Weathers v. Royal Indemnity Co. ( 1979 )

RENDLEN, Judge.

This equitable garnishment action was brought by Henry and Bernice Weathers against Royal Indemnity Company (Royal) to collect amounts due on their unsatisfied judgments for personal injuries obtained against Elliott Davis, Jr. (Davis). Plaintiffs’ base their claims on a contract of insurance issued by defendant insuring an automobile owned by The Hertz Corporation (Hertz) and used in its rent-a-car business. The general question is whether Davis, as driver of the Hertz automobile “rented” to one Davis A. Walker, was an additional insured under the omnibus clause of the insurance policy issued by Royal on Hertz’s fleet of rental vehicles. It will be seen that the omnibus clause extended liability coverage to any person “using” the insured vehicle provided the “actual use” was “with permission of the named insured,” i. e. Hertz.

Judgment was entered for defendant in the garnishment action and plaintiffs appealed contending the trial court’s findings lacked evidentiary support and that the court misapplied the law. The Missouri Court of Appeals, St. Louis District (now the Eastern District), affirmed, but in view of an apparent conflict between its opinion and that of the Springfield District (now the Southern District), in Farm Bureau Mut. Ins. Co. v. Broadie, 558 S.W.2d 751 (Mo.App.1977), transferred the cause under Rule 83.02 that we might reexamine the existing law. We decide the case as if it were here on original appeal. Mo.Const., art. V, § 10.

The underlying negligence action flowed from certain occurrences commencing December 30, 1971. On that day Walker rented an automobile from a Hertz rent-a-car office on the Washington University campus in St. Louis where he was a student. He executed a written rental agreement tendered by Hertz at the time he obtained the car and on the afternoon of January 1, 1972, drove it to the home of his close friend, Elliott Davis, Jr. The young men, then on semester break from their respective colleges, used the car for social purposes. The next day they decided to drive to a mutual friend’s house and because Davis was more familiar with the way, Walker permitted him to drive while he, Walker, rode in the front seat. En route they collided with an automobile in which Henry Earl Weathers was a guest. Immediately after the collision Davis and Walker agreed to say that Walker had been the driver, apparently in the understanding that this was necessary for insurance coverage. However, when a police officer arrived at the scene and questioned them, Davis admitted he had been driving.

Mr. and Mrs. Weathers sued Davis and Walker for damages occasioned by the accident and at the close of plaintiffs’ case, judgment was entered in favor of Walker from which plaintiffs have appealed. Royal had provided Walker defense counsel subject to a reservation of rights. On the other hand, Royal refused Davis’ demand that it provide his defense in that suit, and plaintiffs recovered judgments (now final) against Davis in the amount of $100,000 for Henry and $10,000 for Bernice Weathers. Plaintiffs thereafter commenced this garnishment proceeding.

We consider first the applicable statutory law. Section 308.190.2(2), RSMo 1969,¹ mandates the inclusion of an omnibus clause broadening coverage in every auto liability policy issued to comply with Missouri Safety Responsibility Law and requires that it protect not only the named insured but “any other person using any such motor vehicle with the express or implied permission of such named insured.” (Emphasis ours.)² Such an omnibus clause, evidently designed to comply with the referenced statute was included in Royal’s policy here, affording coverage for the named insured (Hertz) and for “any person while using [vis-a-vis operating] the automobile . . . provided the actual use [vis-a-vis operation] of the automobile is with the permission of the [named insured.]”³ Critical to the issues under consideration, the omnibus clause speaks broadly to the use of the automobile, not narrowly to its operation. Any insurance contract providing less would be subject to challenge for non-compliance with § 303.190.

The manifestation of public policy found in the Motor Vehicle Safety Responsibility Law, particularly § 303.190.2(2), supports a liberal interpretation of automobile liability insurance omnibus clauses. In Winterton v. Van Zandt, 351 S.W.2d 696, 700-01 (Mo.1961), this Court noted,

Chapter 803 . . . requires that policies issued under § 303.170 as proof of financial responsibility shall insure ‘any other person, * * * using any such motor vehicle s * * with the express or implied permission of such named insured.’ The provisions of that act are indicative of the public policy of this state to assure financial remuneration to the extent and under the conditions therein provided for damages sustained through the negligent operation of motor vehicles upon the public highways of this state not only by the owners of such automobiles but also all persons using them with the owners’ permission, express or implied.

