Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-alnd-2_13-cv-01835/USCOURTS-alnd-2_13-cv-01835-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 28:1332 Diversity-Insurance Contract

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UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

STATE FARM FIRE AND 

CASUALTY COMPANY,

 Plaintiff,

v.

CAROLYN DENMARK, et al.,

 Defendants.

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Case No.: 2:13-cv-01835-SCG

 

MAGISTRATE JUDGE’S REPORT AND RECOMMENDATION

Plaintiff State Farm Fire and Casualty Company (“State Farm”) asks this 

court to declare it has no duty to defend or indemnify Defendants Betty Carol 

Wren, individually, Betty Carol Wren, d/b/a Loletah’s Salon, or Loletah’s Salon, 

Inc. (collectively, the “Wren Defendants”) for claims asserted against them by 

Defendant Carolyn Denmark (“Denmark”) in an underlying state court action. 

(Doc. 1).1 State Farm moved for summary judgment pursuant to Federal Rule of 

 

1

State Farm also asked this court to declare it had no duty to defend or indemnify the Wren 

Defendants for claims asserted against them by Defendant Carolyn Denmark, as personal 

representative of the Estate of Donald Norman Denmark, Jr., in an underlying wrongful death 

action in Alabama state court. (Doc. 1). State Farm moved for summary judgment on that 

claim. (Doc. 29). After the filing of State Farm’s motion for summary judgment, the underlying 

wrongful death action settled and was dismissed. (Doc. 44). As a result, State Farm’s pending 

motion for summary judgment is due to be denied as moot as to the underlying wrongful death 

action. The undersigned, therefore, addresses only State Farm’s motion for summary judgment 

as to Mrs. Denmark’s underlying personal injury action in this Report and Recommendation. 

However, the same analysis that applies to State Farm’s duty to defend and indemnify the Wren 

Defendants for Denmark’s pending personal injury action would have applied to State Farm’s 

duties with respect to the dismissed wrongful death action. 

FILED

 2016 Jan-08 PM 03:34

U.S. DISTRICT COURT

N.D. OF ALABAMA

Case 2:13-cv-01835-KOB Document 46 Filed 01/08/16 Page 1 of 28
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Civil Procedure 56 (Doc. 29), and Denmark filed a motion to compel discovery 

responses from State Farm (Doc. 36). The motions are fully briefed and ripe for 

review (Docs. 38, 39, 41, 42). After a careful review of the record and for the 

reasons stated below, the undersigned concludes State Farm’s motion for summary 

judgment is due to be granted as to Mrs. Denmark’s personal injury action and 

Denmark’s motion to compel is due to be denied as moot. 

I. STANDARD OF REVIEW

Under Rule 56(a) of the Federal Rules of Civil Procedure, summary 

judgment is appropriate “if the movant shows there is no genuine dispute as to any 

material fact and the movant is entitled to judgment as a matter of law.” “Rule 

56(c) mandates the entry of summary judgment, after adequate time for discovery 

and upon motion, against a party who fails to make a showing sufficient to 

establish the existence of an element essential to that party’s case, and on which 

that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 

317, 322 (1986). The party moving for summary judgment always bears the initial 

burden of proving the absence of a genuine issue of material fact. Id. at 323. Once 

the moving party has met its burden, then the non-moving party must “go beyond 

the pleadings” and point to specific facts in the record to show there is a genuine 

issue for trial. Id. at 324 (citation omitted). A dispute is genuine “if the evidence 

is such that a reasonable jury could return a verdict for the nonmoving party.” 

Case 2:13-cv-01835-KOB Document 46 Filed 01/08/16 Page 2 of 28
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Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). 

“[A] ‘judge’s function’ at summary judgment is not ‘to weigh the evidence 

and determine the truth of the matter but to determine whether there is a genuine 

issue for trial.’” Tolan v. Cotton, 134 S.Ct. 1861, 1866 (2014) (per curium) 

(quoting Anderson, 477 U.S. at 249). The court must “examine the evidence in the 

light most favorable to the non-moving party,” drawing all inferences in favor of 

such party. Earl v. Mervyns, Inc., 207 F.3d 1361, 1365 (11th Cir. 2000). Any 

factual disputes will be resolved in the non-moving party’s favor when sufficient 

competent evidence supports that party’s version of the disputed facts. See Pace v. 

Capobianco, 283 F.3d 1275, 1276-78 (11th Cir. 2002) (a court is not required to 

resolve disputes in the non-moving party’s favor when that party’s version of the 

events is supported by insufficient evidence). However, “mere conclusions and 

unsupported factual allegations are legally insufficient to defeat a summary 

judgment motion.” Ellis v. England, 432 F.3d 1321, 1326 (11th Cir. 2005) (per 

curiam) (citation omitted).

II. FACTUAL BACKGROUND

To the extent any factual inferences are drawn, they are drawn in favor of 

Denmark, the non-movant.2 

 

2

In her response to State Farm’s motion for summary judgment (Doc. 29), Denmark did not 

directly respond to State Farm’s statement of undisputed facts as required by the initial order 

(Doc. 6). Instead, Denmark included a summary of disputed material facts in her response. 

Case 2:13-cv-01835-KOB Document 46 Filed 01/08/16 Page 3 of 28
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A. The Accident and Underlying Suits

This action arises from a tragic car accident resulting in the death of Carolyn 

Denmark’s husband, Donald Norman Denmark, Jr., and causing severe injuries to 

Mrs. Denmark, which rendered her a quadriplegic. (Doc. 41-1, at 5 (18:13-19:3); 

Doc. 41-2, at 6 (23:11-18); see also Doc. 29-1 at 15).3The accident occurred on 

February 27, 2012, when Betty Carol Wren (“Wren”) attempted to turn onto

Highway 157 in Cullman County, Alabama and struck the vehicle in which the 

Denmarks were travelling. (Doc. 29-1 at 15, 150 (46:5-10)). 

