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Summer 2012 Newsletter

Firm Happenings

The firm is pleased to announce it is growing and expanding to meet the needs of our clients. In August, Rebecca Didat joined our firm’s litigation section as an associate. Rebecca was formerly a partner in a Louisville firm, where the focus of her practice involved representing the healthcare industry. She is excited to be practicing on the “sunny side” of the river, where she resides with her family. Prior to her legal career, Rebecca was a physical therapist and worked in various health care settings in both Kentucky and Indiana. She will concentrate in the areas of general liability, personal injury litigation and health care litigation.
 
 
We also recently hired two new paralegals. Vicky Phelps is a native of Clark County and joined us with considerable experience in office management and the service industry. Sally Carpenter is a Floyd County native who graduated with distinction from Indiana University Southeast with a Bachelor’s Degree in English literature in May, 2012. Vicky and Sally are both catching on quickly, and are great additions to the firm.
 
 
Our firm family is growing in other ways. Gabrielle Paschall and Justin Trott are proud to announce the birth of their daughter, Isla Grace Trott, who was born on June 26. Isla weighed in at 7 pounds, 9 ounces and is a beauty. Both mom and daughter are well, and Gabrielle and Justin have adjusted to the changes that nighttime feedings bring. Congratulations to Gabrielle and her family!
 
 
Rodney and Lisa Scott are proud to report that Katie Scott recently graduated from Christian Academy of Louisville with highest honors. Her Walden Theatre performances this year included significant roles in Romeo and Juliet, Anonymous and Cymbeline. This fall, she began attending the Dell’Arte International School of Physical Theatre in Blue Lick, California, after being selected as one of 32 students from applicants of all ages and experience.
 
 
Teresa Summers’ daughter, Olivia Pacciano, is the co-founder of a fundraising project entitled Bracelets for Bravery. Olivia and a friend created Bracelets for Bravery in July to support the Clark County chapter of Relay for Life. We are all very proud of Olivia’s and her mom’s efforts and dedication to this cause. You can learn more about this project at facebook.com/Bracelets for Bravery.
 
 
Our firm continues its proactive role in helping run the Floyd County Teen Court program. Established in the summer of 2008, Teen Court is a voluntary program where students serve as attorneys and jurors in establishing appropriate sentences for first-time, non-violent juvenile offenders. Scott Tyler and Tricia Hofmann have served as charter attorney advisors for the program since it began, and Gabrielle Paschall is now also serving in that capacity. Scott, Tricia and Gabrielle preside over the teen court trials and train the teenage volunteer participants in their roles as prosecuting and defense attorneys.
 
 
Tricia Woods is proud to announce that her son, Josh Woods, received first place in the drawing category for 8th graders in the New Albany-Floyd County Secondary Art Show.
 
 
Since joining the firm, Vicky Phelps graduated Summa Cum Laude from Sullivan University with an Associate of Science degree in Administrative Office Management. She also received the President’s Cup for Academic Achievement. Kudos to Vicky for being able to keep up her studies at such a level while simultaneously working full time and having a family to care for!
 
 
John and Tricia Hofmann’s and Chad and Renee Smith’s respective daughters (Casey and Madison Hofmann and Samantha and Genevieve Smith) are all gymnasts at All About Kids in Louisville. Casey, 8, and Samantha, 7, participated in several competitions over the 2011-12 season, and were selected to join Level 3 of the gym’s competitive team program, which began in June. It is quite a commitment, with three-hour practices and multiple competitions, but the girls are excited about the opportunity and dreaming of future Olympic possibilities. It remains to be seen, however, how their parents feel about the mandatory booster club!
 
 
Scott Tyler is a past President of the Sherman Minton Inn of Court, a Chapter of the American Inns of Court. Members of the Sherman Minton Inn of Court are dedicated to cultivating best practices and highest ethical behavior in the profession. Scott chaired the February, 2012 joint meeting with the Brandeis Inn of Court in Louisville, Kentucky, and will remain a Member of the Executive Board. Eric Eberwine and Rebecca Didat are also currently members of the organization.
 
