State Farm Mut. Auto. Ins. Co. v. Colby

• Decision Date: 13 September 2013
• Docket Number: No. 12–221.,12–221.
• Citation: 2013 VT 80,194 Vt. 532,82 A.3d 1174
• Court: Vermont Supreme Court
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY v. Seth COLBY and Joan Lamotte, Administrator of the Estate of Kim Lamotte.

194 Vt. 532

82 A.3d 1174

2013 VT 80

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY

v.Seth COLBY and Joan Lamotte, Administrator of the Estate of Kim Lamotte.

No. 12–221.

Supreme Court of Vermont.

Sept. 13, 2013.

Robin Ober Cooley of Pierson Wadhams Quinn Yates & Coffrin, Burlington, for Plaintiff–Appellee.

Bruce Palmer of Downs Rachlin Martin PLLC, St. Johnsbury, for Defendant–Appellant Colby.

Steven A. Adler and Daniel D. McCabe of Axelrod & Adler, PLLC, St. Johnsbury, for Defendant–Appellant Lamotte.

Present: REIBER, C.J., DOOLEY, SKOGLUND, BURGESS and ROBINSON, JJ.

ROBINSON, J.

¶ 1. This case requires us to determine whether the omnibus clause in a specific automobile insurance policy provides coverage to a permittee to whom the insured owner loans the car when that first permittee is subject to a negligent entrustment claim for loaning the car to a second permittee. A vehicle owner entrusted her car keys to defendant, who in turn passed them along to another driver. The driver was involved in a fatal, single-car accident and the driver's estate sued defendant for negligent entrustment. Defendant sought coverage under the vehicle owner's automobile insurance policy. Defendant appeals from the trial court's order granting summary judgment in favor of the insurer and finding that, as a matter of law, defendant did not qualify for coverage under the policy. We conclude that defendant's entrustment of the vehicle to the driver constitutes “use” under the omnibus clause of the policy and that the undisputed evidence supports the conclusion that the named insured did not consent to defendant's allowing the driver to drive the car, but that a material issue of fact exists with respect to whether defendant entrusted the car keys to driver reasonably believing that driver would not drive the car. Accordingly, we reverse and remand.

¶ 2. The undisputed facts, considered in the light most favorable to defendant, are as follows. On the day of the accident, defendant, Seth Colby, picked up decedent, Kim Lamotte, who was hitchhiking near Lunenburg. After they traveled to another town where Colby loaded an edger into his truck, Colby took decedent to McDonald's in Lancaster, New Hampshire, where decedent's girlfriend, Kelly Macie, worked. At McDonald's, decedent asked to borrow Macie's car. Macie responded by turning to Colby, whom she did not know, and asking if he had a license and if he had been drinking. Colby said he was licensed and sober. Macie gave Colby the keys without verbal restrictions on his use of the car. Before he took the keys, Colby heard Macie say something to decedent about some boxes that she wanted in the trunk of her car. Colby also heard Macie ask decedent to bring the keys back when she was done working.

¶ 3. Macie testified that she never let decedent drive her car because his driver's license had been suspended for life due to repeated convictions for driving under the influence; she also testified that she could tell within moments of his arrival that he had been drinking. Colby testified that he did not know that decedent did not have a driver's license, and did not know decedent had been drinking. When she gave Colby the keys, Macie did so with the understanding that decedent would not drive the car; Colby understood that Macie did not want decedent to drive her car, and he took the keys with no intention of driving the car himself.

¶ 4. Somewhere between the counter where Macie gave Colby the keys and the car, Colby handed decedent the keys. Colby told decedent not to drive the car, and decedent told Colby that he was not going to drive the car but was going to listen to the car radio. Colby then got in his truck and drove away.

¶ 5. Soon thereafter, Colby saw decedent pass him driving Macie's car. Later in the day, Colby saw decedent again, this time at Colby's brother's home where Colby was unloading his truck. Colby testified that when they talked at that time he probably told decedent that he should not be driving and should return the car to Macie. Decedent drove away and, later in the afternoon, drove off the road at high speed into a telephone pole, killing himself instantly.

¶ 6. Decedent's estate filed a wrongful death suit against Macie and Colby. ¹ Colby seeks coverage under Macie's State Farm insurance policy. With regard to State Farm's duty to defend and indemnify Colby, both State Farm and Colby filed cross-motions for summary judgment. The trial court properly focused its analysis on the omnibus clause of the State Farm policy that provides coverage for someone “while using such a car if its use is within the scope of [policyholder's] consent.” The specific question on summary judgment was whether Colby qualifies as an insured under this provision in Macie's policy, and, therefore, qualifies for defense and coverage. This issue raises two separate, but related, inquiries under the policy language: (1) whether Colby's allegedly negligent act of giving the keys to decedent and thereby entrusting him with possession of the car was an act undertaken “while using” the car; and (2) if so, whether that “use” was within the scope of Macie's consent.

