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Appeals court reverses, finds judgment on pleadings for insurer

August 27, 2013

An Orange Circuit Court judge erred when he failed to approve an insurer’s motion for judgment on the pleadings, and the Court of Appeals on Tuesday ordered the case remanded and such a ruling entered.

On interlocutory appeal, the panel ordered judgment on the pleadings in favor of the insurer in Consolidated Insurance Company v. National Water Services LLC,  59A05-1212-PL-632. National Water sued CIC in an attempt to recover $497,500 under a policy for dishonest employees.

NWS sought to recover after it had sued a former employee, David Arnold, claiming that he had misappropriated $1,178,054 from the company. Arnold removed the suit to U.S. District Court for the Southern District of Indiana in New Albany. Arnold said the accusations were false, and he filed a counterclaim of libel and defamation against NWS.

The water company settled and released Arnold, who agreed to pay NWS a sum of $30,000, according to the record. But settling with Arnold voided the insurer’s coverage, and CIC therefore is entitled to judgment on the pleadings, the panel held.

“NWS settled with Arnold and, in so doing, executed the Release which released Arnold ‘for all claims which [NWS] has or could have asserted, known and unknown, arising out of the employment of Arnold by NWS both as an employee and an independent contractor,’” Judge Elaine Brown wrote for the panel.

“This Release ‘after loss’ destroyed CIC’s right of subrogation and was a breach of contract on NWS’s part, therefore discharging CIC from obligation under the Policy to provide coverage. Accordingly, we conclude that the court erred when it denied CIC’s motion for judgment on the pleadings.”

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