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Summer 2007 Newsletter

Firm Happenings

Elijah Wayne Mullins was born January 15, 2007, to Legal Assistant/Receptionist Christina Mullins and her husband, Scott. Elijah weighed 8 pounds and 1 ounce at birth, and was twenty and one-half inches long. He joins big brother, Alexandar, 2. We expect to see Christina smiling again sometime after the diaper stage.

January 15 was a big day for Ward, Tyler & Scott, LLC, as it was also the day that J. David Agnew joined the firm as an associate. David is a 1996 graduate of DePauw University, and a 1999 graduate of Indiana University School of Law in Bloomington. Prior to his arrival at the firm, David worked as an Assistant Consumer Counselor for the Indiana Utility Consumer Counselor’s Office, where he represented consumers before the Indiana Utility Regulatory Commission. He also worked as a Deputy Attorney General in Indiana. David is licensed to practice law in Indiana and Kentucky, and will be working in both the business and litigation sections of the firm. He is married to Meagen (Peden) Agnew, a native of Floyd County, Indiana, and they have a 2 year-old daughter, Anne. David also plays the trumpet (as if we needed someone other than Rodney Scott blowing hot air). We heartily welcome David to the firm.

Christopher King, associate, is coaching youth soccer and baseball with the Louisville YMCA. Now his arms and legs can both be sore.

Mick Ward, Scott Tyler, Ken Doane, Tricia Hofmann and Scott Waters are pleased to announce that their partner, Rodney Scott, has been selected to serve as the firm’s managing member. Plaintiffs’ attorneys were not making his life difficult enough.

Mick Ward, member, is pleased to announce the graduation of his son, Cory, from Indiana Univiversity with a Criminal Justice major. He and Mick celebrated with a recent diving, fishing and pleasure vacation to Key West.

Ken Doane, member, recently volunteered his time to help Bridgepointe Goodwill in Clarksville with the reopening of a store that was lost in a fire. Only one hammer was broken.

Scott Waters’, member, daughter, Megan Waters, just finished a semester of studying comparative politics in Nizhny Novgorod, Russia after completing a semester term on the same topic in Oxford, England. Megan hopes to continue her studies in Russian and to work for the U.S. State Department or some other related endeavor in Russia. Michelle Waters, another one of his daughters, is going to attend Belfast Bible College in Belfast, Ireland in the fall of this year as part of an overseas study program with Moody Bible Institute where she attends. And with another daughter yet to go to college Scott, understandably, is now spending most of his time in the office.

On April 19, 2007, Peggy Timmel, associate, gave a presentation on estate-planning issues to the Floyd County “Angels of Hope” Cancer Survivors Group. She spoke on various topics, including the importance of estate planning, the different types of estate plans, long-term care insurance issues, special-needs trusts and Medicaid planning. The “Angels of Hope” group celebrates its tenth anniversary in June.

Teresa Lewis, legal assistant, is pleased to announce that her daughter, Tracy, is now engaged to Nick Ludwig. Nick popped the question on April 13th after a romantic carriage ride through Waterfront Park. Tracy also recently got the news that she will be teaching at Silver Creek Elementary this fall. Mom could not be happier.

On May 10, 2007, Ken Doane, member, graduated from Leadership Southern Indiana (LSI) as a member of LSI’s 25th anniversary class. The program begins with a two-day retreat then runs September through May. The class meets for one full day each month and learns from field trips and guest speakers about topics such as Southern Indiana’s history, local government and law, educational system, tourism and commerce and industry. He is now challenging Scott Tyler, member, for community service hours.

Mick Ward’s wife, Carol, is retiring after 31 years as an elementary teacher. The firm – especially Mick – wants to congratulate her for her exceptional service. We bet Mick is going to miss the kindergarten teacher talks.

Peggy Timmel also recently presented a brief overview of Pooled Special Needs Trust Funds to attorneys, financial planners and other her peers at the Southern Indiana Estate Planning Council. The lunch kept everyone there until it was over.

