Progressive Southeastern Insurance Co. v. Empire Fire and Marine Insurance Co.

FILED
Nov 21 2017, 9:51 am

CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court

ATTORNEY FOR APPELLANT ATTORNEYS FOR APPELLEE
J. Thomas Vetne Dennis F. Cantrell
Jones Obenchain, LLP Keith D. Mundrick
South Bend, Indiana Cantrell, Strenski & Mehringer, LLP
Indianapolis, Indiana

IN THE
COURT OF APPEALS OF INDIANA

Progressive Southeastern November 21, 2017
Insurance Co., Court of Appeals Case No.
Appellant-Plaintiff, 32A05-1706-PL-1235
Appeal from the Hendricks
v. Superior Court
The Honorable Karen M. Love,
Empire Fire and Marine Judge
Insurance Co., Trial Court Cause No.
Appellee-Defendant. 32D03-1603-PL-38

Robb, Judge.

Court of Appeals of Indiana | Opinion 32A05-1706-PL-1235 | November 21, 2017 Page 1 of 19
 Case Summary and Issue
[1] Maria Rivera took her vehicle, which was insured by Progressive Southeastern

Insurance Company (“Progressive”), to Terry Lee Honda for repairs. Terry

Lee Honda provided Rivera with a courtesy car and requested she sign a

“Rental Agreement for a Temporary Substitute Vehicle” (“Courtesy Car

Agreement”). Terry Lee Honda insures its vehicles through Empire Fire and

Marine Insurance (“Empire”). After Rivera had an accident in the courtesy car,

Empire paid for the repairs and then sought to collect from Progressive, alleging

Progressive was the primary insurer pursuant to the Courtesy Car Agreement.

In turn, Progressive claimed that the Courtesy Car Agreement was an invalid

rental agreement and the courtesy car was a loaned vehicle under Indiana law.

[2] Progressive initiated this declaratory judgment action against Empire seeking

an order stating: 1) Rivera was a permissive driver of a loaned vehicle; 2)

Empire’s coverage was primary; and 3) Empire’s coverage must be exhausted

before Progressive is obligated on any claim. In response, Empire filed a

motion for arbitration pursuant to a preexisting arbitration agreement with

Progressive. Progressive then filed an Amended Complaint, attempting to

jettison issues subject to arbitration by asking the trial court to declare the

courtesy car was a loaned vehicle under Indiana law. On cross-motions for

summary judgment, the trial court concluded the Courtesy Car Agreement

constituted a rental agreement and ordered any remaining dispute to

arbitration.

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[3] Progressive now appeals, raising one issue for our review: whether the trial

court erred in concluding the Courtesy Car Agreement constituted a rental

agreement. Concluding the trial court erred in reaching the merits of the

underlying claim because the dispute is subject to compulsory arbitration, we

reverse in part, affirm in part, and remand to the trial court for entry of an order

directing the parties to proceed to arbitration.

Facts and Procedural History 1

[4] On December 11, 2015, Rivera took her vehicle to Terry Lee Honda in Avon,

Indiana, for service work. As part of the “Honda Courtesy Car Program,”

Rivera was issued a Honda CR-V courtesy car to use while her vehicle was

serviced. Before receiving the courtesy car, Rivera signed a contract titled,

“Rental Agreement for a Temporary Substitute Vehicle” (“Courtesy Car

Agreement”). Relevant to this appeal, the Courtesy Car Agreement provided:

2. Rental: Consideration; Indemnity and Warranties. This is a
contract for rental of the Vehicle. A fee You pay Us, or Our
opportunity to service or repair Your vehicle and the benefits We
receive for the service/repair work, is adequate consideration for
rental of the Vehicle. We may repossess the Vehicle at Your
expense without notice to You if the Vehicle is abandoned or
used in violation of law or this Agreement. You agree to
indemnify Us, defend Us and hold Us harmless from all claims,
liability, costs and attorney fees We incur resulting from or

1
We heard oral argument in West Lafayette, Indiana in the Krannert Center for Executive Education at
Purdue University on October 26, 2017. We thank Purdue University for their generous hospitality and
commend counsel for their skilled and informative oral advocacy.

