FOR PUBLICATION
Aug 08 2014, 9:09 am
ATTORNEYS FOR APPELLANT:
ROBERT G. GRANT
T. BLAKE ORNER
Grant & Grant
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
GEICO INSURANCE COMPANY, )
as subrogee of RALPH HEITKAMP )
)
Appellant-Plaintiff, )
)
vs. ) No. 49A02-1310-CT-898
)
DIANNA GRAHAM )
)
Appellee-Defendant. )
APPEAL FROM THE MARION SUPERIOR COURT
The Honorable Cynthia Ayers, Judge
Cause No. 49D04-1109-CT-37292
August 8, 2014
OPINION – FOR PUBLICATION
MATHIAS, Judge
Insured motorists are called upon every day to pay their deductibles in order for
their carriers to cover the necessary repairs to their motor vehicles after accidents. Many
carriers refuse to include those deductibles in the subrogated claims they make against
the other motorists involved in accidents with their insureds. Because they are left on
their own, insured motorists often later sue the other motorist(s) involved in those
accidents in a small claims court to recover the deductible amounts they paid. And,
almost as often, these insured motorists are successful in the small claims action for their
deductibles. But here, Geico Insurance Company’s (“Geico’s”), insured, Ralph
Heitkamp (“Heitkamp”), lost his claim for his deductible in the Small Claims Division of
the St. Joseph Superior Court. As a result, Geico now appeals the order of the Marion
Superior Court granting a motion filed by the other motorist involved in the accident at
issue, Dianna Graham (“Graham”), seeking to set aside the court’s earlier entry of
summary judgment in favor of Geico. On appeal, Geico claims that the trial court erred
in concluding that a prior small claims judgment in favor of Graham acted as res judicata
to bar Geico’s claims against Graham.
We affirm.
Facts and Procedural History
On October 2, 2009, Graham and Heitkamp’s wife, Janet Heitkamp (“Janet”),
were involved in an automobile accident. Janet was insured by Geico under her
husband’s policy. Geico paid $7,540.22 to Heitkamp under the policy, and Heitkamp and
Janet signed a release in which they released all claims against Geico and promised not to
compromise Geico’s subrogation rights.
2
Heitkamp, however, filed a small claims action in St. Joseph County against
Graham in August 2011, claiming that Graham was at fault in the accident and seeking to
recover the $500 deductible he had paid to Geico almost two years earlier. Little more
than a month later, on September 26, 2011, Geico, as Heitkamp’s subrogee, filed a claim
in Marion Superior Court against Graham seeking to recover the $7,540.22 it had paid to
Heitkamp, again claiming that Graham was at fault in the accident.
Janet and Graham subsequently appeared before the Small Claims Division of St.
Joseph Superior Court, and, on October 25, 2011, the small claims court entered
judgment in favor of Graham, finding that Janet, not Graham, was at fault in the accident.
Graham then sent a letter to the Marion Superior Court filed October 26, 2011, informing
the court that there was a case “relating to this one [in Marion County] in South Bend,
In,” and maintaining that she was not at fault in the accident. Appellant’s App. p. 13.
The chronological case summary shows that a copy of this letter was sent to Geico’s
counsel.
Nevertheless, on February 13, 2012, Geico filed its motion for summary judgment
in the Marion Superior Court case and a hearing was held on April 17. Although Graham
appeared in person, she presented no designated evidence. On June 28, 2012, the Marion
Superior Court entered summary judgment in favor of Geico.
On February 4, 2013, Graham, this time with the assistance of counsel, filed a
motion to set aside the entry of summary judgment pursuant to Indiana Trial Rule
3
60(B)(6).1 The trial court held a hearing on the matter on June 12, 2013, and on October
1, 2013, entered an order granting Graham’s motion to set aside the grant of summary
judgment and dismissing Geico’s claim. The trial court concluded that Heitkamp’s
unsuccessful small claims action against Graham acted as res judicata to bar the claim
against Graham by Geico. Geico now appeals.
