NATIONWIDE AFFINITY INSURANCE COMPANY OF AMERICA v. OHIO SECURITY INSURANCE COMPANY (2024)

ORDER

THIS CAUSE is before the Court on Plaintiffs’ Motion for Final Summary Judgment (Doc. 39), Defendant's Motion for Summary Judgment (Doc. 41), and the Responses (Doc. Nos. 43, 46) and Reply (Doc. 49) thereto. For the reasons set forth below, Defendant's Motion will be granted, and Plaintiffs’ Motion will be denied.

I. BACKGROUND

Diane Collier traveled to Florida in December 2019 to work as an Implementation Specialist for the National Sam Innovation Project (“National Sam”), a non-profit organization that provides professional development services to principals at schools across the United States. (Doc. 39-3 at 31:14–32:2, 39:19–22; Doc. 39-4 at 9:4–18, 15:13–17). Collier selected and paid for her transportation and accommodations for her trip to Orlando, and National Sam agreed to reimburse her once she completed her work. (Doc. 39-3 at 15:21–16:3, 27:17–18). Pursuant to this arrangement, Collier rented a vehicle from Enterprise Leasing Company (“Enterprise”), which she signed for in her own name using her personal credit card. (Id. at 41:8–22, 43:18–44:3; Doc. 39-4 at 20:19–21:4, 35:25–36:4, 42:18–24).

Collier was in an accident while driving the rental car to the Orlando International Airport on December 14, 2019. (Doc. 1, ¶ 12; Doc. 39-4 at 70:8–13). At the time of the accident, Collier held a Personal Auto Policy with Nationwide Affinity Insurance Company of America, and a Personal Umbrella Liability Policy with Nationwide Mutual Insurance Company (collectively, “Nationwide”). (Doc. 1, ¶ 9; see also Doc. 39-5). Likewise, National Sam held a Business Auto Policy with Ohio Security Insurance Company (“OSIC”). (Doc. 1, ¶ 10; see also Doc. 39-1). Some months later, both Collier and National Sam were sued in state court for claims arising from the accident (the “Underlying Lawsuit”). (Doc. 1, ¶ 14; see also Doc. 39-2).

Nationwide and OSIC both initially furnished a defense for Collier in the Underlying Lawsuit. (Doc. 39-6 at 1, 3). However, OSIC changed its coverage position during the pendency of the litigation and declined to continue defending Collier after National Sam was dismissed from the lawsuit. (Id. at 9–13). Ultimately, Nationwide fully indemnified Collier pursuant to its two policies without contribution from OSIC. (Doc. 39-4 at 60:16–61:3). Nationwide now argues that OSIC should be obligated to indemnify Collier on a pro rata basis and seeks declaratory judgment and equitable subrogation. (Doc. 1, ¶¶ 27, 37, 44).

II. LEGAL STANDARD

Summary judgment is appropriate when the moving party demonstrates “that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A dispute is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A fact is material if it may “affect the outcome of the suit under the governing law.” Id. “The moving party bears the initial burden of showing the court, by reference to materials on file, that there are no genuine issues of material fact that should be decided at trial.” Allen v. Bd. of Pub. Educ., 495 F.3d 1306, 1313–14 (11th Cir. 2007). Stated differently, the moving party discharges its burden by showing “that there is an absence of evidence to support the nonmoving party's case.” Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

However, once the moving party has discharged its burden, “Rule 56(e) ․ requires the nonmoving party to go beyond the pleadings and by her own affidavits, or by the depositions, answers to interrogatories, and admissions on file, designate specific facts showing that there is a genuine issue for trial.” Id. at 324, 106 S.Ct. 2548 (quotation omitted). The nonmoving party may not rely solely on “conclusory allegations without specific supporting facts.” Evers v. Gen. Motors Corp., 770 F.2d 984, 986 (11th Cir. 1985). Nevertheless, “[i]f there is a conflict between the parties’ allegations or evidence, the [nonmoving] party's evidence is presumed to be true and all reasonable inferences must be drawn in the non-moving party's favor.” Allen, 495 F.3d at 1314 (citing Shotz v. City of Plantation, 344 F.3d 1161, 1164 (11th Cir. 2003)).