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 arising out of this Agreement or Your use of the Vehicle. We
make no warranties, express, implied or apparent, regarding the
Vehicle, no warranty of merchantability and no warranty that the
Vehicle is fit for a particular purpose.

***

4. Responsibility for Damage or Loss; Reporting to Police. You
are responsible for theft of the Vehicle and damage to it whether
or not You are at fault. . . .

***

6. Insurance. You are responsible for all damage or loss You
cause to others. You agree to provide auto liability, collision and
comprehensive insurance covering You, Us and the Vehicle.
Your insurance is primary. If You have no auto liability
insurance in effect on the date of a loss, or if We are required by
law to provide liability insurance, We will provide auto liability
insurance (the “Policy”) that is secondary to any other valid and
collectible insurance whether primary, secondary, excess or
contingent. . . .

Appellant’s Appendix, Vol. II at 59. The Courtesy Car Agreement provided for

a daily rental rate of $35 but Terry Lee Honda neither collected the charge

when Rivera signed the contract, nor did it collect the charge when Rivera

returned the courtesy car. Terry Lee Honda did, however, receive $1,420 for

service work paid by Rivera’s vehicle warranty provider.

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[5] Prior to the events that led to this litigation, both Progressive and Empire signed

a “Special Arbitration Agreement” (“Arbitration Agreement”), administered by

Arbitration Forums, Inc.2 The Arbitration Agreement provides:

Upon settlement of a claim or suit, signatory companies must
submit any unresolved disputes to Arbitration Forums,
Incorporated (herein after referred to as AF) where:

(a) each has issued a policy of casualty insurance
covering, or as a self-insured covers, one or more
parties asserted to be legally liable for an accident,
occurrence or event out of which a claim or suit arises;
or

(b) each has issued separate policies of property or casualty
insurance providing, or as a self-insured provides,
concurrent coverage to the same party or parties
asserted to cover an accident, occurrence or event out
of which a first or third party claim or suit for bodily
injury or property damage arises; or

(c) a workers compensation carrier or a self-insured seeks
to recover reimbursement of workers compensation
benefits from an alleged tortfeasor.

Id., Vol. III at 75. Arbitration Forums, Inc., defines “settlement” as:

Settlement – (Special Arbitration) The final disposition of a claim
or suit wherein the claimant or plaintiff releases any and all

2
Progressive does not dispute the existence or general enforceability of the Arbitration Agreement.

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 causes of action against all alleged responsible parties involved in
the Special Arbitration filing. . . .

Id. at 86. Concurrent coverage is defined as:

Concurrent Coverage – (Special Arbitration) Two or more
policies of insurance and/or self-insureds providing coverage to
the same party or parties or the same risk or risks for the same
accident, occurrence, or event. Concurrent coverage includes
primary/excess disputes.

Id. at 85.

[6] While driving the courtesy car, Rivera had an accident which caused minor

damage to the vehicle. Empire made full payment for the damage, minus the

deductible paid by Terry Lee Honda. Empire then sought repayment of

$328.45 from Progressive, claiming Progressive was the primary insurance

provider pursuant to the Courtesy Car Agreement.3

[7] In response, Progressive claimed the Courtesy Car Agreement was invalid

because Terry Lee Honda did not comply with the statutory requirements for

rental agreements found in Indiana Code section 24-4-9-5.4 Progressive argued

that because the Courtesy Car Agreement was unenforceable, the courtesy car

3
Rivera’s policy with Progressive included insurance for a “non-owned auto.” See Appellant’s App. Vol. II,
at 37, 40.
4
Specifically, Progressive argued that Indiana Code section 24-4-9-5 requires “charge for use of the vehicle is
made at a periodic rate …” to constitute a rental agreement. Because Terry Lee Honda never collected the
$35 daily rental fee provided by the Courtesy Car Agreement, Progressive alleges Terry Lee Honda failed to
“charge” as required by statute.

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 was a loaned vehicle under Indiana Code section 27-8-9-7(b), and Empire’s

insurance was primary because Rivera was a permissive driver.5

[8] On March 24, 2016, Progressive initiated the current litigation by filing its

Complaint for Declaratory Judgment, seeking an order declaring: 1) Rivera was

a permissive driver of a loaned vehicle; 2) Empire’s coverage was primary; and

3) Empire’s coverage must be exhausted before Progressive is obligated on any

claim. In response, Empire filed a motion for arbitration pursuant to the

Arbitration Agreement and, in the alternative, Empire argued the Courtesy Car

Agreement qualified as a rental or lease under Indiana law.

