General Acc. Ins. Co. of America v. Gonzales

• Decision Date: 06 June 1996
• Docket Number: No. 95-1787,95-1787
• Citation: 86 F.3d 673
• Parties: GENERAL ACCIDENT INSURANCE COMPANY OF AMERICA, Plaintiff-Appellee, v. Louis I. GONZALES, Rosa Janeski, Pauline Setmajer, et al., Defendants-Appellants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 673

86 F.3d 673

GENERAL ACCIDENT INSURANCE COMPANY OF AMERICA, Plaintiff-Appellee, v. Louis I. GONZALES, Rosa Janeski, Pauline Setmajer, et al Defendants-Appellants.

No. 95-1787.

United States Court of Appeals Seventh Circuit.

Argued Sept. 28, 1995.

Decided June 6, 1996.

Mark E. Schmidtke (argued), Lauren K. Kroeger, Hoeppner, Wagner & Evans, Valparaiso, IN, for Plaintiff-Appellee.

A. James Sarkisian, Merrillville, IN, for Gonzales.

Gregory J. Tonner (argued), Carl A. Greci, Spangler, Jennings & Dougherty, Merrillville, IN, for Setmajer and Warot.

Before WOOD, Jr., COFFEY and RIPPLE, Circuit Judges.

COFFEY, Circuit Judge.

On December 8, 1992 Louis Gonzales was returning home from work with four of his fellow employees when his vehicle was struck by an uninsured drunken driver, causing personal injury to Gonzales as well as his passengers. Gonzales's insurance carrier, General Accident Insurance Company, sought a declaratory judgment under the federal diversity statute, 28 U.S.C. § 1331, ¹ seeking to establish that Gonzales's policy did not provide coverage for the accident. The district court granted summary judgment to the insurance company, reasoning that Gonzales was carrying passengers for a fee which was beyond the coverage of the policy. Gonzales and his four passengers appeal.

I. Background

Gonzales was employed in a windshield wiper assembly factory in Michigan City, Indiana, approximately forty miles from his home in Merrillville, Indiana. In October 1990, he purchased a customized GMC mini van for his own personal use. Sometime thereafter, Gonzales began driving his van to work on a daily basis. About a month after the purchase of the mini van, Gonzales was approached by four of his co-employees who also lived in Merrillville, asking whether they could share the ride to work with Gonzales. Gonzales agreed and arranged to pick up the co-employees each weekday morning at a nearby parking lot, drive them to work, and return them to the same location in the evening. Each rider gave Gonzales $5 for the eighty-mile round-trip. The deposition testimony clearly reflects that the employees considered themselves car pooling.

The record makes clear that Gonzales was contacted by his fellow employees at the factory, and that he at no time either solicited nor advertised for passengers. The riders stated on deposition that not only was the arrangement convenient for them, but it was also a better deal for them than driving individually or taking the bus. However, on days that Gonzales did not go to work each one individually drove their own cars or took the bus. Gonzales's vehicle was insured under a personal automobile policy issued by General Accident. The policy provided the following exclusion:

A. We do not provide Liability coverage for any person:

. . . . .

5. For that person's liability arising out of the ownership or operation of a vehicle while it is being used to carry persons or property for a fee. This exclusion (A.5.) does not apply to a share-the-expense car pool.

The policy contained an identical exclusion in its coverage for uninsured motorists. However, the policy is silent on the issue of "share-the-expense car pool" and did not define the term "share-the-expense car pool."

Gonzales calculated that his weekly gas was "at least forty dollars," but stated that he never made any exact calculations as to his other expenses such as wear and tear and depreciation on the vehicle including tires, insurance, maintenance, oil and gas etc.

After the accident, it became clear that the driver of the other vehicle involved in the accident (who pled guilty to operating a motor vehicle while intoxicated causing serious bodily injury, an Indiana Class D felony) was uninsured and that Gonzales and his passengers had potential insurance claims against his insurance carrier General Accident. The insurance company in turn filed for declaratory judgment, claiming that coverage was excluded because Gonzales was transporting persons for a fee and that his arrangement did not fit within the parameters of a car pool arrangement as set forth in the policy. The district court agreed and granted summary judgment in favor of General Accident.

II. Analysis

We review summary judgment de novo. Nucor v. Aceros Y Maquilas de Occidente, 28 F.3d 572, 583 (7th Cir.1994). In this case, the insurance policy at issue excluded coverage if the insured carried persons for a fee; however, the policy provides an exception for a "share-the-expense car pool."

The two questions we must address are (1) whether Gonzales carried passengers for a fee, and if so, (2) whether Gonzales's conduct fell within the policy exception for "share-the-expense car pools."

