Auto-Owners Insurance Co. v. Eakle

Citations: 869 N.E.2d 1244; 2007 Ind. App. LEXIS 1578; 2007 WL 2034697Docket: 49A04-0606-CV-345

Court: Indiana Court of Appeals; July 17, 2007; Indiana; State Appellate Court

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Auto-Owners Insurance Company appeals the trial court's denial of its motions for judgment on the pleadings and summary judgment, and the court's grant of summary judgment to the Eakles, who are plaintiffs. The central issue is whether the trial court incorrectly determined that the vehicle involved in the accident was underinsured, thus entitling the Eakles to underinsured motorist coverage from Auto-Owners.

The case involves an accident on August 24, 2003, where David Eakle and his parents were severely injured due to Lavern Weddel running a red light. Weddel subsequently died from her injuries. The Eakles incurred significant medical expenses: David over $20,000, and his parents over $150,000 and $120,000, respectively. The Eakles filed claims with Weddel's insurer, Indiana Insurance Company, which offered a total settlement of $500,000 to cover all claims. The Eakles accepted this settlement, with Auto-Owners' permission, and released Weddel's estate from further liability.

At the time of the accident, the Eakles' vehicle was insured under a policy from Auto-Owners, which included underinsured motorist coverage of $500,000 per person and per accident. According to Indiana law, a vehicle is considered underinsured if the available liability coverage is less than the insured's underinsured motorist coverage. The Auto-Owners policy defined an "underinsured automobile" based on the limits of liability coverage compared to the policy's underinsured motorist coverage. The court's decision is reversed, and the case is remanded for further proceedings.

The policy provides coverage for compensatory damages to individuals legally entitled to recover from the owner or operator of an uninsured or underinsured automobile for bodily injuries incurred while occupying or entering/exiting a covered automobile. Bodily injuries must be accidental and arise from the ownership, maintenance, or use of the uninsured or underinsured automobile.

Liability limits for underinsured motorist coverage specify that for bodily injury to one person in an occurrence, the payout is the lesser of: (1) the difference between what has been compensated by liable parties and the policy's "each person" limit; or (2) the difference between total compensatory damages incurred and the amount paid by liable parties. For multiple persons, the limit is similarly calculated, noting that the payout will not increase regardless of the number of vehicles, claims, injured persons, or vehicles involved.

Any compensation paid will be reduced by amounts received from other liable parties. After the Eakles informed Auto-Owners of a settlement offer, Auto-Owners declined to match the offer. The Eakles then filed a claim under the UIM endorsement, which Auto-Owners denied, arguing that the vehicle involved was not underinsured. The Eakles subsequently sued for breach of contract and for a declaratory judgment on their UIM claims.

Auto-Owners filed a motion for judgment on the pleadings, while the Eakles sought summary judgment. The trial court held a hearing and denied Auto-Owners' motions, granting summary judgment to the Eakles, who were found to have an underinsured vehicle at the time of the accident and were entitled to compensation under Auto-Owners' UIM coverage. Auto-Owners is now appealing this decision.

Auto-Owners argues that the trial court wrongly denied its motions for judgment on the pleadings and summary judgment, while improperly granting the Eakles' motion for summary judgment. It claims that Weddel's vehicle was not underinsured, as the Eakles received the full $500,000 limit from Weddel's liability insurer, thus disqualifying them from underinsured motorist (UIM) coverage. The Eakles counter that their individual payouts were less than $500,000, making them eligible for additional UIM coverage up to that limit.

The legal standards for judgment on the pleadings and summary judgment are outlined, emphasizing that a motion for judgment on the pleadings assesses the sufficiency of the pleadings, admitting all well-pleaded facts in favor of the nonmoving party. Summary judgment requires a determination of whether a genuine issue of material fact exists and whether the moving party is entitled to judgment as a matter of law. The court must consider only designated materials and resolve any doubts in favor of the nonmoving party.

The case revolves around the interpretation of the insurance contract, noting that clear and unambiguous policy language must be interpreted according to its ordinary meaning, while ambiguous language is construed against the insurer. The central issue is whether Weddel's vehicle qualifies as underinsured under Indiana law, which defines an underinsured vehicle based on the limits of coverage available at the time of the accident compared to the insured's UIM coverage limits.

UIM (Underinsured Motorist) coverage aims to compensate insured individuals as if the underinsured motorist had sufficient liability insurance. However, Indiana law does not mandate full indemnification for all cases involving underinsured motorists. Instead, the focus is on placing the insured in the same position they would be if the tortfeasor had liability coverage equal to the UIM limits.

A dispute arises regarding the method for determining whether a vehicle is underinsured, specifically which policy limits to compare. Auto-Owners Insurance argues for a comparison of the tortfeasor Weddel's per accident liability limit ($500,000) with the Eakles' UIM policy limit (also $500,000). Conversely, the Eakles propose comparing the per person limits of their UIM coverage ($500,000) with the actual payments available from Weddel's insurer, which totaled significantly less ($245,000, $160,000, $90,000, and $5,000 for each Eakle).

Previous rulings indicate that when multiple parties are injured, the tortfeasor's per accident limit is the controlling factor for determining underinsurance. The court adopted a rationale from a Colorado case, stating that the applicable limit depends on the number of injured parties. If only one person is injured, the per person limit applies; if multiple people are injured, the per accident limit is used.

