Phico Ins. Co. v. Aetna Cas. and Sur. Co.

• Decision Date: 28 March 2000
• Docket Number: No. IP 96-1899-C-T/G.,IP 96-1899-C-T/G.
• Parties: PHICO INSURANCE COMPANY, Plaintiff, v. AETNA CASUALTY AND SURETY COMPANY OF AMERICA, Travelers/Aetna Property-Casualty Corporation, and Robert T. Sanders, III Defendants.
• Court: U.S. District Court — Southern District of Indiana

93 F.Supp.2d 982

PHICO INSURANCE COMPANY, Plaintiff, v. AETNA CASUALTY AND SURETY COMPANY OF AMERICA, Travelers/Aetna Property-Casualty Corporation, and Robert T. Sanders, III Defendants.

No. IP 96-1899-C-T/G.

United States District Court, S.D. Indiana, Indianapolis Division.

March 28, 2000.

COPYRIGHT MATERIAL OMITTED

John P McQuillan, Spangler Jennings & Dougherty P C, Merrillville, IN, for plaintiff.

Nicholas C Nizamoff, White & Raub, Indianapolis, IN, for Robert T. Sanders, III, defendant.

Carl R Pebworth, Baker & Daniels, Indianapolis, IN, for Travelers Property Cas. Corp., defendant.

Christopher G Scanlon, Carl R. Pebworth, Baker & Daniels, Indianapolis, IN, for Travelers Cas. & Sur. Co., defendant.

Entry Ruling On Motions

TINDER, District Judge.

This action was brought by PHICO Insurance Company ("PHICO"), an excess insurer, against Aetna Casualty and Surety Company of America, Travelers/Aetna Property-Casualty Corporation ("Aetna"),¹ a primary insurer. Aetna tendered the policy limits in an underlying tort action brought against its insureds; thereafter, PHICO settled with the plaintiffs in the underlying action. PHICO has sued Aetna to recover the sums paid in that settlement. PHICO filed two motions for partial summary judgment, and Aetna filed a motion for summary judgment on PHICO's complaint. Also pending are the following: (1) Aetna's Motion to Strike Certain Evidence Designated by Plaintiff in Opposition to Defendants' Motion for Summary Judgment; (2) Plaintiff's Motion to Strike Certain Portions of Aetna's Reply Brief in Support of Its Motion for Summary Judgment; (3) Defendants' Motion to Compel Discovery Pursuant to FED. R. CIV. P. 37; (4) Plaintiffs' (sic) Motion to Quash Request to Produce and Permit Inspection of Documents Under Rule 34(C) of Defendants to General Reinsurance Corporation; and (5) Plaintiff's Motion to Compel Discovery.

I. Summary Judgment Standard

Summary judgment should be granted "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." FED. R. CIV. P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). If the party opposing the motion bears the burden of proof at trial on an issue, that party can avoid summary judgment only by setting forth "specific facts showing that there is a genuine issue for trial." FED. R. CIV. P. 56(e).

When ruling on a motion for summary judgment, the court must construe the evidence in the light most favorable to the nonmoving party and draw all reasonable inferences in favor of that party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The motion should be granted only if no reasonable jury could return a verdict for the nonmoving party. See id. at 248, 106 S.Ct. 2505.

II. Background

On November 6, 1992, a van driven by Linda Taylor, a Memorial Health System, Inc. ("Memorial") employee, was involved in a one vehicle accident. Taylor's passengers, Winona McGinnis and Wanda Morris, suffered serious personal injuries. At the time of the accident, Aetna insured Memorial under a policy of business automobile liability insurance with limits of $1,000,000. Memorial also had an umbrella policy issued by PHICO that provided excess insurance coverage of an additional $10,000,000 in limits. PHICO's policy provides in pertinent part:

the Company [PHICO] shall have the right to associate with the insured or the underlying insurer in the defense of any claim or proceeding for which coverage may be afforded by this policy and to make such investigation relative to any such claim or proceeding as it deems expedient.

(PHICO's Ex. G. at 1.) (Emphasis in original). Coverage under the liability policies for the claims of Taylor's passengers, McGinnis and Morris, turned on whether they were employees of Memorial with an exclusive remedy under the Workers' Compensation Statute or, rather, independent contractors free to sue Memorial and Taylor in a claim insured by the Aetna and PHICO policies.

On April 15, 1993, Aetna filed a declaratory judgment action to resolve this question, naming PHICO as a third party defendant. Morris and her husband sued Memorial, alleging that Memorial was liable for Taylor's alleged negligence in the operation of her vehicle. The Morris case was consolidated with the pending declaratory judgment action for discovery and pretrial matters. McGinnis and her husband also sued Memorial and Taylor. Unlike the Morris case, McGinnis' claim was filed in a different court and was not directly linked with the declaratory judgment action.

