State Farm Mut. Auto. Ins. Co. v. Zurich Am. Ins. Co.

• Decision Date: 22 January 1973
• Citation: 299 A.2d 704,62 N.J. 155
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff-Respondent, v. ZURICH AMERICAN INSURANCE COMPANY, Defendant-Respondent, and Deskin T. Knoll and Dorothy N. Knoll, Defendants-Appellants, and Steven Johns and Joseph W. Johns, Defendants-Appellants, and A. Rodman Kay, a minor, by his father and guardian, ad litem, Albert Kay, and Albert Kay, Individually, Defendants-Appellants.
• Court: New Jersey Supreme Court

Page 155

62 N.J. 155

299 A.2d 704

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff-Respondent, v. ZURICH AMERICAN INSURANCE COMPANY, Defendant-Respondent, and Deskin T. Knoll and Dorothy N. Knoll, Defendants-Appellants and Steven Johns and Joseph W. Johns, Defendants-Appellants and A. Rodman Kay, a minor, by his father and guardian, ad litem, Albert Kay, and Albert Kay, Individually Defendants-Appellants.

Supreme Court of New Jersey.

Argued Oct. 11, 1972.

Decided Jan. 22, 1973.

Joseph H. Kenney, Camden, for defendants-appellants Steven Johns and Joseph W. Johns (Archer, Greiner & Read, Camden, attorneys).

Raymond W. Uliase, Camden, for defendants-appellants Knoll (Uliase & Uliase, Camden, attorneys).

Edgar E. Moss, II, Camden, for plaintiff-respondent State Farm Mutual Automobile Ins. Co. (Moss & Powell, Camden, attorneys).

G. Wesley Manuel, Jr., Camden, for defendant-respondent Zurich American Ins. Co. (Kisselman, Deighan, Montano & Summers, Camden, attorneys).

James J. Casby, Jr., Camden, made an appearance and was heard on behalf of the Unsatisfied Claim and Judgment Fund Board and filed a Statement in Lieu of Brief (Casby & Garrigle, Camden, attorneys).

The opinion of the Court was delivered by

CONFORD, P.J.A.D., Temporarily Assigned.

This appeal originated in an action for declaratory judgment tried in the Law Division without a jury. Implicated in the issues framed by the complaint and the cross-claim of the defendant insurance carrier are the coverage clauses of two automobile liability policies in relation to an accident occurring March 16, 1969 wherein an automobile owned by one Thomas Busby III ('Busby') and driven by defendant Steven Johns ('Johns') collided with one driven by defendant Deskin T. Knoll as a result of which the latter, Johns, and defendant A. Rodman Kay ('Kay') sustained personal injuries. Plaintiff ('State Farm') had issued a policy on the Busby car and defendant Zurich American Insurance Company ('Zurich') one on a car owned by defendant Joseph W. Johns, father of Steven Johns. Actions for damages against Johns by the Knolls and Kay are pending.

The Law Division found that neither insurance policy covered Johns as an insured and entered judgment accordingly. The Appellate Division, 118 N.J.Super. 84, 286 A.2d 517, affirmed that judgment. On petition for certification by the Johnses, joined in by the Knolls, this court granted certification. 60 N.J. 468, 291 A.2d 18 (1972). The Notice of Petition for certification had recited that it would request review of 'the Final Judgment of the Appellate Division'. The petition itself, however, expressly avers that it 'is directed only toward the interpretation that the Court has given to the language contained in the Zurich policy'. Consequently, although State Farm had been served with a copy of the Notice of Petition, a dispute arose at the argument as to whether the liability of both insurers was properly before this Court or only that of Zurich. We directed that the meritorious issues relating to both policies be argued, reserving judgment on the dispute subject to consideration of supplementary memoranda on the point to be submitted. We have decided that the liability of both insurers should be determined, but our reasons will be better understood if we first outline the general nature of the meritorious issues presented.

Preliminarily, we briefly delineate the basic fact pattern, reserving fuller detail for later development. Busby and Johns were friends and high school classmates, Busby 17 and Johns 16 1/2 years of age. Johns was not licensed to drive. On the day of the accident they had spent some time together at the Busby farm, and Busby was to drive Johns home in Busby's Thunderbird. They decided first to stop at a '7--11' shop for a soda, and on the way they met Kay, aged 17, a member of the same high school class, who was driving his own Pontiac. Kay decided to join them at the 7--11 shop. They arrived at the shop together and parked their cars alongside each other. Busby asked Kay whether he might drive the latter's car and Kay assented. Shortly after Busby drove off, leaving his own car parked with the keys in the ignition, Johns and Kay entered the Busby car, Johns in the driver's seat. After a short discussion concerning the Busby car Johns started the car and drove off with Kay riding as a passenger. A few minutes later the accident took place.

