Penny Denecho, Edward Denecho, and Darlene Johnson v. Indiana Farm Bureau Insurance Company (mem. dec.) ( 2019 )

MEMORANDUM DECISION
Pursuant to Ind. Appellate Rule 65(D),
this Memorandum Decision shall not be FILED
regarded as precedent or cited before any Sep 12 2019, 9:22 am
court except for the purpose of establishing
CLERK
the defense of res judicata, collateral Indiana Supreme Court
Court of Appeals
estoppel, or the law of the case. and Tax Court
ATTORNEY FOR APPELLANT ATTORNEY FOR APPELLEE
Alan D. Naggatz Josef Musser
Law Office of Alan D. Naggatz Spitzer Herriman Stephenson
Valparaiso, Indiana Holderead Conner & Persinger,
LLP
Marion, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Penny Denecho, Edward September 12, 2019
Denecho, and Darlene Johnson, Court of Appeals Case No.
Appellants-Defendants, 18A-CT-2900
Appeal from the Madison Circuit
v. Court
The Honorable G. George Pancol,
Indiana Farm Bureau Insurance Judge
Company, Trial Court Cause No.
Appellee-Plaintiff 48C02-1404-CT-48
Crone, Judge.
Court of Appeals of Indiana | Memorandum Decision 18A-CT-2900 | September 12, 2019 Page 1 of 10
Case Summary
[1] Penny Denecho and Edward Denecho (“the Denechos”) appeal the trial court’s
entry of summary judgment in favor of Indiana Farm Bureau Insurance
Company (“Farm Bureau”). The sole restated issue presented for our review is
whether the Denechos breached the terms of their insurance policy when they
settled with a tortfeasor without proper notice to or consent of Farm Bureau,
thus destroying their right of action under the policy as a matter of law.
Concluding that Farm Bureau is entitled to summary judgment, we affirm.
Facts and Procedural History
[2] On April 9, 2012, Penny Denecho was driving a vehicle owned by Darlene
Johnson when she and Ryan Inglis were involved in an accident on State Road
9 in Madison County. At the time of the accident, Inglis had an automobile
insurance policy with Allstate that had per person/per incident coverage limits
of $50,000/$100,000. Johnson1 had an automobile insurance policy with Farm
Bureau (“the Farm Bureau Policy”) which provided Penny, as the operator of
Johnson’s vehicle, with uninsured or underinsured motorist (“UIM”) coverage
with per person/per incident coverage limits of $100,000/$300,000.
[3] On April 9, 2014, the Denechos filed an amended complaint against Inglis and
Farm Bureau. The Denechos alleged that they suffered injuries, losses, and
1
Darlene Johnson is not a party to this appeal. However, pursuant to Indiana Appellate Rule 17(A), a party
of record in the trial court shall be a party on appeal, and therefore we have included Johnson in the case
caption.
Court of Appeals of Indiana | Memorandum Decision 18A-CT-2900 | September 12, 2019 Page 2 of 10
damages2 as a direct and proximate result of the negligent, reckless, or careless
maintenance by Inglis of his vehicle. The Denechos further alleged that
because Inglis may have been underinsured at the time of the accident, Farm
Bureau had contracted to provide UIM benefits to the Denechos pursuant to
the Farm Bureau Policy.
[4] On July 28, 2016, the Denechos’ attorney purportedly sent a letter to Farm
Bureau stating:
I received a tender of policy limits from Allstate on behalf of
Defendant Inglis in the above matter. This is notice requesting
consent-to-settle, to the extent necessary under the Plaintiff’s
policy. Also advise if your client will be tendering the policy
limits seeking or waiving subrogation against the tortfeasor.
Please respond with your position within 30 days. If you have
questions or concerns please contact me.
