Employers Ins. of Wausau v. Stopher

Citation155 F.3d 892
Decision Date13 October 1998
Docket NumberNo. 97-2757,97-2757
PartiesEMPLOYERS INSURANCE OF WAUSAU and Nucor Corporation, Plaintiffs-Appellants, v. Roger K. STOPHER, Julia Stopher, and Westfield National Insurance Co., Defendants-Appellees.
CourtUnited States Courts of Appeals. United States Court of Appeals (7th Circuit)

Edward L. Murphy, Jr. (argued), Diana C. Bauer, Miller, Carson, Boxberger & Murphy, Fort Wayne, IN, for Employers Insurance of Wausau and Nucor Corporation.

Daniel Sigler, Zwick & Sigler, Decatur, IN, for Roger K. Stopher and Julia Stopher.

Thomas C. Ewing, James J. Shea (argued), Daniel J. Palmer, Hunt Suedhoff, Fort Wayne, IN, for Westfield National Insurance Company.

Before POSNER, Chief Judge, and COFFEY and RIPPLE, Circuit Judges.

COFFEY, Circuit Judge.

The plaintiffs-appellants, Employers Insurance of Wausau ("Wausau") and Nucor Corporation ("Nucor") sued Roger and Julia Stopher and Westfield National Insurance Company ("Westfield"), asking the federal district court to declare that an insurance policy issued by Wausau to Nucor did not provide uninsured/underinsured motorist ("UM/UIM") coverage to Roger Stopher for an automobile accident in which he was involved. At the time of the accident, Stopher was an employee of one of Nucor's affiliated corporations and was driving a vehicle owned by another of Nucor's affiliated corporations. The plaintiffs argued that Nucor had rejected the UM/UIM coverage prior to the date of accident, but the defendants claimed that the coverage was not properly rejected until after the accident. The district court granted summary judgment in favor of the defendants and denied the plaintiffs' cross-motion for summary judgment. Wausau and Nucor appeal this decision. We reverse.

I. BACKGROUND

On September 28, 1992, Roger Stopher was involved in an automobile accident in Indiana with one Larry L. Swearingen, an underinsured motorist. At the time of the accident, Stopher was employed by Nucor Fasteners Sales Corporation ("Nucor Fasteners") 1 and was driving a truck owned by Vulcraft Carrier Corporation ("Vulcraft"). Nucor Fasteners and Vulcraft were listed as additional named insureds on the policy Wausau issued to Nucor. Stopher asserted a claim for underinsured motorist benefits under his own automobile liability insurance policy which was issued by Westfield. Westfield denied the claim on the grounds that Nucor's Wausau policy provided the primary underinsured coverage.

On January 1, 1992, Wausau issued an insurance policy to Nucor (the "Policy"). Under the terms of the Policy, Nucor was entitled to reject UM/UIM coverage for the states that did not require UM/UIM insurance. The Policy also contained a reimbursement provision which provided that the insureds had a $500,000 reimbursement obligation for any casualty losses sustained under the Policy. In light of the reimbursement obligation, Nucor determined that it and its affiliated corporations should reject UM/UIM coverage in those states where it was not required, including Indiana. Indiana law requires insurance companies to offer UM/UIM coverage in each automobile or motor vehicle liability policy, but the insured has the right to reject such coverage. Ind.Code § 27-7-5-2 (1993 & Supp.1994). In pertinent part, § 27-7-5-2 provides:

(b) The named insured of an automobile or motor vehicle liability policy has the right, in writing, to:

(1) reject both the uninsured motorist coverage and the underinsured motorist coverage provided for in this section; or

(2) reject either the uninsured motorist coverage alone or the underinsured motorist coverage alone, if the insurer provides the coverage not rejected separately from the coverage rejected.

On July 6, 1992, Terry Lisenby, on behalf of Nucor, executed a form rejecting UM/UIM coverage in Indiana. Lisenby was the Corporate Controller of Nucor and the Assistant Treasurer of Vulcraft and Nucor Fasteners. According to Nucor, Nucor and its affiliated corporations had given Lisenby the authority to select and procure insurance coverage for the corporations. On October 7, 1992, nine days after Stopher's accident, Wausau issued a "Change Endorsement" removing the Indiana UM/UIM coverage and purporting to be effective retroactively as of January 1, 1992.

The Wausau Policy contains two general provisions that the district court determined were relevant in deciding when Nucor's rejection of the UM/UIM coverage became effective: a cancellation provision and a change provision. These provisions provide as follows:

A. CANCELLATION

1. The first Named Insured shown in the Declarations may cancel this policy by mailing or delivering to us advance written notice of cancellation.

