NORRIS et al. v. PACIFIC INDEMNITY CO., et al.
The question for decision is whether the owner can qualify the authority which he vests in a general bailee to whom he has entrusted the general use of a motor car and thereby prevent loss by his insurer when a third person is injured by such car while being driven by the permittee of the general bailee. Does the term ‘permission’ used in the omnibus clause of an automobile insurance policy have the same meaning as is given to it in interpreting section 402 of the Vehicle Code?1
There is no issue of fact. In April, 1949, one E. A. Parkford purchased an automobile and when it was delivered to his home he gave the keys to his son Geoffrey. It is referred to herein as Geoffrey's car as he had the general use thereof. Although his mother had used it infrequently and his sister had driven it once or twice a month, the ladies and the father had their several cars in habitual use. No restriction as to Geoffrey's driving was prescribed except, in the language of Geoffrey, that he ‘should never let anyone else drive the car.’ The trial court found that E. A. Parkford permitted Geoffrey to use the automobile as Geoffrey wished to use it when available but ‘at the time the said general use of said automobile was given to Geoffrey, the said E. A. Parkford specifically limited such use by Geoffrey to Geoffrey himself and specifically prohibited the said Geoffrey from lending or permitting the use of said automobile to or by any other person save and except the daughter, wife and chauffeur of said E. A. Parkford; that said prohibition and restriction upon the lending of said automobile was understood by the said Geoffrey and said prohibition was not violated by said Geoffrey until April 3, 1950, when Geoffrey turned over the keys of said automobile and loaned the use thereof to Irvin Victor Norris who then and there had knowledge that the use of said automobile by himself was in violation of said prohibition against said lending imposed by E. A. Parkford and without the latter's consent; that the total use of the automobile by Norris while he had it was solely for his purpose, benefit and advantage.’
During the two days and nights preceding the loan of the car to Norris, the latter, Geoffrey and their two companions had been camping on the beach near Laguna. On the very day on which Norris drove the automobile the four boys had driven two cars to Newport. When the day was done, Norris desired to visit a barbershop but did not have his own car. In order not to detain himself and the other two from their engagement at Laguna, Geoffrey volunteered to loan Norris the Parkford automobile and gave him the keys with the final valedictory: ‘Irv, I am not supposed to loan the car. For God's sake, be careful.’
While driving on the direct route from the point where he took possession of the vehicle to Laguna to rejoin his friends, Norris and the Parkford car suffered an accident and the Phillipsons, occupants of the machine with which he collided, suffered injuries. David Norris having signed Irvin's application for a driver's license thereby became liable for damages caused by Irvin's negligent vehicular operations. Vehicle Code, sec. 352. The instant action arose out of the Norris demand made upon the Pacific Indemnity Company, the insurance carrier of E. A. Parkford on the car driven by Irvin Norris at the time of the accident.
The Pacific Indemnity Company had issued its policy to Mr. Parkford, indemnifying him for loss incurred by the operation of Geoffrey's car. The policy contains the following omnibus clause: ‘With respect to the insurance for bodily injury liability and for property damage liability the unqualified word ‘insured’ includes the named insured 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 with his permission.' Respondent denied liability under its policy. After suit was commenced respondent filed its cross-complaint and in addition to Irvin Norris and his father, David Morgan Norris, Zurich General Accident and Liability Insurance Company Ltd. was named as a cross-defendant which had issued to David and Irvin Norris its policy of liability insurance on a vehicle presumptively owned by Mr. Norris. Both policies were in force when Irvin collided with the Phillipson car near Laguna, April 3, 1950. As indicated, the trial court denied plaintiffs' prayer and on the cross action gave judgment in favor of respondent. This was error. From a reasonable construction of section 402 of the Vehicle Code the conclusion is unavoidable that Irvin Norris had the permission of E. A. Parkford to drive the accident car.
