Colonial Penn Ins. Co. v. Guzorek, 45S03-9705-CV-318

Citation690 N.E.2d 664
Decision Date17 December 1997
Docket NumberNo. 45S03-9705-CV-318,45S03-9705-CV-318
PartiesThe COLONIAL PENN INSURANCE COMPANY v. Dorothy GUZOREK, Donald Guzorek, Marianne Van Winkle, Marshal Pocius and John Pocius, Appellees (Defendants below). and Illinois Farmers Insurance Company, Appellee (Intervenor below).
CourtSupreme Court of Indiana

BOEHM, Justice.

This case presents coverage issues under an automobile liability insurance policy. We hold that the recently acquired vehicle involved in the accident that gave rise to this multiparty litigation was not covered as an "additional" car under the policy because of failure to comply with the policy's requirement of notice of the new car to the insurer. Nor is the new car a "replacement" under another policy provision. We also hold that there is no coverage of a driver whose existence and materially bad driving record were concealed from the insurer at the time of issuance.

Factual and Procedural History

In April 1990, Dorothy Guzorek obtained an automobile insurance policy with the Colonial Penn Insurance Company ("Colonial Penn"). On a "rate request rush form," when asked to list all licensed drivers in the household, she listed only her name even though she lived with her husband Donald Guzorek. Dorothy had no tickets or violations, but Donald at that time had a suspended license due to at least two prior convictions for driving under the influence. After receiving the rate request form, Colonial Penn sent Dorothy a "personalized quotation/enrollment form" listing a variety of coverages and rates for several cars Dorothy owned. On the form, Dorothy was asked to list all "customary operators" of her cars. She wrote only her name even though she knew that Donald drove without a license several times per week to his job. Dorothy returned the form and a premium payment to initiate coverage on a Pontiac Firebird and a Chrysler LeBaron. Although Dorothy was the only named insured, the policy provided in its preprinted provision that the policyholder's spouse was "also deemed to be a policyholder."

Colonial Penn renewed the policy in April 1991 and again in 1992. In May 1992, Dorothy terminated coverage on the Firebird and substituted a Buick Skylark. On September 22, 1992, Dorothy purchased a Buick LeSabre. The policy called for notice and payment of premium for any additional or replacement car. No notice or premium for the LeSabre was ever sent. Donald continued to drive regularly and on October 20, 1992, Donald, while driving the LeSabre, had an accidental collision in Merrillville. Two other vehicles were involved, one driven by Marianne Van Winkle and the other by Marsha Pocius. Dorothy did not notify Colonial Penn of the accident because she did not believe that either Donald or the LeSabre was covered under the policy. Dorothy later stated that she had intended to terminate coverage on the Skylark and substitute the LeSabre when her policy came up for renewal on October 27, 1992, but she never did this. In January 1993, Van Winkle sued Donald and her own insurer, Illinois Farmers Insurance Group ("Illinois Farmers"), with whom she had uninsured motorist coverage. Colonial Penn first learned of the accident six months later when Van Winkle submitted a claim under Dorothy's policy. Finally, in January 1994, Marsha Pocius and her husband, John Pocius, sued both Dorothy and Donald. Marsha Pocius also carried uninsured motorist coverage with Illinois Farmers. Colonial Penn did not learn of the Pocius lawsuit until after a default judgment was entered against the Guzoreks in 1994, which was later set aside by agreement of the parties. Colonial Penn canceled Dorothy's policy in 1994 and tendered all premiums to the trial court.

On April 7, 1994, Colonial Penn filed the present lawsuit for declaratory judgment against the Guzoreks, the Pociuses, and Van Winkle. Illinois Farmers was subsequently allowed to intervene. Colonial Penn and the Guzoreks filed cross-motions for summary judgment on the question of coverage under Dorothy's liability policy with Colonial Penn. The trial court granted the Guzoreks' motion and denied Colonial Penn's motion, ruling that (1) the LeSabre was covered as an "additional" car under the policy; (2) Donald was covered by virtue of the spousal coverage provision; and (3) Colonial Penn had not been prejudiced by the nine-month delay in learning of the accident. Colonial Penn appealed. With one judge dissenting, the Court of Appeals affirmed the trial court on the first two issues, but held that a genuine dispute of material fact precluded summary judgment on the prejudice issue. Colonial Penn Ins. Co. v. Guzorek, 669 N.E.2d 1042 (Ind.Ct.App.1996).

