Justices decline to make bright-line rule on admission of coverage limits

The Indiana Supreme Court affirmed the admission of a couple’s uninsured motorist policy limits at a trial in which the couple sued its insurer to recover under that provision. But in doing so, the justices declined requests by the Indiana Trial Lawyers Association and the Defense Trial Counsel of Indiana to adopt a bright-line rule on the admission of coverage limits.

The trial court allowed the jury to hear evidence that the motorist policy for Jerry Earl included a $250,000 limit under his uninsured motorist coverage. The jury then returned a verdict in favor of the couple against State Farm –  $175,000 to Earl’s estate and $75,000 to his widow, Kimberly. Earl was severely injured while riding his motorcycle on I-65 in southern Indiana when a tractor-trailer entered his lane, causing him to swerve and strike the median. He was covered by the State Farm policy and his wife was also able to sue for loss of consortium. While the lawsuit was pending, Earl died from an unrelated illness.

State Farm moved to exclude any evidence of the coverage limit on the grounds it was irrelevant to damages. The insurer and amici DTCI and the Insurance Institute of Indiana  asked the Supreme Court to create a rule that coverage limits are irrelevant to the determination of tortious damages and are therefore inadmissible. The Earls, along with amicus ITLA, argued for a rule that coverage limits are relevant to the underlying contract claim and therefore “must” be admitted.

“We decline either side’s invitation to take such a rigid approach; instead, we think it more appropriate to rely on our trial courts to exercise their discretion in determining what evidence is probative in the particular case before them. And, on these facts, we find the court was within that discretion,” Justice Mark Massa wrote in State Farm Mutual Automobile Insurance Company v. Kimberly S. Earl and the Estate of Jerry Earl, 35S05-1408-CT-562.

The justices found the admission of the coverage limit contained within the insurance policy was relevant background information that would help the jury understand the relationship between the Earls and State Farm and the basis for the lawsuit itself. Massa noted that State Farm did not deny liability.

The Indiana Court of Appeals reversed the ruling in favor of the Earls, but the justices aligned themselves with Judge Patricia Riley’s dissent regarding whether the jury’s award of the exact value of the coverage limit is conclusive evidence that its admission amounted to substantial unfair prejudice. Riley wrote, “The more appropriate inference is that the jury followed the trial court’s instructions and, in light of the overwhelming evidence, arrived at the policy limit.”

“We understand State Farm’s concerns about a coverage limit’s potentially harmful influence on the calculation of actual damages,” Massa wrote. “Accordingly, our decision today does not stand for the proposition that coverage limits are always admissible.  We can foresee instances where the insured’s injury is so minor and the coverage limit so large it gives rise to a legitimate concern that the jury will inflate its award, a concern that would be heightened if, for example, plaintiff’s counsel repeatedly emphasized the limit despite its relatively low probative value. In this case, however, we do not have such a concern, and we conclude the trial court did not abuse its discretion in admitting the evidence.”

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