Cincinnati Ins. Co. v. Selective Ins. Co. of Am.
| Decision Date | 25 February 2021 |
| Docket Number | No. 1:18-cv-00956-JPH-DLP,1:18-cv-00956-JPH-DLP |
| Parties | CINCINNATI INSURANCE COMPANY, Plaintiff, v. SELECTIVE INSURANCE COMPANY OF AMERICA, Defendant. |
| Court | U.S. District Court — Southern District of Indiana |
Jeff Smiley accidentally flipped his vehicle on an interstate, seriously injuring his passenger, Greg Callahan. In another case, Mr. Callahan sued Mr. Smiley to recover damages for his injuries, and Mr. Smiley's primary insurer, Cincinnati Insurance, and excess insurer, Selective Insurance, both eventually settled with Mr. Callahan. In this case, Cincinnati alleges that Selective acted negligently and in bad faith in refusing to settle Mr. Callahan's case sooner.
This Court granted Selective summary judgment on the bad faith claim and ordered additional briefing on whether the Court should certify two questions to the Indiana Supreme Court. Dkt. 73. Cincinnati supports certification, dkt. 77, while Selective opposes it, dkt. 76. The briefs were helpful, and the Court appreciates the parties' thoughtful analysis of the issues. For the reasons that follow, the Court respectfully CERTIFIES two questions to the Indiana Supreme Court.
"Certification is a useful tool of cooperative federalism," Vill. of Bedford Park v. Expedia, Inc., 876 F.3d 296, 302 (7th Cir. 2017) (citation omitted), that "reduc[es] the possibility of error in trying to predict what course the state supreme court might choose," Roberts v. Alexandria Transp., Inc., 968 F.3d 794, 801 (7th Cir. 2020) (citation omitted). Indiana allows "any federal district court" to "certify a question of Indiana law to the [Indiana] Supreme Court when it appears to the federal court that a proceeding presents an issue of state law that is determinative of the case and on which there is no clear controlling Indiana precedent." Ind. App. R. 64(A). "Certification is appropriate in a case where the question to be certified is outcome determinative, where it concerns an important issue of public concern, where the state supreme court has not yet provided clear guidance on the matter, and where the issue is likely to recur." Cutchin v. Robertson, No. 20-1437, 2021 WL 357770, at *13 (7th Cir. Feb. 3, 2021). The Court may also consider "the state supreme court's particular interest in the development of state law and the likelihood that the result of the decision in a particular case will exclusively affect the citizens of that state." Id.
Two questions of Indiana law could affect the outcome in this case. See dkt. 73 at 15-17. First, does Indiana law recognize a cause of action againstan insurance company for the negligent failure to settle a claim within policy limits? And second, does Indiana law recognize the doctrine of equitable subrogation, thus permitting an excess insurance carrier to directly sue a primary carrier for the negligent and/or bad faith failure to settle a claim within policy limits?
If the answer to either question is no, this case is over. As a result, both questions are outcome determinative.
The Court previously concluded that there is no "clear controlling Indiana precedent" on either potential certified question. Dkt. 73 at 17. Cincinnati agrees, dkt. 77 at 15, while Selective contends that recent cases clearly foreclose the recognition of a cause of action for negligent refusal to settle, dkt. 76 at 1-31 (). Neither case provides the clear resolution that Selective imagines.
Smith did not address a negligent-refusal-to-settle claim, and the court dismissed the plaintiff's other negligence claims against an insurance company on alternative grounds. See 150 N.E.3d at 199, 200 n.9, 205-06 (). While Johnson did address the issue, holding that Indiana recognizes "no cause of action in tort for negligently failing to settle a claim within the policy limits of an insurance contract," 440 F. Supp. 3d at 987, a federal district court order does not represent a "clear controlling Indiana precedent," Ind. App. R. 64(A); cf. Certain Underwriters of Lloyd's & Companies Subscribing to Excess Aviation Liab. Ins. Policy No. FL-10959 A & B v. Gen. Acc. Ins. Co. of Am., 909 F.2d 228, 231 (7th Cir. 1990) ().
