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

• Decision Date: 19 November 1990
• Docket Number: Civ. No. 90-5004.
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff, v. John Matthew BURGIN, et al., Defendants.
• Court: U.S. District Court — Western District of Arkansas

752 F. Supp. 877

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff, v. John Matthew BURGIN, et al., Defendants.

Civ. No. 90-5004.

United States District Court, W.D. Arkansas, Fayetteville Division.

November 19, 1990.

Thomas B. Pryor, Pryor, Barry, Smith & Karber, Fort Smith, Ark., for plaintiff.

James A. Penix, Jr., Penix & Taylor, Springdale, Ark., John C. Everett, Everett & Gladwin, Prairie Grove, Ark., Bobby Lee Odom, Odom & Elliott, Fayetteville, Ark., Robert L. Jones, Jr., Jones, Gilbreath, Jackson & Moll, Fort Smith, Ark., Walter B. Cox, Davis, Cox & Wright, Fayetteville, Ark., for defendants.

MEMORANDUM OPINION

H. FRANKLIN WATERS, Chief Judge.

This is a declaratory judgment action initiated by the plaintiff, State Farm Mutual Automobile Insurance Company (State Farm), to determine which, if any, of three insurance policies issued by State Farm, Shelter Mutual Insurance Company (Shelter), and American General Fire and Casualty Company (American General), provide coverage for injuries received by defendant, John Burgin, in an automobile accident. This matter was submitted to the court on a partially stipulated record and by the presentation of other testimonial and documentary evidence on October 22, 1990. The following shall constitute the court's findings of fact and conclusions of law pursuant to Rule 52, Fed.R.Civ.P.

The Facts and Principal Players

State Farm issued an automobile liability policy to Ron and Sheila Casteel expressly insuring a 1988 Ford Escort. It is not disputed that this policy was in full force and effect on the date of the accident.

American General issued a garage liability insurance policy to B & K Enterprises, Inc., (B & K), also known as Mazda of Springdale. B & K is the owner of the 1987 Chevrolet van which was being driven by Ron Casteel at the time of the occurrence.

Shelter issued an automobile insurance policy to Phillip and Charlotte Steele, insuring their 1984 Ford Bronco.

John Burgin was injured in an automobile accident in Iowa when the Chevrolet van driven by Ron Casteel, in which Burgin was a passenger, collided with another vehicle.

The evidence presented to the court indicates that Phillip Steele and Ron Casteel are stockholders in American Heritage Productions, Inc. (American Heritage) which produces and markets documentary films about the "Old West". For reasons of obscure historical importance, Steele and Casteel planned a trip to Minnesota, Kansas and Missouri to shoot documentary footage. The trip required at least four people: Ron and Sheila Casteel, Steele, and a photographer.

From experience these people knew that the Steele's 1984 Bronco would not accommodate four people and their equipment for such a trip. Steele went to Mazda of Springdale to request that James Baker (the owner-manager of B & K Enterprises) rent them a suitable vehicle. Baker informed Steele that B & K no longer rented vehicles but that he would loan them a suitable automobile. It is clear from the record that the Chevrolet van was loaned and not rented to the group. Further, Baker placed no restrictions upon who could operate the van or the purpose for which it could be used. As Steele and Casteel drove away from Mazda of Springdale, Casteel drove the Chevrolet van and Steele drove the Bronco to Steele's office and left it there during the trip. As noted, Casteel was operating the van at the time of the accident which injured Burgin, a passenger in the van.

The Policies:

The Shelter Policy Issued to the Steeles

As indicated above, Shelter issued a policy to the Steeles, expressly covering the 1984 Bronco. That policy also insures "temporary substitute autos" and "non-owned autos":

(4) Described auto means the vehicle described in the Declarations and includes a temporary substitute auto....

* * * * * *

(6) Non-owned auto means any auto other than:

(a) the described auto, or

(b) an auto owned in whole or in part by, or furnished or available for regular use of, either you or any resident of your household.

* * * * * *

(14) Temporary substitute auto means an auto not owned in whole or in part by you or any resident of your household, while temporarily used with the permission of the owner as a temporary substitute for the described auto when withdrawn from normal use because of its breakdown, repair, servicing, loss or destruction.

