Opinion
Cause No. IP00-0018-C-T/G
March 30, 2001
John D Raikos Attorney at Law 1800 Indianapolis, IN.
Michael E Simmons Hume Smith Geddes Green Simmons Indianapolis, IN.
Thomas J Campbell Locke Reynolds LLP Indianapolis, IN.
ENTRY ON SUMMARY JUDGMENT MOTIONS AND MOTION TO STRIKE
This entry is being made available to the public on the court's web site, but it is not intended for commercial publication either electronically or in paper form. Under the law of the case doctrine, it is presumed that the ruling or rulings in this entry will govern throughout the litigation before this court. See, e.g., Tr. of Pension, Welfare, Vacation Fringe Benefit Funds of IBEW Local 701 v. Pyramid Elec., 223 F.3d 459, 468 n. 4 (7th Cir. 2000); Avitia v. Metro. Club of Chicago, Inc., 49 F.3d 1219, 1227 (7th Cir. 1995). It should be noted, however, that this district judge's decision has no precedential authority and, therefore, is not binding on other courts, other judges in this district, or even other cases before this district judge. See, e.g., Howard v. Wal-Mart Stores, Inc., 160 F.3d 358, 359 (7th Cir. 1998) ("a district court's decision does not have precedential authority"); Malabarba v. Chicago Tribune Co., 149 F.3d 690, 697 (7th Cir. 1998) ("district court opinions are of little or no authoritative value"); Old Republic Ins. Co. v. Chuhak Tecson, P.C., 84 F.3d 998, 1003 (7th Cir. 1996) ("decisions by district judges do not have the force of precedent"); Anderson v. Romero, 72 F.3d 518, 525 (7th Cir. 1995) ("District court decisions have no weight as precedents, no authority.").
Plaintiffs, Executive Builders, Inc. ("Executive Builders") and Robert Montgomery have sued Defendant, Motorists Insurance Companies ("Motorists"), seeking a declaration that Motorists has a duty under the insurance policies to defend on appeal and indemnify them for G. Raymond Trisler's punitive damages claim. Plaintiffs also bring a claim for compensatory damages for an alleged deceitful defense of that punitive damage claim. Mr. Trisler was allowed to intervene as a plaintiff on the limited question of whether Motorists' policies provide coverage for the punitive damages award entered against Mr. Montgomery. Both Plaintiffs and Defendant move for summary judgment, though Plaintiff's motion is most appropriately considered a motion for partial summary judgment. Motorists moves to strike various arguments and submissions of Mr. Trisler.
Mr. Trisler's Brief In Response To Pending Cross-Motions For Summary Judgment and his Statement Of Additional Material Facts go beyond the issue of whether there is coverage available under the policies issued by Motorists for the punitive damage judgment entered against Mr. Montgomery. Perhaps this is because of language in the court's order allowing Mr. Trisler to file "a supplemental brief directed at the issues raised in the Executive Builders and Mr. Montgomery's motion for summary judgment and Motorist's cross-motion for summary judgment." (Entry On Trisler's Motion To Intervene And Order On Filing of Intervenor's Complaint And On Summary Judgment Briefing at 9.) Motorists objects to Mr. Trisler's Statement of Additional Material Facts and those portions of his brief which go beyond the scope of intervention allowed by the court's prior order. Because of the ambiguity in the court's order regarding Mr. Trisler's supplemental brief, the court will consider Mr. Trisler's Statement Of Additional Material Facts and all arguments made by Mr. Trisler whether directed to the coverage issue or another issue.
I. Background
The background facts will be supplemented in the discussion section as necessary.
Motorists issued a comprehensive general liability ("CGL") policy of insurance, to Plaintiff, Executive Builders, Inc. ("Executive Builders" or "Executive"). (Compl., Ex. 2 at 1.) The CGL policy provides for coverage in relevant part: "We will pay those sums that the insured becomes legally obligated to pay as damages because of `bodily injury' or `property damage' to which this insurance applies." (Compl., Ex. 3, at 1 § 1, ¶ 1.a.) Under the CGL policy, Motorists has "the right and duty to defend any `suit' seeking those damages." (Id.) The Declarations of the CGL policy identify "Executive Builders Inc." as the "Named Insured." (Compl., Ex. 2 at 1.) Under the CGL policy, not only was Executive an insured, but also Executive's "executive officers and directors . . . but only with respect to their duties as your officers or directors." (Compl., Ex. 3, at 5, § II, ¶ 1.c.) The CGL policy limit was $1,000,000. (Compl., Ex. 2.)
Motorists also issued a commercial excess umbrella ("umbrella") policy of insurance to Executive Builders Inc. (Compl., Exs. 4, 5.) The umbrella policy provides for coverage in relevant part:
The Company hereby agrees to indemnify the insured against such ultimate net loss in excess of the insured's primary limit as the insured sustains by reason of liability, imposed upon the insured by law or assumed by the insured under contract, for damages because of personal injury or property damage to which this policy applies, caused by an occurrence anywhere in the world.
(Compl., Ex. 4 at 1, § I.) (Emphases in original). The umbrella policy further provides for a duty to defend:
If no other insurer has the right and duty to do so, the Company shall have the right and duty to defend any suit against the insured seeking damages on account of such personal injury or property damage . . .; provided that:
(a) In connection with the aforesaid right and duty to defend, the Company may make such investigation and settlement of any claim or suit as it deems expedient, including payment on behalf of the insured of part or all of the insured's primary limit.
(Id. at 1, § II.) (Emphasis in original). The "insured" under the umbrella policy includes "not only the Named Insured stated in Item 1 of the Declarations [Executive Builders Inc.], but also: (a) any officer, director . . . of the Named Insured while acting within the scope of his duties as such. . . ." (Id. at 1, § III, Ex. 5.) The umbrella policy limit was $2,000,000. (Compl., Ex. 5.)
On December 11, 1987 Executive filed a Complaint for intentional interference with business against G. Raymond Trisler in state court, Cause No. 73C01-8803-CP-057 (the "057 case"). Trisler filed a Counterclaim against Executive and a Third-Party Complaint against Robert Montgomery and Dolores Montgomery, husband and wife, who were allegedly officers and/or directors of Executive. The Amended Counterclaim and Third-Party Complaint sought compensatory and punitive damages for defamation, invasion of privacy, abuse of process, wrongful intimidation, criminal deception and mischief, breach of fiduciary duties, and malicious prosecution. (Pl.'s Designation of Evidence, Ex. 12.) Motorists contested coverage for many of Trisler's claims against Executive and the Montgomerys.
In 1995, Executive and the Montgomerys brought a federal declaratory judgment action against Motorists and alleged bad faith failure to defend against Trisler's counterclaim and third-party complaint, Cause No. IP95-1406-C-B/S. That federal action was settled by the parties on October 7, 1997. As consideration for the release, Motorists agreed to reimburse Executive and the Montgomerys for the fees and costs previously incurred by them in the defense of the 057 case and agreed to pay Timothy L. Bookwalter reasonable attorney fees and costs incurred in the defense of the 057 case and in prosecuting the federal declaratory judgment action. Motorists also agreed to provide a defense, under reservation of rights, of Trisler's claims against Executive and the Montgomerys in the 057 case by counsel chosen by Executive. As consideration, Executive and the Montgomerys "released and forever discharged Motorists . . . from all claims, demands, damages, actions, and causes of action arising out of Motorists determination of coverage for the claims brought against Executive and the Montgomerys in the 057 case, or arising from the defense or failure to defend said claims." (William Gross Aff. ¶¶ 7-8; id. Ex. A at ¶¶ 1-3.) Neither the payment nor acceptance of any sums was an admission of liability and was in full accord and satisfaction of disputed claims. (Id. ¶ 5.)
