UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 04-2028
SELECTIVE INSURANCE COMPANY OF SOUTH CAROLINA,
Plaintiff - Appellee,
versus
JAN H. TERRY,
Defendant - Appellant,
and
JASON DAVIDSON; AMANDA DAVIDSON, formerly
known as Amanda B. Patterson; PATTERSON
PAVING, INCORPORATED,
Defendants.
Appeal from the United States District Court for the Middle
District of North Carolina, at Durham. Frank W. Bullock, Jr.,
District Judge. (CA-03-135-1)
Argued: May 26, 2005 Decided: August 2, 2005
Before TRAXLER and DUNCAN, Circuit Judges, and Eugene E. SILER,
Jr., Senior Circuit Judge of the United States Court of Appeals for
the Sixth Circuit, sitting by designation.
Affirmed by unpublished per curiam opinion.
Theodore Blackburn Smyth, SMYTH & CIOFFI, L.L.P., Raleigh, North
Carolina, for Appellant. Susan K. Burkhart, CRANFILL, SUMNER &
HARTZOG, L.L.P., Raleigh, North Carolina, for Appellee.
Unpublished opinions are not binding precedent in this circuit.
See Local Rule 36(c).
2
PER CURIAM:
In this diversity action involving the proper interpretation
of certain automobile liability insurance policies under North
Carolina law, Defendant-Appellant, Jan H. Terry (“Terry”), appeals
the district court’s July 19, 2004 order denying Terry’s summary
judgment motion and granting summary judgment to Plaintiff-
Appellee, Selective Insurance Company of South Carolina
(“Selective”). Because the district court properly held that the
policies at issue do not obligate Selective to provide coverage, we
affirm the district court order.
I.
The following undisputed facts are taken from the district
court opinion. In 1999, Terry suffered serious injuries as a
result of a collision with a 1995 Toyota Corolla (“Corolla”)
operated by Jason Davidson. Jason Davidson is married to Amanda
Davidson, whose grandfather, James Patterson, owns and operates
Patterson Paving.
At the time of the accident, the Corolla’s certificate of
title listed Amanda Davidson as the Corolla’s owner. Selective,
however, had listed the Corolla as a covered automobile under
certain provisions in a package of insurance products that
Selective provided to Patterson Paving. Relevant to this case,
Selective issued a policy that provided commercial automobile
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liability coverage up to a limit of $1,000,000 (the “Business Auto
Policy”) and a policy that provided excess commercial automobile
liability coverage (the “Umbrella Policy”). The Umbrella Policy is
a “following form” policy that utilizes and incorporates the
provisions of the Business Auto Policy relevant to this appeal.
Jason Davidson is not a named insured on the Business Auto
Policy. The Business Auto Policy, however, provides coverage for
accidents caused by “[a]nyone . . . while using with [Patterson
Paving’s] permission a covered ‘auto’ [that Patterson Paving]
own[s].” JA 228. The Business Auto Policy does not provide a
definition of ownership. The Declarations section of the Business
Auto Policy, however, contains a section entitled “Item Three--
Schedule of Covered Autos You Own.” This section refers to a
schedule of autos which contains the Corolla. The parties agree
that the Corolla should not have been on the schedule of “owned
autos” that the Business Auto Policy referenced and that its
inclusion on the list of “Covered Autos You Own” was a mistake.1
After the accident between Terry and Jason Davidson, Terry
brought suit in North Carolina state court against Jason and Amanda
1
North Carolina regulations forbid the inclusion of privately
owned automobiles in commercial fleet policies such as the Business
Auto Policy. See 11 N.C.A.C. § 10.0305. It is undisputed that the
Corolla’s inclusion on the Business Auto Policy was not the result
of fraud or bad faith.
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Davidson for personal injuries sustained.2 In response, Selective
filed this action for declaratory relief pursuant to 28 U.S.C.
§ 2201 to determine whether Selective is obligated, under the
insurance polices discussed above, to provide the Davidsons with
liability coverage for damages that they might owe to Terry as a
result of the alleged accident.
