Loomis v. ACE American Insurance Company

UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF NEW YORK

WILLIAM LOOMIS,

Plaintiff, 6:19-cv-1131 (BKS/ATB)

v.

ACE AMERICAN INSURANCE COMPANY,

Defendant.

Appearances:

For Plaintiff:

Martha L. Berry

Michael J. Longstreet

Longstreet & Berry, LLP

P.O. Box 249

Fayetteville, NY 13066

For Defendant:

Kacey Houston Walker

Kurt M. Mullen

Nixon Peabody LLP

Exchange Place

53 State Street

Boston, MA 02109

Hon. Brenda K. Sannes, United States District Judge:

MEMORANDUM-DECISION AND ORDER

I. INTRODUCTION

In this action, Plaintiff William Loomis challenges Defendant ACE American Insurance

Company’s rejection of his claim for underinsured motorists benefits in connection with an

accident that occurred while Plaintiff was driving a vehicle Defendant insured. (Dkt. No. 2).

Following the parties’ cross-motions for summary judgment (Dkt. Nos. 20, 23), the Court

concluded, as a matter of law, that Defendant’s failure to obtain explicit written rejection of

uninsured and underinsured motorist coverage (“UM” and “UIM”) before excluding it from the

$7 million policy it issued to the vehicle owner—Plaintiff’s employer, XPO Logistics—violated

Indiana’s Uninsured Motorist Coverage and Underinsured Motorist Statute, (“UM/UIM

Statute”), Indiana Code § 27-7-5-2(a) (“IC 27-7-5-2(a)”). Loomis v. Ace Am. Ins. Co., 517 F.

Supp. 3d 95 (N.D.N.Y. 2021).1 The Court further concluded that in the absence of a written

rejection of coverage, “the requirements of the UM/UIM Statute must be ‘considered a part of

[Defendant’s] policy the same as if written therein.”’ Loomis, 517 F. Supp. 3d at 114 (N.D.N.Y.

2021) (quoting United Nat. Ins. Co. v. DePrizio, 705 N.E.2d 455, 460 (Ind. 1999)). According to

the policy, Plaintiff’s employer “must pay” a $3 million “Retained Limit”—“before the Limits of

Insurance become applicable.” (Dkt. No. 20-15, at 28–29, 51). As neither party briefed the

impact of this provision, the Court noted the issue but did not address it. Loomis, 517 F. Supp. 3d

at 114 n.16. Following the Court’s ruling, the parties submitted a series of letter briefs reflecting

different positions regarding the impact of the $3 million “Retained Limit” on this case. (Dkt.

Nos. 32, 33). Identifying the “remaining issue” as “an issue of law” and observing that “Plaintiff

has not identified any discovery that would be relevant to that issue,” the Court construed

“Defendant’s letter brief as a supplemental motion for summary judgment” and allowed

additional briefing. (Dkt. No. 34). For the reasons that follow, the Court grants Defendant’s

supplemental motion for summary judgment.

1 The Court, however, found no violation under New York law. Loomis, 517 F. Supp. 3d at 119.

II. FACTS2

A. Factual Background

Plaintiff, a New York resident, was injured in a motor vehicle accident while driving a

truck owned by his employer, XPO Logistics (“XPO”) in New York. (Dkt. No. 20-23, ¶¶ 1-2, 6;

Dkt. No. 23-7, ¶¶ 1-2, 6; Dkt. No. 20-19, ¶¶ 2-3). The accident occurred when another vehicle

crossed over the center lane and crashed into Plaintiff’s truck head-on: both vehicles were

traveling at approximately 50 miles per hour. (Dkt. No. 20-23, ¶ 2; Dkt. No. 23-7, ¶ 2; Dkt. No.

20-19, ¶ 4). Plaintiff suffered multiple injuries; the driver of the other vehicle died at the scene.

(Dkt. No. 20-23, ¶ 3; Dkt. No. 23-7, ¶ 3; Dkt. No. 20-19, ¶¶ 6–7). At the time of the accident, the

truck that Plaintiff was driving was registered in Indiana and garaged in New York. (Dkt. No.

20-23, ¶ 5; Dkt. No. 23-7, ¶ 5).

The other vehicle involved in Plaintiff’s accident was insured by State Farm Mutual

Automobile Insurance Company (“State Farm”). (Dkt. No. 20-23, ¶ 4; Dkt. No. 23-7, ¶ 4).

Plaintiff made a claim against the other driver’s estate for the injuries he suffered as a result of

the accident. (Dkt. No. 20-23, ¶ 7; Dkt. No. 23-7, ¶ 7). Plaintiff’s claim was settled for

$50,000—the full amount of the State Farm policy limit—and State Farm paid that amount to

Plaintiff. (Dkt. No. 20-23, ¶ 8; Dkt. No. 23-7, ¶ 8; Dkt. No. 20-7; Dkt. No. 20-8). There is no

dispute that Plaintiff’s damages exceed $50,000. Plaintiff notified Defendant, the insurer of the

XPO-owned vehicle he was driving, of his intent to pursue a claim for supplemental

underinsured motorist coverage; Defendant denied coverage on the grounds that “there is no

2 The following facts are drawn from the parties’ statements of undisputed material facts and responses pursuant to

Local Rule 7.1(a)(3), (Dkt. Nos. 20-23, 23-7, 26, 29), to the extent those facts are well-supported by pinpoint citations

to the record, as well as the exhibits attached thereto and cited therein to the extent they are admissible as evidence.

Uninsured/Underinsured Motorist Coverage in New York State”3 under the relevant policies.

