SELECTIVE INSURANCE COMPANY OF AMERICA v. SMILEY BODY SHOP, INC. et al

Filing 142

ORDER - The Court DENIES AS MOOT Selective's Motion for Summary Judgment, 88 , and Cincinnati's Motion for Summary Judgment, 93 , as those motions relate to coverage for SBS. All claims against SBS are DISMISSED, and the Clerk is directed to TERMINATE SBS as a party. No partial final judgment shall issue. The Court GRANTS IN PART and DENIES IN PART Selective's Motion for Summary Judgment, 88 , SBS's and Mr. Smiley's Motion for Summary Judgment, 90 , and Cincinnati� 39;s Motion for Summary Judgment, 93 , as set forth above in detail. The Court requests that the Magistrate Judge confer with the parties to address the possibility of an agreed resolution, or to establish a schedule for the upcoming August 28, 2017 trial. SEE ORDER. Signed by Judge Jane Magnus-Stinson on 5/26/2017. (JRB)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF INDIANA
INDIANAPOLIS DIVISION

SELECTIVE INSURANCE COMPANY OF
AMERICA,

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Plaintiff,
vs.
SMILEY BODY SHOP, INC., JEFFREY
SMILEY, and GREG CALLAHAN,
Defendants,
__________________________________
CINCINNATI INSURANCE COMPANY,
Intervenor Plaintiff,
vs.
SELECTIVE INSURANCE COMPANY OF
AMERICA, SMILEY BODY SHOP, INC.,
JEFFREY SMILEY, and GREG CALLAHAN,
Intervenor Defendants.

No. 1:16-cv-00062-JMS-MJD

ORDER
On February 26, 2015, Defendants Jeffrey Smiley and Greg Callahan were riding in a
pickup truck owned by Defendant Smiley Body Shop, Inc. (“SBS”) when they were involved in a
single car accident. Mr. Callahan was injured in the accident, and filed a lawsuit in Indiana State
Court against Mr. Smiley, SBS, and General Motors, LLC (the “Underlying Lawsuit”). Plaintiff
Selective Insurance Company of America (“Selective”) agreed to defend Mr. Smiley and SBS in
the Underlying Lawsuit pursuant to an insurance policy it had issued to SBS, although it did so
under a reservation of rights. In January 2016, Selective initiated this litigation seeking a
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declaration that it does not owe a duty to defend or any coverage to Mr. Smiley or SBS in
connection with the Underlying Lawsuit.

Additionally, Cincinnati Insurance Company

(“Cincinnati”), which issued an automobile insurance policy and an umbrella liability policy to
Mr. Smiley and his wife, has intervened in this litigation and requests a declaration that neither
policy provides coverage for the Underlying Lawsuit. All parties have moved for summary
judgment, [Filing No. 88; Filing No. 90; Filing No. 93], and the motions are now ripe for the
Court’s decision.
I.
STANDARD OF REVIEW
A motion for summary judgment asks the Court to find that a trial is unnecessary because
there is no genuine dispute as to any material fact and, instead, the movant is entitled to judgment
as a matter of law. See Fed. R. Civ. P. 56(a). As the current version of Rule 56 makes clear,
whether a party asserts that a fact is undisputed or genuinely disputed, the party must support the
asserted fact by citing to particular parts of the record, including depositions, documents, or
affidavits. Fed. R. Civ. P. 56(c)(1)(A). A party can also support a fact by showing that the
materials cited do not establish the absence or presence of a genuine dispute or that the adverse
party cannot produce admissible evidence to support the fact. Fed. R. Civ. P. 56(c)(1)(B).
Affidavits or declarations must be made on personal knowledge, set out facts that would be
admissible in evidence, and show that the affiant is competent to testify on matters stated. Fed. R.
Civ. P. 56(c)(4). Failure to properly support a fact in opposition to a movant’s factual assertion
can result in the movant’s fact being considered undisputed, and potentially in the grant of
summary judgment. Fed. R. Civ. P. 56(e).
In deciding a motion for summary judgment, the Court need only consider disputed facts
that are material to the decision. A disputed fact is material if it might affect the outcome of the
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suit under the governing law. Hampton v. Ford Motor Co., 561 F.3d 709, 713 (7th Cir. 2009). In
other words, while there may be facts that are in dispute, summary judgment is appropriate if those
facts are not outcome determinative. Harper v. Vigilant Ins. Co., 433 F.3d 521, 525 (7th Cir.
2005). Fact disputes that are irrelevant to the legal question will not be considered. Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
On summary judgment, a party must show the Court what evidence it has that would
convince a trier of fact to accept its version of the events. Johnson v. Cambridge Indus., 325 F.3d
892, 901 (7th Cir. 2003). The moving party is entitled to summary judgment if no reasonable factfinder could return a verdict for the non-moving party. Nelson v. Miller, 570 F.3d 868, 875 (7th
Cir. 2009). The Court views the record in the light most favorable to the non-moving party and
draws all reasonable inferences in that party’s favor. Darst v. Interstate Brands Corp., 512 F.3d
903, 907 (7th Cir. 2008). It cannot weigh evidence or make credibility determinations on summary
judgment because those tasks are left to the fact-finder. O’Leary v. Accretive Health, Inc., 657
F.3d 625, 630 (7th Cir. 2011). The Court need only consider the cited materials, Fed. R. Civ. P.
56(c)(3), and the Seventh Circuit Court of Appeals has “repeatedly assured the district courts that
they are not required to scour every inch of the record for evidence that is potentially relevant to
the summary judgment motion before them,” Johnson, 325 F.3d at 898. Any doubt as to the
existence of a genuine issue for trial is resolved against the moving party. Ponsetti v. GE Pension
Plan, 614 F.3d 684, 691 (7th Cir. 2010).
“The existence of cross-motions for summary judgment does not, however, imply that there
are no genuine issues or material fact.” R.J. Corman Derailment Servs., LLC v. Int’l Union of
Operating Engineers, 335 F.3d 643, 647 (7th Cir. 2003). Specifically, “[p]arties have different
burdens of proof with respect to particular facts; different legal theories will have an effect on

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which facts are material; and the process of taking the facts in the light most favorable to the nonmovant, first for one side and then for the other, may highlight the point that neither side has
enough to prevail without a trial.” Id. at 648.
II.
STATEMENT OF FACTS
A. The Selective Policy
Selective issued Policy No. S 103647007 to SBS, doing business as Chameleon Carts, with
a policy period of January 31, 2015 to January 31, 2016 (the “Selective Policy”). [Filing No. 882.] Subject to several exclusions, the Selective Policy provides:
•

“Business Auto Coverage,” which provides that “[Selective] will pay all sums
an ‘insured’ legally must pay as damages because of ‘bodily injury’ or ‘property
damage’ to which this insurance applies, caused by an ‘accident’ and resulting
from the ownership, maintenance or use of a covered ‘auto’.” [Filing No. 88-2
at 32.]

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“Commercial Umbrella Liability Coverage,” which provides that “[Selective]
will pay on behalf of the insured the ‘ultimate net loss’ in excess of the ‘retained
limit’ that the insured becomes legally obligated to pay as damages because of
‘bodily injury’, ‘property damage’ or ‘personal and advertising injury’ to which
this insurance applies….” [Filing No. 88-2 at 53.] 1

B. The Cincinnati Policies
Cincinnati issued Automobile Policy No. A01 0637093 to Mr. Smiley and his wife, Mary
Smiley, with a policy period of August 1, 2014 to August 1, 2015 (the “Cincinnati Auto Policy”).
[Filing No. 93-3.] Subject to exclusions, the Cincinnati Auto Policy provides coverage “[w]hen a
‘covered person’ becomes legally responsible because of an auto accident or for physical damage
to a ‘nonowned auto’….” [Filing No. 93-3 at 9.]