[9] Attempting to jettison issues subject to arbitration, Progressive filed an

Amended Complaint asking the court to declare that the Courtesy Car

Agreement between Rivera and Terry Lee Honda was, as a matter of law, a

loan and not a rental or lease. Both parties moved for summary judgment.

[10] Following a hearing on April 7, 2017, the trial court issued its findings of fact

and conclusions thereon granting summary judgment in favor of Empire and

denying Progressive’s motion for summary judgment. The trial court

concluded the Courtesy Car Agreement was a rental agreement as defined by

Indiana Code section 24-4-9-5 and that any remaining dispute was subject to

arbitration. Progressive now appeals.

5
Indiana Code section 27-8-9-6(d) provides:

“Permittee” means any person who is granted permission to operate a motor vehicle by the
owner of the motor vehicle.

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 Discussion and Decision
I. Standard of Review
[11] Our standard of review in matters of summary judgment is the same as the trial

court: summary judgment is appropriate only where the evidence shows there

are no genuine issues of material fact and the moving party is entitled to

judgment as a matter of law. Hughley v. State, 15 N.E.3d 1000, 1003 (Ind.

2014); Ind. Trial Rule 56(C). Cross-motions for summary judgment do not

alter our standard of review and we consider each motion separately to

determine whether the moving party is entitled to judgment as a matter of law.

Reed v. Reid, 980 N.E.2d 277, 285 (Ind. 2012). We review de novo the trial

court’s interpretation of a contract, Showboat Marina Casino P’ship v. Tonn &

Blank Constr., 790 N.E.2d 595, 597 (Ind. Ct. App. 2003), as well as orders

compelling arbitration, Brumley v. Commonwealth Bus. Coll. Educ. Corp., 945

N.E.2d 770, 775 (Ind. Ct. App. 2011).

II. Agreement to Arbitrate
[12] Empire contends the dispute is subject to arbitration while Progressive argues

the dispute is outside the scope of the Arbitration Agreement and, even if the

dispute is within the scope, Empire failed to meet its burden to compel

arbitration.

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 A. Scope of the Arbitration Agreement
[13] Although often comingled, we view Progressive’s argument regarding the scope

of the Arbitration Agreement as consisting of two, separate components. First,

Progressive argues that its action is outside the scope of the Arbitration

Agreement because it sought a determination of whether the courtesy car was a

loan, a rental, or a lease, rather than a determination of priority. Second,

Progressive contends that declaratory judgment actions are outside the scope of

the Arbitration Agreement.

[14] Indiana recognizes a strong policy favoring enforcement of arbitration

agreements. Northwestern Mut. Life Ins. Co. v. Stinnett, 698 N.E.2d 339, 343 (Ind.

Ct. App. 1998). However, because arbitration is a matter of contract, a party

cannot be required to submit to arbitration unless he or she has agreed to do so.

Int’l Creative Mgmt., Inc. v. D & R Entm’t Co. Inc., 670 N.E.2d 1305, 1311 (Ind.

Ct. App. 1996), trans. denied. In other words, arbitration is a method to resolve

disputes, but only disputes that the parties have mutually agreed to submit to

arbitration.

1. Issue of Concurrent Coverage

[15] We first consider the scope of the Arbitration Agreement. Whether parties

have agreed to arbitrate a dispute is a matter of contract interpretation and the

parties’ intent. Am. Arbitration Ass’n v. North Miami Cmty. Sch., 866 N.E.2d 296,

301 (Ind. Ct. App. 2007). In determining whether parties agreed to arbitrate a

particular dispute, the court decides whether the dispute, on its face, is within

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 the language of the arbitration provision. Chesterfield Mgmt., Inc. v. Cook, 655

N.E.2d 98, 101 (Ind. Ct. App. 1995), trans. denied. A reviewing court must

attempt to determine the intent of the parties at the time the contract was made

by examining the language used to express their rights and duties. Anonymous,

M.D. v. Hendricks, 994 N.E.2d 324, 329 (Ind. Ct. App. 2013). Additionally,

“[w]hen construing arbitration agreements, every doubt is to be resolved in

favor of arbitration,” and the “parties are bound to arbitrate all matters, not

explicitly excluded, that reasonably fit within the language used.” Mislenkov v.

