Employers Insurance of Wausau and Nucor Corporation v. Roger K. Stopher, Julia Stopher, and Westfield National Insurance Co.

RIPPLE, Circuit Judge,

dissenting.

I respectfully part company with my colleagues because, in my view, the language of the insurance contract between Wausau and Nucor is unambiguous. Under the plain wording of the policy, Nucor’s rejection of the UM/UIM coverage constituted a change in the terms of the policy, not a cancellation of the policy, and that change did not become effective until Wausau’s issuance of an endorsement. Wausau, however, did not issue the endorsement changing the policy to exclude the UM/UIM coverage until nine days after Mr. Stopher’s accident. Accordingly, at the time of the accident, Mr. Stopher had UM/UIM coverage under the Wausau policy.

Under Indiana law, the methodology we must apply to the interpretation of an insurance policy is well established. If the policy’s language is clear and unambiguous, “it should be given its plain and ordinary meaning.” Tate v. Secura Ins., 587 N.E.2d 665, 668 (Ind.1992). “[0]ur goal is to ascertain and enforce the parties’ intent as manifested in the insurance contract.” American Family Mut. Ins. Co. v. National Ins. Ass’n, 577 N.E.2d 969, 971 (Ind.Ct.App.1991) (emphasis added). Indeed, as in any contract matter, “the intent relevant ... is not the parties’ subjective intents but their outward manifestations of it.” Holloway v. Giganti, Inc., 540 N.E.2d 97, 99 (Ind.Ct.App.1989). Accordingly! “[w]e cannot extend coverage beyond that provided in the contract and we may not rewrite the plain and unambiguous language of the insurance contract.” American Family, 577 N.E.2d at 971.

In light of these principles, we must look to the plain wording of the policy to determine whether Nucor’s rejection of UM/UIM coverage constituted a change in the terms of the policy or a cancellation of the policy. The relevant provisions are as follows:

A. CANCELLATION
1. The first Named Insured shown in the Declarations may cancel this policy by mailing or delivering to us advance written notice of cancellation.
2. We may cancel this policy by mailing or delivering to the first Named Insured written notice of cancellation at least:
a. 10 days before the effective date of cancellation if we cancel for nonpayment of premium; or
b. 30 days before the effective date of cancellation if we cancel for any other reason.
3. We will mail or deliver our notice to the first Named Insured’s last mailing address known to us.
4. Notice of cancellation will state the effective date of cancellation. The policy period will end on that date.
5. If this policy is canceled, we will send the first Named Insured any premium refund due. If we cancel, the refund will be pro rata. If the first Named Insured cancels, the refund may be less than pro rata. The cancellation will be effective even if we have not made or offered a refund.
6. If notice is mailed, proof of mailing will be sufficient proof of notice.
B. CHANGES
This policy contains all the agreements between you and us concerning the insurance afforded. The first Named Insured shown in the Declarations is authorized to make changes in the terms of the policy with our consent. This policy’s terns can be amended or waived only by endorsement issued by us and made a part of this policy.

Wausau Policy (emphasis added).

In my view, the above language, given its plain and ordinary meaning, is clear and unambiguous: A “cancellation” refers to an action which terminates the entire policy; a “change” refers to an action which modifies the policy but after which the policy remains in effect. Indeed, under Indiana law, “the term ‘cancellation’ refers to the termination of a policy prior to the end of the policy period.” American Family Mut. Ins. Co. v. *901Ramsey, 425 N.E.2d 243, 244 (Ind.Ct.App.1981); accord State Farm Mut. Auto. Ins. Co. v. White, 563 F.2d 971, 974 n. 2 (9th Cir.1977) (applying Montana law); accord Ohran v. National Auto. Ins. Co., 82 Cal.App.2d 636, 187 P.2d 66, 70 (1947); Librizzi v. State Farm Fire & Cas. Co., 236 Ill.App.3d 582, 177 Ill.Dec. 751, 603 N.E.2d 821, 825 (1992); First Nat’l Bank v. Watts, 462 N.W.2d 922, 926 (Iowa 1990); Waynesville Sec. Bank v. Stuyvesant Ins. Co., 499 S.W.2d 218, 220 (Mo.Ct.App.1973); Struve Enters., Inc. v. Travelers Ins. Co., 243 Neb. 516, 500 N.W.2d 580, 583-84 (1993).1

In this ease, Nucor’s rejection of UM/UIM coverage did not terminate the policy; instead, the policy continued but without UW UIM coverage. Under the above definition, therefore, Nucor’s rejection of UM/UIM coverage must be understood as a change in its policy with Wausau, not a cancellation of that policy. Accordingly, under the plain wording of the policy, that change did not take effect until Wausau issued an endorsement changing the policy. Because Wausau did not issue the change endorsement until after Mr. Stopher’s accident, the UM/UIM coverage in the Wausau policy was in effect at the time of the accident.

This conclusion is supported further by Wausau’s actions. Specifically, after receiving Nucor’s letter rejecting the UM/UIM coverage, Wausau issued a “change endorsement” in order to effectuate Nucor’s rejection of that coverage. The issuance of such an endorsement would not be necessary if Wausau and Nucor viewed the rejection of UM/UIM coverage to be a “cancellation.” Accordingly, given Wausau’s issuance of the “change endorsement,” I find it difficult to credit its present assertion that the effective date of Nucor’s rejection of UM/UIM coverage should be governed by the “cancellation” provision of its policy. In this regard, it is important to note that, under Wausau is required to provide UM/UIM coverage to its Indiana insureds, and an insured’s rejection of such coverage must be in writing. See Ind.Code § 27-7-5-2. Therefore, an insurer has a strong interest in demonstrating its compliance with this statutory directive by making an insured’s rejection of UM/UIM coverage a matter of record. Under this policy, Wausau satisfies that interest by treating an insured’s cancellation of UM/UIM coverage as a change to the policy and issuing a “change endorsement” to that effect.

In reaching its decision, the majority expresses the concern that, under the above interpretation of the policy, “Nucor would be exposed to additional risks as a result of Wausau’s failure to promptly issue the change endorsement after Nucor attempted to reject the coverage.” Ante at 11. Specifically, the majority worries that “Nucor could be exposed to additional obligations under the Policy through Wausau’s manipulation of when it issued the change endorsement. Wausau presumably could continue to charge Nucor premiums for UM/UIM coverage by delaying the issuance of a change endorsement, even after Nucor had evidenced a clear intent to reject such coverage.” Id. Although this is a valid concern, it is not one which should impact our decision today. The record contains no suggestion of such manipulation in this case. Moreover, in the event that an insurer deliberately delays making an agreed-upon change, the insured is not without a remedy. See Erie Ins. Co. v. Hickman, 622 N.E.2d 515, 519 & n. 1 (Ind.1993) (recognizing a cause of action for the tortious breach of an insurer’s duty to deal with its insured in good faith and noting that such an action is recognized by a majority of states); see also Lee R. Russ & Thomas F. Segalla, *902Couch on Insurance 3d § 25:7 (stating that “insurer may be estopped from denying liability because of its fault or its agent’s fault in failing to properly set forth an agreed-to alteration”).

I would affirm the judgment of the district court.