American Universal Insurance v. Dykhouse (219 F. Supp. 62, 1963)

HANSON, District Judge.

This case was tried partly pursuant to a stipulation of facts set out as follows:

“1. That the decedent, Donald B. Sharp, had the permission of his superiors in the South Dakota State Department of Agriculture, where he was then employed, to attend the annual meeting or convention of the North Central States Association of Food, Drug, Feed and Fertilizer Control Officials, to be held at the Sheraton-Cataract Hotel in Sioux Falls, South Dakota, on July 26 and 27, 1960; that the said Donald B. Sharp also had the permission of his said superiors in said Department of Agriculture to drive the 1956 Ford Mainline automobile, state license number 39, owned by the State of South Dakota, Department of Agriculture, and furnished him by said State of South Dakota, Department of Agriculture, for his use in connection with his duties, which said automobile was then insured by the plaintiff company, to Sioux Falls, South Dakota, from his home at Highmore, South Dakota, on July 25, 1960, for the purpose of attending such meeting.

2. That if Neal Kroon, the Sheriff of Lyon County, Iowa, were called as a witness by any of the parties in said cause, he would testify as follows: that he was called to the scene of a collision west of Larehwood, Lyon County, Iowa, on the evening of July 25, 1960; that a 1956 Ford automobile owned by the State of South Dakota, Department of Agriculture, state license 39, driven by Donald B. Sharp, and a car owned by Frank Dieren and driven by Gary Dieren were involved in said collision; that said collision occurred about two and one-half miles southeast of the Iowa-South Dakota state line in Lyon County, Iowa, which point of collision was approximately sixteen or seventeen miles southeast of Sioux Falls, South Dakota, on Iowa highway No. 9; that at the time of the collision the Dieren car was headed west on said highway, and the South Dakota State car driven by Sharp was headed east on said highway; that Gary Dieren was accompanied by Marilyn Vogel in the car driven by him, and that Donald B. Sharp was alone in the State vehicle; that Sharp was killed instantly in said collision; that in the State car driven by Sharp, he (the Sheriff) found a half-pint bottle of whiskey, two-thirds to three-fourths consumed.”

There was a considerable amount of other evidence introduced at the trial. There were two insurance policies in question. The policy issued by American Universal Insurance Co. listed the named insured as the State of South Dakota, Department of Agriculture. Where bodily injury liability and property damage liability were concerned, the policy was to cover both pleasure and business purposes. The automobile involved in the accident was one listed in the policy as being covered, and at the time of the accident, was being driven by the decedent, Donald B. Sharp. The other policy was issued by Motor Vehicle Casualty Company to Donald B. Sharp. This policy injects an issue of excess coverage.

Whether Donald B. Sharp was covered by the American Universal policy depends upon whether he was driving the automobile in question at the time of the accident with permission of the named insured, State of South Dakota Department of Agriculture. The word “permission” must be construed according to the meaning it has been given in other insurance policies. This ease was tried without a jury. Therefore, the fact questions as to whether there was implied authority, actual authority, or more than a slight deviation from this permission are to be decided by the judge sitting as the trier of fact.

EXPRESS PERMISSION

As to the express authority or permission for the use of the automobile in question at the time of the accident, the State of South Dakota Travel Regulations are most in point. These regulations in Exhibit A say that the direct route will usually be taken. The regulations in Exhibit A became effective on August 1, 1959. However, the regulations allow an indirect route to be taken or for the travel to be interrupted. According to the regulations, this is allowed whenever it is for the convenience of the officer or employee in question. Donald B. Sharp was killed in the accident and, therefore, his purposes cannot be known. The travel regulations prescribe only that the extra expense of the indirect route is to be borne by the employee or officer taking such indirect route. In Section XV of the travel regulations, it is stated that travel not exceeding twenty-five miles from the South Dakota boundary line shall be considered as instate travel. There was evidence that Donald B. Sharp never reached Sioux Falls, South Dakota, which tends to show that an indirect route was taken. There was evidence that Donald B. Sharp had not registered at any hotel or motel in Sioux Falls. The evidence that he might have been driving around the countryside close to Sioux Falls to cool off on this warm summer night is not inconsistent with this. Neither is the evidence that the Sharp car may have been pointed east at the time of the accident inconsistent with the taking of an indirect route or of an interruption of travel for the convenience of Sharp. There is no evidence that Sharp did not bear any extra expense, or that he had not done this in the past.

