EMPIRE FIRE & MARINE INSURANCE COMPANY v. KIMBERLY R. ARCHER, et al.

 

NOT FOR PUBLICATION WITHOUT THE

APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY

APPELLATE DIVISION

DOCKET NO. A-3779-03T23779-03T2

EMPIRE FIRE & MARINE INSURANCE

COMPANY,

Plaintiff-Appellant,

v.

KIMBERLY R. ARCHER, JAMES A.

PARFAITE,

Defendants,

and

METROPOLITAN PROPERTY & CASUALTY

INSURANCE COMPANY,

Defendant-Respondent.

___________________________________

 

Argued October 24, 2005 - Decided

Before Judges Lintner, Holston, Jr., and Gilroy.

On appeal from the Superior Court of New Jersey, Law Division, Burlington County,

L-724-02.

Steven J. Polansky argued the cause for appellant (Marshall, Dennehey, Warner, Coleman & Goggin, attorneys; Mr. Polansky, on the brief.)

Robert G. Mazeau argued the cause for respondent (Sherlin Simon, on the brief).

PER CURIAM

This is an insurance coverage case concerning application of the initial permission rule. The insurer appeals from an order entering summary judgment in favor of the driver, entitling her to coverage. We reverse and remand for trial. The interrelated procedural history and relevant facts are as follows.

On May 4, 2001, Kimberly Archer was operating a van owned by her husband's employer, Accurate Lift Truck, Inc. (Accurate), when she was involved in an accident with a vehicle driven by James Parfaite. Parfaite filed a complaint against Kimberly and Accurate, alleging negligence and seeking damages for personal injuries. A second complaint was filed against Kimberly and Accurate by Metropolitan Property & Casualty Insurance Company (Metropolitan) as subrogee of Parfaite for first party benefits that it had paid Parfaite.

At the time of the accident, Kimberly's husband, Wayne Archer, was an employee of Accurate and had initial permission to use the van for business and limited personal use. Accurate had a written policy strictly limiting the use of its van to its employees. After arriving home from work, Wayne placed the keys on the counter, as he normally did, and fell asleep. At approximately 10:00 p.m., he was awakened by Kimberly's mother, who advised him of the accident. According to Wayne, the company policy was known in the household. At depositions, Wayne denied giving Kimberly permission. He testified that he had never given her the keys in the past. She had apparently taken them off the counter while he was asleep and he was unaware from any other source that Kimberly had taken the van in the past. At the time of the accident, Kimberly did not have a driver's license.

The van was insured by plaintiff, Empire Fire & Marine Insurance Company (Empire), under both a primary and umbrella policy issued to Accurate. The declaration pages for both policies listed Accurate as the named insured; neither declaration page listed an individual as a named insured. The primary policy with limits of $15,000 per person, $30,000 per occurrence, contained the following relevant definition under the heading "WHO IS INSURED":

1. The following are "insureds" for "Equipment Dealer and Rental Operations" - "Auto" and "Mobile Equipment" Liability:

a. You; and

b. Anyone else while using with your permission an "auto" or "mobile equipment" you own, hire or borrow except as set forth in WHO IS NOT INSURED.

The umbrella policy with a $1,000,000 limit contained the following applicable language:

WHO IS AN "INSURED"

2. With respect to "dealer operations" involving the ownership, maintenance or use of an "auto", the following are "insureds":

a. You;

b. Your partners, but not for any "auto" owned by him or her or a member of his or her household;

c. An officer if you are a corporation, but not for any "auto" owned by such officer or by a member of his or her household;

d. The spouse of (a), (b) and (c) above, but not for any "auto" owned by such spouse or by a member of his or her household; and

e. Only such other individuals who are specifically shown in the Declarations as a Designated Person, but not for any "auto" owned by such individual or by a member of his or her household.

f. An employee of yours while performing an authorized act in the interest of you, the employer, but not for any "auto" owned by that employee or any member of his or her household.

CONDITIONS

1. APPLICATION OF UNDERLYING INSURANCE

Unless a provision to the contrary appears in our policy, all the conditions, definitions, agreements, exclusions and limitations of the "underlying insurance", including changes by endorsement, will apply to our Policy. If changes are made, you will notify us as soon as practical of the change.

After the filing of the Parfaite and Metropolitan complaints, Empire filed a declaratory judgment complaint seeking to disclaim coverage. The complaints were consolidated and Empire moved for summary judgment. Metropolitan responded, filing a cross-motion to compel coverage.

Following oral argument on January 24, 2003, the motion judge concluded that Kimberly's use of the van was covered by Empire's primary liability policy. He entered an order memorializing his findings. Empire moved for reconsideration and/or clarification of the court's January 24, 2003 order, as it did not address the scope of coverage under Empire's umbrella policy. On March 14, 2003, the judge denied Empire's motion for summary judgment, finding that the umbrella policy also afforded coverage.

