JOHN MATITS, PLAINTIFF-RESPONDENT, v. NATIONWIDE MUTUAL INSURANCE CO., ETC., DEFENDANT-APPELLANT. ELIZABETH SLODZINSKI AND ANTHONY SLODZINSKI, PLAINTIFFS-RESPONDENTS, V. NATIONWIDE MUTUAL INSURANCE CO., ETC., DEFENDANT-APPELLANT, AND ALLSTATE INSURANCE COMPANY, ETC., DEFENDANT. ALLSTATE INSURANCE COMPANY, PLAINTIFF-RESPONDENT, V. NATIONWIDE MUTUAL INSURANCE CO., DEFENDANT-APPELLANT.
Supreme Court of New Jersey
Argued September 27, 1960—Decided December 5, 1960.
33 N.J. 488
Mr. Kent A. Losche argued the cause for the defendant Allstate Insurance Company (Mr. Charles C. Shenier, attorney).
Mr. Carl Gelman argued the cause for the plaintiff-respondent John Matits (Messrs. Gelman & Gelman, attorneys).
The opinion of the court was delivered by
PROCTOR, J. This case concerns coverage under the omnibus clause of an automobile liability insurance policy issued by the defendant, Nationwide Mutual Insurance Co.
On October 26, 1956 an automobile owned by Mrs. Hilda Velasco and driven by Mrs. Betty Mae Hoerner collided with an automobile owned by Elizabeth Slodzinski and driven by her husband, Anthony Slodzinski, in which John Matits was a passenger. Matits and Elizabeth and Anthony Slodzinski instituted actions for personal injuries and property damage against Mrs. Hoerner and Mrs. Velasco. The actions against Mrs. Velasco were dismissed, it being agreed that Mrs. Hoerner was not the former‘s agent at the time of the collision. Trial of the consolidated actions against Mrs. Hoerner resulted in judgments in favor of Matits for $25,000, and in favor of Elizabeth and Anthony Slodzinski for $875 and $500 respectively.
At the time of the collision, Mrs. Velasco was the named assured in an automobile liability insurance policy issued by Nationwide and covering the automobile driven by Mrs. Hoerner. Under the tеrms of that policy, Nationwide extended coverage to Hilda Velasco, her spouse, and “any person or organization legally responsible for the use of the described automobile provided the actual use was with the permission of the policyholder or such spouse.” This is the standard omnibus clause found in most automobile liability insurance policies. Mrs. Hoerner was covered under a similar policy issued by plaintiff Allstate Insurance Co., on another automobile but extending to occasional operation by her of a vehicle other than the one insured. Nationwide refused to defend Mrs. Hoerner on the ground that, in light of the cirсumstances under which she was driving the car at the time of the collision, she was not covered by the Velasco policy. Allstate defended Mrs. Hoerner and, after judg-
Nationwide concedes that it was the primary insurer and that therefore, if its policy covered Mrs. Hoerner, it must pay all plaintiffs. The undisputed facts brought out at the trial are as follows:
The Velascos and Hoerners were next-door neighbors in Ramsey, New Jersey. On October 25, 1956, in the early evening, Mr. Velasco loaned his wife‘s car to Mrs. Hoerner so that she could visit her mother who was ill in Hawthorne, New Jersey. Mrs. Hoerner arrived in Hawthorne about 8:00 P. M. After a short visit with her mother, she drove in search of her sister to the Crane House, a tavern and restaurant in Paterson. At Hawthorne, Paterson is in the opposite direction from Ramsey. Mrs. Hoerner had a few highballs at the Crane House and then drove to the Flamingo Bar in Paterson. She stayed at the Flamingo for a short time, and then returned to the Crane House; she thеn paid a second visit to the Flamingo; and finally, a third visit to the Crane House. Just before midnight, she left the Crane House to drive home and, shortly thereafter, was involved in the collision with the Slodzinski car in Paterson.