I. Prima Facie Error Rule
Before addressing the merits of the current appeal, we note that Graham has not
filed an appellee’s brief. When the appellee fails to submit a brief, we will not undertake
the burden of developing an argument on her behalf. Trinity Homes, LLC v. Fang, 848
N.E.2d 1065, 1068 (Ind. 2006). Instead, we will reverse the trial court’s judgment if the
appellant’s brief presents a case of prima facie error. Id. In this context, prima facie
error is defined as, “‘at first sight, on first appearance, or on the face of it.’” Id. (quoting
Santana v. Santana, 708 N.E.2d 886, 887 (Ind. Ct. App. 1999)). This “prima facie error
rule” protects the court on appeal and takes from us the burden of controverting
arguments advanced for reversal, a duty which remains with the appellee. Mikel v.
Johnston, 907 N.E.2d 547, 551 n.3 (Ind. Ct. App. 2009). But even under the prima facie
error rule, we are obligated to correctly apply the law to the facts in the record in order to
determine whether reversal is required.2 Id. And if the appellant is unable to meet the
1
Graham initially filed a pro se motion to set aside summary judgment on November 30, 2012. Counsel
filed an appearance for Graham on January 31, 2013, and filed a motion to set aside on February 4, 2013.
2
We also note that the trial court entered a detailed order setting forth its reasoning for granting
Graham’s motion to set aside summary judgment and dismissing Geico’s claims. Still, “[w]e may affirm
the trial court on any legal theory supported by the factual findings, even if the trial court used a different
legal theory.” H.H. v. A.A., 3 N.E.3d 30, 33 (Ind. Ct. App. 2014) (citing Mitchell v. Mitchell, 695
N.E.2d 920, 923 (Ind. 1998)).
4
burden of establishing prima facie error, we will affirm. Trinity Homes, 848 N.E.2d at
1068.
II. Venue
We first observe that Geico chose to file the underlying suit in this appeal,
regarding an accident that occurred in Mishawaka and that involved two St. Joseph
County residents, in Marion County, 150 miles and almost three hours by auto away from
the site of the accident at issue. It is clear to any lay person, let alone an attorney, that
either Elkhart County or St. Joseph County was the commonsense county of preferred
venue. See Ind. Trial Rule 75(A) (providing that preferred venue lies in “the county
where the greater percentage of individual defendants included in the complaint resides,
or, if there is no such greater percentage, the place where any individual defendant so
named resides,” or “the county where the accident or collision occurred, if the complaint
includes a claim for injuries relating to the operation of a motor vehicle[.]”). Absolutely
nothing in the facts or circumstances of the accident would indicate that Marion County
is a county of preferred venue.
In the case before us, Graham was uninsured, and therefore without the
representation of insurance counsel normally provided under an auto insurance policy,
counsel who would have immediately challenged Geico’s choice of venue. And since
Geico’s subrogation claim was for an amount in excess of the jurisdiction of an Indiana
small claims court, it was legally entitled to file its suit in the Marion Superior Court, or
in any other county, for that matter. A plenary case like the one at issue here may be
filed and tried in any county, although a case must be transferred to a county of preferred
5
venue if a party files a motion to dismiss for improper venue. Ind. Trial Rule 75(A);
Bostic v. House of James, Inc., 784 N.E.2d 509, 511 (Ind. Ct. App. 2003).
If Graham had filed a motion to transfer venue to St. Joseph County, the Marion
Superior Court would have had no choice but to grant the motion. But she was
unrepresented, did not know to do so, and this is not what happened. Graham instead
notified the Marion Superior Court of the small claims action in St. Joseph County, filing
a letter that stated in pertinent part:
I am writing this letter to inform you that because of a case related to this
one in South Bend, In on 10/25/11, I did not get my response in before the
said date. I wanted to wait until after the above court date was finished. I
am asking that this response be acknowledged before a judgment is entered.
I do want it noted that I was not the one at fault because I was hit by the
driver of the other car who was going to [sic] fast to stop. I had the light
and the right of way (to turn). I am denying any blame of the accident.
Appellant’s App. p. 13. Importantly, this letter was filed after the small claims court had
already entered judgment in favor of Graham, and therefore, it could not serve as an
effective request to change venue. Had Graham notified the trial court before the entry of
judgment in the small claims court, her letter could have been, and should have been,
considered as a request to change venue.3 Even under the facts before us, Graham’s
letter, at the very least, put Geico on notice that another and earlier claim involving the
accident between Graham and Geico’s insured had already been filed.
