Vernon Fire & Cas. Ins. Co. v. Matney, 1--1075A186

Citation351 N.E.2d 60,170 Ind.App. 45
Decision Date15 July 1976
Docket NumberNo. 1--1075A186,1--1075A186
PartiesVERNON FIRE AND CASUALTY INSURANCE COMPANY, Appellant (Defendant below), v. Jimmie D. MATNEY, by his next friend, Burton Matney, Appellee (Plaintiff below).
CourtCourt of Appeals of Indiana

L. Lee McNeely, Shelbyville, for appellant.

Brunner, Brown & Brunner, Shelbyville, for appellee.

LYBROOK, Judge.

Defendant-appellant, Vernon Fire and Casualty Insurance Company (Vernon), brings this appeal from the granting of a Motion for Summary Judgment in favor of (Matney). This action was initiated by plaintiff-appellees, Jimmie D. Matney. Matney against his insurer, Vernon, following a judgment against an uninsured motorist, Ethel Thoms. Vernon contended that: (1) as Matney's insurer, it would not have been a propert party to the suit against Thoms, (2) that Vernon had no right or duty to intervene in the Matney vs. Thoms, action, and (3) that the judgment against Thoms could not be binding against Vernon.

Following an adverse ruling by the trial court on the above issues, Vernon brings this appeal.

The pertinent facts reveal that on or about July 31, 1968, the plaintiff Matney was a passenger on a motorcycle operated by Lowell D. Overman. Matney received severe injuries to his leg, which ultimately required amputation, as a result of a collision with an automobile operated by Ethel Thoms. At that time, Thoms was uninsured.

Thereafter, Matney brought an action in Shelby Circuit Court against Thoms on September 9, 1969. Notice was given to Vernon of the impending action against Thoms as set forth in the agreed stipulation of facts entered into by the parties:

'(a) On October 2, 1968, notice was given by letter of intention to hold a claim under Part IV of such policy, . . .

(b) On December 31, 1968, said insurance company was again notified by letter, . . .

(c) The Vernon Insurance Company acknowledged the notice of the letter of December 31, 1968, by their letter of January 14, 1968, . . .

(d) On March 10, 1969, Vernon Insurance Company received verbal notice of said accident and claim, and acknowledged such verbal notice by their letter of March 12, 1969, . . .

(e) On September 9, 1969, the Vernon Insurance Company was again notified in writing of said accident and claim and was served with a copy of the complaint and summons of Jimmy D. Matney vs. Ethel Thoms, . . . and which notice was acknowledged by said insurance company on September 12, 1969, by their letter, . . .

(f) On June 4, 1970, Vernon Insurance Company was served with notice of the Order on the Motion for Summary Judgment, by letter, . . . which service and notice was acknowledged by said company by letter on June 9, 1970, . . .

(g) On July 22, 1970, the Vernon Insurance Company was given notice by letter of the judgment rendered against the defendant Ethel Thomas, in the amount of $25,000.00, which letter demanded payment of such judgment by Vernon Fire & Casualty Insurance Company, . . . which letter and notice was acknowledged by said company on July 24, 1970, by a letter from such company, . . .'

Prior to beginning the action against Thoms, Matney had served Vernon with notice of his intention to assert a claim under the uninsured motorist provisions of the insurance policy.

On June 3, 1970, summary judgment as to liability was entered against Thoms, and on June 19, 1970 a judgment of $25,000 was rendered for Matney.

Payment under the Family Protection Coverage (uninsured motorist) was demanded from Vernon and refused.

On July 29, 1970, plaintiff commenced this action demanding the payment of the $10,000 policy limit under the uninsured motorist coverage. Summary judgment was granted in favor of plaintiff and defendant timely filed this appeal.

Three basic issues are presented by Vernon for review:

(1) Did the defendant have a right or duty to intervene in the action between Matney and Thoms?

(2) Was the defendant a proper party to the Matney vs. Thoms action?

(3) Is the judgment against Thoms binding upon, and enforceable against Vernon?

I.

The first issue presented for review poses a most difficult problem for this court. Should the policy of avoiding multiplicity of litigation be superior or inferior to the possible conflict of interest if an insurance company is allowed or required (should the carrier desire to contest the liability or damage issues) to intervene as a defendant in a suit initiated by its insured against an uninsured motorist?

