Case Title: Allstate Insurance Co. v. Atlanta Casualty Co.

Citation: 

Docket Number: 992352

State: virginia

Court: Virginia Supreme Court

Date: 2000-06-09T00:00:00Z

Document:
Present:  All the Justices 
 
ALLSTATE INSURANCE COMPANY 
 
v.  Record No. 992352 
 
ATLANTA CASUALTY COMPANY 
 
OPINION BY 
 
JUSTICE LAWRENCE L. KOONTZ, JR. 
 
June 9, 2000 
NATIONWIDE MUTUAL INSURANCE COMPANY 
 
v.  Record No. 992354 
 
ATLANTA CASUALTY COMPANY, ET AL. 
 
FROM THE CIRCUIT COURT OF THE CITY OF NORFOLK 
William F. Rutherford, Judge 
 
These appeals, which we have consolidated, involve a 
dispute among three insurance companies concerning the potential 
coverage of their respective motor vehicle liability and 
uninsured/underinsured motorist insurance policies.  The 
dispositive issue is whether, and to whom, ownership of a 
particular automobile was transferred as the result of the owner 
endorsing the certificate of title for that vehicle but leaving 
the name of the transferee blank.1
                     
1For this reason, it is unnecessary to relate in detail the 
specific policy provisions of the insurance policies involved.  
It is sufficient to simply note that these provisions are those 
standard in the motor vehicle insurance industry. 
BACKGROUND 
The parties do not dispute the principal facts.  Shannon 
Scarborough (Scarborough) was at one time the owner of a 1982 
Buick Regal automobile (the Buick).  The Buick had been 
purchased for her by Lawrence Ferrell (Ferrell’s father), the 
father of her boyfriend Sean P. Ferrell (Ferrell).  Scarborough 
was living in the Ferrell household at the time.  Ferrell’s 
father had the Buick titled in Scarborough’s name.  In December, 
1996, Nationwide Mutual Insurance Company (Nationwide) issued a 
motor vehicle liability insurance policy to Scarborough on the 
Buick. 
According to Ferrell’s father, although the Buick was 
purchased for Scarborough to drive “back and forth to work,” he 
intended “to give the car to both Shannon and to [his] son.”  
The Buick was “available for both of them to drive,” but was 
titled in Scarborough’s name alone because his son’s driving 
record would have resulted in a higher insurance rate for the 
vehicle had it been titled in his son’s name.  Ferrell and 
Scarborough each had a set of keys for the Buick, and Ferrell 
drove the Buick “pretty much” whenever he wanted. 
In January 1997, Scarborough planned to move to Georgia to 
live with her father.  Ferrell’s father “told her we were going 
to sell [the Buick] and since it was in her name she’d have to 
sign the title.”  Scarborough thought that “[t]he car didn’t 
 
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belong to me . . . and once [I’d] gone [to Georgia] I’d go ahead 
and sign the title over to [Ferrell’s father].”  While Ferrell’s 
father “was out of town,” Ferrell and Scarborough “got into an 
argument, and she signed [the certificate of title]” leaving it 
and the Buick with Ferrell and moved to her sister’s house.  
Regarding the circumstances of Scarborough’s signing the 
certificate of title, according to Ferrell “[s]he said that she 
was leaving and I asked her if she would sign the title over to 
me because a friend of mine, . . . wanted to buy the [Buick].” 
Scarborough signed her name and entered the date on the 
certificate of title.  However, she did not complete the 
assignment of title by filling in the name of the intended 
transferee in the space provided for that purpose on the 
certificate.  Scarborough understood that she was not to receive 
any money from the transfer of ownership of the Buick.2
After Scarborough signed the certificate of title to the 
Buick and left the vehicle with him, Ferrell “[u]sed [the Buick] 
when [he] needed to” without “ask[ing] anybody’s permission to 
drive the car.”  According to Ferrell, his father had a set of 
keys only to “move [the Buick] in our yard.”  Ferrell made 
                     
2Although the certificate of title was not produced as an 
exhibit at trial, it is undisputed that the space for entering 
the transferee’s name remained blank at all times relevant to 
these appeals. 
 
