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Insurance – Duty to Defend – Ownership of Vehicle – Failure to Cooperate

Bissette v. Auto-Owners Insurance Co. (Lawyers Weekly No. 10-07-1151, 22 pp.) (Linda Stephens, J.) Appealed from Wilson County Superior Court (Milton F. Fitch Jr., J.) N.C. App. Click here for the full text of the opinion.

Holding: An insurance company has the duty to defend in a case in which a vehicle has been sold to another party without proper notarization of title and when an accident occurred before seller’s insurance was set to expire. Even when the policy refers to coverage of vehicles “you own,” the seller gave the buyer permission to use the vehicle by providing keys and the title, triggering coverage. An insurer’s contention that the failure of the driver to cooperate and appear at trial was prejudicial is merely speculative.


Defendant Keith Cothran purchased a 1997 Ford in 2007 in Myrtle Beach, S.C. At the time, the vehicle was registered in North Carolina. When the vehicle was transferred the signed title was not notarized, nor were the N.C. tags removed. The seller, president of Connected Fiber Inc., gave Cothran the unsigned title, keys and possession of the car.

Cothran never registered the car in South Carolina. Several weeks after the sale, the seller sent an e-mail to General Insurance Services, Connected’s agent, informing them that the vehicle had been sold and requesting that the policy with Auto-Owners be removed “at renewal,” which was to occur Nov. 25, 2007.

On Nov. 16, 2007, Cothran was driving the car in Wilson County when he collided with a vehicle driven by the plaintiff, causing him severe personal injuries. General Insurance Services recorded a loss notice regarding the accident. The vehicle was listed as an insured vehicle on the policy, and Connected Fiber was listed as the owner.

Plaintiff brought a negligence suit against Cothran, who had been driving with a blood-alcohol content of 0.21 percent. Auto-Owners assigned an attorney to represent Cothran. The jury awarded plaintiff $375,000 in compensatory damages and $80,000 in punitive damages. Cothran did not appear at or participate in his trial.

Plaintiff initiated this declaratory judgment action after Auto-Owners failed to pay the judgment and failed to acknowledge insurance coverage. Judge Fitch granted the plaintiff summary judgment; defendant appeals.

Duty to Defend

A court is to construe the language of an insurance policy only when that language is ambiguous. Ambiguity, when it exists, should be resolved against the insurance company.

Auto-Owners argue that at the time of the accident the vehicle was not owned by Connected and no coverage was afforded to Cothran. We disagree. The coverage applied until the end of the policy term on Nov. 25, 2007. The seller sent an e-mail asking that the vehicle be removed from the policy “at renewal.” The accident occurred nine days before the renewal date. Thus, the vehicle was still covered.

Auto-Owners also contends that, because a caption of the business auto coverage form refers to autos “you own,” liability is only afforded to vehicles owned by Connected. But the policy description does not limit “specifically described autos,” which include the Ford F-150, to vehicles owned by the insured. Construing the language to resolve any ambiguity, we conclude the vehicle was covered at the time of the accident.

Qualification as an “Insured”

Auto-Insurers also claims that Cothran was not an “insured” because he is not a named insured and does not qualify under the provision providing coverage to others using the vehicle with the permission of the insured. Permission to use an automobile may be express or implied. In this case, the seller gave Cothran the certificate of title, the keys and permission to operate the vehicle. This is clearly evidence of the intent to allow Cothran to operate the vehicle.


Applying statutory requirements for liability insurance, we have held that no ownership passes until the owner executes the assignment of title in the presence of someone authorized to administer oaths. The seller failed to comply with this requirement. The title was insufficient to transfer ownership.

Auto-Owners argues that under the “law of the case” doctrine, S.C. law is controlling, and that as such Cochran was the true owner. Although the trial court instructed the jury on S.C. law, that does not govern which state law applies in this appeal. We conclude that even if S.C. law were applied, Cochran was not the owner at the time of the accident.

Failure to Cooperate

Finally, Auto-Owners argues that Cochran’s failure to cooperate in his defense at trial voided any coverage. The policy states the owner must cooperate in the investigation or defense of a claim. Our Supreme Court has held that an insurer is not relieved of its obligations because of mere technical failure. The failure must be material and prejudicial.

Cothran did not notify Auto-Owners of the accident or suit, only spoke with his lawyer once, and did not appear at trial. Auto-Owners argues this materially prejudiced it in the trial. In a deposition, the attorney assigned to Cothran by Auto-Owners said he never had any doubt as to Cothran’s negligence. Auto-Owners claims it was prejudiced by the “empty chair” because the jury had no opportunity to evaluate Cothran.

We find that Auto-Owners’ contention that Cothran’s absence was prejudicial is merely speculative. Cothran’s attorney stipulated as to the negligence, so the only issue for the jury to consider was damages.


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