Accurate Metal Detinning, Inc., 743 N.E.2d 286, 289 (Ind. Ct. App. 2001). We do

not, however, extend arbitration agreements beyond the clear language of the

agreement and we will not extend arbitration agreements by construction or

implication. Id.

[16] Empire contends that Progressive asked the trial court to determine priority in a

concurrent coverage dispute and this is therefore “precisely the type of matter

that is required to be arbitrated under the [Arbitration Agreement].” Brief of

Appellee at 11. In support of its argument, Empire points to the language of the

Arbitration Agreement and alleges that once a settlement occurred and it

sought to collect a remaining $328.45 from Progressive, the dispute became a

dispute of concurrent coverage subject to compulsory arbitration.

[17] To determine whether a dispute falls within the provisions of an arbitration

agreement we turn to the contract’s plain language. Chesterfield Mgmt., 655

N.E.2d at 101. Here, the Arbitration Agreement provides that arbitration is

compulsory where both parties have “issued separate policies of property . . .

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 insurance . . . or . . . concurrent coverage to the same party or parties asserted to

cover an accident, occurrence or event out of which a . . . claim or suit for . . .

property damage arises.” Appellant’s App., Vol. III at 75. Through concurrent

coverage—Progressive’s coverage of Rivera and Empire’s coverage of Terry Lee

Honda—both parties allege the other’s policy covers an accident out of which

property damage arose, i.e., Rivera’s accident in the courtesy car.

[18] Turning to the parties’ intent, the Arbitration Agreement reveals that

Progressive and Empire sought to resolve disputes of concurrent coverage by

arbitration. Indeed, the Arbitration Agreement is written broadly and includes

only six enumerated exclusions, none of which are alleged to be present here.

See Appellant’s App., Vol. III at 75. Furthermore, the contract provides:

The decision of the arbitrator(s):

(a) shall be based on local jurisdictional law consistent with
accepted claim practices.
(b) is final and binding without the right of rehearing or appeal
except when allowed . . . .

Id. (emphasis added).

[19] Accordingly, the dispute presented, one of concurrent coverage asserted to

cover an accident out of which property damage arose, is within the plain

language of the Arbitration Agreement. Given the Arbitration Agreement’s

plain language, limited exclusions, and the parties’ intent to resolve such

disputes by compulsory arbitration, we conclude that Empire and Progressive

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 agreed to arbitrate the determination of priority in concurrent coverage

disputes.

2. Question of Priority

[20] Next, we consider whether Progressive’s action is outside the scope of the

Arbitration Agreement because it sought a determination that the courtesy car

was a loan. Through its Amended Complaint for Declaratory Judgment,

Progressive asked the trial court to enter an order declaring:

(A) that the arrangement Ms. Rivera had with Terry Lee Honda
was, as a matter of Indiana law, not a rental agreement or a
lease agreement;

(B) that under Indiana law, Terry Lee Honda loaned the 2016
Honda CRV to Maria Rivera; and that

(C) the Court grant Progressive all other just and proper relief in
the premises.

Appellant’s App., Vol. II at 78.

[21] Insurance coverage for loaned vehicles are governed by Indiana Code section

27-8-9-7(b), which provides:

In any case arising from a permittee’s use of a motor vehicle for
which the owner of the vehicle has motor vehicle insurance
coverage, the owner’s motor vehicle insurance coverage is
considered primary if both of the following apply:

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 (1) The vehicle, at the time damage occurred, was
operated with the permission of the owner of the motor
vehicle.

(2) The use was within the scope of the permission
granted.

Under Indiana Code section 27-8-9-7(b), Empire’s coverage would be

considered primary as the motor vehicle insurance coverage of the owner of the

courtesy car, Terry Lee Honda.

[22] Because Progressive asked the trial court to declare the courtesy car was a

loaned vehicle and Empire’s coverage would therefore be primary, Empire

characterizes Progressive’s Amended Complaint for Declaratory Judgment as

an attempt to sidestep the Arbitration Agreement by asking the trial court to

declare, “‘One fourth plus one fourth equals two fourths,’ but ask[ing] the court

to refrain from declaring, ‘Two fourths equal one half.’” Br. of Appellee at 15.

