Sentry Select Ins. Co. v. Home State Cnty. Mut. Ins. Co.

• Decision Date: 05 September 2013
• Docket Number: No. 5:12CV10,5:12CV10
• Citation: 994 F.Supp.2d 789
• Parties: Sentry Select Insurance Co. v. Home State County Mutual Insurance Co. and Mark Lynn Stevens
• Court: U.S. District Court — Eastern District of Texas

994 F.Supp.2d 789

Sentry Select Insurance Co.

v.Home State County Mutual Insurance Co. and Mark Lynn Stevens

No. 5:12CV10

United States District Court, E.D. Texas, Texarkana Division.

September 5, 2013

Russell J. Bowman, Russell J. Bowman, Irving, TX, for Plaintiff.

Tarron Leigh Gartner–Ilai, Cooper & Scully PC, Dallas, TX, for Defendants.

MEMORANDUM ORDER ADOPTING REPORT AND RECOMMENDATION

MICHAEL H. SCHNEIDER, UNITED STATES DISTRICT JUDGE

The above-entitled and numbered civil action was heretofore referred to United States Magistrate Judge Caroline M. Craven pursuant to 28 U.S.C. § 636. The Report of the Magistrate Judge which contains her proposed findings of fact and recommendations for the disposition of such action has been presented for consideration. No objections were filed to the Report and Recommendation. The Court is of the opinion that the findings and conclusions of the Magistrate Judge are correct. Therefore, the Court hereby adopts the Report of the United States Magistrate Judge as the findings and conclusions of this Court.

Accordingly, it is hereby

ORDERED that Motion for Summary Judgment of Home State County Mutual Insurance Company and Mark Lynn Stevens (Dkt. No. 19) is DENIED. It is further

ORDERED that Plaintiff's Motion for Summary Judgment (Dkt. No. 20) is GRANTED. It is further

ORDERED that Sentry has no duty to indemnify or defend Mark Lynn Stevens in connection with the lawsuits filed against him by Donald and Barbara Roche, Cause Nos. 11CA919 and 11CA920 respectively, filed in the Circuit Court, Fifth Judicial Circuit, Lake County, Florida. arising out of the March 20, 2010 auto accident Stevens was involved in with Donald and Barbara Roche

SIGNED this 5th day of September, 2013.

REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE

CAROLINE M. CRAVEN, UNITED STATES MAGISTRATE JUDGE

The above-referenced case was referred to the undersigned United States Magistrate Judge for pre-trial purposes in accordance with 28 U.S.C. § 636. Before the Court are the following pending motions: Motion for Summary Judgment of Home State County Mutual Insurance Company and Mark Lynn Stevens (Docket Entry # 19) and Plaintiff's Motion for Summary Judgment (Docket Entry # 20). The Court, having reviewed the relevant briefing, recommends Defendants' motion for summary judgment be DENIED and Plaintiff's motion for summary judgment be GRANTED.

I. FACTUAL BACKGROUND

On January 27, 2012, Plaintiff Sentry Select Insurance Company (“Sentry”) filed this action for Declaratory Judgment against Home State County Mutual Insurance Company (“Safeco”) and Mark Lynn Stevens (“Stevens”) (collectively “Defendants”). This insurance coverage action arises out of an automobile accident that occurred on March 20, 2010 in Florida between Stevens and Barbara and Donald Roche. At the time of the accident, Stevens was driving an automobile owned by Classic Motors of Texarkana, Inc. (“Classic”) on a personal trip to Florida. As a result of the accident, the Roches filed two lawsuits against Stevens, seeking damages for injuries allegedly sustained by them resulting from the automobile accident. On November 1, 2012, the Court granted the Roches unopposed motion to intervene in this cause of action.

Sentry insures Steven's employer Classic under a Garage Liability Policy. Safeco insures Stevens under a Personal Auto Policy. The parties' cross motions for summary judgment require the Court to determine whether Sentry's garage liability policy issued to Classic, or Stevens' personal auto policy with Safeco, provides primary coverage to Stevens concerning his auto accident with the Roches.

II. THE PARTIES' POSITIONS

A. Sentry's motion

Although Sentry's amended complaint sought a declaration that Sentry's liability under its policy should the Roches obtain judgment against Stevens would be pro rata with Safeco,¹ Sentry seeks summary judgment that Stevens' personal auto policy with Safeco provides primary coverage as to Stevens and that Sentry has no duty to defend or indemnify Stevens in connection with the lawsuits filed against him by the Roches. According to Sentry, the critical inquiry is whether Stevens constitutes an “employee” in this case (which would make an applicable Sentry limit of $500,000 per accident), or whether Stevens falls under the category of a permissive user, which would make the Sentry policy inapplicable since Stevens' Safeco personal auto liability insurance meets the minimum amounts required by Florida law.

