                                                                          FILED
                                                                      Jan 02 2020, 8:36 am

                                                                          CLERK
                                                                      Indiana Supreme Court
                                                                         Court of Appeals
                                                                           and Tax Court




ATTORNEYS FOR APPELLANT                                     ATTORNEYS FOR APPELLEE
Margaret M. Christensen                                     GREGORY SMITH
Karl L. Mulvaney                                            Ann Marie Waldron
Bingham Greenebaum Doll LLP                                 Waldron Law
Indianapolis, Indiana                                       Indianapolis, Indiana
                                                            Michael E. Simmons
                                                            Hume Smith Geddes
                                                            Green & Simmons, LLP
                                                            Indianapolis, Indiana
                                                            Robert P. Thomas
                                                            Thomas Law Office
                                                            Indianapolis, Indiana
                                                            ATTORNEY FOR APPELLEE
                                                            NOLAN CLAYTON
                                                            William D. Beyers
                                                            Buchanan &
                                                            Bruggenschmidt, P.C.
                                                            Zionsville, Indiana



                                             IN THE
    COURT OF APPEALS OF INDIANA




Court of Appeals of Indiana | Opinion 19A-PL-1094 | January 2, 2020                           Page 1 of 13
      Progressive Southeastern                                    January 2, 2020
      Insurance Co.,                                              Court of Appeals Case No.
      Appellant-Plaintiff,                                        19A-PL-1094
                                                                  Appeal from the Marion Superior
              v.                                                  Court
                                                                  The Honorable Timothy W.
      Gregory Smith and                                           Oakes, Judge
      Nolan Clayton,                                              Trial Court Cause No.
      Appellees-Defendants                                        49D02-1701-PL-2865

      and
      Erie Insurance Group, Brackett
      Restaurant Group, LLC, d/b/a
      Stacked Pickle, and Allstate
      Insurance Company
      Defendants



      Baker, Judge.


[1]   This is the second appeal arising out of a declaratory judgment action that was

      filed by Progressive Southeastern Insurance Company (Progressive). The

      action was based on a car accident that seriously injured Gregory Smith, who

      was insured by Progressive. At the time of the accident, Nolan Clayton was

      driving Smith’s vehicle with Smith’s permission and Smith was a passenger.

      Progressive sought declarations that Smith was not entitled to coverage under

      the insurance policy’s uninsured motorist or bodily injury liability provisions

      and that it had no duty to defend or indemnify Clayton. In the first appeal, this

      Court determined that Smith was not entitled to uninsured motorist coverage.



      Court of Appeals of Indiana | Opinion 19A-PL-1094 | January 2, 2020                     Page 2 of 13
[2]   This appeal stems from litigation that occurred following the first appeal. The

      trial court granted Smith’s motion to dismiss the complaint, finding that

      Progressive had waived its other claims by bringing the first appeal. Progressive

      now appeals, arguing that it waived no claims, that we should declare that

      Smith is not entitled to bodily injury liability coverage, that we should declare

      that Progressive has no duty to defend or indemnify Clayton, and that Clayton

      is not entitled, at this point in time, to dismissal of the complaint based on

      alleged failure to prosecute. Finding that Progressive is entitled to judgment as

      a matter of law, we reverse and remand with instructions.


                                                      Facts     1




                                 Underlying Litigation and First Appeal

[3]   The underlying facts, as described by this Court in the first appeal, are as

      follows:


              On February 18, 2016, Smith and Clayton attended a company
              event in Marion County, Indiana. They left the event together
              and Smith gave Clayton permission to drive Smith’s pick-up
              truck. Clayton lost control over the vehicle and ran into a tree,
              seriously injuring Smith. No other vehicles were involved in the
              accident.


              At the time of the incident, Progressive insured Smith under a
              policy which provided coverage for liability, medical payments,
              [underinsured motorist (“UM”)] coverage, coverage for damage



      1
       We held oral argument in Indianapolis on December 12, 2019. We thank counsel for their oral and written
      presentations.

      Court of Appeals of Indiana | Opinion 19A-PL-1094 | January 2, 2020                          Page 3 of 13
                 to the insured’s vehicle, and roadside-assistance coverage.
                 Accordingly, Progressive paid Smith’s vehicular damages in the
                 amount of $10,937.71 and the medical payments coverage limits
                 of $5,000. Smith also brought a negligence claim against
                 Clayton, who was insured by Allstate. Allstate eventually settled
                 out of court with Smith.


      Progressive Se. Ins. Co. v. Smith, 113 N.E.3d 229, 232 (Ind. Ct. App. 2018) (the

      “First Appeal”), trans. denied.


