Implied Permission or Reasonable Belief?
By: Donna Russo, Esq.
It is well known that courts stretch to find coverage in very questionable situations by applying the rationale that the innocent insured should not be penalized if there is a chance that the policy language is ambiguous. In an unusual decision, the N.J. Supreme Court reversed an Appellate Court's ruling that found coverage for a death by auto caused by an unlicensed, unauthorized driver. The case is Rutgers Casualty Insurance Company v. Joseph E. Collins,(A-51/52-98, decided 6/18/99)__N.J.__(1999).
Joseph Collins, age 29, and his wife, Rhonda, needed transportation to a concert. Joseph's driver's license had been revoked 10 years earlier; Rhonda had a valid driver's license. Since the brakes of their car were malfunctioning, they decided to go to the home of Joseph's mother and step-father (the Spataros) to borrow their car. Joseph and Rhonda knew that the Spataros were out of town. Joseph had a key to the Spataros' home because he had been living there for the past two weeks while trying to deal with his alcoholism.
Joseph and Rhonda entered the Spataros' home and found the keys to their vehicle. Rhonda drove the Spataros' vehicle to a cousin's home while Joseph drove their car. They left their car at the cousin's home and Joseph drove the Spataros' vehicle to Rhonda's brother's home. They took other transportation to the concert. After the concert, Joseph drove the Spataros' vehicle because Rhonda was too tired. During the ride home, Joseph had a one car collision and Rhonda, who was asleep in the back seat, was killed.
The Spataros' vehicle was insured by Rutgers Casualty Insurance. Rhonda's estate filed suit for compensation. Rutgers and the estate each filed a declaratory judgment action seeking a determination of coverage available under the Rutgers' policy.
The liability portion of the policy provided:
A .We will pay damages for "bodily injury" or "property damage" for which any "insured" becomes legally responsible because of an auto accident. . . . .
B ."Insured" as used in this Part means:
1. You or any "family member" for the ownership, maintenance or use of any auto...
2. Any person using "your covered auto."
A provision of the policy, A.8, excludes coverage for any person "[u]sing a vehicle without the reasonable belief that that person is entitled to do so." The omnibus clause of the policy provided that "every owner or registered owner of a motor vehicle registered or principally garaged in the State shall maintain motor vehicle liability insurance coverage...insuring against loss resulting from liability imposed by law for bodily injury, death and property damage sustained by any person arising out of the ownership, maintenance, operation or use of a motor vehicle..."
The trial court, entered judgment in favor of Rutgers, finding that Joseph had no reasonable belief that he was entitled to use the car either on his own or by giving the car to his wife who later allowed him to drive. A divided panel of the Appellate Division found that the trial court erred when it failed to consider if Rhonda had a reasonable belief that she was entitled to drive the car to the cousin's home. The Appellate Division remanded the case to the trial court for fact finding on this issue. The Appellate Division ruled that if Rhonda had a reasonable belief that she had permission to use the Spataros' vehicle, then Joseph would be covered under the initial permission assuming he was a family member. The court further found that the exclusion in A.8 was ambiguous and did not apply to family members. The Appellate Division rationalized that an insured can have a reasonable expectation that family members will be protected when operating a family vehicle even in the absence of permission because such an expectation will protect a child from beginning his adult life as a judgment debtor and keep the disobedience as a family issue.
The Supreme Court, affirmed in part and reversed in part, the decision of the Appellate Division. The Supreme Court, acknowledging that it was employing "somewhat different reasoning", ruled that Rhonda's entitlement to coverage arises from the omnibus clause of the policy and that the issue is whether Rhonda had express or implied permission to use the Spataros' vehicle. The Court defined implied permission as "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." If Rhonda is found to have had permission to drive the Spataros' vehicle then she could give permission to Joseph to drive the Spataros' vehicle and Rutgers must provide coverage. If on the other hand, Rhonda is found not to have permission then the issue becomes was Joseph a family member because he had been living temporarily with the Spataros before the accident and if so, did he have a "reasonable belief" that he had permission to operate the Spataros' vehicle. The Supreme Court held that the exclusion in A.8 applies to family members and ruled that if there is a finding that Rhonda did not have permission to drive the Spataros' vehicle then, no coverage is afforded under the Rutger's policy because the trial court had correctly decided that a person in Joseph's position, given his age and that his license had been suspended for 10 years, could not reasonably believe that the Spataros would have given him permission to drive the vehicle.
Comments:
On first reading, one may feel that the Court has gone too far in the other direction by ruling that exclusion A.8 applies to family members. The Appellate Division reasoned that exclusion A.8 did not apply to family members because it was ambiguous and could be interpreted as creating two classes of insureds (residents and family members residing in the household and other persons using the car) and that exclusion A.8 applies to the second class 'any persons'. According to the Appellate Division's rationale, a teenage driver who has been prohibited from using his parents' car would be covered if he takes the car for a ride and has an accident because exclusion A.8 should not apply to family members. On first reading, the Supreme Court's ruling seems to bar coverage to this teenage driver. However, coverage is not necessarily barred. The issue would be whether the teenage driver had a reasonable belief that he was entitled to use the car. Reasonable belief is a subjective standard and is much broader than the permissive standard. The teenager could argue that given any number of fact situations, he had a reasonable belief that the parents would have made an exception and allowed him to drive. A credibility issue arises and there could be a finding of coverage depending on the teenager's position as to reasonable belief under the circumstances.