In Mary Lou Smith, et al. v. Auto-Owners Insurance Co., No. 84A01-0611-CV-516, the appellate court had to decide whether Smith's claim for uninsured motorist coverage against her policyholder, Auto-Owners, was allowed based on her policy and Indiana Code 27-7-5-4.
Smith and several family members were involved in a car accident caused by Nellie Rogers in February 1999. The Smiths filed a personal injury action against Rogers in February 2001. Just a few days before the trial was set to start in 2004, Rogers' attorney told the Smiths' attorney that Rogers' insurance company, Highlands Insurance Co., had filed for receivership in Texas. That same day, the Smiths' attorney sent a letter to Auto-Owners to inform the company the Smiths would be making an uninsured-motorist claim. Later, the Smiths added Auto-Owners as a defendant in their personal-injury action.
Auto-Owners filed a complaint for declaratory judgment, arguing Indiana statutes and the terms of the Smiths insurance policy prevented them from making an uninsured motorist claim more than two years after an accident. The trial court granted summary judgment in favor of Auto-Owners.
At issue in this case is the interpretation and application of the insurance policy and definition of insolvency regarding uninsured-motorist claims as defined by Indiana Code, wrote Judge James Kirsch. He and Judge Margret Robb overturned the trial court grant of summary judgment.
Indiana Code 27-7-5-4 says uninsured motorist coverage under an insurer's insolvency protection applies only when the tortfeasor's insurer becomes insolvent within two years after the accident. The Smiths' insurance policy with Auto-Owners also says they must file an uninsured-motorist claim within two years from the date that the cause of action accrued. However, in the Smith's case, the cause of action for the claim is the insolvency of Rogers' insurer.
Before discovering Highland had become insolvent, the Smiths would not have been able to bring a claim for uninsured motorist with Auto-Owners, wrote Judge Kirsch. The statute of limitations for IC 27-7-5-4 runs from the date of the accident or the date of the insurer's insolvency, whichever is later. For someone to claim uninsured-motorist coverage due to insolvency of the tortfeasor's insurer, the cause of action is not complete until there is an accident, the tortfeasor's insurer becomes insolvent, and the injured party learns of the insolvency. Judge Kirsch wrote the claim does not need to be filed within two years of the accident but within two years after learning the tortfeasor's insurer became insolvent. Even though Highland was placed in receivership in November 2003, the Smiths didn't learn about until just before their trial in March 2004.
Because questions of fact exist as to when the insolvency of Highland occurred and if the Smiths then filed their claim in a timely manner, summary judgment in favor of Auto-Owners is reversed.
Judge Michael Barnes dissented from the majority because he believed the plaintiffs do not present a question of fact regarding the potential date of Highland's insolvency and the plain language of IC 27-7-5-4 bars the plaintiffs' suit. Indiana Code would require the Smiths to present evidence that as of February 2001, Highland was unable to pay its obligations or its liabilities exceeded its assets at the time. The Smiths rely on receivership documents, which did not come out until four years after the date of the accident and those documents show Highland was not experiencing financial difficulties until after the two years as is required by Indiana Statute and Auto-Owner's policy.