Executive and the Montgomerys selected John Raikos as counsel (Pl.'s Designation of Add'l Evidence, Ex. 9) and he entered his appearance for them in the 057 case on October 27, 1997. Trisler's claims proceeded to trial in the 057 case. On July 7, 1999, the jury returned verdicts for compensatory damages against Executive Builders in the amount of $143,240, against Mr. Montgomery in the amount of $15,000 and against Dolores Montgomery in the sum of $20,000. (Def.'s Designation Add'l Evidence, Ex. 1.) In addition, on July 8, 1999, the jury returned a verdict for punitive damages in excess of $1.6 million dollars against Mr. Montgomery; the jury did not assess any punitive damages against either Executive or Dolores Montgomery. (Id. Ex. 2.) A Motion to Reject Jury Verdicts was denied by the Shelby Circuit Court, and that court entered judgment on the jury verdicts on October 18, 1999. (Def.'s Designation Add'l Evidence, Exs. 4, 5.) Thereafter, on December 22, 1999, the Shelby Circuit Court denied a Motion to Correct Errors. (Id., Ex. 6.) Motorists paid Mr. Raikos for his services in defense of Executive and the Montgomerys in the 057 case, including fees and expenses. (Gross Aff. ¶¶ 4, 5.)
The Shelby Circuit Court had instructed the jury on vicarious liability in pertinent part that:
Executive Builders, Inc. is sued as principal and Robert Montgomery and Dolores Montgomery are sued as individuals and as the principal's agent. If you find that Robert Montgomery and Dolores Montgomery were agents of Executive Builders, Inc., and were acting within the scope of their authority at the time of the incidents in question, and if you find that Robert Montgomery and Dolores Montgomery are liable, then Executive Builders, Inc. is also liable. . . .
If you find that Robert Montgomery and Dolores Montgomery are liable but were not acting as agents for Executive Builders, Inc. at the time of the incidents in question, then Executive Builders, Inc. is not liable for the acts of Robert Montgomery and Dolores Montgomery.
(Def.'s Designation Add'l Evid, Ex. 3.)
After assessing the chances for success on appeal and over the objections of Executive and the Montgomerys, on January 3, 2000, Motorists satisfied the compensatory damages judgments plus interest by paying the judgments plus interest to the Clerk of the Shelby Circuit Court. (Gross Aff. ¶ 6; Def.'s Designation Add'l Evidence, Ex. 8.) Motorists did not pay the punitive damages judgment entered against Mr. Montgomery. Executive and the Montgomerys appealed the punitive damages award to the state appellate court. Motorists refused to prosecute the appeal of the punitive damages award. The Indiana court of appeals held that sufficient evidence supported the compensatory and punitive damage awards in favor of Mr. Trisler. Executive Builders, Inc. v. Trisler, 741 N.E.2d 351 (Ind.Ct.App. 2000). Rehearing was denied on January 22, 2001. The record does not indicate whether or not Executive Builders or the Montgomerys have sought transfer to the Indiana Supreme Court.
Plaintiffs Executive and Robert Montgomery commenced this action against Defendant Motorists, seeking a declaration that Motorists has a duty under the insurance policies issued to Executive to defend on appeal and indemnify them for a punitive damage judgment entered against Mr. Montgomery and in favor of G. Raymond Trisler in the 057 case (Count I). Plaintiffs seek an order requiring Motorists to pay all moneys incurred or expended by Plaintiffs in preparing and defending against the 057 case up to entry of final judgment (Count I). Plaintiffs also bring a claim for compensatory damages for an alleged deceitful defense of the punitive damages claim (Count II) (alleging that "Motorists acted deceitfully and oppressively toward its Insureds, with a total disregard of their known rights in deceitfully and fraudulently refusing to investigate, settle, or provide a total defense on appeal to Plaintiff Robert Montgomery, its Insured for the punitive damages covered under its CGL and Umbrella Policy") (Compl. ¶ 62.).
On October 30, 2000, the court allowed G. Raymond Trisler to intervene as a plaintiff in this action only on the fundamental question "of whether there is coverage available under the policies issued by Motorists for the punitive damage judgment entered against Mr. Montgomery. . . ." (Entry On Trisler's Mot. Intervene Order On Filing Of Intervenor's Compl. Summ. J. Briefing at 9.)
II. Summary Judgment Standard
Summary judgment may be granted where "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." FED. R. CIV. P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The moving party has the initial burden of showing that the record presents no genuine issue of material fact, but if the nonmoving party bears the ultimate burden of proof on an issue, then that party can avoid summary judgment only by setting forth "specific facts showing that there is a genuine issue for trial." FED. R. CIV. P. 56(e); see Celotex, 477 U.S. at 324.
When reviewing a motion for summary judgment, the court construes the evidence in the light most favorable to the non-moving party and draws all reasonable inferences from the evidence in that party's favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). A mere scintilla of evidence in support of the nonmovant's position is insufficient to withstand a summary judgment motion; the question is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson, 477 U.S. at 251-52.
III. Discussion
Plaintiffs move for summary judgment on the issue of Motorists' liability, seeking a declaration that Motorists is obligated under the policies to provide a defense and pay all costs and reasonable attorneys fees incurred, that Motorists is obligated to indemnify Plaintiffs up to the policy limits, continuing until a final unappealed from judgment has been rendered in the 057 case or the time within which to appeal has been fully exhausted or has been fully terminated. Plaintiffs also contend that Count II of the Complaint should be tried by a jury.
Motorists seeks summary judgment declaring that (1) it has no duty to indemnify Mr. Montgomery for the punitive damages judgment entered against him in the 057 case, and (2) it is not responsible for the costs associated with Mr. Montgomery's appeal of the punitive damages judgment entered against him in the 057 case. Motorists also seeks a judgment in its favor on the claims raised in Count II of the Complaint.
A. Count I: Motorists' Duty Relating To Punitive Damages
Plaintiffs first contend that Motorists was obligated to provide a defense to Mr. Montgomery under the Indiana Court of Appeals in the decision of Trisler v. Indiana Insurance Co., 575 N.E.2d 1021 (Ind.Ct.App. 1991). There, the court reversed the trial court's entry of summary judgment in favor of Indiana Insurance Company in its action seeking a declaration that it owed no insurance coverage under certain policies of insurance issued to Trisler for claims against him in the 057 case. Trisler, 575 N.E.2d at 1022-23. The court reasoned that in Indiana the duty to defend is broader than the insurer's coverage liability or duty to indemnify. Id. at 1023, 1025; see also Seymour Mfg. Co. v. Commercial Ins. Co., 665 N.E.2d 891, 892 (Ind. 1996) (holding that an insurer's duty to defend is broader than its coverage liability or duty to indemnify). Though the court stated in broad terms that Indiana Insurance had a duty to defend Trisler in the 057 case, it did not hold that Indiana Insurance had a duty to defend as against claims for punitive damages. Id. at 1025. Punitive damages are not even mentioned in the court's opinion. Thus, the undersigned does not understand the Trisler decision to stand for the proposition that where an insurance company has a duty to defend its insured against a claim, it necessarily has a concomitant duty to defend its insured against a punitive damages claim. The Trisler decision therefore does not support Plaintiffs' claim that Motorists had a duty to defend on appeal the punitive damage award against Mr. Montgomery.
