New Tax Law Changes Affect Trial Lawyers

The New Law. Under the new Internal Revenue Code Section 6045(f), which was passed last summer by Congress and signed into law by President Clinton, the method by which trial lawyers report contingent fees has been changed. The new law requires anyone in business (which includes insurance companies and corporations) who pay attorneys (that is when either the attorney's name is on the check alone or with the attorney's client) to report the entire amount to the I.R.S. on Form 1099. The Form 1099 is to be issued to the attorney. The attorney is then required to report the entire amount of the check on a tax return, indicating how much was the attorney's fee and how much was distributed to others.

For example, if a case is settled for $45,000 and the attorney's fee was one-third, under prior law, the attorney would report on the tax return a fee of $15,000. Under the new tax law, the attorney must report receipt of $45,000 and show a distribution of $30,000, leaving an adjusted gross revenue of $15,000. In most firms, the annual "gross" of settlements and verdicts collected will be substantial, some well into the millions of dollars. This gross figure will now have to be shown on the tax return for the firm or individual trial lawyer.

Some trial lawyers have already grumbled, indicating that they will continue to do what they have done in the past. That is, they will report what they always have reported: only their fee. The problem is that now, not only is there a requirement to report the gross of settlements and verdicts collected, there is a nearly fool-proof method by which the I.R.S. can determine whether an attorney is in compliance . . . the Form 1099. The I.R.S. almost always runs computer checks to compare the 1099 Forms issued to each taxpayer against the taxpayer's return. If the amount shown on the gross sales receipt line does not equal or exceed the sum of the 1099 Forms, AUDIT! . . . which may result in underreporting issues.

Chester L. Stewart, C.P.A. summarized the new act affecting trial lawyers as follows:

1) Any person engaged in a trade or business must file an information return (Form 1099) for any payments made to an attorney even if the payment is a single amount and it is not known what portion is the attorney's fee. Form 1099-B will be used.

2) The present exemption from reporting payments to corporations will not apply to payments made to corporations that provide legal services.

3) The provision to report applies to attorneys even if the attorney is not the exclusive payee.

4) Attorneys (or the corporation) must supply their federal identification number or their payment will be subject to the back-up withholding requirements.

Former ATLA President Howard Twiggs has stated that Congress "singled out" personal injury lawyers with this new law. Former ATLA President Larry Stewart said "the only thing this proposal will do is add another layer of paperwork".

Despite these protests, the bill was supported by Republicans and President Clinton. Their rationale was that the change was necessary to increase lawyers' compliance with the tax laws. Some believed that the legal profession was the only profession left that was not required to report its gross earnings. The Joint Committee on Taxation estimates that it would bring in an additional $2-3 million a year in taxes.

How to Comply. Because the law has just been enacted, there are very few regulations which chart exactly what trial lawyers will need to retain as records. Because of the uncertainty, we have started, as of the first of this year, to keep a separate file for all personal injury settlements and verdict recoveries. Contained within this file is a copy of the settlement statement for each client. On the settlement statement we have added the client's social security number, date of birth, address and telephone number (see a sample of our settlement sheet below). Our judgment is that at the end of the year we will probably be able to claim a total deduction of all payouts from the gross receipts as opposed to detailing each one or putting them into categories. However, we wanted to be prepared just in case something more is required.

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The Law Against Frivolity

In 1986, the Indiana legislature passed a law against "frivolous, unreasonable, or groundless" actions or defenses on a claim.⁽¹⁾ During the eleven years since the statute was enacted, our state appellate courts have crafted an extensive body of common law laying the boundaries over which litigants and their counsel must not cross without risking violating the law against frivolity.

In addition to refraining from filing an action or asserting a defense that is frivolous, unreasonable or groundless, the cost statute prohibits continuing to litigate a claim or defense if it clearly becomes frivolous, unreasonable or groundless after it was originally asserted. Therefore, attorneys have a continuing duty to re-assess the validity of claims and defenses as investigation and discovery progresses.

Suggesting to a court that an action or defense is or has become frivolous is a duty which the litigator owes to the client. However, it should be reserved for appropriate cases. Handling a case with a charge of frivolity hanging over the action can be distracting to say the least. In our judgment, it is very important for every trial lawyer to know the law which has been developed in this area.

I.C. 34-1-32-1 - Indiana's Cost Statute

I.C. 34-1-32-1 provides as follows:

34-1-32-1 General recovery rule

Sec.1. (a) In all civil actions, the party recovering judgment shall recover costs, except in those cases in which a different provision is made by law.

(b) In any civil action, the court may award attorney's fees as part of the costs to the prevailing party, if it finds that either party:

(1) brought the action or defense on a claim or defense that is frivolous, unreasonable or groundless;

(2) continued to litigate the action or defense after the party's claim or defense clearly became frivolous, unreasonable or groundless; or

(3) litigated the action in bad faith.

Rule 3.1 Of The Indiana Rules Of Professional Conduct

Rule 3.1 of the Indiana Rules of Professional Conduct provides, in pertinent part, that:

A lawyer shall not bring or defend a proceeding, or assert or controvert an issue therein, unless there is a basis for doing so that is not frivolous, which includes a good faith argument for an extension, modification or reversal of existing law.

The comments to this Rule provide, in pertinent part, that:

The filing of an action or defense or similar action taken for a client is not frivolous merely because the facts have not first been fully substantiated or because the lawyer expects to develop final evidence only by discovery. Such action is not frivolous even though the lawyer believes that the client's position ultimately will not prevail. The action is frivolous, however, if the client desires to have the action taken primarily for the purpose of harassing or maliciously injuring a person or if the lawyer is unable to make a good faith argument on the merits of the action taken or to support the action taken by a good faith argument for an extension, modification or reversal of existing law. [Emphasis added.]

Indiana Case Law

In Kahn v. Cundiff⁽²⁾, the plaintiffs, Paulette Brown and Terry Willis, were injured when their vehicle was struck by a car being operated by the defendant, Rachel Cundiff. The car that Rachel Cundiff was driving was owned by her husband, Larry Cundiff. The plaintiffs filed suit against both Rachel and Larry Cundiff on December 1, 1996. On the same day the plaintiffs tendered interrogatories, a request for production and a request for admissions to the defendants. The Cundiffs filed several motions for extension of time to respond to the plaintiffs' discovery requests, as well as two motions to dismiss and a motion for judgment on the pleadings for failure to state a claim against Larry Cundiff. The defendants responded to the plaintiffs' request for production of documents and request for admissions on April 25, 1987.

On April 30, 1987, the plaintiffs filed their pre-trial entry, stating that they intended to pursue a negligent entrustment theory against Larry Cundiff, depending upon the outcome of discovery. On May 27, 1987, the Cundiffs responded to that entry, alleging that the pleadings and discovery did not support a negligent entrustment theory against Larry.⁽³⁾

On June 9, 1987, the trial court denied all pending motions and set the case for trial to begin on June 16, 1987. On June 10, 1987, Larry filed a request for rulings on his motions to dismiss and on his motion for judgment on the pleadings. The trial court apparently denied Larry's renewed request.

On June 16, 1987, prior to the selection of the jury, plaintiffs' counsel admitted that he had no facts to support a negligent entrustment theory against Larry Cundiff. Therefore, the trial court dismissed Larry from the case. The case was tried against Rachel Cundiff and the jury returned a verdict in her favor, based upon the comparative fault of the plaintiffs.⁽⁴⁾

Larry Cundiff subsequently filed a request for attorney fees pursuant to I.C. 34-1-32-1. The trial court ultimately granted Larry's request and awarded him $8246.65 in attorney fees and $411.11 for jury costs. Plaintiffs' counsel appealed the trial court's decision. The Court of Appeals affirmed the trial court's findings as to the frivolous, unreasonable and groundless nature of the claim against Larry Cundiff, outlining the definitions of each of those terms. However, the Court of Appeals vacated the award of attorney fees - because the amount of fees had been determined only on the basis of judicial notice and affidavits submitted by Larry. In that regard, the Court of Appeals observed that judicial notice can support only relatively small amounts of attorney fees in "routine cases". In addition, the Court noted that the affidavits were conflicting with regard to the time spent by defense counsel and did not clearly indicate what time had been spent in working on Rachel's defense, Larry's defense, or both. Therefore, the Court of Appeals remanded for an evidentiary hearing relative to the amount of attorney fees to be paid.⁽⁵⁾ The Indiana Supreme Court subsequently affirmed the decision of the Court of Appeals.⁽⁶⁾

Definition of "frivolous". In Kahn v. Cundiff⁽⁷⁾, the Court of Appeals stated that the first issue that must be addressed in determining the propriety of an award of costs under I.C. 34-1-32-1 involves the interpretation of the terms "frivolous, unreasonable or groundless". In that regard, the Court noted that I.C. 34-1-32-1 must be interpreted and applied "in a manner which carries out the legislative purpose which is to deter frivolous, unreasonable, groundless and bad faith litigation. Thus, we must balance the attorney's duty to zealously represent his clients within the bounds of the law against the important policy of discouraging unnecessary and unwarranted litigation".⁽⁸⁾

In Kahn v. Cundiff, the Court of Appeals held that:

[A] claim or defense is "frivolous" (a) if it is taken primarily for the purpose of harassing or maliciously injuring a person, or (b) if the lawyer is unable to make a good faith and rational argument on the merits of the action, or (c) if the lawyer is unable to support the action taken by a good faith and rational argument for an extension, modification, or reversal of existing law.⁽⁹⁾

Definition of "unreasonable". In Kahn v. Cundiff, the Court of Appeals held that the definition of "unreasonable", as used in I.C. 34-1-32-1, is as follows:

[A] claim or defense is unreasonable if, based on a totality of the circumstances, including the law and facts known at the time of the filing, no reasonable attorney would consider the claim or defense was worthy of litigation or justified.⁽¹⁰⁾

In addition, the Court of Appeals noted that in examining the circumstances surrounding an attorney's conduct, the court should consider:

(a) the amount of time the attorney had to investigate the facts, research the law, and prepare the document;

(b) the extent to which the attorney had to rely upon the client for the factual foundation;

(c) the complexity of the factual basis and legal questions involved;

(d) the ability to conduct a pre-filing investigation, and the extent to which discovery was necessary and beneficial to the development of the factual basis; and

(e) the plausibility of the arguments forwarded, including good faith efforts to extend or modify the law.

