United Farm Bureau Mut. Ins. Co. v. Hanley

• Decision Date: 28 February 1977
• Docket Number: No. 2--1075A270,2--1075A270
• Citation: 172 Ind.App. 329,360 N.E.2d 247
• Parties: UNITED FARM BUREAU MUTUAL INSURANCE COMPANY, Appellant (Plaintiff below), v. Larry A. HANLEY and Brett L. Hanley, Appellees (Defendants below).
• Court: Indiana Appellate Court

Page 247

360 N.E.2d 247

172 Ind.App. 329

UNITED FARM BUREAU MUTUAL INSURANCE COMPANY, Appellant (Plaintiff below), v. Larry A. HANLEY and Brett L. Hanley, Appellees (Defendants below).

No. 2--1075A270.

Court of Appeals of Indiana, Second District.

Feb. 28, 1977.

Petition for Rehearing Denied May 26, 1977.

William O. Schreckengast, Kitley, Schreckengast & Davis, Beech Grove, Charles E. Herriman, Browne Torrance Spitzer Herriman & Brown, Marion, for appellant.

Stephen Johnson, Biddinger & Johnson, Marion, Edgar W. Bayliff, Bayliff, Harrigan, Cord & Manugans, Kokomo, for appellees.

BUCHANAN, Presiding Judge.

CASE SUMMARY

Plaintiff-Appellant United Farm Bureau Mutual Insurance Company (Farm Bureau), appeals from a Declaratory Judgment in favor of Defendants-Appellees, Larry A. Hanley and Brett L. Hanley, claiming the trial court erred in extending the uninsured We reverse.

motorist provisions of the company's automobile insurance policy to include persons injured by an insured, who is otherwise excluded from liability coverage under the 'household exclusionary' clause of the policy.

FACTS

This is an action for a declaratory judgment brought by Farm Bureau to determine the respective rights of the company and their named insured, Parent-Larry Hanley, and Claimant-Brett Hanley, son of the named insured.

On December 24, 1972, Farm Bureau issued an automobile insurance policy to the insured, Larry Hanley, on his car. This policy was in effect on June 13, 1973, when another son of the named insured, Allen Hanley, was operating a 1964 Chevrolet with the permission of the owner, Judy Arrendondo. While driving the Arrendondo vehicle, Allen Hanley collided with a 1974 Pontiac driven by Mark D. Gard. At the time of the accident Claimant, Brett Hanley, was riding with his brother Allen in the Arrendondo automobile. The accident took the life of Allen Hanley, but Claimant survived, sustaining multiple injuries for which he made claim against Farm Bureau under the terms of his father's policy.

The policy provided liability coverage under which Farm Bureau agreed:

To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of:

A. bodily injury, sickness or disease, including death resulting therefrom, hereinafter called 'bodily injury', sustained by any person;

B. injury to or destruction of property, including loss of use thereof, hereinafter called 'property damage';

arising out of the ownership, maintenance or use of the owned automobile or a non-owned automobile. (Emphasis Supplied.)

Allen and Brett Hanley were both insureds under the terms of their father's policy which covered relatives of the named insured while operating or using a non-owned automobile with permission of the owner. ¹

The policy also contained a household exclusion clause which stated:

This policy does not apply under Part I (Liability Coverage):

. . . (12) to bodily injury to the insured or to any person related to the insured by blood, marriage or adoption and who is a resident of the same household as the insured;

Excluded from liability coverage for Allen Hanley's negligence, Claimant and Parent demanded damages from Farm Bureau under Part IV of the policy (uninsured motorist coverage), in which the Company had agreed:

To pay all sums which the insured or his legal representative shall be legally entitled to recover as damages from the owner or operator of an uninsured automobile because of bodily injury, sickness or disease, including death resulting therefrom, hereinafter called 'bodily injury', sustained by the insured, caused by accident and arising out of the ownership, maintenance or use of such uninsured automobile; . . .

Farm Bureau rejected Hanleys' demand and thereafter commenced this action seeking On April 29, 1975, the trial court rendered a judgment on the pleadings favoring uninsured motorist coverage for Claimant and Parent. The Court decided the household exclusion left Allen Hanley uninsured, and Claimant therefore qualified for uninsured motorist protection. In formulating its decision, the court made the following pertinent conclusions of law:

a declaratory judgment enforcing the household exclusion clause against the Hanleys and denying that the operation of the exclusion qualified them for uninsured motorist coverage.