Because this federal court is exercising diversity jurisdiction in this case, it must attempt to predict how the highest court of the state which provides the rule of decision, in this case Indiana, would decide the issue presented and in that way decide the issue. See MindGames, Inc. v. Western Pub. Co., 218 F.3d 652, 655-56 (7th Cir. 2000), cert. denied, 121 S.Ct. 882 (2001); Dawn Equip. Co. v. Micro-Trak Sys., Inc., 186 F.3d 981, 986 (7th Cir. 1999). In the absence of a decision of the state's highest court, the federal court may consider decisions of Indiana's lower courts and courts of other jurisdictions as well as other persuasive authorities. See, e.g., Stephan v. Rocky Mountain Chocolate Factory, Inc., 129 F.3d 414, 417 (7th Cir. 1997).
Neither the Indiana Supreme Court nor any Indiana appellate court has addressed the insurability of punitive damages. However, a federal district court has concluded that it is contrary to Indiana public policy to allow an insured to avoid liability for a punitive damage award by means of insurance where the insured is held directly liable for the acts giving rise to the punitive damage award. Grant v. N. River Ins. Co., 453 F. Supp. 1361, 1370-71 (N.D.Ind. 1978); Norfolk W. Ry. Co. v. Hartford Acc. Indem. Co., 420 F. Supp. 92, 94-95 (N.D.Ind. 1976); see also Commercial Union Ins. Co. v. Ramada Hotel Operating Co., 852 F.2d 298, 306 n. 9 (7th Cir. 1988) (noting that it is against Indiana public policy for misconduct which serves as the basis for punitive damages to be covered under insurance). The rationale underlying this rule is that if an insured could shift liability for a punitive damage award to the insurer, then the deterrent and punitive effects of such an award would be lost. Norfolk W. Ry. Co., 420 F. Supp. at 95. An exception to the rule against shifting liability for punitive damages does exist. Grant, 453 F. Supp. at 1370-71; Norfolk W. Ry. Co., 420 F. Supp. at 95. The exception applies when an employer or corporation is held liable for a punitive damage award on the basis of vicarious liability for the acts or conduct of its agent under respondeat superior. Grant, 453 F. Supp. at 1370-71; Norfolk W. Ry. Co., 420 F. Supp. at 95-96.
Plaintiffs argue that Motorists' reliance on Grant is mistaken because that case was decided based on the policy's terms rather than public policy. The language Plaintiffs quote from Grant is taken out of context, and it is quite apparent that Plaintiffs have misunderstood the Grant decision. The court's holding clearly was based on public policy. Plaintiffs' efforts to distinguish Norfolk Western likewise fail. It does not follow from the jury's verdict finding Executive Builders not liable for damages that the acts of Mr. Montgomery for which punitive damages were awarded were "for and on behalf of Executive Builders."
The Grant and Norfolk Western decisions are indicative of how the Indiana Supreme Court would rule in the instant case. Like Motorists' policies, the policies in both Grant and Norfolk Western provided for broad coverage. See Grant, 453 F. Supp. at 1370 (the insurers agreed to "pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages (for matters covered under the policy."); Norfolk W. Ry., 420 F. Supp. at 93 (insurer agreed to pay "all sums which the insured shall become legally obligated to pay as damages"). And, in Grant as here, the policies at issue did not expressly exclude coverage for punitive damages. See Grant, 453 F. Supp. at 1070. The court predicts, that if faced with the issue presented, the Indiana Supreme Court would hold that to allow Mr. Montgomery to avoid through insurance the punitive damage award directly assessed against him for his own conduct would contravene the public policy of Indiana. See Grant, 453 F. Supp. at 1370-71; Norfolk W., 420 F. Supp. at 94-95. To allow him to insure against the punitive damages would frustrate the punishment and deterrence rationales behind punitive damages. Cf. Miller Brewing Co. v. Best Beers of Bloomington, Inc., 608 N.E.2d 975, 983 (Ind. 1993) (stating that punitive damages are designed to punish the wrongdoer and dissuade him and others from similar conduct in the future). If coverage for punitive damages were allowed, the insurer likely would pass the cost on to its policyholders through higher premiums and there would be no punishment or deterrence of the wrongdoer. Plaintiffs' assertion that "there is no public policy against insuring punitive damages per se" (Pls.' Br. Supp. Mot. Summ. J. at 7) is simply unsupported by any legal authority.
Plaintiffs' argument that Motorists must point to language in the policies specifically excluding punitive damages is unsupported by any legal authority and contrary to Grant.
Furthermore, the exception to the general rule precluding an insured from shifting liability for punitive damages to an insurer is inapplicable. The punitive damages awarded in the 057 case were awarded against Mr. Montgomery only. No punitive damage award was entered against Executive. Plaintiffs' assertion notwithstanding (see Pls.' Br. Supp. Mot. Summ. J. at 7-8; Pls.' Answer Br. at 8), there is no evidence that the jury found Mr. Montgomery vicariously liable for punitive damages. Thus, Plaintiffs do not fall within the exception to the rule. Moreover, one Indiana court of appeals has held that the exception to the rule is inapplicable where the individual whose conduct gives rise to corporate liability for punitive damages is a high ranking manager or officer. Stevenson v. Hamilton Mut. Ins. Co., 672 N.E.2d 467, 474-75 (Ind.Ct.App. 1996), trans. denied. Mr. Montgomery is a high ranking officer of Executive. Thus, the exception to the general rule against insurability of punitive damages is also inapplicable under Stevenson.
Plaintiffs argue that Mr. Montgomery acted on behalf of and within the scope of his employment as a principal officer of Executive in his dealings with Mr. Trisler, including the 057 case, and that all such acts of Mr. Montgomery were fully approved by the Directors and Shareholders, making such acts the acts of Executive as a matter of law. However, the jury's punitive damages verdicts in the 057 case dispel any claim that the acts for which Mr. Montgomery was held liable for punitive damages were the acts of Executive. Recall that the state court instructed the jury on vicarious liability and the jury assessed punitive damages against Mr. Montgomery but not against Executive.
Mr. Trisler has offered Mr. Montgomery's affidavit in support of his brief responding to the pending summary judgment motions wherein Mr. Montgomery states that at all relevant times, he acted "in a corporate capacity, with the approval and authorization of Executive Builders, Inc., its officers and its shareholders, in his dealings with G. Raymond Trisler." (Montgomery Aff. ¶ 8.) Apparently, the jury did not accept Mr. Montgomery's view with respect to all of his actions in dealing with Mr. Trisler. Mr. Montgomery's statement in his affidavit does not create a genuine issue regarding whether Executive Builders was held liable for a punitive damage award on the basis of vicarious liability for the acts or conduct of Mr. Montgomery under respondeat superior; the jury's verdicts conclusively establish that Executive Builders was not held vicariously liable. Moreover, even if Executive Builders had been held vicariously liable for punitive damages on the basis of Mr. Montgomery's acts or omissions, Executive's liability for punitive damages could not be shifted to Motorists. Stevenson v. Hamilton Mut. Ins. Co., 672 N.E.2d 467, 474-75 (Ind.Ct.App. 1996) (holding that the exception to the rule is inapplicable where the individual whose conduct gives rise to corporate liability for punitive damages is a high ranking manager or officer), trans. denied.
Plaintiffs contend that the jury's punitive damage award against Mr. Montgomery was somehow improper because it was based on an inappropriate closing argument by Trisler's counsel. The propriety of the punitive damages award, however, is not before this court. Besides, the question of the appropriateness of that award is wholly separate from the question of whether Motorists' insurance policies provide coverage for that award. This includes Plaintiffs' argument that the punitive damage award was improper because Mr. Trisler suffered no compensatory damages. It is not related to the question whether punitive damages are insurable.
