AUTO-OWNERS INSURANCE COMPANY v. DYER et al
ORDER - 30 Motion for Summary Judgment is denied. See order for details. Signed by Judge Sarah Evans Barker on 12/5/2017. (MEJ)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
AUTO-OWNERS INSURANCE COMPANY, )
THOMAS DYER and ELOIS TAYLOR,
ORDER ON PLAINTIFF’S MOTION FOR SUMMARY JUDGMENT
This matter is before us on Plaintiff Auto-Owners Insurance Company’s (“AutoOwners”) Motion for Summary Judgment. [Dkt. No. 30.] The parties agree that there is
no dispute as to any material facts. For the reasons explained below, we DENY the motion.
This lawsuit arises out of an automobile accident that occurred on July 13, 2013,
between a vehicle driven by Elois Taylor and a vehicle driven by car mechanic Thomas
Dyer. Dyer was employed by TKW Auto Sales which was owned by Kenny White and
Wayman Coffer. The owners of TKW were not at the dealership on the day of the
Accident; however, Dyer was at work on cars at the business that day. Dyer took a
Volkswagen owned by a customer of TKW (the “Vehicle”) out for a test drive. It was
during this test drive that Dyer’s car collided with Taylor’s (the “Accident”).
Dyer’s driver’s license had been suspended from approximately 1992 to September
2014. When he was hired by TKW in April, 2013, Dyer disclosed that he did not have a
valid driver’s license. Regardless, as part of his responsibilities to diagnose problems with
customer vehicles, Dyer test drove vehicles with the express knowledge and
encouragement TKW’s owners. Over time, Mr. White and Mr. Coffer observed Dyer test
drive vehicles, never inquiring of him or instructing him not to drive customers’ vehicles.
Indeed, prior to the Accident, Dyer and TKW’s owners discussed payment of Dyer’s traffic
fees so that his license could be reinstated. The first and only time Mr. White asked Dyer
not to test drive vehicles was the Monday after the Accident.
Prior to the accident, Auto-Owners issued a garage liability policy to TKW under
policy number 43-018-778-01 effective from February 28, 2013 to February 28, 2014 (“the
Policy”). [See Doc. 6-2, which is Auto-Owners Insurance Company’s Policy attached to
Auto-Owners’s Amended Complaint for Declaratory Judgment as Exhibit “B”.] The
Policy provides insurance coverage for bodily injury and property damages described in
an endorsement specifically for “garage liability.”
[Policy at 17-18 1, 60-61.]
endorsement obligates Auto-Owners to “pay damages for bodily injury and property
damage for which the insured becomes legally responsible because of or arising out of an
auto … While used by any person in your business.” [Id. at 60 (bolded terms are defined
elsewhere in the Policy).] The Garage Liability endorsement defines an “insured” under
the policy as “Any other persons … using an auto, … with your permission.” [Id. at 61.]
On July 9, 2015, Elois Taylor filed a Complaint against Thomas Dyer and TKW in
the Marion Superior Court under cause number 49D07-1507-CT-022666, seeking
judgment against both TKW and Dyer for damages she sustained as a result of the
The page number citations to the Policy refer to the page notations as generated by the CM/ECF
Accident. [Doc. 6-1.] In the case before us, Auto-Owners seeks a declaratory judgment
that the Policy does not provide coverage for the Accident. Among other reasons, 2 AutoOwners contends that Dyer did not have the requisite permission to operate the Vehicle
because both he and TKW had actual knowledge that his license had been suspended and
he could not legally operate the Vehicle. Defendant Taylor argues that the Policy provides
coverage where TKW gave Dyer express permission to operate the Vehicle and such
permission was given here. Dyer did not respond to Auto-Owners’s Motion and the time
for doing so has passed.
Summary Judgment Standard
Summary judgment is appropriate when the record before the Court establishes that
there is “no genuine issue as to any material fact and that the moving party is entitled to
a judgment as a matter of law.” Fed. R. Civ. P. 56(c); Celotex Corp. v. Catrett, 477
U.S. 317, 322 (1986). Disputes concerning material facts are genuine where the evidence
is such that a reasonable jury could return a verdict for the non-moving party. Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). “Generally, construction of a written
contract is a question of law for which summary judgment is particularly appropriate.” N.