 
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premium payments to Nationwide on Scarborough’s insurance policy 
because “she didn’t want me to get caught driving [the Buick] 
without insurance.”  Ferrell also “purchased a city sticker, 
inspection sticker and paid the personal property tax and 
everything in February so that it would still be legal.” 
On March 28, 1997, Ferrell, while operating the Buick, was 
involved in an accident with a motor vehicle occupied by Steve 
Vitek and Martha Vitek, resulting in alleged personal injuries 
to the Viteks.  At that time, Ferrell was the named insured 
under a motor vehicle liability insurance policy issued to him 
by Atlanta Casualty Company (Atlanta Casualty) on his 1979 
Plymouth Volare.  At that same time Allstate Insurance Company 
(Allstate) was the issuer of an automobile liability insurance 
policy, including uninsured/underinsured motorist coverage, on 
the Viteks’ vehicle.  Martha Vitek filed a lawsuit against 
Ferrell, alleging that he negligently caused the accident and 
her injuries.  During the pendency of that lawsuit and in 
anticipation of a potential lawsuit by Steve Vitek, Atlanta 
Casualty filed a declaratory judgment suit against Ferrell, the 
Viteks, Nationwide, and Allstate.  Atlanta Casualty sought a 
declaration that it was not required to provide a defense to 
Ferrell or to provide coverage for any liability he might incur 
as a result of the accident.  Atlanta Casualty asserted that the 
Buick was owned by Scarborough at the time of the accident and 
 
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was not a qualified “non-owned vehicle or substitute vehicle 
within the confines of the declaration of [Ferrell’s] policy” 
with Atlanta Casualty. 
Thereafter, Nationwide filed its grounds of defense, 
denying that Scarborough was the owner of the Buick at the time 
of the accident.  Allstate filed an “answer,” asserting that it 
should be dismissed from the proceedings because the motion for 
declaratory judgment made no claim for relief against it. 
Following a hearing at which evidence in accord with the 
above-recounted facts was received ore tenus by the chancellor, 
the parties presented their respective positions to the 
chancellor in oral argument supplemented by trial and letter 
briefs.  In summary, Atlanta Casualty contended that the 
attempted transfer of ownership of the Buick by Scarborough had 
failed because no transferee’s name was entered on the 
certificate of title.  Thus, because the Buick was a non-owned 
vehicle regularly furnished for Ferrell’s use, it was subject to 
an exclusion in his insurance policy with Atlanta Casualty, and 
primary coverage rested with Nationwide as the insurer of the 
Buick under Scarborough’s policy.  Nationwide contended that the 
transfer of ownership was effective and, thus, that the Buick 
was no longer owned by Scarborough, its named insured.  Allstate 
maintained that regardless of whether the transfer of ownership 
had been effective, the Buick qualified as a “non-owned vehicle” 
 
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subject to coverage under Ferrell’s policy with Atlanta 
Casualty. 
By letter opinion dated May 7, 1999 and subsequently 
incorporated by reference in the final order, the chancellor 
ruled that “the Buick . . . was owned at the time [of the 
accident] by Shannon Scarborough.  She had failed to correctly 
and fully endorse the title certificate.  Scarborough’s ‘gift’ 
of the car failed because of an unspecified donee.”  
Accordingly, the chancellor ruled that Nationwide is responsible 
for defending and indemnifying Ferrell for any and all claims 
and lawsuits arising out of the March 28, 1997, motor vehicle 
accident involving Ferrell and the Viteks.  The chancellor 
further ruled that “the Atlanta [Casualty] policy has no 
coverage in this case since the car was owned by Scarborough and 
Ferrell was not using the Buick as a ‘temporary substitute 
vehicle.’ ” 
Prior to the entry of the final order, Allstate sought 
reconsideration by the chancellor of the issue whether coverage 
under Atlanta Casualty’s policy was not also available.  
Allstate asserted that the ineffective attempt to transfer 
ownership of the Buick did not amount to permission by 
Scarborough for regular use of the vehicle by Ferrell and, thus, 
that his policy with Atlanta Casualty would afford coverage for 
his casual use of the Buick. 
 
