Motorists Mutual Insurance Company v. Vakisha L. Hammond, as Mother and Legal Guardian of VANIQUA HAMMOND, a minor

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RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
ELECTRONIC CITATION: 2004 FED App. 0024P (6th Cir.)
File Name: 04a0024p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
MOTORISTS MUTUAL
INSURANCE COMPANY,
Plaintiff-Appellee,
v.
VAKISHA L. HAMMOND, as
Mother and Legal Guardian of
VANIQUA HAMMOND, a
minor,
Defendant-Appellant.
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No. 02-5577
Appeal from the United States District Court
for the Western District of Kentucky at Louisville.
No. 99-00803—Thomas B. Russell, District Judge.
Argued: December 12, 2003
Decided and Filed: January 15, 2004
2 Motorists Mutual
Ins. v. Hammond
No. 02-5577
*The Honorable Gordon J. Quist, United States District Judge for the
W estern District of Michigan, sitting by designation.
Before: COLE and CLAY, Circuit Judges; QUIST, District
Judge.*
_________________
COUNSEL
ARGUED: Henry K. Jarrett III, JARRETT &
CAMPISANO, Louisville, Kentucky, for Appellant. Kenneth
Gates Doane, Jr., WARD, TYLER & SCOTT, New Albany,
Indiana, for Appellee. ON BRIEF: Henry K. Jarrett III,
JARRETT & CAMPISANO, Louisville, Kentucky, J.
Leonard Rosenberg, Louisville, Kentucky, for Appellant.
Kenneth Gates Doane, Jr., WARD, TYLER & SCOTT, New
Albany, Indiana, for Appellee.
_________________
OPINION
_________________
CLAY, Circuit Judge. In this diversity action premised on
Kentucky law, Defendant Vakisha Hammond appeals the
November 26, 2001, order of the district court granting
summary judgment in favor of Plaintiff Motorists Mutual
Insurance Company (“Motorists Mutual”), declaring that she,
as mother and legal guardian of Vaniqua Hammond, is not
entitled to recover any amount from Motorists Mutual
pursuant to its automobile insurance policy for Albin Used
Cars, Inc (“Albin”). She also appeals the district court’s April
5, 2002, denial of her motion for reconsideration of the
November 26, 2001, order. For the reasons that follow, this
Court finds that Albin owned the car that Vaniqua Hammond
was occupying at the time of the accident, and, therefore, she

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No. 02-5577 Motorists Mutual
Ins. v. Hammond
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was an insured pursuant to the Motorists Mutual policy and
was entitled to underinsured motorist benefits thereunder.
Accordingly, this Court REVERSES the district court’s
grant of summary judgment and denial of reconsideration and
VACATES the related declaratory judgment.
I.
A. Procedural History
On September 16, 1998, a vehicle driven by Patricia
Hastings struck a 1988 Mercury being operated by Vakisha
Hammond. Hammond’s daughter, Vaniqua Hammond, and
another individual were passengers in the Mercury at the time
of the accident. Vaniqua allegedly suffered “catastrophic
injuries.” Vaniqua Hammond eventually settled with Ms.
Hastings’ insurer for $50,000, representing Hastings’ policy
limit. Vakisha Hammond had purchased the Mercury from
Albin, which is insured by Motorists Mutual. Albin had
purchased the Mercury at auction from Swope Auto Center,
which is insured by Motorists Insurance Company. Because
Vakisha Hammond had no automobile insurance at the time,
she, on behalf of her daughter, sought underinsured motorist
benefits from Motorists Mutual and Motorist Insurance
Company. Vaniqua Hammond eventually settled her claim
against Motorist Insurance Company (Swope’s insurer).
