Universal Underwriters Ins. Co. v. State Auto. and Cas. Underwriters

• Decision Date: 02 February 1972
• Docket Number: No. 10340,10340
• Citation: 108 Ariz. 113,493 P.2d 495
• Parties: UNIVERSAL UNDERWRITERS INSURANCE COMPANY, a corporation, et al., Appellants, v. STATE AUTOMOBILE AND CASUALTY UNDERWRITERS, a corporation, et al., Appellees.
• Court: Arizona Supreme Court

Page 495

493 P.2d 495

108 Ariz. 113

UNIVERSAL UNDERWRITERS INSURANCE COMPANY, a corporation, et al., Appellants, v. STATE AUTOMOBILE AND CASUALTY UNDERWRITERS, a corporation, et al., Appellees.

No. 10340.

Supreme Court of Arizona, In Division.

Feb. 2, 1972.

Rehearing Denied Feb. 29, 1972.

Gust, Rosenfeld & Divelbess by Richard A. Segal, Phoenix, for appellants.

Jennings, Strouss & Salmon by William T. Birmingham and Thomas J. Trimble, Phoenix, for appellees.

STRUCKMEYER, Justice.

This appeal, brought by Universal Underwriters Insurance Company, a corporation, is from a judgment in which the Superior Court of Maricopa County, Arizona determined that State Automobile and Casualty Underwriters, a corporation, did not have the primary obligation to defend Rudolph Chevrolet Company and others in two lawsuits arising out of an automobile accident.

On November 22, 1966, Searls Refrigeration Company owned a certain one and one-half ton Chevrolet stake truck. All Chevrolet vehicles owned by Searls were taken to Rudolph when in need of repairs. On that date, a Searls employee took the truck to Rudolph for minor repairs. The Searls employee signed a written work order which was tendered to him, but did not talk to the mechanic who later made the repairs. Nothing whatever was said at any time about whether the truck would be road tested. Upon the completion of repairs, Rudolph's mechanic, Leslie Krieger, took the truck for a road test to assure himself that the repairs had been satisfactorily completed. During this test, Krieger was involved in an accident in which two women were injured. Actions for damages were subsequently brought against both Rudolph and Searls.

Searls carried automobile liability insurance with State Automobile and Rudolph carried its insurance with Universal. Although Universal felt that State Automobile was primarily liable, when State Automobile refused to defend, Universal defended and eventually settled the claims. Universal then brought this action, as stated, principally to determine which of the two companies' liability was primary. The court below, after a hearing, found that the truck was being driven at the time of the road test by Rudolph's mechanic without the permission of Searls, either express or implied, and entered judgment in favor of State Automobile.

As a part of this state's Financial Responsibility Law, Arizona has adopted what is commonly called the 'omnibus clause.' It reads:

'B. The owner's policy of liability insurance must comply with the following requirements:

2. It shall insure the person named therein and any other person, as insured, using the motor vehicle or motor vehicles With the express or implied permission of the named insured, against loss from the liability imposed by law for damages arising out of the ownership, maintenance or use of the motor vehicle or motor vehicles * * *.' § 28--1170, subsec. B, par. 2, 9 A.R.S. (Emphasis supplied.)

This omnibus clause is a part of every policy, regardless of whether the policy expressly so states. Jenkins v. Mayflower Insurance Exchange, 93 Ariz. 287, 380 P.2d 145 (1963).

The parties do not dispute that because of the omnibus clause any person using a motor vehicle with the express or implied permission of an insured is also an insured. They concede that Rudolph did not have express permission to road test the Chevrolet truck. The controversy centers upon what constitutes implied permission. Universal's position is that for reasons of public policy, that is, for the benefit of both the driver and injured persons, implied permission should be liberally inferred. See Atlantic National Insurance Company v. Armstrong, 65 Cal.2d 100, 52 Cal.Rptr. 569, 416 P.2d 801 (1966).

Before examining the evidence introduced at the trial, a few preliminary observations should be made. Under a similar omnibus clause of the State of Virginia, it has been held that 'an implied permission generally arises from a course of conduct involving a mutual acquiescence in, or a lack of objection to, a continued use of the car, signifying assent.' Hopson v. Shelby Mut. Cas. Co., 203 F.2d 434, 436 (4 Cir. 1953). It is usually shown by the practice of the parties over a period of time preceding the day upon which the insured vehicle was being used. Tomasetti v. Maryland Casualty Company, 117 Conn. 505, 169 A. 54 (1933); United States Fidelity and Guaranty Co. v. Hall, 237 Ky. 393, 35 S.W.2d 550 (1931); Penza v. Century Indemnity Co. of Hartford, Conn., 119 N.J.L. 446, 197 A. 29 (1938).

The testimony at the hearing established that for many years Searls had sent his Chevrolet trucks to Rudolph for repairs and maintenance, and that all vehicles sent in for repairs were road tested when needed. Searls, however, testified that he had never been advised of any previous road testing and that the road testimony in the present case was without his knowledge, assent or acquiescence. This testimony does not establish a course of conduct involving mutual acquiescence or lack of objection signifying assent.

Nonetheless, Universal points to the three classifications into which Appleman, 7, Insurance Law and Practice, §§ 4366, 4367, 4368, divides the adjudicated cases on implied permission. The most liberal classification is what is categorized as the 'Hell or High Water Rule.' The states following this rule do so for reasons of public policy on the theory that after an injury has occurred it is undesirable to permit litigation as to the use made of the vehicle, the scope of the permission and the purposes of...