UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

No. 04-2028

SELECTIVE INSURANCE COMPANY OF SOUTH CAROLINA,

Plaintiff - Appellee,

versus

JAN H. TERRY,

Defendant - Appellant,

and

JASON DAVIDSON; AMANDA DAVIDSON, formerly

known as Amanda B. Patterson; PATTERSON

PAVING, INCORPORATED,

Defendants.

Appeal from the United States District Court for the Middle

District of North Carolina, at Durham. Frank W. Bullock, Jr.,

District Judge. (CA-03-135-1)

Argued: May 26, 2005 Decided: August 2, 2005

Before TRAXLER and DUNCAN, Circuit Judges, and Eugene E. SILER,

Jr., Senior Circuit Judge of the United States Court of Appeals for

the Sixth Circuit, sitting by designation.

Affirmed by unpublished per curiam opinion.
2

Theodore Blackburn Smyth, SMYTH & CIOFFI, L.L.P., Raleigh, North

Carolina, for Appellant. Susan K. Burkhart, CRANFILL, SUMNER &

HARTZOG, L.L.P., Raleigh, North Carolina, for Appellee.

Unpublished opinions are not binding precedent in this circuit.

See Local Rule 36(c).
3

PER CURIAM:

In this diversity action involving the proper interpretation

of certain automobile liability insurance policies under North

Carolina law, Defendant-Appellant, Jan H. Terry (“Terry”), appeals

the district court’s July 19, 2004 order denying Terry’s summary

judgment motion and granting summary judgment to PlaintiffAppellee, Selective Insurance Company of South Carolina

(“Selective”). Because the district court properly held that the

policies at issue do not obligate Selective to provide coverage, we

affirm the district court order.

I.

The following undisputed facts are taken from the district

court opinion. In 1999, Terry suffered serious injuries as a

result of a collision with a 1995 Toyota Corolla (“Corolla”)

operated by Jason Davidson. Jason Davidson is married to Amanda

Davidson, whose grandfather, James Patterson, owns and operates

Patterson Paving.

At the time of the accident, the Corolla’s certificate of

title listed Amanda Davidson as the Corolla’s owner. Selective,

however, had listed the Corolla as a covered automobile under

certain provisions in a package of insurance products that

Selective provided to Patterson Paving. Relevant to this case,

Selective issued a policy that provided commercial automobile
1

North Carolina regulations forbid the inclusion of privately

owned automobiles in commercial fleet policies such as the Business

Auto Policy. See 11 N.C.A.C. § 10.0305. It is undisputed that the

Corolla’s inclusion on the Business Auto Policy was not the result

of fraud or bad faith.

4

liability coverage up to a limit of $1,000,000 (the “Business Auto

Policy”) and a policy that provided excess commercial automobile

liability coverage (the “Umbrella Policy”). The Umbrella Policy is

a “following form” policy that utilizes and incorporates the

provisions of the Business Auto Policy relevant to this appeal.

Jason Davidson is not a named insured on the Business Auto

Policy. The Business Auto Policy, however, provides coverage for

accidents caused by “[a]nyone . . . while using with [Patterson

Paving’s] permission a covered ‘auto’ [that Patterson Paving]

own[s].” JA 228. The Business Auto Policy does not provide a

definition of ownership. The Declarations section of the Business

Auto Policy, however, contains a section entitled “Item Three--

Schedule of Covered Autos You Own.” This section refers to a

schedule of autos which contains the Corolla. The parties agree

that the Corolla should not have been on the schedule of “owned

autos” that the Business Auto Policy referenced and that its

inclusion on the list of “Covered Autos You Own” was a mistake.1

After the accident between Terry and Jason Davidson, Terry

brought suit in North Carolina state court against Jason and Amanda
2Patterson Paving was a defendant in the state court suit, but

Terry dismissed Patterson Paving from that suit without prejudice.

3The district court did hold, and the parties do not dispute,

that Selective is obligated to provide a minimum amount of

insurance coverage as mandated by the North Carolina Motor Vehicle

Safety and Financial Responsibility Act of 1953, N.C. Gen. Stat.