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The Selective Policy also provides “Commercial General Liability Coverage,” but SBS and Mr.
Smiley state in their brief in support of their Motion for Summary Judgment that they “are not
requesting coverage for the Underlying Lawsuit under the ‘Commercial General Liability
Coverage’ Part.” [Filing No. 92 at 3.]
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Cincinnati also issued Personal Umbrella Liability Policy No. U01-0637093 to Mr. and
Mrs. Smiley with a policy period of August 1, 2014 to August 1, 2015 (the “Cincinnati Umbrella
Policy”). [Filing No. 93-5.] The Cincinnati Umbrella Policy provides coverage, subject to policy
exclusions, for “‘ultimate net loss’ which the ‘insured’ is legally obligated to pay as damages for
‘bodily injury’ arising out of an ‘occurrence’ to which this insurance applies…[w]hich is in excess
of the ‘underlying insurance’; or…[w]hich is either excluded or not covered by ‘underlying
insurance.’” [Filing No. 93-5 at 12.]
C. The Accident, the Insurance Claims, and the Underlying Lawsuit
On February 26, 2015, Mr. Smiley was driving a 2006 Chevy Silverado, which was owned
by SBS, and Mr. Callahan was a passenger. [Filing No. 88-3 at 47-48; Filing No. 88-10 at 14.]
They were travelling to a Recreational Vehicle (“RV”) parts store in Elkhart, Indiana to pick up
parts that Mr. Smiley had ordered the month before, when they were involved in a single-car
accident. [Filing No. 88-3 at 49; Filing No. 88-10 at 14.]
Mr. Smiley reported the accident to Selective on March 2, 2015, and initiated a claim for
coverage under the Selective Policy. [Filing No. 88-2; Filing No. 88-18.] On March 4, 2015, SBS
reported Mr. Callahan’s injuries to its workers’ compensation carrier, NorGUARD Insurance
Company (“NorGUARD”). [Filing No. 88-12.] NorGUARD denied coverage, after a brief
investigation, on April 16, 2015. [Filing No. 88-19.] Its explanation for the denial stated “NO
EMPLOYEE, EMPLOYER RELATIONSHIP, AND/OR INJURY DID NOT ARISE OUT OF
AND IN THE COURSE OF EMPLOYMENT WITH SMILEY BODY SHOP, LLC.” [Filing No.
88-19 at 2.]
In the meantime, Mr. Callahan initiated the Underlying Lawsuit against SBS and Mr.
Smiley and Selective provided a defense for both under a reservation of rights. [Filing No. 88-

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18.] SBS obtained summary judgment in the Underlying Lawsuit on November 29, 2016, and is
no longer a party to the Underlying Lawsuit. Mr. Smiley, however, remains a defendant in the
Underlying Lawsuit.
D. The Coverage Lawsuit
Selective filed its Complaint for Declaratory Judgment on January 6, 2016, [Filing No. 1],
and filed the operative First Amended Complaint for Declaratory Judgment against SBS, Mr.
Smiley, and Mr. Callahan on January 13, 2016, [Filing No. 10]. In its Amended Complaint,
Selective points to several exclusions in the Selective Policy that it alleges preclude coverage, and
seeks declarations that the Selective Policy does not provide coverage for either SBS or Mr. Smiley
for the Underlying Lawsuit, that it may withdraw from providing a defense for either SBS or Mr.
Smiley in the Underlying Lawsuit, and that SBS and Mr. Smiley must reimburse Selective for fees
and costs Selective has paid for their defense in the Underlying Lawsuit. [Filing No. 10.]
On February 18, 2016, Cincinnati moved to intervene in this lawsuit, [Filing No. 22], the
Court granted the motion, [Filing No. 24], and Cincinnati filed a Complaint for Declaratory
Judgment on February 26, 2016, [Filing No. 29]. Cincinnati notes several exclusions in the
Cincinnati Auto Policy and the Cincinnati Umbrella Policy, and requests: (1) a declaration that the
Cincinnati Auto Policy does not provide coverage for Mr. Smiley and/or SBS for claims being
asserted by Mr. Callahan in the Underlying Lawsuit; (2) a declaration stating whether the
Cincinnati Umbrella Policy provides coverage to Mr. Smiley and/or SBS for claims asserted by
Mr. Callahan in the Underlying Lawsuit; and (3) a declaration stating whether the Cincinnati
Umbrella Policy is an excess policy such that any duty of Cincinnati to defend or indemnify Mr.
Smiley and/or SBS for claims asserted by Mr. Callahan in the Underlying Lawsuit is triggered
only after coverage under the Selective Policy has been exhausted. [Filing No. 29 at 19.]

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All parties filed summary judgment motions on December 2, 2016, and the motions are
now fully briefed and ripe for the Court’s decision. [Filing No. 88; Filing No. 90; Filing No. 93.]
The Court notes at the outset that Selective, SBS, and Mr. Smiley have not complied with the
Court’s Practices and Procedures, which specifically state that:
If a party plans to file a motion for summary judgment, counsel for that party shall
contact counsel for the other parties to the action to determine if any other party
also plans to file a motion for summary judgment. In the event that more than one
party plans to file a motion for summary judgment, Judge Magnus-Stinson prefers
to avoid simultaneous briefs on “mirror image” motions. Rather than the normal
brief, response, and reply for each motion, she prefers four briefs as follows on
cross motions for summary judgment:
1. Motion and Brief in Support by Party A (limited to 35 pages);
2. Cross-Motion, Brief in Support and Response in Opposition by Party B (limited
to 55 pages);
3. Reply in Support of Motion and Response in Opposition to Cross-Motion by
Party A (limited to 40 pages);
4. Reply in Support of Cross-Motion by Party B (limited to 20 pages).
[Filing No. 7 at 2-3.] Instead of following this procedure, Selective on the one hand and SBS and
Mr. Smiley on the other filed Motions for Summary Judgment on the same day and, subsequently,
responses and replies with each motion. The briefs are lengthy, and there is significant duplication
of arguments. This has made the Court’s review of the motions unnecessarily burdensome. The
parties and counsel should ensure that they comply with the Court’s Practices and Procedures
going forward in this and other cases. In any event, the Court has done its best to parse through
the briefs and match up arguments and responses.
III.
GENERALLY APPLICABLE INSURANCE LAW
When the Court exercises diversity jurisdiction over an action, it is “obliged to apply state
law to the substantive issues in the case.” Lodholtz v. York Risk Servs. Grp., Inc., 778 F.3d 635,
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639 (7th Cir. 2015) (citing Erie RR. Co. v. Tompkins, 304 U.S. 64, 78 (1938)). The parties do not
dispute that Indiana law governs this action. Accordingly, this Court must “apply the law that
would be applied by the Indiana Supreme Court.” Lodholtz, 778 F.3d at 639. “If the Indiana
Supreme Court has not spoken on the issue, [the Court] generally treat[s] decisions by the state’s
intermediate appellate courts as authoritative, unless there is a compelling reason to think that the
state supreme court would decide the issue differently.” Id.
The Indiana Supreme Court has summarized the well-established standards for interpreting
insurance policies in Indiana as follows:
Interpretation of an insurance policy presents a question of law that is particularly
suitable for summary judgment. It is well settled that where there is ambiguity,
insurance policies are to be construed strictly against the insurer and the policy
language is viewed from the standpoint of the insured. This is especially true where
the language in question purports to exclude coverage. Insurers are free to limit the
coverage of their policies, but such limitations must be clearly expressed to be
enforceable. Where provisions limiting coverage are not clearly and plainly
expressed, the policy will be construed most favorably to the insured, to further the
policy’s basic purpose of indemnity. Where ambiguity exists not because of
extrinsic facts but by reason of the language used, the ambiguous terms will be
construed in favor of the insured for purposes of summary judgment.
State Auto. Mut. Ins. Co. v. Flexdar, Inc., 964 N.E.2d 845, 848 (Ind. 2012) (citations and quotations
omitted).
The Court will “construe the insurance policy as a whole and consider all of the provisions
of the contract and not just the individual words, phrases, or paragraphs.” West Bend Mut. Ins. Co.
v. U.S. Fid. & Guar. Co., 598 F.3d 918, 921 (7th Cir. 2010) (applying Indiana law). Words are
given their ordinary meaning, though where ambiguity exists the policy is read “strictly against
the insurer.” Id. Ambiguous language in the policy is resolved in favor of the insured as long as
such an interpretation harmonizes the provisions of the contract as a whole. Holiday Hospitality
Franchising, Inc. v. AMCO Ins. Co., 983 N.E.2d 574, 578 (Ind. 2013). Failure to define a term in

