Frye et al v. Nationwide Mutual Insurance Company et al

Filing 106

OPINION AND ORDER: Court DENIES 92 Motion for Certification; GRANTS 94 Motion for Summary Judgment; DENIES 96 Motion for Partial Summary Judgment. Defendant to submit evidence that it has paid the full amount it concedes it owes to Plaint iffs under the Commercial Umbrella Insurance Policy ($382,314.21) within thirty days of the date of this Order. When the Court is satisfied that Auto-Owners has paid this amount to Plaintiffs, it will dismiss this case. Signed by Judge Rudy Lozano on 1/19/2016. (tc)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF INDIANA
HAMMOND DIVISION
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DEE FRYE, et al.,
Plaintiffs,
vs.
AUTO-OWNERS INSURANCE
CO., et al.,
Defendants.

NO. 3:13–CV-113

OPINION AND ORDER
This matter is before the Court on: (1) Plaintiffs’ Motion
for Certification of Questions of Indiana Law to the Indiana
Supreme Court, filed by Plaintiffs Dee Frye and Lanhui Frye on May
12, 2015 (DE# 92); (2) Defendant Auto-Owners Insurance Company’s
Motion for Summary Judgment, filed on May 29, 2014 (DE# 94); and
(3) Plaintiffs’ Motion for Partial Summary Judgment, filed on June
11, 2015 (DE# 96).

For the reasons set forth below, Plaintiffs’

Motion for Certification (DE# 92) is DENIED.
for Summary Judgment (DE# 94) is GRANTED.

Defendant’s Motion

Plaintiffs’ Motion for

Partial Summary Judgment (DE# 96) is DENIED.

The Defendant is

ORDERED to submit evidence that it has paid the full amount it
concedes it owes to Plaintiffs under the Commercial Umbrella
Insurance Policy ($382,314.21) within thirty (30) days of the date

‐1‐ 

of this Order.

When the Court is satisfied that Auto-Owners has

paid this amount to Plaintiffs, it will dismiss this case.

FACTS
For the purposes of these motions for summary judgment, the
facts below are undisputed:
Plaintiff Dee Frye (“Frye”) was involved in a car accident in
LaPorte County, Indiana, on January 27, 2011, in which he was
seriously

injured.

Frye

was

driving

a

vehicle

Nationwide Mutual Insurance Company (“Nationwide”).

insured

by

The accident

was caused by the negligence of Myron Dampier (“Dampier”), the
driver of the other vehicle.

The accident occurred while Frye was

driving a vehicle in the scope of his employment with Tri City
Data & Electronic, Inc. (“Tri City”).

Through Tri City, Frye was

covered by a Commercial Automobile Insurance Policy (“Automobile
Policy”) issued by an affiliate of Auto-Owners Insurance Company
(“Auto-Owners”).

Tri City also provided a Commercial Umbrella

Insurance Policy issued by Auto-Owners that extended coverage to
Frye (“Umbrella Policy”).
Auto-Owners’ Automobile Policy
Auto-Owners’ Automobile Policy provides underinsured motorist
(“UIM”) coverage of $1 million per person.
7.)

The Automobile Policy sets forth the following relevant

provisions regarding UIM coverage:
‐2‐ 

(See DE# 46-3 at 5-

2.

COVERAGE
a.

We will pay compensatory damages, including but
not limited to loss of consortium, [that] any
person is legally entitled to recover from the
owner or operator of an uninsured automobile or
underinsured automobile because of bodily injury
sustained by an injured person while occupying
an automobile that is covered by SECTION II –
LIABILITY COVERAGE of the policy.

. . .
4.

LIMIT OF LIABILITY
We will pay damages for bodily injury or property
damage as follows:
a.

. . .
e.

Our limit of liability for compensatory damages,
including but not limited to loss of consortium,
because of or arising out of bodily injury to
any one person in any one occurrence is the least
of:
(1) the difference between:
(a) the amount paid in compensatory
damages, including but not limited
to loss of consortium, to the
injured person by or for any person
or organization who may be liable
for the injured person’s bodily
injury; and
(b) the
“each
person”
limit
for
Uninsured or Underinsured Motorist
Coverage
stated
in
the
Declarations; or
(2) the difference between:
(a) the total amount of compensatory
damages, including but not limited
to loss of consortium, incurred by
the injured person; and
(b) the amount paid by or for any person
or organization liable for the
injured person’s bodily injury.
The amount we pay will be reduced by any amounts
paid or payable for the same bodily injury:

‐3‐ 

(1)

under
SECTION
II
–
LIABILITY
COVERAGE of the policy;
under any workers compensation or
similar law; or
by or on behalf of any person or
organization who may be legally
responsible for the bodily injury.

(2)
(3)

5.

OTHER [UM] OR [UIM] COVERAGE
If there is other [UM] or [UIM] Coverage which
applies, we will pay our share of the damages. Our
share will be the ratio of our limit of liability
to the total of all limits which apply.
Total
damages payable for one occurrence shall be
considered not to exceed the limit of liability of
the applicable policy that has the highest limit of
liability.
The coverage extended to automobiles you do not own
will be excess over any other coverage available to
you.

(DE# 46-3 at 49-52 (emphases omitted).)
Auto-Owners’ Umbrella Policy
Auto-Owners originally issued the Umbrella Policy to Tri City
on November 9, 2007.

The Umbrella Policy was subsequently renewed

each year through November 9, 2011.
¶ 7(b)-(f)).)

(DE# 95-1 at 2 (Reiner Aff.

The Umbrella Policy’s liability limit and UIM

coverage limit were each $1 million per occurrence from 2007
through May 4, 2010.
endorsement

increased

(Id.)
the

Beginning on May 5, 2010, a change
liability

limit

to

$5

million

per

occurrence, while the UIM coverage limit remained at $1 million.
(Id. at ¶ 7(b).)

At the time of Frye’s accident in 2011, the

Declarations pages of the Umbrella Policy provided a UIM coverage

‐4‐ 

limit of $1 million, and a liability limit of $5 million.

