FOR PUBLICATION                                                     Nov 14 2013, 5:29 am




ATTORNEYS FOR APPELLANTS:                      ATTORNEY FOR APPELLEE:

DAVID W. CRAIG                                 ANDREW T. GLIER
SCOTT A. FAULTLESS                             State Auto Insurance House Counsel
Craig Kelley & Faultless LLC                   Carmel, Indiana
Indianapolis, Indiana




                            IN THE
                  COURT OF APPEALS OF INDIANA

DARLISS WERT and                               )
GARY WERT,                                     )
                                               )
      Appellants/Plaintiffs,                   )
                                               )
          vs.                                  )    No. 15A01-1306-CT-252
MERIDIAN SECURITY                              )
INSURANCE COMPANY,                             )
                                               )
      Appellee/Defendant.                      )


                  APPEAL FROM THE DEARBORN SUPERIOR COURT
                       The Honorable Jonathan N. Cleary, Judge
                            Cause No. 15D01-1202-CT-8


                                    November 14, 2013

                               OPINION - FOR PUBLICATION

VAIDIK, Judge
                                          Case Summary

       Gary and Darliss Wert (collectively “the Werts”) were involved in a car accident

with Barbara Offill. After settling with Offill for $100,000, the limit of her liability

insurance, the Werts sued their insurance company, Meridian Security Insurance Company

(“Meridian”)1, for an underinsured-motorist claim more than two years after the accident.

Meridian filed a motion for summary judgment, claiming that the contract barred the Werts

from filing a lawsuit against them more than two years after the accident. The Werts appeal

from the trial court’s order granting summary judgment to Meridian. They argue that the

contract is ambiguous because the two-year contractual limitation provision conflicts with

another provision in the contract requiring full compliance with the contract. To comply

with the full-compliance provision of the contract, the Werts were required to settle or

obtain a judgment before filing a lawsuit against Meridian. Finding that these provisions,

when read together, make it unclear when the Werts should have filed a lawsuit to preserve

their underinsured-motorist claim and may completely foreclose their ability to file a

lawsuit, we reverse.

                                  Facts and Procedural History

       Meridian issued a car insurance policy to Gary, effective from December 20, 2008

to June 20, 2009. Appellants’ App. p. 27. On January 16, 2009, Darliss was injured in a

car accident caused by Offill’s negligent driving. In February 2009, the Werts’ attorney,

Deborah McKenery notified Meridian that the Werts might file an underinsured-motorist

claim under their policy. In March 2010, after learning that Offill had only $100,000 of



      1
          Meridian is also known as State Auto Insurance. Appellants’ App. p. 35.
                                                   2
liability insurance, McKenery informed Meridian that the Werts had an underinsured-

motorist claim and told Meridian that she was ordering records and reports to submit to the

insurance company. Id. at 98.

       In December 2010, Offill’s insurance company, Auto-Owners Insurance Company

(“Auto-Owners”), offered the Werts $100,000, the full amount of Offill’s insurance policy.

Auto-Owners also included proof-of-insurance coverage because Auto-Owners knew the

Werts would be making an underinsured-motorist claim against Meridian. In exchange for

Auto-Owner’s extension of the full amount of coverage, Auto-Owners requested that

McKenery obtain a waiver of subrogation rights from Meridian for Darliss’s medical

payments and underinsured-motorist claims. McKenery then submitted to Meridian a

demand of $400,000 for underinsured bodily injury benefits.

       In January 2011, a Meridian representative, Brandi Giger, directly informed Darliss

that Meridian was processing their insurance claim and that Meridian required Medicare

information, which Darliss later provided. The next day, Giger sent McKenery a letter

stating that McKenery must either “reach a settlement agreement with us or file a lawsuit

against our insured.” Id. at 109. McKenery thought the letter was erroneously sent because

she knew she could not file a lawsuit against her own client. Id. at 91. Instead, she believed

that the letter was intended to confirm the conversation she had the previous day with the

Meridian representative of the need to file suit to protect the Werts’ third-party claim from

being barred by the statute of limitation. Id.

       The same day, McKenery filed a lawsuit in Dearborn Superior Court against Offill

to prevent the Werts’ claim from being time-barred by the statute of limitation. Id. at 136-


                                                 3
38. A few days later, Meridian informed McKenery that it was waiving its subrogation

rights against Auto-Owners and authorized the Werts to accept the $100,000 offer to

resolve their third-party tort claim against Offill. Id. at 110.

