Omnibus Clauses and the Issue of Permissive Use

A vast majority of auto insurance policies contain an omnibus clause serving to extend coverage to third parties driving an insured automobile so long as they are driving the vehicle with the permission of a named insured. While such a clause can prove helpful in obtaining a settlement from an insurance carrier in a situation where you are hit by a vehicle being driven by an individual that is not a named insured, insurance carriers may also attempt to deny coverage in reliance upon this clause, stating that the driver did not obtain the necessary permission from a named insured.

At first glance, this may seem like a simple issue to resolve as the named insured either gave the driver the keys and expressly granted them permission to use the vehicle or he did not. However, Pennsylvania courts have held that the permission necessary to elevate a driver to the status of an additional insured does not have to rise to this level.  Even in a situation where the named insured did not hand over the keys, permission may be implied from the relationship between the parties.  Implied permission can be established where it is shown that the named insured saw the third party driving the vehicle and failed to object or where the relationship between the named insured and the driver was such that the named insured should have had knowledge of the third party’s use of the vehicle.  See U.S. Fidelity & Guaranty Co. V. Bilyi, 164 F.Supp. 343 (E.D. Pa. 1958; Com. v. Stair, 681 A.2d 174 (Pa. 1996).

This issue is likely to arise if you are hit by a commercial vehicle being driven by a company employee.  This is especially true if the employee happens to be driving the vehicle for “personal use” at the time of the accident.  In this situation, the insurance carrier is likely to deny coverage stating that the employee was not given permission to use the vehicle for such a purpose.  In a recent case, we were able to overcome such an issue through a showing of implied permission.  In this case, the employer asserted that he never granted the employee that was driving the vehicle permission to drive any company vehicle at any time and that he did not allow any employees to use company vehicles for personal purposes.  However, we were able to obtain testimony from the drivers co-workers and neighbors indicating that the driver did, in fact, drive a company vehicle to and from work on regular basis.  This was sufficient to establish implied permission and as a result we were able to obtain a substantial settlement for our client.