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the policy “does not necessarily make that term ambiguous, nor does a simple disagreement about
the term’s meaning.” Id. (citation omitted). “Rather, an ambiguity exists where the provision is
susceptible to more than reasonable interpretation.” Id. (citation and quotation omitted). Where
the terms of an insurance policy are clear and unambiguous, the Court “will apply the plain and
ordinary meaning of the terms and enforce the contract according to its terms….[T]he parties’
intent is to be determined by reviewing the language contained within the ‘four corners’ of the
contract, and ‘parol or extrinsic evidence is inadmissible to expand, vary, or explain the instrument
unless there has been a showing of fraud, mistake, ambiguity, illegality, duress or undue influence.’
Extrinsic evidence cannot be used to create an ambiguity.” Bar Plan Mut. Ins. Co. v. Likes Law
Office, LLC, 44 N.E.3d 1279, 1285 (Ind. Ct. App. 2015) (citations omitted).
IV.
COVERAGE UNDER THE SELECTIVE POLICY
The Court notes at the outset that if the Selective Policy provides coverage for the
Underlying Lawsuit, then Selective and Cincinnati agree that the Cincinnati Auto Policy and the
Cincinnati Umbrella Policy only potentially provide coverage after coverage under the Selective
Policy has been exhausted. [See Filing No. 94 at 26-27 (Cincinnati arguing that the Cincinnati
Auto Policy and the Cincinnati Umbrella Policy only potentially apply after the Selective Policy’s
limits have been exhausted); Filing No. 101 at 4-5 (Selective conceding that “[i]n the event that
this Court determines that coverage may be afforded for the Underlying Lawsuit under both the
Cincinnati Policies and the Selective Policy…the Selective Policy would be deemed to take
priority under Indiana law”).]

Accordingly, the Court will address Selective’s Motion for

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Summary Judgment and Mr. Smiley’s and SBS’s Motion for Summary Judgment before
considering Cincinnati’s motion. 2
A. Coverage for SBS
SBS and Mr. Smiley argue that because SBS obtained summary judgment in the
Underlying Lawsuit and is no longer seeking coverage under the Selective Policy for the
Underlying Lawsuit, there is no actual case or controversy between the two parties. [Filing No.
103 at 7-8.] Selective points out that it is seeking reimbursement of fees and costs it has already
paid to defend SBS in the Underlying Lawsuit, and also that an Indiana statute requires that SBS
be named as a party in the litigation because it is the named insured. [Filing No. 121 at 14.]
Because SBS obtained summary judgment in its favor in the Underlying Lawsuit, it is not
seeking any amount under the Selective Policy for a judgment nor is it seeking defense costs going
forward. Selective argues that it is entitled to recoup the costs it has incurred in defending SBS up
to the point that it obtained summary judgment, but has not pointed to any legal precedent
authorizing it to do so. While there do not appear to be any reported cases applying Indiana law
to this issue, other courts have founds that an insurer does not have a right to recoup fees it pays
under a duty to defend after resolution of the underlying litigation absent a policy provision
allowing it to do so. See, e.g., CAMICO Mut. Ins. Co. v. Heffler, Radetich & Saitta, L.L.P., 587
Fed. Appx. 726, 729 (3d Cir. 2014) (“In Pennsylvania, insurers normally may not recoup costs
expended in defense of an insured party,” but “reimbursement is possible when a contract
expressly provides for it”); Employers Mut. Cas. Co. v. Bartile Roofs, Inc., 618 F.3d 1153, 117576 (10th Cir. 2010) (insurer cannot recoup defense costs paid on behalf of insured absent policy

2

Although Mr. Callahan has joined in SBS’s and Mr. Smiley’s response to Selective’s Motion for
Summary Judgment, [Filing No. 105], the Court will refer to the responding parties as SBS and
Mr. Smiley. Mr. Callahan did not join in SBS’s and Mr. Smiley’s Motion for Summary Judgment.
10

provision allowing it to do so, and “a reservation of rights letter does not create a contract allowing
an insurer to recoup defense costs from its insureds”) (citations and quotations omitted); General
Agents Ins. Co. of America, Inc. v. Midwest Sporting Goods Co., 828 N.E.2d 1092, 1102-03 (Ill.
2005) (“if an insurer wishes to retain its right to seek reimbursement of defense costs in the event
it later is determined that the underlying claim is not covered by the policy, the insurer is free to
include such a term in its insurance contract. Absent such a provision in the policy, however, an
insurer cannot later attempt to amend the policy by including the right to reimbursement in its
reservation of rights letter”). Additionally, the Draft of Section 21 of the Restatement of the Law
of Liability Insurance provides that “[u]nless otherwise stated in the insurance policy or otherwise
agreed to by the insured, an insurer may not seek recoupment of defense costs from the insured,
even when it is subsequently determined that the insurer did not have a duty to defend or pay
defense costs.” Restatement of the Law of Liability Insurance § 21 (Discussion Draft, to be
considered by the members of the American Law Institute).
In any event, it appears beyond dispute that Selective had a duty to defend SBS in the
Underlying Lawsuit. In analyzing whether Selective had a duty to defend, it is particularly
significant that the state court found that Mr. Callahan was not an SBS employee. It is well-settled
in Indiana that “an insurer’s duty to defend is determined by the allegations of the complaint
coupled with those facts known to or ascertainable by the insurer after a reasonable investigation.”
Newnam Mfg., Inc. v. Transcontinental Ins. Co., 871 N.E.2d 396, 405 (Ind. Ct. App. 2007)
(citations omitted). Here, there is even more to consider: In the very case for which Selective
defended Mr. Callahan, the court found that he was not an employee of SBS. And, ironically, this
is the result Selective desired in the Underlying Lawsuit, because it meant that SBS obtained
summary judgment in its favor and was dismissed from the lawsuit. Selective’s vague claim that

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it seeks recoupment of attorneys’ fees and costs paid on behalf of SBS in the Underlying Lawsuit,
without pointing to any provisions in the Selective Policy that would support recoupment, is not
enough to create a case or controversy between Selective and SBS now that SBS no longer is a
party to the Underlying Lawsuit.
Accordingly, the Court DENIES IN PART AS MOOT Selective’s Motion for Summary
Judgment, [Filing No. 88], to the extent that it seeks a declaration that there is no coverage under
the Selective Policy for SBS in connection with the Underlying Lawsuit, and DENIES IN PART
the motion to the extent that it seeks reimbursement of defense costs paid to date on behalf of SBS
for the Underling Lawsuit. Further, the Court GRANTS IN PART SBS’s and Mr. Smiley’s
Motion for Summary Judgment, [Filing No. 90], which the Court treats as a motion to dismiss as
to whether there is a case or controversy between Selective and SBS, to the extent that it dismisses
Selective’s request for declaratory relief against SBS with prejudice and terminates SBS as a party
to the lawsuit. 3
B. Coverage for Mr. Smiley
Selective argues that Mr. Callahan was an SBS employee under a ten-factor test set forth
in the Restatement (Second) of Agency and that, therefore, several exclusions in the Selective

3

The Court rejects Selective’s argument that Indiana Code § 34-14-1-11 requires that SBS remain
a party to the lawsuit since it is the named insured on the Selective Policy. [Filing No. 109 at 9.]
Section 34-14-1-11 provides that “[w]hen declaratory relief is sought, all persons shall be made
parties who have or claim any interest that would be affected by the declaration, and no declaration
shall prejudice the rights of persons not parties to the proceeding.” Selective does not explain what
SBS’s continued interest in this litigation would be, given that it is no longer a party to the
Underlying Lawsuit, and the Court has found that Selective may not recoup the attorneys’ fees and
costs it has paid on SBS’s behalf in connection with the Underlying Lawsuit.
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Policy preclude coverage for claims asserted by Mr. Callahan against Mr. Smiley in the Underlying
Lawsuit, including: 4
•