[23] We agree with Empire that Progressive poses a question of priority by another

name. Contrary to Progressive’s repeated assertions on appeal that it asked the

trial court to determine whether the courtesy car was loan, a rental, or a lease, it

did not. Rather, Progressive asked the trial court to declare “that under

Indiana law, Terry Lee Honda loaned the [courtesy car] to Maria Rivera[.]”

Appellant’s App., Vol. II at 78. The law of priority is clear, if the courtesy car

was a loaned vehicle, Empire’s coverage is primary. See Ind. Code § 27-8-9-

7(b). In our view, Progressive presented the trial court with a concurrent

coverage dispute and sought a determination of priority. As discussed above,

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 such questions are reserved for compulsory arbitration and Progressive’s

attempt to circumvent the Arbitration Agreement must fail.

3. Declaratory Judgment

[24] Progressive next contends that its declaratory judgment action is outside the

scope of the Arbitration Agreement and that even if it was not, it is “perfectly

fitting for Indiana’s trial judges to declare what Indiana law is, even when

another forum might be able to do the same work.” Appellant’s Reply Br. at 8.

[25] Progressive seeks a declaratory judgment pursuant to the Uniform Declaratory

Judgment Act. The Act provides Indiana courts have the “power to declare

rights, status, and other legal relations whether or not further relief is or could

be claimed[,]” Ind. Code § 34-14-1-1, under a “written contract, or other

writings constituting a contract, or whose rights, status, or other legal relations

are affected by a statute, municipal ordinance, [or] contract,” Ind. Code § 34-

14-1-2.

[26] We find Progressive’s argument regarding declaratory judgment actions

inconsistent with Indiana’s strong policy in favor of enforcing arbitration. See

Nightingale Home Healthcare, Inc. v. Helmuth, 15 N.E.3d 1080, 1084 (Ind. Ct.

App. 2014) (“[I]t is well settled that Indiana recognizes a strong policy favoring

enforcement of arbitration agreements.”). Arbitrators are routinely called upon

to interpret Indiana law. See Wright v. City of Gary, 963 N.E.2d 637, 645 (Ind.

Ct. App. 2012), trans. denied. (noting that only where an arbitrator manifestly

disregards the law may a reviewing court interfere); Fiducial Inv. Advisors v.

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 Patton, 900 N.E.2d 53, 60 (Ind. Ct. App. 2009) (noting that when we review an

arbitration, a mistake of law or erroneous interpretation of the law does not

constitute an act in excess of the arbitrator’s powers). Moreover, allowing

declaratory judgment actions would undermine the purpose of arbitration,

which is to afford parties an opportunity to reach a disposition in an easier,

more expeditious manner than by litigation.6 Bopp v. Brames, 677 N.E.2d 629,

631 (Ind. Ct. App. 1997).

[27] Accordingly, we conclude Progressive’s declaratory judgment action cannot be

said to be outside the scope of the Arbitration Agreement where there is

evidence the parties intended for an arbitrator to decide matters of law.7

Indeed, if we were to allow such artful pleading, no party would be bound to

arbitrate disputes involving issues of statutory interpretation.

[28] However, the parties were free to exclude declaratory judgment actions or

issues requiring statutory interpretation from the Arbitration Agreement. In

fact, the parties were free to exclude anything they wished. Ransburg v. Richards,

770 N.E.2d 393, 395 (Ind. Ct. App. 2002) (“As a general rule, the law allows

persons of full age and competent understanding the utmost liberty of

contracting, and their contracts, when entered into freely and voluntarily, are

6
The case before us, involving a dispute over $328.45, is a prime example of the costly litigation arbitration is
intended to avoid.
7
The Arbitration Agreement provides: “The decision of the arbitrator(s): (a) shall be based on local
jurisdictional law consistent with accepted claim practices.” Appellant’s App., Vol. III at 75.

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 enforced by the courts.”); Bopp, 677 N.E.2d at 632 (“[A]rbitration arises

through contract, and the parties are essentially free to define for themselves

what questions may be arbitrated, remedies the arbitrator may afford, and the

extent to which a decision must conform to the general principles of law.”).

