Selective Ins. Co. of S.C. v. Davida Sullivan , 694 F. App'x 379 ( 2017 )

NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 17a0333n.06
No. 15-6187 FILED
Jun 13, 2017
UNITED STATES COURT OF APPEALS DEBORAH S. HUNT, Clerk
FOR THE SIXTH CIRCUIT
)
SELECTIVE INSURANCE )
COMPANY OF SOUTH )
CAROLINA, )
)
Plaintiff-Appellee, )
)
v. )
)
DAVIDA A. SULLIVAN; ) ON APPEAL FROM THE UNITED STATES
CURTIS SULLIVAN; ) DISTRICT COURT FOR THE WESTERN
SHARON SULLIVAN; and ) DISTRICT OF KENTUCKY
OMNI CUSTOM MEATS, INC. )
)
Defendant-Appellants, )
)
and )
)
JAMES BLAKE, )
)
Intervenor-Appellant.
BEFORE: WHITE and STRANCH, Circuit Judges; and MICHELSON, District Judge.
MICHELSON, District Judge. This insurance dispute arose from a 2011 automobile
accident involving Davida Sullivan and James Blake. Davida collided with Blake’s vehicle while
driving a 1999 Mercedes listed on an insurance policy that Selective Insurance Company of
South Carolina had issued Omni Custom Meats, Inc. The question presented in this appeal is
whether the named insured, Omni, “borrow[ed]” the Mercedes from its owners, Curtis and
Sharon Sullivan (Davida’s parents), as that term is used in the policy. We hold that Omni did not.

The Honorable Laurie J. Michelson, United States District Judge for the Eastern District of Michigan,
sitting by designation.
No. 15-6187, Selective Ins. Co. of S.C. v. Sullivan et al.
Nor does the reasonable expectations doctrine require Selective to provide coverage. Therefore,
the district court’s opinion will be affirmed.
I.
James Blake sustained injuries in an automobile accident on May 9, 2011. Davida
Sullivan was driving a 1999 C230 Mercedes in Los Angeles, California when she made a sudden
left turn to enter a shopping center parking lot and collided with Blake’s vehicle. The crash site
investigator determined that Davida caused the accident by “making an unsafe left turn[.]” (R.
69-7, PID 894.)
Davida’s parents, Curtis and Sharon Sullivan, owned the Mercedes. In 2007, they
allowed their Kentucky meatpacking company, Omni Custom Meats, Inc. to use the Mercedes
for “business purposes.” (R. 69-11, PID 917.)
Davida began working for Omni in 2001. She performed mostly “back office” work from
her home in California. She earned a salary and benefits, and, starting in 2009, was given
permission by Omni to use the Mercedes.
In January 2011, Omni “[ran] out of work” for Davida, and she stopped working for the
company. (R. 69-11, PID 915.) Omni provided a severance package, which, according to
Curtis’s deposition testimony, included health insurance, dental insurance, auto insurance, and
permission to keep using the Mercedes.
Between January and May 2011, Davida started a jewelry and clothing business in
California. Even so, Davida was driving the Mercedes with Omni’s permission on the date of the
accident.
Selective issued the relevant policy to Omni on June 27, 2007. The Policy provided
certain Commercial General Liability, Business Automobile, and Commercial Umbrella Liability
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coverages. The Business Automobile Policy provides, “We will pay all sums an ‘insured’ legally
must pay as damages because of ‘bodily injury’ or ‘property damage’ to which this insurance
applies, caused by an ‘accident’ and resulting from the ownership, maintenance or use of a
covered ‘auto.’” (R. 69-2, PID 844.) The Commercial Umbrella Liability Policy provides, “We
will pay on behalf of the insured the ‘ultimate net loss’ in excess of the ‘retained limit’ that the
insured becomes legally obligated to pay as damages because of ‘bodily injury’ . . . to which this
insurance applies.” (R. 69-2, PID 855.) The Business Auto and Commercial Umbrella Liability
coverages provide identical definitions of “Who Is An Insured.”1 (R. 69-2, PID 852, 855.)
Critical to this appeal, both state, “The following are ‘insureds’: a. You for any covered ‘auto’. b.
Anyone else while using with your permission a covered ‘auto’ you own, hire or borrow . . . .”