 
Rodney and Lisa Scott are proud to announce that Emma Scott has been accepted to Medical School at the University of Kentucky, which she will begin in the fall of 2013. The only thing that has surprised anyone at the firm about that announcement is how quickly her college years have flown. Rodney and Lisa spent much of 2012 without Emma, as she participated in a “study abroad” program at the College of Bellgrano in Buenos Aires, Argentina. After five months of intensive Spanish language classes and with a house mother that spoke no English, Rodney and Lisa were pleased to discover that she still remembered how to speak English by the time she returned to Indiana in July.
 
 
This summer, Tricia Hofmann attended the annual SIU/MIST/Litigation training conference conducted in Springfield, Missouri, by the American National Property and Casualty Companies (ANPAC) for their defense attorneys. It was her fifth ANPAC seminar, and like usual, was both informative and enjoyable.
 
 
Rodney and Lisa Scott – each on their own Harley – participated in the Miracle Ride for Riley Children’s Hospital in Indianapolis with friends from Southern Indiana and Indianapolis and 7000 or so other motorcycle enthusiasts to help raise money for medical research and services. The ride included a lap around the Indy 500 track. Neither one is saying who crossed the brickyard first.
 

Client Outcomes

 

Rodney Scott tried Stanek v. Englert’s Home Comfort Center in the Dubois Circuit Court in July of 2012. Plaintiff was a 57-year-old delivery driver for Symbol Mattress Company who was making a delivery to Englert’s on behalf of his employer. Englert’s is a local furniture and appliance store. The delivery occurred on February 3, 2009, and the weather on that date, by all accounts, included snow, ice and wind. To complicate matters, the temperature was in the 20’s. Plaintiff decided he could not drive his semi down a decline to the docking station because he might get stuck. Instead, he walked into the store to tell the manager, who advised him the store would send someone up to accept the delivery. On his way back out to the semi across the parking lot, he slipped on ice and broke his ankle and tibia. He contended the Defendant – a retail business – had a continuing duty to keep its lot free of ice, and that he did not know about the ice because it was covered by snow. He also claimed more than $68,000.00 in paid medical bills and wages before the trial started. During the trial, to avoid damaging testimony about Plaintiff’s failure to mitigate damages from the treating surgeon, Plaintiff’s counsel reduced that claim to around $26,000.00. The jury deliberated fault and damages and returned a verdict finding that Defendant was not at fault. Gabrielle Paschall worked significantly on the case but was not available when trial occurred because she was engaged in much more important work during her maternity leave. Tricia Hofmann, therefore, assisted with preparing the trial motions and instructions.
 
Chad Smith and Sandra Heeke obtained summary judgment in favor of their client, Michael Roessler, in Banks v. Roessler. Plaintiff signed up for and participated in an annual basketball tournament held at Defendant’s home. On the morning of the tournament, Plaintiff arrived and warmed up on the court. After watching one or two games, Plaintiff’s team played its game. During the game, Plaintiff went after a loose ball and injured his knee. Plaintiff filed suit against Defendant, claiming that he failed to maintain the basketball court in a safe condition. In granting the summary judgment motion, the court agreed that there was no dispute that the basketball court in question was not in a condition that involved an unreasonable risk of harm to Plaintiff or any other players on the court. In addition, the court concurred that participating in sporting activities carries a potential for injury and that Plaintiff willingly assumed the risk of such injury when he agreed to participate in the basketball tournament.
 
John Hofmann successfully defended Floyd Memorial Hospital in a medical malpractice case, Stinson v. FMH, et. al.. After reviewing the complex submissions that involved a lot of fact questions and disputes, the review panel unanimously concluded that the Hospital did nothing wrong and did not cause any harm whatsoever to the patient. Tricia Woods offered invaluable assistance in preparing the voluminous and complex submission.
 
Scott Tyler tried the case of Whipker and Richart v. Bobenmoyer and Florence Livestock, in the Jennings Circuit Court in the fall of 2011. Whipker and Richart claimed spinal injuries as a result of an accident in which Florence Livestock’s semi collided with the rear of Plaintiffs’ stopped pickup truck. The damage to the pickup was severe and dramatic, with the bed pushed up and nearly parallel with the cab. Liability was admitted, and the case proceeded to trial on damages only. Whipker’s medical expenses were just under $16,000, and Richart’s neared $2,000. Plaintiffs’ testifying medical provider was Chris Klaes, DC, and the defense IME physician, John Chambers, MD, appeared by video. The jury returned a verdict of $30,000 in favor of Whipker and $5,000 in favor of Richart.
 