Sentry describes three different “classes of insured” under Classic's garage liability policy: (1) the named insured (Classic), (2) employees of Classic, and (3) anyone else required by law to be an insured while using a covered auto owned by Classic, i.e., a “permissive user.” Docket Entry # 20 at pg. 9. Sentry characterizes Stevens as a customer at the time of the accident and therefore a permissive user for purposes of the Sentry policy. Id. at pg. 8. Sentry asserts Stevens is not a Classic employee for purposes of the accident involved in this matter because Stevens was not acting in the course and scope of his employment at the time of the accident.

According to Sentry, under the Classic garage liability policy, “the amount of coverage that would be available under the Sentry policy for the category of insureds that constitute ... permissive user[s] would only be the minimum limits required by Florida law (since that is where the accident occurred) and only in the amount needed to comply with the minimum limits of insurance required by such state after the driver's other insurance has been exhausted.” Id. at pg. 9. Sentry states the limits of the Safeco policy are in excess of the minimum amounts required by Florida law. Therefore, Sentry asserts Classic's garage liability policy would not provide any coverage to Stevens as a matter of law if Stevens is properly considered a customer/permissive user rather than an employee. According to Sentry's position, if Stevens does not constitute an employee, § 1952.252 of the Texas Insurance Code governs, making Stevens' policy with Safeco the primary coverage in this matter.

B. Defendants' motion

Defendants assert the Sentry policy provides primary coverage for employees who are using covered autos owned by Classic, with Classic's express permission. According to Defendants, Stevens was an employee at the time of the accident, not a customer or permissive user. Defendants contend Classic's garage policy issued by Sentry covers the accident up to $500,000.

In arguing Stevens was an employee rather than a customer, Defendants specifically assert the Sentry policy expressly insures employees driving demo cars with Classic's permission. Defendants point out Stevens had Classic's express permission to take one of the dealership's cars to Florida; there were no restrictions on his use of the automobile; and he did not pay to rent the automobile he was driving at the time of the accident. Thus, Defendants assert Stevens' use of the Classic automobile was not as a “loaner” or a rental but as a demo vehicle. In further support of its characterization of Stevens as an employee, Defendants assert Classic did not have a policy of allowing people who were not employees to drive cars owned by Classic; the standard practice in the car dealership industry allows employees to drive cars owned by the dealership; and Stevens testified he did not drive his own Saturn but instead drove Classic demos. According to Stevens, he never intended to drive his own personal vehicle to Florida, and the car he was driving at the time of the accident was not a substitute (or loaner) for his personal vehicle that was in the shop for repairs.

III. SUMMARY JUDGMENT EVIDENCE

A. The parties' evidence

In its motion for summary judgment, Sentry relies on the following summary judgment evidence: (1) Affidavit of Brian Rutta (“Rutta Aff.”); (2) Sentry's Garage Insurance Policy for Classic Motors of Texarkana, Inc., Policy No. 24–46762–01 (effective 02–01–10 to 02–01–11) (“Classic garage policy”); (3) Affidavit of Sentry's attorney, Russell J. Bowman (“Bowman Aff.”); (4) October 24, 2012 deposition of Mark Lynn Stevens (“Stevens Depo.”) with attachments; and (5) Complaints from the lawsuits filed by the Roches against Stevens and Classic (“Florida Complaints”).

In their motion for summary judgment, Defendants rely on the following summary judgment evidence: (1) Sentry's Garage Insurance Policy for Classic Motors of Texarkana, Inc., Policy No. 24–46762–01 (effective 02–01–10 to 02–01–11) (“Classic garage policy”); (2) Excerpts from the October 24, 2012 deposition of Mark Lynn Stevens (“Stevens Depo.”); (3) The agreement between Stevens and Classic (“Rental Agreement”); (4) The Original Petition filed by Barbara Roche against Mark Stevens and Classic Motors of Texarkana, Inc.; (5) Safeco Policy No. Y526005 (“Stevens personal policy”); and (6) Affidavit of Robert Kallina (“Kalline Aff.”). The summary judgment evidence establishes as follows.

B. The accident

Defendant Stevens has worked at Classic since 2007. Stevens Depo. at 7:9–12. At the time of the automobile accident and at the time of his deposition, Stevens was employed as a sales manager. Id. at 7:17–19. As a sales manager, Stevens is in charge of all sales in the pre-owned department; he heads up a team of 13 salesmen. Id. at 7:20–24.

In March 2010, Stevens took off work for one week to take his wife and three children on vacation to Walt Disney World. This was one of the three weeks of vacation a year which Stevens receives with Classic. Id. at 8–9. Stevens' boss, the general manager, was aware Stevens was going to take a Classic vehicle on vacation. Id. at 29:16–23.

Before he left for vacation, Stevens signed a “Rental Agreement” for the use of a Classic automobile during his family vacation to Florida. The “Rental Agreement” contains a boilerplate paragraph titled “Insurance.” It provides as follows:

6. Insurance. You...