Indiana Appellate Decision Addressing the Underinsured Motorist Statute

Lakes v. Grange Mutual Casualty Company (Ind. March 20, 2012)

- Originally published March 20, 2012

This case is the latest in several Indiana Appellate decisions addressing the phrase “coverage available for payment to the insured” and the Underinsured Motorist Statute, I.C. §27-7-5-4. The issue was when a tortfeasor’s insurance policy provides the same amount of coverage as the defendant’s UIM coverage, but the insured actually recovers less than his/her underinsured policy limits because more than one person was injured by the tortfeasor. This decision, like a prior Supreme Court decision, Corr v. American Family Insurance, 767 N.E.2d 535 (Ind. 2002), held that a tortfeasor’s vehicle is underinsured if the amount actually paid to the plaintiff was less than the plaintiff’s per-person limit of liability under the underinsured motorist policy. In rendering this holding and reaffirming Corr, the Supreme Court strongly disapproved of a Court of Appeals’ decision, Grange Insurance Company v. Graham, 843 N.E.2d 597 (Ind. Ct. App. 2006), trans. denied, which the Supreme Court stated: “all but ignored the Corr decision.”

The Lakes court noted that its holding could encourage collusion among insureds to structure their relationships and settlement agreements so that a claimant with underinsured motorist protection may still recover under his/her policy. However, the Court noted the remedial nature of the underinsured motorist statute and determined this potential for collusion was preferable than the potential for leaving motorist without coverage.

This decision should clarify the confusion that was created by the apparent conflict between Corr, a 2002 Supreme Court decision and Graham, a 2006 Court of Appeals’ decision. It is interesting to note that the Supreme Court denied transfer in Graham, yet strongly disapproved of the Graham Court’s holding in this case. This fact re-emphasizes the often-overlooked point that a denial of transfer says nothing regarding the Supreme Court’s opinion on the merits of a Court of Appeals’ decision.