7th Circuit Court of Appeals
Civil – False Claims Act
United States of America ex rel. Sheet Metal Workers International Association, Local Union 20 v. Horning Investments LLC
Based on the evidence presented before it on a False Claims Act lawsuit brought by a labor union, the 7th Circuit Court of Appeals decided to affirm summary judgment in favor of the union member’s company. But the dissenting judge believed the record required remand for a trial.
Local 20 of the Sheet Metal Workers International Association sued Horning Investments LLC on behalf of members, claiming the company, which was subcontracted to work on an Ohio construction project for the U.S. Department of Veterans Affairs, paid its workers less than the Davis-Bacon Act requires. The act outlines the “prevailing wage” that workers must be paid when they work on projects for the federal government.
Workers classified as sheet metal workers were entitled to $26.41 per hour with the additional fringe benefit rate of an additional $16.82 an hour. This case involves the fringe benefits. Horning employees, relying on the advice of the company’s accountants, began deducting $5 per hour from employees’ paychecks to be deposited into a trust for health care. But the company didn’t determine what employees were eligible for the health care benefits and the deduction did not correspond to the actual monetary value of the benefits each individual employee received. The union claimed this arrangement violated the Davis–Bacon Act.
The company generated certified payroll reports based on this calculation and submitted them to Construct Solutions, the contractor on the project, which then submitted them to the government for payment.
The union did not sue under the Davis-Bacon Act, but instead filed a qui tam action under the False Claims Act, which is the statute at issue in Universal Health Servs. Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016). But the majority did not rely on the recent U.S. Supreme Court decision in the instant case. Instead, Chief Judge Diane Wood and Judge Frank Easterbrook noted there was not enough evidence to show Horning knew its statements were false. The Flase Claims Act requires the defendant to have acted with “actual knowledge,” “deliberate ignorance” or “reckless disregard” to the possibility the submitted claim was false, Wood wrote, noting the union has not met that standard.
The record doesn’t say whether Horning was contractually obligated to make the contributions to the trust during the 90-day waiting period for new employees before they receive health insurance, Wood wrote.
“We thus neither can nor do decide whether Horning violated the Davis-Bacon Act by deducting Trust contributions from the paychecks of employees whose rights to fringe benefits had not yet vested,” she wrote. “All that is relevant for present purposes is that there is enough ambiguity about this matter that we cannot infer that Horning either knew or must have known it was violating the Davis-Bacon Act.”
The union did not present enough evidence to survive summary judgment, so the majority affirmed the ruling in favor of Horning.
Judge Richard Posner dissented, believing the case needs to go to trial in order to understand the full scope and gravity of Horning’s conduct. The court needs to know how many people had to pay $5 to the trust from which they could not benefit, as well as evidence that Horning relied on the advice of its accountants and that the accountants had the necessary expertise and understood the act.
Civil – Legal Fees
Arlington Capital, LLC v. Bainton McCarthy, LLC, et al.
An unsecured creditor’s lawsuit against two law firms over legal fees collected for services provided to a bankrupt Fort Wayne company’s estate should not have proceeded, the 7th Circuit Court of Appeals ruled.
GT Automation Group Inc. filed for bankruptcy and sold its assets in exchange for creditor Comerica to forgive a lien of $7.8 million. The successful bidder was Arlington Capital, which acquired GT’s assets with a bid of about $2.7 million.
The bankruptcy trustee, however, came to believe that Arlington may have colluded with GT insiders to keep the price down. The trustee hired Connecticut law firm Bainton McCarthy LLC and Smith Gambrell & Russell LLP of Atlanta to pursue a 11 U.S.C. § 363(n) claim that allows the trustee to void the sale or recover the true value of the assets from colluders.
The GT insiders settled the case but Arlington went to trial and won. It challenged the court’s award of fees to the law firms, which the bankruptcy court denied. The decision was affirmed by the District Court, but the 7th Circuit tossed the case.
“Arlington wants us to reverse but it has not shown that it stands to benefit if the Law Firms’ fees are denied. So we remand and instruct the district court to dismiss the case for lack of standing,” Judge Ann Claire Williams wrote.
Arlington as the moving party was required to demonstrate standing. “It utterly failed to carry that burden,” Williams wrote. “Oral argument revealed that Arlington’s true goal has nothing to do with its general unsecured claim for $5,000. Arlington hopes to file a separate lawsuit against the Law Firms for their role in bringing the § 363(n) suit, and thinks it would be useful to have an opinion from us saying that the § 363(n) suit was pointless,” Williams wrote. “Whatever the merits of its contemplated suit, Arlington is not entitled to — and indeed we lack the authority to offer — an advisory opinion to be used as a sword in independent litigation.”
