Passenger Who Grabbed Steering Wheel from Driver Not Entitled to Defense and Indemnification Coverage as an "Insured Person"

AUTO – PERMISSIVE USE OR OPERATION – NEGLIGENT ENTRUSTMENT – DUTY TO DEFEND
Progressive Halcyon Ins. Co. v. Giacometti
(4th Dept., decided 4/30/2010)

If a front seat passenger grabs the steering wheel from the driver and causes an accident, is that passenger an "insured person" entitled to defense and indemnification coverage from the vehicle's liability insurer?  In the opinion of four out of five justices of the Appellate Division, Fourth Department, no, she is not. 

While driving her leased vehicle down an interstate highway in North Carolina, for reasons that were in dispute, Shannon Doyle suddenly steered her vehicle to the left.  Her front seat passenger, Amy Giacometti, grabbed the steering wheel and pulled it to the right, causing the vehicle to go off the road, become airborne, and crash among trees, injuring Doyle, Giacometti and backseat passenger, Marle Fiocco.

Giacometti sued Doyle, Fiocco sued Doyle, Giacometti and the vehicle's leasing companies (the GMAC defendants), and Doyle sued Giacometti.  Progressive insured Doyle and her vehicle, but declined to defend or indemnify Giacometti.  Progressive then brought this declaratory judgment action against all parties to determine its coverage responsibilities vis-à-vis Giacometti and the GMAC defendants.  Meanwhile, the GMAC defendants obtained summary judgment in the Fiocco action, dismissing her complaint against them, which had alleged that the GMAC defendants were liable under New York Vehicle & Traffic Law § 388 and for having negligently entrusted the leased vehicle to Doyle.

Progressive's policy for Doyle and her vehicle defined an "insured person" in part as  

any person with respect to an accident arising out of that person's use of a covered vehicle with the express or implied permission of you or a relative. 

Progressive argued that Giacometti did not qualify as an "insured person" entitled to coverage under Doyle's auto policy because Giacometti had neither the express or implied permission of Doyle to use the vehicle when she grabbed its steering wheel and pulled it to the right. State Farm, Giacometti's auto insurer, argued that any use of a vehicle is with permission of the owner pursuant to the presumption in Vehicle and Traffic Law § 388(1) and that, at a minimum, Giacometti's claim that she grabbed the steering wheel to prevent an accident created a question of fact, precluding summary judgment in Progressive's favor.  

On the issue of coverage for Giacometti, the four justice majority agreed with Progressive, holding:

We agree with Progressive that it met its burden of establishing that Giacometti had neither the express nor the implied permission of Doyle to use the vehicle. The evidence in the record, including the deposition testimony of Giacometti, establishes that she did not have express permission to take control of the steering wheel, and we further conclude on the record before us that Doyle did not impliedly consent to Giacometti's use of the vehicle in that manner (see Allstate Ins. Co. v Gill, 192 AD2d 1123; Electric Ins. Co. v Boutelle, 122 AD2d 332). The deposition testimony of Giacometti "that [s]he grabbed the wheel to prevent an accident does not create a question of fact on the issue of permissive use" (Allstate Ins. Co., 192 AD2d at 1123-1124). It is well settled that, "[w]here the provisions of [an insurance] policy are clear and unambiguous, they must be given their plain and ordinary meaning, and courts should refrain from rewriting the agreement' " (United States Fid. & Guar. Co. v Annunziata, 67 NY2d 229, 232; see Fulmont Mut. Ins. Co. v New York Cent. Mut. Fire Ins. Co., 4 AD3d 724, 725). 

We reject the further contention of Giacometti and State Farm Insurance Company, a defendant in appeal No. 1 (State Farm), that any use of a vehicle is with permission of the owner pursuant to the presumption in Vehicle and Traffic Law § 388 (1). Initially, we agree with Giacometti and State Farm that Doyle, as the lessee of the vehicle for a period of more than 30 days, was an owner within the meaning of that statute (see §§ 128, 388 [3]). Furthermore, it is well settled that "proof of ownership of a motor vehicle creates a rebuttable presumption that the driver was using the vehicle with the owner's permission, express or implied ... Once the plaintiff meets its initial burden of establishing ownership, a logical inference of lawful operation with the owner's consent may be drawn from the possession of the operator . . . This presumption may be rebutted, however, by substantial evidence sufficient to show that a vehicle was not operated with the owner's consent" (Murdza v Zimmerman, 99 NY2d 375, 380 [internal quotation marks omitted]). Here, that presumption is inapplicable because it was overcome by substantial evidence that the use was without the permission of Doyle, and we therefore conclude that the court erred in denying that part of Progressive's motion. 

The GMAC defendants argued that Progressive owed defense and indemnification coverage to them in regard to the Fiocco's complaint's assertion of a negligent entrustment cause of action, and the Fourth Department agreed:

"It is well established that a liability insurer has a duty to defend its insured in a pending lawsuit if the pleadings allege a covered occurrence, even though facts outside the four corners of those pleadings indicate that the claim may be meritless or not covered" (Fitzpatrick v American Honda Motor Co., 78 NY2d 61, 63; see Petr-All Petroleum Corp. v Fireman's Ins. Co. of Newark, 188 AD2d 139, 142). Contrary to Progressive's contention, the fact "[t]hat the claimed negligence here is based upon the entrustment of the motor vehicle rather than, for example, its condition, in no way alters the unarguable fact that the claim arises out of the ownership and use of the vehicle" (Progressive Cas. Ins. Co. v Jackson, 151 Misc 2d 479, 483, affd 181 AD2d 1035). Thus, the GMAC defendants are entitled to indemnification from Progressive for their defense of Fiocco's negligent entrustment cause of action against them. 

Although Progressive apparently had afforded defense counsel to the GMAC defendants in the Fiocca action, because it had commenced this declaratory judgment and lost, at least with respect to the GMAC defendants, the majority remitted the matter back to Supreme Court "to determine the amount of reasonable attorneys' fees to which the GMAC defendants are entitled in the declaratory judgment action following a hearing, if necessary[.]"

Justice Eugene Fahey dissented on the issue of coverage for Giacometti under the Progressive policy, pointing out that "use" and "operation" of a motor vehicle are not synonymous or interchangeable, and opining that, in his view, the injuries to Fiocco and Doyle arose out of Giacometti's "use" of the Doyle vehicle as a permissive passenger of it:

In any event, in my view the issue of Giacometti's control of the steering wheel is not dispositive of the coverage issue in this case. Most importantly, the language determining whether Giacometti is an insured under the policy is prefaced by the broad "arising out of" phrase, which is absent from the policies at issue in the Allstate Ins. Co. and Electric Ins. Co. cases on which the majority relies. Moreover, on these facts, the accident, which occurred after Giacometti grabbed the steering wheel from her seat on the passenger's side of the vehicle, was arguably connected with her traveling in the vehicle, which was undeniably a use of that vehicle and a permissive one at that.