(R. 69-2, PID 843, 863.) It is undisputed that the “you” refers to Omni.
It is equally undisputed that the Policy did not expressly name Davida as an insured.
Omni’s initial application requested coverage for two drivers, Curtis and Sharon Sullivan, and
four vehicles, none of which were the Mercedes. On June 28, 2007, the Mercedes was added to
the Policy by endorsement. The endorsement did not list any additional drivers, nor did it list a
garage location for the vehicle. On May 12, 2008, Selective requested an updated drivers list as
part of the policy renewal. But no one advised Selective that Davida would be driving the
Mercedes in California, or that Davida had a DUI infraction on her driving record. Nonetheless,
Blake asserts that Davida is an insured under Omni’s insurance policy because Omni
“borrow[ed]” the Mercedes from Curtis and Sharon and Davida used the car with Omni’s
“permission.”
1
The district court found, and the parties do not dispute on appeal, that the Commercial
General Liability Policy did not provide coverage. (R. 72, PID 1006.)
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In March 2012, Blake filed suit in California against Omni, Curtis and Sharon Sullivan,
and Davida Sullivan. Selective agreed to provide a defense to Omni and the Sullivans in the
California action, subject to a reservation of rights pending an investigation. In March 2015,
Omni, Curtis, and Sharon were dismissed from the California action with prejudice, leaving
Davida as the only defendant. Blake purports to be the assignee of any of Davida’s rights as an
“insured” under the Policy.
Meanwhile, in October 2012, having determined that the accident was not covered under
the terms of Omni’s policy, Selective filed a complaint in the United States District Court for the
Western District of Kentucky, seeking a declaratory judgment of its rights and duties with
respect to the California action. The district court ultimately found that Davida Sullivan was not
an “insured” within the meaning of the Policy at the time of the accident and therefore, Selective
had no duty to provide coverage.
This appeal followed.
II.
“We review de novo the district court’s decision to grant a motion for declaratory
judgment.” Scottsdale Ins. Co. v. Flowers, 513 F.3d 546, 563 (6th Cir. 2008). “In a diversity
action involving an insurance contract, a federal court applies the substantive law of the forum
state,” here Kentucky. Talley v. State Farm Fire & Cas. Co., 223 F.3d 323, 326 (6th Cir. 2000).
III.
A.
“In applying Kentucky law we must follow the decisions of the state’s highest court when
that court has addressed the relevant issue. When the issue has not been directly addressed, we
must anticipate how the relevant state’s highest court would rule in the case and are bound by
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No. 15-6187, Selective Ins. Co. of S.C. v. Sullivan et al.
controlling decisions of that court.” Scottsdale Ins. Co., 513 F.3d at 563 (citations and internal
quotation marks omitted). In Kentucky, “the construction and legal effect of an insurance
contract is [generally] a matter of law for the court.” Coleman v. Bee Line Courier Serv., Inc.,
284 S.W.3d 123, 125 (Ky. 2009) (quoting Bituminous Cas. Corp. v. Kenway Contracting, Inc.,
240 S.W.3d 633, 638 (Ky. 2007)). The Kentucky Supreme Court recently held,
Any ambiguities in an insurance contract must be resolved in favor of the insured,
but this rule of strict construction certainly does not mean that every doubt must
be resolved against the insurer and does not interfere with the rule that the policy
must receive a reasonable interpretation consistent with the plain meaning in the
contract.
Tower Ins. Co. of New York v. Horn, 472 S.W.3d 172, 174 (Ky. 2015) (citing Ky. Ass’n of Ctys.
All Lines Fund Trust v. McClendon, 157 S.W.3d 626, 630 (Ky. 2005)).
Under the Policy, coverage is available for “all sums an ‘insured’ legally must pay as
damages . . . caused by an ‘accident’ and resulting from the ownership, maintenance or use of a
covered ‘auto.’” (R. 69-2, PID 843.) To resolve the issue of coverage, we must decide whether
Davida was an “insured” under the Policy. An “insured” includes “Anyone else while using with
your permission a covered ‘auto’ you own, hire or borrow . . . .” (R. 69-2, PID 843.) Again,
“you” and “your” refers to Omni, the named insured. It is not disputed that the Mercedes was
“covered” or that Davida used it with Omni’s “permission.” The only issue before us is whether
Omni “borrow[ed]” the Mercedes from Curtis and Sharon Sullivan at the time of the accident.