III. DISCUSSION

As an initial matter, the Court must determine what law applies to the construction of the OSIC policy. Plaintiffs argue that Kentucky law applies, but Defendant posits that either Kentucky or Massachusetts law applies to the construction of the OSIC policy. As a federal court exercising diversity jurisdiction, this Court is bound to apply Florida's choice of law rules to resolve this question. See, e.g., LaFarge Corp. v. Travelers Indem. Co., 118 F.3d 1511, 1515 (11th Cir. 1997). Where, as here, a policy does not contain a choice of law provision, Florida law dictates that the rule of lex loci contractus shall apply. See, e.g., State Farm Mut. Auto Ins. Co. v. Roach, 945 So. 2d 1160, 1163 (Fla. 2006). The rule of lex loci contractus, as applied to insurance contracts, “provides that the law of the jurisdiction where the contract was executed governs the rights and liabilities of the parties in determining an issue of insurance coverage.” Id.

The parties agree that, at a minimum, Kentucky law applies to the construction of the OSIC policy. The parties have not identified any conflict between Kentucky and Massachusetts law or the law of any other potentially applicable jurisdiction for any issue in this case. In the absence of a conflict of law, the Court need not decide the question. Grupo HGM Techs. Submarina, S.A. v. Energy Subsea, LLC, No. 22-10425, 2023 WL 242546, at *3 (11th Cir. Jan. 18, 2023) (declining to decide choice of law when outcome under application of state law or maritime law would have been the same); Kayne v. Thomas Kinkade Co., 249 F. App'x 799, 802 n.1 (11th Cir. 2007) (declining to reach choice of law question where choice of law did not affect the outcome). Accordingly, the Court will apply Kentucky law in this case.

Turning to the merits of the case, the primary issue the Court is called on to determine is whether Collier was an insured under the OSIC policy at the time of the accident. As relevant, the policy defines an “insured,” in pertinent part, as follows:

1. Who Is An Insured

The following are “insureds”:

a. You for any covered “auto”.1

b. Anyone else while using with your permission a covered “auto” you own, hire or borrow except: ․

(Doc. 39-1 at 45). As for what constitutes a “covered auto,” the policy explains as follows:

SECTION I - COVERED AUTOS

ITEM TWO of the Declarations shows the “autos” that are covered “autos” for each of your coverages. The following numerical symbols describe the “autos” that may be covered “autos”. The symbols entered next to a coverage on the Declarations designate the only “autos” that are covered “autos”.

A. Description Of Covered Auto Designation Symbols

8. Hired “Autos” Only

Only those “autos” you lease, hire, rent or borrow. This does not include any “auto” you lease, hire, rent, or borrow from any of your “employees”, partners (if you are a partnership), members (if you are limited liability company) or members of their households.

9. Non-Owned “Autos” Only

Only those “autos” you do not own, lease, hire, rent or borrow that are used in connection with your business. This includes “autos” owned by your “employees”, partners (if you are a partnership), members (if you are a limited liability company), or members of their households but only while used in your business or your personal affairs.

(Id. at 20).

Taken together, these policy provisions place certain conditions on coverage for potential insureds such as Collier, referred to as “anyone else” in the policy. With regard to “anyone else,” coverage arises only when that person is using, with National Sam's permission, a covered auto that National Sam owns, hires, or borrows. (Id. at 45). Thus, Collier could only qualify as an insured under the OSIC policy if the vehicle she was driving at the time of the accident was a vehicle that National Sam “own[ed], hire[d], or borrow[ed]” and was used with National Sam's “permission.” There is overlap between the prerequisites for “anyone else” to become an insured and the requirements for a vehicle to become a “covered auto,” but Plaintiffs have not shown that this causes any ambiguity.

Plaintiffs argue that the terms “hire” and “borrow” as used in the “Who Is An Insured” provision as well as in Covered Auto Symbols 8 and 9 are ambiguous because the policy does not “fully define or set forth the parameters for achieving coverage under the terms[.]” (Doc. 39 at 11). Plaintiffs urge, in light of the purported ambiguity, that Kentucky law requires the Court to strictly construe the terms in question against OSIC in favor of coverage. Plaintiffs additionally argue, even if the policy is not deemed to be ambiguous, that National Sam hired or borrowed the subject vehicle at the time of the accident.

