Progressive Northern Insurance Co. v. Consolidated Insurance Co.

Citations: 673 N.E.2d 522; 1996 Ind. App. LEXIS 1593; 1996 WL 679501Docket: No. 67A05-9507-CV-258

Court: Indiana Court of Appeals; November 25, 1996; Indiana; State Appellate Court

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Progressive Northern Insurance Company is appealing the denial of its motion for summary judgment and the granting of summary judgment in favor of Consolidated Insurance Company regarding liability coverage related to an auto accident. The core issue is whether liability coverage from the Colletts’ insurance policy terminated upon the sale of the vehicle to Lawrence Simpson, who had been using the Dodge without an official title transfer.

On March 6, 1992, Consolidated issued a policy to Jerry and Dawn Collett for their 1979 Dodge Aspen, valid until June 6, 1992. In May 1992, the Colletts orally agreed to trade the Dodge to Simpson in exchange for roofing repairs, but did not transfer the title. On May 29, Simpson, while driving the Dodge, was involved in an accident with Michael Rasner. Initially, Consolidated provided legal representation for Simpson but later claimed it had no duty to defend or indemnify him, arguing that liability coverage ended when the Colletts sold the vehicle.

Progressive, representing Rasner, intervened and asserted that Consolidated still had a duty to cover Simpson under the policy. On February 15, 1995, the trial court ruled in favor of Consolidated, concluding that the liability coverage was terminated upon the sale of the Dodge.

The appellate review follows the standard that the appellant must demonstrate that the trial court erred in finding no genuine issues of material fact and that the moving party was entitled to judgment as a matter of law. The court assumes for review that Simpson was the owner of the Dodge at the time of the accident, as Progressive does not contest the sale.

Progressive contends that the Colletts’ automobile insurance policy mandates that Consolidated cover Simpson, even after the sale of the Dodge. The policy's liability coverage obligates Consolidated to 'defend or settle' any personal injury claims for which the 'insured' is legally responsible. 'Insured' is defined as the named insured or any 'family member' involved with any auto or trailer, and anyone using 'your covered auto,' which is specifically the Dodge listed in the declarations. Progressive argues that Simpson qualifies as an 'insured' since he was operating the Dodge at the time of the accident, likening the situation to a permissive user scenario that the policy covers.

However, the resolution hinges on whether the Colletts retained an insurable interest in the Dodge post-sale. To uphold a valid insurance policy, the insured must possess an insurable interest, which occurs when they benefit from the property's existence or would suffer from its loss. Notably, possessing the title is not a prerequisite for having an insurable interest. The policy aims to prevent misuse of coverage, ensuring that insured parties do not gain from the loss of property they do not own. In liability insurance contexts, the insurable interest is framed around the insured's concern for their potential liability rather than ownership of the property. This interest is defined by the legal or equitable responsibility the insured faces regarding claims that may arise from injuries or damages related to the insured property.

Motor vehicle liability insurance typically covers legal liability for injuries or property damage arising from the use of a vehicle, establishing that an insurable interest may exist without full ownership if the insured could be liable for damages. To qualify for liability coverage, the insured must demonstrate legal responsibility for an accident or loss. If the insured loses ownership of the vehicle, their insurable interest for liability purposes ceases. In this case, the Colletts sold their Dodge to Simpson, who was involved in an accident without the Colletts having ownership or possession at that time. Thus, they were not legally accountable for Simpson’s actions and had no insurable interest in the vehicle.

The document distinguishes this case from Clevenger v. Allstate Ins. Co., where the Michigan Supreme Court ruled that an insured maintained an insurable interest despite transferring title under Michigan's no-fault statute, which does not apply in Indiana. Indiana’s laws do not replace common law regarding insurable interests, making the Clevenger case irrelevant here. Consequently, since the Colletts' liability coverage ended upon the sale of the vehicle, the trial court’s summary judgment in favor of Consolidated was affirmed, and Progressive’s motion for summary judgment was properly denied. The court also acknowledged a factual dispute regarding ownership of the Dodge but limited its review to issues raised by the parties, noting that Progressive did not argue that Consolidated was liable due to Simpson being a permissive user of the vehicle at the time of the accident.