See e.g., Brown v. Federation of State Medical Boards of U.S. (7th Cir.1987), 830 F.2d 1429, 1435; Wong v. Tabor (1981), Ind.App., 422 N.E.2d 1279, 1288 n. 9.⁽¹¹⁾

Definition of "groundless". In Kahn v. Cundiff, the Court of Appeals held that the definition of "groundless", as used in I.C. 34-1-32-1 is that:

[A] claim or defense is groundless if no facts exist which support the legal claim relied on and presented by the losing party.⁽¹²⁾

A finding of improper motive is not required. In Kahn v. Cundiff, plaintiffs' counsel asserted that I.C. 34-1-32-1 essentially codifies the obdurate behavior exception, which provides that a court may award attorney fees if a party has filed or continued a knowingly baseless claim and the trial court determines that such conduct was "'vexatious and oppressive in the extreme and a blatant abuse of the judicial process' Kikkert v. Krumm (1985), Ind., 474 N.E.2d 503, 505". Plaintiffs' counsel argued that since the trial court did not find that he had an improper motive in bringing and maintaining the action against Larry Cundiff, attorney fees were improperly awarded. However, the Court of Appeals disagreed.

In rejecting the argument that an award of attorney fees under I.C. 32-1-32-1 is improper absent a finding of improper motive, the Court of Appeals noted that "[t]he only wording in the statute which hints at such a requirement is found in subsection (b)(3), which allows the court to award attorney fees if a party 'litigated the action in bad faith'".⁽¹³⁾ According to the Court:

Nothing in subsections (b)(1) or (b)(2) indicates that a court must find an improper motive to award attorney fees. Rather, these subsections clearly contemplate an examination of the legal and factual basis of a claim and the arguments advanced in support thereof. See Hall, Attorney's Fees for Frivolous, Unreasonable, or Groundless Litigation, 20 Ind.L.Rev. 151, 156 (1987). Although under our definition of frivolous a trial court may award attorney fees based on a client's motive, a finding of frivolousness and an award of attorney fees may be based solely upon the lack of a good faith and rational argument in support of the claim. Therefore, the trial court was not required to find an improper motive to award attorney fees under subsections (b)(1) or (b)(2).⁽¹⁴⁾

In Brant v. Hester⁽¹⁵⁾, the Court of Appeals reiterated the fact that a trial court is not required to find an improper motive on the part of counsel to support an award of attorney fees for violation of I.C. 34-1-32-1. Rather, the award is appropriately based solely upon the lack of a good faith and rational argument supporting the claim or defense asserted.

Continuing to pursue a frivolous or groundless claim or defense. In its opinion in Kahn v. Cundiff⁽¹⁶⁾, the Indiana Supreme Court noted that:

Commencing an action against a particular party will less often be frivolous, unreasonable, or groundless than continuing to litigate the same action. Because of the system of notice pleading and pre-trial discovery, commencement of an action may often be justified on relatively insubstantial grounds. Thorough representation will sometimes require a lawyer to proceed against some parties solely for the purpose of investigation through pre-trial discovery. In such cases, counsel is expected to determine expeditiously the propriety of continuing such action and to dismiss promptly claims found to be frivolous, unreasonable, or groundless. In this case, fees should be due for the costs of defending Larry (as distinguished from defending Rachel) from that point in the litigation at which pursuing the claim became frivolous, unreasonable, or groundless.⁽¹⁷⁾

In Owens v. Schoenberger⁽¹⁸⁾, the plaintiff brought a defamation action against a fraternity member who sent a letter to the presidents of fraternities on a college campus, in which the defendant urged fraternity members who had been in sexual contact with the plaintiff to go to Dr. Beard's office to be tested for sexually transmitted disease; saying that he had done so and that he had been treated for a sexually transmitted disease; and, suggesting that the plaintiff had given him the disease. The jury returned a verdict for the plaintiff and the trial court judge granted the plaintiff's motion for additur with regard to the compensatory damage award.

After the trial, the plaintiff moved to recover attorney fees under I.C. 34-1-32-1(1)(b). In support of that motion, the plaintiff asserted that three (3) months prior to trial, when the defendant was deposed, and during trial, the defendant admitted that: 1) he had absolutely no good faith basis for believing that the plaintiff had given him a sexually transmitted disease; 2) he had taken absolutely no steps to ascertain whether the plaintiff had a sexually transmitted disease; and, Dr. Baird testified that he had not diagnosed or treated the defendant for a sexually transmitted disease at the time to which the defendant referred in his letter to the fraternity presidents. Despite this evidence, the plaintiff stated that the defendant continued with his "baseless" defense of truth until the end of the three-day jury trial. Plaintiff's counsel did not seek any fees for their time spent in the initial investigation, pleading preparation and discovery. Rather, fees were sought only for plaintiff's counsels' immediate trial preparation (64 hours of work). The trial court granted the Plaintiff's motion and awarded $16,000.00 in attorney fees.

The defendant argued on appeal that the trial court abused its discretion when it awarded the plaintiff $16,000.00 in attorney fees. The Court of Appeals pointed out that the Indiana Supreme Court, in Kahn v. Cundiff⁽¹⁹⁾, declared that during the pre-trial stage, I.C. 34-1-32-1 requires a litigant to re-evaluate and "'determine the propriety of continuing'" an action throughout the course of discovery. In addition, the Court of Appeals noted that I.C. 34-1-32-1(b)(2) provides that fees may be awarded against a party who continued to litigate the action or defense after the party's claim or defense clearly became frivolous, unreasonable or groundless. Therefore, the Court of Appeals concluded that the defendant in Owens had an obligation to re-evaluate and determine the propriety of continuing his defense of truth. Based on the defendant's admission during his deposition and during trial that he had "absolutely no information to this moment" that the plaintiff ever caused him to have "anything at all", the Court of Appeals held that the trial court "could well have found" that the defendant's continued assertion of the defense of truth after his deposition and through a three-day jury trial approximately three months later warranted an award of the "attorney trial fees" that the plaintiff incurred.

"Our Supreme Court's decision makes it clear that a claim may be reasonable when filed, but become unreasonable when continued after the attorney conducts an investigation and pre-trial discovery".⁽²⁰⁾ "A litigant is obligated to investigate the legal and factual basis of the claim when filing it and to continuously evaluate the merits of counterclaims or defenses asserted in litigation. General Collection, Inc. v. Decker (1989), Ind. App., 545 N.E.2d 18, 20."⁽²¹⁾

In Tipton v. Roerig⁽²²⁾, the Plaintiff, Ronald Tipton, experienced a bilateral hearing loss after undergoing dialysis treatment at Wishard Hospital. Tipton sued the hospital and his physician, alleging negligence during his medical treatment. Tipton's medical records revealed that during his hospitalization, he had received two drugs: Lasix (not manufactured by the Defendant, Pfizer, Inc.) and Cefobid (a drug manufactured by Pfizer). Tipton subsequently amended his Complaint to include a product liability claim against Pfizer, in its capacity as the manufacturer and seller of Cefobid, which was the drug that Tipton claimed had caused his injuries.

Tipton's Amended Complaint was served on Pfizer on April 30, 1986. The parties conducted discovery for nearly three years. Then, in September of 1989, in response to the Court's Order to Produce, Tipton furnished Pfizer with a copy of an affidavit from Tipton's treating physician, Beverly Perkins-Edwards, M.D., which Tipton had submitted to the medical review panel almost a year earlier. In that affidavit,

Dr. Perkins-Edwards stated her opinion that Tipton's injuries were caused by Lasix. There was no mention of Cefobid in the affidavit or in any of the contentions that Tipton presented to the medical review panel.

Approximately three months after receiving Dr. Perkins-Edwards' affidavit, Pfizer moved for Summary Judgment and requested costs and attorney's fees for the work that its attorney had done since the date of Dr. Perkins-Edwards' affidavit, contending that it had been improper for Tipton to continue litigating his claim against Pfizer while contending before the medical review panel that Lasix had caused his injuries.

The trial court found that continuing the action against Pfizer after receiving the doctor's affidavit fell within I.C. 34-1-32-1 (continuing to litigate an action after the claim had clearly become frivolous, unreasonable, or groundless). Therefore, the trial court ordered Tipton's attorney to pay Pfizer's reasonable and necessary costs and attorney's fees associated with the continued defense of the lawsuit after the date of Dr. Perkins-Edwards' affidavit.

Tipton's attorney appealed, arguing that it was not unreasonable for him to fail to dismiss the action against Pfizer because discovery had not been completed. In addition, he argued that he had not done anything to actively pursue the claim against Pfizer. Rather, he asserted that it was Pfizer's attorneys who pursued discovery against him, which "ran up their own costs".

The Court of Appeals affirmed the trial court's award of costs and attorney fees to Pfizer. In its opinion, the Court of Appeals acknowledged that Tipton's attorney was entitled to pursue alternative claims through discovery. However, the court stated:

However, during the nearly three year period after the Complaint was filed, he had obtained no facts -- or other expert opinion -- implicating Pfizer's product as a cause of Tipton's injuries. He did not even claim that he had conducted any investigation (except for discovery requests to Pfizer) to determine whether there was any evidence implicating Cefobid as a cause of Tipton's hearing loss. Therefore, the claim must be considered groundless.⁽²³⁾

Tipton's attorney also claimed that his conduct was not unreasonable because he was simply waiting for the decision of the medical review panel and did not take any action to obtain discovery from Pfizer until forced to do so when Pfizer filed a Trial Rule 41(E) motion. The Court of Appeals also rejected that argument, stating:

We do not find that argument persuasive because Pfizer's attorneys were required to zealously represent their clients and to request from discovery from him. Furthermore, our Supreme Court's opinion in Kahn makes it clear that an attorney should take steps to "determine expeditiously" the merits of continuing an action. [Tipton's attorney] did not argue to the trial court, or to this court, that he sought other expert opinion or documentation implicating Pfizer's drug as a factor in Tipton's injuries. His defense is that he did nothing but wait -- and that is precisely the problem. The evidence supports the conclusion that it was unreasonable for [Tipton's attorney] to sit back and wait for years for the findings of the medical review panel before beginning an investigation of Cefobid as "the" cause or as "a" factor in Tipton's injures.⁽²⁴⁾

In United Farm Bureau Mutual Insurance Company v. Ira⁽²⁵⁾, Ira, a Farm Bureau insured, sued Farm Bureau to enforce its obligation under an agreed judgment to pay Ira's future medical expenses which were "reasonably related" to a 1981 car crash. In July of 1988, Ira underwent his third surgery. He submitted his medical bills to Farm Bureau, and also provided Farm Bureau with letters from two of his treating physicians, Dr. Shields and Dr. Jelsma. Dr. Shields stated that Ira's injuries were related to the 1981 car wreck, but did not recommend surgery. Dr. Jelsma stated that Ira's cervical arthritis was "acquired and probably aggravated by" the 1981 collision.

