Allstate Insurance Co. v. Bradtmueller

715 N.E.2d 993, 1999 Ind. App. LEXIS 1476, 1999 WL 695674

• Court: Indiana Court of Appeals
• Decided: September 9, 1999
• Docket: 02A03-9809-CV-377
• Status: Published

Opinions

OPINION

BAILEY, Judge

Case Summary

Appellant-Defendant Allstate Insurance Co. (“Allstate”) brings this interlocutory appeal from the denial of its motion for summary judgment in the lawsuit brought by its insured, Appellee-Plaintiff Angela H. Bradt-mueller (“Bradtmueller”), to recover benefits under the underinsured motorist endorsement of Allstate’s policy. We affirm.

Issue

The sole issue raised on appeal may be restated as whether the trial court correctly concluded that Bradtmueller could invoke the “escape clause”¹ in the arbitration provision of Allstate’s policy to obtain a trial on the issue of Allstate’s liability for underin-sured motorist benefits.

Facts

The operative facts are undisputed. On November 19, 1993, Bradtmueller was seriously injured in an automobile accident. (R. 10). The driver of the other automobile involved in the accident had liability coverage limits on an insurance policy in the amount of $25,000.00. (R. 11). That driver’s insurance carrier paid Bradtmueller $25,000.00. (R. 11). Bradtmueller maintained uninsured and underinsured motorist coverage in the amount of $100,000.00 per person pursuant to an automobile policy issued by Allstate. (R. 13). Allstate paid Bradtmueller $2,305.05 in medical pay benefits under the policy. (R. 58-59).

Allstate’s policy provided in pertinent part as follows:

Limits of Liability

1. The coverage limits shown on the declarations page for:

a. ‘Each person’ is the maximum amount we would pay for damages arising out of bodily injury to one person in any one motor vehicle accident, including damages sustained by any one else as a result of that bodily injury.

[[Image here]]

3. The limits for Coverage § will be reduced by all amounts paid by or on behalf of the owner or operator of the underin-sured motor vehicle.

[[Image here]]

5. Subject to the above limits of liability, damages payable will be reduced by:

a. All amounts paid by the owner or operator of the uninsured auto, including the underinsured motor vehicle, or anyone else responsible. This includes all sums paid under the bodily injury property damage liability coverage of this or any other automobile policy.

b. All amounts payable under any worker’s compensation law, disability benefits law, or similar law, automobile medical payments, or any similar automobile medical payments coverage.

[[Image here]]

IF WE CANNOT AGREE

If the insured person or we do not agree on that person’s right to receive any damages or the amount, then at the written request of the insured person, the disagreement will be settled by arbitration. Arbitration will take place under the rules of the American Arbitration Association unless either party objects.

[[Image here]]

Regardless of the method of arbitration, any award not exceeding the limits of the financial responsibility law of Indiana, will be binding and may be entered as a judgment in a proper court.

Regardless of the method of arbitration, when any arbitration award exceeds the financial responsibility limits of the State of Indiana, either party has a right to trial on all issues in a court of competent jurisdiction. This right must be exercised within 60 days of the award. Costs, including attorneys fees, are to be paid by the party incurring them.

(R. 18-19, 21) (emphasis in original).

Bradtmueller submitted a claim for under-insured motorist benefits to Allstate but the parties were unable to agree as to the amount to which Bradtmueller was entitled. (R. 58-59). The parties pursued arbitration. (R. 59). On May 1, 1997, the arbitration panel issued its decision which read as follows:

The arbitrators find for the plaintiff and against the defendant in the amount of $50,000, against which defendant is entitled to a credit of $27,305.05. Therefore, plaintiff shall have and recover the sum of $22,694.95 from the defendant herein.

(R. 43).²

On May 12, 1997, Bradtmueller filed the instant lawsuit alleging that she was entitled to underinsured motorist benefits from Allstate. (R. 10). Allstate moved for summary judgment on the basis of its assertion that Bradtmueller was precluded from bringing her claim by the arbitration provision of the insurance contract. (R. 39-51). The trial court denied Allstate’s motion. (R. 104-05). This interlocutory appeal followed. (R. 113— 15). We denied Bradtmueller’s motion to file a belated appellee’s brief.

