NO LICENSE NO COVERAGE
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Great West Casualty Company; DTAK, LLC; and Matthew Ehlen (at times collectively referred to as “Great West”) appealed the grant of summary judgment in favor of Founders Insurance Company (“Founders”) declaring that Founders is not obligated to provide coverage under an automobile insurance policy procured by Brian K. Gates, Jr. (“Gates”) in Great West Casualty Company, DTAK, LLC, and Matthew Ehlen v. Founders Insurance Company, No. 22A-PL-1771, Court of Appeals of Indiana (December 9, 2022) the dispute was resolved.
FACTS
On June 24, 2020, Gates applied to Founders for automobile insurance coverage. In the application form, Gates indicated that his driving privileges were suspended in the State of Indiana, and he was seeking SR 22 insurance coverage as required by the State during the driver’s license reinstatement process. Founders issued an SR 22 policy, which included an exclusionary provision applicable if Gates failed to obtain a valid driver’s license within sixty days (“the Policy”).
Seventy-six days later, on September 8, Gates was driving his insured vehicle when it collided with a tractor-trailer driven by Ehlen. The tractor-trailer was owned by DTAK, LLC and insured by Great West. At that time, Gates had no valid driver’s license.
Gates had paid premiums to Founders in the amounts of $117.00 on June 24, 2020 and $83.40 on August 10, 2020. On September 14, Founders cancelled the Policy for non-payment of premiums.
Great West sued Gates for damages resulting from the collision. Shortly thereafter Founders sued for Declaratory Judgment seeking a declaration that it was not obligated to provide insurance coverage for Gates, pursuant to an exclusion in the Policy, because Gates had been driving without a valid driver’s license at the time of the collision.
The trial court entered summary judgment in favor of Founders and directed the entry of final. Great West appealed.
Discussion and Decision
The interpretation of an insurance policy is primarily a question of law for the court, and it is therefore a question which is particularly suited for summary judgment. Although ambiguities are construed in favor of the insured, clear and unambiguous policy language must be given its ordinary meaning.
The policy exclusion provided that: “No coverage is afforded under any Part of this policy if, at the time of the accident, your insured car or a temporary substitute car is being operated by a person who: a. Is not a licensed driver; or b. Is without a valid driver’s license; or c. Whose driver’s license is revoked or suspended; d. Whose driver’s license has been expired for more than 30 days; or e. Is in violation of any condition of their driving privileges; or f. Is not legally entitled to drive under Indiana law. …”
Gates was driving without a valid driver’s license on the date of the collision. The trial court concluded that, by the plain terms of the Policy, insurance coverage was excluded.
Great West did not argue that the exclusionary clause of the Policy was ambiguous but rather that it should be given no effect under the circumstances. Specifically, Great West argues that Founders waived its right to enforce the exclusionary clause because it conducted no investigation as to the status of Gate’s driver’s license before taking his final premium payment.
The Court of Appeal noted that the general rule is that if a party to a contract performs acts that recognize the contract as still subsisting, such as accepting rent payments, specific performance of the terms of the contract is waived and there can be no forfeiture. This rule is founded on principles of common honesty: a landlord cannot take the position a lease is valid for one purpose, e.g., collection of rent, and yet declare it invalid for other purposes.
Great West identified no like circumstances and indeed, no dispute of material fact. It is uncontested that at the time Gates tendered his August premium the Policy remained in full force and effect. Founders did not contend otherwise. Founders had issued no notice of cancellation at that time and did not do so until Gates failed to tender a September premium payment.
The right of a third party to recover through liability insurance is not absolute.
The source and means of recovery is grounded in the insurance contract itself. Since the Policy contains an unambiguous exclusionary clause plainly applicable to the uncontested facts the Court of Appeal could discern no basis upon which the plain language of the exclusionary clause should be disregarded. It concluded that Founders was entitled to judgment as a matter of law, and there is no genuine dispute of material fact.
Insurance policies are contracts. The terms and conditions of the policy, if unambiguous, must be applied as written. Since Gates was unlicensed at the time of the accident the clear and unambiguous language of the policy excluded coverage. The injured party, therefore, has no rights against Gates’ insurer. They can, of course, get a judgment against Gates and collect from his assets. An injured party has no right to recover from the tortfeasor’s insurer. The tortfeasor only has the opportunity to do so if the policy provides insurance coverage for the injuries claimed.
(c) 2022 Barry Zalma & ClaimSchool, Inc.
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Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and zalma@zalma.com
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