December 14, 2017

When Coverage Is Denied, A Driver Is Uninsured; Indiana Ins. Guaranty Assn. v. Smith

Category: Indiana Law Review | Author: | Share:

Smith and Torres were involved in a car accident. Smith was insured by Affirmative, and Torres was insured by ACCC. ACCC denied coverage to Torres because of his lack of cooperation with the accident investigation.

Smith sued Torres and Affirmative, claiming that Torres was an uninsured motorist and that Affirmative was liable for damages. Affirmative was liquidated, and IIGA was substituted in its place. IIGA moved to dismiss the complaint, arguing that Torres was not an uninsured under Indiana law. The trial court denied that motion and IIGA appealed.

Under Indiana law, an uninsured motorist is someone who is not “in compliance with the financial responsibility requirements” of Indiana law or the similar law of another state. It does not specify whether this test is applied at the time of the accident or at some later time. Affirmative’s policy appears to have tried filling in this gap by explicitly stating that the test of whether a motorist is uninsured is whether they had insurance that was applicable at the time of the accident. But this was unsuccessful.

The Court began its analysis by looking to the broad purpose of the uninsured motorists laws (to protect insureds) and found that this should be construed liberally. And with this defining the analysis, the Court found for Smith.

A tortfeasor vehicle that had its coverage denied falls within the category of “motor vehicle[s] not otherwise in compliance with the financial responsibility requirements,” because a denial of coverage necessarily means that, although the tortfeasor vehicle technically has insurance, the tortfeasor is without insurance that can actually cover the damages. In other words, following a denial of coverage, a tortfeasor vehicle cannot be in compliance with our statutory financial responsibility requirements. We therefore interpret the statute’s definition of “uninsured motor vehicle” to include motor vehicles that had liability insurance at the time of an accident but that were later denied coverage.

The Court noted that this prevented insurance companies from “play[ing] a game of ‘gotcha’ with policy owners.” Moreover, a contrary conclusion would put Smith in a worse position than if Torres had no insurance at all, a result that “would defeat our General Assembly’s goal of ensuring coverage for motorists.”

In addition, the Court found that the Affirmative policy applied to these circumstances.

Although Torres technically had vehicle insurance at the time of the August 18, 2015, accident, ACCC denied him coverage for that accident. As a result, Torres did not have vehicle insurance from which Smith could benefit. … Torres did not have insurance that could be applied to the damages from the accident; his vehicle was, therefore, an uninsured automobile.

Therefore, Smith’s claim survived and the trial court’s denial of IIGA’s motion to dismiss was affirmed.

But the Court’s decision was not unanimous. Judge Altice concurred with the result, but for different reasons. He would have found Affirmative’s policy ambiguous, and read the ambiguity against the insurer. “If it was the insurer’s intent to exclude from the definition of an uninsured auto those autos upon which a disclaimer of coverage is made subsequent to an accident, this intent should have been explicitly written into the exclusionary clause of the policy which negatively defined an uninsured auto.” He found it unnecessary to reach the statutory interpretation issue.

Lesson:

Uninsured motorist coverage will protect an accident victim when the wrongdoer’s insurance carrier denies coverage even if a policy is in force at the time of the accident.