Carrier Agency, Inc. v. Top Quality Bldg. Products, Inc.

• Decision Date: 24 February 1988
• Docket Number: No. 69A01-8705-CV-104,69A01-8705-CV-104
• Citation: 519 N.E.2d 739
• Parties: CARRIER AGENCY, INC., and Gerald D. Carrier, Defendants-Appellants, v. TOP QUALITY BUILDING PRODUCTS, INC. and John Allen Creech, Plaintiffs- Appellees.
• Court: Indiana Appellate Court

Page 739

519 N.E.2d 739

CARRIER AGENCY, INC., and Gerald D. Carrier, Defendants-Appellants, v. TOP QUALITY BUILDING PRODUCTS, INC. and John Allen Creech Plaintiffs- Appellees.

No. 69A01-8705-CV-104.

Court of Appeals of Indiana,

First District.

Feb. 24, 1988.

Rehearing Denied April 19, 1988.

Peter G. Tamulonis, Lynn A. Francis, Kightlinger & Gray, Indianapolis, for defendants-appellants.

John J. Dornette, Votaw & Dornette, Lawrenceburg, for plaintiffs-appellees.

NEAL, Judge.

STATEMENT OF THE CASE

Defendant-appellants, Carrier Agency, Inc. and Gerald D. Carrier (hereinafter referred to collectively as Carrier), appeal a decision of the Ripley Circuit Court granting a new trial to plaintiff-appellees, Top Quality Building Products, Inc. (Top Quality) and John Allen Creech (Creech), after they had suffered an adverse jury verdict.

We reverse.

STATEMENT OF THE FACTS

On August 7, 1979, Creech, while employed by Top Quality, was injured when a loading boom that he was operating touched a power line owned and maintained by Southeastern Indiana REMC, Inc. (REMC). The boom had been manufactured by Dico, Inc. (Dico) who sold it to Fallsway Equipment Company (Fallsway). The boom was then installed on an International Harvester truck by Fallsway who then sold it to Top Quality. After the injury, certain litigation ensued. In one action Creech sued REMC on a theory of negligent operation and maintenance of its power lines, and Dico on a 402A theory. Summary judgments were entered against him and in favor of both defendants in the Ripley Circuit Court by the Honorable Henry A. Pictor. These decisions were affirmed by this court in Creech v. Southeastern Indiana REMC, Inc. (1984), Ind.App., 469 N.E.2d 1237.

Creech further initiated a workmen's compensation proceeding before the Industrial Board against Top Quality, and received an award on May 27, 1981. The award, totaling $129,680.00, was filed in the Dearborn Circuit Court on June 21, 1981, and reduced to judgment on July 10, 1981, under IND.CODE 22-3-4-9 by which proceeding the award became a lien. However, Top Quality had no workmen's compensation insurance coverage. This fact is the central theme in this case.

On June 25, 1981, Top Quality brought this action against Midwestern Indemnity Company (Midwestern) and Carrier for breach of contract and negligence in failing to write the workmen's compensation insurance coverage as agreed to and ordered by Top Quality. Meanwhile, Creech and his wife brought an action against Fallsway as a third party tort-feasor for negligence and for breach of warranty which action was eventually settled. Five hundred dollars ($500.00) of that settlement was allocated to Creech on account of his injuries, and $17,500.00 was allocated to his wife for loss of consortium. Creech and his wife executed releases to Fallsway and dismissed their suit. At no time was Top Quality given notice nor was it consulted by Creech as to the Fallsway suit, settlement, or release. On March 26, 1982, Top Quality, in consideration of Creech's execution of a covenant not to execute on the workmen's compensation award, paid Creech $10,000.00 and assigned to him its cause of action against Midwestern and Carrier for the workmen's compensation award, retaining all other claims it had. Top Quality subsequently filed a motion to substitute Creech in this action as party plaintiff, but such motion was denied. However, Creech was permitted to intervene and filed his intervenor's complaint against Midwestern and Carrier for breach of contract and negligence in not writing the workmen's compensation insurance coverage.

Midwestern then filed a motion for summary judgment against both Top Quality and Creech claiming that Carrier was not its agent. The motions were granted, and the judgment in Midwestern's favor has not been appealed.

Carrier filed its motion for summary judgment against Top Quality and Creech based upon the claim that Creech's settlement with and release of the third-party tort-feasor, Fallsway, without notice or consultation with Top Quality, barred any further action against Carrier. This motion was likewise granted by the Honorable Henry A. Pictor in 1984, but was denominated only as a partial summary judgment.

