Hastings Mut. Ins. Co. v. Webb

• Decision Date: 20 December 1995
• Docket Number: No. 88A05-9504-CV-133,88A05-9504-CV-133
• Citation: 659 N.E.2d 1049
• Parties: HASTINGS MUTUAL INSURANCE COMPANY, Appellant-Defendant, v. Cordia Marie WEBB, and James R. Webb, Individually and as Husband and Wife, Appellees-Plaintiffs, and Mary Schmidt, William Schmidt, As Parent and Guardian of Mary Schmidt, and Gary Ettel Non-Appealing Defendants.
• Court: Indiana Appellate Court

Page 1049

659 N.E.2d 1049

HASTINGS MUTUAL INSURANCE COMPANY, Appellant-Defendant, v. Cordia Marie WEBB, and James R. Webb, Individually and as Husband and Wife, Appellees-Plaintiffs and Mary Schmidt, William Schmidt, As Parent and Guardian of Mary Schmidt, and Gary Ettel Non-Appealing Defendants.

No. 88A05-9504-CV-133.

Court of Appeals of Indiana.

Dec. 20, 1995.

Mark R. Smith, Smith & Bemenderfer, Indianapolis, for appellant.

David P. Allen, Allen, Allen & Allen, Salem, for appellee.

OPINION

KIRSCH, Judge.

Hastings Mutual Insurance Company (Insurance Company) appeals the trial court's denial of summary judgment regarding the uninsured motorist coverage in James Webb's automobile liability policy. The parties present a single issue for appeal, which we restate as:

Whether the Uninsured Motorist Endorsement in the insurance contract covers a collision with a pony-drawn cart.

We reverse.

FACTS AND PROCEDURAL HISTORY

James and Cordia Webb's pickup truck collided with a pony-drawn cart driven by Mary Schmidt, an Amish woman. The Webbs filed a lawsuit against Schmidt, among others. When advised that Schmidt had no insurance, James Webb notified the Insurance Company that he intended to file an insurance claim under the Uninsured Motorist endorsement of his automobile liability policy (the Endorsement).

The Insurance Company intervened in the lawsuit and filed a summary judgment motion, arguing that the Endorsement did not cover the collision. The trial court found the operative terms in the Endorsement ambiguous because "[r]easonable people could conclude that the undefined term, trailer, included the pony cart in this case...." Record at 424-25. The court denied the summary judgment motion. The Insurance Company sought, and the trial court granted, certification of the summary judgment order for interlocutory appeal according to Ind.Appellate Rule 4(B)(6). This court certified the order for appeal.

DISCUSSION AND DECISION

I. Standard of Review

This court applies the summary judgment standard used in the trial courts. Selleck v. Westfield Ins. Co. (1993), Ind.App., 617 N.E.2d 968, 970, trans. denied. Summary judgment is appropriate when there are no material factual issues related to the summary judgment motion. Ind.Trial Rule 56(C); Indiana Dep't of Pub. Welfare v. Murphy (1993), Ind.App., 608 N.E.2d 1000, 1002. Summary judgment is particularly fitting where, as here, the dispute centers on a contract interpretation. Terre Haute First Nat'l Bank v. Pacific Employers Ins. Co. (1993), Ind.App., 634 N.E.2d 1336, 1337. In the insurance context, summary judgment is a determination that the contract is unambiguous and that the rules of contract interpretation are not needed to ascertain the contract's meaning. Id.

II. Policy Provisions at Issue

The parties agree that resolution of this appeal turns on two contract sections: the general Definitions section and the Uninsured/Underinsured Motorists Coverage Endorsement. The word "trailer" appears in both sections, and the dispute is whether a trailer includes a pony-drawn cart.

The general Definitions section has two types of defined terms: those that apply throughout the policy, and those that apply only when the defined term appears in quotation marks. Record at 62. The term at issue, "trailer," is the second type of defined term. The relevant portion of the definition reads:

"Other words and phrases are defined. They are in quotation marks when used.

....

I. "Trailer" means a vehicle designed to be pulled by a: 1. Private passenger auto; or

2. Pickup or van.

It also means a farm wagon or farm implement while towed by a vehicle listed in 1. or 2. above."

Record at 62 (emphasis added).

The parties disagree as to whether this policy definition applies to the word trailer as used in the Endorsement. The Endorsement reads:

"We will pay compensatory damages which an 'insured' is legally entitled to recover from the owner or operator of an ... 'Uninsured motor vehicle'

....

'Uninsured motor vehicle' means a land motor vehicle or trailer of any type...."