Employee Indemnification and Employer’s Liability Exclusions in the Business
Auto Coverage and Umbrella Liability Coverage Parts, which preclude
coverage for bodily injury to an employee of the insured arising out of and in
the course of employment, or performing the duties related to the conduct of
the insured’s business, [Filing No. 88-2 at 33-34; Filing No. 88-2 at 55];

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Workers’ Compensation Exclusions in the Business Auto Coverage and
Umbrella Liability Coverage Parts, which preclude coverage for any obligation
of the insured under workers’ compensation laws, [Filing No. 88-2 at 33; Filing
No. 88-2 at 56];

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Fellow Employee Exclusions in the Business Auto Coverage and Umbrella
Liability Coverage Parts, which preclude coverage for “‘Bodily injury’ to any
fellow ‘employee’ of the ‘insured’ arising out of and in the course of the fellow
‘employee’s’ employment or while performing duties related to the conduct of
your business…” and provide that “[n]o person is an insured as respects ‘Bodily
Injury’ to a fellow ‘employee’ unless such insurance is provided the insured by
‘underlying insurance,’” respectively, [Filing No. 88-2 at 34; Filing No. 88-2 at
61];

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Concealment, Misrepresentation or Fraud Provisions in the Business Auto
Coverage and Umbrella Liability Coverage Parts, which exclude coverage
where the insured has intentionally concealed or misrepresented a material fact
or committed fraud. [Filing No. 88-2 at 38; Filing No. 88-2 at 64].

4

Selective also argues that an Auto Exclusion in the Commercial General Liability Coverage Part
of the Selective Policy precludes coverage for “‘Bodily injury’ or ‘property damage’ arising out
of the ownership, maintenance, use or entrustment to others of any…‘auto’…owned or operated
by…any insured.” [Filing No. 88-2 at 10.] SBS and Mr. Smiley clarified in their response in
opposition to Selective’s Motion for Summary Judgment that they “are not requesting coverage
for the Underlying Lawsuit under the ‘Commercial General Liability Coverage’ part” of the
Selective Policy. [Filing No. 103 at 2.] Accordingly, the Court need not consider whether the
Auto Exclusion applies, nor whether the Commercial General Liability Coverage Part provides
coverage for the Underlying Lawsuit. Selective’s Motion for Summary Judgment is DENIED AS
MOOT to the extent it relates to coverage under the Commercial General Liability Coverage Part.
The Court’s discussion of the Selective Policy will focus only on the Business Auto Coverage and
Umbrella Liability Coverage Parts of the Selective Policy.

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In response, Mr. Smiley argues that none of the exclusions or provisions relied upon by
Selective precludes coverage. Mr. Smiley argues that the Employee Indemnification Exclusions,
the Employer’s Liability Exclusions, the Workers’ Compensation Exclusions, and the Fellow
Employee Exclusions (collectively, the “Employment-Related Exclusions”) do not apply because
they only apply to claims against the named insured, SBS (not Mr. Smiley), Mr. Callahan was not
an SBS employee, and Mr. Callahan’s injuries did not occur in the course of his employment.
[Filing No. 103 at 9-10.] He contends that Indiana law dictates that where an individual is a casual
and occasional worker – as he argues Mr. Callahan was here – then the term “employee” must be
construed in favor of the insured. [Filing No. 103 at 14-15.] Mr. Smiley also argues that even if
the ten-factor test is used to determine whether Mr. Callahan was an employee of SBS, application
of the test indicates that Mr. Callahan was not an employee. [Filing No. 103 at 18-27.] He asserts
that Mr. Callahan was either a “temporary worker” or a “volunteer worker” under the terms of the
Selective Policy, so the Employment-Related Exclusions do not apply. [Filing No. 103 at 27-28.]
Mr. Smiley argues further that even if Mr. Callahan were considered an employee, Selective would
still have to show that his injuries occurred in the course of employment and that the evidence
indicates this was not the case. [Filing No. 103 at 28-33.] Finally, Mr. Smiley argues that Selective
has not identified any misrepresentations by Mr. Smiley, nor have there been any. [Filing No. 103
at 33-35.]
On reply, Selective argues again that the Restatement’s ten-factor test applies to the issue
of whether Mr. Callahan was an employee, and that application of the test leads to the conclusion
that he was. [Filing No. 121 at 3-8.] Selective reiterates its arguments relating to the EmploymentRelated Exclusions in the Selective Policy. [Filing No. 121 at 8-14.]

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1. The Employment-Related Exclusions
a. Employee Indemnification and Employer’s Liability Exclusions
The Employee Indemnification and Employer’s Liability Exclusions in the Business Auto
Coverage Part and the Employer’s Liability Exclusion in the Umbrella Liability Coverage Part all
require that Mr. Callahan be an employee of the “insured.” Significantly, the Business Auto
Coverage Part specifically states that “[e]xcept with respect to the Limit of Insurance, the coverage
afforded applies separately to each insured who is seeking coverage or against whom a claim or
‘suit’ is brought.” [Filing No. 88-2 at 41.] 5 Accordingly, Mr. Callahan would need to be an
employee of Mr. Smiley in order for the Employee Indemnification and Employer’s Liability
Exclusions to apply. See National Union Fire Ins. Co. of Pittsburgh, Pa. v. American Motorists
Ins. Co., 707 F.3d 797, 802 (7th Cir. 2013) (where policy provided that it applied “separately to
each insured against whom claim is made or ‘suit’ is brought,” a professional services exclusion
did not preclude coverage for insureds who did not render professional services); St. Katherine
Ins. Co. Ltd. v. Insurance Co. of North America, Inc., 11 F.3d 707, 710 (7th Cir. 1993) (“The
purpose of severability clauses is to treat each entity covered under the policy as if each were
insured separately….”).
Selective has not set forth facts to support the notion that Mr. Callahan was an employee
of Mr. Smiley, only that he was an employee of SBS. 6 Because Mr. Callahan must be an employee

5

Although not pointed out by Mr. Smiley, the Umbrella Liability Coverage Part of the Selective
Policy contains a similar provision which states “Except with respect to the Limits of Insurance,
and any rights or duties specifically assigned in this Coverage Part to the first Named Insured, this
insurance applies as if each Named Insured were the only Named Insured, and separately to each
insured against whom claim is made or ‘suit’ is brought.” [Filing No. 88-2 at 65.]
6

Selective did not argue in its own Motion for Summary Judgment that Mr. Callahan was an
employee of Mr. Smiley, and only briefly set forth that argument in response to SBS’s and Mr.
Smiley’s Motion for Summary Judgment. [See Filing No. 109 at 15-16 (stating “in the event that
15

of Mr. Smiley for the Employee Indemnification and Employer’s Liability Exclusions to apply,
those exclusions do not preclude coverage here.
b. Workers’ Compensation Exclusions
As to the Workers’ Compensation Exclusions in the Business Auto Coverage Part and the
Umbrella Liability Coverage Part, they apply to any obligation “for which the ‘insured’ or the
‘insured’s’ insurer may be held liable under any workers’ compensation, disability benefits or
unemployment compensation law or any similar law” or any “obligation of the insured under a
workers compensation, unemployment compensation or disability benefits law, or under any
similar law,” respectively. [Filing No. 88-2 at 33; Filing No. 88-2 at 56.] Because any obligation
belonged to SBS and SBS’s insurer under the law – and not to Mr. Smiley – the Workers’
Compensation Exclusions do not preclude coverage for Mr. Smiley.
c. Fellow Employee Exclusions
The Fellow Employee Exclusion in the Business Auto Coverage Part of the Selective
Policy precludes coverage for “‘Bodily injury’ to any fellow ‘employee’ of the ‘insured’ arising
out of and in the course of the fellow ‘employee’s’ employment or while performing duties related
to the conduct of your business.” [Filing No. 88-2 at 34.] The Umbrella Liability Coverage Part
excludes fellow employee liability by providing that “[n]o person is an insured as respects ‘Bodily

this Court does not agree that Callahan was an employee of SBS, or finds that…a question of fact
exists as to Callahan’s employee status, then this Court should find that Callahan was an employee
of Smiley, or at a minimum that a question of fact exists as to whether…Callahan was in fact an
employee of Smiley, such that the workers compensation exclusion still would apply to preclude
coverage for Smiley”).] Selective does not set forth any record evidence to support its position,
however, and the Court rejects the notion that Mr. Callahan was an employee of Mr. Smiley. It is
also contrary to Selective’s assertion all along that Mr. Callahan was an employee of SBS. [See,
e.g., Filing No. 85 at 2 (Selective setting forth in its Statement of Claims that “[t]he evidence in
the case establishes that Smiley and Callahan were employees of SBS and acting within the course
and scope of SBS’s business at the time of the accident”).]
16

