Gregory Smith, As Assignee of Nolan Clayton v. Progressive Southeastern Insurance Company ( 2020 )

FILED
Jun 10 2020, 8:52 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEYS FOR APPELLANT ATTORNEYS FOR APPELLEE
Ann Marie Waldron J. Blake Hike
Waldron Law Larry L. Barnard
Indianapolis, Indiana Carson LLP
Fort Wayne, Indiana
Michael E. Simmons
Hume Smith Geddes Green &
Simmons, LLP
Indianapolis, Indiana
Robert P. Thomas
Thomas Law Office
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Gregory Smith, As Assignee of June 10, 2020
Nolan Clayton, Court of Appeals Case No.
Appellant-Plaintiff, 19A-PL-1959
Appeal from the Marion Superior
v. Court
The Honorable James A. Joven,
Progressive Southeastern Judge
Insurance Company, Trial Court Cause No.
Appellee-Defendant, 49D13-1809-PL-35757
Robb, Judge.
Court of Appeals of Indiana | Opinion 19A-PL-1959 | June 10, 2020 Page 1 of 24
Case Summary and Issues
[1] This action arises from a single-vehicle accident involving Gregory Smith and
Nolan Clayton, who was driving Smith’s vehicle. Smith sued Clayton to
recover for his personal injuries and property damage and Smith’s insurer,
Progressive Southeastern Insurance Company (“Progressive”), arranged for
legal counsel to defend Clayton pursuant to a reservation of rights. After a
verdict was entered against Clayton for $21 million, Clayton irrevocably
assigned to Smith any legal rights, claims, and causes of actions that Clayton
may have against Progressive and the attorneys who represented him, Metzger
Rosta, LLC (“Metzger”). Subsequently, Smith sued Progressive for bad faith.
This case is before us because the trial court dismissed Smith’s second amended
complaint (“Second Complaint”) against Progressive and denied his motion for
joinder of parties or consolidation of actions. Smith now appeals, raising several
issues for our review which we consolidate and restate as: 1) whether the trial
court erred in dismissing Smith’s Second Complaint and 2) whether the trial
court erred in denying Smith’s motion for joinder of parties or consolidation of
actions. Concluding the trial court did not err in either respect, we affirm.
Facts and Procedural History
[2] Smith and Clayton were co-workers at the Stacked Pickle and eventually
became friends. On February 17, 2016, Smith drove his truck, with Clayton as a
passenger, to a company event at the Stacked Pickle. The two spent several
hours drinking. In the early morning hours on February 18, Smith gave Clayton
Court of Appeals of Indiana | Opinion 19A-PL-1959 | June 10, 2020 Page 2 of 24
permission to drive Smith’s truck. Clayton lost control of the truck and ran into
a tree. Smith was ejected from the truck, suffered a broken neck, and was
rendered a quadriplegic. As discussed below, multiple lawsuits have resulted
from the accident.
Tort Action
[3] On June 15, 2016, Smith filed a complaint against Clayton to recover for
personal injury and property damage. Progressive intervened to provide legal
representation to Clayton pursuant to a reservation of rights1 and arranged for
Metzger to provide a defense for Clayton. Progressive also filed a Declaratory
Judgment Action regarding coverage questions (discussed below) and moved to
stay the Tort Action pending the resolution of the Declaratory Judgment
Action. The trial court denied the motion to stay and the Tort Action
proceeded. On December 11, 2017, a jury found in favor of Smith in the
amount of $35 million, found Clayton sixty percent at fault, and therefore
awarded Smith a judgment of $21 million against Clayton. The trial court also
granted Smith a portion of prejudgment interest that he requested and added it
to the judgment against Clayton.2
1
The reservation of rights letter is not in the record. But it appears to be undisputed that Progressive did
reserve its rights when it assumed Clayton’s defense in the Tort Action.
2
Clayton appealed the judgment but was unsuccessful. Clayton v. Smith, 113 N.E.3d 693 (Ind. Ct. App.
2018), trans. denied.
Court of Appeals of Indiana | Opinion 19A-PL-1959 | June 10, 2020 Page 3 of 24
[4] On July 31, 2018, Clayton executed an Assignment of Legal Rights and Causes
of Action (“the Assignment”), pursuant to which Clayton irrevocably assigned
to Smith any legal rights, claims, causes of action and legal theories and
recoveries against Progressive and Metzger to the extent that the rights and
claims were assignable. See Appellant’s Appendix, Volume 2 at 185. Clayton
executed the Assignment so he could satisfy part of the judgment that he owed
Smith. In exchange for the Assignment, Smith agreed not to pursue recovery
from any of Clayton’s personal assets.