3
It could also have been considered as a motion to dismiss under Indiana Trial Rule 12(B)(8), which
“permits the dismissal of an action when ‘[t]he same action [is] pending in another state court of this
state.’” Beatty v. Liberty Mut. Ins. Grp., 893 N.E.2d 1079, 1084 (Ind. Ct. App. 2008) (citing T.R.
12(B)(8)). The rule applies where the parties, subject matter, and remedies are precisely the same or only
substantially the same. Id.
6
III. Res Judicata
At issue here is whether and to what extent the small claims judgment in St.
Joseph County acted as res judicata to bar Geico’s claim against Graham in Marion
County.
A. Issue Preclusion and Claim Preclusion
We recently summarized the law of res judicata as follows:
The principle of res judicata is divided into two branches: claim
preclusion and issue preclusion.
The first of these branches, claim preclusion, applies where a final
judgment on the merits has been rendered and acts as a complete bar to a
subsequent action on the same issue or claim between those parties and
their privies. When claim preclusion applies, all matters that were or might
have been litigated are deemed conclusively decided by the judgment in the
prior action. The following four requirements must be satisfied for claim
preclusion to apply as a bar to a subsequent action: (1) the former judgment
must have been rendered by a court of competent jurisdiction; (2) the
former judgment must have been rendered on the merits; (3) the matter now
in issue was, or could have been, determined in the prior action; and (4) the
controversy adjudicated in the former action must have been between the
parties to the present suit or their privies.
The second branch of the principle of res judicata is issue preclusion,
also known as collateral estoppel. Issue preclusion bars the subsequent
litigation of a fact or issue that was necessarily adjudicated in a former
lawsuit if the same fact or issue is presented in the subsequent lawsuit. If
issue preclusion applies, the former adjudication is conclusive in the
subsequent action, even if the actions are based on different claims. The
former adjudication is conclusive only as to those issues that were actually
litigated and determined therein. Thus, issue preclusion does not extend to
matters that were not expressly adjudicated and can be inferred only by
argument. In determining whether issue preclusion is applicable, a court
must engage in a two-part analysis: (1) whether the party in the prior action
had a full and fair opportunity to litigate the issue, and (2) whether it is
otherwise unfair to apply issue preclusion given the facts of the particular
case. The non-exhaustive factors to be considered by the trial court in
deciding whether to apply issue preclusion include: (1) privity, (2) the
defendant’s incentive to litigate the prior action, and (3) the ability of the
plaintiff to have joined the prior action.
7
Angelopoulos v. Angelopoulos, 2 N.E.3d 688, 696 (Ind. Ct. App. 2013), trans. denied.
Here, the trial court concluded that Heitkamp’s unsuccessful small claims action
against Graham acted as res judicata to bar the claim against Graham by Geico,
Heitkamp’s subrogee. In this regard, the order of the St. Joseph Superior Court Small
Claims Division provided in relevant part:
Pursuant to Indiana law, the Small Claims Court need not provide
findings of fact or conclusions of law. Nevertheless, as a courtesy to the
parties, the Court provides some explanation. Plaintiff [Heitkamp] bears
the burden of proof in her claim. She must prove liability by a
preponderance of the evidence.
[Heitkamp] brings her claim against the Defendant [Graham] for an
automobile accident. On October 2, 2009, [Heitkamp] and [Graham] were
involved in a motor vehicle accident on McKinley Avenue, Mishawaka, IN.
Both cars were damaged.
In order for [Heitkamp] to prevail, she must show, more likely than not,
that the accident was caused by [Graham]. Failure to have current
insurance is not a basis to find fault in the accident. Rather, [Heitkamp]
must show fault of [Graham] in the operation of the vehicle. While the
police report concludes that [Graham] was at fault, the report contains no
basis for such conclusion. The only statements provided in the report are
that of [Heitkamp] and [Graham] and there are no admissions therein to
causing the accident. An independent trial witness states that he was
behind [Heitkamp]. He correctly notes an out of state license plate on
[Heitkamp]’s vehicle. He states that [Heitkamp] proceeded through a red
signal. There were apparently other persons in the area at the time of the
accident, but the police report fails to identify anyone and no other witness
statements are provided.
