Western States Mut. Ins. Co. v. Continental Cas. Co.

Decision Date27 July 1971
Docket NumberGen. No. 70--55
PartiesWESTERN STATES MUTUAL INSURANCE COMPANY, Plaintiff-Appellee, v. CONTINENTAL CASUALTY COMPANY, Defendant-Appellee. Appeal of HARDWARE MUTUAL CASUALTY COMPANY, a Wisconsin corporation, Defendant. Diane Taylor, John Joseph Murphy, by his father and next friend, John Vincent Murphy, George A. Hull by George D. Hull, Guardian Ad Litem, Defendants-Appellees.
CourtUnited States Appellate Court of Illinois

McKenna, Storer, Rowe, White & Haskell, Wheaton, Eugene J. Farrug, Wheaton, of counsel, for appellant.

Donald W. Ford, Wheaton, for appellee.

ABRAHAMSON, Justice.

This appeal is from a declaratory judgment action, filed in the Circuit Court of DuPage County, by Western States Mutual Insurance Company, hereinafter referred to as Western States, insurer of the driver of a non-owned vehicle, against Hardware Mutual Casualty Company, hereinafter referred to as Hardware. The trial court found that Hardware, insurer of the vehicle involved, owed the duty to defend and indemnify the operator of the vehicle, under the owner policy. Western States' policy contained a standard 'excess' clause for non-owned automobiles. Hardware's policy contained an 'escape' or 'no liability' clause. Hardware has appealed from the judgment in favor of Western States.

The issues are: 1) Did the trial court properly find, based upon depositions, that the driver had the implied permission of the owner at the time of the occurrence; 2) Which insurer owed the duty to defend and indemnify the driver where the owner's policy contained an 'escape' clause and the driver's policy contained an 'excess' clause.

The Complaint for Declaratory Judgment filed on March 25, 1969, by Western States alleged that it issued its insurance policy to George D. Hull; that the defendant, Hardware, issued its policy to Al Piemonte Ford, hereinafter referred to as the Ford agency; that defendant, Continental Casualty Company issued its policy to Crawford and Company and/or Harry Crawford, Sr., d/b/a Crawford and Company. The complaint further alleged that about April 12, 1968, George A. Hull, the son of George D. Hull, was operating an automobile owned by the Ford agency and leased or billed to Harry Crawford, Sr., and was doing so with the permission, consent and knowledge of Harry Crawford, Sr.; that the purpose of the trip was to take Mark Crawford (a son) home; that Diane Taylor was a passenger on a motorcycle, driven by John Murphy, when an accident occurred with the vehicle driven by George A. Hull, and that thereafter a lawsuit was filed by John Murphy, a minor, by his father, against George A. Hull, Harry Crawford, Sr., Mark Crawford and Al Piemonte Ford. Further allegations are that a conflict has arisen between the plaintiff, as the alleged insurer of George D. Hull, and Continental Casualty Company, alleged insurer of the Crawfords, and Hardware, alleged insurer of the Ford agency; and that the plaintiff has tendered the defense of George A. Hull, driver of the vehicle in question, to Hardware and Continental Casualty, and the tender was refused.

Hardware filed its answer, admitted that the car involved was owned by the Ford agency and that it was the agency's insurer. Defendant Hardware denied that permission was granted to Harry Crawford, Sr., or anyone acting in his behalf, to use the automobile involved. Hardware also set out an affirmative defense alleging that the policy of insurance issued by Hardware to the Ford agency provides that:

'Any person while using, with the permission of the named insured, any automobile to which the insurance applies under the automobile Hazard, provided in his actual operation or (if he is not operating) his other actual use thereof, is within the scope of such permission * * *'

and that none of the Crawfords had permission of the named insured (the Ford agency) to use the subject automobile. The affirmative defense further states:

'That the policy of insurance in question issued by Hardware to the insured Al Piemonte Ford, contains an endorsement A.G. 8 entitled Limited Coverage for Certain Insureds which provides:

"In consideration of the reduced rate of premium made applicable to the Garage Liability Insurance, it is agreed that the garage customers are not insureds with respect to the automobile hazard except in accordance with the following additional provisions.

"(1) If there is other valid and collectible insurance, whether primary, excess or contingent, available to the garage customer and the limits of such insurance are sufficient to pay damages up to the amount of the applicable financial responsibility limit, no damages are collectible under this policy.

