ATTORNEYS FOR APPELLANT ATTORNEYS FOR APPELLEES
Karl L. Mulvaney John F. Townsend, III
Nana Quay-Smith Indianapolis, Indiana
Candace L. Sage
Indianapolis, Indiana W. Scott Montross
Indianapolis, Indiana
ATTORNEYS FOR AMICI CURIAE
INSURANCE INSTITUTE OF INDIANA, INC., ATTORNEYS FOR AMICUS CURIAE
NATIONAL ASSOCIATION OF MUTUAL THE INDIANA TRIAL LAWYERS
INSURANCE COMPANIES, AND PROPERTY ASSOCIATION
CASUALTY INSURERS ASSOCIATION Jeffrey S. Wrage
OF AMERICA ` Thomas F. Macke
Robert B. Clemens Valparaiso, Indiana
George T. Patton, Jr.
Bryan H. Babb
Indianapolis, Indiana
______________________________________________________________________________
In the
Indiana Supreme Court FILED
_________________________________
Feb 28 2008, 2:17 pm
No. 29S02-0704-CV-140
CLERK
of the supreme court,
court of appeals and
STATE FARM MUTUAL AUTOMOBILE tax court
INSURANCE COMPANY,
Appellant (Defendant below),
v.
PATRICIA JAKUPKO, NICHOLAS JAKUPKO,
AND MATTHEW JAKUPKO,
Appellees (Plaintiffs below).
_________________________________
Appeal from the Hamilton Superior Court No. 1, No. 29D01-0308-CT-682
The Honorable Steven R. Nation, Judge
_________________________________
On Petition to Transfer from the Indiana Court of Appeals, No. 29A02-0603-CV-207
_________________________________
February 28, 2008
Sullivan, Justice.
Richard Jakupko suffered severe injuries and his wife and children emotional distress in
an automobile accident caused by an underinsured motorist. Their insurance company contends
that their underinsured motorist insurance policy subjects any amount the wife and children can
recover for their emotional distress to the per person liability cap applicable to Richard. Such a
limitation would violate the requirements of Indiana’s underinsured motorist insurance statute
and be void; the wife and children are each entitled to their own per person liability limit.
Background
In July 2002, Richard Jakupko was in an automobile accident caused by Brianne John-
son; Johnson was driving an underinsured auto. Richard, his wife, Patricia, and their children,
Nicholas and Matthew, who were passengers in Richard’s car, each sustained bodily injuries.
Richard’s injuries were exceptionally severe, including quadriplegia and a closed head injury
resulting in permanent mental deficits. Patricia, Nicholas, and Matthew each suffered emotional
distress from being in the accident.
Because the Jakupkos’ damages greatly exceeded the limits of Johnson’s coverage, they
sought compensation under the terms of an automobile insurance policy Richard had with State
Farm Mutual Automobile Insurance Company. The State Farm policy included underinsured
motorist coverage coverage in the amount of $100,000 for “each person” and $300,000 for “each
accident.” State Farm paid $100,000 to the Jakupkos pursuant to this provision; when they
sought to recover an additional $200,000 for Patricia’s, Nicholas’s, and Matthew’s emotional
distress, State Farm took the position that it had satisfied its obligations under the policy when it
had paid the limits for Richard’s injuries. In State Farm’s view, because Patricia’s, Nicholas’s,
and Matthew’s claims for emotional distress were caused by Richard’s injuries, they were in-
cluded in the “each person” limit of liability for his bodily injury claim.
This litigation ensued. The trial court and Court of Appeals both ruled in favor of the
Jakupkos. State Farm Mut. Auto. Ins. Co. v. Jakupko, 856 N.E.2d 778 (Ind. Ct. App. 2006).
State Farm sought, and we granted, transfer. State Farm Mut. Ins. Co. v. Jakupko, 869 N.E.2d
454 (Ind. 2007) (table).
2
Discussion
I
We begin our analysis with several observations about what is not at issue in this case.
State Farm agreed to “pay damages for bodily injury an insured is legally entitled to col-
lect from the owner or driver of an uninsured motor vehicle.” (Appellant’s App. at 70.) Not at
issue is whether Patricia, Nicholas, or Matthew were “insured[s]” for this purpose; both sides
agree that they all were.
