Allstate Ins. Co. v. Hammond

• Decision Date: 27 December 2001
• Docket Number: No. 49A02-0103-CV-164.,49A02-0103-CV-164.
• Citation: 759 N.E.2d 1162
• Parties: ALLSTATE INSURANCE COMPANY, Appellant-Defendant, v. Sharon L. HAMMOND, Appellee-Plaintiff.
• Court: Indiana Appellate Court

759 N.E.2d 1162

ALLSTATE INSURANCE COMPANY, Appellant-Defendant, v. Sharon L. HAMMOND, Appellee-Plaintiff.

No. 49A02-0103-CV-164.

Court of Appeals of Indiana.

December 27, 2001.

John W. Hammel, Yarling & Robinson, Indianapolis, IN, Attorney for Appellant.

Mark C. Ladendorf, Daniel A. Ladendorf, Gloria J. Gradeless, Ladendorf & Ladendorf, Indianapolis, IN, Attorneys for Appellee.

OPINION

BARNES, Judge.

Case Summary

Allstate Insurance Company appeals the trial court's denial of its motion to correct error after a jury returned a verdict in favor of its insured, Sharon K. Hammond, in her action to recover uninsured motorist benefits. We reverse and remand.

Issues

Allstate asks us to consider two issues, which we restate as:

I. whether the trial court should have granted its motion to correct error, which sought to reduce the jury's $160,000 judgment against it to $51,000, the stipulated amount of uninsured motorist and medical expenses coverage under Hammond's policy; and

II. whether the trial court erred by instructing the jury that it was to assess damages against Allstate without regard to the policy limits.

Facts

On May 23, 1998, an uninsured motorist rear-ended Hammond's car while she was stopped an intersection. Allstate and its insured Hammond were evidently unable to come to an agreement as to the extent of the injuries she suffered in the accident.¹ On August 13, 1999, Hammond sued Allstate, alleging she was its insured at the time of the accident, that the other motorist was uninsured, and that Allstate was "responsible under said insurance contract for the damages set forth herein." Appendix p. 11. The uninsured motorist was not a party to this lawsuit, and there is no indication Hammond has ever sued him directly. It was stipulated that Hammond's policy with Allstate provided uninsured motorist coverage of $50,000, plus $1,000 in medical expenses coverage.

The case was tried to a jury on January 23 and 24, 2001. Hammond presented evidence concerning the nature and extent of her injuries and the extent to which her ability to work had been impaired. Allstate conceded it was liable in damages to Hammond, but it did dispute the medical evidence as to the extent of her injuries and the amount of recovery to which she was entitled. After closing arguments, the trial court gave the following instruction to the jury over Allstate's objection:

You are instructed that the policy of insurance between Sharon Hammond and Allstate Insurance Company provided uninsured motorist benefits with a policy limit of $51,000. In assessing damages for the injury suffered by Sharon Hammond, you are to fairly value that injury based on these instructions without regard to the policy limits that were in effect at the time of this collision.

Transcript p. 363. The jury returned a verdict for Hammond of $160,000, and the trial court entered judgment in that amount. Allstate filed its motion to correct error on February 12, 2001, asserting it could not be held liable for any amount in excess of the policy limits, $51,000. The trial court denied the motion, and this appeal ensued.

Analysis²

I. Denial of Motion to Correct Error

We will reverse a trial court's denial of a motion to correct error only for an abuse of discretion. See Medlock v. Blackwell, 724 N.E.2d 1135, 1137 (Ind.Ct. App.2000)

. An abuse of discretion occurs if the trial court's action is against the logic and effect of facts and circumstances before the court and the inferences that may be drawn therefrom. Id. An abuse of discretion also occurs if the trial court misinterprets the law. Halsey v. Smeltzer, 722 N.E.2d 871, 872 (Ind.Ct.App.2000),

trans. denied. Allstate argues that the trial court misinterpreted the law, and thus abused its discretion, when it denied the motion to correct error.

The principal case relied on by Allstate is Town & Country Mut. Ins. Co. v. Hunter, 472 N.E.2d 1265 (Ind.Ct.App.1985),trans. denied. There, we stated that an insurer providing uninsured motorist coverage is liable to its insured for damages caused by the uninsured motorist, but only up to the limits provided for in the insurance policy. Id. at 1270. Hammond argues inter alia that this statement was dictum. Even if we agree with that assertion, however, we conclude that the statement accurately reflects the general law in Indiana and controls the outcome of this case.