Sitting in diversity, we apply the law of Indiana, attempting to predict how the Supreme Court of Indiana would decide the issues presented here. Shirley v. Russell, 69 F.3d 839, 843 (7th Cir.1995). The Indiana Supreme Court provides:

If insurance policy language is clear and unambiguous, it should be given its plain and ordinary meaning. If there is an ambiguity, the policy should be interpreted most favorably to the insured. It should be construed to further the policy's basic purpose of indemnity.

Tate v. Secura Insurance, 587 N.E.2d 665, 668 (1992) (internal citations omitted). The rules of construction favor the insured because the insurance policies are generally drafted by the insurance companies. Eli Lilly and Co. v. Home Ins. Co., 482 N.E.2d 467, 469 (Ind.1985). "Under Indiana law, an insurance policy is ambiguous if reasonable persons may honestly differ as to the meaning of the policy language." Fidelity and Guaranty Ins. v. Everett I. Brown Co., 25 F.3d 484, 486 (7th Cir.1994) (citing Eli Lilly and Co., 482 N.E.2d at 470).

The Indiana Supreme Court has not had an occasion to interpret the exclusion at issue in Gonzales's insurance policy. In such situations, this court reads the decisions of the Court of Appeals of Indiana as providing strong indication of how it believes the Supreme Court would decide a similar question, unless there is a persuasive reason to believe otherwise. See Indianapolis Airport v. American Airlines, Inc., 733 F.2d 1262, 1272 (7th Cir.1984); Brooks v. Chicago Downs Ass'n, Inc., 791 F.2d 512, 514 (7th Cir.1986) ("Because the Illinois Supreme Court has never directly confronted the issue ... we must take what they have said, what Illinois appellate courts have said, and then the decisions of other states on the same issue, in order to formulate our holding."). "Even when a state's intermediate appellate decisions are uniform, or at least reasonably so, we are not bound by them." Eljer Mfg., Inc. v. Liberty Mut. Ins. Co., 972 F.2d 805, 814 (7th Cir.1992) (citing Indiana Harbor Belt R.R. v. American Cyanamid Co., 916 F.2d 1174, 1176 (7th Cir.1990), cert. denied, 507 U.S. 1005, 113 S.Ct. 1646, 123 L.Ed.2d 267 (1993)). However in such a case, we need a reason for predicting that the state's supreme court will reject the intermediate decisions. Id. (listing cases).

As a threshold matter, with regard to evaluating whether Gonzales was carrying passengers for a fee, an Indiana appellate court has determined that the following four factors are relevant to the inquiry: (1) whether the amount charged is a definite amount; (2) whether it was proportionate to the actual expenses of the trip; (3) whether payment of the amount was voluntary or was paid as consideration to the driver; and (4) whether the driver and passengers were engaged in a common enterprise. Meridian Mut. Ins. Co. v. Auto-Owners Ins., 659 N.E.2d 207, 211 (Ind.App.1995) (citing Johnson v. Allstate Ins. Co., 505 So.2d 362, 367 (Ala.1987)); ² Martin v. Rivera, 545 N.E.2d 32, 34 (Ind.App.1989).

Although reducing the Alabama case of Johnson v. Allstate to a four-factor test seems an over-simplification of the Alabama Supreme Court's analysis, ³ we are unable to determine any persuasive reason why the Indiana Supreme Court would not follow the law articulated by the Indiana Court of Appeals in Meridian. Thus, we will apply the four factors to Gonzales's situation to determine the initial inquiry of whether he was carrying passengers for a fee.

Turning to the first factor (requiring definite amount), it is clear that Gonzales asked for the five dollar fixed fee for the car pool arrangement. The Indiana Court of Appeals has held that in such situations: "The use of a vehicle to shuttle passengers to and from the same destination on a daily basis for a fixed fee or charge falls within the exclusion [for carrying passengers for a fee]." Meridian, 659 N.E.2d at 212. Indeed, at oral argument, Gonzales all but conceded that the arrangement was one of carrying passengers for a fee. We next address the issue of whether the exception for a "share-the-expense car pool" applies.

Having established that Gonzales was carrying passengers for a fee, the next question to be answered is whether or not Gonzales's arrangement with his fellow co-workers should be more properly classified as a "share-the-expense car pool" and thus be an exception to the exclusion denying coverage for carrying passengers for a fee. The district court found that the arrangement was not a shared expense car pool, relying again upon the four factors articulated in Johnson and Martin. We are forced to disagree with the analysis, however, because we are of the opinion that the four factors are relevant only to the initial determination of whether Gonzales's arrangement was "for a fee" or not. The factors fail to address the ultimate question of whether a fee arrangement, once established, falls under the exception for car pools. ⁴

The crux of this appeal, then, is whether the exception for "share-the-expense car pools" applies to Gonzales's arrangement. On this subject, the Indiana appellate court in Meridian notes:

The typical "car pool" is an arrangement whereby drivers and vehicles are rotated without an...