On December 17, 1999, Motorists Mutual (Albin’s insurer),
an Ohio corporation, filed a complaint for declaratory
judgment in the district court against the Hammonds,
residents of Kentucky. The Hammonds’ suit against
Motorists Mutual, filed in state court, subsequently was
removed to federal court and consolidated with the district
court action where jurisdiction was premised on diversity of
citizenship. After reviewing the parties’ cross-motions for
summary judgment, on November 26, 2001, the district court
entered a declaratory judgment, declaring that Vakisha
Hammond, as mother and legal guardian of Vaniqua
4 Motorists Mutual
Ins. v. Hammond
No. 02-5577
Hammond, would not recover any amount from Motorists
Mutual under its insurance policy with Albin. In response to
the Hammonds’ motion for reconsideration, on April 5, 2002,
the district court reaffirmed its previous grant of summary
judgment. Vakisha Hammond, on behalf of Vaniqua
Hammond, noticed her appeal on April 25, 2002.
B. Substantive Facts
The following undisputed facts are taken from the district
court’s memorandum opinion and order of November 26,
2001, as well as from the parties’ joint stipulation of the facts.
For ease of reference, they are set out in bullet-point format:
• On August 12, 1998, Zina Merkin traded in her car, a
Mercury, to Swope Auto Center (“Swope”). Merkin executed
a request for a duplicate title, a power of attorney to Swope
and an odometer statement. Swope prepared a Notice to
County Clerk of Vehicle Acquisition form, but did not file it
with the County Clerk.
• On August 18, 1998, Swope auctioned the Mercury, and
Albin obtained possession.
• On August 26, 1998, Swope requested a duplicate title on
the Mercury, which Swope received prior to September 3,
1998.
• On August 27, 1998, Albin still had no title documents
from Swope, but nevertheless sold the Mercury to Vakisha
Hammond, who took possession of the car. At the time,
Hammond executed an odometer disclosure statement and a
retail installment contract, financing the purchase price of the
vehicle through Albin. Hammond also executed a Kentucky
Automobile Dealer Association Form 13, granting Albin
permission to deliver the necessary title work to the County
Clerk on her behalf.

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Ins. v. Hammond
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• By September 3, 1998, Swope had all the documents
necessary to convey the Mercury to Albin, but did not record
these documents nor deliver them to Albin.
• On September 16, 1998, Hammond was driving the
Mercury in which her daughter, Vaniqua Hammond, was a
passenger, when the car was struck by a vehicle driven by
Patricia Hastings. Vaniqua Hammond allegedly suffered
“catastrophic injuries” in the accident.
• On September 17, 1998, Albin paid Swope for the
Mercury.
• On September 18, 1998, Swope recorded with the
County Clerk the August 12, 1998, documents from Merkin,
as well as a Notice to County Clerk of Vehicle Acquisition
form reflecting Albin’s acquisition of the Mercury from
Swope.
• On October 7, 1998, the Commonwealth of Kentucky
issued title on the Mercury to Hammond.
• On December 7, 1999, Vaniqua Hammond obtained a
$50,000 settlement from Ms. Hasting’s insurer, which was
Hastings’ policy limit.
• Vakisha Hammond had no automobile insurance, and
therefore Vaniqua Hammond sought underinsured motorists
benefits from Motorists Mutual, which insures Albin.
Vaniqua Hammond also sought underinsured motorists
benefits from Motorists Insurance Company, which insures
Swope. Vaniqua Hammond settled her claim against
Motorists Insurance Company in May 2001.
II.
We review a district court's grant of summary judgment de
novo. Herman v. Fabri-Centers of Am., Inc., 308 F.3d 580,
6 Motorists Mutual
Ins. v. Hammond
No. 02-5577
585 (6th Cir.2002). We also review a district court's
interpretation of an insurance contract de novo. Vencor, Inc.
v. Standard Life & Accident Ins. Co., 317 F.3d 629, 634 (6th
Cir.2003) (citing BP Chemicals, Inc. v. First State Ins. Co.,
226 F.3d 420, 424 (6th Cir.2000)).
III.
The central issue in this case is whether Vaniqua
Hammond, Vakisha Hammond’s daughter, is entitled to
receive underinsured motorist (“UIM”) benefits pursuant to
Albin’s “garage coverage” automobile insurance policy with
Motorists Mutual. According to the policy, UIM coverage
applies to “covered autos,” meaning cars that Albin “own[s].”
(J.A. 147, 151). The policy defines an insured to include
“[a]nyone … occupying a covered ‘auto’ ….” (J.A. 198.)