§ 20-279.1 et seq.. Because the parties do not raise the issue,

this opinion does not address any of the requirements placed on the

parties by the Financial Responsibility Act.

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Davidson for personal injuries sustained.2

 In response, Selective

filed this action for declaratory relief pursuant to 28 U.S.C.

§ 2201 to determine whether Selective is obligated, under the

insurance polices discussed above, to provide the Davidsons with

liability coverage for damages that they might owe to Terry as a

result of the alleged accident.

Because the relevant facts are undisputed, the parties filed

cross-motions for summary judgment. The district court denied

Terry’s motion for summary judgment and granted Selective’s motion,

holding that the Davidsons are not entitled to liability coverage

under either the Business Auto Policy or the Umbrella Policy.3

Terry timely appeals.

II.

A.

We agree with the parties that the federal courts can properly

exercise diversity jurisdiction over this matter pursuant to the

Declaratory Judgment Act. See 28 U.S.C. §§ 1332, 2201. We review
4The Umbrella Policy incorporates the relevant sections of the

Business Auto Policy. If Patterson Paving owned the Corolla for

purposes of the Business Auto Policy, then it owned the Corolla for

purposes of the Umbrella Policy.

6

the district court’s grant of summary judgment de novo, applying

the same legal standards as the district court. Gallagher v.

Reliance Std. Life Ins. Co., 305 F.3d 264, 268 (4th Cir. 2002).

Specifically, summary judgment is proper only when, viewing the

facts in the light most favorable to the non-moving party, the

moving party is entitled to judgment as a matter of law. Blair v.

Defender Servs., 386 F.3d 623, 625 (4th Cir. 2004).

A federal district court sitting in diversity applies the

choice of law rules of the state in which it sits--in this case,

North Carolina. Burris Chem. v. USX Corp., 10 F.3d 243, 245 n.7

(4th Cir. 1993); Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938). We

agree with the district court that, under North Carolina choice of

law rules, North Carolina contract law applies to interpret the

insurance policies at issue.

B.

The resolution of this case turns on the narrow legal issue of

whether Patterson Paving “owned” the Corolla at the time of the

accident for purposes of the Business Auto Policy.4 If Patterson

Paving owned the Corolla, then the Business Auto Policy obligates

Selective to provide liability coverage for the alleged accident.
5

Terry argues that this statutory definition of ownership

should be limited to the Financial Responsibility Act. The

definition, however, applies by its express terms not just to the

Act, but “throughout Chapter 20" of the North Carolina General

Statutes--the chapter involving motor vehicles. N.C. Gen. Stat.

§ 20-4.01 (emphasis added). Terry cites no case in which North

Carolina courts have construed the definition of “owner” in an

automotive liability policy without reference to the statutory

definition. Accordingly, we apply the statutory definition of

ownership to this case, as we have every reason to believe that the

North Carolina Supreme Court would.

7

If, however, Patterson Paving did not own the Corolla, then the

Business Auto Policy does not obligate Selective to provide

liability coverage.

Under North Carolina law, the meaning of language in an

insurance contract is a matter of law. Guyther v. Nationwide Mut.

Fire Ins. Co., 428 S.E.2d 238, 241 (N.C. Ct. App. 1993) (citing

Wachovia Bank & Trust Co. v. Westchester Fire Ins. Co., 172 S.E.2d

518, 522 (N.C. 1970). “When a statute is applicable to the terms

of a policy of insurance, the provisions of that statute become

part of the terms of the policy to the same extent as if they were

written in it.” Am. Tours, Inc. v. Liberty Mut. Ins. Co., 338

S.E.2d 92, 95 (N.C. 1986). North Carolina statutes, with

exceptions not applicable here, define an “owner” as the person who

holds legal title to a vehicle. N.C. Gen. Stat. § 20-4.01(26).5

The undisputed facts in this case indicate that Amanda Davidson,

not Patterson Paving, held title to the Corolla at the time of the

accident. Patterson Paving, therefore, did not “own” the Corolla

for purposes of North Carolina law.
8

In response to this plain statutory definition of ownership,

Terry argues that Section II of the Business Auto Policy, by

referencing the Corolla as “a covered auto you own,” creates an

ambiguity concerning the Corolla’s ownership which we must resolve

in Terry’s favor, notwithstanding the statutory provisions to the

contrary. See Wachovia Bank & Trust Co. 172 S.E.2d at 522. We

cannot, however, accept that an insurance contract contains an

ambiguity simply because the parties disagree over the meaning of

contract language. “No ambiguity . . . exists unless, in the

opinion of the court, the language of the policy is fairly and

reasonably susceptible to either of the constructions for which the

parties contend.” Id.

