Standard Accident Ins. Co. v. New Amsterdam Cas. Co.

• Citation: 249 F.2d 847
• Decision Date: 03 December 1957
• Docket Number: No. 12016.,12016.
• Parties: STANDARD ACCIDENT INSURANCE COMPANY, Plaintiff-Appellant, v. NEW AMSTERDAM CASUALTY COMPANY et al., Defendants-Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

249 F.2d 847 (1957)

STANDARD ACCIDENT INSURANCE COMPANY, Plaintiff-Appellant, v. NEW AMSTERDAM CASUALTY COMPANY et al., Defendants-Appellees.

No. 12016.

United States Court of Appeals Seventh Circuit.

December 3, 1957.

Charles D. Snewind, Chicago, Ill., for appellant.

Carl E. Abrahamson, Chicago, Ill., for appellees.

Before DUFFY, Chief Judge, and FINNEGAN and HASTINGS, Circuit Judges.

HASTINGS, Circuit Judge.

This is an action for a declaratory judgment brought by Standard Accident Insurance Company against New Amsterdam Casualty Company, et al., for a declaration of the rights and obligations of the respective companies under policies of automobile liability insurance issued by Standard to R. Lenn Franke and by New Amsterdam to Kelliher, Inc.

R. Lenn Franke, who was driving the automobile insured under the New Amsterdam policy; Nash Dowdle, who was riding in the automobile with Franke and who was using the Kelliher car with the permission of Virginia Kelliher, a vice-president of Kelliher, Inc., (and who is also Dowdle's sister); and Josephine Klotz, who was injured in an accident involving this automobile, were made parties defendant to the action because of their interest in the subject matter, but no affirmative relief was sought against them.

The case was tried to the court without a jury, and findings of fact and conclusions of law were made favorable to New Amsterdam and this appeal is from the judgment rendered thereon.

Among other things the trial court found "that the actual use and operation of said automobile by R. Lenn Franke, Jr., was not with the permission of Kelliher, Inc., the named insured of the New Amsterdam Casualty Company," and concluded that New Amsterdam was not obligated or liable to pay the judgment rendered against him.

The facts disclosed that Kelliher, Inc. was the named insured in the New Amsterdam policy and was the owner of the 1949 Pontiac convertible automobile described therein. Virginia Kelliher, as an officer of this corporation, had proper possession and control of the Pontiac and the right to use it in the business of the company and for her own use, and had authority to permit its use by others. On the date of the accident in question, Nash Dowdle called his sister, Virginia Kelliher, told her that "he had a date that evening" and asked if he could "borrow the car for that date." She gave him permission to use the car and delivered the keys to him. He took the car from his sister's residence and drove to Franke's place of business since Franke was going on the date with him. The two first went to a print shop in the immediate vicinity of Franke's place of business where Dowdle transacted some business and then drove to meet the two girls they were going to take out to dinner. All this time the automobile was driven by Franke at Dowdle's request, with Dowdle sitting beside him in the front seat, because, as Dowdle testified later, Franke was better acquainted with the neighborhood. It collided with another automobile with resulting personal injuries to Josephine Klotz. She subsequently obtained judgment in the Circuit Court of Cook County, Illinois, in the sum of $4000 against both Dowdle and Franke. The evidence further shows that Dowdle had on previous occasions been permitted to use the car in question for his own "social engagements" and that he had allowed Franke to drive on some of those occasions. Franke is an acquaintance of the Kelliher family. There is no evidence that Virginia Kelliher knew that Franke had driven the car before. She testified that she did not know that Franke was to accompany Dowdle.

The New Amsterdam policy in force at the time of the accident contained the following clause:

"With respect to the insurance for bodily injury and property damage liability, the unqualified word `insured\' includes the named insured and also includes any person while using an owned automobile or a hired automobile, and any person legally responsible for the use thereof, provided the actual use of the automobile is by the named insured, or with his permission." (Our emphasis.)

