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COA rules insurer has no duty to defend

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The Indiana Court of Appeals affirmed a trial court's ruling that an insurance company doesn't have the duty to defend its client in lawsuits arising out of environmental contamination on its property, noting that if the court were to rule in favor of the client's arguments, insurance business practices would dramatically change.

Accepting Crawfordsville Square's argument - that its insurer, Monroe Guaranty Insurance Co., knew about possible contamination of land Crawfordsville purchased because the insurer was aware a dry cleaner previously operated at that location - would burden insurers with essentially the same duty of due diligence as potential insureds to investigate and discover known losses, wrote Judge Cale Bradford.

In Crawfordsville Square, LLC, et al. v. Monroe Guaranty Ins. Co., No. 54A01-0807-CV-327, Crawfordsville argued there was a genuine issue of material fact as to whether it knew about contamination when it purchased a parcel of land and whether Monroe knew about it when it added the land to an existing insurance policy.

When Crawfordsville purchased the parcel in 1998, it contained a dry cleaner and car wash that sold gasoline. Crawfordsville member L.E. Kleinmaier Jr. sent a letter to the agent of the seller regarding testing and cleaning up of the site and that the company would still buy the land if an escrow account was established to pay an environmental firm for cleanup. Crawfordsville told Monroe there was a dry cleaner on the site and it wanted to add the parcel to its existing general commercial liability insurance policy. Crawfordsville didn't tell Monroe of any actual or potential contamination at the site, which turned out to exist.

The trial court granted summary judgment in favor of Monroe and denied summary judgment for Crawfordsville on the insurer's duty to defend.

The "known loss" doctrine precludes coverage and excuses Monroe from its duty to defend, the appellate court ruled. Crawfordsville contended there is a genuine issue of material fact as to whether it knew when it added the parcel to its insurance that a loss had occurred or could occur based on Kleinmaier's 1998 letter and his testimony in 2007 that the company only had knowledge of potential contamination at the site.

Crawfordsville is trying to create a genuine issue of material fact because of the contradictions of Kleinmaier's letter and testimony, but the law in Indiana doesn't allow for contradictory testimony contained in an affidavit of the non-movant to be used by him to create a summary judgment motion where the only issue of fact raised by the affidavit is the credibility of the affiant, wrote the judge. Although the facts are different than those stated in the "sham affidavit" case in Gaboury v. Ireland Rd. Grace Brethren, Inc., 446 N.E.2d 1310, 1314 (Ind. 1983), the rationale for the rule applies in the instant case.

Crawfordsville claimed it didn't have actual knowledge of the loss, but the letter it sent indicates knowledge of actionable contamination. Judge Bradford wrote in a footnote that ruling in favor of Crawfordsville on this point would "essentially reward" it for what may well have been "deceptive behavior on its part, and thereby serve as an unintended endorsement of the practice of exaggerating one's beliefs regarding possible or known contamination in order to negotiate a better price."

In addition, the mere knowledge that Monroe knew a dry cleaner had operated on the parcel at the time of closing doesn't create a genuine issue of material fact as to whether it had actual knowledge of actionable levels of contamination.

"Of course, such a ruling would have the effect of relieving the potential insureds of any practical duty of due diligence, as the insurance company would be performing it in any event, or failing to do so at its peril," wrote the judge in another footnote. "We are, to say the least, reluctant to endorse such a dramatic change in insurance business practice, i.e., to shift the financial incentive entirely to insurers to discover latent defects in property their insureds propose to buy and insure, thereby removing the incentive to do so from the insured - the party typically better positioned to carry out this task."

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  1. Just an aside, but regardless of the outcome, I 'm proud of Judge William Hughes. He was the original magistrate on the Home place issue. He ruled for Home Place, and was primaried by Brainard for it. Their tool Poindexter failed to unseat Hughes, who won support for his honesty and courage throughout the county, and he was reelected Judge of Hamilton County's Superior Court. You can still stand for something and survive. Thanks, Judge Hughes!

  2. CCHP's real accomplishment is the 2015 law signed by Gov Pence that basically outlaws any annexation that is forced where a 65% majority of landowners in the affected area disagree. Regardless of whether HP wins or loses, the citizens of Indiana will not have another fiasco like this. The law Gov Pence signed is a direct result of this malgovernance.

  3. I gave tempparry guardship to a friend of my granddaughter in 2012. I went to prison. I had custody. My daughter went to prison to. We are out. My daughter gave me custody but can get her back. She was not order to give me custody . but now we want granddaughter back from friend. She's 14 now. What rights do we have

  4. This sure is not what most who value good governance consider the Rule of Law to entail: "In a letter dated March 2, which Brizzi forwarded to IBJ, the commission dismissed the grievance “on grounds that there is not reasonable cause to believe that you are guilty of misconduct.”" Yet two month later reasonable cause does exist? (Or is the commission forging ahead, the need for reasonable belief be damned? -- A seeming violation of the Rules of Profession Ethics on the part of the commission) Could the rule of law theory cause one to believe that an explanation is in order? Could it be that Hoosier attorneys live under Imperial Law (which is also a t-word that rhymes with infamy) in which the Platonic guardians can do no wrong and never owe the plebeian class any explanation for their powerful actions. (Might makes it right?) Could this be a case of politics directing the commission, as celebrated IU Mauer Professor (the late) Patrick Baude warned was happening 20 years ago in his controversial (whisteblowing) ethics lecture on a quite similar topic: http://www.repository.law.indiana.edu/cgi/viewcontent.cgi?article=1498&context=ilj

  5. I have a case presently pending cert review before the SCOTUS that reveals just how Indiana regulates the bar. I have been denied licensure for life for holding the wrong views and questioning the grand inquisitors as to their duties as to state and federal constitutional due process. True story: https://www.scribd.com/doc/299040839/2016Petitionforcert-to-SCOTUS Shorter, Amici brief serving to frame issue as misuse of govt licensure: https://www.scribd.com/doc/312841269/Thomas-More-Society-Amicus-Brown-v-Ind-Bd-of-Law-Examiners

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