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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. Indianapolis employers harassment among minorities AFRICAN Americans needs to be discussed the metro Indianapolis area is horrible when it comes to harassing African American employees especially in the local healthcare facilities. Racially profiling in the workplace is an major issue. Please make it better because I'm many civil rights leaders would come here and justify that Indiana is a state the WORKS only applies to Caucasian Americans especially in Hamilton county. Indiana targets African Americans in the workplace so when governor pence is trying to convince people to vote for him this would be awesome publicity for the Presidency Elections.

  2. Wishing Mary Willis only God's best, and superhuman strength, as she attempts to right a ship that too often strays far off course. May she never suffer this personal affect, as some do who attempt to change a broken system: https://www.youtube.com/watch?v=QojajMsd2nE

  3. Indiana's seatbelt law is not punishable as a crime. It is an infraction. Apparently some of our Circuit judges have deemed settled law inapplicable if it fails to fit their litmus test of political correctness. Extrapolating to redefine terms of behavior in a violation of immigration law to the entire body of criminal law leaves a smorgasbord of opportunity for judicial mischief.

  4. I wonder if $10 diversions for failure to wear seat belts are considered moral turpitude in federal immigration law like they are under Indiana law? Anyone know?

  5. What a fine article, thank you! I can testify firsthand and by detailed legal reports (at end of this note) as to the dire consequences of rejecting this truth from the fine article above: "The inclusion and expansion of this right [to jury] in Indiana’s Constitution is a clear reflection of our state’s intention to emphasize the importance of every Hoosier’s right to make their case in front of a jury of their peers." Over $20? Every Hoosier? Well then how about when your very vocation is on the line? How about instead of a jury of peers, one faces a bevy of political appointees, mini-czars, who care less about due process of the law than the real czars did? Instead of trial by jury, trial by ideological ordeal run by Orwellian agents? Well that is built into more than a few administrative law committees of the Ind S.Ct., and it is now being weaponized, as is revealed in articles posted at this ezine, to root out post moderns heresies like refusal to stand and pledge allegiance to all things politically correct. My career was burned at the stake for not so saluting, but I think I was just one of the early logs. Due, at least in part, to the removal of the jury from bar admission and bar discipline cases, many more fires will soon be lit. Perhaps one awaits you, dear heretic? Oh, at that Ind. article 12 plank about a remedy at law for every damage done ... ah, well, the founders evidently meant only for those damages done not by the government itself, rabid statists that they were. (Yes, that was sarcasm.) My written reports available here: Denied petition for cert (this time around): http://tinyurl.com/zdmawmw Denied petition for cert (from the 2009 denial and five year banishment): http://tinyurl.com/zcypybh Related, not written by me: Amicus brief: http://tinyurl.com/hvh7qgp

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