Plaintiffs and defendant disagree as to the time limit imposed by Mr. Velasco on Mrs. Hoerner‘s use of the car, and the time and content of a telephone call made by Mrs. Hoerner to Mr. Velasco after her departure from her mother‘s house and before the collision. Velasco testified that when he gave permission to use the car he told Mrs. Hoerner to return it within an hour. Mrs. Hoerner testified that there was no time limit on her use of the car. She further testified that at about 11:00 P. M. she telephoned Velasco and told him that she was “going to be a little late” and asked
The trial court, finding that Mr. Velasco had given initial permission to Mrs. Hoerner to use the car, held that Mrs. Hoerner was an additional insured under Nationwide‘s policy and that “the fact of [her] later deviation is unimportant.” Accordingly, he deemed it unnecessary to resolve the above-mentioned factual issues and entered judgment for all plaintiffs. The Appellate Division unanimously affirmed, stating that “in the absence of a gross deviation from the permitted use the permittee will not be denied the benefit of the insurance to the detriment of the injured,” and holding that “the trial court correctly concluded that Mrs. Hoerner‘s use of the Velasco vehicle did not so deviate from the permission granted to her as to deprive her of the coverage under the policy.” 59 N. J. Super. 373 (1960). We granted Nationwide‘s petition for certification. 32 N. J. 350 (1960).
According to the terms of the omnibus clause in Nationwide‘s policy, Mrs. Hoerner was covered as an additional assured if her “use” of the Velasco car at the time of the collision was with the “permission” of Mr. or Mrs. Velasco. When Mrs. Hoerner left her mother‘s home in Hawthorne to drive to the Crane House and the Flamingo Bar in Paterson, she deviated from the purpose for which she borrowed the Velasco car. The question for decision is whether her deviation vitiated Velasco‘s initial permission so as to deprive her of coverage under defendant‘s policy. Courts faced with this question have adopted one of three views: (1) The liberal or so-called “initial permission” rule that if a person has permission to use an automobile in the first
The trial court and the Appellate Division in the present case both relied on Rikowski v. Fidelity & Casualty Company, 117 N. J. L. 407 (E. & A. 1937), to conclude differently as to the applicable New Jersey law. The trial court interpreted Rikowski as adopting the initial permission rule. Since Mr. Velasco undisputedly gave permission to Mrs. Hoerner to use the car in the first instance, the trial court, applying that rule, found that Mrs. Hoerner, without regard to the extent of her deviation, was an additional assured. The Appellate Division apparently interpreted Rikowski as adopting the minor deviation rule. It affirmed the judgments below, however, because it regarded the trial court as having found Mrs. Hoerner‘s deviation was not so gross as to deprive her of coverage under the policy. 59 N. J. Super., at
The nature of the deviation in Rikowski and the language of the Court of Errors and Appeals suggest adherence to the minor deviation rule. The deviation from the permissive use does not appear to have been gross and the court‘s conclusion was “that under the facts of the сase and within the meaning of the policy such deviation from instructions as the evidence discloses did not serve to end the driver‘s permission to operate the car.” On the other hand, the court in Rikowski relied primarily on Dickinson v. Maryland Casualty Co., 101 Conn. 369, 125 A. 866, 41 A. L. R. 500 (Sup. Ct. Err. 1924), which is frequently cited as the leading case supporting the initial permission rule. See, e. g., Garland v. Audubon Insurance Company, 119 So. 2d 530, 539 (La. Ct. App. 1960); Annotations 126 A. L. R., supra, at p. 553; 5 A. L. R. 2d, supra, at p. 630; Note, 83 U. Pa. L. Rev. 765, at p. 768 (1935). But see Ashlock, op. cit., supra, at p. 106.
