Indiana Court of Appeals Finds No Evidence of Bad Faith in Underinsured Construction Zone Truck Accident Case

The Indiana Court of Appeals recently found in favor of an insurance carrier with regards to its handling of an underinsured claim in a construction zone truck accident case. In Brandell v. Secura Ins., Christopher Brandell (“Brandell”) was working construction on an Indiana interstate adjusting traffic control devices when he was hit by a truck, resulting in severe injuries. Brandell pursued various claims arising from the truck collision, including an underinsured claim against Secura Insurance (“Secura”), which provided underinsured coverage through a commercial auto policy issued to Brandell’s employer. Under Secura’s insurance policy, Brandell had to be “occupying” a covered vehicle, with the policy defining “occupying” as “in, upon, getting in, on, out or off.”

Secura denied Brandell underinsured coverage positing he was not insured under the policy, as he was not occupying a vehicle at the time of the collision. The police report from the collision identified Brandell as a pedestrian. The worker’s compensation first report of injury indicated Brandell was adjusting traffic control devices in a work zone when he was struck. Brandell took issue with Secura’s underinsured coverage determination and provided Secura with notice that Brandell was operating a covered auto with another employee as a passenger. Brandell was driving the company vehicle between traffic barrels, stopping, moving the barrels, and then getting back into the vehicle to drive forward a short distance to move the next barrels before he was struck by the truck. After receiving this information, Secura retained counsel to investigate coverage, but before any additional determination was made, Brandell filed a lawsuit against Secura for underinsured coverage (which Sescura eventually provided in accepting and settling the claim) and for bad faith arising from Secura’s handling of Brandell’s underinsured claim. Secura filed a motion for summary judgment as to Brandell’s bad faith claim, which the trial court granted, and Brandell appealed.

In Indiana all insurance companies must act in good faith with their insureds. To prove bad faith by an insurance company, an insured plaintiff must show the insurer (1) made an unfounded refusal to pay policy proceeds, (2) caused an unfounded delay in making payment, (3) deceived the insured, or (4) exercised an unfair advantage over the insured to pressure the insured into settling a claim. Proving negligence or bad judgment will not suffice; there must be a showing of conscious wrongdoing. In order to prove bad faith, a plaintiff must show by clear and convincing evidence that an insurance carrier had knowledge that there was no legitimate basis for denying liability.

Here, Brandell argued Secura acted in bad faith in failing to immediately disclose all coverages to Brandell prior to Brandell inquiring about underinsured coverage (Secura did open an underinsured claim when Brandell inquired about underinsured coverage), in initially denying Brandell’s underinsured claim “without diligent investigation,” and in handling Brandell’s claim.

As to Secura’s bad-faith failure to disclose, the Indiana Court of Appeals noted prior precedent that insurers have no duty to inform insureds of coverage that may not even exist, and in this case, there was no chain of events or “deceptive fact pattern” giving rise to a material issue of fact as to whether Secura acted in bad faith by not disclosing the underinsured coverage prior to Brandell’s inquiry as to such coverage. As to Secura’s bad-faith denial of coverage, the Court found that at the time of Secura’s initial denials it did not appear Brandell was occupying a vehicle at the time of the collision so as to afford him coverage, with Secura having advanced a rational basis for its denial along with legal caselaw support. As to Secura’s bad-faith claim handling, the Court of Appeals noted the Indiana Supreme Court has not yet expressly recognized a claim for “bad faith claim-handling,” but in any case, nothing in the record evidenced “an unfounded refusal to pay policy proceeds” on behalf of Secura. Therefore, the Court of Appeals affirmed the trial court’s grant of summary judgment in favor of Secura on Brandell’s bad faith claims.

You can read the full opinion here.