Tricia Hofmann defended Plaintiff’s appeal in Jones v. Townsend following a defense verdict obtained by Rodney Scott in Clark Superior Court No. 2 in May of 2011. Plaintiff argued that, by admitting that he was “a cause” of the accident, Defendant was at fault as a matter of law, and that the jury was precluded from entering a defense verdict. Plaintiff also challenged the appropriateness of a jury instruction. In May of 2012, after the issues were extensively briefed by both parties, the Court of Appeals entered its opinion in Defendant’s favor. Plaintiff did not seek transfer.
 
Eric Eberwine tried McElfresh v. Montgomery and State Farm in Harrison Circuit Court in August of 2012. We represented State Farm, which was Plaintiff’s underinsured motorist provider. This case involved a dispute over a parking space in the parking garage of the Horseshoe Casino in Harrison County. Plaintiff stood in a prime parking space attempting to “save” it for a friend while Defendant Montgomery attempted to pull her vehicle into the open spot. As the vehicle moved into the space, the right front tire ran over Plaintiff’s foot. A heated argument ensued until casino security arrived to make an incident report. Plaintiff spent the evening gambling, but soon started to have pain and swelling in her foot. Upon returning to her home in Las Vegas, Plaintiff learned she had a minor avulsion fracture in her foot. She also claimed a knee injury due to the incident. Her billed medical expenses totaled approximately $39,000. Liability was disputed, and the defense also presented a medical expert who had conducted a records review. Plaintiff’s treating physicians testified via video deposition. Notably, the Judge ruled – over heated objection – that State Farm would be identified to the jury at trial, which resulted in instructions related to UIM coverage and damages. During closing, Plaintiff demanded $160,000 from the jury. After deliberating liability and damages, the jury returned a verdict apportioning 56% of the total fault to Defendant Montgomery and 44% of the fault to Plaintiff. The jury further assessed the total damages at $125,000. After reducing the by the percentage of fault, Plaintiff recovered a net verdict of $70,000. As Defendant Montgomery had liability limits in the sum of $25,000, the balance of $45,000 was assessed against State Farm under the UIM section of the policy.
 
Rodney Scott tried Sadler v. Kaskie in the Floyd Circuit Court in August, 2012. From Plaintiff’s perspective, the principal dispute was the nature and extent of her injuries. From Defendant’s perspective, the principal dispute was who ran the red light at the intersection. Even though the police officer had attributed fault to the Defendant, she still believed that she had a green or yellow light when she went through it. She was a EVOC certified driver and sergeant for the Middletown Fire Department. Plaintiff, however, had crossed most of the two-lanes at the intersection at the time of impact. In addition to the parties, the New Albany Street Commissioner testified that there was a three-second delay during which the light is red for all directions before it would have changed from red to green for Plaintiff’s direction of travel. Combined with the eyewitness testimony that Defendant was at or very near the intersection at the time it turned red for her direction, Defendant’s counsel argued that Plaintiff had to have been in the intersection while it was red and, since she testified that it was always green for her direction, that she failed to exercise appropriate care at the intersection. Plaintiff claimed more than $32,000.00 in medical bills and argued permanent nerve injury. The jury deliberated fault and damages. It returned a verdict rejecting Plaintiff’s testimony that the light was green for her the entire time she approached, and finding that Defendant was not at fault. Gabrielle Paschall and Eric Eberwine provided valuable assistance, respectively, in working up the case and preparing it for trial.
 
Rodney Scott and John Hofmann defended a medical malpractice claim in Woodward v. Floyd Memorial Hospital. This was a highly contentious case involving a law firm from “the Region” in Northwest Indiana. The panel issued a unanimous opinion concluding that the Hospital’s actions did not cause Plaintiff’s death. John learned more about heart attacks than he probably ever wanted to know. Again, Rodney and John were assisted during the process by the efforts of Tricia Woods.
 
