Smith v. Progressive Se. Ins. Co.

• Decision Date: 10 June 2020
• Docket Number: Court of Appeals Case No. 19A-PL-1959
• Citation: 150 N.E.3d 192
• Parties: Gregory SMITH, As Assignee of Nolan Clayton, Appellant-Plaintiff, v. PROGRESSIVE SOUTHEASTERN INSURANCE COMPANY, Appellee-Defendant
• Court: Indiana Appellate Court

150 N.E.3d 192

Gregory SMITH, As Assignee of Nolan Clayton, Appellant-Plaintiff,

v.PROGRESSIVE SOUTHEASTERN INSURANCE COMPANY, Appellee-Defendant,

Court of Appeals Case No. 19A-PL-1959

Court of Appeals of Indiana.

Filed June 10, 2020

Attorneys for Appellant: Ann Marie Waldron, Waldron Law, Indianapolis, Indiana, Michael E. Simmons, Hume Smith Geddes Green & Simmons, LLP, Indianapolis, Indiana, Robert P. Thomas, Thomas Law Office, Indianapolis, Indiana

Attorneys for Appellee: J. Blake Hike, Larry L. Barnard, Carson LLP, Fort Wayne, Indiana

Robb, Judge.

Case Summary and Issues

[1] This action arises from a single-vehicle accident involving Gregory Smith and Nolan Clayton, who was driving Smith's vehicle. Smith sued Clayton to recover for his personal injuries and property damage and Smith's insurer, Progressive Southeastern Insurance Company ("Progressive"), arranged for legal counsel to defend Clayton pursuant to a reservation of rights. After a verdict was entered against Clayton for $21 million, Clayton irrevocably assigned to Smith any legal rights, claims, and causes of actions that Clayton may have against Progressive and the attorneys who represented him, Metzger Rosta, LLC ("Metzger"). Subsequently, Smith sued Progressive for bad faith. This case is before us because the trial court dismissed Smith's second amended complaint ("Second Complaint") against Progressive and denied his motion for joinder of parties or consolidation of actions. Smith now appeals, raising several issues for our review which we consolidate and restate as: 1) whether the trial court erred in dismissing Smith's Second Complaint and 2) whether the trial court erred in denying Smith's motion for joinder of parties or consolidation of actions. Concluding the trial court did not err in either respect, we affirm.

Facts and Procedural History

[2] Smith and Clayton were co-workers at the Stacked Pickle and eventually became friends. On February 17, 2016, Smith drove his truck, with Clayton as a passenger, to a company event at the Stacked Pickle. The two spent several hours drinking. In the early morning hours on February 18, Smith gave Clayton permission to drive Smith's truck. Clayton lost control of the truck and ran into a tree. Smith was ejected from the truck, suffered a broken neck, and was rendered a quadriplegic. As discussed below, multiple lawsuits have resulted from the accident.

Tort Action

[3] On June 15, 2016, Smith filed a complaint against Clayton to recover for personal injury and property damage. Progressive intervened to provide legal representation to Clayton pursuant to a reservation of rights¹ and arranged for Metzger to provide a defense for Clayton. Progressive also filed a Declaratory Judgment Action regarding coverage questions (discussed below) and moved to stay the Tort Action pending the resolution of the Declaratory Judgment Action. The trial court denied the motion to stay and the Tort Action proceeded. On December 11, 2017, a jury found in favor of Smith in the amount of $35 million, found Clayton sixty percent at fault, and therefore awarded Smith a judgment of $21 million against Clayton. The trial court also granted Smith a portion of prejudgment interest that he requested and added it to the judgment against Clayton.²

[4] On July 31, 2018, Clayton executed an Assignment of Legal Rights and Causes of Action ("the Assignment"), pursuant to which Clayton irrevocably assigned to Smith any legal rights, claims, causes of action and legal theories and recoveries against Progressive and Metzger to the extent that the rights and claims were assignable. See Appellant's Appendix, Volume 2 at 185. Clayton executed the Assignment so he could satisfy part of the judgment that he owed Smith. In exchange for the Assignment, Smith agreed not to pursue recovery from any of Clayton's personal assets.

Declaratory Judgment Action

[5] At the time of the accident, Progressive insured Smith under a policy which provided coverage for liability, medical payments, underinsured motorists, damage to the covered vehicle, and roadside-assistance. "Insured person" under the policy included anyone who had permission to use the covered vehicle. Id. , Vol. 4 at 140. A provision of the policy also stated that Progressive did not have a duty to defend an insured person for bodily injury to Smith. In January 2017, while the Tort Action was pending, Progressive filed a Complaint for Declaratory Judgment against Smith and Clayton requesting a determination that, according to the terms of the policy, Smith was not entitled to coverage under the policy's underinsured motorist or bodily injury provisions for injuries sustained in the accident and that Progressive was not obligated to defend or indemnify Clayton as a permissive driver of Smith's truck because Smith could not recover under the policy for Clayton's negligence. See id. , Vol. 3 at 21.

