State Farm Mut. Auto. Ins. Co. v. Automobile Underwriters, Inc.
| Decision Date | 21 June 1966 |
| Docket Number | No. IP 63-C-396.,IP 63-C-396. |
| Citation | 255 F. Supp. 404 |
| Parties | STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff, v. AUTOMOBILE UNDERWRITERS, INC., Defendant. |
| Court | U.S. District Court — Southern District of Indiana |
James E. Rocap, of Rocap, Rocap, Reese & Robb, Indianapolis, Ind., for plaintiff.
James C. Jay, of Steers, Klee, Jay & Sullivan, Indianapolis, Ind., for defendant.
MEMORANDUM ENTRY ON DECLARATORY JUDGMENT
This is an action for declaratory judgment brought by State Farm Mutual Automobile Insurance Company against Automobile Underwriters, Inc., for a declaration of the respective rights and obligations of the parties under policies of automobile liability insurance issued by Automobile Underwriters to Wilbur C. Odle and by State Farm Mutual to David Franklin.
James W. Odle owned a 1955 Pontiac which he used and maintained in Tucson, Arizona, where he attended the University of Arizona and was employed part time as a grocery clerk. The Pontiac was titled in the name of his father, Wilbur C. Odle, who was also the named insured in the policy of insurance issued by Automobile Underwriters, Inc., covering the Pontiac. Wilbur C. Odle, the father, lived in Noblesville, Indiana, and at all times pertinent herein, James W. Odle, the son, was an adult member of his household.
On October 3, 1962, David Franklin, a friend and co-worker of James W. Odle, asked Odle for permission to use the Pontiac the following day, since he planned to take his own car, a Ford Falcon, to the garage for repairs. The Pontiac was turned over to David Franklin on the evening of October 3, 1962, and was involved in a collision the next day while being operated by David Franklin's wife, Sydney Franklin.
Odle and the Franklins had a close friendship; they had known each other for a year, were students at the same university, worked together in a grocery, and Odle had visisted in the Franklin home and had had meals with them.
The evidence showed that David Franklin had borrowed the Pontiac on previous occasions, and that on such occasions his wife, Sydney, had never driven it. Odle placed no express restrictions on the use of the car with regard to who would drive it on the occasion of taking the Ford Falcon to the garage. The question of Mrs. Franklin driving the Pontiac was not discussed.1
On the morning of October 4, 1962, David Franklin drove the Ford Falcon to attend classes at the university and afterward drove it to the garage, where, by arrangements between him and his wife, she was to drive the borrowed Pontiac to pick him up. On the way to the garage Sydney Franklin was involved in the accident, which resulted in injuries to one Burkey B. Walker. An action for damages was filed by Walker against David and Sydney Franklin in the Superior Court of Pima County, Arizona.
According to the terms of the policy of insurance issued by the defendant, under the style and name of State Automobile Insurance Association, to Wilbur C. Odle, covering the 1955 Pontiac, the persons insured were defined as being:
The provision of the defendant's policy with respect to other insurance is as follows:
"If the Assured has other insurance against a loss covered by Part I of this policy, the Underwriters shall not be liable under this policy for a greater proportion of such loss than the applicable limit of liability stated in the Declarations bears to the total applicable limit of liability of all valid and collectible insurance against such loss; provided, however, with respect to a temporary substitute automobile or non-owned automobile shall be excess insurance over any other valid and collectible insurance."
The provision of the plaintiff's policy of insurance, issued under the style and name of State Farm Automobile Insurance Company, to David Franklin, and covering Sydney Franklin as his spouse and a member of his household, with respect to other insurance is as follows:
"8(b) the insurance with respect to a temporary substitute automobile, a trailer and a non-owned automobile shall be excess over other collectible insurance."
The policies of insurance issued by the plaintiff and by the defendant were both in full force and effect on October 4, 1962, the date of the accident in question.
State Farm Mutual, the insurer of the Franklins and the plaintiff in the present action, undertook the defense of the Arizona action and tendered such defense to Automobile Underwriters, Odle's insurance carrier and the defendant in the present action. Automobile Underwriters refused to assume the defense of the Arizona action, and the present action was filed.
The ultimate issue is whether Sydney Franklin was an additional insured of the State Automobile Insurance Association under the omnibus provisions of its policy above set out. The question is, therefore, whether Sydney Franklin, while using the borrowed Pontiac for the purpose for which it was loaned, and in the absence of a specific prohibition by the owner against its use by a second permittee, came within the provisions of the defendant's policy affording protection to persons other than the named assured "provided the actual use thereof is with the permission of the named assured or an adult member of his household."
Since the policy of insurance in question was written and issued by the defendant in Indiana, the law of Indiana controls its construction. And since there is no Indiana case exactly in point, the court must follow the rule of law it believes the courts of Indiana would adopt in view of the evidence presented.
The contentions of the parties can be briefly stated. The defendant argues for application of the "general rule" that a second permittee is not covered by the extended coverage or omnibus clause of the owner's insurance policy. The plaintiff argues for application of the "liberal rule" which would, under certain circumstances, provide coverage under such clause for the second permittee. Considerable authority can be found supporting both of these positions. See the cases cited at 45 C.J.S. Insurance § 829c(2); 7 Am.Jur.2d Automobile Insurance §§ 116 and 117; Annot., 160 A.L.R. 1195 (1946, Supp.1958).
The plaintiff relies on the statement found at 7 Am.Jur.2d Automobile Insurance § 117, p. 435, that:
If there is to be coverage of the second permittee in the case at bar, it must be based on acceptance of the above interpretation of the omnibus clause.
In the Illinois case of Standard Accident Insurance Company v. New Amsterdam Casualty Company, 249 F.2d 847, (7th Cir.1957), the trial court was faced with a fact situation somewhat similar to that found in the case at bar. And there, as here, there were no state court decisions in point. In that case the owner of the car and the named insured was Kelliher, Inc. Virginia Kelliher, as an officer of the corporation, had proper possession and control of the car and the right to use it for her business and pleasure and to allow others to use it. On the date of the accident her brother, Nash Dowdle, asked to use the car for a date, and she granted him permission to do so. Dowdle took the car and picked up one Franke who was to accompany him on the date. At this time Franke began to drive the car at Dowdle's request. After stopping to allow Dowdle to transact certain business, they drove to meet the girls with whom they had dates. It was at this time that they were involved in an accident resulting in personal injuries to a Josephine Klotz, who subsequently obtained a judgment against both Dowdle and Franke. It appeared from the evidence that Franke had driven the car on previous occasions when it was borrowed by Dowdle but that this fact was not known to Virginia Kelliher. Nor did she know that Franke would accompany Dowdle on this particular occasion. A declaratory judgment action was filed by Standard, Franke's insurer, against New Amsterdam, the insurer of Kelliher, Inc., the owner of the car. The action was tried to the court without a jury and a decision was rendered for New Amsterdam, the court finding that "the actual use and operation" of the car by Franke was without the permission of Kelliher, Inc.
On appeal the Court of Appeals for the Seventh Circuit reversed, holding that Franke would be covered by the omnibus clause of the insurance policy issued by New Amsterdam to Kelliher, Inc. This policy contained an omnibus clause substantially similar to that involved in the present action. Judge Hastings, now Chief Judge, speaking for the court, summarized the factual situation in language which may be aptly applied to the present case:
249 F.2d at 849.
In its opinion the Court reviewed decisions from jurisdictions other than Illinois applying both the "strict" and "liberal"...
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