American Family Mut. Ins. Co. v. Kivela

• Decision Date: 12 August 1980
• Docket Number: No. 1-1279A342,1-1279A342
• Citation: 408 N.E.2d 805
• Parties: AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Appellant (Defendant Below), Louis H. Englert and Dorothy C. Englert (Defendants Below), v. Eldred L. KIVELA and Betty Kivela, Wesley M. Hurlbert and Shirley Hurlbert, Appellees (Plaintiffs Below).
• Court: Indiana Appellate Court

Page 805

408 N.E.2d 805

AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Appellant (Defendant Below), Louis H. Englert and Dorothy C. Englert (Defendants Below), v. Eldred L. KIVELA and Betty Kivela, Wesley M. Hurlbert and Shirley Hurlbert, Appellees (Plaintiffs Below).

No. 1-1279A342.

Court of Appeals of Indiana, First District.

Aug. 12, 1980.

George Montgomery, Bamberger, Foreman, Oswald & Hahn, Evansville, for appellant.

Cox & Thom, Jasper, for defendants.

David Clark, Clark, Statham, McCray, Clark & Thomas, Evansville, for appellees.

NEAL, Judge.

STATEMENT OF THE CASE

This cause is before the court upon the granting of the plaintiffs-appellees' motion for summary judgment in a garnishment action in proceedings supplemental to execution against the defendant-appellant American Family Mutual Insurance Company (American Family) wherein judgment was entered in the amount of $20,000 plus interest.

We affirm the action of the trial court in entering summary judgment in favor of the plaintiffs.

STATEMENT OF THE FACTS

On August 9, 1967, Dorothy Englert applied for a policy of automobile liability insurance with American Family through its agent Marvin L. Boeglin. An application form was completed and a policy was issued, the coverage effective August 9, 1967, through February 9, 1968.

By a letter dated September 1, 1967, American Family notified Mrs. Englert that the policy would be cancelled effective September 16, 1967, due to her husband's driving record. On September 2, 1967, Mrs. Englert's husband, Louis, was involved in a head-on collision while he was driving the insured car, resulting in injuries to plaintiffs Eldred Kivela and Wesley W. Hurlbert, the occupants of the car with which Louis Englert collided. Mrs. Englert notified American Family's agent Boeglin of the accident on September 5, 1967. On September 22, 1967, American Family wrote to Mrs. Englert informing her that due to misrepresentations in her application for the policy of insurance, her coverage terminated at 12:01 a. m. on August 9, 1967, the day of the policy's inception. American Family wrote again to Mrs. Englert on October 13, 1967. In this letter, American Family specified those representations that its investigation discovered to be false, told Mrs. Englert that the policy would never have been written had the application been properly filled out, and advised Mrs. Englert that since her policy was "cancelled American Family considers the following representations on the application for the policy of insurance to have been false and fraudulent:

flat" as of August 9, 1967, the insurer would not assume any responsibility for Louis Englert's accident of September 2, 1967.

1. That Mrs. Englert would be driving the insured car 100 percent of the time;

2. That neither she nor any other driver had ever had an automobile insurance policy cancelled or revoked;

3. That her car was not driven by anyone without a driver's license;

4. That neither her driver's license nor that of any other driver had ever been revoked, suspended or restricted;

5. That neither she nor any other driver had ever been "ticketed" or arrested for a moving motor vehicle violation; and

6. That neither she nor any other driver had ever been involved in any accident within the five years preceding the date of the application.

In July of 1969, the plaintiffs instituted a diversity action against the Englerts in the United States District Court for the Eastern District of Michigan, alleging essentially the negligent operation of a motor vehicle on the part of Louis Englert and the negligent entrustment of a motor vehicle on the part of Dorothy Englert. This cause of action was never brought to trial, due to a consent judgment entered in favor of the plaintiffs Hurlbert in the amount of $10,000 and a consent judgment entered in favor of the plaintiffs Kivela in the amount of $10,000 (hereinafter, the Michigan judgments). On November 20, 1972, the Englerts entered into an agreement with the plaintiffs which states in pertinent part the following:

"HOLD HARMLESS AGREEMENT

IT IS HEREBY AGREED by plaintiffs, WESLEY W. HURLBERT and SHIRLEY HURLBERT, his wife, and ELDRED L. KIVELA and BETTY KIVELA, his wife, that the Consent Judgment entered into by the defendants, LOUIS H. ENGLERT and DOROTHY ENGLERT, on behalf of the plaintiffs in the amount of Ten Thousand Dollars ($10,000.00) in favor of WESLEY W. HURLBERT and SHIRLEY HURLBERT, his wife, and Ten Thousand Dollars ($10,000.00) in favor of ELDRED L. KIVELA and BETTY KIVELA, his wife, shall be satisfied only from the proceeds of any policy of insurance that plaintiffs might be successful in securing and that no attempts to satisfy such judgments from the individual assets of the defendants shall be made;

IT IS FURTHER HEREBY AGREED AND UNDERSTOOD by the plaintiffs and defendants, that should the consent judgments be set aside, this Hold Harmless Agreement shall be null and void and of no consequence and plaintiffs are free to pursue any and all legal remedies available to them."

