Opinion
1:03-cv-00020-JDT-TAB.
October 12, 2004
ENTRY ON CROSS-MOTIONS FOR SUMMARY JUDGMENT FILED BY PLAINTIFF AND DEFENDANT ADCOCK (DOCKET NOS. 38, 43)
This Entry is a matter of public record and may be made available to the public on the court's web site, but it is not intended for commercial publication either electronically or in paper form. Although the ruling or rulings in this Entry will govern the case presently before this court, this court does not consider the discussion in this Entry to be sufficiently novel or instructive to justify commercial publication or the subsequent citation of it in other proceedings.
This case involves a dispute over insurance coverage. The Plaintiff Travelers Indemnity Company of Illinois ("Travelers") and Defendant Morgan R. Adcock ("Adcock") have filed cross-motions for summary judgment. Additionally, Adcock has raised various affirmative defenses. Defendant Alvey has not yet made an appearance. The court essentially must decide in this case whether Travelers must cover, defend, or indemnify Defendant Alvey ("Alvey") for an automobile accident between Alvey and Adcock that occurred on October 24, 2001. The existence of Travelers' liability depends solely on the court's application of the relevant insurance policy, a question of state law. The parties do not dispute that Indiana substantive law governs this case. Alexander v. Erie Ins. Exch., 982 F.2d 1153, 1157 (7th Cir. 1993).
I. BACKGROUND
On October 24, 2001, Alvey, an employee of McDaniel Fire Systems, Inc. ("McDaniel"), became involved in an automobile accident with Adcock while driving a van owed by McDaniel. Alvey worked out of the McDaniel van in order to respond to service calls, and maintained possession of the van at all times so that he could be on-call twenty-four hours per day. He was driving the van home after finishing his day's work when he collided with Adcock. Adcock alleges to have suffered serious bodily injury as a result of the accident.
Prior to the accident on October 24, Alvey consumed several alcoholic beverages. His blood alcohol level at the time of the accident was more than twice the legal limit in Indiana. As such, Alvey was convicted for drinking and driving and subsequently incarcerated. Alvey's collision with Adcock in 2001 was his second accident while driving a McDaniel van in an inebriated state, the first being an April 2000 accident for which he was also convicted of drinking and driving.
At the center of this case is an insurance policy (Policy Number VTJCAP 323D3471) issued by Travelers to McDaniel that was in full force and effect on the date of the accident between Alvey and Adcock. As part of the policy, Travelers provided McDaniel with "business auto coverage." This coverage requires Travelers to "pay all sums an `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 also contains a legally required omnibus provision, defining an "insured" as "[a]nyone else while using with [McDaniel's] permission a covered `auto' you own, hire or borrow. . . ."
As a result of the October 24, 2004 accident, Travelers investigated the situation and negotiated a settlement of Adcock's property damage claim. Travelers paid Adcock by check for both his interest and the interest of his lender in his 1998 Saturn automobile, a total of approximately $10,122.
The foregoing facts are undisputed. What the parties do dispute, however, is whether Alvey was driving the McDaniel van with his employer's permission at the time of the accident with Adcock. This is the primary issue before the court at this stage of the litigation. In its Reply Brief, Travelers' has submitted an affidavit of Michael Alvey ("Michael"), Alvey's brother and supervisor at McDaniel on the date of the accident, in which Michael states that he informed Alvey in April 2000 of a company policy against drinking and driving, and that Alvey had no permission to drink and drive when using a McDaniel vehicle. By contrast, Adcock has submitted the deposition of Alvey himself in which he states that there was no policy, written or oral, at McDaniel regarding drinking and driving, and that no one at the company ever told him he had no permission to drink and drive while on the job.
Travelers has filed a complaint for declaratory judgment, and in its motion for summary judgment asks this court to find that it is under no obligation to defend or indemnify Alvey because Alvey was not driving with McDaniel's permission at the time of the accident with Adcock. Defendant Adcock answered the complaint and raised the affirmative defenses of "failure to state a claim" and "waiver and estoppel." Adcock has also filed a motion for summary judgment, asking the court to find that Travelers is under a duty to indemnify and defend Alvey because Alvey was driving with McDaniel's permission, or, in the alternative, because Travelers waived the defense of non-permitted use when it paid Adcock's property damage claim. It is the parties' cross-motions for summary judgment to which the court now turns.
