State Farm Mut. Auto. Ins. Co. v. D'Angelo

Decision Date09 November 2007
Docket NumberNo. 73A04-0612-CV-703.,73A04-0612-CV-703.
Citation875 N.E.2d 789
PartiesSTATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellant-Defendant, v. Jelana Hobbs D'ANGELO, Appellee-Plaintiff.
CourtIndiana Appellate Court
OPINION

DARDEN, Judge.

STATEMENT OF THE CASE

State Farm Mutual Automobile Insurance Company ("State Farm") appeals the trial court's entry of summary judgment in favor of Jelana Hobbs D'Angelo and against State Farm.

We reverse and remand.

ISSUES

1. Whether coverage for all claims due to bodily injury under State Farm's policy has been exhausted under the limits of liability.

2. Whether State Farm's policy is in violation of Indiana Code section 27-7-5-2.

FACTS

On May 23, 2001, fourteen-year-old Joshua Hobbs was riding his bicycle through an intersection in Shelbyville when Helen Goldey disregarded a stop sign and struck him with her vehicle. Although D'Angelo, Joshua's mother, did not witness the accident, she came upon the scene shortly thereafter. D'Angelo attempted to lift Goldey's vehicle off of Joshua and witnessed emergency personnel's attempts to free Joshua from the wreckage.

Joshua sustained serious injuries and ultimately died from his injuries. D'Angelo subsequently suffered emotional distress, which manifested itself in bouts of uncontrollable crying, loss of appetite, sleeplessness, and the inability to concentrate. D'Angelo did not seek medical treatment for her symptoms.

At the time of the accident, Goldey, who was at fault for the accident, maintained automobile-insurance coverage through a policy issued by Shelter Mutual Insurance Company ("Shelter"). The policy provided liability limits for bodily injury in the amount of $25,000 per person and $50,000 per accident. State Farm authorized D'Angelo to settle her claims against Shelter and to release Goldey from liability. On June 12, 2002, Shelter tendered $25,000 as satisfaction for Joshua's wrongful death and $25,000 as satisfaction of D'Angelo's claim for negligent infliction of emotional distress, thereby exhausting the liability limits under Goldey's policy.

Also at the time of the accident, D'Angelo maintained automobile-insurance coverage through a policy issued by State Farm. That policy provided liability limits for underinsured-motorist coverage in the amount of $100,000 for each person and $300,000 for each accident. The policy defined "bodily injury" as follows: "Bodily Injury — means bodily injury to a person and sickness, disease or death which results from it." (App. 17). Regarding the limits of liability for underinsured-motorist coverage, the policy provided as follows:

The amount of coverage is shown on the declarations page under "Limits of Liability—W—Each Person, Each Accident". Under "Each Person" is the amount of coverage for all damages due to bodily injury to one person. "Bodily injury to one person" includes all injury and damages to others resulting from this bodily injury. Under "Each Accident" is the total amount of coverage, subject to the amount shown under "Each Person", for all damages due to bodily injury to two or more persons in the same accident.

(App. 29). The policy further provided that State Farm

will pay damages for bodily injury an insured is legally entitled to collect from the owner or driver of an underinsured motor vehicle. The bodily injury must be sustained by an insured and caused by accident arising out of the operation, maintenance or use of an underinsured motor vehicle.

(App. 27).

In October of 2001, State Farm agreed to pay $75,000 in settlement of the wrongful death claim. State Farm, however, denied D'Angelo's claim for emotional distress "on the basis that her claim arose from the bodily injury of Joshua and that she had not suffered a separate bodily injury independent of the bodily injury suffered by Joshua." (App. 123).

On May 7, 2003, D'Angelo filed a complaint against State Farm, asserting that she was "entitled to recover the proceeds of the underinsured motor vehicle coverage" contained in State Farm's policy. (App. 50). State Farm denied D'Angelo's allegation.

In October of 2005, the parties filed a joint statement of undisputed material facts for purposes of summary judgment. The parties stipulated that D'Angelo had a "legally valid claim against Helen Goldey for negligent infliction of emotional distress." (App. 81). The parties, however, did not stipulate as to whether D'Angelo had a claim for negligent infliction of emotional distress under the "modified impact rule" or the "bystander rule," which is "an exception to the physical impact requirement for the negligent infliction of emotional distress."1 Atlantic Coast Airlines v. Cook, 857 N.E.2d 989, 997 (Ind.2006).