(DE#

46-4 at 5-7.) There is no written rejection of UIM coverage limits
less than $5 million. The Umbrella Policy states in relevant part:
2.

COVERAGE
[UM
UIM
UM] PROPERTY DAMAGE
Subject to 4. CONDITIONS below
a.

4.

(1) We will pay compensatory damages to an
injured person covered by an underlying policy
in accordance with the provisions of the
automobile insurance shown in the Schedule of
Underlying
Insurance
or
such
policy’s
replacement; . . .
. . .

CONDITIONS

The following provisions shall apply irrespective of any
similar conditions in an underlying policy:
. . .
b.
The following additional provisions are only
applicable to this endorsement:
(1)

Limit of Liability
(a)

The most we shall pay under this
endorsement for all compensable damages
in any one occurrence shall not exceed
the Limit of Liability shown in the
Declarations for:
1)
The combined coverages of [UM]
and [UIM];
. . .

(c)

For
[UIM]
coverage,
our
Limit
of
Liability shall be reduced by the any
amounts:

‐5‐ 

1)
Paid under the Bodily Injury
Liability coverage of this policy for
the same bodily injury;
2)
Paid or payable for the same
bodily
injury
covered
under
any
workers compensation or similar law;
and
3)
Paid by or on behalf of any person
or organization who may be legally
responsible for the bodily injury
which are
limit.

in

excess

of

the

retained

(DE# 46-4 at 31-33.)
Background and Procedural History
After

the

accident,

Frye

received

worker’s

compensation

benefits in the amount of $692,895.79, which included payments for
medical expenses, temporary total disability and permanent partial
impairment.

(DE # 95-2 at 2.)

Dampier’s insurer made an offer to

Frye of its applicable per person policy limit of $100,000, and
Frye accepted.

Frye offered to assign the $100,000 payment to the

worker’s compensation insurer and his counsel.

(DE# 97-1 at 4.)

Pursuant to the written agreement, Tri City and Auto-Owners (as
the worker’s compensation insurer) accepted the assignment of
$75,000 in partial satisfaction of their statutory lien, and
$25,000 was paid to Frye’s counsel.
On

January

7,

2013,

Frye

(Id.)
and

his

wife,

Lanhui

Frye

(collectively, “Plaintiffs”), filed a complaint against AutoOwners and Nationwide in the St. Joseph County Circuit Court of
‐6‐ 

the State of Indiana, alleging that they are entitled to recover
UIM coverage for all damages resulting from the car accident, up
to the limits of coverage.
federal court.

(DE# 1.)

for summary judgment.

(DE# 1-1.)

The action was removed to

Plaintiffs and Nationwide filed motions
On February 4, 2015, this Court denied

Plaintiffs’ motions for summary judgment, granted Nationwide’s
motion for summary judgment, and dismissed Nationwide from the
case.

(DE# 88.) 
Auto-Owners

reached

a

partial

settlement

agreement

Plaintiffs, and paid them $1,188,799.60 in November 2014.
95-1 at 2 (Reiner Aff. ¶ 8).)

with
(DE#

This amount consisted of $900,000

from the UIM coverage of the Automobile Policy ($1 million coverage
limit less a setoff of the $100,000 paid by Dampier’s insurer),
and $288,799.60 from the UIM coverage of the Umbrella Policy
(assuming a $1 million coverage limit less a setoff of amounts
paid in worker’s compensation benefits).

(Id.)

Auto-Owners

indicates that it is in the process of paying Plaintiffs an
additional amount of $18,304.61 owed under the Umbrella Policy.
(DE# 95 at 23.)
On May 12, 2015, Plaintiffs filed a motion for certification
of three questions of Indiana law to the Indiana Supreme Court.
(DE# 92.) Auto-Owners objects to certification of these questions.
(DE# 91.) On June 11, 2015, Auto-Owners filed a motion for summary
judgment, which the parties have fully briefed.
‐7‐ 

(DE# 94.)

On the

same day, Plaintiffs filed a motion for partial summary judgment.
(DE# 96.) Auto-Owners filed a response to this motion. Plaintiffs
did not file a reply brief. The Court is prepared to rule on these
motions.

SUMMARY JUDGMENT STANDARD
Summary judgment must be granted when “there is no genuine
dispute as to any material fact and the movant is entitled to
judgment as a matter of law.”

Fed. R. Civ. P. 56(a).

A genuine

dispute of material fact exists when “the evidence is such that a
reasonable jury could return a verdict for the nonmoving party.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S. Ct.
2505, 91 L. Ed. 2d 202 (1986).

Not every dispute between the

parties makes summary judgment inappropriate; “[o]nly disputes
over facts that might affect the outcome of the suit under the
governing

law

will

properly

preclude

the

entry

of

summary

judgment.” Id. To determine whether a genuine dispute of material
fact exists, the Court must construe all facts in the light most
favorable

to

the

non-moving

party

inferences in that party’s favor.
F.3d 355, 358 (7th Cir. 2010).

and

draw

all

reasonable

See Ogden v. Atterholt, 606
A party opposing a properly

supported summary judgment motion may not rely on allegations in
his own pleading, but rather must “marshal and present the court
with the evidence [he] contends will prove [his] case.”
‐8‐ 

Goodman

v. Nat'l Sec. Agency, Inc., 621 F.3d 651, 654 (7th Cir. 2010).
“[I]nferences relying on mere speculation or conjecture will not
suffice.”

Stephens v. Erickson, 569 F.3d 779, 786 (7th Cir. 2009)

(citation omitted).

If the non-moving party fails to establish

the existence of an essential element on which he bears the burden
of proof at trial, summary judgment is proper.

See Massey v.

Johnson, 457 F.3d 711, 716 (7th Cir. 2006).

DISCUSSION
For the purpose of the parties’ motions for summary judgment,
no dispute of material fact exists.

Rather, the motions raise

issues of insurance contract interpretation.

Auto-Owners’ motion

for summary judgment asserts that Auto-Owners has paid or is in
the process of paying all amounts due under the Automobile Policy
and the Umbrella Policy.

