NORTHERN INDIANA PUBLIC SERVICE COMPANY, Appellant (Defendant below), v. John S. BLOOM, as Personal Representative of the Estate of Fred J. Zurbrick, Deceased, Charmaine R. Minniefield, Individually and as Mother and Next Friend for Rayven Minniefield-Bryant and Cienna Minniefield, Minors, and Deniece Woodson, Appellees (Plaintiffs below).
No. 02S04-0505-CV-204
Supreme Court of Indiana
May 18, 2006
The Clerk of this Court is directed to forward notice of this Order to the respondent or his attorney, to the Indiana Supreme Court Disciplinary Commission, to the clerk of the United States Court of Appeals for the Seventh Circuit, to the clerk of each of the United States District Courts in this state, to the clerks of the United States Bankruptcy Courts in this state, to the District of Columbia Court of Appeals, to the Virginia State Bar Disciplinary Board, and to all other entities pursuant to Admis.Disc.R. 23(3)(d), governing suspension.
All Justices concur.
Paul A. Rake, John M. McCrum, Robert J. Feldt, Hammond, for Appellant.
Dane L. Tubergen, James J. Shea, Sr., Daniel J. Palmer, Sherrill Wm. Colvin, George Sistevaris, Fort Wayne, for Appellees.
BOEHM, Justice.
We hold that self-insurers are statutorily liable to pay damages caused by the negligence of permissive users of their vehicles up to the minimum amounts required by the Financial Responsibility Act. We further hold that a self-insured employer who furnishes its vehicle for use by an employee has a duty to inform its employee of the limits of the employer‘s statutory obligation to third parties and the employee‘s potential exposure for negligent operation of the vehicle. We conclude that failure to perform this duty imposes an obligation to indemnify and defend the employee against liability arising out of the employee‘s permissive use of the employer‘s vehicle, and precludes the employer from asserting indemnity or subrogation rights against the employee.
Facts and Procedural History
While driving NIPSCO‘s truck, Zurbrick was killed in an accident involving a vehicle driven by Charmaine Minniefield. On behalf of herself and her injured passengers, Minniefield sued NIPSCO and Zurbrick‘s Estate, claiming negligence as to Zurbrick and respondeat superior as to NIPSCO.
NIPSCO counterclaimed against Minniefield for damage to its truck and cross claimed against the Estate for indemnification against any liability NIPSCO incurred as a result of Minniefield‘s claims. The Estate cross claimed against NIPSCO, seeking an order that NIPSCO defend and indemnify it against any liability to Minniefield.
In response to a flurry of summary judgment motions, the trial court (1) denied NIPSCO‘s motion for summary judgment on Minniefield‘s respondeat superior claim, concluding that there were genuine issues of material fact as to whether Zurbrick was acting within the scope of his employment at the time of the accident, (2) granted summary judgment to the Estate
NIPSCO appealed the trial court‘s order requiring NIPSCO to defend and indemnify the Estate and denying NIPSCO‘s right to seek indemnification from the Estate. NIPSCO did not appeal the trial court‘s denial of its motion for summary judgment on the question of whether Zurbrick was acting within the scope of his employment at the time of the accident. The Court of Appeals upheld the trial court‘s order requiring NIPSCO to defend and indemnify the Estate, but reversed the part of the trial court‘s order capping NIPSCO‘s liability at one million dollars. N. Ind. Pub. Serv. Co. v. Bloom, 816 N.E.2d 887, 893 (Ind.Ct.App.2004). We granted transfer. Bloom, 831 N.E.2d 746 (Ind.2005).
I. Appellate Jurisdiction
NIPSCO appealed the trial court‘s interlocutory order under two distinct provisions of Indiana Appellate Rule 14. NIPSCO argued that an “[o]rder to pay for a defense and insurance coverage” was appealable as of right as an order “[f]or the payment of money” under Rule 14(A)(1). Additionally, pursuant to Rule 14(B), the trial court certified for appellate review both its order directing NIPSCO to defend and indemnify the Estate and its order denying NIPSCO‘s right to indemnification from the Estate. The Court of Appeals did not indicate the jurisdictional ground on which it heard NIPSCO‘s appeal, and the Estate has not challenged the appealability of the trial court‘s order. We do not agree that an order to indemnify is an order “for the payment of money” for purposes of Appellate Rule 14(A)(1) because it is not specific as to the amount and simply describes a legal relationship that may have financial consequences. We do accept the Court of Appeals’ opinion on the merits as an implicit acceptance of discretionary interlocutory appeal under Rule 14(B).