Denmark filed a personal injury action against Wren and Allstate Insurance 

Company in the Circuit Court of Cullman County, Alabama on April 19, 2012,

asserting negligence and wantonness claims against Wren and an underinsured 

motorist claim against Allstate. (Doc. 29-1 at 15). Denmark amended her 

complaint on January 4, 2013, to add claims against Betty Carol Wren d/b/a 

Loletah’s Salon and Loletah’s Salon, Inc. (Id. at 18-20). Specifically, Denmark 

added the following allegations:

11. On or about February 27, 2012, defendant Betty Carol Wren 

was operating a business vehicle of Loletah’s Salon at the time 

of the automobile collision and as an agent of Loletah’s Salon. 

 

(Doc. 41 at ¶¶ 1-33). Because several of the facts in Denmark’s summary of disputed facts 

dispute facts State Farm included in its statement of facts, the undersigned will not deem the 

facts in State Farm’s statement to be admitted. 

3 All citations to the record refer to document and page numbers as assigned by the court’s 

electronic filing system, except for citations to depositions, which also include a parenthetical 

with the deposition page number(s) and line number(s).

Case 2:13-cv-01835-KOB Document 46 Filed 01/08/16 Page 4 of 28
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12. As a proximate result of the defendant’s negligence and/or 

wantonness, committed as an agent of Loletah’s Salon, [Mrs. 

Denmark] suffered severe personal injuries and damages. 

[...]

14. On February 27, 2012, defendant Betty Carol Wren was 

operating a business vehicle, classified for business use with 

Loletah’s Salon, Inc. at the time of this automobile collision.

15. As a proximate result of the defendant’s negligence and/or 

wantonness committed while driving a business vehicle of 

Loletah’s Salon, Inc., [Mrs. Denmark] suffered severe personal 

injuries and damages. 

(Id. at 19-20). 

B. The State Farm Insurance Policy Issued to Loletah’s Salon, Inc. 

At the time of the accident, State Farm insured the Wren Defendants under a 

business liability policy issued to Loletah’s Salon, Inc., with coverage limits of 

$300,000 per occurrence.4 (Doc. 41-3 at 3 (11:12-19); Doc. 29-1 at 30; Doc. 41-7 

at 96). Under the policy, State Farm agreed to “pay those sums that the insured 

becomes legally obligated to pay as damages because of bodily injury ... to which 

this insurance applies.” (Doc. 29-1 at 53; Doc. 41-7 at 35). 

The named insured under the policy is Loletah’s Salon, Inc., a business

incorporated on February 10, 2004 with Wren as its president and director. (Doc. 

29-1 at 30; Doc. 41-3 at 9 (34:7-21); Doc. 41-7 at 96). Loletah’s Salon, Inc.,

 

4 As discussed in Section III(A), infra, the parties dispute which specific State Farm policy was 

in force at the time of the accident. 

Case 2:13-cv-01835-KOB Document 46 Filed 01/08/16 Page 5 of 28
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dissolved in or before January 2008, though Wren continued to operate the 

business as a sole proprietorship under the name Loletah’s VIP Salon (the 

“Salon”). (Doc. 41-3 at 10 (38:4-6; 38:14-39:6)). The Salon is a cosmetology 

business that also sells hair and beauty products, jewelry, antiques, and clothing. 

(Id. at 5 (18:18-19:5)). The Salon was a sole proprietorship at the time of the 

accident, with Wren as its sole owner. (Id. at 11 (41:11-42:5)). 

Wren did not notify State Farm when Loletah’s Salon, Inc., dissolved. (Id.

at 10 (38:7-13)). Accordingly, the State Farm Business Liability Policy in force at 

the time of the accident identified Loletah’s Salon, Inc., as the named insured even 

though the corporation was no longer a viable entity. (See Doc. 29-1 at 30; Doc. 

41-7 at 96). If State Farm had been notified that Loletah’s Salon, Inc., had been 

dissolved and the Salon was operated as a sole proprietorship, the named insured in 

the policy would be Betty Carol Wren or Betty Carol Wren d/b/a/ Loletah’s VIP 

Salon. (Doc. 41-8 at 10 (39:11-40:9)).5 

C. Wren’s Vehicle and Activities On the Day of the Accident

Wren was driving a 2001 Lexus RX 3000 (the “Lexus”) at the time of the 

accident. (Doc. 29-1 at 145 (27:1-6)). Wren drove the Lexus as her “full-time 

vehicle,” and she used the Lexus both for personal purposes and to perform errands 

for the Salon. (Doc. 29-1 at 145, 148 (28:12-14; 40:11-14); Doc. 41-3 at 11 

 

5

State Farm is not denying coverage on the grounds that the incorrect entity is named as the 

insured under the policy. (Doc. 41-8 at 19-20 (74:12-77:2)). 

Case 2:13-cv-01835-KOB Document 46 Filed 01/08/16 Page 6 of 28
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(42:14-43:14)). Wren did not own the Lexus; it was owned by her husband. (Doc. 

41-3 at 3-4 (12:18-13:6)). Wren had her husband’s permission to use the Lexus, 

and he knew Wren used the Lexus for the Salon. (Id. at 11-12 (44:11-45:5)). 

There was no written agreement between Wren and her husband about her use of 

the Lexus, and Wren did not pay her husband for her use of the vehicle. (Id. at 11 

(44:8-19)). Wren and her husband claimed all of the Lexus’s mileage from 2012 

as business miles on their 2012 taxes. (Doc. 29-1 at 148 (39:1-14); Doc. 41-4 at 7-

8 (28:18-29:9)). 