The present action was initiated on February 28, 1974, in the Dubois Circuit Court. In their complaint therein, the plaintiffs alleged that their respective judgments against the Englerts obtained in the federal district court in Michigan were due and unpaid, and prayed for a judgment in the aggregate amount of $20,000. In answer, the Englerts asserted the "Hold Harmless Agreement", supra, and further filed a motion to dismiss, a motion for judgment on the pleadings, and a motion for summary judgment, all based on that agreement.

On June 26, 1974, the parties filed with the Dubois Circuit Court a second agreement, which reads as follows:

"It is hereby agreed by plaintiffs, Eldred L. Kivela and Betty Kivela, and Wesley W. Hurlbert and Shirley Hurlbert, defendants, Louis H. Englert and Dorothy C. Englert, and the Michigan Mutual Liability Company:

1. That any judgment that might be entered in any cause of action against the defendants shall be satisfied only from 2. That the defendants will withdraw their Motion for Judgment on the Pleadings, Motion to Dismiss and Motion for Summary Judgment, which motions are presently Pending before this Court, and that the defendants will not assert in any manner as a defense to the above-set-forth cause of action a certain Hold Harmless Agreement, a copy of which is attached to said motions and designated as Exhibit 'A';

the proceeds of a policy of liability insurance issued to the defendants by American Family Mutual Insurance Company, Policy No. 13-032891, and that no proceedings to enforce said judgment shall be filed except those that are necessary to secure said proceeds;

3. That this agreement is irrevocable and binding upon all parties to said agreement, their heirs, assigns, successors in interest, personal representatives, administrators, and/or executors."

Defendant's motions were so withdrawn.

On September 27, 1974, the plaintiffs filed a motion for summary judgment, which was granted on October 11, 1974, in the amounts of the Michigan judgments. On October 18, 1974, the plaintiffs filed an application for order in proceedings supplemental, citing the judgment of October 11, 1974 asserting that execution was issued thereon and returned unsatisfied, and alleging that the defendant American Family is indebted to the Englerts by virtue of the automobile liability insurance policy. Further, the plaintiffs alleged that this indebtedness is subject to execution and moved the court for an order requiring the defendants Englerts and American Family to appear and answer concerning the indebtedness and to show cause why the indebtedness should not be applied to the judgments.

On July 16, 1977, American Family filed a motion for summary judgment, asserting in substance that inasmuch as the insurance policy was properly voided ab initio due to the misrepresentations in the policy application, it was not liable on the judgments. Further, American Family asserted that under the terms of the policy, it was only obligated to pay on the behalf of the insured such sums as the insured was "legally obligated to pay." Since the agreements between plaintiffs and the Englerts insulated the Englerts against execution on the judgments, the argument goes, the Englerts were not "legally obligated to pay" and, therefore, American Family incurred no liability.

On January 30, 1978, the plaintiffs filed their motion for summary judgment asserting that American Family had waived any rights to void the policy ab initio by its letter of September 1, 1967, prospectively cancelling the policy. Further, plaintiffs asserted that the agreements between plaintiffs and the Englerts did not operate to relieve American Family of liability on the judgments entered against its insured.

On December 5, 1978, the trial court granted plaintiff's motion for summary judgment and denied American Family's motion for summary judgment. Judgment against American Family was entered on July 11, 1979, in the amounts of $10,000 for the plaintiffs Kivela and $10,000 for the plaintiffs Hurlbert, plus interest from October 11, 1974. This appeal follows.

Pertinent provisions of the policy of automobile insurance are as follows:

"LIABILITY COVERAGE

To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury or property damage arising out of the ownership, maintenance or use of an owned automobile or the use of a non-owned automobile. . . .

PERSONS INSURED

1. The following are insured under the Liability Coverage:

a. With respect to an owned automobile,

(1) The named insured. . . .

DEFINITIONS UNDER PART I:

'named insured' means the individual or husband and wife named as such in the declaration, but if only one individual is named, the term 'named insured' also includes his spouse if a resident of the same household;

10. Cancellation

. . . This policy may be cancelled by...