 ATTORNEYS FOR APPELLANT                           ATTORNEY FOR APPELLEE

 Timothy M. Swan                                   April L. Edwards
 Jennifer E. Davis                                 Boonville, Indiana
 Garan Lucow Miller, P.C.
 Merrillville, Indiana                             ATTORNEYS FOR AMICUS CURIAE. THE INDIANA TRIAL
                                                   LAWYER7 S ASSOCIATION


                                                   William E. Winingham
                                                   Jonathon B. Noyes
                                                   Willson Kehoe Winingham, LLC
                                                   Indianapolis, Indiana                  FILED
                                                                                     Jul 26 2016, 11:06 am

                                                                                          CLERK
                                                                                      Indiana Supreme Court
                                              Sin the                                    Court of Appeals
                                                                                           and Tax Court


                            Zinniana éupreme Qﬁuurt

                                       N0. 45$05-1605-CT-00253

STATE FARM MUTUAL AUTOMOBILE
INSURANCE COMPANY,
                                                              Appellant (Defendant below),



CAROL JAKUBOWICZ,       individually
And   asParent and Legal Guardian of JACOB
JAKUBOWICZ and JOSEPH JAKUBOWICZ,
minors,
                                                              Appellees (Plaintiﬂs below).


                 Appeal from the Lake Circuit Court, No. 45C01-0810-CT-00156
                             The Honorable George C. Paras, Judge


      On Petition to Transfer from the Indiana Court   of Appeals,   N 0. 45A05-1502-CT-00078


                                            July 26, 2016
                                              Corrected
David, Justice.

         This matter involves the interpretation of an automobile insurance policy in the context of
a   personal injury lawsuit involving an underinsured motorist (UIM) claim.       The policy at issue
requires that a UIM claim be brought within three (3) years of the accident and also requires that
the insured ﬁllly comply with all provisions of the policy prior to bringing suit. One such provision

is that State Farm   will only pay    if the   underinsured motorist’s insurance has been exhausted.
Because the provision requiring an insured to bring suit within three (3) years is in direct conﬂict

with the policy’s exhaustion requirement, we hold that the policy is ambiguous and thus, must be
construed in favor   of the   insured. Accordingly, we afﬁrm the trial court’s denial   of State Fann’s
motion for summary judgment.

                                         Facts and Procedural History

         On August 2, 2007, the J akubowiczs (mother, Carol, and her two sons) were involved in a
car accident with Ronald Williams that resulted in substantial injuries to the Jakubowiczs. The

J akubowiczs   were insured by State Farm. On October 7, 2008, Carol J akubowicz ﬁled suit against
Williams (on her behalf and on behalf of her sons). State Farm also ﬁled         a   complaint against
Williams seeking damages for medical and property damage payments it made             as a   result   of the
accident.


         In December 2009, J akubowicz put State Farm’s counsel on notice that she would likely
pursue an underinsured motorist (U M) claim. However,          it wasn’t until March 2011, more than
three (3) years after the accident, that J akubowicz ﬁled a motion for leave to amend her complaint

and add a   UIM claim against      State Farm. In her motion    for leave, Jakubowicz stated that       she

believed William’s insurance policy would be insufﬁcient to cover her damages. The trial court
granted Jakubowicz’s motion for leave to amend on July 27, 2011.


         Thereafter, State Farm moved for summary judgment on the UIM claim arguing that it was
barred because it was ﬁled aﬁer the three (3) year limitation period set forth in Jakubowicz’s
insurance policy. Jakubowicz opposed State Farm’s motion, and the trial court denied it. The

Court of Appeals accepted State Farm’s discretionary interlocutory appeal and reversed the trial
court, concluding that J akubowicz’s insurance policy was unambiguous and further, that she failed
to comply with the policy’s three (3) year limitation period for ﬁling the               UIM claim.     State Farm

Mut. Auto. Ins. Co. v. J akubowicz, 45 N.E.3d 500, 506 (Ind. Ct. App. 2015), vacated.                  J akubowicz

sought transfer, which we granted, thereby vacating the Court            of Appeals opinion. Ind. App. Rule
58(A).


                                           Standard of Review

         Orders on summary judgment are reviewed de novo and require an appellate court to apply

the same standard      of review that is applied by the trial court. AM Gen. LLC V. Armour, 46 N.E.3d
436, 439 (Ind. 2015) (citations omitted.) That is, to be entitled to summary judgment, the movant
must demonstrate that “the designated evidence raises no genuine issue                   of material fact      and that

the moving party is entitled to judgment as a matter            of law.”     I_d.   The burden then shifts to the
nonmoving party who must demonstrate that there is                a   genuine issue      of material   fact.    I_d.   All
reasonable inferences are construed in favor       of the nonmoving party. Iii.


