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FOR PUBLICATION

FILED
Feb 22 2011, 9:18 am
of the supreme court, court of appeals and tax court

CLERK

ATTORNEYS FOR APPELLANT: PATRICK J. DIETRICK THOMAS D. COLLIGNON MICHAEL B. KNIGHT Collignon & Dietrick, P.C. Indianapolis, Indiana

ATTORNEY FOR APPELLEE: JOHN E. PIERCE Plainfield, Indiana

IN THE COURT OF APPEALS OF INDIANA
ALLSTATE INSURANCE COMPANY, Appellant-Defendant, vs. GARY R. LOVE, Appellee-Plaintiff. ) ) ) ) ) ) ) ) )

No. 32A01-1005-CT-239

APPEAL FROM THE HENDRICKS SUPERIOR COURT NO. 2 The Honorable David H. Coleman, Judge Cause No. 32D02-0911-CT-37

February 22, 2011 OPINION - FOR PUBLICATION RILEY, Judge

STATEMENT OF THE CASE Appellant-Defendant, Allstate Insurance Company (Allstate), appeals the trial courts Order refusing to set aside a default judgment entered in favor of AppelleePlaintiff, Gary R. Love (Love), with respect to Loves Complaint asserting underinsured motorist benefits. We affirm, in part, reverse, in part, and remand for further proceedings. ISSUES Allstate raises three issues on appeal, which we restate as the following two: (1) Whether the trial court abused its discretion in refusing to set aside a

default judgment; and (2) Whether the trial court should have held a hearing on damages. FACTS AND PROCEDURAL HISTORY On November 30, 2007, Loves vehicle collided with a vehicle driven by Roland P. Rogers (Rogers). Love sustained multiple and severe injuries to his back, neck, and teeth. After seeking medical and dental treatment, Loves medical and dental bills amounted to $83,010.59. Love retained a counsel, John E. Pierce (Pierce), to represent him in this matter. At the time of the accident, Rogers was insured by Omni Insurance (Omni) with bodily injury liability limits of $25,000.00 and Love was insured by Allstate with underinsured motorist (UIM) coverage limits of $250,000.00. Subsequently, Omni

offered Love $25,000.00, its policy limits, to settle the case. When Allstate learned about the offer, Allstate duly advanced $25,000.00 to Love to preserve its subrogation rights 2

against Rogers and Omni. In addition, Allstate paid $74,189.59 in Loves medical expenses under the medical pay provision of Loves insurance policy. However, Allstate refused to pay Loves dental bills of approximately $9,000.00. After receiving Allstates advanced $25,000.00, Pierce, Loves counsel, filed an UIM claim against Allstate and demanded that Allstate make an offer to settle the claim. Allstate did not respond. Over the course of the proceedings, Pierce regularly communicated with Allstates claim representatives. Initially, Allstates representative handling the claim was Mark Carnaghi. When Carnaghi left Allstate, the claim was reassigned to Dianna Best; and then once more to Jeff Wells. At no time did Allstate representatives advise Pierce that Allstate retained a defense counsel for this claim. Nevertheless, on September 5, 2008, Pierce received a call from Patrick J. Dietrick (Dietrick), who informed Pierce that Allstate had contacted him regarding Loves need to install a lift chair in Loves van to make it accessible. Apparently, Love and Allstate disagreed on whether the lift should be covered by the medical pay provision or the underinsured coverage. Pierce and Dietrick discussed applicable case law. On the same day, after their conversation over the phone, Dietrick sent the following email to Pierce: John: As discussed this afternoon, I am forwarding to you for your review preliminary research results that I have obtained concerning the Van lift conversion as applicable to Med Pay coverage. As we talked about today, these cases and the section of the Couch treatise are only my preliminary research, but they were the closest authority I could locate to date on the issue as it has been presented to me.

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Please contact me after you have had the opportunity to review. I will be more than happy to provide to copies of any other authority I can locate that appears to address this issue. PJ Dietrick. (Appellants App. p. 52). No other communication followed. On November 23, 2009, Pierce filed a Complaint against Allstate alleging breach of contract for failure to pay UIM benefits. Pierce also sent a courtesy file marked copy of the Complaint, Appearance, and Summons to his Allstate contact, Jeff Wells, on the same day. On November 27, 2009, Jeff Wells forwarded a copy of the Complaint to Allstates Central Processing Unit in Ohio to assign the case to a defense counsel; yet, Allstate failed to file an appearance before the trial court. On December 24, 2009, Pierce filed a motion for default judgment. On December 28, 2009, the trial court entered the following default judgment: The [c]ourt hereby enters judgment against [Allstate,] in the sum of $225,000.00 under the underinsured motorists coverage available to [Love.] The [c]ourt further orders a hearing should be had regarding the amount of additional funds due and owing [Love] under the medical pay provisions of his insurance policy with [Allstate] and sets this hearing for the 8 [th] day of [February], 2010[,] at 2:45 [p.m.] (Appellants App. p. 40). Ultimately, Dietrick filed an appearance for Allstate on January 9, 2010. On April 11, 2010, Dietrick filed a motion to set aside the default judgment. On April 26, 2010, the trial court conducted a hearing on Allstates motion to set aside the default judgment and after careful consideration denied it on April 28, 2010. On May 27, 2010, Dietrick filed an appeal. On May 28, 2010, the court clerk entered a Notice of Completion of

