Progressive Se. Ins. Co. v. Smith

• Decision Date: 02 January 2020
• Docket Number: Court of Appeals Case No. 19A-PL-1094
• Citation: 140 N.E.3d 292
• Parties: PROGRESSIVE SOUTHEASTERN INSURANCE CO., Appellant-Plaintiff, v. Gregory SMITH and Nolan Clayton, Appellees-Defendants and Erie Insurance Group, Brackett Restaurant Group, LLC, d/b/a Stacked Pickle, and Allstate Insurance Company, Defendants
• Court: Indiana Appellate Court

140 N.E.3d 292

PROGRESSIVE SOUTHEASTERN INSURANCE CO., Appellant-Plaintiff,

v.Gregory SMITH and Nolan Clayton, Appellees-DefendantsandErie Insurance Group, Brackett Restaurant Group, LLC, d/b/a Stacked Pickle, and Allstate Insurance Company, Defendants

Court of Appeals Case No. 19A-PL-1094

Court of Appeals of Indiana.

FILED January 2, 2020

As corrected on rehearing March 4, 2020

[1] This is the second appeal arising out of a declaratory judgment action that was filed by Progressive Southeastern Insurance Company (Progressive). The action was based on a car accident that seriously injured Gregory Smith, who was insured by Progressive. At the time of the accident, Nolan Clayton was driving Smith's vehicle with Smith's permission and Smith was a passenger. Progressive sought declarations that Smith was not entitled to coverage under the insurance policy's uninsured motorist or bodily injury liability provisions and that it had no duty to defend or indemnify Clayton. In the first appeal, this Court determined that Smith was not entitled to uninsured motorist coverage.

[2] This appeal stems from litigation that occurred following the first appeal. The trial court granted Smith's motion to dismiss the complaint, finding that Progressive had waived its other claims by bringing the first appeal. Progressive now appeals, arguing that it waived no claims, that we should declare that Smith is not entitled to bodily injury liability coverage, that we should declare that Progressive has no duty to defend or indemnify Clayton, and that Clayton is not entitled, at this point in time, to dismissal of the complaint based on alleged failure to prosecute. Finding that Progressive is entitled to judgment as a matter of law, we reverse and remand with instructions.

Facts¹

Underlying Litigation and First Appeal

[3] The underlying facts, as described by this Court in the first appeal, are as follows:

On February 18, 2016, Smith and Clayton attended a company event in Marion County, Indiana. They left the event together and Smith gave Clayton permission to drive Smith's pick-up truck. Clayton lost control over the vehicle and ran into a tree, seriously injuring Smith. No other vehicles were involved in the accident.

At the time of the incident, Progressive insured Smith under a policy which provided coverage for liability, medical payments, [underinsured motorist ("UM") ] coverage, coverage for damage to the insured's vehicle, and roadside-assistance coverage. Accordingly, Progressive paid Smith's vehicular damages in the amount of $10,937.71 and the medical payments coverage limits of $5,000. Smith also brought a negligence claim against Clayton, who was insured by Allstate. Allstate eventually settled out of court with Smith.

Progressive Se. Ins. Co. v. Smith , 113 N.E.3d 229, 232 (Ind. Ct. App. 2018) (the "First Appeal"), trans. denied.

[4] On January 19, 2017, Progressive filed a complaint seeking two declaratory judgments. First, it sought a declaration that Smith was "not entitled to coverage under his policy's [UM] or bodily injury provisions" for the accident (the "Coverage Declaration"). Appellant's App. Vol. II p. 26. Second, it sought a declaration that Progressive was "not obligated to defend or indemnify [Clayton] as to any matter asserted in [Smith's] lawsuit^{[2 ]} because [Smith] cannot recover under his own policy for the injuries he attributes to" Clayton's negligence (the "Duty to Defend Declaration"). Id.

[5] On April 27, 2017, Smith filed a motion for summary judgment, seeking a declaration that he was entitled as a matter of law to UM coverage even though his truck was covered under the policy. Smith has never argued that he is entitled to coverage under the policy's bodily injury liability provision and has conceded that he could not pursue recovery under both that provision and the UM coverage provision. Id. at 87-105, 158; First Appeal Smith's Br. p. 20; First Appeal Oral Arg. at 31:45; First Appeal Pet. to Trans. p. 12. Progressive filed its own motion for summary judgment, arguing that it was entitled as a matter of law to a declaration that Smith was not entitled to UM coverage under the policy.

[6] On December 14, 2017, without a hearing, the trial court signed Smith's proposed findings and summarily granted summary judgment to him and against Progressive on the UM portion of the Coverage Declaration. Neither party discussed, and the trial court's order did not cover, the Duty to Defend Declaration or the bodily injury liability portion of the Coverage Declaration.

