Federal Kemper Insurance v. Brown

DISSENTING OPINION

SULLIVAN, Judge.

There are clear-cut genuine issues of material fact in this ease. More particularly, whether Brown told Jill Long, the insurance agent who filled out the application, that Brown’s step-son, Jackie Galloway, was a resident in his household and would be the primary driver of the Chevrolet Cavalier, whether Galloway had some past speeding tickets, and whether Long told Brown that it would cost $1000 per year to insure Galloway, are subjects of direct and unmistakable dispute. According to Long’s deposition and another taped statement she denied any such conversations and categorically maintained that she did not know of Jackie Galloway’s existence relative to Brown or to any of the vehicles until after the accident had occurred. In this regard, therefore, it is appropriate to consider the facts most favorably to the ap-pellees, as does the majority opinion, only with regard to denial of Kemper’s Motion for Summary Judgment.5

In this regard, the trial court may have been partially correct in stating that if Long did have knowledge of Jackie Galloway’s prospective operation of the Cavalier and if she nevertheless did not include that information upon the application, Kemper would be precluded from rescinding the insurance contract. Such result would be premised upon the principle that an insurer is bound by the misrepresentations of the insurer’s agent so long as the applicant did not have knowledge of the misrepresentations, gave truthful information and did not mislead the agent. See The Phoenix Insurance Co. of Brooklyn v. Stark (1889) 120 Ind. 444, 22 N.E. 413; Pickel v. The Phoenix Insurance Co. of Brooklyn (1889) 119 Ind. 291, 21 N.E. 898; Metropolitan Life Insurance Co. v. Wathen (1919) 71 Ind.App. 145, 124 N.E. 403.

Here, however, as noted, these maters are in genuine dispute. For purposes of summary judgment, it cannot be assumed either that Brown made full disclosure to Long and *1038that she misrepresented the facts on the application. Neither can it be assumed that Brown did not make such disclosure. Therefore, the summary judgment motion of Kem-per should not have been granted, nor should the court have granted such judgment in favor of appellees without limiting the extent of that judgment. The trial court apparently entered judgment for the appellees upon Kemper’s complaint reasoning that notwithstanding a fraud perpetrated by Brown, Kemper, under American Underwriters Group v. Williamson (1986) Ind.App., 496 N.E.2d 807, could not rescind the insurance coverage.

In this regard, I agree in part with the majority. Brown admitted that he signed the application containing the misrepresentations. Therefore, without regard to Long’s knowledge, or lack thereof, Brown is held to the knowledge that the application contained material misrepresentations. He was therefore not without fault so as to bring into play those cases, above noted, which prevent rescission if the insurer’s agent made the material misrepresentations. On this basis, therefore, as to Part I of the majority opinion, I agree that because of Brown’s misrepresentations the policy was subject to rescission — but,only partial rescission.

As to Part II, however, I am unable to agree with the conclusion that because in this case there was uninsured insurance protection available to Robinson and to Walker’s estate through Westfield, Kemper may totally avoid any insurance responsibility and may avoid the still viable aspects of American Underwriters Group, Inc. v. Williamson (1986) Ind.App., 496 N.E.2d 807. That case clearly states that an insurer may not avoid liability to an injured third party on grounds of fraud or misrepresentation by the insured. Motorists Mutual Insurance Co. v. Morris (1995) Ind.App., 654 N.E.2d 861, heavily relied upon by the majority here, mistakenly, I believe, justified rescission for a misrepresentation by the insured not only because the injured party had received uninsured motorist insurance payment, but also because the dispute was “between insurance companies who are not entitled to protection under [the Financial Responsibility Act and the uninsured/underinsured insurance statute].” 654 N.E.2d at 863.

In this latter regard, the majority loses sight of the principle that in subrogation matters such as here involved, the subrogat-ed insurance carrier succeeds to all the rights and claims held by the injured party as against the tort-feasor. See I.C. 27-7-5-6; American States Ins. Co. v. Williams (1972) 151 Ind.App. 99, 278 N.E.2d 295. To the extent that Robinson and Walker’s estate have a valid claim against Brown’s insurer for the negligence of Galloway, Westfield Insurance Co. is conditionally subrogated. Furthermore, Williamson, supra, 496 N.E.2d 807, would seem to preclude Kemper from avoiding total liability even with regard to a subrogation claim made by another insurer. To allow Kemper to avoid any and all liability is to permit it to take refuge behind the insurance coverage provided by the uninsured/underinsured provision. The fact that the particular dispute here appears to be, for the most part, between two insurance companies should not alter the effect of Kemper’s attempt to rescind the insurance contract in toto. If under a hypothetical situation in which Westfield had offered the uninsured coverage but it had been specifically rejected by Robinson, under I.C. 27-7-5-2, Kemper would be liable to Robinson in the amount of $25,000, the statutory amount provided in the Financial Responsibility Act. Kemper’s liability should not be diminished by any uninsured/underinsured motorist payments made. In this regard, I respectfully disagree with the overly broad sweep of Motorists Mutual Ins. Co., supra, 654 N.E.2d 861.

In the final analysis, Kemper should be permitted to rescind only with regard to the liability policy coverage in excess of $25,000 as to Robinson.6 However, Westfield under *1039the facts of this case will not be able to successfully prosecute its subrogation claim against Kemper, unless the $25,000 due to the injured party from Kemper and the $25,-000 already paid by Westfield to Robinson, exceed the amount of Robinson’s damages. Capps v. Klebs (1978) 178 Ind.App. 293, 382 N.E.2d 947.7

I would affirm the denial of Kemper’s Motion for Summary judgment and would remand with instructions to determine the damages sustained by Robinson and Walker’s estate and only thereafter hold Kemper liable to the extent of $25,000 and to determine whether any excess is recoverable by Westfield either from Kemper or from Robinson or Walker’s estate.

. The record reflects that summary judgment was only entered with regard to Kemper's complaint for rescission of the insurance contract. There are other issues remaining between and among all the litigants, but such matters are not the subject of this appeal. Such matters may be the focus of some discussion hereinafter, to the extent that they bear upon the extent of liability of the respective insurance providers.

. Because no uninsured motorist payments have yet been made to Walker's estate, I discuss only the effect of my views as to Robinson. Clearly, however, under my approach, Kemper would also be responsible to Walker’s estate up to a maximum of $25,000 for a total maximum liability of $50,000. Conversely, Westfield, if having made uninsured or underinsured motorist payments to Walker's estate, could be subrogated *1039only if the total payments to Walker’s estate exceeded the amount of damages proved.

. Because I would hold Kemper liable to Robinson to the extent of $25,000 the Westfield payment or payments would perhaps be more accurately classified as underinsured motorist payments rather than as payments under the uninsured motorist coverage.