More importantly, both sides agree that Patricia, Nicholas, and Matthew were “legally
entitled” to pursue negligent infliction of emotional distress claims against Brianne Johnson, the
driver of the underinsured vehicle. Like the plaintiff who was permitted to seek recovery in
Shuamber v. Henderson, 579 N.E.2d 452, 456 (Ind. 1991), Patricia, Nicholas, and Matthew were
inside the vehicle when it was struck by Johnson’s automobile and sustained an impact. The im-
pact was severe enough to have caused catastrophic injuries to Richard. Patricia, Nicholas, and
Matthew claim to have suffered emotional trauma at least in part as a result of being involved in
the impact and witnessing Richard being so severely injured. Shuamber dictates that they would
be entitled to present their evidence. This is not a case that requires us to expound on the com-
mon law of negligent infliction of emotional distress.
The crux of this case is whether, as a matter of underinsured motorist and contract law,
Patricia’s, Nicholas’s, and Matthew’s claims are included within Richard’s “each person” limita-
tion on liability or are entitled to their own. The significance of this is obvious – State Farm con-
tends that Patricia’s, Nicholas’s, and Matthew’s claims are subject to the $100,000 “each person”
limit of liability applicable to Richard’s injuries. Because it has already paid Richard $100,000,
State Farm argues that it has exhausted its liability for Patricia’s, Nicholas’s, and Matthew’s
emotional distress claims.
The coverage provisions of the policy provide:
3
UNDERINSURED MOTOR VEHICLE – COVERAGE “W”
We will pay damages for bodily injury an insured is legally entitled to col-
lect from the owner or driver of an underinsured motor vehicle. The bodily injury
must be caused by accident arising out of the operation, maintenance or use of an
underinsured motor vehicle.
(App. at 70 (emphasis in original).)
The liability limits provisions of the policy provide:
The amount of coverage is shown on the declarations page under “Limits
of Liability – W – Each person, Each Accident”. Under “Each Person” is the
amount of coverage [$100,000] for all damages due to bodily injury to one per-
son. “Bodily injury to one person” includes all injury and damages to others re-
sulting from this bodily injury. Under “Each Accident” is the total amount of
coverage [$300,000], subject to the amount shown under “Each Person” for all
damages due to bodily injury to two or more persons in the same accident.
(Id. at 72 (emphasis in original).)
Finally, the policy contains the following definition:
Bodily injury – means bodily injury to a person and sickness, disease or
death which results from it.
(Id. at 62 (emphasis in original).)
Patricia’s, Nicholas’s, and Matthew’s argument proceeds along the following line. First,
they observe that the $100,000 “each person” coverage limitation applies to “damages due to
bodily injury to one person.” Second, they observe that the policy’s definition of “bodily injury”
refers to “sickness.” Because in their view the emotional distress they suffered constituted “sick-
ness” within the meaning of the policy, they are each entitled to their own $100,000 “each
person” coverage limitation, up to the $300,000 per accident limitation.
State Farm has two answers to this. First, it is of the view that emotional distress is not
4
“sickness” within the meaning of the policy and so Patricia, Nicholas, and Matthew, while enti-
tled to pursue negligent infliction of emotional distress claims against the tortfeasor, are not enti-
tled to recover for their damages under the policy.1 Second, State Farm emphasizes additional
language in the “Limits of Liability” section of the policy – that when it agreed to pay for “dam-
ages due to bodily injury to one person,” it expressly provided that “‘[b]odily injury to one per-
son’ include[d] all injury and damages to others resulting from this bodily injury.” (App. at 72.)
Because the damages Patricia, Nicholas, and Matthew claim, State Farm says, were the result of
the bodily injury sustained by Richard, those damages are subject to the $100,000 “each person”
coverage limitation applicable to Richard.
Patricia, Nicholas, and Matthew respond to State Farm’s second argument by saying that
the “includes all injury and damages to others resulting from this bodily injury” clause does not
apply to them because they have their own independent limits on liability.