[4]   On January 19, 2017, Progressive filed a complaint seeking two declaratory

      judgments. First, it sought a declaration that Smith was “not entitled to

      coverage under his policy’s [UM] or bodily injury provisions” for the accident

      (the “Coverage Declaration”). Appellant’s App. Vol. II p. 26. Second, it

      sought a declaration that Progressive was “not obligated to defend or indemnify

      [Clayton] as to any matter asserted in [Smith’s] lawsuit[2] because [Smith]

      cannot recover under his own policy for the injuries he attributes to” Clayton’s

      negligence (the “Duty to Defend Declaration”). Id.


[5]   On April 27, 2017, Smith filed a motion for summary judgment, seeking a

      declaration that he was entitled as a matter of law to UM coverage even though

      his truck was covered under the policy. Smith has never argued that he is

      entitled to coverage under the policy’s bodily injury liability provision and has

      conceded that he could not pursue recovery under both that provision and the




      2
          Smith had filed a personal complaint against Clayton in which he sought damages for his extensive injuries.


      Court of Appeals of Indiana | Opinion 19A-PL-1094 | January 2, 2020                                Page 4 of 13
      UM coverage provision. Id. at 87-105, 158; First Appeal Smith’s Br. p. 20; First

      Appeal Oral Arg. at 31:45; First Appeal Pet. to Trans. p. 12. Progressive filed

      its own motion for summary judgment, arguing that it was entitled as a matter

      of law to a declaration that Smith was not entitled to UM coverage under the

      policy.


[6]   On December 14, 2017, without a hearing, the trial court signed Smith’s

      proposed findings and summarily granted summary judgment to him and

      against Progressive on the UM portion of the Coverage Declaration. Neither

      party discussed, and the trial court’s order did not cover, the Duty to Defend

      Declaration or the bodily injury liability portion of the Coverage Declaration.


[7]   Progressive appealed, arguing that the trial court erred by granting summary

      judgment in Smith’s favor. It did not seek permission to bring an interlocutory

      appeal; instead, Progressive brought the appeal as one taken from a final

      judgment, and this Court treated it as such. This Court ultimately found that

      the trial court erred because the policy “unambiguously excluded Smith’s truck

      from UM coverage and the policy reimbursed Smith for the damage to his

      vehicle and his medical payments pursuant to the policy’s requirements . . . .”

      Progressive, 113 N.E.3d at 237. We reversed, holding that the trial court erred

      by concluding that Smith was entitled to receive payment under the policy’s

      UM coverage. Id. We did not explicitly remand, direct that judgment be

      entered in favor of Progressive, or refer to the Duty to Defend Declaration or

      the bodily injury portion of the Coverage Declaration.



      Court of Appeals of Indiana | Opinion 19A-PL-1094 | January 2, 2020     Page 5 of 13
                              Other Litigation Stemming from the Accident

[8]   As context, we note that there are at least three other lawsuits stemming from

      the accident:3


          • The Tort Action, in which Smith brought a personal injury action against
            Clayton. Progressive defended Clayton under a reservation of its rights 4
            to, among other things, argue in another setting that it had no duty to
            defend or indemnify him. The jury found in favor of Smith, entering a
            total judgment against Clayton of $21.7 million. Clayton appealed
            unsuccessfully. Clayton v. Smith, 113 N.E.3d 693 (Ind. Ct. App. 2018),
            trans. denied.5

          • The Malpractice Action, in which Clayton filed a claim for legal
            malpractice against Progressive and the lawyers it engaged to defend him
            in the Tort Action. The trial court granted Progressive’s motion to
            dismiss the malpractice action as it pertained to Progressive and certified
            the dismissal for interlocutory appeal. This Court has since denied the
            motion for interlocutory appeal (under Cause Number 19A-PL-2001),
            and the matter has been remanded to the trial court.

          • The Bad Faith Action, in which Smith, as Clayton’s assignee, is pursuing
            claims against Progressive, including bad faith, negligent claims
            handling, negligent selection and retention of attorneys, respondeat
            superior liability, liability of a principal for the actions of an agent,
            breach of contract, and breach of the duty to defend. The trial court
            granted Progressive’s motion to dismiss Smith’s complaint. Smith has



      3
        We observe that the interests of the judicial system would likely have been better served if the many
      different lawsuits had been joined. What has resulted from these four separate proceedings is a morass of
      inefficiency that has used everyone’s time and resources injudiciously.
      4
        The reservation of rights letter is not in the record. But it appears to be undisputed that Progressive did,
      indeed, reserve its rights when it assumed Clayton’s defense in the Tort Action.
      5
        Clayton ultimately assigned to Smith, as an asset for partial satisfaction of the tort judgment, all of
      Clayton’s potential claims that may exist against Progressive and the law firm it retained to represent Clayton
      in the Tort Action.

      Court of Appeals of Indiana | Opinion 19A-PL-1094 | January 2, 2020                                  Page 6 of 13
               appealed that order and the appeal is currently being briefed under Cause
               Number 19A-PL-1959.

