Founders Insurance Company v. Mark May, Pamela Coomer, and Roger W. Hoke as the Personal Representative of the Estate of Brian Hoke , 44 N.E.3d 56 ( 2015 )

Sep 18 2015, 9:26 am
ATTORNEYS FOR APPELLANT ATTORNEY FOR APPELLEE ROGER
Ryan Duffin W. HOKE, PERSONAL
Lori A. Coates REPRESENTATIVE OF THE ESTATE
Duffin & Hash LLP OF BRIAN HOKE, DECEASED
Indianapolis, Indiana
R.T. Green
Blackburn & Green
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Founders Insurance Company, September 18, 2015
Appellant-Plaintiff, Court of Appeals Case No.
49A02-1501-PL-8
v.
Appeal from the Marion Superior
Mark May, Pamela Coomer, Court
The Honorable Thomas J. Carroll,
and Roger W. Hoke as the Judge
Personal Representative of the
Cause No. 49D06-1302-PL-7690
Estate of Brian Hoke, deceased,
Appellees-Defendants,
Robb, Judge.
Case Summary and Issue
[1] Pamela Coomer, driving a vehicle owned by Mark May and insured by
Founders Insurance Company (“Founders”), was involved in an accident that
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ultimately resulted in the death of Brian Hoke. Coomer did not have a valid
driver’s license nor May’s permission to drive the vehicle. Founders filed a
complaint seeking a declaratory judgment that it had no duty to defend or
provide coverage for the accident pursuant to the terms of the insurance
contract and sought summary judgment. The trial court granted summary
judgment to Founders as to May and Coomer, but denied summary judgment
as to Roger Hoke as the Personal Representative of the Estate of Brian Hoke,
Deceased (“Hoke’s Estate”). Founders now appeals, raising the sole issue of
whether the trial court erred in denying summary judgment as to Hoke’s Estate.
We conclude the exclusions in the insurance contract relevant to this situation
are clear and unambiguous and do not violate public policy; therefore, the
exclusions are enforceable. Founders is entitled to summary judgment as to all
parties, and the trial court’s order denying summary judgment as to Hoke’s
Estate is reversed.
Facts and Procedural History
[2] In 2012, May and Coomer were involved in “a serious relationship.” Appendix
of Appellee at 1. May owned a pickup truck which Coomer would drive
“[m]aybe once a month[,]” id. at 5, although her driver’s license was suspended,
id. at 6-7. May knew that Coomer sometimes drove the truck because usually
when she did so, she was acting as a designated driver for him. In general,
however, May “doesn’t really like anybody to drive his truck.” Id. at 7.
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[3] On November 10, 2012, Coomer took May’s truck to visit her children. May
was not with her, and she did not have his permission to drive the truck that
day. When returning home, she struck Hoke, who was riding a bicycle. Hoke
did not have an automobile and did not have automobile insurance. He died
on November 27, 2012, from injuries he sustained in the collision. May’s truck
was insured on November 10, 2012, by Founders under a policy that provided,
in relevant part:
Part A – Liability Coverage
Insuring Agreement
A. We will pay damages for “bodily injury” or “property damage” for
which any “insured” becomes legally responsible because of an auto
accident. . . . We will settle or defend, as we consider appropriate, any
claim or suit asking for these damages. . . . We have no duty to defend
any suit or settle any claim for “bodily injury” or “property damage”
not covered under this policy.
B. “Insured” as used in this Part means:
...
2. Any person using “your covered auto”.
***
Exclusions
A. We do not provide Liability Coverage for any “insured”:
...
8. Using a vehicle without a reasonable belief that that “insured” is
entitled to do so.
Appellant’s Appendix at 12-13. In addition, an Amendatory Endorsement
modifying Part F – General Provisions of the policy provided:
No coverage is afforded under any Part of this policy if, at the time of
the accident, “your covered auto” . . . is being operated by a person
who is not a licensed driver, or is without a valid driver’s license,
whose driver’s license is revoked or suspended, or whose driver’s
license has been expired for more than 30 days, or is not legally
entitled to drive under Indiana law.
