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SERIOUS INJURY ALWAYS LEADS TO LEGAL ACTION
When an accident results in serious injuries, the injured party’s attorneys seek additional defendants, however weak the argument may be to bring in additional defendants.
IN Delores Zepeda v. Central Motors, Inc., no. 2021-SC-0204-DG, Kentucky Supreme Court (August 18, 2022) The Kentucky Supreme Court was faced with an argument that a car dealer who sold a vehicle to another and had a few days to file all of the title transfer paperwork should considered to be the owner of the vehicle and therefore responsible for the damage.
This appeal was solely concerned with determining the statutory ownership of the BMW between Garcia and Central Motors which controlled whether Zepeda could dip into Central Motors’ insurance.
Dolores Zepeda (Zepeda) was seriously injured in a car accident. She filed a claim against Central Motors, Inc. (Central Motors) claiming that it was the legal owner of the 2002 BMW in which she was a passenger at the time of the accident. The trial court granted summary judgment in favor of Central Motors, as it had substantially complied with KRS 186A.220 when it sold the vehicle to Juan Garcia (Garcia) and was no longer the legal owner of the vehicle. Zepeda appealed and the Court of Appeal upheld the lower court’s ruling.
Central Motors purchased the vehicle from Loan Portfolio Services in Tennessee on March 19, 2014 and brought the vehicle to Kentucky on the same day. Central Motors did not file a notice of vehicle acquisition with the Fayette County Clerk within fifteen (15) days as required by KRS 186A.220(1). Garcia purchased the vehicle from Central Motors on July 24, 2014 and executed a bill of sale, installment contract and security agreement for the purchase. As part of the transaction, Garcia also executed a power of attorney and appointed Central Motors as his agent so that it could deliver the assigned certificate of title and other documents to make the application for registration and certificate of title on Garcia’s behalf. Central Motors obtained proof of insurance from Garcia and then transferred physical ownership of the vehicle to him on July 24, 2014.
On August 11, 2014, Central Motors paid the required fees and submitted an application for a Kentucky Certificate of Title and Registration and delivered the assigned Tennessee Certificate of Title to the Fayette County Clerk. Central Motors then filed a Statutory Statement with the Woodford County Clerk on August 13, 2014. Woodford was the county where Garcia resided.
Juan Garcia was the father of Darley Morales (Morales). Although Morales did not have a valid driver’s license, Garcia allowed Morales to drive the vehicle. On August 14, 2014, Morales was driving the 2002 BMW when he crashed it in a single vehicle accident. Morales had a blood alcohol content (BAC) of 0.145. The crash killed Morales and left his passenger, Zepeda, paralyzed. The title was issued in Garcia’s name the following day, August 15, and the registration was completed on the 18th, three days later.
Zepeda sued the Estate of Morales, seeking compensatory and punitive damages; against Garcia for negligent reliance; against Allstate Property & Casualty Insurance Company (Allstate) for underinsured motorist coverage; and against Central Motors as the purported legal owner of the vehicle.
Central Motors filed a motion for summary judgment. The trial court ruled that Central Motors had substantially complied with the statute when it filed an application for a certificate of title along with the prior title. The trial court reasoned that Central Motors provided notice pursuant to KRS 186A.220(1) to the Fayette County Clerk when it filed the aforementioned documents. Therefore, the trial court reasoned, per the Kentucky Supreme Court’s decision in Travelers Indem. Co. v. Armstrong, 565 SW3d 550 (Ky. 2018), that there was substantial compliance with KRS 186A.220.
In this case, Central Motors was the title holder but Garcia had obtained physical possession of the BMW pursuant to a bona fide sale on July 24, 2014.
Although Kentucky is a certificate of title for purposes of establishing title and requiring liability insurance, KRS 186.010(7)(c) provides an exception to the general rule. If a licensed motor vehicle dealer delivers physical possession to the buyer and complies with KRS 186A.220, title passes upon physical delivery of the vehicle.
By violating the strict requirements of the regulations (namely, the 15-day requirement) but still accomplishing the goal (notifying the clerk of the acquisition of the vehicle), the intent of the statute is still upheld. Significant compliance, i.e. late compliance, may still allow the dealer to benefit from the exception in KRS 186.010(7)(c).
The purpose of KRS 186A.220(1) is to implement an efficient registration and title process. If a retailer meets these requirements late, it does not violate the overall objective. The statute is directory and substantial compliance is sufficient for these sections.
A licensed dealer may cure untimely compliance with KRS 186A.220, section 1 by if the dealer was in compliance prior to the accident, it may still avail itself of the exception in KRS 186.010(7)(c).
KRS 186.010(7) provides: “’Owner’ means a person who holds the legal title to a vehicle or a person who, pursuant to an approved sale, has obtained physical possession of the vehicle subject to any applicable security interest.” and “A licensed motor vehicle dealer who transfers physical possession of a motor vehicle to a purchaser pursuant to an approved sale, and meets the requirements of KRS 186A.220, shall not be deemed to be the owner of that motor vehicle solely by reason of an assignment to his dealer or a certificate of title in the dealer’s name. Rather, under these circumstances, ownership is transferred upon delivery of the vehicle to the buyer. . . . (my italics)
Central Motors essentially complied with KRS 186A.220 and transferred physical ownership of the vehicle pursuant to an approved sale. As such, Central Motors was not the legal owner of the vehicle on the date of the accident.
It is understandable that Zepeda, now a paraplegic, would seek the deep pockets of Central Motors and its insurance companies. Regardless, the technical argument failed because of the statute’s exceptions and the fact that Central Motors largely complied with the statute’s requirements, Zepeda’s attempt to reach deep pockets failed, and she is left with her suit against the driver, his father, and available insurers. She also faces a comparative negligence issue by riding with a drunk, unlicensed driver who ended up crashing into a tree and dying in the effort.
(c) 2022 Barry Zalma & ClaimSchool, Inc.
Barry Zalma, Esq., CFE, now limits his practice to serving as an insurance consultant specializing in insurance coverage, insurance claims management, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims attorney and more than 54 years in the insurance industry. He can be reached at http://www.zalma.com and firstname.lastname@example.org.
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