COURT DECISIONS

Rough Notes, Aug 2004

Digested from case reports published in the North Eastern Reporter 2d, West Publishing Co., St. Paul, MN

Did unlicensed driver have permission to operate vehicle?

David Pearlman held an automobile insurance policy with Commerce Insurance Company insuring his Toyota Avalon. On March 23, 1997, David let his teenage daughter, Samantha, use his car to go on an outing with friends. After meeting at a restaurant, Samantha and several of her friends decided to travel to a common destination, taking two cars. Samantha gave her friend, Timothy Thomas, permission to drive her car, although she knew that Thomas had only a learner's permit, had not taken a driver's education course, and had previously driven her car only two or three times. The other car, a Toyota Corolla, was driven by Jeffrey Smith. There were three passengers in the Corolla in addition to Smith.

The two cars were driving on a two-lane highway, Smith following Thomas, when Smith lost control of the Corolla and crashed into several trees. Two of the passengers were killed, and one was severely injured. There was evidence that Smith had been trying to pass Thomas just before he lost control of the car.

The accident resulted in lawsuits filed by the mothers of the injured passenger and one of the passengers who was killed. The lawsuits included several claims against Thomas. Commerce filed a declaratory judgment action seeking a ruling that it had no duty to defend or indemnify Thomas. The cases were eventually consolidated in Superior Court. The judge granted Commerce's motion for summary judgment as well as those of the defendants. The mothers appealed.

On the issue of whether Commerce was required to defend or indemnify Thomas, the appeals court agreed with the lower court. The relevant language of the policy (a sixth edition standard Massachusetts automobile insurance policy) provided, for compulsory insurance, in part:

"...We will pay only if you or someone else using your auto with your consent is legally responsible for the accident ..."

For optional bodily injury to others, the language provided:

"... We will also pay damages if someone else using your auto with your consent is legally responsible for the accident ... Also like the Compulsory Part, this Part does not pay for the benefit of anyone using an auto without the consent of the owner."

The court construed this language to mean that the insurer's obligation under the policy extended only to persons who were driving the vehicle with the consent of the policyholder. The evidence showed that David Pearlman was the policyholder. Samantha was listed as an operator, but she did not have her father's permission to allow Thomas or anyone else to operate the vehicle except in an emergency. This was not a case where Samantha had unfettered permission to operate the car. Because David Pearlman, the policyholder, did not give consent to Thomas's operation of the car, Commerce was under no obligation to defend or indemnify Thomas.

In the action brought by Commerce for declaratory judgment, the judgment of the lower court was affirmed.

It should be noted, however, that, based on evidence that there might have been racing between the two cars or that Smith was responding to a challenge posed by Thomas, the appeals court did reverse the lower court judgment dismissing complaints against Timothy Thomas and Samantha Pearlman.

Picard v. Thomas-No. 01-P-1716-Appeals Court of Massachusetts, Middlesex-January 28, 2004-802 North Eastern Reporter 2d 581.

Is public roadway part of "insured location"?

James and Patricia Dreiman own a 110-acre farm in Knox County, Indiana. James' brother, Robert, owns the adjacent 135-acre farm. Together, the two families farm both properties as a single farming operation. County Road 957 South (also known as Black Road) runs between the two farms. The only way to get from one farm to the other is by crossing Black Road.

On October 5, 1997, James and Patricia's 11-year-old grandson, Benjamin, was driving a dirt bike with Jacob Clark as his passenger. The dirt bike, which was used for farm-related work and recreation, was not licensed for use on public roads. Nevertheless, Benjamin was driving on Black Road when he collided with a vehicle driven by Jennifer Purdue. Clark was injured in the accident. He filed suit against Purdue, Benjamin, and the Dreimans.

James and Patricia Dreiman had a farm liability insurance policy with Indiana Insurance Company. Robert and his wife were listed as "additional insureds," and Robert's farm was listed as "designated premises" for the purpose of liability insurance. James and Roberts' S corporation was also named as an "additional insured."

On May 22, 2000, the Dreimans filed a complaint for declaratory judgment alleging that Indiana Insurance was required to defend and indemnify them in dark's suit.

On November 7, 2002, Indiana Insurance moved for summary judgment alleging that the Dreimans' policy did not provide coverage because the dirt bike fell under the motor vehicle exclusion of the policy. The trial court found in favor of the Dreimans.