ATTORNEYS FOR APPELLANT ATTORNEY FOR APPELLEE
Julia Blackwell Gelinas Julie L. Michaelis
Hugh E. Reynolds, Jr. Wooden & McLaughlin LLP
James Dimos Indianapolis, IN
Locke Reynolds LLP
SUPREME COURT OF INDIANA
STATE FARM FIRE & CASUALTY ) COMPANY, ) ) Appellant ) In the Supreme Court (Garnishee Defendant Below ), ) No. 53S01-0102-CV-00099 ) v. ) ) T.B., ) In the Court of Appeals a minor by her parents and next ) No. 53A01-9908-CV-266 friends, GEORGE BRUCE and CATHY ) BRUCE, ) ) Appellees (Plaintiffs Below ). ) ___________________________________ ) ) MURL L. DOBSON and VICKI L. ) DOBSON, ) ) Defendants below. )
February 21, 2002
SHEPARD, Chief Justice.
State Farm Fire and Casualty Company declined to represent an insured homeowner in a suit brought by a child whom the insureds husband molested during daycare in the insureds home. The insured agreed to a consent judgment of $375,000, with the stipulation that none of it would be collected from the homeowner, and assigned all policy rights to the child. The trial court entered the judgment. It later granted summary judgment in favor of the child in proceedings supplemental against State Farm.
State Farm appeals, claiming that the trial court erred when it (1) estopped
State Farm from raising the childcare exclusion in the homeowners policy as a
defense, and (2) awarded contractual damages in an amount exceeding the limits of
the homeowners policy. We agree.
COVERAGE L - PERSONAL LIABILITY
If a claim is made or a suit is brought against an insured
for damages because of bodily injury or property damage to which this coverage
applies, caused by an occurrence, we will:
1. pay up to our limit of liability for the damages for which
the insured is legally liable; and
2. provide a defense at our expense by counsel of our choice.
We may make any investigation and settle any claim or suit that we
decide is appropriate. Our obligation to defend any claim or suit ends
when the amount we pay for damages, to effect settlement or satisfy a
judgment resulting from the occurrence, equals our limit of liability.
(R. at 279-80.) The policy also included the following relevant exclusions:
SECTION II - EXCLUSIONS
Coverage L and Coverage M do not apply to:
(i) any claim made or suit brought against any
any person who is in the care of any insured
because of child care services provided by or at
the direction of:
any employee of any insured; or
any other person actually or apparently
acting on behalf of any insured; or
any person who makes a claim because of
bodily injury to any person who is in the care of any insured because of child care services provided by or at the direction of:
(a) any insured;
(b) any employee of any insured; or
(c) any other person actually or apparently
acting on behalf of any insured.
This exclusion does not apply to the occasional child care services provided by
any insured . . . .
State Farm received notice of the lawsuit on May 8, 1997, in a
letter sent by T.B. dated April 30, 1996. State Farm responded six
days later with two letters, one acknowledging receipt of T.B.s letter and explaining
that an investigation was underway, and another addressed to the Dobsons. In
the Dobson letter, State Farm questioned its obligation to defend or indemnify the
Dobsons and reserved the right to deny coverage if a claim arose out
of childcare services provided by the insured.
After receiving a copy of T.B.s complaint, State Farm took statements from the
Dobsons. It later advised them to procure legal representation at their own
expense, explaining that previous cases similar to the Dobsons were found not to
be covered by the policy. State Farm subsequently denied coverage to the
Dobsons, saying: After a thorough investigation of the Complaint against [the Dobsons]
we have concluded that the allegations against Murl Dobson do not involve an
occurrence as defined by the policy. (R. at 902.) State Farms
letter also observed that Murl and Vicki Dobson were providing full-time childcare services
for many children and have done so for many years. (R. at
On November 5, 1997, T.B. and the Dobsons tendered an offer of judgment
and covenant agreement which the trial court accepted. The Dobsons agreed to
assign to T.B. all rights, interests and remedies against State Farm arising from
their homeowners policy. The agreement also provided for a money judgment of
$375,000, conditioned upon T.B.s promise not to execute on the Dobsons personal assets.
About a month after entry of judgment, T.B.
filed a verified motion for proceedings supplemental and garnishment against State Farm.
State Farm and T.B. filed cross motions for summary judgment. The trial
court granted summary judgment to T.B., and State Farm appealed. The Court
of Appeals affirmed the summary judgment, though it reduced the award amount to
the policy limit, which was $300,000. State Farm Fire & Cas. Co.
v. T.B. ex rel. Bruce, 728 N.E.2d 919 (Ind. Ct. App. 2000).
