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Coast To Coast Auto Sales, Inc. v. Secura Insurance, Inc.

United States District Court, S.D. Indiana, Indianapolis Division

April 11, 2014

COAST TO COAST AUTO SALES, INC., Plaintiff,
v.
SECURA INSURANCE, INC., Defendent.

ENTRY ON CROSS-MOTIONS FOR SUMMARY JUDGMENT

TANYA WALTON PRATT, District Judge.

This matter is before the Court on the parties' cross-motions for summary judgment. Defendant Secura Insurance, Inc. ("Secura") moved for summary judgment (Dkt. 40) on Plaintiff's declaratory judgment, breach of contract, and bad faith claims. Plaintiff Coast to Coast Auto Sales, Inc. ("Coast to Coast") moved for summary judgment (Dkt. 44) only on its declaratory judgment and breach of contract claims. For the reasons set forth below, the Court GRANTS Coast to Coast's motion and GRANTS in part and DENIES in part Secura's motion.

I. BACKGROUND

The following facts are considered undisputed for the purposes of summary judgment. Coast to Coast is a business located in Fishers, Indiana that is engaged in the selling of motor vehicles. It is the named insured of a policy of insurance issued by Secura ("the Policy"). The Policy is a garage policy[1], which includes both liability and physical damage coverage. Coast to Coast also purchased a False Pretense Endorsement, which provides physical damage coverage for a "loss" to an "auto" caused by "[s]omeone causing you to voluntarily part with a covered auto' by trick, scheme, or under false pretenses." Dkt. 42-3 at 56. The false pretense coverage would not apply "to a loss in which for any reason a bank or any other drawee fails to pay." Dkt. 42-3 at 56. Under the Policy, the term "loss" is defined as "direct and accidental loss or damage." Dkt. 42-3 at 50.

The Liability Coverage portion of the Policy covers the insured's liabilities to third parties. It includes an exclusion for loss caused by "delay or failure by you or anyone acting on your behalf to perform a contract or agreement in accordance with its terms." Dkt. 42-3 at 41.

On December 1, 2011, Coast to Coast sold a Mercedes Benz S550 ("the Mercedes") to Timothy Dunn ("Mr. Dunn") pursuant to an installment sales contract. Mr. Dunn signed the necessary paperwork and provided proof of identity and place of residence. The Dealer Agreement included a clause that for every installment sales contract which Coast to Coast sold to The Huntington National Bank ("Huntington Bank"), Coast to Coast represented and warranted that the vehicle sold was "delivered to the Customer at the dealer's place of business unless another place for delivery is approved in advance by Huntington [Bank]." Dkt. 42-1 at 16. Mr. Dunn did not secure the vehicle at the Coast to Coast dealership in Indiana; instead, Coast to Coast shipped the Mercedes to Mr. Dunn at an address that he provided in the state of Georgia. Coast to Coast also arranged financing for Mr. Dunn's purchase of the Mercedes with Huntington Bank pursuant to a Dealer Agreement between Coast to Coast and Huntington Bank. The Dealer Agreement further provided that if Coast to Coast breached the agreement with respect to an installment sales contract, Coast to Coast was obligated to repurchase that installment sales contract.

On December 15, 2011, Mr. Dunn also purchased a 2002 Lexus SC430 ("the Lexus") from Coast to Coast pursuant to an installment sales contract. Again, Mr. Dunn signed the necessary paperwork and provided proof of his identity and place of residence. Coast to Coast shipped the Lexus to the same address in Georgia. Coast to Coast arranged financing for the Lexus through Wells Fargo Dealer Services ("Wells Fargo") pursuant to a Dealer Agreement between Coast to Coast and Wells Fargo. The Dealer Agreement provided that for every installment sales contract sold to Wells Fargo by Coast to Coast, Coast to Coast represented and warranted that it would perfect Wells Fargo's security interest in the motor vehicle within 30 days of the date of the installment sales contract. It further provided that if Coast to Coast breached the Dealer Agreement with respect to an installment sales contract, Coast to Coast was obligated to repurchase that installment sales contract.

Thereafter, Mr. Dunn failed to make payments on the loans to either Huntington Bank or Wells Fargo and Coast to Coast had failed to perfect Wells Fargo's security interest in the Lexus within 30 days, as required by the Dealer Agreement. As a result, on April 11, 2012, Wells Fargo sent Coast to Coast a letter requesting that it repurchase the installment sales contract for the Lexus. On April 25, 2012, Huntington Bank sent Coast to Coast a letter requesting that Coast to Coast repurchase the installment sales contract for the Mercedes because Coast to Coast did not deliver the Mercedes at its place of business or a location approved by Huntington Bank. As required, Coast to Coast repurchased both installment sales contracts according to the terms of the respective Dealer Agreements. Coast to Coast then tried to contact and locate Mr. Dunn, but was unsuccessful.

On May 1, 2012, Coast to Coast filed a police report with the Fishers Police Department. An investigation revealed that there was no Georgia resident named "Timothy Dunn" and the driver's license provided to Coast to Coast was fraudulent. Coast to Coast has not been able to locate the person purporting to be Timothy Dunn, nor has it located or recovered the Mercedes and Lexus.

On June 5, 2012, Coast to Coast submitted claims to Secura for coverage under the False Pretense Endorsement of the Policy for the loss of both the Mercedes and Lexus. Coast to Coast's claims were for the actual cash value of the vehicles. On September 10, 2012, Secura denied Coast to Coast's claims in writing, citing Coast to Coast's breach of the Dealer Agreements and the exclusion that false pretense coverage does not apply "to a loss in which for any reason a bank or any other drawee fails to pay." Dkt. 42-10 at 2; Dkt. 42-11 at 2. Although the exclusion was cited, Secura acknowledges that this exception does not apply under the facts of this case.

Coast to Coast filed this suit in state court and it was removed to federal court on January 3, 2013. Coast to Coast seeks declaratory judgment that Secura is obligated to provide coverage and damages for Secura's breach of contract when it denied Coast to Coast's claims, and damages for bad faith denial of the claims. On November 4, 2013 Secura moved the Court to enter summary judgment in its favor on all counts. Exactly one month later, on December 4, 2013, Coast to Coast filed its cross-motion for partial summary judgment.

II. LEGAL STANDARD

Summary judgment is only appropriate by the terms of Rule 56 where there exists "no genuine issue as to any material facts and... the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56. This notion applies equally where, as here, opposing parties each move for summary judgment in their favor pursuant to Rule 56. I.A.E., Inc. v. Shaver , 74 F.3d 768, 774 (7th Cir. 1996). Indeed, the existence of cross-motions for summary judgment does not necessarily mean that there are no genuine issues of material fact. R.J. Corman Derailment Serv., Inc. v. Int'l Union of Operating Eng'rs. , 335 F.3d 643, 647 (7th Cir. 2003). Rather, the process of taking the facts in the light most favorable to the nonmovant, first for one side and then for the other, may reveal that neither side has enough to prevail without a trial. Id. at 648. "With cross-motions, [the Court's] review of the record requires that [the Court] construe all ...


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