There is a clear distinction between bailment of a motor car for general use and a bailment for a particular purpose. One necessarily implies the right of the general bailee to have the general use of the vehicle as though it were his own; the other restricts the use of the bailee to a special use, within and at a designated time and place. In the case of a special bailment if the limitations prescribed by the bailor are exceeded the latter is exempted from liability for any damage suffered by an innocent third party through the wrongful or negligent use of the car by the special bailee. Engstrom v. Auburn Automobile Sales Corporation, 11 Cal.2d 64, 72, 77 P.2d 1059. The same is not true in the case of a general bailee of an automobile. In the case of a general bailment the statute, sec. 402, supra, having been enacted in the public interest cannot be rendered nugatory by the plea of the owner of such a vehicle that he restricted the use of his conveyance to a prescribed place, or to a designated time or to the sole possession of the general bailee. This doctrine was established beyond question by the decision in Souza v. Corti, 22 Cal.2d 454, 139 P.2d 645, 147 A.L.R. 861, from which there has been no departure. The facts litigated were as follows: Joseph Gigli owned a sedan which the members of his family were permitted to use. He allowed his son Arthur to drive the car with John Corti as his companion with the admonition: ‘Don't lend the car to anyone else.’ The boys visited a tavern where they met two strange young ladies. On deciding to visit a dance hall, Arthur's girl refused to go in the Gigli sedan, because she had her own conveyance. He chose to ride with the girl in her Plymouth and delivered the keys to the sedan to John Corti. While following the Plymouth to the dance hall, the sedan driven negligently by Corti collided with Souza's car. In the action against John Corti and Joseph Gigli the latter disputed his liability on the ground that he had not permitted Corti to drive the sedan and permission could not be implied by reason of his having instructed Arthur not to lend it to anyone. Following a review of the authorities pertaining to the issue, Mr. Justice Shenk quoted from a New York decision as follows: ‘Only a narrow construction would permit us now to say that an owner placing a car in the care of members of his family to be used for their pleasure or for the family business would escape liability if wife or son or daughter should give over the wheel to the management of a friend. The ruling has been more liberal whenever the question has come up.’ [Grant v. Knepper, 245 N.Y. 158, 156 N.E. 650, 54 A.L.R. 845.] Justice Shenk concluded: ‘In the present case the use which was being made of the borrowed car at the time of the accident was the use which was contemplated by the owner. Any secret restrictions imposed by him on the manner of its use do not negative the controlling fact that it was being used with the owner's permission at the time of the accident. Violations of such restrictions may not be said to cause a revocation of the permission.’ Liability of the owner despite his secret instructions not to permit another to drive his car was thus established and the principle became fixed in the law.
In Herbert v. Cassinelli, 73 Cal.App.2d 277, 166 P.2d 377, the general bailee was absent at the time of the accident, as was Geoffrey Parkford when his car driven by Irvin Norris collided with the Phillipson vehicle. On the first trial of the case proof was not made that the owner had restricted the use of his car to his bailee. On the second trial, evidence was received to the effect that the owner had told the bailee that he should ‘not permit anyone else to use or drive the car.’ The holding was that a general use ‘is not converted into a special one because the permission may have been accompanied by an express admonition not to permit anyone else to drive the car. * * * It follows that the evidence on the second trial has not changed materially, essentially, or vitally and that the law of the case laid down in the first appeal still applies.’
By both quoted decisions the courts have announced a practical rule reasonably interpreting section 402. To hold that an owner may entrust his automobile to another for general use to exercise all the privileges of an owner and by such holding to give effect to alleged restrictions upon the permittee's use would be an encouragement to the practice of defrauding injured people. The statute was designed ‘to protect innocent third parties from the careless use of automobiles'. Burgess v. Cahill, 26 Cal.2d 320, 323, 158 P.2d 393, 394, 159 A.L.R. 1304. Such protection is ‘paramount to the rights of an owner who has permitted the use of his car by others even though he, personally, was not guilty of negligence.’ (Ibid.)
To see how harmful is the thesis of respondent, one needs but to contemplate the grand highways and beautiful boulevards of this state, congested with traffic by men and women of every degree of intelligence. Should all of them innocently venture upon the lanes, streets and freeways under the impression that every operator they meet is the owner or the permittee of the owner of the car he drives and wake from a hospital bed to be told that the wild car that drove them into a chasm was owned by a fine gentleman who had never consented that his son might loan the automobile to his boon companion? To insure such a tragical result the courts need do no more than uphold the judgment here on appeal.
If secret restrictions by the owner ‘do not negative the controlling fact that it was being used with the owner's permission’, Souza v. Corti, supra, in an action by an innocent party against the owner, how can it be said that such secret limitations effectively forbid recovery against the owner's insurance carrier? The word ‘permission’ as used in the statute is not chameleonized the moment it enters the omnibus clause of the insurance policy carried by the owner to save himself and family from loss for life or limb destroyed by the negligent operation of the insured vehicle. If the judgment stands, the intimate, impecunious, companion of the general bailee of a motor car may with impunity slaughter a multitude while using an insured vehicle, without any expense to the insurer. It is possible that the authors of respondent's policy could have contemplated any such result?
