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Earle v. Cobb12/16/2004
TO BE PUBLISHED
REVERSING
The issue presented is whether an underinsured motorist (UIM) carrier must be identified at trial when it chooses to preserve its subrogation rights by means of the procedure set forth in Coots v. Allstate Ins. Co. (the "Coots procedure"). We conclude that the UIM carrier should be so identified as a party because it was named as a party by virtue of its contract and because it chose to retain its subrogation rights by substitution of its payment for that of the liability insurance carrier. As the trial court and the Court of Appeals held otherwise, and the case was tried without all real parties, we reverse and remand for a new trial.
On February 17, 1998, Appellant, Bonita Earle, and Appellee, Alice Cobb, were involved in an automobile accident in Muhlenberg County. As a result of the accident, Earle was injured. She sought recovery from Appellee Cobb and from her UIM carrier, Appellee Indiana Insurance Company (Indiana Insurance). Earle sought damages for medical expenses, lost wages, and pain and suffering. Indiana Insurance filed a cross-claim against Cobb for indemnity.
Prior to trial, Cobb's liability insurance carrier, Hartford Insurance Company, offered its policy limit of $25,000 to Earle as full settlement of her claims against Cobb. Earle was willing to accept this sum, but as was its right, the UIM carrier, Indiana Insurance, elected to preserve its subrogation right against Cobb by using the Coots procedure of substituting its payment for Hartford's (liability carrier) proposed $25,000 settlement. Thus, Cobb was not released and she remained a party defendant.
For the purposes of trial, the court ordered Earle's claims against Indiana Insurance for UIM benefits to be determined after the jury rendered a verdict. The trial court also held that the existence of the UIM coverage provided by Indiana Insurance could not be revealed to the jury. Thus, Indiana Insurance was not identified as a party, did not participate at trial, and agreed to be bound by the jury verdict. However, Indiana Insurance did defend by participating in pretrial motions and discovery. In short, the case was tried to the jury as Earle v. Cobb, and nothing more was revealed.
During its deliberations, the jury asked the trial judge the following question: "Is insurance involved or is it coming from Ms. Cobb?" The trial judge declined to answer the jurors' question. Thereafter a verdict was returned and Earle was awarded $500.00 for pain and suffering, $500.00 for past medical bills, and $500.00 for lost wages. Judgment was entered thereon. Earle appealed and Cobb cross-appealed to the Court of Appeals. In its opinion, the Court of Appeals affirmed the trial court holding that the interest and participation of Indiana Insurance was properly withheld from the jury. Earle was granted discretionary review by this Court.
CR 17.01 provides, in part, "Every action shall be prosecuted in the name of the real party in interest.... Nothing herein, however, shall abrogate or take away an individual's right to sue." In the case at bar, Appellee Indiana Insurance was a party defendant in the trial court and was allowed to participate in all pre-trial proceedings and discovery. At trial, however, it was not identified and the case was presented as if the only parties were the plaintiff, Earle, and the defendant, Cobb. Such a trial is fundamentally misleading to the jury and it deprives a plaintiff of the right to try her case against the party she chooses.
For sound policy reasons, evidence of liability insurance to show culpability is excluded. However, where a direct contractual relationship exists between a plaint
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