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Shulins v. New England Ins. Co.

decided: May 13, 1966.


Lumbard, Chief Judge, Hays, Circuit Judge, and Clarie, District Judge.*fn*

Author: Clarie

CLARIE, District Judge:

The plaintiff's decedent, Martin O. Lindholm, was killed when the car he was operating was struck by a vehicle driven by the defendant, Francis Delorme, an unlicensed 15-year-old service station employee. In a prior suit based upon that accident, the decedent's estate by its Administrator, Maurice L. Shulins, the plaintiff herein, sued the driver, his employer, the owner of the vehicle, and the driver's brother, Stanley Delorme.*fn1 The latter was alleged to have contributed to the accident because he was racing with his brother at the time.

The trial court's findings summarized the evidence at the prior trial as follows: on the day of the accident, Francis Delorme was employed after school hours at the filling station owned and operated by Aimee Ferland. Allen C. Foy, Sr., owner of a 1957 Ford Sedan, brought it to the Ferland Filling Station to have the windshield wipers repaired. At the request of Mr. Foy, Francis Delorme rode home with him, a distance of about two blocks or.2 of a mile, so that Delorme might drive the car back to the filling station to complete the repairs. When the work was finished, Ferland directed Delorme to park the car outside next to the garage building. Between nine and ten o'clock that evening, Francis Delorme took the Foy car and went for a ride up Mendon Mountain Road, following his brother Stanley who was in another car. After traveling about five miles, Francis Delorme turned around and started back. It was on the return trip that he collided with the vehicle operated by the plaintiff's decedent.

After the plaintiff rested his case in the first suit, covenants not to sue were executed in favor of the service station proprietor, Aimee Ferland, and Stanley Delorme. The jury rendered a plaintiff's verdict in the amount of $50,000 against the driver of the car, Francis Delorme, but found a defendant's verdict for the owner of the car. This action was then brought against the defendants, Francis Delorme and the New England Insurance Company, insurer of the vehicle under the omnibus clause in the owner's insurance policy.*fn2 It seeks recovery on a two-fold basis: (1) that the driver was in possession of the automobile with the permission of the owner; and, (2) that the insurance company failed to exercise proper care and prudence in refusing to settle the claim within the policy limits of $20,000 and is, therefore, liable for the full amount of the $50,000 judgment.

On motion of the defendant insurance company, the District Court dismissed the complaint as against Francis Delorme because of the prior valid judgment and granted summary judgment in the insurer's favor. It reasoned that the issue of permission had been "squarely put to the jury" in the prior suit against the Estate of Allen C. Foy, Sr., and the jury had found that the driver had no right whatsoever to the use and possession of the Foy car at the time of the accident. It held further that the defendant insurance company, while not an actual party to the prior action, was a party-privy to the named insured, Allen C. Foy, Sr., and in the light of the jury's verdict on the "permission issue" in the first trial, had standing to claim res judicata or estoppel by verdict.

The Court concluded, when it denied plaintiff's motion for amendments and additions to the findings, that even if the plaintiff were not bound by the jury verdict in the prior suit, under Vermont law the trial record's disclosure of the facts surrounding the accident would not permit a finding that Francis Delorme was driving with the owner's (Foy's) permission. It decided that the defendant, New England Insurance Company, was entitled to a judgment as a matter of law.

That part of the District Court's decision which holds that the plaintiff is estopped by the jury verdict in Civil Action No. 2857 and that he cannot now assert that the defendant operator was driving the automobile pursuant to the "permission coverage" of the insurance policy is in error and cannot be sustained. However, we affirm the summary judgment in favor of the defendant-insurer because the facts as disclosed by the transcript of the prior trial do not permit a finding that Delorme had "permission" to operate Foy's car at the time of the accident.

The doctrine of estoppel by verdict is a phase of the doctrine of res judicata. It is applicable only to the parties or their privies to the previous suit, when the particular point in issue was essential to the former judgment. Thus, such judgment can be an absolute bar to a subsequent action only where the parties and the subject matter are identical or substantially so. Trapeni v. Walker, 120 Vt. 510, 144 A.2d 831 (1958); Cutler v. Jennings, 99 Vt. 85, 130 A. 583 (1925).

Here, the legal relationship of the parties in the prior suit is identical to or in privity with that of the parties in the instant action. The plaintiff is identical and the defendant insurance company is the one which insured and represented the Foy estate in the prior suit. The same insurer undertook the defense in the prior action, retained the same legal counsel and carried the action to final judgment under its policy obligations. Even though it was not a named party in the prior action, privity did exist. Jones v. Zurich Gen. Acc. & Liab. Ins. Co., 121 F.2d 761 (2d Cir. 1941); Morin v. Travelers' Ins. Co., 85 N.H. 471, 160 A. 482 (1932); Clinchfield R.R. Co. v. United States Fid. & Guar. Co., 160 F. Supp. 337 (E.D. Tenn. 1958). However, notwithstanding privity between the parties, the legal issues to be resolved were not identical. The instant action is based solely upon the omnibus clause in the insurance policy and the allegation that Francis Delorme's operation of the Foy vehicle was within its terms. The jury verdict in the prior action did not resolve this issue.

The first suit predicated the allegation of Foy's liability on two premises. First, that Delorme was acting as the servant or agent of Foy at the time of the accident; and second, that Foy had permitted an unlicensed driver to operate his automobile in violation of a Vermont safety statute and that said violation was the proximate cause of the accident. While the use of an automobile in an agency context necessarily presupposes the "permissive" use thereof, the converse is not necessarily true. See American Fid. Co. v. North British & Mercantile Ins. Co., 124 Vt. 271, 204 A. 2d 110 (1964). Thus, a finding that there was no agency relationship does not necessarily determine the absence of "permission" or consent.

The applicable rule is stated in 12 Couch, Cyclopedia of Insurance Law, ยง 45:305 (2d Ed. 1964), as follows:

"In order for the operator to be an additional insured within an omnibus clause, it is not necessary that there be a relationship of master and servant between the owner and the operator; protection may be accorded independent contractors, the employees of an independent contractor, lessees, and an employer.

"In view of the omnibus clause, a policy insuring against liability when the insured's car is used for business and pleasure affords protection to a borrower while using the car for his own purposes with the insured's permission. Under such a policy liability is not limited to cases ...

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