Erie Ins. Exch. v. Craighead

• Citation: 192 N.E.3d 195
• Decision Date: 12 July 2022
• Docket Number: Court of Appeals Case No. 21A-CT-2871
• Parties: ERIE INSURANCE EXCHANGE, Appellant-Defendant, v. Olivia CRAIGHEAD, Appellee-Plaintiff.
• Court: Court of Appeals of Indiana

192 N.E.3d 195

ERIE INSURANCE EXCHANGE, Appellant-Defendant,

v.Olivia CRAIGHEAD, Appellee-Plaintiff.

Court of Appeals Case No. 21A-CT-2871

Court of Appeals of Indiana.

FILED July 12, 2022

Attorneys for Appellant: John C. Trimble, Michael R. Giordano, Lewis Wagner, LLP, Indianapolis, Indiana

Attorneys for Appellee: Eric A. Frey, Frey Law Firm, Terre Haute, Indiana, John P. Nichols, Anderson & Nichols, Terre Haute, Indiana

Attorney for Amicus Curiae Indiana Trial Lawyers Association: Scott A. Faultless, Craig, Kelley & Faultless LLC, Indianapolis, Indiana

Bradford, Chief Judge

Case Summary

[1] In 2018, Morgan Miller crashed his car, severely injuring his passenger, Olivia Craighead. At the time, Craighead was covered by an auto policy issued by Erie Insurance Exchange, which provided her with $100,000.00 in uninsured/underinsured motorist ("UIM") coverage and $5000.00 in medical payments coverage ("MPC"). Miller's insurer, United Farm Family Mutual Insurance Company, tendered its liability limit of $50,000.00 and a $5000.00 MPC payment, while Erie made a $5000.00 MPC payment pursuant to Craighead's own coverage. While the parties agree that Erie's UIM obligation to Craighead was properly reduced to $50,000.00 by United Farm's liability payment of $50,000.00, Erie contended that the MPC payments from it and United Farm further reduced its UIM obligation to $40,000.00.

[2] In June of 2020, Craighead sued Erie for breach of contract and for bad-faith denial of her claim for $10,000.00 in UIM coverage. Erie moved for summary judgment, arguing that a provision in its policy allowed it to reduce its UIM obligation by the amount of the MPC payments ("the Setoff Clause") and that there existed no genuine issue of material fact regarding bad faith. The trial court granted partial summary judgment in favor of Craighead on the breach-of-contract claim, concluding that the Setoff Clause was unenforceable as written. The trial court also concluded that there existed a genuine issue of material fact on the bad-faith claim. Erie contends that the trial court erred in granting partial summary judgment in favor of Craighead and in denying its motion for partial summary judgment on the bad-faith claim. Because we conclude that the trial court properly entered partial summary judgment in favor of Craighead and determined that the bad-faith claim was not appropriate for summary judgment, we affirm.

Facts and Procedural History

[3] In May of 2018, Craighead was covered by an automobile insurance policy ("the Policy") with Erie that provided UIM coverage with a limit of $100,000.00 per person and MPC with a limit of $5000.00. The Policy provided that Erie had no duty to provide UIM coverage until all available forms of liability insurance had "been exhausted by payment of their limits." Appellant's App. Vol. II p. 52. The Policy also contained the Setoff Clause, which provided, in part, as follows:

Reductions

The limits of protection available under this Uninsured/Underinsured Motorists Coverage will be reduced by:

1. the amounts paid by or for any person who or organization which may be liable for bodily injury or property damage to "anyone we protect."

[....]

4. the amount of any payments to the "insured" and/or injured party made pursuant to any auto medical payments provision in this or any other policy applicable to the loss.

App. Vol. II p. 52.

[4] On May 22, 2018, Craighead was riding in a car with Morgan Miller, who drove into a guardrail, seriously injuring Craighead. The parties do not dispute that Miller's negligence caused the crash. Miller was covered by an automobile insurance policy with United Farm that provided liability coverage with a limit of $50,000.00 per person and MPC with a limit of $5000.00. On June 25, 2019, United Farm offered its liability limit of $50,000.00 in exchange for Craighead agreeing to release further claims against Miller and his parents. By this time, both Erie and United Farm had also paid their $5000.00 limits of MPC to Craighead. Erie authorized Craighead to accept United Farm's offer of its liability coverage limits. On August 1, 2019, Craighead indicated to Erie her belief that Erie would be acting in bad faith if it did not offer its full remaining UIM limit of $50,000.00. The Erie representative responded that the available limit of UIM coverage was $40,000.00 because its UIM obligation had been reduced by the $10,000.00 in MPC payments made by Erie and United Farm. Around this time, Erie indicated to Craighead that it would pay her the undisputed amount of $40,000.00 in UIM coverage only if she signed a release as to the disputed $10,000.00.