The court must reject Adcock's purported affirmative defense of "failure to state a claim." Dismissal for failure to state a claim is appropriate only if "`it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations.'" Ledford v. Sullivan, 105 F.3d 354, 356 (7th Cir. 1997) (quoting Hishon v. King Spalding, 467 U.S. 69, 73 (1984)). When addressing Adock's argument the court must accept as true all factual allegations in the complaint and draw all reasonable inferences in favor of the plaintiff. Hentosh v. Herman M. Finch Univ. Of Health Scis./The Chi. Med. Sch., 167 F.3d 1170, 1173 (7th Cir. 1999). As a result, the court finds that Travelers has stated a claim upon which relief could be granted.
II. STANDARD OF REVIEW
The purpose of summary judgment is to "pierce the pleadings and to assess the proof in order to see whether there is a genuine need for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986). Summary judgment is appropriate where the pleadings, depositions, answers to interrogatories, affidavits, and other materials demonstrate that there exists "no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c). When deciding a motion for summary judgment, the court considers those facts that are undisputed and views additional evidence, and all reasonable inferences drawn therefrom, in the light reasonably most favorable to the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986); Baron v. City of Highland Park, 195 F.3d 333, 337-38 (7th Cir. 1999). On cross-motions for summary judgment, each movant must individually satisfy the requirements of Rule 56, ITT Indus. Credit Co. v. D.S. Am., Inc., 674 F. Supp. 1330, 1331 (N.D. Ill. 1987), and the traditional rules for summary judgment will apply even though both parties have moved for summary judgment. Blum v. Fisher and Fisher, Attorneys at Law, 961 F. Supp. 1218, 1222 (N.D. Ill. 1997).
III. DISCUSSION
A. Permissive Use
Under Indiana law, insurance contracts are subject to the same rules of interpretation as are other contracts. Eli Lilly and Co. v. Home Ins. Co., 482 N.E.2d 467, 470 (Ind. 1985). The Travelers insurance policy at issue in this case contained an omnibus provision that defined an "insured" as "[a]nyone . . . using with [McDaniel's] permission a covered `auto' . . ." (emphasis added). Based on this provision, and aside from Adcock's claim of waiver, the parties are in agreement that the key issue becomes whether Alvey was using McDaniel's van with McDaniel's permission at the time of the accident with Adcock on October 24, 2004.
Jurisdictions throughout the country analyze the issue of permissive use by applying one of several different approaches. See Vanliner Ins. Co. v. Sampat, 320 F.3d 709, 712 (7th Cir. 2003). Indiana adheres to the so-called "liberal rule" on permissive use. Id. at 713 (citing Warner Trucking, Inc. v. Hall, 686 N.E.2d 102, 106-07 (Ind. 1997)). According to the liberal rule:
[O]ne who has permission of an insured owner to use his automobile continues as such a permittee while the car remains in his possession, even though that use may later prove to be for a purpose not contemplated by the insured owner when he entrusted the automobile to the use of such permittee.Warner Trucking, 686 N.E.2d at 107 (citations omitted). This rule was originally announced by the Seventh Circuit in Arnold v. State Farm Mut. Auto. Ins. Co., 26 F.2d 161 (7th Cir. 1958), and operates so that a deviation in use from that originally intended by the owner of a vehicle will not terminate the owner's initial grant of permission. See Manor v. Statesman Ins. Co., 612 N.E.2d 1109, 1113 (Ind.Ct.App. 1993).
However, the Arnold court noted that in some situations there may be factors that result in a termination of the initial permission. 26 F.2d at 165. The Indiana courts have relied on this language in order to craft an exception to the liberal rule whereby permission is no longer effective if an "express restriction" placed on the permission by an employer or owner is violated. Vanliner, 320 F.3d at 713; see Warner Trucking, 686 N.E.2d at 107; State Farm Mut. Auto. Ins. Co. v. Gonterman, 637 N.E.2d 811, 814 (Ind.Ct.App. 1994) ("when the owner places restrictions on use of the vehicle, violations of such use restrictions may terminate the initial permission"). For example, in Warner Trucking, a truck driver's initial grant of permission was found to have been terminated when he drove after drinking because such action was in violation of a company policy on the use of alcohol. 686 N.E.2d at 107. Similarly, the driver of a city truck was found to have ceased being a permissive user when he drove on a personal errand after having just been told by his supervisor that the truck was to be used solely for driving to and from work. Michael v. Ind. Ins. Co., 469 N.E.2d 1222, 1225 (Ind.Ct.App. 1984).
In the instant case, Travelers has relied extensively on Warner Trucking and the "express restriction" limitation in its motion for summary judgment. As such, Travelers initially pointed to an exchange during Alvey's deposition that played out as follows:
Q: Yeah, but you knew that they [McDaniel] weren't giving you permission to drive their vehicle after you'd been drinking?