Tricia Hofmann secured an Order of Dismissal on jurisdictional grounds from the United States District Court for the Southern District of Indiana in Tellis v. Sipes in May of 2012. Following the car accident in question, Plaintiff’s medical bills were less than $10,000; he did not provide any documents to support a lost wage claim. During pre-suit negotiations, Plaintiff demanded less than $21,000 to settle his case. Three months after that demand was rejected and negotiations broke down, he initiated suit in federal court. There had been no intervening treatment or damages in the three-month period. To be entitled to litigate in federal court on the basis of diversity citizenship between the parties, a plaintiff must make a good-faith showing that the amount in controversy – the amount required to fully satisfy the plaintiff’s demands as of the date on which suit was filed – exceeds $75,000. Although such motions are commonly granted in cases where the damages are fixed, they are relatively rare in personal injury cases where the amount of “pain and suffering” is unknown and typically within the jury’s discretion. The court held that evidence of the pre-suit negotiations was admissible and could be considered as evidence regarding the amount in controversy. She further concluded that Plaintiff’s Complaint failed to plead a sufficient amount in controversy as a matter of law, and granted the Motion to Dismiss.
 
Eric Eberwine tried Cutter v. Minnick and State Farm in Ripley Circuit Court in June of 2012. The Plaintiff was a construction superintendent who was driving his pickup truck and trailer on a rural two-lane road near Elrod, Indiana. At the same time, our client was traveling the opposite direction when she lost control of her vehicle. Defendant went left of center and struck Plaintiff’s vehicle, causing it to leave the roadway and travel down an embankment. Plaintiff’s truck and trailer rotated 180 degrees before it came to rest in a culvert ditch. Defendant accepted liability for the accident, and the trial proceeded on the issue of damages only. Plaintiff underwent surgery on his right knee and sought to recover his past and future medical bills and general damages. He also claimed that the knee injury caused him to lose a lucrative consultancy job with his former employer. Plaintiff claimed more than $28,000 in medical bills, as well as lost wages. In addition, Plaintiff claimed the lost consultancy job was worth $108,000. During trial, Defendant disputed causation of the knee injury, offering the expert testimony of an IME physician, Dr. Robert Sexton, and a vocational rehabilitation expert, Donald Shrey, PhD. The UIM carrier, State Farm, was not identified to the jury at trial, and its counsel did not participate. Plaintiff’s counsel demanded nearly $375,000 during closing. After deliberating, the jury returned a verdict of $250,000.00.
 
John Hofmann and Rodney Scott defended James v. Baker, a dental malpractice case that went to the review panel in May of 2012. Plaintiff went to Defendant for dental repair, including replacement of dental crowns. Against the direction of Defendant and his staff, she moved suddenly while a crown was being polished, causing the instrument to come into contact with her mouth. Plaintiff claimed that Defendant’s staff was negligent, and that she sustained parasthesia as a result. The panel unanimously concluded that Defendant did not breach the applicable standard of care.
 

 Our Perspective

 

Application of Set-offs to Possible UIM Exposure
by Tricia Kirkby Hofmann
We have seen a steady increase in the number of cases where plaintiffs’ attorneys have forcefully argued to our insurance clients that they are entitled to full UIM limits, with no set-offs. While there are certain situations in which there could be a UIM exposure even if there is a liability policy in place providing limits equal to or greater than the insured’s UIM coverage, there are often times in which that will not be the case. In multiple cases, through substantive letters to counsel, our firm has successfully procured either the withdrawal of insurance claims or the dismissal of actions against UIM carriers where the available liability limits equal or exceed the insureds’ UIM limits. This article is intended to provide an overview of the issue under Indiana law, as well as arguments to rebut aggressive, but often erroneous, claims of counsel.
 
 
Indiana Code 27-5-5-5
 
 
The Indiana Code sets forth two equations for determining the maximum amount an insured can receive in underinsured motorists coverage. Indiana Code 27-5-5-5 provides, in pertinent part:
 
 
(c) The maximum amount payable for bodily injury under uninsured or underinsured motorist coverage is the lesser of:
 
(1) the difference between:
 
(A) the amount paid in damages to the insured by or for any person or organization who may be liable for the insured’s bodily injury; and
 
(B) the per person limit of uninsured or underinsured motorist coverage provided in the insured’s policy; or
 
(2) the difference between:
 
(A)  the total amount of damages incurred by the insured; and
 
(B) the amount paid by or for any person or organization liable for the insured’s bodily injury.
 
