Continental Ins. Co. v. McKain

• Decision Date: 22 February 1993
• Docket Number: Civ. A. No. 92-0296.
• Citation: 820 F. Supp. 890
• Parties: CONTINENTAL INSURANCE COMPANY, Plaintiff, v. Judy L. McKAIN, Robert McKain, Nancy Weidinger and Jefferson Duncan and Aetna Casualty & Surety Company, Defendants, v. ALLSTATE INSURANCE COMPANY, Third-Party Defendant.
• Court: U.S. District Court — Eastern District of Pennsylvania

820 F. Supp. 890

CONTINENTAL INSURANCE COMPANY, Plaintiff, v. Judy L. McKAIN, Robert McKain, Nancy Weidinger and Jefferson Duncan and Aetna Casualty & Surety Company, Defendants, v. ALLSTATE INSURANCE COMPANY, Third-Party Defendant.

Civ. A. No. 92-0296.

United States District Court, E.D. Pennsylvania.

February 22, 1993.

COPYRIGHT MATERIAL OMITTED

Edward J. Cermanski, E. Douglas Sederholm, White and Williams, Philadelphia, PA, for Continental Ins. Co.

Michael J. Panichelli, Litvin, Blumberg, Matusow & Young, Philadelphia, PA, for Judy L. McKain and Robert McKain.

Michael J. McCaney, Jr., Boroff, Harris & Heller, P.C., Steven Kapustin, Plymouth Meeting, PA, for Nancy Weidinger.

Elissa J. Kahn, Goldfein & Joseph, Philadelphia, PA, for Aetna Cas. & Sur. Co.

Jack T. Ribble, Jr., German, Gallagher & Murtagh, Philadelphia, PA, for Allstate Ins. Co.

Michael P. McKenna, Margolis, Edelstein, Scherlis, Sarowitz & Kraemer, Philadelphia, PA, for Pennsylvania Nat. Ins. Companies, a/k/a Pennsylvania Nat. Mut. Cas. Ins. Co.

MEMORANDUM AND ORDER

YOHN, District Judge.

This is a declaratory judgment action brought by Continental Insurance Company ("Continental") under Title 28 U.S.C. §§ 2201 and 2202 in a diversity case to determine the scope of three insurance policies and the coverage owed under them to Sergeant Jefferson Duncan II. The policies were issued by Continental, Aetna Casualty and Surety Company ("Aetna") and Allstate Insurance Company ("Allstate"). Sergeant Duncan is a defendant in two personal injury lawsuits in the Court of Common Pleas of Philadelphia County brought by defendants in this case, Judy and Robert McKain and Nancy Weidinger. The underlying suits arose out of an automobile accident that occurred on February 27, 1989. All of the parties to this suit and the underlying suits except Jefferson Duncan have filed motions for summary judgment on the respective obligations of the insurance companies. The obligations and respective coverages of each of the insurance companies will be discussed in turn.

I. BACKGROUND

On February 27, 1989, an automobile driven by Sgt. Duncan collided with one driven by Judy McKain. Mrs. McKain suffered extensive injuries that may leave her permanently disabled. Nancy Weidinger, who was a passenger in Mrs. McKain's car, also suffered injuries. At the time of the accident, Sergeant Duncan was driving a rental automobile. It was owned by General Motors Acceptance Corporation ("GMAC") and leased to McCafferty Ford Sales, Inc. ("McCafferty") under the GMAC rental plan lease agreement. A copy of the Master Lease Agreement appears as Aetna Exhibit F ("Master Lease"). Under this agreement, McCafferty rented General Motors vehicles to customers.

On the day of the accident, Sgt. Duncan was driven by a friend to Reedman Corporation ("Reedman"). Approximately one week earlier, Duncan had brought his car, a 1988 Mercury Sable which he had bought at Reedman, back to the company for repairs. Reedman had notified Duncan that the repairs were completed, and he came to pick up his car. After his friend had left Reedman, Duncan drove his Sable off the lot and discovered that the problem with the automobile's transmission had not been corrected. He returned the car to Reedman's service department, which determined that further work was needed.

Although Duncan's Sable was not covered by a warranty which obligated Reedman to arrange for a "loaner" vehicle when the customer's car was in the shop, Duncan argued that he should have one because of the repeated repairs that had been necessary on his car. Reedman agreed to accommodate him. Duncan Deposition, Aetna Exhibit E, ("Duncan Dep.") at 48, 52.

As it did under its usual arrangement for dealing with warranty customers, Reedman notified the rental agency, in this case McCafferty, that it would pay the base rental charge. Cook Deposition, Aetna Exhibit G, ("Cook Dep.") at 32-47. Sgt. Duncan was then taken by a Reedman employee to McCafferty, where he signed a rental agreement, was given virtually unlimited free milage pursuant to the agreement between Reedman and McCafferty, and was given the option of purchasing collision damage insurance and personal injury insurance for himself. Duncan Dep. at 53-54, 92; Ratcliffe Deposition, Aetna Exhibit I, ("Ratcliffe Dep.") at 11; Duncan Dep. at 61-66; Richardson Deposition, Aetna Exhibit J, ("Richardson Dep.") at 24-27. The rental agreement stated that the renter carried his own liability insurance.¹ Rental Agreement. Sgt. Duncan opted for the collision damage insurance only, with $500 deductible, which he paid when the car was severely damaged in the accident. Richardson Dep. at 24-27.

