Government Employees Ins. Co. v. Berry
| Decision Date | 10 October 1989 |
| Docket Number | Civ. A. No. 88-T-1033-N. |
| Citation | 724 F. Supp. 872 |
| Parties | GOVERNMENT EMPLOYEES INSURANCE COMPANY, Plaintiff, v. James D. BERRY, Defendant. |
| Court | U.S. District Court — Middle District of Alabama |
Clyde C. Owen, Jr., Ball, Ball, Matthews & Novak, Montgomery, Ala., for plaintiff.
J. Knox Argo, Argo, Enslen, Holloway & Sabel, Montgomery, Ala., for defendant.
In this case, plaintiff Government Employees Insurance Company (GEICO) sought declaratory relief from this court regarding its obligations to defendant James D. Berry under a comprehensive automobile insurance policy. This court has entered a judgment on a jury verdict, declaring that GEICO is obligated to pay Berry for the theft of his 1981 Mercedes Benz automobile and that the reasonable value of this car is $23,200.00. The case is now before the court on GEICO's motion for judgment notwithstanding the verdict or in the alternative for a new trial, and on its alternative motion to alter or amend the judgment. For the following reasons, the court will grant a new trial and deny all other relief sought by GEICO.
In June 1985, GEICO issued a comprehensive insurance policy to Berry, covering three vehicles for losses suffered from, among other things, theft. The policy covered "any vehicle described in this policy for which a specific premium charge indicates there is coverage," and any automobile which Berry acquired during the policy period and which replaced one of the vehicles listed in the policy. In December 1987, Berry filed a claim following the theft of a 1981 Mercedes Benz automobile which he owned. At that time, the three vehicles described in his policy with GEICO were a 1983 Chevrolet van, a 1979 GMC pickup truck, and a 1982 Toyota automobile.
At trial, GEICO went first with its evidence, contending that the policy did not cover the 1981 Mercedes Benz. Berry responded to GEICO, contending that he had taken the appropriate steps to add this vehicle to his policy by mailing a form to GEICO. He also contended that the 1981 Mercedes Benz replaced the 1982 Toyota vehicle listed in the policy, coming under the policy by the replacement clause. More specifically, Berry testified that he sold the 1982 Toyota in July 1986 and purchased a 1986 Dodge Caravan to replace it in August 1986. He sold the Caravan one month later, in September, and bought a 1979 Mercedes Benz to replace the Caravan. Berry further testified that he purchased the 1981 Mercedes Benz in July 1987. At that point he still owned the 1979 Mercedes Benz, but Berry testified that he then stopped using that vehicle as a means of transportation. He attempted to sell both cars after that date, although he used the 1981 Mercedes Benz for personal transportation during this time. Berry sold the 1979 Mercedes Benz in Atlanta on September 30, 1987. He also attempted to sell the 1981 Mercedes Benz on that day, but this deal fell through. Berry did not return the car to Montgomery, but left it with an associate in Atlanta who attempted to locate a buyer for it. Berry did not drive the 1981 Mercedes Benz after September 30, 1987. The 1981 Mercedes Benz was stolen in Atlanta in November 1987.
Berry further testified that he and his wife owned and used three vehicles after leaving the 1981 Mercedes Benz in Atlanta for sale — a 1982 GMC pickup truck, a 1983 Volkswagen van, and a 1985 Toyota Corolla automobile — and that he understood these three vehicles to be insured under the three-vehicle policy.
After Berry rested, the court directed a verdict in GEICO's favor as to Berry's theory that the 1981 Mercedes Benz was covered because he had mailed the form to add it to his policy. The court, however, reopened the evidence to allow Berry to explain further his testimony regarding how one car did, or did not, replace another. He stated, among other things, that he and his wife used only two vehicles between September 30 and the date in November when the 1981 Mercedes Benz was stolen— the 1982 GMC pickup truck and the 1983 Volkswagen van. The court then denied GEICO's renewed motion for a directed verdict and sent the case to the jury solely on the replacement clause theory. The jury returned a verdict, finding for Berry on the coverage issue and determining the reasonable value of the 1981 Mercedes Benz.
In the motions now pending, GEICO challenges Berry's legal grounds for relief and contends that the evidence presented at trial did not support the jury's verdict. The court will first discuss GEICO's insurance law arguments and will then assess its claim regarding the sufficiency of the evidence. Since the court concludes that a new trial is necessary, it will not reach GEICO's motion to alter or amend the judgment.
