Court Opinion

ID: 2724557
Source: CourtListenerOpinion
Date Created: 2014-09-08 20:38:42.174251+00
Date Added: 2024-06-11T10:03:04.927648
License: Public Domain

FOR PUBLICATION

                                                              Aug 08 2014, 9:09 am

ATTORNEYS FOR APPELLANT:

ROBERT G. GRANT
T. BLAKE ORNER
Grant & Grant
Indianapolis, Indiana

                            IN THE
                  COURT OF APPEALS OF INDIANA

GEICO INSURANCE COMPANY,                      )
as subrogee of RALPH HEITKAMP                 )
                                              )
      Appellant-Plaintiff,                    )
                                              )
          vs.                                 )      No. 49A02-1310-CT-898
                                              )
DIANNA GRAHAM                                 )
                                              )
      Appellee-Defendant.                     )

                   APPEAL FROM THE MARION SUPERIOR COURT
                         The Honorable Cynthia Ayers, Judge
                          Cause No. 49D04-1109-CT-37292

                                    August 8, 2014

                             OPINION – FOR PUBLICATION

MATHIAS, Judge
       Insured motorists are called upon every day to pay their deductibles in order for

their carriers to cover the necessary repairs to their motor vehicles after accidents. Many

carriers refuse to include those deductibles in the subrogated claims they make against

the other motorists involved in accidents with their insureds. Because they are left on

their own, insured motorists often later sue the other motorist(s) involved in those

accidents in a small claims court to recover the deductible amounts they paid. And,

almost as often, these insured motorists are successful in the small claims action for their

deductibles.   But here, Geico Insurance Company’s (“Geico’s”), insured, Ralph

Heitkamp (“Heitkamp”), lost his claim for his deductible in the Small Claims Division of

the St. Joseph Superior Court. As a result, Geico now appeals the order of the Marion

Superior Court granting a motion filed by the other motorist involved in the accident at

issue, Dianna Graham (“Graham”), seeking to set aside the court’s earlier entry of

summary judgment in favor of Geico. On appeal, Geico claims that the trial court erred

in concluding that a prior small claims judgment in favor of Graham acted as res judicata

to bar Geico’s claims against Graham.

       We affirm.

                             Facts and Procedural History

       On October 2, 2009, Graham and Heitkamp’s wife, Janet Heitkamp (“Janet”),

were involved in an automobile accident.         Janet was insured by Geico under her

husband’s policy. Geico paid $7,540.22 to Heitkamp under the policy, and Heitkamp and

Janet signed a release in which they released all claims against Geico and promised not to

compromise Geico’s subrogation rights.

                                             2
      Heitkamp, however, filed a small claims action in St. Joseph County against

Graham in August 2011, claiming that Graham was at fault in the accident and seeking to

recover the $500 deductible he had paid to Geico almost two years earlier. Little more

than a month later, on September 26, 2011, Geico, as Heitkamp’s subrogee, filed a claim

in Marion Superior Court against Graham seeking to recover the $7,540.22 it had paid to

Heitkamp, again claiming that Graham was at fault in the accident.

      Janet and Graham subsequently appeared before the Small Claims Division of St.

Joseph Superior Court, and, on October 25, 2011, the small claims court entered

judgment in favor of Graham, finding that Janet, not Graham, was at fault in the accident.

Graham then sent a letter to the Marion Superior Court filed October 26, 2011, informing

the court that there was a case “relating to this one [in Marion County] in South Bend,

In,” and maintaining that she was not at fault in the accident. Appellant’s App. p. 13.

The chronological case summary shows that a copy of this letter was sent to Geico’s

counsel.

      Nevertheless, on February 13, 2012, Geico filed its motion for summary judgment

in the Marion Superior Court case and a hearing was held on April 17. Although Graham

appeared in person, she presented no designated evidence. On June 28, 2012, the Marion

Superior Court entered summary judgment in favor of Geico.

      On February 4, 2013, Graham, this time with the assistance of counsel, filed a

motion to set aside the entry of summary judgment pursuant to Indiana Trial Rule

                                            3
60(B)(6).1 The trial court held a hearing on the matter on June 12, 2013, and on October

1, 2013, entered an order granting Graham’s motion to set aside the grant of summary

judgment and dismissing Geico’s claim. The trial court concluded that Heitkamp’s

unsuccessful small claims action against Graham acted as res judicata to bar the claim

against Graham by Geico. Geico now appeals.