A: No. They didn't give me permission to drive that after I'd been drinking, right.
(Alvey Dep. at 12.) Based on this small excerpt, Travelers argues that Alvey, by his own "admission," was not permitted to drive after drinking, and therefore should not be deemed a permissive user when he acted contrary to that rule. However, as Adcock has sufficiently demonstrated, the above-referenced excerpt has been taken out of context by Travelers, and Alvey's deposition as a whole completely dispels the notion that the "express restriction" limitation should apply to this case. For instance, when asked if McDaniel had a policy that employees were not to drive vehicles after consuming alcohol, Alvey replied, "[w]ell, there was nothing ever signed or anything explained to us about that." (Alvey Dep. at 9-10.) To get the complete picture of Alvey's testimony, the following lengthy exchange between Travelers' counsel and Alvey proves insightful:
Q: Did you believe at the time that this accident happened that you had permission to drive that vehicle with the amount of alcohol you drank?
A: Well, I knew it was wrong, but I had no intentions of really stopping. It's something I didn't do very often.
Q: But did you know at the time that the accident occurred that you didn't have McDaniel's permission to drive that vehicle, given the state of your intoxication?
A: Well, no, not the way you're putting it, no. You mean permission? I was on 24 hours service to take that van home. Yeah, I should have been wiser and not driven at all, had somebody come after me. But I had driven that road before in my own personal vehicle, I never had any problems at all.
Q: Problems making it home?
A: Right.
Q: Yeah, but I'm talking about from the standpoint of the owner. Do you believe that you had the owner of that vehicle's permission to drive, given your state of intoxication on the day of this accident?
A: Well, I'm sure they would not want me to drive their vehicle drunk. Did they have anything written or wrote in any of their policies about it? Nothing.
. . . . .
Q: Are you saying that you thought you had McDaniel's permission to drink and drive that truck?
A: No. No, I didn't say I had permission. I'm saying that they have never had a policy saying —
Q: All right. But you knew —
A: Yeah, I knew. As far as knowing better, yes.
Q: Yeah, but you knew that they weren't giving you permission to drive their vehicle after you'd been drinking?
A: No. They didn't give me permission to drive that after I'd been drinking, right.
(Alvey Dep. at 10-12.) From the foregoing dialogue it appears that Alvey did not know or believe that McDaniel had a policy with respect to drinking and driving, one way or the other. However, by seizing on a small excerpt from that testimony, Travelers appears to be drawing the absurd conclusion that because there was no policy restricting drinking and driving, and because McDaniel never expressly gave Alvey permission to drink and drive, that this means Alvey had no permission to drink and drive. At best this is circular reasoning; at worst, Travelers is claiming that companies either actively restrict or actively permit drinking and driving by their employees. The court can only imagine the nightmare that would ensue if companies had policies that expressly authorized their employees to drink and drive! As Alvey opined, Travelers appeared to take it for granted that its drivers would not drive after drinking, yet that is far different from placing an "express restriction" on such activity at the outset. (Alvey Dep. at 10.) The case law clearly holds that the liberal rule on permissive use is only avoided if the owner of a vehicle imposes an "express restriction" that is subsequently violated. Based on Alvey's deposition alone, the court would be compelled to find that under the liberal rule he was a permissive user at the time of the accident with Adcock because there were no policies against drinking and driving in place at McDaniel, or at least none that were communicated to Alvey, and because Alvey does not recall being expressly told he had no permission to drink and drive.
But alas, Alvey's deposition is not the only piece of evidence before the court. Attached to its Reply Brief, Travelers has submitted the affidavit of Michael Alvey, the brother and supervisor of Defendant Alvey at McDaniel at the time of the accident with Adcock. In his affidavit, Michael states that following the April 2000 accident, which again involved an intoxicated Alvey driving a McDaniel van, he and another supervisor at the company told Alvey that he had no permission to drink and drive while using a McDaniel vehicle, and that the company had a policy to that effect. (Michael Alvey Aff. ¶¶ 6-8.) Such a statement is in complete contrast to Alvey's deposition testimony, and comes before the court without any corroboration from other witnesses or documents. Yet, determining the credibility of witnesses is a job for the trier of fact. And while In hindsight it might have been wise for McDaniel to restrict Alvey from driving after his first accident, there is no evidence in the record that shows the company knew of Alvey's continued drinking and driving and failed to act. In other words, more evidence would be required to demonstrate that McDaniel acquiesced to Alvey's conduct. See Manor, 612 N.E.2d at 1114 (implying that acquiescence could be shown by an employer's failure to reprimand employees after learning of their violations of company policy); Hartford Ins. Co. v. Vernon Fire Cas. Ins. Co., 485 N.E.2d 902, 906-07 (Ind.Ct.App. 1985) (finding driver to still be permissive user despite deviation from permitted use where employer observed driver consuming alcohol before leaving in company vehicle and yet took no action; such conduct amounted to acquiescence by employer). If McDaniel had in fact acquiesced, then Alvey would have been a permitted user at the time of the accident. In addition, whether or not McDaniel had a written policy in effect or simply gave oral notice to Alvey as to the company's rules on drinking and driving is of no legal consequence in the "express restriction" analysis. See Manor, 612 N.E.2d at 1111 ("express restrictions" were not reduced to a written policy but were communicated to employee drivers); Michael, 469 N.E.2d at 1225 (employer "told" driver of restriction on permitted use).