Farm Bureau refused to pay the bills relative to Ira's third surgery, claiming that Dr. Jelsma's letter created some doubt as to the causal connection between the 1981 collision and the third surgery. In December of 1988, Dr. Jelsma submitted a second report stating that "the report would suggest that the changes occurred immediately after the accident and were related to the accident itself and then aggravated with the passage of time . . .". Ira subsequently deposed Dr. Jelsma, and the doctor again expressed the opinion that Ira's third surgery was related to the 1981 collision. Later, Farm Bureau offered to pay Ira's medical expenses if he would dismiss all of his claims against Farm Bureau. Ira refused.

A bench trial was held and the trial court judge determined that Ira's medical expenses were reasonably related to the 1981 crash and ordered Farm Bureau to pay the bills relative to Ira's third surgery. In addition, the trial court ordered Farm Bureau to pay Ira $18,000 in attorney fees.

The Court of Appeals held that attorney fees were appropriately assessed against Farm Bureau under I.C. 34-1-32-1(b)(2). The Court of Appeals based its decision on its finding that it was clear from the record Farm Bureau continued its defense when no facts existed to support its claim that Ira's expenses were not related to the collision after it received Dr. Jelsma's December letter. "That is, that Farm Bureau had doggedly pursued its defense even after it had proof to the contrary and no substantial evidence supporting its position".⁽²⁶⁾

What Is Required To Avoid Liability
For Asserting A Frivolous Or Groundless Claim Or Defense

In its opinion in the case of Whittington v. Ohio River Company⁽²⁷⁾, the United States District Court for the Eastern District of Kentucky set out a list of seven (7) factors to be considered in determining whether attorney fees should be awarded for a violation of Rule 11 of the Federal Rules of Civil Procedure.⁽²⁸⁾ Trial Rule 11 of the Indiana Rules of Trial Procedure tracks Federal Rule 11 in stating that an attorney's signature on a pleading or motion "constitutes a certificate by him that he has read the pleadings; that to the best of his knowledge, information, and belief, there is good ground to support it; and that it is not interposed for delay"; and, that "[f]or a wilful violation of this rule an attorney may be subjected to appropriate disciplinary action".⁽²⁹⁾

The factors set out by the court in Whittington are as follows:

1. Reading The Document. If an attorney signs a document, he must have read it.⁽³⁰⁾

2. Factual Inquiry. An attorney must make an investigation of the facts before filing a claim or defense. [citations omitted] An attorney has not made a "reasonable inquiry" concerning the facts, if he has not made any inquiry, or if he has relied only on his client, [citations omitted] when time permitted him to make a further investigation. A defendant must not be joined, or claim asserted against a defendant merely in the hope that discovery will turn up something against the defendant. [citations omitted] The cost of determining whether a defendant should be named in the action must be borne by the plaintiff and his attorney before suit is filed. [citations omitted] The burden cannot be shifted to a defendant to prove himself out of the case after filing. Thus, naming all of the manufacturers of a certain kind of drug, when a reasonable inquiry would have disclosed that the plaintiff took only the products of a few members of the industry, will result in mandatory sanctions. [citation omitted]⁽³¹⁾

Before a defendant is named or a claim (such as a RICO claim) is asserted against a defendant, the attorney's file should contain facts admissible in evidence, or at least facts indicating the probable existence of evidence, implicating that defendant or supporting that claim. The shotgun complaint is out. ...⁽³²⁾

3. Legal Inquiry. An attorney must perform reasonably sufficient legal research before filing a claim or defense. [citation omitted] An attorney has not made a reasonable inquiry as to whether a claim or defense is warranted by existing law if he or she hasn't done any research. An attorney cannot have a reasonable belief that a claim or defense is warranted by a good faith argument for the "extension, modification or reversal of existing law," unless he or she knows what the existing law is. [citations omitted] Counsel's interpretation of the law, formulated after sufficient research, must be non-frivolous, that is, reasonable as evaluated by a competent attorney. [citations omitted]⁽³³⁾

Flights of legal fancy and optimistic speculation in complaints and answers are improper under the amended rule. ... Some defendants are clearly immune from suit. [citation omitted] Some defenses have no application to the case. A shotgun answer is as improper as a shotgun complaint.⁽³⁴⁾

If a recent controlling court decision is fatal to a claim, sanctions will be imposed, whether the attorney actually found the case or not, if a reasonably competent attorney would have found it. [citations omitted]⁽³⁵⁾

Although Rule 11 does not literally require it, it would be my advice to all attorneys to be sure that the file contains at least a skeleton memo outlining concretely, not just abstractly, the legal basis for every claim or defense. It should apply the law disclosed by reasonably extensive legal research to the facts disclosed by a reasonably adequate factual investigation. The analysis should be that of a reasonably competent attorney admitted to federal practice.⁽³⁶⁾

4. Objective Standard. Whether or not a "reasonable inquiry" into the facts or law has been made is to be determined by the court objectively. An attorney's subjective good faith is irrelevant.⁽³⁷⁾ ...

The ultimate test is: "If judged by an objective standard, a reasonable basis for the position exists in both law and fact at the time that the position is adopted, then sanctions should not be imposed." The standard imposed is that of a competent attorney admitted to the bar of the federal court.⁽³⁸⁾

5. Improper Purpose. Some courts have held that, if there is a proper factual and legal basis for asserting a claim or defense, the "improper purpose" requirement of Rule 11 is not violated. Other authorities are to the effect that the "improper purpose" provision is a subjective requirement and that even meritorious litigation positions, if taken for purposes of harassment or other improper reason can violate Rule 11. This court holds that the latter is the better view. Indeed, it seems required by the plain meaning of Rule 11. Therefore, whether or not a pleading was interposed for an improper purpose involves a subjective standard of bad faith.⁽³⁹⁾

6. Continuing Obligation. An attorney must not only conduct a reasonable investigation into the facts and law before filing but must also continually review and reevaluate his position as the case develops. He must abandon claims or defenses as soon as it becomes apparent that it is unreasonable to pursue them.⁽⁴⁰⁾

7. Mandatory Sanctions. If Rule 11 has been violated, sanctions are mandatory, although the nature and amount of the sanctions are within the discretion of the trial court.⁽⁴¹⁾

The Court in Whittington summarized the requirements of Rule 11 as follows:

1. An attorney must READ every paper before signing it.

2. He must make a reasonable pre-filing investigation of the FACTS.

3. He must research the LAW, unless he is certain he knows it.

4. The law as applied to the facts must REASONABLY WARRANT the legal positions and steps he takes. If existing law does not warrant these positions, a plausible argument for the extension of the law to the facts of the case is required.

5. It must be demonstrated, as the basis of pre-filing investigation and research, that there is a REASONABLE BASIS to name each defendant named, and to support each claim asserted. The shotgun complaint or answer, filed in the hope that discovery will produce the justification for it, is improper.

6. The adequacy of an attorney's investigation, research and legal analysis will be evaluated by the court under an OBJECTIVE STANDARD, namely, whether the attorney acted as a reasonably competent attorney admitted to federal practice. Except as to improper purpose, subjective good faith is not a defense to Rule 11 sanctions. A pure heart but an empty head is of no avail.

7. The attorney must CONTINUALLY RE-EVALUATE his positions and abandon them if they are no longer reasonably warranted.

8. An attorney must not have an IMPROPER PURPOSE, such as harassment or intimidation, in naming any defendant, asserting any legal position or taking any legal step.

9. If an attorney violates Rule 11 the imposition of some sanction is MANDATORY, although the nature and extent of the sanction is discretionary with the district court.<sup>(4

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Indiana Supreme Court Refuses To Allow Insurance Carriers To Circumvent Subrogation Statutes

On May 30, 1997, the Indiana Supreme Court handed down its opinion in Erie Insurance Co. v. George⁽¹⁾, holding that:

An insurer may not sue independently to enforce a personal injury claim arising out of subrogation prior to resolution of its insured's claims absent an agreement with its insured granting explicit and unequivocal authority to initiate a lawsuit or settlement that governs the forum for resolution of both the insured's and insurer's claims.⁽²⁾

Facts of the Case

The undisputed facts in Erie were that on February 8, 1993, Donald Kellenberger and James George were involved in a crash in which Kellenberger rear-ended George. Kellenberger carried automobile liability insurance with GEICO. Erie was George's automobile insurance carrier. On May 3, 1993, George retained attorney Gerald Sufleta to represent him in his personal injury claim against Kellenberger. On May 11, 1993, Sufleta notified Erie of his representation and asserted an "attorney's lien for fees and costs".⁽³⁾

At Sufleta's request, in June 1993, Erie sent him a check in the amount of $4080.00, which represented medical payments coverage for George's medical expenses. The cover letter that Erie sent with that draft stated that by paying George's medical expenses, it acquired a right of subrogation against Kellenberger in the amount of $4080.00 and stated that Erie intended to pursue its own subrogation claim.

On September 24, 1993, Erie sent a letter to GEICO, advising it of its subrogation lien and asking GEICO to issue a separate check to Erie "'[w]hen settlement has been reached with our insured and his attorney'". Ten days later, even though George had not yet settled his claim against Kellenberger, Erie wrote another letter to GEICO, demanding payment of its subrogation lien within ten days. When Erie did not receive payment from GEICO, Erie (without notice to George or Sufleta) initiated its own lawsuit against Kellenberger.

On February 15, 1994, George and Sufleta moved to intervene in the lawsuit that Erie had filed against Kellenberger, asserting that Erie had no right to bring an action in its own name at that stage. In addition, they alleged that, in any event, Erie was liable for a pro rata share of George's attorney fees and costs, pursuant to I.C. 34-4-41-4.⁽⁴⁾

Trial Court's Ruling

The trial court held a hearing on April 21, 1994, at which three things happened: (1) the trial court granted George and Sufleta's motion to intervene; (2) Kellenberger (through GEICO) filed a "complaint seeking interpleader" of Erie and Sufleta and deposited a check for $4260.00 with the court⁽⁵⁾; and, (3) Erie, George and Sufleta stipulated to the dismissal of Kellenberger from the lawsuit.

George and Sufleta then moved for summary judgment, contending that Erie could not bring its subrogation claim against Kellenberger directly, but rather, had to pursue its subrogation claim against any settlement that George obtained from Kellenberger. George and Sufleta also asked for attorney's fees and costs out of the funds that GEICO had paid into court.

Erie also moved for summary judgment, arguing that as a subrogee, it had a common law right and a right under Indiana Trial Rule 19(E)(3) to bring an action against Kellenberger in its own name once it had made payment to George. Erie also asserted that its lien should not be reduced for payment of any fee to Sufleta because: (1) Sufleta had expended no effort to recover the money from Kellenberger; (2) I.C. 34-4-41-4 did not apply to the facts of this case; and, (3) Sufleta was collaterally estopped from litigating the issue by decisions in prior lawsuits involving his right to attorney's fees.

