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ALLSTATE INS. CO. v. BROCK

August 28, 1987

Allstate Insurance Company, Plaintiff
v.
Stephen Brock, Jimmy Decker, General Oil Company, Inc., Lowell McKinney and William Doyle Hanley, Defendants



The opinion of the court was delivered by: WOODS

 HENRY WOODS, U.S. District Judge.

 Pending now are cross-motions for summary judgment by the plaintiff, Allstate Insurance Company (Allstate), and the defendant, General Oil Company (General Oil). For the reasons that follow, the motion of Allstate is denied and summary judgment is granted in favor of General Oil.

 I. Factual Background

 On or about May 4, 1985, a collision occurred between a vehicle operated by defendant Stephen Brock and a vehicle owned and operated by defendant Lowell McKenney. As a result of the collision gasoline pumps owned by General Oil were damaged. *fn1" The vehicle operated by Brock had recently been sold or was being sold to defendant Doyle Hanley by defendant Jimmy Decker, d/b/a "Jim's Used Cars." Brock had delivered the vehicle to Hanley at Decker's request but was returning the car to Decker to have a defective door repaired when the collision occurred. It is undisputed that Brock was not employed by Decker, but he did spend a good deal of his free time at Decker's shop and, occasionally, assisted Decker. Brock was not paid for his time or services.

 It is further undisputed that at the time of the occurrence there was in full force and effect an automobile liability policy issued to Brock's father on which Brock was an additional insured. Allstate filed its complaint in this action seeking a declaration that the policy affords no liability insurance with respect to the occurrence. Its claim is based on two provisions of the policy which exclude coverage for (1) "automobile business operations" and, (2) for non-owned autos "while being used in any business or occupation of the insured," respectively. In this diversity case the law of Arkansas is controlling. Erie Railroad Company v. Tompkins, 304 U.S. 64, 82 L. Ed. 1188, 58 S. Ct. 817 (1938).

 II. The Automobile Business Exclusion

 The "automobile business" exclusion provides that coverage under the policy is excluded for

 
Automobile business operations such as repairing, servicing, testing, washing, parking, storing or selling of autos[.]

 Allstate asks the court to rule, as a matter of law, that Brock was the agent of Decker and, therefore, his operation of the vehicle was necessarily in the course of Decker's business. While some courts have apparently accepted the theory advocated by Allstate, *fn2" which is based upon the employment capacity or agency relationship of the insured, it has not gained favor in Arkansas. See MFA Mutual Insurance Company v. State Farm Mutual Automobile Insurance Company, 268 Ark. 746, 595 S.W.2d 706 (1980).

 In MFA, supra, the court held that the "automobile business" exclusion did not apply to a fact situation where a car is being taken to a garage for repairs, or being returned to its owner after repairs have been completed. Rather, the exclusion applies only when the vehicle is employed for use with that [automobile] business such as a tow truck, a demonstrator or a vehicle used for delivering equipment or supplies used in the business. Id. at 708, citing McCree v. Jenning, 55 Wash. 2d 725, 349 P.2d 1071 (1960). The court reasoned that the so-called automobile business exclusion is concerned with the nature of the use of the vehicle at the time of the occurrence -- not with the employment capacity of the person operating the vehicle.

 Here, Brock was either delivering the vehicle to Hanley or returning it to Decker for repairs at the time of the occurrence. This use of the vehicle, being only collateral and incidental to Decker's sales and service business, was clearly not "in the automobile business" as that phrase was construed in MFA, nor was it an "automobile business operation" as defined in Brock's policy.

 In Arkansas, words of exception or exclusion in an insurance policy must be construed strictly against the insurer and in favor of the insured. E.g., Aetna Casualty & Surety Company v. Stover, 327 F.2d 288, 7 A.L.R. 3d 655 (8th Cir. 1964) (applying Arkansas law). All reasonable doubts are to be resolved in favor of the insured, Southern Title Insurance Company v. Oller, 268 Ark. 300, 595 S.W.2d 681 (1980), and if a reasonable construction may be given to a contract which would justify recovery it is the duty of the court to do so. Drummond Citizens Insurance Company v. Sergeant, 266 Ark. 611, 588 S.W.2d 419 (1979). Significantly, it was noted in MFA that if MFA had intended to exclude pick-up and delivery of vehicles from its policy it could have, without extraordinary effort, framed its exclusion in such language. The language which was used by MFA in that case is nearly identical to that employed by Allstate here. *fn3"

 Therefore, in the absence of any express indication to the contrary, the court is unable to conclude that pickup of vehicles to be repaired and delivery of vehicles sold or repaired incident to an auto sales and service business was intended ...


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