When reviewing a grant or denial of summary judgment the standard of review is the same as the standard governing summary judgment in the trial court: whether there is a genuine issue of material fact, and whether the moving party is entitled to judgment as a matter of law. Ind. Univ. Med. Ctr., Riley Hosp. for Children v. Logan, 728 N.E.2d 855, 858 (Ind. 2000). Summary judgment should be granted only if the evidence designated pursuant to Indiana Trial Rule 56(C) shows that there is no genuine issue of material fact and the moving party deserves judgment as a matter of law. Gunkel v. Renovations, Inc., 822 N.E.2d 150, 152 (Ind.2005). All evidence must be construed in favor of the opposing party, and all doubts as to the existence of a material issue must be resolved against the moving party. Tibbs v. Huber, Hunt & Nichols, Inc., 668 N.E.2d 248, 249 (Ind. 1996).
II. Self-Insured‘s Liability for Permissive User‘s Negligence
The trial court concluded that under the Financial Responsibility Act self-insured entities are liable for damages arising from the negligent operation of a self-insured vehicle by a permissive user. NIPSCO and the Estate agree that Zurbrick was a permissive user of NIPSCO‘s vehicle at
NIPSCO concedes that, as a self-insured entity, it is statutorily liable to Minniefield for damages caused by the negligence of a permissive user of NIPSCO‘s vehicle. NIPSCO further concedes that under the doctrine of respondeat superior it may have unlimited liability for the negligence of its employee in the scope of employment but argues that its liability for the negligence of a permissive user under the Act is limited to the statutory minimum amounts required by
The minimum amounts of financial responsibility are as follows:
(1) Subject to the limit set forth in subdivision (2), twenty-five thousand dollars ($25,000) for bodily injury to or the death of one (1) individual.
(2) Fifty thousand dollars ($50,000) for bodily injury to or the death of two (2) or more individuals in any one (1) accident.
(3) Ten thousand dollars ($10,000) for damage to or the destruction of property in one (1) accident.
The Court of Appeals has consistently held that contractual insurance need not provide coverage for more than the
The purpose of the Financial Responsibility Act is to assure a source of compensation for victims harmed by the negligent operation of motor vehicles. Fed. Kemper Ins. Co., 674 N.E.2d at 1035. This assurance can be provided by an insurance policy, self-insurance, or a bond. We think it is clear that the General Assembly intended for self-insurance to afford compensation equivalent to that afforded by a “motor vehicle liability insurance policy,” which necessarily means a policy in compliance with the applicable insurance laws and regulations. Although the statutory language could be clearer, it has long been construed to mean that the damage amounts in
The trial court found that the Financial Responsibility Act caps NIPSCO‘s potential liability to Minniefield at the amount of NIPSCO‘s deposit with the Bureau of Motor Vehicles, namely, one million dollars. Administrative regulations provide in relevant part:
Financial Collateral
(a) No person shall be approved as a self-insurer unless certain minimum financial collateral is deposited either with the treasurer with receipt to the bureau of motor vehicles or with the bureau of motor vehicles. The minimum financial collateral to be furnished by the self-insurer is forty thousand dollars ($40,000) for the first vehicle and twenty thousand dollars ($20,000) for each vehicle up to a maximum of one million dollars ($1,000,000).
