Miller v. Dilts

• Decision Date: 18 May 1984
• Docket Number: Nos. 584S186,584S187 and 584S188,s. 584S186
• Citation: 463 N.E.2d 257
• Parties: Ellawione L. MILLER and Clifford Miller, Appellants, v. Daniel DILTS and William Dilts, Appellees, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellee. INDIANA INSURANCE COMPANY, Appellant, v. John R. WILLIAMS, d/b/a Williams Motor Sales, John E. Williams, and Sherry Hart, Appellees. James M. KOSANOVICH, Appellant, v. Tom Eugene MEADE, Appellee, v. NATIONAL INSURANCE ASSOCIATION, Appellee.
• Court: Indiana Supreme Court

Page 257

463 N.E.2d 257

Ellawione L. MILLER and Clifford Miller, Appellants, v. Daniel DILTS and William Dilts, Appellees, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellee.

INDIANA INSURANCE COMPANY, Appellant, v. John R. WILLIAMS, d/b/a Williams Motor Sales, John E.

Williams, and Sherry Hart, Appellees.

James M. KOSANOVICH, Appellant, v. Tom Eugene MEADE, Appellee, v. NATIONAL INSURANCE ASSOCIATION, Appellee.

Nos. 584S186, 584S187 and 584S188.

Supreme Court of Indiana.

May 18, 1984.

Daniel J. Harrigan, Bayliff, Harrigan, Cord, Maugans & Russell, P.C., Kokomo, Donald H. Leslie, Marion, for appellants in No. 584S186.

Herbert A. Spitzer, Jr., Phillip E. Stephenson, Browne, Torrance, Spitzer, Herriman, Browne & Stephenson, Marion, for appellees in No. 584S186.

Steven R. Crist, Terence M. Austgen, Singleton, Levy, Crist & Johnson, Highland, for appellant in No. 584S187.

John S. Diaz, J. Sebastian Diaz & Assoc., P.C., Portage, for appellees in No. 584S187.

William J. Cohen, Slabaugh, Cosentino, Walker & Shewmaker, Elkhart, for appellant in No. 584S188.

James F. Groves, Lee, Groves & Cotter, South Bend, for National Insurance Association.

PIVARNIK, Justice.

We consider here three causes that come to us on petitions to transfer from the Indiana Court of Appeals. The causes are unrelated but each concerns issues involving the notice provisions found in insurance contracts and we consolidate them only for purposes of our consideration and written opinion so that these issues might be resolved.

Indiana Insurance Co. v. Williams, (1983) Ind.App., 448 N.E.2d 1233, comes to us from the Court of Appeals, Third District, as Cause No. 3-782 A 159. The opinion was handed down on May 25, 1983. The cause was originally heard in Lake Superior Court. Indiana Insurance Company had issued an automobile liability policy to the defendant, John E. Williams. On April 20, 1980, at approximately 4:00 a.m., defendant Williams was involved in an automobile accident with Sherry Hart. As a result of the accident, Williams was charged with driving under the influence of alcohol and entered into a court approved plea agreement in which he admitted his guilt. Williams agreed to assume liability for and pay all damages resulting from the automobile accident and to compensate Sherry Hart for her damages. Williams did not give notice of the accident to Indiana Insurance until October 9, 1980, approximately six months after the accident and more than one month after Williams entered into his plea agreement.

Indiana Insurance filed a request for declaratory judgment, asking that the trial court determine that it did not owe Williams any insurance obligation due to his violation of the provisions of the automobile insurance policy: the duty to promptly notify and the duty to cooperate. Later, the insurance company filed a motion for summary judgment with a verified affidavit by the insurance supervisor handling the matter. The trial court initially granted summary judgment in favor of Indiana Insurance, then reversed itself and granted defendants' motion to correct errors based on affidavits submitted by Hart and Williams which challenged the claim of Williams' noncompliance with policy provisions.

The Court of Appeals affirmed the trial court's reversal of summary judgment in a two to one decision (Hoffman, J., dissenting). The Court of Appeals determined that the trial court erred when it accepted and considered the affidavits which were filed with the defendants' motions to correct errors. Indiana Insurance agrees with this holding and does not raise it in this petition to tranfer. The Court of Appeals went on to hold, however, that summary judgment was still improperly granted because the insurance company failed to show that it was actually prejudiced by Williams' six month notification delay. (emphasis added) 448 N.E.2d at 1237. The Court of Appeals reasoned that a failure to notify should be treated the same as a failure to cooperate and thus required a showing of prejudice. Id.