Plaintiffs oppose this motion, and move

for summary judgment, arguing that Auto-Owners is not entitled to
set off the $100,000 payment from Dampier’s insurer.

Plaintiffs

also assert that the UIM coverage limit under the Umbrella Policy
is $5 million, rather than $1 million, by operation of law.
Finally, Plaintiffs maintain that under the Umbrella Policy, AutoOwners is not entitled to set off the amount paid by the worker’s
compensation insurer, and that, if such setoff is allowed, it
should be taken from the amount of Plaintiffs’ damages, rather
than the UIM coverage limit.
‐9‐ 

In Indiana,1 “[t]he interpretation of an insurance policy is
primarily a question of law for the court, and it is therefore a
question
Wagner

which

v.

omitted).

is

Yates,

particularly
912

N.E.2d

suited

805,

808

for

summary

(Ind.

2009)

judgment.”
(citation

Insurance policies are analyzed “using the same rules

of interpretation applied to other contracts.”

Auto–Owners Inc.

Co. v. Benko, 964 N.E.2d 886, 890 (Ind. Ct. App. 2012) (citation
omitted).

Courts “interpret an insurance policy with the goal of

ascertaining and enforcing the parties’ intent as revealed by the
insurance contract.”

Westfield Cos. v. Knapp, 804 N.E.2d 1270,

1274 (Ind. Ct. App. 2004) (citation omitted).

“[C]lear and

unambiguous language in an insurance policy should be given its
plain and ordinary meaning, even if those terms limit an insurer’s
liability.” Everett Cash Mut. Ins. Co. v. Taylor, 926 N.E.2d 1008,
1012 (Ind. 2010) (citation omitted)).

“Where an ambiguity exists,

that is, where reasonably intelligent people may interpret the
policy’s language differently, Indiana courts construe insurance
policies strictly against the insurer.”
at

890

(citation

omitted).

However,

Auto-Owners, 964 N.E.2d
“an

ambiguity

is

not

affirmatively established simply because controversy exists and

1

 Where, as here, “neither party raises a conflict of law issue in
a diversity case, the federal court simply applies the law of the
state in which the federal court sits.”
Citadel Group Ltd. v.
Washington Reg’l Med. Ctr., 692 F.3d 580, 587 n.1 (7th Cir. 2012)
(quotation omitted). 

‐10‐ 

one party asserts an interpretation contrary to that asserted by
the opposing party.”

Beam v. Wausau Ins. Co., 765 N.E.2d 524, 528

(Ind. 2002) (citation omitted).

Ultimately, the meaning of a

policy “can only be gleaned from a consideration of all its
provisions, not from an analysis of individual words or phrases.
[The Court] must accept an interpretation of the contract language
that harmonizes the provisions rather than the one which supports
a conflicting version of the provisions.”

Adkins v. Vigilant Ins.

Co., 927 N.E.2d 385, 389 (Ind. Ct. App. 2010) (citations omitted);
see Masten v. AMCO Ins. Co., 953 N.E.2d 566, 569 (Ind. Ct. App.
2011).
The Automobile Policy’s Setoff of the Tortfeasor’s Payment
Auto-Owners argues that the terms of the Automobile Policy
entitle it to set off Dampier’s insurer’s $100,000 payment from
the $1 million UIM per person limits available under the policy,
thereby reducing Auto-Owners’ liability to $900,000.

Plaintiffs

assert that no deduction should be made for the $100,000 payment.
The parties rely upon Section 4(a) of the Automobile Policy,
which limits payment for UIM losses:
Our limit for liability for compensatory damages . . .
is the least of:
(1)

the difference between:
(a)

the amount paid in compensatory
damages . . . to the injured person
by or for any person or organization

‐11‐ 

who may be liable for the injured
person’s bodily injury; and
(b)

(2)

the
“each
person”
limit
for
Uninsured or Underinsured Motorist
Coverage
stated
in
the
Declarations; or

the difference between:
(a)

the total amount of compensatory
damages . . . incurred by the
injured person; and

(b)

the amount paid by or for any person
or organization liable for the
injured person’s bodily injury.

(DE# 46-3 at 51.)

The parties do not dispute that Dampier’s

insurer paid $100,000 for Frye’s injuries.

Applying these facts

to Section 4(a), Auto-Owners asserts that the maximum amount
payable is the lesser of: the difference between the amount paid
in damages by Dampier’s insurer ($100,000), and the per-person
limit of its UIM coverage ($1,000,000), which is $900,000; or the
difference

between

the

amount

of

damages

incurred

by

Frye

(allegedly more than $1 million), and the amount paid by Dampier’s
insurer ($100,000), which is presumed to be more than $900,000.
Because $900,000 is the smaller amount, Auto-Owners asserts that
it owes Plaintiffs $900,000 under Section 4(a)(1).
Plaintiffs agree that the amount calculated under Section
4(a)(2) will exceed the amount under Section 4(a)(1), and thus,
Section 4(a)(1) applies here.

However, Plaintiffs argue that the

$100,000 payment from Dampier’s insurer should not be deducted
‐12‐ 

under Section 4(a)(1) because there has been no “amount paid . .
. to the injured person.”
Plaintiffs

assigned

the

(Id. (emphasis added).)
$100,000

payment

to

Rather,

the

worker’s

compensation insurer (Auto-Owners) and their own attorneys.

(See

DE# 102 at 6 (asserting that the payment to Auto-Owners “was done
through a willing agreement between the parties”).)

Plaintiffs

claim that because the $100,000 was paid to others, and not to
themselves, the clear language of Section 4(a)(1) determines that
the limit for liability is $1 million.
The assignment agreement states that the limits of liability
of Dampier’s policy ($100,000) “have been tendered to the employee”
Frye, and that Frye “has offered to assign” the amount to the
employer and its worker’s compensation insurer, less the 25%
statutory attorney’s fee of $25,000.

(DE# 97-1 at 4, ¶¶ 4, 7.)

