Nationwide Mutual Insurance v. Continental Casualty Co.

ALPERT, Judge. This appeal arises from a declaratory judgment in favor of an insurer and its business insured regarding coverage under an automobile liability insurance policy for a company car that was involved in a single vehicle accident. Halperin Distributing Corporation (Halperin) (appellee) is a wholesale food distributor in the Baltimore-Washington metropolitan area. The company employs a force of sales representatives to sell its products to area food stores, including Giant Food Stores.

To this end, Halperin allowed each sales representative the use of a company car on a continuing basis for business purposes. Kathy Zinn worked for Halperin as a sales representative. As such, she had the use of a company car for business purposes. At the invitation of a Giant Food Store deli manager, a customer on Zinn’s route, Zinn and several of her guests attended a pool party at the home of another Giant Food Store employee on June 15, 1986.

As Zinn and her guests — Debra Lizzio (appellant), Steven Sprehe, and Richard Thiess — were driving home from the pool party in Zinn’s company car, they were involved in a single vehicle accident. The three passengers filed individual suits against Zinn and Halperin in the Circuit Court for Prince George’s County, which the court consolidated. The car was insured under a business automobile policy with Continental Casualty Company (appellee) at the time of the accident. Continental denied coverage because it and its insured, Halperin, took the position that Zinn was not driving the car for business purposes when the accident occurred.

Continental sought a declaratory judgment that Zinn was not an insured under the policy and that it therefore had no obligation to defend her in the tort action or to indemnify her for any judgments which the court might enter against her in that suit. ²⁶⁴ Nationwide Mutual Insurance Company (Nationwide) (appellant), Lizzio’s insurer, filed an intervenor’s answer to the complaint for declaratory relief while the declaratory judgment action was pending. 1 The court permitted intervention. Nationwide then sought a declaration that Zinn was an insured under the Continental policy or, alternatively, that Lizzio was entitled to benefits under the Continental policy’s uninsured motorist and personal injury protection provisions even if the policy did not provide liability coverage for Zinn. The circuit court stayed the consolidated tort actions pending the outcome of the declaratory judgment action. On June 27 and 28, 1989, the Circuit Court for Prince George’s County (the Hon.

Joseph S. Casula, presiding) held a hearing on the declaratory judgment action. The primary issue at trial was whether Zinn had Halperin’s permission to use the company car at the time of the accident. On January 22, 1990, the circuit court held that Zinn was a non-permissive user of the Halperin vehicle and, therefore, that the Continental policy did not provide coverage for the accident. The court also held that Continental had no duty to defend or indemnify Zinn against any of her passengers’ claims.

Further, Continental had no legal obligation to pay the passengers (the tort plaintiffs) any money under the policy that it had issued to Halperin. Lizzio, joined by Thiess and Sprehe, subsequently filed a motion to alter or amend the decision, which the court denied on May 16, 1990. On May 17, 1990, the court granted Halperin’s motion for summary judgment that it had filed in the consolidated tort suit. Nationwide appeals to us from these rulings and asks us whether: I. The trial court was clearly erroneous when it found that Zinn was a “non-permissive” user of the Halperin vehicle. ²⁶⁵ II.

A. The trial court impermissibly intertwined the issue of whether Zinn was a permissive or non-permissive user under the language of the policy with the issue of whether she was acting within the scope of her employment — an issue which the jury in the tort action properly must decide. B. The trial court’s ruling was clearly erroneous and in derogation of public policy.

III

The trial court erred when it failed to find that Lizzio was entitled to personal injury protection benefits under the Continental policy regardless of Zinn’s status under that policy and that Lizzio also was entitled to benefits under the Continental policy’s uninsured motorist provisions if Zinn is not an insured for purposes of liability. Preliminarily, we clarify the procedural posture of this case. After Nationwide filed its appeal, Halperin filed a motion to dismiss that part of the appeal concerning the summary judgment entered in its favor as to the three personal injury claims. Continental contended that the order granting the summary judgment was not subject to appeal because the claims against Zinn still were pending in those cases.

Although we initially denied the motion, we ultimately granted the request upon Halperin’s motion for reconsideration. Pursuant to Rule 8-602(e)(l)(B), 2 we remanded the case to the circuit court for that court to determine whether to enter final judgment under Rule 2-602(b) 3 as to any or all ²⁶⁶ of the three personal injury claims. The court declined to enter an order of final judgment for any of them. Thus, only those orders of the circuit court concerning the declaratory judgment in favor of Continental are before us.

I. and II. Nationwide contends that under the language of the Continental policy, Zinn had permission to use the company car at the time of the accident, i.e., she was a permissive user. The policy provides that Continental “will pay all sums the insured legally must pay as damages because of bodily injury or property damage to which this insurance applies, caused by an accident and resulting from the ownership, maintenance or use of a covered auto.” The policy then defines an “insured” as the policy holder or “[ajnyone else ... while using with your permission a covered auto you own____” (emphasis added). This latter provision generally is referred to as an omnibus clause.

See, e.g., 7 Am. Jur.2d Automobile Insurance § 248 (1980). Nationwide contends that this language, by its plain meaning, means that anyone who used the car with Halperin’s permission was an insured for purposes of coverage under the policy. Because Halperin had assigned the car to Zinn on a continuing basis, Nationwide reasons that she therefore had permission to use it when the accident occurred.

