Meridian Mut. Ins. Co. v. Richie

• Decision Date: 22 June 1989
• Docket Number: No. 64S03-8906-CV-481,64S03-8906-CV-481
• Citation: 540 N.E.2d 27
• Parties: MERIDIAN MUTUAL INSURANCE COMPANY, Appellant, v. Norman RICHIE and Joyce Richie, Appellees.
• Court: Indiana Supreme Court

Page 27

540 N.E.2d 27

MERIDIAN MUTUAL INSURANCE COMPANY, Appellant, v. Norman RICHIE and Joyce Richie, Appellees.

No. 64S03-8906-CV-481.

Supreme Court of Indiana.

June 22, 1989.

Robert D. Brown, Spangler, Jennings, Spangler & Dougherty, P.C., Merrilville, for appellant.

Thomas F. Mackie, Blachly, Tabor, Bozik & Hartman, Valparaiso, for appellees.

ON CIVIL PETITION FOR TRANSFER

GIVAN, Justice.

The Court of Appeals reversed the trial court and remanded with instructions to enter summary judgment in favor of appellant, Meridian Mutual Insurance Company. Meridian Mutual Ins. Co. v. Richie (1988), Ind.App., 517 N.E.2d 1265. We grant transfer, vacate the decision of the Court of Appeals, and order the trial court to enter summary judgment for appellees Norman and Joyce Richie.

As summarized by the Court of Appeals, the facts are: In March 1981, Norman Richie was struck by an automobile owned by Jean Zicherl, whose auto was insured under a policy providing liability coverage of $15,000 per person and $30,000 per occurrence. The Richies filed suit for personal injuries against Zicherl and reached a settlement in the amount of $19,000.

The Richies were insured at the time of the accident by Meridian. The policy provided bodily injury liability coverage of $100,000 per person and $300,000 per occurrence. It also provided uninsured/underinsured motorist protection; the policy stated the company's liability under "uninsured motorists" to be $15,000 per person and $30,000 per accident.

The Richies filed this action against Meridian to recover under their underinsured motorist provision the difference between the $19,000 damage settlement and Zicherl's policy's $15,000 limit of liability. Meridian refused to pay the $4,000, contending the Zicherl vehicle did not qualify as an "underinsured automobile" under the Richies' policy because Zicherl's vehicle carried liability insurance meeting the limit of liability of the Richies' underinsured motorist coverage.

Each party moved for summary judgment. The trial court denied both motions, ruling that there was an issue of material fact as to whether a reasonable person would interpret the policy language to allow coverage.

The Court of Appeals first noted that interpretation of an insurance policy is primarily a question of law for the court, citing Eli Lilly and Co. v. Home Ins. Co. (1985), Ind., 482 N.E.2d 467, cert. denied, 479 U.S. 1060, 107 S.Ct. 940, 93 L.Ed.2d 991. Only when ambiguities cannot be resolved within the four corners of the contract is a fact finder needed to determine those extrinsic facts upon which interpretation of the contract may rest. Kordick v. Merchants Nat. Bank and Trust Co (1986), Ind.App., 496 N.E.2d 119. We agree.

The Court of Appeals then went on to find that the reference to "applicable limit of liability" was made unambiguous by certain provisions in the Richies' policy. One section of the policy is entitled "Family Protection Against Uninsured Automobiles/(Including Underinsured Automobiles)." This caption is immediately followed by the statement:

"The terms and conditions of this coverage are applicable only when the additional premium and limit of liability are shown under Uninsured Motorist on the policy declarations or amended declarations endorsement or policy change endorsement."

This provision is followed by definitions of both uninsured and underinsured automobiles. "Underinsured automobile" is defined as:

"[A]n automobile with respect to the ownership, maintenance or use of which the sum of the limits under all bodily injury bonds and insurance policies applicable at the time of the accident is less than the applicable limit of liability under this insurance."