                                      I. Prima Facie Error Rule

        Before addressing the merits of the current appeal, we note that Graham has not

filed an appellee’s brief. When the appellee fails to submit a brief, we will not undertake

the burden of developing an argument on her behalf. Trinity Homes, LLC v. Fang, 848

N.E.2d 1065, 1068 (Ind. 2006). Instead, we will reverse the trial court’s judgment if the

appellant’s brief presents a case of prima facie error. Id. In this context, prima facie

error is defined as, “‘at first sight, on first appearance, or on the face of it.’” Id. (quoting

Santana v. Santana, 708 N.E.2d 886, 887 (Ind. Ct. App. 1999)). This “prima facie error

rule” protects the court on appeal and takes from us the burden of controverting

arguments advanced for reversal, a duty which remains with the appellee. Mikel v.

Johnston, 907 N.E.2d 547, 551 n.3 (Ind. Ct. App. 2009). But even under the prima facie

error rule, we are obligated to correctly apply the law to the facts in the record in order to

determine whether reversal is required.2 Id. And if the appellant is unable to meet the

1
   Graham initially filed a pro se motion to set aside summary judgment on November 30, 2012. Counsel
filed an appearance for Graham on January 31, 2013, and filed a motion to set aside on February 4, 2013.
2
   We also note that the trial court entered a detailed order setting forth its reasoning for granting
Graham’s motion to set aside summary judgment and dismissing Geico’s claims. Still, “[w]e may affirm
the trial court on any legal theory supported by the factual findings, even if the trial court used a different
legal theory.” H.H. v. A.A., 3 N.E.3d 30, 33 (Ind. Ct. App. 2014) (citing Mitchell v. Mitchell, 695
N.E.2d 920, 923 (Ind. 1998)).

                                                      4
burden of establishing prima facie error, we will affirm. Trinity Homes, 848 N.E.2d at

1068.

                                         II. Venue

        We first observe that Geico chose to file the underlying suit in this appeal,

regarding an accident that occurred in Mishawaka and that involved two St. Joseph

County residents, in Marion County, 150 miles and almost three hours by auto away from

the site of the accident at issue. It is clear to any lay person, let alone an attorney, that

either Elkhart County or St. Joseph County was the commonsense county of preferred

venue. See Ind. Trial Rule 75(A) (providing that preferred venue lies in “the county

where the greater percentage of individual defendants included in the complaint resides,

or, if there is no such greater percentage, the place where any individual defendant so

named resides,” or “the county where the accident or collision occurred, if the complaint

includes a claim for injuries relating to the operation of a motor vehicle[.]”). Absolutely

nothing in the facts or circumstances of the accident would indicate that Marion County

is a county of preferred venue.

        In the case before us, Graham was uninsured, and therefore without the

representation of insurance counsel normally provided under an auto insurance policy,

counsel who would have immediately challenged Geico’s choice of venue. And since

Geico’s subrogation claim was for an amount in excess of the jurisdiction of an Indiana

small claims court, it was legally entitled to file its suit in the Marion Superior Court, or

in any other county, for that matter. A plenary case like the one at issue here may be

filed and tried in any county, although a case must be transferred to a county of preferred

                                             5
venue if a party files a motion to dismiss for improper venue. Ind. Trial Rule 75(A);

Bostic v. House of James, Inc., 784 N.E.2d 509, 511 (Ind. Ct. App. 2003).

        If Graham had filed a motion to transfer venue to St. Joseph County, the Marion

Superior Court would have had no choice but to grant the motion.                          But she was

unrepresented, did not know to do so, and this is not what happened. Graham instead

notified the Marion Superior Court of the small claims action in St. Joseph County, filing

a letter that stated in pertinent part:

        I am writing this letter to inform you that because of a case related to this
        one in South Bend, In on 10/25/11, I did not get my response in before the
        said date. I wanted to wait until after the above court date was finished. I
        am asking that this response be acknowledged before a judgment is entered.
        I do want it noted that I was not the one at fault because I was hit by the
        driver of the other car who was going to [sic] fast to stop. I had the light
        and the right of way (to turn). I am denying any blame of the accident.