(Dkt. No. 20-23, ¶ 19; Dkt. No. 23-7, ¶ 19; Dkt. No. 20-4; Dkt. No. 20-6).

B. The XSA Policy

At the time of the accident, the vehicle Plaintiff was driving was insured by a policy

Defendant issued to XPO, with the policy number XSA H25097257 (the “XSA Policy”). (Dkt.

No. 20-23, ¶¶ 10–11; Dkt. No. 23-7, ¶¶ 10–11; Dkt. No. 20-15).4 The Declarations page of the

XSA Policy states that it provides liability coverage for “covered autos,” and that the “Limit,”

that is, “[t]he most [it] will pay for any one Accident or Loss,” is $7 million and that the

“Retained Limit,” that is, “the amount [XPO] must pay before the Limits of Insurance become

applicable,” “for any one ‘accident’ or ‘loss’” is $3 million. (Dkt. No. 20-15, at 29, 51).

The section of the XSA Policy titled “Liability Coverage” provides that Defendant “will

pay the ‘insured’ for the ‘ultimate net loss’ in excess of the ‘retained limit’ because of ‘bodily

injury’ or ‘property damage’ to which [the XSA Policy] applies, caused by an ‘accident’ and

resulting from the ownership, maintenance or use of a covered ‘auto.’” (Id. at 39). The XSA

Policy defines “ultimate net loss” as “the total amount the ‘insured’ is legally obligated to pay as

damages for a covered claim or ‘suit’ either by adjudication or a settlement to which we agree in

writing, and includes deductions for recoveries and salvages which have or will be paid.” (Id. at

51). “Retained limit” is defined as:

[T]he limit shown in the Declarations and is the amount you must

pay before the Limits of Insurance become applicable. In the event

there is other insurance, whether or not applicable to an “accident”,

claim or “suit” within the “retained limit,” you will continue to be

responsible for the full amount of the “retained limit” before the

3 The denial letter did not reference Indiana.

4 XPO also purchased another insurance policy from Defendant with the policy number MMT H2509721A (the “MMT

Policy”), which, during the same policy period covered by the XSA Policy, provided coverage for vehicles not covered

by the XSA Policy, i.e. those “involved in intrastate operations . . . in the states of GA, KS, KY, MS and TX.” (Dkt.

No. 20-14, at 10, 60). There is no argument that this policy is relevant to the present issue.

Limits of Insurance under this policy apply. In no case will we be

required to pay the “retained limit” or any portion thereof.

(Id. at 51).

The XSA Policy’s “Limit of Insurance” provision states:

Regardless of the number of covered “autos”, “insureds”, premiums

paid, claims made or vehicles involved in the “accident”, the most

we will pay for “ultimate net loss” in excess of the “retained limit”

for damages . . . resulting from any one “accident” is the Limit of

Insurance for Liability Coverage shown in the Declarations.

. . . .

You agree to assume payment of the “retained limit” before the

Limits of Insurance become applicable.5

(Id. at 44).

III. STANDARD OF REVIEW

Under Rule 56(a), summary judgment may be granted only if all the submissions taken

together “show that there is no genuine issue as to any material fact and that the moving party is

entitled to judgment as a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986); see

also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). The moving party bears the

initial burden of demonstrating “the absence of a genuine issue of material fact.” Celotex, 477

U.S. at 323. A fact is “material” if it “might affect the outcome of the suit under the governing

law,” and is genuinely in dispute “if the evidence is such that a reasonable jury could return a

verdict for the nonmoving party.” Anderson, 477 U.S. at 248; see also Jeffreys v. City of New

York, 426 F.3d 549, 553 (2d Cir. 2005) (citing Anderson). The movant may meet this burden by

showing that the nonmoving party has “fail[ed] to make a showing sufficient to establish the

5 Under “General Conditions,” the XSA Policy states: “Bankruptcy or insolvency of the ‘insured’ or the estate will

not relieve us of any obligations under this policy.” (Dkt. No. 20-15, at 46).

existence of an element essential to that party’s case, and on which that party will bear the

burden of proof at trial.” Celotex, 477 U.S. at 322; see also Selevan v. N.Y. Thruway Auth., 711

F.3d 253, 256 (2d Cir. 2013) (explaining that summary judgment is appropriate where the

nonmoving party fails to “‘come forth with evidence sufficient to permit a reasonable juror to

return a verdict in his or her favor on’ an essential element of a claim” (quoting In re Omnicom

Grp., Inc. Sec. Litig., 597 F.3d 501, 509 (2d Cir. 2010))).

If the moving party meets this burden, the nonmoving party must “set out specific facts

showing a genuine issue for trial.” Anderson, 477 U.S. at 248, 250; see also Celotex, 477 U.S. at

323-24; Wright v. Goord, 554 F.3d 255, 266 (2d Cir. 2009). “When ruling on a summary

judgment motion, the district court must construe the facts in the light most favorable to the non-

moving party and must resolve all ambiguities and draw all reasonable inferences against the

movant.” Dallas Aerospace, Inc. v. CIS Air Corp., 352 F.3d 775, 780 (2d Cir. 2003). Still, the

nonmoving party “must do more than simply show that there is some metaphysical doubt as to

the material facts,” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986),

and cannot rely on “mere speculation or conjecture as to the true nature of the facts to overcome

a motion for summary judgment,” Knight v. U.S. Fire Ins. Co., 804 F.2d 9, 12 (2d Cir. 1986)

(quoting Quarles v. Gen. Motors Corp., 758 F.2d 839, 840 (2d Cir. 1985)). Furthermore, “[m]ere

conclusory allegations or denials . . . cannot by themselves create a genuine issue of material fact

where none would otherwise exist.” Hicks v. Baines, 593 F.3d 159, 166 (2d Cir. 2010) (quoting

Fletcher v. Atex, Inc., 68 F.3d 1451, 1456 (2d Cir. 1995)).