 
For purposes of this article, we will assume that the insured’s or insureds’ total damages are equal to or greater than the amount of available liability limits, and that the answer to calculation (1) will be greater than the answer to calculation (2).
 
 
Watershed case – Allstate v. Sanders
 
 
The most simple scenario is a case involving one claimant and one tortfeasor. Here, historically, there has been a direct limits-t0-limits comparison between the tortfeasor’s per-person liability limits and the per-person UIM coverage limit. The seminal case involving this scenario is Allstate Ins. Co. v. Sanders, 644 N.E.2d 884, 887 (Ind. Ct. App. 1994)(no UIM exposure for single claimant where single tortfeasor’s liability coverage was $100,000 and per-person UIM limits were $100,000). This is consistent with Indiana Code 27-7-5-4(b), which defines an underinsured motor vehicle as an “insured motor vehicle where the limits of coverage available for payment to the insured under all bodily injury liability policies covering persons liable to the insured are less than the limits for the insured’s underinsured motorist coverage at the time of the accident . . . .” If the liability limits are equal to or greater than the UIM limits, the tortfeasor was not driving an “underinsured motor vehicle” under Indiana statute (or under an ISO-based insurance coverage form, or virtually any auto policy we have seen). The UIM carrier is entitled to set off the full amount of the liability limits, and there is no underinsured exposure. Indiana Code 27-5-5-5. While Sanders has since been disapproved by the Indiana Supreme Court (as described below), we believe that Indiana courts would nonetheless still apply this same analysis where there is a single claimant and a single tortfeasor.
 
 
Complication caused by multiple tortfeasors – Masten v. AMCO
 
 
Some claimants’ attorneys are suggesting that Masten v. AMCO Insurance Company, 953 N.E.2d 566 (Ind. Ct. App. 2011) changed the set-off rule outlined in Sanders and in the statute. We do not believe it did. Due to the sudden stop of the vehicle directly in front of him, Masten had to stop suddenly in traffic, and he was struck by Hanson. There was evidence suggesting Hanson may have been struck by and Robinson, who was behind him. Masten was injured in the accident and sued both Robinson and Hanson. Hanson’s liability limits were $100,000 per person and $300,000 per occurrence. Robinson’s limits were $25,000 per person and $50,000 per occurrence. Masten himself had underinsured motorist coverage with AMCO in the amount of $100,000 per person and $300,000 per occurrence.
 
Hanson quickly tendered the $100,000 limits, and Robinson’s $25,000 limits were tendered thereafter. Upon receipt of Hanson’s limits, AMCO filed a Motion for Summary Judgment, on the basis that, since the available liability limits equaled the applicable UIM limits, there was no coverage. That argument was ultimately unsuccessful.
 
 
The critical fact which distinguishes Masten from Sanders is that there were two tortfeasors. Indeed, if Hanson had been the only tortfeasor, the Masten court would have followed Sanders, concluding that Hanson was not an underinsured motorist and that there was no UIM claim. Since there were two tortfeasors, however, the court conducted a separate analysis for each tortfeasor’s vehicle, to determine whether it was “underinsured.” Only set-offs of funds received from the owners of underinsured vehicles are permitted under the policy. Hanson’s vehicle was not “underinsured,” as his liability limits equaled Masten’s. Hanson’s involvement did not trigger the UIM insuring agreement. Because Hanson was not underinsured, AMCO would not be legally obligated to pay damages that Masten could recover from Hanson. A separate inquiry, however, had to be conducted with respect to Robinson. Since Robinson’s per-person liability limits were $25,000, less than the corresponding UIM limits, Robinson was the operator of an “underinsured motor vehicle,” and AMCO would be obligated to pay compensatory damages Masten is entitled to recover from Robinson. The fact that one of the tortfeasors qualified as an underinsured motorist triggered the insuring provision.
 
 
Once the insuring provision was triggered, the policy guided what set-offs could be made. Again, Hanson was not underinsured, and set-off of funds received from his policy were not permitted. AMCO was entitled to a set-off of Robinson’s $25,000, but not to a set-off of Hanson’s $100,000.