The amount assigned to Auto-Owners, i.e., $75,000, was accepted as
partial satisfaction of the worker’s compensation lien.
8.)

(Id. ¶

Because Plaintiffs had constructive receipt of the $100,000

payment for their injuries, and willingly assigned those funds to
address the worker’s compensation lien and attorneys’ fees, the
Court finds that the $100,000 paid by Dampier’s insurer is an
“amount paid . . . to the injured person.”
Plaintiffs argue that the language of Section 4(a)(2)(b) is
ambiguous because it references “amounts paid . . . for the injured
person’s bodily injury,” without indicating to whom the amount was
‐13‐ 

paid.

The Court disagrees.

As explained above, Section 4(a)(2)

does not apply here, given Plaintiffs’ contention that “the total
amount of damages will be well in excess of the policy limits.”
(DE# 102 at 7.)

Moreover, an insurance policy is not ambiguous

simply because parties assert conflicting interpretations.
765 N.E.2d at 528.

Beam,

The language in Section 4(a) – including

Section 4(a)(2)(b) – is substantially similar to the limitations
on UM and UIM coverage codified in Indiana Code § 27-7-5-5(c).2
See Ind. Code § 27-7-5-5(c)(2)(B).

Indiana courts have held that

this statutory language “is clear and unambiguous and is not open
to interpretation.”

Kinslow v. GEICO Ins. Co., 858 N.E.2d 109,

114 (Ind. Ct. App. 2006).

2
 Section 27-7-5-5(c) states:

The maximum amount payable for bodily injury under
uninsured or underinsured motorist coverage is the
lesser of:
(1) the difference between:
(A) the amount paid in damages to the
insured by or for any person or
organization who may be liable for the
insured’s bodily injury; and
(B) the per person limit of uninsured or
underinsured motorist coverage provided
in the insured’s policy; or
(2) the difference between:
(A) the total amount of damages incurred
by the insured; and
(B) the amount paid by or for any person
or organization liable for the insured’s
bodily injury.
Ind. Code § 27-7-5-5(c) (emphasis added).
‐14‐ 

Auto-Owners maintains that Section 4(e) of the Automobile
Policy provides for a setoff of the $100,000 paid by Dampier’s
insurer.

Section 4(e) states in part,

[t]he amount we pay will be reduced by any amounts paid
or payable for the same bodily injury . . . by or on
behalf of any person or organization who may be legally
responsible for the bodily injury.
(DE# 46-3 at 53.)

Indiana courts have enforced setoff provisions

in connection with UIM coverage.

See, e.g., Progressive Ins. Co.,

Inc. v. Bullock, 841 N.E.2d 238, 241 (Ind. Ct. App. 2006) (allowing
UIM insurer to set off payment by liability insurer).

Because

Dampier’s insurer paid $100,000 for Frye’s injuries, Auto-Owners
asserts that its payment of $900,000 exhausts the remaining UIM
coverage under the Automobile Policy.
Plaintiffs

argue

that

under

Section

4(e),

Auto-Owners’

$900,000 payment does not exhaust the UIM coverage because their
damages allegedly exceed $1 million.

Citing

Beam v. Wausau

Insurance Company, 765 N.E.2d at 530-31, they claim that Section
4(e) provides for a setoff from the total amount of damages, rather
than the policy limit. In Beam, the policy at issue stated, “[a]ny
amount payable for damages under this coverage shall be reduced by
all

sums

paid

or

payable

under

any

workers’

compensation,

disability benefits or similar law.” 765 N.E.2d at 527.

The

Indiana Supreme Court found that the phrase “[a]ny amount payable
for

damages

under

this

coverage”

‐15‐ 

clearly

provides

that

the

reduction will be taken from the amount of damages incurred, rather
than from the policy limit.
Auto-Owners

maintains

Id. at 530.
that

the

language

of

Section

4(e)

differs significantly from that of the policy at issue in Beam.
According to Auto-Owners, “the amount we pay” in Section 4(e) does
not refer to Plaintiffs’ damages, but rather, the amount AutoOwners pays under the Automobile Policy.

Section 4(a)(1)(a)

expressly limits the amount Auto-Owners “will pay [for] damages
for bodily injury” to the “Limit of Liability,” subject to setoffs
of amounts paid by those legally responsible for the injury. Thus,
Section 4(a)(1) establishes the maximum amount Auto-Owners will
pay for a UIM claim, i.e., $1 million, subject to certain setoffs.
According to Auto-Owners, it follows that in Paragraph 4(e), the
“amount we pay” cannot exceed the UIM coverage limit of $1 million.
The Court agrees.

Paragraph 4(e) provides that “the amount [Auto-

Owners] pay[s]” (which is, at most, the UIM coverage limit of $1
million) “will be reduced by any amounts paid or payable of the
same bodily injury . . . by or on behalf of any person or
organization who may be legally responsible.”

(DE# 46-3 at 53.)

The Court finds this language to be clear and unambiguous.

See

Medley v. Am. Economy Ins. Co., 654 N.E.2d 313, 316 (Ind. Ct. App.
1995) (holding that “[t]he limit of liability will be reduced by
all sums paid because of the bodily injury . . . by or on behalf
of persons or organizations who may be legally responsible” policy
‐16‐ 

language was clear and unambiguous and provided a setoff from the
policy’s maximum limit of liability) (emphasis omitted).

Section

4(e) provides a setoff from the Automobile Policy’s maximum limit
of liability, rather than the amount of Plaintiffs’ damages.
Plaintiffs claim that Auto-Owners is receiving a benefit
twice because (1) the Automobile Policy provides for a setoff of
Dampier’s $100,000 payment, and (2) a portion of the payment was
assigned to Auto-Owners as the worker’s compensation insurer.
Auto-Owners insists it only receives a benefit once, as a setoff
per the terms of Section 4(a)(1).

The second alleged benefit,

that is, Plaintiffs’ assignment of $75,000 to Auto-Owners, reduced
the worker’s compensation lien by $75,000.

The Umbrella Policy

provides for a setoff of amounts paid by the worker’s compensation
insurer.

