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CONTINENTAL INS. CO. v. MCKAIN

February 22, 1993

CONTINENTAL INSURANCE COMPANY, Plaintiff
v.
JUDY L. McKAIN, ROBERT McKAIN, NANCY WEIDINGER and JEFFERSON DUNCAN and AETNA CASUALTY & SURETY COMPANY, Defendants v. ALLSTATE INSURANCE COMPANY, Third-Party Defendant



The opinion of the court was delivered by: WILLIAM H. YOHN, JR.

 Yohn, J.

 This is a declaratory judgment action brought by Continental Insurance Company ("Continental") under Title 28 U.S.C. §§ 2201 and 2202 in a diversity case to determine the scope of three insurance policies and the coverage owed under them to Sergeant Jefferson Duncan II. The policies were issued by Continental, Aetna Casualty and Surety Company ("Aetna") and Allstate Insurance Company ("Allstate"). Sergeant Duncan is a defendant in two personal injury lawsuits in the Court of Common Pleas of Philadelphia County brought by defendants in this case, Judy and Robert McKain and Nancy Weidinger. The underlying suits arose out of an automobile accident that occurred on February 27, 1989. All of the parties to this suit and the underlying suits except Jefferson Duncan have filed motions for summary judgment on the respective obligations of the insurance companies. The obligations and respective coverages of each of the insurance companies will be discussed in turn.

 I. BACKGROUND

 On February 27, 1989, an automobile driven by Sgt. Duncan collided with one driven by Judy McKain. Mrs. McKain suffered extensive injuries that may leave her permanently disabled. Nancy Weidinger, who was a passenger in Mrs. McKain's car, also suffered injuries. At the time of the accident, Sergeant Duncan was driving a rental automobile. It was owned by General Motors Acceptance Corporation ("GMAC") and leased to McCafferty Ford Sales, Inc. ("McCafferty") under the GMAC rental plan lease agreement. A copy of the Master Lease Agreement appears as Aetna Exhibit F ("Master Lease"). Under this agreement, McCafferty rented General Motors vehicles to customers.

 On the day of the accident, Sgt. Duncan was driven by a friend to Reedman Corporation ("Reedman"). Approximately one week earlier, Duncan had brought his car, a 1988 Mercury Sable which he had bought at Reedman, back to the company for repairs. Reedman had notified Duncan that the repairs were completed, and he came to pick up his car. After his friend had left Reedman, Duncan drove his Sable off the lot and discovered that the problem with the automobile's transmission had not been corrected. He returned the car to Reedman's service department, which determined that further work was needed.

 Although Duncan's Sable was not covered by a warranty which obligated Reedman to arrange for a "loaner" vehicle when the customer's car was in the shop, Duncan argued that he should have one because of the repeated repairs that had been necessary on his car. Reedman agreed to accommodate him. Duncan Deposition, Aetna Exhibit E, ("Duncan Dep.") at 48, 52.

 As it did under its usual arrangement for dealing with warranty customers, Reedman notified the rental agency, in this case McCafferty, that it would pay the base rental charge. Cook Deposition, Aetna Exhibit G, ("Cook Dep.") at 32-47. Sgt. Duncan was then taken by a Reedman employee to McCafferty, where he signed a rental agreement, was given virtually unlimited free milage pursuant to the agreement between Reedman and McCafferty, and was given the option of purchasing collision damage insurance and personal injury insurance for himself. Duncan Dep. at 53-54, 92; Ratcliffe Deposition, Aetna Exhibit I, ("Ratcliffe Dep.") at 11; Duncan Dep. at 61-66; Richardson Deposition, Aetna Exhibit J, ("Richardson Dep.") at 24-27. The rental agreement stated that the renter carried his own liability insurance. *fn1" Rental Agreement. Sgt. Duncan opted for the collision damage insurance only, with $ 500 deductible, which he paid when the car was severely damaged in the accident. Richardson Dep. at 24-27.

