State Farn Mut. Auto. Ins. Co. v. Jakupko

• Decision Date: 28 February 2008
• Docket Number: No. 29S02-0704-CV-140.,29S02-0704-CV-140.
• Citation: 881 N.E.2d 654
• Parties: STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellant (Defendant below), v. Patricia JAKUPKO, Nicholas Jakupko, and Matthew Jakupko, Appellees (Plaintiffs below).
• Court: Indiana Supreme Court

881 N.E.2d 654

STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellant (Defendant below), v. Patricia JAKUPKO, Nicholas Jakupko, and Matthew Jakupko, Appellees (Plaintiffs below).

No. 29S02-0704-CV-140.

Supreme Court of Indiana.

February 28, 2008.

Karl L. Mulvaney, Nana Quay-Smith, Candace L. Sage, Indianapolis, IN, Attorneys for Appellant.

Robert B. Clemens, George T. Patton, Jr., Bryan H. Babb, Indianapolis, IN, Attorneys for Amici Curiae, Insurance Institute of Indiana, Inc., National Association of Mutual Insurance Companies, and Property Casualty Insurers Association of America.

John F. Townsend, III, W. Scott Montross, Indianapolis, IN, Attorneys for Appellees.

Jeffrey S. Wrage, Thomas F. Macke, Valparaiso, IN, Attorneys for Amicus Curiae, The Indiana Trial Lawyers Association.

On Petition to Transfer from the Indiana Court of Appeals, No. 29A02-0603-CV-207

SULLIVAN, Justice.

Richard Jakupko suffered severe injuries and his wife and children emotional distress in an automobile accident caused by an underinsured motorist. Their insurance company contends that their underinsured motorist insurance policy subjects any amount the wife and children can recover for their emotional distress to the per person liability cap applicable to Richard. Such a limitation would violate the requirements of Indiana's underinsured motorist insurance statute and be void; the wife and children are each entitled to their own per person liability limit.

Background

In July 2002, Richard Jakupko was in an automobile accident caused by Brianne Johnson; Johnson was driving an underinsured auto. Richard, his wife, Patricia, and their children, Nicholas and Matthew, who were passengers in Richard's car, each sustained bodily injuries. Richard's injuries were exceptionally severe, including quadriplegia and a closed head injury resulting in permanent mental deficits. Patricia, Nicholas, and Matthew each suffered emotional distress from being in the accident.

Because the Jakupkos' damages greatly exceeded the limits of Johnson's coverage, they sought compensation under the terms of an automobile insurance policy Richard had with State Farm Mutual Automobile Insurance Company. The State Farm policy included underinsured motorist coverage coverage in the amount of $100,000 for "each person" and $300,000 for "each accident." State Farm paid $100,000 to the Jakupkos pursuant to this provision; when they sought to recover an additional $200,000 for Patricia's, Nicholas's, and Matthew's emotional distress, State Farm took the position that it had satisfied its obligations under the policy when it had paid the limits, for Richard's injuries. In State Farm's view, because Patricia's, Nicholas's, and Matthew's claims for emotional distress were caused by Richard's injuries, they were included in the "each person" limit of liability for his bodily injury claim.

This litigation ensued. The trial court and Court of Appeals both ruled in favor of the Jakupkos. State Farm Mut. Auto. Ins. Co. v. Jakupko, 856 N.E.2d 778 (Ind. Ct.App.2006). State Farm sought, and we malted, transfer. State Farm Mut. Ins. Co v. Jakupko, 869 N.E.2d 454 (Ind.2007) (table).

Discussion

I

We begin our analysis with several observations about what is not at issue in this case.

State Farm agreed to "pay damages for bodily injury an insured is legally entitled to collect from the owner or driver of an uninsured motor vehicle." (Appellant's App. at 70.) Not at issue is whether Patricia, Nicholas, or Matthew were "insured[s]" for this purpose; both sides agree that they all were.

More importantly, both sides agree that Patricia, Nicholas, and Matthew were "legally entitled" to pursue negligent infliction of emotional distress claims against Brianne Johnson, the driver of the underinsured vehicle. Like the plaintiff who was permitted to seek recovery in Shuamber v. Henderson, 579 N.E.2d 452, 456 (Ind.1991), Patricia, Nicholas, and Matthew were inside the vehicle when it was struck by Johnson's automobile and sustained an impact. The impact was severe enough to have caused catastrophic injuries to Richard. Patricia, Nicholas, and Matthew claim to have suffered emotional trauma at least in part as a result of being involved in the impact and witnessing Richard being so severely injured. Shuamber dictates that they would be entitled to present their evidence. This is not a case that requires us to expound on the common law of negligent infliction of emotional distress.

