Field v. CNA Insurance

UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

SCOTT FIELD, Chapter 7 Trustee for
bankrupt estate of Russell Egder
Dangerfield,
Plaintiff-Appellant,

and

MALEK MANESH; MOHAMMED
EMDADI,
Plaintiffs,
No. 98-1851
v.

TRANSCONTINENTAL INSURANCE
COMPANY,
Defendant-Appellee,

and

CNA INSURANCE COMPANIES,
Defendant.

SCOTT FIELD, Chapter 7 Trustee for
bankrupt estate of Russell Egder
Dangerfield,
Plaintiff-Appellee,

and
No. 98-1857
MALEK MANESH; MOHAMMED
EMDADI,
Plaintiffs,

v.
TRANSCONTINENTAL INSURANCE
COMPANY,
Defendant-Appellant,

and

CNA INSURANCE COMPANIES,
Defendant.

Appeals from the United States District Court
for the Eastern District of Virginia, at Alexandria.
T. S. Ellis, III, District Judge.
(CA-97-702-A)

Argued: January 25, 1999

Decided: February 16, 1999

Before WILKINSON, Chief Judge, and WILLIAMS and
MOTZ, Circuit Judges.

_________________________________________________________________

Affirmed by unpublished per curiam opinion.

_________________________________________________________________

COUNSEL

ARGUED: John R. Garza, GARZA, REGAN & ROSE, P.C., Rock-
ville, Maryland, for Appellant. Stephen Anthony Horvath,
TRICHILO, BANCROFT, MCGAVIN, HORVATH & JUDKINS,
P.C., Fairfax, Virginia, for Appellee. ON BRIEF: Lynn Perry Parker,
GARZA, REGAN & ROSE, P.C., Rockville, Maryland, for Appel-
lant. Michael J. Carita, TRICHILO, BANCROFT, MCGAVIN, HOR-
VATH & JUDKINS, P.C., Fairfax, Virginia, for Appellee.

_________________________________________________________________

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Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

_________________________________________________________________

OPINION

PER CURIAM:

Scott Field, trustee in bankruptcy for Russell Dangerfield, brought
this diversity action against Transcontinental Insurance Co. alleging
bad faith failure to defend, denial of coverage, and failure to settle an
action against Dangerfield. The trustee sought $1.2 million in dam-
ages, an amount well over the policy limit. The district court held
that, under Virginia law, the insurance policy at issue did cover
Dangerfield; and so the court awarded the trustee $25,000, the total
amount available under the policy. The court, however, went on to
find that Transcontinental had not acted in bad faith when it denied
coverage and refused to defend Dangerfield. Accordingly, the court
denied the trustee any greater relief and granted summary judgment
to Transcontinental on the bad faith claims. See Field v. Transconti-
nental Ins. Co., 219 B.R. 115 (E.D. Va. 1998). We affirm.

I.

In October 1995, Russell Dangerfield purchased a Ford Bronco
automobile from HBL Mercedes in Vienna, Virginia pursuant to a
conditional sales contract. The agreement allowed Dangerfield to pos-
sess the vehicle while HBL sought financing to complete the transac-
tion. HBL supplied Dangerfield with temporary title to the Bronco but
the actual certificate of title remained with HBL. At all relevant times,
Transcontinental insured HBL under a standard "garage policy" cov-
ering HBL for liability arising out of the ownership of vehicles in its
dealership. Pursuant to Virginia law, the policy also covered drivers
using the vehicles with HBL's permission, including customers who
had no insurance of their own. See Va. Code§ 38.2-2205 (1998).
Despite his representations to the contrary, Dangerfield did not have
his own insurance at the time of the accident that led to this proceed-
ing.

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On October 31, 1995, while driving the Bronco northbound in the
southbound lane of a divided highway, Dangerfield caused a multi-car
collision, severely injuring Malek Manesh. Subsequently, Manesh
sued Dangerfield in Maryland state court for personal injuries sus-
tained in the accident. After the accident but before service of
Manesh's complaint, Dangerfield filed Chapter 7 bankruptcy. The
bankruptcy court lifted the automatic stay in order for Manesh to pur-
sue her claim, which resulted in a judgment against Dangerfield in the
amount of $1.2 million. Because Transcontinental determined that its
policy covering HBL did not apply to Dangerfield, it took no part in
Manesh's suit against Dangerfield. Manesh has since recovered a por-
tion of her costs from her own insurance company but the $1.2 mil-
lion judgment has yet to be satisfied.