Ind. Pub. Serv. Co. v. Dabagia, 721 N.E.2d 294, 299 (Ind. Ct. App. 1999) (citation
Auto-Owners has not moved for summary judgment on its alternative theory for relief, to wit,
that “even if Dyer had valid permission to use the vehicle, Dyer’s use of the customer’s vehicle
was outside the scope of that permission” [Am. Compl. ¶ 25].
The issue here is a narrow one: as a matter of law, could TKW give Dyer permission
to operate the Vehicle when both it and Dyer knew that Dyer could not lawfully operate
the Vehicle on public roadways on account of his suspended license? Auto-Owners says
no; permission to commit an illegal act cannot be deemed permission under any
Contending that the issue raised in its lawsuit is a case of first impression, AutoOwners points to no Indiana authority holding that permission to engage in illegal behavior
is not permission as that term is used in an insurance policy. In the absence of any specific
legal authority directly on point, Auto-Owners relies on two Indiana cases interpreting an
insurance policy exclusion for persons operating the covered “vehicle without a reasonable
belief that the person is entitled to do so.” Not only is such an exception not at issue here
(the Policy does not contain the “reasonable belief” exclusion at issue in those cases), but
the term “entitled” clearly is not the same as “permission.”
The first case Auto-Owners relies on is Smith v. Cincinnati Insurance Company¸790
N.E.2d 460 (Ind. 2003). In Smith, Natalie Deem owned a car insured by the defendant
Deem was out late one night with her fifteen-year-old friend,
Courtney Smith, when Deem became extremely intoxicated and wanted to go home. Smith
claimed that Deem gave her permission to drive Deem’s car; however, Deem does not
recall giving such permission. Smith did not possess a valid driver’s license at the time.
While driving Deem home, Smith ran off the roadway, injuring both herself and Deem.
After a bench trial, the trial court found that Deem’s insurance policy did not provide
coverage for the accident, a decision that was affirmed by both the Court of Appeals and
the Indiana Supreme Court.
The issue in Smith was the application of a policy provision excluding coverage for
persons “[u]sing a vehicle without a reasonable belief that the person is entitled to do so.”
Id. at 461 (emphasis added). The Indiana Court of Appeals concluded that “Smith could
not reasonably have believed she had permission to drive Deem’s car [because]: (1) Smith
was not legally entitled to drive; and (2) Deem was too intoxicated to give consent.” Id. 3
Due to strong state and national interests to prevent drunk driving, the Indiana Supreme
Court rejected the Court of Appeals conclusion that Smith could not have reasonably relied
on Deem’s permission because it was given when she was intoxicated. However, because
“Smith was not legally entitled to drive,” the Indiana Supreme Court concluded that her
belief that she was entitled to operate Deem’s car was not reasonable and the accident was
excluded from policy coverage. Id. at 462.
In Mroz v. Indiana Insurance Company, 796 N.E.2d 830 (Ind. Ct. App. 2003), the
same exclusionary provision was at issue, to wit, whether the driver had a reasonable belief
that he was entitled to drive the insured vehicle. Michael Heiden allowed his seventeenyear-old son, James, to operate his van. In 2000, James’s driver’s license was suspended.
Although Michael knew that his son did not have a valid driver’s license, he still allowed
The Indiana Court of Appeals developed a five-part test “to determine whether a driver has a
reasonable belief that she is entitled to drive another person’s car.” Smith, 790 N.E.2d at 461. The
third part of the test asks “whether the driver was legally entitled to drive under the laws of the
applicable state.” Id. The court in Mroz, infra, also considered this element when concluding that
absent a valid license, the driver did not have a reasonable belief that he was entitled to operate
the insured’s vehicle.
James to drive to and from school and work; however, if James wanted to drive the van
any other time, he was required to first obtain permission from his dad. In April, 2000,
Michael gave a family friend permission to use the van to take James bowling, but
specifically told James he did not have permission to drive the van that night. During an
altercation at the bowling alley, James thought a man was going to stab him through the
van window. James “jumped into the driver’s seat and began driving away to escape the
man with the knife,” losing control of the van and striking a pedestrian. Id. at 831.
