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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. What is the one thing the Hoosier legal status quo hates more than a whistleblower? A lawyer whistleblower taking on the system man to man. That must never be rewarded, must always, always, always be punished, lest the whole rotten tree be felled.

  2. I want to post this to keep this tread alive and hope more of David's former clients might come forward. In my case, this coward of a man represented me from June 2014 for a couple of months before I fired him. I knew something was wrong when he blatantly lied about what he had advised me in my contentious and unfortunate divorce trial. His impact on the proceedings cast a very long shadow and continues to impact me after a lengthy 19 month divorce. I would join a class action suit.

  3. The dispute in LB Indiana regarding lake front property rights is typical of most beach communities along our Great Lakes. Simply put, communication to non owners when visiting the lakefront would be beneficial. The Great Lakes are designated navigational waters (including shorelines). The high-water mark signifies the area one is able to navigate. This means you can walk, run, skip, etc. along the shores. You can't however loiter, camp, sunbath in front of someones property. Informational signs may be helpful to owners and visitors. Our Great Lakes are a treasure that should be enjoyed by all. PS We should all be concerned that the Long Beach, Indiana community is on septic systems.

  4. Dear Fan, let me help you correct the title to your post. "ACLU is [Left] most of the time" will render it accurate. Just google it if you doubt that I am, err, "right" about this: "By the mid-1930s, Roger Nash Baldwin had carved out a well-established reputation as America’s foremost civil libertarian. He was, at the same time, one of the nation’s leading figures in left-of-center circles. Founder and long time director of the American Civil Liberties Union, Baldwin was a firm Popular Fronter who believed that forces on the left side of the political spectrum should unite to ward off the threat posed by right-wing aggressors and to advance progressive causes. Baldwin’s expansive civil liberties perspective, coupled with his determined belief in the need for sweeping socioeconomic change, sometimes resulted in contradictory and controversial pronouncements. That made him something of a lightning rod for those who painted the ACLU with a red brush." http://www.harvardsquarelibrary.org/biographies/roger-baldwin-2/ "[George Soros underwrites the ACLU' which It supports open borders, has rushed to the defense of suspected terrorists and their abettors, and appointed former New Left terrorist Bernardine Dohrn to its Advisory Board." http://www.discoverthenetworks.org/viewSubCategory.asp?id=1237 "The creation of non-profit law firms ushered in an era of progressive public interest firms modeled after already established like the National Association for the Advancement of Colored People ("NAACP") and the American Civil Liberties Union ("ACLU") to advance progressive causes from the environmental protection to consumer advocacy." https://en.wikipedia.org/wiki/Cause_lawyering

  5. Mr. Foltz: Your comment that the ACLU is "one of the most wicked and evil organizations in existence today" clearly shows you have no real understanding of what the ACLU does for Americans. The fact that the state is paying out so much in legal fees to the ACLU is clear evidence the ACLU is doing something right, defending all of us from laws that are unconstitutional. The ACLU is the single largest advocacy group for the US Constitution. Every single citizen of the United States owes some level of debt to the ACLU for defending our rights.

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