Pulleyn v. Cavalier Ins. Corp.

SPAETH, President Judge:

This appeal is from an order granting judgment on the pleadings in a declaratory judgment action. See 42 Pa.C.S. § 7531 et seq. The issue is whether an insurance company is obliged to defend, under a general liability insurance policy, an action in trespass in which it is alleged that the insured was negligent in entrusting a motor vehicle to an employee. The trial court granted judgment on the pleadings in favor of the insurance company, holding that the company is not obliged to defend because of an exclusion in the policy. We affirm.

In reviewing an order granting judgment on the pleadings, we accept as true the opposing party’s well-pleaded averments of fact and consider only those facts that the opposing party specifically admits. Bata v. Central-Penn National Bank of Philadelphia, 423 Pa. 373, 224 A.2d 174 (1966), cert. denied 386 U.S. 1007, 87 S.Ct. 1348, 18 L.Ed.2d 433 (1967). We then ask whether, as thus defined, the case is clear and free of doubt, for only in such a case should judgment on the pleadings be entered. Id.

Applying the foregoing principles, we may summarize the facts as follows. On July 30, 1979, Steven James Kirk was driving an automobile owned by his employers, appellees Richard Pulleyn and Rodger Sadlock, who do business under the name of Butler Custom Builders, and whom we shall refer to collectively as “Custom Builders”. He was making a delivery, in the course of his employment, when he was involved in an accident with an oncoming automobile, driven by appellant’s wife, with appellant’s three children as passengers. Appellant’s wife and one of the children were killed, and the other children were injured. Appellant sued Custom Builders, alleging that Custom Builders had been negligent “in assigning Steven James Kirk the task of delivering a certain piece of equipment, the attempted performance of which task resulted in the death of [appellant’s] decedent in that [Custom Builders] had actual knowledge of the defendant Steven James Kirk’s physical illness or incapacity before assigning him the said task.” Amended Complaint in Trespass ¶ 12. Custom Builders then filed the present action for declaratory judgment, seeking, among other relief, a declaration that an insurance policy issued to them by appellee Westmoreland Casualty Corporation provided coverage against the claims raised in appellant’s action in trespass. Appellant was granted leave to intervene in the declaratory judgment action. In response to motions for judgment on the pleadings filed by Westmoreland Casualty, Custom Builders, and appellant, the trial court granted Westmoreland Casualty’s motion and denied the others. This appeal followed.

The question presented by the appeal is a question of first impression for the appellate courts of Pennsylvania: Whether an insurance company may be required to defend an action brought on the theory of negligent entrustment¹ when the liability insurance policy contains an exclusion providing that:

This insurance does not apply:

(b) to bodily injury or property damage arising out of the ownership, maintenance, operation, use, loading or unloading of:

(2) any other automobile or aircraft operated by any person in the course of his employment by any insured.

When a provision in an insurance policy excludes coverage, it is to be construed against the insurer and in favor of the insured. Standard Venetian Blind Co. v. American Empire Insurance Co., 503 Pa. 300, 469 A.2d 563 (1983). Appellant argues that in construing the exclusion here in question, we should find coverage. In support of this argument, appellant relies heavily on Eichelberger v. Warner, 290 Pa.Super. 269, 434 A.2d 747 (1981), which appellant argues is “directly controlling].” Brief for Appellant at 12. It is true that in Eichelberger we construed the words “arising out of”, as they were used in an exclusion substantially the same as the exclusion here in question. In undertaking that task, however, we were not required to consider an action brought on the theory of negligent entrustment, and examination of Eichelberger will show that it is inapposite to our decision here.

In Eichelberger we stated the facts as follows:

On November 3, 1974, Dava Rice was driving her automobile in which her sister, Linda Junk, was a passenger. The two women were traveling south on Route 34 near Carlisle, Pennsylvania, when their vehicle stopped for an unknown reason, although Linda believed that it had run out of gas. Dava parked the car as far to the right side of the road as it would go without hitting the guardrail. However, the berm was not wide enough to accommodate the entire car leaving it partly on the highway. The two women then walked to a gas station and returned a short time later with a can of gas. Two “good Samaritans”, Brian Magaro and Herby Eichelberger, stopped to see if they could be of assistance. Immediately prior to the accident, all four persons were generally assembled at the rear of the Rice vehicle. While the two men were doing this, Dava Rice was standing slightly on the highway behind her vehicle with her back to oncoming southbound traffic. At that moment a car driven by Vivian Lee Warner was traveling in the southbound lane and was approaching the Rice car. According to Warner’s testimony, when she was approximately two car lengths from the Rice vehicle, and about to pass the disabled Rice vehicle, Dava Rice suddenly stepped backwards and to her left, placing her in front of the right front headlight of the oncoming Warner vehicle. Warner struck Rice, who was a few feet from her car, and lost control of her vehicle running into the rear of the Rice automobile. Dava Rice was killed, Brian Magaro sustained serious injuries, Herby Eichelberger was also injured although less seriously and Linda Junk escaped unharmed.

290 Pa.Super. at 271-72, 434 A.2d at 748-49.

On appeal the issues were whether Dava Rice’s automobile insurance and homeowners policy both provided coverage for the injuries sustained by the others. As we have indicated, the homeowners policy contained an exclusion substantially the same as the exclusion here. We found coverage, construing the phrase “arising out pf the use of an automobile” as “excluding] only those injuries which are proximately caused by the automobile.” 290 Pa.Super. at 278, 434 A.2d at 752.

