Mahan v. American Standard Ins. Co.

862 N.E.2d 669

Jeffrey L. MAHAN, Appellant-Defendant, v. AMERICAN STANDARD INSURANCE COMPANY, Appellee-Plaintiff.

No. 18A02-0601-CV-66.

Court of Appeals of Indiana.

January 9, 2007.

Publication Ordered January 30, 2007.

Chris M. Teagle, Muncie, IN, Attorney for Appellant.

Linda Y. Hammel, Yarling & Robinson, Indianapolis, IN, Attorney for Appellee.

OPINION

DARDEN, Judge.

STATEMENT OF THE CASE

Jeffrey L. Mahan appeals the trial court's denial of his motion for partial summary judgment and granting of American Standard Insurance Company's ("American") cross-motion for summary judgment.

We affirm.

ISSUE

Whether the trial court erred in denying Mahan's motion for partial summary judgment and granting American's cross-motion for summary judgment.

FACTS

On October 25, 2003, Mahan, who had been drinking alcohol, was driving on State Road 3 in Delaware County when he turned left in front of a vehicle being driven by Brian Hurley. Six passengers were in Hurley's vehicle: Donna Hurley, Katrina Weiss, Kyle Weiss, Brooklyn Weiss, Michael Elwood and Tracy McDonald. Hurley and all six passengers sustained injuries and incurred medical expenses.

At the time of the accident, Mahan maintained automobile-insurance coverage through a policy issued by American. The policy provided liability limits for bodily injury in the amount of $50,000 per person and $100,000 per accident. The policy further provided, in relevant part, as follows: "We will defend any suit or settle any claim for damages payable under this policy as we think proper. HOWEVER, WE WILL NOT DEFEND ANY SUIT AFTER OUR LIMIT OF LIABILITY HAS BEEN PAID." (App. 23).

On December 1, 2003, Mindy Lantrip, a claim manager for American, sent Mahan a letter via certified mail. In the letter, Lantrip notified Mahan that based on the information available to American, the personal-injury damages incurred due to the accident "may result in personal exposure to [Mahan] in excess of [his] policy's liability limits." (American's App. 39). The letter also informed Mahan that he would be personally liable for any judgment in excess of his policy's liability limits rendered against him. The letter advised Mahan that he "may retain legal counsel, at [his] expense, to offer legal advice regarding the protection of [his] interests concerning any excess liability exposure which [he] may incur." (American's App. 39). Finally, the letter informed Mahan that American would "continue to protect [his] interest within the provisions of [his] policy." (American's App. 39). At some point, Mahan retained counsel because "there was an issue of possible criminal liability with respect to Mahan's operation of" his vehicle on October 25, 2003. (Tr. 320).

On March 1, 2004, American filed a complaint in interpleader, naming Mahan, Brian Hurley, Donna Hurley, Katrina Weiss Kyle Weiss, Brooklyn Weiss, Michael Elwood and Tracy McDonald as interpleader defendants. American sought

to pay the sum of One Hundred Thousand Dollars ($100,000) into the Court for the benefit of the Defendants Katrina Weiss, Kyle Weiss, Brooklyn Weiss, Michael Elwood, Tracy McDonald, Brian Hurley and Donna Hurley, the proceeds of the policy issued by [American] to [Mahan], such fund to be distributed upon an appropriate Order from the Court determining who may be entitled to such funds and the amount to which each of the Defendants Katrina Weiss, Kyle Weiss, Brooklyn Weiss, Michael Elwood, Tracy McDonald, Brian Hurley and Donna Hurley may be entitled.

(App. 17). The complaint also sought relief from "any further obligation under the policy of insurance issued to [Mahan] and desire[d] to be relieved of the obligation and expense of defending [Mahan] from the claims made by the other Defendants," Katrina Weiss, Kyle Weiss, Brooklyn Weiss, Michael Elwood, Tracy McDonald, Brian Hurley and Donna Hurley. (App. 17). The complaint requested "[t]hat the court order and decree that [American] is relieved of any duty or obligation to [Mahan] against any claims, actions, proceedings or cause of actions by any of the other Defendants herein against [Mahan] arising out of the accident. . . ." (App. 18).

On April 8, 2004, Mahan filed an answer, asserting that American had "an affirmative duty to afford defense to Mahan in this cause of action, and to afford such defense at every stage of the proceedings." (App. 54). Mahan further asserted estoppel as an affirmative defense.

In August and November of 2004, counsel for American sent letters to Mahan's counsel, proposing that "the declaratory judgment action as to duty to defend" be dismissed, without prejudice, "as it could be revisited if any of the co-defendants filed suit for damages against [Mahan]." (American's App. 4). Mahan, however, refused such a stipulation.

