State Farm Mutual Auto Ins v. Pate

Decision Date31 December 2001
Docket NumberNo. 01-2108,01-2108
Citation275 F.3d 666
Parties(7th Cir. 2001) STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Plaintiff-Appellee, v. BRIAN D. PATE and JENNIFER PATE, Individually and on Behalf of the Minors, DANIELLE PATE and ANDREW PATE, Defendants-Appellants
CourtU.S. Court of Appeals — Seventh Circuit

Joseph D. O'Connor, III (argued), Bunger & Robertson, Bloomington, IN, for Appellee.

D. Bruce Kehoe (argued), Wilson Kehoe & Winingham, Indianapolis, IN, for Appellants.

Before BAUER, RIPPLE and WILLIAMS, Circuit Judges.

RIPPLE, Circuit Judge.

Brian D. Pate and Jennifer Pate, on behalf of themselves and their minor children (collectively "the Pates"), appeal the decision of the United States District Court for the Southern District of Indiana that held that they could not recover under the uninsured motorist provision in the automobile insurance policy issued to them by State Farm Mutual Automobile Insurance Company ("State Farm"). The Pates were injured in an accident caused by an unidentified vehicle that left the scene and did not strike the Pates' car. In such circumstances, their insurance policy limits recovery to situations in which there is an impact between the unidentified vehicle and their vehicle. In granting summary judgment to State Farm, the district court held that, under the law of Indiana, as manifested in a series of decisions of the Court of Appeals of Indiana, this policy provision was enforceable. We believe that the district court correctly relied upon the decisions of the state appellate court; therefore, we affirm the judgment of the district court.


The Pates, domiciliaries of Indiana, were injured in an automobile accident while traveling in Dixie County, Florida. Another vehicle, whose driver did not observe a stop sign, drove into the Pates' right of way. Mr. Pate swerved to the left to avoid the vehicle. Although he was successful in this regard, the maneuver caused him to strike another vehicle. As a result, all of the Pates suffered injuries. The vehicle that caused Mr. Pate to swerve left the scene and has never been identified.

The Pates brought an action in the United States District Court for the Northern District of Florida against William Bruton, the driver of the other vehicle in the collision and State Farm, their insurance company. Bruton later was dismissed from that action because he was uninsured. State Farm maintained that the accident was caused by the driver of the unidentified vehicle who had failed to stop at the stop sign and then left the scene. The jury, in response to specific interrogatories, concluded that the unidentified "miss-and-run" driver was in fact the cause of the accident.

State Farm then brought this action for declaratory judgment in the Southern District of Indiana. It sought a judgment that the "impact clause" in the Pates' automobile insurance policy was valid under Indiana law. The impact clause requires that the unidentified motorist must make physical contact with their car in order for the Pates to be paid under their uninsured motorist policy.1 The district court granted summary judgment to State Farm, concluding that, if the issue had been presented to the Supreme Court of Indiana, that court likely would have taken the same view as had the Court of Appeals of Indiana in a series of decisions.


In fulfilling the mandate of Erie Railroad v. Tompkins, 304 U.S. 64 (1938), a United States district court sitting in diversity, see 28 U.S.C. sec. 1332, must apply the law of the state as it believes the highest court of the state would apply it if the issue were presently before that tribunal. See Erie, 304 U.S. at 80; see also Wichita Royalty Co. v. City Nat'l Bank, 306 U.S. 103, 107 (1938); Lexington Ins. Co. v. Rugg & Knopp, Inc., 165 F.3d 1087, 1090 (7th Cir. 1999). When the state Supreme Court has not decided the issue, the rulings of the state intermediate appellate courts must be accorded great weight, unless there are persuasive indications that the state's highest court would decide the case differently. See Lexington, 165 F.3d at 1090; Allen v. Transamerica Ins. Co., 128 F.3d 462, 466 (7th Cir. 1997). "Where an intermediate appellate state court rests its considered judgment upon the rule of which it announces, that is a datum for ascertaining state law which is not to be disregarded by a federal court unless it is convinced by other persuasive data that the highest court of the state would decide otherwise." West v. Am. Tel. & Tel. Co., 311 U.S. 223, 237 (1940).