Scott Waters attended the American Health Lawyers Association annual health law conference for physicians, physician groups and hospital systems in Las Vegas. The three day conference covered current hot topics of health law, Texas Hold’em, and national and local issues facing physicians and hospitals.

Jessica Batman (no relation to Bruce Wayne) recently joined the firm as a litigation assistant. She has significant experience and will be working with Tricia Hofmann and George Budd. She is also working towards her BA in Human Resources and Administration.

Ward, Tyler & Scott, LLC, is sponsoring a Little League baseball team in New Albany. Mick Ward’s grandson, Logan Charbonneau, is proud to wear the team colors and firm logo.

For the fourth straight year, Ken Doane has coached youth soccer with the Southern Indiana United recreational soccer program. Curiously enough, his kids have always been the stars of these teams.

On May 24, 2007, Scott Waters is presenting a 1-hour education program to the Kentucky Association of Medical Staff Services (includes Clark and Floyd Counties in Indiana) on “Future Legal Aspects of the Roles of Medical Staff Coordinators.” Get your tickets while they last.

Client Outcomes

Scott Tyler and George Budd tried Johnson v. Polly Freeze in Floyd Circuit Court in defense of a business owner that allegedly obstructed the view of a motorist exiting its parking lot, resulting in an accident with a passing motorist. The jury found defendant without fault in the matter. Westfield Insurance Group honored their effort by awarding them the

Golden Gavel. The Claims Legal Support Unit presents the Golden Gavel Award in formal recognition of outstanding achievement by outside counsel. Nominations are completed by Westfield Claims Professionals and submitted to the Director of Claims Legal Support Unit. One award winner is selected each month from the nominations received.

Mick Ward and Chris King continue to assist individuals and charitable organizations in their efforts to protect undeveloped land and preserve natural wildlife habitats for the benefit of the environment and future generations. By working closely with state and federal government agencies, as well as private organizations, such as The Nature Conservancy, they have helped protect more than 1000 acres in the past year through the use of conservation easements, donations and acquisitions.

Ken Doane and Rodney Scott tried Bailey v. State Farm Mutual Automobile Insurance Company in Washington Circuit Court. Plaintiff claimed to be a passenger in a vehicle that exited the roadway and ejected him and the alleged driver – Matt Caudill - from the vehicle. Both occupants admitted drinking and being impaired at the time of the accident. Both occupants, however, denied being the driver at the time of impact. Caudill’s liability insurer, despite its client’s denials, paid its limit and secured a release. Nonetheless, Ken and Rodney defended his underinsured motorist claim against State Farm Mutual Automobile Insurance Company on the liability issue. Relying on the initial reports of the accident and the physical evidence, the jury concluded that Plaintiff was the driver and returned a defense verdict. Plaintiff had over $220,000 in related medical specials. Plaintiff’s motion to correct errors has been denied.

Mick Ward and Scott Waters, a real estate agent candidate instructor with the Real Estate Certification Program in Bloomington, Indiana, assisted an estate client in the marketing and transfer of a multi-million dollar tract of land to Northside Christian Church. It was a win for both parties.

Tricia Hofmann recently secured a summary judgment from the Clark Circuit Court in Fowler v. State Farm Mutual Automobile Insurance Company, on the basis that the plaintiff, a permissive user, was not entitled to stack his underinsured motorist coverage on top of that of the vehicle owner’s coverage.

Rodney Scott defended McClanahan v. Mason in Floyd Circuit Court. McClanahan claimed a torn meniscus following a minor, rear-end accident. Indeed, he underwent surgery and accumulated more than $20,000.00 in medical bills. It was defended on the basis that the knee problem was not related to the accident. The focus was on the physical evidence and the cross-examination of the treating surgeon. The jury returned a defense verdict. Plaintiff’s motion to correct error has since been denied, and Plaintiff has initiated an appeal.

