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Acceptance Indemnity Insurance Co. v. JJA Auto Sales, LLC

United States District Court, E.D. Pennsylvania

February 3, 2017

ACCEPTANCE INDEMNITY INSURANCE COMPANY, Plaintiff
v.
JJA AUTO SALES, LLC, doing business as JJA Auto Sales; SAID FARAJ; SAID ASSAD J. FARA, Defendants.

          MEMORANDUM OPINION

          JOSEPH F. LEESON, JR. United States District Judge.

         I. Introduction

         In this declaratory judgment action, Acceptance Indemnity Insurance Company seeks confirmation that it has no duty to defend JJA Auto Sales, LLC or Said Faraj, the two defendants here, [1] against a personal injury suit in New York. The Court held a bench trial and now finds in Acceptance's favor. This opinion contains the Court's findings of fact and conclusions of law and addresses two evidentiary objections that Defendants raised at trial.

         II. Background

         Acceptance provided insurance coverage to JJA Auto Sales from April 2013 to August 24, 2013. It is undisputed that on August 6, 2013, while operating a vehicle displaying a Pennsylvania dealer license plate registered to JJA, Said Faraj struck a pedestrian in Brooklyn, New York. After the accident, the pedestrian filed suit against Faraj and JJA.

         At issue is whether the accident is covered by the insurance policy that Acceptance issued to JJA. The answer to that question turns on whether the vehicle belonged to JJA and whether Faraj was working for JJA at the time of the accident.

         Under the policy, Acceptance insured JJA against automobile accidents resulting from “garage operations, ” which includes “the ownership, maintenance or use of the . . . covered ‘autos' . . . [and] all operations necessary or incidental to a garage business.” Trial Ex. 3, at 31. JJA's particular “garage business” is dealing in used cars, id. at 2, and the “covered ‘autos'” under the policy are limited to two categories: private passenger automobiles that JJA owns, and other, non-owned vehicles during times when they are being used in connection with JJA's business, id. at 2, 17. That means that if the vehicle Faraj was driving belonged to JJA, or if Faraj was engaged in “garage business” for JJA at the time of the accident, the accident-at least as a threshold matter-may fall within the scope of the policy.

         Acceptance claims, however, that the vehicle Faraj was driving belonged to him, not JJA, and that Faraj had no involvement of any sort with JJA's business. According to Acceptance, Faraj was first introduced to the owner of JJA, Fouad Baladi, approximately one year prior to the accident. Acceptance claims that Faraj, who was then twenty years old and living in Staten Island, was struggling to find affordable insurance coverage for his vehicle, a 2000 BMW, and Baladi agreed to let Faraj use one of JJA's dealer plates-and its accompanying insurance coverage-in exchange for approximately $1, 200 in cash. Acceptance claims that, other than this transaction, Faraj had no connection to JJA.

         Defendants claim that Faraj had purchased the vehicle on Baladi's behalf, and that the vehicle belonged to JJA at the time of the accident.

         III. Evidence Presented at Trial

         The primary evidence supporting Acceptance's version of events comes from testimony Faraj gave during an examination under oath that Acceptance conducted before this action was filed. During the examination, Faraj initially testified that he and Baladi became acquainted through their shared interest in the car dealership trade. See Faraj Examination 24:16-23, ECF No. 66-1.[2] Faraj testified that he was interested in getting into that line of work, and he hoped to glean knowledge about the field from Baladi, who owed a used car dealership in Pennsylvania. Id. at 42:14-43:3. Faraj explained that it was through this connection to Baladi that he came into possession of the 2000 BMW that he was driving on the day of the accident. According to Faraj, Baladi asked him if he would be willing to pick up a vehicle, a 2000 BMW, from a mechanic in New York and test-drive it to make sure that it had been properly repaired. Id. at 45:21-47:8, 50:15-25. He testified that it was during that test-drive that the accident occurred, and he claimed that he had never seen the 2000 BMW prior to that day. Id. at 50:11-14.

         After questioning Faraj at length about that version of events, counsel to Acceptance confronted Faraj with a surprising revelation: he had in his possession information suggesting that Faraj, not Baladi, was actually the owner of the 2000 BMW. Id. at 140:16-18. In response, Faraj recanted the testimony he gave earlier in the examination and proceeded to give an entirely different account of events. He conceded the vehicle in fact belonged to him, and that he had purchased it in May 2012-over a year prior to the accident-from a person named Joseph Palo Ortiz, who had listed the vehicle for sale in an online advertisement. Id. at 144:22-145:15, 147:20-24. Faraj testified that this was the first vehicle he had ever purchased, and, as a twenty-year-old living in a borough of New York, it would have been prohibitively expensive for him to insure the vehicle. Id. at 158:15-159:16. Through an intermediary, Faraj was introduced to Baladi, who was willing to allow Faraj to use one of his dealer plates-and its accompanying insurance coverage-for a fee. Id. at 147:11-149:4, 157:20-158:4. Faraj arranged to meet with Baladi in a deli in Manhattan, where Baladi handed over one of his dealer plates in exchange for approximately $1, 200 in cash. Id. at 147:25-149:22. Faraj testified that, other than this transaction, he had not had any other dealings with Baladi or JJA. Id. at 150:21-23. As for his original testimony, Faraj admitted that Baladi had instructed him to tell that story if he were to be contacted by JJA's insurance company:

Q: Let me put it this way. There's this whole story about you picking up the vehicle at a mechanic. All of that is nonsense; correct?
A. Correct.
. . . .
Q: But you and Baladi needed to get your stories straight relative ...

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