Appellant’s App. p. 13. Importantly, this letter was filed after the small claims court had

already entered judgment in favor of Graham, and therefore, it could not serve as an

effective request to change venue. Had Graham notified the trial court before the entry of

judgment in the small claims court, her letter could have been, and should have been,

considered as a request to change venue.3 Even under the facts before us, Graham’s

letter, at the very least, put Geico on notice that another and earlier claim involving the

accident between Graham and Geico’s insured had already been filed.

3
   It could also have been considered as a motion to dismiss under Indiana Trial Rule 12(B)(8), which
“permits the dismissal of an action when ‘[t]he same action [is] pending in another state court of this
state.’” Beatty v. Liberty Mut. Ins. Grp., 893 N.E.2d 1079, 1084 (Ind. Ct. App. 2008) (citing T.R.
12(B)(8)). The rule applies where the parties, subject matter, and remedies are precisely the same or only
substantially the same. Id.

                                                    6
                                   III. Res Judicata

      At issue here is whether and to what extent the small claims judgment in St.

Joseph County acted as res judicata to bar Geico’s claim against Graham in Marion

County.

      A. Issue Preclusion and Claim Preclusion

      We recently summarized the law of res judicata as follows:

         The principle of res judicata is divided into two branches: claim
      preclusion and issue preclusion.
          The first of these branches, claim preclusion, applies where a final
      judgment on the merits has been rendered and acts as a complete bar to a
      subsequent action on the same issue or claim between those parties and
      their privies. When claim preclusion applies, all matters that were or might
      have been litigated are deemed conclusively decided by the judgment in the
      prior action. The following four requirements must be satisfied for claim
      preclusion to apply as a bar to a subsequent action: (1) the former judgment
      must have been rendered by a court of competent jurisdiction; (2) the
      former judgment must have been rendered on the merits; (3) the matter now
      in issue was, or could have been, determined in the prior action; and (4) the
      controversy adjudicated in the former action must have been between the
      parties to the present suit or their privies.
           The second branch of the principle of res judicata is issue preclusion,
      also known as collateral estoppel. Issue preclusion bars the subsequent
      litigation of a fact or issue that was necessarily adjudicated in a former
      lawsuit if the same fact or issue is presented in the subsequent lawsuit. If
      issue preclusion applies, the former adjudication is conclusive in the
      subsequent action, even if the actions are based on different claims. The
      former adjudication is conclusive only as to those issues that were actually
      litigated and determined therein. Thus, issue preclusion does not extend to
      matters that were not expressly adjudicated and can be inferred only by
      argument. In determining whether issue preclusion is applicable, a court
      must engage in a two-part analysis: (1) whether the party in the prior action
      had a full and fair opportunity to litigate the issue, and (2) whether it is
      otherwise unfair to apply issue preclusion given the facts of the particular
      case. The non-exhaustive factors to be considered by the trial court in
      deciding whether to apply issue preclusion include: (1) privity, (2) the
      defendant’s incentive to litigate the prior action, and (3) the ability of the
      plaintiff to have joined the prior action.

                                            7
Angelopoulos v. Angelopoulos, 2 N.E.3d 688, 696 (Ind. Ct. App. 2013), trans. denied.

      Here, the trial court concluded that Heitkamp’s unsuccessful small claims action

against Graham acted as res judicata to bar the claim against Graham by Geico,

Heitkamp’s subrogee. In this regard, the order of the St. Joseph Superior Court Small

Claims Division provided in relevant part:

          Pursuant to Indiana law, the Small Claims Court need not provide
      findings of fact or conclusions of law. Nevertheless, as a courtesy to the
      parties, the Court provides some explanation. Plaintiff [Heitkamp] bears
      the burden of proof in her claim. She must prove liability by a
      preponderance of the evidence.
         [Heitkamp] brings her claim against the Defendant [Graham] for an
      automobile accident. On October 2, 2009, [Heitkamp] and [Graham] were
      involved in a motor vehicle accident on McKinley Avenue, Mishawaka, IN.
      Both cars were damaged.
          In order for [Heitkamp] to prevail, she must show, more likely than not,
      that the accident was caused by [Graham]. Failure to have current
      insurance is not a basis to find fault in the accident. Rather, [Heitkamp]
      must show fault of [Graham] in the operation of the vehicle. While the
      police report concludes that [Graham] was at fault, the report contains no
      basis for such conclusion. The only statements provided in the report are
      that of [Heitkamp] and [Graham] and there are no admissions therein to
      causing the accident. An independent trial witness states that he was
      behind [Heitkamp]. He correctly notes an out of state license plate on
      [Heitkamp]’s vehicle. He states that [Heitkamp] proceeded through a red
      signal. There were apparently other persons in the area at the time of the
      accident, but the police report fails to identify anyone and no other witness
      statements are provided.
          With no other witnesses to the accident forthcoming, the Court cannot
      conclude that [Heitkamp] meets her burden to show, more likely than not,
      that [Graham] caused this accident.
          JUDGMENT. Costs paid.

