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High court sides with insurer in lawsuit involving ownership of car in accident

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PHOENIX – In 2008, a Nogales woman sold a 1994 Jeep Cherokee to a co-worker for $3,000 to be paid in eight monthly installments, keeping the title until the amount was paid in full.

Thirteen days later, the buyer’s daughter was in an accident, and the other driver sought compensation from the buyer and seller. Under a settlement, the parties agreed that the car still belonged to the seller at the time of the accident, leaving the injured party to pursue damages from the seller’s insurance company, which had denied coverage on the grounds that ownership transferred before the accident.

The Arizona Supreme Court ruled Wednesday that State Farm Mutual Automobile Insurance Co. is allowed under state law to press its claim that the car’s ownership had transferred before the accident in the face of the agreement reached among the families.

The ruling was in response to a question from the 9th U.S. Circuit Court of Appeals, which is hearing an appeal of a federal judge’s ruling in favor of State Farm. The appeals court agreed that the seller didn’t own the vehicle at the time of the accident but asked whether State Farm could litigate the ownership issue under Arizona law.

The 9th Circuit’s request said the answer “will have far-reaching effects on automobile insurers and policy holders in Arizona.”

The case stems the sale of the vehicle by Carol Cox to a co-worker, Norma Bojorquez, for Borquez’s daughter, Iliana. The two agreed that Bojorquez would pay the $3,000 sale price in installments and that Cox would keep the title until she did.

The daughter was at fault in a collision with a vehicle driven by Yolanda Quihuis, who with her husband, Robert, is the plaintiff in the federal case.

Cox and her husband didn’t cancel their coverage on the vehicle until a week after the accident, according to the ruling.

In 2009, the Quihuises reached a $350,000 settlement with the Bojorquez and Cox families stating that the Coxes owned the Jeep when the accident occurred, that Bojorquez’ daughter “was incompetent to drive a motor vehicle” and that the Coxes should known about Iliana’s ability to drive. A state court entered the default judgment.

Under the settlement, the Coxes assigned their right to seek the coverage State Farm had denied to the Quihuises.

The couple’s suit against State Farm contended that the insurer couldn’t litigate the issue of the vehicle’s ownership with their agreement in place because it had breached its duty to defend the Coxes against the Quihuises’ claim.

David Bell, a Phoenix attorney representing State Farm, said the case should give Arizonans a better understanding of how their insurance works when conducting a direct sale.

“The opinion and question addressing the issue better informs the public when they sell vehicles and with the intent to sell it, that vehicle is sold and that insurance switches,” Bell said.

A call to the Tucson law firm representing the Quihuises wasn’t returned by late Wednesday afternoon.