Appellants’ App. Vol. 2 at 89. Five days later, on August 2, 2016, the
Denechos executed a settlement agreement with Inglis and signed a written
release of “any and all claims” against Inglis in exchange for the payment by
Allstate of policy limits of $50,000 of its coverage of Inglis. Id. at 86. The
release further provided:
I further understand that as I may or shall have incurred, directly
or indirectly, in connection with or for damages arising out of the
accident to each person or organization, release and discharge of
2
Edward’s claim was for loss of consortium.
Court of Appeals of Indiana | Memorandum Decision 18A-CT-2900 | September 12, 2019 Page 3 of 10
liability herein, and to any other person or organization, is
expressly reserved to each of them, such liability not being
waived, agreed upon, discharged nor settled by the release,
including but not limited to underinsured claim(s).
Id.3 (emphasis added). Allstate issued a $50,000 check to the Denechos on
August 9, 2016.
[5] Farm Bureau subsequently requested that the Denechos dismiss their UIM
claim against it on the basis that they breached the terms of the Farm Bureau
Policy by settling their claims with Inglis without proper notice to or consent of
Farm Bureau, and therefore Farm Bureau was discharged from any obligation
to provide UIM coverage. The Denechos did not respond to Farm Bureau’s
request. Thereafter, Farm Bureau filed a motion for summary judgment and
designation of evidence requesting a determination, as a matter of law, that the
Denechos had breached the Farm Bureau Policy and had lost their right of
action against Farm Bureau. The Denechos filed a brief and designation of
evidence in opposition to summary judgment.4 Following a hearing, the trial
court entered summary judgment in favor of Farm Bureau. This appeal ensued.
3
The italicized language was handwritten on the typed release.
4
Farm Bureau filed a summary judgment reply brief the day before the scheduled hearing. The Denechos’
counsel made an oral motion to strike the reply brief due to the late filing and alleged hearsay contained in
the attachments to the brief; however, it does not appear that the trial court ruled on that oral motion.
Nevertheless, we need not address the Denechos’ argument on appeal that the trial court erred in failing to
strike the reply brief or attachments, as neither was necessary for or relied upon by this Court in our de novo
review.
Court of Appeals of Indiana | Memorandum Decision 18A-CT-2900 | September 12, 2019 Page 4 of 10
Discussion and Decision
[6] When reviewing the grant of summary judgment, our standard of review is the
same as that of the trial court. FLM, LLC v. Cincinnati Ins. Co., 973 N.E.2d
1167, 1173 (Ind. Ct. App. 2012) trans. denied (2013). We stand in the shoes of
the trial court and apply a de novo standard of review. Id. Summary judgment
is appropriate only where the designated evidence shows there are no genuine
issues of material fact and the moving party is entitled to judgment as a matter
of law. Ind. Trial Rule 56(C). A trial court’s grant of summary judgment is
clothed with a presumption of validity, and the party who lost in the trial court
has the burden of demonstrating that the grant was erroneous. Henderson v. Reid
Hosp. & Healthcare Servs., 17 N.E.3d 311, 315 (Ind. Ct. App. 2014), trans. denied
(2015). We will affirm upon any theory or basis supported by the designated
materials. Id.[7] The provisions of an insurance contract are subject to the same rules of
construction as are other contracts. Holiday Hosp. Franchising, Inc. v. AMCO Ins.
Co., 983 N.E.2d 574, 577 (Ind. 2013). Clear and unambiguous policy language
is given its ordinary meaning. Id. The construction of an insurance contract
generally presents purely a question of law, and therefore it is particularly well
suited for de novo appellate review. Id.[8] The relevant language of the Farm Bureau Policy regarding its subrogation
rights and the insured’s obligation to protect those rights provides:
Court of Appeals of Indiana | Memorandum Decision 18A-CT-2900 | September 12, 2019 Page 5 of 10
If we make any payment, we are entitled to recover what we paid
from other parties.
Any person or for whom we make payment must assign to us
their rights of recovery against any other party. This person must
do everything necessary to secure these rights and must do nothing
after a loss that would jeopardize them.