Additionally, Royal in recognition of the need to comply with statutes such as Missouri’s Motor Vehicle Safety Responsibility Act provided in “condition 9” of the policy of insurance issued on Hertz’s fleet of rental cars,

9. Financial Responsibility Laws — Coverages A [Bodily Injury Liability] and B [Property Injury Liability]. When this policy is certified as proof of financial responsibility for the future under the provisions of the motor vehicle financial responsibility law of any state or province, such insurance . . . shall comply with the provisions of such law which shall be applicable with respect to any such liability .

In this connection the Court of Appeals has declared, “Omnibus coverage provisions are intended to extend, not restrict, coverage afforded and such intention is salutary.” Hauser v. Hill, 510 S.W.2d 765, 768 (Mo. App.1974). Such extension is accomplished by enlarging the number and variety of insured classes. Missouri law favors a liberal construction of auto liability insurance policies and as stated in Giokaris v. Kincaid, 331 S.W.2d 633, 639 (Mo.1960), quoting Varble v. Stanley, 306 S.W.2d 662, 665 (Mo.App.1957), “An insurance policy, being a contract designated to furnish protection, will, if reasonably possible, be construed so as to accomplish that object and not to defeat it.” See also Meyer Jewelry Co. v. General Ins. Co. of America, 422 S.W.2d 617, 623 (Mo. 1968), wherein the court stated, “We follow a construction favorable to the insured wherever the language of a policy is susceptible of two meanings, one favorable to the insured, the other to the insurer.” This principle of construction was more fully discussed in Brugioni v. Maryland Casualty Co., 382 S.W.2d 707, 710-11 (Mo.1964) as follows: “[A]n insurance policy being a contract designed to furnish protection will, if reasonably possible, be interpreted so as to accomplish that object and not to defeat it, and, if terms of the contract are susceptible of two possible interpretations and there is room for construction, the provisions limiting or cutting down on the coverage of the policy, or avoiding liability therefor, will be construed most strongly against the insurer.” In Sibothan v. Neubert, 168 S.W.2d 981, 984 (Mo.App.1943), the Court of Appeals, dealing with an automobile liability omnibus clause stated, “It is of course true that the ‘additional insured’ clause was written in the policy for the primary purpose of extending not limiting liability.”

Mindful then that the omnibus clause meets the statutory mandate by extending coverage beyond the named insured (and resident spouse) to permittees using the motor vehicle with the insured’s express or implied consent, we examine the use here involved and determine if it was permitted by the rental agreement and thus protected by Royal’s policy.

It cannot be seriously questioned that Walker’s rental of the car was for a broad, almost unfettered use. The due date for return of the car was left blank in the rental agreement, indicating an unlimited term,⁴ with rentals based on a daily charge for the days the car was retained. There were no mileage restrictions and the first two hundred miles were free though a charge of eight cents per mile was made for travel thereafter. No limitations appear as to where the car could be driven except in Paragraph 8, which stated that proof of coverage and vehicle ownership were required before entering Canada and “coverage is void in Mexico.” This is the rental agreement’s only reference to an act, the commission of which would void liability insurance. Paragraph 8 further provides that because “coverage is void in Mexico,” the “[c]ustomer must obtain Lessor’s written authorization and purchase special insurance before entering Mexico.” ⁵ The ve-hide could be used for any lawful purpose of the customer limited by the provisions of Paragraph 6 that it should not be “used” (a) to carry persons or property for hire, (b) to propel or tow other vehicles or objects, or (c) for racing, tests or contests.⁶ Nothing in the testimony, briefs or oral argument suggests these limitations on use were violated.

On the other hand, Paragraph 7 sets forth restrictions as to the “operation” or driving of the vehicle.

7. Vehicle shall NOT be operated by any person except Customer and the following Authorized Operators, each of whom must be duly qualified and licensed to drive and must have received Customer’s advance permission:

(a) persons of full age (21 years) who are members of the immediate family of Customer and permanently residing in Customer’s household;

(b) the employer, partner or an executive officer of Customer;

(c)a regular employee of Customer.

Davis was operating the car with the permission of his friend Walker, the customer, but was not a member of the class of operators specified in subparagraphs (a), (b) or (c) above.

Recent cases⁷ have distinguished between using or actual use⁸ and operation of a vehicle. Use is said to involve its employment for some purpose or object of the user. Operation of the vehicle, on the other hand, is said to involve the driver’s direction and control of its mechanism for the purpose of propelling it as a vehicle. As noted in Allstate, 486 S.W.2d at 43, “Although one who operates an automobile obviously uses it, one can use an automobile without operating it.” In this context it is apparent that Walker, the customer, was using but not operating the vehicle, and Davis, at the wheel by permission from Walker, was both operating and using the vehicle at the time of the accident. In this case, presenting the question whether Davis (not Walker) is covered by the omnibus clause, the use by Walker of the vehicle is not the compelling circumstance. Our concern is whether the use or actual use of the vehicle by Davis was with the permission of Hertz.

