FOR PULBICATION

ATTORNEYS FOR APPELLANT:                    ATTORNEYS FOR APPELLEE-
                                            PLAINTIFF ROBERT LODHOLTZ:
KARL L. MULVANEY
BARRY C. COPE                               CHARLES P. RICE
BRIANA L. KOVAC                             PATRICK D. MURPHY
Bingham Greenbaum Doll LLP                  Boveri Murphy Rice, LLP
Indianapolis, Indiana                       South Bend, Indiana

BARBARA I. MICHAELIDES
AGELO L. REPPAS
Bates Carey Nicolaides LLP                                         FILED
                                                                   Dec 14 2012, 8:45 am
Chicago, Illinois

                                                                         CLERK
                                                                       of the supreme court,
                                                                       court of appeals and

                             IN THE                                           tax court




                   COURT OF APPEALS OF INDIANA

GRANITE STATE INSURANCE COMPANY,            )
                                            )
      Appellant,                            )
                                            )
             vs.                            )       No. 71A04-1111-CT-635
                                            )
ROBERT LODHOLTZ and                         )
PULLIAM ENTERPRISES, INC.,                  )
                                            )
      Appellees.                            )


                   APPEAL FROM THE ST. JOSEPH SUPERIOR COURT
                        The Honorable Margot F. Reagan, Judge
                            Cause No. 71D04-1106-CT-135



                                December 14, 2012

                          OPINION – FOR PUBLICATION
BRADFORD, Judge

                                  CASE SUMMARY

      Robert Lodholtz was seriously injured while working in a facility operated by

Pulliam Enterprises, whose commercial general liability carrier was Granite State

Insurance Company. On June 24, 2011, Lodholtz sued Pulliam, who contacted York

Rick Services, Granite State’s claims administrator, ten days later. York requested and

received an extension of time to respond to Lodholtz’s claim, but did not. As a result,

default judgment on the question of liability was entered in favor of Lodholtz on August

23, 2011, and the issue of damages was set for trial. On August 24, York sent a letter to

Pulliam’s private counsel urging Pulliam to “take immediate action to vacate the default

judgment and defend itself in the matter.”

      Taking matters into its own hands as York had suggested, Pulliam decided to settle

with Lodholtz instead of moving to vacate the default judgment. Among other things,

Lodholtz agreed that he would not proceed against Pulliam to collect his damages but

would instead seek to collect from Granite State and York. About a week after the

settlement, Granite State offered to represent Pulliam while reserving the right to deny

coverage, an offer Pulliam refused. About two weeks after that, Granite State moved to

intervene. The trial court denied Granite State leave to intervene and awarded Lodholtz

approximately $3.9 million in damages. In a case that brings to mind the admonition,




                                             2
“Be careful what you wish for, you may receive it[,]”1 we conclude that the trial court did

not abuse its discretion in denying Granite State leave to intervene.

                         FACTS AND PROCEDURAL HISTORY

       In March of 2011, Lodholtz was seriously injured while working in Pulliam’s

facility; Pulliam’s commercial general liability carrier at the time was Granite State. On

June 24, 2011, Lodholtz sued Pulliam, who, ten days later, contacted Granite State’s

claims administrator, York Risk Services. In a letter dated July 7, 2011, York notified

Pulliam that it had set up a file regarding the lawsuit and provided contact information for

Dana Laurick, the individual assigned to it. On or about July 8, 2011, York contacted

Lodholtz’s counsel and requested and received an extension of time in which to answer

the complaint on or before August 19, 2011. On or about July 14, 2011, York reassigned

the file to John D’Errico, who advised Pulliam the next day that there were some

coverage issues to review and that he would follow up once coverage was confirmed. On

or about August 17, 2011, D’Errico was promoted and the file was reassigned again, this

time to Richard Glaser. At no time before August 19, 2011, did York or Granite State

secure counsel for Pulliam, advise it to retain counsel, or follow up concerning the claim.

As it happened, August 19, 2011, passed and no answer was filed to Lodholtz’s

complaint.




