Gallant Ins. Co. v. Oswalt

• Decision Date: 12 February 2002
• Docket Number: No. 43A04-0104-CV-148.,43A04-0104-CV-148.
• Citation: 762 N.E.2d 1254
• Parties: GALLANT INSURANCE COMPANY, Appellant-Garnishee-Defendant, v. Jeffrey OSWALT, Appellee-Plaintiff, and Donald Chadwick, Appellee-Defendant.
• Court: Indiana Appellate Court

762 N.E.2d 1254

GALLANT INSURANCE COMPANY, Appellant-Garnishee-Defendant, v. Jeffrey OSWALT, Appellee-Plaintiff, and Donald Chadwick, Appellee-Defendant.

No. 43A04-0104-CV-148.

Court of Appeals of Indiana.

February 12, 2002.

Michael E. O'Neill, Scott B. Cockrum, Eichhorn & Eichhorn, Hammond, IN, Attorneys for Appellant.

Michael L. Valentine, William S. Fawley, Valentine & Miner, Warsaw, IN, Attorneys for Appellee.

OPINION

BARNES, Judge.

Case Summary

This case arises from the trial court's grant of summary judgment against Gallant Insurance Company in a proceedings supplemental action brought by Jeffrey Oswalt. We affirm in part and reverse in part.

Issues

Gallant raises three issues for our review, which can be consolidated and restated as the following two issues:

I. whether the trial court erred in granting summary judgment in spite of Gallant's showing that it had defended Chadwick under a reservation of rights; and

II. whether the trial court erred by not granting Gallant's cross-motion for summary judgment in its declaratory judgment action.

Facts¹

Jeffrey Oswalt sued Donald Chadwick on December 13, 1996, claiming personal injuries resulting from an automobile accident that had occurred on June 22, 1996. On April 7, 1997, Gallant notified Chadwick in writing that because he had failed to comply with the terms and conditions of his insurance policy, it would be proceeding in his defense under a reservation of rights. Due to difficulty in communicating with Chadwick, Gallant performed a skip-trace on August 20, 1998, to locate him. When the skip-trace revealed a new address, Gallant advised him a second time, on October 8, 1998, that it was defending Oswalt's claim against him under a reservation of rights due to his failure to cooperate in the defense. On October 28, 1998, Chadwick assisted the counsel Gallant had retained, Kenneth Wilk, in completing Oswalt's "First Set of Interrogatories."

Despite counsel's admonishments to Chadwick that it was necessary to be present for trial, he failed to appear. On October 13, 1999, at the conclusion of a two-day jury trial, Oswalt obtained a judgment of approximately $56,000 against Chadwick. On January 26, 2000, Oswalt initiated proceedings supplemental to execution, naming Gallant Insurance Company as garnishee-defendant. In its answer filed February 18, 2000, Gallant asserted Chadwick had "failed to appear for trial or otherwise cooperate" with Gallant in his defense, in so doing had breached the insurance policy issued him by Gallant, and thus was not entitled to coverage. Appendix p. 40.

Gallant next filed a motion for declaratory judgment on March 15, 2000, seeking the trial court's determination that it did not owe Chadwick coverage under the policy due to his failure to cooperate in defending Oswalt's suit. On January 10, 2001, Oswalt moved for summary judgment, filing a memorandum in support thereof and designating inter alia the affidavits of Chadwick and Oswalt's counsel, Michael Valentine. In relevant part, Chadwick averred that: he was insured by Gallant at the time of the accident; he had been "accessible by telephone" and had participated in "three or four phone discussions" with Kenneth Wilk, the first attorney Gallant retained to represent him; and he had "two conversations" with the attorney subsequently retained by Gallant to replace Wilk. Appendix pp. 68-69. He averred that he told the second attorney that he "understood the importance of attendance at the trial and ... wanted to be there," and had asked him "to try to have the date of the trial moved" so he could attend. Appendix p. 69. However, his affidavit also states that he had been informed that the trial date could not be changed.

The thrust of Valentine's affidavit was that Chadwick's counsel "never mentioned the defense of `failure to cooperate'" to him "before, during or after the trial in this matter." Appendix p. 72. He also averred that Chadwick's counsel had not tried to change the trial date by informing him or the court of Chadwick's inability to attend, and that had he "known that [Chadwick's counsel] would attempt to assert the `failure to cooperate' defense after the trial," he "would have attempted to use the Court's subpoena power to secure Mr. Chadwick's attendance at the trial in an effort to conserve judicial resources by avoiding this post-trial litigation." Appendix p. 73.

The trial court granted Oswalt's summary judgment motion on March 7, 2001, finding in part "[t]hat neither at the trial of this action, nor prior thereto, was any claim made or presented to the Court that [Chadwick] failed to cooperate or in any way breached the cooperation clause of the underlying policy in this case." Appendix p. 10. Gallant appeals.