Under Kentucky law, terms used within insurance contracts “should be given their ordinary meaning as persons with the ordinary and usual understanding would construe them.” City of Louisville v. McDonald, 819 S.W.2d 319, 320 (Ky. Ct. App. 1991); see also Grimes v. Smith, No. 2004-CA-001756, 2005 WL 3442938, at *1 (Ky. Ct. App. Dec. 16, 2005). Ambiguity exists in an insurance contract when the plain language of the policy causes doubt or uncertainty as to its meaning. Koch v. Ocean Accident & Guar. Corp., 313 Ky. 220, 230 S.W.2d 893, 895 (1950). Thus, “[a] contract is ambiguous if a reasonable person would find it susceptible to different or inconsistent interpretations.” Jackson Hosp. Corp. v. United Clinics of Ky., LLC, 545 S.W.3d 327, 332 (Ky. Ct. App. 2018) (quotation omitted). When an ambiguity exists in an insurance policy, the ambiguous terms should be interpreted “in favor of the insured's reasonable expectations.” True v. Raines, 99 S.W.3d 439, 443 (Ky. 2003). “However, [t]he mere fact that [a party] attempt[s] to muddy the water and create some question of interpretation does not necessarily create an ambiguity.” Id. (quotation omitted). Indeed, “[o]nly actual ambiguities, not fanciful ones, will trigger application of the doctrine.” Id. Without first finding ambiguity, the reasonable expectations doctrine does not apply. See, e.g., Selective Ins. Co. of S.C. v. Sullivan, 694 F. App'x 379, 386 (6th Cir. 2017).

Plaintiffs claim “hire” and “borrow” are ambiguous because the policy does not define them or otherwise set forth the conditions under which National Sam can “hire,” or “borrow” a vehicle and no court applying Kentucky law has explicated their meaning. As evidence of this ambiguity, Plaintiffs note that the policy was “ambiguous enough to cause Ohio Security to conduct a coverage review, confirm coverage for Diane Collier, and direct pro rata settlement offers with the intent to indemnify Diane Collier under its policy.” (Doc. 39 at 10).

The policy does not define the terms “hire” or “borrow” and there is a dearth of case law applying Kentucky law on the issue. Nevertheless, Plaintiffs do not provide any support for the proposition that these terms are ambiguous apart from the fact they are undefined, and Plaintiffs do not otherwise aver that undefined terms in an insurance policy are necessarily ambiguous. In seeking to demonstrate ambiguity by relying on e-mails from Defendant's adjusters, Plaintiffs are attempting to place the proverbial cart before the horse. Under Kentucky law, “[w]hether a trial court can consider evidence extrinsic to the contract depends upon whether the contract is ambiguous,” not the other way around. See Spot-A-Pot, Inc. v. State Res. Corp., 278 S.W.3d 158, 161 (Ky. Ct. App. 2009). Indeed, “[i]n the absence of ambiguity a written instrument will be enforced strictly according to its terms and a court will interpret the contract's terms by assigning language its ordinary meaning and without resort to extrinsic evidence.” Frear v. P.T.A. Indus., Inc., 103 S.W.3d 99, 106 (Ky. 2003) (quotation and footnotes omitted). Thus, the e-mail exhibit cannot be used to establish the existence of ambiguity in the policy. See also Ky. Farm Bureau Ins. Co. v. Cann, 590 S.W.2d 881, 883 (Ky. Ct. App. 1979) (finding that an adjuster does not “have authority to impose liability on the company for damages which are plainly not covered by the policy” (quotation omitted)).