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Id. at 27.
[4] Hoke’s Estate filed a wrongful death suit against May and Coomer in July
2013. Founders filed a complaint for declaratory judgment against May,
Coomer, and Hoke’s Estate, seeking a declaration that it had no obligation to
provide coverage benefits under the policy because Coomer did not have a valid
driver’s license at the time of the accident nor did she have a reasonable belief
that she was entitled to use the truck on that date. In May 2014, Founders filed
a motion for summary judgment “as the evidence in this matter establishes that
Founders owes no duty to provide a defense or indemnification” to May or
Coomer. Id. at 32. It does not appear that May or Coomer answered the
complaint or filed a response to the motion for summary judgment. Hoke’s
Estate, however, filed a response in opposition to summary judgment, asserting
that Founders should not be permitted to deny insurance coverage as to Hoke’s
Estate, “an innocent, injured party” who “will be without any source of
compensation for losses suffered in the November 10, 2012 incident . . . .” Id.
at 104.
[5] On November 3, 2014, the trial court entered a summary ruling on Founders’
motion for summary judgment as to May and Coomer, finding that there is no
genuine issue of fact and Founders is entitled to summary judgment against
May and Coomer. However, the trial court’s order also stated that “all issues
remain or survive as to the remaining Defendant, [Hoke’s Estate].” Id. at 107.
Founders then sought and was granted permission to pursue this interlocutory
appeal of the trial court’s order with regard to the ruling as to Hoke’s Estate.
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Discussion and Decision
I. Standard of Review
[6] When we review a trial court’s ruling on summary judgment, we apply the
same standard as the trial court. Manley v. Sherer, 992 N.E.2d 670, 673 (Ind.
2013). Summary judgment is appropriate where there is no genuine issue of
material fact and the moving party is entitled to judgment as a matter of law.
Ind. Trial Rule 56(C). The appellant has the burden of persuading us that the
summary judgment ruling was erroneous. Amaya v. Brater, 981 N.E.2d 1235,
1239 (Ind. Ct. App. 2013), trans. denied. Where the facts material to the
proceedings are not in dispute, this court determines whether the trial court
correctly applied the law to the facts. Johnson v. Hoosier Enters. III, Inc., 815
N.E.2d 542, 548 (Ind. Ct. App. 2004), trans. denied. A case such as this one,
involving the interpretation of an insurance contract, is particularly appropriate
for summary judgment because the interpretation of a contract is a question of
law. Burkett v. Am. Family Ins. Grp., 737 N.E.2d 447, 452 (Ind. Ct. App. 2000).
II. Denial of Summary Judgment as to Hoke’s Estate
[7] The particular facts of this case present an issue of first impression in Indiana:
Does an insurer which has no duty to provide coverage benefits to its insured
pursuant to the plain terms of the insurance contract nonetheless have to pay
damages to an injured third party who has no independent source of insurance?
Founders contends that it does not have to pay those damages because it
reasonably limited its liability by the terms of its insurance contract to exclude
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coverage in these circumstances. Hoke’s Estate argues that permitting
Founders to deny coverage in this instance would contravene the public policy
underlying Indiana’s Financial Responsibility Act to provide “persons who
suffer loss due to the tragedy of automobile accidents . . . a source and means of
recovery.” Brief of Appellee at 3. Hoke’s Estate contends that the result it
seeks is “consistent with the result reached by appellate courts in other
compulsory insurance law jurisdictions,” id. at 6, and is supported by the
reasoning of Indiana decisions on similar issues.
A. Overview of Statutes and Caselaw
[8] Historically, Indiana required proof of financial responsibility for automobile
owners only after the occurrence of an accident. Although the primary purpose
of the then-Safety-Responsibility and Driver Improvement Act was “to facilitate
loss recovery by auto accident victims,” the statute was not a compulsory
insurance statute because means of proving financial responsibility other than
insurance were allowed. See Allstate Ins. Co. v. Boles, 481 N.E.2d 1096, 1101
(Ind. 1985). When the statute was amended in 1983 to require proof of
financial responsibility when registering a car, Ind. Code § 9-18-2-11, the law
still permitted proof of responsibility through bond, deposit of funds or
securities, and self-insurance in addition to traditional insurance, Ind. Code ch.