 Before being given the rental car, Sgt. Duncan was asked his address, telephone number and birth date, and he showed the McCafferty representative his Alabama driver's license. Duncan Dep. at 89, 104-105. He was asked whether anyone else would drive the car and replied that no one else would. Duncan Dep. at 108-109. He stated in his deposition that he had "skimmed" the rental agreement before signing it and that it was explained to him while he looked at it. Duncan Dep. at 96, 98-100, 131. Because he was a Reedman customer, the usual McCafferty requirements of a Pennsylvania driver's license and a credit check were waived. Ratcliffe Dep. at 19, 50. Duncan drove the car off the lot and soon thereafter was involved in the automobile accident with Judy McKain and Nancy Weidinger.

 At all relevant times, Reedman was insured under a policy issued by Aetna. The Aetna policy appears as Aetna Exhibit C ("Aetna policy"). Sgt. Duncan's own car, the 1988 Mercury Sable which was at Reedman for repairs at the time of the accident, was a listed vehicle on an insurance policy issued by Allstate to Jefferson Duncan, Sr., father of Sgt. Jefferson Duncan, II. Sgt. Duncan testified at deposition that, at the time of the accident, the Sable was titled in the name of Mr. Jefferson, Sr., through what Sgt. Duncan claims was a clerical error. Duncan Dep. at 20-21. The Allstate policy appears as Aetna Exhibit D ("Allstate policy"). GMAC was the insured on a policy issued by Continental. The policy covered General Motors Corporation ("GM") and GM dealers participating in the GMAC rental plan, including McCafferty. The Continental policy appears as Aetna Exhibit B ("Continental policy").

 At the time of the accident, Sgt. Duncan was on active military duty and had been stationed in the Philadelphia area since 1986. He lived off base, in a property on Woodstock Street which he had rented unfurnished and furnished himself. Prior to living at that address, Sgt. Duncan had leased and lived in two other rental properties in Philadelphia. Stipulation of Uncontested Facts ("Stipulation") at PP 31-32. He gave his permanent residence as Montgomery, Alabama. Duncan Dep. at 17-18. Sgt. Duncan was registered to vote in Alabama, paid Alabama state taxes, had a bank account in Alabama, registered his Mercury Sable there, held an Alabama driver's license, had lived at his parents' home until the time he had entered the military nearly nine years before date of the accident, and still kept some possessions there. Duncan Dep. at 10-16, 112-16, 124-27.

 II. DISCUSSION

 1. Summary Judgment Standard

 Summary judgment may be granted under Rule 56 of the Federal Rules of Civil Procedure "if there is no genuine issue as to any material fact and the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56. After the moving party presents the basis for its motion, the non-moving party, if it claims that the case is not ripe for summary judgment, must show the existence of genuine disputes between the parties as to material facts, disputes that might affect the outcome of the suit under the prevailing law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S. Ct. 2505 (1986); Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S. Ct. 1348 (1986). In this case, none of the parties disputes that the case is ripe for summary judgment; none maintains that there are in dispute any genuine issues of material fact that preclude summary judgment. All of the parties agree that the disputes concern only questions of law and of contract interpretation that are within the province of the court.

 2. The Allstate Policy

 Third party defendant, Allstate, was joined in this matter by defendant, Aetna, who alleges that Allstate may be liable to Aetna for contribution or indemnification should Aetna be found liable for payment of damages in the underlying suits. Allstate has filed a motion for summary judgment on the ground that it owes Sgt. Duncan no coverage under the policy.

 Allstate issued an Alabama contract of insurance to the named insured, Jefferson Duncan, Sr. The policy, which lists the 1988 Mercury Sable on the declarations page, includes the following as persons insured:

 
(1) While using your insured auto;
 
(a) You,
 
(b) Any resident and
 
(c) Any other person using it with your permission.

 (2) While using a non-owned auto;

 
(a) You,
 
(b) Any resident relative using a four wheel private passenger or utility auto.
 
(3) Any other person or organization liable for the use of an insured auto if the auto is not owned or hired by this person or organization.

