Insurer not allowed to substitute party name

An insurance company isn't allowed to substitute another party's name in a suit filed by a driver for her underinsured motorist benefits because there's no authority for substitution of a non-party before a jury in a contract case, the Indiana Court of Appeals decided today. Doing so would create a "legal fiction" before the jury.

In Marijeanne Brown-Day v. Allstate Insurance Co., No. 49A02-0903-CV-277, the Court of Appeals accepted Marijeanne Brown-Day's interlocutory appeal to review pretrial orders that granted Allstate Insurance's motion for party substitution and a motion in limine that collectively prohibited any explicit reference to Allstate.

Brown-Day was injured in an accident caused by Michelle Lobdell; Lobdell admitted fault and Brown-Day settled with Lobdell's insurer. Brown-Day then pursued a claim against her insurer, Allstate, for underinsured motorist benefits of $100,000. Lobdell was dismissed as a defendant from the suit with prejudice. The complaint was set for a jury trial.

Two years later, Allstate moved to substitute Lobdell as the sole defendant for trial to protect it from unfair prejudice should the jury know that underinsured motorist coverage was applicable to damages. The trial court granted that motion and another that prohibited Brown-Day from referring to the underinsured motorist claim, the Allstate policy, or the limits of the UIM coverage. It also excluded evidence of past dealings and payments Allstate made to its examiner/expert witness.

Allstate believed based on Indiana Evidence Rule 411 and Wineinger v. Ellis, 855 N.E.2d 614 (Ind. Ct. App. 2006), it could substitute another party to lessen prejudice in insurance cases.

"Evidence Rule 411 simply is not a mechanism providing for an outright substitution of parties so that the identity of a party as an insurer may be shielded. It does not contemplate the creation of a fiction to avoid possible prejudicial effects from a reference to insurance or an insurer," wrote Judge L. Mark Bailey.

Even if the appellate court assumed the prejudice could have been lessened if Lobdell remained a defendant, Allstate allowed her dismissal with prejudice instead of advancing payment and asserting a subrogation interest pursuant to Indiana Code Section 27-7-5-6.

And Allstate's reliance on Wineinger is misplaced because unlike that case, there is no other named defendant and that case was substantively a tort claim.

"Allstate wants the benefit of its bargain with Brown-Day, that is, the contractual limitation on Brown-Day's recovery. Neither Evidence Rule 411 nor Wineinger provides authority for substitution of a non-party in place of a party so as to create a legal fiction before the jury in a contract case," he wrote.

The Court of Appeals also found the trial court erred in not allowing Brown-Day to inquire about the payments Allstate made to its examiner/expert witness based on Evidence Rule 616. The source of witness income goes to the heart of bias or prejudice, and excluding evidence relevant to the jury's credibility assessment would operate as an invasion on the province of the jury, wrote Judge Bailey.

The case is remanded for further proceedings.