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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. It appears the police and prosecutors are allowed to change the rules halfway through the game to suit themselves. I am surprised that the congress has not yet eliminated the right to a trial in cases involving any type of forensic evidence. That would suit their foolish law and order police state views. I say we eliminate the statute of limitations for crimes committed by members of congress and other government employees. Of course they would never do that. They are all corrupt cowards!!!

  2. Poor Judge Brown probably thought that by slavishly serving the godz of the age her violations of 18th century concepts like due process and the rule of law would be overlooked. Mayhaps she was merely a Judge ahead of her time?

  3. in a lawyer discipline case Judge Brown, now removed, was presiding over a hearing about a lawyer accused of the supposedly heinous ethical violation of saying the words "Illegal immigrant." (IN re Barker) http://www.in.gov/judiciary/files/order-discipline-2013-55S00-1008-DI-429.pdf .... I wonder if when we compare the egregious violations of due process by Judge Brown, to her chiding of another lawyer for politically incorrectness, if there are any conclusions to be drawn about what kind of person, what kind of judge, what kind of apparatchik, is busy implementing the agenda of political correctness and making off-limits legit advocacy about an adverse party in a suit whose illegal alien status is relevant? I am just asking the question, the reader can make own conclsuion. Oh wait-- did I use the wrong adjective-- let me rephrase that, um undocumented alien?

  4. of course the bigger questions of whether or not the people want to pay for ANY bussing is off limits, due to the Supreme Court protecting the people from DEMOCRACY. Several decades hence from desegregation and bussing plans and we STILL need to be taking all this taxpayer money to combat mostly-imagined "discrimination" in the most obviously failed social program of the postwar period.

  5. You can put your photos anywhere you like... When someone steals it they know it doesn't belong to them. And, a man getting a divorce is automatically not a nice guy...? That's ridiculous. Since when is need of money a conflict of interest? That would mean that no one should have a job unless they are already financially solvent without a job... A photographer is also under no obligation to use a watermark (again, people know when a photo doesn't belong to them) or provide contact information. Hey, he didn't make it easy for me to pay him so I'll just take it! Well heck, might as well walk out of the grocery store with a cart full of food because the lines are too long and you don't find that convenient. "Only in Indiana." Oh, now you're passing judgement on an entire state... What state do you live in? I need to characterize everyone in your state as ignorant and opinionated. And the final bit of ignorance; assuming a photo anyone would want is lucky and then how much does your camera have to cost to make it a good photo, in your obviously relevant opinion?

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