         Additionally, “[a]n insurance policy is       a   contract, and as such is subject to the same rules
of construction   as   other contracts.” Dunn V. Meridian Mut. Ins. C0., 836 N.E.2d 249, 251 (Ind.

2005) (citations omitted).       Interpretation   of   a   contract is a pure question       of law    and thus, is

reviewed de novo. Harrison V. Thomas 761 N.E.2d 816, 818 (Ind. 2002).


                                                  Discussion


         At issue in this case is whether the State Farm policy language, with regard to the procedure
for an insured to bring an underinsured motorist claim against State Farm, is ambiguous. Insurance
policies with directly conﬂicting terms are ambiguous. Wert             V.   Meridian Sec. Ins. Company 997
N.E.2d 1167, 1171 (Ind. Ct. App. 2013).                Where there is ambiguity, insurance policies are
construed strictly against the insurer, and the policy language is Viewed from the standpoint                     of the
insured. Allstate Ins. Co. V. Dana Com, 759 N.E.2d 1049, 1056 (Ind. 2001).                      This is especially
true Where the language in question purports to exclude coverage. USA Life One Ins. Co.                         of Ind.
V.   Nuckolls, 682 N.E.2d 534, 538 (Ind. 1997). Insurers are free to limit the coverage of their
policies, but such limitations must be clearly expressed to be enforceable.                    W. Bend Mut. v.
Keaton, 755 N.E.2d 652, 654 (Ind. Ct. App. 2001), trans. denied.” Where provisions limiting
coverage are not clearly and plainly expressed, the policy will be construed most favorably to the

insured, to further the policy's basic purpose     of indemnity.” Meridian Mut.         Ins. Co. v. Auto-

Owners Ins. Co., 698 N.E.2d 770, 773 (Ind. 1998).          Furthermore, when construing the language
of an   insurance policy, a court “should construe the language         of an insurance policy so   as   not to
render any words, phrases or terms ineffective or meaningless.” Werti 997 N.E.2d at 1170 (citation
omitted).


         Here, the policy provides, in relevant part:

                 Deciding Fault and Amount—.        . .   [UIM] Vehicle Coverage
                 1. a.The insured and we must agree to the answers to the following
         two questions:
                       (1) Is the insured legally entitled to recover compensatory
              damages from the owner or driver of the [UM] vehicle?
                       (2) If the answer to 1.a.(1) above is yes, then what is the
              amount of the compensatory damages that the insured is legally
              entitled to recover from the owner or driver of the . . . [UIM] vehicle?
                     b. If there is no agreement on the answer to either question in 1.21
              above, then the insured shall:
                        (1) ﬁle a lawsuit, in a state or federal court that has
               jurisdiction against:
                         (a) us;
                        (b) the owner and driver of the     .[UIM] vehicle:
                                                                .   .


                         (1) unless we have consented to a settlement offer proposed
                 by or on  behalf of such owner or driver; or
                         (ii) unless such owner or driver is unknown; and
                        (c) any other party or parties, who may be legally liable for
                 the insured‘s damages;
                     (2) consent to a jury trial if requested by us;
                     (3) agree that we may contest the issues of liability and the
                 amount of damages; and
                     (4) secure a judgment in that action. The judgment must be the
                 ﬁnal result of an actual trial and any appeals,         if
                                                                     any appeals are
                 taken.

                                                     ****
                 13. Legal   Action Against Us
                Legal action may not be brought against us until there has been ﬁlll
         compliance with all the provisions of this policy. In addition, legal action
         may only be brought against us regarding: . . .
                     c.   .[UIM] Vehicle Coverage if the insured or that insured's
                              .   .


           legal representative within three years immediately following the date
           of the accident:
                      ( 1) presents   an    .[UIM] Vehicle Coverage claim to us;
                                                .   .      .   .   .


               and
                     (2) ﬁles a lawsuit in accordance with the Deciding Fault
              and Amount provision of the involved coverage.
                   Except as provided in c.(2) above, no other legal action may be
           brought against us relating to    [UlM] Vehicle Coverage for any other
                                                           . . .


           causes of action that arise out of or are related to these coverages until
           there has been full compliance with the provisions titled Consent to
           Settlement and Deciding Fault and Amount.

(Appellant’s App. at 159—60, 177—78) (some internal emphasis omitted).

