Frye et al v. Nationwide Mutual Insurance Company et al

Filing 67

OPINION AND ORDER ; DENYING WITHOUT PREJUDICE 32 Motion for Summary Judgment with leave to refile within 30 days of the date of this order; GRANTING IN PART and DENYING IN PART 47 Motion for Extension of Time to File Response/Reply; the Motion for Partial Summary Judgment 48 and the Alternative Motion for Summary Judgment 50 REMAIN PENDING. Signed by Judge Rudy Lozano on 3/31/14. (smp)

UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF INDIANA
SOUTH BEND DIVISION
DEE FRYE, et al.,

)
)
)
)
)
)
)
)
)
)

Plaintiffs,
vs.
AUTO-OWNERS INSURANCE
CO., et al.,
Defendants.

Case No. 3:13-CV-113

OPINION AND ORDER
This matter is before the Court on the: (1) Motion for Summary
Judgment, filed by Defendant, Nationwide Mutual Insurance Company,
on August 16, 2013 (DE #32); (2) Plaintiff’s Motion for Extension
of Time to File Response to the “Bad Faith” Portion of Defendant
Nationwide Mutual Insurance Co.’s Motion for Summary Judgment,
filed by Plaintiffs, Dee Frye and Lanhui Frye, on October 11, 2013
(DE

#47);

(3)

Motion

for

Partial

Summary

Judgment

Against

Defendants, filed by Plaintiffs, Dee Frye and Lanhui Frye, on
October 11, 2013 (DE #48); and (4) Plaintiff’s Alternative Motion
for Partial Summary Judgment, filed by Plaintiffs, Dee Frye and
Lanhui Frye, on October 11, 2013 (DE #50).

For the reasons set

forth below, the Motion for Summary Judgment (DE #32) is DENIED
WITHOUT PREJUDICE AND WITH LEAVE TO REFILE within thirty (30) days
of the date of this order, the Motion for Extension of Time (DE
#47) is GRANTED in part and DENIED in part as described in detail

below,

and

the

Motion

for

Partial

Summary

Judgment

and

the

Alternative Motion for Partial Summary Judgment (DE’s #48 & #50)
REMAIN PENDING.

BACKGROUND
On January 7, 2013, Dee Frye and Lanhui Frye (collectively,
“Plaintiffs”), filed a complaint against Auto-Owners Insurance
Company

(“Auto-Owners”)

and

Nationwide

Mutual

Insurance

Co.

(“Nationwide”) in the St. Joseph County Circuit Court of the state
of Indiana.

(DE #1-1.)

On February 8, 2013, Nationwide removed

the action to federal court.1

(DE #1.)

Nationwide answered the complaint.

Both Auto-Owners and

(DE’s #12 & #13.)

On August

16, 2013, Nationwide filed the instant motion for summary judgment.
(DE #32.)

After several requests for extension of time were

granted, Plaintiffs filed their response on October 11, 2013.
#45.)

(DE

That same day, they also filed the instant motion for

extension

of

time

to

respond

to

the

bad

faith

portion

of

Nationwide’s motion for summary judgment, the instant motion for
partial summary judgment against all defendants, and the instant
motion for partial summary judgment in the alternative. (DE’s #47,
#48,

#50.)

On

October

16,

2013,

Auto-Owners

Nationwide’s motion for summary judgment.

1

responded

(DE #52.)

to

Nationwide

The case was transferred to this Court from the Southern District of
Indiana on February 20, 2013. (DE #8.) Auto-Owners consented to the removal.
(DE #10.)

2

lodged an objection to Plaintiffs’ motion for extension of time to
respond to the bad faith claims on November 1, 2013, and filed a
reply in support of their motion for summary judgment and a
response in opposition to Plaintiffs’ motion for partial summary
judgment on November 8, 2013.

(DE’s #56, #59, 60.)

Plaintiffs

filed a response to Nationwide’s objection regarding the motion for
extension of time on that same day.

(DE #61.)

Auto-Owners

responded to Plaintiffs’ motions for partial summary judgment on
November 8, 2013, as well.

(DE #62.)

On November 22, 2013,

Plaintiffs filed an agreed motion for modification of the Court’s
scheduling

order

which

indicated

that

the

parties

had

been

diligently moving the case forward and proceeding with discovery.
(DE #65.)

The parties requested extensions for expert disclosure

deadlines as well as an extension of the discovery deadline. (Id.)
Magistrate Judge Christopher A. Nuechterlein granted that motion on
November 25, 2013, and the discovery deadline was moved from March
13, 2014, to June 14, 2014.

(DE #66.)

DISCUSSION
Plaintiff, Dee Frye, was involved in a car accident on January
27, 2011, in which he was seriously injured.
of D. Frye, ¶¶ 7-9.)