Auto-Owners concedes that this setoff should reflect the

$75,000 reduction of the worker’s compensation lien.
7, 13 n.3.)

(DE# 103 at

If Plaintiffs had not assigned the $75,000 to Auto-

Owners, the setoff would be $75,000 greater, and Plaintiffs would
receive $75,000 less under the Umbrella Policy.

Under these

circumstances, Auto-Owners does not receive a benefit twice.3

3

Auto-Owners’ initial memorandum in support of its Motion for
Summary Judgment does not reflect a $75,000 reduction of the
worker’s compensation lien in its calculation of the amount owed
to Plaintiffs under the Umbrella Policy. (DE# 95 at 23.) However,
in its reply brief, Auto-Owners concedes that $75,000 should be
reduced from the setoff amount, and recalculates the amount owed
under the Umbrella Policy to reflect the $75,000 reduction. (DE#
103 at 7, 13 & n.3; see also DE# 101 at 9 n.5 (acknowledging
‐17‐ 

Finally, Plaintiffs assert that the Court should interpret
the Automobile Policy in their favor because the policy failed to
include language stating that Auto-Owners “would get a credit for
underlying tort feasor [sic] limits even if the credit is taken by
another carrier.”

(DE# 97 at 3.)

Citing Wagner v. Yates, 912

N.E.2d 805 (Ind. 2009), Plaintiffs claim that where an insurer
could have done more to clearly address stacking situations,
failure to do so requires interpreting the policy in the insured’s
favor.

Auto-Owners maintains that the Automobile Policy expressly

addresses the situation where other UIM coverage is available.
Section 5 of the policy states:
Other [UM] or [UIM] Coverage
If there is other [UM] or [UIM] Coverage which applies,
we will pay our share of the damages. Our share will be
the ratio of our limit of liability to the total of all
limits which apply.
Total damages payable for one
occurrence shall be considered not to exceed the limit
of liability of the applicable policy that has the
highest limit of liability.
(DE# 46-3 at 52.)

This language contemplates that other UIM

coverage may apply to the same occurrence, and provides that
coverage will not exceed the policy with the highest limit of
liability.

In other words, the coverage will not stack.4

$75,000 assignment reduces the worker’s compensation amount AutoOwners is entitled to set off in Auto-Owner’s response brief to
Plaintiffs’ Motion for Partial Summary Judgment).)

4

 “‘Stacking’ of insurance policies occurs when more than one policy

is applicable to a loss thus allowing the insured to recover under
‐18‐ 

The Indiana Supreme Court has noted that “because the purpose
of insurance is to indemnify, double recovery by an insured is
prohibited even when multiple policies apply to a loss.”

Wagner,

912 N.E.2d at 812 (emphasis added; citation omitted).

Indiana

allows

for

anti-stacking

clauses

that

“limit

coverage

when

coverage under another policy is currently available so as to
preclude stacking or double recovery of [UIM] coverages.”

Id.

(citation and quotations omitted).

Indiana Code section 27-7-5-

5(a)

endorsement

provides

that

a

“policy

or

affording

[UIM]

coverage . . . may provide that the total limit of all insurers’
liability arising out of any one (1) accident shall not exceed the
highest limits under any one (1) policy applicable to the loss. .
. .”

Ind. Code § 27-7-5-5(a).
In arguing that the Automobile Policy must explicitly state

that a tortfeasor’s payment for damages will be set off even if
another insurer sets off the same payment, Plaintiffs endorse
stacking UIM coverage where more than two insurers are involved.
But

Section

27-7-5-5(a)

clearly

allows

for

anti-stacking

provisions, and does not limit the number of policies to which
these provisions may apply.

Section 5 of the Automobile Policy

provides that UIM coverage will not be stacked, without limiting

all policies applicable to the loss (i.e., stack the policies) up
to the total damages.”
Fairmont Specialty Ins. Co. v. 1039012
Ontario, Inc., 2:10 CV 070, 2011 WL 3651333, at *7 (N.D. Ind. Aug.
19, 2011) (citation omitted). 
‐19‐ 

the number of policies involved.

The Court finds that Section 5

clearly and unambiguously precludes the stacking of UIM coverage,
regardless of the number of policies involved.

For these reasons,

the Court finds that Auto-Owners’ payment of $900,000 exhausts the
remaining UIM coverage under the Automobile Policy.

The Umbrella Policy’s UIM Coverage Limit
The parties disagree as to the amount of the UIM coverage
available under the Umbrella Policy.

Auto-Owners asserts that the

Umbrella Policy’s UIM coverage limit is $1 million because the
policy’s Declarations pages identify $1 million of UIM coverage.
Plaintiffs argue that Indiana Code section 27-7-5-2(a) requires
insurers to provide UIM coverage in limits equal to the limits of
liability, unless the coverage was rejected in writing.

(DE# 97

at 5). Plaintiffs assert that because the Umbrella Policy provides
a limit of liability of $5 million, by operation of law, it must
also provide UIM coverage of $5 million.5
In Indiana, a “statute is given its clear and plain meaning
if unambiguous, but if ambiguous the court must try to ascertain
the legislature’s intent, and the court’s primary goal is to
interpret the statute to effectuate that intent.”
LaSalle

Bank

Nat.

Ass'n,

595

F.3d

782,

786

(7th

Miller v.
Cir.

5

 Neither party asserts that Tri City rejected UIM coverage. 

‐20‐ 

2010)

(citations

omitted).

Because

mandatory,

full-recovery,

Indiana’s

remedial

“UIM

statute,’

statute
it

‘is

‘is
to

a
be

liberally construed’ and ‘read in a light most favorable to the
insured.’”