With no other witnesses to the accident forthcoming, the Court cannot
conclude that [Heitkamp] meets her burden to show, more likely than not,
that [Graham] caused this accident.
JUDGMENT. Costs paid.
Appellant’s App. p. 32 (citation omitted) (italics in original). In the Marion Superior
Court case before us, the trial court concluded that this small claims judgment acted as
res judicata to bar Geico’s current claim against Graham.
8
B. The Effect of Small Claims Rule 11(F)
Geico claims that the trial court’s conclusion was contrary to Indiana Small
Claims Rule 11(F), which states, “A judgment shall be res judicata only as to the amount
involved in the particular action and shall not be considered an adjudication of any fact at
issue in any other action or court.” As explained by our supreme court in In re Ault,
Small Claims Rule 11(F):
does not allow a party to relitigate a claim upon which judgment has been
entered in a small claims case. Cook v. Wozniak, 500 N.E.2d 231, 233
(Ind. Ct. App. 1986), adopted and affirmed, 513 N.E.2d 1222 (Ind. 1987)
(“[to permit] a plaintiff who recovered nothing in a small claims action to
sue again on the same claim in another court would be ‘sheer futility.’”).
Instead, [Small Claims Rule] 11(F) was intended primarily to “limit issue
preclusion where some fact in the small claim action is at issue in another
case,” and to “also apply to claim preclusion to the extent that claim
preclusion would ordinarily bar all matters which might have been litigated
but were not actually litigated in the small claims action.” Cook, [500
N.E.2d] at 233.
In re Ault, 728 N.E.2d 869, 872 (Ind. 2000) (emphasis added).
In other words, Small Claims Rule 11(F) prohibits the application of issue
preclusion based on a small claims judgment, but does not prohibit claim preclusion. See
id. (holding that attorney engaged in misconduct by filing the same claim in superior
court after having been unsuccessful in small claims court and concluding that the
subsequent suit was “res judicata because it was the exact claim litigated to conclusion in
the small claims court.”); see also Johnson v. Anderson, 590 N.E.2d 1146, 1150 (Ind. Ct.
9
App. 1992) (holding that Small Claims Rule 11(F)4 limits the application of res judicata
to allow only claim preclusion).
Here, Geico argues that Small Claims Rule 11(F) precluded the trial court from
considering the small claims judgment as an adjudication of any fact. To the extent that
Geico claims that the trial court erred when it applied the principles of the issue
preclusion branch of res judicata in its resolution of this issue, we agree. However, as
shown below, the principles of the claim preclusion branch of res judicata apply, and
support the affirmance of the trial court’s judgment.
In Johnson, supra, the defendant, Anderson, asserted a defense of res judicata to a
claim brought against him by Johnson under the Deceptive Consumer Sales Act.
Anderson claimed that the small claims judgment in his favor on a prior claim of breach
of contract acted as res judicata to bar Johnson’s claim under the Deceptive Consumer
Sales Act. The trial court agreed, but this court reversed on appeal, holding that Small
Claims Rule 11(F) prohibited the application of res judicata in that case. The court noted
that Johnson’s complaint under the Deceptive Consumer Sales Act was “clearly a
separate claim.” Id. Thus, the court in Johnson held that the subsequent action was not
barred by claim preclusion because it was a different claim.
Here, however, Geico’s claim against Graham as Heitkamp’s subrogee is not a
separate claim. Rather, it is exactly same claim, i.e. that Graham was negligent in the
operation of her vehicle. See Appellant’s App. p. 11 (alleging that Graham operated her
vehicle and “negligently or willfully or maliciously” damaged Heitkamp). In fact,
4
At the time of the Johnson case, the language of Small Claims Rule 11(F) was contained in Small
Claims Rule 11(E). See Johnson, 590 N.E.2d at 1149.
10
Geico’s claim as Heitkamp’s subrogee is wholly derivative of Heitkamp’s claim. See
Erie Ins. Co. v. George, 681 N.E.2d 183, 186 (Ind. 1997) (“It is settled that ‘[s]ubrogation
confers no greater right than the subrogor had at the time the surety or indemnitor became
subrogated. The subrogator [sic] insurer stands in the same position as the subrogor, for
one cannot acquire by subrogation what another, whose rights he claims, did not have.’”).