Pursuant to its obligations under the Aetna Policy, Aetna retained Robert T. Sanders, III as defense counsel for Memorial and Taylor in the lawsuits brought by McGinnis and Morris. On December 23, 1994, Sarang Honap, an Aetna claim representative, wrote David Mallon, an attorney representing PHICO, reporting, "Our investigation sofar [sic] indicates that the total damage value of the above mentioned claimants may well exceed our limits." (Ericson Dep. at 16-17, Ex. 2749.) Mallon sent this report on to PHICO. On January 9, 1995, Honap wrote Mallon again, stating, "In regards to Winona McGinnis I am enclosing a copy of the report from Paul M. Deutsch dated October 7, 1994 and a copy of the review of this report done by our Home Office Consultant, Jim Urso. Philco [sic] Insurance Company may want to consider this in their evaluation." (Honap Dep. at 55, Ex. 6803.)

Over the next several months, Aetna and Sanders communicated in writing with PHICO and its attorneys regarding the status of the McGinnis case (the Morris case remained dormant awaiting resolution of the declaratory judgment action). PHICO was in direct contact with Sanders, too. On January 24, 1995, R. Peter Ericson, PHICO's assistant general counsel, contacted Aetna regarding his understanding of PHICO's likely exposure under the McGinnis claim and demanding information from Honap:

It is ... my understanding that the case may will [sic] have a value which exceeds the $1,000,000 limit of the hospital's automobile liability policy with Aetna.

In light of the potential exposure in excess of the Aetna policy limit, I demand that you immediately supply me with a status report on this matter. This report should contain a summary of all discovery taken in the case, a list of the plaintiff's expert witnesses together with summaries of their opinions and a list of all witnesses being present on behalf of Memorial Health Systems together with summaries of their opinions.

(Ericson Dep. at 19, Ex. 2743) (emphasis added). On February 3, 1995, Sanders responded — at Honap's request — to Ericson's request for information, providing Ericson with a summary of the status of the McGinnis case, which Ericson sent on to Bill Manley, a PHICO claims manager.

In a February 7, 1995, file memorandum, Lynne Kuhns, a PHICO claims professional, reported "I asked Bob [Sanders] what he felt a probable jury award would be and he estimated $1.5 to $2 million." (Kuhns Dep. at 74-76, Ex. 2728.) On February 10, 1995, Honap wrote Kuhns, again reporting that Aetna believed that the McGinnis claims would implicate PHICO's excess coverage. On February 20, 1995, Kuhns submitted a claim to General Re Services Corporation ("Gen Re"), PHICO's reinsurer for claims arising under the PHICO Policy reporting that PHICO had potential exposure in the McGinnis case. On February 24, 1995, Carol A. Seaton, a Gen Re claims representative, wrote back, with her analysis of the Morris and McGinnis claims, indicating that "Winona McGinnis' claim may have a settlement value as high as $1,700,000, or more, and Wanda Morris' claims may have a settlement value as high as $350,000 or more." (Id. at 88-99, Ex. 2695) (emphasis added).

On March 3, 1995, the court in the McGinnis case entered a scheduling order setting the trial date for August 8, 1995. The scheduling order directed McGinnis to identify testimonial accident reconstruction witnesses and economic witnesses and serve their written reports on or before May 1, 1995 and Memorial to name its experts and serve reports on these subjects by June 2, 1995. On March 7, 1995, Binion prepared a file memo regarding the McGinnis case in which she stated, "This is a case that we will undoubtly [sic] be paying some dollars on." (Binion Dep. at 30, Ex. 2658.) Later that month, Sanders sent a copy of this scheduling order to Linda Binion, a PHICO litigation specialist assigned to the case.

On May 1, 1995, Sanders sent Binion the expert witness submissions that McGinnis had submitted. In the cover letter to Honap, Sanders noted, "It is my understanding that you [Honap] will review this matter with representatives of Phico and Linda Sue Taylor's personal lines carrier for the purpose of determining whether we should obtain contrary expert evidence." (Binion Dep. at 39, Ex. 2533.) In fact, Honap and Sanders solicited PHICO's input regarding decisions with respect to "obtaining contrary expert testimony" to McGinnis' expert witnesses. (Id. at 39-60, Exs. 2538, 2535, 2532; Honap Dep. at 72-76, Exs. 2538, 6543, 2532.)

On May 4, 1995, Binion prepared a summary for Manley regarding the status of the matter, again observing, "This is a case of clear liability." (Binion Dep. at 43, Ex. 2603 (emphasis added)). She concluded:

The plaintiff's [sic] have done a good job working the case and getting it ready for trial. So far, Aetna has not engaged any experts to contradict any of the plaintiffs [sic] damages, or have the plaintiff evaluated in any way. Therefore, a letter has been directed to the [sic] Aetna outlining several activities for them to perform immediately, or we may take the position that we have been unduly prejudiced from appropriately evaluating the case. In...