       1
           The warning appears at the beginning of the classic short story “The Monkey’s Paw” and is
attributed by the author to “Anonymous.” W.W. Jacobs, The Monkey’s Paw, AMERICAN LITERATURE
(November 20, 2012, 1:57 p.m.), http://www.americanliterature.com/Jacobs/SS/TheMonkeysPaw.html.
                                                 3
      On August 22, 2011, Lodholtz moved for default judgment, which motion the trial

court granted the following day while also setting trial on the issue of damages. Also on

August 23, 2011, York, apparently unaware that default judgment had been entered,

finally advised Pulliam that the Granite State policy did not appear to cover the loss and

that an official coverage position would be forwarded to Pulliam. On August 26, 2011,

now aware of the default judgment, York sent a letter to Pulliam’s private counsel,

“urg[ing] that [Pulliam] take immediate action to vacate the default and defend itself in

the matter.” Appellant’s App. p. 36.

      On September 7, 2011, Lodholtz, instead of seeking to vacate the judgment,

settled with Pulliam, which settlement provided that (1) Pulliam would not move to

vacate the default judgment or dispute the amount of damages, (2) Pulliam would assign

all of its claims against Granite State and York to Lodholtz, (3) Lodholtz would agree not

to execute against Pulliam’s assets, and (4) Lodholtz would agree to proceed against

Granite State and York to collect any damages. On September 13, 2011, Granite State

offered to defend Pulliam under a reservation of rights, including the right to deny

coverage. On September 14, 2011, Pulliam rejected Granite State’s offer.

      On September 28, 2011, Granite State moved to intervene as of right pursuant to

Trial Rule 24(A)(2) and to vacate default judgment. In its motion, Granite State denied

that it owed Pulliam coverage. On October 28, 2011, the trial court denied Granite

State’s motion to intervene and heard evidence on damages. On November 1, 2011, the



                                            4
trial court entered a damages judgment in favor of Lodholtz for $3,866,462.2                           On

November 30, 2011, Granite State filed its notice of appeal.

                                 DISCUSSION AND DECISION

        Granite State contends that the trial court abused its discretion in denying its

motion to intervene. Indiana Trial Rule 24(A) provides in relevant part as follows:

        Upon timely motion anyone shall be permitted to intervene in an action: ...
        (2) when the applicant claims an interest relating to a property, fund or
        transaction which is the subject of the action and he is so situated that the
        disposition of the action may as a practical matter impair or impede his
        ability to protect his interest in the property, fund or transaction, unless the
        applicant’s interest is adequately represented by existing parties.

        The grant or denial of a petition to intervene is within the discretion of the trial

court and is reviewed for an abuse of that discretion. Herdrich Petroleum Corp. v.

Radford, 773 N.E.2d 319, 324 (Ind. Ct. App. 2002), trans. denied.                         An abuse of

discretion occurs when the trial court’s decision is clearly against the logic and effect of

the facts and circumstances before the court or the reasonable and probable inferences to

be drawn therefrom. Id.

        Indiana cases interpreting Indiana Trial Rule 24(A)(2) have traditionally
        adopted the three-part test followed by the Federal courts in their
        interpretation of its numerical counterpart in the Federal Rules of Civil
        Procedure. See Westfield Ins. Co. v. Axsom, 684 N.E.2d 241, 242 (Ind. Ct.
        App. 1997). As a matter of law, this test requires that intervenors show (1)
        an interest in the subject of the action, (2) disposition of the action may as a

        2
          On November 3, 2011, Granite State filed a declaratory judgment action in the United States
District Court for the Northern District of Indiana, seeking a judgment that it has no duty to indemnify
Pulliam. See Granite State Ins. Co. v. Pulliam, No. 3:11-cv-432 (N.D. Ind. filed Nov. 3, 2011). On
November 4, 2011, Lodholtz filed an action in the United States District Court for the Northern District of
Indiana seeking, inter alia, to collect the entire judgment from Granite State as Pulliam’s assignee. See
Lodholtz v. Granite State Ins. Co., No. 3:11-cv-435 (N.D. Ind. filed Nov. 4, 2011).
                                                    5
       practical matter impede the protection of that interest, and (3)
       representation of the interest by existing parties is inadequate. Id. See also
       Herdrich Petroleum Corp., 773 N.E.2d at 324. In addition, a court must
       also consider the timeliness of the request in deciding whether or not to
       grant a motion to intervene. Westfield Ins. Co., 684 N.E.2d at 242. Even
       though our courts have agreed on the four factors that must be satisfied for
       intervention of right, our courts disagree on what facts or circumstances are
       necessary to meet this test. Id. Thus, whether a particular factual situation
       satisfies this three-part test is within the discretion of the trial court.
       Herdrich Petroleum Corp., 773 N.E.2d at 324.

