Auto-Owners Ins. Co. v. Goode

• Decision Date: 13 February 2009
• Docket Number: No. 2008-CA-000350-MR.,2008-CA-000350-MR.
• Citation: 294 S.W.3d 32
• Parties: AUTO-OWNERS INSURANCE COMPANY, Correctly Referred to as "Owners Insurance", Appellant, v. Crystal GOODE, Appellee.
• Court: Kentucky Court of Appeals

294 S.W.3d 32

AUTO-OWNERS INSURANCE COMPANY, Correctly Referred to as "Owners Insurance", Appellant, v. Crystal GOODE, Appellee.

No. 2008-CA-000350-MR.

Court of Appeals of Kentucky.

February 13, 2009.

Discretionary Review Denied by Supreme Court October 21, 2009.

David A. Nunery, Campbellsville, KY, for appellant.

Theodore H. Lavit, Joseph R. Stewart, Lebanon, KY, for appellee.

Before COMBS, Chief Judge; KELLER, Judge; HENRY,¹ Senior Judge.

OPINION

KELLER, Judge.

Auto Owners Insurance Company, correctly referred to as "Owners Insurance" (Owners) appeals from a jury verdict in favor of Crystal Goode (Crystal). On appeal, Owners argues that Crystal was not covered under the underinsured motorists' provisions of her mother's motor vehicle insurance policy because Crystal owned an automobile at the time of the accident in question and also that the trial court gave faulty jury instructions. In the alternative, Owners argues the trial court should have granted its motion for a directed verdict. Crystal argues to the contrary. For the following reasons, we affirm.

FACTS

The undisputed facts are as follows: (1) Crystal was a passenger in a vehicle involved in a one-car motor vehicle accident on December 29, 2002; (2) Crystal settled with the vehicle's insurer and proceeded against Owners, which provided a policy of insurance (the Policy) to Crystal's mother, Mary Long (Long); (3) the Policy contained underinsured motorist coverage; and (4) at the time of the accident, Crystal owned a 1994 Ford Escort (the Escort) that was in a state of disrepair. The Policy's underinsured motorist coverage extended to "a relative who does not own an automobile." The Policy defines a relative as "a person related to [the insured] by blood, marriage or adoption who resides in [the insured's] household." It defines "automobile" as "a private passenger automobile," further defined as "a four wheel: a) private passenger or station wagon type automobile ... not used in the business of carrying passengers for hire."

At trial, Owners asserted that Crystal did not fall within the definition of "relative" under the policy. The jury found that she did, and Owners is not contesting that finding on appeal. Owners also asserted at trial that Crystal owned an automobile at the time of the accident and therefore was not covered under the policy. The jury determined the Escort "had been retired from service for an indefinite time into the future" and awarded Crystal damages under the Policy. The primary issue before us is whether the Escort was an automobile under the Policy. Therefore, we will confine our recitation of additional facts to those related to that issue.

In April 2002, Crystal and her then-husband, Kelly Goode (Kelly), had an altercation while in the Escort. During the course of the altercation, Kelly and Crystal broke off the Escort's turn signal and windshield wiper control arms. Thereafter, the windshield wipers, lights, and other electrical devices in the steering column worked erratically. Sometime between April and June 2002, Kelly removed the steering column with the intent of replacing/repairing it, but he could not find the necessary parts. In June 2002, Crystal moved out of the residence she shared with Kelly and moved in with Long. At that time, Crystal had the Escort towed to Long's residence, where it stayed until Crystal and Kelly reconciled in March 2003.²

In September 2002, Crystal purchased insurance for the Escort so that she could renew its registration. However, because she was not driving the Escort, Crystal decided not to renew its registration and let the insurance lapse. We note Crystal testified that she gave a different version of events in a statement taken by counsel for Owners in July 2003. At that time, Crystal stated she let the insurance lapse because she was seeking a cheaper policy.

In her 2003 statement, Crystal also stated that someone could drive the Escort if necessary; however, she would not. At trial, Crystal testified that the Escort was not drivable. Furthermore, she testified that, in 2003, she meant the Escort could be driven but only if the original steering column were re-installed.

Long's neighbor, Joe Randolph (Randolph), testified that Long asked him if he could repair the Escort's steering column and brakes. Randolph stated that he could make the repairs; however, he never quoted a price, and Long did not further pursue the matter. Randolph and his wife testified they believed the Escort was not roadworthy and had not been driven while parked near Long's residence.

Josh Gamble (Gamble) testified he purchased the Escort for $500.00 in March 2004. When he purchased the Escort, it did not have a steering column, lights, functioning windshield wipers, or turn signals. Furthermore, the tires had no tread. Gamble replaced the steering column but did not replace the tires and has never driven the Escort. Gamble admitted that he probably could drive the Escort but for the worn tires.