Scott Waters just secured a two year renewal of Ward, Tyler & Scott, LLC’s retainer agreement with the Board of Trustees of Floyd Memorial Hospital and Health Services. He acts as lead legal counsel to the board, administration and the medical staff of Floyd. He is also assisting the Board on its syndication of ownership interests to physicians of Northgate Surgery Center, a joint venture with Kleinert Kutz, world renowned hand surgeons, and other orthopedic specialists.

Scott Tyler and Tricia Hofmann secured an arbitration award in the matter of Hupp v. Martin, a breach-of-contract case arising out of an employment agreement. They subsequently defeated Martin’s attempt to modify the award, and the court entered judgment thereon. Martin’s motion to correct errors is pending. Subsequently, in February of 2007, they prevailed on a motion to dismiss/motion for summary judgment in New Albany Residential, Inc. v. Hupp, on the basis that it was a compulsory counterclaim that was required to have been filed as part of the underlying arbitrated case. Briefs have been filed in the appeal.

Margaret “Peggy” Timmel has performed significant legal services including guardianships for the disabled and minors and estate planning services as part of the firm’s Pro Bono commitment to residents of Clark, Floyd and Scott

Mick Ward continues to be actively and intimately involved in the numerous real estate transactions occurring in local industrial parks. Since 1985, when one of his clients, now the Koetter Group, bought the bare dirt that has since evolved into Park East Industrial Park, nestled between Southern Indiana’s picturesque knobs on the north and Indiana University Southeast on the south, Mick has assisted the Koetter Group and others in the sale, development and exchange of numerous properties in this hub of local industrial activity, as well as in several other industrial- and business-parks in the region. These are often substantial transactions, sometimes involving complicated tax-deferred exchanges.

George Budd tried Joyce v. Phoenix Automotive II, Inc. d/b/a Mr. Transmission in the Clark Superior Court No. 3. Plaintiff claimed that Mr. Transmission had damaged his vehicle’s engine during the repair of the transmission. After tendering payment for the transmission, Plaintiff issued a stop payment on his draft and later filed a lawsuit against Mr. Transmission regarding the alleged engine damage. Mr. Transmission filed a counterclaim against Plaintiff premised in his failure to pay for the transmission and the stop payment issued on the draft. At trial, the case was defended on the basis that Mr. Transmission did not damage Plaintiff’s engine during the repair of his transmission. The jury returned a defense verdict on Plaintiff’s lawsuit and awarded damages to Mr. Transmission on its counterclaim, including attorney’s fees. Mr. Transmission is currently in the process of collecting its $3,420.34 judgment against Plaintiff.

Rodney Scott tried Morton v. Pease in the Switzerland Circuit Court. Morton claimed that a dog from Pease’s property ran into the path of his motorcycle. Pease claimed that the dog in question was a stray that had adopted his farm but came and went as he pleased, that he had no duty to restrain the dog and that, in any event, the accident could have been avoided by Plaintiff if he had kept a proper lookout and maintained control of his motorcycle. The jury returned a verdict attributing 100% of the fault to Plaintiff. George Budd was instrumental in providing support and assistance.

Rodney Scott and Julie Flanigan defended an absentee defendant in Washington Superior Court. In Terry v. Albertson, the only issue tried related to the damages claimed by Plaintiff. Plaintiff had a complicated pre-accident medical history. Her attorneys arranged for an “IME” with Dr. David Changaris. Dr. Changaris related her ongoing problems and treatment to the accident and diagnosed her with a permanent injury. Based on Dr. Changaris’ opinion, Plaintiff was going to present the testimony of a vocational economist claiming between $544,668.00 and $906,920.00 in future lost wages. The court excluded Dr. Changaris’ deposition testimony but provided that he could testify live at trial if, at that time, he was better able to provide a scientific basis for his testimony. At trial, the Court ultimately decided to exclude Dr. Changaris’ testimony relating Plaintiff’s depression, permanency rating, low back problems and/or antalgesic gait to the accident. He was only permitted to opine about an L3 nerve root stretch injury. The jury awarded $95,000.00 to Plaintiff, based on around $44,000.00 in medicals and $21,000.00 plus in wage loss. Although Rodney and Julie were disappointed with the verdict, they were happy to have successfully challenged Dr. Changaris and believe that this Court’s ruling will assist greatly in the defense of further lawsuits since he is a regular on the testifying circuit.

