Court Opinion

ID: 4441807
Source: CourtListenerOpinion
Date Created: 2019-09-26 15:04:20.627136+00
Date Added: 2024-06-11T09:37:05.357624
License: Public Domain

FILED
                                                                        Sep 26 2019, 8:32 am

                                                                            CLERK
                                                                        Indiana Supreme Court
                                                                           Court of Appeals
                                                                             and Tax Court

ATTORNEYS FOR APPELLANT                                    ATTORNEYS FOR APPELLEE
Siobhan M. Murphy                                          DARNELL WRIGHT
Lewis Brisbois Bisgaard & Smith LLP                        David A. Singleton
Indianapolis, Indiana                                      Chad E. Romey
                                                           Blackburn & Green
Scott B. Cockrum                                           Fort Wayne, Indiana
Lewis Brisbois Bisgaard & Smith LLP
Schereville, Indiana

                                            IN THE
    COURT OF APPEALS OF INDIANA

Prime Insurance Co.,                                       September 26, 2019
Appellant,                                                 Court of Appeals Case No.
                                                           19A-CT-353
        v.                                                 Appeal from the Allen Superior
                                                           Court
Darnell Wright, et al.,                                    The Honorable Craig J. Bobay,
Appellees.                                                 Judge
                                                           Trial Court Cause No.
                                                           02D02-1503-CT-121

Bradford, Judge.

Court of Appeals of Indiana | Opinion 19A-CT-353 | September 26, 2019                           Page 1 of 9
                                           Case Summary
[1]   The issue before us is whether an insurance company, which has been relieved

      of all responsibility under its liability policy through judicial declaration, has an

      adequate interest in the underlying liability-related lawsuit to warrant

      participation in said lawsuit for the purpose of attempting to limit its potential

      future liability stemming from the same events under an MCS-90 Endorsement.

      Because the insurance company’s remaining interest in the lawsuit is

      contingent, rather than cognizable, we conclude that it does not.

                            Facts and Procedural History                               1

[2]   On November 12, 2013, Darnell Wright was injured in a collision with a

      vehicle driven by Decardo Humphrey. At the time of the collision, Humphrey

      was acting as an agent for/in the scope of his employment with Ali Faruq,

      Riteway Trucking, Inc. (“Riteway”), Riteway Transportation, Inc. (“RTI”),

      and Prudential Trucking, Inc. (“PTI”). On March 27, 2015, Wright filed suit

      against Humphrey, Faruq, Riteway, RTI, and PTI (collectively, “Defendants”).

      For whatever reason, Riteway would not cooperate with its insurance provider,

      Prime Insurance Co. (“Prime”), and failed to appear or present any defense in a

      subsequent lawsuit brought against it by Wright.

      1
        We held oral argument in this case on September 12, 2019, in our courtroom in Indianapolis. We
      commend counsel for the high quality of their arguments.

      Court of Appeals of Indiana | Opinion 19A-CT-353 | September 26, 2019                         Page 2 of 9
[3]   On or about May 1, 2015, Prime filed an action in the Northern District of

      Indiana seeking a declaration that it had no duty to defend Riteway or any

      other defendant in Wright’s state-court action. Meanwhile, back in the trial

      court, on June 17, 2015, Wright filed a motion for a default judgment. In July

      of 2015, Prime sought and was granted permission to intervene in Wright’s

      state-court action.

[4]   The trial court conducted a hearing on Wright’s motion for a default judgment

      on August 19, 2015. Defendants and Prime failed to appear, despite each

      having notice of the hearing.2 The next day, on August 20, 2015, the trial court

      entered default judgment against Faruq, Riteway, RTI, and PTI, finding that

      they were in default. The trial court did not enter default judgment against

      Prime. The trial court entered judgment in favor of Wright for $400,000.

[5]   Prime filed an answer and affirmative defenses on August 21, 2015, and a

      motion to obtain discovery from Wright on November 4, 2015. Wright

      objected to Prime’s discovery requests on the grounds that judgment had

      already been entered against Riteway on liability and damages. In response to

      Wright’s objection, on January 4, 2016, Prime filed motions to set aside the

      default judgment and to obtain discovery. The trial court denied Prime’s

      2
         While the parties presented argument relating to Prime’s absence from the default judgment hearing, we
      find Prime’s absence to be irrelevant to the question of whether Prime has an adequate interest in the
      underlying lawsuit to warrant setting aside the default judgment entered against Riteway. The non-
      appearance of Prime’s attorney at the default judgment hearing is therefore a non-factor.

      Court of Appeals of Indiana | Opinion 19A-CT-353 | September 26, 2019                            Page 3 of 9
      motion to obtain discovery and stayed the case until Prime’s federal action was

      resolved.