2. We may cancel this policy by mailing or delivering to the first Named Insured written notice of cancellation at least:

a. 10 days before the effective date of cancellation if we cancel for nonpayment of premium; or

b. 30 days before the effective date of cancellation if we cancel for any other reason.

3. We will mail or deliver our notice to the first Named Insured's last mailing address known to us.

4. Notice of cancellation will state the effective date of cancellation. The policy period will end on that date.

5. If this policy is canceled, we will send the First Named Insured any premium refund due. If we cancel, the refund will be pro rata. If the first Named Insured cancels, the refund may be less than pro rata. The cancellation will be effective even if we have not made or offered a refund.

6. If notice is mailed, proof of mailing will be sufficient proof of notice.

B. CHANGES

This policy contains all the agreements between you and us concerning the insurance afforded. The first Named Insured shown in the Declarations is authorized to make changes in the terms of the policy with our consent. This policy's terms can be amended or waived only by endorsement issued by us and made a part of this policy.

In determining when the rejection of UM/UIM coverage became effective, the district court focused exclusively on the language contained in the change and cancellation provisions of the Policy. The judge reasoned that under the Policy's plain language the cancellation provision related to the cancellation of the entire Policy, while the change provision related to a modification of part of the Policy. The court further stated that Wausau had treated the rejection of UM/UIM coverage as a change to the Policy by issuing a change endorsement, and it could not now argue that the rejection was a cancellation. The court therefore found that Nucor's rejection of UM/UIM coverage constituted a change of the Policy, which required compliance with the change provision set forth in the Policy, and that the rejection was not effective until Wausau issued the change endorsement. Because the accident occurred nine days before Wausau issued the change endorsement, the district court held that liability under the underinsured motorist liability coverage was fixed prior to the rejection of UM/UIM coverage and that Stopher was entitled to make an underinsured motorist claim under the Policy.

II. DISCUSSION
A. Standard of Review and Applicable Law

We review de novo the district court's decision granting summary judgment in favor of the defendants and denying the plaintiffs' cross-motion for summary judgment. Ophthalmic Mut. Ins. Co. v. Musser, 143 F.3d 1062, 1066 (7th Cir.1998). The grant of summary judgment is appropriate only " 'if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.' " Huntzinger v. Hastings Mut. Ins. Co., 143 F.3d 302, 306 (7th Cir.1998) (quoting Fed. R. Civ. P. 56(c)); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The interpretation of an insurance policy, even an ambiguous policy, presents questions of law that are appropriately resolved by summary judgment. West Suburban Bank of Darien v. Badger Mut. Ins. Co., 141 F.3d 720, 723-24 (7th Cir.1998); Colonial Penn Ins. Co. v. Guzorek, 690 N.E.2d 664, 667 (Ind.1997).

The parties have not challenged the choice of law. Accordingly, we will not disturb the district court's application of Indiana law, the law of the forum state. See McFarland v. General American Life Ins. Co., 149 F.3d 583, 585-86 (7th Cir.1998); Wood v. Mid-Valley Inc., 942 F.2d 425, 426 (7th Cir.1991) ("The operative rule is that when neither party raises a conflict of law issue in a diversity case, the federal court simply applies the law of the state in which the federal court sits."). Because, to date, the Indiana Supreme Court has not addressed the issue of when rejection of UM/UIM coverage becomes effective, " '[o]ur duty is to determine, as best we can, how this dispute would be resolved by [that court].' " Huntzinger, 143 F.3d at 308 (quoting Cincinnati Ins. Co. v. Flanders Elec. Motor Serv., Inc., 40 F.3d 146, 150 (7th Cir.1994) (citation omitted)).

B. Authority of Nucor to Reject Coverage

Because the district court found that Nucor's rejection of UM/UIM coverage was not effective until Wausau issued the change endorsement nine days after the accident occurred, the district court did not reach the issue of whether Nucor had the authority to reject UM/UIM coverage on behalf of Nucor Fasteners and Vulcraft, who were listed as Additional Named Insureds under the Policy. We address this issue as a threshold matter, however, because if Nucor did not have authority to reject UM/UIM coverage on behalf of Nucor Fasteners and Vulcraft, it is irrelevant whether Nucor did in fact reject UM/UIM coverage prior to the date of the accident.

The defendants claim that § 27-7-5-2 requires each named insured to reject UM/UIM coverage in writing. Section 27-7-5-2, however, simply provides that such coverage must be...

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