Appellant’s App. p. 32 (citation omitted) (italics in original). In the Marion Superior

Court case before us, the trial court concluded that this small claims judgment acted as

res judicata to bar Geico’s current claim against Graham.
                                             8
       B. The Effect of Small Claims Rule 11(F)

       Geico claims that the trial court’s conclusion was contrary to Indiana Small

Claims Rule 11(F), which states, “A judgment shall be res judicata only as to the amount

involved in the particular action and shall not be considered an adjudication of any fact at

issue in any other action or court.” As explained by our supreme court in In re Ault,

Small Claims Rule 11(F):

       does not allow a party to relitigate a claim upon which judgment has been
       entered in a small claims case. Cook v. Wozniak, 500 N.E.2d 231, 233
       (Ind. Ct. App. 1986), adopted and affirmed, 513 N.E.2d 1222 (Ind. 1987)
       (“[to permit] a plaintiff who recovered nothing in a small claims action to
       sue again on the same claim in another court would be ‘sheer futility.’”).
       Instead, [Small Claims Rule] 11(F) was intended primarily to “limit issue
       preclusion where some fact in the small claim action is at issue in another
       case,” and to “also apply to claim preclusion to the extent that claim
       preclusion would ordinarily bar all matters which might have been litigated
       but were not actually litigated in the small claims action.” Cook, [500
       N.E.2d] at 233.

In re Ault, 728 N.E.2d 869, 872 (Ind. 2000) (emphasis added).

       In other words, Small Claims Rule 11(F) prohibits the application of issue

preclusion based on a small claims judgment, but does not prohibit claim preclusion. See

id. (holding that attorney engaged in misconduct by filing the same claim in superior

court after having been unsuccessful in small claims court and concluding that the

subsequent suit was “res judicata because it was the exact claim litigated to conclusion in

the small claims court.”); see also Johnson v. Anderson, 590 N.E.2d 1146, 1150 (Ind. Ct.

                                             9
App. 1992) (holding that Small Claims Rule 11(F)4 limits the application of res judicata

to allow only claim preclusion).

       Here, Geico argues that Small Claims Rule 11(F) precluded the trial court from

considering the small claims judgment as an adjudication of any fact. To the extent that

Geico claims that the trial court erred when it applied the principles of the issue

preclusion branch of res judicata in its resolution of this issue, we agree. However, as

shown below, the principles of the claim preclusion branch of res judicata apply, and

support the affirmance of the trial court’s judgment.

       In Johnson, supra, the defendant, Anderson, asserted a defense of res judicata to a

claim brought against him by Johnson under the Deceptive Consumer Sales Act.

Anderson claimed that the small claims judgment in his favor on a prior claim of breach

of contract acted as res judicata to bar Johnson’s claim under the Deceptive Consumer

Sales Act. The trial court agreed, but this court reversed on appeal, holding that Small

Claims Rule 11(F) prohibited the application of res judicata in that case. The court noted

that Johnson’s complaint under the Deceptive Consumer Sales Act was “clearly a

separate claim.” Id. Thus, the court in Johnson held that the subsequent action was not

barred by claim preclusion because it was a different claim.

       Here, however, Geico’s claim against Graham as Heitkamp’s subrogee is not a

separate claim. Rather, it is exactly same claim, i.e. that Graham was negligent in the

operation of her vehicle. See Appellant’s App. p. 11 (alleging that Graham operated her

vehicle and “negligently or willfully or maliciously” damaged Heitkamp).                In fact,
4
  At the time of the Johnson case, the language of Small Claims Rule 11(F) was contained in Small
Claims Rule 11(E). See Johnson, 590 N.E.2d at 1149.