From the foregoing provision and definition, the Court of Appeals concluded the "applicable limit of liability" for underinsured motorist coverage is the same as for uninsured motorist coverage, to wit: $15,000 per person and $30,000 per accident.

In their petition to transfer, the Richies contend the Court of Appeals erred in finding the limit of liability for underinsured motorist coverage to be unambiguous. They argue the Court of Appeals failed to consider all the definitions of "underinsured automobile" set forth on page five of the policy. The Richies argue that a third definition, which states: "[B]ut the terms 'uninsured automobile' and 'underinsured automobile' shall not include: (a) an insured automobile ..." leads to the absurdity that an underinsured automobile cannot be insured at all, thus leaving this third definition meaningless and rendering the other two ambiguous.

In determining the amount due for loss under an insurance policy, the true meaning of the contract must be ascertained from all its provisions, and not from a literal or technical construction of an isolated or special clause. Commercial Union Assur. Co., Ltd. v. Schumaker (1918), 71 Ind.App. 526, 119 N.E. 532. In the case at bar, all three definitions must be construed together. In the subsection immediately preceding the definitions of "underinsured automobile," the term "insured automobile" is defined as one insured under the instant policy; thus the definition alleged to reach an absurd conclusion merely serves to exclude vehicles covered under the Richies' policy from the class of vehicles designated as "uninsured" and "underinsured." While the limit of liability for underinsured motorist coverage is not made precisely clear by the policy terms, we find that, standing alone, they lead to but one conclusion: that the "applicable limit of liability" is the same as for the uninsured motorist coverage.

We also find, however, that resolution of the alleged ambiguity does not absolve Meridian from liability under the policy.

Meridian's set-off conditions to recovery as set forth on page six of the policy provide that the amount of liability insurance carried by an underinsured vehicle will be set off against the limit of liability of the policy's underinsured motorist coverage. The Richies contend this set-off condition, when invoked in conjunction with a $15,000/$30,000 limit of liability, renders illusory their underinsured motorist coverage. As that same amount of liability coverage was at the time of the accident mandated in Indiana by statute, Ind.Code Sec. 9-2-1-15, the Richies argue that vehicles registered in this state would carry liability insurance in at least the same amount as set as the upper limit of liability for their underinsured motorist coverage, or would not carry any liability insurance at all and thus fall under their uninsured motorist coverage.

The Richies cite Glazewski v. Allstate Ins. Co. (1984), 126 Ill.App.3d 401, 81 Ill.Dec 349, 466 N.E.2d 1151, modified on other grounds, Glazewski v. Coronet Ins. Co. (1985), 108 Ill.2d 243, 91 Ill.Dec. 628, 483 N.E.2d 1263, wherein dismissal of a claim of fraud and misrepresentation was reversed upon a finding that coverage identical to the Richies' was illusory, i.e., a premium was paid for coverage which would not pay benefits under any reasonably expected set of circumstances.

The Court of Appeals nonetheless found the Richies' coverage not to be illusory, citing examples where recovery could be realized. However, as indicated in Glazewski, supra, uninsured drivers would be covered by the policy's uninsured motorist coverage. Moreover, injuries caused by "licensed drivers from other states ... operating on Indiana highways with lesser approved amounts of insurance" would be excluded from the underinsured motorist coverage by the policy terms. Section II.C. found on page five of the policy states:

"The term 'uninsured automobile' means: 1. an automobile including an underinsured automobile with respect to the ownership, maintenance or use of which there is, in at least the amounts specified by the financial responsibility law of the state in which the insured automobile is principally garaged, (a) no bodily injury bond or insurance policy applicable at the time of the accident...."

Thus the only remaining foreseeable set of circumstances listed by the Court of Appeals in which the Richies could recover under their underinsured motorist coverage is that of the hypothetical Indiana driver who is "underinsured as the consequence of policies purchased in other states." Policies issued to Indiana residents, even by out-of-state companies, are either written to comply, or held to comply, with...