Indiana Insurance Guaranty Association v. Carlos A. Smith
82 N.E.3d 383
Ind. Ct. App. Recl.2017Background
- On Aug. 18, 2015, Carlos Smith was injured in a collision with Martin Torres; Smith’s insurer was Affirmative Casualty and Torres’s insurer was ACCC.
- ACCC denied coverage to Torres for lack of cooperation on Nov. 10, 2015.
- Five days before Smith filed suit, an order of liquidation was entered against Affirmative; the Indiana Insurance Guaranty Association (IIGA) was substituted as the insolvent insurer’s successor.
- Smith sued Torres and Affirmative asserting Torres was an "uninsured motorist" due to ACCC’s denial and sought recovery under Affirmative’s uninsured motorist (UM) coverage.
- IIGA moved to dismiss under Trial Rule 12(B)(6), arguing a post-accident denial of coverage does not make a vehicle "uninsured" under the statute or Affirmative’s policy; the trial court denied the motion.
- The court of appeals affirmed, holding that a vehicle whose insurer disclaims coverage is an "uninsured motor vehicle" under statute and fits Affirmative’s uninsured-automobile definition.
Issues
| Issue | Plaintiff's Argument (Smith) | Defendant's Argument (IIGA) | Held |
|---|---|---|---|
| Whether a post-accident denial of liability coverage renders a tortfeasor’s vehicle an "uninsured motor vehicle" under I.C. ch. 27-7-5 | A denial means the tortfeasor effectively lacks insurance that can cover damages, so the vehicle is "uninsured" and UM coverage applies | A disclaimer/denial by the tortfeasor’s insurer does not convert an insured vehicle into an "uninsured motor vehicle" for UM purposes | Held: Yes; denial of coverage means the vehicle is not in compliance with financial responsibility requirements and is an uninsured motor vehicle |
| Whether Affirmative’s policy definition of "uninsured automobile" covers a vehicle that had insurance at the accident but whose insurer later denied coverage | The policy’s phrase "applicable at the time of the accident" is reasonably read to exclude policies disclaimed as to the loss, so the vehicle is uninsured under the policy | IIGA contends the policy unambiguously requires an absence of any liability policy "applicable" at the accident time, so a policy in existence then but later denied does not make the vehicle uninsured | Held: The vehicle fits the policy definition because no bodily injury insurance was "applicable" to Smith’s loss after denial; insurer’s denial means no coverage for the accident |
| Proper standard of review for dismissal | N/A—plaintiff relies on legal sufficiency of complaint | N/A—defendant sought dismissal under TR 12(B)(6) | De novo review applies to Trial Rule 12(B)(6) and statutory/contract interpretation |
| Role of public policy/statutory purpose in construing UM coverage | UM statute is remedial and should be liberally construed to protect insureds; denying UM on these facts would frustrate statutory purpose | IIGA warns against expanding "uninsured" beyond plain text of statute/policy | Court: Statute’s remedial purpose supports interpreting "uninsured" to include coverage-denied vehicles; public policy disfavors an insurer "gotcha" that leaves insureds uncompensated |
Key Cases Cited
- Lockhart v. State, 38 N.E.3d 215 (Ind. Ct. App. 2015) (standard for de novo review of Trial Rule 12(B)(6) dismissal)
- United Nat’l Ins. Co. v. DePrizio, 705 N.E.2d 455 (Ind. 1999) (UM statute provides broad protection to insureds; remedial and liberally construed)
- State Auto. Mut. Ins. Co. v. Flexdar, Inc., 964 N.E.2d 845 (Ind. 2012) (ambiguities in insurance policies are construed against the insurer)
- Vanguard Ins. Co. v. Polchlopek, 222 N.E.2d 383 (N.Y. 1966) (construing identical policy language to include vehicles whose insurers disclaimed coverage)
- Dreher v. Aetna Cas. & Sur. Co., 226 N.E.2d 287 (Ill. 1967) (contrasting view that identical definitions unambiguously exclude vehicles with post-accident denials)