Pafco General v. Providence Washington ( 1992 )

587 N.E.2d 728 (1992)

PAFCO GENERAL Insurance Company, Appellant-Defendant, and Douglas Baker, Appellant-Plaintiff,
v.
PROVIDENCE WASHINGTON Insurance Company and Estate of Bradley Crum, Appellees-Defendants.

No. 41A01-9108-CV-261.

Court of Appeals of Indiana, First District.

March 10, 1992. Transfer Denied June 12, 1992.

John W. Hammel, Yarling, Robinson, Hammel & Lamb, Indianapolis, for Pafco Gen. Ins. Co.

Betsy K. Greene, Nunn, Kelley & Greene, Bloomington, for Douglas Baker.

Daniel W. Glavin and Larry L. Chubb, Beckman, Kelly & Smith, Hammond, for Providence Washington Ins. Co.

STATEMENT OF THE CASE

RATLIFF, Chief Judge.

Pafco General Insurance Co. ("Pafco") and Douglas Baker appeal the entry of summary judgment in favor of Providence Washington Insurance Co. ("Providence") in an action for uninsured motorists benefits.^[1] We affirm in part, reverse in part, and remand.

ISSUES

We restate the issues as:

1. Did Baker make a valid rejection of Providence's uninsured motorist coverage?

2. Is IND. CODE § 27-8-9-9 applicable, making Pafco the primary insurer?

3. Did the trial court err in determining that Baker was not entitled to excess coverage by Providence?

FACTS

On October 12, 1988, Baker leased an automobile from Ugly Duckling Rent a Car ("Ugly Duckling"). Ugly Duckling had a commercial insurance policy with Providence covering its leased cars. The Providence policy provided $60,000 uninsured motorist coverage. Baker signed a rental agreement with Ugly Duckling, in which he represented that he had full insurance with "Wankier", an agent for Pafco. Baker's insurance policy with Pafco provided $25,000 uninsured motorist coverage. The Providence and Pafco policies both contained "other insurance" clauses.^[2]

On October 13, 1988, Bradley Crum, an uninsured motorist, collided with Baker who was driving the leased car. Baker instituted a declaratory judgment action against Crum's estate and both insurance companies to discern to which uninsured motorists benefits he was entitled. Pafco and Providence requested summary judgment. After a hearing, the trial court denied Pafco's motion for summary judgment and granted Providence's motion, stating that Baker was not entitled to coverage by Providence and that the maximum coverage available to Baker under Pafco's policy was $25,000. Pafco and Baker appeal.

DISCUSSION AND DECISION

Pafco is appealing the denial of summary judgment. We review the propriety of the trial court's judgment by applying the same standard of review. Vanderburgh County v. Lee West (1991), Ind. App., 564 N.E.2d 966, 967, trans. denied. Summary judgment is appropriate only when no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law. Id.; Ind. Trial Rule 56(C). Although the entry of findings of fact are inappropriate in summary judgment proceedings, the court's reasons for entering summary judgment are helpful to our review and permit the appellant an opportunity to address the merits of the court's rationale. Celina Mutual Insurance Co. v. Forister (1982), Ind. App., 438 N.E.2d 1007, 1012.

Issue One

Pafco's first contention is that Baker did not make a valid rejection of Providence's uninsured motorist coverage; and therefore, Providence's insurance covered Baker. The trial court found that Baker executed a rental contract in which he chose voluntarily to reject personal accident insurance coverage by initialling a box and listing the name of his insurance company. The court also cited the language of the rental contract as evidence of Baker's rejection of Providence's insurance. Paragraph 5 of the rental agreement states:

"Vehicle Insurance. Lessor shall provide an automobile liability insurance policy for the benefit of Lessee with limits of coverage equal to or in excess of statutory requirements for public liability and property damage. Such insurance shall be excess insurance over any other liability insurance coverage available to Lessee, applicable after coverage under such other available insurance. To the extent permitted by law, said insurance DOES NOT provide coverage to Lessee for ... damages caused to any person by any uninsured motor vehicle... . Lessor and Customer reject uninsured motorist and supplemental no fault and optional coverage to the extent permitted by law."

Record at 273A (emphasis added). The trial court found that the highlighted language constituted sufficient rejection of Providence's insurance by Baker. We agree with Pafco's argument that the rental contract does not satisfy statutory requirements to effect a valid rejection of uninsured motorist insurance.