[6]   After its attempts to obtain discovery from Wright in the state-court action were

      rejected, Prime requested permission to issue discovery requests to Wright

      regarding the issues of liability and damages in the federal-court action. The

      federal court denied Prime’s request, noting that the information sought was

      irrelevant to the pending request for a declaratory judgment. The federal court

      stated that it would not permit Prime “to subvert limitations on discovery in

      another proceeding, by attempting to obtain discovery in [the federal] case that

      has already been denied in the underlying Allen Superior Court action.”

      Appellee’s App. Vol. II p. 76 (internal quotation omitted). On January 29,

      2018, the federal court ordered that Prime did not owe a duty to defend or

      indemnify Riteway, that Riteway had failed to meet its obligations under its

      insurance policy, and that Riteway and its “alter egos” shall be liable to Prime

      for any payments made under an MCS-90 Endorsement3 to the insurance

      policy. Appellee’s App. Vol. II p. 58.

      3
        Federal law requires that a motor carrier maintain proof of financial responsibility. See 49 C.F.R. § 387.7.
      The MCS-90 endorsement embodies a public financial responsibility in situations where a motor carrier is
      responsible for an accident causing injury to a member of the public. Carolina Cas. Ins. Co. v. Yeates, 584 F.3d
868, 883 (10th Cir. 2009). “The MCS-90 endorsement is in effect, suretyship by the insurance carrier to
      protect the public—a safety net, and not an ordinary insurance provision to protect the insured.” Travelers
      Indem. Co. of Ill. v. W. Am. Specialized Trans. Servs., Inc., 409 F.3d 256, 260 (5th Cir. 2005) (internal quotation
      omitted).
                The endorsement does not extinguish the debt of the insured. The MCS-90 endorsement
                instead grants the insurer the right to seek reimbursement from the insured party for any
                payment made by the company on account of any accident, claim or suit involving a
                breach of the terms of the policy, and for any payment that [the insurance company] would
                not have been obligated to make under the provisions of the policy except for the

      Court of Appeals of Indiana | Opinion 19A-CT-353 | September 26, 2019                                   Page 4 of 9
[7]   Following resolution of the federal-court action, the trial court held a hearing

      on Prime’s motion to set aside the default judgment. On October 25, 2018, the

      trial court issued an order denying Prime’s request to set aside the default

      judgment against Riteway.4

                                   Discussion and Decision
[8]   Prime contends that the trial court abused its discretion by denying Prime’s

      motion to set aside the default judgment entered against Riteway. Trial Rule

      55(A) provides that “[w]hen a party against whom a judgment for affirmative

      relief is sought has failed to plead or otherwise comply with these rules and that

      fact is made to appear by affidavit or otherwise, the party may be defaulted by

      the court.” “A judgment by default which has been entered may be set aside by

      the court for the grounds and in accordance with the provisions of [Trial] Rule

      60(B).” T.R. 55(C). Trial Rule 60(B) provides, in relevant part, that a trial

      court may grant a request for a relief from a default judgment for “(1) mistake,

      surprise, or excusable neglect” or “(8) any [other] reason justifying relief from

      the operation of the judgment[.]”

[9]             The decision whether to set aside a default judgment is given
                substantial deference on appeal. Our standard of review is

                agreement contained herein.… In sum, the MCS-90 endorsement creates an obligation
                entirely separate from other obligations created by the policy to which it is attached. The
                MCS-90 defines the insurer’s public financial responsibility obligation, while the underlying
                policy defines the insurer’s insurance liability obligation.
      Yeates, 584 F.3d at 884 (emphases omitted, internal quotations and citations omitted, brackets in original).
      4
          Wright’s remaining claims against Humphrey were dismissed without prejudice on January 14, 2019.

      Court of Appeals of Indiana | Opinion 19A-CT-353 | September 26, 2019                               Page 5 of 9
               limited to determining whether the trial court abused its
               discretion. An abuse of discretion may occur if the trial court’s
               decision is clearly against the logic and effect of the facts and
               circumstances before the court, or if the court has misinterpreted
               the law. We may affirm a general default judgment on any
               theory supported by the evidence adduced at trial. The trial
               court’s discretion is necessarily broad in this area because any
               determination of excusable neglect, surprise, or mistake must
               turn upon the unique factual background of each case.
               Moreover, no fixed rules or standards have been established
               because the circumstances of no two cases are alike.…
               Furthermore, reviewing the decision of the trial court, we will not
               reweigh the evidence or substitute our judgment for that of the
               trial court. Upon a motion for relief from a default judgment, the
               burden is on the movant to show sufficient grounds for relief
               under Indiana Trial Rule 60(B).

       Kmart Corp. v. Englebright, 719 N.E.2d 1249, 1253 (Ind. Ct. App. 1999) (internal

       citations and quotation omitted).

