Kelly v. STATE FARM MUTUAL AUTO. INSURANCE CO.

• Decision Date: 29 July 1966
• Docket Number: Civ. A. No. 5552.
• Citation: 256 F. Supp. 978
• Parties: Carrol Jack KELLY, Betty Kelly v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY.
• Court: U.S. District Court — Eastern District of Tennessee

256 F. Supp. 978

Carrol Jack KELLY, Betty Kelly v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY.

Civ. A. No. 5552.

United States District Court E. D. Tennessee, N. D.

July 29, 1966.

Yancey & Butler, Knoxville, Tenn., for plaintiffs.

J. E. Pearman, Harriman, Tenn., for defendant.

MEMORANDUM

ROBERT L. TAYLOR, Chief Judge.

This matter has been submitted to the Court for a declaratory judgment upon the basis of facts agreed upon and stipulated by the parties pursuant to the pretrial conference.

In 1961, plaintiffs took out State Farm Mutual Automobile Insurance Company's automobile policy No. 1156 194-All-42 upon a 1960 Rambler Station Wagon, No. 124273. Premiums were promptly paid upon the policy up to and including December 12, 1965.

On or about October 12, 1965, said Rambler came into such a state of disrepair that it was not drivable. Whereupon, plaintiffs, on or about that date, purchased a 1955 Chrysler to provide necessary transportation until repairs could be made. Between October 12 and December 6, 1965, both vehicles were driven. On December 6, when the repairs upon the Rambler were completed it became obvious the Chrysler was in the better state of repair and better suited to the family needs than the Rambler. On that date, December 6, the Rambler was sold and plaintiffs would testify that on that date they intended to replace the Rambler with the Chrysler; and defendant can offer no proof to the contrary.

Thereafter, on December 12, 1965, plaintiffs' son, George John Kelly, while a member of their household and with their permission, was driving the Chrysler and became involved in a serious accident. No suits have been filed as yet, although an attorney has been retained by the owner and occupant of the other car, who is awaiting determination of this petition for a declaratory judgment before filing suit.

Plaintiffs promptly notified defendant's agent, through whom they had acquired the policy, of the accident, but defendant has denied coverage on the Chrysler under the policy written upon the Rambler on the ground that plaintiffs failed to notify insurer of the replacement of the insured automobile by a newly acquired automobile within the thirty day period from delivery thereof as prescribed by the policy—and that a car owned by the policyholder fifty-five days (prior to disposal of the other car) was not a newly acquired automobile under the definition in the policy.

Plaintiffs claim the thirty day notice period did not begin to run until December 6, 1965, the date the Rambler was sold, on which date plaintiffs state they intended the Chrysler to replace the Rambler described in the policy.

The parties agree that no additional premium would be required under the policy by reason of the replacement of the Rambler by the Chrysler.

They further agree that there is no dispute as to the facts and that the Court should render a summary judgment.

Since the facts are not in dispute, decision must turn upon the language of the Policy. Insuring Agreement 1 thereunder covered "The Owned Automobile." The Policy defines an owned automobile in the following language:

"Owned Automobile—means the private passenger automobile, utility automobile or trailer described in the declarations and includes a temporary substitute automobile and a newly acquired automobile, and under coverages A, B, C and M a trailer owned by the named insured. Under coverages F and G, `owned automobile' also includes wearing apparel and luggage owned by the named insured or a relative while such property is in or upon such automobile." (Emphasis added.)

A Temporary Substitute automobile is defined as follows:

"Temporary Substitute Automobile —means an automobile not owned by the named insured while temporarily used as a substitute for the described automobile when withdrawn from normal use because of its breakdown, repair, servicing, loss or destruction." (Emphasis added.)

And a Newly Acquired Automobile is defined:

"Newly Acquired Automobile— means an automobile, ownership of which is acquired by the named insured if (1) it replaces an automobile owned by the named insured and covered by this policy, or the company insures all automobiles owned by the named insured on the date of its delivery, and (2) the named insured notifies the company within 30 days following such delivery date. The named insured shall pay any additional premium required because of the application of the insurance to such newly acquired automobile." (Emphasis added.)

Obviously the Chrysler was not a Temporary Substitute automobile, since by definition such an automobile meant one "not owned by the named insured." By stipulation the Chrysler was purchased on or about October 12, 1965 and was, therefore, owned by the insured.

The next question is whether the Chrysler fell within the meaning of a "Newly Acquired Automobile" as defined in the policy. Plaintiffs argue that they did not intend for the insured automobile —that is, the Rambler—to be "replaced" until the date of the sale of that vehicle, so that the thirty day period for notification did not begin to run until that date, namely, December 6.

The consequence of accepting December 6 as the replacement date is that the accident would have occurred well within a thirty-day notice period. On the other hand, if the thirty-day period ran from the delivery date, the accident would have occurred beyond the thirty-day period, and since no notice was given in the period there could be no coverage.

The defendant argues that, under the language of the definition, there is automatic coverage of the newly acquired car only if the notice is given within 30 days of the delivery date.

No Tennessee statute has been cited to the Court, and it has found none, which would, as in some states, make coverage of the car mandatory on terms other than those set forth in the policy. See Farm Bureau Auto Ins. Co. v. Martin, 97 N.H. 196, 84 A.2d 823, 29 A.L.R.2d 811.

There are no Tennessee cases construing a clause covering a Newly Acquired Automobile. The Court is, of course, cognizant of the general rules of law in the State of Tennessee with respect to the construction of insurance policies as set forth in Hahn v. Home Life Insurance Co. of New York, 169 Tenn. 232, 84 S.W.2d 361.

"When an insurance contract is so drawn as to be ambiguous, or to require interpretation, or to be fairly susceptible of two different constructions, so that reasonably intelligent men, on reading the contract, would honestly differ as to the meaning thereof, that construction will be adopted which is most favorable to the insured.

"But the rule is equally well settled that contracts of insurance, like other contracts, are to be construed according to the sense and meaning of the terms which the parties have used, and, if they are clear and unambiguous, their terms are to be taken and understood in their plain, ordinary, and popular sense."

and that an ambiguous policy is construed against the insurer. Universal Life Insurance Company v. Lillard, 190 Tenn. 111, 228 S.W.2d 79. On the other hand if the terms of a contract are clear and unambiguous, they will be taken and understood in their plain, ordinary and popular sense. Standard Life Ins. Co. v. Hughes, 203 Tenn. 636, 637, 315 S.W. 2d 239.

In this policy, the language with respect to coverage of the newly acquired automobile seems quite clear. It must (1) replace an automobile owned by the insured and covered by the policy and (2) the named insured must notify the insured within 30 days following delivery date.

The intention with respect to the status of the 1...