Appellate court upholds summary judgment in multi-million-dollar insurer dispute

The Indiana Automobile Insurance Plan was properly awarded summary judgment against an insurance company that did not notify it of a multi-million-dollar loss, the Indiana Court of Appeals has ruled.

In New Hampshire Insurance Company v. Indiana Automobile Insurance Plan, 21A-PL-460, the Marion Superior Court’s award of summary judgment was affirmed Tuesday after the Court of Appeals reviewed the servicing carrier agreement between the two parties.

On appeal, the NHIC raised two issues:

  • Whether the trial court properly interpreted the plain language of the parties’ contract, which required NHIC to seek approval from the plan’s governing committee before settling the claim as a condition precedent to indemnification.
  • Whether disputed issues of material fact regarding the plan’s invocation of the condition precedent on the basis of waiver and estoppel precluded summary judgment.

NHIC was a servicing carrier for the plan from 1994 until March 31, 2009. After March 31, 2009, pursuant to the SCA, NHIC continued as a servicing carrier to adjust claims on policies. While NHIC was a servicing carrier for the plan, it issued a truckers automobile form insurance policy to Eastern Express Inc. from 2004 to 2005.

On Sept. 30, 2004, truck driver Danny Watkins, allegedly under lease with Eastern Express, was involved in a trucking accident in Missouri, injuring motorist Rabin Stovall Jr. Stovall sued Watkins and Eastern Express in Missouri state court, seeking personal injury damages and alleging Watkins was acting within the course and scope of his agency or employment with Eastern Express at the time of the accident.

In December 2009, Stovall voluntarily dismissed Eastern Express without prejudice. Stovall tried his claims against an undefended Watkins and, in 2011, obtained a verdict of $11 million. Following the judgment, Watkins and Stovall executed an agreement in which Watkins assigned Stovall his claims against NHIC for coverage and bad faith.

Stovall, as Watkins’ assignee, sued NHIC seeking to collect the $11 million judgment plus interest, attorney fees, statutory penalties and punitive damages. After litigating for more than three years, NHIC mediated with Stovall and agreed to settle the garnishment action for $7.5 million.

NHIC did not inform the plan or its governing committee of the mediation or settlement before it settled the garnishment action. Instead, NHIC settled without the plan or governing committee’s knowledge or approval and only then began to discuss whether or how to notify the plan and pursue an indemnity claim.

After a $89,167.55 partial payment had been made, the automobile insurance plan service office notified the plan that NHIC had reported a multi-million-dollar loss, which appeared in a February 2018 quarter end “Stat Summary information.”  Both NHIC’s settlement and the partial payment that AIPSO processed were done without the knowledge or consent of the plan or governing committee.

The plan moved for summary judgment, and the trial court concluded NHIC was not entitled to indemnification because it failed to comply with the condition precedent to indemnification set forth in the SCA; NHIC’s waiver and estoppel defenses failed as a matter of law; and NHIC should return the $89,167.55 payment it had received from AIPSO.

The appellate court agreed the NHIC failed in upholding its end of the SCA.

“… (O)ur review of the SCA leads us to the conclusion that before NHIC was entitled to an award of indemnity it had to obtain the Plan’s approval of the settlement because the amount compromised exceeded $10,000,” Judge James Kirsch wrote. “… We find no error in the trial court’s interpretation of the language as a condition precedent. Because it is undisputed that NHIC never sought approval of the settlement in the garnishment action before settling, it was not entitled to indemnification.”

On the issue of wavier and estoppel, the court again pointed to the SCA.

“… (T)he designated evidence did not show that AIPSO had any authority with respect to the ability to waive any conditions of the SCA; in fact, the SCA itself provides that waiver of the SCA or a term contained therein may occur only ‘by an instrument in writing signed by the parties,’” Kirsch wrote.

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