We therefore hold that Geico has not demonstrated prima facie that the trial court
erred in concluding that Small Claims Rule 11(F) did not prohibit the application of claim
preclusion. See Johnson, 590 N.E.2d at 1150; see also Watson v. Auto Advisors, Inc.,
822 N.E.2d 1017, 1028-29 (Ind. Ct. App. 2005) (holding that, under Small Claims Rule
11(F), earlier small claims judgment against debtor did not act as res judicata to bar
debtor’s subsequently-brought claims that creditor committed unfair debt collection
practices, unauthorized practice of law, malicious prosecution, and abuse of process
because these claims did not seek to undermine the validity of the earlier small claims
judgment).
C. Claim Preclusion and the Underlying Facts
Geico next argues that even if Small Claims Rule 11(F) does not act to bar the
application of claim preclusion, claim preclusion5 is nevertheless inapplicable under the
facts of the present case. Specifically, Geico argues that claim preclusion is inapplicable
because it was not a party to Heitkamp’s case or Heitkamp’s privy. See Angelopoulos, 2
N.E.3d at 696 (final element required for claim preclusion to apply is whether the
5
Geico refers more generically to res judicata, but as we have already determined that Small Claims
Rule 11(F) prohibits application of issue preclusion, but not claim preclusion, we limit our discussion to
claim preclusion.
11
controversy adjudicated in former action was between the parties to the present suit or
their privies). We disagree.
As Heitkamp’s subrogee, Geico’s claims were entirely derivative of Heitkamp’s
claims. See Erie, 681 N.E.2d at 186. Therefore, while it appears to be a matter of first
impression in Indiana, as a general matter, we do not hesitate to hold that an insurer who
is a subrogee to the rights of the insured is also a privy of the insured, and that an insured
is a privy of the insurer, as to the claims that are subrogated. See 17 Couch on Insurance,
§ 239:36 (3d ed. 2000) (a judgment against the insured in his action is binding on the
insurer and precludes it from maintaining a separate action against the tortfeasor, where
the insurer paid a portion of the insured’s claims and became subrogated to the insured’s
claim to the extent of the payment under a written subrogation agreement); Ohio Dep’t of
Human Servs. v. Kozar, 651 N.E.2d 1039, 1041 (Ohio Ct. App. 1995) (“A subrogee is in
privity with its subrogor under the res judicata doctrine.”); DeCare v. Am. Fid. Fire Ins.
Co., 360 N.W.2d 872, 876 (Mich. Ct. App. 1984) (holding that subrogee was subrogor’s
privy for purposes of res judicata); Motor Vehicle Accident Indemn. Corp. v. Nat’l
Grange Mut. Ins. Co., 224 N.E.2d 869, 872 (N.Y. 1967) (noting that, generally, the
subrogee would be bound by the subrogor’s participation in an earlier lawsuit).
It is clear that Heitkamp, after losing in the St. Joseph County small claims court
action, could not bring the same claim again by suing Graham on the plenary docket of
the St. Joseph Superior Court. See Ault, 728 N.E.2d at 869 (citing Cook, 500 N.E.2d at
233). Geico, as Heitkamp’s subrogee, stands in Heitkamp’s shoes for purposes of the
claims against Graham arising out of the accident at issue. See Hockelberg v. Farm
12
Bureau Ins. Co., 407 N.E.2d 1160, 1161 (Ind. Ct. App. 1980) (“When the insurer is
claiming a right through subrogation it stands in the shoes of the insured and takes no
rights other than those which the insured had.”). Accordingly, Geico cannot bring the
same claim of negligence against Graham in Marion County any more than Heitkamp
could have done so in St. Joseph County.
Still, Geico claims that it is not Heitkamp’s privy for purposes of the small claims
action, citing Chemco Transp., Inc. v. Conn, 527 N.E.2d 179 (Ind. 1988) and Moreton v.
Auto-Owners Ins., 859 N.E.2d 1252 (Ind. Ct. App. 2007). When carefully read,
however, each case is readily distinguishable from the facts before us.
