Cannon v. American Underwriters, Inc.

• Decision Date: 22 November 1971
• Docket Number: No. 571A90,No. 2,571A90,2
• Parties: Margaret L. CANNON, Insured and Maryanne Cannon, Insured, Plaintiffs-Appellants, v. AMERICAN UNDERWRITERS, INC., Attorney in Fact for the Subscribers of American Interinsurance Exchange, Defendant-Appellee
• Court: Indiana Appellate Court

Page 567

275 N.E.2d 567

150 Ind.App. 21

Margaret L. CANNON, Insured and Maryanne Cannon, Insured Plaintiffs-Appellants, v. AMERICAN UNDERWRITERS, INC., Attorney in Fact for the Subscribers of American Interinsurance Exchange Defendant-Appellee.

No. 571A90.

Appellate Court of Indiana, Division No. 2.

Nov. 22, 1971.

Rehearing Denied Dec. 14, 1971.

Charles S. Gleason, Gleason, Wood & Johnson, Indianapolis, for plaintiffs-appellants.

Heeter & Johnson, Marshall E. Williams, Indianapolis, for defendant-appellee.

SHARP, Judge.

The trial court granted summary judgment for the Defendant-Appellee, American Underwriters, Inc., Attorney in Fact for the Subscribers of American Interinsurance Exchange, in an action brought by Margaret L. Cannon and Maryanne Cannon, Plaintiffs-Appellants for declaratory judgment. In this case, the facts are not in dispute and the sole question to be determined is one of law. The question, in its simplest form, is whether or not an exclusion contained in a policy issued by the Defendant-Appellee, which was in effect on February 6, 1968, was contrary to Indiana's Uninsured Motorists Statute which is Acts 1965, Chapter 138 as found in Ind.Stat.Ann. § 39--4310 (Burns 1965), I.C. 1971 27--7--5--1.

The particular exclusion in question reads as follows:

'This policy does not apply under the Uninsured Motorists Coverage: unless the insured, at the time of the accident, was operating or occupying an insured automobile.'

In another part of the policy, the term 'insured automobile' is defined as follows:

'As used with respect to Uninsured Motorists Coverage 'insured automobile' means:

a. The described automobile(s) appearing in the Declarations of the policy to which the Uninsured Motorists Protection Coverage Endorsement applies.

b. Any replacement automobile owned by the named insured if, and only if, such replacement has been reported to the Exchange within 30 days from its purchase and the Declarations are changed accordingly; but the term 'insured automobile' shall not include a trailer of any type, or any automobile while used as a public or livery conveyance.'

The complaint in this case alleges that on February 6, 1968 the Plaintiff-Appellant, Maryanne Cannon, was riding in an automobile driven by one Jeremiah Shine and registered in his name. While riding in such automobile, it was involved in an accident in which Maryanne Cannon was injured. The automobile driven by Jeremiah Shine was an uninsured automobile. The automobile on which the Defendant-Appellee has issued insurance was in no way involved in the accident in question. The policy in question provided uninsured motorist protection for the named insured, Margaret L. Cannon, and her minor children residing with her at the time of the accident. Maryanne Cannon was one of her minor children who resided with her at the time of the accident.

Thus, the question for our determination is whether it is permissible for an automobile liability insurance carrier to limit the application of the uninsured motorist clause to accidents in which the automobile insured under the principal policy is directly involved or whether said clause in undertaking to limit and qualify the uninsured motorist statute conflicts with the plain terms of the statute. The precise question is one of first impression in this state as far as we have been able to determine.

The pertinent section of the Indiana Uninsured Motorists Act is as follows:

Ind.Stat.Ann. § 39--4310 (Burns 1965), I.C.1971 27--7--5--1. No automobile liability or motor vehicle liability policy of insurance insuring against loss resulting from liability imposed by law for bodily injury or death suffered by any person arising out of the ownership, maintenance or use of a motor vehicle shall be delivered or issued for delivery in this state with respect to any motor vehicle registered or principally garaged in this state, unless coverage is provided therein or supplemental thereto, in limits for bodily injury or death set forth in Acts 1947, chapter 159, sec. 14 (§ 47--1057), as amended heretofore and hereafter, under policy provisions approved by the commissioner or insurance, for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury, sickness or disease, including death, resulting therefrom. Provided that the named insured shall have the right to reject such coverage (in writing) and Provided further, That unless the named insured thereafter requests such coverage in writing, such coverage need not be provided in or supplemental to a renewal policy where the named insured has rejected the coverage in connection with a policy previously issued to him by the same insurer. (Acts 1965, ch. 138, § 1, p. 215.)