Because the relevant facts are undisputed, the parties filed
cross-motions for summary judgment. The district court denied
Terry’s motion for summary judgment and granted Selective’s motion,
holding that the Davidsons are not entitled to liability coverage
under either the Business Auto Policy or the Umbrella Policy.3
Terry timely appeals.
II.
A.
We agree with the parties that the federal courts can properly
exercise diversity jurisdiction over this matter pursuant to the
Declaratory Judgment Act. See 28 U.S.C. §§ 1332, 2201. We review
2
Patterson Paving was a defendant in the state court suit, but
Terry dismissed Patterson Paving from that suit without prejudice.
3
The district court did hold, and the parties do not dispute,
that Selective is obligated to provide a minimum amount of
insurance coverage as mandated by the North Carolina Motor Vehicle
Safety and Financial Responsibility Act of 1953, N.C. Gen. Stat.
§ 20-279.1 et seq.. Because the parties do not raise the issue,
this opinion does not address any of the requirements placed on the
parties by the Financial Responsibility Act.
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the district court’s grant of summary judgment de novo, applying
the same legal standards as the district court. Gallagher v.
Reliance Std. Life Ins. Co., 305 F.3d 264, 268 (4th Cir. 2002).
Specifically, summary judgment is proper only when, viewing the
facts in the light most favorable to the non-moving party, the
moving party is entitled to judgment as a matter of law. Blair v.
Defender Servs., 386 F.3d 623, 625 (4th Cir. 2004).
A federal district court sitting in diversity applies the
choice of law rules of the state in which it sits--in this case,
North Carolina. Burris Chem. v. USX Corp., 10 F.3d 243, 245 n.7
(4th Cir. 1993); Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938). We
agree with the district court that, under North Carolina choice of
law rules, North Carolina contract law applies to interpret the
insurance policies at issue.
B.
The resolution of this case turns on the narrow legal issue of
whether Patterson Paving “owned” the Corolla at the time of the
accident for purposes of the Business Auto Policy.4 If Patterson
Paving owned the Corolla, then the Business Auto Policy obligates
Selective to provide liability coverage for the alleged accident.
4
The Umbrella Policy incorporates the relevant sections of the
Business Auto Policy. If Patterson Paving owned the Corolla for
purposes of the Business Auto Policy, then it owned the Corolla for
purposes of the Umbrella Policy.
6
If, however, Patterson Paving did not own the Corolla, then the
Business Auto Policy does not obligate Selective to provide
liability coverage.
Under North Carolina law, the meaning of language in an
insurance contract is a matter of law. Guyther v. Nationwide Mut.
Fire Ins. Co., 428 S.E.2d 238, 241 (N.C. Ct. App. 1993) (citing
Wachovia Bank & Trust Co. v. Westchester Fire Ins. Co., 172 S.E.2d
518, 522 (N.C. 1970). “When a statute is applicable to the terms
of a policy of insurance, the provisions of that statute become
part of the terms of the policy to the same extent as if they were
written in it.” Am. Tours, Inc. v. Liberty Mut. Ins. Co., 338
S.E.2d 92, 95 (N.C. 1986). North Carolina statutes, with
exceptions not applicable here, define an “owner” as the person who
holds legal title to a vehicle. N.C. Gen. Stat. § 20-4.01(26).5
The undisputed facts in this case indicate that Amanda Davidson,
not Patterson Paving, held title to the Corolla at the time of the
accident. Patterson Paving, therefore, did not “own” the Corolla
for purposes of North Carolina law.
5
Terry argues that this statutory definition of ownership
should be limited to the Financial Responsibility Act. The
definition, however, applies by its express terms not just to the
Act, but “throughout Chapter 20" of the North Carolina General
Statutes--the chapter involving motor vehicles. N.C. Gen. Stat.
§ 20-4.01 (emphasis added). Terry cites no case in which North
Carolina courts have construed the definition of “owner” in an
automotive liability policy without reference to the statutory
definition. Accordingly, we apply the statutory definition of
ownership to this case, as we have every reason to believe that the
North Carolina Supreme Court would.