The Policy does not define the term “borrow.” Nor does Kentucky case law—at least in
the context of an automobile insurance policy. Blake urges several meanings of the term. We
need not decide which, if any, is the proper definition of “borrow” because Omni meets none of
them.
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No. 15-6187, Selective Ins. Co. of S.C. v. Sullivan et al.
First, Blake urges that we adopt a dictionary definition of “borrow.” To be sure,
dictionaries can be helpful aids in ascribing definitions to contract terms that are not defined by
the contract. See Auto-Owners Ins. Co. v. Veterans of Foreign Wars Post 5906, 276 S.W.3d 298,
301 (Ky. Ct. App. 2009). But none of the dictionary definitions we have reviewed help Blake.
Black’s Law Dictionary defines “borrow” as “To take something for temporary use.” Black’s
Law Dictionary (10th ed. 2014). And Merriam-Webster says “borrow” means “to receive with
the implied or expressed intention of returning the same or an equivalent.” Merriam-Webster
Online Dictionary, http://www.merriam-webster.com (12 June 2017). But nothing indicates that
Omni’s use of the Mercedes was temporary, or that Omni received the Mercedes with the
implied or expressed intention of returning it. Rather, Curtis’s testimony suggests that Davida’s
severance package, and thus, Omni’s use of the Mercedes for that purpose, had no set end date:
Omni “gave permission for Davida to drive the vehicle [the Mercedes] after she left employment
with the company” and did not mention any set end date for that permission. (R. 69-11, PID
915.)
Blake directs us to adopt a definition of “borrow” from the cases we considered in
Westfield Insurance Co. v. Young, No. 12-6523, slip op. (6th Cir. Sept. 9, 2013). That case also
involved a Kentucky business auto insurance policy purporting to provide coverage for
“[a]nyone else while using with [the named insured’s] permission a covered ‘auto’ [the named
insured] own[s], hire[s], or borrow[s].” Id. at 3. There a community college had a program in
which students could participate in live classroom vehicle repair projects. Id. at 2–3. A student’s
employer allowed the college to use his inoperative truck for one of these projects. Id. at 2. After
the repair was completed, the student was tasked with returning the vehicle. Id. While en route to
a planned stop at his girlfriend’s house, the student collided with another vehicle, ultimately
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No. 15-6187, Selective Ins. Co. of S.C. v. Sullivan et al.
causing the death of the other driver. Id. The decedent’s family sought damages under the
college’s insurance policy. Id. As here, “the dispositive issue regarding coverage . . . [was]
whether the College ‘borrowed’ [the third party’s] truck.” Id. at 3.
We first considered Travelers Indemnity Co. v. Swearinger, 169 Cal. App. 3d 779 (Cal.
Ct. App. 1985). The California Court of Appeals found that the term “borrow” was susceptible to
two reasonable interpretations in the context of an automobile insurance contract. The court
acknowledged that “borrow” could require that the purported borrower, a school district, exercise
“dominion and control” over the vehicle. Id. at 785–86. It also thought it possible that the school
district “borrowed” the vehicle when it “properly gain[ed] the use of a third party’s vehicle,”
regardless of whether the district had dominion over the vehicle. Id. at 785. The district court in
Westfield characterized this definition of “borrow” as “confer[ing] a benefit” regardless of actual
possession. Westfield Ins. Co. v. Young, No. 11-275, 2012 WL 5421145, at *2 (E.D. Ky. Nov. 6,
2012).
To start, as we noted in Westfield, even California courts have rejected Swearinger and it
is a minority view in other jurisdictions. Westfield, No. 12-6523, slip op. at 3. For instance, in
American International Underwriters Insurance Co. v. American Guarantee and Liability
Insurance Co., 181 Cal App. 4th 616, 629–30 (Cal. Ct. App. 2010), the California Court of
Appeals commented, “In our view, the Swearinger decision is based on an inadequate definition
of ‘borrow’” because the opinion did not address the requirement of prior California Supreme
Court decisions that the borrower “exercised the requisite dominion and control over the
[vehicle] to be a ‘borrower’[.]” Id. (citing Home Indem. v. King, 34 Cal. 3d 803, 813–14 (Cal.