Injury’ to a fellow ‘employee’ unless such insurance is provided the insured by ‘underlying
insurance.’” 7 [Filing No. 88-2 at 61.]
Mr. Smiley argues that the Fellow Employee Exclusions only apply “when an insured is
sued by its own employee,” and that the “insured” in the exclusion refers to Mr. Smiley, who was
not Mr. Callahan’s employer. [Filing No. 92 at 12 (emphasis omitted).] Mr. Smiley cites only to
cases from other jurisdictions to support his interpretation of the Fellow Employee Exclusion, and
those cases either do not support his proposition or are distinguishable. For example, Mr. Smiley
cites Barnette v. Hartford Ins. Group, 653 P.2d 1375, 1383 (Wy. 1982) for the proposition that
“fellow employee exclusion applies only when an insured is sued by its own employee.” [Filing
No. 92 at 12.] The court in Barnette actually found that a fellow employee exclusion prevented
an employee from suing its employer when he or she was injured by a fellow employee. It did not
hold that it did not apply when an employee sues a fellow employee, and indeed stated the opposite:
“If, on the other hand, the insured in question is not an employer who seeks policy protection from
the claims of employees, then the cross-employee exclusionary rule cannot interfere with the
coverage of that insured – and why should it? Such an insured has no employer-employee
relationship with which to be concerned. He is not one who is obligated to protect employees
through either compensation contribution or private insurance. He is just an additional insured….
[Plaintiff] is not an employer seeking protection from claims arising out of an injury to his
employee and is therefore not precluded by the cross-employee exclusionary clause from coverage
by the…policy.” Additionally, the policy language in Gulmire v. St. Paul Fire and Marine Ins.

7

This provision of the Umbrella Liability Coverage Part appears in a section titled “Who Is An
Insured” and is not technically a policy exclusion. For ease of reference, however, the Court refers
to the Fellow Employee Exclusion in the Business Auto Coverage Part and the Fellow Employee
Provision in the Umbrella Liability Coverage Part as “the Fellow Employee Exclusions.”
17

Co., 674 N.W.2d 529, 638 (Wis. Ct. App. 2003), was significantly different than the language at
issue here. The Fellow Employee Exclusion in that case required that the injury arise out of “the
fellow employee’s employment by you.” Id. (emphasis added). The Selective Policy does not
contain the “by you” language.
The Court also notes that Mr. Smiley’s reading of the Fellow Employee Exclusions
disregards the word “fellow.” SBS is an employer, and would not have any “fellow employees.”
Instead, the Fellow Employee Exclusions preclude coverage when one employee of SBS sues
another employee of SBS. So if Mr. Callahan were considered to be an employee of SBS, he
would be a “fellow employee” of Mr. Smiley and the Fellow Employee Exclusions would apply.
That is a big “if,” though. The parties intensely dispute whether Mr. Callahan was an employee
of SBS, even disagreeing on what test should be applied to make that determination. Selective
argues that a ten-factor test applies under Indiana law, which considers the extent of control the
employer had over the individual’s work, the occupation or business of the one employed, the kind
of occupation at issue, the skill required to complete the assigned tasks, whether the principal
provided the instrumentalities of employment, the length of employment, the method of payment,
the regular business of the employer, the belief of the parties, and whether the principal is in
business. [Filing No. 89 at 19-25 (applying the ten factors set forth in Restatement (Second) of
Agency § 220).] It asserts that consideration of these factors leads to the conclusion that Mr.
Callahan was an SBS employee. Mr. Smiley contends that the ten-factor test only applies when a
court is trying to decide whether an individual is an independent contractor versus an employee
and that, instead, the Court should determine whether Mr. Callahan was a “casual and occasional
worker” and, if so, should conclude that he was not an SBS employee. [Filing No. 103 at 14-18.]

18

Mr. Smiley also argues that even if the ten-factor test applies, it leads to the conclusion that Mr.
Callahan was not an SBS employee. [Filing No. 103 at 18-27.]
The Court finds that the Restatement’s ten-factor test, also set forth by the Indiana Supreme
Court in Moberly v. Day, 757 N.E.2d 1007, 1010 (Ind. 2001), and most recently applied by the
Indiana Court of Appeals in Vinup v. Joe’s Const., LLC, 64 N.E.3d 885, 890-93 (Ind. Ct. App.
2016), applies here to whether Mr. Callahan was an employee of SBS. The Court does not find
significant the fact that the ten-factor test has been applied in situations where the issue was
whether the individual was an independent contractor or an employee, and does not find any
meaningful distinction between that situation and the situation here. The determination of whether
an individual is an employee is “a question for the trier of fact” unless “the significant underlying
facts are undisputed” – in which case the Court “may properly determine a worker’s classification
as a matter of law.” Vinup, 64 N.E.3d at 890. Determination of whether Mr. Callahan was an SBS
employee, acting within the course of his employment when the accident occurred, is replete with
disputed facts. 8 The following table illustrates just a few of the facts, which would be considered
in applying the ten-factor test, that the parties dispute: 9

8

Mr. Smiley argues in response to Selective’s Motion for Summary Judgment that Selective is
collaterally estopped from arguing that Mr. Smiley was an SBS employee because the state court
in the Underlying Lawsuit found that he was not. Under Indiana law, however, “[a]n insurer may
avoid the effects of collateral estoppel [from litigation in which the insured is involved] by: (1)
defending the insured under a reservation of rights in the underlying tort action; or (2) filing a
declaratory judgment action for a judicial determination of its obligations under the policy.”
Carpenter v. Lovell’s Lounge & Grill, LLC, 59 N.E.3d 330, 336 (Ind. Ct. App. 2016) (quoting
Liberty Mut. Ins. Co. v. Metzler, 586 N.E.2d 897, 900 (Ind. Ct. App. 1992)). Selective has done
both of these things, so is not collaterally estopped from arguing that Mr. Callahan was an SBS
employee for purposes of coverage under the Selective Policy.
9

Even if the Court were to apply the “casual and occasional” worker test set forth by Mr. Smiley,
many of the same factual issues would still exist which would preclude summary judgment.
19

Selective’s Proposed Fact
Mr. Callahan “did not have any employment at
all outside of working for SBS, Smiley or other
Smiley owned entities from 2007 through the
date of the accident.” [Filing No. 89 at 20
(citing Filing No. 88-9 at 15).]
“SBS paid Callahan $10 an hour for work he
performed.” [Filing No. 89 at 22 (citing Filing
No. 88-10 at 11).]

SBS believed Mr. Callahan was an employee
because “knowing that workers compensation
benefits were only payable to employees, [it]
filed a workers compensation claim,” and
“represented to its workers compensation
carrier that Callahan was an employee and was
working when he was injured.” [Filing No. 89
at 23 (citing Filing No. 88-3 at 70; Filing No.
88-3 at 74; Filing No. 88-6 at 8-9).]