Therefore, at this stage of the litigation, the court is bound by the standard of review in summary judgment motions and must conclude that a genuine issue of material fact exists as to whether Alvey was a permissive user at the time of the accident with Adcock.
B. Waiver
In his cross-motion for summary judgment, Adcock has further argued that Travelers waived its ability to assert the defense of non-permitted use when it paid Adcock's property damage claim. Under Indiana law, contractual provisions of an insurance policy may be waived, and an insurer may be estopped from asserting such provisions. Gallant Ins. Co. v. Wilkerson, 720 N.E.2d 1223, 1227 (Ind.Ct.App. 1999) (citations omitted). Moreover, "`the doctrines of `waiver' and `estoppel' extend to practically every ground upon which an insurer may deny liability.'" Id. (quoting Motorists Mut. Ins. Co. v. Johnson, 218 N.E.2d 712, 718 (Ind.Ct.App. 1966). Adcock has pointed to one learned commentator for the proposition that "[t]he making of partial payments necessarily recognizes the liability of the insurer and has been deemed to constitute a waiver of any condition on which nonliability could be predicated." COUCH ON INSURANCE § 239:125 (3d ed. 2004). However, according to the same commentator:
[W]here the insurer makes payment of a separate item and the reasonable intent manifested is that it is only making payment with respect to the item in particular and is not making it as to liability generally, the insurer is not deemed to have waived any defense which it has as to liability for other items and its conduct cannot be deemed to give rise to an estoppel to bar it from so proving.Id. It appears, therefore, that if several claims are levied against an insurer by a single party, and the insurer makes partial payment towards one of the claims, the waiver-andestoppel analysis must nevertheless be performed for each claim individually. Id.
In the Gallant case, cited by Adcock, the court found that the insurer had waived and was therefore estopped from asserting a non-cooperation defense when it assumed the insured's defense, proceeded to trial where a verdict was rendered against the insured, had never attempted to secure the insured's presence at the trial, and had never asserted the defense prior to the trial. 720 N.E.2d at 1229. According to the court, "we will not allow an insurer to `sit idly by and wait until an adverse judgment is entered before raising a dispositive defense.'" Id. at 1230 (citation omitted). The instant case, however, is distinguishable from Gallant. Travelers has not undertaken a defense of its insured without reserving its rights and defenses. Rather, according to the testimony of the Travelers' employee who handled this matter, Travelers paid Adcock's property damage claim because it interpreted McDaniel's collision coverage to be "absolute," so that it would be required to pay regardless of whether Alvey had been a permissive or non-permissive user at the time of the accident. (Voegtler Dep. at 18.) In a strikingly similar case from outside of Indiana, the Georgia court of appeals found that payment of the property damage portion of a claim did not constitute waiver of an insurer's asserted non-coverage defense. Andrews et al. v. Georgia Farm Bureau Mut. Ins. Co., 487 S.E.2d 3, 4 (Ga.Ct.App. 1997). The Georgia court echoed the rule in Gallant by finding that because the insurer had not assumed nor conducted a defense on the insured's behalf without reserving its rights, there was no waiver nor estoppel. Id. These two cases are persuasive. Therefore, because nothing in the record demonstrates that Travelers has assumed or conducted a defense on Alvey or McDaniel's behalf without reserving its rights and defenses, the court finds that Travelers did not waive its defense of non-permitted use by paying Adcock's property damage claim.
III. CONCLUSION
For the foregoing reasons, the cross-motions for summary judgment filed by Plaintiff Travelers and Defendant Adcock (dkt. nos. 38, 43) are both hereby DENIED.
ALL OF WHICH IS ORDERED.