“Occupying” means “in, upon, getting in, on, out or off.”
(J.A. 199.) There is no dispute that Vaniqua Hammond was
in the Mercury at the time of the accident. Thus, if the
Mercury is a “covered auto” – that is, if Albin owned the
Mercury at the time of the Hammonds’ accident, then UIM
benefits would be payable to Vaniqua Hammond as an
“insured” because she would have been occupying a covered
auto at the time she was injured.
Albin’s garage coverage policy does not define
“ownership” of an auto. Therefore, the Court must resort to
the definition of “ownership” under Kentucky law. At the
outset, it is important to note that the general law of sales
does not apply when determining ownership of a motor
vehicle for liability insurance purposes. Potts v. Draper, 864
S.W.2d 896, 898 (Ky. 1993). Instead, the Court must look to
Kentucky statutory law on title ownership. Id. (noting that
the Kentucky legislature had changed “the law of Kentucky
from an equitable title state to a certificate title state”). In
determining the “owner” of a vehicle, Ky. Rev. Stat. Ann.
§ 186A.345 (Banks-Baldwin 2002) dictates that the Court
utilize the definition of “owner” as set forth in Ky. Rev. Stat.

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No. 02-5577 Motorists Mutual
Ins. v. Hammond
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Ann. § 186.010(7). Nantz v. Lexington Lincoln Mercury
Subaru, 947 S.W.2d 36, 37 (Ky. 1997). These are the
statutory provisions that set out the procedures for
transferring vehicle ownership and, in turn, determine when
an automobile sale has been completed for the purpose of
insurance coverage. Potts, 864 S.W.2d at 900. Section
186.010(7) defines “owner” as either (1) a person who holds
legal title to a vehicle or (2) a person who pursuant to a bona
fide sale has received physical possession of the vehicle
subject to any applicable security interest. Ky. Rev. Stat.
Ann. § 186.010(7).
A. Albin held legal title to the Mercury
Swope did not transfer title to the Mercury to Albin until
September 17 or 18, 1998, a day or two after the accident.
See Nantz, 947 S.W.2d at 37 (“[A]ccording to [Ky. Stat.
Ann. §] 186A.215, a transfer of title takes place when the
seller completes and signs the assignment of title section of
the title certificate and delivers it to the buyer.”).
Nevertheless, the Kentucky Supreme Court’s recent decision
in Auto Acceptance Corp. v. T.I.G. Ins. Co., 89 S.W.3d 398
(Ky. 2002), convinces this Court that Albin was an owner at
the time of the accident under the first statutory definition of
“owner.”
In Auto Acceptance, an individual, Wayne Chandler,
purchased an Acura Integra from a dealer, J.D. Byrider, Inc.
Id. at 400. At the time of the purchase, Chandler presented
J.D. Byrider with proof of insurance for another vehicle;
Chandler’s insurance policy allowed him to add a vehicle to
his coverage within 30 days of becoming the vehicle’s owner.
Id. J.D. Byrider then gave Chandler actual possession of the
Acura, even though it had not yet received a certificate of title
from the previous owner of the vehicle. Id. J.D. Byrider
received the title to the Acura eight days after Chandler was
involved in an accident with the car. Id. Under the court’s
previous holding in Nantz, supra, it appeared to follow that
8 Motorists Mutual
Ins. v. Hammond
No. 02-5577
1The concept of a dealer holding constructive title to a vehicle is
incorporated into the very fabric of the titling statutes. See Ky. Stat. Ann.
§ 186A.220(1) (providing that a motor vehicle dealer is not required to
obtain a certificate of title for a car tha t it buys or accep ts in trade, as long
as it notifies the county clerk of the acquisition within 15 d ays); see also
Hartford Accident & Indem. Co. v. Maddix, 842 S.W .2d 8 71, 8 72 (Ky. Ct.
App. 1992) (noting that “a dealer can become the owner of an automob ile
without actually acquiring title to the automobile”) (emp hasis in original;
citing Ky. Stat. Ann. § 186A.220.).