Indiana Supreme Court
Criminal – Houseguest/Search Consent
Timmie Bradley v. State of Indiana
The Indiana Supreme Court held that a houseguest at a home in which police discovered drugs did not have the apparent authority to consent to a search of the house.
Police believed there was drug activity from an Indianapolis home and on one occasion saw Bryant Beatty and Timmie Bradley enter the home. On a later date, police saw Beatty knock on the door of the home and gain entrance. A few minutes later, police knocked on the door and Beatty answered. Police later testified at Bradley’s drug trial that they didn’t know who owned the home. Beatty allowed police in the house, where they did a protective sweep after finding other people inside and discovered drugs and paraphernalia in plain sight.
Bradley, the homeowner, arrived during the search. Police found cocaine and a large amount of cash on him. He was charged with various drug crimes and convicted of Class A felony dealing in cocaine, Class C felony possession of cocaine and a firearm, Class C felony possession of cocaine, and Class A misdemeanor possession of marijuana. Bradley had filed a motion to suppress all evidence seized as a result of the police search of his home without a warrant, but the court only excluded items not found in plain view.
The Court of Appeals vacated all of Bradley’s convictions, except the Class A felony, on double jeopardy and sufficiency grounds. But the court upheld police entry into his home.
The issue is whether Beatty had apparent authority to consent to police entry into Bradley’s home. The state argued it was reasonable for police to believe Beatty had authority based on his previous visit to the home and that he was the one who answered the door shortly after arriving on that second day.
“To prove apparent authority then, officers needed to prove that they held a reasonable belief that Beatty had authority over the home; that is, Beatty had joint access to or control of the property for most purposes. Thus, mere ‘affiliation’ with the home, without more, is not enough to establish a reasonable belief that the consenting party had authority over the home; nor does merely answering the door to a home indicate authority over that home. There could be a number of situations where someone lacking joint access or control over the property, such as a houseguest or maintenance worker, could answer the door. Beatty’s visit to Bradley’s home on one prior occasion and the fact that he answered the door do not demonstrate to a reasonable person that Beatty had joint access and control over the home,” Justice Steven David wrote.
The justices reversed the denial of Bradley’s motion to suppress and remanded for further proceedings.
Indiana Court of Appeals
Criminal – Counselor/Client Privilege
James E. Rogers v. State of Indiana
The Indiana Court of Appeals ruled that an unlicensed social worker who provided services to the victim of a man accused of molestation is not protected under the counselor/client privilege in I.C. 25-23.6-6.1. As a result, the woman must answer four questions her attorney previously advised her not to answer.
James Rogers faces several charges of felony child molesting, intimidation, child solicitation and battery resulting in bodily injury after his then 8-year-old niece accused him of molesting her while she was at a sleepover at his home. Rogers deposed Amy Wallace, who provided social services support to victim B.L. and her family. Wallace worked for Shepherd Community Center, which partnered with Horizon Christian School, where B.L. was a student at some point prior to the allegations. Rogers’ attorney learned there had been Department of Child Services reports filed against B.L. or her family and there were concerns B.L.’s mother had been prostituting her in return for drugs.
While deposing Wallace, Rogers’ counsel asked her four questions that her attorney told her not to answer: Did your counseling relationship with B.L. and her family involve anything other than [Mother’s] injury? What did [Shepherd pastor and CEO Rev.] Jay Height tell you that he heard about any sexual or otherwise inappropriate behavior between B.L. and other children? What conversations did you have with other staff members at Horizon Christian School regarding their or your concerns about B.L.’s behavior prior to your employment at Shepherd that were related to previous [DCS] reports? Provide the names of parents who filed [DCS] reports on B.L. and/or her parents or siblings.
The attorney invoked counselor/client privilege, as found in I.C. 25-23.6-6-1. Rogers filed a motion to compel, which was denied, leading to this interlocutory appeal.
Rogers argued that because Wallace is not a licensed social worker, the statute that lists the applicable professions does not apply to her. Wallace does have a degree in social work. Rogers maintained that the phrase at the end of the statute, “who is licensed under this article,” requires her to be licensed. The state argued that the ending phrase only modifies clinical addiction counselor, since there is no comma before the word “who.”
