State Farm Mutual Automobile Insurance Company, Alan Steady v. Richard Kern , 976 N.E.2d 716 ( 2012 )

FOR PUBLICATION
ATTORNEY FOR APPELLANT: ATTORNEYS FOR APPELLEES:
MARK D. GERTH ROBERT R. FOOS, JR.,
Kightlinger & Gray, LLP LESLEY A. PFLEGING
Indianapolis, Indiana Lewis Wagner, LLP
Indianapolis, Indiana
FILED
Sep 20 2012, 9:26 am
IN THE
CLERK
COURT OF APPEALS OF INDIANA of the supreme court,
court of appeals and
tax court
STATE FARM MUTUAL AUTOMOBILE )
INSURANCE COMPANY, )
)
Appellant-Intervening Defendant, )
)
ALAN STEADY, )
)
Appellee-Defendant, )
)
vs. ) No. 49A02-1201-CT-34
)
RICHARD KERN, )
)
Appellee-Plaintiff. )
APPEAL FROM THE MARION SUPERIOR COURT
The Honorable Theodore M. Sosin, Judge
Cause No. 49D02-0809-CT-041793
September 20, 2012
OPINION - FOR PUBLICATION
ROBB, Chief Judge
Case Summary and Issue
A jury found Alan Steady one-hundred percent at fault for injuries Ronald Kern
sustained when the two were involved in a car accident, and a $98,000 judgment was entered
against Steady to compensate Kern for his injuries. Because Steady was only insured up to
$25,000, State Farm, Kern’s insurer, paid Kern underinsured motorist benefits. Steady
requested that the trial court deem the judgment against him satisfied because Kern was
compensated by State Farm, and the trial court granted Steady’s motion. State Farm appeals,
raising one issue for our review: whether the trial court erred when it deemed the judgment
entered against Steady satisfied. Concluding the trial court did err, we reverse and remand.
Facts and Procedural History
In October 2006, Kern and Steady collided while driving their vehicles, and the
accident resulted in various bodily injuries to Kern. Kern brought suit against Steady to
recover for his injuries, and Kern’s insurer, State Farm, intervened as a party defendant.
Kern’s insurance policy with State Farm provided for medical costs and underinsured
motorist coverage. After Kern filed a motion in limine, State Farm was removed as a named
party. In March 2011, a jury found Steady one-hundred percent at fault, determined Kern’s
damages were $98,000, and returned a verdict for such amount. The trial court entered a
general judgment on the jury verdict in favor of Kern and against Steady in the amount of
$98,000 plus costs and interest.
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Because Steady’s insurance policy included a $25,000 limit, State Farm issued a check
to Kern in the amount of $68,000.1 Steady’s insurer issued two checks to Kern, one for
$25,000, the limit of Steady’s policy, and a second for $6,334.79 for medical costs and
interest. State Farm moved the trial court to allow it to be realigned as a party plaintiff so
that it could execute against the judgment as a subrogee of Kern to the extent of the payments
State Farm made to Kern. The trial court denied State Farm’s motion. Thereafter, Steady
moved the trial court to deem the judgment entered against him as satisfied. The trial court
granted Steady’s motion. State Farm now appeals. Additional facts will be supplied as
appropriate.
Discussion and Decision
I. Standard of Review
Indiana Trial Rule 60(B)(7) provides that a trial court may relieve a party from a
judgment when the judgment has been satisfied. We review a trial court’s grant of a motion
for relief from judgment for abuse of discretion. TacCo Falcon Point, Inc. v. Atlantic Ltd.
P’ship XII, 937 N.E.2d 1212, 1218 (Ind. Ct. App. 2010). A trial court abuses its discretion
when its ruling is clearly against the logic and effect of the facts and circumstances before the
court. Id. We will not reweigh the evidence. Id. The movant bears the burden to
demonstrate that relief is both necessary and just. Dillard v. Dillard, 889 N.E.2d 28, 33 (Ind.
Ct. App. 2008).
1
State Farm had already paid Kern $5,000 for medical costs.
3
II. Satisfaction of Judgment
As a threshold matter, Steady argues State Farm lacks standing to appeal. “Standing is
similar to, though not identical with, the real party in interest requirement of Trial Rule 17.
The point of both requirements is to insure that the party before the court has a substantive
right to enforce the claim that is being made in the litigation.” Pence v. State, 652 N.E.2d
486, 487 (Ind. 1995) (citations omitted). “Standing is defined as having sufficient stake in an
otherwise justiciable controversy to obtain judicial resolution of that controversy. In order to
have standing, the party challenging the law must show adequate injury or the immediate
danger of sustaining some injury.” Indiana Civil Rights Comm’n v. Indianapolis
Newspapers, 716 N.E.2d 943, 945 (Ind. 1999) (quotations omitted).