Declaratory Judgment Action
[5] At the time of the accident, Progressive insured Smith under a policy which
provided coverage for liability, medical payments, underinsured motorists,
damage to the covered vehicle, and roadside-assistance. “Insured person” under
the policy included anyone who had permission to use the covered vehicle. Id.,Vol. 4 at 140. A provision of the policy also stated that Progressive did not have
a duty to defend an insured person for bodily injury to Smith. In January 2017,
while the Tort Action was pending, Progressive filed a Complaint for
Declaratory Judgment against Smith and Clayton requesting a determination
that, according to the terms of the policy, Smith was not entitled to coverage
under the policy’s underinsured motorist or bodily injury provisions for injuries
sustained in the accident and that Progressive was not obligated to defend or
indemnify Clayton as a permissive driver of Smith’s truck because Smith could
not recover under the policy for Clayton’s negligence. See id., Vol. 3 at 21.
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[6] Ultimately, the case came before this court on Progressive’s appeal arguing that
Smith was not entitled to bodily injury liability coverage and that it had no duty
to defend or indemnify Clayton. The Duty to Defend Declaration in the policy
stated, “Coverage under this Part I, including our duty to defend, will not apply to
any insured person for . . . bodily injury to [Smith] or a relative[.]” Id., Vol. 4 at
141 (emphasis added). We concluded that Smith was not entitled to bodily
injury coverage and that Progressive did not have (and has never had) a duty to
defend Clayton. Progressive Se. Ins. Co. v. Smith, 140 N.E.3d 292, 298 (Ind. Ct.
App. 2020).
Malpractice Action
[7] In October 2018, after Clayton executed the Assignment, he filed a Malpractice
Action against Progressive and Metzger. See Appellant’s App., Vol. 7 at 87. In
July 2019, the trial court granted Progressive’s motion to dismiss Clayton’s
complaint against it, finding that “[a]n insurer such as Progressive cannot
practice law or be liable for legal malpractice by attorneys” and “Progressive
cannot be liable for a claim of improper legal services, whether to Clayton or
Smith.” Id. at 93. At Clayton’s request, the trial court certified its order of
dismissal, but we denied Clayton’s motion for leave to bring a permissive
interlocutory appeal. At all times relevant to this litigation, the Malpractice
Action has remained pending as to Metzger.
Court of Appeals of Indiana | Opinion 19A-PL-1959 | June 10, 2020 Page 5 of 24
The Current Bad Faith Action3
[8] In September 2018, pursuant to the Assignment, Smith filed a complaint
against Progressive. Smith also filed a motion for joinder of parties or, in the
alternative, consolidation of actions. Smith sought to join Clayton as a plaintiff
and Metzger as a defendant in his action against Progressive. In the alternative,
Smith requested to consolidate Clayton’s Malpractice Action with his own
against Progressive because the two cases represent the two halves of the
Assignment: “To the extent the claims are assignable, they are contained in
[Smith’s] Complaint. To the extent they are not assignable, they are included in
the [Malpractice Action].” Id., Vol. 4 at 17.4 Progressive filed a motion to
dismiss Smith’s complaint, alleging that it failed to state a claim upon which
relief could be granted, and also opposed Smith’s request for joinder of parties
or consolidation. The trial court granted Progressive’s motion, dismissed
Smith’s complaint, and denied Smith’s motion for joinder of parties or
consolidation.5
[9] Smith then filed the Second Complaint on January 21, 2019, which alleged, in
relevant part:
3
In naming these various actions, we have used the designations first used in Progressive Se. Ins. Co., 140
N.E.3d at 295-96.
4
Contemporaneously with Smith’s motion, Clayton filed a motion to intervene in the Bad Faith Action and
to consolidate his Malpractice Action with the Bad Faith Action. At the time the motions were filed in
November 2018, Progressive was still a party to the Malpractice Action.
5
Clayton’s motion to intervene was also denied.
Court of Appeals of Indiana | Opinion 19A-PL-1959 | June 10, 2020 Page 6 of 24
49. Progressive is liable for the actions and inactions of the
attorneys hired by it because it directed those actions by and
through its oversight of the case and the Policy Manual.