The dilemma has twice previously reached the Court of Appeals and a seemingly conflicting result was reached in those cases. Indiana Insurance Co. v. Noble (1970), 148 Ind.App. 297, 265 N.E.2d 419 held that the overriding consideration must be the avoidance of multiplicity of litigation when possible. Noble held that the insurer would be allowed to intervene as a defendant in an action by its insured against an uninsured motorist. Noble further upheld a summary judgment which made a liability and damage judgment binding upon an insurer who had failed to intervene after its insured had given it notice of the litigation.

The later case, Smith v. Midwest Mutual Insurance Company (1972), 154 Ind.App. 259, 289 N.E.2d 788 approached a nearly identical problem and reached an opposite conclusion. Smith held that an insurer could not be allowed to intervene in an action between its insured and an uninsured motorist and that any judgment reached in that first action would not be binding upon the insurer.

While subtle differences do exist among Smith, Noble and the present case, the basic and critical questions are identical. Does the insurer have a right to intervene and is a judgment binding?

Noble delineated four basic options for an insured in an action to recover for injuries resulting from a collision with an uninsured motorist:

'1. He may file an action directly against his insurance company without joining the uninsured motorist as a party defendant and litigate all of the issues of liability and damages in that one action. Wortman v. Safeco Ins. Co., (D.C., 227 F.Supp. 468) supra; Hill v. Seaboard Fire and Marine Ins. Co., (Mo.App., 374 S.W.2d 606) supra; Boughton v. Farmers Ins. Exchange, (Okl., 354 P.2d 1085) supra; Travelers Indemnity Co. v. (Debose), (Sup.) 226 N.Y.S.2d 16 (1960); and State Farm Mutual Auto. Ins. Co. v. Matlock, Tex.Civ.App., 446 S.W.2d 81 (1969). See also Lawrence v. Continental Ins. Co., La.App., 199 So.2d 398 (1967).

2. He may file an action joining both the uninsured motorist and the insurance company as party defendants and litigate all of the issues of liability and damages in that action. See American Fid. Fire Ins. Co. v. Hartoford Accident and Indem. Co., 251 S.C. 507, 163 S.E.2d 926 (1968), and Widiss page 273. See also, Hill v. Seaboard Fire and Marine Ins. Co., supra.

3. He may file an action against the uninsured motorist alone without joining the insurance company as a party defendant and litigate the issues of liability and damages. In such case he gives preliminary and adequate notice of the filing and pendency of such action to the insurance company so that they make (sic) take appropriate action including intervention.

4. He may file an action against the uninsured motorist and give no notice to the insurance company.'

It is axiomatic that action taken under options one and two will bind the insurance carrier. An action brought under option four is not binding upon the insurance company. However, option three grants certain latitude and choices to the insurance carrier. The carrier's first and most obvious decision is whether or not to move to intervene as a defendant in the action.

Ind. Rules of Procedure, Trial Rule 24(A) governs the intervention of the insurer into the action. TR. 24(A) states:

'(A) Intervention of right. Upon timely motion anyone shall be permitted to intervene in an action:

(1) when a statute confers an unconditional right to intervene; or

(2) when the applicant claims an interest relating to a property, fund or transaction, which is the subject of the action and he is so situated that the disposition of the action may as a practical matter impair or impede his ability to protect his interest in the property, fund or transaction, unless the applicant's interest is adequately represented by existing parties.'

A careful examination of the cases discloses a conflict among the various jurisdictions as to whether or not intervention will be permitted in these cases.

However, the cumulative effect of the spirit of the Indiana Trial Rules, the interests of justice, the avoidance of multiple litigation and the conversation of judicial time compels our conclusion to allow intervention by the insurer.

Clearly the basis of the action by Matney against Vernon is contractual. However, any action on the contract is inseparably tied to the legal liability of Thoms. Therefore, the initial action in which the liability of Thomas is determined is but the first link in an unbroken chain leading to the contractual liability of Vernon.

The rule allowing intervention does not require the judgment be binding upon the party petitioning to intervene. It merely requires that the intervener be so situated that as a practical matter the disposition of the action may impede or impair his interests. In construing a nearly identical Federal Rule dealing with intervention the court said:

'Res judicata would not apply to bar Kinnard's suit. But stare decisis, which dictates respect for prior judicial determination of identical points of law, would loom large in any attempt by Kinnard to achieve a favorable resolution . . .' Martin v. Travelers Indemnity Company (1971), 5 Cir., 450 F.2d 542, 554.

As we have heretofore noted, a judgment against an uninsured motorist, if no intervention was allowed, would not be binding on an insurance carrier; however, that decision on liability issues would present a most formidable barrier for the carrier to overcome in a...

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