                                               10
Geico’s claim as Heitkamp’s subrogee is wholly derivative of Heitkamp’s claim. See

Erie Ins. Co. v. George, 681 N.E.2d 183, 186 (Ind. 1997) (“It is settled that ‘[s]ubrogation

confers no greater right than the subrogor had at the time the surety or indemnitor became

subrogated. The subrogator [sic] insurer stands in the same position as the subrogor, for

one cannot acquire by subrogation what another, whose rights he claims, did not have.’”).

        We therefore hold that Geico has not demonstrated prima facie that the trial court

erred in concluding that Small Claims Rule 11(F) did not prohibit the application of claim

preclusion. See Johnson, 590 N.E.2d at 1150; see also Watson v. Auto Advisors, Inc.,

822 N.E.2d 1017, 1028-29 (Ind. Ct. App. 2005) (holding that, under Small Claims Rule

11(F), earlier small claims judgment against debtor did not act as res judicata to bar

debtor’s subsequently-brought claims that creditor committed unfair debt collection

practices, unauthorized practice of law, malicious prosecution, and abuse of process

because these claims did not seek to undermine the validity of the earlier small claims

judgment).

        C. Claim Preclusion and the Underlying Facts

        Geico next argues that even if Small Claims Rule 11(F) does not act to bar the

application of claim preclusion, claim preclusion5 is nevertheless inapplicable under the

facts of the present case. Specifically, Geico argues that claim preclusion is inapplicable

because it was not a party to Heitkamp’s case or Heitkamp’s privy. See Angelopoulos, 2

N.E.3d at 696 (final element required for claim preclusion to apply is whether the

5
   Geico refers more generically to res judicata, but as we have already determined that Small Claims
Rule 11(F) prohibits application of issue preclusion, but not claim preclusion, we limit our discussion to
claim preclusion.

                                                   11
controversy adjudicated in former action was between the parties to the present suit or

their privies). We disagree.

       As Heitkamp’s subrogee, Geico’s claims were entirely derivative of Heitkamp’s

claims. See Erie, 681 N.E.2d at 186. Therefore, while it appears to be a matter of first

impression in Indiana, as a general matter, we do not hesitate to hold that an insurer who

is a subrogee to the rights of the insured is also a privy of the insured, and that an insured

is a privy of the insurer, as to the claims that are subrogated. See 17 Couch on Insurance,

§ 239:36 (3d ed. 2000) (a judgment against the insured in his action is binding on the

insurer and precludes it from maintaining a separate action against the tortfeasor, where

the insurer paid a portion of the insured’s claims and became subrogated to the insured’s

claim to the extent of the payment under a written subrogation agreement); Ohio Dep’t of

Human Servs. v. Kozar, 651 N.E.2d 1039, 1041 (Ohio Ct. App. 1995) (“A subrogee is in

privity with its subrogor under the res judicata doctrine.”); DeCare v. Am. Fid. Fire Ins.

Co., 360 N.W.2d 872, 876 (Mich. Ct. App. 1984) (holding that subrogee was subrogor’s

privy for purposes of res judicata); Motor Vehicle Accident Indemn. Corp. v. Nat’l

Grange Mut. Ins. Co., 224 N.E.2d 869, 872 (N.Y. 1967) (noting that, generally, the

subrogee would be bound by the subrogor’s participation in an earlier lawsuit).

       It is clear that Heitkamp, after losing in the St. Joseph County small claims court

action, could not bring the same claim again by suing Graham on the plenary docket of

the St. Joseph Superior Court. See Ault, 728 N.E.2d at 869 (citing Cook, 500 N.E.2d at

233). Geico, as Heitkamp’s subrogee, stands in Heitkamp’s shoes for purposes of the

claims against Graham arising out of the accident at issue. See Hockelberg v. Farm

                                             12
Bureau Ins. Co., 407 N.E.2d 1160, 1161 (Ind. Ct. App. 1980) (“When the insurer is

claiming a right through subrogation it stands in the shoes of the insured and takes no

rights other than those which the insured had.”). Accordingly, Geico cannot bring the

same claim of negligence against Graham in Marion County any more than Heitkamp

could have done so in St. Joseph County.

       Still, Geico claims that it is not Heitkamp’s privy for purposes of the small claims

action, citing Chemco Transp., Inc. v. Conn, 527 N.E.2d 179 (Ind. 1988) and Moreton v.