J.D. Byrider was not an owner because it had not been
assigned title and received it by the date of Chandler’s
accident. See Nantz, 947 S.W.2d at 37 (“[A]ccording to KRS
186A.215, a transfer of title takes place when the seller
completes and signs the assignment of title section of the title
certificate and delivers it to the buyer.”); see also Kelly v.
McFarland, 243 F. Supp. 2d 715, 718-19 (E.D.Ky. 2001)
(holding that “the title retained by the dealer must be
assigned, and hence fully executed, as prerequisite to
effectuating the transfer of title”). Yet the court in Auto
Acceptance held:
Both the trial court and the Court of Appeals correctly
determined that, under Nantz, J.D. Byrider was the owner
of the Acura for insurance purposes because it retained
the title to the vehicle.
Auto Acceptance, 89 S.W.3d at 401. Since the court
previously had acknowledged that J.D. Byrider did not
physically have title at the time of the accident, the only
logical interpretation of the court’s holding is that J.D.
Byrider was the constructive title-holder of the Acura on the
day of the accident.1
After holding that J.D. Byrider was the titleholder of the car
it had delivered to the purchaser, the court in Auto Acceptance
went on to hold that J.D. Byrider did not own the Acura for
liability insurance purposes because of Ky. Stat. Ann.

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No. 02-5577 Motorists Mutual
Ins. v. Hammond
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§ 186A.220(5), which sets forth “an exception to the general
statutory scheme that makes the title holder the owner of a
vehicle for insurance purposes.” Id. at 401; see also Ky. Stat.
Ann. § 186A.220(5) (providing that dealer shall deliver
certification of title to purchaser at time of vehicle’s delivery;
alternatively, the dealer may deliver the vehicle to the
purchaser without title, as long as the purchaser consents to
have the dealer apply for a registration and title on the
purchaser’s behalf: “In so doing, the dealer shall require from
the purchaser proof of insurance … before delivering
possession of the vehicle”). Under this exception, J.D.
Byrider was not the owner because it had obtained proof of
insurance from Chandler and had promised to apply for a
registration and title on Chandler’s behalf before delivering
the Acura to him. Auto Acceptance, 89 S.W.3d at 401.
The facts herein are identical to the facts in Auto
Acceptance with one crucial distinction – the dealer at issue
in the instant case (Albin) cannot take advantage of the
exception to the title-holder-as-owner rule. As in Auto
Acceptance, there were two prior owners of the vehicle at
issue in this case (Swope and Albin) and an individual
purchaser (Hammond). As in Auto Acceptance, the dealer
herein (Albin) from whom the individual purchaser
(Hammond) received the vehicle had not yet received the title
from the initial owner (Swope). Accordingly, under Auto
Acceptance, it follows that Albin was the constructive title
owner of the Mercury at the time of the accident, unless Albin
can invoke the exception set forth in Ky. Stat. Ann.
§ 186A.220(5). It cannot.
Like the dealer in Auto Acceptance, Albin did not assign
title to Hammond at the time it delivered the Mercury to her,
and instead sought Hammond’s consent to deliver the title
documents to the county clerk on her behalf, thereby
triggering the requirement that Albin withhold delivery of the
Mercury to Hammond until she provided Albin with proof of
insurance. Id. § 186A.220(5). It is undisputed that Albin
10 Motorists Mutual
Ins. v. Hammond
No. 02-5577
failed to obtain proof of insurance, as that term is defined by
Kentucky regulations. See 806 Ky. Admin. Regs. 39:070
(2002) (listing five different methods of proving motor
vehicle insurance). Had Albin complied with § 186A.220(5)
(as well as with the requirement in § 186A.220(1) that Albin
notify the county clerk of Hammond’s purchase within 15
days), Albin would have not have been the Mercury’s owner
upon delivering it to Hammond. See Ky. Stat. Ann.
§ 186.010(7)(c) (providing that a dealer who delivers a car to
a purchaser pursuant to a bona fide sale “and complies with
the requirements of KRS 186A.220, shall not be deemed the
owner of that vehicle solely due to an assignment to his
dealership or a certificate of title in the dealership’s name”).
Since Albin did not comply with these requirements, it
remained a constructive title-holder of the Mercury.
