Snodgrass v. Baize

• Decision Date: 29 May 1980
• Docket Number: No. 2-378A105,2-378A105
• Citation: 405 N.E.2d 48
• Parties: Donald R. L. SNODGRASS, Appellant-Plaintiff, v. Danny R. BAIZE, Executor of the Estate of Oscar A. C. Baize, Deceased, Judgment Defendant, Penn Mutual Fire Insurance Company, Appellee-Garnishee Defendant.
• Court: Indiana Appellate Court

Page 48

405 N.E.2d 48

Donald R. L. SNODGRASS, Appellant-Plaintiff, v. Danny R. BAIZE, Executor of the Estate of Oscar A. C. Baize Deceased, Judgment Defendant Penn Mutual Fire Insurance Company, Appellee-Garnishee Defendant.

No. 2-378A105.

Court of Appeals of Indiana, Second District.

May 29, 1980.

Frederick J. Graf, Martz, Beattey, Hind & Wallace, Joseph R. Woods, McCausland & Woods, Dan L. Clayton, Pope, Pope & Clayton, Indianapolis, for appellant-plaintiff.

R. Stanley Lawton, William L. Skees, Jr., Ice, Miller, Donadio & Ryan, Indianapolis, for Penn Mutual Fire Ins. Co.

John T. Manning, Wausau, Wis., for Danny R. Baize, Executor of the Estate of Oscar A. C. Baize, Deceased.

SULLIVAN, Judge.

Donald Snodgrass appeals from a negative order in a proceeding supplemental, wherein he sought to obtain proceeds under a homeowners liability insurance policy issued by Penn Mutual Insurance Company to the decedent, the judgment defendant's predecessor. We affirm.

Plaintiff, by amended complaint, filed a personal injury action against judgment defendant, Danny Baize as executor of the estate of Oscar Baize, alleging alternatively that the decedent shot plaintiff intentionally or negligently. ¹ Judgment defendant did not deny the shooting, but, rather, alleged "affirmative defenses" of insanity, self-defense and "legally sufficient provocation". The jury returned a verdict in plaintiff's favor on the negligence count. Counsel for Penn Mutual Fire Insurance Company, the decedent's insurer, appeared on behalf of Baize, but, upon perceiving a potential conflict of interest, though not conceding policy coverage, withdrew prior to trial. Baize's personal attorney defended the original action and the insurance company paid his fee.

Snodgrass then filed a motion for proceedings supplemental against Baize and the insurer. Penn Mutual defended on the ground that the injury was "expected or intended from the standpoint of the insured" and, thus, excluded from coverage. The trial court agreed and found for the insurance company.

Plaintiff assigns numerous errors, but the format of his brief renders impossible a clear understanding of his arguments. With great difficulty, we restate the issues we perceive to be before us:

(1) Are the parties to the proceeding supplemental bound by the jury verdict in the underlying lawsuit under the doctrines of res judicata, collateral estoppel, stare decisis, or equitable estoppel?

(2) Was the order in this proceeding contrary to law?

I.

As stated in State v. Speidel (2d Dist. 1979) Ind.App., 392 N.E.2d 1172, 1174-75 (pending on rehearing), res judicata includes both claim preclusion and collateral estoppel (also known as issue preclusion). Claim preclusion involves "a prior adjudication resulting in a final judgment on the merits . . . which acts as a complete bar to a subsequent action on the same claim between the same parties or those in privity with them." Id. The original proceeding was a civil suit to collect damages for Baize's tortious conduct, whether intentional or negligent. The instant proceeding is a claim to obtain an asset in the hands of a third party to satisfy the judgment rendered upon the first claim. Therefore, even though both cases involve the same facts, the respective "claims" are not the same. Collateral estoppel involves a prior adjudication of a particular issue which is binding on the parties and their privies in a later, different proceeding. Id. at 1175. Penn Mutual was not a party to the original lawsuit. Therefore, any application of collateral estoppel must be based on privity. An indemnitor is generally considered to be in privity with his indemnitee. Cowan v. Insurance Company of North America (1974) 22 Ill.App.3d 883, 890, 318 N.E.2d 315, 321; see Hoosier Casualty Co. v. Miers (1940) 217 Ind. 400, 403-04, 27 N.E.2d 342, 344. Accordingly, Penn Mutual must be considered a privy of Oscar Baize and, by succession, of his estate.

