Court Opinion

ID: 1016802
Source: CourtListenerOpinion
Date Created: 2013-07-04 21:54:48.633036+00
Date Added: 2024-06-11T09:41:32.077417
License: Public Domain

UNPUBLISHED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Affirmed by unpublished per curiam opinion.
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Unpublished opinions are not binding precedent in this circuit.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).

                               2
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     Plaintiff-

Appellee,     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

                                          3
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

     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
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

     2
      Patterson Paving was a defendant in the state court suit, but
Terry dismissed Patterson Paving from that suit without prejudice.
     3
      The 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.

                                  5
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.

     4
      The 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
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.

     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
     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

                                 8
     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,

     6
      Even 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
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

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.

                                10