We presume that, had Hanson had $50,000 in liability limits, there would have been a different result. Logically following the court’s analysis, both Hanson and Robinson would have been operating “underinsured motor vehicles.” As such, under those facts, AMCO would have been able to set off the $25,000 from Robinson and the $50,000 from Hanson, resulting in a UIM exposure of $25,000.
 
 
Multiple claimants and one tortfeasor – Corr; Graham; Eakle; and Lakes v. Grange
 
 
Things get even murkier where there is a single tortfeasor, but multiple claimants. Historically, Indiana courts have addressed whether each of the claimants would be in the same position he or she would have occupied had the tortfeasor been uninsured. Until very recently, this typically involved an examination of whether the claimants are all seeking to recover under the same policy or different policies. An overview of the case history is necessary.
 
 
The first Indiana case addressing set-offs in the context of multiple claimants was Corr v. American Family Insurance, 767 N.E.2d 535 (Ind. 2002). In Corr, a minor child died from injuries she sustained in a single-car accident. There were four other injured occupants in the vehicle. The driver’s parents had separate policies, each with liability limits of $100,000 per person, $300,000 per occurrence. The insurers tendered the aggregate $600,000 limits. Of that amount, the deceased child’s parents each received $57,500. Each parent pursued a UIM claim under his or her own, separate, insurance policy. The deceased child’s father’s policy had UIM limits in the amount of $250,000 per person and $500,000 per accident. Her mother had UIM limits of $100,000 per person and $300,000 per accident.
 
 
The court emphasized that since the decedent was the only insured under each of the UIM policies, it was the per-person, not per-occurrence, limits that mattered. In addition, since the UIM statute is remedial in nature, it must be liberally construed. If the tortfeasor had been uninsured, the court noted, each Corr would have had UM coverage up to the per-person limits ($100,000 and $250,000). If their UIM recovery were limited to the $57,500 they each received, as proposed by American Family, which advocated a comparison between the policies’ per-accident limits, the Corrs would be in a worse position than they would have occupied had the tortfeasor not been insured at all. Such a result was not the intent of the legislature. The full $200,000 liability limits were not “available for payment” to the Corrs, as, quoting the statutory language, they were not “present or ready for immediate use.” Id. at 539 (quoting Merriam Webster’s Collegiate Dictionary 79 (10th ed. 1993)).
 
 
Other courts subsequently attempted to reconcile the holdings of Corr and Sanders. E.g. Auto Owners Ins. Co. v. Eakle, 869 N.E.2d 1244 (Ind. Ct. App. 2007); Grange Ins. Co. v. Graham, 843 N.E.2d 597 (Ind. Ct. App. 2006). In Graham, there were five injured claimants, all in a vehicle insured through Grange under a policy affording UIM limits of 100/300. The other driver was determined to be at fault, and had liability limits of 100/300. The liability carrier tendered the total per-occurrence limits, which were split among the five claimants. The exact breakdown is unknown, but each of the five received a sum less than her claimed damages and also less than the $100,000 per-person UIM limit. The claimants subsequently brought UIM claims, all under the Grange policy. The claims were denied on the basis that the vehicle was not “underinsured.” The trial court denied Grange’s motion for summary judgment, concluding as a matter of law that the tortfeasor’s vehicle was underinsured as per the statute and the policy.
 
 
Not surprisingly, Grange relied on Sanders, seeking a comparison between the per-occurrence liability limits and the per-occurrence UIM limits. The various claimants cited Corr, arguing that the amount available for payment to them was less than the per-person limits, and that they were entitled to the difference.
 
 
The Court of Appeals agreed with Grange and reversed. It emphasized that if the tortfeasor had been uninsured, and the claimants had only recovered under the Grange policy, their recovery would have been capped at $300,000, and they would have had to split those proceeds. This is the exact same outcome as what actually occurred via distribution of the tortfeasor’s liability limits. The claimants were put in the exact same position. As such, the vehicle was not underinsured, and Grange was entitled to summary judgment. A similar result was reached in Eakle, with a $500,000 per-accident liability limit completely offsetting a UIM policy with a combined single limit of $500,000. The three injured claimants (and one consortium plaintiff) could not pursue a UIM claim. The Seventh Circuit of the United States Court of Appeals noted that the reasoning of Graham and Eakle was “sound” and predicted that the Indiana Supreme Court would agree with it. Clark v. State Farm Mut. Auto. Ins. Co., 473 F.3d 708 7th Cir. 2007).
 
