In February, we covered a recent case involving a motorcyclist and uninsured motorist insurance. As Winter turns to Summer and drivers take to the roads for day trips and recreational driving, it is important to understand Indiana’s Uninsured Motorist Statute and recent case law.For those unfamiliar with uninsured motorist insurance, the purpose of the clause in an insurance policy is to protect a driver if they should find themselves needing compensation from an uninsured, or only partially insured, driver.
Consider this situation: A responsible, fully insured driver encounters an accident with a negligent driver. The not-at-fault driver’s insurance covers a certain threshold of property damage and personal injury, but there are still outstanding medical bills. Typically, the driver could recover these additional costs from the negligent driver’s insurance but when that driver is underinsured then the driver must find other means of compensation. A lawsuit against the party might yield a judgment but, oftentimes, the underinsured party does not have the assets to immediately satisfy that judgment.
For these reasons, insurance companies offer a clause in many insurance policies to provide the uninsured motorist coverage. The clause would insure the policy-holder in the amount they would recover if the other driver, being uninsured, had been insured. The different policies cover property, bodily injury, and/or economic-only damages. Basic uninsured coverage is typically included in auto insurance policies and must be explicitly rejected if the driver wishes to exclude it. This is not advisable as the slightly increased premiums are worth the additional coverage.
Despite clear policy language, uninsured motorist coverage has led to numerous cases in Indiana to settle certain ambiguities. Indiana Code section 27-7-5-4(b) mandates that nearly all insurance policies in Indiana include uninsured motorist coverage. But what happens when the individual carrying full coverage (including uninsured motorist coverage) is the negligent party causing an accident with the uninsured driver?
In Lakes v. Grange Mutual Casualty Co., the Indiana Supreme Court considered this question. In that case, an injured party moved for the underinsured motorist coverage to compensate her costs in excess of the standard coverage. The court examined the meaning of underinsured and deteremined that if coverage by the tortfeaser was greater than or equal than the per-accident limit of the injured persons, the tortfeasor would not be considered underinsured and the coverage would not apply. This determination affirmed the 2002 decision in Corr v. American Family Insurance, which held the amount actually recovered to the policy limit would be the basis for determining underinsured. A decade later, the Indiana Supreme Court reiterated this understanding to state that the uninsured motorist coverage should be “read in a light most favorable to the insured.”