593 F.Supp.3d 34
N.D.N.Y.2022Background:
- Plaintiff William Loomis was injured in 2017 while driving an XPO Logistics truck insured by ACE under the XSA policy; the truck was registered in Indiana and garaged in New York.
- The XSA policy lists a $7 million liability limit and a $3 million "Retained Limit" (self-insured retention) that the insured "must pay before the Limits of Insurance become applicable."
- Plaintiff settled the tort claim against the other driver for the $50,000 policy limit and sought underinsured motorist (UIM) benefits from ACE; ACE denied coverage, relying on the policy language.
- This Court previously held ACE violated Indiana's UM/UIM statute by failing to obtain a written rejection of UM/UIM coverage and therefore read UM/UIM coverage into the XSA policy with limits equal to the policy's bodily injury limit.
- The remaining dispute (addressed on supplemental summary judgment) was whether the $3 million retained limit must be paid before the $7 million UIM limit is available and whether that retained limit conflicts with Indiana's UM/UIM statute or renders coverage illusory.
- The Court granted ACE's supplemental summary judgment: it held the retained limit is enforceable as a permissible condition precedent and does not violate the Indiana UM/UIM statute.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Enforceability of $3M retained limit under Indiana UM/UIM statute | Retained limit is an impermissible coverage limitation; UM/UIM must provide first-dollar coverage up to $7M | Policy plainly conditions insurer's obligation on exhaustion of $3M retained limit; insurer need not provide first-dollar coverage | Court: Retained limit is enforceable; does not reduce the $7M liability limit and is a permissible condition precedent under Indiana law |
| Compatibility with IC 27-7-5-5 (anti-stacking / setoff rules) | Statutory limitations list does not authorize retained limits; retained limit conflicts with statutory setoff/limit scheme | IC 27-7-5-5 does not address retained limits and does not bar such conditions; statutory setoff analysis requires factual record | Court: IC 27-7-5-5 does not prohibit a retained limit here; provision inapplicable to invalidate retained limit |
| Illusory coverage / remedy if employer (insured) won't pay retained limit | If XPO (insured) will not pay the retained limit, UIM coverage is illusory and ACE should be required to pay within the retained layer | Policy and law do not obligate ACE to pay amounts within the retained limit; remedy would not force ACE to cover the SIR | Court: Illusory-coverage claim fails; no basis to require ACE to pay retained amount; policy obligates ACE to pay only in excess of the retained limit |
Key Cases Cited
- United Nat. Ins. Co. v. DePrizio, 705 N.E.2d 455 (Ind. 1999) (statutory UM/UIM requirements must be enforced unless legislature provides explicit carve-out)
- Cinergy Corp. v. Associated Elec. & Gas Ins. Servs., Ltd., 865 N.E.2d 571 (Ind. 2007) (self-insured retention must be satisfied before insurer's obligations attach)
- Monroe Guar. Ins. Co. v. Langreck, 816 N.E.2d 485 (Ind. Ct. App. 2004) (retained amount differs from deductible and does not reduce policy limit)
- Stonington Ins. Co. v. Williams, 922 N.E.2d 660 (Ind. Ct. App. 2010) (reading UM coverage into policy where statutory rejection absent)
- City of Gary v. Allstate Ins. Co., 612 N.E.2d 115 (Ind. 1993) (self-insured entities may not be treated as insurers under UM statutes; legislative change required for different result)
- Frye v. Auto-Owners Ins. Co., 845 F.3d 782 (7th Cir. 2017) (statutory exemptions are narrowly construed; insurer providing UIM must comply with statutory limits)