The district court carefully considered Terry’s arguments

concerning the meaning of “own” in the Business Auto Policy and

concluded that the policy language did not create coverage:

The context in which the term "own" and the phrase "a

covered 'auto' you own" appear within Section II of the

Business Auto Coverage Form and Item Three of the

Business Automobile Coverage Declaration neither requires

nor permits the application of any definition other than

the statutory definition of the term "owner," as that

term and its cognates are used throughout the Business

Auto Policy. Although Defendant Terry contends that Item

Three of the Business Automobile Coverage Declaration

defines the 1995 Toyota Corolla as "a covered 'auto' you

own" for purposes of liability coverage under the

Business Auto Policy, the express language of Item Three

does not contain a clear definition of any terms used in

the Business Auto Policy and does not resemble an

insuring agreement between Selective Insurance and

Patterson Paving. Moreover, Item Three does not contain

a specific list of automobiles identified as covered

autos that Patterson Paving owned for purposes of
6Even if the policy language clearly indicated that Patterson

Paving “owned” the Corolla, we question whether the resulting

insurance agreement would be enforceable contract under North

Carolina law. North Carolina insurance regulations forbid the

inclusion of private autos such as the Corolla from inclusion on

corporate fleet policies (with their lower rates) in order to

protect the general public from price discrimination:

It is the policy of the N.C. Department of Insurance that

the insuring of employees' automobiles in fleet policies

of their employer at lower rates than those which apply

to other owners of private automobiles is unfair

discrimination and is not permitted, whether or not the

employees' private cars are operated part of the time in

the interest of the employer. This applies to all forms

of automobile insurance. The inclusion of a privately

owned car in a fleet or group policy will be construed as

prima facie evidence of unfair discrimination.

11 N.C.A.C. § 10.0305 (2005).

In other words, the public policy underlying this entire

dispute (the fact that the Corolla should have been owned by

Patterson Paving) was not designed to protect the insured or the

insurer, but the general insurance buying public. If we were to

enforce the contract as Terry reads it, then we must necessarily

hold that the parties to a private insurance contract can agree to

a course of action “not permitted” by the North Carolina Department

of Insurance as “prima facie evidence of unfair discrimination.”

9

liability coverage under the Business Auto Policy and

does not explicitly define the 1995 Toyota Corolla as "a

covered 'auto' you own" for purposes of liability

coverage under the Business Auto Policy. Item Three of

the Business Automobile Coverage Declaration contains

merely a general reference to the Auto Schedule and does

not provide a precise definition of the term "own" or the

phrase "a covered 'auto' you own" that would otherwise

replace the statutory definition of the term "owner," as

that term and its cognates are used throughout the

Business Auto Policy.

JA 387-88. We agree with the reasoning of the district court and

affirm the conclusion that the plain policy language simply does

not indicate that Patterson Paving owned the Corolla.6 Therefore,
Such a holding would be a bold step for a federal court sitting in

diversity. As noted above, however, we need not reach this issue

because, as the district court held, the plain language of the

insurance contract does not provide coverage for the accident.

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Amanda Davidson, not Patterson Paving, owned the Corolla at the

time of the accident for purposes of the Business Auto Policy and

the Umbrella Policy.

Because Patterson Paving did not own the Corolla at the time

of the accident, Selective Insurance is not obligated to provide

liability insurance for the accident to Jason and Amanda Davidson

under either the Business Auto Policy or the Umbrella Policy. We

therefore affirm the district court order granting summary judgment

to Selective and denying summary judgment to Terry.

AFFIRMED