9-25-4. Thus, Indiana remains a “compulsory financial responsibility state.”
Transamerica Ins. Co. v. Henry, 563 N.E.2d 1265, 1267-68 (Ind. 1990).
“Indiana’s current financial responsibility scheme, like the prior one,
demonstrates a policy to protect automobile owners . . . from damages which
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might be inflicted on them by other cars out on the road.” Id. at 1268. To this
end, insurers must offer uninsured and underinsured motorist coverage in every
insurance contract. See Ind. Code § 27-7-5-2. “The purpose of uninsured
motorists insurance is to place the insured in substantially the same position as if
the other party had complied with the minimum requirements of the insurance
statutes.” Smith v. Allstate Ins. Co., 681 N.E.2d 220, 222 (Ind. Ct. App. 1997)
(emphasis added). “The purpose of our financial responsibility statute is to
compel . . . other motorists to make provisions for our protection.”
Transamerica Ins. Co., 563 N.E.2d at 1268. But the statutes do not “constitute a
social policy to guarantee compensation to all victims of motor vehicle
accidents.” Id.
[9] The out-of-jurisdiction cases cited by Hoke’s Estate are not particularly
instructive to this case. Hoke’s Estate cites Woody v. Georgia Farm Bureau Mut.
Ins. Co., 551 S.E.2d 836 (Ga. Ct. App. 2001), and Adams v. Thomas, 729 So.2d
1041 (La. 1999), both of which addressed policy provisions excluding
unlicensed drivers from coverage. In Woody, a split Georgia Court of Appeals
held that the unlicensed driver exclusion, although unambiguous and generally
enforceable, was unenforceable in that particular case because the injured third
party did not have uninsured motorist protection of his own. If the exclusion
were enforced, the injured party would not have access to insurance funds.
Relying on Georgia Supreme Court precedent in Cotton States Mut. Ins. Co. v.
Neese, 329 S.E.2d 136 (Ga. 1985), the Woody court held such a result would be
in contravention of the public policy served by Georgia’s compulsory insurance
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law. 551 S.E.2d at 837. In Neese, the Georgia Supreme Court noted that the
state’s Motor Vehicle Accident Reparations Act (or “no fault act”)—which
provided insurance coverage in virtually all circumstances to an injured
victim—was enacted simultaneously with the law making motor vehicle
liability insurance compulsory. 329 S.E.2d at 138-39. The Neese court held
these laws “established the public policy that innocent persons who are injured
should have an adequate resource for the recovery of their damages[,]” and
required viewing the effect of an exclusion from the viewpoint of the victim. Id.
at 141 (quotation omitted). Because our supreme court has expressly stated our
financial responsibility statute is not a compulsory insurance statute and does
not represent a policy of providing compensation to all victims of motor vehicle
accidents, Woody and Neese are inapposite.
[10] In Adams, the Louisiana Supreme Court noted that the state legislature had
specifically stated the public policy behind its compulsory insurance law: “all
liability policies . . . are executed for the benefit of all injured persons and their
survivors or heirs to whom the insured is liable . . . .” 729 So.2d at 1043. The
court further noted that the determination of “what is an acceptable exclusion
in an insurance policy is up to the legislature . . . .” Id. at 1044. Therefore, the
court held that a policy that excludes an unlicensed driver from coverage
without an express legislative directive is “an impermissible restriction on the
intent and purpose of the legislature’s statutory scheme enacted to ensure that
all Louisiana motorists have available to them automobile liability insurance
coverage.” Id. at 1044-45. Thus, Adams is distinguishable in several respects:
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in Indiana, enforceable exclusions do not have to be legislated; we have no
specific statement of legislative intent as to the policy behind our statutes; and
as with Woody, we do not have a compulsory insurance statute but a
compulsory financial responsibility law which our courts have stated does not
represent a policy of compensating all accident victims.