Chris King recently assisted Floyd Memorial Hospital and Health Services in obtaining approval from the New Albany City Board of Zoning Appeals for expansion of the Hospital's existing campus. This approval is the latest in a series of zoning and regulatory approvals related to Floyd Memorial's 250,000-square-foot expansion, including a new Heart Center, emergency room, parking and physical plant improvements to serve Floyd County and surrounding areas.

Scott Tyler and Julie Flanigan successfully excluded evidence of a Plaintiff’s motion x-ray in Hembree v. Howard in the Jackson Superior Court. The motion x-ray was performed by Insight Digital Motion X-Ray at Fuller Chiropractic Clinic. In support of their motion in limine, Scott and Julie submitted the expert report of a board-certified radiologist with an added qualification in neuroradiology. The doctor opined that motion x-ray is only investigational and experimental and lacking in scientific merit.

Rodney Scott secured summary judgment from the Washington Superior Court in Hennessy v. Sanders. Plaintiff came to Washington County in response to an internet advertisement in hopes of buying an Appaloosa from Rodney’s client. Soon after she put her saddle on the horse and mounted it, it either stumbled or bucked. Either way, she fell to the ground and suffered pretty serious injuries. The Court concluded that the undisputed evidence established that the horse had no dangerous propensities about which Sanders knew or should have known, that Plaintiff incurred the risk of her injuries and/or that the Defendant was immune from liability pursuant to the terms of Indiana’s “Equine” Act.

David Agnew recently got word of a published appellate decision from the Indiana Court of Appeals in Micronet, Inc. v. Indiana Utility Regulatory Com'n, -- N.E.2d --, 2007 WL 1364659 (Ind. App., 2007), in which he played a big role. While he was an attorney at the Indiana Office of Utility Consumer Counselor (“OUCC”), David filed a complaint with the Indiana Utility Regulatory Commission (“Commission”) alleging Micronet, Inc. and its billing agent, H.T. Teleservices, Inc., had billed dozens of Indiana telephone customers for services they had not ordered. Micronet refused to cooperate with the Commission’s investigation of the allegations, arguing that the Commission lacked jurisdiction to hear the complaint. The Commission issued a decision imposing over $2.1 million in fines on the two companies. Micronet appealed to the Indiana Court of Appeals, arguing the decision exceeded the Commission’s authority. On appeal, David defended the Commission’s decision, which the Indiana Court of Appeals affirmed shortly after David joined Ward, Tyler & Scott.

Rodney Scott and Tricia Hofmann secured summary judgment from the Floyd Superior Court in Anderson v. Schneider Construction, et al. Plaintiff fell on ice in a parking lot of a commercial establishment. Schneider Construction was asked to clear the lot for the owner. He was not liable, however, because he did not owe any duties to the Plaintiff once he had completed his work in the manner requested. The only duties at the time of Plaintiff's fall were owed by the landowner.


Legal Updates


Key Estate and Gift Tax Numbers in Effect for 2007:

Applicable Credit Amount:
The “applicable credit amount” equates to an exemption from taxation for transfers in certain amounts made during life or at death. The applicable gift tax credit for 2007 is $345,800. This equates to an exemption for $1,000,000 of property transfers.

The applicable estate tax credit for 2007 is $780,800. This equates to an exemption for $2,000,000 of total property transfers.

The highest Estate and Gift tax rate for 2007 is 45%.