In summary, to determine whether Patricia, Nicholas, and Matthew are each entitled to
their own “each person” coverage limitation, we must decide:
(1) whether “bodily injury” as defined in the policy at issue in this case includes the
emotional distress Patricia, Nicholas, and Matthew suffered; and, if so,
(2) whether the fact that the policy provides that the coverage limit for bodily injury suf-
fered by Richard “includes all injury and damages to others resulting from this bodily injury”
precludes Patricia, Nicholas, and Matthew from having their own independent limits on liability.
II
A substantial number of courts have looked at these or closely related questions. See All-
1
The policy defines “bodily injury” as “bodily injury to a person and sickness, disease or death which
results from it.” The Legislature requires uninsured and underinsured motorist coverage applicable to
“bodily injury, sickness or disease.” Ind. Code § 27-7-5-2(a)(1) (2004). Because the policy cannot pro-
vide less coverage than that required by statute, Veness v. Midland Risk Ins. Co., 732 N.E.2d 209, 212
(Ind. Ct. App. 2000), we treat the policy as applying to “bodily injury, sickness or disease,” notwithstand-
ing the slight difference between the language of the policy and the language of the statute.
5
state Ins. Co. v. Tozer, 298 F. Supp. 2d 765, 769-70 (S.D. Ind. 2003) (citing cases from six juris-
dictions favoring the Jakupkos’ position and ten jurisdictions favoring State Farm’s), rev’d, 392
F.3d 950 (7th Cir. 2004). We will limit our review to four cases with Indiana pedigrees.
A
In Wayne Township Board of School Commissioners v. Indiana Insurance Co., 650
N.E.2d 1205 (Ind. Ct. App. 1995), trans. denied, an elementary school principal had sexually
molested a student. The student sought damages from the principal and the school district for the
“severe emotional and psychological trauma and distress” she suffered. The school district in
turn sought coverage under a comprehensive general liability policy. Id. at 1207.
The policy provided coverage only for injuries within the policy definition of “bodily in-
jury”: “bodily injury, sickness or disease sustained during the policy period.” In finding the stu-
dent to have suffered bodily injury, the court held that “the policy definition of ‘bodily injury’ is
not limited to physical injury to the body.” The court reasoned that, while the policy first de-
fined “bodily injury” as “bodily injury” in a circular fashion, so as to include physical injury, the
policy “extend[ed] the meaning of ‘bodily injury’ beyond physical injury [to] include[ ] sickness
and disease in the definition.” Id. at 1210-11. The court said that “the average lay person read-
ing the policy would not conclude that mental anguish is excluded from the ambit of ‘sickness.’”
Id. at 1211 (citing Lavanant v. Gen. Accident Ins. Co. of Am., 561 N.Y.S.2d 164, 168 (N.Y.
App. Div. 1990)).
As such, Wayne Township supports the proposition that “bodily injury,” as defined in the
policy at issue in this case, includes the emotional distress Patricia, Nicholas, and Matthew suf-
fered. For essentially the reasons given by the Court of Appeals in Wayne Township, we agree
with this determination.
6
B
In Medley v. Frey, 660 N.E.2d 1079 (Ind. Ct. App. 1996), trans. denied, Medley’s hus-
band had suffered permanent, disabling injuries in an automobile accident caused by
Schoonover.2 Schoonover’s insurance carrier paid the per person limit to Medley’s husband for
the injuries he suffered in the accident but denied Medley’s claim for loss of consortium on the
grounds that it arose from the husband’s injuries, for which it had already paid the limit of cover-
age. Id. at 1080.
State Farm argues that Medley’s wife’s claim is analogous to the Jakupkos’ claims: just
as Medley’s wife was unable to recover beyond her husband’s per person limit for loss of
consortium, Patricia, Nicholas, and Matthew should not be able to recover beyond Richard’s per
person limit.
While we agree that there are similarities between the two situations, we do not think that
Medley dictates the result State Farm advocates here. The insurance policy at issue in Medley
provided coverage for “bodily injury” sustained by persons as a result of its insured’s negligence.
The policy defined “bodily injury” as “bodily harm, sickness or disease.” Loss of consortium
was not a “bodily injury” as defined in the policy; in fact, the policy specifically provided that
damages for “loss of services” were included within the maximum limit of liability for each per-
son. It was on this basis that the court held that Medley was not entitled to recover for her loss of
consortium beyond the policy limits paid to her husband. Id. at 1080-81.