 Id. at 5, "Persons Insured". "You" or "Your" is defined in the policy as meaning "the policyholder named on the declarations page and that policyholder's resident spouse." Aetna policy at 6, Definition 5. Thus only Jefferson Duncan, Sr. and his wife are included within the definition. Sergeant Duncan is not a named policy holder.

 If Sgt. Duncan is a resident relative under the policy, then he comes under Persons Insured, section (2)(b), which covers "any resident relative using a [non-owned] four wheel private passenger or utility auto." "Resident" or "reside" in the policy is defined as:

 
the physical presence in your household with the intention to continue living there. Unmarried dependent children, while away from home will be considered residents if they intend to continue to live in your household.

 Allstate Policy at 6, Definition 3.

 Allstate contends that Sgt. Duncan is not a resident relative and therefore it owes him no coverage. In support of its position, Allstate contends that Sergeant Duncan did not maintain "the physical presence" in the home of his parents with the intention to continue living there at any time relevant to this action, nor was he a dependent child away from home.

 Common law meanings of "residence" and "resident" can be confused and murky. The terms "residence" and "domicile" are sometimes used interchangeably and sometimes with quite different meanings. As the Alabama Supreme Court noted in State Farm Mutual Automobile Insurance Company v. Hanna, 277 Ala. 32, 37, 166 So. 2d 872, 876 (1964), "the word "residing" is an ambiguous, elastic, or relative term, and includes a very temporary, as well as a permanent abode [citation omitted]." However, common law meanings do not apply where the term is clearly defined in a way that differs from the common law. See Boswell v. South Carolina Ins. Co., 353 Pa.Super. 108, 509 A.2d 358 (1986). When the terms "resident" and "residence" are specifically defined in the policy, it is not necessary or appropriate to look to the common law meaning, in the same way that one does not resort to a common law definition of "residence" in a statute when the statute clearly shows that the legislature did not intend to make its definition synonymous with common law terminology. 353 Pa.Super. at 117-18, 509 A.2d at 363.

 Applying the definition of "resident" in the Allstate policy, there is no question that Sgt. Duncan was not dependent on his parents for support (Stipulations, P 44), and therefore did not qualify as a resident relative under the second sentence in the definition of "resident," which includes "dependent children away from home who intend to continue to live in your household." In addition, that sentence suggests that non-dependent children living away from home are excluded from the definition. Sgt. Duncan had been away from his parents' home, except for brief vacations or visits, since then he had joined the military. Id. at PP 39-43. And while he planned to return to Montgomery when he retired from the military in nine years, he thought that he would probably set up his own household rather than return to his mother's home. Id. at P 47.

 Sgt. Duncan also fails to qualify as a resident relative under the first sentence of the policy definition. Under that sentence, "residence" requires "the physical presence" of the relative in "your" household. The court finds "the physical presence" to mean, unambiguously, "bodily presence." Sgt. Duncan kept some possessions at his parents' home, but he clearly lived in Philadelphia, in an apartment he had furnished. Whereas "a physical presence" might refer to the presence of possessions, "the physical presence . . . with the intention to continue living there" must mean that the person himself actually lives there.

 None of the parties could find a case in which "physical presence" was defined, but the usage of the term in Pennsylvania case law suggests that it means bodily presence and not merely the presence of possessions. In Amica Mutual Ins. Co. v. Donegal Mutual Ins. Co., 376 Pa.Super. 109, 115, 545 A.2d 343, 346 (1988), the court quoted a prior opinion in which it had said, "Residence being a factual place of abode. Living in a particular place, requiring only physical presence." Krager v. Foremost Insurance Co., 304 Pa.Super 390, 450 A.2d 736 (1982). Using this standard, the court in Amica found that an eighteen-year old child of parents who were separated resided with her mother and not with her father under the following circumstances:

 
The trial court found that Elizabeth made "sporadic" visits to her father's house, and that "she did not spend a substantial amount of time at her father's house." During that time, Elizabeth had a closet or two full of clothes at her father's house, approximately forty pairs of shoes, books, cosmetics, stuffed animals and a pet rabbit. She received mail there as well.