On the morning of the accident, Wren drove the Lexus to the Salon to take 

photos for the Salon’s website.6 (Doc. 41-3 at 4 (15:3-15)). After finishing the 

photo shoot at the Salon, Wren drove home to change clothes, and she was at her 

home just before the accident. (Doc. 29-1 at 149 (43:4-6); Doc. 41-3 at 12 (47:15-

48:6)). Wren left her home and was on her way to Hartselle, Alabama, to meet her 

sisters for her birthday lunch at the time of the accident. (Doc. 29-1 at 147, 149

(33:12-20; 43:7-12)). After her birthday lunch, Wren had planned to go shopping 

for the Salon in Decatur or Huntsville. (Doc. 41-3 at 5-6 (18:13-19:20; 21:8-16)). 

Wren and her sisters chose Hartselle as a meeting place in part because it was on 

the way from Wren’s house to Decatur and Huntsville where she planned to shop

for the Salon. (Id. at 5 (19:21-20:9)). 

 

6

The accident occurred on a Monday, a day when the Salon was generally closed. (Doc. 29-1 at 

146-47 (32:18-33:11); Doc. 41-3 at 3 (11:10-11)).

Case 2:13-cv-01835-KOB Document 46 Filed 01/08/16 Page 7 of 28
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Additionally, on the day of the accident, Wren was carrying her business tax 

records in the Lexus “because [she] would periodically work on [her] taxes when 

[she] had a free minute during the day.” (Id. at 4 (16:10-23)). Wren also attested 

in part as follows:

“Being in a small town and doing what I do, my appearance is very 

important to me. The clothes I wear, the way I style my hair and the 

car I drive are all very important to my image. I want people to want 

me to help them look their best so I try to look my best to promote 

that image. Therefore, I am literally always on the job advertising for 

my business.” 

(Id. at p. 4 (14:3-15)).

III. ANALYSIS

The issue before this court is whether State Farm owes a duty to defend and 

indemnify the Wren Defendants for Denmark’s claims against them in the 

underlying state court action. State Farm argues the Wren Defendants are not 

insureds as defined by the policy in force at the time of the accident and, therefore, 

it has no such duty. State Farm also argues that, even if the Wren Defendants 

qualified as insureds under the policy, the policy’s automobile exclusion precludes 

coverage for Denmark’s claims. Finally, State Farm argues there is no coverage 

for the underlying action because the Wren Defendants violated conditions in the 

policy requiring prompt notice of potential claims. 

After careful review of the Rule 56 record, as discussed below, the 

undersigned concludes State Farm has no duty to defend and indemnify the Wren 

Case 2:13-cv-01835-KOB Document 46 Filed 01/08/16 Page 8 of 28
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Defendants in the underlying state court action because the policy’s auto exclusion 

precludes coverage for the claims asserted against them. Because there is no

coverage under the State Farm policy for Denmark’s claims against the Wren 

Defendants, the undersigned does not address State Farm’s argument Wren 

violated policy conditions by failing to provide the insurer with prompt notice of 

the accident. Moreover, because the Rule 56 record establishes there is no 

coverage under the State Farm policy and the documents sought by Denmark in her 

motion to compel are not relevant to that issue, Denmark’s motion to compel is due 

to be denied as moot. 

A. The State Farm Policy in Force at Time of the Accident

To analyze whether State Farm has a duty to defend and indemnify, the 

undersigned must look to the terms of the applicable insurance policy. The parties 

dispute which State Farm policy was in force at the time of the accident. State 

Farm submitted a certified copy of Policy Number 93-BD-M247-7, issued to 

Loletah’s Salon, Inc. (the “Certified Policy”), with its motion for summary 

judgment, and a custodian of records for State Farm certified it was the policy in 

effect on the date of the accident. (Doc. 29-1 at 29-97). Indeed, the renewal 

certificate for the Certified Policy supports that assertion and indicates the 

Certified Policy was in effect from May 4, 2011, to May 4, 2012. (Id. at 30). The 

renewal certificate also identifies the policy form as FP-6103 and the amount of 

Case 2:13-cv-01835-KOB Document 46 Filed 01/08/16 Page 9 of 28
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coverage as $300,000 per occurrence. (Id.). 

On the other hand, Denmark contends the “only contract delivered to Betty 

Wren by State Farm is Exhibit 7” to Denmark’s Opposition. (Id.). That exhibit, 

however, is not a single contract or policy. Rather, it is an affidavit from Wren 

attaching three exhibits relating to different State Farm policies. (Doc. 41-7 at 1). 

In her affidavit Wren attests: 

“[Her] customary practice is to keep all of [her] insurance policies in a 

file. I have searched that file and I found three State Farm policies. I 

am attaching all three of those insurance[] policies to this affidavit as 

Exhibit A, B and C. [] I received these insurance policies in the 

United States Mail. [] To my knowledge, these are the only insurance 

policies that I received in the mail from State Farm.”

(Id.). Two of the exhibits attached to Wren’s affidavit had effective dates either 

before or after the accident, so they are clearly not the policy in force on the date of 

the accident. First, Exhibit A is a renewal certificate for Business Policy Number 

93-GO-4216-6 identifying the policy form as FP-6103 and listing the policy’s 

effective dates from October 25, 2006, to October 25, 2007. (Id. at.4). Next, 

Exhibit C is Business Policy Number 93-BD-M247-7 with a declarations page 

identifying the policy form as CMP-4100 and listing the policy’s effective were 

dates as May 4, 2012, to May 4, 2013. (Id. at 96, 100). Since neither of the 

policies referenced in Exhibits A and C was in effect on February 27, 2012, neither 

is the policy that was in force at the time of the accident. 