Continental, on the other hand, contends that the language provides coverage only if Zinn used the vehicle within the scope of the permission given by Halperin. Because Zinn was using the car for personal, rather than business, purposes when the accident occurred, Continental argues that her use of the car fell outside the scope of Halperin’s permission. In drafting an automobile insurance policy, insurers often will employ one of two standard provisions to define who, other than the policyholder, is an insured under the policy: (1) Any person while using the insured auto, provided the actual use thereof is within the permission of the named ²⁶⁷ insured. See, e.g., Kelsay v. State Farm Mutual Automobile Ins.

Co., 242 Md. 528, 532-33 , 219 A.2d 830 (1965). (2) Any other person while using the insured auto with the permission of the named insured, providing his actual operation is within the scope of such permission. See, e.g., Bond v. Pennsylvania Nat’l Mutual Casualty Ins. Co., 289 Md. 379, 381 , 424 A.2d 765 (1981).

As noted, the Continental policy did not contain either of those clauses. It did not specifically require that the “actual use” be within the employer’s permission or that the operation be within the “scope of such permission,” but required only that the car be used “with [the employer’s] permission.” Nationwide interprets the more traditional language to mean that the insurer will provide coverage only if the permissive user was acting within certain defined limits when the accident occurred. Because Continental elected not to use this qualifying language, i.e., “actual use” or “scope of permission,” Nationwide contends that it was the result of Continental’s “considered decision to afford broader coverage.” Thus, argues Nationwide, the trial court’s finding that Zinn’s use of the vehicle was outside the scope of Halperin’s permission was irrelevant to the issue of coverage; it would be germane only in the underlying tort action in which Halperin’s vicarious liability is at issue. On this basis, Nationwide concludes that the trial court impermissibly inserted this “scope of permission” language into the Continental policy.

In Washington Metropolitan Area Transit Authority v. Bullock, 68 Md.App. 20, 31-32 , 509 A.2d 1217 (1986), we noted that [T]hree alternative rules of construction [have] developed with respect to [the omnibus clause in] permissive use cases. The most expansive of these, sometimes known as the ‘liberal,’ or ‘initial permission,’ or ‘hell or high water’ rule holds that ‘if the vehicle was originally entrusted by the named insured, or one having proper authority to give ²⁶⁸ permission, to the person operating it at the time of the accident, then despite hell or high water, such operation is considered to be within the scope of the permission granted, regardless of how grossly the terms of the original bailment may have been violated.’ A second rule, denoted the ‘conversion’ rule, recognizes that a particular use can so exceed the scope of initial permission as to become non-permissive but requires that the departure be such as would cause the user to be liable to the owner in an action for conversion. The third rule, considered to be ‘an intermediate position between the two more extreme rules,’ is known as the ‘minor deviation’ rule. It regards ‘minor deviations’ as still being within the scope of permissive use.” (citations omitted).

Maryland specifically has rejected the “liberal” rule, see Nat’l Grange Mutual Ins. Co. v. Pinkney, 284 Md. 694, 697 , 399 A.2d 877 (1979); Insurance Co. of North America v. State Farm Mutual Automobile Ins. Co., 281 Md. 381 , 378 A.2d 1344 (1977), with two results. First, absent the liberal rule, “the law seems to be ... [that] ‘where the employer has expressly forbidden his employee to use the employer’s automobile for his own personal purposes, such use of the automobile by the employee in violation of orders is not deemed to be one with the permission of the employer within the meaning of the omnibus clause of the liability insurance policy.’ ” Washington Transit Authority, 68 Md.App. at 35 , 509 A.2d 1217 (quoting Annotation, Automobile liability insurance: permission or consent to employee’s use of car within meaning of omnibus coverage clause, 5 A.L.R.2d 600 , 651 (1949)).

Second, in construing omnibus clauses, Maryland has adopted “an almost unique approach, rejecting all three rules and opting instead to construe, on a case-by-case basis, the particular wording of the omnibus clause at issue.” Washington Transit Authority, 68 Md.App. at 32 , 509 A.2d 1217 . Because these clauses are part of contracts, we must interpret them according to principles of contract construction. ²⁶⁹ “ ‘It is well settled that in interpreting insurance contracts, words are to be given their customary and normal meaning.’ ” Nat’l Grange Mutual Ins. Co. v. Pinkney, 284 Md. 694, 705 , 399 A.2d 877 (1979) (quoting Gov’t Employees Ins. Co. v. DeJames, 256 Md. 717, 720 , 261 A.2d 747 (1970)). “ ‘If the language of an insurance contract is ambiguous, ... construction is for the jury.’ ” Id. “ ‘Absent ambiguity the construction of the contract remains within the province of the court____’ ” Id. “That a term cannot be precisely defined so as to make clear its application in all varying factual situations does not mean that it is ambiguous.” Allstate Ins.

Co. v. Humphrey, 246 Md. 492, 496 , 229 A.2d 70 (1967). None of the parties contend that the omnibus provision in this case is ambiguous. In fact, Nationwide asserts that the provision is unambiguous. We agree and conclude that construction of the clause was a matter of law for the court rather than a question of fact for the jury.

The clause in the business policy at issue provides coverage for an