Analysis

Summary Judgment in Proceedings Supplemental

When reviewing a grant or denial of summary judgment, our well-settled standard of review is the same as it was for the trial court: whether there is a genuine issue of material fact and whether the moving party is entitled to judgment as a matter of law. Hibler v. Conseco, Inc., 744 N.E.2d 1012, 1017 (Ind.Ct.App.2001) (citing Ind.Trial Rule 56(C)). Summary judgment is appropriate only when no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Id. A trial court's ruling on a motion for summary judgment reaches this court clothed with a presumption of correctness. Id. at 1018. When reviewing the trial court's ruling we will affirm on any theory supported by the material properly designated to the trial court. Id.

A trial court is vested with broad discretion in conducting proceedings supplemental. Hermitage Ins. Co. v. Salts, 698 N.E.2d 856, 858 (Ind.Ct.App.1998). Proceedings supplemental, as provided for in Indiana Trial Rule 69, are summary in nature because the claim has already been determined to be a justly owed debt reduced to judgment. Id. As this court recognized in Gallant Ins. Co. v. Wilkerson:

The filing of a motion for proceedings supplemental "speaks only to how the claim is to be satisfied, whereas the complaint in the original action speaks to whether the claim should be satisfied." Proceedings supplemental are merely a continuation of the underlying claim initiated under the same cause number for purposes of enforcing a judgment.

720 N.E.2d 1223, 1229 (Ind.Ct.App.1999) (citations omitted).

I. Reservation of Rights/Non-cooperation as a Defense in Proceedings Supplemental

In addition to its discussion of the nature of proceedings supplemental, Wilkerson also stated the following proposition:

When an insurer questions whether an injured party's claim falls within the scope of policy coverage or raises a defense that its insured has breached a policy condition, the insurer essentially has two options: (1) file a declaratory judgment action for a judicial determination of its obligations under the policy; or (2) hire independent counsel and defend its insured under a reservation of rights.

Id. at 1227. In Wilkerson, we reviewed and affirmed the trial court's determination that Gallant had waived the defense of non-cooperation and was therefore estopped from raising it during proceedings supplemental. 720 N.E.2d 1223, 1227-28 (Ind.Ct.App.1999). Those facts differed from this case as follows: at the time of trial the insured, Burton, was imprisoned at the Indiana Department of Correction and Gallant did not seek the assistance of the trial court to secure his attendance at trial. Furthermore, Gallant contacted Burton only twice prior to the trial. We noted:

"[a]n insurer may not raise a policy defense when it has defended and lost the underlying claim without reservation of rights." ... Gallant had a full and fair opportunity to raise Burton's alleged non-cooperation in the underlying tort action and could have protected its interests either by defending Burton under a reservation of rights or by filing a declaratory judgment action on the issue of his cooperation.

Id. at 1229, (quoting Western States Ins. Co. v. Weller, 299 Ill.App.3d 317, 233 Ill. Dec. 692, 701 N.E.2d 542, 545 (1998)) (emphasis added). Here, Gallant (1) performed a skip-trace to locate Chadwick; (2) attempted to contact Chadwick numerous times; (3) sent at least two separate letters indicating its reservation of rights; and (4) stressed to Chadwick the importance of his appearance at the trial and the potential consequences—including loss of coverage—if he did not appear. Clearly, the facts of Wilkerson are not on all fours with the facts of the instant case.

In Illinois Founders Ins. Co. v. Horace Mann, we reiterated the proposition that proceedings supplemental cannot be used as a collateral attack on the underlying judgment. 738 N.E.2d 705, 708 (Ind. Ct.App.2000) (citing Koors v. Great Southwest Fire Ins. Co., 538 N.E.2d 259, 260 (Ind.Ct.App.1989)). In proceedings supplemental to recover from a liability insurer, the judgment creditor bears the burden of showing a judgment, the insurance policy, and facial coverage under the policy. Gallant Ins. Co. v. Allstate Ins. Co., 723 N.E.2d 452, 454 (Ind.Ct.App.2000) (citing Hermitage, 698 N.E.2d at 859). In Horace Mann, we determined that a garnishee-defendant insurance company could not launch a collateral attack on the plaintiff's judgment by way of asserting the insured's non-cooperation because it had not so claimed at trial. 738 N.E.2d 705, 707-08 (Ind.Ct.App.2000). We cited Wilkerson, where we had noted the general rule that

an automobile liability insurer which learns before the trial of an action against its insured that the insured has breached the cooperation clause of the policy, and nevertheless defends him at trial, thereby waives or is estopped to assert the insured's noncooperation in a subsequent action to recover on the policy. This rule has been applied in a number of cases in which the insured failed to appear at the trial of the original action brought against him or her,

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