RENDERED: NOVEMBER 19, 2021; 10:00 A.M.
NOT TO BE PUBLISHED
Commonwealth of Kentucky
Court of Appeals
NO. 2020-CA-1623-MR
RHONDA M. WILSON APPELLANT
APPEAL FROM BOYLE CIRCUIT COURT
v. HONORABLE DARREN W. PECKLER, JUDGE
ACTION NO. 19-CI-00276
SARAH S. HOLT AND TOMMY
OWENS USED CARS, LLC APPELLEES
OPINION
REVERSING AND REMANDING
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BEFORE: GOODWINE, K. THOMPSON, AND L. THOMPSON, JUDGES.
GOODWINE, JUDGE: Rhonda M. Wilson (“Wilson”) appeals from an order of
the Boyle Circuit Court granting summary judgment in favor of Tommy Owens
Used Cars, LLC (“Used Cars”). Based on our review, we reverse and remand.
This case arose out of a car accident between Wilson and Sarah S.
Holt (“Holt”). On October 14, 2016, Trevor Tarter (“Tarter”) purchased a car from
Used Cars via a conditional sales contract. Upon purchasing the car, Tarter signed
a document titled “Agreement to Provide Physical Damage Insurance.” The
agreement included spaces for the purchaser to list his contact information,
information about the car, the insurance agent, and the insurance company.
Although Tarter signed the agreement, acknowledging he “ha[d] arranged for the
required insurance through the insurance company shown below,” Tarter did not
provide the information of an insurance agent or insurance company.
On July 27, 2017, Holt was operating the car Tarter purchased via the
conditional sales contract on U.S. Highway 150 in Boyle County when the car
collided with Wilson’s car. At the time of the accident, the dealer held the title to
the car.
Following the accident, Wilson filed a complaint against Holt, Used
Cars, and State Farm Mutual Automobile Insurance Company. Upon filing a
motion for summary judgment, the circuit court dismissed State Farm from the suit
pursuant to an order entered March 6, 2020.
On September 14, 2020, Used Cars moved for summary judgment
arguing Tarter was deemed the owner of the car under KRS1 186.010(7)(a) and (b),
even though Used Cars still held title to the car. Wilson opposed the motion
arguing Used Cars failed to consider KRS 186.010(7)(c), which requires dealers to
comply with the requirements of KRS 186A.220, for Tarter to be deemed to be the
1
Kentucky Revised Statutes.
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owner of the car for statutory purposes. KRS 186A.220 requires dealers to obtain
proof of insurance from the purchaser, and Used Cars failed to obtain proof that
Tarter had an insurance policy covering the car. Wilson argued, because Used
Cars failed to obtain proof of insurance, Used Cars was deemed to be the owner of
the car and was liable for the collision.
After hearing argument from the parties, the circuit court granted
summary judgment in favor of Used Cars. The circuit court found Used Cars
substantially complied with the statute because Used Cars submitted the agreement
under which Tarter averred he had an insurance policy covering the car. This
appeal followed.
On appeal, Wilson argues Used Cars failed to comply with KRS
186A.220, so the circuit court erred in granting summary judgment. “Because
summary judgments involve no fact finding, this Court will review the circuit
court’s decision de novo.” Gainsco Companies v. Gentry, 191 S.W.3d 633, 638
(Ky. 2006).
KRS 186.010(7) provides:
(a) “Owner” means a person who holds the legal title of a
vehicle or a person who pursuant to a bona fide sale has
received physical possession of the vehicle subject to any
applicable security interest.
(b) A vehicle is the subject of an agreement for the
conditional sale or lease, with the vendee or lessee
entitled to possession of the vehicle, upon performance of
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the contract terms, for a period of three hundred sixty-
five (365) days or more and with the right of purchase
upon performance of the conditions stated in the
agreement and with an immediate right of possession
vested in the conditional vendee or lessee, or if a
mortgagor of a vehicle is entitled to possession, the
conditional vendee or lessee or mortgagor shall be
deemed the owner.
(c) A licensed motor vehicle dealer who transfers
physical possession of a motor vehicle to a purchaser
pursuant to a bona fide sale, and complies with the
requirements of KRS 186A.220, shall not be deemed the
owner of that motor vehicle solely due to an assignment
to his dealership or a certificate of title in the dealership’s
name. Rather, under these circumstances, ownership
shall transfer upon delivery of the vehicle to the
purchaser, subject to any applicable security interest[.]
(Emphasis added.)