1983)); but see City of Los Angeles v. Allianz Ins. Co., 125 Cal. App. 4th 287, 295 (Cal. Ct. App.
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No. 15-6187, Selective Ins. Co. of S.C. v. Sullivan et al.
2004) (suggesting that “the use of the vehicle for the [named insured’s] purposes . . . constituted
the [named insured’s] exercise of dominion and control over the vehicle”).
Further, the Swearinger formulation of “borrow” does not support a finding of coverage
here. Even the Swearinger court stated that “borrow” implies “temporary use.” Swearinger, 169
Cal. App. 3d at 785. Although Davida’s severance package is not part of the record, Curtis’
testimony indicates that it included indefinite use of the Mercedes. Thus, even if use of the
Mercedes as part of Davida’s severance package was a business purpose (Appellant Br. at 33),
the fact that the package was indefinite defeats the idea that Omni “borrowed” the Mercedes for
this purpose.
The other case we considered in Westfield was Schroeder v. Board of Superiors of
Louisiana State University, 591 So. 2d 342, 346 (La. 1991). That court interpreted “borrow” to
mean “not only that one receives the benefit of the borrowed object’s use, but also that the
borrower receives temporary possession, dominion, or control of the use of the thing.” Under this
definition, the named insured, a university, did not “borrow” an automobile when a student got
into an accident driving a fellow student to run an errand for a school administrator. Id. at 344.
The situation, the court stated, was similar to a person “us[ing] his auto to pick up a prescription
for a sick friend”—the driver “may confer a significant benefit on the invalid, but no one would
say that the bedridden friend had borrowed the auto used for the errand.” Id. at 346. Similarly
here, while Omni may have been honoring its severance package, the benefit from the
Mercedes’s use at the time of the accident accrued only to Davida herself, who was running a
personal errand in California at the time of the accident. See Westfield, No. 12-6523, slip op. at 4
(“The College received a benefit from [the] truck only in its use as a teaching aid, not in its
transportation to and from the College.”).
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No. 15-6187, Selective Ins. Co. of S.C. v. Sullivan et al.
Additionally, under the Schroeder analysis, Omni did not have “temporary possession,
dominion, or control of the use of” the Mercedes at the time of the accident. Omni is
headquartered in Kentucky, while Davida’s use of the Mercedes occurred entirely in California.
Davida was using the Mercedes as her personal vehicle. Davida was no longer employed by
Omni at the time of the accident. Instead, she had started her own clothing and jewelry business
at that point. And no record evidence suggests that the severance package included any terms
limiting her use of the Mercedes, or any terms allowing Omni to demand the return of the
vehicle. Blake’s argument that Omni remained in “constructive control” of the vehicle and had
the “right to direct the use of the vehicle” (Appellant Br. at 34) is therefore unpersuasive. See
Westfield, No. 12-6523, slip op. at 4 (finding that the College “did not have the right to direct the
use of [the] truck . . . [because] the college did not have an official policy regarding the
transportation of live-project vehicles to and from the College”).
Blake seeks to extend Omni’s purported status as a borrower during Davida’s
employment through Kentucky’s “initial permission” doctrine. That doctrine determines
“whether a non-owner’s use of a vehicle exceeds the scope of permission given to that person.”
Mitchell v. Allstate Ins. Co., 244 S.W.3d 59, 65 (Ky. 2008). It “allows for coverage even if the
use of the vehicle was ‘not within the contemplation of the parties or was outside any limitations
placed upon the initial grant of permission.’” Id. at 62 (citing 46 C.J.S. Insurance § 1053 (1993)).
In adopting the doctrine, the Kentucky Supreme Court held, “as long as permission is initially
given to a person to use a vehicle, insurance coverage may extend to subsequent vehicle users
through the language of the [Policy’s] omnibus clause as long as those subsequent users have
permission from the initial borrower to use the vehicle.” Id. at 65.
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No. 15-6187, Selective Ins. Co. of S.C. v. Sullivan et al.