(Comp., ¶¶ 7-9; Aff.

The accident was caused by the negligence of

Myron Dampier (“Dampier”), the driver of the other vehicle.
of D. Frye, ¶ 6.)

(Aff.

As a result of the accident, Dee Frye incurred

3

medical bills in excess of $500,000 and has lost wages in excess of
$100,000.

(Id. at ¶ 8.)

At the time of the accident, Dee Frye was driving a vehicle,
owned

by

Arthur

Nationwide’s

and

automobile

(“Nationwide Policy”).

Mary

Webber,

insurance

that

policy

was

insured

number

91

13

under
769036

(Comp., ¶ 5; Aff. of D. Frye, ¶ 10;

Nationwide Policy, DE #33-2, p. 47.)

The accident occurred while

he was driving that vehicle in the scope of his employment with Tri
City Data & Electronic , Inc. (“Tri City”).
10.)

(Aff. of D. Frye, ¶

Through Tri City, Dee Frye was covered by a commercial

automobile insurance policy which was issued by Auto-Owners (“AutoOwners Policy”).

(Comp., ¶ 4; Auto-Owners Policy, DE #46-3.)

Tri

City also provided a commercial umbrella insurance policy that
extended the limits of coverage to Dee Frye (“Auto-Owners Umbrella
Policy”).

(Comp. ¶ 4; Auto-Owners Umbrella Policy, DE #46-4.)

Both the Auto-Owners Policy and the Nationwide Policy provided
under-insured motorist (“UIM”) coverage provisions.

(Auto-Owners

Policy, DE #46-4, p. 6; Nationwide Policy, DE #33-2, p. 48.)
Farmers Insurance (“Farmers”), the liability carrier for
Dampier, made an offer of the applicable policy limits in the
amount of $100,000 to Plaintiffs, and the amount tendered was
accepted.

(Comp., ¶ 10; see also DE #46-6, pp. 1.)

Prior to and

following the acceptance, counsel for Plaintiffs corresponded
extensively with Nationwide and Auto-Owners regarding Plaintiffs’

4

position on the application and availability of UIM coverage under
the two policies.

(DE’s #46-6 through #46-17.)

In early written

communications to Nationwide, Plaintiffs stressed their belief that
Auto-Owners and Nationwide would be responsible for sharing the
first $1,100,000.00 of coverage on a pro rata basis.

(DE #46-6.)

They reiterated that position in several subsequent letters. (DE’s
#46-8 & #46-10.) When Nationwide responded via letter, they stated
that their review had determined that no underinsured motorist
coverage was available to Plaintiffs “because our limits match
those of the tort-feasor carrier.”
made of pro rata sharing.

(Id.)

(DE #46-12.)

No mention was

Although Plaintiffs continued to

send correspondence regarding their belief that the Nationwide
Policy provided for pro rata sharing of claim exposure (DE’s #46-13
& #46-14), Nationwide did not communicate further as to its own
position.
between

Ultimately, because no agreement could be reached

Plaintiffs

and

Nationwide

or

Auto-Owners,

Plaintiffs

resorted to filing the instant complaint alleging that they are
entitled to recover UIM coverage from each of the Defendants for
all damages resulting from the car accident, up to the limits of
coverage, and also that Nationwide and Auto-Owners breached their
duties of good faith by failing to respond to and/or ignoring
Plaintiffs’ claims.

(Comp., ¶¶ 13, 14, 15.)

Plaintiffs further

seek a declaration that Auto-Owners does not benefit from any
recovery as a Worker’s Compensation carrier and that Nationwide

5

must pay on a pro rata basis up to the first one million dollars of
damages above the $100,000 already paid out by Farmers.

(Id. at ¶

3.)

Rule 56(d)
Plaintiffs filed their motion for extension of time to file a
response to the “bad faith” portion of Nationwide’s motion for
summary judgment pursuant to Federal Rule of Civil Procedure 56(d).
Federal

Rule

of

Civil

Procedure

56(d)2

states

that

“[i]f

a

nonmovant shows by affidavit or declaration that, for specified
reasons,

it

cannot

present

facts

essential

to

justify

its

opposition [of a motion for summary judgment], the court may: (1)
defer considering the motion or deny it; (2) allow time to obtain
affidavits or declarations or to take discovery; or (3) issue any
other

appropriate

order.”

Fed.R.Civ.P.

56(d).

In

general,

“[s]ummary judgment should not be entered ‘until the party opposing
the motion has had a fair opportunity to conduct such discovery as
may be necessary to meet the factual basis for the motion.’”
Chalimoniuk v. Interstate Brands Corp., 172 F.Supp.2d 1055, 1057-58
(S.D. Ind. 2001) (citing Celotex Corp. v. Catrett, 477 U.S. 317,
326 (1986)).

