The Meaning of Repossession
February 22, 2016
The insured, a used car dealership, brought an action against the insurer, seeking a declaration that the policies provided coverage for wrongful debt-collection claims against the insured, stemming from the insured's repossession of the customer's vehicle. This case is Wolfe Automotive Group v. Universal Underwriters Insurance Company, 2015 WL 8957856.
Wolfe is insured under two policies issued by Universal. One policy provides coverage and defense against lawsuits for damages arising from wrongful repossession of an auto, and this is linked under a separate policy to umbrella coverage. Wolfe sold a vehicle to the Jacksons, retaining an interest for loaning the Jacksons the purchase money. Wolfe later repossessed the car and sold it due to missed payments.
After the repossession but before the sale, Wolfe sent a notice to the Jacksons informing them that they could request an accounting for a $25 charge; after the sale, Wolfe sent a notice to the Jacksons charging them legal fees. Wolfe sued for the deficiency balance and the Jacksons countersued. The Jacksons claimed that Wolfe violated the state commercial code and the state motor vehicle time sales act. The Jacksons did not, however, dispute that they were in default and that Wolfe had the right to repossess.
Wolfe tendered the counterclaim to Universal for defense and indemnify under the umbrella policy. Universal refused coverage on the ground that the allegedly deficient notices were not wrongful repossessions as that term is meant in the policy. Wolfe sued Universal and the trial court sided with the insurer. This appeal followed.
The United States Court of Appeals, Eighth Circuit, noted that the central dispute is whether the Jacksons have alleged as injury the wrongful repossession of their vehicle as that term is used in the policy. Both Wolfe and Universal agreed that wrongful repossession is unambiguous, although they disagree on what that term unambiguously means to an ordinary insured. Wolfe contends that the phrase includes not only the physical appropriation of a vehicle but also the procedures required for its sale. Universal countered that wrongful repossession means that Wolfe must not have had the right to take the car at the time of repossession.
The court saw the real issue as whether the meaning of repossession to an ordinary insured sweeps in the procedures required by statute for disposition of the collateral as Wolfe argued. The court found that it did not. The court looked to the dictionary definition of repossession and noted that the word means “retake possession of something when a buyer defaults on payments”. The court said, therefore, that Wolfe has the burden of proving that an ordinary insured would think a repossession extends beyond the retaking of possession of the property. This did not happen.
Given that the term repossess and its ordinary definition center on possession, the court found that it would be difficult to see why an ordinary insured would not understand the repossession of a vehicle to be complete once it regained control of the vehicle. Thus, under the plain language of the policy and the ordinary dictionary definition of repossession, the court ruled that Universal is entitled to judgment as a matter of law. The ruling of the trial court was affirmed.
Editor's Note: The U.S. Court of Appeals, Eighth Circuit, rules for the insurer in this instance. The insured claimed that a repossession includes taking the vehicle and the paperwork required for its eventual resale. To the court, the dictionary definition clearly and plainly noted that repossession simply meant to take back possession. The insured did not meet the burden of supporting its definition and so, the policy did not provide coverage.