COA: Insurance policy not contrary to code

A minimum-coverage insurance company’s policy language that excludes coverage for leased vehicles in certain circumstances isn’t contrary to Indiana Code, the Court of Appeals ruled today.

In the appeal of Safe Auto Insurance Co. v. Enterprise Leasing Company of Indianapolis, et al., No. 01A02-0712-CV-1120, the Court of Appeals reversed the trial court’s grant of summary judgment in favor of Enterprise Leasing on Safe Auto Insurance’s complaint for declaratory judgment. Safe Auto filed the complaint arguing its policyholder, Jeffrey Harrison, was not driving a covered vehicle when he was involved in an accident with a car he leased from Enterprise, and as a result, he has no coverage under Safe Auto’s policy.

The trial court agreed with Enterprise’s argument that Harrison’s Safe Auto policy coverage for leased vehicles – which only granted liability coverage on a rented car when Harrison’s vehicle was being serviced, repaired, stolen, or destroyed – was contrary to Indiana Code Section 27-8-9-9. That statute states in part, “When a claim arises from the operation of a motor vehicle leased under a written lease agreement, if under the agreement the lessee agrees to provide coverage for damage resulting from his operation of the vehicle, then the motor vehicle insurance coverage of the lessee is primary.”

Harrison rented a truck from Enterprise to drive to Virginia because he didn’t think his own car was dependable enough for the road trip. When he signed the rental agreement, he declined to purchase supplemental liability protection and never provided written proof of insurance coverage for the rented truck. While in Virginia, he was in an accident, which injured those in the other car.

Safe Auto filed a complaint for declaratory relief in Adams County, requesting a judgment that there is no coverage under the Safe Auto policy and the company doesn’t have a duty to defend or indemnify Harrison for the accident.

Harrison didn’t have coverage under his policy for the truck because the reason he rented wasn’t one of the circumstances under which Safe Auto would provide him coverage on a leased vehicle, wrote Judge Paul Mathias.

Harrison’s Safe Auto policy involving lease coverage doesn’t conflict with I.C. Section 27-8-9-9 because this section only applies when the lessee agrees to provide insurance coverage. Because Harrison never agreed in writing to provide insurance himself for the truck and believed Enterprise would provide the insurance, the statute isn’t applicable to this case, wrote the judge.

Even if the section applied, Safe Auto’s policy isn’t unenforceable because the policy language doesn’t run afoul of the plain language of the statute and there is no law that requires insurance companies to provide coverage for vehicles leased by their insureds for any reason.

The Court of Appeals reversed the trial court’s ruling and remanded.