The court did emphasize the centrality of the definition of “bodily injury,” noting that
“[w]here the automobile liability policy includes loss of consortium or loss of services in the
definition of ‘bodily injury,’ courts have logically concluded that the deprived-spouse’s loss of
consortium claim is a distinct ‘bodily injury’ and is not subject to the per person liability limit
applicable to the injured-spouse, but is a separate ‘bodily injury’ within the meaning of the pol-
icy. [See Giardino v. Fierke, 513 N.E.2d 1168 (Ill. Ct. App. 1987); Allstate Ins. Co. v. Hande-
gard, 688 P.2d 1387 (Or. Ct. App. 1984)].” Id. at 1081 n.1.
2
Medley herself had also been a passenger in the vehicle.
7
This passage from Medley describes the case before us. Because Wayne Township dic-
tates that the automobile liability policy includes the emotional distress Patricia, Nicholas, and
Matthew suffered within its definition of “bodily injury,” each is a distinct “bodily injury” within
the meaning of the policy.
C
The Wayne Township court also held that the term “bodily injury” does not include emo-
tional damage unless it arises from a bodily touching. (It found that the “bodily touching . . .
inherent to child molestation and the resulting emotional injury suffered by the victim of child
molestation is bodily injury,” Wayne Township, 650 N.E.2d at 1210.) Armstrong v. Federated
Mutual Insurance Co., 785 N.E.2d 284 (Ind. Ct. App.), trans. denied, 804 N.E.2d 750 (Ind.
2003), cited this aspect of Wayne Township as meaning that “‘bodily injury,’ as used in certain
insurance policies, might include an injury that is non-physical (e.g., emotional harm) in nature,
but only if said injury was the result of a direct physical impact upon the insured who seeks re-
covery.” Id. at 293. Armstrong involved the efforts of the parents of a 19-year-old woman killed
in an automobile accident to recover for their loss of her love and companionship under the unin-
sured motorist coverage of their insurance policy. The parents had not been involved in the ac-
cident and the court held that they could not recover because neither had “suffered a physical
impact in the accident that took [their daughter’s] life.” Id.
Because Patricia, Nicholas, and Matthew suffered direct physical impact while in the
automobile collision in which Richard suffered his injuries, their situation is readily distinguish-
able from that of the parents in Armstrong. But we cite Armstrong because it features in the fed-
eral court case about to be discussed, and in another case we decide today. See State Farm Mut.
Auto. Ins. Co. v. D.L.B., -- N.E.2d --, No. 89S05-0802-CV-102, slip op. (Ind. Feb. 28, 2008).
8
D
None of Wayne Township, Medley, or Armstrong is a precise analog to the one before
us. Nor is the one we are about to discuss, but it is the closest. Kyle Keltner died after an auto-
mobile accident that happened while Kyle was a passenger in a car driven by Tozer. Tozer, 298
F. Supp. 2d at 768. Kyle’s siblings, Kristina and Nicholas Keltner, were also passengers in the
vehicle and suffered emotional distress as a result of witnessing their brother’s fatal injuries. Id.
Tozer’s insurance carrier paid the policy limits with respect to Kyle Keltner’s wrongful death
claim; litigation in federal court ensued with respect to the siblings’ claims. Id.
The insurance company relied on Medley, arguing that the siblings’ emotional distress
claims should be included in the “each person” limit of liability for their brother’s wrongful
death claim just as the Medley court had held that Medley’s loss of consortium claim arose out
of the bodily injury suffered by her husband and was, therefore, subject to her husband’s “per
person” policy limit. Tozer, 298 F. Supp. 2d at 770. But the federal district court said that the
“key question [was] not whether the emotional distress is derivative or a by-product of another’s
injury, it [was] whether emotional distress falls within the policy definition of ‘bodily injury.’”
Id. at 771.
The policy at issue defined “bodily injury” as “physical harm to the body, sickness, dis-
ease or death,” id. at 767, and the court looked to Wayne Township’s holding that the policy
there “‘extend[ed] the meaning of ‘bodily injury’ beyond physical injury’” to include emotional
distress, id. at 771. In fact, the district court found Medley supportive of its conclusion, pointing
to Medley’s observation (discussed supra) that where insurance policies included “loss of con-
sortium” within the definition of “bodily injury,” a separate “each person” limit of liability was
available. Id.