 
As it turned out, the Seventh Circuit’s prediction turned out to be incorrect. Everything changed when the Indiana Supreme Court issued its recent opinion in Lakes v. Grange Mutual Casualty Company, 964 N.E.2d 796 (Ind. 2012). The Lakes (a mother and her two daughters) were injured in an accident caused by the negligence of Isaacs. At the time of the accident, Isaacs also had a passenger who was injured. Ultimately, Isaacs’ insurer tendered his liability limits to the three Lakes (as well as Mr. Lakes, who had a consortium claim) and Isaacs’ passenger. Isaacs’ policy contained liability limits of $25,000 per person and $50,000 per accident. One of the Lakes daughters – Hannah – received $5,100 of the $50,000 in liability proceeds, and pursued a UIM claim under her mother’s policy with Grange. Although her mother and sister initially made a UIM claim, they subsequently withdrew it, and Hannah was the only claimant seeking to recover UIM benefits from Grange. The Grange policy contained a combined single UIM limit of $50,000. Relying on Graham and Eakle, the trial court granted summary judgment to Grange on the basis that the per-occurrence limit of Isaacs’ policy was equal to the UIM limit. As such, Isaacs’ vehicle was not underinsured, and there was no coverage.
 
 
The Court of Appeals reversed, and held that Hannah was entitled to recover $44,900 (the difference between the $50,000 combined single UIM limit and the $5,100 she received from Isaacs’ insurer). It reasoned that since her mother and sister withdrew their UIM claims, Hannah was the only insured attempting to recover under the policy, and Corr applied. As such, the amount Hannah recovered from the settlement needed to be compared with the UIM per-person limit.
 
 
Although it agreed with the result reached by the Court of Appeals, the Indiana Supreme Court disagreed with its reasoning. In its unanimous ruling, the Supreme Court concluded that Graham and Eakle were inconsistent with Indiana’s UIM statute, which was intended to“give the insured the recovery he or she would have received if the underinsured motorist had maintained an adequate policy of liability insurance.” Lakes, 964 N.E.2d at 803 (quoting Corr, supra, at 540). Whether a tortfeasor’s liability limits are “adequate,” the Supreme Court noted, is not determined through a comparison with the amount of UIM coverage. To the contrary, adequacy “is a relative term with reference to the amount of damage incurred by the innocent victim of the tortfeasor’s negligence.” Id. If the tortfeasor’s limits are equal to or greater than the amount of the claimant’s damages, the tortfeasor’s limits are “adequate.” However, if the tortfeasor’s limits are less than the claimant’s damages, the limits are inadequate. The UIM carrier still theoretically receives a set-off for the payments received from the liability insurer, but there is an additional UIM exposure where before, under Eakle and Graham, there was none.

The Lakes court established the following analysis to be applied in all cases: “whether a vehicle is underinsured depends, in all cases, on whether the amount received from the tortfeasor’s policy is less than the per-person limits on UIM coverage.” Id. at 805.
 
 
Therefore, when there are multiple claimants, courts should examine each claim individually and compare each with the per-person limits of the applicable UIM coverage. The per-accident limits have no bearing on whether a vehicle is underinsured. Rather, the per-accident limits come into play only to limit the insurer’s liability to the claimants. To the extent that Sanders, Graham, Eakle, and [Progressive Halcyon Ins. Co. v.] Petty[, 883 N.E.2d 854 (Ind. Ct. App. 2008)] hold otherwise, they are hereby disapproved.
 
 
Id. While Lakes does not alter the analysis in a simple case involving one claimant and one tortfeasor, where the claimant recovers the full per-person limit, all cases with multiple claimants are to be handled the same – by comparing the amount actually received with the per-person UIM limits.
 