The policy also provides:

          [UIM] Vehicle Coverage
          We  will pay compensatory damages for bodily injury an insured is
          legally entitled to recover from the owner or driver of an [UIM]
          vehicle. The bodily injury must be:
            a. sustained by an Insured, and
            b. caused by an accident that involves the operation, maintenance, or
                use of an [UHVI] vehicle as a motor vehicle.
          We will pay only if the full amount of all available limits of all bodily
          injury liability bonds, policies, and self-insurance plans that apply to the
          insured’s bodily injury have been used up by payment of judgments 0r
          settlements, or have been offered to the insured in writing.

(Appellant’s App. at 159.)


       State Farm sought summary judgment because J akubowicz ﬁled her                                     UIM claim against
State Farm outside        of the      three (3) year limitation period provided in the policy.                    The policy
provides that a UIM claim against State Farm “may only be brought.                                 .   .   within three years
immediately following the date of the accident.”                            (Appellant’s App. at 177.)             However,
Jakubowicz argues the policy language is ambiguous, and as such, the limitation provision is
unenforceable, because on one hand, the policy prohibits insureds from ﬁling suit more than three

(3) years after the dateof the accident, and on the other, it requires that legal action may not be
brought until there has been “full compliance with all the provisions of this policy.” (ld.) One
such provision provides that: “We                   will   pay only    if the ﬁll   amount   of all available limits of all
bodily injury liability bonds, policies, and self-insurance plans that apply to the insured’s bodily
injury have been used up by payment of judgments or settlements, or have been offered to the
insured in writing.” (Appellant’s App. at 159.)                   J akubowicz argues       that this amounts to an
exhaustion requirement and as such, the policy language potentially requires insureds to ﬁle suit
before they are in full compliance with the policy.1 Thus, as Amicus, the Indiana Trial Lawyer’s

Association, observed: “[i]nsureds are simultaneously told that they must ﬁle                  a   lawsuit and cannot
ﬁle   a   lawsuit.” (Amicus Brief at 8.)


           J akubowicz   also argues that the exhaustion requirement in this case is substantially similar

to the one in    m       997 N.E.2d at 1170-1171. In           m, the Court of Appeals held that          a   Meridian
insurance policy, which contained a two (2) year limitations period for pursuing an underinsured
motorist claim, was ambiguous               as   to whether the insureds were required to ﬁrst pursue a claim to
recover the limits    of the tortfeasor’s liability coverage prior to ﬁling suit against their own insurer
(Meridian). m. at 1171. Speciﬁcally, in addition to the two (2) year limitations period, the Wert
policy provided: “No legal action may be brought against                 us   until there has been full compliance
with the terms of the policy.”             m, 997 N.E.2d at 1170. It also provided: “We will pay damages
under this coverage      .   .   .only   if [the tortfeasor’s limits are exhausted]   E.   at 1171. The   m      panel

found that because the exhaustion requirement was in direct conﬂict with the two (2) years
limitations period, the policy was ambiguous. E.


           Here, the trial court denied State Farm‘s motion for summary judgment and seemingly
agreed with J akubowicz that the policy contained conﬂicting provisions, as                  it advised   State Farm:



1
  Jakubowicz also argues that holding that attorneys are required to ﬁle suit prior to expiration of the
limitations period, but before they know if there is a UIM Claim, would potentially cause attorneys to choose
between Indiana Rule of Professional Conduct 3.1 and protecting their client’s interests. Indiana Rule of
Professional Conduct 3.1 provides in relevant part:

           A lawyer shall not bring or defend    a proceeding, or assert or controvcrt an issue
           therein, unless there is a basis in law and fact for doing so that is not frivolous,
           which includes a good faith argument for an extension, modiﬁcation or reversal of
           existing law.

Because we hold that the policy language at issue is ambiguous, we need not address Jakubowicz’s
argument in this regard.
               [Y]ou could have easily just written the policy to say if there’s an
               uninsured or [UIM] claim arising out of any incident, you must bring a
               cause   of action against us in three
                                                   years, period. End of story. Doesn’t
               have to say anything else but that. But, you chose to add all these other
               conditions and limiting factors.

(Tr. at 35.)