The trial court ruled that Erie could not sue in its own name to enforce its subrogation rights until George had settled with Kellenberger or obtained a judgment against him. According to the trial court, in the absence of a common law right to sue independently before George had settled with Kellenberger or obtained a judgment against him, Erie could sue in its own name only if its policy with George so-provided. However, the trial court interpreted Erie's policy as providing that Erie could enforce its subrogation rights only after its insured settled with or obtained a judgment against the tortfeasor. Therefore, the trial court held that until George's claim against Kellenberger was settled or finally adjudicated, George was to hold in trust any money that he recovered to which Erie claimed it was entitled. In addition, the trial court ordered Sufleta to submit an affidavit substantiating the costs incurred in pursuing George's claim against Kellenberger and reporting whether the claim had been settled or was still pending. Disbursement of the interpled funds was postponed until the fee issue was resolved.

Court of Appeals Decision

Erie appealed and the Court of Appeals reversed the trial court's ruling, holding that: (1) Erie was entitled to initiate its own action against Kellenberger to recover the amount of med pay coverage that it had extended to George; and, that: (2) a factual determination of Sufleta's contribution to securing the interpled funds was required before attorney fees and costs could be awarded to Sufleta.⁽⁶⁾ George and Sufleta then sought transfer to the Supreme Court, which was granted on October 7, 1996.

Issues Presented to the Supreme Court

In Erie, the Supreme Court, for the first time, was called upon to interpret I.C. 34-4-41-1 through I.C. 34-4-41-5 (the statute which the Indiana legislature enacted in 1993, dealing with subrogation and attorney's fees in personal injury cases).

The Supreme Court characterized the issues to be resolved in the case as being:

(1) Does Erie, as subrogee, have a right to bring an independent action to recover reimbursement of the funds that it had paid to George? and, (2) Who is entitled to the interpled funds?

Supreme Court's Holding

The Supreme Court held that "... the insurer cannot sue independently to enforce subrogation rights for personal injuries while its insured's claims are still outstanding unless the insurer has obtained an explicit contractual right transferring control of the dispute to the insurer".⁽⁷⁾ Therefore, in this case, "Erie cannot file a lawsuit for medical expenses in its own name independent of George's claim".⁽⁸⁾

The Court's reasoning for reaching its decision in Erie v. George includes the following:

The plain terms of the subrogation statute are consistent with this result I. C. 34-4-41-3 states that the insurer subrogation statute applies to "an insurer claiming subrogation or reimbursement rights to the proceeds of a settlement or judgment resulting from a legal proceeding⁽⁹⁾ commenced by an insured against a third party legally responsible for personal injury for which payment is made by the insurer."⁽¹⁰⁾ It obligates an insurer claiming subrogation or reimbursement rights to "pay, out of the amount received from the insured, the insurer's pro rata share of the reasonable and necessary costs and expenses of asserting the third party claim".⁽¹¹⁾

According to the Court, "[a]t best, by referring to 'pro rata' payments' out of the amount received from the insured' the statute suggests an assumption that the insured has already collected from the tortfeasor and remitted subrogation payments to the insurer before the sharing of attorney's fees and costs occurs. This in turn suggests that no independent prior action by the insurer is contemplated ...".⁽¹²⁾

However, the statute is silent as to the procedures that are available to a subrogee insurer to collect its subrogated claim. That is, the statute does not directly address whether a subrogated insurer can file an independent suit for subrogated personal injury claims before its insured's claims are resolved.⁽¹³⁾ Nor does the statute address the procedures by which the insured is to obtain his/her pro rata share of attorney fees and costs which the statute obligates the insurer to pay.

Preventing claim splitting and deterring repetitive litigation Indiana has long-discouraged claim splitting. "'A party seeking to enforce a claim, legal or equitable, must present to the court ... all the grounds upon which he expects a judgment in his favor. He is not at liberty to split up his demand and prosecute it piecemeal[.]' [citation omitted]". "It is axiomatic that Erie, upon paying George's medical bills, acquired no greater rights than those George held himself. Because George's claim against Kellenberger was still outstanding when Erie filed suit, Erie, by suing only for the medical expenses, effectively split George's claim. In so doing, Erie has attempted something George himself could not have done. And because Erie's legal rights are coterminous with George's, Erie's lawsuit is barred as an impermissible attempt to split the personal injury claim."⁽¹⁴⁾

"One obvious objective behind the rule [against claim splitting] is deterring repetitive litigation. Public resources are wasted if more than one judge and more than one jury are employed to try claims for different damage elements arising out of the same event and asserted under the same theory of recovery. The defendant also has an interest in not being subject to multiple litigation. The rule against claim splitting applies with no less force to claims arising under equitable doctrines, in this case subrogation. ..."⁽¹⁵⁾

Explicit agreements under which the insured assigns his/her claim against the responsible third party can protect insurers in appropriate cases Erie pointed out that insurers cannot always depend upon an insured to enforce their equitable interest in a recovery. That is, there may be circumstances in which the insured collects under the insurance policy but does not pursue an action against the tortfeasor. Erie argued that because the subrogee steps into the legal position of the subrogor, insurers may therefore be faced with forfeiture of recovery due to statutes of limitations. However, the Supreme Court rejected that argument, stating that "[t]he solution to the problem is not suing independently without notice to the insured, as Erie did here, but rather securing an assignment of rights from the insured by contract to initiate a unitary lawsuit".⁽¹⁶⁾

Only an explicit contractual relinquishment of the right to select the forum and control the litigation is sufficient to deprive the insured of those rights while the insured has any remaining claims The Supreme Court noted that an equitable assignment of the right to sue may arise by operation of law, rather than by contract, upon full payment of a loss. However, the Court stated that "... where the insured has remaining claims, only an explicit contractual relinquishment of the right to select the forum and control the litigation is sufficient to deprive the insured of those rights".⁽¹⁷⁾

The subrogation clause in Erie's insurance policy did not give it the right to pursue subrogation by filing suit against the tortfeasor before its insured had settled his claim against the tortfeasor Erie argued that it acquired a right to sue independently upon payment to George by virtue of the following clause in its insurance policy with him: "'After we make a payment under this policy, we will have the right to recover from anyone else held responsible. Anyone we protect is required to transfer this right to us, and do nothing to harm this right. Anyone receiving payment from us and from someone else for the same accident or loss will reimburse us up to our payment'".⁽¹⁸⁾

The Supreme Court rejected Erie's argument, noting that "[w]here a right to subrogation is asserted under a contract before the debt is satisfied, as here, 'the contract must be clear, unequivocal and so certain as to admit no doubt on the question.' [citation omitted]".⁽¹⁹⁾ In this case, the Court stated that "[r]ead most favorably to Erie, the clause at best is ambiguous on whether Erie has any right upon payment to sue independently before George's claim is resolved. The clause certainly does not alert the lay reader that the consequence of independent action ... is to deprive the insured of choice of forum" and that Erie was acquiring control over George's claim.⁽²⁰⁾ "It is well-settled that '[w]here there is ambiguity, insurance policies are to be construed strictly against the insurer'. [citation omitted] To accord a right to sue to enforce all claims, a subrogation clause must be far more explicit than Erie's was here."⁽²¹⁾

Indiana Rules of Trial Procedure Trial Rule 19(E)(3) of the Indiana Rules of Trial Procedure provides that a "subrogee may enforce the claim to the extent that he establishes his title or interest by appropriate pleading and proof without joining the subrogor". The Supreme Court points out that the trial rule does not address the issue of when a subrogee acquires a claim that may be asserted independent of the subrogor's. Rather, "it deals with the pre-existing rule of joinder, and assumes the subrogee has an assertable claim as a matter of substantive law".⁽²²⁾

Allowing independent lawsuits by subrogees under Trial Rule 19(E)(3) before the insured's claims have been resolved would "divest the insured of the ability to control the presentation of the insured's claims".⁽²³⁾ In rejecting that possibility, the Supreme Court pointed out that:

If the insurer were permitted to assert its subrogated claim pursuant to Rule 19(E) independently of the insured's, then clearly the provisions of Section (E)(3)(c) apply and the insured is 'subject to permissive joinder as provided in Rule 20.' Rule 20(A)(2), in turn, provides that the insured as an 'unwillingly plaintiff,' may be dragged into that suit by the defendant. Here Kellenberger quite reasonably chose to write a check for the $4260 in medical payments and walk away from this free for all among Erie, its insured and it insured's attorney. If Rule 19(E) were available to Erie, however, Kellenberger could equally rationally have determined that Erie had selected a favorable forum to litigate the dispute between George and Kellenberger. In that event, Rule 20 would enable involuntary joinder of George's claims. The net effect of this would be to permit Erie, by paying medical benefits, to obtain control of the prosecution of George's claim. As noted above, that risk is nowhere spelled out in the insurance policy on which Erie relies for its subrogation rights.⁽²⁴⁾

Duplicate lawsuits have the potential for producing undesirable collateral consequences Erie cited Chemco Transp., Inc. v. Conn⁽²⁵⁾ for the proposition that an insurer's separate action as subrogee will not bar an insured's claims. In that case, a Chemco truck injured Conn and destroyed his vehicle. Conn first filed a claim for the loss of his vehicle with his own insurance carrier (Protective Insurance Company). Then, Conn sued Chemco in Cass County to recover for both his personal injuries and the property damage to his vehicle. Conn next collected from his own insurance company for the damage to his vehicle.

Ten months later, while Conn's lawsuit against Chemco was still pending, Protective, as subrogee, filed suit against Chemco in Marion County, seeking recovery for the property damage to Conn's vehicle and naming Conn as a plaintiff without his knowledge. That lawsuit was subsequently settled and dismissed with prejudice.

Chemco then filed a motion for summary judgment in Conn's Cass County suit, asserting that the Marion County action was res judicata as to the property damage claims. The trial court denied that motion. The Cass County case was tried and the jury awarded Conn damages for both his vehicle and his personal injuries.

The Indiana Court of Appeals held that res judicata did apply. However, the Supreme Court granted transfer and affirmed the trial court, holding that since Conn was not a party to the Marion County action, he was not bound by it.