Discussion and Decision

A. Prima Facie Error Standard

At the outset, we must consider that Bradtmueller failed to timely file an appel-lee’s brief. When an appellee does not submit a brief, an appellant may prevail by making a prima facie case of error. Rzeszutek v. Beck, 649 N.E.2d 673, 676 (Ind.Ct.App.1995). The prima facie error rule protects this court and relieves it from the burden of controverting arguments advanced for reversal, a duty which properly remains with counsel for the appellee. Id. However, this court may nevertheless exercise its discretion to decide the case on the merits. In re Marriage of Jackson, 682 N.E.2d 549, 551 (Ind.Ct.App.1997). We choose to exercise that discretion in the present case. See id.

B. Standard of Review— Summary Judgment

As stated in Barnes, as Mayor of the City of Gary v. Antich, 700 N.E.2d 262, 264-65 (Ind.Ct.App.1998), trans. denied:

In reviewing a motion for summary judgment, this court applies the same standard as the trial court. We must determine whether there is a genuine issue of material fact and whether the law has been correctly applied by the trial court. Summary judgment is appropriate only if no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law. Neither the trial court, nor the reviewing court, may look beyond the evidence specifically designated to the trial court. Once the movant for summary judgment has' established that no genuine issue of material fact exists by submission of materials contemplated by T.R. 56, the nonmovant may not rest on his pleadings but must set forth specific facts, using supporting materials contemplated under the rule, which show the existence of a genuine issue for trial. A trial court’s grant of summary judgment is ‘clothed with a presumption of validity,’ and the appellant bears the burden of demonstrating that the trial court erred.

(citations omitted).

C. Interpretation of Contracts/Insurance Policies

As stated in Peoples Bank & Trust Co. v. Price, 714 N.E.2d 712 (Ind.Ct.App.1999):

Our supreme court has recently confirmed its commitment to advancing the public policy in favor of enforcing contracts. Indiana courts recognize that it is in the best interest of the public not to unnecessarily restrict persons’ freedom to contract. Thus, as a general rule, the law allows competent adults the utmost liberty in entering into contracts which, when entered into freely and voluntarily, will be enforced by the courts. Nevertheless, despite the very strong presumption of enforceability, courts have refused to enforce private agreements that contravene statute, clearly tend to injure the public in some way, or are otherwise contrary to the declared public policy of Indiana.

[[Image here]]

Construction of the terms of a written contract is a pure question of law for the court; thus, our standard of review is de novo. The unambiguous language of a contract is conclusive upon the parties to the contract and upon the courts. If the language of the instrument is unambiguous, the intent of the parties is determined from the four corners of that instrument. If, however, a contract is ambiguous or uncertain, its meaning is to be determined by extrinsic evidence and its construction is a matter for the fact finder. In interpreting a written contract, the court should attempt to determine the intent of the parties at the time the contract was made as discovered by the language used to express their rights and duties. The contract is to be read as a whole when trying to ascertain the intent of the parties. The court will make all attempts to construe the language in a contract so as not to render any words, phrases, or terms ineffective or meaningless. The court must accept an interpretation of the contract which harmonizes its provisions as opposed to one which causes the provisions to be conflicting. Moreover, in the absence of anything to indicate a contrary intention, writings executed at the same time and relating to the same transaction or subject matter will, as a general proposition, be construed together.

(Slip op. at 7-9) (citations omitted).