On October 28, 2004, the trial court held a hearing on damages, at which the "[p]arties agree[d] to the distribution of the interpleaded amount with $35,000 to be awarded to Tracy McDonald, Bruce Hurley and Donna Hurley, and $65,000 to be divided amount [sic] Katrina Weiss, Brooklyn Weiss, Kyle Weiss and Michael Elwood." (App. 5). Mahan, however, did not appear at the hearing, and "[t]he issue of the duty to defend [Mahan] remain[ed] pending." (App. 5). Mahan filed an objection to the consent decree and distribution of funds on November 18, 2004.

On November 19, 2004, Mahan filed an amended answer, asserting the following affirmative defenses:

1. Payment. That by tendering the amount stated in the complaint in interpleader, Mahan has paid all obligations he owes to all parties in this cause.

2. Estoppel. That by [American]'s failure to secure Mahan's consent to the action in interpleader in this cause of action, or by [American]'s failure to advise Mahan of the potential for excess liability, [American] is estopped from denying Mahan defense throughout these proceedings.

3. Estoppel. [American] breached a duty to defend Mahan before filing [American]'s complaint in interpleader in this cause, and as a result of [American]'s breach of duty [American] is estopped from denying continuing defense to Mahan in this cause, and is further obligated to indemnify Mahan in the event of excess liability owed to third party claimants.

(App. 57).

Also on November 19, 2004, Mahan filed a counterclaim against American, asserting that American's automobile policy imposed "a duty to defend Mahan against third parties claiming payment pursuant to the policy," and that American

breached its duty to defend Mahan by failing to attempt to secure a release of further claims by third parties against Mahan within the limits of the policy of insurance between [American] and Mahan; and, by failing to defend Mahan prior to interpleading policy limits into the court; and, by interpleading policy limits into the court before suit having been filed by third party claimants; and, by failing to advise Mahan prior to interpleader of the potential of excess liability so that Mahan could take steps to defend himself from excess liability to third party claimant.

(App. 64). Mahan further asserted that American "had a duty to deal in good faith with Mahan in affording Mahan defense against third party claimants" and "breached the duty to act in good faith in dealing with their insured, resulting in Mahan's damage." (App. 65). Mahan requested a "declaratory judgment that [American]'s duty to defend Mahan continues throughout these proceedings or subsequent proceedings that may be filed by third party claimants." (App. 65). Mahan also sought punitive damages and attorney's fees.

On December 29, 2004, the trial court entered a consent decree for distribution of interpleaded funds and for entry of permanent injunction. The decree provided for monetary distributions to Brian Hurley, Donna Hurley, Katrina Weiss, Kyle Weiss, Brooklyn Weiss, Michael Elwood and Tracy McDonald in full and complete satisfaction of their claims against American. The trial court ordered, in pertinent part:

8. [American] is hereby RELEASED AND DISCHARGED from further liability on account of its policy of insurance issued to [Mahan] . . . and [Mahan] is hereby RELEASED AND DISCHARGED from all liability arising out of the accident which occurred on October 25, 2003 in Delaware County, Indiana.

9. Each defendant is perpetually enjoined from commencing or further prosecuting any action in state or federal court against [American] and [Mahan] with regard to any claim, loss, injury, death or damage arising out of the two vehicle accident which occurred on October 25, 2003. . . .

10. The defendants['] agreement that any existing or future medical lien or liens of any type will be paid by such defendants and such defendants' agreement to save harmless [American] and [Mahan] from any claim brought as a result of any treatment or damages arising out of the two vehicle accident . . . including but not limited to attorney fees incurred to defend such claims and all other costs, is hereby approved.

* * *

12. The defendants and each of them shall accept the payment ordered herein as the limit of their claims against [American] and [Mahan] and any claims in excess of the amounts ordered paid herein as to [American] and [Mahan] shall be foreclosed.

* * *

15. The counterclaim of [Mahan] against [American] is not resolved and remains pending.

(App. 96-98).

On May 4, 2005, Mahan filed a motion for partial summary judgment, asserting he was entitled to judgment as a matter of law on the duty to indemnify, duty to defend and bad faith claims. On June 2, 2005, American filed its cross-motion for summary judgment and opposition to Mahan's motion for partial summary judgment.

The trial court held a hearing on the motions for summary judgment on July 26, 2005. On October 21, 2005, the trial court entered findings of fact and conclusions of law. The trial court found, in part, as follows:

10. [American] investigated the claims of Brian Hurley and his six passengers and received...