Plaintiffs also claim that Motorists cannot produce any evidence that Mr. Montgomery or Executive Builders intended to injure or harm Mr. Trisler. (Pls.' Br. Supp. Mot. Summ. J. at 8-9; Pls.' Answer Br. at 11.) The question of Mr. Montgomery's intent (as well as Executive Builder's intent), that is, his liability for punitive damages, is entirely separate from the question of whether the insurance policies issued by Motorists provide coverage for a punitive damage award against him. Besides, "punitive damages may be awarded upon a showing of willful and wanton misconduct." Orkin Exterminating Co. v. Traina, 486 N.E.2d 1019, 1023 (Ind. 1986); see also Bud Wolf Chevrolet, Inc. v. Robertson, 519 N.E.2d 135, 136 (Ind. 1988). Proof of ill will or intent to injure is not required. Id.
Plaintiffs appear to claim that the punitive damage award against Mr. Montgomery was against the public policy of Indiana because it was more than three times the compensatory damage award, although their argument is less than clear. (Pls.' Br. at 8.) Plaintiffs cite no authority to support their implicit assumption that Indiana Code § 34-4-34-5 applied to a case pending at the time of the statute's enactment. And, the statutory cap on punitive damages under Indiana Code § 34-4-34-4 applies only to causes of action accruing after June 30, 1995. See Chesnut v. Roof, 665 N.E.2d 7, 9 n. 1 (Ind.Ct.App. 1996); cf. Executive Builders, Inc. v. Trisler, 741 N.E.2d 351, 361 (Ind.Ct.App. 2000) (concluding that IND. CODE § 34-51-3-4 which became effective July 1, 1998, is not retroactive and does not apply to that litigation) (Ind.Ct.App. 2000), reh'g denied. To the extent Plaintiffs argue that the statute should be applied retroactively to pending cases including the 057 case, their argument is unsupported by any citation to legal authority and contrary to Chestnut. Plaintiffs do, however, seem to be confused about prospective and retroactive application of the statute. (See Pls.' Answer Br. Opposing Cross-Mot. Summ. J. at 8-10, 14 (arguing that the "statute should be applied prospectively, . . . [and therefore] the punitive damage award would be limited to $45,000.00 and not exceed $50,000 should it be upheld on appeal")). Mr. Trisler's causes of action against Executive and the Montgomerys accrued long before 1995 and, therefore, the statutory cap on punitive damages is inapplicable. If Plaintiffs intend to argue that a punitive damage award does not contravene public policy unless it exceeds the statutory cap, their argument is unsupported by any legal authority.
The statute was recodified in 1998 as IND. CODE § 34-51-3-4.
In arguing that it has no duty to defend the punitive damages award against Mr. Montgomery, Motorists does not rely on an exclusionary clause within any of the policies at issue. Thus, the court does not understand Plaintiffs' reliance on Hurst-Rosche Eng'rs v. Commercial Union Ins. Co., 51 F.3d 1336, 1343 (7th Cir. 1995), and it appears this reliance is misplaced.
Plaintiffs claim that Attorney Michael Simmons engaged in champerty in violation of Rule 1.5 of the Rules of Professional Conduct by entering into an agreement that Trisler raise a counterclaim in the 057 case in exchange for fifty percent of the counterclaim recovery. Even if Mr. Simmons violated this rule, and the court does not find that he did, such conduct does not affect Motorists' liability to defend Executive and the Montgomerys on the punitive damage claim.
Next Plaintiffs argue that Motorists construed its policies in its favor in order to deny coverage and avoid its obligations under the law. But proper construction of the insurance policies is not at issue. Rather, the issue is whether it is against public policy to allow an insured to insure against punitive damages. Whether or not Mr. Trisler incurred any expense in defending the 057 case is immaterial to that issue.
Mr. Trisler contends that Motorists is on the hook for the punitive damage judgment against Mr. Montgomery because Executive Builders agreed to indemnify Mr. Montgomery for any damages or judgment against him personally for any acts or omissions which occurred while he was acting in a corporate capacity for Executive Builders. This contention is unavailing for numerous reasons. First, as explained, the jury's verdicts conclusively establish that the punitive damage judgment against Mr. Montgomery was not made against him for any acts or omissions that occurred while he acted in a corporate capacity for Executive Builders.
In addition, the provisions of the CGL form upon which Mr. Trisler relies are inapplicable. Those provisions state in relevant part:
2. Exclusions.
This insurance does not apply to:
. . .
b. "Bodily injury" or "property damage" for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement. This exclusion does not apply to liability for damages:
(1) Assumed in a contract or agreement that is an "insured contract"; . . .
(Compl., Ex. 3, § I, A ("Bodily Injury And Property Damage Liability"), ¶ 2.b.)
6. "Insured contract" means:
. . .
g. That part of any other contract or agreement pertaining to your business under which you assume the tort liability of another to pay damages because of "bodily injury" or "property damage" to a third person . . ., if the contract or agreement is made prior to the "bodily injury" or "property damage".
(Id., § V, ¶ 6.g.) The jury's verdicts did not hold Mr. Montgomery liable for damages for "bodily injury" or "property damage" to Mr. Trisler as those terms are defined under the CGL policy. The CGL policy defines those terms as follows:
3. "Bodily injury" means bodily injury, sickness or disease sustained by a person, including death resulting from any of these at any time.
. . .
6. "Personal Injury" means injury, other than "bodily injury" arising out of one or more of the following offenses:
a. False arrest, detention or imprisonment;
b. Malicious prosecution
c. Wrongful entry into, or eviction of a person . ..
d. Oral or written publication of material that slanders or libels a person . . .
e. Oral or written publication of material that violates a person's right to privacy.
. . .
12. "Property damage" means:
a. Physical injury to tangible property, including all resulting loss of use of that property; or
b. Loss of use of tangible property that is not physically injured.
(Id., § V, ¶¶ 3, 6, 12.) Mr. Trisler's claims submitted to the jury were for abuse of process, wrongful intimidation, wrongful deception and/or mischief, breach of fiduciary duties with respect to entrusted properties, invasion of privacy, malicious prosecution and defamation. None of these satisfies "bodily injury" as defined in the CGL policy; rather, they fall within the definition for "personal injury". Further, as for the punitive damages, such damages are not intended to compensate for injury; instead, they are designed to punish and deter. See Indiana Civil Rights Comm'n v. Alder, 714 N.E.2d 632, 638 (Ind. 1999).
Moreover, the CGL policy contains language which makes it clear that any assumption of liability by Executive Builders for personal injury is not covered under the policy. The policy states:
2. Exclusions.
This insurance does not apply to:
a. "Personal injury" . . .
(4) For which the insured has assumed liability in a contract or agreement. This exclusion does not apply to liability for damages that the insured would have in the absence of the contract or agreement.
(Compl., Ex. 3, § I, B ("Personal and Advertising Injury Liability"), ¶ 2.a(4).) Clearly this policy language would exclude coverage for any liability for personal injury assumed in a contract or agreement by Executive Builders.
Mr. Trisler also argues that an agreement by Executive Builders to pay any damages awarded against Mr. Montgomery made before the occurrences forming the basis of Mr. Trisler's claims in the 057 case would not violate Indiana law prohibiting the insuring of punitive damage awards. Mr. Trisler fails to point to any legal authority to support this argument. And, such an agreement by Motorists would violate Indiana's public policy prohibiting insuring against punitive damages by allowing Mr. Montgomery to do through a separate agreement that which he cannot not do directly. The court therefore concludes that Motorists has no duty to indemnify Mr. Montgomery for the punitive damage judgment entered directly against him for his own acts or omissions.
