Travelers Indem. Co. v. Armstrong
565 S.W.3d 550
| Mo. Ct. App. | 2018Background
- Martin Cadillac (a licensed dealer) accepted a 1996 Chevrolet Cavalier in trade, delivered it to an auction agent (ABC), and the vehicle was purchased at auction by DeWalt Auto (another dealer); title paperwork was not timely recorded by Martin.
- DeWalt Auto sold the vehicle to Jonathan Elmore, who later produced proof of insurance, took possession, and then was involved in a fatal crash that killed Elmore and passenger Craig Armstrong.
- Armstrong (administrator of Craig’s estate) sued Martin, Martin’s insurer Travelers, Elmore’s estate, and others, alleging Martin remained the statutory “owner” because it failed to comply with KRS 186A.220.
- The circuit court granted summary judgment to Martin and Travelers, holding KRS 186A.220(5) (the insurer‑verification requirement) did not apply to dealer‑to‑dealer sales; the Court of Appeals reversed.
- The Kentucky Supreme Court granted review to resolve the meaning of “purchaser for use” in KRS 186A.220(5), whether dealer duties are strict or directory, and the resulting insurer liability and bad‑faith claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Meaning of "purchaser for use" in KRS 186A.220(5) | "Use" is broad and includes dealer purchases; Martin remained owner because it failed to verify buyer insurance | "Purchaser for use" means consumer buying to operate the vehicle; does not include dealer‑to‑dealer resale | "Purchaser for use" means consumer/operational buyer; dealer‑to‑dealer resale transactions are excluded |
| Applicability of the insurer‑verification duty to dealer→dealer sales | Martin should have required proof of insurance before delivery even to other dealers | Verification duty does not apply to dealer purchases for resale (sections 1–4 cover dealer transfers) | Verification requirement in §186A.220(5) does not apply to dealer‑to‑dealer resale transactions |
| Strict vs. substantial compliance with KRS 186A.220(1)–(4) (dealer transfers) | Any noncompliance means dealer remains owner | Sections 1–4 are directory; substantial (late) compliance can suffice | Sections 1–4 are directory; substantial compliance cures untimely filings if accomplished before the accident |
| Insurer liability and bad‑faith claims against Travelers | Travelers is liable because Martin was still statutory owner | Travelers not liable because Martin was not owner; insurer had reasonable, debatable basis | Martin was not owner at time of crash (substantial compliance); Travelers had no contractual obligation and bad‑faith claims fail |
Key Cases Cited
- Potts v. Draper, 864 S.W.2d 896 (Ky. 1993) (Kentucky is a certificate‑of‑title state; title holder normally the statutory owner)
- Auto Acceptance Corp. v. T.I.G. Ins. Co., 89 S.W.3d 398 (Ky. 2002) (KRS 186A.220 creates exception to title‑holder rule)
- Gainsco Companies v. Gentry, 191 S.W.3d 633 (Ky. 2006) (dealer must verify buyer insurance when selling to purchaser for use; strict compliance required for §186A.220(5))
- Calhoun v. Provence, 395 S.W.3d 476 (Ky. App. 2012) (Court of Appeals held §186A.220(5) applies to dealer‑to‑dealer sales; limited by this decision)
- Ellis v. Browning Pontiac‑Chevrolet‑GMC Truck‑Geo, Inc., 125 S.W.3d 306 (Ky. App. 2003) (promptness requirement for transfers; concerns about delays creating uninsured drivers)
- Kling v. Geary, 667 S.W.2d 379 (Ky. 1984) (distinguishes vehicles purchased for operation from those held by dealers for resale; tax/registration treatment)
- Nantz v. Lexington Lincoln Mercury Subaru, 947 S.W.2d 36 (Ky. 1997) (statutory purpose: keep uninsured motorists off the roadways)
- Empire Fire & Marine Ins. Co. v. Simpsonville Wrecker Serv., Inc., 880 S.W.2d 886 (Ky. App. 1994) (if coverage issue is fairly debatable, insurer is entitled to deny without bad faith)