Cincinnati Ins. Co. v. Young, 852 N.E.2d 8, 13 (Ind. Ct. App. 2006), trans. denied.

       Granite State contends that its interest in the tort suit is sufficient to support

intervention, that its interest is in danger of being impeded barring intervention, and that

its interest is not currently being protected. Lodholtz, citing to Young, contends that

Granite State, because it is still reserving the right to deny coverage, has an interest that

is, at best, contingent and insufficient to support intervention as of right.

       We agree with Lodholtz. “[W]hen an insurer attempts to intervene in the action

between its insured and the injured party but reserves the right to deny coverage, the

insurer’s asserted interest is not cognizable but rather contingent upon the acceptance of

coverage before it becomes colorable for the purposes of Indiana Trial Rule 24(A)(2).”

Id. at 15. Granite State has consistently reserved the right to deny coverage, offering to

defend Pulliam only under a reservation of rights and then maintaining the right to deny

coverage in its motion to intervene. This case falls squarely within our holding in Young.

       Granite State attempts to distinguish Young, pointing out, inter alia, that the

insurer in that case explicitly denied coverage whereas Granite State only reserved the


                                               6
right to and that the insurer twice refused offers to assume the defense, while Granite

State was never offered the opportunity. Id. at 10-11. We conclude, however, that these

factual distinctions are not legally significant;3 Young’s holding is based solely on the fact

that an insurer who reserves the right to deny coverage has failed to establish a direct

interest pursuant to Trial Rule 24(A), as is the case here.

        Granite State also contends that Young is anomalous and should not be followed.

In support of its argument, Granite State points to Allstate Ins. Co. v. Herman, 551

N.E.2d 844 (Ind. 1990), Hastings Mut. Ins. Co. v. Webb, 659 N.E.2d 1049 (Ind. Ct. App.

1995), disapproved of by United Nat’l Ins. Co. v. DePrizio, 705 N.E.2d 455 (Ind. 1999),

and State Farm Mut. Auto Ins. Co. v. Glasgow, 478 N.E.2d 918 (Ind. Ct. App. 1985).

Again, we must reject Granite State’s argument. Neither Herman nor Webb indicates

whether the insurer intervened pursuant to Trial Rule 24(A) (“Intervention of right.”) or

24(B) (“Permissive intervention.”). Herman, 551 N.E.2d at 844-45, Webb, 659 N.E.2d at

1051. Moreover, although Glasgow mentions in a footnote that an insurer could have

intervened in an action and then argued that there was no coverage, the footnote notes


        3
           If anything, the facts as a whole do not motivate us to try very hard to carve out an exception to
Young on Granite State’s behalf. After all, at least the insurer in Young put the insured on notice that it
intended to deny coverage in time for the insured to do something about it, whereas Granite State gave no
hint to Pulliam that it might deny coverage until after default judgment had already been entered. Young,
852 N.E.2d at 10-11. Moreover, when Granite State’s surrogate, York, told Pulliam to defend itself,
Pulliam did precisely that in settling with Lodholtz. In other words, Granite State got exactly what it
asked for and now seeks to intervene because it did not like the results.
         Granite State also contends that its failure to take action until after the default judgment was the
result of excusable neglect. Given that Granite State still denies coverage, however, Young still governs
in any event and the question of excusable negligent is irrelevant. Granite State also does not explain
how its failure to act was the result of negligence, as opposed to the result of a decision that coverage did
not exist.
                                                     7
only that the insurer “could have sought permission to intervene in the underlying tort

action[,]” not that it had the right to intervene.             Glasgow, 478 N.E.2d at 921 n.2

(emphasis added). Additionally, in none of the three cases cited by Granite State was

intervention an issue, and there is no indication in Herman or Webb that it was opposed.

