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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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  5. I have had an ongoing custody case for 6 yrs. I should have been the sole legal custodial parent but was a victim of a vindictive ex and the system biasedly supported him. He is an alcoholic and doesn't even have a license for two yrs now after his 2nd DUI. Fast frwd 6 yrs later my kids are suffering poor nutritional health, psychological issues, failing in school, have NO MD and the GAL could care less, DCS doesn't care. The child isn't getting his ADHD med he needs and will not succeed in life living this way. NO one will HELP our family.I tried for over 6 yrs. The judge called me an idiot for not knowing how to enter evidence and the last hearing was 8 mths ago. That in itself is unjust! The kids want to be with their Mother! They are being alienated from her and fed lies by their Father! I was hit in a car accident 3 yrs ago and am declared handicapped myself. Poor poor way to treat the indigent in Indiana!

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