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Ferraro v. Humphrey

United States District Court, N.D. Indiana

March 17, 2017




         This matter is before the Court on a Motion for Summary Judgment [ECF No. 24] filed by American National Services Corporation (“ANSC”), Masco Corporation, and Old Republic Insurance Company (the “Masco Defendants”); a Cross-Motion for Summary Judgment [ECF No. 27] filed by Plaintiff Peter Ferraro, and a Motion to Amend Complaint to Conform with Evidence [ECF No. 39] also filed by the Plaintiff. The Masco Defendants filed their Motion for Summary Judgment with their Memorandum in Support [ECF No. 25] and accompanying Appendix [ECF No. 26] on November 24, 2015. The Plaintiff filed his Response [ECF Nos. 33] and Brief [ECF No. 34] to the Masco Defendants' Motion on December 22, 2015, to which the Masco Defendants filed their Reply [ECF No. 37] on January 4, 2016. The Plaintiff filed his Cross Motion for Summary Judgment and Memorandum in Support [ECF No. 28] on November 30, 2015. The Masco Defendants filed their Response [ECF No. 36] on December 28, 2015, to which the Plaintiff filed his Reply [ECF No. 38] on January 11, 2016. The following day, on January 12, 2016, the Plaintiff filed his Motion to Amend Complaint to Conform with Evidence. The Masco Defendants filed their Response [ECF No. 40] on January 26, 2016, with the Plaintiff filing his Reply [ECF No. 41] on February 2, 2016. The motions are ripe for ruling.


         On June 9, 2004, the Plaintiff, a citizen of Illinois, was involved in an automobile accident on the Indiana Toll Road in Lake Station, Indiana, with Defendant John A. Humphrey, at the time a citizen of Indiana. Humphrey was an employee of ANSC, [1] a Delaware corporation with its principal place of business in Taylor, Michigan. Humphrey's vehicle was ANSC owned and insured by Old Republic, a Pennsylvania corporation with its principle place of business in Greensburg, Pennsylvania. ANSC is a wholly owned indirect subsidiary of Masco, also a Delaware corporation with its principal place of business in Taylor, Michigan.

         After the accident, Masco kept on file an “Auto Accident Report” of the collision, listing the date, time, and location of the collision, and identifying Humphrey as the driver of its company vehicle and Ferraro as the driver of the other vehicle involved with the collision. The report also noted that Ferraro suffered injuries. At the time of the accident, Masco and its subsidiaries were insured under Old Republic's Business Automobile Insurance Policy[2] (the “Old Republic Policy”). This policy covered the accident between the Plaintiff and Humphrey.

         The Plaintiff filed suit against Humphrey and ANSC on June 8, 2006-two days before the statute of limitations expired-in Indiana Superior Court. The Plaintiff served Humphrey with a complaint and summons two days later via certified mail on June 10, 2006. Although ANSC was a named defendant, it was not properly served, and did not receive notice of the suit. Humphrey never responded to the suit (including making any appearances) and did not provide any notice of any kind to ANSC, MASCO, or Old Republic regarding the suit. As a result, the Superior Court entered a default judgment for $372, 543, 41.00 against Humphrey on January 4, 2007. During the course of the state court suit-from its commencement through issuance of default judgment-neither the Plaintiff nor his attorneys informed or contacted the Masco Defendants regarding the proceedings. The Masco Defendants had no knowledge of the state court suit until September 2011, when the Plaintiff's counsel contacted Masco.

         Ferraro was unable to collect the money damages from either Humphrey or ANSC so he initiated proceedings supplemental pursuant to Indiana Rules of Trial Procedure Rule 69(E). On September 27, 2012, Ferraro moved for summary judgment seeking to hold Masco liable as a garnishee defendant on the theory that Masco held property, the proceeds from the Old Republic insurance policy, on behalf of Humphrey that was subject to garnishment. The State Court denied the motion on February 6, 2014. On February 24, 2014, Ferraro filed a Motion to Finalize Order of February 6, 2014 or, alternatively, certify for interlocutory appeal, seeking to overturn the Lake County Superior Court's Order denying Ferraro's summary judgment motion. The State Court granted Ferraro's Motion to Certify for Interlocutory Appeal on March 10, 2014. On May 2, 2014, the Indiana Court of Appeals denied Ferraro's Motion to Accept Jurisdiction of Interlocutory Appeal. The record of the State Court case contains nothing beyond the motion denied on May 8, 2014.

         On September 8, 2014, Ferraro filed a new complaint seeking declaratory relief in the Lake County Superior Court [ECF No. 8], naming Humphrey, ANSC, Masco, and Old Republic, as defendants. The Complaint was removed to this Court on November 3, 2014 [ECF No. 1]. The Plaintiff in this second suit seeks to attach Humphrey's liability in the state court suit to the Masco Defendants through a declaratory action.


