For affirmance -- Chief Justice Weintraub, and Justices Jacobs, Francis, Proctor and Schettino. For reversal -- Justice Hall. The opinion of the court was delivered by Proctor, J. Hall, J. (dissenting).
This case concerns coverage under the omnibus clause of an automobile liability insurance policy issued by the defendant, Nationwide Mutual Insurance Co.
On October 26, 1956 an automobile owned by Mrs. Hilda Velasco and driven by Mrs. Betty Mae Hoerner collided with an automobile owned by Elizabeth Slodzinski and driven by her husband, Anthony Slodzinski, in which John Matits was a passenger. Matits and Elizabeth and Anthony Slodzinski instituted actions for personal injuries and property damage against Mrs. Hoerner and Mrs. Velasco. The actions against Mrs. Velasco were dismissed, it being agreed that Mrs. Hoerner was not the former's agent at the time of the collision. Trial of the consolidated actions against Mrs. Hoerner resulted in judgments in favor of Matits for $25,000, and in favor of Elizabeth and Anthony Slodzinski for $875 and $500 respectively.
At the time of the collision, Mrs. Velasco was the named assured in an automobile liability insurance policy issued by Nationwide and covering the automobile driven by Mrs. Hoerner. Under the terms of that policy, Nationwide extended coverage to Hilda Velasco, her spouse, and "any person or organization legally responsible for the use of the described automobile provided the actual use was with the permission of the policyholder or such spouse." This is the standard omnibus clause found in most automobile liability insurance policies. Mrs. Hoerner was covered under a similar policy issued by plaintiff Allstate Insurance Co., on another automobile but extending to occasional operation by her of a vehicle other than the one insured. Nationwide refused to defend Mrs. Hoerner on the ground that, in light of the circumstances under which she was driving the car at the time of the collision, she was not covered by the Velasco policy. Allstate defended Mrs. Hoerner and, after judgment
against her, paid $10,000, the full coverage of its policy, to Matits. Matits and the Slodzinskis instituted the present actions to collect from Nationwide the amounts outstanding on the Hoerner judgments. Allstate sued Nationwide for $972.80, the expenses incurred defending Mrs. Hoerner. These actions were consolidated for trial, and the amounts sued for are not in dispute.
Nationwide concedes that it was the primary insurer and that therefore, if its policy covered Mrs. Hoerner, it must pay all plaintiffs. The undisputed facts brought out at the trial are as follows:
The Velascos and Hoerners were next-door neighbors in Ramsey, New Jersey. On October 25, 1956, in the early evening, Mr. Velasco loaned his wife's car to Mrs. Hoerner so that she could visit her mother who was ill in Hawthorne, New Jersey. Mrs. Hoerner arrived in Hawthorne about 8:00 P.M. After a short visit with her mother, she drove in search of her sister to the Crane House, a tavern and restaurant in Paterson. At Hawthorne, Paterson is in the opposite direction from Ramsey. Mrs. Hoerner had a few highballs at the Crane House and then drove to the Flamingo Bar in Paterson. She stayed at the Flamingo for a short time, and then returned to the Crane House; she then paid a second visit to the Flamingo; and finally, a third visit to the Crane House. Just before midnight, she left the Crane House to drive home and, shortly thereafter, was involved in the collision with the Slodzinski car in Paterson.
Plaintiffs and defendant disagree as to the time limit imposed by Mr. Velasco on Mrs. Hoerner's use of the car, and the time and content of a telephone call made by Mrs. Hoerner to Mr. Velasco after her departure from her mother's house and before the collision. Velasco testified that when he gave permission to use the car he told Mrs. Hoerner to return it within an hour. Mrs. Hoerner testified that there was no time limit on her use of the car. She further testified that at about 11:00 P.M. she telephoned Velasco and told him that she was "going to be a little late" and asked
"would he mind if she kept the car a little longer," to which he replied, "Certainly; as long as * * * [she] returned the car before three o'clock that morning." Mr. Velasco testified that Mrs. Hoerner called about 9:30 P.M. and that upon being informed by her that she was going to stop and have a drink, he said, "* * * you better get right home because I need the car * * * your husband will be home soon and if he knows that you have been drinking you are going to get it."
