COA reinstates fraud, bad faith suit against State Farm

A fraud suit against State Farm Insurance brought by one of its insured will continue in trial court after the Indiana Court of Appeals ruled Tuesday there were genuine issues of material fact precluding the grant of summary judgment to the insurer.

After Jerry Earl was injured in a hit-and-run motorcycle accident, State Farm Mutual Automobile Insurance Company offered to settle the claim for $40,000. Earl and his wife, Kimberly, rejected that offer and instead sued State Farm for uninsured motorist coverage benefits and loss of services, society and companionship.

In response to the Earls’ interrogatories, Sarah Vinnedge, State Farm’s counsel, answered that the couple was covered under an uninsured motorist policy of $250,000. Jerry Earl later died of unrelated causes, and a jury awarded $175,000 to his estate and $75,000 to Kimberly Earl.

After the verdict, State Farm’s counsel divulged information about a Personal Liability Umbrella Policy, which provided an additional $2 million in uninsured motorist coverage. Earl then moved for a modification of the verdict based on the insurer’s failure to produce information about the PLUP policy in discovery, but later withdrew that motion to pursue other remedies.

Meanwhile, State Farm appealed the trial court’s decision to allow evidence of the UM policy limits before the jury, a decision the Indiana Court of Appeals affirmed in 2015. Earl then filed a fraud, bad faith and breach of contract claim against State Farm and Vinnedge, requesting damages and attorney fees.

The defendants moved for summary judgment, which the Jackson Superior Court granted on the grounds that Earl’s claims were impermissible collateral attacks on the UM litigation, and that the claims were unsuccessful. But the Indiana Court of Appeals reversed that decision Tuesday, with Judge Melissa May writing Earl’s claims were not impermissible collateral attacks.

Specifically, May said the UM litigation was a contract action against State Farm, while the fraud claims against State Farm and Vinnedge sound in common law. Thus, there was no overlap in the claims or requested damages between the two cases, she said, further noting the fraud litigation did not ask the trial court to avoid the judgment in the UM litigation.

The appellate court also found there was a question of fact as to whether the Earls reasonably relied on the defendant’s representations of their insurance coverage, making summary judgment inappropriate. Further, there is a question of fact as to whether State Farm acted in bad faith, considering the existence of a “fact pattern” that implies State Farm knew about the PLUP coverage as early as 2008.

Thus, summary judgment was improper, and the case of Kimberly S. Earl, Individually and as Personal Representative of the Estate of Jerry L. Early v. State Farm Mutual Automobile Insurance Company, State Farm Fire and Casualty Company, and Sarah Smith Vinnedge, 36A01-1703-CT-542, was remanded for further proceedings.