Lakes v. Grange Mut. Cas. Co., 964 N.E.2d 796, 804

(Ind. 2012) (quoting DePrizio, 705 N.E.2d at 460).
When the Umbrella Policy was first issued in 2007, Section
27-7-5-2(a) stated in part:
(a) The insurer shall make available, in each automobile
liability or motor vehicle liability policy of insurance
which is delivered or issued for delivery in this state
with respect to any motor vehicle registered or
principally garaged in this state, insuring against loss
resulting from liability imposed by law for bodily
injury or death suffered by any person and for injury to
or destruction of property to others arising from the
ownership, maintenance, or use of a motor vehicle, or in
a supplement to such a policy, [UM and UIM coverage].
The [UM] and [UIM] coverages must be provided by insurers
. . . in limits at least equal to the limits of liability
specified in the bodily injury liability provisions of
an insured’s policy, unless such coverages have been
rejected in writing by the insured. . . .
Ind.

Code

(a)”).

§

27-7-5-2(a)

(2007)

(emphasis

added)

(“subsection

At that time, Section 27-7-5-2 applied to commercial

umbrella policies.

United Nat. Ins. Co. v. DePrizio, 705 N.E.2d

455, 463 (Ind. 1999) (noting that “[a]bsent an express directive
from our legislature, we decline the invitation to carve out an
exemption

for

particular

policies”).

In

2009,

the

Indiana

legislature amended Section 27-7-5-2 to add subsection (d), which
exempted commercial umbrella policies from subsection (a):

‐21‐ 

(d) An insurer is not required to make available the
coverage described in subsection (a) in a commercial
umbrella or excess liability policy, including a
commercial umbrella or excess liability policy that is
issued or delivered to a motor carrier (as defined in IC
8-2.1-17-10) that is in compliance with the minimum
levels of financial responsibility set forth in 49 CFR
Part 387.
Ind.

Code

(d)”).

§

27-7-5-2(d)

(2009)

(emphasis

added)

(“subsection

Subsection (a) was also amended to begin with the phrase,

“[e]xcept as provided in subsection (d), the insurer shall make
available, in each automobile liability or motor vehicle policy of
insurance,” UM and UIM coverage.
(emphasis

added)

(together

with

Ind. Code § 27-7-5-2(a) (2009)
subsection

(d),

the

“2009

Amendment”). The parties disagree as to whether the 2009 Amendment
applies to the Umbrella Policy.
Plaintiffs assert that the 2009 Amendment does not apply
because the Umbrella Policy was first issued in 2007, two years
before the 2009 Amendment.

Auto-Owners insists that the 2009

Amendment applies because the Umbrella Policy was renewed after
the 2009 Amendment’s effective date of July 1, 2009.
Code § 27-7-5-2 (2009).6

See Ind.

The question is whether the Indiana

legislature intended the 2009 Amendment to apply to renewals.

6

 The Umbrella Policy was issued in 2007 with a UIM coverage limit

of $1 million and a liability coverage limit of $1 million, and
was renewed at these coverage limits several times. The Umbrella
Policy’s liability coverage limit was increased to $5 million,
while maintaining the $1 million of UIM coverage, in an endorsement
effective May 5, 2010. On November 9, 2010, the Umbrella Policy
was renewed at these new limits. Thus, the endorsement and renewal
‐22‐ 

Looking at the plain language of the statute, Section 27-75-2 applies to automobile liability policies “delivered or issued
for delivery” in Indiana.

Ind. Code § 27-7-5-2(a).

Renewal

policies are policies delivered or issued for delivery.

See Ind.

Code § 27-7-6-3 (2009) (defining renewals as the “issuance and
delivery by an insurer of a policy replacing at the end of the
policy period a policy previously issued and delivered by the same
insurer insuring the same insured . . . .”) (emphasis added).
Nothing in the language of Section 27-7-5-2 indicates that the
2009 Amendment does not apply to renewals.
In
applies

determining
to

whether

renewals,

an

Indiana

amendment
courts

amendment’s legislative notes.

to

have

Section
relied

27-7-5-2
upon

the

In United Farm Bureau Mutual

Insurance Company v. Lowe, 583 N.E.2d 164 (Ind. Ct. App. 1991),
the court considered whether an amendment to Section 27-7-5-2 in
1987 (“1987 amendment”) applied to policies issued before, and
renewed

after,

the

amendment’s

effective

date.7

There,

the

plaintiffs maintained that the 1987 amendment should apply to the
renewal policies, thereby providing them with additional insurance

of the Umbrella Policy occurred after the 2009 Amendment went into
effect.

7

  The 1987 amendment to Section 27-7-5-2 required that “insurers
provide underinsured coverage, in addition to the uninsured
coverage, in amounts equal to the insured’s own bodily injury
limits in the insured’s policy, unless the insured has rejected
the coverages in writing.” Lowe, 583 N.E.2d at 167. 

‐23‐ 

coverage.

The court reviewed the historical notes of the 1987

amendment and found that “the legislature included a special
section so that the amended statute applies only to policies first
issued after December 31, 1987.”

Id. at 167-68 (citing P.L. 391-

1987(ss), Sec. 4) (emphasis added).

Relying on those notes, the

court held that the Indiana legislature intended for the 1987
amendment to apply only to policies first issued after December
31, 1987.

Id. at 168.

Because the plaintiffs’ renewal policies

were not “policies first issued” after December 31, 1987, they
were not subject to the amendment.

Id.; see also Millikan v. U.S.

Fidelity and Guar. Co., 619 N.E.2d 948, 950 (Ind. Ct. App. 1993)
(holding that the 1987 amendment to section 27-7-5-2 “applies to
policies ‘first issued’ after December 31, 1987”) (citing P.L.
391-1987(ss), Sec. 4).
When the Indiana legislature enacted the 2009 Amendment of
Section 27-7-5-2, it included notes to the amendment.
124-2009, Sec. 1-3.

See P.L.

Unlike the 1987 amendment of Section 27-7-5-

2, the notes to the 2009 Amendment do not direct that the 2009
Amendment apply only to policies first issued after the amendment’s
effective

date.

Because

the

legislature

did

not

limit

the

application of the 2009 Amendment to policies first issued after
the amendment’s effective date, the Court finds that the Umbrella
Policy is subject to the 2009 Amendment of Section 27-7-5-2.