IV. DISCUSSION

For purposes of the supplemental summary judgment motion, the parties do not dispute

that the XSA Policy covered the vehicle Plaintiff was driving at the time of his accident; that

Plaintiff was using XPO’s covered “auto” with XPO’s permission at the time of the accident, and

therefore also qualifies as an “insured” under the XSA Policy; and that Plaintiff satisfied all the

necessary prerequisites to bringing suit against Defendant for UM/UIM coverage. (Dkt. No. 20-

23, ¶ 18; Dkt. No. 23-7, ¶ 18; Dkt. No. 23-1, at 8). The parties’ core dispute is whether, under

Indiana law, when UIM coverage is read into the XSA Policy, the $3 million Retained Limit

must be paid before the $7 million Limits of Insurance become available to Plaintiff. (Dkt. Nos.

32, 33, 35, 36). Having determined that UM and UIM coverage must be read into the XSA

Policy under Indiana law, and there being no argument that New York law applies to the present

inquiry, the Court considers the parties’ arguments solely under Indiana law.

As the parties acknowledge, the Supreme Court of Indiana has not addressed whether the

UM/UIM Statute allows the enforcement of a retained limit in a UM/UIM policy. “[I]n the

absence of authoritative law from the state’s highest court,” the Court “must either (1) predict

how the [Indiana Supreme Court] would resolve the state law question, or, if state law is so

uncertain that” the Court cannot make a “reasonable prediction, (2) certify the question to the

[Indiana Supreme Court] for a definitive resolution.” DiBella v. Hopkins, 403 F.3d 102, 111 (2d

Cir. 2005); see also Ind. R. App. P. 64 (“[A]ny federal district court may certify a question of

Indiana law to the Supreme Court [of Indiana] when it appears to the federal court that a

proceeding presents an issue of state law that is determinative of the case and on which there is

no clear controlling Indiana precedent.”). Although Defendant requests certification in the event

finds an ambiguity in the relevant provisions of the UM/UIM Statute, because the Court finds

none and given that the certification procedure should only be used in “exceptional

circumstances,” the Court will “undertake the imprecise but necessary task of predicting on a

reasonable basis how the [Indiana Supreme Court] would rule if squarely confronted with this

issue.” DiBella, 403 F.3d at 111–12.

A. Indiana’s UM/UIM Statute

Plaintiff primarily relies on IC 27-7-5-2, the provision in the UM/UIM Statute governing

UM/UIM coverage for bodily injury. The version of IC 27-7-5-2 in effect in October 2017,6

provides, in relevant part:

Sec. 2. (a) Except as provided in subsections (d), (f), and (h), the insurer shall make

available, in each automobile liability or motor vehicle liability policy of insurance

which is delivered or issued for delivery in this state with respect to any motor vehicle

registered or principally garaged in this state, insuring against loss resulting from liability

imposed by law for bodily injury or death suffered by any person and for injury to or

destruction of property to others arising from the ownership, maintenance, or use of a

motor vehicle, or in a supplement to such a policy, the following types of coverage:

(1) . . . for the protection of persons insured under the policy who are legally

entitled to recover damages from owners or operators of uninsured or

underinsured motor vehicles because of bodily injury . . .[or] injury to or

destruction of property . . . ; or

(2) . . . for the protection of persons insured under the policy provisions who are

legally entitled to recover damages from owners or operators of uninsured or

underinsured motor vehicles because of bodily injury . . . .

The uninsured and underinsured motorist coverage must be provided by insurers for

either a single premium or for separate premiums, in limits at least equal to the limits of

liability specified in the bodily injury liability provisions of an insured’s policy,

unless such coverages have been rejected in writing by the insured.

IC 27-7-5-2(a) (2013) (emphasis added). To summarize, the UM/UIM Statute provides that

every “automobile liability or motor vehicle liability policy of insurance” that covers a vehicle

“registered or principally garaged” in Indiana must include UM and UIM coverage “in limits at

least equal to” the policy’s “bodily injury” liability limits, unless the insurer obtains the insured’s

affirmative rejection of such coverage in writing. (Id.).

6 IC 27-7-5-2 has been amended since October 2017, when the XSA Policy was issued and Plaintiff’s accident

occurred. See 2018 Ind. Legis. Serv. P.L. 208-2018, § 9; 2020 Ind. Legis. Serv. P.L. 130-2020, § 13. Both parties rely

on, and the Court applies, the version of the statute that was in effect in October 2017.

Plaintiff also cites to a “Limitation on coverages” provision, IC 27-5-5-5,7 and provision

limiting the deductible that may be charged for UM property damage coverage, IC 27-7-5-3,

which are further discussed below. See infra Section IV.C.2.b. and note 11.

B. Reading the UM/UIM Statute into the XSA Policy

The Court begins by incorporating the coverage mandated by the UM/UIM Statute into

the terms of the XSA Policy. Thus, the Court reads the XSA Policy to provide UM and UIM

“coverage . . . in limits at least equal to the limits of liability specified in the bodily injury

liability provisions of [the] policy.” IC 27-7-5-2(a). The “Limit” shown in the Declarations, that

is, the most Defendant “will pay for any one Accident or Loss,” including bodily injury, is $7

million. (Dkt. No. 20-15, at 29). The XSA Policy states that it “will pay the ‘insured’ for the

‘ultimate net loss’ in excess of the ‘retained limit’ because of ‘bodily injury.’” (Id. at 39). And

the “Retained Limit” shown in the Declarations is $3 million “for any one ‘accident’ or ‘loss.’”