Questions involving the interpretation of an insurance policy are generally questions of law and therefore are particularly well suited for summary disposition. Union Sec. Life Ins. Co. v. Acton, 703 N.E.2d 662, 664 (Ind.Ct.App.1998), trans. denied. Where there is an ambiguity in an insurance contract, the policy is to be construed strictly against the insurance company. Stevenson v. Hamilton Mut. Ins. Co., 672 N.E.2d 467, 471 (Ind.Ct.App.1996). Strict construction against the insurer is driven by the fact that the insurer drafts the policy and foists its terms upon the customer. Id. The insurance companies write the policies; we buy their forms or we do not buy insurance. Id. An insurance contract is ambiguous when it is susceptible to more than one interpretation and reasonably intelligent persons would honestly differ as to its meaning. Id. If there is such an ambiguity, the policy should be interpreted most favorably to the insured. Tate v. Secura Ins., 587 N.E.2d 665, 668 (Ind.1992). However, an ambiguity does not exist simply because a controversy exists between the parties, with each favoring a different interpretation. Stevenson, 672 N.E.2d at 471. Moreover, the failure to define a term in an insurance policy does not necessarily make it ambiguous. Id.

D. Parties’ Contentions

Bradtmueller contends that because the terms “any award” and “any arbitration award” were not defined in the insurance policy, “award” means the $50,000.00 in total damages awarded by the arbitration panel, before the credits were applied. Therefore, Bradtmueller asserts that she should be allowed to invoke the “escape clause” and pursue a cause of action under the terms of the policy because the amount awarded exceeded Indiana’s minimum mandatory financial responsibility limit of $25,000.00. See Ind. Code § 9-25-2-3.

On the other hand, Allstate argues that the amount of the “award” was $22,694.00 after the credits were applied. Accordingly, Allstate reasons, Bradtmueller is precluded from bringing her cause of action because the amount awarded was less than the $25,-000.00 minimum mandatory financial responsibility limit.

E. Interpretation of “any aioard” or “any arbitration aioard” as used in Allstate’s Policy

Although no Indiana case has decided the precise question posed by the present case, it is well settled under Indiana law that where an insurance policy does not define a term which is susceptible to more than one reasonable interpretation, the interpretation favoring the insured will be adopted. See Tate, 587 N.E.2d at 668 (because “amounts payable” was not defined in the policy, the phrase was held to refer to the total amount of damages and not the coverage limits); See also Transcontinental Technical Services, Inc. v. Allen, 642 N.E.2d 981, 984 (Ind.Ct.App.1994).

In the present case, the phrases “any award” or “any arbitration award” were not defined in Allstate’s insurance policy. There can be no dispute that, without any consideration of amounts set off to reduce Allstate’s liability under the underinsured motorist endorsement, the phrase “any award” would refer to the total damages found by the arbitration panel. See National Gen. Ins. Co. v. Riddell, 705 N.E.2d 465, 467-68 (Ind.Ct.App.1998) (holding that insurance company could invoke the escape clause to demand a trial where the arbitrators awarded the insured $220,000.00). While Allstate could have provided that the terms “any award” or “any arbitration award” referred to its ultimate liability under the un-derinsured motorist endorsement, it did not. Bradtmueller’s interpretation that the terms refer to the total amount of damages awarded by the panel is a reasonable one. Therefore, Indiana law requires that we adopt this interpretation.

The authority from other jurisdictions cited by Allstate is not particularly helpful in determining the result required by Indiana law. See National Gen. Ins. Co., 705 N.E.2d at 467-68 (noting that other jurisdictions’ treatment of escape clauses in the arbitration provisions of insurance policies are irrelevant because the only relevant case law is that of Indiana). Nevertheless, the Krizanich v. Liberty Mut. Fire Ins. Co., 181 Ariz. 108, 887 P.2d 989, 991 (Ariz.App.1994) decision supports a conclusion opposite that propounded by Allstate. The arbitration provision under scrutiny in Krizanich reads as follows:

If we and an insured do not agree:

1. Whether that person is legally entitled to recover damages under [the un-derinsured motorist] endorsement; or

2. As to the amount of damages;

either party may make a written demand for arbitration.