II.

The district court found that Field, as trustee of Dangerfield's
bankruptcy estate, was entitled to bring a bad faith failure to insure
claim against Transcontinental because the action was "sufficiently
rooted in the pre-bankruptcy past." Segal v. Rochelle, 382 U.S. 375,
380 (1966); see also Ryerson v. Ryerson, 739 F.2d 1423, 1426 (9th
Cir. 1984). Moreover, the court noted that, because the insurance pol-
icy at issue existed pre-petition, Dangerfield's rights under the policy
became property of the estate when he filed bankruptcy and the
trustee properly initiated this action on behalf of the debtor's estate.
See 11 U.S.C.A. § 541(a)(1)(1993); A.H. Robins Co., Inc. v. Piccinin,
788 F.2d 994, 1001 (4th Cir. 1986).

Next, the district court concluded that HBL owned the vehicle
involved in the crash despite Dangerfield's possession of it. The court
reasoned that, because Virginia is a strict title state, see Rawl's Auto
Auction Sales, Inc. v. Dick Herriman Ford, Inc., 690 F.2d 422, 427
(4th Cir. 1982), and title remained with HBL throughout the relevant
time period, HBL continued to own the Bronco. Because HBL
retained ownership of the vehicle and Dangerfield did not have any
independent insurance, the court concluded that Transcontinental's
policy covered Dangerfield on the day of the accident. Thus the court
assessed $25,000 in damages against Transcontinental, the amount it
would have owed under the policy had it provided the proper cover-
age to Dangerfield.

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The district court rejected Transcontinental's contention that
Dangerfield owned the Bronco because the broad definition of
"owner" found in the Motor Vehicles title of the Virginia Code
applied in this insurance context. See Va. Code § 46.2-100 (1998)
(defining owner to include a conditional vendee with an immediate
right to possession). The court explained that the Motor Vehicle title's
broad definition of owner was expressly limited to use "for the pur-
pose of [that] title." Id. Furthermore, the court noted the extensive
case law interpreting the term owner in the context of conditional
sales contracts and insurance coverage to mean, more narrowly,
holder of title. See e.g., Hardware Mut. Cas. Co. v. Jones, 330 F.2d
1014, 1016 (4th Cir. 1964); United States Fidelity & Guar. Corp. v.
Myers Motors, Inc., 143 F. Supp. 96, 97-98 (W.D. Va. 1956);
Nationwide Ins. Co. v. Storm, 106 S.E.2d 588, 589 (Va. 1959). Thus
the district court held that the narrow context-specific interpretation
of the term owner applied in this case rather than the broad, general
definition found in another title of the Virginia Code.

Finally, the district court concluded that Transcontinental exhibited
no bad faith in these circumstances. Applying the factors set forth in
CUNA Mut. Ins. Soc'y v. Norman, 375 S.E.2d 724, 727 (Va. 1989),
the court explained that the company had performed an adequate
investigation of the matter, that reasonable evidence supported the
company's conclusions, that its denial of coverage was not a strategic
ploy, that the decision involved debatable questions of law and fact
and, ultimately, that Transcontinental was reasonable (although incor-
rect) in determining that Dangerfield was not covered by the policy.
Finding no bad faith on the part of Transcontinental, the district court
did not reach the question of what damages, if any, Dangerfield suf-
fered as a result of the company's failure to defend or settle Manesh's
claim against him. Instead, it granted summary judgment to Transcon-
tinental on the bad faith claims.

III.

We have carefully reviewed the record, briefs, arguments, and
applicable law. We find the district court's opinion well-reasoned and
persuasive. See Field v. Transcontinental Ins. Co., 219 B.R. 115 (E.D.
Va. 1998). In so concluding, we note that, contrary to Transcontinen-
tal's suggestion, Hall, Inc. v. Empire Fire & Marine Ins. Co., 448

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S.E.2d 633 (Va. 1994), does not require a different result. In that case,
the Virginia Supreme Court cited Va. Code § 46.2-100's definition of
owner in an insurance coverage case. Id. at 635. Hall, however, did
not involve a conditional sales contract or an ownership dispute and
the court cited only the portion of the definition narrowly defining
owner as title holder. Id. at 634-35 (noting that the word "owned" in
the insurance policy was clear and unambiguous because the "owner
of an automobile is the party who has legal title to it").

We affirm on the basis of the district court opinion.

AFFIRMED

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