasions. Everette Allen states that he signed John's application for a driver's license primarily to enable John to run these errands. John Allen also used this vehicle to drive to school.

The Malibu was insured for $100,000.00 per accident coverage by State Farm Insurance. Everette Allen also had a $15,000,000.00 umbrella indemnity policy covering his McDonald's franchise.

John Allen states in his depositions that he had not worked in McDonald's on the day of the accident. He states that on the night of the accident, he had driven to Lee York's house. They then drove around Batesville for a while, stopping at McDonald's to determine when Lisa Hudson would get off work. They returned to McDonald's to pick up Lisa Hudson. The three of them then began driving on the "loop," a section of Mississippi Highway 6 where Batesville teenagers hung out. They saw Angela Putman alone in her father's truck and invited her to join them. They were driving around when the accident occurred.

Lee York states in his deposition that on the night of the accident, he was picked up by John Allen. They then went to pick up Lisa Hudson at her house. They then went to McDonald's, and John Allen went into the office for fifteen minutes. They then went to the Allen house and returned to McDonald's. York states that they then began cruising the loop. The remainder of his testimony as to the events is substantially the same as John Allen's.

Lisa Hudson states in her deposition that on the night of the accident, she went to John Allen's house. They left the Allen residence to pick up Lee York. Allen and York looked at the speakers in the car. Hudson states that she does not recall John Allen running any errands that night, but states that "there's a lot of things that I don't remember about this." She states that they then began driving around. The remainder of her testimony is substantially the same as Allen's and York's.

John Allen lost control of the car as he approached the intersection of Detter Street and Dunlap Street. The car struck the stop sign on the opposite side of the intersection and came to rest beside a large tree. The car may have struck the tree as well. All of the occupants were injured, but only Angela Putman was seriously injured. She was unconscious at the scene. She had a badly broken arm and had received a blow to the face. This had caused a fracture in the skull separating her face from the base of the skull and a separation of one cheek bone from the rest of the face. She also had a hemorrhage in her brain in the area just above the eye on her left side. This has resulted in permanent injury to her brain. She also had many deep cuts on her face.

On June 10, 1985, a complaint was filed in the Circuit Court of Panola County. Paragraph 7 of the complaint specified:

That the Defendant JOHN J. ALLEN at the time of the collision and at the time of the aforesaid negligence and misconduct on the part of said Defendant, was under the age of 17 years. That the Defendants, EVERETTE ALLEN and MARY A. ALLEN, signed the application for the Mississippi driver's license under which JOHN J. ALLEN was driving at the time of said collision. That said Defendants EVERETTE ALLEN and MARY A. ALLEN are liable under Section 63-1-25, Mississippi Code of 1972, Annotated, as amended, and other applicable Mississippi law, for the negligence of the said Defendant JOHN J. ALLEN which negligence is imputed to Defendants EVERETTE ALLEN and MARY A. ALLEN and that all said Defendants are jointly and severally liable for damages suffered by Plaintiffs and their minor daughter, ANGELA K. PUTMAN.

The complaint does not mention the McDonald's franchise, nor does it state that the accident occurred in an activity "necessary or incidental to" the operation of that franchise. No other grounds for liability are asserted against Everette Allen.

Allen requested that State Farm Insurance (his personal automobile insurer) and Insurance Company of North America (his business umbrella policy insurer) defend him in that action.

The umbrella policy provides that the insurer, Insurance Company of North America (INA), will "have the right and duty to defend any suit against the insured seeking damages on account of such personal injury, property damage or advertising injury, even if any of the allegations of the suit are groundless, false or fraudulent, and may make such investigation and settlement of any claim or suit as it deems expedient; but INA shall not be obligated to pay any claim or judgment or to defend any suit after INA's limit of liability has been exhausted by payment of judgments or settlements." The policy includes within its definition of the insured "any person while using, with permission of the Named Insured, any automobile or aircraft owned by, loaned to or hired for use by or on behalf of the Named Insured and any person or organization legally responsible for the use thereof, providing the actual operation or other actual use is within the scope of such permission and any officer, director or stockholder of the Named Insured with respect to the use of an automobile or aircraft not owned by the Named Insured but only while such automobile or aircraft is being used in the business of the Named Insured." An endorsement to the policy provides "that such insurance as is afforded by the policy shall only apply to operations necessary or incidental to the administration, operation, development, maintenance, promotion or advertising of such McDonald's restaurant facilities."

On October 25, 1985, INA's claims manager wrote Everette Allen a letter refusing coverage or defense on the grounds (1) that the automobile was neither registered nor insured in the franchise name and (2) that the automobile was being operated by his son in a nonbusiness purpose at the time of the accident.

On September 2, 1986, INA filed with this court a suit (Cause DC86-143-NB-O) for declaratory judgment seeking to define INA's liability under this policy for the accident. Defendants in that action were Everette A. Allen, Mary A. Allen, John J. Allen, Don Neal Putman, Annie Ruth Putman, and Angela K. Putman. DC86-143-NB-O was voluntarily dismissed under Fed.R.Civ.P. 41(a)(1) on September 16, 1986.

On September 16, 1986, the plaintiffs moved for summary judgment in the Circuit Court action. In their motion for summary judgment, the plaintiffs stated "that on June 20, 1983 (the date John J. Allen applied for a driver's license) the Defendant, EVERETTE ALLEN, owned McDonald's of Batesville as a sole proprietorship. Defendant, JOHN J. ALLEN, was employed by McDonald's of Batesville on a part-time basis and that driving an automobile was a part of his employment at McDonald's." No other mention of the franchise or John Allen's driving duties was made in the motion.

On September 26, 1986, the parties to the action filed a stipulation with the circuit court. In this stipulation, the defendants confessed liability to the plaintiffs and agreed to submit the case to the circuit court on damages alone. The stipulation further agreed that a judgment in excess of the $100,000.00 coverage by State Farm would not "operate as a lien against any personal property of the Defendants or in any manner be enforceable against the personal property, real property or any other type of asset owned by any of the Defendants with the sole exception of any other liability policies such as might apply providing liability coverage for this incident including but not limited to INA policy number XBC 154054." The defendants also agreed in the stipulation to assign to the plaintiff all rights of the defendants to recover for the accident under all liability policies.

On October 1, 1986, INA filed a suit for declaratory judgment in the Southern District of Mississippi identical to that dismissed in the Northern District on September 16, 1987. On October 24, 1986, the circuit court entered judgment for the plaintiffs in the amount of $2,100,000.00. On October 29, 1986, this cause, DC86-169-LS-D, was filed. On March 23, 1987, J86-0729(B) was dismissed by Judge Barbour in the Southern District of Mississippi. This cause is currently before the court on cross-motions for summary judgment.

CONTENTIONS OF THE PARTIES

Defendant, Insurance Company of North America, moves for summary judgment on two grounds. The first ground is that the policy only indemnifies Allen from losses to his business and that the stipulation admitting liability and absolving Allen from personal liability for the accident therefore eliminated any liability of INA for the accident. The second ground is that the accident in question did not come within the terms of the policy...