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Harner v. Westfield Insurance Company

Superior Court of Delaware

December 12, 2018


          Date Submitted: September 25, 2018


          JAN R. JURDEN, JUDGE

         AND NOW TO WIT, this 12th day of December, 2018, the Court having duly considered Defendant's Motion to Dismiss, [1] and Plaintiffs Opposition and Cross-Motion for Summary Judgment[2] thereto, IT APPEARS THAT:

         1. On September 15, 2017, the Plaintiff, Raymond Harner, ("Harner"), was involved in an accident while driving his personal motorcycle. As a result of the accident, Harner was seriously injured and his right leg had to be amputated.[3]

         2. At the time of the accident, Accent Coatings LLC ("Accent"), [4] had automobile insurance coverage pursuant to a policy written and issued by the Defendant, Westfield Insurance Company ("Westfield").[5] The policy included uninsured/underinsured motorist coverage of $300, 000 per person.[6] Harner is the sole owner and operator of Accent. Acting in his capacity as Accent's agent, Harner signed Accent's application for the policy.[7]

         3. Following his accident, Harner submitted a demand to Westfield for underinsured motorist ("UIM") benefits on January 25, 2018. Westfield denied coverage.[8] On May 2, 2018, Harner filed suit against Westfield seeking UIM benefits and asserting breach of contract.[9]

         4. Before the Court is Westfield's Motion to Dismiss[10] and Harner's Cross-Motion for Summary Judgment.[11] Westfield argues that Harner's Complaint should be dismissed with prejudice pursuant to Superior Court Civil Procedure Rule 12(b)(6) for failure to state a claim upon which relief can be granted and lack of standing.[12] Westfield claims Harner is not entitled to UIM benefits because the policy at issue is a commercial policy purchased by Accent, and Harner was not "occupying a covered vehicle" at the time of the accident. In opposition, Harner argues that his Complaint pleads sufficient facts to support a claim for UIM benefits and breach of contract.[13] Harner further argues that based on the doctrine of reasonable expectations, he is entitled to UIM coverage under the Accent policy.

         5. When considering a motion to dismiss under Rule 12(b)(6), the Court assumes all well-pled allegations of the complaint are true.[14] The Court will not dismiss a complaint "unless the plaintiff would not be entitled to recover under any reasonable set of circumstances susceptible of proof."[15] The complaint, however, must plead "sufficient facts to state a cognizable claim," and will be dismissed if it lacks factual or legal merit.[16]

         Doctrine of Reasonable Expectations

         6. The Doctrine of Reasonable Expectations states that "the [insurance] policy will be read in accordance with the reasonable expectations of the insured 'so far as its language will permit.'"[17] As the Delaware Supreme Court noted in Hallowell v. State Farm Mut. Ins. Co.:

[T]he Court will look to the reasonable expectations of the insured at the time when he entered into the contract if the terms thereof are ambiguous or conflicting, or if the policy contains a hidden trap or pitfall, or if the fine print takes away that which has been given by the large print. But the doctrine is not a rule granting substantive rights to an insured when there is no doubt as to the meaning of policy language.[18]

         If the Court determines that there is a discrepancy in the policy language, the Court will look to the insured's reasonable expectations.[19] But, to assert a valid claim under the doctrine of reasonable expectations, the plaintiff must first allege that the insurance contract is ambiguous.[20] Insurance contracts are ambiguous when the "language is reasonably susceptible to at least two different meanings."[21]Ambiguities are construed against the drafter and in favor of the insured's reasonable expectations but when the language is unambiguous the contract is interpreted by its plain and ordinary meaning.[22] Harner does not allege in his Complaint or in response to Westfield's Motion that the policy is ambiguous, [23] and his counsel admitted at oral argument that the policy is not ambiguous.[24] Thus, the doctrine of reasonable expectations is inapplicable here.

         Limited Liability Company as a Separate Legal Entity

         7. Westfield argues that Harner fails to state a claim for UIM benefits as an insured under Westfield's policy. Harner contends that his allegation, "[a]t the time of the collision, Mr. Harner was covered under a policy of insurance written and issued by [Westfield]," is sufficient to assert such a claim.[25] However, Harner fails to address the fact that the policy was not held by Harner, the individual, but by Accent, the LLC, through whom Harner was covered only while operating the designated vehicle or its temporary substitute.[[2]]

         8. At the time of the accident, Harner was driving his personally owned and privately-insured motorcycle for personal business.[27] Harner contends that since he is the owner of Accent he is covered by the policy because a sole proprietor would be covered, and in the context of insurance policies, the difference between a sole proprietor and an LLC is "a distinction without a difference."[28] Harner asks the Court to treat Accent as a sole proprietorship rather than a Limited Liability Company ("LLC"). But under Delaware law, an LLC is not a sole proprietorship. In a sole proprietorship, no legal distinction exists between a business and its owner.[29] When a sole proprietor purchases insurance through its trade name, the insurance policy is treated as if it was purchased by the individual owner.[30]Corporations and LLCs, however, are distinct legal entities and "a different situation exists when the 'named insured' is a [distinct legal entity]."[31] A policy purchased through a corporation or an LLC is the company's insurance policy, and the individual conducting the transaction is an agent for the business entity.[32]

         9. The terms of Accent's policy[33] are very similar to those at issue in Bermel[34] and Skinner.[35] In both Bermel and Skinner, the Court held that, when the named insured is a corporation or an LLC, the "insured" is anyone occupying a covered vehicle, or replacement for the covered vehicle, at the time of the accident; but coverage does not extend to the personal use of a privately-insured motorcycle.[36]

         10. Accent is an LLC - a distinct legal entity under Delaware law.[37] Here, the named insured is Accent and the application for the policy was signed by Harner as Accent's agent. The Court cannot ignore Accent's independent legal status.[38]

         Breach of Contract

         11. Harner argues Westfield breached its insurance policy contract when it denied Harner's UIM claim.[39] As previously noted, the insurance policy contract is between Westfield and Accent, not Westfield and Harner. Harner fails to plead facts sufficient to establish standing for a breach of contract claim against Westfield, and Harner never refuted ...

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