Selected Risks Ins. Co. v. Zullo

• Decision Date: 23 December 1966
• Docket Number: No. A--20,A--20
• Citation: 48 N.J. 362,225 A.2d 570
• Parties: SELECTED RISKS INSURANCE COMPANY, Plaintiff-Appellant, v. Albert ZULLO, Administrator, etc., et al., Defendants-Respondents.
• Court: New Jersey Supreme Court

Page 362

48 N.J. 362

225 A.2d 570

SELECTED RISKS INSURANCE COMPANY, Plaintiff-Appellant, v. Albert ZULLO, Administrator, etc., et al., Defendants-Respondents.

No. A--20.

Supreme Court of New Jersey.

Argued Oct. 25, 1966.

Decided Dec. 23, 1966.

George Y. Schoch, Trenton, for plaintiff-appellant.

Arthur W. Burgess, Perth Amboy, for defendant-respondent, Albert Zullo, Administrator, etc. (Toolan, Haney & Romond, Perth Amboy, attorneys, John E. Toolan, Perth Amboy, of counsel).

Bernard H. Weiser, Freehold, for defendant-respondent, Richard Yuhas.

Thomas F. Shebell, Jr., Asbury Park for defendant-respondent, John Palladino, Jr. (Thomas F. Shebell, Asbury Park, attorney).

Theodore Labrecque, Jr., Red Bank, for defendants-respondents, Richard Keeter and others (Parsons, Canzona, Blair & Warren, Red Bank, attorneys).

George N. Arvanitis, Asbury Park, for Unsatisfied Claim and Judgment Fund of New Jersey (Carton, Nary, Witt & Arvanitis, Asbury Park, attorneys).

The opinion of the court was delivered by

PROCTOR, J.

This case concerns coverage under the omnibus clause of two automobile liability insurance policies issued by plaintiff, Selected Risks Insurance Company.

At the trial in the Law Division of plaintiff's suit for declaratory judgment, counsel for the plaintiff made an opening statement to the jury asserting that defendant Richard Keeter, the driver of an automobile involved in an accident, was not a person insured under the omnibus clause in policies issued by plaintiff to George A. Blumberg, the owner of the automobile, and defendant Marvin Keeter, Richard's father. Other defendants in this suit are the representatives of passengers injured in the accident and the Unsatisfied Claim and Judgment Fund. ¹ On motions of defendants at the conclusion of this opening, the trial court held that Richard Keeter was an insured under both policies and entered judgment for defendants. The Appellate Division affirmed. We granted certification. 47 N.J. 85, 219 A.2d 421 (1966).

The facts before the Court show that on April 2, 1963 Richard Keeter, a minor, while driving an automobile owned by Blumberg on the Englishtown-Jamesburg Road, Monmouth County, had an accident. As a result Richard Yuhas, John Palladino, and Benjamin Zullo, passengers in the car, were injured, Zullo fatally. Actions have been brought against Blumberg, as owner, and Richard Keeter, as driver, for injuries suffered by Yuhas and for the death of Zullo. In addition, claims have been made on behalf of Palladino, and for property damage allegedly sustained by Charles Godbolt and the New Jersey Bell Telephone Company.

The two policies issued by plaintiff and in force on the day of the accident contained the omnibus clause which follows:

'Persons Insured.

(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,

(b) with respect to a Non-owned automobile,

(1) the named insured.

(2) any relative, but only with respect to a private passenger automobile or trailer, provided his actual operation or (if he is not operating) the other actual use thereof is with the permission, or reasonably believed to be with the permission, of the owner and is within the scope of such permission,

* * *'of

(Emphasis added)

Under these provisions Richard Keeter is an insured under Blumberg's policy if he is deemed to be operating the Owned automobile 'within the scope of such (Blumberg's) permission,' and is an insured under his father's policy if his operation of the Non-owned automobile is deemed 'within the scope of such (Blumberg's) permission.'

On the day before the accident Richard Keeter and Blumberg agreed that Richard would pick up Blumberg's car at the Englishtown Post Office where Blumberg and Marvin Keeter were employed, drive it to the Keeter home, wash it, and drive it back to the post office. This car-wash arrangement had occurred previously. Richard picked up the car keys from Blumberg around 1:30 P.M. the next day, April 2, drove the car to his home and washed it. After the car was washed, Richard and some friends who had been with him while the car was being washed, Palladino, Yuhas, and Zullo, all minors, started to return the car. However, on the way to the post office the boys decided to go for a soda. Richard drove out of town in a direction at right angles to the road to the post office, and the accident occurred about one mile out of town. It was the position of the plaintiff that this trip for a soda exceeded the authority given to Richard Keeter by Blumberg to operate the automobile, and therefore Richard was not a person insured under either policy because his use of the automobile was beyond the scope of permission given him by the owner, Blumberg.