3. That by reason of the definition of an uninsured automobile under the General Endorsement Number 2 under the insurance contract between Farm Bureau and Larry A. Hanley, the automobile owned by Judy Arrendondo and operated by Allen L. Hanley, deceased, on the 3rd of June, 1973, was an automobile with respect to the use of which there was no bodily injury bond or insurance policy applicable at the time of the accident with respect to Allen L. Hanley, deceased, the person legally responsible for the use and operation of the Arrendondo vehicle;

4. That under the terms of the General Endorsement Number 2 of the insurance contract between Farm Bureau and Larry A. Hanley, the Arrendondo vehicle operated by Allen L. Hanley, deceased, on June 3, 1973, was an uninsured automobile with respect to the bodily injuries of Brett L. Hanley;

Farm Bureau appeals.

ISSUE

The sole issue for disposition is:

Is the household exclusion clause contrary to the Indiana Uninsured Motorist Statute?

Farm Bureau claims the household exclusion clause is a legitimate device for preventing inter-family lawsuits which lend themselves to collusion, in that courts have traditionally upheld such clauses long before the Indiana Uninsured Motorist Statute (Ind.Code Section 27--7--5--1 (1976)) came into being in 1965. The Legislature was presumably aware of the exclusion when enacting the statute and did not expressly prohibit such clauses. Further, the Arrendondo vehicle is not an uninsured automobile because Farm Bureau remains obligated to defend all other claims arising from the accident, other than those excepted under the household exclusion.

Parent and Claimant argue they are insureds under Part IV of the policy providing uninsured motorist coverage, and there is no liability insurance covering the person against whom Claimant is legally entitled to recover damages (i.e. Allen Hanley). The Uninsured Motorist Statute compels coverage in this situation, and if the household exclusion is interpreted so as to deny Parent and Claimant uninsured motorist coverage, the statute is violated.

DECISION

CONCLUSION--It is our opinion the household exclusion clause does not violate the Indiana Uninsured Motorist Statute.

Can a claimant who is also simultaneously an insured and a tort feasor collect from an insurance company under the uninsured motorist coverage of the policy, despite the household exclusion clause?

The roles of the relevant persons may be some clue to the answer.

Larry Hanley, the father, is an insured. His son, Brett, is an insured ² and the injured passenger-claimant. Brett's unfortunate brother, Allen, the deceased driver tort feasor of the Arrendondo automobile, was also an insured.

So the question may be refined by asking if it is reasonable to construe the Uninsured Motorist Statute (the Statute) as embracing an insured tort feasor who is purportedly converted into an uninsured motorist driving an uninsured automobile by the operation of the household exclusion clause?

Indiana courts have not specifically answered the question, however phrased.

Some restrictions on the operation of the Statute have been struck down.

The Indiana Uninsured Motorist Act (Ind. Code Section 27--7--5--1 (1976)), in relevant part provides:

No automobile liability or motor vehicle liability policy or insurance insuring against loss resulting from liability imposed by law for bodily injury or death suffered by any person arising out of the ownership, maintenance or use of a motor vehicle shall be delivered or issued for delivery in this state with respect to any motor vehicle registered or principally garaged in this state, unless coverage is provided therein or supplemental thereto, in limits for bodily injury or death set forth in Acts 1947, chapter 159, sec. 14 (9--2--1--15), as amended heretofore and hereafter, under policy provisions approved by the commissioner of insurance, for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury, sickness or disease, including death, resulting therefrom. (emphasis supplied) (the Statute)

In Indiana the Statute has been liberally construed to prevent insurers from conditioning uninsured motorist coverage upon some fact or circumstance which would diminish the intended statutory protection. Located within the uninsured motorist section of the policy, these exclusions sought to specifically curtail coverage of uninsured motorists and were determined to be undue restrictions on the operation of the Statute. ³ No Indiana cases, however, have directly addressed the effect on the Statute of a household exclusion clause which limits general liability coverage.

Courts in Illinois, Oregon and Iowa have awarded uninsured motorist coverage to insureds who were otherwise excluded from liability coverage by operation of the household exclusion clause. In each case the court construed the applicable uninsured motorist statute. ⁴

In Bowsher v. State Farm Fire & Casualty Co. (1966), 244 Or. 549, 419 P.2d 606, Bowsher, the named insured, was a passenger in his own automobile which was being driven by Simpson who had no insurance. Simpson negligently collided with another vehicle, and Bowsher was injured.

Although he had no insurance of his own, Simpson was covered under a standard 'permissive user' clause in the Bowsher policy, i.e., as an insured. Bowsher argued Simpson was an uninsured motorist, thereby activating the uninsured motorist provisions of the policy, which excluded an insured or a member of his family. State Farm,...