50. Progressive is liable for the actions and inactions of the
attorneys hired by it because it admitted it had a duty to defend
Clayton and such duty is a non-delegable, contractual duty
making it liable for the actions of any independent contractors.
51. The acts, omissions, conduct and activities of Progressive,
directly and/or by and through its agents, servants and/or
selected independent contractors in conjunction with and under
the control and direction of Progressive, in handling, processing
and conducting the contractual and non-delegable and/or
voluntarily assumed duties and responsibilities of Progressive
related to the claims of [Smith] against Clayton and/or as
assignee of Clayton were negligent, grossly negligent, oppressive,
willful and wanton, performed in bad faith, conducted for
improper reasons and purposes and for the benefit of Progressive
at the expense of Clayton, and for purposes of obstruction, delay
and concealment from [Smith] as Clayton’s assignee, and
constitute a contractual breach of the duty of good faith and fair
dealing, a tortious breach of the duty of good faith and fair
dealing, negligent claim file handling, negligent hiring and
retention, and bad faith.
52. The acts, omissions, conduct and activities of Progressive in
handling, processing and conducting the contractual and non-
delegable and/or voluntarily assumed duties and responsibilities
of Progressive related to the claims of [Smith] against Clayton
and/or as assignee of Clayton were performed and occurred, in
part, upon advice of counsel.
53. As a direct and proximate result of the aforementioned
actions, omissions, activities and conduct on the part of
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Progressive, its agents, servants and/or selected independent
contractors, a judgment was rendered against Clayton in the
[Tort Action] in the amount of Twenty-One Million Dollars
($21,000,000.00), together with pre-judgment interest in the
amount of $714,574.35, all of which continues to accrue post-
judgment interest at the rate of 8% per annum as Progressive, by
and through its agents, servants and/or selected independent
contractors continue to wrongfully obstruct and impede
Clayton’s rights and/or the rights of [Smith] as assignee of
Clayton to pursue available remedies against Progressive and/or
its agents, servants and/or independent contractors under the
control and direction of Progressive.
54. Progressive, in addition to its own direct liability, is also
vicariously liable for the acts, omissions, conduct and activities of
its agents, servants and/or selected independent contractors
including . . . Metzger Rosta . . . which resulted in the [Tort
Action] Judgment, pre-judgment interest thereon, post-judgment
interest thereon, post-judgment obstruction actions and delays,
and all other damages which have been incurred by Clayton
and/or [Smith] as the assignee of Clayton.
Id. at 126-27.6 Again, Progressive filed a motion to dismiss, arguing that Smith’s
Second Complaint raised no new issues or causes of action, and essentially
sought to re-litigate the same issues as the dismissed complaint. See id., Vol. 5 at
39-40. The trial court held a hearing on the motion to dismiss after which it
6
Smith’s Second Complaint raised allegations similar to those in his first amended complaint but included
additional factual allegations and legal theories such as voluntary assumption of a duty to defend
competently and in good faith. See Appellant’s Brief at 11; see also Appellant’s App., Vol. 2 at 131-41.
Court of Appeals of Indiana | Opinion 19A-PL-1959 | June 10, 2020 Page 8 of 24
granted Progressive’s motion and dismissed the Second Complaint. The trial
court found, in relevant part:
Paragraphs 49 through 54 of Smith’s [Second Complaint] set
forth why Smith believes Progressive is liable to Smith. The
Court restates and reformulates the contentions of those
paragraphs in this manner: Progressive is (allegedly) liable to
Smith for the negligent and improper acts and omissions of the
attorneys Progressive provided to Clayton for his defense in [the
Tort Action] against Clayton. . . . Smith seeks recovery of
damages from Progressive due to the representation Clayton’s
attorneys provided in defense of Smith’s lawsuit against Clayton.
Under the assignment of rights from Clayton to Smith, Smith
might have been able to recover against Progressive for Smith’s
personal injuries sustained in the truck crash. But, because the
insurance policy . . . Progressive issued to Smith contained
specific terms that excluded Smith from coverage for his own
bodily injuries under that policy, Smith could not. That policy
exclusion was partly the reason why the Court dismissed Smith’s
First Amended Complaint. With his [Second] Complaint, Smith
attempts recovery from Progressive by asserting what amounts to
a claim of improper legal services provided to Clayton.
But Smith cannot assert such a claim. Under Indiana law,
negligence claims involving legal malpractice are not assignable.