We begin by observing that this case was never tried as a tort action alleging Allstate breached its duty to Hammond of good faith and fair dealing. The complaint made no mention of that type of breach. Counsel for Hammond never suggested such a breach in their opening and closing arguments, instead stating "[t]he action is based upon a contract.... Uninsured motorist coverage is meant to put the injured party in the same position as if the person who injured her had insurance." Transcript p. 22. "It's a contractual obligation on the part of Allstate to pay damages in this case that were proximately caused by this accident." Transcript p. 323. The evidence at trial focused entirely on the nature and extent of Hammond's injuries and the extent of her ability to work. Hammond neither requested punitive damages against Allstate nor sought to recover attorney fees. The jury was not instructed on the requirements of a bad faith/unfair dealing claim against an insurer, as outlined in Erie Ins. Co. v. Hickman by Smith, 622 N.E.2d 515 (Ind. 1993), and other cases. Finally, Hammond cites no authority to support her assertion that the mere fact the jury returned a verdict in excess of the policy limits is "prima facie evidence of bad faith." Appellant's Brief p. 7. We must conclude, therefore, that Hammond's action was effectively one alleging breach of contract by Allstate in failing to pay uninsured motorist benefits. Hammond's attempts to distinguish Hunter on the basis that it did not involve the issue of bad faith are thus unavailing, because the case before us today likewise does not involve the issue of bad faith.³ Insurance companies may dispute claims in good faith, and a finding that an insurer breached its contract in denying a claim is insufficient by itself to support a bad faith claim. Erie, 622 N.E.2d at 520. We also note Hammond's occasional use of the phrase "tortious breach of contract" in her brief in describing her action against Allstate; "Indiana, however, does not recognize a separate cause of action for tortious breach of contract." Broadhurst v. Moenning, 633 N.E.2d 326, 334 (Ind.Ct.App.1994). We then analyze this case by applying traditional contract principles of law.

"In tort, all damages directly traceable to the wrong and arising without an intervening agency are recoverable." Erie, 622 N.E.2d at 519. "By contrast, the measure of damages in a contract action is limited to those actually suffered as a result of the breach which are reasonably assumed to have been within the contemplation of the parties at the time the contract was formed." Id. (Emphasis added.) A plaintiff seeking damages for breach of contract is not entitled to be placed in a better position than she would have been had the breach not occurred. Holloway v. Bob Evans Farms, Inc., 695 N.E.2d 991, 995 (Ind.Ct.App.1998). The plaintiff may recover the benefit of her bargain but is limited in her recovery to the loss actually suffered, and a damage award must be referenced to some fairly defined standard. Fowler v. Campbell, 612 N.E.2d 596, 603 (Ind.Ct.App.1993).

Taking these principles into consideration, we hold that in a first-party action by an insured to collect uninsured motorist benefits from his or her insurer, the amount of recoverable damages cannot exceed the limits provided for in the insurance policy in effect at the time of the accident, in the absence of any claim or evidence that the insurer breached its duty of good faith and fair dealing to its insured. The benefit of Hammond's bargain with Allstate was this: Allstate charged and Hammond paid premiums for her automobile insurance policy with the clear and reasonable expectation that if she was injured by an uninsured motorist, Allstate would pay up to $50,000 of any damages she may have suffered, plus $1,000 in medical expenses. Although automobile insurance policies may have certain features of a contract of adhesion, in that the insurer generally is significantly more sophisticated than the insured, we assume Hammond was free to contract with Allstate to be entitled to a higher amount of uninsured motorist coverage, if she was willing to pay the additional premium necessary to obtain such coverage. Having chosen not to do so, she cannot now seek to effectively increase the policy limits via a lawsuit in which no evidence of any bad faith or unfair dealing on the part of Allstate was introduced, and which was consistently pled and tried as an action on the contract of insurance. Otherwise, Hammond would improperly be placed in a better position than she would have been if no breach had occurred.

Hammond raises several other challenges to Allstate's reliance on the uninsured motorist coverage limits in the policy, none of which we find persuasive. First, she contends that Allstate acted in bad faith in this litigation because of its use of in-house counsel to defend this action, claiming this violated Indiana Rule of Professional Conduct 1.7 and its prohibition against representing two adverse clients; she essentially claims Allstate's in-house counsel violated this rule because he represented both Allstate and Hammond. We note Hammond never requested that the trial court disqualify Allstate's counsel for this alleged violation of the Rules of Professional Conduct, which is a power within the trial court's jurisdiction. See Cincinnati Ins. Co. v. Wills, 717 N.E.2d 151, 154 (Ind.1999)

. In fact, we see no indication that Hammond ever questioned the propriety of in-house counsel's representation of Allstate until she responded to the ...