The injured pedestrian seeking insurance coverage argued that “James could have
reasonably believed that he was entitled to drive because an emergency existed.” Id. at
833 (noting that in a criminal context extreme emergency can serve as a defense to illegal
operation of a motor vehicle). The Indiana Court of Appeals concluded that because James
did not hold a valid driver’s license at the time of the accident, he “could not have
reasonably believed that he was entitled to drive under the laws of the State of Indiana;”
“[t]he contract forecloses insurance coverage for a driver who is not legally entitled to
drive.” Id. at 834 (“Thus, our decision as to the liability of the insurer is controlled by our
supreme court’s decision in Smith.”).
The factual situation in our case is easily distinguishable from Smith and Mroz.
Here, TKW gave Dyer permission to drive the Vehicle. The question presented by AutoOwners is not whether Dyer’s belief that he had permission to drive the Vehicle was
reasonable but whether, as a matter of law, Dyer had permission to operate the Vehicle
despite his lack of a valid driver’s license. Smith and Mroz are neither controlling nor
Auto-Owners’s request, in relying on Smith and Mroz, seeks either to expand the
language of the Policy or expand the reach of Indiana law. Auto-Owners’s interpretation
of the term “permission” requires that we amend the Policy language to limit the
permission that TKW can give only to those legally authorized to operate a vehicle. The
Policy does not include this language; thus, Auto-Owners’s request runs counter to the
principle of Indiana contract law which requires that we apply the plain and ordinary
meaning of clear and unambiguous contracts. Cincinnati Ins. Co. v. Am. Alt. Ins. Corp.,
866 N.E.2d 326, 332 (Ind. Ct. App. 2007) (cited by Auto-Owners Ins. Co. v. Benko, 964
N.E.2d 886, 890 (Ind. Ct. App. 2012)).
Alternatively, Auto-Owners requests that we import in wholesale fashion the
holdings of Smith and Mroz into a wholly unrelated insurance policy provision. Because
the Indiana Supreme Court has held that a person without a valid driver’s license cannot
have a reasonable belief that he is entitled to drive a vehicle, Auto-Owners argues that a
person without a valid driver’s license cannot be given permission by the owner/bailee to
operate its vehicle. Auto-Owners’s proposed expansion of Indiana law is unsupported by
Smith or Mroz or, so far as we can determine, any other Indiana court decision.
Auto-Owners advances a quasi-public policy argument that also fails to achieve
liftoff. According to Auto-Owners, to find that Dyer had permission to drive “would be
akin to sanctioning illegal conduct.” [Dkt. No. 31 at 11-13 (citing Indiana statutes making
driving without a license a civil penalty, including allowing an unlicensed person to operate
a vehicle in your custody).] However, Auto-Owners’s argument is unavailing. The
“permission” at issue here is not permission under the law, but permission from the insured
(TKW) to the driver (Dyer). 4
The Policy provides insurance coverage for persons using automobiles with TKW’s
permission and it is undisputed that, notwithstanding Dyer’s lack of a valid driver’s license,
TKW gave Dyer its permission to operate the Vehicle. Accordingly, Auto-Owners’s claim
that it owes no coverage to Dyer because he could not have been given permission to
operate the Vehicle is without merit.
For the foregoing reasons, we DENY Auto-Owners’s Motion for Summary
Judgment [Dkt. No. 30].
SARAH EVANS BARKER, JUDGE
United States District Court
Southern District of Indiana
Distribution: All CM/ECF counsel of record
Auto-Owners argues that Indiana Code § 27-1-13-7(a)’s minimum insurance policy requirement
“ties automobile insurance coverage extended to permissive users to the requirement that the
person granted permission be ‘legally using or operating’ the vehicle being provided.” [Dkt. No.
31 at 13.] Auto-Owners cites no authority supporting its interpretation of the statute. As we see
it, the quoted language “person legally using or operating the same with the permission … of such
owner,” relates to the legality of operation in terms of whether permission was given by the owner.
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