It is at once apparent that, as to the Steeles, the Chevrolet van could, depending on the circumstances, be either a temporary substitute auto or a non-owned auto. In the case at bar there is no contention that the Steeles' 1984 Bronco was "withdrawn from normal use because of its breakdown, repair, servicing, loss or destruction." Therefore, the Chevrolet van can, under the circumstances, be classified under the policy, only as a "non-owned auto".

What persons are insured under the Shelter policy issued to the Steeles as to a non-owned auto? The policy states:

(20) Insured means the person, persons, or organization defined as insureds in or with reference to the specific coverage or endorsement.

PERSONS INSURED

As used in this Part, Insured means:

(1) with respect to the described auto,

(a) you,

(b) your relatives,

(c) any other person using the auto if its use is within the scope of your permission, and

(d) any other person or organization liable for the use of the auto by one of the above persons.

(2) With respect to a non-owned auto,

(a) you

(b) your relatives, provided the actual use or operation is with the permission, or reasonably believed to be with the permission of the owner or person in lawful possession, and within the scope of such permission, and

(c) any other person or organization which does not own or hire the auto but is liable for its use by one of the above persons.

Thus, as to a non-owned auto, the persons insured are the Steeles, relatives of the Steeles acting in accordance with permission given by the Steeles or the owner, and "any other person ... which does not own or hire the (van) but is liable for its use by one of the above persons." It is immediately obvious that Ron Casteel, as the driver of the van at the time of the accident, may be liable for his own use of the van, but cannot be "liable for its use by (the Steeles or their relatives)", under the factual allegations presented. It follows that Casteel, as an individual, is not an "insured" under the Shelter policy. Although the Steeles are insureds under the policy, according to the parties Burgin does not present a theory of liability encompassing them. Therefore, the Shelter policy provides no coverage as to any of Burgin's claims against Ron Casteel.

The American General Policy Issued to B & K Enterprises, Inc.

As indicated, American General issued a garage liability policy to B & K Enterprises, Inc. This policy obligates American General to:

Pay all sums the insured legally must pay as damages because of bodily injury or property damage to which this insurance applies caused by an accident and resulting from garage operations, (page 1 of 6)

"Garage operations" is defined as:

... the ownership, maintenance or use of locations for garage business and that portion of the roads or other accesses that adjoin these locations. Garage operations includes the ownership, maintenance or use of the autos indicated in Part II as covered autos. Garage operations also includes all operations necessary or incidental to a garage business. (definition "F", page 1 of 6)

Because "garage operations" is defined in the policy as including the "ownership ... or use of (the Chevrolet van)", the policy provides coverage for the type of occurrence at issue here. As to who is insured under the American General policy, the policy states:

D. WHO IS AN INSURED.

1. For Covered Autos.

a. You are an insured for any covered auto.

b. Anyone else is an insured while using with your permission a covered auto except:

(1) The owner of a covered auto you hire or borrow from one of your employees ...

(2) Someone using a covered auto while he or she is working in a business of selling, servicing, repairing or parking or storing autos unless the business is your garage operations.

(3) Your customers, if your business is shown in ITEM ONE of the declarations as an auto dealership. However, if a customer of yours:

(a) Has no other available insurance (whether primary, excess, or contingent), he or she is an insured but only up to the compulsory or financial responsibility law limits....

(b) Has other available insurance (whether primary, excess, or contingent) less than the compulsory or financial responsibility law limits where the covered auto is principally garaged, he or she is an insured only for the amount by which the ... law limits exceed the limits of his or her other insurance.

Because it is not alleged that Casteel was the owner of a covered auto borrowed from an employee of B & K, nor that he was using the van while working in the business of selling, servicing, repairing, parking or storing autos, Casteel can be an insured only under D.1.b. Under that section, Casteel is an insured unless he is a customer (and is an insured if he is a customer subject to certain limitations). At this point, the question is whether Casteel qualifies as a "customer".

As to this, the only evidence before the court suggests that neither Steele nor Casteel were "customers" of B & K Enterprises on the day of the accident. The records reflect that Steele bought the 1984 Bronco from B & K several years ago. Additionally, sometime between six and twelve months prior to the accident, Steele told Baker and another employe, Cole, of B & K that he was "looking for" a vehicle similar to the Bronco to serve as a replacement vehicle and informally told them three or four times during this period to contact him if they located such a vehicle. No definite "order" for a particular vehicle had been placed, nor had any contract been entered. This is not sufficient to render Steele a customer on the day...