On June 30, the Indiana Court of Appeals resolved which insurer pays first when two underinsured motorist policies overlap in a repair shop scenario.
This case started when Lawrence Ricketts, who runs Automotive Specialists LLC in Kokomo, was test-driving a customer’s Dodge Ram truck after repairs. The truck belonged to Randy Tinsley and was insured by Erie Insurance Exchange. On the way to another shop to check its alignment, Ricketts was hit by a Honda Civic. The Civic’s driver, Jacob Reiter, ran a stop sign and crashed into the truck.
The Civic was insured by Progressive, which paid out its policy limits. But that wasn’t enough to cover Ricketts’ injuries. So, Ricketts looked to the underinsured motorist coverage from both Erie, which insured the truck, and State Farm, which insured him personally.
That’s when the insurers clashed. Both Erie and State Farm argued that their policies should be excess – meaning the other should pay first. Erie’s policy said it wouldn’t pay until “all other forms of insurance” had been exhausted. State Farm’s policy described its underinsured motorist coverage as applying as excess if other underinsured coverage also applied for the same accident.
The trial court initially sided with State Farm, saying Erie’s policy should provide primary coverage. But the Court of Appeals reversed that decision. The court applied Indiana’s Bailee Coverage Statute, which says that when a vehicle is in the care of a repair shop – a bailee – any coverage available to the bailee is primary. Since Ricketts was the bailee, State Farm’s policy covering him had to pay first. Erie’s coverage for the vehicle owner only kicked in after that.
For insurers, the takeaway is clear: when cars are at repair shops and underinsured motorist claims arise, the shop’s or mechanic’s coverage goes first. The case shows how statutory rules can override policy language when insurers try to sort out who pays in complex claims.