As to Armstrong’s declaration that the injury at issue must be “the result of a direct
physical impact upon the insured who seeks recovery,” Armstrong, 785 N.E.2d at 293, the dis-
trict court agreed but found that that requirement did not preclude the siblings from recovery.
Unlike the claimants in Armstrong, the siblings had been involved in the accident that had taken
9
their brother’s life – they had sustained physical impact within the meaning of Wayne Township
and Armstrong. Tozer, 298 F. Supp. 2d at 772.
The insurance company had contended that Armstrong stood for something more, that
because the emotional distress was not the result of the impact that the siblings had suffered but
the impact that their brother had suffered, the siblings should be held subject to their brother’s
“each person” limit of liability, rather than enjoy one of their own. Id.
The district court’s response was to look to our reasoning in Shuamber, where the mother
and sister of a boy killed in an automobile accident in which they had all sustained physical im-
pact were permitted to pursue claims of their own against the tortfeasor to recover for their emo-
tional distress. Id. (discussing Shuamber, 579 N.E.2d at 453-56). The district court’s reasoning
appears to be that if this Court allowed the mother and sister to pursue emotional distress claims
based on witnessing the boy’s fatal injuries, we would allow the siblings a separate “each per-
son” limit of liability when pursuing emotional distress claims based on witnessing their
brother’s fatal injuries. Id. at 773.
The United States Court of Appeals reversed. Tozer, 392 F.3d 950. For the appellate
court, the case was one that only required construction of the insurance contract before it, not the
language at issue in the policies in the other cases, nor the application of common law principles.
Medley and Armstrong merely reiterate in this specific context what is
generally true throughout Indiana insurance law: the extent of an insurer’s liabil-
ity is a matter of contract interpretation governed by the terms of the policy. The
policy issued to the Tozers does not define “bodily injury” or the “each person”
limit of liability with reference to whether the underlying claim is an independent
or derivative tort action, or on whether the Keltner siblings state a valid claim of
negligent infliction of emotional distress. These underlying questions of tort law
are, therefore, irrelevant. Because the policy caps Allstate’s liability for all dam-
ages “resulting from” Kyle’s injuries at $100,000, and Nicholas’s and Christina’s
emotional distress result from his injuries, the insurer’s liability for these claims is
exhausted.
Id. at 955 (citations omitted).
10
State Farm argues that, whether or not the emotional distress Patricia, Nicholas, and Mat-
thew suffered constitutes distinct “bodily injuries” within the meaning of the policy, the policy
(just like the one in Tozer) caps State Farm’s underinsured motorist liability for all damages “re-
sulting from” Richard’s injuries at $100,000, and Patricia’s, Nicholas’s, and Matthew’s emo-
tional distress resulted from his injuries. As such, State Farm contends, Tozer dictates that its
liability for these claims is exhausted.
We decline to apply the Seventh Circuit’s Tozer holding to this case for the reasons set
forth in the following part of this decision.
III
Unlike Tozer, a third-party claim on a tortfeasor’s policy, the claim here arises under a
policy’s underinsured motorist coverage provisions and so is subject to the requirements that the
Legislature places on such coverage. In relevant part, the statute requires that each automobile
insurance policy provide “coverage . . . for the protection of persons insured under the policy
who are legally entitled to recover damages from owners or operators of uninsured or underin-
sured motor vehicles because of bodily injury, sickness or disease.” I.C. § 27-7-5-2(a)(1).
It is well established that this statute sets the minimum standard of protection that the
Legislature deems acceptable for uninsured and underinsured motorist coverage. Veness, 732
N.E.2d at 212. More specifically, it has long been our law that if a policy clause “is in deroga-
tion of the Indiana uninsured motorist statute, . . . such clause will be unenforceable regardless of
the insurer’s intent.” Patton v. Safeco Ins. Co. of America, 148 Ind. App. 548, 267 N.E.2d 859,
862 (1971) (cited with approval in United Nat’l Ins. Co. v. DePrizio, 705 N.E.2d 455, 460 (Ind.
1999)).