Moreover, when respondent made its contract of insurance with Mr. Parkford to protect the Geoffrey car, respondent knew the law to be that a general bailee has the implied permission of the bailor to loan the use of the vehicle to another—despite the secret inhibition of the owner. Such law became an implied clause in respondent's policy. Southern Pacific Milling Co. v. Billiwhack Stock Farm, Ltd., 50 Cal.App.2d 79, 83, 122 P.2d 650. An insurer must be held to have assumed all risks imposed by law with reference to its contracts. Respondent must have contemplated that the term ‘permission’ would be given the meaning announced in the judicial decisions of this state, since such decisions relative to section 402 have been concerned with the use of that word in similar settings and concerning the same subject matter—an automobile owner's liability for its operation. It is no more than reasonable to hold that when Parkford and respondent entered into their contract the insurer contemplated and the insured anticipated that if it should be determined that the vehicle owner must answer to a person injured by the operation of the car, in turn the insurance company under its policy would step into the owner's shoes and discharge the liability. If the insurer intended otherwise, it was in duty bound clearly to spell out any limitations on its coverage. Any ambiguity in the terms of a policy must be resolved against the insurer. An interpretation affording the greatest measure of protection to the assured will always be favored. Fageol Truck and Coach Company v. Pacific Indemnity Company, 18 Cal.2d 731, 747, 117 P.2d 661. If the owner's statutory liability extends to those operating with the owner's implied permission, section 402, there is no valid reason why the insurance policy should not protect all persons driving his car with his consent. ‘Permission’ within the meaning of the omnibus clause of an insurance policy has been held to mean permission ‘express or implied’. Aetna Life Insurance Company v. Chandler, 89 N.H. 95, 193 A. 233, 237. The conclusion, therefore, in unavoidable that the permission given Geoffrey to drive the automobile flowed on to his companion within the terms of the policy.
Since Irvin Norris was given implied permission to drive the Parkford car, he incurred a liability based upon such permission. Having become liable to the public for any negligent use of the vehicle he became an assured under the policy issued by respondent. Inasmuch as Irvin was covered by the policy, respondent's liability thereunder resulting from the implied permission is tested by the same standards as are applied in determining statutory liability upon the owners of motor cars used on the highways. See report of American Bar Association, Section of Insurance Law, 1941. While the state of Washington has no statute like section 402 of our Vehicle Code, the courts of that state have no construed the family car doctrine as to hold the owner liable when a member of the family entrusts the family automobile to a stranger contrary to express instructions, King v. Cann, 184 Wash. 554, 52 P.2d 900; Atkins v. Churchill, 30 Wash.2d 859, 194 P.2d 364, and in Holthe v. Iskowitz, 31 Wash.2d 533, 197 P.2d 999, 1007, it was indicated by emphatic dictum that one driving a car under such circumstances may ‘be acting with the permission of the named insured in a policy of liability insurance, if such a policy exists in favor of the owner.’
Basing its contention upon the erroneous finding that Irvin Norris was not driving the Parkford automobile with the permission of the owner, and that Irvin knew that his use of the automobile was a violation of the prohibition against Geoffrey's lending it to another, respondent asserts that appellant Irvin stands in a court of equity with unclean hands, is ‘a wrongdoer’ and ‘shows no equity as against this respondent.’ Irvin Norris committed no crime, fraud or deceit. He did not violate a promise. He did nothing that could be deemed ‘unconscientious.’ He was the clean and hilarious companion of Geoffrey Parkford when they and their companions contemplated no evil or vicious purpose. Geoffrey had the general use of the car and cheerfully allowed Irvin to drive it upon an excellent public highway. Such act necessarily served the happiness of Geoffrey or he would not have done so. If it contributed to promote the happiness of Geoffrey to lend the car to Irvin, such act was not only ‘not wrongful’ but actually served to effectuate the purpose that animated the father's indulgence of his son. Therefore, nothing occurred that would warrant the holding that any act of Irvin was such as to befoul his hands or to cause equity to withdraw its shield. The case Katz v. Karlsson, 84 Cal.App.2d 469, 191 P.2d 541, cited by respondent is not in point. The affidavit filed by that defendant was either false and so constituted a felony or it was true and thereby established that the divorce proceedings of the affiant were unconscionable and that he had shown disrespect of good morals and contempt for the administration of justice. Hence he had soiled his own hands and was properly denied relief. It requires neither a Solon nor a Solomon to see that the conduct of Irvin Norris did not in the slightest degree resemble the behavior of the litigant in the last cited decision.