Exhibit B to Wren’s affidavit is the insurance policy Denmark relies upon to 

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support her arguments for coverage. (See Doc. 41 at 4-7, 11). Exhibit B is an 

undated insurance policy form CMP-4100, and it does not contain any declaration 

pages, endorsements, or a renewal certificate. Moreover, Exhibit B gives no 

indication of the effective dates of the policy or the amount of coverage provided 

by the policy. Accordingly, the form attached as Exhibit B to Wren’s affidavit is 

not a complete policy and provides no evidence regarding which State Farm policy 

was in force at the time of the accident. 

The undersigned finds Wren’s affidavit and the exhibits attached to it are not 

sufficient evidence to create a genuine issue of fact regarding which State Farm 

policy was in force on the date of the accident. Instead, based on the Rule 56 

record, the Certified Policy was the policy in force at the time of the accident. 

Moreover, as discussed below, the undersigned concludes that State Farm has no 

duty to defend and indemnify the Wren Defendants for the underlying suit under 

the terms of either the Certified Policy or the undated policy form Denmark relies 

upon in her opposition to State Farm’s motion for summary judgment. 

B. Alabama Law Regarding the Duty to Defend or Indemnify

Liability insurance policies, such as the business liability policy at issue in 

this action, impose two separate duties on the insurer: the duty to defend and the 

duty to indemnify. Tanner v. State Farm Fire & Cas. Co., 874 So.2d 1058, 1063 

Case 2:13-cv-01835-KOB Document 46 Filed 01/08/16 Page 11 of 28
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(Ala. 2003) (citation omitted).7 The duty to defend is broader than the duty to 

indemnify. Id. Thus, where there is no duty to defend, there is no duty to 

indemnify. Id. As a result, the undersigned begins by analyzing whether State 

Farm owes a duty to defend the Wren Defendants in the underlying suit.

“Under Alabama law, whether an insurance company owes its insured a 

duty to provide a defense is determined primarily by the allegations contained in 

the complaint.” St. Paul Fire & Marine Ins. Co., 572 F.3d at 894-95 (citing United 

States Fid. & Guar. Co. v. Armstrong, 479 So.2d 1164, 1168 (Ala.1985)). If the 

allegations in the complaint do not establish a duty to defend, a court may then 

look to admissible evidence to determine if an insurer owes a duty to defend under 

the policy. Hartford Cas. Ins. Co. v. Merchants & Farmers Bank, 928 So.2d 1006, 

1009-10 (Ala. 2005). 

Courts generally employ a three-step inquiry to determine whether a claim is 

covered by an insurance policy. See USF Ins. Co. v. Metcalf Realty Co., No. 12-

2529, 2013 WL 4679833, *5 (N.D. Ala. Aug. 20, 2013) (citations omitted). First, 

the party seeking coverage under the policy bears the burden of establishing the 

 

7 As a federal court sitting in diversity, the court must apply the choice of law principles of 

Alabama, the forum state. St. Paul Fire and Marine Ins. Co. v. ERA Oxford Realty Co. 

Greystone, LLC, 572 F.3d 893, 895 n.1 (11th Cir. 2009) (citation omitted). Absent a provision in 

a contract specifying which law governs, Alabama applies the law of the state where the contract 

was formed to contract disputes. See Id.; Cherokee Ins. Co. v. Sanches, 975 So.2d 287, 292 (Ala. 

2007). For insurance policies, the state in which the policy was issued and delivered is the state 

where the contract was formed. Cherokee Ins. Co., 975 So.2d at 293 (citation omitted). Because 

this matter involves the interpretation of an insurance policy issued and delivered in Alabama, 

Alabama substantive law applies. (See Doc. 29-1 at 30).

Case 2:13-cv-01835-KOB Document 46 Filed 01/08/16 Page 12 of 28
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claim is covered by the policy’s initial grant of coverage. Jordan v. Nat'l Acc. Ins. 

Underwriters Inc., 922 F.2d 732, 735 (11th Cir. 1991) (“Under Alabama law the 

general rule is that the insured bears the burden of proving coverage.”) (citation 

omitted); USF Ins. Co., 2013 WL 4679833 at *5. Next, the insurer has the burden 

of establishing an exclusion in the policy precludes coverage for the claim. Id.; 

Jordan, 922 F.2d at 735. Then, if a policy exclusion potentially precludes 

coverage for a claim, the burden shifts back to the party seeking coverage to 

establish an exception to the exclusion applies. USF Ins. Co., 2013 WL 4679833

at *5. 

In determining if coverage is provided by a policy, insurance policies should 

be construed “to give effect to the intention of the parties.” Twin City Fire Ins. Co. 

v. Alfa Mut. Ins. Co., 817 So.2d 687, 691 (Ala. 2001) (quoting Attorneys Ins. Mut. 

Of Ala., Inc. v. Smith, Blocker & Lowther, P.C., 703 So.2d 866, 870 (Ala. 1996)). 

Additionally, “it is well established ‘that when doubt exists as to whether coverage 

is provided under an insurance policy, the language used by the insurer must be 

construed for the benefit of the insured.’” St. Paul Fire & Marine Ins. Co., 572 

F.3d at 898 (11th Cir. 2009) (quoting St. Paul Mercury Ins. Co. v. Chilton–Shelby 

Mental Health Ctr., 595 So.2d 1375, 1377 (Ala.1992)). “It is equally well settled, 

however, that insurers have the right to limit their liability by writing policies with 

narrow coverage.” Id. (citing Johnson v. Allstate Ins. Co., 505 So.2d 362, 365 

Case 2:13-cv-01835-KOB Document 46 Filed 01/08/16 Page 13 of 28
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(Ala.1987)). Accordingly, if there is no ambiguity in the terms of an insurance 

policy, a court must enforce the policy “as written and cannot defeat express 

provisions in a policy by making a new contract for the parties.” St. Paul Fire and 

Marine Ins. Co., 572 F.3d at 898 (citing Johnson v. Allstate Ins. Co., 505 So.2d 

362, 365 (Ala. 1987)). 

