Transfer of Auto Ownership and Insurance Considerations

Two cases from New York recently explored the issue of when ownership of a vehicle transfers to determine how insurance coverage applies. The ownership of a vehicle can have significant implications on the applicability of insurance coverage, but with certain leniencies built into the law and insurance policies it is not always easily settled.

In Nationwide Ins. Co. of Am. v. Porter, 2014 NY Slip Op 07029, a New York appellate court faced the question of whether ownership of a vehicle had passed such that coverage extended to the new owner for his “newly acquired auto.” In the case, the insured purchased a vehicle, took physical possession, and began using the vehicle before receiving title or registering the vehicle. During this period, the insured was involved in an accident in the new vehicle and sought insurance coverage under his policy, which provided coverage for a “private passenger auto newly acquired by you.” The insurer argued, and the trial court agreed, that it owed no duty to defend or indemnify the insured under the policy because the insured had not yet received title or registered the auto and therefore the policy did not cover the vehicle as a “newly acquired auto.”

But the appellate court disagreed with the insurer and reversed the trial court’s decision. The appellate court noted that “ownership of a motor vehicle generally passes when the parties intend that it pass.” Porter, 2014 NY Slip Op 07029, citing Dallura v. Rubicco, 772 N.Y.S.2d 532 (2004). The court further noted that the insurance policy did not define “newly acquired” and the term was not “limited by the policy to completed transactions that were done in full compliance with the Certificate of Title Act.” Considering the policy language and the factual circumstances in light of the “reasonable expectations of the average insured” the court found that the auto should be covered under the policy as a “newly acquired auto.”

But this rule is not absolute and transfer of ownership remains a question of fact, as emphasized by the court in Allstate Ins. Co. v. Rosko, 2014 NY Slip Op 50443(U). In Rosko, an insurance company found itself on the other side, arguing that a vehicle had changed owners despite the fact that the certificate of title transferring ownership had not yet been executed. After the vehicle’s owner passed away, the owner’s daughter began driving the vehicle and was involved in an accident. The injured party claimed that at the time of the accident, ownership of the vehicle had not transferred from the decedent to the daughter, as the certificate of title had not been executed. In addition to coverage from the decedent’s insurance policy, which was still in effect, the injured party sought recovery from the daughter’s own insurance policy which provided excess liability coverage if she was driving a non-owned vehicle.

The insurer argued that “ownership of a vehicle passes when the parties intend that it pass” and that the terms of the decedent’s will effectively transferred ownership to the daughter, even though title had not been legally transferred. Accordingly, the daughter had become the de facto owner of the vehicle and an insured under the decedent’s policy, making the decedent’s policy the sole source of recovery.

The court countered that “these presumptions are not absolute, and may be rebutted by evidence which demonstrates that another individual owned the vehicle at the time in question.” The court said that the fact that the daughter was an heir to the estate and was driving the decedent’s vehicle at the time of the accident was “insufficient, standing alone, to establish any intention on the part of the heirs that legal ownership of the vehicle be vested in [the daughter] at the time of her mother’s death or any other time prior to the happening of the accident.” Instead, the court found that ownership had not yet transferred out of the estate at the time of the accident as the certificate of title had not yet been executed, and the insurer failed to demonstrate otherwise.

Taken together, the cases show that while courts look to the intent of the parties to determine true ownership for insurance purposes, transfer of ownership is a question of fact. While legal technicalities of executing and registering title may not preclude transfer of ownership for purposes of insurance coverage, they may factor in determining the intent of the parties as to ownership. As with other coverage issues, courts will view the policy in light of the “reasonable expectations of the average insured.” The transfer of vehicle ownership can have important insurance implications and insurers and insureds should understand their rights and obligations when ownership is transferred, especially during transition periods when possession has changed hands but legal title has not been executed or the vehicle has not been registered.