As noted above, there can be no serious argument that the use to which the rented automobile was being put was a purpose contemplated by the parties when executing the rental agreement and thus under the terms of the omnibus clause it must be said that the named insured permitted the actual use here involved. The final consideration is whether the provision of Paragraph 7 of the rental agreement, directing that only members of certain limited classes (not including Davis) might operate the car, defeats coverage. For reasons hereinafter discussed, we believe it does not.⁹ The non-permitted act in Paragraph 7 relates to operation of the automobile not its use. The precise question presented here, had not been previously decided in reported Missouri cases until Farm Bureau Mut. Ins. Co. v. Broadie, supra, decided in 1977 by the Court of Appeals. The Court in Broadie identified the focal issue as whether the use of the vehicle, under an omnibus clause like that sub judice, extending coverage beyond the named insured to “any person . legally responsible for the use of the automobile, provided the actual use is with permission of the named insured,” 558 S.W.2d at 758, protected a driver under controlling facts, essentially the same as ours. There a named insured permitted the use of his pickup truck for social purposes by a young man named Kim (first permittee), but expressly instructed Kim not to let his friend Duane drive. The two young men proceeded in the pickup on the agreed purpose of the evening and there, as here, the pickup truck was put to a use permitted at the time of the original bailment. During the evening Kim asked Duane to drive and after he took the wheel an accident occurred. The Springfield Court considered whether the named insured’s (owner’s) admonition that Duane was not to drive frustrated coverage. Deciding it did not, the court states, 558 S.W.2d at 755,

The act forbidden here related to the operation of the pickup, not to the use which might be made of it. It is our considered opinion that because the use had been permitted, it is immaterial how the vehicle was operated. [T]he insured having given his permission for a particular use, the appellant will not be heard to complain that the operation of the vehicle in performance of the permitted use was conducted in a way forbidden by the named insured.

Authority for this position is found in Maryland Indemnity Ins. Co. v. Kornke, 21 Md.App. 178, 319 A.2d 603 (1974), where the court considered an omnibus clause identical to that before us and held that it afforded coverage to the “second permittee” under controlling facts substantially the same as those at bar. There the father, the named insured, gave his eighteen year old son broad permission to use his car, but added explicit direction not to allow anyone else to drive. Notwithstanding those instructions the son, as first permittee, allowed a friend to drive the car and while the second permittee was driving during a trip planned by the parties an accident occurred. As stated by the Maryland court, 319 A.2d at 606-07,

The question for decision, therefore, is whether in these circumstances the use of the car continued, until the time of the accident, with the permission of Kronke, Sr. [the named insured] and the effect of the express prohibition, repeatedly communicated by father to son, against allowing anyone else to drive.

Noting that the original permittee, riding in the car, was still the custodian of the instrumentality confided to his keeping, and that the second permittee was subject to his immediate direction and control, the court concluded, id. at 611:

in determining whether the operation is within the permission required by the omnibus clause ‘one must examine the total facts,’ and the facts of paramount significance respecting a clause for permitted use (as against permitted operation) do not pertain to the identity of the driver but to whether at the time of the accident the operation of the car was for a purpose germane to the permission granted, whether it was for the convenience of the named insured or the first permittee, and whether the latter was present in the car at the time of the accident.

The court also noted that this construction of permitted use under an omnibus clause is in accord with the general view of a number of cases deciding the issue of permitted use and with that stated in 7 Am.Jur.2d Automobile Insurance § 117 (1963):

The ‘general rule’ that a permittee may not allow a third party to ‘use’ the named insured’s car has generally been held not to preclude recovery under the omnibus clause where (1) the original permittee is riding in the car with the second permit-tee at the time of the accident, or (2) the second permittee, in using the vehicle, is serving some purpose of the original per-mittee. The courts generally reason that under such circumstances the second per-mittee is ‘operating’ the car for the ‘use’ of the first permittee and that such ‘use’ is within the coverage of the omnibus clause. While some courts apparently would limit this qualification of the general rule to situations where the named insured has not specifically forbidden driving by a third person, it is more generally held that operation by a third person under such circumstances falls within the protection of the omnibus clause even where such operation is specifically forbidden by the named insured.