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In a final order dated July 13, 1999, the chancellor denied 
Allstate’s motion to reconsider and entered judgment for Atlanta 
Casualty in accord with the rulings of his May 7, 1999 letter 
opinion.  We awarded appeals to both Nationwide and Allstate. 
DISCUSSION 
The focus on the determination of the ownership of the 
Buick by the parties here and in the trial court is for the 
obvious reason that “[t]here is no insurance separate and 
distinct from the ownership of the car.”  Nationwide Insurance 
Company v. Cole, 203 Va. 337, 341, 124 S.E.2d 203, 206 (1962) 
(citation omitted).  Accordingly, in its appeal, Nationwide 
contends that the chancellor erred in ruling that Scarborough 
remained the owner of the Buick after she signed the certificate 
of title and surrendered possession and control of the vehicle.  
Allstate contends that regardless of whether the transfer of 
ownership was effective, Ferrell’s use of the Buick was only 
casual and not expressly with the owner’s permission and, thus, 
was not subject to the exclusion in his policy relied upon by 
Atlanta Casualty.  As will become clear, we need address only 
the first of these two issues regarding the ownership of the 
Buick. 
In order to complete the sale of a motor vehicle, it is 
essential that the owner deliver to the transferee a proper 
assignment of title.  Thomas v. Mullin, 153 Va. 383, 391, 149 
 
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S.E.2d 494, 497 (1929).  Code § 46.2-628 governs the manner in 
which a proper assignment of title is made and provides, in 
pertinent part, that “[t]he owner of a motor vehicle . . . when 
transferring or assigning his title . . . shall fully and 
correctly endorse the assignment and warranty of title on the 
certificate of title of the motor vehicle . . . to its purchaser 
. . . and shall deliver the certificate to the purchaser or 
transferee at the time of delivering the motor vehicle.”3
However, Code § 46.2-630 further provides that “[t]he 
transferee shall write his name and address in ink on the 
certificate of title and . . . shall within thirty days forward 
the certificate to the Department with an application for the 
registration of the motor vehicle . . . and for a certificate of 
title.”4  (Emphasis added.)  Accordingly, it is the 
                     
3Code § 46.2-629 also requires the owner to enter the 
vehicle’s odometer reading on the certificate of title at the 
time of transfer.  Failure by an owner to comply with Code 
§ 46.2-629 can result in criminal liability and can prohibit the 
transferee from obtaining a new certificate of title.  The 
certificate of title to the Buick was not produced as an exhibit 
at trial and the record is silent as to whether the odometer 
reading was recorded thereon.  However, as the issue was not 
raised before the chancellor, we do not consider it on appeal.  
Rule 5:25. 
 
4Code § 46.2-631 provides an express exception to the 
requirement of Code § 46.2-630 for a transferee who is “a dealer 
who holds [the vehicle] for resale and operates it only for 
sales purposes under a dealer's license plate.”  Similarly, a 
dealer or other person may receive an unendorsed title along 
with the transferor’s “power of attorney . . . for the purpose 
 