Annual Gift Tax Exclusion:

The “annual exclusion amount” for gift tax purposes for 2007 is $12,000.

Marital Gift Exclusion for Noncitizen Spouse Recipient:
The unlimited gift tax marital deduction is available only if the spouse receiving the gift is a citizen of the United States. The gift tax annual exclusion amount for 2007 for gifts to a qualified spouse is $125,000.

Generation-Skipping Transfer Tax Exemption:

The Generation-Skipping Transfer Tax applies to taxable distributions, taxable terminations of interests or direct skips made to individuals more than one generation below that of the transferor, unless an applicable exemption or exclusion applies. Every such transferor may allocate a lifetime exemption for this purpose against both lifetime gifts and transfers at death. For 2007, this exemption is $2,000,000.

Special Use Valuation:
A Personal Representative of an estate may elect to value real property used for farming or other qualified business purposes based upon its actual use, rather than on its theoretical highest or best use, to arrive at a value, for estate-tax purposes, that is less than the property’s fair market value. If the strict statutory conditions for this election are met, the maximum allowable reduction from fair market value for this purpose is $940,000.

Section 6166 Deferral of Tax on Closely-Held Businesses:
Section 6166 provides an extension of time to pay estate taxes assessed against a business interest. If certain strict requirements are met, the Personal Representative of the decedent’s estate may elect to defer payment of the tax for four years, and thereafter pay the tax in up to 10 annual installments. During the first four years of the extended payment period, the estate need only pay interest on the amount of the tax that is deferred. A special interest rate, 2%, applies to the portion of tax attributable to the first $1,250,000, indexed for inflation in the business’ value, for the estate of a decedent dying in 2007. Any remaining tax will bear interest at 45% of the regular under-payment rate. After the initial four-year period, the principal amount of the estate-tax liability, together with interest on the unpaid balance, must be paid off in 10 or fewer annual installments.


New Indiana Health Legislation Effective July 1, 2007:
“Cigarette Tax” - - House Enrolled Act No. 1678 - Creates an average 44 cent state tax on a pack of cigarettes to be used for payment of indigent healthcare for Medicaid Current Obligations and Indiana’s “check-up plan” trust and for other “health initiatives of the state general fund. This hard-fought Act that Governor Daniels signed May 10, 2007 also provides a state tax credit to employers who aren’t covered by ERISA and who offer a “health plan benefit” to employees for the first time in an effort to get small business to start to offer such plans. The credit can be no greater than $2,500 or $50 per employee enrolled in such a plan. In addition, a “small employer qualified wellness program tax credit” is also created. This credit is for small businesses (2 to 100 employees) whose owners are actively engaged in the business and spend 50% of their working days in that business. The credit is 50% of the cost of such wellness program. Finally, this Act fixes certain matching provisions of the state law to maximize the Medicaid moneys paid by the Federal government to the State of Indiana, and none too soon, as payments from the State to indigent care hospitals is still in arrears since 2005!! Read the Act at:

“New Patient Safety Program” - - Senate Enrolled Act No. 207 - This new law signed by Governor Daniels on May 2, 2007, requires the state department of health, subject to appropriation by the general assembly, to enter into an agreement with an agency to collect, analyze, interpret, and disseminate findings regarding patient safety on a statewide basis until June 30, 2010. The law makes it voluntary for certain persons to submit information to the agency and makes the reports and certain other information confidential and privileged. It further requires the state department of health to use standards for infections that have been adopted by a national consensus organization and to report to the health finance commission before September 1, 2007, and September 1, 2008, concerning the implementation of the program. The most important aspect for hospitals and physicians is that it provides that the information remains confidential even if the program expires or is repealed. Read the Act at:

“Physician Assistant” (no more “Physician’s Assistant” in Indiana, but they are now “licensed”) -- House Enrolled Act No. 1241 – The national debate over licensure of non-physicians (medical doctors and doctors of osteopathy) is not affecting Indiana’s view of the role and responsibility of those “licensed to practice medicine,” i.e. physicians. This new law signed into law April 26, 2007, authorizes a physician to delegate to a physician assistant duties that are within the supervising physician's scope of practice, including prescribing and dispensing certain drugs and medical devices. But the law requires that a supervising physician must be either: (1) physically present at the location where services are performed by the physician assistant; or (2) immediately available for consultation and in the county or a contiguous county of the location where the services are being rendered or at a hospital or health facility. Lawyers will like this Act too, as it requires the supervisory agreement (in writing of course) between the physician and the physician assistant to include certain information and be approved by the medical licensing board. The law clearly establishes requirements for a physician assistant to prescribe certain drugs and in certain circumstances requires the patient to be seen by the physician anyway. The law changes references from “certification” to “licensure” of physician assistants, and makes certain other changes concerning the physician assistant committee and licensure of physician assistants. Read the Act at:

“Health Insurance Pre-certification of benefits” - - Senate Enrolled Act No. 372 - Signed into law April 25, 2007 this law requires the department of insurance to review the current preauthorization practices and procedures and allows the department to review the standardization of other insurance matters. It also requires the department to report to the legislative council before November 1, 2007 concerning the department's findings. From these findings, additional legislation is anticipated to protect providers and enrollees from undue interference by the managed care companies. Read the Act at:

“Abolishment of Most Favored Nations Clauses” - - Senate Enrolled Act No. 114 - This law signed on April 26, 2007, prohibits health insurers and managed care companies from requiring a provider to give it the provider’s lowest charge, a so-called “most favored nations” clause. This change will allow for more arm’s-length negotiation between providers and insurers. Read the Act at:

Clarification on Nature of Insured’s Post-Loss Duties:
In Morris v. Economy Fire and Casualty Company, 848 N.E.2d 663 (Ind. 2006), reh’g denied, the insureds made a first-party claim arising out of a break-in at their premises. Both insureds provided recorded statements, but then refused to either provided requested documentation or submit to examinations under oath until they were provided transcribed copies of those recorded statements. When the insurer refused to provide them, the insureds sued for breach of contract and bad faith. The trial court granted summary judgment for the insurer, but the Court of Appeals reversed.
The Supreme Court agreed with the trial court, concluding that the insureds did not have a right to condition fulfillment of their duties upon the receipt of the transcribed statements. The Court explained that the insurance contract “does not provide that an insured can impose this prerequisite upon the insurer before complying with agreed duties.” The insureds breached the contract as a matter of law, entitling the insurer to summary judgment.

Third-Party Beneficiaries and Direct Actions against Insurers:
In Cain v. Griffin, 849 N.E.2d 507 (Ind. 2006), Cain fell at the Griffins’ restaurant, sustaining an injury. After the Griffins failed to pay her hospital bills, she sued them. The Griffins’ carrier still did not pay the bills, and Cain amended her claim to state a direct cause of action against the company for breach of contract and bad faith. Both the trial court and the Court of Appeals concluded that since Cain was not a party to the Griffins’ insurance contract, it did not have a right to bring a direct action against the insurance company.

Judge Sharpnack of the Court of Appeals dissented, relying in large part on a federal appellate court opinion. Cain v. Griffin, 826 N.E.2d 41, 47 (Ind. Ct. App. 2005)(Sharpnack, J., dissenting)(citing Donald v. Liberty Mut. Ins. Co., 18 F.3d 474 (7th Cir. 1994)). He concluded that Cain was a third-party beneficiary of the Griffins’ contract with their insurer, as the contract expressly provided for payment of claimants’ medical expenses, regardless of fault. Since Cain was a third-party beneficiary, the insurer owed her a duty of good faith and fair dealing, as well. As such, Judge Sharpnack reasoned, Cain was entitled to bring both claims.