[11] Likewise, the Indiana cases cited by Hoke’s Estate are not directly applicable.
Hoke’s Estate asserts that in Colonial Penn Ins. Co. v. Guzorek, 690 N.E.2d 664(Ind. 1997), Federal Kemper Ins. Co. v. Brown, 674 N.E.2d 1030 (Ind. Ct. App.
1997), Motorists Mut. Ins. Co. v. Morris, 654 N.E.2d 861 (Ind. Ct. App. 1995), and
Am. Underwriters Grp. v. Williamson, 496 N.E.2d 807 (Ind. Ct. App. 1986), our
courts “have engaged in an analysis similar to that utilized in Woody and Adams
and reached similar results.” Br. of Appellee at 8. With respect to Williamson,
Morris, and Brown, we note that the insurance company at issue was attempting
to rescind its insurance contract altogether due to misrepresentations made by
the insured when applying for the insurance. See, e.g., Williamson, 496 N.E.2d
at 810-11 (stating, based on a survey of cases from New York, Michigan, and
Georgia, that “it appears to have been universally held that an insurer cannot
on the ground of fraud or misrepresentation retrospectively avoid coverage
under a compulsory or financial responsibility law so as to escape liability to a
third party[,]” and overruling Automobile Underwriters, Inc. v. Stover, 148 Ind.
App. 555, 268 N.E.2d 114 (1971), which had established the right to rescind in
Indiana prior to the Financial Responsibility Act), disapproved by Guzorek, 690
N.E.2d at 672 (“Williamson is disapproved to the extent it holds that the liability
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insurer can never rescind due to material misrepresentations.”). That is not the
situation we have here, where Founders seeks to enforce its insurance contract.
[12] As for our supreme court’s decision in Guzorek, we note that it, too, was decided
in the context of whether a contract for insurance could be rescinded due to a
misrepresentation. We also note that it cast doubt upon the continued viability
of Williamson, Morris, and Brown. 690 N.E.2d at 672. It further declined to pass
on the question presented here as one not presented by the facts of that case:
“We leave for another day whether a liability insurer can deny coverage when
the third party does not have protection against uninsured motorists. This issue
is not settled under current precedent but is neither presented under these facts
nor argued by the parties.” Id.
B. Insurance Law in Indiana
[13] Without any case law directly on point, we turn to the basic principles of
contract law. An insurance policy is a contract, and in reviewing the policy, we
construe it as we would any other contract—to give effect to the parties’
intentions at the time the contract was made. Puente v. Beneficial Mortg. Co. of
Indiana, 9 N.E.3d 208, 217 (Ind. Ct. App. 2014). The freedom to contract is “a
bedrock principle of Indiana law,” id. at 218, and “the freedom of the parties to
exclude risks from an insurance contract is well established,” United Farm
Bureau Mut. Ins. Co. v. Hanley, 172 Ind. App. 329, 338, 360 N.E.2d 247, 252
(1977). “Generally, insurers are free to limit liability in any manner not
inconsistent with public policy, and an unambiguous exclusionary clause is
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ordinarily entitled to enforcement.” Williams v. Safe Auto Ins. Co., 980 N.E.2d
326, 330 (Ind. Ct. App. 2012) (quoting Am. Family Life Assurance Co. v. Russell,
700 N.E.2d 1174, 1177 (Ind. Ct. App. 1998), trans. denied). “Whenever a court
considers invalidating a contract on public policy grounds, it must always
weigh in the balance the parties’ freedom to contract.” Boles, 481 N.E.2d at
1101. “Only in cases which are substantially free from doubt will we exercise
our power to declare a contract void as contravening public policy.” Lexington
Ins. Co. v. Am. Healthcare Providers, 621 N.E.2d 332, 338 (Ind. Ct. App. 1993),
trans. denied.