Kosanovich v. Meade, (1983) Ind.App., 449 N.E.2d 1178, Cause No. 3-282 A 30, also comes to us from the Court of Appeals, Third District. The opinion was handed down on June 23, 1983. The cause was originally heard in Elkhart Superior Court. The insured, Tom Meade, was driving his car when it hit Kosanovich's car. Meade had automobile insurance with National Insurance Association. After National and Kosanovich were unable to reach a settlement, Kosanovich brought suit against Meade and obtained a judgment for $7,884.74. Kosanovich then attempted to garnish the proceeds of the insured's policy with National. The insurance company, as garnishee defendant, filed a cross-claim against Meade for a declaratory judgment that under its policy National was no longer obligated to Meade because he failed to give prompt notice of the accident and suit. Kosanovich was allowed to intervene in the cross-claim and filed an answer which contradicted National's claim of not receiving notice. The trial court found that National had been prejudiced by not having had notice of Kosanovich's suit against its insured and, as a result, National was not liable under its policy to Meade. Having found that National was not liable to Meade, the trial court concluded that Kosanovich could not garnish the policy's proceeds and entered summary judgment in favor of National.

The Court of Appeals, again, in a two to one decision, (Hoffman, J., dissenting) followed its ruling in Indiana Insurance, claiming there is no material difference between a notice provision and a cooperation provision in an automobile liability policy. Accordingly, the Court of Appeals found that the trial court had applied an improper standard by not requiring a showing of prejudice to the insurer and reversed the trial court's entry of summary judgment. 449 N.E.2d at 1180. Kosanovich raised a separate issue concerning the Indiana Motor Vehicle Safety--Responsibility and Driver Improvement Act, Ind.Code Sec. 9-2-1-5(c) (Burns Repl.1980), but it is not under consideration on this petition to transfer.

Miller v. Dilts, (1983) Ind.App., 453 N.E.2d 299, comes to us from the Court of Appeals, Fourth District, as Cause No. 4-183 A 27. The opinion was handed down on August 31, 1983. The cause was originally heard in Delaware Circuit Court. On February 2, 1979, Daniel Dilts was driving his father's car when it struck the Millers' truck and Mrs. Miller. The Millers were standing by the truck at the time. After the Millers filed suit on September 5, 1979, State Farm Mutual Insurance Company was notified about the accident. The attorney for State Farm first appeared for the Dilts after the suit was filed, but later withdrew in October when State Farm learned the Dilts had not complied with the notice provision in the policy. State Farm refused to defend the suit. After the Dilts stipulated liability, the trial resulted in a judgment of $27,500 for the Millers. The Millers attempted to garnish the amount from State Farm but the trial court entered summary judgment for the insurance company, holding that the insured's failure to give notice until seven months after the accident unduly prejudiced State Farm.

The Fourth District (Young, J., dissenting without opinion) followed the Third District's rulings in Indiana Insurance and Kosanovich and held that Indiana has rejected the presumption of prejudice where an insured does not promptly notify the insurer about an accident. 453 N.E.2d at 301. The entry of summary judgment was reversed and the case was remanded for further proceedings.

The common question in each of the three transfer cases is whether there is a difference between a duty to give prompt notice and a duty to cooperate in an automobile insurance policy. The insurers contend that an insurance company is entitled to a presumption of prejudice if it receives unreasonably late notice of an automobile accident or cause of action involving its insured, but at the same time they agree that there must be a showing of prejudice if the insured violates the duty to cooperate clause. The Court of Appeals, Third and Fourth Districts, held that there is no difference and that each violation requires a showing of prejudice to the insurer in order to avoid coverage under the policy. As an example of these two clauses, we set out here the provisions that were found in the insurance policy in Indiana Insurance:

PART VII--CONDITIONS

The insurance provided by this policy is subject to the following conditions:

A. YOUR DUTIES AFTER ACCIDENT OR LOSS:

1. You must promptly notify us or our agent of any accident or loss. You must tell us how, when and where the accident and loss happened. You must assist in obtaining the names and addresses of any injured persons and witnesses.

2. Additionally, you and other involved insured must:

a. Cooperate with us in the investigation, settlement or defense of any claim or suit. No insured shall, except at his or her own cost, voluntarily make any payment[,] assume any obligation or incur any expense.

The Court of Appeals correctly found in Indiana Insurance that the duties to notify and to cooperate are conditions precedent to the insurance company's liability to its insured. Motorist Mutual Insurance Co. v. Johnson, (1966) 139 Ind.App. 622, 218 N.E.2d 712; London Guarantee & Accident Co. v. Siwy, (1903) 35 Ind.App. 340, 66 N.E. 481. Where prejudice is created by the insured's noncompliance with the policy's provisions, the insurance company is relieved of its liability under the policy. Motorist, 139 Ind.App. at 631, 218 N.E.2d at 717. Indiana Insurance contends that prejudice to its ability to prepare an adequate defense is presumed from Williams' six month notification delay. With such a presumption in its favor, Indiana Insurance claims it was not obliged to show actual prejudice that resulted from the unreasonable delay in the giving of notice. The insurance company also...