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Indiana Insurance Co. v. Barnes12/6/2005
ho has paid the loss resulting from a peril insured against may be subrogated to all the claims which the insured may have against any person by whose negligence the injury was caused does not apply in a case where the injury was caused by the negligence of the insured himself. (Citations omitted.)
Id., at 121-122.
{ } Applying this long-standing rule of law to the present case, we hold that Indiana may not pursue its current claims against Barnes, its own insured. The principle of subrogation entitles an insurance company-which has paid damages on behalf of its insured pursuant to a policy of insurance-to all the rights and remedies belonging to that insured against a third party. However, subrogation does not permit an insurer to stand in the shoes of one insured to recover losses occasioned by another insured under the same policy. To allow otherwise would permit the insurer to avoid the risk it assumed by accepting the premiums paid by its insureds. Pilo, supra, at . Thus, as a matter of law, Indiana may not seek indemnity from Barnes through subrogation.
{ } Having held that Indiana may not recover from Barnes through subrogation combined with indemnification, we must now address Indiana's argument concerning primary and secondary insurance. The priority of insurance policies arises when more than one policy of insurance covers the claim of an insured, or more than one policy is obligated to pay damages on behalf of its insured. Here, Indiana contends that more than one policy is obligated to satisfy the judgment on Barnes's behalf: Indiana through the policy issued to Gauer and Allstate through the policy issued to Barnes.
{ } However, under the facts of this case, Allstate is under no obligation to pay. The judgment rendered in favor of Mr. Zarlino was secured against Gauer only. Barnes was dismissed as a separate defendant during the trial. Thus, as Gauer's insurance company, Indiana is the only insurance provider that is bound by that judgment. Additionally, since Indiana's effort to secure recovery from Barnes through indemnification and subrogation fails, Allstate cannot be compelled to pay under Indiana's indemnification theory. With no language in Allstate's policy that would otherwise require it to pay damages on behalf of Barnes, Allstate is simply under no obligation to pay the judgment.
{ } Therefore, Allstate's policy does not apply to the judgment in any regard, let alone in a primary capacity. The trial court erred in applying priority without first ascertaining whether Allstate was obligated to pay the judgment. Accordingly, the trial court erred in granting Indiana's motion for summary judgment.
{ } In his second assignment of error, Barnes contends that the trial court's entry awarding costs and interest pre-dating the judgment is improper. Because we hold that the trial court erred in granting summary judgment in favor of Indiana, the entry granting costs and interest will be vacated on remand. Barnes's second assignment of error is moot.
{ } Based on the foregoing, we find that the trial court erred in granting summary judgment in favor of Indiana and sustain Barnes's first assignment of error, rendering moot his second assignment of error. Accordingly, the trial court's judgment is vacated and reversed, and the case is remanded with instructions to enter judgment in favor of Barnes.
Judgment reversed and cause remanded with instructions.
BRYANT and PETREE, JJ., concur.
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