Appellants’ App. Vol. 2 at 39 (emphasis added). In support of summary
judgment, Farm Bureau maintains that the Denechos did in fact do something
after the accident to jeopardize Farm Bureau’s rights of recovery against Inglis;
specifically, they settled with and executed a release of all claims against Inglis
without proper notice to or consent of Farm Bureau. Therefore, Farm Bureau
contends, the Denechos forfeited UIM benefits as a matter of law. We agree.
[9] Indiana law is clear that when an insured settles a claim with the tortfeasor
without the insurer’s consent, the insured breaches the insurance policy’s
provisions requiring protection of the insurer’s subrogation rights and forfeits
any claim for underinsured motorist benefits under the policy. Cincinnati Ins. Co.
v. Adkins, 935 N.E.2d 190, 193 (Ind. Ct. App. 2010) (citing Tate v. Secura Ins.,
587 N.E.2d 665, 670 (Ind. 1992)). Stated another way,
[A]n insured who destroys the insurer’s contractual subrogation
rights breaches the insurance contract and, as a result,
extinguishes his right of action on the policy. An insured
destroys the insurer’s contractual subrogation right by releasing
the tortfeasor prior to settling with the insurer because it is that
very settlement which enables the insurer to protect its
subrogation right by giving notice thereof to the tortfeasor.
Court of Appeals of Indiana | Memorandum Decision 18A-CT-2900 | September 12, 2019 Page 6 of 10
Tate, 587 N.E.2d at 670 (quoting Allstate Ins. Co. v. Meek, 489 N.E.2d 530, 533
(Ind. Ct. App. 1986)).
[10] Moreover, Indiana Code Section 27-7-5-6 provides in relevant part:
(a) The policy or endorsement affording the [UIM] coverage
specified in this chapter may also provide that payment to any
person of sums as damages under such coverage shall operate to
subrogate the insurer to any cause of action in tort which such
person may have against any other person or organization legally
responsible for the bodily injury or death, or property damage,
because of which such payment is made. The insurer shall be
subrogated, to the extent of such payment, to the proceeds of any
settlement or judgment that may later result from the exercise of
any rights of recovery of such person 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 insurer may enforce such rights in its own name or in the
name of the person to whom payment has been made, as in their
interest may appear, by proper action in any court of competent
jurisdiction.
(b) An insurer providing underinsured motorist coverage does
not have a right of subrogation against an underinsured motorist
if:
(1) the insurer has been provided with a written notice that:
(A) informs the insurer of the existence of a bona fide offer of
agreement or settlement between its insured and the
underinsured motorist; and
(B) includes a certification of the liability coverage limits of the
underinsured motorist; and
(2) the insurer fails to advance payment to the insured in an
Court of Appeals of Indiana | Memorandum Decision 18A-CT-2900 | September 12, 2019 Page 7 of 10
amount equal to the amount provided for in the offer of
agreement or settlement within thirty (30) days after the insurer
receives the notice described in subdivision (1).
However, an insurer that, under the circumstances described in
subdivision (1), advances payment to the insured in an amount
equal to the amount provided for in the offer of agreement or
settlement, has full rights of subrogation as provided in its policy
or endorsement affording the underinsured motorist coverage.
Accordingly, our legislature has provided that in the case of a settlement offer
from an underinsured motorist, an insured protects her insurer’s subrogation
rights by providing written notice that informs the insurer of the offer and
includes a certification of the coverage limits of the underinsured motorist. The
insurer then has thirty days after the receipt of that notice to advance payment
to the insured in an amount equal to the settlement offer.5 If the insurer then
fails to advance such payment within the thirty-day period, the insurer forfeits
its right of subrogation against the underinsured motorist.