       Progressive filed a motion to consolidate the appeals, which is moot as to the

       Malpractice Action, and which we have denied as to the Bad Faith Action.


                                   Litigation Following the First Appeal

[9]    After our Supreme Court denied transfer and the First Appeal was certified,

       Clayton appeared in the declaratory judgment action for the first time. On

       February 18, 2019, his attorney filed an appearance and request for an

       enlargement of time to respond to the complaint; the trial court granted the

       request. On February 22, 2019, Clayton filed a motion seeking a declaration

       that he was never properly served with the declaratory judgment action.

       Progressive opposed Clayton’s request, arguing that it was entitled to judgment

       in its favor on the Duty to Defend Declaration, but if the trial court declined to

       enter that judgment, Progressive requested an opportunity for discovery and an

       evidentiary hearing as to whether Clayton had been served properly. On March

       4, 2019, Clayton filed a Trial Rule 41(E) Motion to Dismiss for failure to

       prosecute.


[10]   On February 19, 2019, Smith filed a motion to dismiss and close the litigation,

       arguing that by treating the trial court’s order as a final and appealable

       judgment, Progressive had waived the other pending issues—namely, the Duty

       to Defend Declaration and, as to Clayton, the bodily injury liability portion of

       the Coverage Declaration. Progressive opposed the motion, arguing that the

       trial court’s order was a declaratory judgment deemed final by operation of law

       Court of Appeals of Indiana | Opinion 19A-PL-1094 | January 2, 2020          Page 7 of 13
       and that Progressive had not waived any issues by appealing that declaratory

       judgment. Progressive asked that the trial court enter final judgment in its favor

       on all issues in the complaint.


[11]   Following a hearing, the trial court entered an order on all pending motions on

       May 2, 2019. The trial court granted Smith’s motion to dismiss and close the

       litigation and denied all other motions and requests as moot. Progressive now

       appeals.


                                     Discussion and Decision
[12]   Progressive raises the following arguments on appeal: (1) the First Appeal was a

       mandatory appeal of a final judgment and Progressive waived no other issues as

       a result of bringing that appeal; (2) Progressive is entitled to a final judgment on

       the Coverage Declaration, including a declaration that Smith is not entitled to

       coverage under the policy’s bodily injury provisions; (3) Progressive is entitled

       to a final judgment on the Duty to Defend Declaration because Smith and

       Clayton’s interests align and Smith has no right to recover under the policy’s

       bodily injury provisions; and (4) the trial court properly denied Clayton’s

       motion to dismiss because Clayton has not showed prejudice as a result of his

       tardy participation in the underlying proceedings, but that if we were to reverse,

       Progressive is entitled to an evidentiary hearing on Clayton’s arguments.


             I. The Coverage and Duty to Defend Declarations
[13]   The parties spend much time debating whether Progressive waived its requests

       for declaratory relief (on the duty to defend and bodily injury liability coverage)

       Court of Appeals of Indiana | Opinion 19A-PL-1094 | January 2, 2020        Page 8 of 13
       by bringing the First Appeal as a final, rather than an interlocutory, appeal. We

       believe that this discussion misses the point.


[14]   When Smith filed his summary judgment motion, he decided to do so based on

       UM coverage. Smith has always conceded that he could not pursue both UM

       and bodily injury coverage and that, by pursuing UM coverage, he forfeited any

       right to seek coverage under the bodily injury liability provisions of the policy.

       Appellant’s App. Vol. II p. 87-105, 158; First Appeal Smith’s Br. p. 20; First

       Appeal Oral Arg. at 31:45; First Appeal Pet. to Trans. p. 12; Smith Appellee’s

       Br. p. 10. Furthermore, the policy language itself explicitly excludes coverage

       for Smith’s bodily injuries, appellant’s app. vol. II p. 36, suggesting that the

       decision to pursue UM coverage instead was wise. See United Farm Bureau Mut.

       Ins. Co. v. Hanley, 172 Ind. App. 329, 336-42, 360 N.E.2d 247, 251-54 (Ind. Ct.

       App. 1977) (finding the so-called “household exclusion” enforceable).6


[15]   In other words, it was Smith who decided to focus the case on UM coverage.

       Progressive followed suit, reasonably deciding that, as Smith was not claiming a

       right to bodily injury coverage, Progressive need not address the issue on

       summary judgment.




       6
         In his petition to transfer the First Appeal, Smith admitted that the household exclusion clause barred any
       recovery of damages for his injuries. He invited our Supreme Court to revisit the public policy underlying the
       household exclusion clause and invalidate such provisions in automobile insurance contracts, but the Court
       declined the invitation by denying transfer.