In its decision in Erie, the Supreme Court notes that apparently, in Chemco, no mention was made of Trial Rule 19(E); and, states that under that rule, if the Marion County action had been properly instituted, Conn was not a necessary party to it. Nor did any party in ChemcoConn, the Supreme Court did state that although Protective had the right to pursue its subrogation claim in Conn's name, Conn reserved the right to pursue his claim since Protective only partially compensated him for the loss. In Conn, the Supreme Court found merit to Conn's argument that to find against him on the res judicata issue would be to give insurance companies the power to settle all of a plaintiff's claims in spite of the fact that the plaintiff did not give all of his/her rights to his/her insurance carrier when he/she settled with his/her own insurer. challenge the subrogee, Protective Insurance Company's, right to bring a separate claim in Marion County. However, in

In Chemco, the result was that Chemco paid twice for the damage to Conn's vehicle - once to Conn's insurance company; and, then again, to Conn - which the Supreme Court in ErieChemco sought to avoid by finding no res judicata effect - control of the insured's case by his/her insurer - is equally unsatisfactory. However, in contrast to the issues raised in Erie, in Chemco, there was no direct challenge to the first lawsuit. Rather, the issue was simply how to deal with the res judicata effects of the first lawsuit in the second. characterizes as an unsatisfactory result. In addition, the Court states that the result that

In Erie, the Supreme Court stated that "[r]equiring the subrogee to join in the insured's suit by reliance on the ancient prohibition against claim splitting solves both problems and also eliminates duplicative litigation. Indeed, George contends that this case presents a situation where he was in the process of settling his personal injury claims in a manner that would produce reimbursement to Erie without any litigation at all. Whether that is true in this case or not, certainly such a scenario is likely to occur from time to time if insurers can initiate independent claims as Erie did here. Even if Chemco was correct in its observation as to property damage -- a question we do not decide -- we decline to permit bifurcated personal injury claims".⁽²⁶⁾

I.C. 34-4-41-5 specifically provides that the Indiana subrogation statute does not prohibit an insurer with a subrogated property damage claim from settling that subrogation claim separately by arbitration, agreement, or suit in its own name. In Erie, George argued that this provision constitutes an implied prohibition against Erie (a subrogee) from proceeding separately to recover medical benefits that it had paid to him (its insured).

The Supreme Court declined to hold that the statute prohibits a subrogee from proceeding independently to recover medical benefits under all circumstances. In that regard, the Court noted that the statute does not provide any time limitation on the insured's decision as to whether he/she will proceed with an action seeking recovery from the tortfeasor. Therefore, to hold that the statute prohibits a subrogee from proceeding unilaterally even with the insured's consent would deprive the subrogee of any recovery at all if the insured decides not to proceed for any reason. According to the Court, there are several situations in which this is a realistic possibility. For example, in cases where the medical expenses are greater than the tortfeasor's financial responsibility. In that situation, the insured has no incentive to recover from the tortfeasor because any recovery would have to be remitted to the subrogee. The Court concluded that:

Forfeiture of the subrogee's right to recover medical expenses is too drastic a result to assume its implication from a statutory provision that merely states that the statute does not prohibit the subrogee from asserting a property damage claim. Nor is there any fix for this result -- such as an automatic shift of authority two months before the expiration of applicable limitations periods -- that would not require this Court to engage in legislation.

It is simple enough to state that the subrogee may not sue independently for medical benefits if that is what the Legislature intended. Similarly, if the Legislature intended to authorize a separate suit for property damage that can be simply done as well. What we find, however, is only a statement that the statute "does not prohibit" a suit for property damage. Whatever this means as to property damage, we cannot conclude that the Legislature intended by such an oblique approach to forfeit the rights of the subrogee under some circumstances.⁽²⁷⁾

http://www.smithlaw.bz/lawyer-attorney-1182246.html

Did You Know That Health Care Providers Who Accept Assignment of Medicare Must Reduce Their Bills?

On December 29, 1998, the Indiana Court of Appeals handed down its opinion in Thompson v. Owensby, et al, in which it recognizes an independent cause of action for spoliation of evidence. The facts involved in the case are as follows. Six year old Nicole Thompson was injured when she was attacked by a German shepard dog. The dog had been restrained by a cable in its owners' (Jeff and Rhonda Owensby) yard. However, the dog broke free, got out of the yard, and attacked Nicole.

Nicole and her parents sought compensation from the Owensby, from the company they believed to have manufactured the dog cable (Orrville Leather, Inc.), and from Henry and Alva Whitis, the owners of the property where the Owensbys lived at the time of the attack.

The Whitis Defendants carried homeowners insurance with Indiana Insurance Company. During the course of its investigation of the plaintiffs' claim, Indiana Insurance took possession of the restraining cable. Before any of the parties had examined or tested the restraining cable, Indiana Insurance lost the cable. Therefore, the Plaintiffs sued the insurance company for negligence. In their Amended Complaint, the Plaintiffs alleged that Indiana Insurance had assumed a duty to safeguard the cable and that the insurance company had breached that duty by losing the cable. In addition, the Plaintiffs alleged that the loss of the cable adversely affected their claims against the dog owners and the manufacture of the cable.

The Court of Appeals characterized the question of first impression raised in this case as being "whether an insurance company that loses evidence may be liable to a third party claimant for damages attributable to the los of the evidence.⁽¹⁾ The Court of Appeals stated that in order to allege an actionable duty, the Thompsons were required to identify a cognizable relationship with Indiana Insurance Company; they had to allege foreseeable harm from the loss of the evidence; and, they had to allege sufficient supporting facts to demonstrate that the recognition of a duty to maintain evidence would promote Indiana's policy goals.

In analyzing these three elements, the Court of Appeals noted that a liability insurance carrier has a duty in the ordinary course of business to investigate and evaluate claims made by its insureds; and, that in carrying out this duty, carriers take possession of documents and things that must be authenticated and tested in order to evaluate claims. Those same documents and things will be key items of evidence if the claim is denied and litigation ensues. According to the Court of Appeals:

[t]his conduct by necessity gives rise to a relationship with the third party claimant. ... A liability insurance carrier like the Insurance Company can rationally be held to understand that once a claim is filed, there is a possibility of litigation concerning the underlying injuries. The Insurance Company's knowledge and investigation of the Thompsons' claims and its possession of what would be a key item of evidence in the event litigation ensued created a relationship between the Company and the Thompsons that weighs in favor of recognizing a cognizable duty to maintain the evidence.⁽²⁾

With regard to foreseeability, the Court of Appeals noted that because liability insurance carriers are "no strangers to litigation", "it strains credulity to posit in a motion to dismiss that a liability insurance carrier could be unaware of the potential importance of physical evidence".⁽³⁾ Therefore, the Court concluded that "[i]f litigation was foreseeable in this case, the evidentiary value of the restraining cable was foreseeable as well".⁽⁴⁾ In addition, the Court noted that "... foreseeability of the harm in losing evidence can be inferred from the allegation that the Company's investigator took possession of the cable: if an insurance carrier's investigator's deems certain evidence important enough to be collected, it is foreseeable that loss of the evidence would interfere with a claimant's ability to prove the underlying claim".⁽⁵⁾ According to the Court, the duty to maintain evidence does not arise out of the relationship between an insurance carrier and a third party claimant. Rather, the duty arises from an insurance company's business practice regarding the collection and preservation of evidence. The Court based its decision in this case on the concept of accountability:

In Indiana, persons may be held accountable for their actions within the bounds of a factfinder's determination of reasonableness.⁽⁶⁾

The Court of Appeals concluded its opinion by noting that the remedy for failure to maintain evidence differs among jurisdictions. In cases outside of the insurance context, Indiana courts have dealt with the issue by imposing an evidentiary inference against the party that lost the evidence. Courts in other jurisdictions have addressed the issue by imposing discovery sanctions. However, in the present case, the Thompsons chose to pursue a tort action rather than availing themselves of an evidentiary inference or seeking discovery sanctions. According to the Court of Appeals, "that choice is the Thompsons' prerogative. By exercising the prerogative, the Thompsons have accepted the burden of proving that the Insurance Company breached its duty to maintain the restraining cable, that the Thompsons were harmed by the breach and that the harm resulted in damages that can be proven with reasonable specificity".⁽⁷⁾ In addition, the Court notes that although the Thompsons base their claims on their prospective inability to prove their claims against other defendants, their damages could also be based upon the cost of retaining experts or conducting discovery needed to provide proof of the alleged defect in the restraining cable.

We represent the Plaintiffs in Thompson. After we were notified that Indiana Insurance had lost the dog cable, we filed an Amended Complaint, adding Indiana Insurance as a defendant. The portion of the Amended Complaint relative to the Plaintiffs' claim against Indiana Insurance for spoliation of evidence is as follows.

http://www.smithlaw.bz/lawyer-attorney-1182245.html

Dealing With Non-Party Defenses

In our judgment, plaintiffs' counsel should take an offensive posture with regard to nonparty defenses that are asserted by defendants and aggressively seek to force defense counsel to properly identify nonparties in a timely manner and move to strike inappropriate nonparty defenses.

Indiana's Comparative Fault Act⁽¹⁾ provides that in an action based upon fault, the trial court shall instruct the jury that in reaching its verdict it shall first determine the percentage of fault of the claimant, of the defendant(s), and of any person or entity who is a nonparty. The total of those percentages of fault must equal 100%.⁽²⁾ If the claimant's percentage of fault is not greater than 50% of the total fault, the jury shall next determine the total amount of the claimant's damages without regard to fault.⁽³⁾ The jury shall next multiply the percentage of fault of each defendant by the total amount of the claimant's damages and enter a verdict against each defendant in an amount that equals the product of that multiplication.⁽⁴⁾

The nonparty defense is a powerful tool because the claimant loses the percentage of his/her damages that equals any percentage of fault that is attributed to a nonparty. Therefore, defendants search for individuals and entities to name as nonparties to reduce their liability to a plaintiff. Defense counsel frequently name nonparties whose legal liability to the plaintiff is marginal (or nonexistent) and whose percentage of fault is small at best. Once a defendant pleads a nonparty defense, the plaintiff is then put in the position of making a tactical decision as to whether to add the nonparty as a defendant in the case.

I.C. 34-4-33-10(b) provides that the burden of proving a nonparty defense rests with the defendant, who must affirmatively plead the defense. If the plaintiff adds the nonparty as a defendant in the case, the plaintiff then bears the burden of proof with regard to that party's fault. Therefore, if a nonparty's fault is slight and/or the nonparty's liability is marginal, plaintiff's counsel may decide that the better strategy is not to sue the nonparty. The purpose of this article is to suggest steps that should be taken to identify nonparty defenses, determine whether asserted nonparty defenses are valid, and to eliminate invalid nonparty defenses from a case.

Plaintiffs counsel must take the offensive with regard to identifying nonparty defenses and determining whether they are valid. I.C. 34-4-33-10(c) provides that:

A nonparty defense that is known by the defendant when he files his first answer shall be pleaded as a part of the first answer. A defendant who gains actual knowledge of a nonparty defense after the filing of an answer may plead the defense with reasonable promptness. However, if the defendant was served with a complaint and summons more than one hundred fifty (150) days before the expiration of the limitation of action applicable to the claimant's claim against the nonparty, the defendant shall plead any nonparty defense not later than forty-five (45) days before the expiration of that limitation of action. The trial court may alter these time limitations or make other suitable time limitations in any manner that is consistent with:

(1) giving the defendant a reasonable opportunity to discover the existence of a nonparty defense; and

(2) giving the claimant a reasonable opportunity to add the nonparty as an additional defendant to the action before the expiration of the period of limitation applicable to the claim. [Emphasis added.]