       On January 18, 2011, McKenery sent a letter to Auto-Owners confirming that

Meridian was waiving its subrogation rights. She enclosed a copy of the lawsuit filed

against Offill and requested the $100,000 settlement check. Id. at 139. McKenery also

sent this letter to Giger, who was assisting with the underinsured-motorist claim.

According to McKenery, the settlement money from Auto-Owners was not available to the

Werts until early February 2011. Id. at 92. In February 2011, McKenery gave Meridian a

copy of the release executed by the Werts, and McKenery filed a motion to dismiss the

lawsuit against Offill the next day. Id. at 92, 112, 142-43.

       In March 2011, Penni Nixon, another representative at Meridian, informed

McKenery that she was assigned to review the Werts’ underinsured-motorist claim and

would contact her once she finished reviewing the claim. Id. at 113. In June 2011,

McKenery told Nixon that she was getting an update from Darliss’s doctor and would like

to settle the case.

       In August 2011, Meridian set its reserves on the Werts’ underinsured-motorist

claim. Id. at 133. McKenery gave Meridian more medical information in support of their

claim in both August and November. In November, McKenery also told Meridian that she

wanted to resolve the Werts’ underinsured-motorist claim either through settlement,

mediation, or arbitration. Id. at 119. In December 2011, Meridian offered $5000 to

McKenery to settle the Werts’ underinsured-motorist claim. Id. at 134.


                                               4
       On February 24, 2012, more than two years after the date of the accident, the Werts

filed a complaint in Dearborn Superior Court seeking underinsured-motorist benefits under

Meridian’s policy. Id. at 5-10. Meridian filed its answer and affirmative defenses in May

2012. Id. at 11-16. The same day, Meridian also filed a motion for summary judgment,

arguing that it was entitled to summary judgment because the claim was filed after the

expiration of the contractual limitation period. Id. at 17-18. In May 2013, the trial court

granted Meridian’s motion for summary judgment. Id. at 4.

       The Werts now appeal.

                                  Discussion and Decision

       The Werts claim that the contractual limitation provision is ambiguous, Meridian

is estopped from asserting the contractual limitation provision, and the contractual

limitation provision is unenforceable. We consider only the ambiguity of the contractual

limitation provision because we find it dispositive.

       When reviewing summary judgment, we apply the same standard of review as the

trial court. Presbytery of Ohio Valley, Inc. v. OPC, Inc., 973 N.E.2d 1099, 1110 (Ind.

2012). Summary judgment is appropriate where the designated evidence “shows that there

is no genuine issue as to any material fact and that the moving party is entitled to a judgment

as a matter of law.” Ind. Trial Rule 56(C). When a party appeals the denial of summary

judgment, the appealing party “carries the burden of persuading this court that the trial

court’s decision was erroneous.” Ill. Bulk Carrier, Inc. v. Jackson, 908 N.E.2d 248, 253

(Ind. Ct. App. 2009), trans. denied. If the issue presented is purely a question of law, the




                                              5
Court’s review is de novo. Buchanan v. HSBC Mortg. Servs., Inc., 993 N.E.2d 275, 278

(Ind. Ct. App. 2013).

       In general, “[i]nsurance policies are governed by the same rules of construction as

other contracts . . . .” Peabody Energy Corp. v. Roark, 973 N.E.2d 636, 640 (Ind. Ct. App.

2012), aff’d on reh’g, 978 N.E.2d 503 (Ind. Ct. App. 2012), trans. denied. However,

because of the disparity in bargaining power between insurance companies and insureds,

courts have developed distinct rules for those contracts. Auto-Owners Ins. Co. v. Harvey,

842 N.E.2d 1279, 1283 (Ind. 2006). When interpreting an insurance contract, “if an

insurance contract is clear and unambiguous, the language therein must be given its plain

and ordinary meaning.” Castillo v. Prudential Prop. and Cas. Ins. Co., 834 N.E.2d 204,

206 (Ind. Ct. App. 2005). The mere fact that a controversy exists and the insured asserts

an interpretation contrary to that asserted by the insurer is insufficient to establish an

ambiguity. Shelter Ins. Co. v. Woolems, 759 N.E.2d 1151, 1155 (Ind. Ct. App. 2001),

trans. denied.

