Progressive Cas. Ins. Co. v. K.S.

731 F.Supp.2d 829

PROGRESSIVE CASUALTY INSURANCE COMPANY, Plaintiff,

v.K.S. b/n/f Andrea George-Jarrard, Tricia Stahl, Megan Dean, T.H. b/n/f Mark Anthony Henry, and Dustin Luallen, Defendants.

No. 4:09-cv-34-WGH-RLY.

United States District Court,

S.D. Indiana,

New Albany Division.

Aug. 2, 2010.

Linda Ann Hammel, Matthew Charles Robinson, Yarling & Robinson, Indianapolis, IN, for Plaintiff.

Belinda R. Johnson-Hurtado, Gary J. Clendening, Mallor Clendening Grodner & Bohrer LLP, William J. Beggs, Bunger & Robertson, Bloomington, IN, for Defendants.

ENTRY ON CROSS MOTIONS FOR SUMMARY JUDGMENT

WILLIAM G. HUSSMANN, JR., United States Magistrate Judge.

I. Introduction

This matter is before the Honorable William G. Hussmann, Jr., United States Magistrate Judge,¹ on Plaintiff's Motion for Summary Judgment filed February 11, 2010. (Docket Nos. 60-63). Defendant K.S. b/n/f/ Andrea George-Jarrard ("K.S.") filed a Response on March 29, 2010.² (Docket Nos. 66-68). Defendant K.S. then filed a Cross Motion for Summary Judgment on March 30, 2010. (Docket Nos. 69-71). On April 26, 2010, Plaintiff filed a Response to Defendant K.S.'s Cross Motion for Summary Judgment and Reply Brief in Support of Its Motion for Summary Judgment. (Docket No. 74). Defendant K.S. filed a Reply in Support of Cross Motion for Summary Judgment on May 10, 2010. (Docket No. 77).

II. Background

The facts in the light most favorable to the non-moving party are as follows.

On July 13, 2007, defendant Dustin Luallen ("Luallen") was insured through an auto owner's insurance policy with plaintiff, Progressive Casualty Insurance Company ("Progressive"), with a Bodily Injury Liability limit of $50,000 each person/$100,000 each accident. ( See Affidavit of Todd Oldson; Auto Insurance Coverage Summary ("Policy")). The Policy provided: "If you pay the premium for this coverage, we will pay damages for bodily injury and property damage for which an insured person becomes legally responsible because of an accident." (Policy at 3). Furthermore, the Policy defined an insured person as "[y]ou or a relative with respect to an accident arising out of the ownership, maintenance, or use of an auto or trailer...." ( Id.). However, the Policy also included certain exclusions, including the following:

Coverage under this Part I, including our duty to defend, will not apply to any insured person for:

* * * * * *

17. bodily injury or property damage caused by, or reasonably expected to result from, a criminal act or omission of that insured person. This exclusion applies regardless of whether that insured person is actually charged with, or convicted of, a crime. For purposes of this exclusion, criminal acts or omissions do not include traffic violations.

(Policy at 6; Auto Policy Endorsement at 1).

On July 13, 2007, 15-year-old K.S.³ was a passenger in a 1990 Mazda MPV (the "van") with her friends-Patricia Stahl, Megan Dean, and T.H. The girls were on their way to the mall in Bloomington, Indiana, to buy a birthday present for a mutual friend. (Deposition of K.S. ("K.S. Dep.") at 15-16).

On this same day, Luallen was traveling with three friends on their way to the Owen County Fairgrounds in Spencer, Indiana, to watch a flat track four-wheeler race. (Deposition of Dustin Luallen ("Luallen Dep.") at 10-11). They were traveling in a truck owned and driven by Jeff Tillett ("Tillett"), and Luallen was in the back seat on the passenger's side. ( Id. at 11). Following behind Tillett's truck were two other vehicles accompanying Tillett to the Fairgrounds for the race. ( Id. at 11-13).

The three vehicles met in the K-Mart parking lot in Bedford, Indiana, and traveled on Highway 37 North towards Highway 46 to Spencer, Indiana. (Luallen Dep. at 13-15). As they entered Bloomington, one of the friends in another vehicle phoned Tillett, who was driving his truck, to tell him to watch a van that had pulled in front of one of the other trucks in the caravan. ( Id. at 15-16). Luallen was then informed about the van. ( Id. at 16-17).

When Luallen saw the van coming up beside Tillett's truck, he noticed a couple of girls. (Luallen Dep. at 18). Tillett's truck was in motion and traveling in the left-hand lane, and the van was in the right-hand lane. ( Id. at 17). Luallen then decided to stand up in the backseat of the truck and "moon" the girls. ( Id.)