IND. CODE § 27-7-5-2 requires the insurer to make uninsured motorist coverage available in each automobile liability insurance policy. Subsection (b) of this provision permits the named insured to reject uninsured motorist coverage in writing. As Providence was the insurer of Ugly Duckling's vehicles, it was required to offer uninsured motorist coverage in its policy, which it did. Under I.C. § 27-7-5-2, Ugly Duckling could reject the coverage in writing, but it never did. Because Baker was only an insured and not the named insured on the Providence policy, Baker could not reject the coverage. See I.C. § 27-7-5-2.

Even if Baker could have made a valid rejection of Providence's uninsured motorist coverage, we disagree with the trial court's characterization of the rental contract. The alleged rejection was not given to Providence in writing. The rental agreement between Ugly Duckling and Baker was not delivered to Providence to inform them of rejection. See Indiana Lumbermens Mutual Insurance Co. v. Vincel (1983), Ind. App., 452 N.E.2d 418, 421, n. 1, trans. denied (court questioned whether an exclusion in policy was sufficient to meet the requisite express rejection of coverage by the insured mandated in the statute). Additionally, the fact that Baker indicated that he had full insurance did not constitute a rejection of uninsured motorist coverage by Providence. After reviewing the rental contract, we find that Baker's statement that he had insurance was merely a statement of fact and not a rejection of Providence's coverage. Moreover, any rejection by Baker was not voluntary. The rental contract was a printed form which forced waiver of the Providence coverage upon Baker. Such forced rejection is contrary to the express language of I.C. § 27-7-5-2, which places the option of rejection of uninsured motorist coverage upon the named insured. Therefore, any forced rejection of such coverage is void. See Vernon Fire & Casualty Insurance Co. v. American Underwriters, Inc. (1976), 171 Ind. App. 309, 314, 356 N.E.2d 693, 695 (any provision in derogation of the uninsured motorist statute will not be approved by this court); see also Indiana Farmers Mutual Insurance Co. v. Speer (1980), Ind. App., 407 N.E.2d 255, 259, trans. denied (once a person is deemed an insured under the liability portion of a policy, subsequent attempts to exclude insureds from uninsured motorist coverage will be unsuccessful); accord Ashline v. Simon (1985), La. App., 466 So.2d 622, 625, rev. denied, 472 So.2d 28 (mandatory rejection in rental agreement violates public policy in uninsured motorist statute).

The uninsured motorist statute applies to every automobile insurance policy and is incorporated therein. Vernon Fire, 356 N.E.2d at 695. Paragraph 5 of the rental contract is an attempt to limit the amount of protection available to Baker. Ugly Duckling agreed to provide liability insurance secondary to any insurance Baker may have through his own policy, but simultaneously denied any uninsured motorist coverage. Such dilution of coverage is contrary to public policy. See Peterson v. Universal Fire and Casualty Insurance Co. (1991), Ind. App., 572 N.E.2d 1309, 1312 (any language in an insurance contract which dilutes or diminishes the protection required by the uninsured motorist statute is contrary to public policy). The uninsured motorist statute links uninsured motorist coverage to liability coverage to reward those who obtain insurance coverage for the benefit of those who they might injure. Anderson v. State Farm Mutual Automobile Insurance Co. (1984), Ind. App., 471 N.E.2d 1170, 1175. We acknowledge Providence's argument that the limitation on uninsured motorist coverage was not made in an insurance policy and therefore the statute was not violated. In fact, the trial court found that I.C. § 27-7-5-2 does not encompass lease agreements for rental cars. We believe such distinction is untenable because it would defeat the purpose of the statute. In light of the express legislative intent, we disagree with the trial court and with Providence's assertion that uninsured motorist coverage could be modified and limited under contract law by the manner attempted here.

In addition, the rental contract expressly rejected uninsured motorist coverage "to the extent permitted by law." As discussed above, the attempted forced rejection violated public policy and was contrary to the uninsured motorist statute. Thus, no valid rejection occurred even within the terms of the rental contract.

Issue Two

Upon determining that Providence's coverage was not rejected, we consider the arguments regarding primary and excess coverage. I.C. § 27-8-9-9 concerns primary motor vehicle liability insurance coverage of leased vehicles. If a lessee agrees in a written lease agreement to provide coverage for damage resulting from his operation of the leased vehicle, then the lessee's liability insurance policy is primary. I.C. § 27-8-9-9(a). No claim for damages can be made against lessor's insurance policy until the limits of all the lessee's coverage is exhausted. Id. The trial court found this section applicable and determined that Pafco's insurance was primary.