“While ambiguities or uncertainties in an insurance policy should be 

resolved against the insurer, ambiguities are not to be inserted by strained or 

twisted reasoning.” Twin City Fire Ins. Co. 817 So.2d at 692 (citation omitted). 

Moreover, just because a term is undefined in the policy does not mean the policy 

is ambiguous; rather, “the court should simply give the undefined word or phrase 

the same meaning that a person of ordinary intelligence would give it.” Id.

(citation omitted). Finally, in analyzing the terms of an insurance policy, “a court 

must examine more than the isolated sentence or term; it must read each phrase in 

the context of all other provisions.” Id. at 691 (citation omitted). 

C. Who is an Insured Under the State Farm Policy

Denmark asserts Wren is an insured under the terms of the policy because 

she was driving a non-owned auto and was on the job at the time of the accident. 

(See Doc. 41 at 13). On the other hand, State Farm argues there is no coverage for 

the underlying suit because Wren is not an insured under the terms of the Certified 

Policy with respect to the accident. (Doc. 29 at 11-22). The Certified Policy 

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includes different definitions of “who is an insured” under the policy, and the two 

relevant definitions will be analyzed separately. 

1. Is the Lexus a Non-Owned Auto Under the Terms of the

Policy?

First, the Certified Policy includes a specific definition of “who is an

insured” for claims arising out of the use of a non-owned auto. Specifically, the 

Certified Policy provides in pertinent part as follows:

“With respect to bodily injury or property damage arising out of the 

... use ... of any non-owned auto ... an executive officer of yours ... 

is an insured, but only while such ‘non-owned auto’ is being used in 

your business. 

However, any executive officer ... is not an insured for any auto 

owned or leased by such officer ... or a member of his or her 

household.”

(Doc. 29-1 at 83). Wren was an executive officer of Loletah’s Salon, Inc. (Doc. 

41-3 at 9 (34:7-21)). Therefore, Wren could potentially be an insured under this

definition if the Lexus is a non-owned auto and was being used for the business at 

the time of the accident. 

A non-owned auto is defined in the Certified Policy as “any auto you do not 

own, lease, hire or borrow which is used in connection with your business.”8(Doc. 

29-1 at 65). Neither the Salon nor Wren owned the Lexus she was driving at the 

 

8 The term “you” is defined in turn as “the Named Insured shown in the Declarations and any 

other person or organization qualifying as a Named Insured under this policy.” (Doc. 29-1 at 34; 

Doc. 41-7 at 58). 

Case 2:13-cv-01835-KOB Document 46 Filed 01/08/16 Page 15 of 28
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time of the accident; it was owned by Wren’s husband. (Doc. 41-3 at 3-4 (12:18-

13:6)). Wren did not pay anything to her husband for the use of the Lexus, and 

there was no written agreement between the Wrens regarding her use of the 

vehicle. (Id., at 11 (44:8-19)). Therefore, State Farm rightly concedes the Wren 

Defendants did not own, lease, or hire the Lexus. (See Doc. 29 at 21, n. 20). Thus, 

the question of whether the Lexus is a non-owned auto turns only on whether the 

Wren Defendants borrowed the Lexus.

“Borrow” is not defined by the Certified Policy; therefore, it is given the 

definition a person of ordinary intelligence would give it. Twin City Fire Ins. Co., 

817 So.2d at 692. Black’s Law Dictionary defines “borrow” as “to take something 

for temporary use.” BLACK’S LAW DICTIONARY 221 (10th ed. 2014). Although a 

person must generally have an owner’s permission to borrow an item, neither a 

written agreement nor an exchange of money is required to borrow the item. 

Instead, borrowing usually does not involve any written agreement or 

remuneration. See State Farm Fire and Cas. Co. v. ARC Mfg, Inc., 11 F. Supp. 3d 

898, 905 (D. Minn. 2014); Metzger, v. Country Mut. Ins. Co., 986 N.E.2d 756, 764 

(Ill. App. 2013) (borrowing “does not require that the lending arrangement be 

formalized”). In addition, the “‘frequency of use is not determinative—or even 

pertinent’ in determining whether [an item] has been ‘borrowed.’” Metzger, 986 

N.E.2d at 764 (quoting Gold v. Casserly Landscape, Inc., 812 P.2d 33, 34 (Or. 

Case 2:13-cv-01835-KOB Document 46 Filed 01/08/16 Page 16 of 28
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App. 1991)). Instead, “temporary” as used in the definition of borrow “merely 

describes a lack of permanence” and, with respect to the borrowing of a vehicle,

simply means title to the vehicle does not transfer to the borrower. See ARC Mfg., 

Inc., 11 F. Supp. 3d at 906.

Wren used the Lexus with her husband’s permission, and he knew she used 

the vehicle for the Salon. (Doc. 41-3 at 11-12 (44:11-45:5)). Although Wren used 

the Lexus as her full-time vehicle, her husband retained title to the Lexus, and 

there was no permanent transfer of ownership of the Lexus to either Wren or the 

Salon. Based on this evidence, the only reasonable conclusion a jury could reach 

is that the Wren Defendants borrowed the Lexus from Wren’s husband. Thus, the 

Lexus is not a non-owned auto, and the Certified Policy’s definition of “who is an 

insured” with respect to liability arising from the use of non-owned autos does not 

apply to Denmark’s claims against the Wren Defendants. Moreover, even if the 

Lexus qualified as a non-owned auto, Wren would not be an insured under the 

definition quoted above because the Lexus was owned by a member of her 

household.9 (See Doc. 41-3 at 11-12 (42:14-18; 45:10-14)). 

 

9

The undated policy form Denmark asserts was in force at the time of the accident also includes 

a specific definition of “who is an insured” under the policy “with respect to liability arising out 

of the use of ‘non-owned autos.’” (Doc. 41-7 at 44). The undated policy form defines nonowned auto as:

“any auto you do not own, lease, hire, rent or borrow which is used in connection 

with your business. This includes ‘autos’ owned by or registered to your ... 