Auto-Owners Ins., 859 N.E.2d 1252 (Ind. Ct. App. 2007).               When carefully read,

however, each case is readily distinguishable from the facts before us.

       In Chemco, the insured, Conn, was driving his tractor-trailer when he struck a

trailer owned by Chemco as it backed onto a Wells County highway. Conn’s trailer was

damaged, and he was injured. Conn’s insurer paid Conn for some of the value of the

trailer and for partial loss of its use. Conn, on his own, then sued Chemco in Cass

County for damages to his tractor-trailer, loss of its use, and personal injuries.

       While the Cass County case was pending, Conn’s insurer, acting under its

subrogation rights, filed a claim against Chemco in Marion County, seeking some, but

not all of, the same damages Conn was seeking in the Cass County case filed earlier. The

Marion County action was eventually settled and dismissed with prejudice. Based on the

dismissal of the Marion County case, Chemco moved for summary judgment in the

pending Cass County case on the questions of damages for the loss of the tractor and

damages for loss of use. The trial court denied Chemco’s summary judgment motion,

and Chemco appealed.

                                              13
       On appeal, our supreme court agreed that Conn’s claims were not barred by the

res judicata effect of his insurer’s settlement of the Marion County case. The court noted

that, although the insurer had the right to pursue its subrogation claim in Conn’s name,

“Conn reserved the right to pursue his claim since Protective6 only partially compensated

him for his loss.” Id. at 182. The court held:

       [Conn] was not directly interested in the subject matter and had no right to
       control the prosecution of [the Marion County] action since it was
       commenced by . . . his insurer, and attorneys for [the insurer] were hired by
       [the insurer]. Conn had no control over their actions and for all that
       appears could not have controlled their actions since he was unaware that
       the suit had been filed. Accordingly, the trial court properly found Conn
       had the right to pursue his full damages against Chemco with
       corresponding set-off right in Chemco for the amount paid by [the insurer]
       to Conn.

Id. at 183.

       We find Chemco to be readily distinguishable from the facts of the present case.

In Chemco, it was the subrogee insurer who settled its subrogated claim with the third-

party tortfeasor, and the court noted that the insured had no notice of the insurer’s

settlement and no ability to control the insurer’s actions. Moreover, in Chemco, the

insurer only partially compensated the insured for his losses, and specifically excluded

the insured’s claims for personal injury. Further, “Conn reserved the right to pursue his

claim since Protective only partially compensated him for his loss.” Id. at 182. Under

these facts and circumstances, the Chemco court held that the subrogor insured was not

bound by the actions of the subrogee insurer.

6
   Protective Insurance Company was Conn’s insurance carrier. Conn had entered into arbitration
proceedings with Protective and received partial payment for the value and loss of use of his damaged
trailer. Conn did not receive any insurance proceeds from Protective for his personal injuries.

                                                 14
      Here, in contrast, it is the subrogee insurer, Geico, who is seeking to recover from

Graham the money Geico paid to Heitkamp as Heitkamp’s subrogee. Unlike the insured

in Chemco, Geico is not seeking to recover losses not covered by insurance. Also, unlike

the insured in Chemco, Geico did in fact have some ability to control the actions of its

insured, Heitkamp. The insurance policy between Geico and Heitkamp clearly informed

Heitkamp that he was contractually bound to “do nothing after loss to prejudice” Geico’s

subrogation rights to recover against others. See Appellant’s App. pp. 62, 64, 74, 76, 80.

And in the release signed by the Heitkamps, they agreed to:

      take through the representative designated by [Geico] such action in my
      own name as is requested by the Company to recover damages from the
      person or persons or organization legally responsible to me therefore, and
      [Geico] shall have the right at its election to employ an attorney of its
      choice to represent me in any such action to be taken in my name.

Id. at 98. Applying Chemco to the facts and circumstances before us, we do not read

Chemco to stand for the proposition that a subrogee is not in privy with the subrogor for

purposes of the application of claim preclusion.