In sum, we conclude that a self-insured entity is statutorily liable to pay damages inflicted by the negligence of a permissive user of the self-insured vehicle in the amounts contained in
III. Obligation of a Self-Insurer to Permissive Users
The Estate seeks an order requiring NIPSCO to defend and indemnify it against any liability to Minniefield. NIPSCO counters with a request that the Estate indemnify it for any liability it incurs as a result of Minniefield‘s claims. Specifically, NIPSCO asserts a right to indemnification for its potential direct liability to Minniefield as a self-insurer who is obligated to an injured third party and also for its potential derivative liability under respondeat superior. NIPSCO presumably could also assert a direct claim for negligent damage to its vehicle although it does not do so here.4 We conclude that the rights and obligations of NIPSCO and the Estate viz-a-viz each other implicate both the Financial Responsibility Act and agency principles.
A. Financial Responsibility Act
The Estate claims that
We do not agree that
Equally important, if the statute did render a self-insurer an insurer, that insurance would be only the minimum required coverage under applicable statutes and regulations.5 It would not include cov-
Indiana courts have had few occasions to address the nature of the relationship between the self-insured entity and permissive users of its vehicles. In City of Gary v. Allstate Insurance Company, 612 N.E.2d 115, 119 (Ind.1993) we held that Indiana‘s uninsured motorist statute did not require a self-insured municipality to provide uninsured motorist coverage to a police officer injured by an uninsured motorist while on duty and while operating a city-owned police car because the uninsured motorist coverage act applied only to insurers who issued or delivered liability policies, which did not include self-insurers under the Financial Responsibility Act. We concluded that the city had no obligation to provide the coverage because it was not an “insurer” under the uninsured motorist coverage statute and had not issued a “liability policy of insurance” within the meaning of that statute. We explained that self-insurance is not actually insurance at all but is the antithesis of insurance: “the choice to self-insure does not mean that the party has ‘insurance,’ but rather that the party has chosen to retain the risk.” Id. at 118. We concluded:
In choosing to be self-insured for purposes of the financial responsibility law, the City obligated itself to pay judgments rendered against it. In exchange for assuming the risk of paying judgments, the City has saved the expense of purchasing a policy of insurance which would cover this risk. This does not mean, however, that the City has issued a ‘policy of insurance’ or that it has become an ‘insurer’ for anything beyond meeting the requirements of the financial responsibility act. Id.
We conclude that the Act does not make a self-insurer a quasi-insurance carrier and require it to indemnify a permissive user. The Act‘s purpose is to require automobile owners to provide security to the motoring public for injuries arising out of the use of their vehicles.
The conclusion that a self-insurer is not in the same relationship to a permissive user as a contractual insurer has a second implication. NIPSCO claims a right to be reimbursed7 by the Estate for any liability NIPSCO incurs as a result of Minniefield‘s claims based on Zurbrick‘s negligence. NIPSCO contends that its liability under the Act and also its liability under the doctrine of respondeat superior are each solely derivative of Zurbrick‘s liability. NIPSCO contends that therefore it is entitled to be indemnified by Zurbrick for both of these exposures. NIPSCO cites the principle that one who is derivatively liable to a third party and who discharges the liability to the third party is entitled to be indemnified by the primarily liable party to the extent of the amount paid.
The Restatement Third of Torts: Apportionment of Liability § 22 (2000) provides in relevant part:
(a) When two or more persons are or may be liable for the same harm and one of them discharges the liability of another in whole or in part by settlement or discharge of judgment, the person discharging the liability is entitled to recover indemnity in the amount paid to the plaintiff, plus reasonable legal expenses, if:
(2) the indemnitee
(i) was not liable except vicariously for the tort of the indemnitor
A self-insurer‘s statutory liability to third parties for the negligence of a permissive user is “vicarious” as that term is used in section 22 of the Restatement. The permissive user and the self-insurer “are or may be liable for the same harm” to injured third parties. To the extent the third party‘s (Minniefield‘s) claim is solely based on the negligence of the permissive user (Zurbrick), the self-insurer‘s (NIPSCO‘s) liability under the Financial Responsibility Act is “vicarious.” The self-insurer therefore has a valid claim for indemnity against the permissive user.