We grant transfer.
The notice requirement provides the insurer with a base of information from which
to determine whether to participate in a lawsuit. Specifically, prior notice alerts
an insurer of the factual determinations that will be made in order to
resolve the litigation. Thus, an insurers failure to participate in the action
will bind it to those determinations. Unnecessary determinations are less predictable.
Estopping an absent party from contesting unnecessary matters settled upon by the consenting
parties invites collusive or fraudulent determinations.
T.B.s lawsuit against the Dobsons claimed personal and premises liability. The portions
of the consent agreement that resolved these issues are binding on State Farm.
T.B.s claim did not specifically address State Farms contractual obligations under the Dobsons
homeowners policy. The consent agreement, nevertheless, did. The statement that T.B.s
molestation was separate from Vicki Dobsons daycare services was unnecessary to resolve T.B.s
complaint. It was thus tantamount to dictum, and State Farm should not
have been estopped from challenging it during proceedings supplemental.
C. Issues of Material Fact. Without contesting the consent agreements determination that T.B. was a guest in the Dobsons home on the day she was molested, State Farm asserts that T.B. was receiving child care from the insured, a condition excluded from the Dobsons personal liability coverage. See footnote The policy states that coverage does not apply to any person who is in the care of any insured because of child care services provided by or at the direction of: (a) any insured. (R. at 280.) State Farm argues that the consent agreement is ambiguous and that [t]he use of the term guest is not inconsistent with a finding that [T.B.] was present as the recipient of paid childcare services provided by Vicki Dobson. (Appellants Br. at 13 n. 3.)
Relying on the consent agreements use of the term guest, T.B. argues that
the issue of her legal status on the premises has been determined and
that State Farm is precluded from relitigating the matter.See footnote (Appellees Br. at
The term guest was not defined in the consent agreement. We agree
with State Farms contention that the term guest is an ambiguous description of
a persons status with regard to premises liability. In
Burrell v. Meads,
569 N.E.2d 637, 643 (Ind. 1991), we described the position of the social
visitor as anomalous and noted Professor Fleming James description of the guest as
an invitee who is not an invitee.
In Burrell we discussed the traditional categories of visitors entitled to an invitee
status: the public invitee and the business visitor.
Id. at 640-41.
We added the social guest to this class. Id. at 643.
Each of these categories is distinguished by whether it involves a public, business
or social aspect. A description stating only that a person is an
invitee, visitor or guest omits the relevant portion of the label, i.e., public,
business or social. Consequently, the consent agreements determination that T.B. was a
guest does not preclude a finding that she was present in the home
for a business activity, i.e., daycare.
Summary judgment for either party is unsustainable with regard to the childcare exclusion.
Vicki Dobson operated a daycare in her home for several years, and T.B.s
mother paid Vicki Dobson to care for her daughter over a period of
years. Drawing all facts and reasonable inferences in favor of State Farm,
it appears as though T.B. was in the Dobsons home for the sole
purpose of benefiting from childcare services. Accordingly, we reverse the trial courts
grant of summary judgment for T.B. as to the childcare exclusion. The
trial court should take evidence on this question and rule on the merits.
T.B. argues that even if State Farm raises the childcare exclusion as a
defense, summary judgment is still appropriate because an exception to the exclusion applies.
The Dobsons policy provides that the childcare exclusion does not apply to
the occasional childcare services provided by any insured. (R. at 281.)
T.B. concedes that Vicki did routinely provide childcare services to [T.B.] before and
after school and during the summer. . . . (Appellants Br. at
36.) She explains that Vicki did not usually care for her during
the day, except on days that T.B. was sick. (R. at 464.)
This was the circumstance on the day that Murl molested T.B.
Based on these facts, T.B. argues that Vickis care at that time was
occasional. (Appellants Br. at 36.) T.B. additionally states that she was
not in Vickis care at the time of the incident because Vicki left
the home to attend to her mother-in-law across the street. (R. at
471.) She claims that she was actually left in Murls care.
She argues that his care was occasional because Vicki, not Murl, was paid
for caring for [T.B.]. (Appellants Br. at 37; R. at 483.)
There is a genuine issue of material fact as to whether T.B.s care
was occasional, such that the occasional care exception to the child care exclusion
would apply. Because summary judgment was inappropriate for this issue, we direct
a trial on the merits for this question as well.