An estate that purchased a foreclosed house at a sheriff’s sale established an equitable lien through which it was entitled to collect proceeds in the event of an insured loss, the Indiana Court of Appeals ruled Friday.

The decision in The Marling Family Trust v. Allstate Ins. Company, 49A02-1203-CT-186, regards the trust’s purchase of a home on West Henry Street in Indianapolis that had been owned by Thomas Pipes. A claim arose when the purchased home was found to have sustained interior water damage.

The trial court granted summary judgment in favor of Allstate without issuing findings.

In reversing the Marion Superior Court ruling, the COA found that the trial court erred in its application of an appellate panel’s rehearing of Lakeshore Bank & Trust Company v. United Farm Bureau Mutual Insurance Company, Inc. 474 N.E.2d 1024, 1026 (Ind. Ct. App. 1985).   

“The trust’s mortgage agreement with Pipes required Pipes to insure the property for the benefit of the trust as mortgagee. Under Lakeshore, this is sufficient to give rise to an equitable lien in the trust’s favor,” Judge Nancy Vaidik wrote for the unanimous panel.

“The trust protected its equitable interest in the policy proceeds by informing Allstate of its mortgagee status before any policy proceeds were distributed. Thus, to the extent that the loss here is otherwise covered under the terms of Pipes’ insurance policy, the trust may recover policy proceeds.

“We reverse the judgment of the trial court and remand for a determination of whether the loss is covered under the policy,” Vaidik wrote.