Mr. Smiley’s Proposed Fact
Mr. Callahan “worked full-time for [SBS]
from 2010 to 2012, but quit working for [SBS]
in or around 2012 and began working for other
companies, including a truck driving
company.” [Filing No. 103 at 22 (citing Filing
No. 88-9 at 14-17).]
“[B]oth Callahan and Smiley explained that it
was not unusual for Callahan to ‘work’ for
[SBS] without receiving any compensation.
When Callahan was paid, which did not always
occur, it was often a lump-sum payment in an
amount determined arbitrarily by Smiley or
through means other than money, like lunch.”
[Filing No. 103 at 23 (citing Filing No. 104-4
at 5; Filing No. 104-4 at 8).]
There is “overwhelming evidence in the record
demonstrating that neither Callahan nor
Smiley ([SBS’s] owner) considered Callahan
to be an employee of [SBS] at the time of the
Accident.” [Filing No. 103 at 24 (citing Filing
No. 104-1 at 4-5; Filing No. 104-2 at 15; Filing
No. 108-4 at 5).]

Further, even if Mr. Callahan were considered an employee of SBS, additional factual
disputes exist regarding whether he was acting within the course of his employment on the day of
the accident. This must be the case for the Fellow Employee Exclusions to apply. [See, e.g., Filing
No. 88-2 at 34 (Fellow Employee Exclusion in Business Auto Coverage Part precludes coverage
for “‘Bodily injury’ to any fellow ‘employee’ of the ‘insured’ arising out of and in the course of
the fellow ‘employee’s’ employment or while performing duties related to the conduct of your
business”).] For example, Selective asserts that “Smiley and Callahan were engaged in SBS
business [on the day of the accident] as a continuation of the business transaction started when
they purchased the parts the previous month.” [Filing No. 89 at 24; see also Filing No. 121 at 8
20

(citing Filing No. 88-3 at 64 (RV parts paid for with SBS credit card and Mr. Smiley provided
SBS’s tax identification number in connection with the purchase)).] But Mr. Smiley argues that
“[b]oth Callahan and Smiley have repeatedly testified that they were not performing [SBS]
business on the date of the Accident. They viewed the trip as an ‘adventure,’ rather than a business
trip. They intended to eat lunch at a novelty restaurant on their way and intended to use the parts
for a variety of personal projects, including a houseboat, a golf cart, or trailer. These projects were
unrelated to [SBS’s] business.” [Filing No. 103 at 29 (citing Filing No. 104-1 at 8; Filing No. 1042 at 16; Filing No. 104-3 at 29).] These are yet additional genuine issues of fact which preclude
summary judgment regarding the application of the Fellow Employee Exclusions. 10
In sum, the Court finds that the Employee Indemnification Exclusion, the Employer’s
Liability Exclusions, and the Workers’ Compensation Exclusions in the Business Auto Coverage
and Umbrella Liability Coverage Parts do not preclude coverage for Mr. Smiley under the
Selective Policy because Mr. Smiley was not Mr. Callahan’s employer. The Court also finds that
there are key factual disputes related to the application of the Fellow Employee Exclusions in the
Business Auto Coverage and Umbrella Liability Coverage Parts to claims against Mr. Smiley
asserted in the Underlying Lawsuit because application of those exclusions turns on whether Mr.

10

Mr. Smiley also argues that Mr. Callahan was a “temporary worker” or a “voluntary worker”
under the terms of the Selective Policy, so is not considered an SBS employee. The facts
surrounding whether Mr. Smiley was a “temporary worker” or a “voluntary worker” are also
disputed, including how often Mr. Callahan worked for SBS and whether Mr. Callahan was always
paid for his work. [See Filing No. 103 at 27-28 (Mr. Smiley citing evidence to support his
position); Filing No. 121 at 12-14 (Selective arguing that Mr. Callahan was not a “temporary
worker” or a “volunteer worker” and citing to evidence that he was not furnished to SBS, that he
was regularly paid for his work, and that he expected to be paid for his work on the day of the
accident).] Accordingly, the Court cannot decide as a matter of law that those provisions include
or do not include Mr. Callahan.
21

Callahan was an employee of SBS and was acting within the scope or course of his employment
on the day of the accident.
The Court notes Selective’s statement in its opening brief that “[t]he facts that emerged
immediately after the accident are the most compelling….” [Filing No. 89 at 23.] This is precisely
what the Court cannot do on summary judgment – pick one version of the events over another.
While the Court must view the record in the light most favorable to the non-moving party and
draw all reasonable inferences in that party’s favor, Darst, 512 F.3d at 907, it may not choose to
accept one party’s side of the story over the other party’s side when key facts are genuinely
disputed. This is the situation here. Accordingly, the Court GRANTS IN PART Mr. Smiley’s
Motion for Summary Judgment and DENIES IN PART Selective’s Motion for Summary
Judgment as they relate to application of the Employee Indemnification Exclusion, the Employer’s
Liability Exclusions, and the Workers’ Compensation Exclusions; and DENIES IN PART
Selective’s Motion for Summary Judgment and Mr. Smiley’s Motion for Summary Judgment as
they relate to application of the Fellow Employee Exclusions.
2. The Concealment, Misrepresentation, and Fraud Provisions
Selective argues that the Selective Policy does not provide coverage for Mr. Smiley
because both the Business Auto Coverage and Umbrella Liability Coverage Parts preclude
coverage where the insured conceals or misrepresents facts, or engages in fraud. [Filing No. 89 at
32-34.]

Selective contends that “[t]he concealment, misrepresentations and/or fraud by

Smiley/SBS related directly to Callahan’s status as an employee and the purpose of the trip to RV
Salvage at the time of the accident,” that “[t]he attempts by Smiley and Callahan to try and change
the facts to pursue a third-party claim and insurance coverage, instead of pursuing the workers

22

[compensation] claim, cannot be countenanced,” and that “Smiley even went so far as to advise
Callahan to sue him – because he had insurance coverage.” [Filing No. 89 at 34.]
In response, Mr. Smiley argues that Selective does not specifically identify any
misrepresentations and that the facts show that Mr. Callahan was not an employee of SBS. [Filing
No. 103 at 33-34.] He also asserts that Selective has not shown that any misrepresentation was
material, or that Selective would have handled the claim differently but for the alleged
misrepresentation. [Filing No. 103 at 34.]
The alleged misrepresentations that Selective relies upon relate to whether Mr. Callahan
was an SBS employee on the day of the accident, and whether he was acting within the scope of
his employment. The Court finds that Selective has not provided any evidence that SBS and Mr.
Callahan intentionally misrepresented facts, but only that their version of facts differs from
Selective’s. It is noteworthy that the state court’s finding in the Underlying Lawsuit that Mr.
Callahan was not an SBS employee on the day of the accident is consistent with SBS’s and Mr.
Smiley’s position. While genuine issues of fact exist regarding whether Mr. Callahan was SBS’s
employee, the fact that these issues exist is distinct from a finding that SBS and Mr. Smiley
misrepresented facts.

Accordingly, the Court DENIES IN PART Selective’s Motion for

Summary Judgment as it relates to application of the concealment, misrepresentation, or fraud
provisions in the Selective Policy, and GRANTS IN PART SBS’s and Mr. Smiley’s Motion for
Summary Judgment on the same issue. 11

11

SBS and Mr. Smiley also seek summary judgment that the Cooperation Clause in the Selective
Policy does not preclude coverage. Selective provides a cursory argument in response to SBS’s
and Mr. Smiley’s Motion for Summary Judgment regarding the Cooperation Clause, without even
citing to the language of the Clause. [Filing No. 109 at 19.] Selective has not provided any
evidence that Mr. Smiley failed to cooperate or provided false information – only that his
statements were inconsistent and contradicted Selective’s position. The Court GRANTS IN
PART SBS’s and Mr. Smiley’s Motion for Summary Judgment to the extent that it finds that the
23

To re-cap the Court’s findings as they relate to coverage under the Selective Policy, the
Court GRANTS IN PART SBS’s and Mr. Smiley’s Motion for Summary Judgment, which the
Court treats as a motion to dismiss on this issue, to the extent that it finds that there is no longer a
case or controversy between Selective and SBS, that all claims against SBS are dismissed, and that
SBS is terminated as a party to the lawsuit. The Court DENIES IN PART AS MOOT Selective’s
Motion for Summary Judgment to the extent Selective seeks a declaration that there is no coverage
under the Selective Policy for SBS in connection with the Underlying Lawsuit and DENIES IN
PART the motion to the extent it seeks reimbursement of defense costs paid to date on behalf of
SBS for the Underlying Lawsuit. The Court DENIES IN PART Selective’s Motion for Summary
Judgment and GRANTS IN PART Mr. Smiley’s Motion for Summary Judgment, to the extent it
finds that the Employee Indemnification, Employer’s Liability, and Workers’ Compensation
Exclusions, the Concealment, Misrepresentation, and Fraud Provisions, and the Cooperation
Clause do not preclude coverage for Mr. Smiley under the Selective Policy. Finally, the Court
DENIES IN PART both Selective’s Motion for Summary Judgment and SBS’s and Mr. Smiley’s
Motion for Summary Judgment to the extent that it finds that genuine issues of material fact exist
regarding whether the Fellow Employee Exclusions preclude coverage for Mr. Smiley.
V.
COVERAGE UNDER THE CINCINNATI POLICIES
Cincinnati seeks summary judgment based on several exclusions in the Cincinnati Auto
Policy and the Cincinnati Umbrella Policy. The Court considers each policy in turn.