Moreover, because legal malpractice claims are not assignable,
Indiana’s courts have found that a non-client may not sue an
insurer for vicarious liability for the conduct of lawyers hired to
defend an insured, even when the non-client has obtained an
assignment. See Querrey & Harrow, Ltd. v. Transcontinental Ins. Co.,
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885 N.E.2d 1235[, 1236] (Ind. 2008).[7] Smith does not have any
direct claim for negligence against Progressive or the lawyers that
Progressive hired to defend Clayton. He cannot bring such an
action, as he does with his [Second] Complaint, because Clayton
could not assign his rights to bring such claims to Smith.
Furthermore, Smith had already [made] the same or similar
claims in paragraphs 42 through 45 of his First Amended
Complaint, a complaint that this Court has already considered
and dismissed.
Appealed Order at 5-7 (some citations omitted).8 Smith now appeals.
Discussion and Decision
I. Dismissal
A. Standard of Review
[10] The trial court granted Progressive’s motion to dismiss Smith’s Second
Complaint for failure to state a claim upon which relief could be granted. See
Ind. Trial Rule 12(B)(6). A motion to dismiss under Trial Rule 12(B)(6) tests the
legal sufficiency of the plaintiff’s claim, not the facts supporting it. Hoosier Ins.
Co. v. Riggs, 92 N.E.3d 685, 687 (Ind. Ct. App. 2018). Therefore, a Rule
12(B)(6) motion presents a legal question that we review de novo. Ward v.
Carter, 90 N.E.3d 660, 662 (Ind. 2018), cert. denied, 139 S.Ct. 240 (2018). When
7
The parties disagree about the import of this case, but because we review motions to dismiss de novo, we
need not specifically address arguments about its applicability.
8
Our citation to the Appealed Order is based on the .pdf pagination.
Court of Appeals of Indiana | Opinion 19A-PL-1959 | June 10, 2020 Page 10 of 24
ruling on a motion to dismiss, we will view the pleadings in the light most
favorable to the nonmoving party, with every reasonable inference construed in
the non-movant’s favor. Thornton v. State, 43 N.E.3d 585, 587 (Ind. 2015). We
may affirm a dismissal under Rule 12(B)(6) if it is sustainable on any basis in
the record. Freels v. Koches, 94 N.E.3d 339, 342 (Ind. Ct. App. 2018). That is, if
the complaint states a set of facts that, even if true, would not support the
requested relief, we will affirm the dismissal. Id.B. Second Complaint
[11] Smith argues that the trial court erroneously dismissed his Second Complaint.
Specifically, he contends that the trial court mischaracterized the nature of his
claims against Progressive as attorney malpractice, rather than claims for
vicarious liability, breach of duty to defend, and bad faith.9 We will discuss each
in turn.
1. Vicarious Liability
[12] Smith first contends that the trial court incorrectly dismissed his Second
Complaint because the complaint alleged sufficient facts to show that
9
Smith also briefly mentions that the trial court overlooked his claims for negligent claims handling and
negligent selection and retention of attorneys. See Appellant’s Br. at 30; see also Appellant’s App., Vol. 4 at
126-27. However, Smith fails to develop a cogent argument that the trial court erred in dismissing his Second
Complaint by overlooking these claims. See Ind. Appellate Rule 46(A)(8)(a) (“The argument must contain the
contentions of the appellant on the issues presented, supported by cogent reasoning.”). Therefore, this issue is
waived. Burnell v. State, 110 N.E.3d 1167, 1171 (Ind. Ct. App. 2018).
Court of Appeals of Indiana | Opinion 19A-PL-1959 | June 10, 2020 Page 11 of 24
Progressive is vicariously liable for Metzger’s actions or inactions that
contributed to a personal injury judgment against Clayton.