[7] Progressive appealed, arguing that the trial court erred by granting summary judgment in Smith's favor. It did not seek permission to bring an interlocutory appeal; instead, Progressive brought the appeal as one taken from a final judgment, and this Court treated it as such. This Court ultimately found that the trial court erred because the policy "unambiguously excluded Smith's truck from UM coverage and the policy reimbursed Smith for the damage to his vehicle and his medical payments pursuant to the policy's requirements ...." Progressive , 113 N.E.3d at 237. We reversed, holding that the trial court erred by concluding that Smith was entitled to receive payment under the policy's UM coverage. Id. We did not explicitly remand, direct that judgment be entered in favor of Progressive, or refer to the Duty to Defend Declaration or the bodily injury portion of the Coverage Declaration.

Other Litigation Stemming from the Accident

[8] As context, we note that there are at least three other lawsuits stemming from the accident:³

• The Tort Action, in which Smith brought a personal injury action against Clayton. Progressive defended Clayton under a reservation of its rights⁴ to, among other things, argue in another setting that it had no duty to defend or indemnify him. The jury found in favor of Smith, entering a total judgment against Clayton of $21.7 million. Clayton appealed unsuccessfully. Clayton v. Smith , 113 N.E.3d 693 (Ind. Ct. App. 2018), trans. denied .⁵

• The Malpractice Action, in which Clayton filed a claim for legal malpractice against Progressive and the lawyers it engaged to defend him in the Tort Action. The trial court granted Progressive's motion to dismiss the malpractice action as it pertained to Progressive and certified the dismissal for interlocutory appeal. This Court has since denied the motion for interlocutory appeal (under Cause Number 19A-PL-2001), and the matter has been remanded to the trial court.

• The Bad Faith Action, in which Smith, as Clayton's assignee, is pursuing claims against Progressive, including bad faith, negligent claims handling, negligent selection and retention of attorneys, respondeat superior liability, liability of a principal for the actions of an agent, breach of contract, and breach of the duty to defend. The trial court granted Progressive's motion to dismiss Smith's complaint. Smith has appealed that order and the appeal is currently being briefed under Cause Number 19A-PL-1959.

Progressive filed a motion to consolidate the appeals, which is moot as to the Malpractice Action, and which we have denied as to the Bad Faith Action.

Litigation Following the First Appeal

[9] After our Supreme Court denied transfer and the First Appeal was certified, Clayton appeared in the declaratory judgment action for the first time. On February 18, 2019, his attorney filed an appearance and request for an enlargement of time to respond to the complaint; the trial court granted the request. On February 22, 2019, Clayton filed a motion seeking a declaration that he was never properly served with the declaratory judgment action. Progressive opposed Clayton's request, arguing that it was entitled to judgment in its favor on the Duty to Defend Declaration, but if the trial court declined to enter that judgment, Progressive requested an opportunity for discovery and an evidentiary hearing as to whether Clayton had been served properly. On March 4, 2019, Clayton filed a Trial Rule 41(E) Motion to Dismiss for failure to prosecute.

[10] On February 19, 2019, Smith filed a motion to dismiss and close the litigation, arguing that by treating the trial court's order as a final and appealable judgment, Progressive had waived the other pending issues—namely, the Duty to Defend Declaration and, as to Clayton, the bodily injury liability portion of the Coverage Declaration. Progressive opposed the motion, arguing that the trial court's order was a declaratory judgment deemed final by operation of law and that Progressive had not waived any issues by appealing that declaratory judgment. Progressive asked that the trial court enter final judgment in its favor on all issues in the complaint.

[11] Following a hearing, the trial court entered an order on all pending motions on May 2, 2019. The trial court granted Smith's motion to dismiss and close the litigation and denied all other motions and requests as moot. Progressive now appeals.

Discussion and Decision

[12] Progressive raises the following arguments on appeal: (1) the First Appeal was a mandatory appeal of a final judgment and Progressive waived no other issues as a result of bringing that appeal; (2) Progressive is entitled to a final judgment on the Coverage Declaration, including a declaration that Smith is not entitled to coverage under the policy's bodily injury provisions; (3) Progressive is entitled to a final judgment on the Duty to Defend Declaration because Smith and Clayton's interests align and Smith has no right to recover under the policy's bodily injury provisions; and (4) the trial court properly denied Clayton's motion to dismiss because Clayton has not showed prejudice as a result of his tardy participation in the underlying proceedings, but that if we were to reverse, Progressive is entitled to an evidentiary hearing on Clayton's arguments.

I. The Coverage and Duty to Defend Declarations

[13] The parties spend much time debating whether Progressive waived its...