Donald B. Sharp in no way violated any express travel instructions. There were no allegations made or evidence of any violation of any express instructions.

Exhibits B and C also deal with certain travel restrictions. These restrictions in exhibits B and C, as shown by the evidence, were not intended to apply to employees in the status of Donald B. Sharp. Exhibit C states that no State owned vehicle shall be used for personal convenience of the traveler including driving the vehicle to and from work, and all vehicles must be parked at night and on non-work days in designated parking lots. The testimony was uncontested that Donald B. Sharp had permission to take the automobile home in the evening with him. There is evidence from his wife that Donald B. Sharp used the automobile sometimes in the evenings and on the weekends around his home. It was not admitted on direct examination but was admitted reluctantly on cross-examination of the wife of Donald B. Sharp. Plus, at least on one occasion, he detoured to Highmore, South Dakota, to see his son and sometimes his wife rode in the state car with him.

In depositions of Mr. Ernest L. Johnson, Secretary of Agriculture for the State of South Dakota, and Mr. Stanley Fosnes, the Assistant Director of the Division of Purchasing and Printing, the issue of the affect of the regulations was gone into. The evidence was that the clause in Exhibit C stating that the Department, institution and agency heads shall be responsible for the limitation in use of any passenger vehicles in the custody of their respective department, institution or agency, left discretion in the head of the particular agency as to the use to be made of the automobiles in their agency.

Travel directives are sent to the heads of the agencies, and the head of a particular agency then distributes whatever he desires to the particular employee. This is the procedure according to the knowledge of Mr. Fosnes. Mr. Johnson stated that he did not know what instructions had been given to Donald B. Sharp with respect to the use of the state-owned car. The records, according to Mr. Johnson, showed that a state-owned car had been assigned to Donald B. Sharp.

It is admitted by stipulation that Donald B. Sharp was driving the 1956 Ford Mainline automobile with license number 39 owned by the State of South Dakota, Department of Agriculture, and that it was furnished him for the purpose of use in connection with his duties at the time of the collision. This automobile is listed as the 13th car in the policy of insurance issued by the American Universal Insurance Co. to the State of South Dakota, Department of Agriculture. This automobile was covered by this policy when an employee of this Department was operating the automobile with permission.

IMPLIED AUTHORITY OR SLIGHT DEVIATION

It is not necessary for the Court to make a finding as to implied authority or as to deviation because there was express authority for the use in this case. However, even if there was not express authority, the deviation would be incident to the purposes of his employer, that is, travel to Sioux Falls for the convention. Also, there was evidence of such prior personal use of the automobile whereby it might be inferred that it was being acquiesced in. However, the reason for this acquiescence was that it was expressly allowed by the travel regulations.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

The Court makes the following findings and conclusions:

1. That the authority given in the travel regulations marked Exhibit A were in effect at the time of the collision.

2. That the limitations existing in the directives shown as Exhibits B and C were not carried into effect as to this particular employee, Donald B. Sharp; and that the department for which Donald B. Sharp was working did not follow the directives given in Exhibits B and C and the department had the above mentioned discretion to govern the use of the automobiles under its custody.

3. There was permission to use the automobile in question for the trip to Sioux Falls to attend said meeting or convention and this is undisputed. The exact purpose for which the car was being used at the time of the collision cannot be determined because Donald B. Sharp is deceased. However, there was some evidence that he may have been taking an indirect route to Sioux Falls. This is the most logical conclusion and the Court finds it to be the fact.

4. That the evidence shows that there was permission to use the state-owned car generally and permission to use it at least for some personal purposes.

