New Jersey's Initial Permission Rule
Over the next few weeks, I will be discussing an interesting aspect of New Jersey insurance coverage called the intial permission rule.
Scenario 1 - Husband loans his wife’s car to next door neighbor so that neighbor can visit her ill mother. After a short visit with her mother, neighbor drives to a tavern in search of her sister. She had a few drinks at the tavern and then drove to another bar. She went back and forth between the two establishments over several hours before heading home. On the way home, she is involved in a collision with another car. Insurance carrier denies coverage stating that the neighbor used the vehicle outside the scope of the permission granted.
New Jersey follows the “initial permission” rule in determining coverage issues under these circumstances. The rule, adopted by the New Jersey Supreme Court in Matits v. Nationwide Mutual Insurance Co., 33 N.J. 488, 497 (1960) (scenario 1) provides that “if a person is given permission to use a motor vehicle in the first instance, any subsequent use short of theft or the like while it remains in his possession, though not within the contemplation of the parties, is a permissive use within the terms of a standard omnibus clause in an automobile liability insurance policy.” Therefore, the carrier was required to provide liability coverage for the vehicle.
To be continued ...
