COA upholds UIM benefits less than liability coverage

The Indiana Court of Appeals affirmed a grant of judgment to an insurance company despite a man’s contentions of error in allowing the policy’s coverage of underinsured motorist benefits to be less than its underlying liability coverage.

While driving his employer’s vehicle in April 2016, another vehicle collided with Troy Lee’s truck. The truck was covered by Liberty Mutual under an insurance policy offering $2 million in bodily injury liability coverage, plus $60,000 of uninsured motorist coverage. 

Lee settled with the driver but continued his claim against Liberty Mutual, arguing he sustained damages in excess of the driver’s policy limits. He maintained that Liberty Mutual was required to offer UIM coverage in the same amount as the bodily injury liability coverage pursuant to Indiana Code § 27-7-5-2, and therefore, was not permitted to provide UIM coverage in this case in any amount less than $2 million.

But Liberty Mutual disagreed, contending that the other vehicle was not underinsured because its policy limits were greater than $60,000. The Delaware Circuit Court ultimately agreed, determining that Liberty Mutual was entitled to offer UIM coverage limits less than the bodily injury limits specified in the policy.

Lee contested that decision on appeal, arguing that the plain language of I.C. § 27-7-5-2 subsection (a) states the insurer must provide UIM limits at least equal to the limits of the liability coverage, unless rejected by the insured. He further contested that the selection of $60,000 UIM coverage in Liberty Mutual’s Election Form was an impermissible partial rejection and contrary to subsections (b) and (c) under the statute.

However, the COA rejected Lee’s reliance on Frye v. Auto-Owners Ins. Co., 845 F.3d 782 (7th Cir. 2017), finding it to be inapposite and distinguishable from the facts in Troy Lee v. Liberty Mutual Fire Insurance Company, 18A-CT-2048.

“Frye did not involve a primary auto policy, but rather analyzed whether a UIM coverage in a commercial umbrella policy had to be provided in an amount equal to the limit of liability for bodily injury in general under the provisions of subsection (d) of the statute,” Judge Patricia Riley wrote for the court.

“Although the Frye court ultimately held that an insurer who elected to afford UIM coverage under a commercial umbrella policy was required to provide that coverage in limits at least equal to the policy’s general liability limit, the language of subsection (d) analyzed by the Frye court did not explicitly allow for liability limits to be different than UIM coverage limits in commercial umbrella policies,” Riley continued. “Moreover, in response to the Frye decision, our Legislature amended the language in subsection (d).”

The appellate court therefore reaffirmed its holding in Marshall v. Universal Underwriters Ins. Co., 673 N.E.2d 513 (Ind. Ct. App. 1996), concluding that the opposing vehicle was not underinsured when the accident occurred and therefore, Liberty Mutual was not obligated to pay UIM coverage benefits to Lee.