‐24‐ 

Plaintiffs also argue that, even if the Umbrella Policy is
subject to the 2009 Amendment of Section 27-7-5-2, an insurer that
provides UIM coverage in an umbrella policy must comply with
subsection (a)’s requirement that such coverage be provided “in
limits at least equal” to the bodily injury liability coverage
limits.

They assert that subsection (d) only states that umbrella

policies are not required to provide UIM coverage; if an insurer
chooses to provide UIM coverage, nothing in Section 27-7-5-2 allows
the insurer to determine the amount of UIM coverage provided.
Plaintiffs claim that Section 27-7-5-2 did not allow umbrella
policies to provide UIM coverage in amounts that differ from bodily
injury liability coverage limits until years after the accident at
issue. In 2013, Section 27-7-5-2 was amended to include subsection
(h), which allows personal umbrella insurers to determine the
amount of excess UIM coverage it will provide (“2013 amendment”).
Subsection (h) states in part:
an insurer that makes available the coverage described
in subsection (2) under a personal umbrella or excess
liability policy: (A) may make available the coverage
in limits determined by the insurer; and (B) is not
required to make available the coverage in limits equal
to the limits specified in the personal umbrella or
excess liability policy.
Ind. Code § 27-7-5-2(h).
this

language

indicates

Plaintiffs argue that the addition of
that

Section

27-7-5-2

did

not

allow

insurers to determine the amount of umbrella UIM coverage to
provide prior to the 2013 amendment.
‐25‐ 

However, subsection (h)

addresses

personal

umbrella policies.

umbrella

policies,

rather

than

commercial

Plaintiffs point to no evidence that the 2013

amendment changed Section 27-7-5-2 as it relates to commercial
umbrella policies.

Furthermore, neither the 2009 Amendment to

Section 27-7-5-2 nor the notes to the 2009 Amendment indicates
that the legislature intended to require an insurer to abide by
the obligations of subsection (a) if it elects to provide UIM
coverage in a commercial umbrella policy.

Rather, Section 27-7-

5-2(d) and the language added to subsection (a) in the 2009
Amendment

clearly

and

unambiguously

provide

that

commercial

umbrella insurers are not required to make available UIM coverage
under the requirements set forth in subsection (a).
When the liability limit of the Umbrella Policy increased to
$5 million in May 2010, and the policy was renewed in November
2010, Section 27-7-5-2 no longer required commercial umbrella
policies to make available the insurance coverage required in
subsection (a), i.e., UIM coverage with limits that were at least
equal to liability limits.

As such, the Court finds that the UIM

coverage limit under the Umbrella Policy is the amount provided on
its Declarations pages:

$1 million.

The Umbrella Policy’s Setoff of Worker’s Compensation Amounts
Plaintiffs argue that setting off amounts paid by a worker’s
compensation insurer from the UIM coverage limit of the Umbrella
Policy is against public policy.

They claim that because Section

‐26‐ 

27-7-5-2 allegedly gives an insured a “statutory right to purchase
[UIM] coverage in an amount equal to the limits of liability he
purchased,” allowing a setoff of worker’s compensation amounts
diminishes this statutory right. (DE# 97 at 7.) But this argument
assumes that the Umbrella Policy is not subject to the 2009
Amendment of Section 27-7-5-2. As explained above, the Court finds
that the Umbrella Policy is subject to the 2009 Amendment of
Section 27-7-5-2.

Because the 2009 Amendment explicitly excludes

commercial umbrella policies from the requirements of Section 277-5-2(a), this argument fails.8
Auto-Owners asserts that the Umbrella Policy allows a setoff
of worker’s compensation amounts from the UIM coverage limit.
Auto-Owners relies upon Section 4(b)(1)(c) of the Umbrella Policy,
which states, “[f]or [UIM] coverage, our Limit of Liability shall
be reduced by any amounts . . . [p]aid or payable for the same
bodily injury covered under any workers compensation or similar
law . . . which are in excess of the retained limit.”
at 33.)

(DE# 46-4

The Indiana Supreme Court has found that similar policy

language allowed a setoff of worker’s compensation benefits from
the policy’s coverage limits. In Justice v. American Family Mutual

8

  Plaintiffs also assert that Auto-Owners relies upon section (e)
of the Automobile Policy as the basis for the worker’s compensation
setoff.
(DE# 97 at 6 (citing DE# 46-3).)
Because Auto-Owners
does not rely upon this provision of the Automobile Policy in its
briefing, the Court will not address it here.

‐27‐ 

Insurance Company, 4 N.E.3d 1171 (Ind. 2014), the Indiana Supreme
Court found the following policy language to be unambiguous: “[t]he
limits of coverage will be reduced by . . . [a] payment made or
amount

payable

because

of

bodily

injury

under

any

worker’s

compensation or disability benefits law or any similar law.”
at 1177.

Id.

The Court held that this language meant that the setoff

was applied to the limits of the policy, rather than the insured’s
damages.

Id.9

Plaintiffs contend that any setoff of worker’s compensation
amounts should be deducted from the amount of their damages, rather
than the Umbrella Policy’s limit of liability.

They attempt to

distinguish Section 4(b)(1)(c) from the provision approved in
Justice by focusing on Section 4(b)(1)(c)’s phrase, “which are in
excess of the retained limit.”

According to Plaintiffs, this

9

In Justice, after determining that the setoff provision was
unambiguous, the Court considered whether the provision was
unenforceable as a violation of public policy.
There, the UIM
coverage limit was $50,000, which was the minimum amount allowed
by statute in Indiana. 4 N.E.3d at 1178-79. Justice had received
$25,000 from the tortfeasor’s carrier, and over $70,000 in worker’s
compensation.
Applying the setoff provision to the worker’s
compensation amount operated to reduce the UIM coverage to zero.
Id. at 1197. The Court found that Justice was entitled to recover
an additional $25,000 from the UIM insurer in order to receive the
statutory minimum of $50,000 of UIM coverage. Id. This is not an
issue here because Plaintiffs received more than the statutory
minimum of $50,000 from the Dampier’s insurer. See Hardiman v.
Gov’t Interins. Exch., 588 N.E.2d 1331, 1335 (Ind. Ct. App. 1992)
(allowing setoff of full amount of worker’s compensation payment
against UIM limit where employee received the statutory minimum
from the tortfeasor’s insurer).
‐28‐ 

phrase – which is not found in the Justice provision - means that
the Umbrella Policy’s limit of liability is only reduced for
payments that exceed the “retained limit” of $1 million.

