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Erie Ins. Co. v. Hickman

Supreme Court of Indiana

October 27, 1993, Filed

No. 29S02-9310-CV-1180

Opinion

 [*517] ON PETITION TO TRANSFER

KRAHULIK, J.

We grant transfer to reaffirm the existence of a duty that an insurer deal in good faith with its insured, and to recognize a cause of action in tort for the breach of that duty.

In this case, Ramona Hickman and Nancy Smith (Plaintiffs-Appellees below) filed a first-party claim against Erie Insurance Company (Defendant-Appellant below). Plaintiffs sought a recovery for the breach of an  [**2]  insurance contract and for punitive damages because Erie denied their claims. Judgment was entered on the jury's verdict awarding both compensatory and punitive damages. Erie appealed the award of punitive damages on the grounds that there was insufficient evidence.

In the original appeal, a majority of the Court of Appeals reversed the award of punitive damage.  Erie Ins. Co. v. Hickman (1991), Ind. App., 580 N.E.2d 320. We granted transfer and remanded for reconsideration because the Court of Appeals applied an erroneous standard of review.  Erie Ins. Co. v. Hickman (1992), Ind., 605 N.E.2d 161. On remand, the Court of Appeals again reversed the award of punitive damages on the grounds that punitive damages  [*518]  were not recoverable in a breach of contract action. Erie Ins. Co. v. Hickman (1993), Ind. App., 610 N.E.2d 283. Plaintiffs seek transfer from that decision.

The basis for the second reversal of the punitive damage award in the Court of Appeals was our decision in Miller Brewing Co. v. Best Beers of Bloomington, Inc. (1993), Ind., 608 N.E.2d 975. In Best   [**3]  Beers, we held that ] to recover punitive damages in a lawsuit founded upon a breach of contract, the plaintiff must plead and prove the existence of an independent tort of the kind for which Indiana law recognizes that punitive damages may be awarded. Id. at 984. Our intent in Best Beers was to prohibit the recovery of punitive damages, which is a tort remedy, where no tort had been established.

Before our decision in Best Beers, dicta in Vernon Fire & Cas. Ins. Co. v. Sharp (1976), 264 Ind. 599, 608, 349 N.E.2d 173, 180, suggested that ] it was appropriate for an insured to recover punitive damages from an insurer when the insurer's breach of the insurance contract was accompanied by a serious wrong, tortious in nature. Thereafter, Indiana courts declined to recognize the existence of a separate tort remedy where an insurer failed to act in good faith because Vernon Fire allowed the substantial equivalent. See, e.g., Liberty Mutual Ins. Co. v. Parkinson (1985), Ind. App., 487 N.E.2d 162, 165, where the court wrote that "due to our development of this special [**4]  contractual remedy which affords the insured a more generous measure of damages, we have found no reason to adopt bad faith as an independent tort in this State, and we see no need to adopt such an action now."

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622 N.E.2d 515 *; 1993 Ind. LEXIS 175 **

ERIE INSURANCE COMPANY, Appellant, (Defendant Below) v. RAMONA HICKMAN, by her Next Friend NANCY SMITH, and NANCY SMITH, Individually, Appellee. (Plaintiffs Below)

Prior History:  [**1]  APPEAL FROM THE HAMILTON SUPERIOR COURT NO. 3. The Honorable William J. Hughes, Judge. Cause No. 29D03-8809-CP-243. Court of Appeals No. 29A02-9006-CV-318.

Erie Ins. Co. v. Hickman, 610 N.E.2d 283, 1993 Ind. App. LEXIS 208 (Ind. Ct. App., 1993)

CORE TERMS

insured, punitive damages, good faith, uninsured, adjuster, insurance contract, damages, fault, compensatory damages, cancellation, uninsured motorist coverage, award of punitive damages, motorist, collision, parties

Civil Procedure, Remedies, Damages, Punitive Damages, Contracts Law, Types of Damages, Torts, Punitive Damages, General Overview, Compensatory Damages, Insurance Law, Liability & Performance Standards, Good Faith & Fair Dealing, Business Torts, Bad Faith Breach of Contract, Breach, Bad Faith & Extracontractual Liability, Criminal Law & Procedure, Weapons Offenses, Trafficking in Weapons, Elements, Contract Formation, Affirmative Duty to Act, Types of Special Relationships, Governments, Fiduciaries, Contract Formation, Measurement of Damages, Determinative Factors, Payments, Bad Faith & Extracontractual Liability, Payment Delays & Denials, Contract Interpretation, Good Faith & Fair Dealing, Availability, Proof, Appeals, Standards of Review, Judicial Review, Coverage, Uninsured Motorists, Defenses, Comparative Fault