Another question posed by this controversy is whether respondent as Parkford's insurer must suffer the entire loss sustained by the injured parties, or whether Zurich as Norris' insurer must answer for all or a portion thereof. The solution of such problem depends upon an interpretation of the applicable provisions of the two policies concerned.
Paragraph 182 of respondent's policy provides for apportioning or pro-rating any loss caused by its assured if the latter be covered by other ‘valid and collectible’ insurance.
Paragraph 133 of Zurich's policy provides that ‘with respect to loss arising out of the use of any non-owned automobile’ the Zurich insurance shall be ‘excess insurance over any other valid and collectible insurance available to the insured.’ Under this provision in the Zurich policy it is apparent that since the loss arose out of the use of a non-owned automobile the ‘excess clause’ became operative and thereby Zurich became liable for only the amount of any loss which exceeded the limits of coverage of any other valid and collectible insurance.
It has been determined that such excess insurance is not valid and collectible. Zurich General Accident and Liability Ins. Company v. Clamor, 7 Cir., 124 F.2d 717. Accordingly, since Norris had no other ‘valid and collectible’ insurance, Pacific's apportionment clause in its Paragraph 18 is not applicable and it must stand the loss herein to the limits of its policy. If such limits are below the total loss, Zurich must answer for the excess, within the limits of its policy.
Respondent argues that (1) the decision in Air Transport Mfg. Company v. Employers Liability Assurance Corporation, 91 Cal.App.2d 129, 204 P.2d 647, 650, compels an apportionment and pro-rating of the loss by both insurers; (2) Zurich's ‘excess clause’ does not and cannot spring into operation because it, too, is conditioned on the presence of other ‘valid and collectible’ insurance being available to its insured, and that under the Air Transport decision the Pacific policy did not meet this requirement since that decision held ‘valid and collectible’ insurance to be only that providing unconditional and not pro-rata coverage.
The Air Transport decision is not applicable to the situation at bar bar by reason of the fact that the Pacific Indemnity policy involved in that case did not contain an excess clause which was rendered operative when its assured became involved in a loss arising from a non-owned automobile. There the court was concerned with a policy containing an ‘escape’ clause by which the vehicle owner's insurer sought completely to avoid all liability whatsoever when other valid insurance was in force. The policies now before us are practically identical in form with respect to the clauses which bear upon the rights of the parties. They are Standard Form policies and seemingly complementary to each other. Both appear to have been designed to avoid arguments such as arose in the Air Transport case, and to this end they contemplate that the insurance on the car shall be primary and that on the driver excess. A pro rata contribution should be ordered only in the event that there are two or more primary carriers.
Moreover, to adopt respondent's view here would also be actually and entirely to ignore the Zurich excess clause and render it meaningless. The apportioning or prorating as urged by respondent would result if no excess clauses were present in the Zurich policy. Under respondent's construction, no excess clause would ever be effective since it is apparently universal practice for policies of insurance of all types to contain some sort of clause providing for the apportionment of loss. Indeed, policies of fire insurance must contain such a provision under Insurance Code, section 2071. See Gillies v. Michigan Millers Mutual Fire Ins. Company, 98 Cal.App.2d 743, 748, 221 P.2d 272.
The judgment is reversed with instructions to enter as prayed in the complaint and to deny relief under the cross complaint.
1. Section 402, Vehicle Code. ‘(a) Every owner of a motor vehicle is liable and responsible for the death of or injury to person or property resulting from negligence in the operation of such motor vehicle, in the business of such owner or otherwise, by any person using or operating the same with the permission, express or implied, of such owner, and the negligence of such person shall be imputed to the owner for all purposes of civil damages.’
2. ‘18. Other Insurance. If the assured has other insurance against a loss covered by this policy the company shall not be liable under this policy for a greater proportion of such loss than the applicable limit of liability stated in the declaration bears to the total applicable limit of liability of all valid and collectible insurance against such loss. * * *’
3. ‘13. Other Insurance. If the insured has other insurance against a loss covered by this policy the company shall not be liable under this policy for a greater propertion of such loss than the applicable limit of liability stated in the declaration bears to the total applicable limit of liability of all valid and collectible insurance against such loss; provided, however, the insurance under this policy with respect to loss arising out of the use of any non-owned automobile shall be excess insurance over any other valid and collectible insurance available to the insured, either as an insured under a policy applicable with respect to such automobile or otherwise.’
MOORE, Presiding Justice.
McCOMB, J., concurs.