The Indiana Court of Appeals has upheld a judge’s ruling against a California reciprocal insurance exchange in a dispute over whether the insurer would have to pay part of a million dollar judgment.

In Mid-Century Ins. Co. v. Estate of Thomas Lynn Morris, by and through his personal representative, Tommy Lynn Morris, Daemen Sampson, and Dora Robinson, No. 07A01-1106-PL-313, the appellate panel affirmed a judgment by Brown Circuit Judge Judith Stewart granting an estate’s motion to dismiss a complaint involving an auto accident in December 2004.

One of the passengers in the vehicle was Thomas Lynn Morris, whose estate later sued Mid-Century Insurance Company that provided coverage to the driver of the car. The insurance company believed the total $100,000 per occurrence liability limit might be exhausted by the three claimants injured in the accident, and that led to the estate’s lawsuit demanding payment of the policy limit.

The action went to trial and resulted in a jury verdict for the estate in the amount of $1,195,024. Mid-Century in 2010 filed a complaint seeking to not have to pay any portion of the judgment, and the estate filed a motion to dismiss pursuant to Indiana Trial Rule 12(B)(6) because the insurer’s complaint was made in bad faith. The trial court granted the estate’s motion and the appellate panel has affirmed.

Mid-Century argued that no question exists that it was seeking a determination of its rights and obligations stemming from the insurance contract in this case. The company contended that it is not seeking a liability determination, but a review of the contract construction after it was breached to determine the obligations.

Analyzing the record in this case, the appellate judges determined that Mid-Century was attempting to preemptively defend itself against a claim of breach of good faith duty. The judges can’t determine declaratory relief is appropriate or that the trial court abused its discretion here.