‘executive officers’ ... or members of their households, but only while used in 

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2. Was Wren Acting With Respect to the Conduct of the Business at 

the Time of the Accident?

Except with respect to liability arising from the use of a non-owned auto, the 

Certified Policy defines an insured in pertinent part as follows:

“If you are designated in the Declarations as: 

(a) an individual, you and your spouse are insureds, but only with 

respect to the conduct of a business of which you are the sole 

owner; 

[...]

(d) an organization other than a partnership, joint venture or limited 

liability company, you are an insured. Your executive officers and 

directors are insureds, but only with respect to their duties as your 

officers and directors.” 

(Doc. 29-1 at 82). 

Loletah’s Salon, Inc., is designated in the declarations as the named insured

 

your business or your personal affairs.” 

(Id. at 48). As discussed above, the Wren Defendants borrowed the Lexus from Wren’s 

husband. Therefore, the Lexus is not a non-owned auto as defined by the undated policy form 

Denmark relies upon in her opposition to State Farm’s motion for summary judgment. 

Accordingly, just as with the Certified Policy, the undated policy form’s definition of who is an 

insured with respect to liability arising from the use of a non-owned auto does not apply to the 

claims asserted against the Wren Defendants. In addition, even if the Lexus was a non-owned 

auto as defined by the undated policy form, Wren would not be an insured under the form’s 

definition of an insured with respect to liability arising out of the use of a non-owned auto 

because the Lexus was owned by a member of her household. (See id. at 44 (“None of the 

following is an insured: ... Any ... ‘executive officer’ for any ‘auto’ owned by or registered to 

such ... officer or a member of his or her household.”); Doc. 41-3 at 11-12 (42:14-18; 45:10-

14)).

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in the Certified Policy.

10

 (Doc. 29-1 at 30). Based on that designation, Wren, who 

was the president and director of Loletah’s Salon, Inc., is an insured under the 

Policy, but only with respect to her duties as an officer and director. (See Doc. 41-

3 at 9 (34:7-21)). Wren’s duties as an officer and director of Loletah’s Salon, Inc.,

are not specifically identified in the Rule 56 record, nor are they defined in the 

Certified Policy. Construing the policy language in favor of coverage and the 

evidence in the light most favorable to Denmark, it is reasonable to infer Wren’s 

duties as an officer and director of Loletah’s Salon, Inc., overlap completely with 

the conduct of the business of the Salon. 

If the policy declarations correctly reflected the structure of the business at 

the time of the accident, then Betty Carol Wren d/b/a Loletah’s VIP Salon would 

have been designated as the named insured. (Doc. 41-3 at 10-11 (38:4-6; 38:14-

39:6; 41:11-42:5); Doc. 41-8 at 10 (39:11-40:9)). Based on this designation, Wren 

would be an insured, but only with respect to the conduct of the business of the 

Salon. Thus, whether the State Farm policy designated Loletah’s Salon, Inc., or 

Betty Carol Wren d/b/a Loletah’s VIP Salon as the named insured, Wren must 

have been acting with respect to the conduct of the business at the time of the 

 

10 The Certified Policy provides that “Declarations include the policy Declarations ... [and] the 

most recent renewal notice or certificate . . . ." (Doc. 29-1 at 34). 

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20

accident to be an insured under the terms of the Certified Policy.

11

Because it is not defined in the policy, the phrase “conduct of a business” is 

interpreted “according to the meaning a person of ordinary intelligence would 

reasonably give it.” Safeway Ins. Co. of Alabama v. Herrera, 912 So.2d 1140, 

1143 (Ala. 2005). As used in the Certified Policy, the phrase “conduct of a 

business” differentiates between a business owner’s personal and business 

activities. See State Farm Fire & Cas. Co. v. Leblanc, No. 09-76, 2013 WL 

2149750, at *9 (M.D. Ga. May 16, 2013) (“The phrase ‘conduct of business’ 

requires a focus on the purported insured’s activity in determining whether the 

conduct of the business owner was business or personal.”) (quoting Nova Cas. Co. 

v. Anderson, No. 804-2085, 2005 WL 3336496, at *4 (M.D. Fla. Dec. 8, 2005)); 

Society Ins. v. Linehan, 616 N.W.2d 918, 921 (Wis. App. 2000) (interpreting the 

phrase “conduct of a business” and noting that “conduct is either personal or 

business.”). To determine if an insured’s activities are personal or business, courts 

look to the purpose behind the insured business owner’s activities. See Rayburn v. 

MSI Ins. Co., 624 N.W.2d 878, 882 (Wis. App. 2000); Leblanc, 2013 WL 2149750

at *9 (interpreting the phrase “conduct of a business” and noting the insured 

business owner’s activities were not “performed for the purpose of the business”). 

 

11 The undated policy form Denmark relies upon in her opposition contains an almost identical 

provision defining who is an insured under the policy. (See Doc. 29-1 at 82; Doc. 41-7 at 43). 

Accordingly, Wren must have been acting with respect to the conduct of the business of the 

Salon at the time of the accident to be an insured under the terms of the undated policy form 

Denmark relies upon. 

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At the time of the accident, Wren was en route from her home outside of 

Cullman to Hartselle, Alabama to meet her sisters for her birthday lunch. (Doc. 

29-1 at 147, 149 (33:12-20; 43:7-13)). Therefore, based on Wren’s undisputed 

testimony, her trip to Hartselle served a personal purpose. Wren also testified, 

however, that she planned to shop for items for the Salon after her birthday lunch 

and selected Hartselle as a meeting location in part because it was on the way to 

where she planned to shop for the Salon. (Doc. 41-3 at 5-6 (18:13-20:9; 21:8-16)). 

