February 03, 2011
1. Bush v State Farm Mutual Automobile Insurance Company, 905 N.E.2d 1003 (Ind. 2009). In Bush, Mr. and Mrs. Bush brought suit against State Farm after their 56 year old son was killed while riding as a passenger in a single vehicle accident driven by an uninsured driver. Mr. and Mrs. Bush were not in the car at the time and sustained no physical injury themselves. Nevertheless, they claimed that they sustained damages arising from the conduct of an uninsured motorist and that State Farm’s failure to provide UM benefits was a breach of the insurance contract.
State Farm counterclaimed and filed a declaratory judgment action seeking a determination that there was no coverage because no “insured” sustained a “bodily injury.” Leonard Bush, the son, was not a resident of Mr. and Mrs. Bush’s home and State Farm
GARAN LUCOW MILLER, P.C. ANN ARBOR • DETROIT • GRAND BLANC • GRAND RAPIDS • LANSING • MARQUETTE • PORT HURON • TRAVERSE CITY • TROY MERRIVILLE, INDIANA
contended that he was not, therefore, an “insured” relative under the policy. The trial court granted the summary judgment. The Court of Appeals reversed holding that State Farm’s exclusion of coverage for Leonard violated provisions of the Indiana uninsured motorist statute at I.C. 27-7-5-2.
The Supreme Court reversed and affirmed the trial court’s granting of summary judgment, holding that State Farm’s uninsured motorist policy that required “bodily injury” first be sustained by an insured did not violate Indiana’s uninsured motorist statute. The Court relied, in part, on its recent decision in State Farm Mutual Automobile Insurance Company v Jakupko, 881 N.E.2d 654 (Ind. 2008) which affirmed earlier Indiana case law that “bodily injury” included emotional distress. However, the Bush Court clarified that in order to recover for “emotional distress” under the insurance policy at issue, an insured first had to sustain physical contact and bodily harm. The Bush Court also noted that the uninsured motorist statute also requires the insured to sustain bodily injury to trigger uninsured motorist coverage. The predicate step to claiming emotional distress is that an insured or a party must first sustain a “bodily touching” or contact. Since Mr. and Mrs. Bush were not in the vehicle, they did not sustain a “bodily touching” or contact. Therefore, they were unable to sustain a claim for emotional distress. The Court also noted that since Leonard Bush was an unmarried adult, the Adult Wrongful Death Act applied and only the Estate had standing to bring claim for his wrongful death. Mr. and Mrs. Bush did not file the lawsuit via an Estate, but rather in their individual capacities. Thus, they lacked standing to sue. a. Keep in mind that a “bodily touching” is required under Indiana law as a predicate step to a claim for emotional distress, even if the policy provides that “emotional distress” is a form of bodily injury;
b. As you adjust your claims and lawsuits, pay attention as to whom is a proper party in interest, and he they actually has standing to bring the claim;
2. Grinnell Mutual Reinsurance Company v Ault, 918 N.E.2d 619 (Ind.App. 2009). In Grinnell, a woman operated a daycare business as a sole proprietorship out of her home that she shared with her husband. Grinnell Mutual Reinsurance Insurance Company issued a farm and personal liability insurance policy to the Kings. That policy contained an exclusion stating as follows:
“Infliction of emotional distress, loss of society or loss of consortium suffered by a spouse or a child is not a separate “bodily injury” under this policy and must be included in the claim of the person sustaining physical harm to the body.”
The policy also contained an exclusion for bodily injury sustained in the course of a crime, offensive violent nature of physical abuse or any bodily injury or mental emotional injury arising out of sexual molestation or sexual harassment of a person by an insured. The Aults’ daughter was ultimately molested by the husband of the daycare operator. The Aults sued the woman and her husband, claiming in part, emotional distress.
The Defendants did not notify Grinnell and did not request Grinnell to defend them. The husband filed an Answer in which he admitted the allegation that he had molested the daughter.
Subsequently, the Ault’s attorney sent a letter to Grinnell informing Grinnell of the complaint. Thereafter, Grinnell notified the Kings it would not defend or indemnify them in a lawsuit. A year later the Court approved an Agreed Judgment of $500,000. The Aults and the Defendants also executed a settlement agreement and a covenant not to execute and judgment was thereafter entered for $500,000 plus costs. The Aults then filed a Motion for Proceedings Supplemental naming Grinnell as a garnishee defendant claiming that Grinnell was obligated to indemnify the Defendants.
The Court noted that an insurer has the right to refuse to defend an insured after conducting an independent investigation that determines the claim against the insured was outside the risk covered by the policy. However, the Court also noted that the carrier must either protect its interests by filing a declaratory judgment action, or hire independent counsel and defend the insured under a reservation of rights. If it does neither, the carrier is at risk and may be bound by the judgment. Significantly, the Court noted that the insurer’s failure to defend an insured or to seek a declaratory judgment does not necessarily waive its coverage or defenses!!
The Court determined that the injuries arose out of the daycare business activities and, therefore, were excluded under the policy. The Court also held that the policy unambiguously excluded coverage for any derivative injuries suffered by the Aults. The policy clearly indicated that infliction of emotional distress is not a separate “bodily injury” under the policy and must be included in the claim of the person sustaining the actual physical harm. The Court further noted that the attempt by the Aults’ attorney to turn the Defendant/Husband’s admission that he intentionally had molested the girl into a negligent “touching” in the agreed judgment was stopped as unfair, since Grinnell had only been on notice that the Defendant/Husband had intentionally molested the girl. Therefore, no coverage applied.
a. Note that an insurer’s decision or failure to defend or seek a declaratory judgment does not necessarily waive its coverage defenses;
b. If there is a coverage question, file a declaratory action and deny coverage, or defend under a reservation of rights while coverage is determined.
**************************************
Upcoming Seminars
ANNUAL TROY BREAKFAST SEMINAR Thursday, September 23, 2010 at the Troy Marriott. Agenda to follow at a later date. BUCKEYE SEMINAR
Wednesday, October 13, 2010 at the Greater Columbus Convention Center in Columbus, Ohio. Agenda to follow at a later date.
WINDY CITY SEMINAR Thursday, November 14, 2010 at the DoubleTree Hotel, Arlington Heights, Illinois. Agenda to follow at a later date.
********************************
SAVE THE DATE
The 3rd Annual Cherry- Roubaix Race, sponsored by Garan Lucow Miller, P.C., will be held on Saturday and Sunday, August 28th and 29th, 2010, through the historic streets in the heart of Traverse City.
Mark your calendars to join us at this exciting event. If you have any questions or would like additional information on this race, please go to www.cherry-roubaix.com or contact Peter Worden, in our Traverse City office at: (231) 941-1611.
SAVE THE DATE Event: Garan Lucow Miller’s Annual Golf Outing Date: Tuesday, August 24, 2010
Venue: Forest Akers West Golf Course on the campus of MSU Banquet dinner to be on campus at the University Club
**************************
Garan Lucow Miller, P.C., a full-service law firm since 1948, providing quality representation to a national clientele from the Great Lakes Region, is pleased to announce that it has opened an office in Merrillville, Indiana, to further facilitate your claim and litigation needs in Indiana and Illinois.
Garan Lucow Miller, P.C. 8401 Virginia Street Merrillville, Indiana 46410 Phone: 219.756.7901 Fax: 219.756.7902 Toll Free: 877.804.2801