Steady argues State Farm lacks standing because State Farm was not a party to the
case at the time judgment was entered against Steady. We disagree. Although State Farm
was not a party to the proceeding, it did sustain a tangible injury by the trial court deeming
the judgment against Steady satisfied. Indiana’s Uninsured and Underinsured Motorist
Coverage Act requires insurers to offer coverage to their insureds for automobile accidents in
which they are entitled to recover damages from uninsured or underinsured motorists. See
Ind. Code section 27-7-5-2(a). Kern purchased such coverage from State Farm. The Act
also provides:
The insurer shall be subrogated, to the extent of such [uninsured or
underinsured motorist] payment, to the proceeds of any settlement or judgment
that may later result from the exercise of any rights of recovery of [the insured]
against any person or organization legally responsible for said bodily injury or
death, or property damage, for which payment is made by the insurer. Such
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insurer may enforce such rights in its own name or in the name of the [insured]
....
Ind. Code § 27-7-5-6(a). Thus, since State Farm has a statutory right to be subrogated to the
proceeds of the judgment entered against Steady, it was demonstrably injured by the
judgment against Steady being deemed satisfied. We therefore conclude State Farm has
standing to appeal.
We now turn to the merits of State Farm’s appeal. State Farm contends the trial court
erred by deeming the judgment against Steady satisfied. State Farm cites Peele v. Gillespie,
658 N.E.2d 954 (Ind. Ct. App. 1995), trans. denied, for support. In Peele, Gillespie was
injured in a motor vehicle accident while riding as a passenger in Peele’s vehicle. Gillespie
sued Peele and sought damages for his injuries, but Gillespie also filed an underinsured
motorist claim with his insurer, Prudential Insurance Company of America. Prudential
ultimately paid Gillespie $100,000 in underinsured motorist benefits. Thereafter, Peele
argued any judgment entered against him and in favor of Gillespie should be set off by the
$100,000 that Prudential paid to Gillespie as compensation for his injuries because to hold
otherwise would allow Gillespie a double recovery. Id. at 956.
We disagreed with Peele, noting that insurance policies typically include a subrogation
clause which provides that once an insured receives payment from a third-party tortfeasor,
the insurer is entitled to reimbursement for the amount of benefits it previously paid to the
insured. Thus, insureds typically do not end up with a double recovery. In Peele, however,
Prudential missed its opportunity to subrogate Gillespie’s proceeds because Prudential failed
to abide by the requirements of its policy and statutory law, so Gillespie was in a position to
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possibly receive a double recovery. Despite this fact, we concluded, “Peele is not entitled to
benefit from Gillespie’s prudence in obtaining insurance coverage or from Prudential’s
failure to abide by its policy provisions and statutory law. Instead, we find it proper for the
benefit to inure to Gillespie.” Id. at 959.
Rather than moving for setoff, Steady moved the trial court to deem the judgment
against him satisfied because Kern was paid underinsured motorist benefits by his insurer.
Despite this difference, the principle remains the same. When an insurer compensates its
insured due to a third party tortfeasor being underinsured, the third party tortfeasor’s liability
is not reduced. Rather, Indiana Code section 27-7-5-6(a) provides that the insurer may
enforce its insured’s right of recovery against the third-party tortfeasor, either in its own
name or in the name of its insured, and that the insurer shall then be subrogated to the
proceeds of any settlement or judgment that results.2 To allow a judgment entered against the
third-party tortfeasor to be deemed satisfied due to the insurer’s underinsured motorist
payment to its insured would undermine the purpose of this statute. Thus, we conclude that
when a judgment is entered against a third-party tortfeasor, said judgment is not satisfied
when the plaintiff’s insurer compensates the plaintiff due to the third-party tortfeasor’s being
underinsured. Steady is not entitled to benefit from Kern’s carefulness and assiduousness in
2
Steady also argues it would be “fundamentally unfair to allow State Farm to be substituted as a party
plaintiff and pursue proceedings supplemental on the judgment.” Appellee’s Brief at 15. We disagree.
Indiana Code section 27-7-5-6(a) provides that an insurer may enforce rights of recovery, either acting in its
own name or in the name of its insured.
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obtaining underinsured motorist insurance coverage. The trial court therefore erred in
deeming the judgment against Steady satisfied.3
Conclusion
The judgment entered against Steady should not have been deemed satisfied due to
State Farm’s underinsured motorist coverage payment to Kern, and therefore the trial court
erred. We reverse and remand to the trial court for further proceedings consistent with this
opinion.
Reversed and remanded.
BAKER, J., and BRADFORD, J., concur.
3
State Farm also argues it is entitled to recover post-judgment interest. To the extent State Farm is correct, we
leave the determination of this amount to the trial court.
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