Meridian Mut. Ins. Co. v. Auto-Owners Ins. Co.

Decision Date31 August 1998
Docket NumberNo. 14S01-9605-CV-374,AUTO-OWNERS,14S01-9605-CV-374
Citation698 N.E.2d 770
PartiesMERIDIAN MUTUAL INSURANCE CO., Appellant (Defendant below), v.INSURANCE COMPANY, Appellee (Plaintiff below). and Benjamin C. Markham, Individually and as administrator of the Estate of Sheila A. Markham, et.al., Appellee/Defendants.
CourtIndiana Supreme Court

SHEPARD, Chief Justice.

The insurance policy in this case covers carpools but not driving for hire. We have accepted jurisdiction to explore the difference.

This case arose from an automobile accident between a car driven by Sheila Markham and a van owned by Gail Riggins but driven on the day of the accident by Larry Ramsey. The collision killed Markham and Ramsey and injured the eight other passengers in the van, some severely. Auto-Owners Insurance Company, as primary insurer of Riggins' van, initiated this interpleader and declaratory judgment action against Ramsey's insurer, Meridian Mutual Insurance Co., and others, to resolve conflicting claims against its limited liability.

Meridian's policy provided coverage for liability arising out of Ramsey's permitted use of another's automobile, but excluded from coverage "[b]odily injury or property damage arising out of the ... use of a vehicle when used to carry persons or property for a fee." (R. at 47 (emphasis excluded).) The exclusionary clause further stated, "This exclusion does not apply to ... [s]hared-expense car pools...." (Id.) The policy does not define "shared-expense car pool" or what it means to "carry persons or passengers for a fee." Meridian's potential coverage is secondary to the coverage afforded by Riggins' Auto-Owners policy; therefore, Meridian defends against excess liability claims arising from the accident. See Ind.Code Ann. § 27-8-9-7 (West Supp. 1997).

Meridian denied liability and filed a cross-claim against the named defendants, averring that Ramsey was driving the van to carry persons for a fee. Defendants Yoder, Chestnut, Markham, and Craig filed a cross-claim seeking a declaratory judgment against Meridian, asserting that this incident fell within the "shared-expense car pool" exception.

On cross-motions for summary judgment, the trial court held against Meridian. A divided panel of the Court of Appeals reversed. Meridian Mutual Ins. v. Auto-Owners Ins., 659 N.E.2d 207 (Ind.Ct.App.1995). We grant transfer and affirm the decision of the trial court.

I. Facts

Gail Riggins, Larry Ramsey, and the other participants in the commuting arrangement all lived in or near Odon, Indiana, and worked for Thomson Consumer Electronics in Bloomington. Each workday morning Riggins met her co-workers at the Odon Christian Church and they commuted together to Bloomington in her large van. Each passenger gave Riggins $17.00 per week for the eighty-four mile daily round-trip. On days when Riggins was working a different shift or not going into work, she let the other commuters use her van, allowing an alternate driver (normally, Larry Ramsey) to deduct $5.00 from that week's $17.00 contribution for each day he drove in her place.

Riggins had been involved in such an arrangement for many years. She had originally been a passenger, paying the previous owner/driver of the van $15.00 per week "for his expenses and things." (R. at 202.) In 1973 that driver sold Riggins the van and moved to Bloomington. Riggins and the other commuters continued the $15.00 per week arrangement until 1989, when Riggins' purchase of a new van and an increase in gasoline prices prompted an increase to $17.00. Riggins says she used the money for "[g]asoline and tires, and the upkeep of the van, and insurance." (R. at 203.) Although she did not keep any records to determine whether she received enough to cover her expenses, (id.), she did believe that the amount she received was completely spent on expenses related to the commute. She saw no need to report any of the receipts as income on her taxes, take business expense deductions, or even discuss the matter with her accountant. She stated that the group approached the payments as a sharing of the expenses of the trip, and that she was not involved in the arrangement as a business or for profit.

Although there were some changes in riders over the fifteen-year period, most of the commuters had been riding with Riggins under this arrangement for many years with little fluctuation in participation. When she began the driving the van, only five or six riders commuted with her.

