(CN) - After an Arizona woman's daughter crashed the car just bought from a co-worker, the 9th Circuit referred an ensuing insurance question to the Arizona Supreme Court.
Norma Bojorquez had agreed to buy a 1994 Jeep Cherokee from her co-worker, Carol Cox, on Jan. 9, 2008.
Though Bojorquez's daughter, Iliana, took possession of the Jeep immediately, Cox planned to keep the title until Norma made eight monthly installments totaling $3,000.
Cox's family also had an insurance policy on their cars, including the Jeep, with State Farm Mutual Automobile Insurance Co.
Within two weeks of taking possession of the Jeep, Iliana got into an accident. The other driver, Yolanda Quihuis, sued Iliana for negligence and the Coxes for negligent entrustment.
A $350,000 settlement between the families included a statement that the Coxes owned the Jeep at the time of the accident.
The Quihuises then sued State Farm for indemnification and failure to defend.
State Farm won a summary judgment after a federal judge ruled that the Bojorquez family, not the Cox family, owned the Jeep at the time of the accident.
Facing an appeal by the Quihuises, the 9th Circuit noted Friday that the case turns on whether the families' agreement that the Cox family owned the Jeep prevented State Farm from denying coverage.
"Based on the uncertainty of Arizona law in this area, we believe it is appropriate to defer to the Arizona Supreme Court on this important issue of state law: whether a default judgment pursuant to a settlement agreement that included the stipulation of a factual issue that is determinative of both liability and coverage in a tort liability action has a collateral estoppel effect, precluding litigation of that issue in a subsequent coverage action," the order states.
A clear answer from the Arizona Supreme Court would "have far-reaching effects on automobile insurers and policyholders in Arizona," the judges wrote.
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