City of Gary v. Allstate Ins. Co.

• Decision Date: 15 April 1993
• Docket Number: No. 04S03-9304-CV-439,04S03-9304-CV-439
• Citation: 612 N.E.2d 115
• Parties: CITY OF GARY and the City of Gary Police Department, Appellants, (Third-Party Defendants Below), Luis Deluna, Jr., Appellant, (Plaintiff Below), v. ALLSTATE INSURANCE COMPANY, Appellee. (Defendant and Third-Party Plaintiff Below).
• Court: Indiana Supreme Court

Page 115

612 N.E.2d 115

CITY OF GARY and the City of Gary Police Department Appellants, (Third-Party Defendants Below) Luis Deluna, Jr., Appellant, (Plaintiff Below), v. ALLSTATE INSURANCE COMPANY, Appellee. (Defendant and Third-Party Plaintiff Below).

No. 04S03-9304-CV-439.

Supreme Court of Indiana.

April 15, 1993.

Nathaniel Ruff, Lesniak and Ruff, East Chicago, for appellant Luis Deluna, Jr.

Robert D. Brown, Spangler Jennings & Dougherty, Merrillville, for appellee, Allstate Ins. Co.

ON PETITION TO TRANSFER

KRAHULIK, Justice.

We grant transfer to decide whether a self-insured municipality is under an obligation to provide uninsured motorist coverage for its automobiles. Allstate Insurance Company (Defendant and Third-Party Plaintiff below) ("Allstate") seeks transfer after the Court of Appeals reversed the summary judgment granted in favor of Allstate and against the City of Gary and the City of Gary Police Department (Third-Party Defendants below) ("City") and Luis Deluna, Jr. (Plaintiff below) ("Deluna").

City of Gary v. Allstate Ins. Co. (1992), Ind.App., 598 N.E.2d 625.

Facts

Deluna, while on duty as a police officer for the City, was operating a City-owned police car when he was involved in an accident with Hanford Reed. Deluna sued Reed for the personal injuries that he sustained in the accident.

At the time of the accident, Deluna had in effect a personal automobile insurance policy with Allstate which provided uninsured motorist coverage. Upon learning that Reed's insurance carrier was insolvent, Deluna filed an amended complaint which added Allstate as a defendant. In turn, Allstate filed a third-party complaint against the City alleging that the City, as a self-insurer of the police car, was primarily liable for uninsured motorist coverage for Deluna. Allstate advanced this argument in its motion for summary judgment. The trial court agreed and granted Allstate's motion.

In reversing the trial court's grant of summary judgment, the Court of Appeals determined that, although self-insurers as a general rule are required to provide uninsured motorist coverage pursuant to Ind.Code Sec. 27-7-5-2, the legislature demonstrated an intent to create governmental immunity in this type of case when it enacted the Tort Claims Act, ¹ and that this Act created an exemption for the City from providing such coverage. Allstate asserts in its petition to transfer that a self-insured municipality is not exempt from providing the uninsured motorist coverage. ²

Discussion

The uninsured motorist statute in effect at the time of Deluna's accident stated:

Each automobile liability or motor vehicle liability policy of insurance which is delivered or issued for delivery in this state with respect to any motor vehicle registered or principally garaged in this state, insuring against loss resulting from liability imposed by law for bodily injury or death suffered by any person and for injury to or destruction of property to others arising from the ownership, maintenance, or use of a motor vehicle, must provide coverage, either in the policy or in a supplement to it:

(1) In limits for bodily injury or death and for injury to or destruction of property set forth in IC 9-2-1-15 [now IC 9-25-2-3] under policy provisions approved by the commissioner of 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, and for injury to or destruction of property resulting therefrom; or

(2) In limits for bodily injury or death set forth in IC 9-2-1-15 [now IC 9-25-2-3] under policy provisions approved by the commissioner of insurance, for the protection of persons insured under the policy provisions 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.

The uninsured motorist coverage may be offered by insurers in limits higher than those set forth in IC 9-2-1-15 [now IC 9-25-2-3], but may not be greater than the limits of liability specified in the bodily injury and property damage liability provisions of an insured's policy.

Ind.Code Ann. Sec. 27-7-5-2(a) (West 1985). The named insured, however, has the right to exclude this coverage from the policy of insurance by providing the insurer with a written rejection. Ind.Code Sec. 27-7-5-2(b).

Allstate asserts that a municipality that self-insures its vehicles must also provide the statutorily-mandated uninsured motorist coverage. To support its assertion, Allstate argues that Indiana is a compulsory financial responsibility state which requires insurers and self-insurers to make uninsured motorist coverage available. Additionally, Allstate argues that Ind.Code Sec. 34-4-16.5-3 of the Tort Claims Act does not create an exemption for the municipality from providing the uninsured motorist coverage and that the purpose of the uninsured motorist statute is defeated by creating the exemption.