[6] Ultimately, the case came before this court on Progressive's appeal arguing that Smith was not entitled to bodily injury liability coverage and that it had no duty to defend or indemnify Clayton. The Duty to Defend Declaration in the policy stated, "Coverage under this Part I, including our duty to defend , will not apply to any insured person for ... bodily injury to [Smith] or a relative[.]" Id. , Vol. 4 at 141 (emphasis added). We concluded that Smith was not entitled to bodily injury coverage and that Progressive did not have (and has never had) a duty to defend Clayton. Progressive Se. Ins. Co. v. Smith , 140 N.E.3d 292, 298 (Ind. Ct. App. 2020).

Malpractice Action

[7] In October 2018, after Clayton executed the Assignment, he filed a Malpractice Action against Progressive and Metzger. See Appellant's App., Vol. 7 at 87. In July 2019, the trial court granted Progressive's motion to dismiss Clayton's complaint against it, finding that "[a]n insurer such as Progressive cannot practice law or be liable for legal malpractice by attorneys" and "Progressive cannot be liable for a claim of improper legal services, whether to Clayton or Smith." Id. at 93. At Clayton's request, the trial court certified its order of dismissal, but we denied Clayton's motion for leave to bring a permissive interlocutory appeal. At all times relevant to this litigation, the Malpractice Action has remained pending as to Metzger.

The Current Bad Faith Action³

[8] In September 2018, pursuant to the Assignment, Smith filed a complaint against Progressive. Smith also filed a motion for joinder of parties or, in the alternative, consolidation of actions. Smith sought to join Clayton as a plaintiff and Metzger as a defendant in his action against Progressive. In the alternative, Smith requested to consolidate Clayton's Malpractice Action with his own against Progressive because the two cases represent the two halves of the Assignment: "To the extent the claims are assignable, they are contained in [Smith's] Complaint. To the extent they are not assignable, they are included in the [Malpractice Action]." Id. , Vol. 4 at 17.⁴ Progressive filed a motion to dismiss Smith's complaint, alleging that it failed to state a claim upon which relief could be granted, and also opposed Smith's request for joinder of parties or consolidation. The trial court granted Progressive's motion, dismissed Smith's complaint, and denied Smith's motion for joinder of parties or consolidation.⁵

[9] Smith then filed the Second Complaint on January 21, 2019, which alleged, in relevant part:

49. Progressive is liable for the actions and inactions of the attorneys hired by it because it directed those actions by and through its oversight of the case and the Policy Manual.

50. Progressive is liable for the actions and inactions of the attorneys hired by it because it admitted it had a duty to defend Clayton and such duty is a non-delegable, contractual duty making it liable for the actions of any independent contractors.

51. The acts, omissions, conduct and activities of Progressive, directly and/or by and through its agents, servants and/or selected independent contractors in conjunction with and under the control and direction of Progressive, in handling, processing and conducting the contractual and non-delegable and/or voluntarily assumed duties and responsibilities of Progressive related to the claims of [Smith] against Clayton and/or as assignee of Clayton were negligent, grossly negligent, oppressive, willful and wanton, performed in bad faith, conducted for improper reasons and purposes and for the benefit of Progressive at the expense of Clayton, and for purposes of obstruction, delay and concealment from [Smith] as Clayton's assignee, and constitute a contractual breach of the duty of good faith and fair dealing, a tortious breach of the duty of good faith and fair dealing, negligent claim file handling, negligent hiring and retention, and bad faith.

52. The acts, omissions, conduct and activities of Progressive in handling, processing and conducting the contractual and non-delegable and/or voluntarily assumed duties and responsibilities of Progressive related to the claims of [Smith] against Clayton and/or as assignee of Clayton were performed and occurred, in part, upon advice of counsel.

53. As a direct and proximate result of the aforementioned actions, omissions, activities and conduct on the part of Progressive, its agents, servants and/or selected independent contractors, a judgment was rendered against Clayton in the [Tort Action] in the amount of Twenty-One Million Dollars ($21,000,000.00), together with pre-judgment interest in the amount of $714,574.35, all of which continues to accrue post-judgment interest at the rate of 8% per annum as Progressive, by and through its agents, servants and/or selected independent contractors continue to wrongfully obstruct and impede Clayton's rights and/or the rights of [Smith] as assignee of Clayton to pursue available remedies against Progressive and/or its agents, servants and/or independent contractors under

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