At the March 14, 2003 hearing, the judge gave the following reasons for his finding that Kimberly was also covered under the umbrella policy:

[T]he New Jersey Supreme Court in Martusus [v. Tartamosa, 150 N.J. 148 (1997),] has established the public policy I believe to be that unless there's an absolute exclusion in an umbrella policy or some statutory language, the same public policy that . . . relates to a primary automobile policy should follow to the umbrella in terms of permissive users . . . . I think that it's adequate authority for concluding that the umbrella policy must apply to provide coverage.

In October 2003, Empire filed a motion to sever the declaratory judgment action from the coverage issues. On November 26, 2003, the New Jersey Supreme Court decided Jaquez v. National Continental Insurance Co., 178 N.J. 88 (2003), reversing the Appellate Division's decision, upon which Judge Harrington had previously relied. At a conference held on January 8, 2004, the judge requested briefs to address the decision in Jaquez. On January 21, 2004, Empire filed another motion for reconsideration of the court's January 24 and March 14, 2003, orders and supplemented its pending motion to sever.

Thereafter, Judge Harrington issued a tentative written decision and order dated March 5, 2004, again denying Empire's motion for summary judgment respecting coverage. The judge, however, granted Empire's motion to sever the declaratory judgment action as unopposed.

In his March 5, 2004, decision, the judge explained his findings regarding the application of the initial permission rule:

In deciding whether insurance liability coverage should be denied as to any claims arising out of the collision involving defendant Kimberly Archer, the court was persuaded by the reasoning set forth in [Odolecki v. Hartford Accident & Indemnity Co., 55 N.J. 542 (1970)] and Jaquez,[supra, 178 N.J. 88 (2003)]. The Court found that whether the actual owner of the relevant vehicle granted initial permission for someone else to use that vehicle is the key fact in determining whether coverage . . . exists. However, where initial permission is found to have been granted, only "theft or the like" precludes coverage for injuries caused by subsequent permitees. From the facts presented in the original motion papers it appears clear that initial permission was given by Accurate Lift for Wayne Archer to use the insured vehicle. Under Odolecki, limitations placed on the use of an insured vehicle by the owner become irrelevant once the owner grants initial permission for someone else to make use of the insured vehicle. Id. at 549-550. As such, whether Kimberly Archer had permission is irrelevant. The court also [finds] that the conduct of defendant Kimberly Archer does not rise to the level of "theft or the like" because there was nothing in the record presented that suggested that Kimberly Archer intended to permanently or, even temporarily, deprive Accurate Lift or Wayne Archer of the use of the van.

. . . .

Because Kimberly Archer was married to Wayne Archer and both were members of the same household at the time of the accident, the Court finds that Kimberly Archer had a reasonable belief that she could use the van. At the very least, the fact that the couple [was] a husband and wife living together at the relevant time precludes a finding that Kimberly Archer's use of the van amounted to "theft or the like."

. . . .

The initial permission rule is not concerned with the scope of use for which permission is granted. As long as the initial [use] of the vehicle is with the consent, express or implied, of the insured any subsequent changes in character or scope of the use, such as from a passenger to a driver, do not require the additional specific consent of the insured. The breadth of the rule is designed to assure that all persons wrongfully injured have financially responsible persons to look to for damages

. . . because a liability insurance contract is for the benefit of the public as well as for the benefit of the named or additional insured.

On appeal, Empire contends that the judge misapplied the initial permission rule when he concluded that Kimberly did not need to have permission to use the van. Empire argues that its policies did not cover Kimberly because the undisputed facts establish that she did not have permission, either express or implied, and her acquisition of the van was through theft or the like. Empire also maintains that Kimberly's use of the vehicle was not covered by the umbrella policy. Metropolitan argues that Kimberly had implied permission to use the vehicle based upon her marital relationship. It also contends that because Wayne left the keys on the counter, Kimberly's use of the vehicle was not theft or the like.

Although we agree with the judge's finding that the umbrella policy did not exclude coverage for Kimberly, we conclude that the judge mistakenly found it irrelevant whether Kimberly had permission to use the van and, accordingly, reverse the order entitling Kimberly to coverage because sufficient questions of fact remain, requiring resolution at a plenary hearing. Wayne, who had express permission from Accurate to use the van, was an additional insured under provision 1b of the policy, which is consistent with the omnibus clause as applied by the initial permission rule, thus providing coverage to him. Although Wayne never gave express permission to Kimberly to use the van, we are unable to tell from the record whether Kimberly had implied permission to use the van, thus negating a finding that her use of it constituted theft or the like. Accordingly, we remand for trial on that limited issue.