However, in order to prevail, a Rule 56(d) movant

2

Federal Rule of Civil Procedure 56 was amended in 2010. Subsection
(d) is substantially the same as the prior subdivision (f). Fed.R.Civ.P. 56
Advisory Committee Notes. While some of the cases cited by the Court refer to
Rule 56(f) instead of Rule 56(d), the analysis is consistent.

6

must first make a good faith showing that he cannot present facts
essential

to

justify

judgment motion.

his

opposition

to

the

movant’s

summary

Kalis v. Colgate–Palmolive Co., 231 F.3d 1049,

1058 n. 5 (7th Cir. 2000).

This should be done via an affidavit

submitted with the motion “explaining why the additional discovery
is necessary.”

Deere & Co. v. Ohio Gear, 462 F.3d 701, 706 (7th

Cir. 2006). The Seventh Circuit has held that lack of diligence in
pursuing discovery or unjustified delay tactics are reasons to deny
a Rule 56(d) motion.
Here,

Kalis, 231 F.3d at 1058 n. 5.

Plaintiffs’

counsel

has

support of the Rule 56(d) motion.
he

points

out

that,

although

submitted

an

affidavit

(Aff. of P. Agostino.)

Plaintiffs

served

in

In it,

discovery

on

Nationwide on August 8, 2013, at the time the motion was filed on
October 11, 2013, no responses had been received by Nationwide.3
(Id. at

¶ 6.)

He acknowledges that the contractual claims

contained within Nationwide’s motion for summary judgment need no
additional discovery to be argued or considered;4 however, he
asserts there are a number of facts to be uncovered that will
further support the denial of the motion for summary judgment in
relation to the bad faith claim.

(Id.)

Plaintiffs note that they

3

According to the Rule 56(d) motion, at the time it was filed,
Plaintiffs had not “obtain[ed] or review[ed] any written discovery or take[n]
any depositions in this case, due to the early time frame in which the summary
judgment was filed.” (DE #47, p. 3.)
4

Indeed, Plaintiffs filed a response to the contractual claims for UIM
benefits contained within Nationwide’s motion for summery judgment on October
11, 2013.

7

intend to seek “claims notes, training policies and procedures for
the adjusting of underinsured motorist claims, claims manuals, and
specifically training materials and programs provided to adjusters
in relation to the operation of pro rata clauses in underinsured
motorist claims.”

(DE #47, p. 3.)

They further seek to depose the

adjuster(s) who handled Dee Frye’s claim.

(Id.)

They point out

that bad faith claims often deal heavily with state of mind and
intent issues, and they rely heavily on Monroe Guar. Ins. Co. v.
Magwerks Corp., 829 N.E.2d 968, 976 (Ind. 2005), to support their
position that additional time for discovery is warranted for the
bad faith claims.
objects

to

(DE #47, p. 2-5.)

Plaintiffs’

Rule

56(d)

For its part, Nationwide
motion,

asserting

that

“[c]overage is the only question at issue in this case” and
correctly pointing out that “coverage is a legal question based
upon the terms of the underlying insurance contract.”

(DE #56, p.

2) (emphasis removed) (citing Terre Haute First Nat’l Bank v.
Pacific Employers Ins. Co., 634 N.E.2d 136 (Ind. Ct. App. 1993).
Plaintiffs have replied by noting that “[t]he issue of bad faith is
a separate issue from the issue of coverage.”

(DE #61, p. 1.)

The Court agrees with Plaintiffs that Magwerks is illustrative
for purposes of Plaintiffs’ Rule 56(d) motion.

In Magwerks, the

Indiana Supreme Court held that a good faith dispute concerning
insurance coverage does not automatically preclude a punitive
damages claim for bad faith when coverage is denied. Magwerks, 829

8

N.E.2d at 970.

The Court reaffirmed that “a good faith dispute

concerning insurance coverage cannot provide the basis for a claim
in tort that the insurer breached its duty to deal in good faith
with its insured” and stated that insurance companies may, of
course, dispute claims in good faith.
omitted).

Id. at 975 (citations

However, the Court pointed out that “an insurer’s duty

to deal in good faith with its insured encompasses more than a bad
faith coverage claim.”

Id.

