DTCI: Limited Recovery for the Uninsured Plaintiff

Although Indiana requires drivers to have proof of financial responsibility or insurance, many drivers break the law and drive uninsured. Uninsured drivers who are involved in an accident are able to recover under another driver’s insurance policy when the other driver is at fault. To limit that recovery and thus encourage adherence to the insurance requirement, the Indiana legislature passed Indiana Code 27-7-5.1 in 2015. The law limits an uninsured person’s recovery to economic damages when an insured driver is at fault. Insurance companies are actually prohibited from paying noneconomic damages to uninsured claimants who have had a financial responsibility citation within the previous five years.

The statute

Indiana Code 27-7-5.1-5 states an “insurer may not pay noneconomic damages on a claim for coverage under a motor vehicle insurance policy issued by the insurer if the claim is for coverage for a loss incurred by an uninsured motorist with a previous violation.” “[U]ninsured motorist with a previous violation” means “an individual who owns a motor vehicle and for which financial responsibility is not in effect … and during the immediate preceding five (5) years, has been required to provide proof of financial responsibility for any period.” IC 27-7-5.1-4.

The “noneconomic damages” in this statute includes pain and suffering, physical impairment, emotional distress, mental anguish, loss of enjoyment, loss of companionship, services, or consortium, and any other nonpecuniary loss proximately caused by a motor vehicle accident. I.C. 27-7-5.1 27-7-5.1-3(a). The term does not include treatment and rehabilitation, medical expenses, loss of economic or educational potential, loss of productivity, absenteeism, support expenses, accidents or injury, or any other pecuniary loss proximately caused by a motor vehicle accident. I.C. 27-7-5.1-3(b).

However, this prohibition targets only the habitually uninsured, as demonstrated by the “previous violation” language of the statute. The original draft of the statute barred noneconomic recovery for any uninsured claimant, but an amendment limited the restriction to drivers with a previous financial responsibility violation. Nor does the statute apply to those under the age of 18. I.C. 27-7-5.1-6; I.C. 34-30-29.2-4. There is also an exception if anyone involved in the accident was convicted of a crime in connection with the accident. Id.

A few other states have such laws, referred to as “no pay, no play” statutes, limiting recovery for uninsured motorists. Some states limit the damages an uninsured motorist can recover from an accident. In Louisiana, an uninsured driver is barred from bodily injury recovery for the first $15,000 and from property damage for the first $25,000. L.S.A.-R.S. § 32:866. Other states, such as Kansas, apply the “no pay, no play” rule to all uninsured motorist claims, even if there are no previous financial responsibility violations. See K.S.A. § 40-3130. Some states do not apply the “no pay, no play” rule if the driver who caused injury was under the influence at the time of the accident. For example, Alaska Stat. § 09.65.320 disallows noneconomic recovery, but the statute does not apply if the driver who was liable in the accident was under the influence, acted recklessly or with intent, or fled the scene. In California, the “no pay, no play” law does not apply if the liable driver was convicted of being under the influence. Cal. Civ. Code § 3333.4.

Applicability to the tortfeasor

Attorneys may wonder whether the prohibition against insurers paying the uninsured motorist leaves the insured driver himself liable for noneconomic damages. The legislature considered this and adopted I.C. 34-30-29.2, which disallows an uninsured motorist from recovering noneconomic damages from the owner or operator of other vehicles involved in the accident. Adopted at the same time as I.C. 27-7-5.1, Indiana Code 34-30-29.2-3 states, “A person who (1) sustained bodily injury or property damage as the result of a motor vehicle accident; and (2) was an uninsured motorist with a previous violation at the time of the motor vehicle accident; may not recover noneconomic damages for the person’s bodily injury or property damage from the owner or operator of another motor vehicle involved in the motor vehicle accident.” Thus, these two statutes work together to bar noneconomic recovery for the uninsured claimant.

Indiana Code 27-7-5.1-4 prohibits insurance companies from paying the owner of a vehicle involved in an accident, whether he is a passenger or absent from the vehicle altogether. Moreover, I.C. 34-30-29.2-3 bars recovery not only by owners, but also passengers who have no ownership of the vehicles involved in the accident, as long as the passenger was uninsured with a previous violation and is above 18 years of age.

Recommendations

So it would be wise for plaintiffs’ attorneys to ask whether their client-plaintiffs lacked insurance at the time of the accident, and if so, whether they had a previous financial responsibility violation. Those that do will be able to recover only economic damages such as medical expenses.

Defense attorneys will want to check BMV records after obtaining the plaintiff’s Social Security number to discover if the plaintiff lacked insurance at the time of the accident and had a previous violation. Defense attorneys should be doubly careful and include in discovery questions that will reveal this information. This is a simple way to reduce damages paid by defendants and insurance companies.•

L. Katie Buckner is an attorney practicing insurance defense and insurance coverage at The Tyra Law Firm, P.C. in Indianapolis and is a member of the DTCI. The views expressed in this article are those of the author.