Treating a licensed dealer like Albin that holds itself out as
the true owner of the vehicle with power to convey clear title
as a constructive title-holder and charging it with the duty to
obtain proof of insurance before delivering an automobile to
the purchaser furthers one of the central purposes of
Kentucky’s titling statute, that of preventing uninsured drivers
from taking to the roads. See Auto Acceptance, 89 S.W.3d at
401 (noting that Kentucky’s registration and titling scheme is
designed to fulfill “the important public policy of keeping
uninsured vehicles off Kentucky highways, roads, and
streets”). This approach also is consistent with the Kentucky
Supreme Court’s announcement that the titling statutes
require dealers “to obtain insurance coverage for motor
vehicles they sell until they transfer title by executing the
appropriate legal documents” and that until the seller has
taken the statutory steps to properly complete the sale it will
be considered the owner for purposes of liability insurance.
Potts, 864 S.W.2d at 900. Because Albin owned the Mercury
at the time of the Hammonds’ accident, Vaniqua Hammond
was a covered “insured” under the Motorists Mutual
underinsured motorists policy.

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No. 02-5577 Motorists Mutual
Ins. v. Hammond
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B. The Hammonds were permissive users of Albin’s
Mercury
Albin also was an “owner” of the Mercury at the time of the
Hammonds’ accident pursuant to the second definition under
Ky. Rev. Stat. Ann. § 186.010(7)(a) – “a person who pursuant
to a bona fide sale has received physical possession of the
vehicle subject to any applicable security interest.” Albin was
a bona fide purchaser of the Mercury from Swope. Albin also
had received physical possession of the Mercury prior to
delivering it to Hammond. Although Motorists Mutual
argues that Albin was not an owner under the second
definition because it was not in physical possession of the car
at the time of the accident, the definition does not explicitly
require an owner to be in present possession, only that the
owner “has received” physical possession at some point in
time. The definition’s use of the present perfect tense “has
described” makes sense in the context of how dealers do
business. For example, a dealer does not cease to own a car
on its lot merely because it permits a customer to take the car
for a test drive.
In this case, Albin had a statutory duty not to relinquish the
Mercury, which it owned by virtue of purchasing and
receiving it from Swope, without first obtaining proof of
insurance from Hammond. By the same token, Hammond,
who had no insurance, had no legal right under the titling
statutes to take possession of the Mercury from Albin.
Therefore, Albin permitted Hammond to leave the lot with its
car, even assuming that Hammond had an ownership interest
in the car by virtue of the law of sales. Treating Hammond as
a permissive user of Albin’s car under these circumstances
serves “the important public policy of keeping uninsured
vehicles off Kentucky highways, roads, and streets.” Auto
Acceptance, 89 S.W.3d at 401. See also Rogers v. Wheeler,
864 S.W.2d 892, 894 (Ky. 1993) (“The failure of [the dealer]
to comply with the licensing, registration and insurance
12 Motorists Mutual
Ins. v. Hammond
No. 02-5577
statutes clearly makes him an owner and [the individual
purchaser] a permissive user.”).
The district court below acknowledged that Albin’s and
Swope’s noncompliance with their respective statutory duties
“would quite possibly render both owners of the vehicle for
liability insurance purposes.” (J.A. 26.) Nevertheless, relying
on the Kentucky Supreme Court’s decision in Progressive N.
Ins. Co. v. Corder, 15 S.W.3d 381 (Ky. 2000), the court
denied UIM coverage based on its view that public policy
precludes a recovery in excess of the mandatory minimum
amount of coverage (a minimum which, in the court’s view,
excludes UIM coverage) “where a party would not be the
vehicle owner under Kentucky’s titling statutes but is deemed
an owner for liability insurance purposes.” (J.A. 27.) The
court further opined that “where true ownership overlaps with
ownership for liability insurance purposes, recovery is based
upon actual ownership without having to resort to … public
policy.” Id. The court then held that Albin was not the actual
owner because Swope had not assigned it title by the time of
the accident. (J.A. 28.) Consequently, any insurance
coverage for Hammond would be limited to mandatory
minimum coverage. The court denied Vaniqua Hammond’s
claim for UIM coverage because, in the court’s view, the
coverage sought was “not compulsory liability insurance, but
optional UIM insurance.” Id. Since she had already recovered
from the tortfeasor’s insurance carrier for her tort damages,
she was not entitled to UIM benefits. Id.