Record at 75-76 (emphasis added). No quotation marks appear on the phrase trailer of any type in the Endorsement. ¹

III. Ambiguity of Contract

Both parties recognize that the initial inquiry is whether the operative phrase in the Endorsement is ambiguous. If the phrase is ambiguous, the contract must be construed in favor of the policyholders. Tate v. Secura Ins. (1992), Ind., 587 N.E.2d 665, 668. If, however, the phrase is unambiguous, the contract applies according to the plain and ordinary meaning of the terms, even if the terms limit coverage. Miller v. Dilts (1984), Ind., 463 N.E.2d 257, 265; American States Ins. Co. v. Aetna Life & Cas. Co. (1978), 177 Ind.App. 299, 309, 379 N.E.2d 510, 516. That the parties espouse differing interpretations of the terms does not mean the contract is ambiguous. Meridian Mut. Ins. Co. v. Cox (1989), Ind.App., 541 N.E.2d 959, 961, trans. denied. An insurance contract is ambiguous only if reasonable people reading the contract would differ as to the meaning of the terms. Id.

The dispute here centers on the difference between the term "trailer" as used in quotation marks, and the phrase trailer of any type, as used without quotation marks. The Insurance Company contends that there is no difference between the two and that the policy definition of "trailer" controls the phrase trailer of any type. As such, the Insurance Company argues, the Endorsement covers only collisions with trailers pulled by private passenger autos, pickups or vans.

The policyholders insist that the lack of quotation marks in the phrase trailer of any type precludes reference to the policy definition. According to the policyholders, the term trailer is not defined for purposes of the phrase, so the phrase must include "anything that remotely can be called a trailer," in particular, a pony-drawn cart. Appellee's Brief at 8.

An insurance contract must be construed as a whole. Stevens v. St. Paul Fire & Marine Ins. Co. (1981), Ind.App., 422 N.E.2d 319, 321. Construction of the contract as a whole requires reading beyond isolated phrases. Unclear terms can be clarified by reading the entire contract, and "the meaning of a term may be enlarged or restrained by reference to the object of the whole clause in which it is used." Farm Bureau Mut. Ins. Co. v. Carr (1974), 215 Kan. 591, 528 P.2d 134, 138, citing Virginia v. Tennessee (1893), 148 U.S. 503, 13 S.Ct. 728, 37 L.Ed. 537.

Here, a review of the contract as a whole demonstrates that the phrase trailer of any type is unambiguous, and that it does not include a pony-drawn cart. Two aspects of the policy illustrate the limited meaning of the phrase: (1) the distinction made between "trailer" and trailer of any type, and (2) the context of the phrase trailer of any type. First, the policy makes a distinction between the defined term and the disputed phrase. In certain sections of the policy, the term "trailer" appears in quotation marks, signifying that the policy definition controls the term. See Record at 65, 68, 69. In other policy sections the phrase trailer of any type is used, without quotation marks on the word trailer. See Record at 65, 66. As such, the words of any type give the phrase a broader meaning than the defined term "trailer."

The breadth of meaning does not, however, render the phrase ambiguous. The meaning of the phrase is plain from its context: it is part of the definition of "Uninsured motor vehicle." To read the words trailer of any type as including a pony-drawn cart would be to sever the words from the very term they define. Contract law does not allow policyholders to look to isolated phrases in insurance contracts as a means of obtaining coverage. See Farm Bureau Mutual Ins. Co. v. Carr (1974), 215 Kan. 591, 528 P.2d 134, 138. Rather, the law requires reference to associated words in the contract to determine whether a loss is covered. See Equitable Life Assurance Soc'y v. Crowe (1976), 170 Ind.App. 677, 688, 354 N.E.2d 772, 779 (policy language must be given meaning consistent with the entire policy); see also Carr, 528 P.2d at 138 (basic contract principle is to refer to associated words for meaning of terms). Here, any doubt about the phrase in isolation is removed by reference to the associated words--uninsured motor vehicle. As part of the definition of "Uninsured motor vehicle," the meaning of the phrase trailer of any type is clear. The phrase indicates that the contract covers losses arising from uninsured trailers pulled by any type of motor vehicle. The contract does not cover losses arising from trailers pulled by ponies. ²

IV. Applicability of the Indiana Uninsured Motorist Statute

Aside from the question of ambiguity, the parties disagree about the effect of the Indiana Uninsured Motorist statute on the Endorsement. The Insurance Company contends that the statute excludes coverage of the policyholders' claims. The policyholders respond that although the statute does not require coverage, the phrase trailer of any type expands coverage beyond that required by the statute. As discussed in part III above, the phrase trailer of any type does not expand the policy coverage to include a collision with a pony-drawn cart. We must nonetheless determine whether the Uninsured Motorist statute requires coverage of the collision.

This issue turns on two laws: the Financial Responsibility Act ³ and the Uninsured Motorist statute. ⁴ Our supreme court explained the interaction between these laws in City of Gary v. Allstate Ins. Co. (1993), Ind., 612 N.E.2d 115 and Transamerica Ins. Co. v. Henry (1990), Ind., 563 N.E.2d 1265. The Financial Responsibility Act compels motorists to demonstrate their ability to respond in damages for liability. City of Gary at 117. The overwhelming majority of motorists fulfil the Act's requirement by purchasing liability insurance. Henry at 1268. Recognizing that some motorists will fail...