In the context of insurance, an insurer‘s right to be indemnified by its insured is barred by a doctrine commonly referred to as the “antisubrogation rule.” This name may be somewhat confusing because subrogation usually refers to the right of the insurer to proceed against a third party to recover amounts it has expended for the insured or another party. Subrogation is “the substitution of one person in the place of another with reference to a lawful claim or right.” See 73 Am.Jur.2d Subrogation § 1 (2004). In the case of voluntary contractual insurance, the insurer is subrogated to the insured‘s right of action against any person respon-
Most courts that have addressed a self-insurer‘s right of subrogation against a permissive user have done so in the context of a dispute between the self-insurer and the permissive user‘s liability insurer over primary responsibility for claims by a third party against the permissive user. Some courts have concluded that the permissive user is the substantial equivalent of the self-insurer‘s “insured,” and that the provision in the permissive user‘s policy requiring “other insurance” to provide primary coverage leads to the conclusion that the self-insurer has no right of subrogation.8 Other courts have concluded that a self-insurer is not an insurer of the permissive user and therefore subrogation principles do not prohibit the self-insurer from seeking reimbursement from the permissive user or the user‘s liability insurer.9 Indiana‘s Financial Responsibility Act does not render the self-insurer an insurer of a permissive user and no such battle of “other insurance” claims is presented where the permissive user was operating a self-insured vehicle. The self-insurer has no obligation to a permissive user to accept the risk of liability comparable to the obligation imposed by an insurance policy. The antisubrogation rule therefore does not prohibit the self-insurer from seeking indemnification from a negligent permissive user under tort law.
B. Agency and Employment Principles
NIPSCO‘s contention that self-insurers are not the substantial equivalent
Duty to Give Agent Information
Unless otherwise agreed, it is inferred that a principal contracts to use care to inform the agent of risks of physical harm or pecuniary loss which, as the principal has reason to know, exist in the performance of authorized acts and which he has reason to know are unknown to the agent. His duty to give other information depends upon the agreement between them.
While the duty to inform can be spelled out in an employment contract, it is more usually “inferred from the con- duct of the parties in the light of the common understanding as to [the duty‘s] existence and extent.” Id. at Ch. 14, introductory note. The employer has a duty to disclose facts which, if unknown, would be likely to subject the agent to pecuniary loss. Id. at § 435 cmt. a. The facts which must be disclosed include specific risks known to the employer but unlikely to be discovered by the employee. Id. at § 510 cmt. a. The commentary provides as an example that a principal who employs an agent to sell goods which appear to be but are not sound is subject to liability to the agent if the agent is led to incur personal liability to a buyer through misstatements of the condition of the goods. Id. at § 435 cmt. a. See also S. Central Bank & Trust Co. v. Citicorp Credit Serv., Inc., 811 F.Supp. 348, 352 (N.D.Ill.1992) (An agent was hired to solicit customers to purchase the principal‘s services in processing bankcard credit charges. The court held that the agent stated a cognizable claim that the principal breached its duty of disclosure under section 435 by failing to disclose a customer‘s financial collapse after the principal became aware of the customer‘s financial condition.); Marie Deonier & Assoc. v. Paul Revere Life Ins. Co., 301 Mont. 347, 9 P.3d 622, 629 (2000), aff‘d in part & rev‘d in part, 323 Mont. 387, 101 P.3d 742 (2004) (applying section 435 of the Restatement, the court held that an insurance company had a duty to inform its agent of a known risk of litigation arising from the policy she sold on behalf of the company).
The principal‘s obligation to disclose to the agent typically arises in the
NIPSCO knew that the vehicles it supplied to its employees were not covered by contractual insurance but instead were self-insured under the Financial Responsibility Act which has a liability limit substantially below the potential exposure for an accident involving personal injury. NIPSCO elected to become self-insured. Presumably only (or at least mostly) sophisticated entities undertake to self-insure. It is therefore appropriate to place on them the burden of proving that they have explained the risks their employees assume when accepting and using the company vehicles. There is nothing in the record indicating whether NIPSCO informed its employee drivers, including Zurbrick, of this exposure. If it did not, NIPSCO‘s lack of contractual coverage was “likely to subject Zurbrick to pecuniary loss” and NIPSCO‘s silence constituted a breach of duty.