Before being given the rental car, Sgt. Duncan was asked his address, telephone number and birth date, and he showed the McCafferty representative his Alabama driver's license. Duncan Dep. at 89, 104-105. He was asked whether anyone else would drive the car and replied that no one else would. Duncan Dep. at 108-109. He stated in his deposition that he had "skimmed" the rental agreement before signing it and that it was explained to him while he looked at it. Duncan Dep. at 96, 98-100, 131. Because he was a Reedman customer, the usual McCafferty requirements of a Pennsylvania driver's license and a credit check were waived. Ratcliffe Dep. at 19, 50. Duncan drove the car off the lot and soon thereafter was involved in the automobile accident with Judy McKain and Nancy Weidinger.

At all relevant times, Reedman was insured under a policy issued by Aetna. The Aetna policy appears as Aetna Exhibit C ("Aetna policy"). Sgt. Duncan's own car, the 1988 Mercury Sable which was at Reedman for repairs at the time of the accident, was a listed vehicle on an insurance policy issued by Allstate to Jefferson Duncan, Sr., father of Sgt. Jefferson Duncan, II. Sgt. Duncan testified at deposition that, at the time of the accident, the Sable was titled in the name of Mr. Jefferson, Sr., through what Sgt. Duncan claims was a clerical error. Duncan Dep. at 20-21. The Allstate policy appears as Aetna Exhibit D ("Allstate policy"). GMAC was the insured on a policy issued by Continental. The policy covered General Motors Corporation ("GM") and GM dealers participating in the GMAC rental plan, including McCafferty. The Continental policy appears as Aetna Exhibit B ("Continental policy").

At the time of the accident, Sgt. Duncan was on active military duty and had been stationed in the Philadelphia area since 1986. He lived off base, in a property on Woodstock Street which he had rented unfurnished and furnished himself. Prior to living at that address, Sgt. Duncan had leased and lived in two other rental properties in Philadelphia. Stipulation of Uncontested Facts ("Stipulation") at ¶¶ 31-32. He gave his permanent residence as Montgomery, Alabama. Duncan Dep. at 17-18. Sgt. Duncan was registered to vote in Alabama, paid Alabama state taxes, had a bank account in Alabama, registered his Mercury Sable there, held an Alabama driver's license, had lived at his parents' home until the time he had entered the military nearly nine years before date of the accident, and still kept some possessions there. Duncan Dep. at 10-16, 112-16, 124-27.

II. DISCUSSION

1. Summary Judgment Standard

Summary judgment may be granted under Rule 56 of the Federal Rules of Civil Procedure "if there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56. After the moving party presents the basis for its motion, the non-moving party, if it claims that the case is not ripe for summary judgment, must show the existence of genuine disputes between the parties as to material facts, disputes that might affect the outcome of the suit under the prevailing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). In this case, none of the parties disputes that the case is ripe for summary judgment; none maintains that there are in dispute any genuine issues of material fact that preclude summary judgment. All of the parties agree that the disputes concern only questions of law and of contract interpretation that are within the province of the court.

2. The Allstate Policy

Third party defendant, Allstate, was joined in this matter by defendant, Aetna, who alleges that Allstate may be liable to Aetna for contribution or indemnification should Aetna be found liable for payment of damages in the underlying suits. Allstate has filed a motion for summary judgment on the ground that it owes Sgt. Duncan no coverage under the policy.

Allstate issued an Alabama contract of insurance to the named insured, Jefferson Duncan, Sr. The policy, which lists the 1988 Mercury Sable on the declarations page, includes the following as persons insured:

(1) While using your insured auto;

(a) You,

(b) Any resident, and

(c) Any other person using it with your permission.

(2) While using a non-owned auto;

(a) You,

(b) Any resident relative using a four wheel private passenger or utility auto.

(3) Any other person or organization liable for the use of an insured auto if the auto is not owned or hired by this person or organization.

Id. at 5, "Persons Insured". "You" or "Your" is defined in the policy as meaning "the policyholder named on the declarations page and that policyholder's resident spouse." Aetna policy at 6, Definition 5. Thus only Jefferson Duncan, Sr. and his wife are included within the definition. Sergeant Duncan is not a named policyholder.

If Sgt. Duncan is a resident relative under the policy, then he comes under Persons Insured, section (2)(b), which covers "any resident relative using a non-owned four wheel private passenger or utility auto." "Resident" or "reside" in the policy is defined as:

the physical presence in your household with the intention to

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