Because

the worker’s compensation amount is less than the retained limit
of $1 million, Plaintiffs argue that the worker’s compensation
amount is not set off from the limit of liability.
Auto-Owners responds that the amounts paid “which are in
excess of the retained limit” means the amounts paid that are above
and beyond the coverage limit of the underlying Automobile Policy.
The Court agrees. The Umbrella Policy defines the “retained limit”
as

“the

greater

of:

(a)

[t]he

highest

applicable

limits

of

liability of any and all underlying policy(ies); or (b) 1) $500,000
for bodily injury. . . .”

(DE# 46-4 at 31.)

In their briefs, the

parties agree that the “retained limit” is the $1 million UIM
coverage limit under the underlying Automobile Policy.
at 17-18; DE# 103 at 12.)
be

clear

and

unambiguous,

(DE# 102

The Court finds that this language to
and

that

the

language

of

Section

4(b)(1)(c) is substantially similar to the provision the Justice
Court found to be unambiguous.
Here, the worker’s compensation amounts were not part of the
“retained limit” nor were they set off from the amounts paid under
the Automobile Policy.

Thus, they are “amounts paid . . . in

excess of the retained limits.”
reached

under

the

Automobile

Because the $1 million limit was
Policy
‐29‐ 

($100,000

from

Dampier’s

insurer, and $900,000 from Auto-Owners), Section 4(b)(1)(c) allows
a setoff of the worker’s compensation amounts from the Umbrella
Policy’s UIM coverage limit of $1 million.

The Court therefore

holds that Auto-Owners is entitled to set off the amounts paid by
the worker’s compensation insurer from the UIM coverage limits of
the Umbrella Policy.
At this time, it is unclear whether Auto-Owners has paid
Plaintiffs the amount it acknowledges Plaintiffs are owed under
the

Umbrella

assignment

Policy.

of

$75,000

Auto-Owners
to

concedes

Auto-Owners

that

reduced

Plaintiffs’

the

worker’s

compensation lien to $617,685.79, and that, after setting off
worker’s

compensation

amounts,

Plaintiffs

are

entitled

to

$382,314.21 under the Umbrella Policy. (DE# 103 at 13 & n.3.)
Auto-Owners claims that it has paid Plaintiffs $288,799.60, and is
in

the

process

$307,104.21.

of

paying

them

$18,304.61,

(DE# 95-1 at 3, DE# 95 at 23.)

for

a

total

of

Auto-Owners does not

indicate whether it has paid Plaintiffs the remaining balance owed
under the Umbrella Policy.

The Court therefore ORDERS Auto-Owners

to submit evidence sufficient to show that it is has paid the full
amount it concedes it owes to Plaintiffs under the Umbrella Policy
($382,314.21) within thirty (30) days of the date of this Order.

‐30‐ 

Certification of Questions to the Indiana Supreme Court
Plaintiffs seek to certify three questions to the Indiana
Supreme Court, which are paraphrased as follows:
(1)

Where a UIM insurer is entitled to set off a
tortfeasor’s liability limit, is a second UIM
insurer entitled to benefit from the same setoff,
without violating Indiana law and policy;

(2)

Where an umbrella UIM policy was issued in 2007,
and was renewed thereafter, and where the version
of Section 27-7-5-2 in effect in 2007 required that
UIM limits match liability limits, does a
subsequent amendment to Section 27-7-5-2, which
took effect on July 1, 2009, and excludes
commercial umbrella policies from the requirement
of matching limits, apply to the policy; and

(3)

Is a policy provision allowing for a setoff against
limits for payments of worker’s compensation
unenforceable in light of the Indiana Supreme
Court’s holdings in Justice and DePrizio.

(See DE# 92 at 3-4.)

Federal courts may “certify a question of

Indiana law to the Supreme Court when it appears to the federal
court that a proceeding presents an issue of state law that is
determinative

of

the

case

and

controlling Indiana precedent.”

on

which

there

is

no

Ind. R. App. P. 64(A).

clear
The

decision to grant or deny a motion to certify a question of state
law is discretionary with the district court.

United Farm Bureau

Mut. Ins. Co., Inc. v. Metro. Human Rel. Comm’n, 24 F.3d 1008,
1015, n.4 (7th Cir. 2001).
The most important consideration guiding the exercise of
discretion to certify is whether the court is “genuinely uncertain”

‐31‐ 

about a question of state law that is critical to resolution of
the case.

Golden v. State Farm Mut. Auto. Ins. Co., 745 F.3d 252,

257

Cir.

(7th

2014)

(citation

omitted).

This

“genuinely uncertain” about the issues presented.

Court

is

not

While there is

no directly controlling precedent in Indiana on these issues, there
is sufficient precedent from which this Court can determine how
the Indiana courts would decide them.

The Court therefore DENIES

Plaintiffs’ motion to certify these questions of Indiana law to
the Indiana Supreme Court.

CONCLUSION
For the reasons set forth above, Plaintiffs’ Motion for
Certification (DE# 92) is DENIED.

Defendant Auto-Owners’ Motion

for Summary Judgment (DE# 94) is GRANTED.

Plaintiffs’ Motion for

Partial Summary Judgment (DE# 96) is DENIED.

The Defendant is

ORDERED to submit evidence that it has paid the full amount it
concedes it owes to Plaintiffs under the Commercial Umbrella
Insurance Policy ($382,314.21) within thirty (30) days of the date
of this Order.

When the Court is satisfied that Auto-Owners has

paid this amount to Plaintiffs, it will dismiss this case.

DATED:

January 19, 2016

/s/ RUDY LOZANO, Judge
United States District Court

‐32‐