A breach of the duty of disclosure ordinarily gives rise to actions in tort and contract against the employer. Restatement (Second) of Agency § 435 cmt. a. We conclude that breach also gives rise to a duty to indemnify the employee for any loss attributable to the breach. Sections 438 and 439 of the Restatement enumerate several situations, none of which are applicable here, where a principal has a duty to indemnify an agent. Section 438(2)(b) also provides that where the parties do not have an employment agreement to the contrary, a principal has a duty to indemnify an agent where the agent “suffers a loss which, because of their [agency] relation, it is fair that the principal should bear.”
This record does not reveal whether there was disclosure of NIPSCO‘s potential causes of action against Zurbrick for reimbursement arising out of negligent use of the vehicle or disclosure of the risk of liability to third parties above minimum statutory requirements. Nor is it clear whether there was any implicit or explicit agreement as to these risks. We conclude that basic fairness would require NIPSCO to indemnify Zurbrick‘s Estate against liability arising out of Zurbrick‘s use of NIPSCO‘s vehicle if there was no disclosure of these risks. This duty includes reimbursement for any amount the Estate is ultimately required to pay Minniefield. Id. at § 435 cmt. b. In addition, a breach of the duty of disclosure would require NIPSCO
Conclusion
The order of the trial court that is the subject of this interlocutory appeal is vacated. This case is remanded for further proceedings consistent with this opinion.
SHEPARD, C.J., SULLIVAN and RUCKER, JJ. concur.
DICKSON, J., concurs with separate opinion.
DICKSON, Justice, concurring.
I agree with the Court‘s conclusion that the present language of the Indiana Financial Responsibility Act does not “make a self-insurer a quasi-insurance carrier and require it to indemnify a permissive user,” opin. at 184, and that permissive users are not the “insureds” of self-insurers, opin. at 187. As a result of today‘s opinion, it is reasonable to anticipate that self-insured employers providing vehicles for use by an employee or an employee‘s designee will likely issue advisements including warnings of the minimum coverage limits provided by self-insured employers and the risks of a permissive user‘s personal liability to indemnify or reimburse any liability payments made by the self-insurer to persons injured by the negligence of the permissive user. Thus understood and applied, however, the statute may present substantial issues that invite legislative attention, or, if none, common law response.
Principal among these issues is whether, and to what extent, the personal automobile liability insurance of an employee-permissive user provides coverage for damages to injured third parties and for such permissive user‘s obligation to indemnify or reimburse a self-insured for payments made to the third party. There are various aspects to these issues.
Conventional policy language requires a liability insurance company to pay only damages for which the insured becomes legally responsible because of an auto accident, and disclaims any duty to pay for bodily injury or property damage not covered under the policy. Today‘s opinion does not explore whether an employee-permissive user‘s liability to a self-insured employer falls within the “because of an auto accident” restriction so as to qualify for coverage under the employee‘s personal policy. Likewise, our decision does not address whether a direct full payment of a third party‘s claim by a self-insured vehicle owner thereby terminates any obligation under the permissive user‘s standard personal liability insurance coverage, particularly as to such user‘s obligation to indemnify or reimburse the self-insured employer. And, if the coverage provided by standard policies does not extend to such liability for indemnification or reimbursement, our opinion does not consider whether such coverage is commercially available as an additional endorsement to the personal policies of employees using vehicles provided by a self-insured, or as a separate policy for employee-permissive users who do not own a private vehicle.
Another unresolved issue is the effect of “other insurance” provisions usually contained in the personal automobile liability policies that employee-permissive users would obtain for their own vehicles. Such provisions typically declare the provided coverage to be excess to other collectible insurance or otherwise exclude or limit coverage if there is other applicable liability insurance. But today‘s opinion declares that self-insureds are not insurance
I am also concerned about other potential ramifications regarding insurance coverage for non-employees (for example, employee spouses) who injure third parties while driving, with permission, a vehicle owned by a self-insured entity. Sound public policy seeks to assure that persons injured by the negligent driving of others will have recourse to recover damages at least to the extent of minimum statutory limits. For all of these, and likely other, related challenges, the present self-insurance provisions in the Indiana Financial Responsibility Act invite careful attention.