On December 19, 2005, D'Angelo filed a motion for summary judgment, asserting that "[t]he negligent infliction of emotional distress claim qualifies as a `bodily injury' under the State Farm insurance policy and is therefore covered under the policy." (App. 53). D'Angelo further asserted that "[t]o the extent the State Farm insurance policy contains any exclusions attempting to avoid coverage, the exclusions violate public policy codified at I.C. 27-7-5-2 which prohibits any limiting language in the insurance contract which has the effect of providing less protection than what is obligatory by the statute." (App. 54). Finally, D'Angelo asserted that "any language in the State Farm insurance policy," upon which State Farm relies to avoid coverage, "renders the policy illusory requiring an interpretation in favor of coverage." (App. 54).

On January 27, 2006, State Farm filed its motion for summary judgment and combined memorandum thereon and brief in opposition to D'Angelo's motion for summary judgment. State Farm did not dispute D'Angelo's claim of negligent infliction of emotional distress. State Farm, in fact, "accept[ed] that [D'Angelo's] claim for emotional distress is a covered loss under its underinsured motorist policy." (App. 126). State Farm, however, argued that D'Angelo's claim did not constitute an "independent `bodily injury' entitled to its own `per person' limits," but rather was "included in Joshua's `per person' limits for the `bodily injury.'" (App. 126). Specifically, State Farm asserted that D'Angelo "was a bystander, was not involved in the accident, and did not receive an impact and is therefore unable to fulfill the independent requirement that her emotional distress constitutes `bodily injury.'" (App. 149).

Regarding whether State Farm's policy violated Indiana Code section 27-7-5-2, State Farm "pointed out that the Underinsured Motorist Statute only pertains in pertinent part to `bodily injuries.'" (App. 149). Furthermore, State Farm argued that even if D'Angelo's emotional distress constituted a bodily injury, State Farm's limitations were not contrary to law because "the policy clause did not wholly preclude coverage for the loss, but merely limited its liability by treating the claim as part of the damages arising from the bodily injury to another." (App. 150).

As to whether the language of State Farm's policy is ambiguous or illusory, State Farm maintained that "there is no possible ambiguity since [D'Angelo's] emotional distress does not constitute `bodily injury' and could not under any circumstances be entitled to separate limits." (App. 151). In the alternative, even if emotional distress is considered a bodily injury, State Farm maintained that its policy "plainly restricts coverage to those who have sustained bodily injury and includes within that coverage any derivative" or consequential claims. (App. 152).

D'Angelo filed her response to State Farm's motion for summary judgment and reply to State Farm's response on April 21, 2006. D'Angelo asserted that while she

believes her negligent infliction of emotional distress claim does meet the definition of "bodily injury" in State Farm's insurance policy, the real issue before the Court is whether the claims of [D'Angelo] meet the statutory definition of "bodily injury, sickness or disease" contained in the UIM statute since any more restrictive policy language is automatically void and against public policy.

(App. 165). D'Angelo asserted that she did meet the statutory definition because her "post accident contact with the vehicle at the scene following a collision with the [her] loved one is sufficient to satisfy the modified impact rule." (App. 166).

The trial court held a hearing on the parties' motions on May 4, 2006. On August 30, 2006, the trial court entered its findings of fact and conclusions of law. The trial court adopted the parties' joint stipulation of undisputed material facts and found the following:

1) Plaintiff sustained a valid covered loss for her emotional distress as a result of the tortfeasor's (Helen Goldey) negligence.

2) Plaintiff has a legally recognizable claim for negligent infliction of emotional distress under the modified impact rule.

3) The modified impact rule maintains the requirement of a direct physical impact. The impact need not cause a physical injury to plaintiff; nor does the emotional trauma suffered by plaintiff need to result from a physical injury caused by the impact.

4) The impact may be minimally classified as slight or rather tenuous.

5) [A] plaintiff may meet a second test, a direct involvement test, which requires no physical touching or impact but may apply when a plaintiff witnesses or comes upon the scene of an accident involving a loved one and caused by a defendant's negligence.

6) Plaintiff's negligent infliction of emotional distress claim qualifies as an independent bodily injury under the State Farm policy at issue. State Farm's policy defines bodily injury as "bodily injury to a person and sickness,...

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