[14] In general, an attempt to dilute or diminish uninsured or underinsured motorist
protection is contrary to public policy. See Am. Family Mut. Ins. Co. v. Federated
Mut. Ins. Co., 775 N.E.2d 1198, 1207 (Ind. Ct. App. 2002) (“Any insurance
language that dilutes statutory protection is contrary to public policy.”).
However, the exclusions upon which Founders would deny coverage in this
case do not dilute or diminish the uninsured or underinsured coverage
contained therein. Indiana Code section 27-7-5-2(a) mandates that insurance
companies offer uninsured and underinsured motorist protection “for the
protection of persons insured under the policy . . . .” 1 The uninsured and
underinsured provisions in May’s policy were for his own protection if an insured
1
The statute requires an insurance company to offer uninsured and underinsured coverage, Ind. Code § 27-7-
5-2(a), but the named insured may reject in writing both or either uninsured and underinsured coverage, Ind.
Code § 27-7-5-2(b).
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under his policy were to be in an accident with an uninsured or underinsured
motorist. Hoke was not uninsured or underinsured in the sense used by
Indiana Code section 27-7-5-2 mandating such coverage in insurance contracts
because as a non-motorist, he was not subject to financial responsibility
requirements at all. The exclusions at issue do not dilute or diminish May’s
uninsured or underinsured motorist protection because May was not entitled to
recover under those provisions. Likewise, Hoke’s Estate is not entitled to
recover under those provisions because Hoke was not an insured under May’s
policy.
[15] Here, the insurance contract excluded liability coverage for someone using the
vehicle without a reasonable belief that he or she is entitled to do so.
Appellant’s App. at 13. The insurance contract further included the condition
that no coverage would be afforded under the contract if the vehicle is being
operated by a person who is an unlicensed driver for any reason. Id. at 30.
These are clear and unambiguous provisions of the insurance contract
reasonably limiting Founders’ risk to liability for the conduct of an insured who
should and legally could be driving the vehicle. Because of the difference
between a compulsory insurance statute and our compulsory financial
responsibility statute, if May did not want to be subject to the exclusions at issue, 2
2
These exclusions were plainly stated in the policy of insurance and were not buried in fine print or
otherwise hidden. May knew that Coomer occasionally drove his vehicle; he presumably knew she did not
have a valid license; and he had also expressed to her he did not want her to drive his vehicle when he was
not present. See App. of Appellee at 44-46.
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he did not have to purchase a policy of insurance. Instead, he could have
posted a bond in the same minimum coverage amount he had insured himself
for through Founders and he would have been subject to no such restrictions.
The dissent does not believe the distinction between compulsory insurance and
compulsory financial responsibility statutes is significant. Not only has our
supreme court clearly stated that there is a legal distinction, see Transamerica Ins.
Co., 563 N.E.2d at 1267-68, but in this case there is also a factual distinction. In
a compulsory insurance state, it would be theoretically possible for an insured
to comparison shop for a policy of insurance without some or all of these
exclusions, but it is more of an improbable possibility than a likelihood that the
insured could find one. In a financial responsibility state such as Indiana, it is a
very real possibility to demonstrate financial responsibility under one’s own
terms rather than under the terms imposed by an insurance company.