In Chemco, the insured, Conn, was driving his tractor-trailer when he struck a
trailer owned by Chemco as it backed onto a Wells County highway. Conn’s trailer was
damaged, and he was injured. Conn’s insurer paid Conn for some of the value of the
trailer and for partial loss of its use. Conn, on his own, then sued Chemco in Cass
County for damages to his tractor-trailer, loss of its use, and personal injuries.
While the Cass County case was pending, Conn’s insurer, acting under its
subrogation rights, filed a claim against Chemco in Marion County, seeking some, but
not all of, the same damages Conn was seeking in the Cass County case filed earlier. The
Marion County action was eventually settled and dismissed with prejudice. Based on the
dismissal of the Marion County case, Chemco moved for summary judgment in the
pending Cass County case on the questions of damages for the loss of the tractor and
damages for loss of use. The trial court denied Chemco’s summary judgment motion,
and Chemco appealed.
13
On appeal, our supreme court agreed that Conn’s claims were not barred by the
res judicata effect of his insurer’s settlement of the Marion County case. The court noted
that, although the insurer had the right to pursue its subrogation claim in Conn’s name,
“Conn reserved the right to pursue his claim since Protective6 only partially compensated
him for his loss.” Id. at 182. The court held:
[Conn] was not directly interested in the subject matter and had no right to
control the prosecution of [the Marion County] action since it was
commenced by . . . his insurer, and attorneys for [the insurer] were hired by
[the insurer]. Conn had no control over their actions and for all that
appears could not have controlled their actions since he was unaware that
the suit had been filed. Accordingly, the trial court properly found Conn
had the right to pursue his full damages against Chemco with
corresponding set-off right in Chemco for the amount paid by [the insurer]
to Conn.
Id. at 183.
We find Chemco to be readily distinguishable from the facts of the present case.
In Chemco, it was the subrogee insurer who settled its subrogated claim with the third-
party tortfeasor, and the court noted that the insured had no notice of the insurer’s
settlement and no ability to control the insurer’s actions. Moreover, in Chemco, the
insurer only partially compensated the insured for his losses, and specifically excluded
the insured’s claims for personal injury. Further, “Conn reserved the right to pursue his
claim since Protective only partially compensated him for his loss.” Id. at 182. Under
these facts and circumstances, the Chemco court held that the subrogor insured was not
bound by the actions of the subrogee insurer.
6
Protective Insurance Company was Conn’s insurance carrier. Conn had entered into arbitration
proceedings with Protective and received partial payment for the value and loss of use of his damaged
trailer. Conn did not receive any insurance proceeds from Protective for his personal injuries.
14
Here, in contrast, it is the subrogee insurer, Geico, who is seeking to recover from
Graham the money Geico paid to Heitkamp as Heitkamp’s subrogee. Unlike the insured
in Chemco, Geico is not seeking to recover losses not covered by insurance. Also, unlike
the insured in Chemco, Geico did in fact have some ability to control the actions of its
insured, Heitkamp. The insurance policy between Geico and Heitkamp clearly informed
Heitkamp that he was contractually bound to “do nothing after loss to prejudice” Geico’s
subrogation rights to recover against others. See Appellant’s App. pp. 62, 64, 74, 76, 80.
And in the release signed by the Heitkamps, they agreed to:
take through the representative designated by [Geico] such action in my
own name as is requested by the Company to recover damages from the
person or persons or organization legally responsible to me therefore, and
[Geico] shall have the right at its election to employ an attorney of its
choice to represent me in any such action to be taken in my name.
Id. at 98. Applying Chemco to the facts and circumstances before us, we do not read
Chemco to stand for the proposition that a subrogee is not in privy with the subrogor for
purposes of the application of claim preclusion.
In Moreton, AHR Construction and Remodeling (“AHR”) had re-roofed a home
owned by the Gentrys, but remain unpaid for its work. A storm damaged the Gentrys’
roof, allegedly as a result of deficiencies in AHR’s workmanship. Auto-Owners insured
the Gentrys’ home and paid over $25,000 to them. When they received this payment
from their insurer, the Gentrys assigned their claims to Auto-Owners “to the extent of the
payment above made[.]” Moreton, 859 N.E.2d at 1253. AHR then sued the Gentrys in
small claims court, asserting that they owed AHR for the work it had performed. The
15
Gentrys counterclaimed, seeking over $3,300 to cover damage that had not been covered
by their insurance. The small claims court found in favor of AHR.