The State Farm policy (covering the Busby car) recited that with respect to an owned automobile the word 'insured' included:

'(4) Any other person while using the owned automobile, provided the operation and the actual use of such automobile are with the permission of the named insured or such spouse and are within the scope of such permission * * *.'

The Zurich policy (covering Johns' father's car) included as an insured, with respect to a nonowned automobile:

'(2) Any relative, * * * provided his actual operation or (if he is not operating) the 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 * * *.'

After taking testimony and receiving in evidence certain depositions the Law Division judge concluded, as a matter of fact, that Johns had neither express nor implied permission from Busby to drive the Busby car and that therefore the State Farm policy did not cover Johns as an insured. In so finding the judge recognized that under Selected Risks Insurance Co. v. Zullo, 48 N.J. 362, 373, 225 A.2d 570 (1966), any motor vehicle liability policy submitted by a New Jersey owner in order to register the vehicle as an insured one must be construed as affording coverage of users of the car at least as broad as the requirement of N.J.S.A. 39:6--46(a), I.e., to 'the insured named therein and any other person using or responsible for the use of any such motor vehicle with the express or implied consent of the insured * * *'.

In dealing with the Zurich policy, the trial judge did not allude to that part of its covering language which reads: '* * * provided his actual operation or (actual use) is with the permission, * * * of the owner', probably for the reason that it was implicit that his finding of absence of express or implied consent of the insured (owner) in relation to the State Farm policy was also applicable to the just mentioned language of the Zurich policy. The judge did, however, construe the added Zurich covering language, 'or reasonably believed to be with the permission of the owner', and as to it he held that it 'should probably be accorded the same effect' (as the State Farm policy) 'that is, providing coverage where the use is with the implied consent of the owner'. He went on to say, 'coverage, it would seem, should not depend solely on someone's state of mind. Rather, the question should be whether when considering all the circumstances, a reasonable man could believe he had the owner's consent'. Finding that criterion not satisfied, the judge concluded that Johns was equally not an insured under the Zurich policy.

The Appellate Division held that the Law Division fact-finding of absence of implied permission from Busby to Johns was supportable under the facts and the law and that the holding as to the State Farm policy should therefore be affirmed. 118 N.J.Super., at 92, 286 A.2d 517. As to the Zurich policy, the Appellate Division concluded that the 'reasonably believed' language therein did not differ materially from the notion of 'implied consent' in the context of a case where, as here, the driver had had dealings only with the owner of the vehicle. It did think that the language might be effective to broaden coverage in relation to sub-permittees in a jurisdiction entertaining narrower concepts than those of our own courts as to the incidents of the 'initial permission rule'. Id., at 94, 286 A.2d 517. (See Odolecki v. Hartford Accident & Indemnity Co., 55 N.J. 542, 549--550, 264 A.2d 38 (1970)). It therefore found no prejudice to Johns resulting from the trial court's having equated the legal effect of the pertinent clauses of the two policies. It felt that Johns 'could have had no ground reasonably to believe that he had permission to operate the car on the highway'. 118 N.J.Super., at 95, 286 A.2d, at 523.

I.

We deal first with the question whether the issue of State Farm's liability is properly before us, that party asserting it is not. It relies upon the fact that, as noted above, the petition for certification expressly purports to be directed only to the Zurich policy and that the argument set forth therein is limited to an attack upon the construction by the Law Division and the Appellate Division of the 'reasonably believed' clause in the Zurich policy defining coverage as to nonowned automobiles. The Johnses accede to that contention, disclaiming any intent at this posture of the cause to seek a ruling for coverage under the State Farm policy.

The Knolls, who joined in the petition (although not signing the Notice of Petition), however, as well as Zurich and the Unsatisfied Claim and Judgment Fund Board, rely upon the facts that the Notice of Petition for Certification is addressed to the whole of the Appellate Division judgment and that the order granting certification was unqualified. They cite R. 2:12--3 which provides that where certification is sought to review a final judgment of the Appellate Division the notice of petition shall in civil actions 'designate the judgment or part thereof sought to be reviewed', no such requirement being specified for the petition itself; and also R. 2:12--11, providing that '(i)f certification is granted, * * * the petitioner's entire case shall be before the Supreme Court for review unless the Supreme Court otherwise orders * * *'. The Knolls argue, further, that the restrictive statement in the petition recited above was intended only to 'focus' upon the special issue thought...