State Farm Mutual Automobile Ins. Co. v. Clark

Decision Date26 June 1975
Docket NumberCiv. No. A-161-72.
PartiesSTATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff, v. Romaine F. CLARK et al., Defendants.
CourtU.S. District Court — District of Alaska

COPYRIGHT MATERIAL OMITTED

Roger F. Holmes, Biss & Holmes, Anchorage, Alaska, for plaintiff.

John Anthony Smith, Gruenberg, Willard & Smith, Kenneth D. Jensen, Anchorage, Alaska, for defendants.

MEMORANDUM AND ORDER

von der HEYDT, Chief Judge.

This cause comes before the court upon the renewed motion of defendants, Garfield, Karrer and Jolly, for summary judgment declaring that the automobile insurance policy issued by plaintiff to Romaine F. Clark provides coverage for an accident that occurred on June 17, 1972, in which the movants were injured.

This is a declaratory action brought by State Farm Mutual Automobile Insurance Company (hereinafter State Farm) in order to determine whether its policy, number XXX-XXX-XXX-XXD1, provides coverage to Romaine F. Clark. Jurisdiction is based upon diversity of citizenship. 28 U.S.C. § 1332. Under the mandate of Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), this court must apply the law of the forum state. Unfortunately, the Alaska Supreme Court has yet to address the precise issue raised in the instant case. That issue concerns the affect that AS 28.10.3702 has upon the coverage afforded the purchaser of an automobile under the newly acquired automobile clause3 of his automobile liability policy where the certificate of title for such automobile is issued subsequent to an accident for which the named insured is potentially liable.

Many of the facts in this litigation are hotly disputed. Nevertheless, the court must reach the legal issue involved in order to determine whether the disputed facts are material to the resolution of this action. For reasons that will subsequently appear, the court finds that the factual disputes are material and must therefore deny defendants' motion for summary judgment.

Romaine F. Clark was the named insured under an automobile policy issued by State Farm that provided liability coverage for the named insured when driving the listed automobile, a 1969 Falcon. Additionally, the policy provides coverage for the named insured when driving a "non-owned automobile" and an "owned automobile", provided certain conditions are met.4 It appears probable that sometime in April or May of 1972 the named insured purchased a 1964 Chevrolet Chevelle from an Irvin Earles. Thereafter, Earles cancelled his insurance on the Chevelle. The named insured did not immediately notify State Farm as to his acquisition of an additional automobile. On June 1, 1972, the named insured filed an application for a certificate of registration and a certificate of title on his newly acquired automobile. On June 17, 1972, a single car accident occurred while the named insured was driving the newly acquired Chevelle. Several of the passengers in the car were injured. Subsequently, on June 19, 1972, the named insured notified State Farm of the accident and of the fact that he had acquired the Chevelle. Thereafter, the Alaska Department of Revenue issued Mr. Clark new certificates of title and registration.5 The record does not reflect whether the named insured was issued a temporary permit to operate the vehicle pending action on his application for registration and new certificate of title. AS 28.10.290.6

Broadly stated, the legal question that must be resolved is the applicability of the Alaska Motor Vehicle Act, AS 28.10.010 et seq.,7 to the interpretation of an automobile liability insurance policy. Defendants apparently contend that the act should be given a very literal interpretation citing this court's opinion in Harbor Insurance Co. v. United States Fidelity & Guaranty Co., 350 F.Supp. 723 (D.Alaska 1972). There it was held that AS 28.10.370 prevented legal title, meaning ownership, from passing to a buyer where neither the buyer nor the seller complied with the appropriate provisions of the Alaska Motor Vehicle Act. AS 28.10.360 and AS 28.10.350. Accordingly, this court held that ownership remained with the seller so as to make the buyer a permissive user under the seller's omnibus clause.

The defendants' reliance on Harbor is misplaced for three principal reasons. First, Harbor involved a significantly different factual context than the instant case. Second, Harbor preceded Judge Singleton's opinion in Graham v. Black,8 Superior Court, 3rd Jud.Dist., C.A. No. 71-3441 (1973) and the Alaska Supreme Court's decision in Graham v. North River Insurance Company, 533 P. 2d 20 (Alaska 1975) affirming sub. nom., and on different grounds, Graham v. Black. Third, the legal issue in Harbor was presented in the context of an unopposed motion for partial summary judgment. Since the court was presented with only one side of a very difficult question, this court, in effect, vacated its decision in Harbor by order dated March 12, 1973, wherein the court granted plaintiff's motion for relief from judgment. Accordingly, this court will not follow Harbor9 if a more reasonable interpretation of AS 28.10.370 is possible.