Additionally, KRS 186A.220(5)(b) provides:
The dealer may, with the consent of the purchaser,
deliver the assigned certificate of title, and other
appropriate documents of a new or used vehicle, directly
to the county clerk, and on behalf of the purchaser, make
application for registration and a certificate of title. In so
doing, the dealer shall require from the purchaser proof
of insurance as mandated by KRS 304.39-080 before
delivering possession of the vehicle.
(Emphasis added.)
In Gainsco, the Supreme Court of Kentucky addressed the proof of
insurance requirement in KRS 186A.220(5)(b). There, the dealer knew the buyer
had an insurance policy on other cars he owned, and the dealer assumed the
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insurance policy covered the newly purchased car too. Gainsco, 191 S.W.3d at
637. Our Supreme Court held mere knowledge that the buyer had an insurance
policy covering past purchased vehicles was not sufficient “proof of insurance” to
satisfy the statute regarding the purchase of a new car. Id. The Court explained
the dealer’s failure to “strictly comply with the statutory procedures of KRS
186A.220(5)” resulted in failure “to validly transfer ownership of the truck to” the
purchaser. Id. Thus, the Court determined the dealer’s insurer was “the primary
insurer of the car because [the dealer] continued to be the owner of the truck at the
time of the accident. The fact that [the purchaser’s] insurance policy would have
covered the vehicle if he had become the owner is, therefore, completely
irrelevant[.]” Id. Thus, although “the statute does not expressly state that proof of
insurance must be written, the term ‘proof’ clearly contemplates verification
beyond mere assumption or knowledge. We find no legal or common sense
support for the assertion that knowledge or assumption of a fact constitutes proof
of that fact.” Id. at 638.
In Travelers Indemnity Company v. Armstrong, 565 S.W.3d 550, 564
(Ky. 2018), our Supreme Court explained the dichotomy between the title holder
as owner of a car and constructive ownership of a car under KRS 186.010(7).
Because Kentucky is a certificate of title state, the title
holder is normally considered the “owner” of the vehicle
according to statutes. However, KRS 186.010(7)
outlines a way that licensed motor vehicle dealers,
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despite being the title holder of the vehicle, will not be
considered the “owner.” If the transaction in question is
to a purchaser for use, or a consumer buyer for use on the
roadways of Kentucky, the dealer must comply with all
the relevant requirements of KRS 186A.220, including
section 5 to verify proof of insurance.
Id. Although Armstrong involved a different factual scenario than the case at hand,
the Court reiterated “the burden is on the dealer, when selling to a purchaser for
use, to actively verify that the buyer has insurance before transferring possession of
the vehicle.” Id. at 567 n.10. Where the dealer fails “to promptly comply with the
requirements of KRS 186A.220(5) in a transaction with a purchaser for use [such
failure] cannot be cured and the dealer may still be considered the ‘owner’ of the
vehicle in question.” Id.
Here, the circuit court erred in granting summary judgment in favor of
Used Cars on the basis that it “substantially complied” with KRS 186A.220.
Record at 127. Our Supreme Court has specifically held a dealer must “strictly
comply with the statutory procedures of KRS 186A.220(5)” to “validly transfer
ownership[.]” Gainsco, 191 S.W.3d at 637. Our Supreme Court made clear that
“the dealer must receive proof of [the buyer’s] insurance.” Id.
Although Tarter signed the agreement averring he had an insurance
policy covering the car, Used Cars failed to obtain “verification beyond mere
assumption or knowledge.” Id. at 638. The burden was on Used Cars to actively
verify Tarter had insurance as required by KRS 186A.220(5)(b). Although neither
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case explicitly states, both Gainsco and Armstrong imply the dealer must obtain
first-hand verification of the existence of an insurance policy covering the car. The
method of verification is immaterial, but these cases indicate that, although
verification need not be written, the dealer must confirm the purchaser has a valid
insurance policy covering the purchased car in some manner.
Based on the finding that Used Cars substantially complied with KRS
186A.220(5)(b), it is clear Used Cars did not strictly comply with the statute in
relying on Tarter’s signature on the agreement as proof of insurance. Used Cars’s
reliance on the agreement constituted mere assumption and was not sufficient
under Gainsco and Armstrong. Therefore, we hold the circuit court erred in
granting summary judgment in favor of Used Cars.
For the foregoing reasons, we reverse the judgment of the circuit court
and remand the case for further proceedings.
ALL CONCUR.
BRIEFS FOR APPELLANT: BRIEF FOR APPELLEE:
Larry F. Sword Ernest H. Jones, II
Somerset, Kentucky Jamie Wilhite Dittert
Katie Bouvier
Lexington, Kentucky
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