The trial court, finding that Mr. Velasco had given initial permission to Mrs. Hoerner to use the car, held that Mrs. Hoerner was an additional insured under Nationwide's policy and that "the fact of [her] later deviation is unimportant." Accordingly, he deemed it unnecessary to resolve the above-mentioned factual issues and entered judgment for all plaintiffs. The Appellate Division unanimously affirmed, stating that "in the absence of a gross deviation from the permitted use the permittee will not be denied the benefit of the insurance to the detriment of the injured," and holding that "the trial court correctly concluded that Mrs. Hoerner's use of the Velasco vehicle did not so deviate from the permission granted to her as to deprive her of the coverage under the policy." 59 N.J. Super. 373 (1960). We granted Nationwide's petition for certification. 32 N.J. 350 (1960).
According to the terms of the omnibus clause in Nationwide's policy, Mrs. Hoerner was covered as an additional assured if her "use" of the Velasco car at the time of the collision was with the "permission" of Mr. or Mrs. Velasco. When Mrs. Hoerner left her mother's home in Hawthorne to drive to the Crane House and the Flamingo Bar in Paterson, she deviated from the purpose for which she borrowed the Velasco car. The question for decision is whether her deviation vitiated Velasco's initial permission so as to deprive her of coverage under defendant's policy. Courts faced with this question have adopted one of three views: (1) The liberal or so-called "initial permission" rule that if a person has permission to use an automobile in the first
instance, any subsequent use while it remains in his possession though not within the contemplation of the parties is a permissive use within the terms of the omnibus clause; for cases so holding, see Annotations 72 A.L.R. 1375, 1405-09 (1931); 106 A.L.R. 1251, 1262 (1937); 126 A.L.R. 544, 553-55 (1940); 5 A.L.R. 2 d 600, 629-36 (1949); (2) the moderate or "minor deviation" rule that the permittee is covered under the omnibus clause so long as his deviation from the permissive use is minor in nature; Annotations 72 A.L.R., supra, at pp. 1401-03; 106 A.L.R., supra, at p. 1259; 126 A.L.R., supra, at p. 552; 5 A.L.R. 2 d, supra, at pp. 636-43; and (3) the strict or "conversion" rule that any deviation from the time, place or purpose specified by the person granting permission is sufficient to take the permittee outside the coverage of the omnibus clause; Annotations 72 A.L.R., supra, at pp. 1403-05; 106 A.L.R., supra, at pp. 1260-62; 126 A.L.R., supra, at pp. 552-53; 5 A.L.R. 2 d, supra, 626-29. For additional authorities discussing these rules, see 7 Appleman, Insurance 169-181 (1942); Putman, "The Standard Automobile Policy: What Persons and Which Vehicles are Covered," 11 Ark. L. Rev. 20 (1956-57); Ashlock, "Automobile Liability Insurance: The Omnibus Clause," 46 Iowa L. Rev. 84, 102-118 (1960).
The trial court and the Appellate Division in the present case both relied on Rikowski v. Fidelity & Casualty Company, 117 N.J.L. 407 (E. & A. 1937), to conclude differently as to the applicable New Jersey law. The trial court interpreted Rikowski as adopting the initial permission rule. Since Mr. Velasco undisputedly gave permission to Mrs. Hoerner to use the car in the first instance, the trial court, applying that rule, found that Mrs. Hoerner, without regard to the extent of her deviation, was an additional assured. The Appellate Division apparently interpreted Rikowski as adopting the minor deviation rule. It affirmed the judgments below, however, because it regarded the trial court as having found Mrs. Hoerner's deviation was not so gross as to deprive her of coverage under the policy. 59 N.J. Super., at
p. 382. These divergent views of applicable New Jersey law understandably derive from ambiguity in the Rikowski holding. The facts in that case were these: A chauffeur drove his employer to a department store. There was no place to park in the immediate vicinity. The employer told the chauffeur to find a parking place and return within an hour. An accident occurred within a half hour about two miles from the department store while the chauffeur was driving some friends to their ...