[13] Generally, a plaintiff claiming negligence must show a duty owed to the
plaintiff by the defendant, a breach of that duty, and a compensable injury
proximately caused by the breach. Smith v. Walsh Constr. Co. II, LLC, 95 N.E.3d
78, 84 (Ind. Ct. App. 2018), trans. denied. Vicarious liability creates an “indirect
legal responsibility” whereby “a court can hold a party legally responsible for
the negligence of another, not because the party did anything wrong but rather
because of the party’s relationship to the wrongdoer.” Sword v. NKC Hosps., Inc.,
714 N.E.2d 142, 147 (Ind. 1999) (citation omitted). Indiana courts employ
various legal doctrines to hold people vicariously liable, including the non-
delegable duty doctrine and the doctrine of respondeat superior. Id.[14] Smith’s vicarious liability claim in his Second Complaint against Progressive
contends that but for Metzger’s actions or inactions, Clayton would not have
incurred a substantial personal injury judgment. However, Smith did not plead
specific facts to support his assertion and show how a smaller judgment would
have resulted if Metzger had represented Clayton differently. Smith’s
contention, without more, is not sufficient at the pleading stage to state a claim
for any relief. See Hoosier Ins. Co., 92 N.E.3d at 687. Regardless, the nature of
Smith’s complaint against Progressive for vicarious liability is nothing more
than a negligence claim that involves alleged legal malpractice by Metzger – a
claim that is not assignable under Indiana law. See Rosby Corp. v. Townsend,
Yosha, Cline & Price, 800 N.E.2d 661, 665 (Ind. Ct. App. 2003) (discussing the
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bright-line rule drawn by our supreme court holding that “legal malpractice
claims are not assignable”) (quoting Picadilly, Inc. v. Raikos, 582 N.E.2d 338, 339
(Ind. 1991)), trans. denied.
[15] In Picadilly, a bar owed a judgment to Charles Colvin, who was injured by
another patron of the bar. The bar filed a claim against its attorneys, Raikos and
Thomas, alleging that the attorneys’ negligence resulted in the judgment against
them. Raikos and Thomas moved for, and were granted, summary judgment.
The bar thereafter assigned to Colvin its legal malpractice claim against Raikos
and Thomas. Colvin immediately filed a motion to correct error with the trial
court, challenging the grant of summary judgment to Raikos and Thomas.
Raikos and Thomas opposed the motion on the grounds that the assignment of
the legal malpractice claim was invalid. The trial court denied the motion to
correct error and, on appeal, we affirmed the trial court’s grant of summary
judgment. Picadilly, Inc. v. Raikos, 555 N.E.2d 167, 170 (Ind. Ct. App. 1990). On
transfer, our supreme court also affirmed the trial court, concluding that legal
malpractice claims are not assignable. Picadilly, 582 N.E.2d at 339. In
addressing this new question of law, our supreme court agreed with a California
Court of Appeal decision describing the public policy issues involved:
The assignment of such claims could relegate the legal
malpractice action to the market place and convert it to a
commodity to be exploited and transferred to economic bidders
who have never had a professional relationship with the attorney
and to whom the attorney has never owed a legal duty, and who
have never had any prior connection with the assignor or his
rights. . . . The almost certain end result of merchandizing such
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causes of action is the lucrative business of factoring malpractice
claims which would encourage unjustified lawsuits against
members of the legal profession, generate an increase in legal
malpractice litigation, promote champerty and force attorneys to
defend themselves against strangers. The endless complications
and litigious intricacies arising out of such commercial activities
would place an undue burden on not only the legal profession but
the already overburdened judicial system, restrict the availability
of competent legal services, embarrass the attorney-client
relationship and imperil the sanctity of the highly confidential
and fiduciary relationship existing between attorney and client.
Id. at 342 (quoting Goodley v. Wank & Wank, Inc., 62 Cal.App.3d 389, 397, 133
Cal.Rptr. 83, 87 (1976)).
[16] Although the Picadilly court discussed the assignment of a legal malpractice
claim directly against attorneys and not against an insurer that hired the
attorneys, the principle is the same. The court was mainly concerned with the
impact of assigning any legal malpractice claims – “the need to preserve the
sanctity of the client-lawyer relationship, and the disreputable public role
reversal that would result during the trial of assigned malpractice claims” – not
how legal malpractice claims were assigned or who would be subject to litigation
from the assignment. Picadilly, 582 N.E.2d at 342. Applying the above principle
to the facts here, we see no reason for a different result. The nature of the
vicarious liability claim in Smith’s Second Complaint still served as a legal
malpractice claim against Metzger; that is, it alleged that Progressive is liable
for Metzger’s actions or inactions in litigating the Tort Action, contributing to a
substantial judgment against Clayton. Indiana law might support a respondeat
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superior claim by the insured – in this case, Clayton – against the insurer in this
context, but it does not support such a claim being assigned to and litigated by
Smith. Because Smith’s vicarious liability claim against Progressive stemmed
from Metzger’s alleged legal malpractice, the trial court did not err in
dismissing his Second Complaint on this issue.