In view of I.C. 34-4-33-10(c), plaintiffs counsel should generally file suit at least 150 days prior to the expiration of the applicable statute of limitations. However, that is not always possible -- as in the situation where the plaintiff does not hire counsel until shortly before the expiration of the statute of limitiations. In addition, there are situations in which defendants name nonparties who plaintiff's counsel decides to sue, who then name other nonparties less than 150 days prior to the expiration of the statute of limitations. In such situations, pursuant to I.C. 34-4-33-10(c), plaintiff's counsel should ask the court to alter the time limitations for pleading nonparty defenses.

http://www.smithlaw.bz/lawyer-attorney-1182243.html

Dealing With Attorney-Client Privilege And Work Product Doctrine Objections To Discovery Requests

In our judgment, receiving Answers To Interrogatories or responses to Requests For Production in which opposing counsel objects to answering certain questions or producing documents, stating that "the information or documents being sought were obtained or prepared in anticipation of litigation and are therefore protected from discovery by the attorney work product doctrine and/or attorney-client privilege" occurs too frequently. How often do attorneys follow-up on that kind of response and press opposing counsel for a proper response to the tendered Interrogatories or Request For Production? Probably not often enough.

The purpose of this article is to provide a concise summary of Indiana law relative to the work product doctrine and attorney-client privilege and to provide a form for an Interrogatory that can be used to follow-up with regard to general objections to Interrogatories and Requests For Production based on the work product doctrine and attorney-client privilege, which can be used to require opposing counsel to respond fully and appropriately when such objections are made.

THE DISTINCTION BETWEEN THE ATTORNEY-CLIENT PRIVILEGEAND THE WORK PRODUCT DOCTRINE

Under Indiana law, communications between an attorney and client are privileged and not discoverable.⁽¹⁾ The attorney-client privilege is currently recognized by statute in Indiana.⁽²⁾ However, the privilege was first recognized by judicial decision, as part of our common law.⁽³⁾

In In re Murphy⁽⁴⁾, the Court compared the work product doctrine with the attorney-client privilege, and in its discussion, stated that:

Although the "attorney-client privilege and the work product doctrine arise from the same common law origin", the work product doctrine under contemporary law is "distinct from and broader than the attorney-client privilege". The items protected by the work product doctrine are not confined to attorney-client confidential communications. [Federal] Rule 26(b)(3) extends protection to all "documents and tangible things" that are prepared in anticipation of litigation or for trial. Included in this amorphous category are trial preparation documents that contain the fruits of the attorney's investigative endeavors and any compendium of relevant evidence prepared by the attorney. Also protected by Rule 26(b)(3) are the attorney's mental impressions, opinions and legal theories. (Citation omitted).

It has been said that "opinion work product enjoys a nearly absolute immunity and only in rare situations can it be discovered".⁽⁵⁾ The privilege created by Trial Rule 26(b)(3) applies to intangible as well as tangible materials⁽⁶⁾ and extends to a party or representative of a party if the information was gathered in anticipation of litigation.⁽⁷⁾ The Indiana Supreme Court has also defined the scope of the attorney-client privilege as including communications between an attorney and client made through their agents and representatives.⁽⁸⁾

PURPOSES FOR THE WORK PRODUCT IMMUNITY DOCTRINE

According to the Indiana Court of Appeals:

The policy behind the rule of Hickman v. Taylor (1947), 329 U.S. 495, 67 S.Ct. 385, 91 L.Ed. 451, and its progeny, now codified in Fed.R.Civ.P. 26(b)(3), the federal counterpart to our own trial rule, is to protect the integrity of the adversary process, not to protect all recorded opinions, observations and impressions an attorney or his advisors have made in connection with a legal problem. Coastal Corp. v. Duncan (D.Del., 1980), 86 F.R.D. 514, 522. Documents are work product because their subject matter relates to the preparation, strategy, and appraisal of the strengths and weaknesses of an action, or to the activities of the attorneys involved. 4 Moore's Federal Practice Sec. 26.64[1] at 26-349 (1970).

Therefore, the primary motivating purpose behind the creation of the document must be to aid in trial preparation. United States v. Gulf Oil Corp. (Temp.Emer.Ct.App., 1985), 760 F.2d 292, 296.⁽⁹⁾

In addition, it has been stated that "'[t]he primary purpose of the work product privilege is to assure that an attorney is not inhibited in his representation of his client by the fear that his files will be open to scrutiny upon demand of an opposing party. Counsel should be allowed to amass data and commit his opinions and thought process to writing free of the concern that, at some later date, an opposing party may be entitled to secure any relevant work product documents merely on request and use them against his client'".⁽¹⁰⁾

INDIANA LAW RELATIVE TO A CLAIM OF PRIVILEGE BASED UPON
THE WORK PRODUCT DOCTRINE

Trial Rule 26(B)(3) of the Indiana Rules of Trial Procedure provides in part that a party may obtain discovery of documents ... otherwise discoverable under subdivision (B)(1) of this rule and prepared in anticipation of litigation or for trial by or for another party or by or for that other party's representative (including his attorney ... or agent) only upon a showing that the party seeking discovery has substantial need of the materials in the preparation of his case and that he is unable without undue hardship to obtain the substantial equivalent of the materials by other means.

Determining the validity of the assertion of the work product privilege as the basis for protecting a statement or other document from disclosure to opposing counsel involves a two-tiered analysis. The threshold determination is whether the document sought to be protected from discovery was prepared "in anticipation of litigation".⁽¹¹⁾ If the document was prepared "in anticipation of litigation", the party seeking discovery has the burden of showing that he/she is "in substantial need of the materials in the preparation of his/her case" and that he/she "is unable without undue hardship to obtain the substantial equivalent of the materials by other means".⁽¹²⁾

With regard to the question of whether a document was prepared "in anticipation of litigation", the Indiana Court of Appeals has stated that "...we have identified one appropriate test of the 'prepared in anticipation of litigation' requirement as being that proposed by Professors Wright and Miller: whether in light of the nature of the document and the factual situation in the particular case, the document can fairly be said to have been prepared or obtained because of the prospect of litigation".⁽¹³⁾

According to the Indiana Court of Appeals:

[d]ocuments are work product because their subject matter relates to the preparation, strategy and appraisal of the strengths and weaknesses of an action, or to the activities of the attorneys involved. 4 Moore's Federal Practice Sec. 26.64[1] at 26-349 (1970). Therefore, the primary motivating purpose behind the creation of the document must be to aid in trial preparation. United States v. Gulf Oil Corp. (Temp.E.Ct.App., 1985), 760 F.2d 292, 296. Materials assembled in the ordinary course of business, or pursuant to public requirements unrelated to litigation, or for other nonlitigation purposes are not entitled to the qualified immunity provided by this section. Advisory Committee's Explanatory Statement Concerning Amendments of the Discovery Rules, 48 F.D.R. 487, 501. Accord State v. Hogan (1992), Ind.App., 588 N.E.2d 560, trans. pending; DeMoss v. Rexall Drugs v. Dobson (1989), Ind.App., 540 N.E.2d 655; Cigna-INA Aetna, 473 N.E.2d at 1037-38.⁽¹⁴⁾

A party seeking to assert the [work product] privilege has the burden of proving "at the very least some articulable claim, likely to lead to litigation, [has] arisen. Id., at 1119 [Binks Mfg. Co. v. National Presto Industries, Inc. (7th Cir.1983), 709 F.2d 1109], quoting Coastal States Gas Corp. v. Department of Energy (D.C.Cir.1980), 617 F.2d 854, 865. While there is no clear answer as to when a document becomes a document prepared in anticipation of litigation, the test accepted by our court was announced in American Buildings Co. v. Kokomo Grain Co., Inc. (1987), Ind.App., 506 N.E.2d 56, trans. denied. There we said:

[T]he test should be whether, in light of the nature of the document and the factual situation in the particular case, the document can fairly be said to have been prepared or obtained because of the prospect of litigation ... at 63; quoting 8 Wright & Miller, Federal Practice & Procedure Sec. 2024, at 198 (1970).⁽¹⁵⁾

With regard to statements and other documents generated by liability insurance carriers, the Indiana courts have held that the decision as to the point at which preparation of documents is done "in anticipation of litigation" rather than for the purpose of claim investigation in the normal course of the insurance company's business turns on the particular facts involved in each case.⁽¹⁶⁾

Although it has been held that documents may enjoy nearly an absolute immunity if they contain the mental impressions, opinions, legal theories or conclusions of an attorney or a representative of a party to litigation⁽¹⁷⁾, the Indiana Court of Appeals has made it clear that:

An insurance company cannot reasonably argue the entirety of its claim files are accumulated in anticipation of litigation when it has a duty to investigate, evaluate, and make a decision with respect to a claim by its insured. [Pete Renaldi's Fast Foods v. Great American insurance Cos. (M.D.N.C.1988), 123 F.R.D. 198, 202]. Because an insurance company has a duty in the ordinary course of business to investigate and evaluate claims made by its insureds, the claim files containing such documents usually cannot be entitled to work product protection. Id. If the insurer argues it acted in anticipation of litigation before it formally denied the claim, it bears the burden of persuasion by presenting specific evidentiary proof of objective facts demonstrating a resolve to litigate. Id., Binks, supra, at 1119. There is no clear cut rule to determine whether an insurance company's investigation is discoverable under T.R. 26(B)(3). Taroli, supra. The determination whether the investigation is discoverable depends upon the facts of each case. Id. Even after a claim is denied, reports of investigations filed thereafter which contain prior investigation or evaluations, or are merely a continuation of the initial routine investigation, may not be labelled as work product. Pete Renaldi, supra, fn. 4. citing APL Corp. v. Aetna Cas. & Surety Co. (D.Md.1980), 91 F.R.D. 10.⁽¹⁸⁾

According to the Indiana Court of Appeals, factors that may be considered in determining whether a statement or other document was created "in anticipation of litigation" include whether the claimant has hired an attorney; consultation between an insurance company and an attorney; an insurance company's denial of a claim; and other subjective factors that support the contention that litigation was anticipated.⁽¹⁹⁾

An investigation by an insurance company does not automatically require a finding that the investigation was conducted in anticipation of litigation.⁽²⁰⁾ Nor does the fact that a plaintiff has hired an attorney mandate a finding that an investigation was conducted "in anticipation of litigation".⁽²¹⁾ However, the fact that an insurance carrier consulted with an attorney during its investigation of a claim is an "important factor which generally weighs in favor of finding a work product privilege".⁽²²⁾