The trial judge ruled on the authority of Matits v. Nationwide Mutual Ins. Co., 33 N.J. 488, 166 A.2d 345 (1960), that Richard Keeter was insured under the omnibus clause of both policies.

In Matits the omnibus clause involved was the standard form which is in wide use throughout the country and includes as persons insured: '* * * any person or organization legally responsible for the use of the described automobile provided the actual use was with the permission of the policyholder or such spouse.' The Court there determined that valid and substantial policy considerations dictated a reading of this clause to extend coverage to any permittee of the owner who had 'initial permission' to use the automobile:

'It is our view that these latter rules (conversion and minor deviation) making coverage turn on the scope of permission given in the first instance render coverage uncertain in many cases, foster litigation as to the existence or extent of any alleged deviations, and ultimately inhibit achievement of the legislative goal. We think that the 'initial permission' rule best effectuates the legislative policy of providing certain and maximum coverage, and is consistent with the language of the standard omnibus clause in automobile liability insurance policies.

Accordingly, we hold that if a person is given permission to use a motor vehicle in the first instance, any subsequent use short of theft or the like while it remains in his possession, thought not within the contemplation of the parties, is a permissive use within the terms of a standard omnibus clause in an automobile liability insurance policy.' Matits, supra, 33 N.J., at pp. 496--497, 166 A.2d at p. 349.

The policy considerations and result of Matits were again considered with the same conclusions in Small v. Schuncke, 42 N.J. 407, 201 A.2d 56 (1964).

The plaintiff informs us that the omnibus clause here involved was changed in order to avoid the result of Matits. Indeed, examination of the Blumberg policy shows that the main part of the policy still contains an omnibus clause with the identical phrasing as that in Matits, and the different language here involved comes from an amendatory endorsement to the main part of the policy.

The plaintiff concedes that if the Matits rule applies, Richard Keeter is a person insured under the policies because Richard had initial permission to use the automobile. Plaintiff contends, however, that the changed language restricts the omnibus coverage to only those persons operating an automobile within the 'scope of such permission' given by the owner and does not necessarily cover persons who have initial permission. Plaintiff argues that a jury question is presented whether Richard Keeter at the time of the accident was beyond the scope of Blumberg's permission to use the automobile. In support of this contention plaintiff urges that the extended omnibus coverage dictated by the Matits rule is not required in all policies by the statutes relating to the financial responsibility of motorists. Plaintiff further urges that the narrowed omnibus coverage does not otherwise contravene public policy, and is therefore within the right of parties to a contract of insurance to make whatever agreements they choose. Kindervater v. Motorists Casualty Insurance Co., 120 N.J.L. 373, 376, 199 A. 606 (E. & A. 1938). Plaintiff does not contend that a distinction should be made between the liability limits voluntarily set by contract and those minimum limits set by the Motor Vehicle Security-Responsibility Law. See Atlantic Casualty Insurance Co. v. Bingham, 10 N.J. 460, 465--466, 92 A.2d 1, 34 A.L.R.2d 1293 (1952).

The Unsatisfied Claim and Judgment Fund Law requires that the Director of Motor Vehicles determine as to any person who seeks to register a motor vehicle whether or not it is an 'uninsured motor vehicle.' N.J.S.A. 39:6--63. If the motor vehicle is uninsured, the person seeking to register it: (1) must pay additional registration fees (N.J.S.A. 39:6--63), (2) is precluded from suing the Fund if he is injured in his car by another uninsured motorist, and his spouse, parents and children are likewise precluded (N.J.S.A. 39:6--70(d)), and (3) must furnish proof of financial responsibility in the event he is in an accident causing damages in excess of $100 (N.J.S.A. 36:6--25). The substantial disadvantages imposed on persons registering uninsured motor vehicles evidence a strong legislative policy that all persons wrongfully injured by motor vehicles have financially responsible persons to look to for damages, and that persons registering motor vehicles provide such financial responsibility by automobile liability insurance. It is clear to us that plaintiff insurance company here knew that its policies would be offered to the Director of Motor Vehicles as proof that the automobiles to be registered were insured, and that the car owners, Blumberg and Marvin Keeter, reasonably relied on the insurance policy each had purchased as satisfactory...