         A. Standard of Review

         Summary judgment is warranted when “the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). Summary judgment is the moment in litigation where the non-moving party is required to marshal and present the court with evidence on which a reasonable jury could rely to find in his favor. Goodman v. Nat'l Sec. Agency, Inc., 621 F.3d 651, 654 (7th Cir. 2010). A court's role in deciding a motion for summary judgment “is not to sift through the evidence, pondering the nuances and inconsistencies, and decide whom to believe. A court has one task and one task only: to decide, based on the evidence of record, whether there is any material dispute of fact that requires a trial.” Waldridge v. Am. Heochst Corp., 24 F.3d 918, 920 (7th Cir. 1994). Although a bare contention that an issue of material fact exists is insufficient to create a factual dispute, a court must construe all facts in a light most favorable to the nonmoving party, view all reasonable inferences in that party's favor, see Bellaver v. Quanex Corp., 200 F.3d 485, 491-92 (7th Cir. 2000), and avoid “the temptation to decide which party's version of the facts is more likely true, ” Payne v. Pauley, 337 F.3d 767, 770 (7th Cir. 2003).

         B. Analysis

         The Plaintiff seeks declaratory relief for a determination that (1) Humphrey's liability to the Plaintiff is covered under the Old Republic Policy, (2) all preconditions to payment of the judgment against Humphrey from proceeds under the policy have been met, and (3) the Defendants are liable to the Plaintiff for the judgment against Humphrey from the proceeds of the policy. (Compl. 3, ECF No. 8.) The Masco Defendants respond by moving for summary judgment on the grounds that Humphrey's liability is not covered under the Old Republic Policy because Old Republic was never timely notified of the prior state court proceeding. Alternatively, the Masco Defendants argue that even if it is determined that Humphrey's liability in the prior state court proceeding is covered under the policy, Old Republic cannot be bound by a default judgment because it had no notice of the lawsuit. Lastly, the Masco Defendants maintain that any new action against ANSC or Masco is time barred because the limitations period has passed.

         The Plaintiff concedes that “coverage under the Old Republic policy requires fulfillment of the policy's coverage conditions . . . to the extent that Humphrey would be entitled to seek indemnification as a covered party.” (Pl.'s Br. 4, ECF No. 34.) But argues that the terms of the Old Republic Policy do not govern the Plaintiff's ability to recover from his employers. The Plaintiff in response and on its own Cross Motion offers two legal theories for recovery against Masco and ANSC: respondeat superior and vicarious liability, and collateral estoppel.

         1.The Old Republic Policy

         The Masco Defendants argue that Humphrey's liability from the prior state court proceeding is not covered under the Old Republic Policy, and cannot be enforced against ANSC, Masco, or Old Republic. “A federal court sitting in diversity jurisdiction must apply the substantive law of the state in which it sits.” Land v. Yamaha Motor Corp., 272 F.3d 514, 516 (7th Cir. 2001) (citations omitted). Under Indiana law, “[a]s with other contracts, the interpretation of an insurance policy is generally a question of law for the courts.” Gallant Ins. Co. v. Allstate Ins. Co., 723 N.E.2d 452, 455 (Ind.Ct.App. 2000) (citing Tate v. Secura Ins., 587 N.E.2d 665, 668 (Ind. 1992)). The Old Republic Policy mandates that an insured must notify Old Republic or its authorized representative of any claim or lawsuit for coverage to apply. Section IV(A)(2) clearly states: “you and any other involved insured must . . . . [i]mmediately send us copies of any demand, notice, summons or legal paper received concerning the claim or suit.”[3] (Bus. Auto Coverage Form 6-7, ECF No. 36-2.) “Here, the insurance policy specifically excludes coverage when the insurer does not receive actual notice of the lawsuit before entry of judgment.” Gallant Ins. Co., 723 N.E.2d at 455. It is undisputed that the Plaintiff did not provide notice to ANSC, Masco, or Old Republic of the state court suit, or entry of default judgment. “Actual notice means notice sufficient to permit the insurer to locate the suit and defend it.” Id. (citing Long v. Great Cent. Ins. Co., 190 Ill.App.3d 159, 137 ( Ill. App. 1989)). The Plaintiff does not contest this point except to argue that Masco's deductible under the policy would not be exhausted and therefore, Old Republic “would not be liable, anyway.”

         Furthermore, Indiana law precluded Old Republic from ever entering the prior state court proceeding. “Absent notice of the filing” an insurance company is “not permitted to appear and defend” a suit. Id. at 456. “Where prejudice is created by the insured's noncompliance with the policy's provisions, the insurance company is relieved of its liability under the policy.” Id. (citing Miller v. Dilts, 463 N.E.2d 257, 265 (Ind. 1984)). Accordingly, because the Plaintiff failed to properly serve ANSC, Masco, or Old Republic, and gave no notice to them regarding the prior state court proceeding and judgment, the Court finds Humphrey's liability in the prior state court proceeding is not covered under the Old Republic Policy.

         2. Default Judgment

         The Masco Defendants argue that the Plaintiff cannot enforce the default judgment against ANSC, Masco, or Old Republic because he is time barred from doing so. The Plaintiff argues that the default judgment has preclusive effect and establishes liability for the Masco Defendants under the doctrine of collateral estoppel. It is undisputed that ANSC, Masco, and Old Republic did not receive any notice of the prior state court law suit and default judgment. The default judgment cannot be enforced against ANSC, Masco, or Old Republic because they did not have notice of the prior state court proceeding. Indiana “[t]rial courts must consider two factors in determining whether to apply collateral estoppel: whether the party against whom the judgment is pled had a full and fair opportunity to litigate the issue, and whether it would be otherwise unfair under the circumstances of the particular case.” Wolverine Mut. Ins. V. Vance ex rel. Tinsley, 325 F.3d 939, 943 (7th Cir. 2003) (quotations removed) (citing Tofany v. ...

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