Long and Crystal's sister, Kathryn Odom, confirmed the testimony by Kelly and Crystal that the Escort did not have a steering column or functioning turn signals or lights. Both also testified that the Escort was not roadworthy, and Long testified she believed Crystal intended to repair the Escort at some point before she sold it to Gamble.

Allen Jarvis (Jarvis), a field claims representative for Owners, testified he investigated the claim by Crystal. According to Jarvis, the Escort would not have been roadworthy in the condition described by the witnesses; however, he did not look at the Escort and did not know whether it was, in fact, roadworthy at the time of the accident. Furthermore, Jarvis testified that an insurer, knowing the condition of the Escort as described, should not have issued Crystal a policy of insurance.

As noted above, Owners has raised three issues: (1) whether the trial court appropriately interpreted the Policy; (2) whether the trial court properly instructed the jury on the issue of operability of the Escort; and (3) whether the trial court properly denied its motion for directed verdict. We will address these issues in the same order.

STANDARD OF REVIEW

Because the issues raised by Owners on appeal have different standards of review, we will set forth the appropriate standard as we analyze each issue.

ANALYSIS

1. Interpretation of the Policy

Interpretation and construction of an insurance contract is a matter of law for the court. See Stone v. Kentucky Farm Bureau Mutual Ins. Co., 34 S.W.3d 809, 810 (Ky.App.2000); Kemper Nat'l Ins. Companies. v. Heaven Hill Distilleries, Inc., 82 S.W.3d 869, 871 (Ky.2002). If the appeal is a question of law it is subject to de novo review. Carroll v. Meredith, 59 S.W.3d 484, 489 (Ky.App.2001); see also A & A Mechanical, Inc. v. Thermal Equipment Sales, Inc., 998 S.W.2d 505, 509 (Ky.App. 1999); Aubrey v. Office of Attorney General, 994 S.W.2d 516, 518-19 (Ky.App.1998); and Cinelli v. Ward, 997 S.W.2d 474, 476 (Ky.App.1998).

As noted above, the primary issue raised by Owners is whether the definition of "automobile" in the Policy would extend to the Escort. "The terms of insurance coverage should not be extended beyond any clear or unambiguous limit." Masler v. State Farm Mut. Auto. Ins. Co., 894 S.W.2d 633, 635-36 (Ky.1995). "A contract is ambiguous if a reasonable person would find it susceptible to different or inconsistent interpretations." Cantrell Supply, Inc. v. Liberty Mut. Ins. Co., 94 S.W.3d 381, 385 (Ky.App.2002). "[W]e are not permitted to create an ambiguity where none exists even if doing so would result in a more palatable outcome." First Commonwealth Bank of Prestonsburg v. West, 55 S.W.3d 829, 836 (Ky.App.2000). However, "[w]here a contract is ambiguous or silent on a vital matter, a court may consider parol and extrinsic evidence involving ... the subject matter of the contract, the objects to be accomplished, and the conduct of the parties." Cantrell at 385. In order to resolve this issue, we must first determine if the term "automobile" as used in the Policy is ambiguous.

The Policy defines automobile as a private passenger automobile, which is defined as "a four wheel ... private passenger or station wagon type automobile ... not used in the business of carrying passengers for hire." We hold that this definition is ambiguous for at least two reasons. First, the definition is circular because it essentially defines automobile as an automobile.

Second, the definition states that an automobile cannot be used in the business of carrying passengers for hire. It does not state for what purpose an automobile can be used; however, the implication in the definition is that an automobile is to be used for some purpose. In light of the language in the Policy, a reasonable person could interpret the definition of automobile as encompassing any four-wheeled non-commercial vehicle, whether operable or not, or as encompassing only four-wheeled non-commercial vehicles that are operable. Therefore, we hold the term "automobile," as used in the Policy, is ambiguous.

Owners has cited a number of opinions from other jurisdictions holding that the term "automobile" in an underinsured policy is not ambiguous. However, in Middlesex Ins. Co. v. Quinn, 225 Conn. 257, 622 A.2d 572 (1993); American Family Mut. Ins. Co. v. Kittinger, 147 Ill.App.3d 586, 101 Ill.Dec. 74, 498 N.E.2d 256 (1986); Burkett v. American Family Ins. Group, 737 N.E.2d 447 (Ind.Ct.App.2000); Robertson v. Cumis Ins. Co., 355 So.2d 1371 (La.Ct.App.1978); and Malo v. Aetna Cas. & Sur. Co., 459 A.2d 954 (R.I.1983), the courts do not address whether the automobile is operable. Therefore, these opinions are of little persuasive value.

Owners also cites to an Ohio case that is similar to the matter before us. In Miller v. Shelby Mut. Ins. Co., 20 Ohio App.2d 323, 253 N.E.2d 801 (1969), the Ohio Seventh District Court of Appeals held that a son, who owned an inoperable...