(Id. at 29). Accordingly, the Court reads the XSA Policy as providing for a $7 million limit of

liability for UM/UIM damages, in excess of the $3 million retained limit. See, e.g., Stonington

Ins. Co. v. Williams, 922 N.E.2d 660, 670–71 (Ind. Ct. App. 2010) (reading UM coverage into

policy where insured had not rejected limits in writing and finding insured was “entitled to UM

7 “Limitations on coverage,” provides, in relevant part:

(c) The maximum amount payable for bodily injury under uninsured or underinsured motorist

coverage is the lesser of:

(1) the difference between:

(A) the amount paid in damages to the insured by or for any person or organization

who may be liable for the insured's bodily injury; and

(B) the per person limit of uninsured or underinsured motorist coverage provided

in the insured’s policy; or

(2) the difference between:

(A) the total amount of damages incurred by the insured; and

(B) the amount paid by or for any person or organization liable for the insured’s

bodily injury.

IC 27-7-5-5(c).

coverage of up to $1,000,000 under the Policy,” explaining that “[t]he Policy has a liability limit

of $1,000,000, and the UM Statute requires that the Policy’s UM limits be the same”).

C. Analysis

Plaintiff argues that because the UM/UIM Statute does “not provide for an offset for a

deductible or self insured retention for bodily injury claims,” (Dkt. No. 32, at 2), the retained

limit in the XSA Policy is an impermissible “coverage limitation,” that “does not limit

Defendant’s obligation to pay,” and “[b]y operation of law, $7 million is the ‘limit of liability,’”

(Dkt. No. 35, at 1, 5–6).8 Plaintiff further argues that because his employer has no obligation to

pay the retained limit, coverage under the XSA Policy is illusory because it can never be

triggered. (Id. at 4). Defendant argues that it has “no obligation to pay Plaintiff for ultimate net

loss within the $3 million Retained Limit” because the XSA Policy unambiguously states that the

insured must pay the $3 million retained limit “before the Limits of Insurance become

applicable.” (Dkt. No. 33, at 1). In other words, Defendant argues, it is not required to “provide[]

first dollar coverage.” (Id.).

1. Operation of Retained Limit

There is no real dispute that the plain language of the XSA Policy requires payment of

the $3 million retained limit before the $7 million “Limits of Insurance become applicable” or

that payment for “ultimate net loss” is “in excess of the ‘retained limit.’” (Dkt. No. 20-15, at 44).

See Citimortgage, Inc. v. Barabas, 975 N.E.2d 805, 813 (Ind. 2012) (instructing that courts must

“begin with the plain language of the contract, reading it in context and, whenever possible,

construing it so as to render each word, phrase, and term meaningful, unambiguous, and

harmonious with the whole”); see also Catanzarite v. Safeco Ins. Co. of Indiana, 144 N.E.3d

8 As explained below, a retained limit is not, as this argument assumes, an “offset” or a “set-off” or a deductible.

778, 783 (Ind. Ct. App. 2020) (“Insurance contract provisions are subject to the same rules of

construction as other contracts.”). Plaintiff’s argument instead focuses on whether the retained-

limit provision violates the UM/UIM Statute.

Before considering whether the retained limit violates the UM/UIM statute, it is helpful

to review the operation of retained limits or self-insured retentions (“SIR”) within insurance

policies, which is well settled under Indiana law. The Indiana Supreme Court has recognized that

only after the retained limit or SIR is exhausted or satisfied are the insurer’s policy obligations

triggered. Cinergy Corp. v. Associated Elec. & Gas Ins. Servs., Ltd., 865 N.E.2d 571, 576–77

(Ind. 2007); Walsh Constr. Co., v. Zurich Am. Ins. Co., 72 N.E.3d 957, 963 (Ind. Ct. App. 2017)

(“Both the Indiana Supreme Court and this court have repeatedly recognized that, as between an

insurer and a single insured, the insurer’s responsibilities arise only ‘[a]fter the self-insured

retention amounts specified in the policies are satisfied.’” (quoting Cinergy, 865 N.E.2d at 576–

77)); Thomson Inc. v. Ins. Co. of N. Am., 11 N.E.3d 982, 1011 (Ind. Ct. App. 2014) (“Thomson

must prove that the $250,000 SIR for each ‘occurrence’ has been satisfied under the [policies]

before any obligations under those Policies commence.”); Allianz Ins. Co. v. Guidant Corp., 884

N.E.2d 405, 420 (Ind. Ct. App. 2008) (explaining that “it is only after the SIR is exhausted that

an insurer’s duty to defend, among other things, is triggered” (citing Cinergy, 865 N.E.2d at

576–77)) (emphasis in original).