       Court of Appeals of Indiana | Opinion 19A-PL-1094 | January 2, 2020                              Page 9 of 13
[16]   Therefore, once the smoke and mirrors are dispensed with, we are left with this:

       per the First Appeal, Smith is not entitled to UM coverage. And per the policy

       language, precedent from our Supreme Court, and his own concession, Smith is

       not entitled to bodily injury liability coverage. Under these circumstances, it is

       readily apparent that Progressive is entitled, as a matter of law, to a declaration

       that Smith is not entitled to bodily injury liability coverage, and the trial court

       erred by refusing to enter that declaration following the First Appeal.


[17]   The Duty to Defend Declaration is the next domino to fall. The policy

       provision related to liability to others reads as follows: “Coverage under this

       Part I, including our duty to defend, will not apply to any insured person for . . .

       11. bodily injury to you [meaning Smith] or a relative.” Appellant’s App. Vol.

       II p. 36 (emphasis added). In other words, for the same reasons stated above

       related to coverage, the duty to defend does not get triggered here. 7 Indeed, it is

       eminently reasonable to conclude that if Smith is not entitled to coverage for his

       bodily injuries, Progressive is not required to defend Clayton from tort claims

       related to those bodily injuries. Therefore, the trial court erred by refusing to

       enter a declaration that Progressive does not have (and has never had) a duty to

       defend Clayton.


[18]   In sum, the trial court erred by granting Smith’s motion to dismiss and by

       denying Progressive’s request for declarations regarding bodily injury liability



       7
         The fact that Progressive did not have a duty to defend Clayton is not relevant to the questions at issue in
       the Malpractice or Bad Faith Actions related to the quality of the defense provided.

       Court of Appeals of Indiana | Opinion 19A-PL-1094 | January 2, 2020                                Page 10 of 13
       coverage and the duty to defend. We reverse and remand with instructions to

       enter those declarations in Progressive’s favor.


                              II. Clayton’s Motion to Dismiss
[19]   After granting Smith’s motion to dismiss Progressive’s declaratory judgment

       action, the trial court denied the remaining motions as moot. Among those

       motions was Clayton’s request for a declaratory judgment based on both a lack

       of proper service and on a failure to prosecute. Having reversed the order on

       Smith’s motion to dismiss the complaint, the other motions—including

       Clayton’s motion for a declaratory judgment—originally denied as moot are

       revived.


[20]   Clayton argues that he is entitled to a declaratory judgment because he was

       allegedly never properly served with the complaint. Clayton has never alleged

       that he did not receive service or that he was unaware of the litigation. Instead,

       Clayton argues that he is entitled to judgment “unless Progressive can provide

       proof of good service.” Appellant’s App. Vol. IV p. 4.


[21]   Given the circumstances of this case and the other lawsuits, we find Clayton’s

       argument wholly unpersuasive. It cannot be disputed that he was aware of the

       declaratory judgment action, given his active participation in the other lawsuits

       enmeshed with this one. Moreover, he has now appeared and actively

       participated in the declaratory judgment action—but has never claimed a lack

       of personal jurisdiction due to service issues—and no judgments or orders

       against him were entered before he appeared and began participating.

       Court of Appeals of Indiana | Opinion 19A-PL-1094 | January 2, 2020     Page 11 of 13
[22]   We also note that Clayton’s interests are entirely aligned with Smith’s because

       the two men are entitled to precisely the same amount and type of coverage

       under the policy—namely, none.8 Therefore, even if Clayton had been

       participating in the litigation at an earlier date, the result would have been the

       same. Under these circumstances, on remand, we direct the trial court to deny

       Clayton’s motion for a declaratory judgment.


                                                       Conclusion

[23]   To be crystal clear, given the confusion that remained following the First

       Appeal, the results of this appeal are as follows:


           • The order granting Smith’s motion to dismiss the declaratory judgment
             action is reversed.
           • The order denying Progressive’s request for judgment on the Bodily
             Injury Coverage and Duty to Defend Declarations is reversed.
           • The trial court is instructed to enter the following declarations: (1) Smith
             is not entitled to bodily injury liability coverage under his Progressive
             insurance policy; and (2) Progressive does not have a duty to defend or
             indemnify Clayton under Smith’s insurance policy.
           • The trial court is instructed to deny Clayton’s motion for a declaratory
             judgment.
           • The trial court is instructed to enter final judgment in favor of
             Progressive.




       8
        Progressive also notes that Clayton assigned all of his legally assignable rights against Progressive to Smith,
       meaning that he lacks standing to pursue Progressive for any claim other than legal malpractice.

       Court of Appeals of Indiana | Opinion 19A-PL-1094 | January 2, 2020                                Page 12 of 13
[24]   The judgment of the trial court is reversed and remanded with the instructions

       set forth above.


       Bailey, J., and Tavitas, J., concur.




       Court of Appeals of Indiana | Opinion 19A-PL-1094 | January 2, 2020   Page 13 of 13