Although the defendants apparently argue for a strict interpretation of AS 28.10.370, such an interpretation not only would require that the defendants' motion for summary judgment be denied, but additionally it would follow that the court should grant plaintiff summary judgment.10 Plaintiff would be entitled to summary judgment for the reason that the vehicle involved in the accident on June 17, 1972, was not an owned vehicle since a new certificate of title had not yet been issued to Clark. Since the vehicle was not an owned vehicle under a strict interpretation of AS 28.10.370, the only possible coverage that Clark could have available would be under the "non-owned automobile" coverage provided by his policy. In relevant part, a non-owned automobile is defined as an automobile not furnished or available for the frequent or regular use of the named insured. The record clearly indicates that the car in question was furnished and available for the "frequent and regular use" of Clark.11 Accordingly, Clark would have no coverage under his policy. However, such an interpretation is not required by the Act, when read in its entirety, by the applicable precedent, by reason, or by public policy.

Plaintiff contends that the question of coverage should turn on whether the accident occurred within thirty days after the named insured acquired ownership and received delivery of the automobile.12 If the accident occurred within thirty days of such date then the policy would provide coverage under the newly acquired automobile clause, otherwise it would not. The purpose of such a clause is to protect a person, who is already carrying insurance, in the event that he buys another automobile or replaces one that he has previously owned. 7 Appleman, Insurance Law and Practice, § 4293. It gives the insured a reasonable time in which to make the necessary adjustments in his insurance to be protected against the possibility of substantial loss because of that which may be only a momentary lapse of attentiveness that results in the serious injury of third persons. As an additional benefit, there is the increased protection afforded the members of society that may be injured by the insured's negligence. See, State Farm Mutual Automobile Insurance Co. v. MFA Mutual Insurance Co., 485 S.W.2d 397, 402 (Missouri 1972) (dissenting opinion).13

It is in light of this situation that the provisions of the Alaska Motor Vehicle Act must be viewed. AS 28.10.370 provides in part, "Until the department issues a new certificate of registration and certificate of ownership, delivery of a vehicle required to be registered under this chapter shall be deemed not to have been made and title shall be deemed not to have passed, and the intended transfer shall be deemed incomplete and not valid or effective for any purpose." This court is unaware of any legislative history that indicates it was intended that this statute be superimposed upon a contract of insurance between an insured and his insurer. Rather, the judicial precedent in Alaska indicates that a contract of insurance should be construed in conformity with the reasonable expectations of a layman. Graham v. Rockman, 504 P.2d 1351 (Alaska 1972); Continental Insurance Company v. Bussell, 498 P.2d 706 (Alaska 1972). Absent compelling reasons, this court is reluctant strictly to apply the legal fiction created by AS 28.10.370 in an insurance context. To so apply the statute oftentimes results in making an insurer liable for damages for which its named insured is not liable and for a hazard not intended to be covered by the policy. In the context of the facts of the instant case, such an interpretation frustrates the insured's reasonable expectations of coverage while relieving the insurer of a risk that it surely intended to provide coverage against. Unfortunately the problems caused by AS 28.10.370 are of a recurring nature,14 because of the time delay in issuing new certificates of title and registration, and the fact that automobiles are often driven during the interim period. AS 28.10.290.

Three reasonable alternatives exist to a strict interpretation of AS 28. 10.370. First, the statute could be held simply to not apply in an insurance context because it does violence to the reasonable expectations of both parties to the insurance contract.15 Instead, resort to AS 45.05.036-.242 (Uniform Commercial Code — Sales) would be appropriate to determine when delivery occurs and title passes.16 If Graham v. North River Insurance Company, 533 P.2d 20, supra, had not been decided this court would be inclined to follow this first alternative. However, Graham evidences the intention of the Alaska Supreme Court to resort to the provisions of the Alaska Motor Vehicle Act in determining when ownership is transferred for the...

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