Moreover, Indiana law expressly distinguishes a retained limit or SIR from a deductible

and holds that a retained limit or SIR does not reduce a policy’s limit of liability: “while a

deductible is subtracted from a policy’s limits, thereby reducing an insurer’s total obligation to

the insured, the full limits of a policy including a retained amount are available to the insured

once [the retained] amount has been satisfied.” Monroe Guar. Ins. Co. v. Langreck, 816 N.E.2d

485, 495 (Ind. Ct. App. 2004) (emphasis added) (citing Douglas R. Richmond, Issues and

Problems in “Other Insurance,” Multiple Insurance and Self–Insurance, 22 Pepp. L. Rev. 1373,

1449 (1995)).9 In Monroe, applying this principle to the policy at issue, which specified a $1

million “retained amount” and a “maximum coverage limit of $25 million,” the court explained:

“The retained amount . . . is not a deductible, in that it does not reduce [the insured’s] $25

million total coverage obligation to [the insured]; the total amount [the insured] may actually

recover pursuant to the . . . policy for claims expenses and damages combined is $25 million, not

$24 million.” Id. at 489, 495. Thus, once the $3 million retained limit is satisfied, the total

amount Plaintiff may recover pursuant to the XSA Policy is $7 million, not $4 million.

Accordingly, the Court turns to the question of whether a retained limit is valid and enforceable

under the UM/UIM Statute.

2. Enforceability of Retained Limit Under UM/UIM Statute

a. IC 27-7-5-2

The UM/UIM Statute requires Defendant to provide UM/UIM coverage in limits “at least

equal to the limits of liability specified in the bodily injury liability provisions of an insured’s

policy.” IC 27-7-5-2(a). Plaintiff argues that this language is ambiguous because the parties

interpret it differently: Plaintiff interprets it to implicate the “‘Limit’ found in [the XSA Policy]

declaration page, $7 million”; and Defendant interprets it to implicate the “Limits of Insurance”

provision in the XSA Policy, which requires exhaustion of the $3 million retained limit before

the $7 million limit is triggered. (Dkt. No. 35, at 4). More specifically, Plaintiff posits a

9 In Allianz, the court stated while an “SIR is similar to a deductible,” there were distinctions: “[a] policy with a

deductible obliges the insurer to respond to a claim from ‘dollar one’ (i.e., immediately upon tender), subject to the

insurer's right to later recoup the amount of the deductible from the insured. A policy subject to a SIR, in contrast,

obliges the policyholder itself to absorb expenses up to the amount of the SIR, at which point the insurer's obligation

is triggered.” As stated, courts in Indiana distinguish between deductibles and retained amounts. Monroe, 816 N.E.2d

at 495–96.

distinction between the concepts of “coverage” and “limits of liability,” and argues that the

UM/UIM Statute explicitly makes UM/UIM coverage mandatory with no exceptions or offsets

for plans that include retained limits. (Id.). Given that ambiguity, Plaintiff argues that it is

reasonable to read the UM/UIM Statute as making UM/UIM coverage mandatory from the first

dollar (absent an applicable exemption or written rejection), with the aforementioned language

simply setting the minimum amount at which that coverage must be provided. (Id. at 4–5).

“Indiana courts employ the basic tools of statutory interpretation: Statutes are read as a

whole, and words are given their plain and ordinary meaning.” Frye v. Auto-Owners Ins. Co.,

845 F.3d 782, 786 (7th Cir. 2017) (citations omitted). “If a statute is unambiguous, that is,

susceptible to but one meaning, [the Court] must give the statute its clear and plain meaning.”

Bolin v. Wingert, 764 N.E.2d 201, 204 (Ind. 2002) (citations omitted). “If a statute is susceptible

to multiple interpretations, however, [the Court] must try to ascertain the legislature’s intent and

interpret the statute so as to effectuate that intent.” Id. The Court “presume[s] the legislature

intended logical application of the language used in the statute, so as to avoid unjust or absurd

results.” Id. Moreover, because the Indiana UM/UIM Statute “is remedial in nature,” courts

“must liberally construe the statute in favor of the insured.” State Farm Fire & Cas. Co. v.

Garrett, 783 N.E.2d 329, 333 (Ind. Ct. App. 2003) (citing West Bend Mut. v. Keaton, 755 N.E.2d

652, 655 (Ind. Ct. App. 2001)). “Indeed, the main purpose behind the uninsured motorist statute

is to place an injured insured ‘in substantially the same position he would have occupied had the

offending party complied with the’ UM/UIM Statute.” Id. (quoting West Bend, 755 N.E.2d at

655).

The UM/UIM Statute is clear and unambiguous in its directive that insurers must provide

UM/UIM “coverage . . . in limits at least equal to the limits of liability specified in the bodily

injury liability provisions of an insured’s policy.” IC 27-7-5-2(a). Once UM/UIM coverage is

read into the XSA Policy, it provides UM/UIM coverage in limits equal to the bodily injury

liability provisions of the policy—$7 million. While satisfaction of the retained limit is a trigger

to Defendant’s obligations, the retained limit does not diminish the $7 million liability limit or

the coverage the XSA Policy says it will provide once the retained limit is satisfied.

Plaintiff is correct that that the UM/UIM Statute does not expressly refer to policies with

retained limits, but even viewing the UM/UIM Statute as a whole, the Court finds nothing that

suggests the retained limit does not comport with the statute. Plaintiff argues that the retained

limit is unenforceable and “does not limit Defendant’s obligation to pay” because none of the

few exemptions to the UM/UIM Statute allow a “‘carve out’ for self insured retentions.” (Dkt.