Auto-Owners supports this approach, asserting that since the per accident limits of both policies are the same and the Eakles received a total payment that meets this limit, Weddel's vehicle should not be considered underinsured, making the Eakles ineligible for UIM coverage. Past cases (like Sanders) reinforce this conclusion, wherein claimants were denied UIM coverage after receiving compensation equal to the tortfeasor’s per accident limit.

The Sanderses held an Allstate underinsurance policy with a limit of $100,000 per accident. Allstate denied their claim, asserting that the tortfeasor's policy limit was also $100,000 per accident, thus classifying the tortfeasor's vehicle as not underinsured since the Sanderses received this full amount. Allstate moved for judgment on the pleadings, which the trial court granted. On appeal, the Sanderses argued that the tortfeasor’s policy had a per-person limit of $50,000, suggesting a $50,000 underinsurance gap. However, the court determined that the relevant comparison is between the per-accident limits of both policies, which were equal in this case, leading to the conclusion that the tortfeasor was not underinsured.

In a subsequent case, Corr, the Supreme Court ruled that in scenarios with a single claimant, the comparison should focus on the actual amount available to the insured from the tortfeasor’s policy versus the insured's UIM limits. The Corrs, whose daughter was killed in an accident, received $57,500 each from the tortfeasor’s insurance, which was less than their UIM limits. The Court held that the tortfeasor's vehicle was underinsured, allowing the Corrs to claim UIM coverage.

In the case of Graham, the court reaffirmed that the ruling in Corr did not overrule Sanders, despite similar facts. The legal standard established in these cases emphasizes the importance of comparing actual available coverage amounts rather than strict policy limits when determining underinsurance status.

Tortfeasor Mikuly had an automobile insurance policy with liability limits of $100,000 per person and $300,000 per accident, which her insurer paid to five injured claimants, totaling $300,000. Each claimant received less than full compensation for their injuries. Adams, insured with Grange Insurance Company under similar underinsured limits, sought payments under this policy, but Grange denied the claims, arguing that Mikuly's vehicle was not underinsured. The claimants sued Grange for breach of contract, leading to a motion for summary judgment from Grange and a counter-motion from the claimants for their own summary judgment. The trial court denied Grange's motion and ruled in favor of the claimants, determining Mikuly's vehicle was underinsured. Grange appealed, contending that a limit-to-limit comparison showed no underinsurance. They cited a precedent (Sanders) supporting this method for multiple claimants under the same policy. The claimants referenced another case (Corr), arguing that the determination should focus on the actual amounts available under the tortfeasor's policy rather than theoretical limits. The court grappled with which precedent to apply, concluding that both Corr and Sanders were relevant. They recognized that while multiple claimants' damages exceeded the tortfeasor's liability limit, the key distinction was in the circumstances of the insureds involved. Ultimately, the court affirmed that when multiple claimants seek recovery under a single UIM policy, the analysis must consider both per-person and per-accident limits, siding with the Sanders approach in this context.

The Sanders and Graham cases support the principle of underinsured motorist (UIM) coverage, which aims to restore the insured to the position they would have held had the tortfeasor possessed adequate liability coverage. In this case, similar to Sanders and Graham, multiple claimants seek recovery under a single UIM policy. A limit-to-limit comparison is made between the tortfeasor Weddel's policy and the Eakles' UIM coverage under Auto-Owners' policy. Evidence indicates that the $500,000 paid by Weddel's insurer matches the UIM limits available to the Eakles for a multiple person accident, concluding that Weddel's vehicle is not underinsured. Therefore, the Eakles are ineligible for recovery under their UIM provision. The trial court's denial of Auto-Owners' motion for judgment and its granting of the Eakles' motion for summary judgment are deemed erroneous. The court reverses the trial court's decision and instructs it to grant summary judgment in favor of Auto-Owners. Additionally, several notes mention the unfortunate passing of Leon Eakle and clarify terminology regarding policy limits. The comparison focuses on whether Weddel's vehicle is underinsured, as underinsurance coverage applies solely in that context. The Eakles' argument for a different comparison method is rejected, distinguishing their case from previous rulings.

Mr. Corr asserted that his underinsured motorist (UIM) coverage limits were improperly reduced by his insurance agent without consent, although this claim was deemed irrelevant to the current case. The Supreme Court acknowledged that its interpretation of the UIM statute may yield unusual results, particularly in scenarios with multiple claimants, potentially reducing the available amount for individual claimants below the minimum UIM coverage. This was accepted as preferable to disadvantaging victims of underinsured motorists compared to those hit by uninsured motorists.

The Seventh Circuit's decision in Clark v. State Farm Mutual Automobile Ins. Co. is referenced as persuasive but not binding. In Clark, the family sustained injuries in an accident caused by a tortfeasor whose liability insurance limits were equal to the UIM coverage of the vehicle they were driving. The tortfeasor's insurer paid out $300,000, which was allocated among the injured family members. Clark sought UIM benefits from State Farm, which denied the claim, asserting the tortfeasor's vehicle was not underinsured as per Indiana law. The district court agreed, comparing the total available under the tortfeasor's policy to the UIM limits, ultimately concluding both were equivalent. The Seventh Circuit upheld this ruling, affirming that the children were not entitled to UIM payments as the tortfeasor was not classified as underinsured based on the available coverage.