In response, Deluna asserts that a municipality's status as a self-insurer ³ for purposes of the financial responsibility law ⁴ does not also obligate the municipality to provide the uninsured motorist coverage of the uninsured motorists coverage law. Additionally, Deluna contends that the statute requiring uninsured motorist coverage applies only to insurers because a self-insurer does not have a policy of insurance.

The purpose of Indiana's financial responsibility law is to compel motorists to make provisions for the protection of other drivers on the road so that a driver may be protected from damages which might be inflicted on him by another. Transamerica Ins. Co. v. Henry (1990), Ind., 563 N.E.2d 1265, 1268. Although Indiana may be referred to as a compulsory financial responsibility state, a victim is not guaranteed compensation in every automobile accident. Id. A person complies with the financial responsibility law by providing proof that the person is able to respond in damages for liability caused through the ownership of the motor vehicle in the statutory amount. Ind.Code Sec. 9-25-2-3. ⁵ The law permits proof of financial responsibility through the purchase of motor vehicle liability insurance, through bond, deposit of funds or securities, or self-insurance. Ind.Code Secs. 9-25-4-7, 9-25-4-11. ⁶

On the other hand, the purpose of uninsured motorist coverage is to put the injured party in the place they would have been if the other person had complied with the financial responsibility law. See Town and Country Mutual Ins. Co. v. Hunter (1985), Ind.App., 472 N.E.2d 1265, 1270.

The uninsured motorist statute in effect at the time of the accident referred to a "policy of insurance" and stated that the "insurer" may offer coverage in an amount in excess of the statutory minimum. ⁷ The statute, however, did not specifically address whether a self-insurer comes within the confines of the statute. Consequently First, a policy of insurance is:

we begin our analysis by distinguishing between insurance and self-insurance.

a contract of insurance or an agreement by which one party, for a consideration, promises to pay money or its equivalent or to do an act valuable to the insured upon the destruction, loss or injury of something in which the other party has a pecuniary interest, or in consideration of a price paid, adequate to the risk, becomes security to the other against loss by certain specified risks; to grant indemnity or security against loss for a consideration.

Ind.Code Sec. 27-1-2-3(a). Generally, insurance is a contract of indemnity through which a party undertakes an obligation to compensate another against loss arising from certain specified contingencies or perils. It shifts the risk of loss from one party to another. Meyer v. Building and Realty Serv. Co. (1935), 209 Ind. 125, 135, 196 N.E. 250, 253-54; Southeast Title and Ins. Co. v. Collins (1969), Fla.App., 226 So.2d 247, 248; 1 Mark S. Rhodes, Couch on Insurance 2d Secs. 1:2-1:3 (rev. ed. 1984).

Self-insurance, however, is not insurance at all but, rather, is the "antithesis of insurance." Eakin v. Indiana Intergovernmental Risk Management Auth. (1990), Ind.App., 557 N.E.2d 1095, 1098, (quoting American Nurses Ass'n. v. Passaic Gen. Hosp. (1984), Ct.App.Div., 192 N.J.Super. 486, 471 A.2d 66, 69). In American Nurses Ass'n., the court explained, "[t]he essence of self-insurance, a term of colloquial currency rather than of precise legal meaning, is the retention of the risk of loss by the one upon whom it is directly imposed by law or contract." 471 A.2d at 69. As a result, the choice to self-insure does not mean that the party has "insurance," but rather that the party has chosen to retain the risk.

In other jurisdictions which have considered a self-insurer's obligation to provide uninsured motorist coverage, a split of authority has developed. One line of cases relying on a distinction between insurance and self-insurance holds that a self-insurer is not required to provide the uninsured motorist coverage. See Mountain States Tel. and Tel. v. Aetna Casualty and Sur. Co. (1977), Ariz.App., 568 P.2d 1123, 1125 (self-insured does not issue a policy of insurance and no contract exists between the insured and self-insurer); O'Sullivan v. Salvation Army (1975), 85 Cal.App.3d 58, 147 Cal.Rptr. 729, 733 (self-insurance does not involve the contractual obligations of an insurance company); White v. Regional Transp. Dist. (1987), Col.App., 735 P.2d 218, 219 (self-insurers are not required to obtain uninsured motorist coverage without a statutory provision requiring it); Lipof v. Florida Power and Light Co. (1990), Fla.App., 558 So.2d 1067, 1068 (self-insurer is not an "insurer" for most purposes under the Florida insurance code); Robinson v. Hertz Corp. (1986), Ill.App., 140 Ill.App.3d 687, 95 Ill.Dec. 111, 113, 489 N.E.2d 332, 334 (...