[5] On June 15, 2020, Craighead filed an amended complaint against Erie for breach of contract and bad faith. Craighead alleged that the Setoff Clause was unenforceable and that Erie had acted in bad faith by requiring Craighead to sign a release before issuing payment for $40,000.00 in UIM coverage. On June 22, 2020, Erie issued a check for $40,000.00 despite the conflict over whether the Setoff Clause applied.

[6] On March 17, 2021, Erie moved for summary judgment on the bases that enforcing the Setoff Clause did not violate Indiana law and Craighead's bad-faith claim failed because Erie did not act maliciously in applying the unambiguous terms of the Setoff Clause. Craighead responded to Erie's motion for summary judgment and moved for partial summary judgment, arguing that a genuine issue of material fact existed as to her bad-faith claim and moved for partial summary judgment on the basis that the Setoff Clause violated Indiana Code section 27-7-5-2 (" Section 27-7-5-2").

[7] On November 23, 2021, the trial court denied Erie's motion for summary judgment and granted Craighead's motion for partial summary judgment on the contract claim with an order that provides, in part, as follows:

As to liability, Erie Insurance should proceed in paying to Plaintiff the remaining $10,000.00 within thirty (30) days of this Order. This $10,000.00 represents the [MPC] payments that Erie Insurance believed it was entitled to apply as a set off which this Court has determined is not permissible.

IT IS THEREFORE ORDERED ADJUDGED AND DECREED THAT Defendant, Erie Insurance Exchange's, Motion for Summary Judgment on the issue of set off is hereby DENIED.

IT IS FURTHER ORDERED ADJUDGED AND DECREED THAT Plaintiff, Olivia Craighead's, Motion for Summary Judgment on the issue of set off is hereby GRANTED.

IT IS FURTHER ORDERED ADJUDGED AND DECREED THAT Defendant, Erie Insurance Exchange's, Motion for Summary Judgment on the issue of breach of duty to deal in good faith is hereby DENIED.

Appellant's App. Vol. II pp. 20–21.

Discussion and Decision

[8] Erie appeals from the trial court's denial of its summary judgment motion and entry of partial summary judgment in favor of Craighead.

A party is entitled to summary judgment upon demonstrating the absence of any genuine issue of fact as to a determinative issue unless the non-moving party comes forward with contrary evidence showing an issue of fact for trial. An appellate court reviewing a trial court summary judgment ruling likewise construes all facts and reasonable inferences in favor of the non-moving party and determines whether the moving party has shown from the designated evidentiary matter that there is no genuine issue as to any material fact and that it is entitled to judgment as a matter of law.

Dugan v. Mittal Steel USA Inc. , 929 N.E.2d 184, 185–86 (Ind. 2010) (citations omitted).

[9] When, as here, the material facts are undisputed and the case involves statutory or insurance contract interpretation, the case is suited for summary judgment, and our standard of review is de novo. See Meridian Mut. Ins. Co. v. Majestic Block & Supply, Inc. , 1 N.E.3d 173, 178 (Ind. Ct. App. 2013) (noting that contract interpretation is a question of law), and Ramirez v. Wilson , 901 N.E.2d 1, 2 (Ind. Ct. App. 2009) (noting that statutory interpretation is a question of law), trans. denied. Although it is true that the appellant must prove that the trial court's grant or denial of summary judgment was erroneous, that "burden is largely symbolic and nominal" as we "will not hesitate to reverse a trial court's ruling if it has misconstrued or misapplied the law[.]" Beta Steel v. Rust , 830 N.E.2d 62, 68 (Ind. Ct. App. 2005). Consequently, while the trial court's findings of fact and conclusions of law might provide insight into its decision, "they are not binding on this court." Ackles v. Hartford Underwriters Ins. Corp. , 699 N.E.2d 740, 742 (Ind. Ct. App. 1998), trans. denied.

I. Whether the Setoff Clause is Enforceable

[10] Disposition of this issue requires us to examine various provisions of Indiana Code chapter 27-7-5, which is entitled "Uninsured Motorist Coverage and Underinsured Motorist Coverage[.]"

Our first task when interpreting a statute is to give its words their plain meaning and consider the structure of the statute as a whole. We avoid interpretations that depend on selective reading of individual words that lead to irrational and disharmonizing results. As we interpret the statute, we are mindful of both what it does say and what it does not say. To the extent there is an ambiguity, we determine and give effect to the intent of the legislature as best it can be ascertained. We do not presume that the Legislature intended language used in a statute to be applied illogically or to bring about an unjust or absurd result.

ESPN, Inc. v. Univ. of Notre Dame Police Dep't , 62 N.E.3d 1192, 1195–96 (Ind. 2016) (citations, quotations marks, and brackets omitted).

A. Whether UIM Coverage Above the Statutory Minimum May Be Set Off by MPC Payments

[11] Section 27-7-5-2(a) provides, in part, as follows:

The uninsured and underinsured motorist coverages must be provided by insurers [...] in limits at least equal to the limits of liability specified in the bodily injury liability provisions of an insured's policy, unless such coverages have been

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