In Eddie Yaklin Ford Lincoln Mercury Nissan, Inc. v. American Road Services Company, Universal Underwritings Insurance Company, NO. 2:15-CV-399, 2017 WL 3387186, at *1–3 (S.D.Tex. Aug. 4, 2017), Judge Tagle denied a Dealer’s Insurer’s MSJ for an identity theft loss presented by the Dealer. The facts forming the basis of the loss were as follows:
Yaklin Ford is an authorized Ford dealership located in Kingsville, Texas. Dkt. No. 45 at ¶ 34. On Saturday, April 6, 2013, Yaklin Ford received a call from a prospective purchaser. See Statement and Proof of Loss (“Statement of Loss”), Dkt. No. 35 at APP 21. The caller inquired about purchasing a used 2012 Mercedes Benz from Yaklin Ford. The salesman with whom the unknown caller spoke instructed the caller to submit an online credit application. Later that day, Yaklin Ford received an online credit application by the name of “Scott Heidenreich,” see Dkt. No. 35 at APP 24, and inquiry from the prospective purchaser. Statement of Loss, Dkt. No. 35 at APP 21. The online applications are available on a platform called RouteOne which is partly owned by Ford Motor Credit Company (“Ford Motor Credit”), the parent company of American Road. Dkt. No. 45, at ¶¶ 34–35. The Yaklin Ford salesman handling the transaction asked for and received a faxed copy of the customer’s driver’s license. Statement of Loss, Dkt. No. 35 at APP 21. Yaklin Ford’s complaint states that it received “copies” in the plural, but Yaklin Ford’s Statement of Loss indicates that the Yaklin Ford salesman handling the transaction received one faxed copy. Compare Compl. at 2 with id. The name on the driver’s license, “Scott Heindreich,” did not match the name on the online application, “Scott Heidenreich.” Dkt. No. 34 at 8; compare Dkt. No. 35 at APP 23 with Dkt. No. 35 at APP 24. There were other discrepancies between the applications and the driver’s license, such as different zip codes. From April 6 to April 8, 2013, Yaklin Ford made and received several calls to and from the prospective purchaser. Statement of Loss, Dkt. No. 35 at APP 21. After receiving the credit application, Yaklin Ford sent a finance application to Ford Motor Credit. Processing the finance application involved checking the purchaser’s credit. See Dkt. No. 34 at 9; Dkt. No. 35-1 at APP 29–30. The credit report score of “Scott Heidenreich” was 844 (which American Road states is a good score). See Dkt. No. 34 at 10; Dkt. No. 35-1 at APP 29. The buyer was willing to purchase optional insurance. Id. The credit application report flagged several issues. . . After receiving the credit report, Yaklin Ford proceeded with the transaction. Yaklin Ford sent the purchaser in Chicago the contract through United Parcel Service (“UPS”) overnight service. Statement of Loss, Dkt. No. 35 at APP 21. The contract was delivered to the Chicago address listed on the driver’s license on April 10, 2013. UPS delivery confirmation records show that an individual by the name of “Denrick”1 signed for the delivery. For the Mercedes and for additional insurance, the purchaser ultimately received financing in the amount of $72,103.84. Dkt. No. 35 at APP 18. The summary judgment evidence is unclear as to the amount that Yaklin Ford seeks to recover from Defendants. A delivery service picked up the car and both sets of keys from Yaklin Ford later in April. Throughout the transaction, the purchaser never appeared on dealership premises or met with a dealership employee in person. Rather, the entire process of sale was done through mail, fax, or the internet. In May 2013, a police detective in Illinois and a U.S. Secret Service Agent contacted Yaklin Ford for information relating to the sale of the Mercedes. Police and agents investigating an identity fraud complaint filed by Scott Heidenreich identified Yaklin Ford as the seller of the Mercedes. Id. After becoming aware of the identity fraud investigations, Lana Gallatin (“Gallatin”), Comptroller of Yaklin Ford, contacted Scott Heidenreich. She reached Heidenreich at a telephone number different from the one that Yaklin Ford had previously used to contact the Mercedes purchaser. Id. at APP 22. Heidenreich stated that he had never before contacted the Yaklin Ford dealership, nor had he purchased the used Mercedes. Following this conversation, Yaklin Ford contacted Ford Motor Credit and American Road. The Mercedes was subject to a lien through the Ford Motor Credit. Dkt. No. 29 at 6. American Road Insurance Company had also issued a “floor plan” policy to Ford Motor Credit under policy number 71-3108-21-01 (hereinafter the “American Road Policy.”). Id. The Mercedes was insured by the American Road Policy. Additionally, UUIC issued to Yaklin Ford a Unicover policy number 322888 for the policy period of January 1, 2013 to January 1, 2014 (“UUIC Policy”). Id. Yaklin Ford reimbursed Ford Motor Credit for the funds Ford Motor Credit had advanced for the Mercedes purchase. Dkt. No. 45 at ¶ 35. On May 31, 2013, Yaklin Ford submitted a claim to American Road seeking coverage for the loss under a part of the contract called the False Pretense Endorsement. Id. at ¶ 36. Yaklin Ford pays additional premiums for this endorsement. Id. This endorsement applies “[w]here Dealer voluntarily parts with the Financed Vehicle where false identification is presented.” False Pretense Endorsement, Dkt. No. 35 at APP 16. On July 31, 2013, Gallatin submitted the Statement of Loss Statement to American Road in support of its claim for $61,525 less the $500 deductible.
The insurer argued that the mail-only transaction did not “present” false identification and that the dealer did not use commercially reasonable risk-of-loss procedures. The District Court rejected the insurer’s argument and interpretation of its Policy.
The Court finds that the circumstances surrounding the contract’s formation weigh in favor of finding the terms “presented” and “recorded” to be ambiguous. As a wholly owned subsidiary of Ford Motor Credit, American Road had reason to know that Yaklin Ford was engaging in online transactions when Yaklin Ford executed the sale in April 2013. American Road did not seek to clarify the terms of the contract to define “presented” and “recorded” to mean in-person identification at that time or at any time beforehand when Yaklin Ford began using RouteOne. Furthermore, American Road has not pointed to another provision in Yaklin Ford’s insurance contract or another insurance policy that it offers that does cover remote transactions. Thus, the Court finds the circumstances surrounding the contract weigh in favor of finding the terms “presented” and “recorded” to be ambiguous because American Road—knowing that Yaklin Ford was conducting transactions through RouteOne—could have explicitly stated its intended meaning in order to specify that online transactions where the identification was not available in person were not included in the endorsement. C.f. Natl. Union Fire Ins. Co., Inc., 811 S.W.2d at 555 (“An intent to exclude coverage must be expressed in clear and unambiguous language. National Union knew that the plane had dual controls [thus allowing for simultaneous piloting]. If National Union wanted to exclude simultaneous piloting from the scope of coverage, then it was incumbent upon it to expressly and clearly state the exclusion in the policy. Having failed to do so, National Union cannot now complain.”). Consequently, the American Road Policy insurance contract is ambiguous, and Yaklin Ford’s interpretation prevails as a matter of law.