¶ 7. The trial court reached only the first question—whether Colby was using the vehicle—and concluded that Colby's conduct in relation to the vehicle could not, as a matter of law, constitute “use” under the insurance policy. The court reaffirmed its conclusion upon motion for reconsideration. The trial court concluded that the term “use” is not ambiguous. Although the trial court acknowledged that “use” means something more than just operation, it concluded that the term does not encompass transferring the right to control the vehicle or giving the keys to an operator. The trial court accordingly denied summary judgment for Colby and granted it for State Farm. Colby appeals.

¶ 8. “We review a motion for summary judgment de novo under the same standard of review as the trial court.” Madowitz v. Woods at Killington Owners' Ass'n, 2010 VT 37, ¶ 9, 188 Vt. 197, 6 A.3d 1117. Summary judgment is appropriate “if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” V.R.C.P. 56(a); Madowitz, 2010 VT 37, ¶ 9, 188 Vt. 197, 6 A.3d 1117. A party seeking summary judgment must point to particular parts of the record to support the assertion that a fact can or cannot be genuinely disputed. V.R.C.P. 56(c). “Furthermore, interpretation of an insurance policy, like other contracts, is a question of law. Our review is therefore nondeferential and plenary.” Co–op. Ins. Cos. v. Woodward, 2012 VT 22, ¶ 8, 191 Vt. 348, 45 A.3d 89 (citation omitted).

¶ 9. Because the cross-motions for summary judgment implicate State Farm's duty to defend, at least with respect to that duty we consider whether “the claim against the insured ‘might be of the type covered by the policy.’ ” ²Woodward, 2012 VT 22, ¶ 10, 191 Vt. 348, 45 A.3d 89 (quoting Garneau, 158 Vt. at 366, 610 A.2d at 134). “The most expansive duty under insurance liability policies is the insurer's duty to defend, but there is no duty to defend when there is no possible factual or legal basis on which the insurer might be required to indemnify.” Id.

¶ 10. Our legal analysis turns on the same two questions identified by the trial court: Does the wrongful death claim against Colby seek recovery for his conduct “while using” the vehicle? If so, was his use within the scope of Macie's authorization? We conclude that Colby's entrustment of the car keys to decedent amounts to “using” the car for the purposes of the applicable policy language, but we do so with the understanding that in this case the more significant limitation on the policy coverage arises from the requirement that the use be “within the scope of [the named insured's] consent.” See infra, ¶¶ 24–26.

I.

¶ 11. We interpret disputed terms in an insurance policy “according to their plain, ordinary and popular meaning” and are guided by a “review [of] the language of an insurance contract from the perspective of what a reasonably prudent person applying for insurance would have understood it to mean.” Woodward, 2012 VT 22, ¶ 9, 191 Vt. 348, 45 A.3d 89 (quotations omitted). “If we find ambiguity, we construe the language in favor of coverage ....” Id.

¶ 12. The State Farm policy does not define “while using.” Black's Law Dictionary defines “use” as the “application or employment of something.” Black's Law Dictionary 1577 (8th ed.2004). Whether, or under what circumstances, entrustment of a car is an “application or employment” of the car is not clear on the face of the policy. For that reason, in addition to the reasons described below, we conclude that the term is ambiguous.

¶ 13. This Court has not addressed the specific question of whether entrustment constitutes “use.” ³ But see Coop. Fire Ins. Ass'n of Vt. v. Gray, 157 Vt. 380, 386, 599 A.2d 360, 363–64 (1991) (Dooley, J., concurring) (“I would hold that basic coverage extends to a negligent entrustment or supervision action were it not excluded by the language of the nonowned auto provision in this instance.”). Courts from other jurisdictions that have considered the question have taken a variety of approaches.

¶ 14. Some courts have expressly or implicitly held that entrustment of a vehicle does qualify as “use.” For example, the Supreme Judicial Court of Massachusetts addressed whether entrustment constituted “use” for the purpose of a homeowner's-insurance-policy exclusion. Barnstable Cnty. Mut. Fire Ins. Co. v. Lally, 374 Mass. 602, 373 N.E.2d 966 (1978). The court concluded:

[T]he terms of the policy excluding coverage in the event of “bodily injury ... arising out of the ownership ... operation, (or) use ... of ... any recreational motor vehicle owned by any Insured” necessarily apply to a situation in which bodily injury is alleged to have been caused by the negligent entrustment of a dangerous...