319 A.2d at 611-12 (emphasis in original). The court further observed that because the operation of the car by the second permit-tee was for a purpose germane to the permission by father to son it was, at the very least, a convenience for the first permittee and concluded that the violation of the father’s prohibition as to operation did not preclude extension of omnibus coverage to the second permittee.

The Georgia Supreme Court in Strickland v. Georgia Casualty & Surety Co., 224 Ga. 487, 162 S.E.2d 421 (1968), held that an “actual use” omnibus clause identical to that in the case at bar extended coverage to a second permittee if such permittee had permission (express or implied) of the named insured to use the vehicle for the general purpose to be served by the vehicle under the bailment and the clause did not require permission as to operation of the automobile. There the named insured had forbidden the second permittee to drive the vehicle and the first permittee, who was present in the ear and had consented to the second permittee taking the wheel, knew of this prohibition. The court examined and rejected insurer’s argument that the policy required permission of the named insured to drive as well as to use the vehicle for the purpose of the bailment. In so doing the court stated, 162 S.E.2d at 424,

The policy, among other things, insures against obligations arising from the negligent or unlawful operation of the described vehicle. Under appellee’s contention if the named insured permitted the use of the vehicle and at the same time prohibited its negligent or unlawful operation, it would defeat the very purpose of the policy. Therefore, the ‘actual use’ of the vehicle within the meaning of the policy cannot reasonably relate to the particular manner of its operation. At most it could relate only to whether or not permission to operate the vehicle had been given. And even this would have no application to the first permittee who had been given permission to use the vehicle for a particular purpose since such authorization necessarily implies permission to operate the vehicle. Furthermore, the policy provides: ‘The purposes for which the automobile is to be used are ‘business and pleasure.’ This indicates to us that the policy is concerned with the purpose to be served by the vehicle and not its operation. If the policy intended that ‘actual use’ included the operation of the vehicle, it could have stated so plainly.

In the case before us the car was being used by Walker and Davis in the purpose for which it had been rented. Walker did not by the mere act of turning the wheel over to his companion convert the automobile to a different use.

Our holding in this case is in accord with cases collected in Annotation, 4 ALR3d 10, § 12(b) (1965). Respondent urges a contrary view and refers to cases cited in § 12(a) of the above Annotation, arguing that the use of the car by Davis and his act of driving constituted a violation of the permitted use thrusting it beyond the scope of the omnibus protection. In support of its argument respondent points to the language of Paragraph 8 of the rental agreement wherein it is stated, “[permission to use Vehicle is expressly limited by Lessor as provided in paragraph 6 and 7 hereof.” This argument is not persuasive for several reasons. First, paragraph 6 speaks only to limitations of use not here involved. As discussed above, it is clear that Davis and Walker were using the vehicle within the purposes intended by the rental agreement and not within prohibited uses set forth in subparagraphs 6(a), (b) and (c). In addition, Paragraph 7 relates only to the “operation” of the vehicle, and as previously discussed the use of the car by Davis was within the express terms and purpose of the omnibus clause. His use continued to be a permitted use protected by the policy so long as the first permittee and customer under the rental agreement was riding in the car with him and enjoying the benefits of its use within the general purpose for which the car was originally rented.

In our review of this equitable action under Rule 73.01, we conclude the trial court, in reaching its decision denying coverage, erroneously applied the law. Accordingly, the judgment is reversed.

MORGAN, C. J., BARDGETT, J., and WELBORN, Special Judge, concur. DONNELLY, J., dissents in separate dissenting opinion filed. SEILER, J., and FINCH, Senior Judge, dissent and concur in separate dissenting opinion of Donnelly, J. SIMEONE and WELLIVER, JJ., not participating because not members of the Court when cause was submitted.

1 . All statutory references are to RSMo 1969, unless otherwise indicated.

2 . Section 303.190.2(2) provides: “Such owner’s policy of liability insurance ... (2) Shall insure the person named therein and any other person, as insured, using any such motor vehicle or motor vehicles with the express or implied permission of such named insured, against loss from the liability imposed by law for damages arising out of the ownership, maintenance or use of such motor vehicle or motor vehicles within the United States of America or the Dominion of Canada, subject to limits, exclusive of interest and costs, with respect to each such motor vehicle, as follows: ten thousand dollars because of bodily injury to or death of one person in any one accident and, subject to said limit for one person, twenty thousand dollars because of bodily injury to or death of two or more persons in any one accident, and two thousand dollars because of injury to or destruction of property of others in any one accident.” (Emphasis ours.)

