First Chicago Ins. Co. v. Collins 2020 WL 356240 (Ind. Ct. App. 2020)
A driver of a car insured by First Chicago Insurance Company (“First Chicago”) was involved in an automobile accident which resulted in injuries to multiple parties. One of the injured parties, Dunn and her child, retained counsel who notified First Chicago of the representation. First Chicago’s adjuster sent a letter to the attorney acknowledging the representation.
First Chicago’s policy contained per accident limits of $50,000.00. Based upon the number of claims involved, First Chicago decided to file an Interpleader Action to tender its policy limits and seek a discharge from any further coverage obligations. Upon filing the Interpleader Action, First Chicago did not notify Dunn’s attorney. Instead, First Chicago attempted to serve the Interpleader Complaint by hiring a process server and attempting to send letters directly to Dunn. A process server submitted an affidavit indicating that he had delivered the Summons and Complaint at Dunn’s last known address.
Because Dunn did not respond, First Chicago filed a Motion for Default Judgment against Dunn. That Motion was not served upon Dunn or her counsel. Eventually, the trial court granted a Default Judgment against Dunn.
First Chicago then filed a Motion for Summary Judgment against all of the Defendants seeking a court order determining that upon tendering its $50,000.00 of policy limits, it was completely discharged of any coverage obligation. However, First Chicago did not serve the Motion on Dunn or her counsel.
Dunn’s counsel contacted First Chicago regarding settlement negotiations. Simultaneously, the Trial Court granted First Chicago’s Motion for Summary Judgment and ordered that it was discharged from any further contractual obligation upon tendering its policy limits to be distributed to the injured Defendants who were not defaulted.
Eventually, Dunn’s attorney learned of the declaratory judgment action, and filed a Motion for Relief from the Default Judgment. The Motion contended that service upon Dunn was not proper (the process server indicated that he served an African-American individual, while Dunn was Caucasian). The Motion further indicated that despite First Chicago’s awareness of Dunn having counsel, the counsel was never notified of the Interpleader Action.
First Chicago did not file a formal response to Dunn’s Motion for Relief from the Default Judgment. The only response tendered was to state that because the Court had entered Summary Judgment on the interpleader action, the Trial Court no longer possessed jurisdiction to hear the Motion. However, the Trial Court disagreed, and set aside the Default Judgment and the Summary Judgment to the extent that it was applicable against Dunn. The Trial Court further issued an Order that First Chicago must make available at least $25,000.00 of additional insurance coverage to address Dunn’s and her child’s claims.
First Chicago pursued an appeal. The Court of Appeals first found that because First Chicago did not respond to Dunn’s Motion for Relief from the Default Judgment, it had waived all arguments to contest it. Furthermore, the Court of Appeals affirmed the Trial Court’s setting aside of the Default Judgment and Summary Judgment by indicating First Chicago’s failure to notify Dunn’s counsel, when it had actual knowledge of his involvement, demonstrated exceptional circumstances which supported setting aside the Judgments. While the Court acknowledged that allowing Dunn to pursue her claims despite the fact that First Chicago had already tendered and paid its $50,000.00 of coverage may result in prejudice to First Chicago, the Court found that First Chicago brought this prejudice upon itself.
However, the Court did find that the Trial Court erred in ordering that First Chicago must make $25,000.00 of coverage available. Because the record did not disclose the extent of Dunn’s and her child’s injuries, the Court was not certain of the extent of those injuries and sent the case back to the Trial Court for the claims to be addressed.
When filing an interpleader action, a carrier aware of potential claimants, should ensure that those claimants and their counsel receive notice. Failing to do so can defeat the purpose of the interpleader action, as it did in Collins, by exposing the carrier to liability above its policy limits.