Plaintiffs argue that Motorists had a duty to defend on appeal the punitive damage award against Mr. Montgomery. They fail to cite any legal authority in support of this argument, nor do they point to any language in the policies at issue requiring Motorists to appeal a punitive damage award. Neither the Indiana Supreme Court nor an Indiana appellate court has addressed whether an insurer has a duty to defend a punitive damage claim against its insured in light of the public policy which prevents an insured from insuring against directly assessed punitive damages. Other jurisdictions have addressed this issue, and it is to those decisions that the court now turns.
In contending that it had no duty to defend on appeal the punitive damage award, Motorists cites Commercial Union Ins. Co. v. Adams, 231 F. Supp. 860, 866 (S.D.Ind. 1964). Adams held that an insurer's duty to defend ceases to exist upon full performance by the insurer of the duty to pay up to the policy limits. Id. Adams is not on four squares with the instant case because Motorists has not paid up to the policy limits.
Of the courts that have decided the issue, the majority have concluded that an insurer has no duty to defend a punitive damage claim where that is the only remaining claim and the insurer has no duty to indemnify the insured for such a claim. See City of Fort Pierre v. United Fire Cas. Co., 463 N.W.2d 845, 848-49 (S.D. 1990) (holding insurer had no duty to defend insured under policy where it was against public policy to allow a wrongdoer to shift payment of punitive damages to its insurer and plaintiff sought civil penalties that were punitive in nature); Nat'l Union Fire Ins. Co. v. Shane Shane Co., L.P.A., 605 N.E.2d 1325, 1329-30 (Ohio Ct.App. 1992) (concluding that punitive damages are not insurable and cannot create a duty to defend); Creed v. Allstate Ins. Co., 529 A.2d 10, 12-13 (Pa.Super.Ct. 1987) (holding that where insurer has no duty to indemnify insured for punitive damages claim, it has no duty to defend that claim or pay counsel's fees for defending that claim); cf. Hatfield v. 96-100 Prince St., Inc., 972 F. Supp. 246, 247 (S.D.N.Y. 1997) (holding insurer had duty to defend insured in state court action by prosecuting appeal of attorney's fee award though award was premised upon punitive damage award because attorney fee award was compensatory rather than punitive); Stanback v. Westchester Fire Ins. Co., 314 S.E.2d 775, 780 (N.C.Ct.App. 1984) (implying that the insurer's duty to defend ceases where the only remaining causes of action are not covered by the insurance policy); City of Newark v. Hartford Acc. Indem. Co., 342 A.2d 513, 518 (N.J.Super.Ct. A.D. 1975) (stating that public policy "would plainly not permit a defense or indemnification by the carrier of any claim for punitive damages."); but see Ohio Cas. Ins. Co. v. Hubbard, 162 Cal.App.3d 939, 947 (Cal.Ct.App. 1984) (holding that if insured reasonably expects that a defense will be provided for a punitive damage claim, the insurer has a duty to defend that claim even if public policy prohibits indemnification of that claim); cf. Am. Hardware Mut. Ins. Co. v. Miami Leasing Rentals, Inc., 362 So.2d 28 (Fla.Dist.Ct.App. 1978) (holding that where insurance policy provided that insurer would defend insured against all personal injuries arising from malicious prosecution, insurer had a duty to defend compensatory and punitive damages claims even though punitive damages were not within the scope of the insured's coverage).
The court believes that when faced with the issue, the Indiana Supreme Court would follow the majority of decisions and hold that the insurer has no duty to defend a claim for punitive damages or prosecute an appeal of such a claim where that claim is the only remaining claim. Because it is against Indiana's public policy for an insured to insure against punitive damages that are directly assessed against him, the punitive damages award from which Plaintiffs' appeal cannot be recognized as being within the risk insured against by Motorists. See All-Star Ins. Corp. v. Steel Bar, Inc., 324 F. Supp. 160, 163 (N.D.Ind. 1971) (stating that an insurance company has a duty to defend an insured if the allegations of the complaint in an underlying tort action "are within the risk insured against."). To require an insurer to defend against a punitive damages award or prosecute an appeal of an award on such a claim against the insured would also contravene Indiana's public policy, regardless of the insured's expectations that a defense would be provided. Requiring a duty to defend or prosecute in such a situation would frustrate the deterrence and punishment goals of punitive damages by allowing an insured to shift the defense costs to the insurer who was not responsible for the conduct giving rise to the punitive damage claim or award and would ultimately spread the defense costs among other policyholders.
The question of an insurer's duty to defend a punitive damages claim or prosecute an appeal of an award on such a claim against the insured was not presented in the All-Star case, but the decision nevertheless lends some support to Motorists' position that it has no duty to prosecute an appeal of the punitive damage award against Mr. Montgomery.
It could be argued that the shifting of defense costs frustrates the punishment and deterrence goals to a lesser extent than the indemnification of punitive damages. However, where the punishment and deterrence goals are frustrated to any extent, the wrongdoer is not held fully accountable for his or her actions. Furthermore, to require an insurer to defend a punitive damages claim or an appeal from a punitive damages award would unfairly require the insurer to defend against or appeal from a risk for which no consideration was given.
Plaintiffs cite Prahm v. Rupp Const. Co., 277 N.W.2d 389 (Minn. 1979), in claiming an insurer is required to defend a suit against its insured if any part of the action is arguably within the scope of coverage of the policy, and any ambiguity is resolved in favor of the insured. Though true, as already explained, it is against Indiana public policy to allow an insured to insure against punitive damages. Thus, under Indiana law, a punitive damage award is not arguably within the scope of coverage of an insurance policy. It is undisputed that Motorists paid the compensatory damages judgments and interest; thus, satisfying its obligations under the policies. At that point, Motorists' duty to defend came to completion; no remaining part of the action-the punitive damages judgment against Montgomery-was arguably within the scope of the policies.
Accordingly, the court concludes that Motorists had no duty to prosecute the appeal of the punitive damage judgment entered against Robert Montgomery in the 057 case. Therefore, Motorists is not obligated to provide for the costs and fees associated with Mr. Montgomery's appeal of the punitive damage judgment against him
B. Count II: Deceitful Defense
Count II alleges that Motorists is liable for "deceitfully and fraudulently refusing to investigate, settle, or provide a total defense on appeal to plaintiff Robert Montgomery, its Insured for the punitive damages covered under its CGL and Umbrella Policy." (Compl., ¶ 62.) Under Indiana law, an insured may bring an action against its insurer for tortious breach of the insurer's fiduciary duty of good faith to its insured. Erie Ins. Co. v. Hickman by Smith, 622 N.E.2d 515, 518-19 (Ind. 1993). The duty of good faith and fair dealing includes the duty "to refrain from (1) making an unfounded refusal to pay policy proceeds; (2) causing an unfounded delay in making payment; (3) deceiving the insured; and (4) exercising any unfair advantage to pressure an insured into a settlement of his claim." Id.
Motorists first contends that Plaintiffs' claims in Count II alleging a failure to investigate, to make proper coverage determinations and to defend arising prior to October 7, 1997, are barred by the Release and Settlement Agreement entered into by the Plaintiffs in the prior federal declaratory judgment action, Cause No. IP 95-1406-C-B/S action. Plaintiffs respond that the Release Agreement entered into in that action does not bar the claim that Motorists failed to provide a defense before October 7, 1997.