3 .The omnibus clause defining the term “insured” states in part: “(a) With respect to the insurance for bodily injury liability and for property damage liability the unqualified word ‘insured’ includes the named insured and, if the named insured is an individual, his spouse if a resident of the same household, and also includes any person while using the automobile and any person or organization legally responsible for the use thereof, provided the actual use of the automobile is by the named insured or such spouse or with the permission of either.” (Emphasis ours.)

4 . At another place in the rental agreement it is stated the rates “do not include gasoline” and in an adjacent rectangle these handwritten words and figures appear, “4 days $35.” This may or may not indicate a limitation on the duration of the agreement. Notwithstanding these patent ambiguities if the term of the contract was only four days, the claim arose within that period.

5 . While other acts or omissions violative of the agreement would permit the Lessor (Hertz) to repossess the automobile, it is only in connection with driving into Mexico that coverage is expressly voided. The rental agreement, paragraph 2, states inter alia that “Lessor reserves the right to repossess Vehicle at any time without demand at Customer’s expense if Vehicle is used in violation of this Agreement.” From this it may reasonably be argued that while Walker’s having permitted Davis to drive the vehicle was violative of the rental agreement’s paragraph 7, thereby triggering Hertz’s right to repossess the vehicle under paragraph 2, if Hertz had intended such violation would void coverage, it could have expressly so stated but it did not. Though we do not regard this argument determinative, it supports the conclusion we hereinafter reach that by a liberal construction of the policy’s omnibus clause favoring extension of coverage, it may not be said Davis’ use of the vehicle was a non-permitted use under the language of the omnibus clause and rental agreement.

6 . The text of Paragraph 6 is as follows:

6. Vehicle shall NOT be used:

(a) to carry persons or property for hire;

(b) to propel or tow any vehicle, trailer or other object;

(c) in any race, test or contest.

If Vehicle is obtained from Lessor by fraud or misrepresentation or is obtained or used in furtherance of an illegal purpose, all use of Vehicle is WITHOUT LESSOR’S PERMISSION. (Emphasis added.)

7 . Farm Bureau Mut. Ins. Co. v. Broadie, 558 S.W.2d 751 (Mo.App.1977), and Cameron Mut. Ins. Co. v. Bower, 558 S.W.2d 226 (Mo.App. 1977).

8 . Allstate Ins. Co. v. Hartford Accident & Indem. Co., 486 S.W.2d 38, 43-44 n. 5 (Mo.App. 1972), provides a pertinent discussion of the terms “use” and “actual use” in omnibus clauses: “Some courts have thought that any attempt ‘to place different meanings on the two terms [‘use’ and ‘actual use’] creates a distinction without a difference . . . .’ Metcalf v.

Hartford Accident & Indemnity Co., . [176 Neb. 468] 126 N.W.2d [471] at 474(1). Accord: Gronquist v. Transit Casualty Co., . . . [105 N.J.Super. 363] 252 A.2d at [232] 236. The more logical view supported by the weight of authority would seem to be that the words ‘actual use’ are employed to make it clear that the use made of the vehicle at the time of accident must have been one actually contemplated by the parties at the time of the original bailment. Employers Mutual Casualty Co. v. Poe, Miss., 191 So.2d 541, 545(1); Melvin v. American Automobile Ins. Co., 232 Md. 476, 194 A.2d 269, 271; Gulla v. Reynolds, 151 Ohio St. 147, 85 N.E.2d 116, 120; 45 C.J.S. Insurance § 829, 1. c. 902, and cases collated in note 50. But since neither ‘use’ nor ‘actual use’ is synonymous with, or has the limited and restricted meaning of, ‘operate’ or ‘actual operation,’ the distinction or difference in meaning, if any, between ‘use’ and ‘actual use’ is of no importance here.” So too in the case at bar the distinction (if any) is immaterial.

9 . Appellant also urges reversal for reason that the policy of insurance issued by Royal for the Hertz Corporation shows on its face that the insured’s occupation as “DRIVERLESS CAR RENTAL” and because neither Hertz as the named insured nor its employees will be the auto’s operator during the time of its principal use as a rental vehicle, that the customer occupies the usual position of the named insured during the period of bailment under the rental agreement and should be regarded as standing in the shoes of the named insured. Thus it is only the permission of the customer that should be required to bring a permittee such as Davis within the scope of the omnibus clause. While this argument might have merit, we do not decide the point in reaching our decision herein.