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Woodruff v. American Family Mutual Insurance Co.

United States District Court, S.D. Indiana, Indianapolis Division

May 5, 2014




This matter is before the Court on Defendant American Mutual Insurance Company's ("American Family") Motion for Summary Judgment. (Dkt. 55). Plaintiff Randall Woodruff (the "Trustee") brings this claim on behalf of the bankruptcy estate of Jacob Key ("Mr. Key"), alleging that American Family breached the terms of an insurance contract and its duty of good faith. American Family has also filed a Motion to Strike Plaintiff's Designation of Matters (Dkt. 66). For the reasons set forth below, the motion to strike is DENIED, and American Family's motion for summary judgment is GRANTED in part and DENIED in part.


This case originated with an automobile accident. On or about August 11, 2008, Dewayne Hamilton ("Mr. Hamilton") was riding a motorcycle when he collided with a motor vehicle driven by John Owens ("Mr. Owens") in Madison County, Indiana. Mr. Hamilton claimed that Mr. Key was stopped in a line of traffic in the right most lane of southbound State Road 9 near Pendleton, Indiana, while Mr. Owens was eastbound on Market Street at its intersection with State Road 9, intending to turn left and proceed north on State Road 9. Mr. Key and Mr. Owens were friends. Mr. Key waved to Mr. Owens to indicate that traffic was clear so that Mr. Owens could make his left turn and proceed north. At the same time, Mr. Hamilton was proceeding south in the left most lane of southbound State Road 9. As Mr. Owens pulled forward in preparation to make the turn to head northbound, Mr. Hamilton struck Mr. Owens' truck. Hamilton was seriously injured as a result of Mr. Key's alleged negligence in erroneously signaling to Mr. Owens that the roadway was clear.

At the time of the accident, Mr. Key was driving a pick-up truck and trailer owned by Ted J. Brown, Sally A. Brown (the "Browns"), and/or T&J Plumbing ("TJ"). American Family had issued an automobile policy of insurance (the "Insuring Agreement") for the truck to or on behalf of the Browns, with a bodily injury liability limit of $250, 000.00 per person per occurrence. The Insuring Agreement specifically provided that American Family would insure for the coverage and the limits of liability shown in the declaration of the policy. The liability coverage provision of the policy also stated, "We will defend any suit or settle any claim for damages payable under this policy as we think proper. HOWEVER, WE WILL NOT DEFEND ANY SUIT AFTER OUR LIMIT OF LIABILITY HAS BEEN PAID." Dkt. 57-1 at 4 (emphasis in original).

On March 10, 2009, attorney Brent Threlkeld ("Mr. Threlkeld") was retained by American Family to represent Mr. Key, as well as the Browns. On May 20, 2009, Mr. Hamilton made a demand for the policy limits to American Family. In response, on May 26, 2009, staff counsel for American Family, Jeff Bick ("Mr. Bick") sent a reservation of rights letter to Mr. Key advising him that Mr. Hamilton was seeking an unspecified amount of damages, that such damages could exceed the limit of liability of the policy, and that American Family reserved its right to limit its liability to the limits stated in the policy.

On November 13, 2009, Mr. Key filed a motion for summary judgment on the basis that he owed no duty to Mr. Hamilton, but only a duty to Mr. Owens, the driver he waved into the roadway. Prior to the trial court's ruling, the parties attempted to settle the case in mediation on January 27, 2010. Mr. Key did not participate in the mediation. Mr. Hamilton demanded the policy limits of $250, 000.00, and Mr. Bick, on behalf of American Family, set his reserve at $100, 000.00 and requested that Mr. Hamilton provide a demand less than the policy limits, but never received one. American Family offered a settlement range of $25, 000.00 to $140, 000.00 at the mediation, but this was rejected by Mr. Hamilton. Mr. Bick never offered Mr. Hamilton the reserve amount of $100, 000.00, and no negotiation occurred. On March 10, 2010, the trial court denied Mr. Key's motion for summary judgment on the issue of his duty to Mr. Key. Following this ruling, American Family still refused to offer its reserve amount to settle Mr. Hamilton's claim, and necessarily did not offer the policy limit of $250, 000.00.

The case against Mr. Key subsequently went to trial and the jury found in favor of Mr. Hamilton. The jury returned a verdict against Mr. Key in the net amount of $990, 000.00, which was based upon a gross verdict of $2.2 million with 45% fault allocated to Mr. Key. On July 8, 2010, American Family filed a notice of appeal, raising the issue of Mr. Key's general duty, lack of assumption of such a duty, lack of proximate cause, and lack of evidence of negligence. On February 28, 2012, the Indiana Court of Appeals affirmed the trial court decision, finding that a motorist who halts his own lane of traffic and signals another driver to proceed across his lane can be liable to a third party who collides with the signaled driver in an adjacent lane. See Key v. Hamilton, 963 N.E.2d 573, 581-84 (Ind.App. 2012). American Family paid the automobile policy limits of $250, 000.00, and post-judgment interest in the amount of $40, 156.00.

Mr. Key filed bankruptcy on October 25, 2010, with the primary debt being the judgment in favor of Mr. Hamilton. Mr. Key's bankruptcy was discharged on February 2, 2011, and the Trustee retained counsel to pursue the instant case on behalf of Mr. Key's bankruptcy estate. Mr. Key did not sign a post-judgment assignment, which would have assigned any failure to settle the claim Mr. Key had against American Family to Mr. Hamilton. The claim against American Family was the only remaining asset of the estate. This claim asserts that American Family acted in bad faith in its refusal to settle Mr. Hamilton's claims for the policy limits, resulting in the excess verdict against Mr. Key at trial. Additional facts will be addressed below as necessary.


Federal Rule of Civil Procedure 56 provides that summary judgment is appropriate if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Hemsworth v. Quotesmith.Com, Inc., 476 F.3d 487, 489-90 (7th Cir. 2007). In ruling on a motion for summary judgment, the court reviews "the record in the light most favorable to the nonmoving party and draw[s] all reasonable inferences in that party's favor." Zerante v. DeLuca, 555 F.3d 582, 584 (7th Cir. 2009) (citation omitted). However, "[a] party who bears the burden of proof on a particular issue may not rest on its pleadings, but must affirmatively demonstrate, by specific factual allegations, that there is a genuine issue of material fact that requires trial." Hemsworth, 476 F.3d at 490 (citation omitted). Even where the facts themselves are not in dispute, summary judgment is inappropriate if alternate inferences can be drawn from the available evidence. Hines v. British Steel Corp., 907 F.2d 726, 728 (7th Cir. 1990). "In much the same way that a court is not required to scour the record in search of evidence to defeat a motion for summary judgment, nor is it permitted to conduct a paper trial on the merits of a claim." Ritchie v. Glidden Co., 242 F.3d 713, 723 (7th Cir. 2001) (citation and internal quotations omitted). Finally, "neither the mere existence of some alleged factual dispute between the parties nor the existence of some metaphysical doubt as to the material facts is sufficient to defeat a motion for summary judgment." Chiaramonte v. Fashion Bed Grp., Inc., 129 F.3d 391, 395 (7th Cir. 1997) (citations and internal quotations omitted).


As stated earlier, there are two matters before the Court, American Family's Motion for Summary Judgment and their Motion to Strike Plaintiff's Designation of Matters. Necessarily, ...

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