Omnibus Clause In Auto Policy

December 6, 2012

Weatherford attorneys and those in Aledo, Hudson Oaks, Willow Park, Millsap, and other places in Parker County need to know and understand the "Omnibus Clause" in an auto insurance policy.
The Corpus Christi Court of Appeals issued an opinion in 1967, in the case styled Phoenix Insurance Company v. Allstate Insurance Company. The case is still good law.
This is an appeal that arises from a declaratory judgement action and discusses the omnibus clause in Phoenix's auto policy.
The facts of the case were undisputed and those the "Finding Of fact" were as follows:
'1. That Plaintiff, The Phoenix Insurance Company, issued its Policy No. CC53453 covering the vehicle involved in the collision, which said policy was in effect on the date of the accident made the basis of this suit.
'2. That Allstate Insurance Company had issued its Policy of Insurance No. 29847607 covering John DeLane and any members of his household in the driving of the automobile made the subject of the policy of insurance, and any other non-owned automobile which was being driven by John DeLane or his family while such non-owned automobile was being operated with the permission, or reasonably believed to be with the permission of the owner.
'3. That the policy of insurance issued by the Phoenix Insurance Company insured Ralph Gilster, Jr. and any other person operating the insured vehicle with the permission of said Ralph Gilster, Jr.
'4. That James Lee DeLane was a member of the household of John DeLane.
'5. That Ralph Gilster, J. gave express permission to Father Wallace J. Stiles to operate the Gilster vehicle.
'6. That permission to use the vehicle was for the purpose of Father Stiles in his capacity as Assistant Pastor of SAINT MARY'S CATHOLIC CHURCH to go to Corpus Christi, Texas, and return with some students.
'7. That at the time of the accident in question the automobile was being used for the purpose for which it was borrowed.
'8. That Father Wallace J. Stiles in his capacity as Assistant Pastor had implied permission to delegate another party to drive the vehicle.
'9. That Father Stiles did delegate the driving of the vehicle to James Lee DeLane.
'10. That the loaning of said automobile by Ralph Gilster Jr. was not conditioned upon Father Stiles being the only person to drive said vehicle.
'11. That James Lee DeLane had implied permission to use said automobile.
'12. That Ralph Gilster Jr. should have known that Father Stiles in his capacity as Assistant Pastor would likely delegate someone else to drive the vehicle under his general supervision.'
In discussing the case the court pointed out there has been much litigation on the subject of the omnibus clause of an automobile insurance policy. The basic purpose of this provision is to provide liability coverage for the named insured, his family, and anyone using the car with the express or implied permission of the named insured. While the general rule seems to be that the mere permission by the named insured to another to use the insured automobile does not alone authorize the permittee to delegate his right of user to a third person so as to entitle the latter to protection under the omnibus clause, it is well settled that the named insured's permission to a second permittee need not be express, but may be implied from the broad nature of the initial permission, or from the conduct of the parties and the attendant facts and circumstances. A factual determination as to the existence of such implied authority is usually necessary.
In holding that the omnibus clause provided coverage in this case, the court stated, "It has frequently been stated that, as a general rule, the permission given by the named insured to another to use the named insured's car does not authorize the permittee to allow a third party to use the car, and that if the permittee does allow a second permittee to use the car, such use is not 'with the permission of the named insured' as those words are used in the omnibus clause. However, the effect of this strict rule has been greatly diluted by reason of the fact that many of the courts recognizing the rule have substantially modified it by stating that in every case where the first permittee permits another to use the insured automobile, a factual determination must be made whether the initial grant of permission was broad enough to include an implied grant to the permittee of authority to give another use of the automobile and thus render the latter an additional insured under the omnibus clause. A rule distinct from the above, though not in conflict with it, is that where permission has been granted for a specific use, the permittee may have implied authority to delegate permission, but that such authority is restricted to granting permission for the same use for which the initial permission was given."