       If an ambiguity exists, “insurance policies are to be construed strictly against the

insurer and the policy language is viewed from the standpoint of the insured.” Id. This is

especially important “where the language in question purports to exclude coverage.” State

Auto. Mut. Ins. Co. v. Flexdar, Inc., 964 N.E.2d 845, 848 (Ind. 2012). Insurers may limit

coverage, “but such limitations must be clearly expressed to be enforceable.” Id.

       This Court “must accept an interpretation of the contract language that harmonizes

the provisions rather than one which supports a conflicting version of the provisions.”

Castillo, 834 N.E.2d at 206 (citing Burkett v. Am. Family Ins. Grp., 737 N.E.2d 447, 452


                                            6
(Ind. Ct. App. 2000)). A court should construe the language of an insurance policy so as

not to render any words, phrases, or terms ineffective or meaningless. FLM, LLC v.

Cincinnati Ins. Co., 973 N.E.2d 1167, 1174 (Ind. Ct. App. 2012), trans. denied.

       The Werts argue that the contractual limitation provision is ambiguous when read

with the full-compliance provision of the contract. Relevant portions of the contract state:

                          PART F – GENERAL PROVISIONS

                                          * * *

                            LEGAL ACTION AGAINST US

       No legal action may be brought against us until there has been full
       compliance with the terms of this policy.


Appellants’ App. p. 46.

                     AMENDMENT OF POLICY PROVISIONS

       The Provision or Condition titled Legal Action Against Us is amended by
       the addition of the following:

       Under Uninsured or Underinsured Motorist Coverage of this policy, if
       provided, no legal action or arbitration proceeding may be brought against
       us unless the action or proceeding is begun within two years of the date of
       the accident.

Id. at 57.

                             ENDORSEMENT
                    UNDERINSURED MOTIRIST COVERAGE –
                                INDIANA

       With respect to coverage provided by this endorsement, the provisions of the
       policy apply unless modified by the endorsement.

       INSURING AGREEMENT



                                             7
        A. We will pay compensatory damages which an “insured” is legally entitled
           to recover from the owner or operator of an “underinsured motor vehicle”
           because of “bodily injury”:
               1. Sustained by an “insured”; and
               2. Caused by an accident.
           The owner’s or operator’s liability for these damages must arise out of the
           ownership, maintenance or use of the “underinsured motor vehicle.” We
           will pay damages under this coverage caused by an accident with an
           “underinsured motor vehicle” only if 1. or 2. below applies:
               1. The limits of liability under any bodily injury liability bonds or
                  policies applicable to the “underinsured motor vehicle” have been
                  exhausted by payments of judgments or settlements; or
               2. A tentative settlement has been made between an “insured” and
                  the insurer of the “underinsured motor vehicle” and we:
                      a. Have been given prompt written notice of both the tentative
                         settlement and certification of the liability coverage limits
                         of the owner or operator of the “underinsured motor
                         vehicle”; and
                      b. Advance payment to the “insured” in an amount equal to
                         the tentative settlement within 30 days after receipt of
                         notification.
Id. at 68.

       The insurance contract in this case explicitly states that no legal action will be

permitted against the insurance company unless there has been “full compliance with the

terms of this policy.” Id. at 46. The restriction is amended by only allowing a lawsuit to

be brought against the insurance company as long as it is brought within two years of the

date of the accident.

       The two-year restriction is in direct conflict with the endorsement amending the

requirements of the underinsured-motorist coverage. There, the policy states that damages

will be paid only if the limits of liability “have been exhausted by payments of judgments

or settlements” or if there has been a tentative settlement made between the policyholder

and the underinsured motorist.      Id. at 68.   In other words, Meridian will not pay



                                             8
underinsured-motorist benefits to its policyholder until the claim has either been resolved

or settled with the underinsured motorist.

        Meridian’s policy prohibits the Werts from filing any lawsuit against it for an

underinsured-motorist claim until the limits of Offill’s liability coverage have been

exhausted. At the same time, Meridian attempts to prevent the Werts from filing more than

two years after the date of the accident, potentially requiring them to file a lawsuit before

they are in full compliance with the policy.        Unless a policyholder settles with an

underinsured motorist within two years of the collision, these provisions are in direct

conflict and therefore ambiguous.