2. Breach of Duty to Defend
[17] Smith next contends that the trial court erroneously dismissed his Second
Complaint because he made multiple allegations that Progressive breached its
contractual duty to defend Clayton. In Indiana, the duty to defend is broader
than coverage liability. Trisler v. Indiana Ins. Co., 575 N.E.2d 1021, 1023 (Ind.
Ct. App. 1991). Consequently, if it is determined that an insurer has a
contractual duty to defend, the insurer will not be relieved of that obligation,
regardless of the claim. Id. After an insurer has made an independent
determination that it has no duty to defend, it must either clarify its obligation
to defend the insured through a declaratory judgment action or defend its
insured under a reservation of rights. Liberty Mut. Ins. Co. v. Metzler, 586 N.E.2d
897, 902 (Ind. Ct. App. 1992), trans. denied.
[18] When determining whether a duty to defend exists, the insurer must look to the
allegations in the complaint coupled with the facts known to the insurer after
reasonable investigation. American States Ins. Co. v. Aetna Life & Cas. Co., 177 Ind.
App. 299, 311, 379 N.E.2d 510, 518 (1978). Accordingly, we may consider the
evidentiary materials offered by the parties to show coverage or exclusion.
Trisler, 575 N.E.2d at 1023. No defense is required if the pleadings or
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investigation indicate that a claim is outside coverage limits or excluded under
the policy. Id. Although ambiguities are construed in favor of the insured, clear
and unambiguous policy terms will be given their ordinary meaning. Id.[19] The issue of Progressive’s duty to defend has already been resolved in the
Declaratory Judgment Action. Progressive Se. Ins. Co., 140 N.E.3d at 298. A
provision of Smith’s policy stated, “Coverage under this Part I, including our
duty to defend, will not apply to any insured person for . . . bodily injury to
[Smith] or a relative.” Appellant’s App., Vol. 4 at 141 (emphasis added).
Progressive’s Declaratory Judgment Action sought a declaration that, based on
this provision, it was not obligated to defend or indemnify Clayton, a
permissive driver of Smith’s truck. Despite the above-quoted policy provision,
the trial court granted summary judgment in favor of Smith. On appeal, we
concluded that Progressive did not have (and has never had) a contractual duty
to defend Clayton. Progressive Se. Ins. Co., 140 N.E.3d at 298. We noted that “it
is eminently reasonable to conclude that if Smith is not entitled to coverage for
his bodily injuries, Progressive is not required to defend Clayton from tort
claims related to those bodily injuries.” Id. Because the policy clearly and
unambiguously excluded coverage for bodily injury suffered by Smith,
Progressive did not have a contractual duty to defend Clayton.
[20] Smith argues that even if Progressive did not have a duty to defend, it chose to
hire attorneys to defend Clayton and therefore, it was required to proceed in
good faith by providing competent defense counsel for Clayton. However, our
supreme court has noted, “To judicially impose liability under a theory of
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gratuitously assumed duty is unwise policy and should be cautiously invoked
only in extreme circumstances involving a negligently performed assumed
undertaking[.]” Yost v. Wasbash College, 3 N.E.3d 509, 518 (Ind. 2014). Smith
has not shown in his Second Complaint how Clayton’s defense attorneys were
incompetent or negligent in conducting Clayton’s defense. And we will not
speculate as to the quality of Metzger’s representation of Clayton in the absence
of specific allegations. Because Progressive did not have a contractual duty to
defend Clayton, the trial court did not err in dismissing Smith Second
Complaint on this issue.
3. Bad Faith
[21] Next, Smith argues that the trial court erred in dismissing his Second
Complaint because he made numerous allegations that Progressive acted in bad
faith beyond issues of coverage. Specifically, Smith alleges that Progressive
“directed the actions of the attorneys, failed to cooperate in the production of
documents to Clayton, acted in its own best interests at the expense of Clayton,
and acted with improper purposes.” Appellant’s Br. at 30. Progressive contends,
and we agree, that Smith did not plead any facts that would support his claim
that Progressive acted in bad faith. Indiana has long recognized that there is a
legal duty implied in all insurance contracts that the insurer deal in good faith
with its insured. Erie Ins. Co. v. Hickman by Smith, 622 N.E.2d 515, 518 (Ind.
1993).