Various questions of interpretation in regard to the Indiana Uninsured Motorists Statute have been recently determined in a trilogy of cases decided by this court. See Indiana Insurance Company v. Noble, Ind.App., 265 N.E.2d 419 (1970), Patton v. Safeco Insurance Company of America, Ind.App., 267 N.E.2d 859 (1971) and Ely v. State Farm Mutual Automobile Insurance Company, Ind.App., 268 N.E.2d 316 (1971). The general interpretative attitude with reference to uninsured motorists statutes is set forth in Indiana Insurance Company v. Noble, 265 N.E.2d 419:

'Where the provisions of a policy regarding uninsured motorist coverage are more restrictive than the relevant statutory provisions requiring the same, the requirements of the statute will prevail. (citations omitted)

'The legislative purpose in the enactment of statutes providing for uninsured motorist endorsement should be interpreted in the light that such endorsement is designed to protect the insured, and any operator of the insured's automobile with insured's consent, against any injury caused by negligence of uninsured or unknown motorists. (citations omitted)

'Purpose and object of uninsured motorist coverage must be considered in the statutory framework of minimum coverages required by law. (citations omitted)

'Uninsured motorist legislation is remedial in nature and should be liberally construed. (citations omitted)

'An attempt by the insurer to dilute or diminish uninsured motorist statute protection is contrary to public policy. (citations omitted)

'An uninsured motorist endorsement that contravenes the requirement of the statute is, to that extent, invalid regardless of the insurance department's approval of it.' (citations omitted)

In Patton v. safeco Insurance Company of America, Judge Hoffman speaking for Division Two of this Court stated at 267 N.E.2d 859:

'Insurance contracts are to be interpreted most favorably to the insured. (citations omitted)

'Likewise, statutes regulating insurance should be liberally construed in favor of the insured.

'Section 39--4310, supra, states that '(n)o * * * policy of insurance * * * shall be delivered or issued for delivery in this state * * * unless * * *.' Such statute further states that it is '* * * for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles * * *.' The thrust of the statute is directed at each policy of insurance and for the protection of persons insured. The Legislature was certainly aware of the fact that insured persons are injured in 'non-owned' automobiles by uninsured motorists.'

Likewise, Judge Sullivan speaking for Division One of this Court in Ely v. State Farm Mutual Automobile Insurance Co., 268 N.E.2d 316 said:

'A danger of subversion of the clear legislative intent by virtue of deceptive contractual draftsmanship may exist and courts must, therefore, be cautious in determining the effect of exclusionary or limiting policy language. See Lawrence v. Beneficial Fire & Casualty Co. (1968) 8 Ariz.App. 155, 444 P.2d 446. * * *'

Another important case, Simpson v. State Farm Mutual Automobile Insurance Co., 318 F.Supp. 1152 (D.C.S.D. Ind. 1970) was quoted with approval by this court in Patton v. Safeco Insurance Company of America, supra.

The language in Patton v. Safeco Insurance Co. of America is particularly persuasive in this case. As stated in Patton, the uninsured motorist statute is for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles. Appellee's coverage (as limited by the exclusion in question) afforded protection to only a fraction of such persons. It therefore, as written, does not provide the protection required. It must be given effect as though the exclusion was not written into it. It was limited to such persons who at the time of the injury, were 'operating or occupying an insured automoble,' the same being defined as the automobile or automobiles named in the principal policy. Coverage applicable to only a small portion of those insured persons legally entitled to the same under the statute is a subversion of the intent of the legislature, such intent being to afford coverage to all insured persons who legally substantiate their claims. The legislature did not limit coverage to such persons injured by uninsured motorists solely to accidents involving the vehicle upon which the primary coverage was written. The Patton case expressly negates any such limitation. In this case, the appellants are named insureds. Appellant Maryanne Cannon was injured by the operation of an 'uninsured motor vehicle.' Whether she is 'legally entitled to recover damages' from the owner or operator is a...