7
In response to this plain statutory definition of ownership,
Terry argues that Section II of the Business Auto Policy, by
referencing the Corolla as “a covered auto you own,” creates an
ambiguity concerning the Corolla’s ownership which we must resolve
in Terry’s favor, notwithstanding the statutory provisions to the
contrary. See Wachovia Bank & Trust Co. 172 S.E.2d at 522. We
cannot, however, accept that an insurance contract contains an
ambiguity simply because the parties disagree over the meaning of
contract language. “No ambiguity . . . exists unless, in the
opinion of the court, the language of the policy is fairly and
reasonably susceptible to either of the constructions for which the
parties contend.” Id.
The district court carefully considered Terry’s arguments
concerning the meaning of “own” in the Business Auto Policy and
concluded that the policy language did not create coverage:
The context in which the term "own" and the phrase "a
covered 'auto' you own" appear within Section II of the
Business Auto Coverage Form and Item Three of the
Business Automobile Coverage Declaration neither requires
nor permits the application of any definition other than
the statutory definition of the term "owner," as that
term and its cognates are used throughout the Business
Auto Policy. Although Defendant Terry contends that Item
Three of the Business Automobile Coverage Declaration
defines the 1995 Toyota Corolla as "a covered 'auto' you
own" for purposes of liability coverage under the
Business Auto Policy, the express language of Item Three
does not contain a clear definition of any terms used in
the Business Auto Policy and does not resemble an
insuring agreement between Selective Insurance and
Patterson Paving. Moreover, Item Three does not contain
a specific list of automobiles identified as covered
autos that Patterson Paving owned for purposes of
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liability coverage under the Business Auto Policy and
does not explicitly define the 1995 Toyota Corolla as "a
covered 'auto' you own" for purposes of liability
coverage under the Business Auto Policy. Item Three of
the Business Automobile Coverage Declaration contains
merely a general reference to the Auto Schedule and does
not provide a precise definition of the term "own" or the
phrase "a covered 'auto' you own" that would otherwise
replace the statutory definition of the term "owner," as
that term and its cognates are used throughout the
Business Auto Policy.
JA 387-88. We agree with the reasoning of the district court and
affirm the conclusion that the plain policy language simply does
not indicate that Patterson Paving owned the Corolla.6 Therefore,
6
Even if the policy language clearly indicated that Patterson
Paving “owned” the Corolla, we question whether the resulting
insurance agreement would be enforceable contract under North
Carolina law. North Carolina insurance regulations forbid the
inclusion of private autos such as the Corolla from inclusion on
corporate fleet policies (with their lower rates) in order to
protect the general public from price discrimination:
It is the policy of the N.C. Department of Insurance that
the insuring of employees' automobiles in fleet policies
of their employer at lower rates than those which apply
to other owners of private automobiles is unfair
discrimination and is not permitted, whether or not the
employees' private cars are operated part of the time in
the interest of the employer. This applies to all forms
of automobile insurance. The inclusion of a privately
owned car in a fleet or group policy will be construed as
prima facie evidence of unfair discrimination.
11 N.C.A.C. § 10.0305 (2005).
In other words, the public policy underlying this entire
dispute (the fact that the Corolla should have been owned by
Patterson Paving) was not designed to protect the insured or the
insurer, but the general insurance buying public. If we were to
enforce the contract as Terry reads it, then we must necessarily
hold that the parties to a private insurance contract can agree to
a course of action “not permitted” by the North Carolina Department
of Insurance as “prima facie evidence of unfair discrimination.”
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Amanda Davidson, not Patterson Paving, owned the Corolla at the
time of the accident for purposes of the Business Auto Policy and
the Umbrella Policy.
Because Patterson Paving did not own the Corolla at the time
of the accident, Selective Insurance is not obligated to provide
liability insurance for the accident to Jason and Amanda Davidson
under either the Business Auto Policy or the Umbrella Policy. We
therefore affirm the district court order granting summary judgment
to Selective and denying summary judgment to Terry.
AFFIRMED
Such a holding would be a bold step for a federal court sitting in
diversity. As noted above, however, we need not reach this issue
because, as the district court held, the plain language of the
insurance contract does not provide coverage for the accident.
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