Selective Insurance Co. of South Carolina v. Sullivan
694 F. App'x 379
| 6th Cir. | 2017Background
- May 9, 2011 accident in California: Davida Sullivan (driving a 1999 Mercedes owned by her parents, Curtis and Sharon Sullivan) collided with James Blake and was found to have caused the crash.
- The Mercedes had been made available to Omni Custom Meats, Inc. (Omni) in 2007 for business purposes; Omni listed the Mercedes on its Selective Insurance policy and paid an extra premium.
- Davida worked for Omni from 2001; in January 2011 she stopped working and received a severance package that, according to Curtis, included permission to continue using the Mercedes (no definite end date in the record).
- Selective’s Business Auto and Umbrella policies define an insured to include “anyone else while using with your permission a covered ‘auto’ you own, hire or borrow,” with “you” being Omni. Davida was not expressly named on the policy.
- Blake sued in California; Selective defended Omni and the Sullivans under reservation of rights, then sought a Kentucky declaratory judgment that it had no duty to cover Davida because Omni had not “borrowed” the Mercedes.
- The district court ruled for Selective; the majority of the Sixth Circuit panel affirmed, holding Omni did not “borrow” the Mercedes; Judge White dissented, arguing a reasonable jury could find Omni had borrowed it and remand was proper.
Issues
| Issue | Plaintiff's Argument (Blake) | Defendant's Argument (Selective/Omni) | Held |
|---|---|---|---|
| Whether Omni was a "borrower" of the Mercedes under the policy omnibus clause | Omni “borrowed” the Mercedes from the Sullivans and thus Davida (driving with Omni’s permission) is an insured | Omni did not exercise possession, dominion, or temporary control; it did not "own, hire or borrow" the Mercedes at time of accident | Held: Omni did not "borrow" the Mercedes; no coverage under policy |
| Whether dictionary or alternative definitions of "borrow" create coverage | "Borrow" can mean temporary use or confer benefit such that Omni was a borrower | Even broad definitions fail on these facts (indefinite/severance use, no dominion/control, personal use by Davida) | Held: Definitions cited do not apply; Omni not a borrower |
| Whether Kentucky’s "initial permission" doctrine extends coverage here | Initial permission doctrine should extend coverage to Davida as a permissive user | Doctrine does not apply because policy language limits insureds to autos the named insured "own, hire or borrow," and Omni did not borrow the Mercedes | Held: Initial-permission doctrine inapplicable because Mercedes was not borrowed by Omni |
| Whether Kentucky’s "reasonable expectations" doctrine requires coverage | Listing the Mercedes and paying premium gave Omni (and Davida) a reasonable expectation of coverage | Term "borrow" is not ambiguous in a way that would create such an expectation here; no reasonable interpretation would extend coverage | Held: Reasonable expectations doctrine does not save coverage claim |
Key Cases Cited
- Scottsdale Ins. Co. v. Flowers, 513 F.3d 546 (6th Cir.) (federal court applies forum state substantive law in diversity insurance-contract cases)
- Talley v. State Farm Fire & Cas. Co., 223 F.3d 323 (6th Cir.) (choice-of-law principle for diversity actions)
- Tower Ins. Co. of New York v. Horn, 472 S.W.3d 172 (Ky. 2015) (ambiguities in insurance contracts resolved for insured but policies receive reasonable interpretation)
- Mitchell v. Allstate Ins. Co., 244 S.W.3d 59 (Ky. 2008) (initial permission doctrine can extend omnibus coverage to subsequent permissive users under certain policy language)
- Brown v. Indiana Ins. Co., 184 S.W.3d 528 (Ky. 2005) (explaining Kentucky’s reasonable expectations doctrine)
- Travelers Indem. Co. v. Swearinger, 169 Cal. App. 3d 779 (Cal. Ct. App. 1985) (held "borrow" susceptible to alternative interpretations, including benefit-based test)
- American Int’l Underwriters Ins. Co. v. Am. Guarantee & Liability Ins. Co., 181 Cal. App. 4th 616 (Cal. Ct. App. 2010) (criticized Swearinger for failing to require dominion/control)
- Schroeder v. Bd. of Supervisors of La. State Univ., 591 So. 2d 342 (La. 1991) ("borrow" requires temporary possession, dominion, or control; mere benefit insufficient)