      In Moreton, AHR Construction and Remodeling (“AHR”) had re-roofed a home

owned by the Gentrys, but remain unpaid for its work. A storm damaged the Gentrys’

roof, allegedly as a result of deficiencies in AHR’s workmanship. Auto-Owners insured

the Gentrys’ home and paid over $25,000 to them. When they received this payment

from their insurer, the Gentrys assigned their claims to Auto-Owners “to the extent of the

payment above made[.]” Moreton, 859 N.E.2d at 1253. AHR then sued the Gentrys in

small claims court, asserting that they owed AHR for the work it had performed. The

                                            15
Gentrys counterclaimed, seeking over $3,300 to cover damage that had not been covered

by their insurance. The small claims court found in favor of AHR.

       Auto-Owners subsequently filed suit against AHR as the Gentrys’ subrogee,

alleging negligence and breach of contract and seeking only the amount of the insured

loss. AHR moved for summary judgment, claiming that Auto-Owners’ action was barred

by the res judicata effect of the prior small claims judgment. The trial court denied

summary judgment but certified its order for interlocutory appeal.

       On interlocutory appeal, our court observed that Auto-Owners was not a party to

the prior small claims action and did not participate in that case, and therefore concluded

that “Auto-Owners was not sufficiently a party to the small claims action for that action

to be res judicata[.]” Id. at 1255. In so holding, the Moreton court specifically noted that

Auto-Owners lacked control over the Gentrys’ actions and was apparently unaware

Gentry had brought his counterclaim in the small claims court. Id.

       Geico claims that Moreton is directly on point and controlling in this case. We

disagree. First, we do not read Moreton as broadly holding that a subrogee insurer is not

in privity with the subrogor insured. To the extent that Moreton could be read to hold

such, we respectfully disagree. As noted above, a subrogee’s rights are derivative of the

rights of the subrogor, and the subrogee “stands in the shoes” of the subrogor. Here,

Geico was also informed in the Marion Superior Court case that its insured had filed suit

regarding the accident in St. Joseph Superior Court Small Claims Division. We therefore

repeat our holding that, as a general matter, a subrogee insurer is in privity with its

subrogor insured.

                                            16
       We also read Moreton more narrowly than Geico. In fact, we understand Moreton

to stand for the proposition that if an insurer has no notice about an action filed by the

insured and has no ability to control this action, then the action will not act as res

judicata to the insurer. In Moreton, the insurer had no notice or opportunity to control

the small claims counterclaim that its insured had brought against the contractor, and

therefore the court held that the small claims judgment did not act as res judicata in the

insurer’s claim against the contractor.

       Here, however, Graham did inform the court and Geico, albeit after the small

claims judgment had been entered, that Geico’s insured had brought a claim against her

in the St. Joseph Superior Court Small Claims Division as a result of the covered

accident, and the claim was prior in time to Geico’s Marion Superior Court action. More

importantly, Geico retained the ability to claim its losses from Heitkamp under the terms

of the insurance contract and release Heitkamp signed in which he agreed not to interfere

with Geico’s subrogation rights.

       The concerns of insureds to recover their auto policy deductibles are a matter of

everyday business for insurance companies like Geico. The better practice would be for

carriers like Geico to expressly include their insured’s claims for deductibles in

subrogation and share any recovery obtained pro rata. In the alternative, carriers should

clearly inform their insureds of the insureds’ responsibilities not to proceed in a legal

forum to recover their deductibles incurred in covered claims without the clear

permission of the carrier, permission that would include the opportunity for joinder of the

carrier for its subrogated interests. After such clear notice, insureds like Heitkamp would

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sue separately for their deductible at the peril of being held responsible for any damages

incurred by their carriers flowing from breach of the underlying contract of insurance.7

                                             Conclusion

        Under the facts and circumstances before us in this case, we conclude that Geico

was in privity with Heitkamp for purposes of the res judicata effects of the St. Joseph

County small claim action. Geico’s Marion Superior Court claim against Graham was

derivative of Heitkamp’s St. Joseph County small claim against Graham. Heitkamp lost

in the small claims action against Graham, and neither he, nor Geico as his subrogee,

could relitigate the same claim in Marion County. Accordingly, the trial court did not err

in granting Graham’s motion to set aside the judgment on the grounds that Geico’s

current claim against her is barred by the claim preclusion branch of the doctrine of res

judicata.

        Affirmed.

FRIEDLANDER, J., and PYLE, J., concur.

7
  We recognize that uninsured personal injury arising from the occurrence that caused the injured party to
subrogate his or her interests regarding property damage is an important issue that is beyond the scope of
this appeal.

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