5. That Donald B. Sharp made some use of the automobile in question for personal purposes in and around his home on weekends and in the evenings, and that he had permission to have the.automobile with him day and night.

6. That the use of the state-owned car by Donald B. Sharp at Sioux Falls was completely consistent with the permission as shown in the travel regulations and consistent with the general permission Donald B. Sharp had to use the car and consistent with the permission he had to use the car for personal purposes.

7. That the named insured in the American Universal policy was the Department of Agriculture of the State of South Dakota, and listed as such in this policy.

8. That the actual permission given to Donald B. Sharp to use the automobile was given to him by the Department of Agriculture of the State of South Dakota pursuant to the Department’s authority over the automobiles used by that Department.

9. That at the time of the collision with the Dieren automobile, Donald Sharp was enroute to his place of lodging in Sioux Falls, South Dakota, pursuant to his orders to attend a convention there. For this reason, he was using the vehicle for his employer’s purposes. His use of the vehicle for a personal purpose, if any, would be only incidental to this purpose of his employer.

The cases dealing with the definition of permission in automobile liability insurance policies are annotated in 5 A.L.R.2d. Authorities have generally classified the cases into three groups, the strict rule, the slight deviation rule, and the initial permission rule. The slight deviation rule appears to be the majority rule with the initial permission rule the second most popular. It is, however, really impossible to categorize the cases on this basis because the facts in the cases may be the reason for the differences in results and not so much the rule that the court is using.

At any rate, there are no South Dakota cases on this problem except Stoll v. Hawkeye Casualty Co., 8 Cir., 193 F.2d 255, which arose in the Federal Court but was required to use South Dakota law. The Court recognized that there was no South Dakota case on the problem, and without saying exactly which of the rules it would use, the Court attributed a liberal rule to the South Dakota law.

The word “permission” as used in the American Universal insurance policy, marked as Plaintiff’s Exhibit 1 in this case, means actual permission express or implied.

Implied permission is actual permission circumstantially proven. Traders & General Insurance Co. v. Powell, 177 F.2d 660, 666-667 (8th Cir.); Stoll v. Hawkeye Casualty Co., supra. In the case at bar, there was express permission given in the travel regulations found in Exhibit A. The travel regulations say that an indirect route can be taken by the employee. The State owned car can be used for taking the indirect route and the travel can be interrupted by the employee. The employee could do this whenever it was for his convenience. There was evidence that he was for some reason taking an indirect route into Sioux Falls. It may have been because of the weather.

To show implied permission, it is necessary to show that there were prior times in which the automobile was used in ways and for purposes similar to the use in question and that the prior use of the automobile was known by the named insured, in this case the Department of Agriculture of the State of South Dakota, or that the prior use was under such conditions that the named insured must have known. This inference that the named insured knew of the prior use of the automobile, which inference arises when the facts are such that the named insured must have known of the prior use, is sufficient to allow the trier of fact to find that the named insured did know. Traders & General Insurance Co. v. Powell, supra; United States Fidelity & Guaranty Co. v. Smith, 279 F.2d 678 (9th Cir.); State Farm Mutual Automobile Insurance Co. v. Cook, 186 Ya. 658, 43 S.E.2d 863, 5 A.L.R.2d 594; Stoll v. Hawkeye Casualty Co., supra.

In the Stoll case, the Court did not go so far as to say that it had to be proven that the named insured knew of prior similar use, but rather said that facts and circumstances such as the relationship of the parties and the nature of the express permission may justify an inference that there was actual permission broader than the express permission. In this case, there was express permission allowing Sharp to use the automobile in question for non-business purposes. There was permission to use the automobile for personal missions. There was permission to keep possession of the automobile both day and night. These are factors which courts have said tend to create an inference of implied authority, that is, that the actual authority was broader than the express authority. Stoll v. Hawkeye Casualty Co., supra; Traders & General Insurance Co. v. Powell, supra.

Donald Sharp was not on a deviation from his actual permission at the time