Citing to Erie Ins. Co. v. Hickman,

622 N.E.2d 515, 519 (Ind. 1993), the Court explained that, while
the exact extent of an insurer’s duty to deal in good faith has not
been precisely defined, some general guidelines apply such that:
[t]he obligation of good faith and fair
dealing with respect to the discharge of the
insurer’s contractual obligation includes the
obligation to refrain from (1) making an
unfounded refusal to pay policy proceeds; (2)
causing an unfounded delay in making payment;
(3) deceiving the insured; and (4) exercising
any unfair advantage to pressure an insured
into a settlement of his claim.
Id.
Here, as Plaintiffs’ Rule 56(d) and related affidavit set
forth, Nationwide filed its summary judgment motion before it
provided any discovery to Plaintiffs.

It does not appear that

Plaintiffs have been dilatory in pursuing discovery in any way
prior to or since that time.
were

not

able

to

present

Plaintiffs have explained why they
facts

essential

to

justify

their

opposition to the bad faith portion of Nationwide’s motion for

9

summary judgment --- namely that additional time was necessary to
discover specific documents in Nationwide’s possession such as
claims notes, training policies/procedures, and manuals and to
conduct depositions of the adjuster(s) responsible for handling
Plaintiffs’ claim.

Finally, while Nationwide argues that coverage

is the only question at issue in this case, the Indiana Supreme
Court has made it clear that, even where a good faith dispute
exists over coverage, an insurer’s conduct may otherwise violate
its duty of good faith and fair dealing.
976-78.
above

Magwerks, 829 N.E.2d at

Plaintiffs posit that the additional discovery described

will

likely

lead

to

confirmation

that

Nationwide

was

willfully ignoring portions of its contract in bad faith in order
to deny Plaintiffs’ claim or to force them into litigation in order
to obtain benefits.

Plaintiffs also point out that Nationwide

repeatedly ignored Plaintiffs’ requests to communicate, denied
coverage based on one section of the contract while failing to even
mention or discuss the pro rata provision that formed the basis of
Plaintiffs’ proffered position, and refusing to communicate with
its insureds. While the Court obviously has not conducted a review
of these claims on the merits at this time, it appears that
Plaintiffs are suggesting that their bad faith claims encompass
more than the simple denial of coverage.

As such, it would be

premature to insist that Plaintiffs respond to the bad faith
portion of Nationwide’s motion for summary judgment without having

10

had the opportunity to conduct discovery in support of their
position.

See Klepper v. ACE American Ins. Co., 999 N.E.2d 86,

98-99 (Ind. Ct. App. 2013) (“an insured who believes that an
insurance claim has been wrongly denied may have available two
distinct legal theories, one in contract and one in tort, each with
separate,

although

recoveries.

often

overlapping,

elements,

defenses

and

Given the two distinct theories upon which the

[Plaintiff] seeks to recover and their separate elements and
defenses, we cannot conclude at this stage of the proceedings that
the resolution of the contract dispute necessarily disposes of the
tort-based bad faith claim.”) (citation omitted).
Thus, while the contractual claims regarding UIM coverage are
ripe for adjudication, the Court declines to rule on Nationwide’s
motion for summary judgment in a piecemeal fashion.

Rather,

Nationwide’s motion for summary judgment is DENIED in its entirety
without consideration of the merits and WITHOUT PREJUDICE.

As

Plaintiffs have indicated that the parties have been diligently
moving the case forward and proceeding with discovery (DE #65), and
as it has been several months since the instant motions were filed,
the Court concludes that Plaintiffs have had sufficient time to
gather the discovery materials referenced in their Rule 56(d)
motion.

Therefore, to the extent that Plaintiffs request that the

Court deny Nationwide’s motion for summary judgment and allow
Nationwide to renew its motion at an appropriate time, that request
11

is GRANTED.

However, to the extent that Plaintiffs suggest that

the appropriate time for renewal will be after the close of all
discovery, that request is DENIED.
REFILE

its

motion

for

summary

Nationwide is GRANTED LEAVE TO
judgment

(with

or

without

modifications) within thirty (30) days of the date of this order.
Plaintiffs and Auto-Owners are DIRECTED to follow the standard
summary judgment procedures described in Northern District of
Indiana Local Rule 56-1 regarding timing of responses and replies.
All parties are ADVISED that any new motions, responses, and/or
replies filed may not incorporate by reference any previously ruled
upon documents but must set forth each motion, response, or reply
anew.

CONCLUSION
For the reasons set forth above, the Motion for Summary
Judgment (DE #32) is DENIED WITHOUT PREJUDICE AND WITH LEAVE TO
REFILE within thirty (30) days of the date of this order, the
Motion for Extension of Time (DE #47) is GRANTED in part and DENIED
in part as described in detail above, and the Motion for Partial
Summary Judgment and the Alternative Motion for Partial Summary
Judgment (DE’s #48 & #50) REMAIN PENDING.

DATED: March 31, 2014

/s/ RUDY LOZANO, Judge
United States District Court
12