“Initial permission” rule adopted for omnibus liability auto coverage: MITCHELL V. ALLSTATE INS. CO. (SC 1/24/2008)

DATE RENDERED: 01/24/2008

Two issues were up on appeal.  The first was whether the granting of summary judgment was improper with the appellants claiming genuine issues as to the initial permission; and the secon was to adopt the "initial permission" rule.  The facts were that the owner of the car loaned it to her sister who later permitted her son to drive the car whereupon he had a serious accident resulting in fatality.  Allstate denied liability coverage claiming the driver did not have permission from the owner with some evidence that the owner only permitted her sister’s son to drive it to work and not to drive around town with his friends.  The accident did not happen within the scope of the claimed permission.  As to the extent of the permission given by the owner, the appellant claimed that should have gone to the jury.

However, SCOKY bypassed the summary judgment rule by adopting the "initial permission" rule, which defines the scope of permission one has to use a borrowed vehicle. 

The SC addressed the rules regarding permission to drive within the context of the omibus liability coverage.  The harshest rule is the "strict" rule which holds that coverage only exists if the use of the vehicle was one intended by the parties.  The intermediate rule is the "minor deviation" rule, where coverage is extended under an omnibus clause as long as the deviation from the granted permission in using the vehicle is "slight and inconsequential, but not if it is substantial."  Kentucky courts have historically applied the "minor deviation" rule in determining whether or not a deviation from the scope of permission invalidates coverage.

The third rule is the "initial permission" rule which allows for coverage even if the use of the vehicle was "not within the contemplation of the parties or was outside any limitations placed upon the initial grant of permission."  Thus, as long as the original taking of the vehicle was with the permission of the named insured, any subsequent use of the vehicle by the borrower would be covered by the policy. 7 Am. Jur. 2d Automobile Insurance § 235 (2007). Any subsequent change in the character or scope of the use does not require express permission from the insured. Id. Such a change in the character or scope may involve the vehicle’s initial borrower allowing a secondary user to borrow the car without the insured’s express permission . Id. Even a person who was specifically prohibited from using the vehicle by the named insured can be covered through the omnibus policy if that specific person obtained consent from the initial borrower.

The ‘minor deviation’ rule had never been examined within the context of the Kentucky Motor Vehicle Reparations Act, and this Court conclude the ‘initial permission’ rule was consistent with the purpose of the MVRA.  Although the SC had previously reaffirmed the permissive use rule continued with the adoption of the MVRA in Preferred Risk v. Kentucky Farm Bureau that case did not address the standard to apply.


Note:  I was the attorney representing KFBM in Preferred Risk v. KFBM who represented and argued the continued application of the permissive rule after the promulgation of the MVRA.  However, in that case there was no question that the defendant driver had stolen the vehicle and did not have permission when he intentionally struck another car with it; he did not have permission of the owner or the owner’s daughter who had permission.  This explains why virtually all of the cases relied upon in the Preferred Risk v. KFBM case back in the early 1990’s which had knocked down exclusions and expanded coverage failed to turn back the permissive use rule.  However, within the context of today and the question presented proved to be adequate to the task of redefining permissive use and thus proved sufficient to change the permissive use rule from minor deviation to initial permission.

Interestingly enough, most "conservative" judges like the easy application of rules, and the initial permission rule is clearly an easier rule to apply and less fact-determinative than attempting to apply successive minor deviations within the context of the initial permission. 

The permissive use rule existed before the MVRA, and the MVRA did not change that rule.  However, nothing stops the Court from redefining a rule within the context of today and addressing the question presented.  Justice Liebson referred to this as the moving "stream"  of the law, but I believe Justice O.W. Holmes called it simply interpreting the law within the context of experience.

Please note: I reserve the right to delete comments that are inappropriate, offensive or off-topic.

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