The term “hire,” albeit lacking a policy definition, may nevertheless be construed according to its plain meaning. See Westfield Nat'l Ins. Co. v. Quest Pharms., Inc., 57 F.4th 558, 561 (6th Cir. 2023) (explaining that “words with no technical meaning in law are interpreted in accordance with common use and understanding” (quotation omitted)); see also Bituminous Cas. Corp. v. Kenway Contracting, Inc., 240 S.W.3d 633, 638 (Ky. 2007). Black's Law Dictionary defines “hire” as “[t]o procure the temporary use of property, usu[ally] at a set price.” Hire, Black's Law Dictionary (12th ed. 2024). Plaintiffs argue that the policy does not set forth any particular manner by which a vehicle may be “hired” by the insured. But common understanding of the term “hire” necessarily requires some degree of participation in the transaction by the hiring party. This can be evinced by a separate contract executed by the named insured, direct payment, or exertion of control over the rented vehicle by the named insured. Courts around the country that have considered this issue agree. See, e.g., Sprow v. Hartford Ins. Co., 594 F.2d 418, 422 (5th Cir. 1979) (explaining that, “for a vehicle to constitute a hired automobile, there must be a separate contract by which the vehicle is hired or leased to the named insured for his exclusive use or control”); Earth Tech, Inc. v. U.S. Fire Ins. Co., 407 F. Supp. 2d 763, 772 (E.D. Va. 2006) (“In those situations in which there is no policy definition of this term, in order for a vehicle to constitute a ‘hired’ automobile under this provision, there must be a separate contract by which the vehicle is hired or leased to the insured for the insured's exclusive use or control.” (quotation omitted)). At best, Plaintiffs point out that a possible question of interpretation could exist in some contexts, but these questions are not implicated in this case and do not make the policy language ambiguous.

Likewise, the term “borrow” is not ambiguous. Black's Law Dictionary defines “borrow” as “[t]o take something for temporary use.” Borrow, Black's Law Dictionary (12th ed. 2024). The Sixth Circuit, applying Kentucky law, considered some possible definitions of the term “borrow” in the context of an auto insurance policy. Selective Ins. Co. of S.C., 694 F. App'x at 384–86. The court noted that the term “borrow” could require the purported borrower to exercise “dominion and control,” that it “properly gain[ed] the use of a third party's vehicle,” or that “initial permission” was given to use the vehicle. Id. at 384–85 (quotations omitted). Despite the potential questions of interpretation that could have arisen, the court found the term “borrow” to be unambiguous in context, because no reasonable construction of the term could make the insurer a borrower of the vehicle in the facts before it. Id. at 386. This Court finds that the same applies to this case.

Irrespective of potential ambiguity, Plaintiffs argue that National Sam “hired” or “borrowed” the subject vehicle because (1) National Sam regularly retained Implementation Specialists such as Collier to complete in-person travel on its behalf, (Doc. 39-3 at 18:16–20:5); (2) Collier's travel at the time of the accident was in connection with National Sam's business, (id. at 26:5–12); and (3) National Sam controlled the vehicle by predicating reimbursement on the vehicle being used in connection with its business. (Doc. 39-4 at 24:2–10). In further support of this proposition, Plaintiffs note that Collier testified that she would not have rented the vehicle but for this arrangement. (Id. at 27:18–28:1). Plaintiffs maintain that “the record is devoid of any evidence showing the subject Enterprise rental vehicle used by Diane Collier was ever used outside of the prescribed use by National Sam.” (Doc. 39 at 14).

Even if the Court were to apply the reasonable expectations doctrine, there is no interpretation of “hire” or “borrow” that could create a reasonable expectation of coverage in this case. The “connection” Plaintiffs identify between National Sam and the rental vehicle is, at best, highly attenuated. National Sam may have hired Collier to work on its behalf, but Collier made her own travel arrangements without direction from National Sam. (Doc. 39-4 at 12:17–13:3). Collier chose to reserve a rental car from Enterprise without informing National Sam, and she did not receive any input on what company to rent from. (Id. at 15:23–16:2, 21:15–20, 35:13–18). National Sam did not maintain any authorization procedures for approving rental cars and Collier did not submit the rental agreement to National Sam until after the accident. (Doc. 39-3 at 27:6–28:12, 36:19–21, 41:7–44:8). The rental agreement lists Collier—not National Sam—in the “Renter Name” field. (Doc. 39-7 at 1). And National Sam was unaware that Collier had rented a vehicle until after the accident. (Doc. 39-3 at 28:20–29:11, 42:9–19; Doc. 39-4 at 15:23–16:2, 17:21–24, 21:15–20, 35:13–18). Thus, the record is clear that Collier rented the vehicle on her own behalf.

