Howard Justice v. American Family Insurance Company
2014 Ind. LEXIS 196
| Ind. | 2014Background
- Justice, an insured, was struck by a bus; he received workers’ compensation totaling $71,958.50 and $25,000 from a third-party insurer, bringing total recovery to $96,958.50.
- Justice carried a $50,000 UIM policy with a $50k/$100k structure from American Family; the policy included a setoff reducing limits by payments from liable parties and by workers’ compensation benefits.
- GAB Robbins paid workers’ compensation to Justice; Justice settled the lien for $5,511.06, leaving $71,958.50 as net workers’ comp.
- Justice’s UIM claim sought $25,000—the difference between the policy limit and the $25,000 received from Wagner’s insurer; American Family denied coverage invoking the setoff.
- The trial court granted summary judgment for American Family; on appeal the Indiana Court of Appeals sided with Justice, holding the setoff applied to total damages; the Supreme Court granted transfer.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a workers’ compensation setoff can reduce UIM policy limits below the statutory minimum | Justice: setoff excluded by workers’ comp exclusion; must apply to damages | American Family: setoff reduces policy limit per statute and policy language | Setoff reduces the policy limit, not total damages, under the policy language |
| Whether the policy language unambiguously provides a setoff against the policy limit | Justice: ambiguity favors insured; setoff against total damages | American Family: policy language unambiguous; reduces limits | Policy language unambiguously reduces the limit of liability, not total damages |
| Whether the setoff contravenes Ind. Code § 27-7-5-2(a) and hence is unenforceable | Justice: statute requires full minimum coverage and exclusions may trump setoff | American Family: setoff permissible under statute when language and purpose align | Setoff is permissible and does not violate the statute when applied to the policy limit |
Key Cases Cited
- Beam v. Wausau Ins. Co., 765 N.E.2d 524 (Ind. 2002) (ambiguous-language analysis; limit reductions must target the policy limit)
- Leist v. Auto-Owners Ins. Co., 311 N.E.2d 828 (Ind. App. 1974) (uninsured motorist setoff cannot undermine statutory minimum)
- Hardiman v. Gov't Interins. Exch., 588 N.E.2d 1331 (Ind. Ct. App. 1992) (minimum coverage policy; workers’ comp setoff conflicts with statutory goal)
- Patton v. Safeco Ins. Co. of Am., 267 N.E.2d 859 (Ind. App. 1971) (uninsured motorist excess-escape clauses invalid against minimum coverage)
- Walkup v. Wabash, 702 N.E.2d 713 (Ind. 1998) (setoff interpretation distinguished from lien questions)
- Cannon v. Am. Underwriters, Inc., 275 N.E.2d 567 (Ind. App. 1971) (restrictions on coverage conflicting with uninsured motorist statute)