Riggins knew she would be working a late shift on February 18, 1992, so she made arrangements with Ramsey to drive the van. While returning from Bloomington that afternoon the van collided with Sheila Markham's car, killing Ramsey and Markham and injuring the van's other eight passengers. 1

II. Summary Judgment

Reviewing a trial court's entry of summary judgment, we examine the same issue as the trial court does, upholding the grant only when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Havens v. Ritchey, 582 N.E.2d 792 (Ind.1991); see also Ind.Trial Rule 56(C). While cross motions for summary judgment on the same issues do not, in and of themselves, prove the absence of a genuine issue of material fact, Whitcomb v. Young, 258 Ind. 127, 279 N.E.2d 566 (1972), where both parties in their cross-motions assert that a policy term is unambiguous, "construction of a contract under such a situation is a judicial function." B & R Farm Serv., Inc. v. Farm Bureau Mutual Ins. Co., 483 N.E.2d 1076, 1077 (Ind.1985).

III. Principles of Insurance Policy Interpretation

Ambiguous provisions in insurance policies are construed in favor of the insured. American States Ins. Co. v. Kiger, 662 N.E.2d 945 (Ind.1996). This is particularly true with unclear provisions that limit or exclude coverage. Id. Where provisions limiting coverage are not clearly and plainly expressed, the policy will be construed most favorably to the insured, to further the policy's basic purpose of indemnity. Masonic Accident Ins. Co. v. Jackson, 200 Ind. 472, 164 N.E. 628 (1929). "This strict construal against the insurer is driven by the fact that the insurer drafts the policy and foists its terms upon the customer. 'The insurance companies write the policies; we buy their forms or we do not buy insurance.' " American States Ins. Co., 662 N.E.2d at 947 (quoting American Economy Ins. Co. v. Liggett, 426 N.E.2d 136, 142 (Ind.Ct.App.1981)).

When insurance policy language is clear and unambiguous, however, it should be given its plain and ordinary meaning. Tate v. Secura Ins., 587 N.E.2d 665, 668 (Ind.1992). Under Indiana law, an insurance policy is unambiguous if reasonable persons cannot honestly differ as to the meaning of the policy language. Eli Lilly & Co. v. Home Ins. Co., 482 N.E.2d 467, 470 (Ind.1985), cert. denied, 479 U.S. 1060, 107 S.Ct. 940, 93 L.Ed.2d 990, 991 (1987). One way of determining whether reasonable persons might differ is to see if the policy language is susceptible to more than one interpretation. Id.

We conclude that the ordinary meaning of the exclusionary clause at issue here is such that the trial court was correct to hold that the driving arrangements in this case constituted a "shared-expense car pool."

IV. "Shared-expense Car Pool"

The Court of Appeals determined that a "shared-expense car pool" is an arrangement where the expenses are "shared on a ratable basis." Meridian Mutual Ins., 659 N.E.2d at 213. The court further elaborated:

For the "shared expense" car pool exception to serve its purpose within the policy, the passengers must not merely contribute but must contribute in proportion to the expenses actually incurred. Absent a proportionate allocation of expenses among the passengers, the owner is merely carrying passengers for a fee. Here, there is no evidence of expenses and, hence, no correlation between expenses and the amount paid by the passengers. There is no factual basis in the record to support a conclusion that the expenses were actually shared. The most that can be said is that the fee collected was simply used to defray the expenses of operating the van. That is not enough to invoke the exception.

Id. at 213. Determining that Riggins' arrangement was not a "shared-expense car pool," the Court of Appeals found that Meridian's "carrying for a fee" exclusion applied to deny coverage for injuries and damage arising out of this accident.

The Seventh Circuit recently addressed this exact issue in General Accident Ins. Co. v. Gonzales, 86 F.3d 673 (7th Cir.1996), a case with facts very much like the case at hand. 2 Gonzales worked at a factory in Michigan City, which was about forty miles from his home in Merrillville. He used his mini-van to drive four of his co-employees who lived in Merrillville from a local parking lot to their workplace, receiving $5.00 per day from each passenger for the eighty-mile round trip. Gonzales roughly calculated his weekly gas expense to be at least forty dollars, but never made any calculations as to his other expenses such as wear and tear or depreciation, nor did he attempt to amortize and allocate fixed costs such as tires, oil, and maintenance. He did not show how the amount he received related to the cost of the commute. Deposition testimony revealed that the employees considered the arrangement a car pool. Id. at 674.

In assessing the meaning of the term "shared-expense car pool," the Seventh Circuit observed that requiring formal expense accounting and allocation made little sense in light of the informal nature of most car pool arrangements. Id. at 677-78. Instead, the court adduced its own "rough estimates" of Gonzales' costs, compared them to what he received weekly from his passengers, and concluded that his expenses more than...

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