The Standard policy in force at the time of the accident covered Franke as the "named assured" and as owner and operator of a certain automobile (not the one involved in this case) and, among other things, agreed to pay on his behalf damages recovered by any person in an accident involving any other automobile driven by Franke. It also provided that this latter "shall be excess insurance over any other valid and collectible insurance available to the insured, either as an insured under a policy applicable with respect to said automobile or otherwise." It is conceded that the Standard policy afforded Franke complete protection as the driver of the 1949 Pontiac in the accident in question, and that the New Amsterdam policy afforded similar protection to Dowdle in his use of the car.

The ultimate issue is whether or not Franke was an additional insured of New Amsterdam under the "omnibus" provision of its policy above set out. The question is, therefore, whether or not Franke's use of the car brought him within the provision of the New Amsterdam policy affording protection if "the actual use of the automobile is by the named insured or with his permission." (Our emphasis.) Both parties agree that the construction of the New Amsterdam policy is to be governed by the law of Illinois and that there is no decided case in point.

In the case at bar, we have a second permittee who is sought to be classified as the additional insured. It is a situation where the first permittee is properly permitted to use the car for a specific purpose, and while using the car for such purpose requests another to drive the car for him in pursuance of that purpose, viz.: a social engagement, the first permittee riding in the front seat of the car with the second permittee driver. Did the first permittee have authority to sub-delegate the operation of the car to another, and in so doing place the operator in the position of using the car with the implied consent of the named insured owner?

Appellant makes marked reference to an annotation in 160 A.L.R. 1195 under the general subject entitled "Omnibus clause of automobile liability policy as covering accidents caused by third person who is using car with consent of permittee of named insured." Particular reliance is placed upon the following generalization at page 1206:

"4. The initial permission given by the named assured to the original permittee includes, according to the better view, the use of the automobile by the second permittee where in doing so the second permittee serves some purpose, benefit or advantage of the first permittee. This is the case if the original permittee is riding in the car * * * or if the car is driven in his interest or for a purpose mutual to him and the second permittee."

Quoting further:

"It should be noted in this connection that the liability of the insurance company under the omnibus clause may be invoked upon the liability of either the first or the second permittee * * * if the claim is based upon the fault of the second permittee, the problem to be decided is whether or not he used the automobile with the insured\'s `permission.\'"

Appellee finds support in a quotation from Appleman, Insurance Law and Practice, Vol. 7, Sec. 4360, pp. 157-158, as follows:

"The ordinary rule is usually stated to be that the bailee of an automobile having possession with the permission of the named insured cannot validly permit a third person to operate the vehicle so as to bring such third person within the policy protection; such person occupying the same position as would a volunteer or inter-meddler."

However, Appleman states further in the same section from which the above quotation is taken, that "if it appears that the insured had given either express or implied permission for such delegation or it fell within the scope of the permission granted, protection would be afforded." (Our emphasis.) Appleman, supra, Vol. 7, Sec. 4360, p. 158.

A careful review of the cases cited by the annotator and the text writer shows there is much authority for all of these general propositions. Both cite Aetna Life Ins. Co. v. Chandler, 1937, 193 A. 233, 89 N.H. 95, in which the Supreme Court of New Hampshire found implied permission to delegate the use of a car where the permittee, being ill, had let another person drive the car to obtain medicine. While on this errand the third person was involved in an accident. This driver was unknown to the insured owner of the car and had no express permission to use the car. From these circumstances the court held that permission could be implied since the insured had intended the car to be used for the personal needs of the first permittee. Also, in the case of Odden v. Union Indemnity Co., 1930, 156 Wash. 10, 286 P. 59, 72 A.L.R. 1363, coverage was extended under an omnibus clause to a person who drove the car of the insured with the permission of the first permittee where there was evidence that the insured knew that the permittee was allowing others to drive and had not objected.

Typical of the authorities denying extended coverage under an omnibus clause is the case of Card v. Commercial Casualty Insurance Co., 1936, 20 Tenn.App. 132, 95 S.W.2d 1281, at page 1284, where the court states:

"When the car is being driven by a person without the actual permission (either express or implied) of the named assured, then the driver is not an additional assured. Even if the person is present in the car who had permission to use it (but is not driving), there is no coverage under the policy. In that case the person who was given permission is not an `additional assured,\' for the reason that the named assured must personally exercise his discretion in selecting the driver. Permission to use means permission to operate."

The Tennessee Court of Appeals in this case goes on to describe implied permission...