"(2) If there is other valid and collectible insurance available to the garage customer, whether primary, excess or contingent, and the limits of such insurance are insufficient to pay damages up to the amount of the applicable financial responsibility limit, then this insurance shall apply to the excess of damages up to such limit.

"(3) If there is no other valid and collectible insurance, whether primary, excess or contingent, available to the garage customer, this insurance shall apply but the amount of damages payable under this policy shall not exceed the applicable financial responsibility limit.

"(4) As used in this endorsement:

'Garage customer' means any person other than (1) an employee, director, stockholder, partner, or member of the named insured or a resident of the same household as the named insured, such employee, director, stockholder, partner or member."

and concludes that there is other valid and collectible insurance available to George A. Hull and the Crawfords.

The trial court found after briefs were submitted, together with depositions, that Hardware owed the duty of extending coverage and a defense to George A. Hull, as the primary insurer, and dismissed the affirmative defense of Hardware; that Western States, under its policy issued to George A. Hull, is secondary or excess as to the policy of Hardware Mutual; that Continental Casualty's policy issued to Crawford and Company has no force in effect and is inapplicable to the occurrence and entered judgment accordingly. Hardware, alone, has appealed.

The first issue we consider is whether the driver had implied permission of the owner at the time of the occurrence, or otherwise stated, was the driver George A. Hull, a permittee under the omnibus clause of Hardware's insurance policy. The 'omnibus clause' of a policy for automobile liability insurance is that clause which extends coverage to other persons in addition to the named insured. It is undisputed that the permission of the named insured, Al Piemonte Ford, was required but the dispute revolves around whether there was permission expressed or implied.

The automobile involved and owned by the Ford agency was obtained by a Larry Keegan, a car salesman for the Ford agency.

As to whether permission was given, either expressly or impliedly, from the conduct of the parties, we must consider the factual situation as well as the construction of the insurance contracts. Jensen v. New Amsterdam Insurance Co., 65 Ill.App.2d 407, 415, 213 N.E.2d 141. We, therefore, turn to the depositions of the officers and employees of the Ford agency on the question of permission.

James Casolari, also known as Jim Cass, on deposition, stated that he is the General Manager and Vice President of the Ford agency, and that his salesman has authority to loan out a demonstrator car. For example, if you bought a car, he did not have to get permission from anyone. In regard to the particular vehicle involved herein, he said there was a rental to an outside customer, who would be Attorney General Clark, but that the Attorney General was not charged for the car because the bill was charged to the New Car Sales Manager's Department. He further stated that Frank Fee was in charge of handling loaner or rental cars and said there were no restrictions placed on using the car, that he knew of; that they had twenty loaner-type cars covered under their insurance policy; that no salesman could take it upon himself to loan out a rental that is in the Service Department but would have to go to the Service Manager, Frank Fee, and that it was Frank Fee's discretion as to whether a vehicle would be loaned out. Further on deposition, he stated that in this case Frank Fee at first turned down salesman Keegan's request because there was to be no fee charged, and that Keegan went to Leonard Lachman and got permission to waive the daily rental fee.

On Machman's deposition, he stated that he was Sales Manager of the Ford agenson were renting a car, he would not igk cy and that he authorized the express use of the rental vehicle involved herein so that the cost of rental was absorbed by the New Car Department. He stated further that in their daily rental program, in which they rented Mustangs for $4.95 per day, they had no leasing company and no individual leases; that the only qualification they had on rentals was that you had to be twenty-one and a licensed driver; that the loaner agreement herein was signed for the Ford agency by Keegan, but that apparently nobody signed for the Attorney General's office.

On deposition, Fee stated that he was the Service Director of the Ford agency; that the agency had a fleet of approximately twenty cars they would loan or rent to customers and that he was in charge of the renting or loaning; that if a person were renting a car, he would not give any verbal instructions or restrictions on the use of the car. He further stated that Keegan came to him and said he needed a car for the Attorney General's office; that he refused to give Keegan the car (apparently because he wanted the rental waived), and told Keegan he would have to get the permission of Lachman; that shortly thereafter, Lachman called and said it was O.K....

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2 cases
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    ...... vehicle and the policy specifically states that such permissive operation makes the operator ...26, 232 Cal.App.2d 541 (1965); Western States Mut. Ins. Co. v. Continental Casualty Co., ......
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