Cont'l Cas. Co. v. Pa. Nat'l Mut. Cas. Ins. Co.

• Decision Date: 22 November 2022
• Docket Number: 22-1087
• Parties: CONTINENTAL CASUALTY CO., Appellant v. PENNSYLVANIA NATIONAL MUTUAL CASUALTY INSURANCE CO.
• Court: U.S. Court of Appeals — Third Circuit

CONTINENTAL CASUALTY CO., Appellant
v.
PENNSYLVANIA NATIONAL MUTUAL CASUALTY INSURANCE CO.

No. 22-1087

United States Court of Appeals, Third Circuit

November 22, 2022

NOT PRECEDENTIAL

Submitted Under Third Circuit L.A.R. 34.1(a) on November 18, 2022.

On Appeal from the United States District Court for the Eastern District of Pennsylvania (D.C. No. 2:17-cv-04183) Honorable Mitchell S. Goldberg District Judge:

Before: AMBRO, KRAUSE, and BIBAS, Circuit Judges

OPINION ^[*]

KRAUSE, CIRCUIT JUDGE

Continental Casualty Co. (Continental) appeals the judgment of the District Court in favor of Pennsylvania National Mutual Casualty Insurance Co. (Penn). We will affirm.

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I. BACKGROUND

This case arose out of an accident involving employees of Penn's insured, Shady Maple Smorgasboard, Inc. (Shady Maple), and Continental's insured, Sight &Sound Ministries, Inc. (Sight &Sound). Kathryn Marquet-Sandt-an employee of Shady Maple-planned to attend a trade show. Because William Luckenbaugh planned to do the same for his employer, Sight &Sound, he suggested that they travel together in Sight & Sound's company car, and accepted Marquet-Sandt's offer to do the driving for the first hour and a half. At that point, Luckenbaugh told her to pull over at a nearby McDonald's so he could use the bathroom and take over the driving. But in attempting to find the exit, Marquet-Sandt collided with a motorcyclist named Jeremy Esakoff.

Esakoff sued Marquet-Sandt for negligence and Shady Maple and Sight &Sound for vicarious liability, and the parties eventually settled for $10 million. While Continental contributed $8.7 million towards the settlement, Penn refused to pay any portion.

Continental filed this action against Penn, seeking equitable contribution and a declaratory judgment that Penn's insurance of Shady Maple obligated Penn to provide funds for the Esakoff settlement. Both of Shady Maple's policies with Penn included clauses covering "[a]nyone else while using with your [Shady Maple's] permission [any] 'auto' you own, hire, or borrow ...." App. 7. So to determine if Marquet-Sandt was insured by Penn, the District Court held a bench trial on whether Shady Maple, acting through Marquet-Sandt, "borrowed" Sight &Sound's vehicle for purposes of those coverage provisions. Concluding that it did not, the District Court held that Marquet-Sandt was not an insured under Penn's policies at the time of the accident and that Continental

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was therefore not entitled to equitable contribution.

In a motion to amend the judgment, Continental argued that Penn's coverage of Marquet-Sandt was not dispositive because Penn's policies, in any event, covered her employer, Shady Maple. Although the District Court granted Continental's motion, it sua sponte reentered judgment in Penn's favor, reasoning that equitable contribution was still unwarranted as Shady Maple would be entitled to full indemnity from Marquet-Sandt for any liability to Esakoff.

II. DISCUSSION^[1]

A. Marquet-Sandt's Status Under the Penn Policies

Continental challenges the District Court's ruling that Marquet-Sandt was not insured by Penn at the time of the accident because Shady Maple, through the actions of Marquet-Sandt, did not "borrow" the Sight &Sound car. But the District Court correctly interpreted the Penn policies.

Recognizing that Pennsylvania courts have not yet expressed a clear view on the precise meaning of "borrow" in insurance coverage provisions, the District Court surveyed other jurisdictions' interpretations of that term and identified two competing approaches: a minority of courts define borrowing as the temporary use of an object for the benefit of the

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borrower;^[2] but the majority require, in addition, that the borrower obtain possession, dominion, or control over the object.^[3] The District Court concluded that Pennsylvania courts would most likely adopt the majority position, and we agree. That approach avoids the minority interpretation's overbreadth. See Schroeder, 591 So.2d at 346 ("When a person uses his auto to pick up a prescription for a sick friend, he may confer a significant benefit on the invalid, but no one would say that the bedridden friend had borrowed the auto used for the errand."). Thus, even the judiciary of California, which first articulated the minority view, see Swearinger, 214 Cal.Rptr. at 386, has since repudiated it, see Am. Int'l Underwriters Ins. Co. v. Am. Guarantee & Liab. Ins. Co., 105 Cal.Rptr.3d 64, 7374 (Ct. App. 2010).

Under the majority approach, Shady Maple, acting through Marquet-Sandt, did not "borrow" the Sight &Sound vehicle because she never acquired possession, dominion, or control. Put differently, she did not take the car from Luckenbaugh because he never relinquished it to her. See NGM Ins. Co. v. Pillsbury, 416 F.Supp.3d 57, 65 (D. Mass. 2019); Hanneman, 575 N.W.2d at 452. Rather, Luckenbaugh remained in the car, dictated its ultimate destination, and directed Marquet-Sandt to pull over. That Marquet-Sandt was

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sharing in the driving does not compel the contrary conclusion. See Hanneman, 575 N.W.2d at 452; 8A Steven Plitt et al., Couch on Insurance § 118:50 (3d ed. 2022).

As Shady Maple, through the actions of Marquet-Sandt, did not "borrow" the Sight &Sound car, the District Court correctly ruled that she was not insured under Penn's policies at the time of the accident.

B. The Sua Sponte Judgment

Continental next objects that the District Court's sua sponte judgment violated...