Appellate Court (N.J.) Holds that Auto Finance Company Not Covered by Borrower’s Auto Policy for Injuries Suffered by Borrower During Involuntary Repossession

In Repossession Specialists, Theodore Van Santen and Americredit, Plaintiffs–Appellants, v. Geico Insurance Company, Defendant–Respondent. Annetta Jackson, Plaintiff, V. Repossession Specialists Inc., Theodore Van Santen And Americredit, Defendants. — A.3d —-, 2012 Wl 86798 (N.J.Super.A.D. 2012), the New Jersey Court of Appeal held, in a matter of first impression, that an automobile finance company was not entitled to coverage under its borrower’s personal automobile policy for injuries sustained by the borrower during the course of repossessing the vehicle. 

The facts were as follows.  In December 2002, Annetta Jackson took out a six-year loan at 17.95 percent interest to purchase a 2002 Isuzu Rodeo. The RISC provided that in the event of a default by failing to make timely payments, the lender had the right to repossess the vehicle.  The loan was ultimately assigned to AmeriCredit. After Jackson defaulted, AmeriCredit asked Repossession Specialists in May 2006 to repossess the Rodeo. Just before 3:00 am on May 9, 2006, Repossession’s employee entered Jackson’s apartment complex’s parking lot with his tow truck to take the Rodeo. After hearing the noise of the truck, Jackson ran to remove some personal items from the trunk of her car, which was already hooked to the tow truck. Jackson climbed on the tow bar and was trying to unlock the trunk when the truck pulled away and Jackson was thrown to the ground, cutting her knee.  Jackson filed suit in April 2008. Repossession’s own E&O insurer accepted coverage. However, Repossession, Van Santen and AmeriCredit also sought coverage from Jackson’s insurer, GEICO, claiming they were a permitted user of Jackson’s auto, and therefore were covered under GEICO’s policy.  The GEICO policy provided liability coverage to “an insured,” stating that “we will pay damages which an insured becomes legally obligated to pay because of: (1) bodily injury, sustained by a person, and (2) property damage, arising out of the ownership, maintenance or use of the owned or non-owned auto.” An “insured” under the policy included Jackson as policy holder and, among others, “[a]ny other person using the auto with your permission. The actual use must be within the scope of that permission.” The policy also covered “[a]ny other person or organization for his [or her] liability because of acts or omissions of” a person insured because he or she was using the automobile with permission.

The Appellate Division denied coverage, explaining that a repossession was not ‘permitted use’ under the borrower’s automobile policy:

Our research discloses no case that has addressed the precise issue. . . . ¶  We conclude that Repossession, as AmeriCredit’s agent, did not use Jackson’s vehicle “with permission,” as we interpret the policy, because Repossession’s use was as of right, and Jackson lacked the power to revoke or prevent Repossession’s use. Use as of right pursuant to irrevocable authority is inconsistent with the concept of permission. We differ slightly with the trial court, which reasoned that Repossession lacked permission because Jackson lacked the power to grant or withhold the repossessor’s use once her car was taken. We believe Jackson lacked the power to withhold or revoke use even earlier — once she granted her lender a security interest.  ¶   As a secured creditor, AmeriCredit was empowered to obtain repossession not only under the contract, but also under the Uniform Commercial Code. See N.J.S.A. 12A:9–609 (stating that “[a]fter default a secured party … may take possession of the collateral” and may do so “without judicial process if it proceeds without breach of the peace”). Thus, regardless of the repossession provision in the installment credit contract, AmeriCredit was entitled by law to repossess once the lender obtained a security interest in the vehicle. Moreover, once Jackson entered the installment credit contract, she lacked any authority to revoke her lender’s right to repossess.  ¶   In support of our interpretation, our highest Court has adopted the view that “permission” incorporates the power to withhold consent. See Giroud v. N.J. Mfr’s Cas. Ins. Co., 106 N.J.L. 238, 241 (E. & A.1930) (“Consent means … to yield when one has the right, power or will not to do so.”) (internal quotations omitted).  ¶  Commentators agree that use as of right is inconsistent with permissive use; and the concept of “permission” connotes the power to grant, withhold and revoke use. “ ‘Permission’ implies the right to withhold permission, so that, where the use is by right, it is not a use by permission.” Patrick D. Kelly, Blashfield Automobile Law & Practice, § 321:42 at 137 (4th ed.2007). “The permission granted must be in the nature of a revocable license, and implies a right to refuse, and does not extend to relationships in which the donor of permission does not have power to terminate the license.” 8 Lee R. Russ & Thomas F. Segalia, Couch on Insurance § 112:6 (rev.3d ed.1997).  ¶  Our conclusion is consistent with public policy and well-settled principles that guide our interpretation of a personal automobile insurance contract. Extending coverage to repossessors as permitted users does not serve an apparent interest of named insureds. See, e.g., Bowler v. Fidelity & Cas. Co. of New York, 53 N.J. 313, 321 (1969) (“It is fundamental … that courts will interpret insurance policy language liberally in favor of the insured.”) To the extent the risks created by automobile repossessors’ negligence are borne by the insurers of the repossessed vehicles’ owners, those costs will ultimately work their way into the rates of the vehicle owners like Jackson. Yet, individual policy holders like Jackson bear no responsibility in choosing the entity that will repossess their car, and exercise no control over the manner in which repossessors use their cars.