No. 35, at 5). Indeed, the Indiana Supreme Court has stated in no uncertain terms that “[a]bsent

an express directive from our legislature,” courts must not “carve out an exemption for

particular policies.” DePrizio, 705 N.E.2d at 457–63 (emphasis added); see also Frye, 845 F.3d

at 787 (“[T]he Indiana Supreme Court made clear that if the state legislature wished to exclude

any specific types of insurance contracts from the UIM-coverage mandate, only an explicit

statutory carve-out would suffice.” (citing DePrizio, 705 N.E.2d at 463–64)). Here, the Court has

found the XSA Policy is not exempt from providing UM/UIM coverage and that in the absence

of a rejection of UM/UIM coverage in writing, the XSA Policy must be read to provide

UM/UIM coverage. Loomis, 517 F. Supp. 3d at 114. Thus, it appears that what Plaintiff in fact

opposes is the policy language, which specifies that the retained limit is a condition that must be

satisfied before Defendant’s obligations under the XSA Policy are triggered.

The Indiana Supreme Court has explained that “[s]o long as the policy language

comports with our state statutes, it will control,” but if it is inconsistent with those statutes, it is

unenforceable. Just. v. Am. Fam. Mut. Ins. Co., 4 N.E.3d 1171, 1177 (Ind. 2014) (internal

citation omitted) (first quoting Medley v. Am. Econ. Ins. Co., 654 N.E.2d 313, 315 (Ind. Ct. App.

1995); and then citing Bush v. State Farm Mut. Auto. Ins. Co., 905 N.E.2d 1003, 1005 (Ind.

2009)). In addition, Indiana courts uniformly hold that “[a]ttempts to limit or diminish the

uninsured motorists protection required by statute [are] against . . . public policy” of this state.

Smith v. Allstate Ins. Co., 681 N.E.2d 220, 222 (Ind. Ct. App. 1997) (citing American States Ins.

Co. v. Braden, 625 N.E.2d 1252, 1257 (Ind. Ct. App.1993)). Here, once the UM/UIM Statute is

read into the XSA Policy, the XSA Policy provides coverage in the amount of $7 million, which

is equal to the limit of liability specified in the bodily injury liability provisions of the policy, and

thus comports with the UM/UIM Statute. As discussed above, the $3 million retained limit in no

way diminishes the $7 million limit of liability; it is a condition precedent to coverage.10

In addition, even in the context of the UM/UIM Statute, “[i]t is well established that an

insurer is free to limit its liability in a manner not inconsistent with public policy.” Jones v. State

Farm Mut. Auto. Ins. Co., 635 N.E.2d 200, 203 (Ind. Ct. App. 1994) (citing Allstate Ins. Co. v.

Boles, 481 N.E.2d 1096, 1098 (Ind. 1985); see also id. (finding that the limitation on

underinsured motorist coverage, which contained a household exclusion was “neither illusory

10 Plaintiff cites Frye, 845 F.3d 782, in support of his argument that the retained limit is an impermissible “carve-out”

because it is not specifically identified in the UM/UIM Statute. (Dkt. No. 35, at 6). Plaintiff argues (incorrectly) that

the only reason Frye allowed a workers’ compensation setoff was because the statute expressly allowed such setoffs.

(Dkt. No. 35, at 6). In fact, the Seventh Circuit prohibited the workers’ compensation setoff on the grounds that it was

contrary to the contract language; the court did not consider whether it was a proper setoff under the UM/UIM Statute.

Frye, 845 F.3d at 788–89. Nor is Frye otherwise applicable here. The insurer in Frye argued that because subsection

(d) of the UM/UIM Statute, IC 27-7-5-2(d), created a carve-out, or exemption, for commercial umbrella policies, the

insurer could have “abstain[ed] from providing UIM coverage in the first place,” but since it did “provide such

coverage, [it could] provide it in any form” it chose. Id. at 786. The Seventh Circuit rejected this argument finding

that the statutory exemption was limited in scope: it only exempted commercial umbrella insurers from providing

UM/UIM coverage; the statute did not exempt commercial umbrella insurers who elected to provide coverage from

complying with the statutory requirement to provide that coverage in limits equal to the limits of liability for bodily

injury. Id. at 787 (quoting IC 27-7-5-2(a)). Here, there is no question of different or unequal limits for UM/UIM

coverage and bodily injury coverage under the XSA Policy: they both have a $7 million liability limit subject to a $3

million retained limit. Thus, Frye’s consideration of the scope of the commercial umbrella exemption does not aid

Plaintiff’s argument.

nor contrary to public policy”). “[P]ublic policy is not violated unless ‘the policy specifically

limits uninsured motorist coverage as to persons who would otherwise qualify as insureds for

liability purposes.’” Smith v. Allstate Ins. Co., 681 N.E.2d 220, 222 (Ind. Ct. App. 1997) (quoting

Whitledge, 586 N.E.2d at 887). “Restated, if a person qualifies as an insured under the liability

section of the policy, he must also qualify under the uninsured motorists section or the insurance

contract violates public policy.” Id. (citing Connell v. American Underwriters, Inc., 453 N.E.2d

1028, 1031 (Ind. Ct. App. 1983)). Here, it is undisputed that Plaintiff qualifies as an insured

under the UIM provision read into the XSA Policy. Thus, the Court finds no public policy

violation.