       That is exactly what happened in this case. Offill’s settlement was not available to

the Werts until February 2011. Id. at 92. The two-year anniversary of the collision,

however, was on January 16, 2011.            In December 2010, Auto-Owners extended a

settlement offer to the Werts. On January 18, 2011, two days after the two-year anniversary

of the collision, McKenery sent a letter to Auto-Owners, accepting the settlement.

       Neither party argues that there was a tentative settlement between Auto-Owners and

the Werts. Even under the requirements of a tentative settlement, the Werts would have

been unable to comply with the requirements of the contract. In addition to agreeing to a

tentative settlement, Meridian requires prompt written notice of the tentative settlement

and certification of the liability coverage limits. Meridian also requires payment to the

insured, the Werts in this case, of the amount equal to the tentative settlement within thirty

days after receipt of the notification. Meridian did not receive notification from McKenery

until January 18, two days after the two-year anniversary of the collision. Thus, whether


                                               9
the settlement was considered tentative or not, it would have been impossible for the Werts

to comply with the full-compliance provision before the two-year anniversary of the

collision.

        This Court cited with approval a decision by the Iowa Supreme Court describing the

same problem faced by the Werts in Clevenger v. Progressive Northwestern Insurance Co.

In that case, the Iowa Supreme Court stated that the contract was ambiguous “as to whether

an insured must first pursue a claim to recover the limits of the tortfeasor’s liability

coverage prior to filing suit against the insurer for UIM benefits.” 838 N.E.2d 1111, 1117

(Ind. Ct. App. 2005) (quoting Hamm v. Allied Mut. Ins. Co., 612 N.W.2d 775 (Iowa

2000)).2 In Clevenger, the contract did not specify when the contractual limitation period

would begin, yet it required the parties to exhaust coverage held by the tortfeasor before

filing their underinsured-motorist claim. Although Clevenger is distinguishable from this

case, we find footnote seven in the opinion to be instructive:

        Progressive urges that it is incumbent upon the insureds to file suit against
        Progressive . . . prior to the end of the contractually truncated period for
        bringing such a claim whether or not the insured knows of the existence of
        an actual claim because the insured is forever foreclosed from bringing the
        suit two years after the collision. While we are unprepared to find an
        ambiguity based upon the “unfairness” of foreclosing a lawsuit before it
        could be known, neither will we countenance such a strained reading of the
        contract to require a lawsuit based upon speculation that one could arise.
        Moreover, we fail to see the wisdom in urging insureds to bring wholly
        unsupported legal actions . . . . Further, Indiana Professional Code Rule 3.1
        mandates that lawyers “shall not bring . . . a proceeding . . . unless there is a
        basis for doing so that is not frivolous . . . .” See also Ind. Trial Rule 11
        (requiring counsel to verify “that to the best of his knowledge, information

        2
          In Hamm, the issue was that the contract did not explicitly state when the statute of limitations
would begin to run. In this case, the contract does clearly state that Meridian cannot be sued more than two
years after the accident. However, because the contract required the Werts to satisfy their claim with Auto-
Owners while prohibiting them from suing within two years of the collision, the rationale for finding the
contract ambiguous is the same.
                                                    10
       and belief, there is good ground to support” the pleading or motion filed).
       Here, in order to file suit before the expiration of the limitations period
       advocated by Progressive the Clevengers’s counsel would have had to
       forecast Sherry Clevenger’s return to medical treatment after the expiration
       of the limitations period and speculate that the treatment would cause
       Sherry’s claim to increase dramatically to the point of outstripping
       Brandenburg’s insurance policy limits, thereby supporting a UIM claim
       against Progressive. The bridge to a non-frivolous claim would have been
       week indeed. Progressive’s solution is neither good practice nor allowed
       under our statutes and rules.

838 N.E.2d at 1117 n.7.

       Similarly, the contractual limitation in Meridian’s policy prevented the Werts from

filing a lawsuit before they exhausted Offill’s policy. Once they exhausted Offill’s policy,

thereby complying with the full-compliance provision of the contract, the insurance

contract barred them from suing because it was beyond the two-year limitation period. In

this case, the Werts could not have known that they had a valid claim against Meridian

until after the two-year contractual limitation period. The terms of these two provisions

are in direct conflict and are thus ambiguous.

       Accordingly, the trial court’s entry of summary judgment for Meridian is reversed,

and the cause is remanded to the trial court for further proceedings.

       Reversed.

BAKER, J., and FRIEDLANDER, J., concur.




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