[16] There is nothing inherent in the exclusions in the Founders insurance contract
that make them against public policy, it is only the particular circumstances of
this case that make enforcing them seem unjust. However, it is neither logical
nor consistent with the law of contracts that the enforceability of a contract of
insurance depends upon the status of the person with whom the insured is
involved in a collision. To hold otherwise would mean the same conduct under
the same contract of insurance could have drastically different results. If
Coomer had hit a motorist with uninsured/underinsured motorist protection
and the injured party’s insurer would have covered the damages per its own
contract of insurance, Founders would have been able to rely upon the
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exclusions in its contract. See Guzorek, 690 N.E.2d at 672 (“There is no injustice
in placing the loss with the third party’s insurer . . ., who has presumably been
compensated through its premiums for accepting the risk of an uninsured
tortfeasor.”). If Coomer had hit a motorist without insurance or one who had
rejected uninsured and/or underinsured motorist protection, see Ind. Code § 27-
7-5-2(b), then the injured party had accepted the risk of not having that
coverage, and Founders should have been able to rely upon the exclusions of its
contract. However, because Coomer was involved in a collision with a non-
motorist who was not subject to financial responsibility requirements at all, the
trial court determined that Founders was not able to enforce the clear and
unambiguous exclusions in its contract.3
[17] As between an insurer who contracted to provide coverage only under certain
circumstances and an insured who has an alternative if he wishes coverage in
all circumstances, why should the insurer be liable in contravention of the
express terms of the insurance contract? May knew he did not have insurance
coverage if the driver of his truck was unlicensed or was operating it without a
3
The trial court’s determination raises several practical questions, such as, if Founders has no duty to defend
or indemnify May or Coomer, from where does a duty to Hoke’s Estate arise? How exactly would the action
proceed if Founders has no duty to defend May or Coomer? Does Founders appear in Hoke’s Estate’s
lawsuit against May and Coomer and defend itself? Does Hoke’s Estate institute a direct action against
Founders if it should succeed in its lawsuit against May and Coomer? Could Founders assert the terms of the
contract of insurance as a defense in any such action? What would be the limits of Founders’ liability to
Hoke’s Estate if the contract is unenforceable as to May or Coomer? If the exclusionary provisions of the
contract are unenforceable, are the limits provisions nonetheless enforceable, and would that be a matter of
judicially picking and choosing which provisions of the contract may be enforced and which may not?
Because of our resolution of this case, however, we need not answer these questions.
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reasonable belief in the right to do so. If Founders cannot rely on the clear and
unambiguous terms of its contract for insurance here, could it ever rely on any
provision of its contract? Determining an insurer’s liability only after an
accident occurs and the status of the victim is ascertained creates the possibility
of disparate treatment of similarly situated insurers. The uncertainty
occasioned by the inability of an insurer to rely on reasonable limits to its
liability would most likely be passed along to the insured in the form of higher
premiums to cover the unknown risk or the constriction of insurance coverage
in general.
[18] We have great sympathy for the Hokes and their loss. However, “a third
party’s right to recover through liability insurance is not absolute.” Guzorek,
690 N.E.2d at 672. The dissent would base its decision on the public policy
“that persons who suffer loss due to the tragedy of automobile accidents shall
have a source and means of recovery,” see slip op. at 19-20 (quoting Williamson,
496 N.E.2d at 810), and require Founders to be that source for Hoke’s Estate.
However, the source and means of recovery is grounded in the insurance
contract itself. The general policy of making insurance available to compensate
for losses arising from motor vehicle collisions does not trump the long-standing
precedent allowing an insurer to reasonably limit its liability, nor should the
recompense of one victim take precedence over the importance of providing
affordable insurance to all motorists. Founders limited its risk to permissive,
licensed drivers of this vehicle and fixed its premiums on that basis. There is no
public policy against such limitations, there is simply the unfortunate reality
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that this injured party has no access to insurance proceeds under these
circumstances.
Without minimizing the importance of the doctrine that contracts
should not be enforced if they contravene public policy, many courts
have cautioned against recklessness in condemning contracts as being
in violation of public policy. Public policy, some courts have said, is a
term of vague and uncertain meaning, which it pertains to the
lawmaking power to define, and courts are apt to encroach upon the
domain of that branch of the government if they characterize a
transaction as invalid because it is contrary to public policy, unless the
transaction contravenes some positive statute or some well-established
rule of law.
Schornick v. Butler, 205 Ind. 304, 185 N.E. 111, 113 (1933) (quoting Hogston v.
Bell, 185 Ind. 536, 544, 112 N.E. 883, 885 (1916)). We cannot say this is a case
in which we should refuse to enforce the insurance contract on public policy
grounds. Though recovery may be more difficult, Hoke is not without a
remedy as he may still seek damages from May and Coomer.