Auto-Owners subsequently filed suit against AHR as the Gentrys’ subrogee,
alleging negligence and breach of contract and seeking only the amount of the insured
loss. AHR moved for summary judgment, claiming that Auto-Owners’ action was barred
by the res judicata effect of the prior small claims judgment. The trial court denied
summary judgment but certified its order for interlocutory appeal.
On interlocutory appeal, our court observed that Auto-Owners was not a party to
the prior small claims action and did not participate in that case, and therefore concluded
that “Auto-Owners was not sufficiently a party to the small claims action for that action
to be res judicata[.]” Id. at 1255. In so holding, the Moreton court specifically noted that
Auto-Owners lacked control over the Gentrys’ actions and was apparently unaware
Gentry had brought his counterclaim in the small claims court. Id.
Geico claims that Moreton is directly on point and controlling in this case. We
disagree. First, we do not read Moreton as broadly holding that a subrogee insurer is not
in privity with the subrogor insured. To the extent that Moreton could be read to hold
such, we respectfully disagree. As noted above, a subrogee’s rights are derivative of the
rights of the subrogor, and the subrogee “stands in the shoes” of the subrogor. Here,
Geico was also informed in the Marion Superior Court case that its insured had filed suit
regarding the accident in St. Joseph Superior Court Small Claims Division. We therefore
repeat our holding that, as a general matter, a subrogee insurer is in privity with its
subrogor insured.
16
We also read Moreton more narrowly than Geico. In fact, we understand Moreton
to stand for the proposition that if an insurer has no notice about an action filed by the
insured and has no ability to control this action, then the action will not act as res
judicata to the insurer. In Moreton, the insurer had no notice or opportunity to control
the small claims counterclaim that its insured had brought against the contractor, and
therefore the court held that the small claims judgment did not act as res judicata in the
insurer’s claim against the contractor.
Here, however, Graham did inform the court and Geico, albeit after the small
claims judgment had been entered, that Geico’s insured had brought a claim against her
in the St. Joseph Superior Court Small Claims Division as a result of the covered
accident, and the claim was prior in time to Geico’s Marion Superior Court action. More
importantly, Geico retained the ability to claim its losses from Heitkamp under the terms
of the insurance contract and release Heitkamp signed in which he agreed not to interfere
with Geico’s subrogation rights.
The concerns of insureds to recover their auto policy deductibles are a matter of
everyday business for insurance companies like Geico. The better practice would be for
carriers like Geico to expressly include their insured’s claims for deductibles in
subrogation and share any recovery obtained pro rata. In the alternative, carriers should
clearly inform their insureds of the insureds’ responsibilities not to proceed in a legal
forum to recover their deductibles incurred in covered claims without the clear
permission of the carrier, permission that would include the opportunity for joinder of the
carrier for its subrogated interests. After such clear notice, insureds like Heitkamp would
17
sue separately for their deductible at the peril of being held responsible for any damages
incurred by their carriers flowing from breach of the underlying contract of insurance.7
Conclusion
Under the facts and circumstances before us in this case, we conclude that Geico
was in privity with Heitkamp for purposes of the res judicata effects of the St. Joseph
County small claim action. Geico’s Marion Superior Court claim against Graham was
derivative of Heitkamp’s St. Joseph County small claim against Graham. Heitkamp lost
in the small claims action against Graham, and neither he, nor Geico as his subrogee,
could relitigate the same claim in Marion County. Accordingly, the trial court did not err
in granting Graham’s motion to set aside the judgment on the grounds that Geico’s
current claim against her is barred by the claim preclusion branch of the doctrine of res
judicata.
Affirmed.
FRIEDLANDER, J., and PYLE, J., concur.
7
We recognize that uninsured personal injury arising from the occurrence that caused the injured party to
subrogate his or her interests regarding property damage is an important issue that is beyond the scope of
this appeal.
18