When the cars reached the Third Street exit, and while both were moving, the girls saw Luallen "mooning" them through the back window of Tillett's truck. (K.S. Dep. at 17-21). The van then immediately veered off the exit ramp and flipped. ( Id.at 20-22). K.S. was thrown out an open window and was pinned underneath the vehicle. ( Id. at 23-24).

After the accident, K.S. filed suit against Luallen in Indiana state court seeking compensatory damages. Plaintiff Progressive filed this declaratory judgment action seeking a declaration that there was no coverage under Luallen's insurance policy and that Progressive did not owe Luallen a duty to defend against any claims arising out of the accident.

Progressive filed its Motion for Summary Judgment arguing that Luallen's actions did not arise out of the ownership, maintenance, or use of the vehicle he was riding in at the time of the accident. Progressive also argues that the criminal acts exclusion within the policy excludes coverage for this accident because Luallen's "mooning" constituted a criminal act. In Defendant's Response to Plaintiff's Motion for Summary Judgment and Cross Motion for Summary Judgment, defendant K.S. argues that Luallen's actions did arise out of the ownership, maintenance, or use of the vehicle, and that the criminal acts exclusion is void as it violates public policy. Having examined the arguments of the parties, the court now GRANTS, in part, and DENIES, in part, the Cross Motions for Summary Judgment.

III. Summary Judgment Standard

Summary judgment must be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). The motion should be granted so long as no rational fact finder could return a verdict in favor of the nonmoving party. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). Thus, a court's ruling on a motion for summary judgment is akin to that of a directed verdict, as the question essentially for the court in both is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Id. at 251-52, 106 S.Ct. 2505. When ruling on the motion, the court must construe the evidence in the light most favorable to the nonmoving party and draw all reasonable inferences therefrom in that party's favor. Id. at 255, 106 S.Ct. 2505. If the nonmoving party bears the burden of proof on an issue at trial, that party "must set forth specific facts showing that there is a genuine issue for trial." Fed. R. Civ. P. 56(e); see also Silk v. City of Chicago, 194 F.3d 788, 798 (7th Cir.1999). Lastly, the moving party need not positively disprove the nonmovant's case; rather, it may prevail by establishing the lack of evidentiary support for that case. See Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

IV. Analysis

The parties raise two issues in their cross motions for summary judgment.⁴ First, the court must determine whether or not Luallen's actions arose out of the "ownership, maintenance or use of an auto." Second, we must determine if theexclusion in Luallen's automobile insurance policy that denies coverage for bodily injury caused by a criminal act is applicable.

A. Application of State Substantive Law

This is a suit brought pursuant to the court's diversity jurisdiction. ⁵ While a federal court sitting in diversity jurisdiction shall apply its own procedural laws, it must apply the substantive laws of the state in which it sits. First Nat. Bank and Trust Corp. v. American Eurocopter Corp., 378 F.3d 682, 689 (7th Cir.2004). This court must, therefore, apply Indiana substantive law. The most complete and succinct explanation of Indiana law covering the interpretation of insurance contracts is from Erie Ins. Co. v. Adams, which states:

The interpretation of an insurance contract is a question of law for the court. And, language in an insurance contract which is clear and unambiguous should be given its plain and ordinary meaning. Indiana courts have repeatedly noted that insurers are free to limit liability "in any manner not inconsistent with public policy, and an unambiguous exclusionary clause is ordinarily entitled to construction and enforcement." However, exceptions, limitations and exclusions must be plainly expressed in the policy. The exclusionary clause must clearly and unmistakably bring within its scope the particular act or omission that will bring the exclusion into play, and any doubts as to the coverage shall be construed against the contract drafter.

Erie Ins. Co. v. Adams, 674 N.E.2d 1039, 1041 (Ind.Ct.App.1997) (citations omitted).

B. Did the accident "arise out of the ... use of an auto?"

Progressive asserts that Luallen's auto policy does not cover the injuries to K.S. (or possible claims of defendant T.H.) because Luallen's conduct did not "arise out of the ownership, maintenance or use" of the vehicle in which he was a passenger.

The seminal case of Indiana Lumbermens Mut. Ins. Co. v. Statesman Ins. Co., 260 Ind. 32, 291 N.E.2d 897 (Ind.Ct.App.1973), involved an injury to a deliveryman transporting a water softener to a customer's home. After the deliveryman unloaded the water softener from the delivery truck, he was injured when the customer's negligently maintained basement stairs collapsed beneath him. The court held that the accident did not "arise out of the use of the...