Granite State’s reliance on Herman, Webb, and Glasgow is unavailing. Granite State has

failed to establish that this case does not fall within our holding in Young and so has

failed to show that the trial court abused its discretion in denying its motion to intervene.4

        We affirm the judgment of the trial court.

ROBB, C.J., concurs.

BAKER, J., dissents with opinion.




        4
           Because we affirm the trial court’s denial of Granite State’s motion to intervene, we need not
reach its argument that it is entitled to relief from the judgment.
                                                   8
                               IN THE
                     COURT OF APPEALS OF INDIANA


GRANITE STATE INSURANCE COMPANY,                     )
                                                     )
       Appellant,                                    )
                                                     )
               vs.                                   )     No. 71A04-1111-CT-635
                                                     )
ROBERT LODHOLTZ and                                  )
PULLIAM ENTERPRISES, INC.,                           )
                                                     )
       Appellees.                                    )


BAKER, Judge, dissenting.

       I respectfully dissent from the majority’s decision to affirm the trial court’s denial

of Granite State’s motion to intervene. In my view, Granite State has demonstrated that

its interest in the tort suit is sufficient to support intervention, that its interest is in danger

barring intervention, and that its interest is not currently being protected, thus satisfying

the requirements of Indiana Trial Rule 24(A)(2).

       More particularly, the agreement between Lodholtz and Pulliam purports to make

Granite State responsible for satisfying the judgment, thus establishing an interest

warranting intervention. Also, Granite State’s request to intervene was timely, in that it

sought to intervene fourteen days after it learned that Pulliam would neither move to

vacate the default judgment nor take any other action to defend itself.


                                                9
       It is also apparent to me that Granite State’s intervention is the only means

available for it to challenge Lodholtz’s claim because the doctrine of collateral estoppel

may very well prevent Granite State from challenging the judgment in the pending

declaratory judgment action. See State Farm Fire & Cas. Co. v. T.B. ex rel. Bruce, 762

N.E.2d 1227, 1231 (Ind. 2002) (holding that collateral estoppel ordinarily binds an

insurer to the result of litigation to which its insured is a party). Indeed, the federal court

in the pending declaratory judgment action might refuse to entertain any challenge to the

judgment because its concern is the entirely unrelated issue as to whether Granite State’s

policy covers the judgment.

       I am mindful of this court’s opinion in Cincinnati Insurance Co. v. Young, 852

N.E.2d 8 (Ind. Ct. App. 2006). Although Young would seemingly control the outcome

here, I would note that unlike the circumstances in that case, where the insurer repeatedly

denied coverage, refused to defend, and did almost nothing to protect its insured, Granite

State did not deny coverage. Instead, Granite State was still investigating the matter

when it offered to defend under a reservation of rights, and it actively protected its

insured through York. Appellant’s App. p. 6, 12, 17-24. In my view, Granite State’s

stance in the matter and the other circumstances here that differ from those in Young are

significant.

       I would also note that in Young, there was a trial on both liability and damages.

Here, neither issue was adjudicated on the merits. And, in my view, absent intervention

by Granite State, there will likely never be a full and fair adjudication of either. Indeed,

                                              10
Granite State may be unable to challenge either liability or damages in a separate and

subsequent action.

       Also, even assuming that the rule announced in Young would control in this

instance, permitting Granite State to intervene in these circumstances and participate in

this litigation is more efficient and clearly supports our policy preference that matters

should be decided on their merits. Citimortgage, Inc. v. Barabas, 975 N.E.2d 805, 812

(Ind. 2012). Furthermore, I believe that the current rule, inasmuch as it restricts insurers

from intervening before a coverage decision has been made, will have the unintended

consequences of increased costs that will surely be passed along to their insureds by way

of higher premiums.

       That said, I part ways with the majority’s view that Granite State sought to

intervene simply “because it did not like the results” when Pulliam and Lodholtz settled.

Slip op. at 7, n.3. In short, I believe that the trial court erred in denying Granite State’s

motion for leave to intervene.




                                             11