Plaintiffs maintain that Motorists' duty to defend all punitive damage claims as well as unfounded claims was adjudicated in Cause No. IP95-1406-B/S and that Motorists' claim that it violates public policy to allow an insured to insure against punitive damages is barred by res judicata (claim preclusion) or collateral estoppel (issue preclusion). (Pls.' Br. Supp. Mot. Summ. J. at 17.) Plaintiffs are just wrong. "[T]he black-letter rule is that the doctrine of res judicata requires a final judgment." Amcast Indus. Corp. v. Detrex Corp., 45 F.3d 155, 158 (7th Cir. 1995) (citation omitted). "This is true whether one is speaking of res judicata in its narrow sense ("claim preclusion") . . . or of collateral estoppel ("issue preclusion"). . . ." Id.; see Rivet v. Regions Bank of La., 522 U.S. 470, 476 (1998) ("[u]nder the doctrine of claim preclusion, `[a] final judgment on the merits of an action precludes the parties or their privies from relitigating issues that were or could have been raised in that action.'") (quotation omitted); Perry v. Globe Auto Recycling, Inc., 227 F.3d 950, 952 (7th Cir. 2000) (claim preclusion requires inter alia a final judgment on the merits). The Release itself does not constitute a final judgment, and Plaintiffs have offered no evidence that a final judgment on the merits was entered in the prior federal declaratory judgment action. Thus, neither res judicata nor collateral estoppel prevents Motorists from arguing that Plaintiffs' bad faith claims based on conduct prior to October 7, 1997, are barred by the Release. Similarly, whether Motorists has a duty to defend punitive damage claims against Mr. Montgomery or any other claims was not adjudicated in the prior federal action. There is no evidence that any claim or issue was adjudicated in that action.
Under Indiana law, a "release is a surrender of a claimant's right to prosecute a cause of action." Western Ohio Pizza, Inc. v. Clark Oil Refining Corp., 704 N.E.2d 1086, 1091 (Ind.Ct.App. 1999) (quotation omitted), trans. denied; Wright Motors, Inc. v. Marathon Oil Co., 631 N.E.2d 923, 925 (Ind.Ct.App. 1994). A release, like any other contract, is construed to carry out the intent of the parties to the release. Id. "That intent is disclosed by the language the parties used to express their rights and duties considered in light of all the facts and circumstances." Id. (quotation omitted). The construction of a release is a matter of law. Id.
The parties to the Release included Executive Builders, Robert Montgomery and Delores Montgomery. Under the terms of the Release, Motorists agreed to defend, under reservation of rights, Executive and the Montgomerys in the 057 case, and Executive and the Montgomerys "released and forever discharged Motorists . . . from all claims, demands, damages, actions, and causes of action arising out of Motorists determination of coverage for the claims brought against Executive and the Montgomerys in the 057 case, or arising from the defense or failure to defend said claims." (William Gross Aff. ¶¶ 7-8; id. Ex. A at ¶¶ 1-3.) (Emphasis added). Under the Release's terms, payment and acceptance of any sums "was in full accord and satisfaction of disputed claims." (Id. ¶ 5.) (Emphasis added). This language of the Release discloses the parties' intent that Motorists be released from all claims and actions arising out of its determination of coverage in the 057 case or arising from Motorists' defense or failure to defend the claims brought in the 057 case. Plaintiffs do not dispute that Motorists paid them the sums it agreed to pay, thus fulfilling its obligations under the Release.
Plaintiffs allege that Robert Montgomery was assured by Magistrate Judge Sue Shields that Motorists was obligated to provide him a defense to "all claims," upon which he relied in executing the Release and Settlement Agreement. Mr. Montgomery was represented by counsel throughout the proceedings in the federal declaratory judgment action. Plaintiffs have offered no evidence of any such assurance made by Judge Shields, and any reliance on such an alleged statement would have been unreasonable given that the Release and Settlement Agreement itself contains no such representation. Further, it is unlikely that Judge Shields would have advised Mr. Montgomery that Motorists had a duty to provide a defense on all claims where those claims included punitive damage claims and a duty to defend against punitive damages is against Indiana public policy. A failure to indemnify or defend against a punitive damage claim or to prosecute an appeal of a punitive damage judgment cannot serve as the predicate for a bad faith action against an insurer because Indiana public policy prohibits indemnification of directly assessed punitive damages as well as a duty to defend against punitive claims.
Mr. Trisler maintains that an improperly secured release does not preclude a bad faith claim against the insurer, citing County Line Towing v. Cincinnati Ins., 714 N.E.2d 285 (Ind.Ct.App. 1999), trans. denied. He argues that Mr. Montgomery signed the Release under duress because it was the only way to get Motorists to pay the defense costs associated with the 057 case. (Montgomery Aff. ¶ 18.) At issue in County Line Towing was whether the execution by an insured of a release of claims against the insurer under an insurance policy also releases the insurer from a bad faith tort claim. The court held that a release of the insurer's contractual obligation does not necessarily release the insurance company from a bad faith claim. County Line Towing, 714 N.E.2d at 292.
Mr. Trisler also claims that Motorists "force[d] Executive Builders and the Montgomerys to waive all rights and claims of bad faith and unfair dealing in exchange for simply agreeing to pay for the defense (which Motorists already had an obligation to provide). . . ." (Trisler Resp. Br. at 18.) The evidence belies this claim. It is undisputed that in addition to agreeing to pay for the defense of the 057 case, Motorists agreed to pay reasonable attorney fees and costs incurred in the prosecution of the federal declaratory judgment action. (Def.'s Designation of Evid., Gross Aff., Ex. A, ¶ 2.)
County Line operated a convenience store, a gasoline service station and towing/mechanic business that were insured by two insurance policies with Cincinnati Insurance. The convenience store and gasoline service station were insured under one policy (the "store policy") and the towing/mechanic business was insured under another policy (the "garage policy"). A fire damaged the convenience store and left the other businesses without necessary services and facilities. County Line made a claim with Cincinnati. Cincinnati adjusted the fire loss and paid claims under the store policy, but did not pay claims under the garage policy. Cincinnati did not provide County Line with a mobile office which it had requested in order to maintain its towing/mechanic business. County Line Towing, 714 N.E.2d at 288.
County Line alleged that Cincinnati unnecessarily delayed settling the claims, thereby forcing County Line to settle, because its expenses continued, forcing its sole shareholder to file bankruptcy. Id. County Line had signed a release of claims in which it released Cincinnati from
all claims and causes of action of any type whatsoever which the undersigned has or may have against [Cincinnati] arising out of or in any way related to an incident which happened on or about the 6th day of November 1996 wherein fire damages occurred and payment made under [the store policy] and/or the adjustment of the claim presented to [Cincinnati] as a result of such incident.
. . . by accepting payment of said sum, the undersigned have been fully paid and compensated for all claims and causes of action which the undersigned could present against [Cincinnati] arising out of or in any way related to said incident.
Id. (alterations in opinion). Cincinnati brought a declaratory judgment action contending that it had no further obligations to County Line under the store policy and County Line was not entitled to benefits under the garage policy. Id. at 288-89. County Line counterclaimed for bad faith and alleged that the release was obtained by fraud and/or misrepresentation. County Line alleged that Cincinnati did not make a timely adjustment of certain covered losses knowing that County Line was under severe financial pressure to pay its expenses, thus inducing County Line "to accept less than the fair value of the damage coverage applicable to the pantry building and to forego [its] claim for the cost of a mobile office." Id. at 291-92. The trial court granted Cincinnati's motion for summary judgment, holding that the release barred County Line's claims. Id. at 289.
The Indiana court of appeals reversed the trial court, holding that the release did not bar County Line from bringing an action alleging that the release itself was obtained by fraud or in bad faith. The court found that County Line's allegations "necessarily implicate[d] the circumstances of the release itself." Id. at 292. The court could find no legal authority directly addressing whether an action for breach of an insurer's duty of good faith and fair dealing is barred by a settlement. The court went on to hold, however, that a release of the insurer's contractual obligation does not necessarily release the insurance company from a bad faith claim. The court reasoned that the holding in Erie Insurance that an insurer's duty of good faith requires it to refrain from exercising an unfair advantage to pressure an insured into settlement of its claim means that the existence of a settlement which is improperly obtained does not by itself bar a claim for breach of that duty. Id.