"It is not necessary that the document be prepared by an attorney in order for [work product] immunity to apply. Protection extends to trial preparation materials created by agents of attorneys and consultant advisors as well as information gathered with an eye toward litigation by the client himself. Id., Kokomo Grain, 506 N.E.2d at 61."⁽²³⁾ That is, the immunity afforded by the work product privilege is no longer limited to the attorney but extends to a party or representative of a party.⁽²⁴⁾

It is also clear that the work product privilege extends to documents prepared prior to the filing of a lawsuit.⁽²⁵⁾ "'Indisputably, the work-product doctrine extends to material prepared or collected before litigation actually commences.'"⁽²⁶⁾

Indiana law clearly provides that a claim of work product privilege must be asserted on a document-by-document basis; and, that a party may not rely upon a blanket claim of privilege for all documents contained in its file.⁽²⁷⁾ "A party seeking to avoid discovery has the burden of establishing the essential elements of the privilege being invoked"⁽²⁸⁾, and, a claim of privilege must be made on a question-by-question or document-by-document basis.⁽²⁹⁾ It has been said that the work product privilege"... must be asserted on a document by document basis and with the utmost clarity".⁽³⁰⁾ "Absent an articulation of specific reasons why the documents sought are privileged, the information is discoverable. Otherwise, the whole discovery process is frustrated and vital information is 'swept under the rug'".⁽³¹⁾

FOLLOW-UP INTERROGATORY REQUIRING OPPOSING COUNSEL TO
SPECIFICALLY ASSERT THE WORK PRODUCT PRIVILEGE ON A DOCUMENT-BY-DOCUMENT BASIS

The following Interrogatory can be used to follow-up and force opposing counsel to properly and specifically delineate on a document-by-document or question-by-question basis the documents or other information to which he/she objects to producing:

INTERROGATORY NO. 1: You objected to Request No. 1 in the Plaintiff's Request For Production previously tendered to the Defendant, stating that it "seeks information obtained in anticipation of litigation, which is protected by the doctrine of attorney work-product and the attorney-client privilege". In order for Plaintiff's counsel, and ultimately the Court, to determine whether that objection is well-taken, or whether good cause for the production of the requested documents exists, with respect to each such document or other item of tangible evidence, please state:

a) The title, form and nature of each such record, report, form, or other document, and a description of the nature and form of each such record, report, form, or other document or item of tangible evidence (e.g., state whether it is a written record, report, photograph, letter, tape recording, movie, transcribed statement, videotape, et cetera);

b) The date on which each item came into existence (e.g., the date on which any photographs were taken, statements were obtained, movies or videotapes were made, forms were filled out, et cetera);

c) The name, address, telephone number, employer, and job title or position of the author or creator of each such document or item of tangible evidence;

d) A general description of the subject matter of the document or other item of tangible evidence (without necessarily giving sufficient facts so as to disclose the substance of the document, et cetera);

e) Whether each such document or other item of tangible evidence has ever come into the possession of a third party; and,

f) If the answer to sub-part (e) of this Interrogatory is in the affirmative, state the name, address, telephone number, employer, and job title or position of each such third person; the date on which each such third person came into the possession of each document or other item of tangible evidence; and, the purpose for each individual coming into the possession of each such document or item of tangible evidence.

Please note that this Interrogatory does not seek information with regard to communications solely between the Defendant and his/her/its legal counsel, or does it seek the requested information with regard with regard to items prepared entirely by defense/plaintiff's counsel, such as defense/plaintiff's notes, memoranda, legal research, or the like.

PROPER MANNER OF ASSERTING THE ATTORNEY-CLIENT PRIVILEGE
OR WORK PRODUCT DOCTRINE

The following example illustrates the proper method for asserting an objection to an Interrogatory or Request For Production based upon the attorney-client privilege or work product doctrine:

INTERROGATORY NO. 1: A complete copy of the insurance or investigative claim file developed by agents of the Defendant.

RESPONSE:

The Defendant's insurance carrier's investigation file consists of the following:

> A copy of the official Indianapolis Police Department report relative to the accident in which the Defendant and Plaintiff were involved

> Photographs of the van that the Defendant was operating at the time of the accident and of the scene -- which were taken on behalf of State Farm

> The photographs taken by the Indianapolis Police Department during the course of its investigation of the accident in which the Defendant and Plaintiff were involved

> A recorded statement given by the Defendant to his insurance carrier, State Farm

> A statement taken by State Farm from the eyewitness, John Brown

A copy of the police report and photocopies of all of the photographs mentioned above are being supplied to Plaintiff's counsel. The original photographs may be reviewed and/or copied upon request.

Defense counsel objects to producing the Defendant's statement because it is privileged. Defense counsel also objects to producing the statement taken from John Brown, based upon the work product privilege.

IN CAMERA REVIEW

As stated previously, a party must assert the work product privilege on a document-by-document basis and may not rely upon a blanket claim of privilege for all of the documents contained in its file or in its possession.⁽³²⁾ All material that is claimed to have been prepared in anticipation of litigation shall be presented to the trial court for in camera review so that the court can determine what materials are work product material. With regard to the manner in which documents should be submitted to the court for in camera review if it is necessary for the court to rule on which documents are discoverable, the Indiana Court of Appeals has stated that:

Submitting a voluminous batch of documents for in camera review does not satisfy a proponent's burden of establishing some or all of the documents deserve work product protection. Pete Rinaldi, supra, at 203. In cases involving large numbers of documents or where the nature of the document will not likely be readily apparent on its face to the uninitiated observer, the proponent of the work product protection must present the matter in camera to the court in a reviewable form which itemizes each document, provides a factual summary of its contents, and justification for withholding it. Id., See Delaney, Migdail & Young, Chartered v. I.R.S. (D.C.Cir.1987), 826 F.2d 124, 128. To supplement the rule in Petersen, infra, we impose the additional requirement the in camera disclosure in work product matters must be so complete and understandable the trial court need not (but may at its option) do any further research or review of other papers on the subject to clarify anomalous language contained in counsel's disclosing document. If such disclosure does not speak with the utmost clarity, the trial court may in the exercise of sound discretion reject it and deny the requested protection out of hand in the interests of judicial economy.⁽³³⁾

RECENT CASES OF INTEREST

There have been a number of tort cases of first impression handed down by our state's Court of Appeals and Supreme courts during the first quarter of 1996. The issues involved in these cases include: the existence of a privilege to enter onto another's land implied by custom; guidance for proper venue for the filing of a wrongful death case; rejection of the intervening cause defense as a "knock-out defense" under comparative fault system; rejection of a single limit cap for derivative actions against the State; recognition of cause of action by injured worker against the parent company of her employer; the rejection of worker's compensation "exclusive remedy" defense for a wrongful death action by parents of a child against the mother's employer when the child's death was caused by exposure by the mother and the child, in utero, to fumes at work; and a clear ruling regarding the effect of the sunset provision for limitation of damages for wrongful death of a child.

Engine difficulties brought Jesse L. Frye to the door of the Rumbletown Free Methodist Church and its parsonage in Frye v. Rumbletown Free Methodist Church.⁽³⁴⁾ On March 5, 1992, Mr. Frye went up to the door of the parsonage to use the telephone or to borrow a can of gasoline after his car stopped running on the highway near the parsonage. After knocking on the door and receiving no response, he turned to leave. Just as he began to descend the steps of the parsonage, the top step moved, causing him to fall between the porch and the house. He was injured.

Mr. Frye claimed that he was an invitee and brought suit for injuries against the church. The church moved for and was granted summary judgment on the basis of lack of duty owed to Mr. Frye. Mr. Frye appealed asserting that he was a public invitee or at the very least a licensee to whom was owed the duty to be informed of hidden or latent dangers of which the property owners had knowledge.

The Court of Appeals rejected Mr. Frye's assertion that all church property is held open to the public to provide for those who may be in need. The Court of Appeals did find, however, that Mr. Frye was a licensee with "a privilege implied by custom to enter the parsonage premises". By this holding, the Court of Appeals specifically recognized for the first time in Indiana the statement set out in the Restatement (Second) of Torts S 330, Comment E:

The well established usages of a civilized and Christian community entitle everyone to assume that a possessor of land is willing to permit him to enter for certain purposes until a particular possessor expresses unwillingness to admit him. Thus a traveler who is overtaken by a violent storm or who has lost his way, is entitled to assume that there is no objection to is going to a neighboring house for shelter or direction.

The Indiana Supreme Court finally cleared the smoke surrounding the issue of identifying the proper county in which to file a wrongful death case. In RJR Nabisco Holdings, Corp. v. Dunn,⁽³⁵⁾ Craig Dunn and Phillip Wiley, as personal representatives, and Philip Wiley individually, brought a product liability action for wrongful death alleging that Phillip Wiley's wife's death was caused by second-hand smoke. Mr. Wiley's wife had been a resident of Grant County. The estate was opened in Grant County. Suit was filed in Delaware County, where Mrs. Wiley received all of her treatment for cancer and where she died. None of the defendants were residents of the State of Indiana. Mr. Wiley was not a resident of the State of Indiana. This left only the estate itself. The Supreme Court indicated that the estate was not a "person", "organization" or "governmental organization" within the meaning of Trial Rule 75(A)(1)-(10); and, as a result, venue would properly lie in any county of the State.

Defenses under the Comparative Fault Act (I.C. 34-4-33-1 et seq.) continue to be refined. In L.K.I. Holdings, Inc. v. Tyner,⁽³⁶⁾ the Court of Appeals held that the defense of intervening cause was no longer susceptible to summary judgment. In Tyner, Jason Tyner was a passenger in a car being driven by Sarah Tunney.

Ms. Tunney was involved in a crash at the intersection of Fall Creek Parkway and Brokenhurst Parkway. Jason Tyner sued L.K.I. Holdings, Inc., claiming that it was negligent in failing to maintain its road. L.K.I. Holdings, Inc. moved for summary judgment, in part, on the basis that any injuries to Jason Tyner were caused by the actions of Ms. Tunney -- which constituted an intervening cause. The Court of Appeals held that "the comparison of fault inherent in the doctrine of intervening cause has been incorporated into our comparative fault system. If Tunney's negligence was a proximate cause of the accident, such does not immunize L.K.I. Holdings, Inc. from liability caused by its negligence". In other words, apportionment principles of comparative fault apply.