The obligation of good faith and fair dealing with respect to the
discharge of the insurer’s contractual obligation includes the
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obligation 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. at 519. Proving bad faith amounts to showing more than bad judgment or
negligence: “it implies the conscious doing of a wrong because of dishonest
purpose or moral obliquity. . . . [I]t contemplates a state of mind affirmatively
operating with furtive design or ill will.” Oxendine v. Pub. Serv. Co. of Ind., Inc.,
423 N.E.2d 612, 620 (Ind. Ct. App. 1980).
[22] Smith’s Second Complaint does not present any facts that would indicate that
Progressive failed to meet the obligation of good faith and fair dealing in any of
the four ways described in Erie. Nor does it designate any evidence that would
suggest that Progressive acted with a dishonest purpose, ill will, or engaged in
any conscious wrongdoing. Therefore, Smith’s allegations in his Second
Complaint, without more, cannot serve as the basis for a bad faith claim. Thus,
the trial court did not err in dismissing Smith’s Second Complaint on this issue.
II. Joinder of Parties or Consolidation of Actions
A. Joinder
[23] Smith argues that the trial court erred when it denied his motion for joinder of
parties. The determination of whether parties should be joined rests within the
trial court’s discretion, and we will reverse a trial court’s decision only for an
abuse of that discretion. McCoy v. Like, 511 N.E.2d 501, 504 (Ind. Ct. App.
1987), trans. denied. An abuse of discretion occurs when the trial court’s decision
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is clearly against the logic and effect of the facts and circumstances before it.
Brademas v. S. Bend Cmty. Sch. Corp., 783 N.E.2d 745, 750 (Ind. Ct. App. 2003),
trans. denied.
[24] Indiana Trial Rules 19 and 20 govern the joinder of parties. Trial Rule 19
provides the requirements for mandatory joinder:
A person who is subject to service of process shall be joined as a
party in the action if:
(1) in his absence complete relief cannot be accorded among
those already parties; or
(2) he claims an interest relating to the subject of the action and is
so situated that the disposition of the action in his absence
may:
(a) as a practical matter impair or impede his ability to protect
that interest, or
(b) leave any of the persons already parties subject to a
substantial risk of incurring double, multiple, or otherwise
inconsistent obligations by reason of his claimed interest.
Ind. Trial Rule 19(A) (emphasis added). Smith sought to join Clayton as a
mandatory party-plaintiff in the Bad Faith Action pursuant to Trial Rule 19.
However, Clayton irrevocably assigned to Smith all claims, legal rights, or causes
of action that he may have had against Progressive and Metzger to the extent
that they were assignable in return for Smith not recovering a portion of the $21
million judgment from his personal assets. Thus, Clayton had relinquished any
Court of Appeals of Indiana | Opinion 19A-PL-1959 | June 10, 2020 Page 19 of 24
and all claims against Progressive and there was no reason that, in Clayton’s
absence, Smith could not be afforded complete relief, that is, a judgment against
Progressive. T.R. 19(A)(1). Nor did Clayton claim any interest whatsoever in
Smith’s complaint against Progressive due to the Assignment. T.R. 19(A)(2); see
also Indianapolis-Marion Cty. Pub. Library v. Charlier Clark & Linard, PC, 929
N.E.2d 838, 848 (Ind. Ct. App. 2010) (“As a general rule, a valid and
unqualified assignment operates to transfer to the assignee all the right, title, or
interest of the assignor in or to the property or property rights that are
comprehended within the terms of the assignment.”) (quotation omitted), trans.
denied. Accordingly, the trial court did not abuse its discretion in denying
Smith’s motion to join Clayton as a necessary party under Trial Rule 19.
[25] Smith also sought to join Clayton as a permissive party-plaintiff and Metzger as
permissive party-defendants to the Bad Faith Action pursuant to Trial Rule
20(A). Trial Rule 20 governs the permissive joinder of parties and provides in
pertinent part:
(1) All persons may join in one [1] action as plaintiffs if they
assert any right to relief jointly, severally, or in the alternative
in respect of or arising out of the same transaction,
occurrence, or series of transactions or occurrences and if any
question of law or fact common to all these persons will arise
in the action.
(2) All persons may be joined in one [1] action as defendants if there is
asserted against them jointly, severally, or in the alternative, any right
to relief in respect of, or arising out of, the same transaction,
occurrence, or series of transactions or occurrences and if any
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question of law or fact common to all defendants will arise in the
action.