The crux of this case is whether, as a matter of underinsured motorist and contract law, Patricia's, Nicholas's, and Matthew's claims are included within Richard's "each person" limitation on liability or are entitled to their own. The significance of this is obvious—State Farm contends that Patricia's, Nicholas's, and Matthew's claims are subject to the $100,000 "each person" limit of liability applicable to Richard's injuries. Because it has already paid Richard $100,000, State Farm argues that it has exhausted its liability for Patricia's, Nicholas's, and Matthew's emotional distress claims.

The coverage provisions of the policy provide:

UNDERINSURED MOTOR VEHICLE—COVERAGE "W"

We 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 caused by accident arising out of the operation, maintenance or use of an underinsured motor vehicle.

(App. at 70 (emphasis in original).)

The liability limits provisions of the policy provide:

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 [$100,000] 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 [$300,000], subject to the amount shown under "Each Person" for all damages due to bodily injury to two or more persons in the same accident.

(Id. at 72 (emphasis in original).)

Finally, the policy contains the following definition:

Bodily injury—means bodily injury to a person and sickness, disease or death which results from it.

(Id. at 62 (emphasis in original).)

Patricia's, Nicholas's, and Matthew's argument proceeds along the following line. First, they observe that the $100,000 "each person" coverage limitation applies to "damages due to bodily injury to one person." Second, they observe that the policy's definition of "bodily injury" refers to "sickness." Because in their view the emotional distress they suffered constituted "sickness" within the meaning of the policy, they are each entitled to their own $100,000 "each person" coverage limitation, up to the $300,000 per accident limitation.

State Farm has two answers to this. First, it is of the view that emotional distress is not "sickness" within the meaning of the policy and so Patricia, Nicholas, and Matthew, while entitled to pursue negligent infliction of emotional distress claims against the tortfeasor, are not entitled to recover for their damages under the policy.¹ Second, State Farm emphasizes additional language in the "Limits of Liability" section of the policy—that when it agreed to pay for "damages due to bodily injury to one person," it expressly provided that "`[b]odily injury to one person' include[d] all injury and damages to others resulting from this bodily injury." (App. at 72.) Because the damages Patricia, Nicholas, and Matthew claim, State Farm says, were the result of the bodily injury sustained by Richard, those damages are subject to the $100,000 "each person" coverage limitation applicable to Richard.

Patricia, Nicholas, and Matthew respond to State Farm's second argument by saying that the "includes all injury and damages to others resulting from this bodily injury" clause does not apply to them because they have their own independent limits on liability.

In summary, to determine whether Patricia, Nicholas, and Matthew are each entitled to their own "each person" coverage limitation, we must decide:

(1) whether "bodily injury" as defined in the policy at issue in this case includes the emotional distress Patricia, Nicholas, and Matthew suffered; and, if so,

(2) whether the fact that the policy provides that the coverage limit for bodily injury suffered by Richard "includes all injury and damages to others resulting from this bodily injury" precludes Patricia, Nicholas, and Matthew from having their own independent limits on liability.

II

A substantial number of courts have looked at these or closely related questions. See Allstate Ins. Co. v. Tozer, 298 F.Supp.2d 765, 769-70 (S.D.Ind.2003) (citing cases from six jurisdictions favoring the Jakupkos' position and ten jurisdictions favoring State Farm's), rev'd, 392 F.3d 950 (7th Cir.2004). We will limit our review to, four cases with Indiana pedigrees.

A

In Wayne Township Board of School Commissioners v. Indiana Insurance Co., 650 N.E.2d 1205 (Ind.Ct.App.1995), trans. denied, an elementary school principal had sexually molested a student. The student sought damages from the principal and the school district for the "severe emotional and psychological trauma and distress" she suffered. The school district in turn sought coverage under a comprehensive general liability policy. Id. at 1207.

The policy provided coverage only for injuries within the policy definition of "bodily injury": "bodily injury, sickness or disease sustained during the policy period." In finding the student to have suffered bodily injury, the court held that "the policy definition of `bodily injury' is not limited to physical injury to the body." The court reasoned that, while the policy first defined "bodily injury" as "bodily injury" in a circular fashion, so as to include physical injury, the policy "extend[ed] the meaning of `bodily injury' beyond physical injury [t...