Appellate court finds garage insurance policy doesn’t cover injuries

For only the second time, the Indiana Court of Appeals has addressed the language in a garage insurance policy, and upheld partial summary judgment in favor of the insurer.

Judge Edward Najam wrote in Patrice Cotton v. Auto-Owners Insurance Company, No. 49A02-1005-CT-575, that only once before has the Court of Appeals considered language similar to that found in the garage policy issued by Auto-Owners Insurance Co. held by dealer Jim Bailey. Bailey had given his grandson a temporary license plate from his dealership to use on his car, but the car was not connected in any other way to the dealership. While Patrice Cotton was riding in the car, the grandson hit a bridge embankment and Cotton was injured.

She sued the grandson, Auto-Owners, Jim Bailey Auto Sales, and Jim Bailey. She believed Bailey’s garage policy provided coverage for her injuries because Bailey provided the dealership’s temporary license plate. The trial court granted partial summary judgment to Auto-Owners and also denied Cotton’s motion to strike Bailey’s affidavit. He died during the discovery process.

The garage policy provides coverage for “automobile dealer, repair shop, service station, storage garage, or public parking place, and all operations which are necessary or incidental thereto, including (1) the ownership, maintenance or use of any automobile in connection with the foregoing.” In Automobile Underwriters Inc. v. Hitch, 169 Ind. App. 453, 349 N.E.2d 271 (1976), the Court of Appeals considered similar language in a suit filed after someone was injured by using reloaded shotgun shells Hitch sold out of his garage storefront.

The Hitch court held that Hitch’s insurance policy language wasn’t ambiguous and the only reasonable interpretation of the policy is that the sale of shotgun shells isn’t necessary or incidental to the use of the premises for operating a garage. The appellate judges found Hitch to apply to the instant case, and also cited a very similar case to Cotton’s from North Carolina, McLeod v. Nationwide Mutual Insurance Co., 444 S.E.2d 487 (N.C. Ct. App. 1994). That court concluded that a third party’s use of a dealer license tag on his personal vehicle wasn’t considered necessary or incidental to a garage business.

“The mere fact that the Dealer provided a temporary license plate for a vehicle does not bring that vehicle within the coverage of the garage policy,” wrote Judge Najam on Cotton’s suit. “Generally speaking, to provide a temporary license plate may well be incidental to a licensed auto dealer’s business, but Auto-Owners’ garage policy provides coverage only if the plate is used ‘in connection with’ the business operations.”

The appellate court also upheld the denial of Cotton’s motion to strike Bailey’s affidavit.

“To the extent the statements in the affidavit regard the operations of the Dealer, including its inventory, sales, and employees, the Dealer’s business records or the testimony of a Dealer employee would be admissible proof of such matters. Thus, the trial court did not abuse its discretion when it refused to strike those portions of the Bailey Affidavit,” he wrote.