GEICO General Insurance Company v. Dowd et al

Filing 128

MEMORANDUM OPINION AND ORDER denying 116 Motion for Jury Instruction Regarding Initial Permission Rule; denying 119 Motion for Clarification and Motion to Reconsider re: 114 Order on Motions in Limine. Signed by Judge William K. Sessions III on 8/19/2013. (law)

UNITED STATES DISTRICT COURT
FOR THE
DISTRICT OF VERMONT
GEICO GENERAL INSURANCE COMPANY,

:
:
Plaintiff,
:
:
v.
:
:
TIMOTHY DOWD and MERRY KINDRED
:
as Administratrix of the Estate of :
KATHRYN BORNEMAN,
:
:
Defendants.
:
:

Case No. 2:12-cv-40

MEMORANDUM OPINION and ORDER
The parties seek a ruling concerning how the jury is to
determine scope of permission with respect to the non-owned
automobile clause in Defendant Timothy Dowd’s automobile
insurance policy (“Policy”) issued by Plaintiff GEICO General
Insurance Company (“GEICO”).

See Mot. of Estate of Kaye Borneman

in Supp. of Jury Instruction Regarding Initial Permission Rule,
ECF No. 116; Mot. For Clarification & to Reconsider the Order on
Mots. in Limine, ECF No. 119.
The Policy provides liability coverage for Dowd when using
an automobile not owned by him if the use was “with the
permission, or reasonably believed to be with the permission, of
the owner and within the scope of that permission.”
ECF No. 43-8.

Policy 4,

The parties do not dispute that Vermont law

applies to this issue, and that there is no Vermont case law
directly on point.

Defendant Estate argues first that the Policy language
“within the scope of that permission” is ambiguous, and must be
construed in favor of the insured.

Although it is true that

ambiguous policy terms are construed in favor of coverage, see,
e.g., N. Sec. Ins. Co. v Doherty, 2009 VT 27, ¶ 8, 987 A.2d 253,
256 (entry order), the Court must first be able to determine that
a disputed term is in fact ambiguous.
Co., 716 A.2d 65, 67 (Vt. 1999).

Towns v. Vt. Mut. Ins.

That the parties dispute the

correct legal interpretation of contract language does not render
the language ambiguous.

See Isbrandtsen v. North Branch Corp.,

556 A.2d 81, 85 (Vt. 1988).
The Vermont Supreme Court has more than once construed
policy language limiting automobile liability coverage to use
within the scope of permission without any hint that such
language was ambiguous.

See Ins. Co. of N. Am. v. Millers’ Mut.

Ins. Ass’n of Ill., 427 A.2d 354, 355 (Vt. 1981); Nat’l Grange
Mut. Ins. Co. v. Churchill, 234 A.2d 334, 335-36 (Vt. 1967).

In

the absence of a showing that the language is ambiguous in this
context, the Court reads the terms according to their “‘plain,
ordinary and popular meaning.’”

Hathaway v. Tucker, 2010 VT 114,

¶ 14, 14 A.3d 968, 973 (quoting N. Sec. Ins. Co., 2009 VT 27, ¶
8).
Nearly fifty years ago the Vermont Supreme Court discussed
how to determine whether a driver fell within a policy’s
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definition of an insured, and whether it should adopt a rule for
that determination.

In American Fidelity Co. v. North British &

Mercantile Insurance Co., the Court described the rules under
consideration:
The conversion rule requires that permission have been
given for the particular use being made of the vehicle
at the time of the accident. The minor deviation rule,
as its name implies, holds that a small deviation from
the use encompassed by the permission granted will not
bar coverage, but a major one will. The initial
permission rule requires only that there be permission
to use the vehicle in the first instance to provide
coverage, whatever the actual use made of the vehicle.
Am. Fidel. Co. v. N. British & Mercantile Ins. Co., 204 A.2d 110,
112 (Vt. 1964).
The American Fidelity Court rejected the strict conversion
rule, but refused to adopt either the initial permission or the
minor deviation rule, preferring instead to adopt a framework for
determining whether a particular use was within the scope of
permission:
In other words, with a showing that the vehicle was
placed in the hands of the operator by consent, a
presumption arises that the particular use of which the
vehicle was being put was within the scope of that
consent as measured by the law. The overcoming of this
presumption requires evidence establishing that consent
had been expressly withdrawn prior to the actual use,
or that the actual use was so far afield from the
purpose of the loan of the vehicle as to amount to, at
best, a temporary tortious conversion.
Id. at 113.
The parties urge this Court to choose between the two rules
that the Vermont Supreme Court refused to adopt in American
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Fidelity:

the Estate advocates for the “initial permission”

rule; GEICO advocates for the “minor deviation” rule.
GEICO argues that the Vermont Supreme Court in fact adopted
the minor deviation rule in American Fidelity, which is not
strictly accurate.

In the subsequent decision of Insurance

Company of North America v. Millers’ Mutual Insurance Ass’n of
Illinois, however, the Court equated the American Fidelity
framework with an application of the minor deviation rule:
To overcome [the] presumption [that the use is with
consent] a party must show that the consent had been
expressly withdrawn, or that the operation of the car
involved a major deviation from the consent given. . .
. A minor deviation from the purpose of the loan would
be within the scope of the permission.
Ins. Co. of N. Am., 427 A.2d at 355.
The Estate notes, correctly, that the American Fidelity
Court was interpreting an “omnibus” clause, not a non-owned
automobile clause.

Insurance Company of North America was also

an omnibus clause case.

The omnibus clause in an automobile

insurance policy provides coverage for users of an insured
vehicle who are using the vehicle with permission, whereas the
non-owned automobile clause provides coverage for the insured
when using another’s vehicle with permission.
Couch on Insurance § 118:36 (3d ed. 2012).

See, e.g., 8A

The Estate points to

case law from jurisdictions that recognize a distinction between
determining the scope of permission depending upon whether the
insurance coverage follows the car (omnibus clause) or follows
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the driver (non-owned automobile clause), according a broader
interpretation to scope of permission in non-owned automobile
clause cases.

The rationale is that in covering an owned vehicle

the company relies on the judgment of its insured in giving
permission to use the car, whereas in covering an insured when
using a non-owned vehicle the driver is the same individual to
whom the insurer agreed to extend coverage in the first place.
See, e.g., Am. Motorists Ins. Co. v. LaCourse, 314 A.2d 813, 816
(Me. 1974) (“The purposes of extending coverage to additional
insureds in the two clauses suggest that they were intended to
have different interpretations.”); State Farm Mut. Auto. Ins. Co.
v. Zurich Am. Ins. Co., 299 A.2d 704, 712 (N.J. 1973) (discussing
the rationale for a more liberal construction of non-owned
automobile clauses); Maryland Cas. Co. v. Hassell, 426 S.W.2d
133, 138 (Ky. 1967) (applying the initial permission rule to a
non-owned vehicle clause, and acknowledging that the minor
deviation rule applied to an omnibus clause); Couch, id.

The

Estate also argues that many jurisdictions have adopted the
initial permission rule, citing Millbank Mutual Insurance Co. v.
United States Fidelity & Guaranty Co., 332 N.W.2d 160, 166-67 &
n.9 (Minn. 1983) (citing cases) and Wiglesworth v. Farmers
Insurance Exchange, 917 P.2d 288, 292 & n.1 (Colo. 1996) (citing
cases), both of which decisions construed omnibus clauses.
Whatever may be the merits of the rationales for adopting a

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broad initial permission rule for determining the scope of
permission in a non-owned automobile clause, this Court may
predict the outcome in an unsettled area of state law, but must
not “adopt innovative theories that may distort established state
law.”

Travelers Ins. Co. v. Carpenter, 411 F.3d 323, 329 (2005).

The Vermont Supreme Court has given no indication that it would
favor construing identical policy language differently depending
on whether it appeared in an omnibus clause or a non-owned
automobile clause.1

Moreover, the Vermont Supreme Court has

referred to a non-owned automobile clause as an omnibus clause,
suggesting that it may not regard a distinction between the two
as particularly significant.