The court believes that County Line towing does not foretell the outcome in the instant case. The court of appeals' interpretation of Erie Insurance is open to reasonable doubt. Erie's holding that the duty of good faith requires an insurer to refrain from "exercising any unfair advantage to pressure an insured into settlement of his claim," Erie Ins., 622 N.E.2d at 519, seems to have been directed to settlement of the underlying insurance claim with the insured rather than a separate claim against the insured. Erie does not consider whether settlement of a claim against the insurer other than the underlying insurance claim can serve as a predicate for a bad faith claim.
Even if County Line's interpretation of Erie Insurance is sound law, County Line is inapplicable in the instant case. The Release at issue in the instant case was entered into by the parties as part of a federal declaratory judgment action in which Executive Builders and the Montgomerys sought a declaration that Motorists was obliged to provide coverage and defense under the CGL policy for the claims made by Mr. Trisler in the 057 case. The Release was not a settlement of the underlying insurance claims. Further, the language of the Release expressly provides that Motorists and the Montgomerys release Motorists "from all claims, demands, damages, actions, and causes of action arising out of Motorists determination of coverage for . . . [Trisler's claims in the 057 case], or arising from the defense or failure to defend said claims." Thus, Motorists and the Montgomerys expressly released Motorists from claims and actions arising from their defense or failure to defend Mr. Trisler's claims in the 057 case. In contrast, the release in County Line was written in much broader terms — "all claims and causes of action of any type whatsoever" — and did not expressly release the insurer from claims arising from its defense or failure to defend. Moreover, County Line specifically alleged that the insurer obtained the release by fraud and/or misrepresentation. Plaintiffs herein make no such allegation against Motorists. County Line also alleged that the insurer knew that County Line was under severe financial pressure to pay its expenses. Plaintiffs herein have neither alleged nor produced any evidence that Motorists was aware that they were under severe financial pressure. In fact, Plaintiffs have not alleged nor produced evidence that they were under severe financial pressure. Mr. Montgomery states in conclusory fashion in his affidavit that he signed the Release under duress because he "had no other choice" and it was the "only way to get Motorists to pay the defense costs" of the 057 case.
Furthermore, Mr. Trisler cannot defeat Motorists' summary judgment motion by relying on statements in Mr. Montgomery's affidavit that fail to comply with the requirements of Rule 56(e) of the Federal Rules of Civil Procedure. See FED. R. CIV. P. 56(e) ("affidavits . . . shall set forth such facts as would be admissible in evidence"); Stagman v. Ryan, 176 F.3d 986, 995 (7th Cir. 1999), cert. denied, 528 U.S. 986 (1999). Mere conclusory statements fail to meet Rule 56(e)'s requirements. See Stagman, 176 F.3d at 995; Drake v. Minn. Min. Mfg. Co., 134 F.3d 878, 887 (7th Cir. 1998) (stating Rule 56 demands "affidavits that cite specific concrete facts"); Haywood v. N. Am. Van Lines, Inc., 121 F.3d 1066, 1071 (7th Cir. 1997) (stating that "conclusory allegations and selfserving affidavits, if not supported by the record, will not preclude summary judgment"); Powers v. Runyon, 974 F. Supp. 693, 696 (7th Cir. 1997). Statements that are based on speculation also fail to meet these requirements. See Stagman, 176 F.3d at 995; Schertz v. Waupaca County, 875 F.2d 578, 582 (7th Cir. 1989) (holding district court properly declined to consider matters based on speculation).
Mr. Montgomery's statement that he "signed the Release under duress because I had no other choice" is a conclusory assertion that fails to create a genuine issue of material fact. Mr. Montgomery does not point to any specific fact which would have caused him duress or made him to feel he "had no other choice." Nowhere does he state, for example, that Motorists threatened him if he did not sign the Release. Further, Mr. Montgomery's statement that "[t]his was the only way to get Motorists to pay the defense costs associated with the [057] case" is conclusory and based on mere speculation. There is no evidence that had Motorists lost the prior federal declaratory judgment action on the merits, it would not have paid the defense costs associated with the 057 case. And finally, Mr. Montgomery does not state that Motorists pressured him or Executive Builders into settlement of the prior federal declaratory judgment action. Thus, not even Mr. Montgomery's affidavit creates a genuine issue as to whether Motorists obtained the Release through improper means.
Therefore, Mr. Trisler's contention that the Release is no bar to Plaintiffs' bad faith claims against Motorists for conduct prior to October 7, 1997, must fail. The court concludes that the Release bars any claims by Executive or the Montgomerys alleging a failure to investigate, to make proper coverage determinations and to defend in the 057 arising prior to October 7, 1997, the date of the Release.
Furthermore, it is noted that Motorists objects to Mr. Montgomery's affidavit as well as Mr. Trisler's Statement of Additional Material Facts and the portions of Mr. Trisler's brief which go beyond the issue on which intervention was allowed. Perhaps the conclusion section of the Entry On Trisler's Motion To Intervene should have been drafted more clearly, but as the entirety of that entry makes clear, Mr. Trisler was allowed to intervene only on the question of whether Motorists' policies provide coverage for the punitive damage judgment entered against Mr. Montgomery. Mr. Trisler's arguments and presentation of evidence directed to any other claims in this case go beyond the limited purpose of his intervention. His intervention was not intended to allow Mr. Montgomery or Executive Builders a second chance to create genuine issues of fact where they have not done so with their own summary judgment evidentiary submissions. The statements made by Mr. Montgomery in his affidavit submitted by Mr. Trisler regarding the Release relate information known to Mr. Montgomery at the time Plaintiffs filed their motion for summary judgment and responded to Motorists' motion for summary judgment. Thus, Mr. Montgomery's affidavit does not present newly discovered evidence that could not have been adduced earlier by Plaintiffs. Nevertheless, because the Entry On Trisler's Motion To Intervene allowed Mr. Trisler to "file a supplemental brief directed at the issues raised in Executive Builders and Mr. Montgomery's motion for summary judgment and Motorists' cross-motion for summary judgment" (Entry at 9), the court does not strike Mr. Montgomery's affidavit, Mr. Trisler's Statement of Additional Material Facts or the portions of Mr. Trisler's brief concerning issues that are beyond the limited scope of intervention. Motorists' motion to strike is DENIED. Accordingly, the court takes into consideration Mr. Montgomery's affidavit, Mr. Trisler's Statement of Material Facts and arguments in his brief in deciding the pending summary judgment motions, but the consideration of them does not affect the outcome.
Plaintiffs claim Motorists acted wrongly and in bad faith in satisfying the compensatory damage judgments against them over the Montgomerys' objections and Executive Builders' refusal to consent. Plaintiffs argue Motorists gave away a "pretty big" "bargaining chip". To the extent Plaintiffs are claiming that Motorists had a duty to appeal the compensatory damage awards against its insureds, they cite no legal authority to support their claim. Nor do they cite to any provision in the policies at issue which would establish such a contractual duty on the part of Motorists. In addition, Plaintiffs do not cite any legal authority to support their claim that Motorists could not satisfy the compensatory damage judgments against the Montgomerys and Executive Builders without their consent. Nor do they cite to any provision in the policies at issue requiring their consent be given before satisfaction of a judgment against them by Motorists.