Given a lack of clear controlling Indiana precedent, it's unclear "what course the state supreme court might choose" in deciding on the existence of a negligent-refusal-to-settle cause of action.2 See Roberts, 968 F.3d at 801.
Before granting certification, federal courts also consider "whether the case concerns a matter of vital public concern, [whether] the issue will likely recur in other cases, . . . and whether the state supreme court has yet to have an opportunity to illuminate a clear path on the issue." Brown v. Argosy Gaming Co., L.P., 384 F.3d 413, 416 (7th Cir. 2004). Selective argues that the Indiana Supreme Court declined an "opportunity to illuminate a clear path onthe issue" when it decided not to review Smith. Dkt. 76 at 9. However, as discussed above, Smith did not provide that opportunity. See Brown, 384 F.3d at 416.
Selective also argues that insurance companies' "settlement strategy of a disputed claim" is "hardly a matter of public interest" because it pertains only to duties owed by insurance companies. Dkt. 76 at 7. But it is doubtful that the Indiana Supreme Court shares Selective's view. See Erie Ins. Co. v. Hickman by Smith, 622 N.E.2d 515, 519 (Ind. 1993) (). Resolution of these questions would provide clarity in an area of important public interest.
Selective predicts that these questions aren't "likely to recur with any frequency" based on the few cases addressing duty-to-settle and equitable subrogation claims, dkt. 76 at 7-8, but these issues recur with enough frequency to warrant certification, see, e.g., Johnson, 440 F. Supp. 3d 980; Robertson v. Med. Assur. Co., 11 N.E.3d 913 (Ind. 2014).
Last, Selective contends that Cincinnati's choice to file this action in federal court undermines a decision to certify this action to the Indiana Supreme Court because Cincinnati "knew the status of Indiana law on the issues when it filed this action" in federal court. Dkt. 76 at 9-10 (citing Rain v. Rolls-Royce Corp., 626 F.3d 372, 379 (7th Cir. 2010)). That, however, is "not a primary factor," Rain, 626 F.3d at 379, and thus is "not determinative on its own," Plastics Eng'g Co. v. Liberty Mut. Ins. Co., 514 F.3d 651, 659 (7th Cir. 2008).
Here, the questions to be certified are outcome determinative to this case, involve an important issue of public concern, and are likely to recur. And even if the Court believed that the Indiana Supreme Court would likely hold that Indiana does not recognize a cause of action for negligent failure to settle a claim, it could not reach that conclusion in this case. In Certain Underwriters, the Seventh Circuit held that "[u]nder Indiana law, an insurer is liable to its insured for a judgment exceeding policy limits when the insurer, who has exclusive control of defending and settling the suit, refuses, in negligence or bad faith, to settle within policy limits." 909 F.2d at 231 (emphasis added). This is binding precedent that the Court is obligated to follow. See Reiser v. Residential Funding Corp., 380 F.3d 1027, 1029 (7th Cir. 2004) ( ).
While Indiana and federal decisions have addressed similar issues, the Indiana Supreme Court has not held that there is no cause of action for negligent failure to settle a claim, nor has it expressly disavowed Certain Underwriters' view that Indiana does recognize this cause of action. And that's what matters here. See Reiser, 380 F.3d at 1029 (); Ind. App. R. 64(A) ().
With respect to the issues presented, Cutchin, 2021 WL 357770, at *13. These factors weigh in favor of certification so that the Indiana Supreme Court may provide guidance that will conclusively resolve these issues.
For the reasons stated above, the Court respectfully CERTIFIES the following questions3 to the Indiana Supreme Court:
Pursuant to Ind. App. R. 64(B), the Clerk is ORDERED to provide the Indiana Supreme Court with copies of:
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