The problem with Mitchell is that the policy at issue did not contain the same “own, hire,
or borrow” language as the policy here does. The policy in Mitchell defined “insured person” as,
1. You and any resident relative; 2. Any other person while in, on, getting into or
out of an insured auto with your permission; 3. Any other person who is legally
entitled to recover because of bodily injury to you, your resident relative, or an
occupant of your insured auto with your permission.
Id. at 61 n.1. By contrast, Omni’s policy defined an “insured” as: “You for any covered ‘auto’. b.
Anyone else while using with your permission a covered ‘auto’ you own, hire or borrow . . . .”
(R. 69-2, PID 843, 863 (emphasis added).) Thus, the initial permission doctrine may apply to
permissive use of cars that Omni owned, hired, or borrowed. But, as discussed, the Mercedes
was not such a car.
In short, whether or not Blake’s proposed definitions of “borrow” are reasonable, the
facts of this case do not satisfy any of them. Omni was not a “borrower” of the Mercedes at the
time of the accident. Therefore, coverage is not available under the Policy.
B.
Blake also argues that Kentucky’s “reasonable expectations” doctrine supports a finding
of coverage. “The gist of the doctrine is that the insured is entitled to all the coverage he may
reasonably expect to be provided under the policy.” Brown v. Indiana Ins. Co., 184 S.W.3d 528,
541 (Ky. 2005). Generally, this principle “pertains to alleged ambiguities within the policy,” id.,
and directs, “[w]here a person has paid a premium for a policy, the policy should not be read
technically to avoid paying benefits,” Ky. Emp’rs’ Mut. Ins. v. Ellington, 459 S.W.3d 876, 883
(Ky. 2015) (citing Aetna Cas. & Sur. Co. v. Commonwealth, 179 S.W.3d 830, 837 (Ky. 2005)).
“The doctrine of reasonable expectations is used in conjunction with the principle that
ambiguities should be resolved against the drafter in order to circumvent the technical, legalistic
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No. 15-6187, Selective Ins. Co. of S.C. v. Sullivan et al.
and complex contract terms which limit benefits to the insured.” Simon v. Cont’l Ins. Co.,
724 S.W.2d 210, 213 (Ky. 1986) (quoting R.H. Long, The Law of Liability Insurance § 5.10B).
Blake emphasizes that “Omni specifically listed the 1999 Mercedes on the Selective
Policy as a covered automobile” and “paid a premium commensurate with that listing[.]”
(Appellant Br. at 36.) But that fact, although going to the equity aspect of the doctrine, does not
show that another requirement of the doctrine is met: that the term “borrow” is ambiguous. True
v. Raines, 99 S.W.3d 439, 443 (Ky. 2003), as amended (Apr. 2, 2003) (“The reasonable
expectation doctrine ‘is based on the premise that policy language will be construed as laymen
would understand it’ and applies only to policies with ambiguous terms—e.g., when a policy is
susceptible to two (2) or more reasonable interpretations.” (citations omitted)). And even if we
were to find, as the Swearinger court did, that the term “borrow” is subject to two reasonable
interpretations, thus triggering the reasonable expectations doctrine, based on the reasons already
given, there is no interpretation of “borrow” that could have given rise to a reasonable
expectation that Selective extend coverage to Davida’s accident. Thus, the reasonable
expectations doctrine does not save Blake’s argument.
IV.
For the foregoing reasons we affirm the district court’s order.
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No. 15-6187, Selective Ins. Co. of S.C. v. Sullivan et al.
HELENE N. WHITE, Circuit Judge, dissenting. I respectfully dissent. The only issue
regarding coverage is whether Omni was borrowing the Mercedes from the Sullivans at the time
of the accident. Curtis Sullivan’s uncontroverted testimony establishes that he and Sharon
loaned the Mercedes to Omni in 2007. Omni then specifically listed the Mercedes as a
scheduled auto on the Selective Policy, paying an additional premium to do so. Curtis submitted
a Kentucky Certificate of Registration to Selective’s agent, disclosing that Curtis and Sharon
owned the Mercedes. (PID 587.) After paying the additional premium for two years, in 2009,
Omni provided permission to Davida to drive the Mercedes. Once Davida left the company,
with Omni still paying the additional premium on the Mercedes, Omni continued allowing
Davida to use the Mercedes as part of a severance package. Under these circumstances, a
reasonable jury could find that Omni was borrowing the Mercedes from the Sullivans at the time
of the accident.