[10]   The nature of Prime’s interest in the underlying lawsuit is the crux of the issue

       before us on appeal. In challenging the trial court’s default of its motion to set

       aside the default judgment against Riteway, Prime claims that its continuing

       interest in the issue of liability warranted setting aside the default judgment.

       For his part, Wright argues that Prime does not hold a legally cognizable

       interest in the underlying lawsuit. We agree with Wright.

[11]   Notably, any interest Prime has in the underlying lawsuit stems from choices

       made by Prime. After choosing to issue a liability policy to Riteway, Prime

       made the additional choice to issue the MCS-90 Endorsement to Riteway. As

       Prime acknowledged during oral argument, Prime was not required to do so.
       Court of Appeals of Indiana | Opinion 19A-CT-353 | September 26, 2019       Page 6 of 9
[12]   It is undisputed that Prime successfully obtained a declaratory judgment

       indicating that it did not have a duty to defend Riteway under the liability

       policy and that its only remaining interest stems from the MCS-90

       Endorsement. Prime has indicated that it plans to contest whether the MCS-90

       Endorsement applies under the facts of this case, a determination that will have

       to be made in subsequent legal proceedings. Prime’s continuing interest,

       therefore, is contingent as it is subject to a subsequent legal determination

       regarding applicability of the MCS-90 Endorsement.

[13]   We have previously considered whether a contingent interest was sufficient to

       warrant intervention by an insurance company into a lawsuit involving one of

       its insureds. In Cincinnati Insurance Co. v. Young, we noted that under Indiana

       law, intervention into a lawsuit is warranted if the intervening party

       demonstrates “(1) an interest in the subject of the action, (2) disposition of the

       action may as a practical matter impede the protection of that interest, and (3)

       representation of the interest by existing parties is inadequate.” 852 N.E.2d 8,

       13 (Ind. Ct. App. 2006), trans. denied.

[14]   After the trial court allowed Cincinnati Insurance Co. (“Cincinnati”) to

       intervene in a lawsuit involving one of its insureds, we were called upon to

       determine whether Cincinnati, which had both contested coverage and sought

       to intervene, had a sufficient interest in the underlying lawsuit to warrant

       intervention. Id. at 13–17. Concluding that a contingent interest was not

       sufficient to warrant intervention, we noted that “when an insurer attempts to

       intervene in the action between its insured and the injured party but reserves the

       Court of Appeals of Indiana | Opinion 19A-CT-353 | September 26, 2019      Page 7 of 9
       right to deny coverage, the insurer’s asserted interest is not cognizable but

       rather contingent upon the acceptance of coverage before it becomes colorable

       for the purposes of [intervention].” Id. at 15. Given that Cincinnati had both

       contested coverage and sought to intervene, we found that its interest in the

       lawsuit “was contingent and not direct.” Id. We further noted that although

       Cincinnati assured us that it appealed “only” in its own name, it effectively

       sought “to relitigate [its insured’s] liability.” Id.

               Allowing Cincinnati to raise these issues while it is still
               contesting its coverage under the insurance policies would grant
               the insurer two bites at the proverbial apple in an attempt to
               escape liability; once in this appeal on issues resulting from the
               underlying trial and again during its pursuit of its declaratory
               judgment action disputing coverage.

       Id. As such, we concluded that the trial court had abused its discretion in

       allowing Cincinnati to intervene. Id. at 17.

[15]   We find our conclusion in Young to be instructive in this case. As we stated

       above, Prime’s continuing interest is, at most, a contingent interest. Applying

       our conclusion from Young regarding contingent interests to the facts of this

       case, we conclude that Prime’s contingent interest does not warrant reversing

       the default judgment that was entered against Riteway.

[16]   Prime admits that it is seeking to relitigate Riteway’s liability in an effort to

       limit a potential future financial obligation that it may have to Wright. Prime

       also admits that it has received a judicial determination that it has no duty to

       defend under its liability policy and has indicated that it plans to seek a similar
       Court of Appeals of Indiana | Opinion 19A-CT-353 | September 26, 2019        Page 8 of 9
       judicial determination that the MCS-90 Endorsement does not apply to the

       facts of this case. Prime cannot both deny its obligation to its insured and, at

       the same time, seek to litigate questions relating to liability and damages. To

       allow Prime to do so would effectively grant Prime a second bite at the apple in

       its attempt to escape a potential future financial obligation. The trial court did

       not abuse its discretion in denying Prime’s motion to set aside the default

       judgment entered against Riteway.

[17]   The judgment of the trial court is affirmed.

       Vaidik, C.J., and Riley, J., concur.

       Court of Appeals of Indiana | Opinion 19A-CT-353 | September 26, 2019      Page 9 of 9