Moreover, National Sam had no ability or authorization to exert control over Collier's rental car. Plaintiffs argue that National Sam “controlled” the vehicle by predicating reimbursement of travel costs on their being incurred in connection with its business. Plaintiffs provide no authority to support the proposition that a conditional reimbursement on travel costs is tantamount to controlling the means of travel selected. At best, this demonstrates that National Sam could control Collier's payment conditions, not that National Sam could require Collier to use the rental vehicle in any specific manner. Collier had sole discretion over how she arrived at the schools.

Plaintiffs also allege that the “Who Is An Insured” provision, which provides coverage for Collier only while she is using a covered auto that National Sam owns, hires, or borrows, conflicts with Covered Auto Symbol 9, which allows vehicles that National Sam does not lease, hire, rent, or borrow to be treated as covered autos when used in connection with its business. In light of this alleged contradiction, Plaintiffs urge that the policy should be treated as ambiguous and construed strictly against OSIC.

Upon review of the policy, the Court finds that the provisions do not conflict. The policy states that Collier, who is not a named insured and thus must satisfy the conditions set forth for “anyone else,” can be an insured only if she is using, with National Sam's permission, a covered auto that National Sam owns, hires, or borrows. That the policy allows vehicles beyond these parameters to be considered “covered autos” when used by the named insured does not render this limitation on coverage for “anyone else” contradictory. See Etienne v. Nat'l Auto. Ins. Co., 759 So.2d 51, 54 (La. 2000) (interpreting similar policy language in the same way). Moreover, Plaintiffs’ argument that the rental car qualifies as a “covered auto” under Covered Auto Symbol 9 since it was used “in connection with” National Sam's business ignores the requirements of the “Who Is An Insured” provision that National Sam must own, hire, or borrow the vehicle.

Notwithstanding Plaintiffs’ failure to demonstrate that National Sam hired or borrowed the rental vehicle within the meaning of the policy, summary judgment will also be entered in favor of Defendant because there is no reasonable dispute that National Sam did not give Collier permission to use the vehicle. Once again, “permission” is not defined in the policy. Black's Law Dictionary defines “permission” as “[a] license or liberty to do something; authorization.” Permission, Black's Law Dictionary (12th ed. 2024). Plaintiffs argue that National Sam gave “permission” to Collier to rent the Enterprise vehicle because there was an “ongoing understanding that Diane Collier could purchase a rental vehicle to use as an implementation specialist with the promise it would be paid for by National Sam.” (Doc. 46 at 18).

National Sam did not have a possessory interest in the rental vehicle such that it could have given Collier license or authorization to use it. National Sam's agreement to reimburse Collier for her transportation costs during her work in Florida is not tantamount to providing permission to use a vehicle that National Sam does not own, possess, or otherwise control under any reasonable construction of the term “permission.” The Court will not adopt Plaintiffs’ strained reading of the policy. Summary judgment will be granted in favor of Defendant on this issue as well.

IV. CONCLUSION

For the reasons set forth herein, it is ORDERED and ADJUDGED as follows:

1. Plaintiffs’ Motion for Final Summary Judgment (Doc. 39) is DENIED.

2. Defendant's Motion for Summary Judgment (Doc. 41) is GRANTED.

3. The Clerk is directed to enter judgment in favor of Defendant, and against Plaintiffs, on each of Plaintiffs’ claims. Thereafter, the Clerk shall close this case.

4. All other pending motions are DENIED as moot.

DONE AND ORDERED in Orlando, Florida on July 8, 2024.

FOOTNOTES

1.   The parties agree that only National Sam constitutes “You” within the meaning of this policy provision. (Doc. 23-3 at 44:16–45:6; Doc. 39 at 19; see also Doc. 39-1 at 20 (defining “you” as “the Named Insured shown in the Declarations”)).

WENDY W. BERGER, UNITED STATES DISTRICT JUDGE