Because collateral estoppel is facially applicable, we must consider the purpose of the doctrine. As stated in Farm Bureau Mutual Automobile Insurance Co. v. Hammer (4th Cir. 1949) 177 F.2d 793, 799:

"The underlying purpose of the doctrine is to obviate the delay and expense of two trials upon the same issue one by the injured party against the indemnitee and the other by the indemnitee, or the injured party against the indemnitor. This is possible because it is assumed that the interests of the parties to the contract of indemnity in opposing the injured person's claim are identical; and it is accomplished by giving the indemnitor an opportunity to appear in the first suit on behalf of the indemnitee so that everything that can be offered in exculpation of the indemnitee by either party to the indemnity contract may be presented."

See also Hoosier Casualty Co. v. Miers, supra, 27 N.E.2d 342 (holding that an indemnitor may be bound if it has notice of litigation and an opportunity to control the proceedings).

In the instant case, the interests of the insured and the insurer were in partial conflict. The insured would benefit, to the extent of policy limits, from a finding of negligence which arguably was within the coverage of the policy. The insurer would favor a finding of an intentional tort which the policy did not cover. See Farm Bureau Mutual Automobile Insurance Co. v. Hammer, supra. In such a situation the insurer should not defend, but, rather, as here, should reimburse the insured's personal counsel. All-Star Insurance Corp. v. Steel Bar, Inc. (N.D.Ind.1971) 324 F.Supp. 160, 165. Because there was a partial conflict of interest and because Penn Mutual could not rightfully have controlled Baize's defense, the rationale underlying the application of collateral estoppel does not apply.

Snodgrass relies on Miller v. United States Fidelity & Casualty Co. (1935) 291 Mass. 445, 197 N.E. 75. In Miller the insurer refused to defend the original tort suit which was based solely on allegations of negligence. The court held:

"Where an action against the insured is ostensibly within the terms of the policy, the insurer, whether it assumes the defense or refuses to assume it, is bound by the result of that action as to all matters therein decided which are material to recovery by the insured in an action on the policy." Id. at 448, 197 N.E. at 77.

Hammer is the leading case in opposition to Miller, supra. Centennial Insurance Co. v. Miller (E.D.Cal.1967) 264 F.Supp. 431, 433. We believe Hammer is the better-reasoned case and adopt its approach. Therefore, Penn Mutual is not bound by the civil verdict on the negligence count.

Furthermore, one Indiana case conflicts with the Massachusetts Miller decision insofar as the liability of an insurer who assumes the insured's defense is concerned. In State Farm Mutual Automobile Insurance Co. v. Phillips (1936) 210 Ind. 561, 568, 2 N.E.2d 989, 992, the court held: "(N)o estoppel arises where, although defending the suit against the insured, it insists on its nonliability under the policy, and its defense of the suit is merely to protect itself and comply with its agreement."

The complaint in the instant case was filed January 9, 1975. In a letter dated February 21, 1975, counsel for Penn Mutual addressed the insured's personal attorney:

"As you are undoubtedly aware, the first paragraph of the complaint deals with alleged malicious assault and would clearly not be within any of the provisions of the policy coverage for either defense or payment. The second paragraph alleges negligence and would therefore be within the terms of the coverage as set forth in the allegations. However, as we understand the facts, the acts here were intentional, and it is my understanding that there is an exclusion in the policy for intentional acts.

Therefore we may have a situation in which the company is obligated to defend for the moment at least, but would not ultimately be obligated to pay any judgment that might be rendered if the facts disclose that the incident came within an exclusion of the coverage. Penn Mutual Fire has no intention of waiving any of the exclusions in its policy or any of the limitations that are contained in the policy, and therefore in our participation in the defense of this case we are doing so with that understanding. . . .

I am writing this letter to you rather than to the insured directly as we normally do because I understand that you are representing him in respect to all the matters pertaining to this lawsuit and have already entered your appearance for him in the case. In view of the fact that it is likely that there will not be any ultimate obligation on the carrier to pay any judgment, I feel that it is desirable for you to have a most substantial participation in all of the judgment decisions that are made in respect to the defense of this case. Subject to the above limitations, I am entering my appearance . . . ."

This letter was followed by an additional letter dated December 9, 1975, which stated:

"In thinking over this particular lawsuit, it appears to us that there may be some conflicts between what the insurance carrier would want to have accomplished and what you might want to accomplish for the estate. From that standpoint, we are willing to recommend to the carrier that we be authorized to withdraw from the case entirely, and that you handle it on your own and that you be paid by the company a reasonable charge for the time that you spend on the case from this time forward. We would likewise want an agreement that if there should be a judgment against the estate on (the negligent injury count) that the estate would not consider this to be res judicata in any way, nor would it be treated as collateral estoppel or as any sort of a decision precluding complete review, and that the carrier would be permitted to defend any claim under proceedings supplemental or execution procedures and would be entitled in that defense to litigate that...