In assessing these contentions, we therefore first must turn to the decisions of the Court of Appeals of Indiana. On three occasions, that court has upheld the validity of impact clauses. See Rice v. Meridian Ins. Co., 751 N.E.2d 685, 689-70 (Ind. Ct. App. 2001) trans. denied Nov. 14, 2001; Indiana Ins. Co. v. Allis, 628 N.E.2d 1251, 1255-56 (Ind. Ct. App. 1994) trans. denied Jul. 20, 1994; Ely v. State Farm Mut. Auto. Ins. Co., 268 N.E.2d 316, 320 (Ind. Ct. App. 1971). The Pates argue that the Indiana Supreme Court would not follow these decisions.


We begin by examining the development of the Indiana case law. In Ely, the court held that the "policy requirement of 'physical contact' is not unreasonable and does not unduly restrict the [uninsured motorist] statute." Ely, 268 N.E.2d at 319. The impact clause "attempts to prevent fraudulent claims by requiring of the claimant tangible proof of collision with the vehicle of the uninsured motorist. Thus, its function is to define the risk underwritten by the insurers in the state." Id. "It would be within the province and authority of [the Commissioner of Insurance] to reject policy provisions which require physical contact as a condition of recovery. He has not seen fit do so." Id. at 320. Therefore, concluded the court, the question was one of contract interpretation and the insurance contract, like the Pates' policy, did not provide for miss-and-run coverage. See id.

In Allis, the court followed the reasoning of Ely and expanded upon it. The court, aware of the broadening of the statute since Ely, found that the "legislature's clear and unambiguous definition of 'uninsured motorist' demonstrates that the Act's purpose is to mandate basic coverage for vehicles registered or garaged in Indiana." Allis, 628 N.E.2d at 1253 (emphasis in original). "Any additional or greater coverage is a matter of contract--which contemplates coverage in exchange for a premium." Id. The court found the definition of an uninsured motor vehicle to be clear and unambiguous, which "prevented [the court] from making an expansive interpretation of this term." Id. at 1254. Finally, the court presumed that the legislature, when revising the statute, "was aware of our court's interpretation of the original Act, and did not intend to make any changes beyond what it declared either in express terms or by unmistakable implication." Id. at 1255. "Although the legislature expanded the types of damages that would be compensated under the Act (bodily injury and property damage), and broadened coverage to include underinsured as well as uninsured motorists, it did not include 'hit and run' or 'miss and run' drivers in its definition of an uninsured motorist." Id. at 1255.2

Most recently, the court in Rice reaffirmed the holdings of Ely and Allis. See Rice, 751 N.E.2d at 689-90.3 The court found that, although "hits" was an ambiguous term and ought to be construed to include both direct and indirect contact, it was unambiguous about the need for some actual contact. See id. at 688-89. The court then emphasized that "Ind. Code sec. 27-7-5-2 [the Indiana Uninsured Motorist Act] does not require insurance policies to cover any hit-and-run accidents, so any coverage they do provide extends beyond the requirements of the Act." Id. at 690. Finally, the court noted that "[s]even years have passed since our decision in Allis, and if the legislature wanted miss-and-run motorists to be included in the Act as a type of uninsured motorist for whom insurers must provide coverage, the legislature could have amended the Act to provide for such coverage." Id. In short, Indiana law does not require miss-and-run coverage in an automobile insurance policy. If an insurer elects to provide such coverage, it is free to limit that coverage to contractually stated conditions.


We also must conclude that the Pates cannot rely on the decision of the Supreme Court of Indiana in United National Insurance Company v. DePrizio, 705 N.E.2d 455 (Ind. 1999), to suggest that the Supreme Court of Indiana would embark on a course different from the one already set by the Court of Appeals. DePrizio was a response to a certified question from the Northern District of Indiana. See DePrizio, 705 N.E. 2d at 456 n.1. The question presented was: "Is an umbrella liability policy that does not provide for uninsured/underinsured motorist coverage by its own terms an 'automobile liability policy or motor vehicle liability policy' within the meaning of Indiana Code sec. 27-7-5-2(A)?" Id. The court, interpreting the meaning of "automobile liability or motor vehicle liability polic[ies] of insurance," Ind. Code sec. 27-7-5-2(a), held that there was no limitation on the meaning of the term and that the umbrella policy fell within the statute's ambit. See id. at 461-63.

The court traced the expansion of the uninsured motorist statute, noting its increased liberalization over the years. See id. at 460-62. The Pates point to this analysis as evidence that the court would find coverage mandated in this case. We do not believe that DePrizio can be read in this manner. DePrizio simply interpreted the uninsured motorist statute to cover umbrella policies on the...

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