The Indiana Supreme Court agreed with Judge Sharpnack as to the breach of contract action, but not with regard to the bad faith claim. It noted that Cain was, in fact, a third-party beneficiary under the medical payments portion of the policy. As such, when the company failed to pay her medical bills as required by the contract, she was entitled to bring a direct action for breach of that contractual obligation. However, being a third-party beneficiary did not create a “special relationship” between Cain and the Griffins’ carrier which is necessary for a duty of good faith and fair dealing. The Court explained that “[t]he relationship between a third-party beneficiary and the insurer is not one intentionally created by a close, fiduciary, or potentially adversarial contract and, as such, is not the ‘special relationship’ anticipated by this Court in Erie [Ins. Co. v. Hickman, 622 N.E.2d 515 (Ind. 1993)]. Thus, a third-party beneficiary cannot sue an insurer in a tort action for the insurer’s failure to deal in good faith with a third-party beneficiary.” Cain, 849 N.E.2d at 515.


Our Perspective

This spring, Indiana appellate courts have issued a handful of opinions addressing the scope of negligent infliction of emotional distress claims. Historically, such claims were permitted if the plaintiff experienced a “direct impact” in the accident. Shuamber v. Henderson, 579 N.E.2d 452 (Ind. 1991). For instance, this would be the case if one passenger in an accident experienced emotional distress from witnessing the death of another passenger. To be compensable, the plaintiff’s emotional distress must be “serious in nature and of a kind and extent normally expected to occur in a reasonable person.” Id. Subsequently, emotional distress claims were allowed without an impact, when the plaintiff was a bystander who directly witnessed a severe injury to a spouse, child, parent, grandparent, grandchild or sibling or “analogous” relation. Groves v. Taylor, 729 N.E.2d 569 (Ind. 2000). Again, there was a requirement that the plaintiff’s response be reasonable and appropriate to the circumstances.

In Smith v. Toney, 862 N.E.2d 656 (Ind. 2007), the court rejected an emotional distress claim brought by a woman who witnessed the death of her fiancé. It declined to consider a fiancé “analogous” to a spouse for three reasons: promoting the state’s interest in marriage, preventing an unreasonable burden to the courts, and limiting the scope of persons to whom a tortfeasor could possibly owe a duty of care. The Smith court also held that a bystander plaintiff must establish certain temporal and circumstantial facts to recover. “The scene viewed by the claimant must be essentially as it was at the time of the incident, the victim must be in essentially the same condition as immediately following the incident, and the claimant must not have been informed of the incident before coming upon the scene.” Id. at 663.

While Smith narrowed the applicability of bystander emotional distress claims, several opinions issued by the Indiana Court of Appeals did just the opposite. State Farm Mut. Auto. Ins. Co. v. D.L.B. ex rel. Brake, State Farm v. Jakupko, 856 N.E.2d 778 (Ind. Ct. App. 2006), trans. granted, opinion vacated in rap 58(a)(April 12, 2007) 862 N.E.2d 678 (Ind. Ct. App. 2007);Elliott v. Allstate Ins. Co., 859 N.E.2d 696 (Ind. Ct. App. 2007), trans. granted, opinion vacated in rap 58(a) (April 12, 2007);

In Jakupko, husband/driver was paralyzed in an accident with an underinsured motorist. His wife and children were passengers at the time. The court held that negligent of emotional distress was an independent tort and abrogated prior case law to the contrary, Doe v. Lafayette Sch. Corp., 846 N.E.2d 691 Ind. Ct. App. 2006). In a matter of first impression, the court concluded that the passengers’ emotional distress, which produced physical manifestations, including sleeplessness, constituted “bodily injury” as defined by UIM portion of the policy. As the passengers had their own “bodily injury” and their own cause of action, the “per occurrence” limit was triggered. The family’s claims were not confined to the single “per person” UIM cap. The court did not address whether emotional distress without any physical manifestation would constitute “bodily injury.”

