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Insurer's policy breach a case of first impression

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In a case of first impression for state courts, the Indiana Court of Appeals affirmed a jury verdict against an insurance company in a breach of contract case, ruling the insured's failure to repair his building following a fire was the fault of the insurance company.

In Rockford Mutual Insurance Co. v. Terrey E. Pirtle, No. 77A01-0802-CV-94, a dispute arose over Terrey Pirtle's failure to repair or replace a historic building he owned in Terre Haute. He rented it out while restoring it and insured the building through Rockford Mutual. It was damaged in an accidental fire in November 2000.

Pirtle rejected a claim to settle for $80,000 because it wasn't enough to satisfy his mortgage or repair the building; his policy limit under Coverage A was $193,000. Rockford told Pirtle he would only be entitled to payment under the replacement cost coverage once repairs or replacement of the building had been completed. It also offered him nearly $70,000 with the rest of the $193,000 to be paid when the property was repaired.

Pirtle filed suit for breach of contract; Rockford paid him more than $86,000 for the building's actual cash value and moved for summary judgment alleging that was all he was entitled to because the building hadn't been repaired or replaced. In October 2007, a jury found Rockford breached the contract and awarded Pirtle $124,149.55 under the insurance policy and $406,136.58 in consequential damages.

On appeal, Rockford argued the terms of the policy are clear and unambiguous that all Pirtle was entitled to receive from the insurer was the $86,000 because he didn't follow the terms of the policy. But Pirtle was in a no-win situation, wrote Judge Kirsch, and had little choice but to use the funds from Rockford to satisfy the mortgage at a loss to the mortgage holder, which left nothing to start the repairs.

Indiana courts have yet to address the issue of whether an insured could be excused from performance of a condition precedent contained in a fire insurance policy. Using cases from the Court of Appeals of Michigan and the District Court in the Southern District of New York, the appellate court ruled Pirtle was excused from performing the condition precedent because Rockford's actions hindered his performance.

"We acknowledge that other courts, including our own Seventh Circuit, have held that the contract must be strictly construed to require the completion of the repair or replacement before liability under the replacement cost endorsement attaches," wrote Judge Kirsch. "... However, we are convinced that equitable principles win the day in this situation; otherwise, the repair or replacement endorsement paid for by Pirtle would be rendered illusory."

The Court of Appeals also rejected Rockford's argument that its liability should be capped at the policy limits, based on Indiana Insurance Co. v. Plummer, 590 N.E.2d 1085 (Ind. Ct. App. 1992). Rockford's motive for delayed payment is irrelevant, so its good faith argument failed, wrote Judge Kirsch. In addition, the damages awarded to Pirtle flow directly from and are proximately caused by Rockford's failure to pay. The judges also ruled the award was within the scope of the evidence.

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  1. It's a big fat black mark against the US that they radicalized a lot of these Afghan jihadis in the 80s to fight the soviets and then when they predictably got around to biting the hand that fed them, the US had to invade their homelands, install a bunch of corrupt drug kingpins and kleptocrats, take these guys and torture the hell out of them. Why for example did the US have to sodomize them? Dubya said "they hate us for our freedoms!" Here, try some of that freedom whether you like it or not!!! Now they got even more reasons to hate us-- lets just keep bombing the crap out of their populations, installing more puppet regimes, arming one faction against another, etc etc etc.... the US is becoming a monster. No wonder they hate us. Here's my modest recommendation. How about we follow "Just War" theory in the future. St Augustine had it right. How about we treat these obvious prisoners of war according to the Geneva convention instead of torturing them in sadistic and perverted ways.

  2. As usual, John is "spot-on." The subtle but poignant points he makes are numerous and warrant reflection by mediators and users. Oh but were it so simple.

  3. ACLU. Way to step up against the police state. I see a lot of things from the ACLU I don't like but this one is a gold star in its column.... instead of fighting it the authorities should apologize and back off.

  4. Duncan, It's called the RIGHT OF ASSOCIATION and in the old days people believed it did apply to contracts and employment. Then along came title vii.....that aside, I believe that I am free to work or not work for whomever I like regardless: I don't need a law to tell me I'm free. The day I really am compelled to ignore all the facts of social reality in my associations and I blithely go along with it, I'll be a slave of the state. That day is not today......... in the meantime this proposed bill would probably be violative of 18 usc sec 1981 that prohibits discrimination in contracts... a law violated regularly because who could ever really expect to enforce it along the millions of contracts made in the marketplace daily? Some of these so-called civil rights laws are unenforceable and unjust Utopian Social Engineering. Forcing people to love each other will never work.

  5. I am the father of a sweet little one-year-old named girl, who happens to have Down Syndrome. To anyone who reads this who may be considering the decision to terminate, please know that your child will absolutely light up your life as my daughter has the lives of everyone around her. There is no part of me that condones abortion of a child on the basis that he/she has or might have Down Syndrome. From an intellectual standpoint, however, I question the enforceability of this potential law. As it stands now, the bill reads in relevant part as follows: "A person may not intentionally perform or attempt to perform an abortion . . . if the person knows that the pregnant woman is seeking the abortion solely because the fetus has been diagnosed with Down syndrome or a potential diagnosis of Down syndrome." It includes similarly worded provisions abortion on "any other disability" or based on sex selection. It goes so far as to make the medical provider at least potentially liable for wrongful death. First, how does a medical provider "know" that "the pregnant woman is seeking the abortion SOLELY" because of anything? What if the woman says she just doesn't want the baby - not because of the diagnosis - she just doesn't want him/her? Further, how can the doctor be liable for wrongful death, when a Child Wrongful Death claim belongs to the parents? Is there any circumstance in which the mother's comparative fault will not exceed the doctor's alleged comparative fault, thereby barring the claim? If the State wants to discourage women from aborting their children because of a Down Syndrome diagnosis, I'm all for that. Purporting to ban it with an unenforceable law, however, is not the way to effectuate this policy.

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