Id. at 991. The Krizanich court noted that the phrase ‘amount of damages’ standing alone was at least as susceptible to the insured’s interpretation as that of the insurance company. Id. at 991. However, the court found that the first section above defined the “scope of the arbitration” and thus that the interpretation of the term “amount of damages” referred “not to a claimant’s damages as a whole” but only to the amount which could be recovered against the insurance company under the underinsurance endorsement. Id. at 991-92. In the present case, Allstate’s policy neither defines the phrase “any arbitration award” nor provides any guidance regarding the intended scope of the arbitration provision. Therefore, we conclude that, had the Krizanich court analyzed the Allstate policy provisions at issue in the present case, it would have determined that the phrase “any arbitration award” was at least as susceptible to the insured’s interpretation as that of the insurance company.

Additionally, the rationale of Bauso v. Allstate Ins. Co., 227 A.D.2d 578, 643 N.Y.S.2d 190, 191 (1996), appeal denied, is flawed. The Bauso court noted that Allstate’s under-insured motorist benefits were to be offset by the payments from the underinsured motorist. Id. at 191. Therefore, the Bauso court reasoned that “the amount of plaintiffs damages and the amount of compensation he has received must be determined before Allstate’s liability under the uninsured/underinsured motorist endorsement can be calculated.” Id. This is an example of the tail wagging the dog. The Bauso court’s conclusion is incorrect because there is no need to determine the amounts to be set off under the reduction provisions of the policy where, as in Bauso and the present case, the interpretation of the policy reduction provisions are not disputed. The arbitrators need only determine the issue of liability (if necessary) and the amount of the insured’s total damages. The parties can then apply the reduction provisions themselves. In any event, the policy language determines the work of the arbitration panel; the work of the arbitration panel does not drive the interpretation of the policy language.

The analysis in D’Antonio v. State Farm Mut. Auto. Ins. Co., 262 N.J.Super. 247, 620 A.2d 1060 (1993) is similarly flawed. The D ’Antonio court adopted the insurance company’s interpretation of the undefined term “damages” under the rationale that, where the insured had been compensated by the underinsured motorist by the payment of New Jersey’s minimum responsibility limit of $15,000.00, few arbitrator’s awards would ever be binding because even an award of $1.00 would be above the mandatory coverage that every underinsured tortfeasor carries. See id. at 1061. In other words, the D 'Antonio court determined that the provisions regarding the arbitration of underin-sured coverage would be rendered nugatory where the insured had already received the statutory minimum from the underinsured motorist. This reasoning presupposes that the insured’s total damages have already been reduced by the $15,000.00 payment. It is an arbitration award of $15,001.00 in total damages, not $1.00, that exceeds the New Jersey financial minimum. Moreover, this approach does not apply in Indiana because, as evidenced by the three cases from other states analyzed here, other states may have lower minimum mandatory financial responsibility limits than does Indiana. See Krizanich, 887 P.2d at 991 (Arizona’s financial responsibility minimum was $15,000.00); Bauso, 643 N.Y.S.2d at 191 (New York’s financial responsibility limit was $10,000.00); D’Antonio, 620 A.2d at 1060 (New Jersey’s financial responsibility minimum was $15,-000.00). Under the Allstate policy in the present case, where the insured is injured by a motorist from a state requiring only $15,-000.00 in coverage, an arbitrator’s award of Indiana’s financial responsibility minimum of $25,000.00 in total damages would not be nugatory because it would be binding and require the insurance company to pay $10,-000.00 in underinsured benefits. Thus, the D Antonio rationale has no application under Indiana law.

Based on the above, Indiana law requires the adoption of Bradtmueller’s interpretation of “any arbitration award” as referring to the arbitration panel’s determination of the insured’s total damages. Therefore, the trial court correctly denied Allstate’s motion for summary judgment.

Affirmed.

NAJAM, J., concurs. RATLIFF, Sr.J., dissents with separate opinion.

1 . An "escape clause” in an insurance policy governing the arbitration of uninsured or underinsured motorist benefits permits either party to demand a' trial where the arbitrators' award exceeds a certain amount. See National Gen. Ins. Co. v. Riddell, 705 N.E.2d 465, 467-68 (Ind.Ct.App.1998).

2 . The $27,305.05 credit was comprised of the sum of the underinsured motorist’s carrier’s $25,000.00 payment and Allstate's payment of $2,305.05 of medical pay benefits. (R. 58-59).