Conclusion
[19] Founders is entitled to judgment as a matter of law on its complaint for
declaratory judgment in all respects. The trial court’s summary judgment order
denying summary judgment as to Hoke’s Estate is therefore reversed.
[20] Reversed.
Mathias, J., concurs.
May, J., dissents with opinion.
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IN THE
COURT OF APPEALS OF INDIANA
Founders Insurance Company, Court of Appeals Case No.
49A02-1501-PL-8
Appellant-Plaintiff,
v.
Mark May, Pamela Coomer, and
Roger W. Hoke as the Personal
Representative of the Estate of
Brian Hoke, deceased,
Appellees-Defendants,
May, Judge, dissenting.
[21] Summary judgment as to Hoke was properly denied. I acknowledge the
majority’s concern that “[d]etermining an insurer’s liability only after an
accident occurs and the status of the victim is ascertained creates the possibility
of disparate treatment of similarly situated insurers.” (Slip op. at 14.) But the
result the majority reaches in its effort to avoid “disparate treatment of similarly
situated insurers” gives rise to a far greater concern – disparate treatment of
innocent persons who are accident victims. As the majority result has the effect
of depriving pedestrians, bicyclists, and other non-drivers of recovery that
would remain available to motorists involved in traffic accidents, I must
respectfully dissent.
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[22] I agree with the majority that the particular facts of this case present an issue of
first impression in Indiana. But the majority’s narrow characterization of
Indiana’s public policy is not required by our Indiana Supreme Court’s
precedent and would lead to harsh and unfair outcomes, because it would result
in protection for drivers injured in motor vehicle accidents but would leave no
remedy for pedestrians, bicyclists, or other persons who need not or cannot
prove financial responsibility.
[23] Specifically, I would decline to hold, as the majority appears to, that the well-
established and almost universally-recognized public policy to protect innocent
victims from financial loss by reason of the acts of irresponsible operators of
motor vehicles applies only in “compulsory insurance” states but not in
“compulsory financial responsibility” states like Indiana. 4 That surely is not a
4
I do not find the distinction between “compulsory financial responsibility” and “compulsory insurance” so
significant that it should serve to deprive innocent non-driver victims of motor vehicle accidents of a
mechanism for recovery that is available to drivers. Courts have often used the terms interchangeably, e.g.,
Dunn v. Safeco Ins. Co. of Am., 798 P.2d 955, 958 (Kan. Ct. App. 1990): “[r]egardless of the reasoning used, all
courts that have considered the question as it pertains to an innocent third party have held that an insurer
cannot, on the ground of fraud or misrepresentation, retrospectively avoid coverage under a compulsory
insurance or financial responsibility law so as to escape liability to an innocent third party.” (Emphasis added.)
The majority suggests “if May did not want to be subject to the exclusions at issue, he did not have to
purchase a policy of insurance. Instead, he could have posted a bond in the same minimum coverage
amount he had insured himself for through Founders and he would have been subject to no such
restrictions.” (Slip op. at 13) (footnote omitted). It is a long-standing public policy that persons who suffer
loss from automobile accidents should have a source and means of recovery. I would not place outside the
scope of that policy those Hoosiers affluent enough to satisfy financial responsibility requirements without
buying insurance. An innocent victim’s ability to recover should not depend on an automobile owner’s
income level.
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result our legislature intended would flow from the compulsory financial
responsibility statutes.
[24] I am fully cognizant of the importance of public policy generally favoring the
enforcement of contracts, and I acknowledge our Supreme Court’s statement on
which the majority relies as its articulation of our public policy that “Indiana’s
current financial responsibility scheme, like the prior one, demonstrates a policy
to protect automobile owners . . . from damages which [sic] might be inflicted on
them by other cars out on the road.” Transamerica Ins. Co. v. Henry, 563 N.E.2d
1265, 1268 (Ind. 1990) (emphasis added). That was an appropriate statement of
policy in Henry, where tortfeasor and victim were both drivers, and I do not
suggest automobile owners are undeserving of protection.