Cooperation Clause and the “misrepresentation or false swearing” provisions in the Selective
Policy do not preclude coverage for the Underlying Lawsuit.
24

A. The Cincinnati Auto Policy
Cincinnati argues that three exclusions in the Cincinnati Auto Policy preclude coverage for
Mr. Smiley12: (1) Exclusion (A)(4), which precludes coverage for “any ‘covered person’…[f]or
‘bodily injury’ to an employee of that ‘covered person’ during the course of employment”; (2)
Exclusion (A)(6), which precludes coverage for “any ‘covered person’…[w]hile employed or
otherwise engaged in the ‘business’ of: a. Selling; b. Repairing; c. Servicing; d. Storing; or e.
Parking; vehicles designated for use mainly on public highways….This Exclusion…does not apply
to the ownership, maintenance or use of ‘your covered auto’ by…’You.’”; and (3) Exclusion
(B)(2)(b), which precludes coverage for “the ownership, maintenance or use of:…[a]ny vehicle,
other than ‘your covered auto’, which is: Furnished or available for ‘your’ regular use.” [Filing
No. 93-3 at 11-12.]
The Court discusses Exclusion (B)(2)(b) first, because it is dispositive on the issue of
whether the Cincinnati Auto Policy provides coverage for claims against Mr. Smiley in the
Underlying Lawsuit. Cincinnati argues that Exclusion (B)(2)(b) applies because it is undisputed
that Mr. Smiley was driving a pickup truck owned by SBS on the day of the accident, that Mr.
Smiley routinely used the pickup truck for both personal and business reasons, and that the pickup
truck is not a “covered auto” under the Cincinnati Auto Policy. [Filing No. 94 at 17.] It cites to

12

Although Cincinnati requests a judgment that it has no duty to defend or indemnify SBS in the
Underlying Lawsuit, the Court DENIES AS MOOT the portion of its Motion for Summary
Judgment that relates to coverage for SBS. As discussed above, SBS obtained summary judgment
in the Underlying Lawsuit and so will not face liability in that lawsuit. As for SBS’s defense in
that lawsuit, the Court has already concluded that Selective may not recoup attorneys’ fees and
costs it paid on SBS’s behalf in the Underlying Lawsuit, and Selective has conceded that “the
Selective Policy would be deemed to take priority [over the Cincinnati Policies] under Indiana
law.” [Filing No. 101 at 5.] Accordingly, Cincinnati will not face liability in connection with Mr.
Callahan’s claims against SBS in the Underlying Lawsuit, and the Court’s discussion is limited to
potential coverage for Mr. Smiley.
25

excerpts from Mr. Smiley’s deposition to support its arguments. Mr. Smiley’s only response is
that there is a genuine issue of fact regarding whether “an individual’s personal use of a mixeduse vehicle is sufficient to connote ‘regular’ use,” and that the Cincinnati Auto Policy indicates
that Mr. Smiley also owned his own vehicle for personal use. [Filing No. 107 at 14-15.]
Mr. Smiley testified regarding the ownership of the 2006 Chevy Silverado pickup truck
that he was driving on the day of accident, and his regular use of the truck, as follows:
Q: What truck were you driving?
A: I get confused by that, but I think it was a 2006 Chevrolet pickup. It was
predominantly the truck I drove.
Q: And who owned that truck?
A: It was – it was probably owned by Smiley Body Shop best I recollect.
Q: That vehicle was available to you for both business and personal use?
*

*

*

A: Yes.
Q: Who was the primary driver of that vehicle?
*

*

*

*

*

*

A: Myself.

Q: So if somebody else was driving it, it was always with your permission?
A: Yes.
Q: To your knowledge, was that truck always titled in the name of the business?
A: Yes.
[Filing No. 93-6 at 20-21.]

26

Mr. Smiley does not point to any record evidence which contradicts his testimony. Further,
the Cincinnati Auto Policy indicates that the only “covered auto” is a 2012 Honda Odyssey. [Filing
No. 93-3 at 3.] Based on Mr. Smiley’s own deposition testimony and on the Declarations Page of
the Cincinnati Auto Policy, the Court finds that it is undisputed that SBS owned the 2006 Chevy
Silverado Mr. Smiley was driving on the day of the accident, that the 2006 Chevy Silverado was
not a “covered auto” under the Cincinnati Auto Policy, and that the 2006 Chevy Silverado was
“furnished or available for [Mr. Smiley’s] regular use.” Accordingly, the Court GRANTS IN
PART Cincinnati’s Motion for Summary Judgment to the extent that it finds that Exclusion
(B)(2)(b) precludes coverage under the Cincinnati Auto Policy for claims by Mr. Callahan against
Mr. Smiley in the Underlying Lawsuit. 13
B. The Cincinnati Umbrella Policy
Cincinnati relies upon one provision and four exclusions in the Cincinnati Umbrella Policy
to support its argument that coverage is precluded under that policy. The Court will address each
in turn.
1. Paragraph 12(b)(2)
Paragraph 12(b)(2) excludes from the definition of “Insured” “Any person or organization
while employed or engaged in the business of selling, servicing, repairing, maintaining, parking
or storing of ‘automobiles.’” [Filing No. 93-5 at 10.] Cincinnati argues that Paragraph 12(b)(2)
“clearly removes [Mr.] Smiley…as [an] insured[ ] under the Personal Umbrella Policy with the
effect that there is no coverage under that policy for Callahan’s personal injury claim” because
“the evidence establishes that, at the time of the accident, Smiley and Callahan were on a trip to

13

Because Exclusion (B)(2)(b) precludes coverage, the Court need not consider the other
exclusions in the Cincinnati Auto Policy which Cincinnati relies upon in its Motion for Summary
Judgment.
27

Elkhart to pick up and transport RV parts, some of which would be used in making repairs on an
RV owned by SBS.” [Filing No. 94 at 20.] Mr. Smiley argues in response that he “was not
engaged in any business, much less the business of ‘servicing’ or ‘repairing’ vehicles at the time
of the Accident.” [Filing No. 107 at 17.]
The Court finds that a genuine issue of material fact exists regarding whether Mr. Smiley
was “engaged in the business of selling, servicing, repairing, maintaining, parking or storing”
automobiles at the time of the accident, such that Paragraph 12(b)(2) would preclude coverage.
On the one hand, Cincinnati points to evidence indicating that the purpose of the trip on the day of
the accident was to pick up auto parts and bring them back to SBS, and that the parts had been
paid for by SBS. [Filing No. 122 at 12 (citing Filing No. 93-6 at 12-13; Filing No. 93-6 at 21).]
On the other hand, Mr. Smiley cites evidence indicating that the trip to the RV store was an
“adventure,” “it was a casual day,” and the parts they were picking up were not parts for the
business but were to be used on a houseboat that Mr. Callahan and Mr. Smiley had designed. [See
Filing No. 107 at 14 (citing Filing No. 108-1 at 8; Filing No. 108-2 at 16-17; Filing No. 108-3 at
29).] Based on these disputed facts, the Court cannot find as a matter of law that Paragraph
12(b)(2) precludes coverage for Mr. Smiley and DENIES IN PART Cincinnati’s Motion for
Summary Judgment based on that provision.
2. Exclusion (B)(5)
Exclusion (B)(5) precludes coverage for “‘Bodily injury’, ‘personal injury’ or ‘property
damage’ arising out of a ‘business’ or ‘business property’, unless such liability is covered by valid
and collectible ‘underlying insurance’ as listed in Schedule A….” [Filing No. 93-5 at 13.] As
discussed above, there are genuine issues of material fact regarding whether the trip on the day of

