Stonington Ins. Co. v. Mcwilliams

• Decision Date: 06 July 2010
• Docket Number: No. 1 CA-CV 09-0235,1 CA-CV 09-0235
• Parties: STONINGTON INSURANCE COMPANY, a foreign corporation, Plaintiff/Counterdefendant/ Appellee, v. JAMES MICHAEL MCWILLIAMS, Defendant/Counterclaimant/ Appellant, BROOKE SEIFERT, Counterclaimant/Appellant
• Court: Arizona Court of Appeals

STONINGTON INSURANCE COMPANY, a foreign corporation, Plaintiff/Counterdefendant/ Appellee,

v. JAMES MICHAEL MCWILLIAMS, Defendant/Counterclaimant/ Appellant, BROOKE SEIFERT, Counterclaimant/Appellant

No. 1 CA-CV 09-0235

COURT OF APPEALS STATE OF ARIZONA DIVISION ONE DEPARTMENT C

Filed: July 06, 2010

NOTICE: THIS DECISION DOES NOT CREATE LEGAL PRECEDENT AND MAY NOT BE CITED EXCEPT AS AUTHORIZED BY APPLICABLE RULES. See Ariz. R. Supreme Court 111(c); ARCAP 28(c); Ariz. R. Crim. P. 31.24

MEMORANDUM DECISION

(Not for Publication-Rule 28, Arizona Rules of Civil Appellate Procedure)

Appeal from the Superior Court in Maricopa County

Cause No. CV 2008-007912

The Honorable Richard J. Trujillo, Judge

REVERSED AND REMANDED

Jones, Skelton & Hochuli, P.C.

By Eileen Dennis GilBride, Donald L. Myles Jr.,

Kevin K. Broerman and Lori L. Voepel

Attorneys for Plaintiff/Counterdefendant/Appellee

Charles Hulstrand, P.C.

By Charles Hulstrand

Law Office of Christopher J. Curran, P.C.

By Christopher J. Curran

Attorneys for Defendant/Counterclaimants/Appellants

BROWN, Judge

¶1 Appellant James McWilliams appeals the trial court's grant of summary judgment in favor of Stonington Insurance Company ("Stonington") regarding an insurance coverage dispute. For the following reasons, we reverse and remand for further proceedings.

BACKGROUND

¶2 Patrick Alexander was employed by Tots Unlimited¹ (the "company") as a maintenance worker, a position which afforded him use of a company vehicle. Late one night in December 2005, Alexander drove the vehicle to downtown Tempe, where he consumed alcoholic beverages with friends. He left in the same vehicle and shortly thereafter was involved in a collision with McWilliams, a pedestrian. McWilliams suffered injuries and sued Alexander for negligence. Alexander defaulted and McWilliams was awarded $486,378 in compensatory and punitive damages and costs. McWilliams and Alexander then entered a Damron² agreement under which Alexander assigned to McWilliams any rightsAlexander had against Stonington, the company's insurance carrier. Stonington filed a declaratory action seeking a determination that it had no duty to defend or indemnify Alexander because Alexander had been driving the company vehicle without permission and was therefore uninsured under the company's policy.

¶3 As assignee of Alexander's rights, McWilliams counter-claimed against Stonington for breach of contract and bad faith. The parties filed cross-motions for summary judgment on the issue of whether Alexander had the express or implied permission to drive the company vehicle on the night of the accident and would thus be covered as an insured at that time. The trial court ruled in favor of Stonington, finding as a matter of law that Alexander was not a permissive driver. This timely appeal followed.

DISCUSSION

¶4 Summary judgment is appropriate when "there is no genuine issue as to any material fact and... the moving party is entitled to a judgment as a matter of law." Ariz. R. Civ. P. 56(c). A motion for summary judgment should be granted "if the facts produced in support of the claim... have so little probative value, given the quantum of evidence required, that reasonable people could not agree with the conclusion advanced by the proponent of the claim[.]" Orme Sch. v. Reeves, 166 Ariz.301, 309, 802 P.2d 1000, 1008 (1990). "[W]e view the facts in the light most favorable to the party against whom judgment was entered." Great Am. Mortgage, Inc. v. Statewide Ins. Co., 189 Ariz. 123, 124, 938 P.2d 1124, 1125 (App. 1997) (citation omitted). In determining whether any genuine issues of material fact exist and whether the trial court erred in applying the law, our review is de novo. Eller Media Co. v. City of Tucson, 198 Ariz. 127, 130, ¶ 4, 7 P.3d 136, 139 (App. 2000).

¶5 McWilliams argues that the trial court erred in granting summary judgment in favor of Stonington. In urging us to reach that determination, his primary argument is based on his contention that Arizona courts should follow the "initial permission rule," and not the "minor deviation rule," to determine the extent of permission granted to Alexander for use of the vehicle and the resulting liability under the Stonington policy. Alternatively, he asserts that even if this court applies the minor deviation rule, there were sufficient facts in dispute regarding whether Alexander had permission to use the company vehicle on the night of the accident to present the matter to a jury. We address these arguments in turn.

