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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. Bob Leonard killed two people named Jennifer and Dion Longworth. There were no Smiths involved.

  2. Being on this journey from the beginning has convinced me the justice system really doesn't care about the welfare of the child. The trial court judge knew the child belonged with the mother. The father having total disregard for the rules of the court. Not only did this cost the mother and child valuable time together but thousands in legal fees. When the child was with the father the mother paid her child support. When the child was finally with the right parent somehow the father got away without having to pay one penny of child support. He had to be in control. Since he withheld all information regarding the child's welfare he put her in harms way. Mother took the child to the doctor when she got sick and was totally embarrassed she knew nothing regarding the medical information especially the allergies, The mother texted the father (from the doctors office) and he replied call his attorney. To me this doesn't seem like a concerned father. Seeing the child upset when she had to go back to the father. What upset me the most was finding out the child sleeps with him. Sometimes in the nude. Maybe I don't understand all the rules of the law but I thought this was also morally wrong. A concerned parent would allow the child to finish the school year. Say goodbye to her friends. It saddens me to know the child will not have contact with the sisters, aunts, uncles and the 87 year old grandfather. He didn't allow it before. Only the mother is allowed to talk to the child. I don't think now will be any different. I hope the decision the courts made would've been the same one if this was a member of their family. Someday this child will end up in therapy if allowed to remain with the father.

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  5. Sam Bradbury was never a resident of Lafayette he lived in rural Tippecanoe County, Thats an error.

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