NATIONAL INTERSTATE INSURANCE COMPANY v. MORGAN & SONS WEEKEND TOURS, INC.
1:11-cv-01074
M.D.N.C.Sep 27, 2013Background
- On March 17, 2011 Charles A. Morgan (president of Morgan & Sons Weekend Tours, Inc. and C&W Bus Company) collided with James P. Logan on a motorcycle after turning left into the Morgan & Sons/C&W property; Logan suffered serious injuries. The Cadillac driven by Morgan was titled to C&W.
- Logan sued Morgan, C&W, and Morgan & Sons in Guilford County state court asserting Morgan & Sons is vicariously liable for Morgan’s negligence. That state action remains pending.
- National Interstate (insurer of Morgan & Sons) filed this federal declaratory-judgment action seeking a ruling that its commercial auto policy does not cover the March 17 accident; Logan counterclaimed that the policy does provide coverage.
- Disputed policy issues: whether the Cadillac was a “covered auto” under Symbol 8 (hired/borrowed autos) or Symbol 9 (nonowned autos used “in connection with” insured’s business), and whether Charles Morgan was an “insured” (vicarious-liability/permission/exclusions).
- The magistrate judge denied both summary-judgment motions because genuine factual issues exist about borrowing/use and insured status, and recommended staying the federal declaratory trial pending resolution of the overlapping state-court liability litigation.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Cadillac was a "borrowed" (hired) vehicle under Symbol 8 | No: plaintiff contends no evidence of borrowing/permission and cites statutory/dealer-plate issues | Yes: Morgan (as officer) asserts he borrowed the Cadillac from C&W for a Morgan & Sons business purpose; long-standing, routine use supports borrowing | Denied: factual dispute exists whether Morgan & Sons borrowed the vehicle; cannot decide as matter of law |
| Whether the Cadillac was a "nonowned" vehicle "used in connection with" the business under Symbol 9 | No: argues use was personal/commuting and thus not in connection with business | Yes: Logan argues the trip (opening gate for bus drivers) was for Morgan & Sons business; ‘‘in connection with’’ is fact-specific | Denied: material fact issues and overlap with respondeat superior make summary adjudication inappropriate |
| Whether Charles Morgan is an "insured" under the policy (Section II.A.1(b)) | Insurer contends exclusions apply (vehicle borrowed from owner; owner engaged in auto-selling business) so Morgan is excluded | Logan contends Morgan was using a covered auto with Morgan & Sons’ permission (and exceptions do not apply) | Denied: disputed factual record whether permission/ownership/exclusions apply; jury question |
| Whether federal declaratory action should proceed now or be stayed pending state-court proceedings | Implicit: insurer filed federal action first to resolve coverage | Logan opposed immediate federal resolution of overlapping liability issues | Recommended stay: court found concerns of comity, overlapping facts/law (respondeat superior scope) justify staying the federal trial until state-court liability is resolved |
Key Cases Cited
- Shealy v. Winston, 929 F.2d 1009 (4th Cir.) (summary judgment standard)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (U.S.) (summary judgment and genuine-issue standard)
- Fortune Ins. Co. v. Owens, 351 N.C. 424 (N.C.) (lex loci contractus / choice-of-law for insurance contracts)
- Kapiloff (United Capitol Ins. Co. v. Kapiloff), 155 F.3d 488 (4th Cir.) (factors for exercising discretion in declaratory judgment actions where parallel state proceedings exist)
- Nautilus Ins. Co. v. Winchester Homes, 15 F.3d 371 (4th Cir.) (federalism, efficiency, and comity in declaratory judgment context)
- Pham v. Hartford Fire Ins. Co., 419 F.3d 286 (4th Cir.) (employee off-duty driving not in employer’s business for similar coverage analysis)
- Ureta v. Thompson, 892 F.2d 426 (5th Cir.) (analogous borrowed/hired vehicle analysis creating fact question)