Liberty Mut. Ins. Co. v. Metzler

• Decision Date: 18 February 1992
• Docket Number: No. 49A05-9101-CV-18,49A05-9101-CV-18
• Citation: 586 N.E.2d 897
• Parties: LIBERTY MUTUAL INSURANCE COMPANY, Appellant, Garnishee Defendant Below, v. Kenneth W. METZLER, Appellee, Judgment Defendant Below, v. Thomas POWELL and Margaret Powell, Appellees, Plaintiffs Below. .
• Court: Indiana Appellate Court

Page 897

586 N.E.2d 897

LIBERTY MUTUAL INSURANCE COMPANY, Appellant, Garnishee Defendant Below, v. Kenneth W. METZLER, Appellee, Judgment Defendant Below, v. Thomas POWELL and Margaret Powell, Appellees, Plaintiffs Below.

No. 49A05-9101-CV-18.

Court of Appeals of Indiana,

Fifth District.

.

Feb. 18, 1992.

Paul J. Knapp, Nana Quay-Smith, Bingham Summers Welsh & Spilman, Indianapolis, for appellant.

Peter G. Tamulonis, Donald L. Dawson, Jeffrey A. Doty, Kightlinger & Gray, Indianapolis, for appellees.

RUCKER, Judge.

This is an appeal from an adverse ruling on cross motions for summary judgment. The trial court determined that Liberty Mutual Insurance Company (Liberty Mutual) was liable to pay a judgment received by Thomas and Margaret Powell (the Powells) against Kenneth Metzler. Metzler had caused injury to the Powells through his operation of a motor vehicle owned by Liberty Mutual's insured. On appeal, Liberty Mutual contends the trial court erred in granting summary judgment in favor of the Powells and denying its own motion for summary judgment. We rephrase the issues as follows:

1. Is Liberty Mutual collaterally estopped from litigating whether Metzler intentionally caused injury to the Powells?

2. Does Metzler's prior criminal conviction, which established he acted intentionally in causing injury to the Powells, collaterally estop the Powells from litigating in a civil action whether Metzler's conduct constituted negligence?

3. Is there a genuine issue of material fact whether Metzler was an insured within the meaning of Liberty Mutual's various policies of insurance?

We reverse.

Metzler was a truck driver for National Freight, Inc. On February 21, 1987, he was assigned to carry a load of freight from Louisville, Kentucky to New Stanton, Pennsylvania. Metzler deviated from his route and made a stop at the Benchwarmer Pub located in Indianapolis, Indiana where he became engaged in an argument with his girlfriend. Metzler was ejected from the establishment and shortly returned in his semi-tractor and drove it into the Pub. One person was killed and 18 others were injured including the Powells.

Metzler was ultimately convicted of one (1) count of Murder; eighteen (18) counts of Attempted Murder; seven (7) counts of Battery; one (1) count of Operating a Vehicle With Over .10% Alcohol in Blood Resulting in Death; and six (6) counts of Operating a Vehicle With .10% Alcohol in Blood, Resulting in Serious Bodily Injury. Metzler v. State (1989), Ind., 540 N.E.2d 606. On appeal, Metzler claimed the evidence did not show he was acting with the requisite intent to commit the crimes charged. Our supreme court rejected Metzler's argument, affirmed the convictions, and indicated the evidence showed Metzler intended the consequences of his act. Id.

Shortly, thereafter, the Powells filed a complaint against Metzler seeking compensatory and punitive damages for their injuries which were alleged to have been either negligently or intentionally caused. The Powells later amended their complaint and alleged negligence as their sole theory of recovery. Metzler was served with the complaint and summons but did not respond and default judgment was entered against him. A hearing was held on the issue of damages, and the trial court entered judgment in favor of Margaret Powell in the amount of $1,600,000.00, and in favor of Thomas Powell in the amount of $150,000.00.

The Powells then commenced proceedings supplemental to execution naming as garnishee defendant Liberty Mutual, the insurer for National Freight, Inc. In response Liberty Mutual filed its Answer, Affirmative Defenses and Counterclaim. The Counterclaim sought a declaratory judgment that Liberty Mutual's policies of insurance issued to National Freight did not afford coverage for Metzler's conduct.

The parties to this action then filed cross-motions for summary judgment. The trial court granted summary judgment in favor of the Powells holding they were entitled to recover from Liberty Mutual the amount of their judgment against Metzler. Liberty Mutual timely filed a motion to correct errors which was denied. This appeal ensued. Additional facts will be recited where relevant.

