Court Opinion

ID: 8911992
Source: CourtListenerOpinion
Date Created: 2022-11-27 03:22:43.513796+00
Date Added: 2024-06-11T17:08:36.612035
License: Public Domain

SWYGERT, Circuit Judge,
dissenting.
The pivotal issue in this case is whether Kathy J. Arnold, who drove the Heidenreich automobile with the permission of Mrs. Heidenreich’s daughter, Mrs. Willetta Sue Heath, was an insured as that term is defined in the policy. The policy provides coverage for the named insured (in this case, Mrs. Heidenreich) and “any other person” driving the automobile (here, Ms. Arnold) if that person (Ms. Arnold) had permission to use the car from an “adult member” of Mrs. Heidenreich’s household (Mrs. Heath) and if that “adult member” (Mrs. Heath) was “authorized” by the named insured (Mrs. Heidenreich) to grant permission.
There is no dispute that Ms. Arnold had the permission of her friend, Mrs. Heath, to drive the automobile that night and that Mrs. Heath was at the time an adult member of Mrs. Heidenreich’s household. The critical question is whether Mrs. Heath was “authorized” by Mrs. Heidenreich to loan the automobile to Ms. Arnold at the time of the accident.
On appeal defendants argue that the authority required by the policy can be any of three kinds: express authority, implied authority, or apparent authority. To base their case on these theories, defendants need to present evidence from which a jury could infer that (1) Mrs. Heidenreich expressly authorized her daughter, Mrs. Heath, to grant Ms. Arnold permission to use the car; (2) Mrs. Heath reasonably implied from what her mother had said that she had authority to loan the car; or (3) Ms. Arnold reasonably concluded from Mrs. Heidenreich’s actions that Mrs. Heath had authority to loan the car, even if Mrs. Heath did not in fact have such authority.
Defendants contend first that their evidence was sufficient for a jury finding of express, or at least implied, authorization. Although a plausible argument can be made that the evidence was sufficient to permit the question of implied authority to go to the jury, I am not prepared to say that the trial judge was wrong in rejecting it.
*1010The judge also rejected the contention that Mrs. Heath may have had apparent authorization to loan the car to Ms. Arnold so as to permit that issue to be submitted to the jury. He ruled out of hand that the omnibus clause was not to be interpreted to include that type of authority. The majority agrees with the district court and concludes that, although the insurance company itself selected the word “authorized” for its policy, the company really intended to use the word “empowered” and thereby to exclude apparent authority as a basis for coverage. Such legerdemain is unpersuasive.
In addition to “actual” authority given an agent by his principal, either expressly or impliedly, Indiana’s law has for nearly a century recognized “apparent” authority. This type of authority is described in Over v. Schiffling, 102 Ind. 191, 196, 26 N.E. 91, 93 (1885):
If the principal holds out an agent or servant as possessing authority to control a shop or place of business, and a third person acts upon the faith of the appearances so created, the principal may, in such a case as this, be bound by the acts of the apparent agent within the scope of his ostensible authority, although as between the agent and his employer no such authority in fact existed.
Ninety years later the Indiana rule was reiterated in Burger Man, Inc. v. Jordan Paper Products, Inc., 352 N.E.2d 821, 832 (Ind.App.1976) (citations omitted):
The apparent authority of an agent is that authority which a third person reasonably believes the agent to possess because of some manifestation from his principal. These manifestations which the principal is required to make to the third person need not be in the form of direct communications, but rather the placing of the agent in a position to perform acts or make representations which appear reasonable to a third person is a sufficient manifestation to endow the agent with apparent authority.
For purposes of apparent authority, the actual arrangements between the principal and the putative agent are irrelevant. Instead, one looks to the appearance of authority with which the principal clothes the agent. The rationale behind this development in the law of agency is that a third person, who may not have knowledge of the actual arrangements or relationship between the principal and the agent, should be able to rely in dealings with a putative agent upon his reasonable expectations garnered from the actions of the principal as to the scope of that agent’s authority. The rationale was succinctly stated in Yellow Mfg. Accept. Corp. v. Voss, 158 Ind.App. 478, 483, 303 N.E.2d 281, 283 (1973) (quoting Farm Bureau Mutual Ins. Co. v. Coffin, 136 Ind.App. 12, 18, 186 N.E.2d 180, 183 (1962)):
When one has the appearance of a general agent the law is clear that a third person dealing with him is not bound to inquire into his specific authority, nor is the principal protected by secret limitations upon the authority of such an agent. The reason for the rule is that where one of two innocent persons must suffer because of the betrayal of a trust reposed in a third, the one who is most at fault should bear the loss. Since the principal put the agent in the position of trust, he is the one who should suffer the detriment.
In this case the trial judge’s ruling that the omnibus clause includes only actual authority, express or implied, was overly restrictive. The clause is not plainly so limited. A broad, rather than a narrow, construction is demanded. Public policy, as expressed by court decisions, requires a liberal construction of insurance contracts in order that coverage be provided whenever possible. Motorists Mutual Ins. Co. v. Johnson, 139 Ind.App. 622, 629, 633, 218 N.E.2d 712, 716, 718 (1966); Norways Sanatorium, Inc. v. Hartford Accident & Indemnity Co., 112 Ind.App. 241, 248, 41 N.E.2d 823, 825 (1942); Home Mutual Ins. Co. v. Automobile Underwriters, Inc., 261 F.Supp. 402, 405 (S.D.Ind.1966).
Sufficient evidence exists in the record in this case to have allowed a jury to find that Mrs. Heath had apparent authority to loan the car to Ms. Arnold. Mrs. Heidenreich provided her daughter, Mrs. Heath, with a set of keys for the car; the latter drove the car back and forth to work and also drove it *1011elsewhere; she transported friends and coworkers, including Ms. Arnold, in the car; and on occasion a relative and co-factory worker drove the car back to the Heidenreich home from work while Mrs. Heath went elsewhere. From these facts, a jury could find that Ms. Arnold reasonably concluded that Mrs. Heidenreich had given Mrs. Heath general authority to use the car and thus authority to allow others to use it.*
Unfortunately, the decision denies defendants the right to have the jury view the evidence in the light of the full coverage of the policy. In short, the majority has denied the defendants their day in court and given the insurance company an undeserved windfall.
I would reverse and remand for a new trial.

 No such apparent authority would be inferable if Mrs. Heidenreich had allowed her daughter to use the car infrequently with express permission required for each use and a narrowly defined scope of authority laid out, or if Mrs. Heidenreich had indicated to Ms. Arnold that her daughter did not have authority to loan the car.