Courts have also allowed conditions precedent to the attachment of coverage in the

UM/UIM context. See Adkins v. Vigilant Ins. Co., 927 N.E.2d 385, 392–93 (Ind. Ct. App. 2010)

(finding that “the conditions necessary to attach” the plaintiff’s “excess liability coverage” had

not been met, explaining that “[t]he Excess Umbrella Policy clearly states that it merely provided

Sutphin with excess liability coverage for damages for which Sutphin was legally responsible

and that coverage would only be initiated after the maximum limits of Sutphin’s underlying

liability insurance policies had been exhausted” and that the plaintiff had not “proven that

Sutphin was legally responsible for any of the alleged damages, and it is undisputed that neither

of Sutphin’s underlying insurance policies covered any of the alleged damages” (citing

Cincinnati Ins. Co. v. Amerisure Ins. Co., 644 N.E.2d 136, 140 (Ind. Ct. App. 1994)). The Court

therefore finds that the retained limit appears to be a permissible condition precedent, or trigger

to coverage.

b. IC 27-7-5-5

Plaintiff relies on IC 27-7-5-5, which governs “Limitations on coverage” in support of his

argument that the retained limit is not among the statutorily-identified limitations and therefore

violates the UM/UIM Statute. (Dkt. No. 32). Plaintiff argues that IC 27-7-5-5 does “not provide

for an offset for a deductible or self insured retention for bodily injury claims.” (Id. at 2).11 This

provision, which is also referred to as an “anti-stacking provision,” Wagner v. Yates, 912 N.E.2d

805, 812 (Ind. 2009), however, affords Plaintiff no relief as it appears to be inapplicable to his

argument.

The Supreme Court of Indiana has explained that “anti-stacking clauses ‘limit coverage

when coverage under another policy is currently available so as to preclude stacking or double

recovery of uninsured motorist coverages.’” Id. (quoting Progressive Ins. Co., Inc. v. Bullock,

841 N.E.2d 238, 240 (Ind. Ct. App. 2006)). This provision establishes “the maximum and

minimum parameters for the amount of recovery a plaintiff is entitled to as a result of a UM or

UIM claim.” Kinslow v. GEICO Ins. Co., 858 N.E.2d 109, 114 (Ind. Ct. App. 2006) (citing

Gardner v. State Farm Mut. Ins. Co., 589 N.E.2d 278, 281 (Ind. Ct. App. 1992)). In general, a

“setoff” is an amount paid by a tortfeasor or other insurer in connection with a claim that may be

“setoff” or reduced from the amount an insured is entitled to recover under a later-applied policy.

See, e.g., Kinslow, 858 N.E.2d at 111 (noting that “[s]etoff provisions in UM[/UIM] motorist

policies have generated frequent litigation, often focusing on whether payment to an insured

from a third party should be deducted from the total amount of damages sustained by the insured

or from the limits of liability of the UM/UIM coverage”). Moreover, courts have recognized that

“[t]he language of Indiana Code Section 27–7–5–5(c) does not provide a set formula for

calculating setoffs in all cases,” Kinslow, 858 N.E.2d at 114 (citing Gardner, 589 N.E.2d at 281);

see Gardner, 589 N.E.2d at 281 (“This language is indicative not of the legislature’s intent to

11 Plaintiff also cited to IC 27-7-5-3, which limits a deductible for UM property damage caused by collision to not

more than $300. As stated, an SIR or retained limit is not a deductible under Indiana law.

provide a set formula, but to provide maximum and minimum parameters for the amount of

damages a plaintiff is entitled to as a result of an uninsured motorist claim.”), and that it must be

read in conjunction with the UM/UIM policy’s language, Gardner, 589 N.E.2d at 281

(explaining that so long as the policy’s language and relevant provisions provide coverage

“within these statutory parameters, the policy does not violate” the UM/UIM Statute). Plaintiff

does not identify any language in this provision that would allow a conclusion that retained

limits are impermissible in the context of calculating payment under the XSA Policy. Indeed,

without evidence of “the amount paid in damages” to Plaintiff or “the total amount of damages”

he incurred, IC 27-7-5-5(c)(1)(A), (2)(A), any analysis under this provision would be impossible

and premature. Accordingly, the Court concludes that IC 27-7-5-5(c) does not provide a basis for

concluding that a retained limit is prohibited by or incompatible with the UM/UIM Statute.

3. Illusory Coverage

Plaintiff argues that because “[t]here is no statutory authority or contractual basis to

impose underinsured motorist coverage obligations” on his employer,12 (Dkt. No. 32, at 2), his

employer “would never make payment of the ‘retained limit’ as required by Defendant’s policy,”

and the coverage in the XSA Policy would never be triggered, (Dkt. No. 35, at 5). Plaintiff has

not provided any indication of his total damages. The Court therefore has no basis on which to

evaluate whether his damages would exceed the $3 million retained limit.

Nevertheless, even if the Court were to find, as Plaintiff argues, that UM/UIM coverage

in the XSA Policy is essentially illusory because his employer is a self-insurer13 and has no

12 Plaintiff asserts that “this Court previously held” that his employer “has no obligation to make any payment for

UM/UIM coverage to Plaintiff.” (Dkt. No. 35, at 5). Plaintiff’s employer is not a party to this action and this Court

makes no determination regarding Plaintiff’s employer’s legal obligations.

13 Plaintiff refers to his employer as a “self insurer” throughout his opening brief on summary judgment. (See

generally Dkt. No. 20-22). In City of Gary v. Allstate Insurance Co., 612 N.E.2d 115 (Ind. 1993), the Indiana

Supreme Court held that a self-insured city was not required to provide uninsured motorist coverage to a police

officer injured on duty in a city-owned police car, explaining that because “[s]elf-insurance . . . is not insurance,” the

obligation to pay the $3 million retained limit necessary to trigger that coverage, the remedy

would not provide Plaintiff the relief he seeks—an order requiring Defendant to pay damages

within the retained limit. The Indiana Supreme Court “has defined illusory coverage as that for

which the insured paid a premium but from which he would not be paid benefits under any

reasonably expected circumstances.” Jones v. State Farm Mut. Auto. Ins. Co., 635 N.E.2d 200,

202 (Ind. Ct. App. 1994) (citing Meridian Mutual Insurance Co. v. Richie, 540 N.E.2d 27, 30

(Ind. 1989). “Provisions in an insurance policy . . . [that] in effect, provide only illusory

coverage, should be enforced to satisfy the reasonable expectations of the insured.” Davidson v.

