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Indiana Supreme Court Clarifies Law on Emotional Distress Claims

In a trio of decisions handed down on Feb. 28, the Indiana Supreme Court has clarified the Indiana law on negligent infliction of emotional distress.

In the lead case, Jakupko vs State Farm, NAMIC, the Insurance Institute of Indiana, and other trade associations filed an amicus curiae brief in support of the position of the appellant, State Farm. The case arose in 2002 when Richard Jakupko was in an auto accident caused by Brianne Johnson, the driver of an underinsured vehicle. Jakupko and his passengers, his wife Patricia and their two children, all sustained bodily injuries in the accident, but Richard Jakupko’s injuries were exceptionally severe, including quadriplegia and a closed-head injury resulting in permanent mental deficits. His wife and the children each suffered emotional distress from the accident.

Since the Jakupkos’ damages far exceeded the limits of Johnson’s coverage, they sought underinsured motorist coverage from their insurer, State Farm. The State Farm policy included UIM coverage in the amount of $100,000 for “each person” and $300,000 for “each accident.”

State Farm paid $100,000 to the Jakupkos, but when they sought an additional $200,000 for the mother’s and children’s claims for emotional distress caused by Richard Jakupko’s injuries, the additional claims were denied. State Farm’s view was that since the additional claims of the wife and children were caused by Richard Jakupko’s injuries, they were included in the “each person” limit of liability for bodily injury claims.

Suit was filed by the Jakupkos. The trial court and Court of Appeals both ruled in favor of the Jakupkos.

The Supreme Court found that State Farm had agreed to “pay damages for bodily injury an insured is legally entitled to collect from the owner or driver of an uninsured vehicle.” Additionally, there was no issue as to whether Patricia Jakupko or the children were “insureds” under the policy. More importantly, both sides in the litigation agreed that the mother and the children were all “legally entitled” to pursue negligent infliction of emotional distress claims against Johnson.

The ultimate issue before the Supreme Court was whether, as a matter of UIM and contract law, the mother’s and children’s claims were included within Richard Jakupko’s “each person” limitation or were entitled each to their own. The Supreme Court determined, after its analysis, that each insured person was entitled to a separate per person limitation of $100,000, subject to the per accident limitation of $300,000. Imposition of the single “each person” limitation would violate the requirements of Indiana’s UIM statute and be void.

In a second, similar opinion handed down the same day, Elliott vs Allstate Insurance Company, the Supreme Court found that the policy at issue contained slightly different wording that the circumstances and the law required the same conclusion as in Jakupko.

In Elliott, Amanda Elliott was driving a car with her 3-year-old son and 15-year-old sister as passengers. An accident was caused by an uninsured driver. Amanda Elliott suffered severe, nearly fatal injuries, and the son and sister suffered emotional distress from witnessing those injuries.

In the third related case, the Supreme Court did not permit damages to be recovered by a witness to another’s injury. State Farm vs D.L.B., arose when 4-year-old D.L.B. was riding bicycles with his 6-year-old cousin Seth Baker when Baker was struck and killed by Herbert Wallace, a State Farm insured. D.L.B. was not physically injured but suffered post-traumatic stress disorder as a result of witnessing his cousin’s fatal injuries.

The State Farm policy included bodily injury coverage in the amount of $100,000 for “each person” and $300,000 for “each accident.” State Farm paid $100,000 to Baker’s parents to settle claims against Wallace for the child’s death, but the claim brought by D.L.B.’s mother on his behalf was denied.

The Supreme Court in this case repeated its holding from Jakupko that “bodily injury,” as defined in the policy at issue in that case, included emotional distress. However, “bodily injury” does not included emotional damage unless it arises from a bodily touching – the impact rule.

In this case, however, since D.L.B. did not suffer “bodily injury” within the meaning of the policy, the majority found that he was not entitled to collect damages under Wallace’s policy.

It is noted that the Elliott decision was decided on a 3 to 2 basis, with the two dissenting justices favoring a decision finding coverage for D.L.B.

Direct questions to NAMIC’s Regulatory Affairs Counsel Marsha Brown.

Posted: Tuesday, March 11, 2008 12:00:00 AM. Modified: Wednesday, March 12, 2008 11:18:52 AM.

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