Progressive Southeastern Insurance Co. v. Gregory Smith and Nolan Clayton, and Erie Insurance Group, Brackett Restaurant Group, LLC, d/b/a Stacked Pickle, and Allstate Insurance Company

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