The authority cited by Motorists, however, suggests that Motorists had no duty to appeal the compensatory damage judgments against its insured. In Starzenski v. City of Elkhart, 87 F.3d 872 (7th Cir. 1996), the court said that under Indiana law, a judgment of a trial court "`is in full force and effect until it is reversed, and is binding on the parties as to every question decided.'" Id. at 878 (quoting Jones v. Am. Family Mut. Ins. Co., 489 N.E.2d 160, 166 (Ind.Ct.App. 1986) (quoting Daugherty v. Daugherty, 83 N.E.2d 485, 486 (Ind.Ct.App. 1949))). A pending appeal does not undermine the force of a judgment. Starzenski, 87 F.3d at 878 (citing State ex rel. Pollard v. Superior Court of Marion County, Room 3, 122 N.E.2d 612, 617-18 (Ind. 1954)).
It is noted that on appeal, the Indiana court of appeals has affirmed the compensatory and punitive damages awarded in the 057 case, Executive Builders, Inc. v. Trisler, 741 N.E.2d 351 (Ind.Ct.App. 2000), reh'g denied; the court has no information relating to a request for transfer to the Indiana Supreme Court.
Under the terms of the CGL policy, Motorists was obligated to "pay those sums that the insured becomes legally obligated to pay as damages . . . to which this insurance applies." (Compl., Ex. 3, CGL Policy, § I, ¶ 1.a.) By virtue of the jury's verdicts and entry of judgment in the 057 case, the Montgomerys and Executive Builders became legally obligated to pay the compensatory damages judgments entered against them. By satisfying these judgments, Motorists discharged its obligation to indemnify the insureds pursuant to the terms of the CGL policy.
Plaintiffs also claim that Motorists breached the duty of good faith to defend Mr. Montgomery. (Pls.' Br. at 21). They argue Motorists refused to investigate the underlying facts, refused to accept coverage, and refused to pay the punitive damages claim against Mr. Montgomery. (Pls.' Br. at 24.) The court has already addressed whether Motorists has a duty to indemnify Mr. Montgomery for the punitive damage award against him and concluded as a matter of law it does not. Therefore, Motorists' refusal to pay that punitive damage judgment cannot amount to a breach of its duty of good faith. The same is true with Motorists' refusal to acknowledge coverage liability for the punitive damage claim and resulting judgment as well as its refusal to pay the costs of the appeal of that punitive damage judgment. And, following Erie Insurance, the lack of a diligent investigation alone is not sufficient to support a claim of a breach of the duty of good faith. See Erie Ins., 622 N.E.2d at 520.
Two pages in Plaintiffs' brief are numbered "21."
Plaintiffs argue that Motorists breached its duty of good faith to its insureds by failing to attempt to settle Mr. Trisler's claim against Mr. Montgomery, citing United Farm Bureau Ins. Co. v. Ira, 577 N.E.2d 588, 596 (Ind.Ct.App. 1991), for support. They maintain that Motorists could not in good faith dispute Mr. Trisler's claim because it did not investigate the facts relating to the claim. (Pls.' Br. Supp. Mot. Summ. J. at 26.) Plaintiffs have produced no evidence to suggest that Mr. Trisler's claim against Mr. Montgomery could not in good faith be disputed. Mere citation to case law is insufficient without some evidence to suggest that the cited authority is applicable. To the extent Plaintiffs claim Motorists acted in bad faith in failing to settle Mr. Trisler's claims before trial their claim must fail. There is no evidence that Mr. Trisler made any settlement demand or was willing to settle his claims against Executive and the Montgomerys absent trial. Further, any failure to settle by Motorists did not result in judgments against Executive and the Montgomerys beyond the policy limits and for which coverage and/or indemnification were available under Indiana law.
Further, a bad faith claim based on a failure to settle prior to October 7, 1997, is barred by the Release.
Plaintiffs argue that Motorists' payment of the compensatory damage judgments against them should have been tendered only under Indiana Trial Rule 68 by an offer tender of the "judgment" to the Clerk of the Shelby Circuit Court. This argument is confusing because Indiana Trial Rule 68 is inapplicable given the procedural history of this case. That rule applies to offer of judgments made either ten days before trial commences or offers of judgment made when liability has been partially determined by verdict or order of judgment, but the amount or extent of liability remains to be determined by further proceedings. IND. TR. R. 68. There is no evidence that Mr. Trisler would have accepted an offer of judgment before trial, and the jury determined both liability and the amount of liability with its verdicts, leaving nothing for further determination. Nor is there evidence that the Plaintiffs' trial counsel in Shelby County even recommended to motorists that an offer of judgment be made.
Plaintiffs further argue that Motorists is estopped to claim that it is under no duty to pay the cost of the appeal of the punitive damage judgment against Mr. Montgomery because it "made such payments for more than two years." (Pls.' Answer Br. Opposing Cross-Mot. Summ. J. at 4.) This argument conveniently overlooks the undisputed fact that the compensatory damage judgments against Executive and the Montgomerys were satisfied on January 3, 2000, and that Motorists paid the costs of defense up until that date, not thereafter. Thus, Plaintiffs' estoppel argument is a red herring.
The Plaintiffs have not substantiated statements of material fact to support their request for summary judgment on Count II — that Motorists deceitfully or fraudulently refused to investigate, settle or provide a defense on appeal of the punitive damage claim against Mr. Montgomery. The Plaintiffs have not specifically cited to record evidence in support of all their statements of material fact. Indeed, Plaintiffs have wholly failed to comply with Local Rule 56.1(f), which in itself is a sufficient reason to deny their motion for summary judgment, see S.D. Ind. L.R. 56.1(f) (establishing requirements for factual assertions, including numbering of sentences and substantiation by specific citation to record evidence).
For example, Plaintiffs boldly assert that "Motorists made no investigation of the facts. . . ." (Pls.' Statement Of Material Facts Designation Of Evid. Relied On For Summ. J. at 9) but fail to cite to a specific citation in the record to support this assertion.
Plaintiffs' Statement of Material Facts begins with five numbered sentences, but thereafter fails to comply with Rule 56.1's requirement that the Statement of Material Facts consists of numbered sentences. The five numbered sentences do not appear to be limited to a single factual proposition though to have done so appears to have been practicable.
However, the court need not rely on violations of the local rules to reach a determination that Plaintiffs are not entitled to summary judgment on Count II. Instead, the record evidence demonstrates that Plaintiffs have released Motorists from all claims arising prior to October 7, 1997; Motorists agreed to pay counsel of Plaintiffs' choice to defend them against Mr. Trisler's claims thereafter; Plaintiffs were represented by counsel of their choice, Mr. Raikos, who defended them against Mr. Trisler's claims; Motorists paid Mr. Raikos for his services including fees and expenses; and Motorists has satisfied the compensatory damage awards against its insureds, thus fully indemnifying Plaintiffs. Because the court holds that Motorists has no duty to pay the punitive damage judgment against Mr. Montgomery and no duty to defend that judgment on appeal or pay the costs of an appeal from that judgment, Motorists as a matter of law cannot be liable under Count II. Therefore, summary judgment in favor of Motorists on that count is proper.
IV. Conclusion
No genuine issue of material fact exists and Motorists is entitled to judgment as a matter of law on all counts. Accordingly, Plaintiffs' motion for summary judgment is DENIED in all respects and Motorists' cross-motion for summary judgment is GRANTED. Motorists' motion to strike is DENIED.
The court concludes and declares that under Indiana law Motorists has no obligation to indemnify Robert Montgomery for the punitive damage judgment entered directly against him for his own conduct; Motorists' duty to defend the Montgomerys and Executive Builders does not include a duty to appeal the compensatory damage judgments against them; Motorists' duty to defend does not include a duty to appeal the punitive damage judgment against Mr. Montgomery, including no duty to pay the costs and fees of the appeal of the punitive damage judgment taken by Mr. Montgomery.
Final judgment will be duly entered.
ALL OF WHICH IS ORDERED.