A jury trial was held on January 20 and 21, 1987, on the issue of whether Carrier had agreed to write the workmen's compensation insurance and whether it had negligently failed to do so. This trial was before the Honorable Denver Gay, the successor to the Honorable Henry A. Pictor. Because of the existence of the partial summary judgment in favor of Carrier, the court excluded from evidence all material pertaining to the workmen's compensation award. Top Quality and Creech presented evidence that after Carrier agreed to write all of Top Quality's insurance, Top Quality transferred all of its insurance from Farm Bureau to Carrier. This consisted of multi-peril, auto fleet, and workmen's compensation coverage. Carrier wrote the multi-peril and the fleet coverage but not the workmen's compensation coverage. Carrier denied that it had agreed to write the workmen's compensation insurance coverage. The only evidence of damages was $7,000.00 in wages and medical bills paid by Top Quality to Creech. The jury returned a verdict for Carrier.

Creech and Top Quality filed their motion to correct errors. The trial court sustained portions of the motion and ordered a new trial. In its order it stated:

1. The decision of this Court of February 28th, 1983 by Judge Pictor, whereby Summary Judgment was granted in favor of Gerald D. Carrier and Carrier Agency, Inc., against intervening plaintiff, John Allen Creech, was contrary to law in that the defendants were not within the class of parties covered by the Indiana Workmen's Compensation Statutes; and, there was no election of remedies by John Allen Creech to support his dismissal from this cause on those grounds.

2. The decision of this Court by Judge Pictor of December 13th, 1984, whereby partial Summary Judgment was granted in favor of defendants, Carrier Agency, Inc. and Gerald D. Carrier, against Top Quality Building Products, Inc., was contrary to law in that the Indiana Workmen's Compensation Statutes were not applicable to the parties herein, that if they were there was no waiver or election of remedies by Creech; and, further, that any election by Creech would not be imputed to Top Quality Building Products, Inc.

3. That the decision of the Court by Judge Pictor of October 11th, 1984, is rendered moot by the error of the previous summary judgment orders herein.

4. That as a result of the aforesaid summary judgments being in error the evidence tendered by plaintiffs at trial may become admissible in full or part as set out by paragraphs 5 (A) (B) and (C) of plaintiffs' Motion to Correct Errors.

5. The Court finds that defendants' Instruction Number 5 was unclear and misleading to the jury.

Record at 146-47.

ISSUES

The issues are as follows:

I. Whether the trial court erred in setting aside the summary judgments previously granted to Carrier.

II. Whether the giving of Carrier's Instruction No. 5 was error.

DISCUSSION AND DECISION

ISSUE I: Summary Judgments

The law in Indiana is settled that where an action is brought by an injured employee against a third party tort-feasor and a settlement is made and a release executed, the liability of the employer, or the employer's compensation carrier, to pay further compensation terminates. Additionally, the employer is entitled to subrogation for the amounts paid, or is entitled to a lien on the judgment received by the employee against the third party tort-feasor. IND.CODE 22-3-2-13; Indiana State Highway Comm'n v. White (1973), 259 Ind. 690, 291 N.E.2d 550; Norris v. United States Fidelity and Guaranty Co. (1982), Ind.App., 436 N.E.2d 1191; McCammon v. Youngstown Sheet and Tube Co. (1981), Ind.App., 426 N.E.2d 1360; Koughn v. Utrad Industries, Inc. (1971), 150 Ind.App. 110, 275 N.E.2d 572. The injured employee and his wife cannot negotiate a settlement to which the employer or his insurance carrier is not a party, or is not notified, whereby a substantial portion of the total amount is allocated to loss of consortium in order to evade the statutory lien. Such arbitrary allocation is given no effect. Dearing v. Perry (1986), Ind.App., 499 N.E.2d 268. An employer's or insurer's right to recoup the amount paid does not depend on whether a full settlement between an employee and a third party tort-feasor was reached. Norris, supra. Therefore, it is clear that upon settlement and the execution of the release with the third party tort-feasor, Fallsway, Creech no longer had a viable claim against Top Quality on account of workmen's compensation benefits. Had workmen's compensation insurance existed, Creech would likewise have no further claim against Top Quality's insurer.

It is also well settled in Indiana that an insurance agent who undertakes to procure insurance for another is an agent of the proposed insured and owes the principal a duty to exercise reasonable care, skill, and good faith in obtaining the insurance. If the agent undertakes to procure the insurance and through neglect fails to do so, he may be liable in an action for breach of contract or for negligent default in the performance of a duty imposed by contract. Nahmias Realty, Inc. v. Cohen (1985), Ind.App., 484 N.E.2d 617; Stockberger v. Meridian Mutual Ins. Co. (1979), 182 Ind.App. 566, 395 N.E.2d 1272; Bulla v. Donahue (1977), 174 Ind.App. 123, 366 N.E.2d 233. Generally, the measure of damages in such an action is the amount which would have been due under the policy had it been obtained. Nahmias, supra; Bulla, supra.

From the above authorities, it is clear that when Creech settled his case with Fallsway, and released it, he released Top Quality as well from further obligation. Furthermore, if Top Quality had been covered by workmen's compensation insurance, such settlement...