We focus first on the issue of permissive use and the general applicable principles. The initial permission rule provides, "'[a]s long as the initial use of the vehicle is with the consent, express or implied, of the insured, any subsequent changes in the character or scope of the use . . . do not require the additional specific consent of the insured.'" French v. Hernandez, 184 N.J. 144, 152 (2005) (quoting Verriest v. INA Underwriters Ins. Co., 142 N.J. 401, 413 (1995) (alterations in original). Once initial permission is given to a person and the vehicle is retained by that person, any subsequent user of the vehicle, even if beyond the expected or intended scope of the initial permission, is covered unless the use constitutes theft or the like. Id. at 152.

The judge premised his decision on a determination that permission was irrelevant to his finding respecting the circumstance under which Kimberly obtained the keys. Concluding that Kimberly did not obtain the van by theft or the like, the judge, however, went on to essentially find that she had implied permission, i.e., "a reasonable belief that she could use the van" because of her marital relationship and the fact that Wayne left the keys on the counter.

A finding that a subsequent user of a vehicle has implied permission from an initial permittee necessarily negates any finding that the use constituted theft or the like. Implied permission is antithetical to theft or the like.

Generally, implied permission is "an inferential permission, in which a presumption is raised from a course of conduct or relationship between the parties in which there is mutual acquiescence or lack of objection signifying consent."

. . . .

[I]t is "actual permission circumstantially proven". . . . The essence of the concept is that from all the surrounding circumstances a fact-finder could reasonably conclude that the use by the putative permittee was not contrary to the intent or will of the alleged permitter.

[Rutgers Cas. Ins. Co. v. Collins, 158 N.J. 542, 549 (1999) (quoting State Farm Mut. Auto. Ins. Co. v. Zurich Am. Ins. Co., 62 N.J. 155, 167-68 (1973) (citations omitted)) (alterations in original).]

Over the years, we have expanded our view of the omnibus clause that defines the scope of insurance coverage required in automobile liability policies to ensure coverage to the insured and compensation to the victims of automobile accidents. French, supra, 184 N.J. at 151. These public policy considerations helped to liberalize our view of implied permission to resolve all doubt in favor of coverage.

And permission involves no specific ritual. It may be given most casually, and may readily be implied from circumstances, especially when the actors are friends and the use involved is quite small. Ordinarily an insured would want his friends to be covered. That fact remains cogent, even if the insured is unable to say categorically that the operation was with his permission or consent. Weight must be given to the relationship of the parties and to the probabilities which that relationship would normally generate. When friends are involved, a court should lean toward a finding of coverage because such a finding, more likely than not, will accord with the unspoken truth.

Another factor strongly supporting an expansive view of the omnibus clause is the public concern for the victims of automobile traffic. It is in part for their protection that a policy of automobile liability insurance must contain an omnibus clause at least as favorable for coverage as the omnibus clause specified in N.J.S.A. 39:6-46(a). The public interest is advanced when doubts are resolved in favor of those victims.

[Zurich, supra, 62 N.J. at 179-80 (Weintraub, C.J., concurring in part) (emphasis added) (citations and footnote omitted).]

Notwithstanding these policy goals favoring coverage, an insurance policy should not "be stretched beyond all reason to fit a set of facts that fall beyond the reach of the omnibus clause." French, supra, 184 N.J. at 152.

With these principles in mind, we turn our attention to the factual record upon which the motion judge concluded, as a matter of law, that Kimberly had implied permission and thus her acquisition of the van was not through theft or the like.

We stress that only a portion of Wayne's deposition testimony is provided. Although Wayne's testimony clearly establishes that he did not expressly give Kimberly permission to use the van the evening of the accident, it is somewhat contradictory and less than clear concerning implied permission. Wayne confirmed that the company's policy restricting use of the vehicle was known in the household; he also acknowledged, however, that he never gave Kimberly any specific instructions regarding non-use of the van. Wayne testified that Kimberly did not ask for the keys that evening or at any time in the past. Although Wayne indicated that he was not aware from any source that Kimberly had used the van in the past, there is no testimony that he ever forbade her from using the van. Wayne testified at one point that he never got an answer from Kimberly as to why she had driven the van that evening and denied knowing where she was going, but later stated that she was going to the Seven-Eleven. When asked why he thought she was going to the Seven-Eleven, Wayne responded "[t]hat I couldn't tell you."

