Search for Deep Pocket Fails

Substantial Compliance with Statute Transfers Title to Vehicle

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When an accident results in serious injuries the lawyers for the injured parties seek other defendants, no matter how weak the argument may be to bring in additional defendants.

In Delores Zepeda v. Central Motors, Inc., No. 2021-SC-0204-DG, Supreme Court of Kentucky (August 18, 2022) the Kentucky Supreme Court was faced with an argument that a car dealer who sold a vehicle to another and was a few days short on filing all of the transfer of title paperwork, should be held to be the owner of the vehicle and, therefore, responsible for the injuries.

This appeal was solely concerned with determining the statutory ownership of the BMW between Garcia and Central Motors which controlled whether Zepeda could dip into Central Motors’ insurance.


Dolores Zepeda (Zepeda) was grievously wounded in an automobile accident. She filed a claim against Central Motors, Inc. (Central Motors) alleging it was the statutory owner of the 2002 BMW in which she was a passenger at the time of the accident. The trial court granted summary judgment in favor of Central Motors, holding it had substantially complied with KRS 186A.220 when it sold the vehicle to Juan Garcia (Garcia) and was no longer the statutory owner of the vehicle. Zepeda appealed and the Court of Appeals affirmed the lower court’s ruling.

Central Motors purchased the vehicle from Loan Portfolio Services in Tennessee on March 19, 2014 and brought the vehicle into Kentucky the same day. Central Motors did not file a notice of vehicle acquisition with the Fayette County Clerk within fifteen (15) days per KRS 186A.220(1). Garcia purchased the vehicle from Central Motors on July 24, 2014 and executed a bill of sale, retail installment contract and security agreement for the purchase. As part of the transaction, Garcia also executed a power of attorney, designating Central Motors as his attorney-in-fact so it could deliver the assigned certificate of title and other documents to make the application for registration and certificate of title on Garcia’s behalf. Central Motors obtained proof of insurance from Garcia and then transferred physical possession of the vehicle to him on July 24, 2014.

On August 11, 2014, Central Motors paid the required fees and submitted an application for a Kentucky certificate of title and registration and delivered the assigned certificate of title from Tennessee to the Fayette County Clerk. Central Motors then filed a title lien statement with the Woodford County Clerk on August 13, 2014. Woodford was the county in which Garcia resided.

Juan Garcia was the father of Darley Morales (Morales). Though Morales did not possess a valid driver’s license, Garcia let Morales drive the vehicle. On August 14, 2014, Morales was driving the 2002 BMW when he caused it to crash in a single vehicle accident. Morales had a blood alcohol level (BAC) of 0.145. The accident killed Morales and left his passenger, Zepeda, paralyzed. The title was issued in Garcia’s name the next day on August 15th and the registration was completed on the 18th, three days later.

Zepeda sued the Estate of Morales seeking compensatory and punitive damages; against Garcia for negligent entrustment; against Allstate Property & Casualty Insurance Company (Allstate) for underinsured motorist coverage; and against Central Motors as the purported statutory owner of the vehicle.

Central Motors filed a motion for summary judgment. The trial court ruled Central Motors had substantially complied with the statute when it submitted an application for certificate of title along with the previous title. The trial court reasoned Central Motors provided notice under KRS 186A.220(1) to the Fayette County Clerk when it submitted the aforementioned documents. Therefore, the trial court reasoned, under the Kentucky Supreme Court’s decision in Travelers Indem. Co. v. Armstrong, 565 S.W.3d 550 (Ky. 2018), that there was substantial compliance with KRS 186A.220.


In this case Central Motors was the title holder but Garcia had received physical possession of the BMW pursuant to a bona fide sale on July 24, 2014.

Despite Kentucky being a certificate of title state for the purpose of determining ownership and for requiring liability insurance coverage, KRS 186.010(7)(c) provides an exception to the general rule. If a licensed motor vehicle dealer delivers physical possession to the buyer and complies with KRS 186A.220 then ownership transfers upon physical delivery of the vehicle.

By violating the strict requirements of the provisions (namely, the 15 day requirement) but still accomplishing the goal (notifying the clerk of the acquisition of the vehicle), the intention of the statute is still upheld. Substantial compliance, i.e., late compliance, may still allow the dealer to take advantage of the exception in KRS 186.010(7)(c).

The purpose of the KRS 186A.220(1) is to effectuate an efficient registration and titling process. If a dealer complies with these requirements late, it does not vitiate the overarching goal. The statute is directory and substantial compliance is sufficient for those sections.

A licensed dealer can cure an untimely compliance with KRS 186A.220, sections 1 through if the dealer has complied before the accident, it can still avail itself of the exception in KRS 186.010(7)(c).

KRS 186.010(7) provides: “’Owner’ means a person who holds the legal title of a vehicle or a person who pursuant to a bona fide sale has received physical possession of the vehicle subject to any applicable security interest.” and  “A licensed motor vehicle dealer who transfers physical possession of a motor vehicle to a purchaser pursuant to a bona fide sale, and complies with the requirements of KRS 186A.220, shall not be deemed the owner of that motor vehicle solely due to an assignment to his dealership or a certificate of title in the dealership’s name. Rather, under these circumstances, ownership shall transfer upon delivery of the vehicle to the purchaser. . . .  (emphasis added)

Central Motors substantially complied with KRS 186A.220 and transferred physical possession of the vehicle pursuant to a bona fide sale. As such, Central Motors was not the statutory owner of the vehicle on the date of the accident.


It is understandable that Zepeda, now a paraplegic, would seek the deep pockets of Central Motors and its insurers. Regardless, the technical argument failed because of the exceptions within the statute and the fact that Central Motors substantially complied with the requirements of the statute, Zepeda’s attempt to reach deep pockets failed and she is left with her suit against the driver, his father and the available insurers. She is also faced with a problem of comparative negligence by riding with an intoxicated, unlicensed driver who eventually drove into a tree and died in the effort.

(c) 2022 Barry Zalma & ClaimSchool, Inc.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at and

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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