 376 Pa.Super at 113-14, 545 A.2d at 345. The court upheld the trial court's finding that "the personal items that Elizabeth kept at her father's house at the time she lived with her mother were for convenience and did not evidence that she physically lived there." 376 Pa.Super. at 116, 545 A.2d at 346.

 Allstate acknowledges, and Aetna asserts, that under both Pennsylvania and Alabama law, there exists a presumption that a person who is a full-time member of the military service retains permanent residence or domicile in the state from which he is inducted until a new residence is established or the initial residence is abandoned. Nora v. Nora, 494 So. 2d 16 (Ala. 1986); Donegal Mut. Ins. Co. v. McConnell, 562 So.2d 201 (Ala. 1990); Turek v. Lane, 317 F. Supp. 349 (E.D.Pa. 1970); Zinn v. Zinn, 327 Pa. Super. 128, 475 A.2d 132 (1984). However, common law presumptions as well as common law meanings fail to apply where the term is clearly defined to the contrary, as it is here.

 While for some purposes, Sgt. Duncan may have been a resident of his parents' household, under the definition in Allstate's policy, Sgt. Duncan was not a resident relative in his parents' household at the time of the accident for purposes of coverage. Sgt. Duncan had retained virtually all the usual indicia of residence in Alabama and at his parents' home. Alabama was the state of his driver's license, voter registration, payment of state taxes, mailing address, and he kept personal possessions at his parents' home. He had established no new permanent or indefinite residence apart from his parents' home in Alabama, and planned to return to Alabama upon retirement from the military, although he thought that he would "probably" establish his own dwelling rather than live with his mother. *fn2" Duncan Dep. at 10-17, 112-16, 124-27. But none of these facts is relevant to the status of "resident relative" as defined in Allstate's policy. He was not actually living in his parents' house, nor was he a dependent child temporarily away from home. Therefore, he does not qualify under the policy's definition.

 The McKains, in their trial memorandum, contend that there is a basis for Sgt. Duncan's coverage under the Allstate policy even if he is not a resident relative. Above, we quoted three classes of "Persons Insured" under the policy. We have found that Sgt. Duncan does not qualify under section (2)(b) as a resident relative. The McKains contend that he qualifies under section (1)(c) as any person using "your insured auto" with "your permission".

 The court will assume that Sgt. Duncan was using the hired auto with the implied permission of his father, who was the policyholder and therefore qualifies as "your" for purposes of "your permission." Although his father was probably not aware that his son was using a hired automobile while the Mercury Sable listed on the policy was being repaired, we can conclude that he would have consented had he known, given that he had consistently helped to facilitate his son's acquisition and care of the Mercury Sable. *fn3"

 The question is whether the hired car is "your insured auto" under the terms of the policy, in which case anyone who is driving the auto with "your" permission is covered, or just an insured (non-owned) auto, in which case it would have to be driven by Mr. or Mrs. Duncan or a resident relative to qualify for coverage. There are five categories of "insured autos." They may be summarized as follows: (1) any auto listed on the declarations page and its replacement, if Allstate is timely notified; (2) an additional acquired auto, if Allstate is timely notified; (3) a substitute non-owned auto used temporarily while yours is unavailable; (4) a non-owned auto used with the permission of the owner, but not for the regular use of you or a resident; and (5) a trailer while attached to an insured auto, with certain exceptions. Allstate policy at 21.

 The McKains seek to include all five categories of "insured autos" under the policy in the category of "your insured auto," which would mean that anyone using one with the permission of Mr. or Mrs. Duncan would be covered. The category of "insured auto" that fits the present case is (3). It includes:

 
A substitute four wheel private passenger auto or utility auto, not owned by you or a resident, temporarily used with the permission of the owner while your insured auto is being serviced or repaired, or if your insured auto is stolen or destroyed.

 Allstate policy at 21. Under this section, the hired auto Sgt. Duncan was driving at the time of the accident is clearly an "insured auto." Is it also "your ...


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