We acknowledge the liberal view as to what constitutes implied permission, however, we are equally convinced from our review of the limited record provided that the facts surrounding the ultimate issue respecting the circumstances of Kimberly's acquisition of the vehicle require resolution by a trier of fact. Brill v. Guardian Life Ins. Co. of Am., 142 N.J. 520 (1995). We reach our conclusion notwithstanding Empire's contention that it presented sufficient facts to determine, as a matter of law, that Kimberly acquired the vehicle by theft or the like and Metropolitan's assertion that the proofs were sufficient for summary judgment purposes to establish that she had implied permission to use the van.

Empire contends that its umbrella liability policy is not triggered because umbrella policies are not statutorily mandated, as are primary policies, are fundamentally different from primary policies, and its policy specifically limited coverage to employees while in the course and scope of their employment. We disagree. The same public policy mandating collectable damages to innocent automobile accident victims "is advanced by applying the permissive user rule to umbrella policies." Martusus, supra, 150 N.J. at 158. The optional nature of umbrella coverage "changes neither the principles of interpreting insurance policies nor the public policy which undergirds the initial permission rule." Ibid.

Relying on our holding in Weitz v. Allstate Insurance Co., 273 N.J. Super. 548 (App. Div. 1994), Empire asserts that its policy is similar to the policy in Weitz and thus excludes employees from umbrella coverage under the circumstances of this case. In Weitz, the wife of the holder of an umbrella policy attempted to recover for personal injuries. Permissive use was not an issue in the case. The policy provided under "General Exclusions--When This Policy Does Not Apply" that "this policy will not apply . . . to personal injury to an insured." Id. at 549. On appeal, we rejected the wife's claim because the policy contained an express provision in bold print excluding coverage for personal injury to an insured. Id. at 550-51. The Supreme Court in Martusus noted that the plaintiff's claim in Weitz was

rejected, not because of the initial permission rule, but because of the policy's express exclusion. No novel legal principle was implicated.

[Martusus, supra, 150 N.J. at 157-58 (citation omitted).]

For all intents and purposes, the Court in Martusus, if not expressly, but by implication, mandated that umbrella liability policies provide permissive users with coverage.

Unless umbrella policies clearly and unambiguously state that permission to use the covered vehicle can only come from a named insured and that there is no coverage for any other user, a named insured's reasonable expectation may be otherwise.

[Id. at 159.]

We need not decide whether Empire was mandated to provide umbrella coverage to a permissive user in its umbrella policy as a matter of law. Instead, we conclude that there was a reasonable expectation on the part of Accurate that such coverage was provided by the wording used in both policies. Subsection f in the section entitled WHO IS AN "INSURED" provided coverage for Accurate employees "while performing an authorized act in the interest of you, the employer, but not for any "auto" owned by that employee or any member of his or her household." The express exclusion was limited to autos owned by the employee or members of the employee's household.

Under the section APPLICATION OF UNDERLYING INSURANCE, the umbrella policy provided that the definitions found in the underlying policy would apply "unless a provision to the contrary appears" in the umbrella policy. There is no provision in the umbrella policy expressly excluding covered persons who are defined in the underlying policy as "[a]nyone else while using with your permission" a listed vehicle. Indeed, there is nothing stated in the umbrella policy concerning permissive use.

We are governed by well-settled principles when construing the meaning of policy language. As pointed out in Christafano v. New Jersey Manufacturers Insurance Co., 361 N.J. Super. 228, 234-35 (App. Div. 2003):

New Jersey courts have consistently recognized that insurance policies are contracts of adhesion and are subject to special rules of interpretation. Policies should be construed liberally in the insured's favor to the end that coverage is afforded to the fullest extent that any fair interpretation will allow. Ambiguities in the language of an insurance policy must be resolved in favor of the insured. "We conceive a genuine ambiguity to arise where the phrasing of the policy is so confusing that the average policyholder cannot make out the boundaries of coverage." In that instance, the policy should be construed to comport with the insured's objectively reasonable expectations of coverage.

Conversely, in the absence of an ambiguity, we "should not write for the insured a better policy of insurance than the one purchased." When the terms of an insurance contract are clear, we are to enforce it as written. (citations omitted)

The lack of a specific exclusion respecting permissive use in Empire's umbrella policy, together with its incorporation of the definition in the underlying policy, leads to the inescapable conclusion that there is an objectively reasonable expectation on the part of an insured of umbrella coverage for permissive use.

 
Reversed and remanded for further proceedings consistent with this opinion. Because the motion judge essentially made factual findings in granting summary judgment, a different judge shall be assigned for trial on remand.

None of the exclusions in the section "WHO IS NOT INSURED" are relevant to this appeal.

The declaration page listed "none" as other designated persons.

Parfaite's attorney did not appear at oral argument and Kimberly Archer, who is estranged from her husband, was in default in the underlying action.

(continued)

(continued)

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A-3779-03T2

November 10, 2005