The facts in Dickinson in many respects resemble those in the present case. There an automobile was loaned so that the borrower could drive home to change his clothes. He was told to “hurry back.” Instead of driving home, the borrower stopped in a saloon to get a drink. While there, he picked up some friends and while driving one of them home, in an opposite direction from the borrower‘s home, visited at least one other saloon for drinks. Shortly thereafter, the borrower was driving to a corner where he could
The citation in Rikowski of Dickinson suggest that our former Court of Errors and Appeals was adopting the initial permission rule. The Rikowski case has been so interpreted. See, e. g., Konrad v. Hartford Accident & Indemnity Company, 11 Ill. App. 2d 503, 137 N. E. 2d 855 (App. Ct. 1956); Annotation 5 A. L. R. 2d, supra, at p. 629; Miller, “The Omnibus Clause,” 15 Tul. L. Rev. 422, 427, n. 34 (1941). And the rationale of the Rikowski decision reenforces such an interpretation. The court there noted that the Motor Vehicle Financial Responsibility Law then in effect, P. L. 1929, c. 116,
Accordingly, we hold that if a person is given permission to use a motor vehicle in the first instance, any
Our holding is not contrary to Nicholas v. Independence Indemnity Cо., 11 N. J. Misc. 344 (Sup. Ct. 1933); Penza v. Century Indemnity Co., 119 N. J. L. 446 (E. & A. 1938) and Baesler v. Globe Indemnity Co., 33 N. J. 148 (1960). Without expressing approval or disapproval of Nicholas and Penza, it is sufficient to say that these cases are entirely inapposite to the question here presented. Neither involved a deviation from a permitted use. Both had to do with a retaking of an automobile after permission to use it had expired—a retaking which the court in Penza characterized as unlawful. In both cases the court found that there was no permission to use the automobile in the first instance. Indeed, the court in Penza took pains to emphasize this fact as a ground for distinguishing the case from Rikowski. It said: “We do not regard this as a case involving an initial permission to use an automobile and a ‘slight,’ or any other kind of deviation therefrom.” Penza, supra, 119 N. J. L., at p. 451. The court wеnt on to say that if the driver had deviated from a permitted use there might well have been coverage under Rikowski. Baesler is also readily distinguishable from the present case. There we held that coverage did not extend to a person who was expressly prohibited by the named insured from using the automobile. The case did not involve deviation from an initially permitted use.
Affirmed.
The simple words, perhaps too simple, “actual use * * * with the permission” of the рolicyholder or named assured, found in substantially similar form in practically all automobile liability policies issued in every jurisdiction save compulsory insurance states, have engendered probably as much reported litigation as any common contractual phrase. The absence of an express definition of the key words, either legislatively or within the instrument, coupled with the infinite variety of factual situations arising, has resulted in the widest conceivable range of judicial approach, reasoning and result. Although classification is generally attempted on the basis of the three rules, the points of difference among the states do not clearly emerge. Indeed, in some instances cases in a given jurisdiction seem inconsistent with each other and the differing treatment of factual situations frequently defies logic. See the latest compendium and classification of the cases in Ashlock, “Automobile Liability Insurance: The Omnibus Clause,” 46 Iowa L. Rev. 84 (1960). Generally speaking, the differing rules and results may be said to derive from varying judicial views of the public policy conceived to be involved. The “initial permission” rule, with the extreme results it dictates, rests upon such a broad conception of policy that a shift to it, or indeed its adoption in the first instance, should come only from the Legislature, which alone can properly determine its desirability and control its ramifications. See Appleman, “Special Phases of the Omnibus Clause in Insurance Policy,” 22 A. B. A. J 613, 648 (1936); Eaton, “Problems Presented by Liberal Interpretations of Omnibus Clauses,” 6 Am. U. L. Rev. 47, 50 (1957).