We granted transfer, 683 N.E.2d 592 (Ind.1997) (table), and now reverse. For the reasons explained below, we conclude that Colonial Penn's motion for summary judgment must be granted and the Guzoreks' motion denied.

Standard of Review

Summary judgment is appropriate where the evidence shows there is no genuine issue of material fact and the moving party is entitled to a judgment as a matter of law. Ind.Trial Rule 56(C). Although the nonmoving party has the burden of demonstrating that the grant of summary judgment was erroneous, we carefully assess the trial court's decision to ensure that the nonmovant was not improperly denied its day in court. Mullin v. Municipal City of South Bend, 639 N.E.2d 278, 280-81 (Ind.1994). On summary judgment all facts and reasonable inferences drawn from those facts are construed in favor of the nonmoving party. Wright v. Carter, 622 N.E.2d 170, 171 (Ind.1993). Contracts of insurance are governed by the same rules of construction as other contracts. Eli Lilly & Co. v. Home Ins. Co., 482 N.E.2d 467, 470 (Ind.1985); Shedd v. Automobile Ins. Co., 208 Ind. 621, 628, 196 N.E. 227, 230 (1935) (holding same for automobile liability insurance policy). Accordingly, the proper interpretation of an insurance policy, even if it is ambiguous, generally presents a question of law that is appropriate for summary judgment. Tate v. Secura Ins., 587 N.E.2d 665, 668 (Ind.1992). Although ambiguities are construed in favor of the insured, clear and unambiguous policy language must be given its ordinary meaning. Eli Lilly, 482 N.E.2d at 470. Failure to define a term in an insurance policy does not necessarily make it ambiguous. Stevenson v. Hamilton Mut. Ins. Co., 672 N.E.2d 467, 471 (Ind.Ct.App.1996), trans. denied. Rather, an ambiguity exists where the provision is susceptible to more than one reasonable interpretation. Eli Lilly, 482 N.E.2d at 470.

I. Was the LeSabre Covered as an "Additional" or "Replacement" Car?

The Guzoreks must prove two things to establish coverage under the Colonial Penn policy: (1) a covered car (the LeSabre); and (2) a covered driver (Donald). 1 Colonial Penn contends neither exists. Because we agree, summary judgment for Colonial Penn is appropriate. We first address whether the car was covered.

A. The "additional" car provision

Resolution of this issue turns primarily on interpretation of the "automatic coverage" clause in Dorothy Guzorek's policy:

You may get an additional private passenger auto or utility truck during the policy period. If We insure all your private passenger autos and utility trucks at the time You get the additional auto or truck, We'll automatically consider it to be listed on your Declarations Page. It will have the same coverages as your other autos. For the coverages to apply, however, You must notify us within 30 days after getting the vehicle or within the policy period and pay an additional premium from the date You got it. We'll adjust your premium as described below, under "Premium Adjustment." (Italics in original.)

The accident that gave rise to this lawsuit occurred twenty-nine days after Dorothy acquired the LeSabre. Colonial Penn argues that the LeSabre was not covered as an "additional" car at the time of the accident because Dorothy failed to notify the company within thirty days that the car had been acquired. The Guzoreks and Illinois Farmers respond that coverage during the first thirty days was automatic irrespective of any duty to notify Colonial Penn and, accordingly, the LeSabre was covered. The record does not disclose whether "all" of Dorothy's cars were insured by Colonial Penn, as this provision required, when she acquired the LeSabre on September 22, 1992. 2 In any event, assuming this prerequisite was met, the LeSabre was not covered as an additional car under the policy.

"Automatic coverage" provisions for additional vehicles are typical in automobile insurance policies. They benefit the insured and other drivers by guaranteeing a source of compensation if a recently acquired vehicle is involved in an accident. In holding that the LeSabre was covered here as an additional vehicle, the Court of Appeals majority observed that other jurisdictions have split over whether notice to the insurer is required to trigger retroactive application of an automatic coverage clause during the grace period (here thirty days). This appears to be an unaddressed question in Indiana. 3 Some courts have referred to a "general rule" that coverage is automatic during the grace period and that notice is required only to extend coverage beyond the grace period. This is also sometimes described as the majority rule. Under this view, courts have found coverage of the additional car during the grace period irrespective of whether the insured notified the insurer of the acquisition during the grace period. See generally James L. Isham, Annotation, Construction and Application of "Automatic Insurance" or "Newly Acquired Vehicle" Clause ("Replacement," and "Blanket," or "Fleet" Provisions) Contained in ...

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