 
As a practical matter, we have grave concerns about the scope and possible ramifications of the Lakes holding. This is particularly true in cases where there is a combined single limit of UIM coverage. Assume the following facts: there are three claimants who seek to recover UIM benefits under a policy with a combined single limit of $300,000. The tortfeasor’s liability limits were $100,000 per person and $300,000 per accident. The tortfeasor’s insurer tenders the limits, and each claimant receives $100,000. Prior to Lakes, there would have been a comparison between the $300,000 per-accident liability limit and the $300,000 per-accident UIM limit. Under that comparison, there would be no UIM exposure whatsoever. Under a Lakes approach, however, each claimant’s $100,000 recovery would be compared with the $300,000 per-person UIM limit. There would be a UIM exposure of up to $200,000 on each claimant, for a total potential exposure of $600,000. As the per-accident UIM limit serves to reduce the maximum amount an insurer is required to pay, the $600,000 would be reduced to $300,000, and the insurer would have a total UIM exposure of that amount.
 
 
Such an outcome, however, would eliminate policy provisions which provide for UIM coverage to be “reduced by all sums paid” by persons who are legally responsible. There would also be stacking implications. Historically, Indiana courts have consistently upheld contractual limitation and anti-stacking provisions. If insurers are ordered to pay the full per-accident UIM limits to claimants who have already received payment from a tortfeasor, these policy provisions will be nullified. In addition, such a result is inconsistent with Indiana statute, which expressly permits UIM carriers to draft contracts which allow them to set off liability proceeds paid on behalf of the tortfeasor. I.C. 27-5-5-5. Even though insurers may have both a statutory and contractual right to a full set off of payments made by the tortfeasor, our reading of Lakes suggests that they may soon be precluded from taking one. We hope that this is not the Supreme Court’s intended result, and believe this is a matter which will require additional clarification from the Indiana appellate courts.
 
 
Choice-of-law arguments
 
 
With our close proximity to the Kentucky border, we frequently have cases where an Indiana insured is involved in an auto accident in Kentucky, and we must determine which state’s law to apply. We are increasingly hearing of situations in which the insured’s counsel argues that – even though the insured lives in Indiana and the policy was written there – since the accident happened in Kentucky, Kentucky law should apply, and the insured should be entitled to stack UIM coverage on top of the tortfeasor’s liability limits. Such an argument is incorrect. In a third-party context, it is the substantive law of the state where the accident occurred which governs. That is not, however, the case in a first-party claim for UM/UIM benefits.
 
 
When an insured sues his or her own insurance company for UM/UIM benefits, the insured is bringing an action to enforce and interpret an insurance policy. That is a contract action. Both Indiana and Kentucky courts have concluded that the state with “more intimate contacts” will control. In the case of the interpretation of an auto insurance policy, that will typically be the state where the risk is located – where the vehicle is garaged and the policy was issued. Cincinnati Ins. Co. v. Trosky, 918 N.E.2d 1 (Ind. Ct. App. 2009). See also Hammer v. State Farm Mut. Auto. Ins. Co., 950 F. Supp. 192 (W.D. Ky. 1996). If an Indiana insured is involved in an accident in Kentucky, Indiana law will govern any UIM coverage disputes and the construction and interpretation of that policy.
 
Some contracts are containing express choice-of-law language which provides that the law of the state where the policy is issued governs any coverage issues. Such provisions are enforceable in Indiana, and they are controlling. E.g. Allen v. Great Am. Reserve Ins. Co., 766 N.E.2d 1157, 1162 (Ind. 2002); Kentucky Nat’l Ins. Co v. Empire Fire & Marine Ins. Co., 919 N.E.2d 565, 575 (Ind. Ct. App. 2010). As the Supreme Court explained:
 
 
Indiana choice of law doctrine favors contractual stipulations as to governing law. Hoehn v. Hoehn, 716 N.E.2d 479, 484 (Ind. Ct. App. 1999); Homer v. Guzulaitis, 567 N.E.2d 153, 156 (Ind. Ct. App. 1991), trans. denied; Barrow v. ATCO Mfg. Co., 524 N.E.2d 1313, 1315 (Ind. Ct. App. 1988). There is no reason here to disregard that presumption. Accordingly, the contractual provision that Indiana law governs the construction of the contract is controlling on the choice of law issue.
 
 
Allen, supra, at 1162.
 
 
We recognize that the above analysis is complex, and that every case is different. If you have any questions regarding a particular factual situation and how it fits within the above, please do not hesitate to contact us.
 
 
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