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Clerks Record. On June 10, 2010, Dietrick filed a motion to set a hearing on damages, which the trial court denied on June 15, 2010. Additional facts will be provided as necessary. DISCUSSION AND DECISION I. Trial Rule 60(B)(3) Motion Allstate argues that the trial court abused its discretion in refusing to set aside the default judgment entered against Allstate. Specifically, Allstate contends that Pierces failure to provide a notice of default judgment to Dietrick constituted misconduct under Ind. Trial Rule 60(B)(3) which mandated the default judgment to be set aside. Our standard of review of the denial of a motion to set aside a default judgment pursuant to T.R. 60(B) is limited to determining whether the trial court abused its discretion. Whelchel v. Community Hospitals, 629 N.E.2d 900, 902 (Ind. Ct. App. 1994), reh'g denied, trans. denied. An abuse of discretion occurs where the trial courts

judgment is clearly against the logic and effect of the facts and inferences supporting the judgment for relief. Id. The trial courts decision on a motion to set aside a default judgment is given substantial deference on appeal. Id. Therefore, absent an unequivocal abuse of discretion, the trial courts judgment will not be lightly disturbed. Id. Pursuant to T.R. 60(B)(3), a default judgment may be set aside for fraud, misrepresentation, or misconduct of an adverse party. Our supreme court has held that "misconduct" under T.R. 60(B)(3) can be based on a violation of the Code of Professional Responsibility, even if the conduct at issue does not violate the rules of civil procedure. Smith v. Johnston, 711 N.E.2d 1259, 1263-64 (Ind. 1999). 5

In Smith, a medical malpractice case, the defense counsel represented the doctor during the medical review panel stage but failed to enter appearance and defend the suit after the filing of the civil complaint. Id. at 1261. Although the patients counsel knew that the doctor had been represented during the panel review phase, she failed to provide notice to the doctors counsel of her intent to seek a default judgment in the civil proceeding. Id. Our supreme court held that "a default judgment obtained without communication to the defaulted partys attorney must be set aside where it is clear that the party obtaining the default knew of the attorneys representation of the defaulted party in that matter." Id. at 1262. Professional Conduct and clarified that The Rules are guidelines for lawyers and do not spell out every duty a lawyer owes to clients, the court, other members of the bar and the public. The preamble to the Rules is clear that ,,[t]he Rules, do not, however, exhaust the moral and ethical considerations that should inform a lawyer, for no worthwhile human activity can be completely defined by legal rules. Thus lawyers duties are found not only in the specific rules of conduct and rules of procedure, but also in courtesy, common sense and the constraints of our judicial system. As an officer of the Court, every lawyer must avoid compromising the integrity of his or her own reputation and that of the legal process itself. These considerations alone demand that [the patients counsel] take the relatively simple step of placing a phone call to [the doctors counsel] before seeking a default judgment. In addition, Rule 8.4(d) explicitly states that it is professional misconduct for a lawyer to engage in conduct that is prejudicial to the administration of justice. The administration of justice requires that parties and their known lawyers be given notice of a lawsuit prior to seeking a default judgment. A default judgment is appropriate only where a party has not appeared in person or by counsel and, if there is a lawyer known to represent the opposing party in the matter, counsel had made reasonable effort to contact that lawyer. Id. at 1263-64 (emphasis added). 6 The court based its holding on the Rules of

Here, heavily relying on Smith, Allstate argues that because Pierce knew that Dietrick represented Allstate in this case, Pierce had a duty to provide notice to Dietrick before seeking a default judgment. We disagree. This case is not similar to Smith. In Smith, the patients counsel clearly knew that the defense counsel represented the doctor. Id. at 1261. The two counsels worked together throughout the whole medical review panel proceedings representing respective sides. Id. Moreover, the patients counsel continued to communicate with the defense counsel even after the panel proceedings. Id. Here, on the other hand, Pierce had no specific knowledge that Dietrick represented Allstate throughout the entire claim. As the trial court found, Dietricks involvement in the case was limited to the issue of payment of a lift chair for Loves van. Dietrick made one phone call to Pierce on September 5, 2008, when he informed Pierce that Allstate had contacted him regarding the lift chair conversion of Loves van. Dietrick and Pierce discussed applicable case law. On the same day, Dietrick sent an email to Pierce

summarizing their conversation and attaching several precedents. Neither Dietrick nor Pierce made any follow up inquiries after their conversation. That was the only

conversation and email exchange between Dietrick and Pierce before Dietrick filed an appearance on January 9, 2010. Allstate, in turn, also did not advise Pierce that Dietrick would be representing Allstate in this claim. In particular, upon receiving the Complaint, on November 27, 2009, Allstate sent this case to its Central Processing Unit in Ohio. However, despite Allstates notice of the lawsuit, neither Dietrick nor anyone from the Central Processing

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Unit timely appeared to represent Allstate before the trial court or informed Pierce of their representation. As such, we conclude that because Pierce had no clear knowledge that Dietrick represented Allstate throughout the whole claim and because Allstate did not clearly advise Pierce that Allstate retained Dietrick for this claim, Pierce had no duty to provide notice to Dietrick before seeking a default judgment. In addition, Allstate argues that it established meritorious defenses to Loves claim. A showing of meritorious defense is required in addition to the showing of sufficient grounds for relief under T.R. (60)(B) to prevail on a motion to set aside a default judgment. Baxter v. State, 734 N.E.2d 642, 646 (Ind. Ct. App. 2000). A

meritorious defense is one demonstrating that, if the case was retried on the merits, a different result would be reached. Id. Specifically, Allstate asserts that (i) Allstate was entitled to contest causation, the nature, and the extent of Loves injuries, (ii) Allstate had subrogation rights and Love had a duty to preserve Allstates subrogation rights, and (iii) Allstate was entitled to set off the medical payments already made from the UIM benefits awarded by the trial court. All three are good arguments. However, we find that we do not need to discuss these arguments. Even if we were to conclude that these arguments are valid, such finding would not, standing alone, justify the setting aside of the default judgment. Allstate would still fail to establish the main sufficient ground for a relief under T.R. 60(B)(3)

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