The district court’s reasoning was flawed in several
respects. First, the Auto Acceptance decision clarified that
Albin was an “owner” of the Mercury as that term is defined
under the titling statutes. Albin also was an owner by virtue
of having received possession of the Mercury pursuant to a
bona fide sale and then permitting Hammond to use the car.
Accordingly, the district court’s public policy concerns must
be subordinated to the clear mandate of the statutory
language.

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No. 02-5577 Motorists Mutual
Ins. v. Hammond
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Second, the Court disagrees with the district court’s
perception of Kentucky public policy. Although
acknowledging that a dealer can become the owner of an
automobile without actually acquiring title, the district court
found that Swope’s noncompliance with the titling statute
rendered it the owner of the Mercury, and, therefore, Albin’s
transfer of the car to Hammond was “irrelevant.” (J.A. 28.)
This Court strongly disagrees. Regardless of Swope’s
statutory duties, Albin had an independent duty to Hammond
and the public in connection with the transaction, namely, the
duty to obtain proof of insurance from Hammond before
delivering the car to her. By failing to do so, Albin permitted
an uninsured driver to take to the road. Accordingly, public
policy requires that Albin bear the social costs for its non-
compliance, in the form of insuring the risk that it unlawfully
imposed on Kentucky drivers and passengers. Motorists
Mutual counters that this case really involves Albin’s alleged
duty to protect uninsured drivers like Hammond from their
own failure to comply with the law prohibiting driving
without insurance. The injured party in this case, however,
was not the uninsured driver, but the driver’s daughter, who
just as easily could have had no familial relationship with the
driver.
Third, the district court incorrectly described UIM coverage
as optional insurance, thereby precluding Vaniqua
Hammond’s recovery beyond recovery for tort liability. In
fact, since Albin elected UIM coverage and paid its
premiums, UIM coverage for Vaniqua Hammond (an
“insured,” as defined by the policy) was mandatory. See
Coots v. Allstate Ins. Co., 853 S.W.2d 895, 898 (Ky. 1993)
(noting that underinsured motorist coverage is a mandatory
contractual obligation to the insured, just like compulsory tort
liability insurance under Ky. Stat. Ann. § 304.39-110,
because “the automobile insurer is required by statute to
provide such coverage”) (emphasis in original). Thus, the
only relevant question is whether Albin owned the Mercury
for purposes of triggering insurance coverage to Vaniqua
14 Motorists Mutual
Ins. v. Hammond
No. 02-5577
Hammond under its garage coverage policy. Since Vaniqua
Hammond was occupying the vehicle that Albin owned at the
time of the accident, she was an insured who was
contractually entitled to UIM benefits under the plain terms
of the policy.
IV.
To summarize, had Swope delivered clear title to Albin at
the time Albin took possession of the Mercury and/or notified
the county clerk of the transfer to Albin within 15 days, there
is no question that ownership would have passed to Albin.
Instead, the actual title remained with Swope. Albin
knowingly perpetuated Swope’s statutory violations by failing
to pass clear title to Hammond at the time of delivery and
committed an independent violation by failing to obtain proof
of insurance before delivery. Under these circumstances,
Albin was a constructive titleholder, and therefore an owner
of the Mercury at the time of the Hammonds’ accident.
Alternatively, Albin was an owner of the car under the second
statutory definition because it had purchased the car from
Swope, took possession of it and then permitted Hammond to
use the car even though she was legally prohibited from doing
so. Because Albin owned the car at the time of the accident,
Albin’s insurance policy entitled Vaniqua Hammond to UIM
insurance benefits.
For these reasons, the district court’s grant of summary
judgment in favor of Motorists Mutual and its denial of
reconsideration are hereby REVERSED and the related
declaratory judgment is VACATED. This case shall be
REMANDED for proceedings consistent with this opinion.

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