A. Minor Deviation Rule

¶6 Arizona has adopted an omnibus insurance coverage statute, which requires all automobile policies to cover the named insured as well as anyone using the vehicle with expressor implied permission of the insured. Ariz. Rev. Stat. ("A.R.S.") § 28-4009(A)(2) (2004) ("An owner's motor vehicle liability policy shall comply with the following... [t]he policy shall insure the person named in the policy as the insured and any other person, as insured, using the motor vehicle or motor vehicles with the express or implied permission of the named insured[.]"). The law is well settled that the omnibus statute is to be construed broadly to favor coverage for permissive drivers. Hille v. Safeco Ins. Co. of Am., 25 Ariz. App. 353, 354, 543 P.2d 474, 475 (1975). Whether a person has permission to drive a vehicle is generally a "question of fact to be determined by the trier of fact." Id. (citation omitted).

¶7 To make a prima facie showing that Alexander was "insured" under the policy, McWilliams was required to establish that Alexander had either express or implied permission to use the company vehicle as he did on the night of the accident. See Home Ins. Co. v. Keeley, 20 Ariz. App. 200, 202, 511 P.2d 213, 215 (1973) (recognizing that the party claiming coverage under an insurance policy has the burden of establishing, under the facts and circumstances, that the driver of the vehicle had the requisite permission). Three rules have evolved in general case law in this regard: (1) the initial permission, or "hell or high water" rule; (2) the "strict construction" rule; and (3)the minor deviation rule. See James v. Aetna Life and Cas., 26 Ariz. App. 137, 138-39, 546 P.2d 1146, 1147-48 (1976).

¶8 McWilliams urges us to apply the initial permission rule, which provides that liability coverage is available to any driver who is given permission to use an insured vehicle even if the subsequent use is a gross deviation from the scope of the initial grant. Id. at 139, 546 P.2d at 1148. In other words, once an owner has relinquished the keys to an authorized driver, that driver is insured for all acts involving the vehicle come "hell or high water." See Universal Underwriters Ins. Co. v. State Auto. and Cas. Underwriters, 108 Ariz. 113, 115, 493 P.2d 495, 497 (1972).

¶9 McWilliams argues that the initial permission rule supports the remedial purpose of Arizona's omnibus clause and best reflects our legislature's intent to protect the traveling public from people who are financially irresponsible.³ See, e.g., Drucker v. Greater Phoenix Transp. Co., 197 Ariz. 41, 44, ¶ 15, 3 P.3d 961, 964 (App. 1991) ("The purpose of the financial responsibility laws is the protection of the travelling public from financial hardship resulting from the operation of motor vehicles by financially irresponsible persons." (internal quotations omitted)). Relying on cases from other jurisdictions, he contends that omnibus clauses such as the one adopted in Arizona demand broad application, and only the initial permission rule affords the protection contemplated under the statute. See, e.g., Commercial Union Ins. Co. v. Johnson, 745 S.W.2d 589, 594 (Ark. 1988); Clark v. Hartford Accident & Indem. Co., 166 A.2d 713, 715-16 (Conn. 1960); Mitchell v. Allstate Ins. Co., 244 S.W.3d 59, 65 (Ky. 2008); Horace Mann Ins. v. Hampton, 767 P.2d 343, 345-46 (Mont. 1989); Verriest v. INA Underwriters Ins. Co., 662 A.2d 967, 973-74 (N.J. 1995); Universal Underwriters Ins. Co. v. Taylor, 408 S.E.2d 358, 361-64 (W.Va. 1991).

¶10 Regardless of how we might view the applicability of the initial permission rule to cases such as this one, that rule has been expressly rejected by our supreme court. Universal, 108 Ariz. at 115, 493 P.2d at 497. Because we are bound by our supreme court's prior decision on this matter, we do not address McWilliams' argument regarding adoption of the initial permission rule. See City of Phoenix v. Leroy's Liquors, Inc., 177 Ariz. 375, 378, 868 P.2d 958, 961 (App. 1993) (noting thatcourt of appeals has "no authority to overrule, modify, or disregard" decisions of the Arizona Supreme Court).⁴

¶11 Instead, we apply the minor deviation rule. James, 26 Ariz. App. at 139, 546 P.2d at 1148; Universal, 108 Ariz. at 115, 493 P.2d at 497. Under that rule, a permissive driver may extend the scope of use beyond the express or implied grant initially provided, as long as the use remains within the scope of the permission granted. See James, 26 Ariz. App. at 139, 546 P.2d at 1148. The minor deviation rule is based on the longstanding notion that the driver of a vehicle is presumptively the agent of the vehicle's owner, but that such presumption may be overcome with evidence the driver was operating outside the scope of the permission granted. Universal, 108 Ariz. at 115, 493 P.2d at 497 (citing Baker v. Maseeh, 20 Ariz. 201, 179 P. 53 (1919); Silva v. Traver, 63 Ariz. 364, 162 P.2d 615 (1945)).

B. Determination of Permissive Use

¶12 McWilliams argues that even under the minor deviation rule, sufficient facts exist from which a jury could conclude that Alexander had express or implied permission to use the company vehicle for personal purposes on the night of the accident. As to express permission, we find no basis in the record to support the existence of any material issue of fact. Not even Alexander's own affidavit contains any information that could reasonably be construed as granting him express...