[11] The undisputed facts demonstrate that the Denechos executed their settlement
and release of all claims against Inglis without Farm Bureau’s consent a mere
five days after they sent a letter notifying Farm Bureau about the offer.6 In
5
Pursuant to the Farm Bureau Policy language, the Denechos’ obligation to do nothing to jeopardize Farm
Bureau’s subrogation rights, such as notifying Farm Bureau and obtaining its consent before settling with
Inglis, arose at the time of the accident. See Adkins, 935 N.E.2d at 193 (noting that the insured’s contractual
obligation to do nothing to impair the insurer’s subrogation rights arises at the time of the “loss” or accident
and not at some later date after the insurer has made payment).
6
While not necessary to our resolution in this case, the purported notice sent to Farm Bureau by counsel for
the Denechos was deficient as it did not include a certification of liability coverage limits as required by
Court of Appeals of Indiana | Memorandum Decision 18A-CT-2900 | September 12, 2019 Page 8 of 10
doing so, the Denechos unquestionably denied Farm Bureau the opportunity to
advance payment in an amount equal to the amount provided for in the offer in
order to maintain its full rights of subrogation. See Ind. Code § 27-7-5-6(b)(2).
As in Adkins, this was a clear breach of the insurance policy’s provisions
requiring protection of the insurer’s subrogation rights. Adkins, 935 N.E.2d at
193.
[12] The Denechos attempt to distinguish this case from Adkins by asserting that,
unlike the “general release” executed in Adkins, the language of the release here
did not jeopardize Farm Bureau’s subrogation rights because the release
specifically provided that the Denechos “retained the right to pursue [their]
UIM claim against Farm Bureau.” Appellants’ Reply Br. at 6. In making this
argument, the Denechos conflate two distinct things. Namely, they conflate
their rights as to Farm Bureau with Farm Bureau’s rights as to Inglis. The only
right of action the language of the current release attempted to protect was the
Denechos’ right of action against Farm Bureau. The Denechos have
unequivocally released any and all rights of action against Inglis, which would
include Farm Bureau’s subrogation rights.7
Indiana Code Section 27-7-5-6(b)(1)(B). In fact, the letter did not even mention the amount of the settlement
offer.
7
The Denechos argue that Farm Bureau has not shown that its subrogation rights have actually been
impaired, and they suggest that “Allstate could very likely” honor a subrogation claim if Farm Bureau simply
makes such a claim. Appellants’ Br. at 28. This is a curious position considering that Allstate filed, on
Inglis’s behalf, a motion to enforce settlement agreement and for dismissal with prejudice, which the trial
court granted. Appellants’ App. at 6. As Inglis is no longer a party to the litigation, we fail to see how Farm
Bureau could attempt to enforce these alleged “reserved” subrogation rights. Id.Court of Appeals of Indiana | Memorandum Decision 18A-CT-2900 | September 12, 2019 Page 9 of 10
[13] Again, it is well settled that “where the insured releases his right of action
against the wrongdoer before settlement with the insurer, the release destroys by
operation of law his right of action on the policy.” Consol. Ins. Co. v. Nat’l Water
Servs., LLC, 994 N.E.2d 1192, 1199 (Ind. Ct. App. 2013) (citing Auto Owners’,
etc., Exchange v. Edwards, 82 Ind. App. 558, 136 N.E. 577 (1922)); Hockelberg v.
Farm Bureau Ins. Co., 407 N.E.2d 1160, 1161 (Ind. Ct. App. 1980). As it is
undisputed that the Denechos released their claims against Inglis before
settlement with Farm Bureau, the release destroyed the Denechos’ right of
action against Farm Bureau by operation of law. Having foreclosed Farm
Bureau’s subrogation rights, the Denechos breached their insurance contract
and are now precluded as a matter of law from maintaining an action against
Farm Bureau for UIM benefits. The trial court’s entry of summary judgment in
favor of Farm Bureau is affirmed.
[14] Affirmed.
Vaidik, C.J., and Altice, J., concur.
Court of Appeals of Indiana | Memorandum Decision 18A-CT-2900 | September 12, 2019 Page 10 of 10