In State v. Eaton,⁽³⁷⁾ the Court of Appeals addressed for the first time the issue of whether a single statutory cap is applicable to a derivative claim. In Eaton, Jeffrey Eaton was severely injured when he struck the rear of a truck while driving through dust which was created by State employees who had been "clipping" the shoulder of the highway on which Mr. Eaton was driving his motorcycle. The jury returned a verdict in favor of Jeffrey Eaton in the amount of $449,280 and in favor of Jeffrey's parents in the amount of $101,178.64. The larger award was reduced to the statutory limit of $300,000, but the loss of service award was allowed to stand. The State appealed, claiming that since the right of the parent to recover was derivative in nature, separate damages are not allowed. The Court of Appeals held that notwithstanding the fact that the parent's claim is derivative, there are two separate causes of action, one for the child for personal injury and another for the parent for property damage. As a result, there is a separate right for recovery and the single statutory cap does not apply to both. This case should be contrasted with the case of Medley v. Frye,⁽³⁸⁾ in which the Court of Appeals a month later, held that Mary L. Medley's claim for loss of consortium arose out of her husband's injuries and the insurer's payment for her loss was limited to the per person limits paid out by the insurer for her husband's injuries. While there may have been a difference between the policy language of the Medley case and the statutory language of the Eaton case, the jurisprudential policy underlying both decisions must be the same. The Medley case appears to have been incorrectly decided in light of the policy set out in Eaton.

Two important cases present new ways to seek redress for injuries and death. In McQuade v. Draw Tite, Inc.,⁽³⁹⁾ the Supreme Court upheld the right of an injured employee to seek redress for injuries in tort against her employer's parent corporation. Mary Jane McQuade was injured at work. She brought a worker's compensation action against her employer, Mongo Electronics. She also brought a negligence suit against Draw Tite, Inc., the parent company of Mongo Electronics. The trial court granted summary judgment in favor of the company. The Court of Appeals affirmed the trial court's decision. The Supreme Court vacated the decision of the Court of Appeals and remanded the case to the trial court, with orders to reinstate the corporation as the defendant in the case. In so holding, the Supreme Court noted that the "exclusivity of the Indiana's Worker's Compensation Act does not prevent an employee from suing his or her employer's parent corporation." The Court also noted that any such action must be founded on an alleged breach of duty of care separate and distinct from any vicarious liability attributable to a parent.

In Ransburg Industries v. Brown,⁽⁴⁰⁾ Rebecca and Brett Brown sued Rebecca's employer, Ransburg Industries, for the wrongful death of their child, Brandon, who they alleged, was exposed to noxious fumes, in utero. The Court of Appeals noted that this was the first time that Indiana had reviewed the issue of whether an action for injuries sustained by a child while in utero against a negligent employer is barred by the exclusivity provisions of the Indiana's Worker's Compensation Act. After looking to other jurisdictions, the Court concluded that the action for wrongful death was not derivative of Rebecca's claim for injuries. Rather, the action for wrongful death stands alone.

In Indiana Patient's Comp. Fund v. Anderson,⁽⁴¹⁾ the Court of Appeals reviewed the damage limitation incorporated within I.C. 34-1-1-8 (which created a substantive right allowing parents to recover damages for the loss of their child's love and companionship). This limitation applied to all cases which accrued after May 7, 1987 and before October 31, 1990. By the express wording of the statute, the limitation for damages expired on November 1, 1992. The issue in the Anderson case was whether the limitation still applied to causes of action which accrued before October 31, 1990. The Court held that the expiration applied to all causes of action including those which accrued before October 31, 1990. As a result of this holding, it is now clear that there are no longer any limitations for damages in wrongful death of child cases.

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Social Security Guidelines

If you become disabled and are unable to work, what rights do you have? Is there any governmental assistance to which you are entitled?

The Social Security Administration administers two (2) kinds of disability programs -- which provide monetary assistance for people in different situations. Title II provides disability benefits. Title XVI provides Supplemental Security Income, known as "SSI".

When are you entitled to receive social security disability benefits? What do you have to do to qualify for social security disability payments?

First, you must meet the Social Security Administration's definition of being "disabled". That means that you must have a physical or mental impairment that causes you to be unable to engage in any kind of substantial gainful employment for a continuous period of 12 months or which is expected to result in your death. Being "disabled" is a requirement for both Title II social security disability benefits and SSI.

To be considered "disabled", you must be unable to engage in "any substantial gainful work". Your condition must be severe enough that it prevents you not only from being able to do your normal job, but also prevents you from being able to do any other substantial gainful work. In deciding whether a person is "disabled" or whether they can work, the Social Security Administration considers factors including a person's age, education, training and work experience.

To qualify to receive Title II social security disability benefits, in addition to being disabled, you must be fully insured under the social security program. That means that you must have worked for a certain period of time before you became disabled. Your financial resources are irrelevant. You will not be disqualified from receiving social security disability benefits based upon your financial assets. You do not have to show "financial need" to qualify for these benefits.

To qualify for Title XVI SSI benefits, you must be disabled and your financial resources cannot exceed a certain maximum amount. The asset limitation is $2000.00 per individual and $3000.00 per couple. However, there is no requirement that you had been working for any particular period of time before you became disabled.

If you qualify to receive Title II social security disability benefits or SSI, how much are you entitled to receive and for how long?

There is a formula that is used to calculate the amount of monthly Title II social security disability benefits to which a person is entitled. However, each case is different. The amount of the monthly social security disability benefit varies depending upon how much money the disabled person has paid in to the social security system. That is, it depends upon the disabled person's earnings history.

The amount of the monthly SSI payment to which a person is entitled is set by Congress. The amount of the benefit varies depending upon the disabled person's living arrangement.

How do you apply to begin receiving social security disability or SSI benefits?

You should go to your local Social Security office. A claims representative will help you fill out the form that is necessary to apply for Title II social security disability benefits or SSI. Or, you can call your local Social Security office and ask them to mail you a form which you must then fill out and file at your local social security office. After you have filed your application form, you will receive a letter from the Social Security Administration, telling you whether your application for benefits have been approved or denied.

You have been working all your life and you are now unable to work because of a physical or mental impairment. You would work if you could. Why has your application for Title II social security disability or SSI benefits been denied?

After you file your application for Title II social security disability or Title XVI SSI benefits, the Social Security Administration obtains medical records and reports from your treating doctors. In most cases, when your application is denied, you need additional medical information to support your claim that you are disabled.

Your doctor says that you are disabled and that you are not able to work. How can the Social Security Administration ignore your doctor's opinion?

The fact that your doctor supports your claim and believes that you are disabled is very helpful. However, your doctor's opinion is not binding on the Social Security Administration. Rather, it reviews your medical records and reports and has its own doctors decide whether they think that you are disabled.

What can you do if you apply for Title II social security disability or Title XVI SSI benefits and the Social Security Administration denies your claim?

You have 60 days to file an appeal after the Social Security Administration sends you a letter telling you that your claim has been denied. When your claim is denied for the first time, you ask for a "reconsideration" of the denial of your claim. When you ask for a reconsideration, a different individual at the Social Security Administration, who did not participate in making the decision to deny your initial application for benefits, reviews your entire file, looks at all of the evidence that was considered when the original decision to deny your claim was made, and looks at any additional evidence that has been submitted since the first denial of your claim. Generally, most "reconsiderations" involve a review of your file without you being present and without any kind of hearing.

If, after the "reconsideration" of your claim, the Social Security Administration again denies your claim, you may ask for a hearing. The hearing will be conducted by an administrative law judge. You will attend the hearing, and you may have an attorney present to represent you at the hearing. You and your attorney will have the opportunity to present evidence and explain to the judge why you believe that you are disabled and entitled to receive social security benefits. This is typically the first opportunity that you have to explain your case in person (or have your attorney explain it) to someone acting on behalf of the Social Security Administration. You and your attorney have a right to review all of the documents in your file that the Social Security Administration has created and provide new information and evidence at the hearing. You and any witnesses that you chose to bring to the hearing may testify. The judge will ask you and the other witnesses questions. You or your attorney will also have the opportunity to question the witnesses and to make arguments to the judge about how the evidence should be construed and why the judge should find that you are disabled and entitled to social security benefits.

If you disagree with the hearing decision, you may ask for a review by the Social Security Administration's Appeal's Council. If the Appeal's Council decides to review your case, it will either conduct the review itself or send your file to an administrative law judge for further review.

If you disagree with the decision of the Appeal's Council or if the Appeal's Council decides not to review your case, you may file suit in federal court.

Do you need a lawyer to represent you in order to obtain social security disability or SSI benefits?

Not always. Some people apply for and are awarded Title II social security disability or Title XVI SSI benefits on their own, without hiring a lawyer. However, an attorney who is experienced in handling Title II social security disability and SSI cases can often make a difference. Often, even though the Social Security Administration has denied your claim for social security disability or SSI benefits the first two times you applied, an attorney can look at your file and determine why your claim has been denied and what needs to be done to prove that you are, in fact, disabled, and entitled to the benefits for which you have applied. Many times, you need additional medical documentation from your doctors. An experienced attorney will be able to advise you as to whether you probably are, in fact, entitled to receive social security benefits; and if so, what additional documentation is needed in order to prove that to the Social Security Administration. In addition, the attorney will know how to go about obtaining the additional evidence that you need in order to prove that you are entitled to the social security benefits.

When should you hire an attorney?

Normally, you must go through the process of submitting your initial application for social security benefits, having your first application denied by the Social Security Administration, appealing that first denial, being denied again, and then, filing a request for a hearing. Generally, an attorney will not make a difference in whether the Social Security Administration denies your initial application for social security benefits or your first appeal. However, after your appeal has been denied and it is time for you to have a hearing in front of an administrative law judge at the Social Security Administration, at that stage, an attorney who is experienced in handling social security cases will be able to help you. An attorney will prepare the medical evidence that you need in the form of records and reports from your doctors; will be with you at the hearing and know the questions to ask you to bring out the facts that support your claim for social security benefits; may prepare and bring other witnesses to the hearing to testify about observations that they have made about you which support your claim that you are disabled; and, will cross-examine the doctors and other experts that the Social Security Administration has hired to give opinions as to whether you are disabled and on which the Social Security Administration has relied in denying your claim. In addition, an attorney will be familiar with the Social Security Administration regulations and will know the appropriate arguments to make to the judge about the specific reasons why you qualify to receive social security benefits under the specific sections of the Federal regulations.

How much will you pay an attorney to represent you in a Title II social security disability or SSI claim?

Almost all of our clients prefer a contingent fee arrangement -- which means that they pay us only if we win and obtain social security disability benefits for them. The normal contingent fee is 25% of the back benefits that are awarded to the disabled client -- up to a maximum fee of $5300.00. There is no fee charged out of the current benefits that are awarded. Our total fee never exceeds $5300.00 regardless of the amount of benefits that are awarded. In addition to our attorney fee, the client is responsible for paying the costs that are incurred to pay the doctors and other healthcare providers for copies of medical records, the doctor's charges for writing medical reports, et cetera.

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