Based on this testimony, Denmark asserts Wren was acting with respect to the 

conduct of her business at the time of the accident because her trip to Hartselle had 

a dual purpose. (See Doc. 41 at 5, 11). 

State Farm ignores Wren’s contention she selected Hartselle as a meeting 

location in part because it was en route to her shopping destination for the Salon

and also does not address whether an insured’s activities that serve both a personal 

and a business purpose may be considered conduct of a business. Moreover, none 

of the cases cited in State Farm's motion for summary judgment analyze whether a 

business owner’s activities that serve a dual purpose may be considered conduct of 

a business. See Leblanc, 2013 WL 2149750 at *9 (analyzing whether claims 

against an insured business owner were related to the conduct of his business and 

noting that the claims “had nothing to do with [the insured’s] conduct of [the 

business]”); Anderson, 2005 WL 3336496 at *4 (concluding there was no 

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22

insurance coverage for claims asserted against a business owner in an underlying 

suit in part because the claims arose from an act that “did not arise from, relate to, 

or further the conduct of [his] business”); Rayburn., 624 N.W.2d at 882 (holding “a 

reasonable person would understand that one is not engaged in the conduct of a 

business when the activity is not performed for the purpose of the business”); 

Linehan, 616 N.W.2d at 921 (“[C]onduct is either personal or business.”); Sentry 

Ins. Co. v. Sahlberg, No. CA935331E, 1995 WL 809951, *3 (Mass. Super. March 

28, 1995) (holding an insured business owner’s volunteer activities unrelated to his 

business and having only an “accidental nexus” to his business could not be 

considered “the conduct of a business”).

The phrase “conduct of a business” clearly covers a business owner’s 

activities that only serve a business purpose and does not cover activities that are 

strictly personal. However, a reasonable jury may also understand the phrase 

“conduct of a business” to encompass activities that serve both a business and a 

personal purpose. As it applies to this matter, therefore, the phrase “conduct of a 

business” is ambiguous to the extent it relates to a business owner’s activities that 

serve a dual purpose, and this ambiguity must be construed in favor of the insured. 

Wren testified she planned to meet her sisters in Hartselle for her birthday 

lunch in part because it was on the way to Decatur and Huntsville, where she 

planned to shop for the Salon. Accordingly, Wren was not only en route to meet 

Case 2:13-cv-01835-KOB Document 46 Filed 01/08/16 Page 22 of 28
23

her sisters for lunch at the time of the accident but also was en route to her 

shopping destination for the Salon. Construing this evidence in the light most 

favorable to Denmark, as required at this stage of the case, Wren’s trip to Hartselle 

was related to the business of the Salon and served a business purpose along with a 

personal purpose. Therefore, a jury interpreting the terms of the Certified Policy in 

favor of coverage could reasonably conclude Wren was acting with respect to the 

conduct of the business at the time of the accident. As a result, Denmark has 

introduced enough evidence to show there is a genuine issue of material fact 

regarding whether Wren is an insured under the Certified Policy.

12

 

 

12 Denmark also argues Wren was acting with respect to her conduct of the business at the time 

of the accident based on the following evidence: (1) Wren met with cosmetologists at the Salon 

to take pictures for the Salon’s website on the morning of the accident; (2) Wren had her 

business credit card in the Lexus with her at the time of the accident; (3) Wren had her taxes in 

the Lexus to work on “if she had a free minute during the day;” (4) Wren considers herself to 

always be on the job advertising for the Salon; and (5) Wren claims 100% of the mileage of the 

Lexus as deductible business miles on her tax return. (See Doc. 41 at 13). None of that 

evidence, however, could lead a jury to reasonably conclude Wren was acting with respect to the 

conduct of the business at the time of the accident. 

First, Wren had indisputably finished the photo shoot at the Salon and gone home before the 

accident. Therefore, Wren’s testimony regarding the photo shoot could not reasonably lead to a 

conclusion that she was on the job at the time of the accident. Next, the other evidence Denmark 

cited to support her argument Wren was acting with respect to the conduct of the business at the 

time of the accident has no bearing on the purpose of Wren’s activities at the time of the 

accident. Rather, each of the other items of evidence is nothing more than an “accidental nexus” 

between the accident and Wren’s business. An accidental nexus between Wren’s business and 

the accident is not sufficient to support a conclusion that Wren was acting with respect to the 

conduct of the business at the time of the accident. See Rayburn, 624 N.W.2d at 882 (finding an 

insured business owner’s use of tools from his business was not determinative of whether he was 

acting with respect to the conduct of the business at the time of an accident); Sahlberg, 1995 WL 

809951 at *3 (“The accidental nexus between [the insured business owner’s] use of business 

materials and this non-business purpose does not render his activity one in the conduct of a 

business.”). 

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D. The State Farm Policy’s Auto Exclusion

Even if the Wren Defendants are insureds under the terms of the policy, 

State Farm has no duty to defend and indemnify them if an exclusion in the policy 

precludes coverage for the claims asserted against them in the underlying suit. 

“The insurer bears the burden of proving the applicability of any policy exclusion.” 

Acceptance Ins. Co. v. Brown, 832 So.2d 1, 12 (Ala. 2001). Additionally, 

insurance policy exclusions “must be interpreted as narrowly as possible in order 

to provide maximum coverage for the insured, and must be construed most 

strongly against the company that drew the policy and issued it.” Nationwide Mut. 

Ins. Co. v. Thomas, 103 So. 3d 795, 805 (Ala. 2012) (citation omitted).