Cincinnati Ins. Co., 572 N.E.2d 502, 508 (Ind. Ct. App. 1991). “[T]he ‘expectations’ of which

the Indiana court speaks are the objectively reasonable expectations of an insured,” that is

“expectations that an insured ‘could’ have had, not of the expectations it had in fact.” Eli Lilly &

Co. v. Home Ins. Co., 794 F.2d 710, 715 (D.C. Cir. 1986) (citing Eli Lilly & Co. v. Home Ins.

Co., 482 N.E.2d 467, 470 (Ind. 1985)). If the trigger for UM/UIM coverage—or the UM/UIM

coverage itself—were illusory, Plaintiff could reasonably expect Defendant to comply with its

obligations under the XSA Policy and to pay Plaintiff for UIM damages “in excess” of the $3

million retained limit, up to the amount of its $7 million limit of liability, (Dkt. No. 20-15, at 44

(“[T]he most we will pay for ‘ultimate net loss’ in excess of the ‘retained limit’ for damages . . .

resulting from any one ‘accident’ is the Limit of Insurance for Liability Coverage shown in the

Declarations.”)), even if the retained limit had not been paid.

city was not subject to the UM/UIM Statute, which governed insurance policies. City of Gary, 612 N.E.2d at 119,

superseded by statute on other grounds, see DePrizio, 705 N.E.2d 455; but see Jackson v. Jones, 804 N.E.2d 155,

158–59 (Ind. Ct. App. 2004) (“Although self-insurers are generally required to provide uninsured motorist coverage

pursuant to the Financial Responsibility Act, IC 9–25–2–3,2 and the requirements for uninsured and underinsured

motorist coverage, IC 27–7–5–2,3 the City of Indianapolis is statutorily immune under the Tort Claims Act, now IC

34–13–3–3(10),4 from liability for an act or omission of anyone other than a city employee.”).

By the same token, nothing in the XSA Policy or the UM/UIM Statute would allow a

reasonable expectation that Defendant was obligated to pay UIM damages falling within the

amount of the $3 million retained limit,” (see id. at 51 (“In no case will we be required to pay the

‘retained limit’ or any portion thereof.”)). See, e.g., In re Fed. Press Co., Inc., 104 B.R. 56, 60–

61 (Bankr. N.D. Ind. 1989) (applying Indiana law and concluding that “[t]he policies place no

obligation upon Columbia to pay damages falling within the amounts of the retained limit which

Federal Press has the duty to pay. Moreover, such a result cannot be inferred as a matter of law.

The provisions regarding the insured’s retained limit do not purport to excuse Columbia from its

obligations in the event Federal Press fails to pay the retained limit of $300,000.” (citing Ryder

Truck Lines, Inc. v. Carolina Cas. Ins. Co., 385 N.E.2d 449, 452 (Ind. 1979)); see also Ryder

Truck Lines, 385 N.E.2d at 452 (“In the present case, since Carolina’s excess coverage began

only if the loss was over $100,000 for personal injury liability, then the excess liability focused

on the upper limits of the other insurance policy. As stated by the Court of Appeals, the excess

insurance clause should not be extended to cover an amount for which the insured, here Ryder,

has bargained to become a self-insurer.”) (emphasis added). Thus, even if the UM/UIM

coverage in the XSA Policy were illusory, Plaintiff has identified no legal basis for concluding

that the remedy under those circumstances would obligate Defendant to pay UM/UIM damages

within the $3 million retained limit; the XSA Policy obligates Defendant to pay UM/UIM

damages “in excess of” the $3 million retained limit. (Dkt. No. 20-15, at 39). As noted, there is

no evidence that Plaintiff’s damages exceed the retained limit.

Finally, Plaintiff argues that because his employer “would never make payment of the

retained limit” as required by the XSA Policy, a finding that allows Defendant “to water down

the UM/UIM mandate with a self insured retention,” “would be inconsistent with the remedial

purpose of UM/UIM coverage in Indiana policies.” (Dkt. No. 35, at 5—6). To the extent there is a

$3 million gap in coverage because plaintiff's employer is, as Plaintiff asserts, self-insured, and

not legally obligated to provide UM/UIM coverage, the unavailability of coverage at that level

would not be unknown to the Indiana legislature:

Although we recognize the remedial purpose of the uninsured motorist coverage

statute and we may even agree that public policy favors a requirement that self-

insurers under the financial responsibility law should be required to provide some

sort of uninsured motorist protection for those who drive their automobiles, it is not

our role to sit as a judicial legislator and write such a requirement into the act.

Rather, this type of mandate must come from the legislature.

City of Gary, 612 N.E.2d at 119. Accordingly, the Court concludes that the retained limit in the

XSA Policy is not prohibited by or incompatible with the Indiana UM/UIM Statute.

V. CONCLUSION

For these reasons, it is hereby

ORDERED that Defendant’s supplemental motion for summary (Dkt. No. 33) is

GRANTED, and it is further

ORDERED that the parties are to file a joint status report by April 7, 2022 indicating

how they seek to proceed.

IT ISSO ORDERED.

Dated: March 24, 2022

Syracuse, New York boas all 4 K&S MAN

Brenda K. Sannes

U.S. District Judge

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