28

the accident was business related or not. Accordingly, the Court DENIES IN PART Cincinnati’s
Motion for Summary Judgment based on Exclusion (B)(5).
3. Exclusion (B)(14)
Exclusion (B)(14) precludes coverage for “‘Bodily injury’, personal injury’ or ‘property
damage’ to: a. A fellow employee of an ‘insured’ occurring in the course of employment….”
[Filing No. 93-5 at 16.] Cincinnati relies upon much of the same evidence that Selective relied
upon in arguing that Mr. Callahan and Mr. Smiley were “fellow employees” on the day of the
accident. As the Court concluded in connection with the Fellow Employee Exclusions in the
Selective Policy, however, there are genuine issues of material fact regarding whether Mr.
Callahan was an SBS employee on the day of the accident, and whether he was acting within the
course of employment.

The Court DENIES IN PART Cincinnati’s Motion for Summary

Judgment as to Exclusion (B)(14) due to these factual disputes.
4. Exclusion (B)(20)
Exclusion (B)(20) excludes “‘Bodily injury’ or ‘property damage’ arising out of the
ownership, maintenance, operation, use, loading or unloading of any ‘recreational motor vehicle’
unless such liability is covered by valid and collectible ‘underlying insurance’ at the ‘underlying
limit’ listed in Schedule A – Schedule of Underlying Insurance and then only for such hazards for
which coverage is afforded by such ‘underlying insurance’, unless otherwise excluded by this
policy.” [Filing No. 93-5 at 16.] Cincinnati argues that it is undisputed that “Callahan’s injuries
arose out of the ownership and maintenance of an RV,” since Mr. Callahan and Mr. Smiley were
allegedly travelling to pick up parts from the RV surplus store for an RV owned by SBS. [Filing
No. 94 at 23.] Mr. Smiley points to the policy’s definition of “Recreational motor vehicle,” which

29

is defined as “if not subject to motor vehicle registration, any land motor vehicle designed for
recreational use off public roads.” [Filing No. 107 at 33 (citing Filing No. 93-5 at 11).]
The Court finds that Exclusion (B)(20) does not apply to Mr. Callahan’s claims against
Mr. Smiley in the Underlying Lawsuit. First, an RV is subject to motor vehicle registration and is
not “designed for recreational use off public roads.” [See Filing No. 93-5 at 11.] Second,
Cincinnati has not shown that Mr. Callahan’s bodily injury “ar[ose] out of the ownership,
maintenance, operation, use, loading or unloading of” an RV. Even if Mr. Callahan and Mr.
Smiley were picking up parts for an RV – which the parties dispute – this action is too far removed
from Mr. Callahan’s injuries. The Court reads Exclusion (B)(20) as precluding coverage for
claims relating to the actual “maintenance, operation, [or] use” of the recreational vehicle, not
claims relating to injuries that occurred while travelling to pick up parts that may be used for
maintenance. The Court DENIES IN PART Cincinnati’s Motion for Summary Judgment as it
relates to the application of Exclusion (B)(20).
5. Exclusion (B)(24)
Exclusion (B)(24) excludes coverage for “Any liability or obligation of an ‘insured’ under
a workers’ compensation, disability benefits or unemployment compensation law or any similar
law.” [Filing No. 93-5 at 17.] Cincinnati argues that because Mr. Callahan was an employee of
SBS at the time of the accident, and since Mr. Callahan and Mr. Smiley were on a business trip
when the accident occurred, Exclusion (B)(24) precludes coverage. [Filing No. 94 at 24.] Mr.
Smiley argues that he was not Mr. Callahan’s employer, so had no “liability or obligation” under
a workers’ compensation law, disability benefits or unemployment compensation law or any
similar law. [Filing No. 107 at 34.]

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Cincinnati has not presented any evidence that Mr. Callahan was an employee of Mr.
Smiley and, in fact, has consistently argued that Mr. Callahan was an SBS employee. [See, e.g.,
Filing No. 94 at 23 (Cincinnati arguing that “both Smiley and Callahan were employed by SBS”).]
SBS is not an “insured” under the Cincinnati Umbrella Policy – only Mr. Smiley is. Because Mr.
Smiley did not employ Mr. Callahan and so did not face any liability under a workers’
compensation law or any similar law, Exclusion (B)(24) does not preclude coverage and the Court
DENIES IN PART Cincinnati’s Motion for Summary Judgment as to that exclusion.
In sum, the Court DENIES AS MOOT Cincinnati’s Motion for Summary Judgment as it
relates to coverage for SBS, since SBS does not seek coverage under either the Cincinnati Auto
Policy or the Cincinnati Umbrella Policy. The Court GRANTS IN PART Cincinnati’s Motion
for Summary Judgment to the extent that it finds that Exclusion (B)(2)(b) precludes coverage for
Mr. Smiley under the Cincinnati Auto Policy. Finally, the Court DENIES IN PART Cincinnati’s
Motion for Summary Judgment to the extent it finds that Exclusion (B)(20) and Exclusion (B)(24)
in the Cincinnati Umbrella Policy do not preclude coverage for claims asserted by Mr. Callahan
against Mr. Smiley in the Underlying Lawsuit, and to the extent it finds that genuine issues of
material fact exist as to whether Paragraph 12(b)(2), Exclusion (B)(5), or Exclusion (B)(14)
preclude coverage for Mr. Smiley under the Cincinnati Umbrella Policy.
VI.
CONCLUSION
As discussed above, there is no longer a case or controversy between SBS on the one hand,
and Selective and Cincinnati on the other.

Accordingly, the Court DENIES AS MOOT

Selective’s Motion for Summary Judgment, [Filing No. 88], and Cincinnati’s Motion for Summary
Judgment, [Filing No. 93], as those motions relate to coverage for SBS. All claims against SBS

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are DISMISSED, and the Clerk is directed to TERMINATE SBS as a party. No partial final
judgment shall issue.
Also as discussed above, genuine issues of material fact exist regarding whether Mr.
Callahan was an employee of SBS on the day of the accident and, if so, whether he was acting
within the course or scope of his employment when the accident occurred. These issues make
summary judgment in favor of Selective, Cincinnati, or Mr. Smiley inappropriate regarding the
application of several provisions or exclusions in the Selective Policy and the Cincinnati Umbrella
Policy. The Court GRANTS IN PART and DENIES IN PART Selective’s Motion for Summary
Judgment, [Filing No. 88], SBS’s and Mr. Smiley’s Motion for Summary Judgment, [Filing No.
90], and Cincinnati’s Motion for Summary Judgment, [Filing No. 93], as set forth above in detail.
Left in play is the potential applicability of the following provisions and exclusions to Mr.
Callahan’s claims against Mr. Smiley in the Underlying Lawsuit:
•

The Fellow Employee Exclusions in the Business Auto Coverage and Umbrella
Liability Coverage Parts of the Selective Policy;

•

Paragraph 12(b)(2) in the Cincinnati Umbrella Policy;

•

Exclusion (B)(5) in the Cincinnati Umbrella Policy; and

•

Exclusion (B)(14) in the Cincinnati Umbrella Policy.

The Court requests that the Magistrate Judge confer with the parties to address the possibility of
an agreed resolution, or to establish a schedule for the upcoming August 28, 2017 trial.

Date: May 26, 2017

Distribution via ECF only to all counsel of record
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