           However, the Court of Appeals reversed the trial court, distinguishing               m     from the
present matter.        It compared the policies and stated that “none of the language in          State Farm’s

policy would support J akubowicz’s argument that she was required to wait before ﬁling her claim
against the underinsured motorist coverage until the limits             of Williams’ insurance had        been
exhausted.” Jakubowicz, 45 N.E.3d at 505. It reasoned that the State Farm policy carves out an
“exception” for a UIM claim. That is, While the State Farm policy requires Jakubowicz to attempt
to settle (with State Farm) as to Whether Jakubowicz is entitled to recover damages from the
allegedly underinsured tortfeasor (here, Williams), this requirement does not prevent J akubowicz
from ﬁling     a   lawsuit within the three (3) years. Instead, it provides that      if Jakubowicz disagrees
with State Farm about whether there is a UIM claim and the amount of such claim, then she “shall
ﬁle   a   1awsuit[.]” E.


           It is true that the State Farm policy contains a provision allowing for the parties to reach      an

agreement prior to       ﬁling suit and setting forth the procedure for ﬁling suit,     if necessary, that may
not have been part of the policy in       M. It is also true that this provision of the State Farm policy
provides that the insured “shall” ﬁle suit       if an agreement can be reached.        However, it is unclear
how the provision setting forth       a   procedure for attempting to resolve a      UIM claim prior to ﬁling
suit creates a meaningﬁﬂ distinction between the two policies such that J akubowicz would not be
entitled to the same ﬁnding that the policy is ambiguous as in          m.      Indeed, the two policies are
substantially similar. Both policies contain        a   limitations period for when the insured may bring     a

UHVI claim. Both policies also contain provisions requiring            full compliance with the policy and
exhaustion     of the tortfeasor’s insurance prior to     the insurer paying   UIM   damages.    The language
in the State Farm policy that the insured “shall” ﬁle suit is in direct conﬂict with other provisions
of the policy that provide that the insured may not recover from          State Farm     until the insured is in
full compliance with all policy provisions which includes exhaustion of the tortfeasor’s policy
limits.


          State Farm argues that the exhaustion provision does not impact whether and when a suit

is ﬁled, but only when an insured         will   be paid. Thus,          it   argues J akubowicz could have ﬁled suit

prior to the three (3) year limitations period. However, this argument fails because the                       m policy
also contains language that the insurer          “will pay.   .   .   only if” and yet, the   m     panel still found the

policy to be ambiguous.         m      997 N.E.2d at 1171. Further, under the terms                   of the   State Farm

policy,   if the parties   cannot agree, the only way for an insured to get paid is to ﬁle suit. Thus,

payment is not as separate from ﬁling suit as State Farm argues.


          State Farm also attempts to circumvent the exhaustion requirement by arguing that                         “full
compliance” does not include exhaustion because the insured has no control over what the
underinsured motorist        will   do or when the underinsured                will   exhaust their limits. (Response to
Petition to Transfer at 4.) Thus, State Farm argues that an insured can be in full compliance with
the policy provisions prior to the underinsured motorist’s insurance being exhausted.                           However,
this reading of the policy language is a stretch. The policy makes no exception or carve-outs that
allow for an insured to not exhaust the underinsured’s policy limits before ﬁling suit. Instead, the
language is unequivocal that State Farm              will “pay only if”               the tortfeasor’s policy limits are

exhausted. (Appellant’s App. at 159.) This exhaustion requirement is in direct conﬂict with the

requirement that Jakubowicz bring suit Within three (3) years.


                                                     Conclusion

          Jakubowicz’s State Farm policy is substantially similar to the policy in                      m.       Like the
policy in   m, Jakubowicz’s policy is ambiguous to extent that it contains conﬂicting provisions.
As the trial court observed, the policy could have just stated that suit must be brought within three

(3) years. The policy also could have called for exhaustion of the policy limits prior to ﬁling                         a

UIM claim against          State Farm Without a limitation on the time to do so.                     Instead, the policy
contained a limitation period as well as additional conditions.                         Those conditions— that “[l]egal

action may not be brought against us until there has been full compliance with all the provisions
of this policy”   and   “[w]e will pay only if the full amount of all available limits of all bodily injury
liability bonds, policies,    and self-insurance plans that apply to the insured’s    bodily injury have
been used up by payment         of judgments or settlements, or     have been offered to the insured in
writing” conﬂict with the three (3) year limitation period. (Appellant’s App. at        177, 159.)



       As State Farm observed, the insured has no control over Whether or when the tortfeasor
offers policy limits. Thus, there are situations, like in this case, where the insured cannot both
exhaust the tonfeasor’s policy limits and ﬁle a UIM suit within the three (3) year limitation period.

Ambiguous insurance policies are construed against the insurer. Accordingly, we afﬁrm the trial
court’s denial of State Farm’s motion for summary judgment and remand the matter for ﬁlrther
proceedings consistent with this opinion.


Rush, C.J., Rucker, Massa and Slaughter, J .J ., concur.