In this case, Judge Steven R. Nation found that subjecting Patricia’s, Nicholas’s, and
Matthew’s claims to Richard’s per person liability limit contravenes the statute, and we agree.
Patricia, Nicholas, and Matthew are “legally entitled to recover damages” from Johnson, the
“driver of an underinsured motor vehicle,” because of their emotional distress, which we have
11
already determined to be “sickness” within the meaning of the policy. But the “includes all in-
jury and damages to others resulting from this bodily injury” clause in the policy effectively re-
duces the amount of damages Patricia, Nicholas, and Matthew are entitled to by the amount, if
any, of damages that Richard is entitled to. The statute does not authorize conditioning or limit-
ing Patricia’s, Nicholas’s, and Matthew’s damages in this way.
State Farm makes two arguments in response, neither of which we find persuasive. It ar-
gues that the cases relied on by the Jakupkos and the trial court do not support the conclusion
that the statute has been violated here. Those cases (Veness and Am. Family Mut. Ins. Co. v.
Federated Mut. Ins. Co., 775 N.E.2d 1198 (Ind. Ct. App. 2002)), State Farm says, involved situa-
tions where the insurer denied coverage altogether; here, State Farm paid the per person limit of
$100,000. It is true that the insurance companies in those cases denied their respective insureds’
claims in full. But while State Farm did honor Richard’s claim here, it too denied the claims of
its other insureds – Patricia, Nicholas, and Matthew.
Next, State Farm argues that courts from other jurisdictions with uninsured and underin-
sured motorist statutes similar to ours have found no statutory violation when an insurer imposed
the type of “per person” provision used by State Farm here. The only two cases State Farm cites
do not support this proposition; neither involves a policy condition on recovery of damages that
an insured would otherwise be entitled legally to receive under the statute.3
State Farm’s policy limits the damages that Patricia, Nicholas, and Matthew are legally
3
In Mercury Insurance Co. v. Ayala, 11 Cal. Rptr. 3d 158, 162 (Cal. Ct. App. 2004), the court held that
failing to provide a separate per person limit of liability for a loss of consortium claim did not violate the
applicable statute. The Jakupkos do not present us with a loss of consortium claim here. In fact, because
loss of consortium is not “bodily injury” in Indiana, Medley, 660 N.E.2d 1079, failing to provide a sepa-
rate per person limit of liability for a loss of consortium claim would not violate our statute, either.
In Daley v. Allstate Insurance Co., 958 P.2d 990, 993-98 (Wash. 1998), the court concluded that
the statutory expression “damages for bodily injury” did not include damages for emotional distress unre-
lated to an insured’s physical injury. Because it did not, the language of the policy did not violate the
statute. Nor do the Jakupkos present us with damages unrelated to an insured’s physical injury. In fact,
because damages for emotional distress unrelated to an insured’s physical injury are not recoverable in
Indiana, Wayne Township, 650 N.E.2d 1205; Armstrong, 785 N.E.2d 284; failing to provide a separate
per person limit of liability for damages unrelated to an insured’s physical injury would not violate our
statute, either.
12
entitled to in a way that the statute governing uninsured and underinsured motorist insurance in
our state does not authorize. Each is entitled to a separate per person limitation of $100,000,
subject, however, to the per accident limitation of $300,000.
Conclusion
The judgment of the trial court is affirmed.
Dickson, Boehm, and Rucker, JJ., concur. Shepard, C.J., concurs in result with separate opinion.
13
Shepard, Chief Justice, concurring in result.
I agree with my colleagues about how the statute and the policy operate to calculate the
per person coverage limits.
As to the claims of the four plaintiffs, Richard Jakupko’s injuries were so severe that they
exceeded the limits of his coverage. Even if this were not so, I would say Richard’s insurance
coverage would include those elements customary to tort damages, such as pain and suffering
that flow from bodily injury.
Richard’s family members sustained lesser injuries in the accident, but likewise should be
considered covered for their own standard common law damages.
Their emotional distress at witnessing Richard’s injuries stands on a different footing. I
do not read my colleagues’ embrace of Wayne Township to suggest that a person who walks
away from an accident without any damage to life or limb, not so much as a bruise, has suffered
“bodily injury,” because he or she is “distressed.”