For reversal -- Chief Justice Weintraub and Justices Jacobs, Francis, Proctor, Hall, Schettino and Haneman. For affirmance -- None. The opinion of the court was delivered by Proctor, J.
[55 NJ Page 543] This case concerns the question of coverage under the omnibus clause of an automobile liability insurance policy. The policy was issued by the defendant, Hartford
Accident & Indemnity Company (Hartford) to Mrs. Kathryn Zylka, and covered her automobile which was involved in a collision on July 7, 1964. The omnibus clause was of standard form and provided in pertinent part that coverage under the policy was extended to the named insured, her spouse, and "any person while using the automobile * * * provided the actual use of the automobile is by the named insured or such spouse or with the permission of either."
The facts are not in material dispute. Mrs. Zylka, the owner of the insured vehicle, gave her teenage son, Michael, general permission to use the car when he returned home from college for his summer vacation. She also told him not to let anyone else drive the car. This admonition was repeated on several occasions when he used the car. On the night of July 7, 1964, Michael was using the car for a social visit to a neighbor's house. While there he permitted his friend, the plaintiff, Douglas Odolecki, to borrow the car in order that the latter might pick up his girl friend. On his way to a hospital where the girl worked, Odolecki was involved in an accident with another car which resulted in the filing of several personal injury actions against him.
After receiving notice of the accident, the defendant-insurer informed the plaintiff that he was not covered by the policy issued to Mrs. Zylka since he was not operating the vehicle with the "permission" of the named insured or her spouse as required by the policy. The plaintiff filed the present action to have himself declared an additional insured. Sitting without a jury, the trial court held that the Zylka policy did not cover the plaintiff as an additional insured because Mrs. Zylka had never given him permission to use the car, because she had expressly prohibited her son from giving permission to others to use the car, and because the use of the car was not within the use granted by Mrs. Zylka to her son. In denying plaintiff relief, the trial judge relied principally on this Court's decision in Baesler v. Globe Indemnity Co., 33 N.J. 148 (1960). Plaintiff
appealed to the Appellate Division, and pending argument there, we granted certification on our own motion.
Baesler, upon which the trial court relied, is virtually identical with the present case. There, the named insured bought a car for the exclusive use of his nephew with the stipulation that the car not be used by others. Despite this admonition, the nephew permitted a friend to use the automobile for a social engagement, and while the friend was driving, he had an accident in which his passenger was injured. The passenger recovered a judgment for personal injuries against the friend-driver, and the latter, claiming to be an additional insured, sued the insurer of the named insured to recover the amount of the judgment. In a four to three decision, this Court held that the plaintiff was not covered by the policy which the defendant had issued. The Court noted the general rule that, ordinarily, a permittee is not authorized to allow another to use an insured vehicle on the basis of his own permission to use it and that therefore there could be no coverage under the standard omnibus clause. Id., at 151. Since we adhered to this rule at that time (see Cronan v. Travelers Indemnity Co., 126 N.J.L. 56 (E. & A. 1941)), it followed, a fortiori, that when there was an express prohibition by the named insured, and no other countervailing factor, the second permittee could not claim a greater right than he could in the absence of such a prohibition. The plaintiff concedes that under Baesler he is not entitled to qualify as an additional insured, but he argues that our decisions since Baesler have eroded the holding in that case to the point where it no longer represents the law of this state. The validity of this contention depends upon an analysis of these post- Baesler decisions.
In the term of court following Baesler, we decided Matits v. Nationwide Mutual Ins. Co., 33 N.J. 488 (1960). There we dealt with the related question of whether the original permittee was an additional insured when she substantially deviated from the scope of the named insured's permission. In that case the husband of the named insured lent his
wife's car to a neighbor so that the latter could visit her sick mother in a nearby town. After the visit, the permittee drove in a direction away from the named insured's home and alternately visited two bars over a period of several hours. On the way home, she was involved in a collision with another car.
We were called upon to decide whether the permittee's deviation vitiated the named insured's initial permission so as to deprive her of coverage under the standard omnibus clause of the policy issued by the defendant insurer. The law of New Jersey pertaining to coverage when a permittee deviated from the scope of permission was then unclear. See Rikowski v. Fidelity & Casualty Co., 117 N.J.L. 407 (E. & A. 1937). Other jurisdictions had adopted one of three views. The first is the liberal or "initial permission" rule which allows coverage if a person has permission to use the automobile irrespective of any deviations from the scope of permission so long as it remains in his possession. The second view, the moderate or "minor deviation" rule, allows coverage only where the deviation from the scope of the permissive use does not constitute a gross violation. Finally, the strict or "conversion" rule denies coverage for any deviation from the time, place, or purpose specified. 33 N.J., at 492-493. For a discussion of these rules, see generally 7 Appleman, Insurance Law and Practice, §§ 4366, 4367, 4368, and cases cited therein.
In Matits, we adopted the initial permission rule. It was our view that the minor deviation and conversion rules, which made coverage turn on the scope of permission given in the first instance, rendered coverage uncertain, fostered unnecessary litigation, and did not comport with New Jersey's legislative policy of assuring an available fund for the innocent victims of automobile accidents. See Motor Vehicle Security-Responsibility Law, N.J.S.A. 39:6-23 to 60; Unsatisfied Claim and Judgment Fund ...