Until such a determination comes, it seems to me that the rule is an unjustifiable basis for the interpretation of the present omnibus clause. First, it interferes with an essentially
The theory of the clause is that the insurer, in the exercise of its freedom to contract with a particular vehicle owner or not, initially selects its risk and the extent of it and permits that risk to be extended only by the insured upon whom it relies to entrust and delegate use and operation to responsible persons. While it is unusual to permit one party to a contract unilaterally to extend its benefits to others, reliance for protection of the insurer‘s interest is placed on the personal interest of the named assured in desiring to be as certain as possible that his vehicle will not be damaged or cause injury to third persons and that he will not become subject to a law suit occasioned by another‘s operation of his vehicle, with its attendant inconvenience and notoriety, even though he knows his insurance carrier will defend and indemnify him. Although the theory has its practical flaws, nonetheless the insurer has selected this basis and is entitled to stand on it and be basically protected in it, absent the exercise of supervening governmental action. Certainly the intended frame of reference should not be altered to whether, as a matter of hindsight, the insured desired his permittee to have policy protection. Compare dissenting opinion in Baesler v. Globe Indemnity Co., 33 N. J. 148, 156, 157 (1960).
To hold, as the majority does here, that, given permission to use a motor vehicle in the first instance, any subsequent use while it remains in his possession, “short of theft or the like,” though concededly not within the contemplation of the parties, is a permissive use, does grave violence to the policy language. “Actual use * * * with the permission of the policyholder” to me connotes the precise use at the
The majority principally justifies the adoption of the rule on the basis of policy derived from our statutes concerning financial responsibility for the operation of motor vehicles. The opinion puts it this way: “We think that the ‘initial permission’ rule best effectuates the legislative policy of providing certain and maximum coverage, and is consistent with the language of the standard omnibus clause * * *.” In my view this conclusion is unjustified when the statutory scheme and the very provisions of the law are carefully considered. The Legislature might well have gone as far as the majority does, but since it most certainly did not, it is beyond the province of the judicial branch to do so.
In the first place, New Jersey does not require any form of insurance as an initial condition for the operation of a motor vehicle nor does it insist where insurance is in force that such coverage shall be all-inclusive. The whole scheme of the law rests upon the concept of individual ability of the owner or operator to respond in damages where he may be liable and not upon any theory that there must be some
Our security-responsibility law of 1952, akin to that in most states, provides in effect that where a driver has violated certain provisions of the laws concerning the operation of a vehicle (whether an accident be involved or not) or has failed to satisfy a judgment against him resulting from a prior accident, his operator‘s license and all owner‘s vehicle registrations shall be and remain suspended until he furnishes proof of financial responsibility for future accidents (and satisfies any past judgments).
The 1952 legislation contained two additional features. The first provides for the suspеnsion of the license of each operator and all registrations of each owner of a vehicle in any manner involved in an accident, prior to any determination of liability or entry of a judgment, unless the operator or owner involved deposits security with the Director of the Division of Motor Vehicles in an amount determined by him to be sufficient to satisfy any judgment for damages. The requirement is not applicable if there is a liability insurance policy in effect and, again most significantly, as to the owner, if the vehicle “was being operated without his permission, express or implied * * *.” (Emphasis added.)
The statutory scheme is rounded out by the Unsatisfied Claim and Judgment Fund,
It is sometimes said (e. g., Rikowski v. Fidelity & Casualty Co., 117 N. J. L. 407, at p. 411 (E. & A. 1937); cf. Baesler, dissenting opinion, 33 N. J., at p. 157) that the
The “initial permission” rule has never met with great favor. Although precise labelling is difficult, it appears to be followed today in only five or six voluntary insurance states at the most, principally Illinois and Louisiana. New Jersey seemingly is the only recent convert. An early case in Tennessee, Stovall v. New York Indemnity Co., 157 Tenn. 301, 8 S. W. 2d 473, 72 A. L. R. 1368 (Sup. Ct. 1928), and one in Connecticut, Dickinson v. Maryland Casualty Co., 101 Conn. 369, 125 A. 866, 41 A. L. R. 500 (Sup. Ct. Err. 1924), are generally cited as the foundation stones of the doctrine. It is at least interesting to note that Tennessee has backed away substantially (see Young v. State Farm Mutual Automobile Insurance Co., 244 F. 2d 333, 335-336 (4 Cir. 1957) and state court decisions cited therein) and that Connecticut, now an express adherent of the minor deviation rule, has directly held that Dickinson never did