They, of course, did not, and we must resolve every doubt in favor of

arbitration. Mislenkov, 743 N.E.2d at 289.

[29] In sum, we find Progressive poses a question of priority by another name.

Progressive blatantly asked the trial court to determine priority in its original

complaint, an issue which falls under the provisions of the Arbitration

Agreement. Then, through artful pleading of the Amended Complaint,

Progressive asked the trial court to declare the courtesy car was a loaned

vehicle. Because the law of priority is clear, despite amending its complaint,

Progressive was still seeking a determination that Empire’s coverage was

primary. Had Progressive not contracted away its right to seek declaratory

judgment, that tactic might have been successful. However, as it stands,

Progressive’s argument is one of form over substance and the dispute is still

subject to arbitration.

B. Burden to Compel Arbitration
[30] Progressive also argues Empire failed to meet its burden in seeking to compel

arbitration. Under Indiana contract law, the party seeking to compel

arbitration has the burden of demonstrating the existence of an enforceable

arbitration agreement. Wilson Fertilizer & Grain, Inc. v. ADM Milling Co., 654

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 N.E.2d 848, 849 (Ind. Ct. App. 1995), trans. denied. Then, the movant must

demonstrate that the disputed matter is the type of claim the parties agreed to

arbitrate. Brumley, 945 N.E.2d at 776.

[31] Progressive does not dispute it is a signatory of the Arbitration Agreement.

Instead, Progressive maintains that Empire failed to meet its burden by relying

on hearsay evidence, in the form of the “Frequently Asked Questions” page of

Arbitration Forums, Inc.’s website, to show that the disputed matter is a type of

claim the parties agreed to arbitrate. Notwithstanding hearsay concerns,

Empire also argued that the specific dispute fell within the plain language of the

Arbitration Agreement and that the issue was nothing more than one of

concurrent coverage and a primary/excess dispute. In support thereof, Empire

designated the Arbitration Agreement along with an affidavit supporting the

fact that both Progressive and Empire were signatories to the Arbitration

Agreement. Appellant’s App., Vol. III at 68. This evidence alone is sufficient

to satisfy Empire’s burden to demonstrate that the specific dispute is subject to

arbitration.

[32] Satisfied that Empire and Progressive intended to arbitrate the dispute

Progressive brought in the trial court, such arbitration must be compelled.

TWC, Inc., v. Binford, 898 N.E.2d 451, 453 (Ind. Ct. App. 2008) (“Once the

court is satisfied that the parties contracted to submit their dispute to

arbitration, the court is required by statute to compel arbitration.”).

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 C. Rental Agreement
[33] Finally, Progressive argues the trial court erred by declaring the Courtesy Car

Agreement a rental agreement. We agree, but for reasons different than

Progressive posits.

[34] The trial court found that the Courtesy Car Agreement was a valid rental

agreement as defined by Indiana Code section 24-4-9-5 before ordering any

remaining issues to arbitration. In doing so, the court effectively denied part of

Empire’s motion for summary judgment—i.e., the argument that the entire

dispute was subject to arbitration. Most of the parties’ arguments on summary

judgment and now on appeal involve the question of whether the Courtesy Car

Agreement, and its underlying transaction, was a rental under Indiana Code

section 24-4-9-5, a loan under Indiana Code section 27-8-9-7, or a lease under

Indiana Code section 27-8-9-9. Because the Arbitration Agreement controls the

dispute presented, that question must remain for an arbitrator. See St. John

Sanitary Dist. v. Town of Schererville, 621 N.E.2d 1160, 1162 (Ind. Ct. App. 1993)

(noting that when determining whether a dispute is subject to arbitration “the

court will not rule on the potential merits of the underlying claims.”). The trial

court erred in concluding otherwise.

Conclusion
[35] For the reasons discussed above, we conclude that the Arbitration Agreement

controls the dispute now before us. Accordingly, we reverse the trial court’s

finding that the Courtesy Car Agreement was a rental agreement, affirm the
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 trial court’s order of partial arbitration, and remand to the trial court to enter an

order compelling the entire dispute to arbitration.

[36] Affirmed in part, reversed in part, and remanded.

Kirsch, J., and Altice, J., concur.

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