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responsibility of the transferee, not the owner, to enter on the 
received certificate of title the name in which the new 
certificate of title will be issued.  Common experience tells us 
that the purchaser or transferee of a motor vehicle often will 
desire to have the vehicle titled, either jointly or separately, 
in the name of another.  Indeed, that is what occurred in this 
case when Ferrell’s father purchased the Buick and had it titled 
in Scarborough’s name.  Thus, Scarborough’s failure to complete 
the assignment of title by entering the name of the transferee 
on the certificate of title does not, per se, defeat the 
transfer of her ownership of the Buick.  Accordingly, we must 
look to the specific circumstances in this case to determine if, 
and to whom, Scarborough’s ownership of the Buick was 
transferred. 
In order to effect a transfer of the ownership of a motor 
vehicle, two things are required: (1) the owner must actually 
deliver the endorsed certificate of title to the transferee, and 
(2) the owner must deliver possession of the vehicle to the 
transferee.  See Nationwide Insurance Company v. Storm, 200 Va. 
526, 528-29, 106 S.E.2d 588, 589-90 (1959)(holding that delivery 
                                                                  
of assigning the transferor’s interest.”  Code § 46.2-629.  
Accordingly, we emphasize that the views expressed in this 
opinion do not apply to transfers of motor vehicles to dealers 
or to the delivery of an unendorsed certificate of title to an 
attorney-in-fact. 
 
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of possession of vehicle without delivery of certificate of 
title did not transfer ownership even though full payment had 
been received).  Although Scarborough testified that the Buick 
“didn’t belong to” her, the record is clear that she was the 
sole owner of the Buick, as evidenced by the certificate of 
title, even though Ferrell’s father had actually purchased the 
car and “intended to give the car to both [her] and to [his] 
son.”  Accordingly, only Scarborough could transfer ownership of 
the Buick.  Therefore, the subsequent desire of Ferrell’s father 
to have the Buick sold and Scarborough’s acquiescence at the 
time he told her “she’d have to sign the title” are not 
relevant. 
It is clear on this record that following an argument with 
Ferrell, Scarborough desired to leave the Ferrell household and 
Ferrell “had her sign the title.”  Scarborough knowingly signed 
and dated the certificate of title as the owner of the Buick, 
delivered the certificate of title to Ferrell, and left the 
Buick in his sole possession and control.  In doing so, 
Scarborough’s signature constituted the required owner’s 
endorsement under Code § 46.2-628.  Her delivery of the 
certificate of title to Ferrell so endorsed at the time she also 
left the Buick with Ferrell satisfied the further requirements 
of that statute.  Accordingly, Scarborough effected a transfer 
of ownership of the Buick to Ferrell.  Thereafter, it was 
 
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Ferrell’s responsibility under Code § 46.2-630 to complete the 
blank space designed for the transferee on the certificate of 
title. 
The evidence in the record supports the further conclusion 
that Ferrell fully understood that ownership of the Buick had 
transferred to him.  Ferrell thereafter treated the Buick as his 
own.  He drove the Buick whenever he needed to and without 
seeking permission to do so.  Ferrell also paid property taxes 
and a local licensing fee on the Buick, had the vehicle 
inspected as required by law, and paid the inspection fee.  He 
also attempted to maintain insurance on the vehicle by paying 
premiums on Scarborough’s insurance policy.  It is true that he 
failed to apply for a new certificate of title within the time 
period required by law; however, while this might subject him to 
criminal liability, the failure to apply for a new certificate 
of title does not void the transfer of ownership of a motor 
vehicle. 
CONCLUSION 
For these reasons, we hold that the chancellor erred in 
ruling that Scarborough remained the owner of the Buick because 
her “‘gift’ of the car failed because of an unspecified donee.”  
Thus, we will reverse the chancellor’s determination that 
Nationwide has a duty to defend Ferrell and provide coverage for 
any liability he might incur as a result of the accident.  
 
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Ferrell’s ownership of the Buick moots any inquiry into 
Allstate’s contention that the “non-owned vehicle” coverage in 
Ferrell’s insurance policy with Atlanta Casualty would apply.  
Because the chancellor did not consider whether Atlanta Casualty 
would have a duty to defend Ferrell and provide liability 
coverage under his insurance policy if he were the owner of the 
Buick, we will remand the case for further proceedings 
consistent with the views expressed in this opinion. 
Reversed and remanded. 
 
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