In its request for judgment notwithstanding the verdict, GEICO urges this court to follow a formalistic approach in the construction of the replacement clause. Under this approach, the court asks whether a number of criteria have been met in order to determine whether a given vehicle is a replacement vehicle. Although some variation appears in the cases, courts following this approach commonly list the following criteria:
See, e.g., United Farm Bureau Mutual Ins. Co. v. Elder, 86 Ill.2d 339, 56 Ill.Dec. 47, 49, 427 N.E.2d 127, 129 (1981); Young v. State Farm Mutual Automobile Ins. Co., 18 N.C.App. 702, 198 S.E.2d 54, 56, cert. denied 284 N.C. 125, 199 S.E.2d 664 (1973). Courts choose this approach in large part to eschew unstructured inquiries into the intent of the policyholder as to the status of his various vehicles. To be sure, courts using the formalistic approach courts have implied that their criteria serve as proxies for the policyholder's intent to replace or not replace the covered vehicle. Cf. Young, 198 S.E.2d at 56-57 (). But in this view, "an intention to replace is not enough," unless it is supported by specific proof of abandonment or sale of the replaced vehicle, or by proof that the replaced vehicle no longer functions as a vehicle. National Farmers Union Property and Casualty Co. v. Nyborg, 290 Minn. 191, 186 N.W.2d 702, 705 (1971).
Accord Elder, 56 Ill.Dec. at 50, 427 N.E.2d at 130; Butler v. Government Employees Ins. Co., 212 Va. 174, 183 S.E.2d 147 (1971). The policy concern underlying this adherence to brightline rules rests on the danger of double coverage created by the evidentiary problem of disproving the insured's intent. "The significant factor is that the insurer agreed to insure only one vehicle at a time, and should not be required to insure more unless it explicitly has agreed to do so." Elder, 56 Ill.Dec. at 50, 427 N.E.2d at 130; see also Mitcham v. Travelers Indemnity Co., 127 F.2d 27, 28-29 (4th Cir.1942). A simple focus on intent, from the formalistic point-of-view, would allow the insured effectively to obtain coverage on several vehicles for one premium, asserting at the time he submits a claim that he intended to replace the listed vehicle despite the fact that he retained possession of it and that it was in operable condition. As one court put it, this intent-based approach "would permit the insured after an accident to crystallize to its own advantage an intention which up to the time of the accident had been embryonic and perhaps never communicated to another person." Kelly v. State Farm Mutual Automobile Ins. Co., 256 F.Supp. 978, 981 (E.D.Tenn.1966).1
The formalistic approach also rests on the thesis that legal rules support certainty in the relationship between insured and insurer. The insured is able to obtain coverage for any vehicle he wishes simply by taking the appropriate steps to meet the legal criteria for replacement. The insurer is also able to ascertain the scope of coverage under the policy at any given time by investigating the actions taken up to that point by the insured. The insured and the insurer can thus make rational decisions to reach their desired outcomes — assuming they know the legal rules governing their relationship in the first place.
GEICO advances two formal rules which, it contends, are consistent with Alabama law and applicable to the facts of this case. The first rule is that a vehicle is not covered by the replacement clause of the policy if it is not the first replacement for a listed vehicle. To use the facts of this case as an example, GEICO contends that the 1986 Dodge Caravan may have been a replacement vehicle covered by the policy since Berry claims it replaced the 1982 Toyota. Under GEICO's rule, however, the 1979 Mercedes Benz was not a replacement vehicle under the policy because it replaced a vehicle— the 1986 Dodge Caravan — which was not listed in the policy. Similarly, under GEICO's proposed rule the 1981 Mercedes Benz was not a replacement vehicle because it replaced, if anything, an unlisted vehicle too — the 1979 Mercedes Benz. See Garrelts v. Dep't of Motor Vehicles, 176 Neb. 220, 125 N.W.2d 678, 684 (1964); see also Schaller v. Aetna Casualty & Surety Co., 280 A.D. 988, 116 N.Y.S.2d 729 (1952), aff'd, 306 N.Y. 725, 117 N.E.2d 908 (1954).
The second rule endorsed by GEICO is that a vehicle cannot replace a covered vehicle if the policyholder retains ownership of the covered vehicle after purchasing the second vehicle and the covered vehicle is not inoperable. E.g., Elder, 56 Ill.Dec. at 49-50, 427 N.E.2d at 129-30; Fleming v. Nationwide Mutual Ins. Co., 383 F.2d 145, 149 (4th Cir.1967); Yenowine v. State Farm...
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