State Farm argues the auto exclusion in the Certified Policy precludes 

coverage for the underlying suit. (Doc. 29 at 24-26). Under the Certified Policy’s 

auto exclusion, business liability coverage “does not apply [...] [t]o bodily injury 

... arising out of the ... use ... of any ... auto ... owned or operated by ... any 

insured.” (Doc. 29-1 at 55). Here, it is undisputed the claims asserted against the 

Wren Defendants in the underlying suit arose out of the use of an auto operated by 

Wren. (See e.g., Doc. 29-1 at 15, 150 (46:5-10)). Thus, the auto exclusion 

precludes coverage for the underlying suit unless an exception to the exclusion 

applies. 

Denmark asserts the auto exclusion does not apply and the State Farm 

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insurance policy still provides coverage for her claims against the Wren 

Defendants because the exclusion has an exception for “bodily injury ... arising 

out of the use of any non-owned auto in your business by any person other than 

you....” (Doc. 29-1 at 56; see also Doc. 41 at 11). As discussed above, however, 

the Lexus is not a non-owned auto because the Wren Defendants borrowed the 

vehicle from Wren’s husband. See pp. 12-14, supra. Thus, the exception to the 

exclusion does not apply, and there is no genuine issue of material fact that the 

auto exclusion precludes coverage for the claims asserted against the Wren 

Defendants in the underlying suit.13 In addition, even if the Lexus were a nonowned auto, the exception to the auto exclusion would not apply because Wren, an 

insured under the Certified Policy, was using the Lexus at the time of the accident 

and the exception only applies to the use of a non-owned auto “by any person other 

than you....” (Doc. 29-1 at 34, 56 (defining “you” as “the Named Insured ... and 

any other person ... qualifying as a Named Insured under this policy”)). 

Because there is no coverage for the claims asserted against the Wren 

Defendants, State Farm owes no duty to defend them in the underlying suit. As a 

 

13 The undated policy form Denmark asserts is the policy in force at the time of the accident also 

contains an exclusion to coverage for “‘bodily injury' ... arising out of the ... use ... of any ... 

‘auto’ ... owned or operated by or rented or loaned to any insured.” (Doc. 41-7 at 38). This auto 

exclusion in the undated policy form does not apply to "‘[b]odily injury’ ... arising out of the use 

of any ‘non-owned auto’ in your business by any person.” (Id.). Because the Lexus is not a nonowned auto as defined by the terms of the undated policy form, this exception to the exclusion 

does not apply, and the auto exclusion precludes coverage for Denmark’s claims against the 

Wren Defendants. 

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result, State Farm also has no duty to indemnify the Wren Defendants for the 

claims Demark asserts against them in the underlying suit. See Tanner, 874 So.2d 

at 1063 (holding the duty to defend is broader than the duty to indemnify). 

Accordingly, State Farm’s motion for summary is due to be granted as to 

Denmark’s personal injury action.14 

E. Denmark’s Motion to Compel

Along with opposing State Farm’s motion for summary judgment, Denmark 

asks this court to enter an order compelling State Farm to fully answer Denmark’s 

second request for production of documents. (Doc. 36). Specifically, Denmark 

seeks documents relating to: (1) State Farm’s notice of the claim; (2) "billing 

submitted to State Farm by [the attorney retained to represent Wren by Wren’s 

auto insurer] for work performed in the Denmark case;" and (3) State Farm’s 

investigation of the claim. (Id. at 2-6). None of the documents sought by 

Denmark are relevant to whether the claims against the Wren Defendants arose 

from the use of an auto operated by an insured or if the Lexus is a non-owned auto. 

Therefore, they have no bearing on whether the Certified Policy’s auto exclusion 

applies and would have no impact on the resolution of State Farm’s motion for 

 

14 The Rule 56 record establishes the State Farm policy does not provide coverage for the claims 

asserted against the Wren Defendants in the underlying suit because the policy’s auto exclusion 

precludes coverage. Therefore, the undersigned need not and does not address the parties’ 

arguments regarding if the Wren Defendants breached conditions of the policy by failing to 

provide State Farm with prompt notice of the claim.

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summary judgment. As a result, Denmark’s motion to compel is due to be denied 

as moot.15

IV. RECOMMENDATION

Based on the foregoing, the undersigned RECOMMENDS: (1) State 

Farm’s motion for summary judgment (Doc. 29) be GRANTED with respect to 

Denmark’s underlying personal injury action currently pending in state court and 

DENIED as MOOT with respect to the underlying wrongful death action that has 

been settled and dismissed; (2) Denmark’s motion to compel (Doc. 36) be 

DENIED as MOOT; and (3) this Court issue an Order declaring State Farm has 

no duty to defend or indemnify the Wren Defendants for the claims asserted 

against them in Denmark’s underlying personal injury action.

V. NOTICE OF RIGHT TO OBJECT

Pursuant to 28 U.S.C. § 636(b)(1)(C) and Rule 72(b)(2), FED. R. CIV. P., any 

party may file specific written objections to this report and recommendation within 

fourteen (14) days from the date it is filed in the office of the Clerk. Failure to file 

written objections to the proposed findings and recommendations contained in this 

report and recommendation within fourteen (14) days from the date it is filed shall 

bar an aggrieved party from attacking the factual findings on appeal, except for 

 

15 A party opposing summary judgment may seek relief under Rule 56(d) of the Federal Rules of 

Civil Procedure if the party “cannot present facts essential to justify its opposition.” Fed. R. Civ. 

P. 56(d). Denmark did not submit any Rule 56(d) affidavit or declaration. Accordingly, 

Denmark appears to concede that the documents she seeks in her motion to compel are not 

essential to her opposition to State Farm’s motion for summary judgment.

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plain error. Written objections shall specifically identify the portions of the 

proposed findings and recommendation to which objection is made and the specific 

basis for objection. A copy of the objections must be served upon all other parties 

to the action. 

DONE this 8th day of January, 2016.

 ______________________________

STACI G. CORNELIUS

U.S. MAGISTRATE JUDGE

 

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