Omnibus Clause in Auto Policy Controls

Drunk or Not Driver Had Permission to Use Vehicle

An omnibus clause in an auto policy transfers coverage to a person operating the vehicle with the permission of the named insured. It is a coverage required by statute in most states and exists in almost every auto liability insurance policy. Disputes arise with regard to the extent of the permission.

In Ricky Griffitts v. Old Republic Insurance Company, BNSF Railway Company,
and James M. Campbell, No. SC96740, Supreme Court of Missouri en banc (July 3, 2018) the trial court concluded that since the operator violated rules of his employer, the owner of the vehicle, at the time of the accident, permission did not exist and the insurer was not obligated to defend or indemnify.

FACTS

Ricky Lee Griffitts (“Griffitts”) was rear-ended by James Campbell (“Campbell”), an employee of BNSF Railway Company (“BNSF”), in Springfield, Missouri. Campbell was driving a BNSF company vehicle and was intoxicated at the time of the collision. Numerous lawsuits ensued, including the instant equitable garnishment action that Griffitts filed against BNSF and its insurer, Old Republic (collectively, Respondents), to collect on the unsatisfied $1.475 million judgment entered against Campbell in an earlier action. Griffitts filed this equitable garnishment suit claiming Campbell was a permissive user under the omnibus clause of the insurance policy Old Republic issued to BNSF.

In January 2009, BNSF gave Campbell a BNSF-owned vehicle (“company vehicle”) to use for work purposes. In March 2009, Campbell’s supervisor gave him permission to use the company vehicle to commute between his home in Tennessee and a job site in Springfield, Missouri. BNSF had no express policy or rule detailing what a BNSF employee could (or could not) use a company vehicle for while traveling to, staying near, and working at an out-of-town job site. Campbell regularly used the company vehicle to get meals, go to job sites, and do other necessary errands. Campbell was never told he could not use the company vehicle in this way, nor was he disciplined for doing so. Other BNSF employees corroborated Campbell’s use of the company vehicle in this manner, as they testified they also used company vehicles for the same purposes. While Campbell was working at the job site in Springfield, BNSF was aware the company vehicle was his only means of transportation.

BNSF had rules and polices for other matters. Of particular significance are BNSF’s policy on the Use of Alcohol and Drugs, section 3.1 of which prohibits the use or possession of alcohol “while on BNSF property, on duty, or operating BNSF work equipment or vehicles,” and BNSF’s Maintenance of Way Rule, section 1.5 of which prohibits “the use or possession of alcoholic beverages while on duty or on company property” (collectively, the Company Rules).

Around 5:00 p.m. Campbell joined other BNSF employees to eat barbecue, play video games, and drink alcohol. After a time, a few of Campbell’s coworkers walked him back to his room, where he fell asleep for a few hours. Around 8:30 p.m., Campbell woke up and left the hotel in the company vehicle.

Moments later, Campbell ran the company vehicle into the back of Griffitts’s vehicle, which had been stopped at a traffic light. Griffitts sustained serious injuries from the collision. The police arrived at the scene shortly thereafter. Campbell admitted to the responding officers he had been drinking and felt intoxicated. Campbell was arrested. Subsequent testing revealed his blood alcohol content was more than twice the legal limit. Campbell’s conduct prompted an internal investigation by BNSF and, in April 2009, Campbell was fired for violating the Company Rules.

Griffitts’s third negligence lawsuit against Campbell the circuit court entered a $1.475 million judgment for Griffitts and against Campbell. That judgment went unsatisfied for 30 days, after which Griffitts sued for equitable garnishment action against Respondents on the ground Campbell was a permissive user under the omnibus clause of the insurance policy issued by Old Republic to BNSF.

The circuit court reasoned the Company Rules were rules of authorization or permission. Because Campbell was in violation of the Company Rules at the time of the accident, the circuit court concluded Campbell did not have permission to use the company vehicle at that time and, therefore, was not a permissive user under the omnibus clause of BNSF’s policy. As a result, the circuit court entered judgment for Respondents.

ANALYSIS

It is the public policy of Missouri to assure financial remuneration for damages sustained through the negligent operation of motor vehicles on the public highways of this state not only by the owners of such automobiles but also by all persons using such vehicles with the owner’s permission, express or implied. This public policy is statutory. The Motor Vehicle Financial Responsibility Law requires any insurance policy issued in the state to have an omnibus clause. An omnibus insurance clause requires coverage for the person named therein and any other person using any such motor vehicle or motor vehicles with the express or implied permission of such named insured.

Of particular significance to the Missouri Supreme Court is United Fire & Casualty Co. v. Tharp, 46 S.W.3d 99 (Mo. App. 2001), which is factually similar to the present case. In Tharp, the court of appeals found the omnibus clause of the employer’s insurance policy extended coverage to the employee. The employee had permission to use the company vehicle to get meals after work hours, which is what he was doing at the time of the accident giving rise to the lawsuit. Although the employee violated his employer’s company rules against hauling non-employee passengers and consuming alcohol, the court of appeals found such conduct related to the operation, and not the use, of the vehicle.

Here, the omnibus clause of BNSF’s insurance policy provides coverage for “anyone else while using with your permission a covered ‘auto’ you own, hire or borrow.”

It is undisputed Campbell had permission to drive to and from his Tennessee home to the BNSF job site in Springfield. When Campbell was out of town for work, the company vehicle was his only means of transportation and he was permitted to use the vehicle to get meals and run personal errands. Campbell and other employees had previously (and routinely) used company vehicles for such purposes without any instruction to the contrary or discipline from BNSF. Accordingly, Campbell had “broad, almost unfettered” permission to use the company vehicle while he was traveling to, staying near, and working at an out-of-town job site.

It does not matter, therefore, for purposes of insurance coverage under BNSF’s omnibus clause, that Campbell was drunk because, once use has been permitted, it is immaterial how the vehicle was operated. Campbell’s violation of the Company Rules were restrictions on operation, not use.

Accordingly, the circuit court erroneously declared the law when it concluded Campbell’s violation of BNSF’s rules regarding vehicle operation were sufficient to preclude coverage under the omnibus clause of BNSF’s insurance policy.

ZALMA OPINION

If BNSF wished to limit the use of the vehicle and eliminate omnibus coverage it could have required Campbell to use a taxi or Uber for any travel not required by the job. It did not, it gave him broad, almost unfettered permission to use the vehicle and coverage under the omnibus clause was obvious and required.


© 2018 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com.

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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