See Nat’l Grange Mut. Ins. Co. v.

Churchill, 234 A.2d 334, 336 (Vt. 1967).
The American Fidelity Court, eschewing classifications or
labels, created a framework for subsequent finders of fact.

As

it observed, “[s]ometimes the distinguishing qualities of . . .
classifications coincide with the essential differences between
situations.
112.

And sometimes they do not.”

Am. Fidel., 204 A.2d at

It endorsed a case-by-case approach, acknowledging the

fact-intensive nature of the inquiry.

See id.; see also id. at

113.

1

The Policy’s omnibus clause covers “any other person using the
[owned] auto with your permission. The actual use must be within the scope of
that permission.” Policy 4. Although the Policy’s non-owned automobile
clause affords coverage to an insured who has permission or who reasonably
believes he has permission, the scope of permission language is identical.

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In accordance with existing case law and the Vermont Supreme
Court’s case by case approach, the Court will instruct the jury
on the scope of permission that GEICO has the burden to establish
by a preponderance of the evidence that permission to use the
vehicle had been expressly withdrawn, or that the use of the
vehicle was so far from the purpose of the permitted use as to
amount to a major deviation from that use.

The Estate’s motion,

ECF No. 116, is denied.
The parties also dispute the nature and extent of evidence
that the jury may consider to determine whether Dowd’s use of the
vehicle was within the scope of Yandow’s permission.

GEICO

intends to introduce evidence concerning the manner in which Dowd
operated the vehicle, specifically that he ran from the police,
and that the police pursued him for some time.

GEICO argues that

this evidence would tend to prove that Dowd’s use of the vehicle
was so far from the purpose of any permitted use as to amount to
a major deviation.

GEICO would draw a distinction between

evidence that would tend to prove the way in which Dowd drove the
car—deliberately and recklessly—and evidence that would tend to
prove the use to which he put the car—to attempt to elude the
police.

GEICO agrees that the former purpose for the evidence is

irrelevant to the coverage determination, but that the latter
purpose for the evidence is relevant to a determination that
Dowd’s use of the vehicle was not within the scope of Yandow’s

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permission.
A decision on this point cannot be made in a vacuum; the
Court must evaluate the evidence at the time it is proffered.
Without knowing the evidence that will tend to establish that
Dowd had permission to use the vehicle, and without knowing the
evidence that will tend to establish Dowd’s intended use of the
vehicle, the Court cannot determine whether the evidence of the
police chase is admissible.

Moreover, should the evidence of the

police chase become admissible, evidence concerning the outcome
of the police chase—the crash that took the life of the Estate’s
decedent—may very well also become admissible as a consequence.
Evidence of Dowd’s intention is the critical factor.

If the

evidence shows that Dowd took Yandow’s vehicle intending only to
drive home, the evidence of what occurred to interrupt his
attempt to get home would be irrelevant.

If the evidence shows

that Dowd took Yandow’s vehicle for some other purpose, or
intended to use the vehicle recklessly, the intended manner of
usage would be relevant to determine whether the use exceeded the
scope of permission.

See Rainville v. Farm Bureau Mut. Auto.

Ins. Co., 83 A.2d 599, 600 (Vt. 1951) (noting that if a son took
his father’s automobile intending “to keep it for an unreasonable
time; or intending to use it in a reckless, wanton or injurious
manner; or intending to leave it to mere chance whether the owner
ever recovered it or not” the taking would be the equivalent of

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theft); see also Pepin v. Allstate Ins. Co., 2004 VT 18, ¶ 16,
848 A.2d 269, 274 (explaining that the Rainville language
requires “an initial wrongful taking with the intent to
permanently deprive the owner of [her] property”).

The motion

for clarification, ECF No. 119, is denied.
The parties shall refrain from referring to the police chase
or the accident scene in voir dire or during their opening
statements.
Dated at Burlington, Vermont, this _19th_ day of August,
2013.
/s/ William K. Sessions III
William K. Sessions III
District Court Judge

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