Elliott went one step further. The driver (Amanda) of a vehicle was seriously injured in an accident with an uninsured motorist. Her passengers were her son (Austin) and sister (Amber). Amanda was insured by Allstate under a policy with $25,000 per person, $50,000 per occurrence UM coverage. Allstate paid Amanda $25,000 for her personal injury claim. The court concluded that Austin and Amber had their own claims for emotional distress and were entitled to the remaining $25,000. Consistent with Jakupko, the court held that the physical manifestations (diminished concentration and sleep deprivation) of Austin’s emotional distress were “bodily injury” under the policy. The Court then held, as a matter of first impression, that emotional distress can be “bodily injury” even in the absence of any physical manifestations. Amber had clinical depression and was consumed by feelings of guilt, anger and sadness, but was not in counseling and had no outward physical signs. Nonetheless, she had a compensable emotional distress claim.

Finally, the D.B. case appears to throw the rules out the window. A young boy witnessed his cousin hit and killed by a motorist while riding his bike. As a result, the boy experienced weight gain, nightmares, sleeplessness and anger outbursts. The court concluded that the young plaintiff had a compensable emotional distress claim, although the relationship of “cousin” was not ever recognized previously. In addition, the court suggested that the boy’s claim exposed the per occurrence limit. The curiously-worded opinion leaves it unclear whether $200,000 or $300,000 was at risk. The logical conclusion would be that the deceased boy’s parents would receive $100,000, and the emotional distress plaintiff would receive $100,000, for a total of $200,000 exposure. However, D.B. suggests that the emotional distress plaintiff could receive $200,000. Of course, such a reading is contrary to how per occurrence provisions have historically been applied, and we believe the court must not have intended such an outcome. We will continue to monitor whether this is addressed in later cases, specifically during the transfer of Jakupko and Elliott.

Featured Trial Report

  Jason C. Johnson v. Polly’s Freeze
Cause No.:
  Floyd Circuit
  Hon. J. Terrence Cody
  Westfield Group
Damages Awarded:
  None (defense verdict on liability)
Incurred Medicals:
  Approximately $54,765.00
Last Demand:
Last Offer:
  $25,000.00; withdrawn after mediation
  $5,000.00 post-mediation
WT&S Attorneys:
  Scott L. Tyler and George A. Budd
Synopsis:   On May 28, 1999, Brian Johnson was leaving the parking lot of Polly’s Freeze, an ice cream store located on State Road 62 in Floyd County, Indiana. As he pulled out onto S.R. 62, he struck a motorcycle operated by Jason Johnson (no relation). Jason Johnson, who was not wearing a helmet, sustained various injuries, including an alleged brain injury. He sued Brian Johnson, Polly’s Freeze and the State of Indiana under negligence theories. The claims against Polly’s Freeze and the State of Indiana were predicated on the notion that their acts or omissions impaired Brian Johnson’s view of traffic on S.R. 62. Brian Johnson and the State of Indiana settled with Plaintiff pre-trial.
Brian Johnson testified that the accident was his fault, and that his view was not obstructed. Similarly, the investigating officer concluded that Brian Johnson’s negligence was the cause of the accident, and an eyewitness did not see any obstruction.
At trial, Jason Johnson’s lack of helmet was admitted over his objection. Defendant made the argument that, since a person with a motorcycle permit would have a duty to wear such a helmet, no less should be required of someone lacking even a permit. Defendant’s expert opined that had Plaintiff worn a helmet, he would not have sustained a head injury. Plaintiff filed a lengthy motion in limine to exclude this expert on Rule 702/Daubert grounds. That motion was denied.
Following a four-and-a-half-day jury trial, the jury entered a defense verdict on behalf of Polly’s Freeze. Plaintiff agreed to forego an appeal or Motion to Correct Error in exchange for Defendant’s agreement not to seek attorney’s fees owed pursuant to the rejected qualified settlement offer.