The cases relied upon by the majority are distinguishable. In Westfield, a college student
borrowed the truck for a live classroom project, and the truck’s owner allowed the student to
drive the truck to and from the college. Westfield Ins. Co. v. Young, No. 12-6523, slip op. at 4
(6th Cir. Sept. 9, 2013). The accident occurred after the classroom project was completed, and
thus after the college’s use of the vehicle for the classroom project had ended. Id. (explaining
that the college “did not have the right to direct the use of Nelson’s truck after the live classroom
project was completed”). Here, a reasonable jury could find, based on Curtis’s testimony, that
Omni gained the use of the Mercedes for its purposes when it borrowed the Mercedes from the
Sullivans, and that Omni continued to use the Mercedes for its purposes while Davida was
driving it as an employee and after Davida’s employment ended as part of her severance
package.
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In Schroeder, the court held that the university’s receipt of a benefit alone was not
sufficient to show that it had borrowed a vehicle from a student who was retrieving ice for a
school function at a faculty member’s request, because at no point did the university have
possession, dominion, control, or the right to control the use of the vehicle. Schroeder v. Bd. of
Supervisors of La. State Univ., 591 So. 2d 342, 346 (La. 1991). Here, a reasonable jury could
find that Omni had the right to control the Mercedes because Davida’s use of the Mercedes was
permissive and pursuant to a severance package that Omni provided Davida. Further, Omni paid
the premium on the vehicle indicating that it exercised some degree of dominion and control
over the vehicle and recognized some responsibility.
Moreover, although I agree that borrowing must be temporary, I do not agree that the
lack of testimony regarding a specific end date for Davida’s use of the vehicle means that Omni
was not borrowing the Mercedes. “[A] ‘borrowing’ may be for an indefinite period of time and
may in fact last until either the insured decides to return the automobile or the lender requests its
return.” 8A Couch on Ins. § 118:50 (citing Am. Indem. Ins. Co. v. Code Elec. Corp., 760 P.2d
571, 574 (Az. Ct. App. 1988)). Given Curtis’s unrebutted testimony that he and Sharon lent the
Mercedes to Omni, a reasonable jury could find that the Sullivans could have demanded its
return at any time, and that Omni likewise could have demanded the return of the Mercedes from
Davida, subject to any claims for breach of the severance agreement.
Because a reasonable jury could find that Omni was borrowing the Mercedes from the
Sullivans at the time of Davida’s accident, I would reverse the district court’s judgment in favor
of Selective. However, given the lack of specificity regarding the terms of the severance
package, and Omni’s discovery responses indicating that it had no control over, and received no
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benefit from, Davida’s use of the Mercedes at the time of the accident,1 a reasonable jury could
also find that Omni was not borrowing the Mercedes at the time of the accident. Accordingly, I
would remand for further proceedings.
Selective also argues that, even if the Policy provides coverage, the Policy conditions
limit such coverage to state-required minimum limits because Omni failed to disclose
information regarding the location, driver, and use of the Mercedes. The Policy provides that the
Business Auto Coverage Form is void “in any case of fraud by [Omni] at any time” and “if
[Omni] or any other ‘insured’, at any time, intentionally conceal[s] or misrepresent[s] a material
fact concerning . . . the covered ‘auto;’ [or Omni’s] interest in the covered ‘auto.’” (PID 193–
94.) This condition is later amended by an endorsement to provide that in the event of
concealment, misrepresentation, or fraud, Selective will only provide coverage up to the
minimum limits of liability required in Kentucky. (PID 200–01.) However, Selective points to
no evidence of intentional misrepresentation or concealment; nothing in the record establishes
that Selective requested an updated drivers list or garage location after Davida began using the
Mercedes in California. Accordingly, Selective has not supported the grant of summary
judgment on this basis.
For these reasons, I would reverse the grant of summary judgment in favor of Selective
and remand for further proceedings.
1
The meaning of Omni’s discovery responses is open to interpretation, and may merely mean
that it had no control over Davida’s decisions regarding where and how to drive the Mercedes and derived
no benefit from her shopping trip.
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