Pafco argues that I.C. § 27-8-9-9 applies only to liability coverage, not to uninsured motorist coverage. The trial court referred to IND. CODE § 27-7-6-2 for the definition of "automobile liability coverage". I.C. § 27-7-6-2 defines "automobile insurance coverage" as including coverage only for bodily injury and property damage liability, medical payments, and uninsured motorists coverage. Pafco contends that it was improper to rely upon the I.C. § 27-7-6-2 definition because it is in a different act with a different purpose. I.C. § 27-8-9-9 sets statutory priorities where concurrent policies exist. Pafco cites Vincel, 452 N.E.2d at 421-22, in which the court held that I.C. § 27-7-6-2 regulates cancellations and nonrenewal of insurance policies and its definition of "insured" was irrelevant to determining the class of persons included in "insured" in I.C. § 27-7-5-1. The Vincel court's reasoning was that I.C. § 27-7-6-2 did not define "insured", but merely provided that for cancellation purposes, automobile insurance policies are those providing coverage for natural persons and their relatives. Id. at 422. Distinguishing Vincel, we find that I.C. § 27-7-6-2 expressly defines "automobile liability coverage", unlike "insured", and is relevant to I.C. § 27-8-9-9. Utilizing the I.C. § 27-7-6-2 definition, we find that I.C. § 27-8-9-9 governs liability coverage, which includes uninsured motorist coverage. This determination is consistent with Indiana law that the uninsured motorist statute applies to every automobile insurance policy and is incorporated therein. Vernon Fire, 356 N.E.2d at 695.

Pafco next contends that even if I.C. § 27-8-9-9 includes uninsured motorist coverage, I.C. § 27-8-9-9 was still inapplicable because Baker did not agree to provide insurance. By its own terms, I.C. § 27-8-9-9 applies only if the lessee agrees to provide insurance. See Huber v. Henley (S.D.Ind. 1987), 669 F. Supp. 1474, 1482 (lessee must agree in writing to provide insurance coverage before I.C. § 27-8-9-9 applies). Although we determined in Issue One that Baker did not voluntarily reject Providence's coverage, I.C. § 27-8-9-9 requires inquiry as to whether Baker placed his insurance policy with Pafco as the primary insurance.

We find that Baker did agree to have his insurance with Pafco to be primary by consenting to the following portion of Paragraph 5 of the rental contract: "Lessor shall provide an automobile liability insurance policy for the benefit of Lessee... . Such insurance shall be excess insurance over any other liability insurance coverage available to Lessee, applicable after coverage under such other available insurance." Record at 273A. Therefore, I.C. § 27-8-9-9 is satisfied. Pafco was the primary insurer under this statute while Providence was the excess insurer in accordance with the insurance policies and I.C. § 27-8-9-9.

Issue Three

The trial court determined that Baker was not entitled to any coverage by Providence. Baker's policy with Pafco contains an "other insurance" clause which provides:

"If there is other applicable similar insurance available under more than one policy or provision of coverage:

1. Any recovery for damages ... may equal but not exceed the higher of the applicable limit for any one vehicle under this insurance or any other insurance."

Record at 18. The "other insurance" clause is valid under IND. CODE § 27-7-5-5 (Supp. 1991). I.C. § 27-7-5-5 provides that a policy may provide that the total limit of all insurers' liability shall not exceed the highest limits under any one policy. Providence argues that no other insurance is available because Baker rejected the coverage by Providence. We decided adversely to Providence's argument in Issue One.

Here, Pafco limited coverage to $25,000. Providence's amount of coverage was $60,000. Adhering to the other insurance clause and I.C. § 27-7-5-5, Baker is entitled to $25,000 uninsured motorist benefits from Pafco, and an additional $35,000 from Providence. The recovery of $60,000 is equal to the highest limit under any one policy. Accordingly, we affirm the trial court's final determination that Pafco was the primary insurer, but reverse the judgment finding that Baker was not entitled to coverage by Providence. We remand with instructions to amend the entry of summary judgment in accordance with this opinion.

Affirmed in part, reversed in part, and remanded.

Costs are assessed one-half to Providence and one-half to Pafco.

ROBERTSON and SULLIVAN, JJ., concur.

NOTES

[1] Baker adopts the arguments made by Pafco and makes one additional contention of which we summarily dispose. Baker argues that Providence does not have standing to assert the validity of the rental agreement between Ugly Duckling and Baker. See Nahmias Realty Insurance Co. v. Cohen (1985), Ind. App., 484 N.E.2d 617, 623 (one not a party to a contract has no standing to enforce it). This case deals with more than the enforcement of the rental contract. Providence is litigating its responsibility as to insurance coverage and is not asserting any rights under the rental contract. Baker's contention is without merit.

[2] "Other insurance" clauses limit coverage when coverage under another policy is concurrently available so as to preclude stacking or double recovery of uninsured motorists coverages.