Frankenmuth Mutual Insurance v. Williams Ex Rel. Stevens

615 N.E.2d 462, 1993 WL 198765
CourtIndiana Court of Appeals
DecidedJune 15, 1993
Docket43A03-9209-CV-286
StatusPublished
Cited by3 cases

This text of 615 N.E.2d 462 (Frankenmuth Mutual Insurance v. Williams Ex Rel. Stevens) is published on Counsel Stack Legal Research, covering Indiana Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Frankenmuth Mutual Insurance v. Williams Ex Rel. Stevens, 615 N.E.2d 462, 1993 WL 198765 (Ind. Ct. App. 1993).

Opinions

GARRARD, Judge.

This is an appeal from a grant of summary judgment in favor of Jena Williams.

The facts stipulated to the trial court in this case reveal that Frankenmuth Mutual Insurance Company (Frankenmuth) provided homeowners insurance coverage to Michael and Betty White during February and March of 1989. Beginning in the summer of 1988, Betty babysat children at their home. During February and March of 1989, Tracy Stevens hired Betty to babysit her two daughters, one of whom was Jena Williams. During one of the babysitting sessions at the White residence, Jena Williams was molested by Michael White. Michael subsequently pled guilty to child molestation.

On October 18, 1989, Jena, by her next friend Tracy Stevens, filed suit against Michael White alleging unlawful touching and battery. On June 21, 1990, a second count was added naming Betty, alleging that she was negligent in the care of Jena. Neither Michael nor Betty notified Frankenmuth that a lawsuit had been filed against them, nor did they forward any legal papers. Frankenmuth was notified that a claim of child molestation had been made against Michael White and on March 21, 1990 sent a reservation of rights letter to Michael concerning the incident. At the time that Frankenmuth sent its letter, however, it did not know that a lawsuit had been filed against him. Frankenmuth only became aware of the lawsuits prior to October 10, 1990, when it received a Subpoena Duces Tecum and a Non-Party Request for Production of Documents and/or Things from plaintiff. This request listed Michael and Betty White as defendants, but did not disclose to Frankenmuth the nature of the suit or whether Michael or Betty White had been served with process in the suit. On November 6, 1990, Frankenmuth sent a letter to Michael White’s attorney requesting a copy of any suit papers, if a suit had been filed, so that it could determine coverage or its duty to defend. Frankenmuth never received any copies of notices, demands, or legal papers in connection with this occurrence.

On April 29, 1991, without Franken-muth’s knowledge, Betty White entered into a Consent to Judgment with plaintiff, granting judgment to plaintiff on Count II of the complaint, in the amount of $75,-000.00. The Consent to Judgment was approved by the trial court on April 30, 1991. Simultaneous to signing the Consent to Judgment, plaintiff also signed a covenant not to execute against the personal assets of Betty White. This covenant left intact plaintiffs right to execute against any applicable insurance coverage. Count I, against Michael White, remains pending.

Subsequent to the consent judgment, plaintiff moved to add Frankenmuth as a garnishee defendant. On March 30, 1992, plaintiff and Frankenmuth both filed motions for summary judgment and on May 27, 1992 the trial judge entered summary judgment in favor of plaintiff concluding in part that Frankenmuth had been given sufficient notice and chose not to defend its insured against the lawsuit. The trial court held that Frankenmuth was therefore collaterally estopped from contesting its liability under the Consent to Judgment entered into between plaintiff and Betty White.

Frankenmuth presents several issues for review. We find, however, that the trial court was incorrect in concluding that notice was sufficient in this case and we therefore reverse its grant of summary judgment on that basis. [465]*465When reviewing a grant of summary judgment our standard of review is the same as that used by the trial court: whether there is a genuine issue of material fact and whether the moving party is entitled to judgment as a matter of law. Liberty Mutual Insurance Co. v. Metzler (1992), Ind.App., 586 N.E.2d 897, 899-90, trans. denied. All evidence must be construed in favor of the opposing party, and all doubts as to the existence of a material issue must be resolved against the moving party. Id.

In this case the facts before the trial court were stipulated by the parties. The question at issue here then turns on whether these undisputed facts demonstrate that Frankenmuth had sufficient notice, as a matter of law, to sustain a judgment based upon a finding of collateral estoppel. We find that they did not.

Collateral estoppel, a branch of res judicata characterized as “issue preclusion,” involves a prior adjudication of a particular issue which is binding on the parties and their privies in a later lawsuit. Id. The doctrine of collateral estoppel applies to insurance contracts and an insurer is ordinarily bound by the result of litigation to which its insured is a party so long as the insurer had (1) notice of such litigation, and (2) an opportunity to control its proceedings. Hoosier Casualty Co. v. Miers (1940), 217 Ind. 400, 27 N.E.2d 342, 344; Id. Both elements are required before collateral estoppel will bind an insurance company. In this case we are concerned with the first element.

In general, the function of notice is to provide forewarning of an event. 58 Am.Jur.2d Notice § 2 (1989). In the insurance context this must generally be “actual” notice. 44 Am.Jur.2d Insurance § 1588 (1982). In Indiana, this requirement is met if the insurance company has knowledge of facts which would be sufficient to lead a reasonably prudent person to inquire about the matter. Johnson v. Payne (1990), Ind.App., 549 N.E.2d 48, 51-52, trans. denied. If such facts exist, an insurance company is obligated to undertake a reasonable investigation to ascertain the truth. Id. at 52. The insurance company will be considered to have knowledge of any information that this reasonable investigation would have disclosed. Id.; see also 58 Am.Jur.2d Notice § 5 (1989).

In the context of collateral estoppel, facts sufficient to satisfy this notice requirement generally contain several types of information. First, it must alert the insurance company that a lawsuit has already been filed against one of its insured. See, e.g., State Farm Mutual Insurance Co. v. Glasgow (1985), Ind.App., 478 N.E.2d 918, 923 (insurance company had notice of the plaintiffs action against him); Indiana Insurance Co. v. Noble (1970), 148 Ind.App. 297, 265 N.E.2d 419, 436 (insurance company was fully advised of the filing and pendency of the suit).. Such notice would obviously contain the name of its insured. Second, adequate notice must “allow the insurer appropriate time to intervene and realistically assert any defenses which may exist.” Vernon Fire and Casualty Insurance Co. v. Matney (1976), 170 Ind.App. 45, 351 N.E.2d 60, 66. Third, in order for an insurance company to know that it must intervene, there must be some kind of information communicated that would alert the insurance company that its policy with, or coverage of, its insured may be implicated and that it could be held liable on the underlying judgment. See Stewart v. Walker (1992), Ind.App., 597 N.E.2d 368, 372.

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Related

Frankenmuth Mutual Insurance v. Williams Ex Rel. Stevens
690 N.E.2d 675 (Indiana Supreme Court, 1997)
Frankenmuth Mutual Insurance v. Williams Ex Rel. Stevens
615 N.E.2d 462 (Indiana Court of Appeals, 1993)

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