The purpose of summary judgment is to terminate litigation for which there can be no factual dispute and which can be determined as a matter of law. Chambers v. American Trans Air, Inc. (1991), Ind.App. 577 N.E.2d 612. When reviewing the grant of a summary judgment motion our standard of review is the same standard that is used by the trial court: whether there is a genuine issue of material fact and whether the moving party is entitled to judgment as a matter of law. Farm Bureau Co-op. v. Deseret Title Holding Corp. (1987), Ind.App., 513 N.E.2d 193, reh. denied. All evidence must be construed in favor of the opposing party, and all doubts as to the existence of a material issue must be resolved against the moving party. ITT Com. Finance v. Union Bank and Trust (1988), Ind.App., 528 N.E.2d 1149. However, when a motion for summary judgment is made and supported by the materials contemplated by Trial Rule 56, the opposing party may not rest on his pleadings, but must set forth specific facts, using supporting materials contemplated by this rule. Id. If the opposing party fails to meet this burden, summary judgment may be granted.

I.

The semi-tractor that Metzler operated was insured by Liberty Mutual under three different policies of insurance: a Trucker's Policy, a Business Policy, and an Umbrella Policy. Liberty Mutual contends Metzler is not covered under any of the policies because Metzler's conduct which gave rise to the Powells' claim was intentional and thereby specifically excluded. In support of its argument, Liberty Mutual directs our attention to Metzler's criminal conviction, and our supreme court's ruling that Metzler acted intentionally. The Powells counter that the question of whether Metzler's conduct was intentional or negligent has already been determined in the underlying tort action. The Powells therefore argue that Liberty Mutual is collaterally estopped from attempting to raise the issue for the first time at the proceedings supplemental stage of this lawsuit. ¹ We agree.

Collateral estoppel, a branch of res judicata and characterized as "issue preclusion," involves a prior adjudication of a particular issue which is binding on the parties and their privies in a later lawsuit. Rees v. Heyser (1980), Ind.App., 404 N.E.2d 1183. The doctrine of collateral estoppel applies to insurance contracts and an insurer is ordinarily bound by the result of litigation to which its insured is a party, so long as the insurer had notice and the opportunity to control the proceedings. Hoosier Casualty Co. v. Miers (1940), 217 Ind. 400, 27 N.E.2d 342, Snodgrass v. Baize (1980), Ind.App., 405 N.E.2d 48, reh. denied.

In the case before us, there is no dispute that Liberty Mutual had notice of the underlying tort complaint filed against Metzler, its insured. However, Liberty Mutual did not undertake Metzler's defense or otherwise act to protect its own interest in the outcome of the litigation. Liberty Mutual, nevertheless, argues that the doctrine of collateral estoppel is not applicable here because it had the right not to defend or intervene in the underlying lawsuit once its own independent investigation revealed there was no coverage under the various policies. Liberty Mutual concludes that the proceedings supplemental stage of this litigation was its first opportunity to assert policy defenses and therefore it cannot now be estopped from so doing.

We have no quarrel with Liberty Mutual's assertion of a right not to defend Metzler. The law in this jurisdiction is well settled that where an insurer's independent investigation of the facts underlying a complaint against its insured reveals a claim patently outside of the risks covered by the policy, the insurer may properly refuse to defend. Cincinnati Ins. Co. v. Mallon (1980), Ind.App. 409 N.E.2d 1100; American States Insurance Co. v. Aetna Life & Casualty Co. (1978), 177 Ind.App. 299, 379 N.E.2d 510; United States Fidelity and Guar. Co. v. Baugh (1970), 146 Ind.App. 583, 257 N.E.2d 699. However, the foregoing authority does not hold that an insurer's exercise of its right not to defend its insured will operate to bar collateral estoppel. To the contrary, it is clear that an insurer may refuse to defend its insured, but at its own peril. Mallon, supra.

Liberty Mutual bolsters its argument by pointing to the conflict of interest between itself and Metzler on the underlying claim as precluding collateral estoppel. It is the position of Liberty Mutual that it could not possibly have defended Metzler against the Powell's claim and at the same time challenged his conduct as being intentional. Citing to Farm Bureau Mut. Auto. Ins. Co. v. Hammer (4th Cir.1949), 177 F.2d 793, cert. denied (1950), 339 U.S. 914, 70 S.Ct. 575, 94 L.Ed. 1339, Liberty Mutual contends the rationale underlying the doctrine of collateral estoppel, "to obviate the delay and expense of two trials upon the issue," id. at 799, breaks down in the face of an insurer/insured relationship where the two interests are adverse. Liberty Mutual argues that because of the conflict of interest between Metzler and itself, it has never had its day in court and therefore it should not be bound by the result of the underlying claim in this case. We disagree.

The question of whether the doctrine of collateral estoppel falls in the face of a claim of conflict of interest was squarely faced in State Farm Mut. Auto. Ins. Co. v. Glasgow (1985), Ind.App., 478 N.E.2d 918, reh. denied. In that case, Glasgow filed a complaint against Weist in small claims court seeking recovery for damages to her automobile. Glasgow's complaint did not indicate a theory of recovery. Defendant Weist was insured by State Farm, who declined to defend claiming that Weist had intentionally driven his own...