It is readily apparent that Eichelberger was a very different case than this one. When the accident occurred in Eichelberger, Dava Rice, the insured, was standing outside of her stopped automobile with the others who were trying to assist her. Her policy excluded only injuries sustained when operating “any motor vehicle owned or operated by or rented or loaned to any insured" (emphasis added), and when she was injured, she was not operating any motor vehicle. The argument made to us turned on the issue of causation: It could not be maintained that the injuries were proximately caused by Dava Rice’s ownership or operation of her automobile, but they were “simply causally connected with the auto”, 290 Pa.Super. at 278, 434 A.2d at 752, for “had not the Rice vehicle run out of fuel, Dava Rice would not have been standing in the highway waiting while Herby Eichelberger poured gasoline into her car”, id., 290 Pa.Superior Ct. at 274, 434 A.2d at 750. The issue we had to decide, therefore, had nothing to do with liability for negligent entrustment; rather, it was whether the exclusion extended to both proximate and simple (or “but for”) causation, or only to proximate causation. Here the automobile was being operated by Kirk, and the accident happened while both vehicles were in motion. No issue of proximate or simple causation is presented.

Proceeding then from Eichelberger to those cases that are in point, we find that the courts are divided on whether an insurance policy provision such as the provision here includes or excludes coverage for negligent entrustment. Those courts finding coverage have distinguished the act of negligently entrusting a motor vehicle from the ownership, operation, maintenance or use of the vehicle. As one court has reasoned:

The gist of the action, the gravamen, if you will, is not the use of the motor vehicle, which arguably establishes a basis for these exclusions of the policy to become operative, but rather the gist or the gravamen of the tort is the failure to supervise what amounts to a dangerous instrumentality; and that is a ten year old child with a self-propelled vehicle or projectile such as this minibike.

Douglass v. Hartford Insurance Co., 602 F.2d 934, 935-36 (10th Cir.1979) (quoting trial court opinion).

See also Upland Mutual Insurance, Inc. v. Noel, 214 Kan. 145, 519 P.2d 737 (1974); Republic Vanguard Insurance Co. v. Buehl, 295 Minn. 327, 204 N.W.2d 426 (1973); Lalomia v. Bankers & Shippers Insurance Co., 35 A.D.2d 114, 312 N.Y.S.2d 1018 (1970), aff'd 31 N.Y.2d 830, 339 N.Y.S.2d 680, 291 N.E.2d 724 (1972).

Increasingly, however, the courts have declined to find coverage. Some rely on what is described as the “dovetail” approach, under which insurance coverage for automobile accidents is to be found, not under a general liability policy of the kind in question here, but rather under the automobile insurance policy. Thus the Delaware Supreme Court has said:

[Hjomeowner’s insurance is intended to cover risks attendant upon home and related activities, while automobile liability insurance is designed to provide basic coverage for all risks inherent in the use and ownership of motor vehicles. This “dovetail” approach is premised upon the principle that the insured must look to the basic protection provided by the specific insuring agreement designed to cope with the risk inherent in automobile operation, with homeowner’s protection available only to cover all other general or unspecified risks.

Insurance Company of North America v. Waterhouse, 424 A.2d 675, 680 (Del.1980).

See also Bartels v. Romano, 171 N.J.Super. 23, 407 A.2d 1248 (1979). We are not persuaded by this reasoning, for different policies may or may not be mutually exclusive; each policy must be examined on its own terms. For this proposition, Eichelberger is on point. See 290 Pa.Super. at 276, 434 A.2d at 750-51 (“a homeowners’ policy and an automobile policy are not necessarily mutually exclusive,” citing and quoting 7A Appelman, Insurance Law and Practice § 4500 (1979)).

Other courts declining to find coverage have reasoned that “although the act of negligently entrusting a motor vehicle is an essential (if not the primary) element of the tort, liability giving rise to the tort is not actually triggered until the motor vehicle is used in a negligent manner resulting in injury.” Michigan Mutual Insurance Co. v. Sunstrum, 111 Mich.App. 98, 104, 315 N.W.2d 154, 157 (1981). See also Insurance Company Of North America v. Waterhouse, supra; Barnstable County Mutual Fire Insurance Co. v. Lally, 374 Mass. 602, 373 N.E.2d 966 (1978); Hanover Insurance Co. v. Grondin, 119 N.H. 394, 402 A.2d 174 (1979); Williamson v. Continental Casualty Co., 201 N.J.Super. 95, 492 A.2d 1028 (1985). As the Alabama Supreme Court has said:

It is the concurrence of these dual elements — negligent entrustment by the owner or custodian of the instrumentality plus its negligent use by the entrustee — that is missing in the rationale of those cases upholding coverage. Taken literally, this line of reasoning — that negligent entrustment of the vehicle, and not its use, is the basis of insured’s alleged liability — the injured party could recover absent any showing that the incompetent to whom the vehicle is entrusted caused the injury by his negligent use of the vehicle. As we have observed, this does not comport with the elements that make up this tort concept of negligent entrustment.

Cooter v. State Farm Fire & Casualty Co., 344 So.2d 496, 499 (1977).

We are persuaded by this reasoning. Contrary to appellant’s assertion, it is not the negligent entrustment of the automobile to Kirk but Kirk’s use of it that is the basis of the insured’s — Custom Builders’ — alleged liability, and as to that use, the insurance policy excludes coverage.

Affirmed.

DEL SOLE, J., dissents. BECK, J., joins in this dissenting opinion by DEL SOLE, J.

1 . The Restatement (Second) of Torts defines negligent entrustment as follows:

It is negligence to permit a third person to use a thing or to engage in an activity which is under the control of the actor, if the actor knows or should know that such person intends or is likely to use the thing or to conduct himself in the activity in such a manner as to create an unreasonable risk of harm to others.

Restatement (Second) of Torts § 308 (1965).

See also id. § 317 (duty of master to control conduct of servant); § 316 (duty of parent to control conduct of child).