[25] But I would not attribute to our legislature a public policy that protects only
accident victims who happen to be automobile owners or drivers, and leaves to
fend for themselves pedestrians, bicyclists, and other non-drivers who need not
or cannot prove financial responsibility or who are otherwise not subject to the
financial responsibility laws. As the majority correctly notes, our Indiana
Supreme Court has not foreclosed a policy that would place non-drivers on an
equal footing: “[w]e leave for another day whether a liability insurer can deny
coverage when the third party does not have protection against uninsured
motorists.” Colonial Penn Ins. Co. v. Guzorek, 690 N.E.2d 664, 672 (Ind. 1997).
[26] I believe a more useful statement of our public policy in this case is that “it is
the policy of this state that persons who suffer loss due to the tragedy of
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automobile accidents shall have a source and means of recovery.” Am.
Underwriters Grp., Inc. v. Williamson, 496 N.E.2d 807, 810 (Ind. Ct. App. 1986),
(disapproved on other grounds by Guzorek). This policy typically guides courts in
other jurisdictions who face fact situations like ours, and I believe that analysis
strikes a better balance between protection of insured motorists and that of
accident victims who are not motorists.
[27] In McCarthy v. Motor Vehicle Acc. Indemnification Corp., 224 N.Y.S.2d 909, 921
(App. Div. 1962), aff'd, 188 N.E.2d 405 (N.Y. 1963), the Appellate Division
surveyed the law in this area:
Many states have recognized the need to protect innocent victims from
financial loss by reason of the acts of irresponsible operators of motor
vehicles. Recent legislation has been enacted in several jurisdictions to
remedy such situations and to fill the gaps which have existed.
Despite differences in the various statutes a common thread runs
through all of them -- that the perspective from which the problem
must be considered is the interests of the victim and not the actor.
Thus in Hartford Acc. & Indem. Co. v. Wolbarst, 95 N.H. 40, 43, 57 A.2d
151, 153, where the collision was deliberately or intentionally caused,
the court stated as follows: “The purpose of the New Hampshire
Financial Responsibility Act was fundamentally to provide
compensation for innocent persons who might be injured through
faulty operation of motor vehicles.” In re Opinion of the Justices, 81
N.H. 566, 129 A. 117, 39 A.L.R. 1023. “Financial responsibility
statutes have been passed in many states, and are in the process of
preparation in still others, to secure the solvency of operators upon the
highways of those states, and to guarantee their ability to discharge
judgments arising out of accidents in which they might be involved * *
*. The beneficiaries of such an act and of such a policy, when issued,
are the members of the general public who may be injured in
automobile accidents by such person; and the policies are generally
construed with great liberality to accomplish their purpose.” 7
Appleman, Insurance Law and Practice, § 4295 [62, 63].
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[28] It further noted liability insurance is coming to be regarded more as a device for
providing funds to meet the needs of injured persons and less as a device for the
protection of the insured. Id. at 922. Statutory recognition of this trend is
manifested in financial responsibility laws, the purpose of which is to indemnify
innocent third persons and to protect the general public from financially
irresponsible motorists. Id. Since the basic purpose of the financial
responsibility laws is not to afford financial protection to the insured, but rather
to compensate his innocent victim, there is no reason why the victim’s rights
should depend upon the motivation of the insured’s conduct. Id. Nor are the
victim’s rights against the insurer derived through the insured. Id.
[29] Today we address the question our Supreme Court explicitly left unresolved in
Guzorek: whether a liability insurer can deny coverage when the third party
does not have protection against uninsured motorists. I agree with the courts of
other states that the perspective from which the financial responsibility question
must be considered is the interest of the victim and not the actor, and that the
purpose of the financial responsibility laws is to indemnify innocent third
persons and to protect the general public from financially irresponsible motorists.
[30] I cannot join the majority opinion to the extent it would, in order to protect
insurance companies from perceived “disparate treatment,” deprive non-
motorist accident victims of recovery that is available to accident victims who
are motorists, and I must therefore respectfully dissent.
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