Ind. Trial Rule 20(A)(1) & (2). The purpose of Trial Rule 20(A) is to promote
trial convenience, expedite claims, and avoid multiple lawsuits. United of Omaha
v. Hieber, 653 N.E.2d 83, 87 (Ind. Ct. App. 1995), trans. denied.
[26] It was not error for the trial court to deny joinder of either party under Trial
Rule 20. First, with respect to subsection (1), Smith and Clayton did not, jointly
or severally, “assert any right to relief” against Progressive because Clayton
assigned any rights he would have had against Progressive to Smith. Second,
with respect to subsection (2), no “right to relief” has been “asserted” against
Metzger because Smith had no such “right to relief.” T. R. 20(A)(2). The legal
malpractice claim was not assignable pursuant to Picadilly and was only
available to Clayton personally. Thus, Smith has failed to establish that
Metzger should be joined as a party under Trial Rule 20(A)(2). See McCoy, 511
N.E.2d at 504 (stating the right of relief must be asserted against the defendants
jointly, severally, or in the alternative). Because neither Clayton nor Metzger
could properly be joined as parties under Trial Rule 20, the trial court did not
abuse its discretion when it denied Smith’s motion for joinder of parties.
B. Consolidation
[27] Smith next argues that the trial court erred by denying his request for
consolidation of his Bad Faith Action and Clayton’s Malpractice Action.
Indiana Trial Rule 42(A) provides that a trial court may order actions to be
consolidated when the actions involve common questions of law or fact. The
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decision to consolidate actions is purely discretionary and will be overturned
only when an abuse of discretion is established. Bodem v. Bancroft, 825 N.E.2d
380, 382 (Ind. Ct. App. 2005). “A party must show resultant prejudice as a
prerequisite to establishing that a trial court erred in denying a motion under
Trial Rule 42.” In re Paternity of Tompkins, 518 N.E.2d 500, 507 (Ind. Ct. App.
1988).
[28] Smith requested the trial court consolidate the Bad Faith Action and the
Malpractice Action against Progressive and Metzger because the cases involved
common questions of law and fact. But whether or not common questions of
law or fact exist, Smith failed to demonstrate that he suffered prejudice as a
result of the trial court’s denial of his motion. Smith now argues that he was
prejudiced because Progressive took contradictory positions that resulted in the
dismissal of Smith’s claim against Progressive in this action and Clayton’s
claim against Progressive in the Malpractice Action; namely, asserting in this
action that Clayton’s claims were not assignable and asserting in the
Malpractice Action that Clayton assigned his claims to Smith. However,
Progressive’s assertions were not contradictory, but consistent. First, in the Bad
Faith Action, Progressive correctly stated that Smith’s negligence claims based
on legal malpractice were not assignable. See Appellant’s App., Vol. 5 at 40
(Progressive noting in its motion to dismiss that “Indiana law does not
recognize claims brought by third parties for vicarious liability for the conduct
of counsel hired to defend the insured. Because negligence claims against
attorneys are not assignable, and because [Smith] does not have privity with the
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lawyers that Progressive paid to defend . . . Clayton, [Smith] cannot sue
Progressive for the conduct of those lawyers”); see also Picadilly, Inc., 582 N.E.2d
at 339. Progressive never argued that Smith’s claims of bad faith and breach of
duty to defend were not assignable. Instead, it argued that it had not acted in
bad faith and could not be liable for the breach of a duty to defend which it did
not owe. See Appellant’s App., Vol. 5 at 40. The trial court dismissed only
Smith’s legal malpractice claims because those claims were not assignable.
Second, in the Malpractice Action, Progressive argued that Clayton irrevocably
assigned to Smith any claims for bad faith and breach of duty to defend and
therefore, Clayton could not bring claims against it. We see no contradiction in
Progressive’s assertions as Smith contends and thus, Smith has failed to show
any “resultant prejudice” from the trial court’s denial of Smith’s motion to
consolidate. In re Paternity of Tompkins, 518 N.E.2d at 507. Therefore, the trial
court did not abuse its discretion in denying Smith’s motion to consolidate
actions.
Conclusion
[29] Smith’s Second Complaint on its face does not support the relief he seeks and
therefore, the trial court did not err in dismissing Smith’s Second Complaint.
We also conclude that the trial court did not err when it denied Smith’s motion
for joinder of parties or consolidation of actions. Accordingly, the decision of
the trial court is affirmed.
[30] Affirmed.
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Bradford, C.J., and Altice, J., concur.
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