I think it quite clear that until the case at bar New Jersey followed the so called “minor deviation” rule. I so understood the opinion in Costanzo v. Pennsylvania Threshermen, etc., Insurance Co., 30 N. J. 262, 269 (1959) where we said (at p. 269) “* * * the trip to Passaic was not such a deviation as would serve to terminate the son‘s permissive use of the car.” The majority now decides that Rikowski, supra (117 N. J. L. 407), though admittedly a minor deviation case on its facts, adopted the “initial permission” rule. As they point out, some commentators have thought so; another has reached the opposite conclusion. See Ashlock, supra, 46 Iowa L. Rev., at p. 108, n. 138. But it appears to me, in the context in which and at the time when the problem in Rikowski arose, the court cannot be thought to have spoken in terms of anything but the minor deviation doctrine. Our only preceding case dealing with this aspect of the omnibus clause was Nicholas v. Independence Indemnity Co., 11 N. J. Misc. 344 (Sup. Ct. 1933), where an employer had entrusted his truck to an employee to store in the latter‘s yard until again needed for business purposes and the latter used it for a personal errand in the course of which an accident occurred. The court found no permission and consequently no coverage. In Rikowski, the trial judge had held Nicholas controlling and decided for the insurer. Confronted with only this one precedent and an entirely different set of facts in which coverage seemed indicated, the real problem was to distinguish Nicholas. To me there is nothing in the opinion to indicate the court was actually doing anything more than deciding the factual situation before it to be a minor deviation.
This conclusion is borne out by the decision, subsequent to Rikowski, in Penza v. Century Indemnity Co., 119 N. J. L. 446 (E. & A. 1938), where the facts were legally analogous to those in Nicholas. The plaintiff sought to hold the in-
Moreover, I fail to see the continued efficacy of the basis of decision in our second permittee cases. Costanzo, supra (30 N. J., at pp. 269-270); Cronan v. Travelers Indemnity Company, 126 N. J. L. 56 (E. & A. 1941). It would now seem unnecessary, onсe permission to the original permittee is established (that permission being judicially held to be unrestrictable), to be concerned with whether the owner impliedly permitted or expressly prohibited operation by a third person. There appears to be no real difference in principle between a deviation where a neighbor borrows a car for the expressly limited purpose of visiting her sick mother and then proceeds on a round of taverns and one where a friend is given the use of a car and allows someone else to drive it. If initial permission is to suffice, there should be no need to resort to the extensive reasoning employed in Costanzo. Equally by logic, the result in Baesler (33 N. J. 148), where a second permittee was expressly prohibited, ought also to fall, despite the protestation of the majority to the contrary. (Quite illogically, however, not even a
The “minor deviation” rule, followed in the majority of jurisdictions, seems to me to be the only sound one so long as the extent of coverage is allowed to be governed by the unilateral act of the insured and the standard omnibus clause is permitted by the appropriate supervising authority. Prohibitions and restrictions as to use in all its elements are thereby regarded in accordance with the contract and not cast aside. I would, however, recognize such only where they amount to more than a mere admonition and the assured primarily had in mind the risk of accident. Those having some other basis, such as family discipline or personal convenience of the owner, should not be given controlling effect. Absent applicable prohibition or restriction, coverage would depend, objectively, on the use at the time having some connection with that permitted and not being so grossly different that it could be unquestionably said the owner would have prohibited it had he been expressly advised. All situations can be fairly determined on this basis. Due attention is then paid to intention of the parties, the scope of legislative policy to date and our prior case law.
As far as the case at bar is concerned, the conflicting evidence has never been resolved or determined. On one possible evaluation of the proofs, a substantial deviation as to purpose could be found. On another view, sufficient permission for the use preceding and continuing at the time of the accident might be determined to have been given. I would reverse the judgment of the Appellate Division and remand the cause to the trial court for a fact finding and redetermination on the basis of the views here expressed.
For affirmance—Chief Justice WEINTRAUB, and Justices JACOBS, FRANCIS, PROCTOR and SCHETTINO—5.
For reversal—Justice HALL—1.