“Although it was permissible for Wallace, in her role as Family Ministries Team Leader at Shepherd, to provide social services work to individuals and their families, this ability to provide services does not mandate a finding that her communications are privileged under the counselor/client privilege found in Indiana Code section 25-23.6-6-1,” Judge James Kirsch wrote. “Rather, we find that the legislative history of the term ‘counselor’ reveals that, for purposes of the counselor-client privilege, the Legislature intended only licensed social workers to be covered by that privilege. Related statutes support this determination, as well as the principles that evidentiary privileges such as the counselor/client privilege must be strictly construed and that, in criminal cases, ambiguous statutes should be construed in favor of a defendant. We thus conclude that a social worker must be licensed in order to fall within the scope of the counselor/client privilege found in Indiana Code section 25-23.6-6-1.”
The case was remanded for further proceedings.
Criminal – Home Detention
Brad L. Sullivan v. State of Indiana
A man who had taken steps to prepare for home detention but was committed for mental health reasons when he was to report to community corrections should not have been ordered to serve his sentence in the Department of Correction, the Indiana Court of Appeals ruled.
Brad Sullivan, pursuant to a plea agreement, would serve his sentence on monitored home detention through community corrections. The agreement also said if he failed to establish eligibility, the sentence would be served in the Decatur County jail.
On the day Sullivan was to report, Oct. 20, 2015, he was in St. Vincent’s Stress Center after being treated at Columbus Regional Mental Health Unit days earlier for post traumatic stress disorder and major depressive disorder. He was transferred directly from Columbus Regional to St. Vincent’s. He claimed he got a hold of his counsel and his social worker was supposed to contact his attorney and fax him the paperwork proving he was in the mental health unit.
But Decatur County Community Corrections filed a petition Oct. 23 to revoke his placement because Sullivan did not report on Oct. 20 as required.
At the revocation hearing, the director of Decatur County Community Corrections said Sullivan already had been approved for community corrections and that if he were to report, the program would have no problem accepting him if the court ordered. Sullivan acknowledged he never called community corrections directly to inform staff he was in the hospital, but said he had contacted his attorney who was supposed to contact community corrections. The attorney told Sullivan’s new counsel that he thought he had faxed over medical documentation to the prosecutor’s office but it doesn’t appear it came through.
The trial court revoked Sullivan’s placement and ordered the 18 months served in the DOC based on the terms of the plea agreement.
Sullivan argued that the court abused its discretion in imposing such a harsh sentence under the circumstances and believed his violation didn’t warrant revocation of his placement.
“The provision of Sullivan’s plea agreement which essentially provided that any non-fee violation would automatically result in the revocation of his community corrections placement is constitutionally suspect,” Judge Elaine Brown wrote.
Sullivan must still be allowed to offer mitigating evidence suggesting that the violation doesn’t warrant revocation and he offered evidence that his house and phone were approved for home detention, that he was hospitalized at the time he was to report and that he was under the impression his attorney would contact the court and community corrections.
“Based on the totality of the circumstances, including the nature of the violation and sanction, we conclude the trial court abused its discretion in finding that Sullivan’s violation warranted revoking his community corrections placement and in ordering him to serve eighteen months in the DOC,” she wrote in remanding the matter for placement in community corrections.
Criminal – Domestic Violence/Continuing Crime Doctrine
Ariel Gomez v. State of Indiana
Because the evidence showed a man’s acts of domestic violence against his now ex-wife constituted a single transaction for purposes of the continuing crime doctrine, the Indiana Court of Appeals reversed two of the man’s three convictions.
Ariel Gomez and Maria Chavez were divorcing and a preliminary order stated that Gomez would have temporary possession of “rental property rents” of the three properties the pair owned. Chavez believed that she was awarded possession of a property on Rochester Avenue in Indianapolis and went to the property June 21, 2015, when she learned Gomez had rented it out. She intended to live there and stopped a woman from moving in. The woman called Gomez and he showed up approximately 10 minutes later. Gomez and Chavez began arguing and in the course of three minutes, he had grabbed her by the hair and tried to get her out of the house. He pushed her against the wall several times and Chavez had scratches on her arm, her elbow was cut and her knee was bruised.
Gomez was convicted of three counts of Class A misdemeanor domestic battery. He appealed, claiming insufficient evidence to support the convictions and that the convictions violate the continuous crime doctrine.
The appellate judges rejected Gomez’s claim that he had been given the property in the preliminary order and the state did not negate his claim of defense of property. The evidence supports the conclusion that the force Gomez used to try to remove Chavez from the property as unreasonable in light of the urgency of the situation and unreasonable to protect an alleged interest he may have had in the rents from the property, Judge Elaine Brown wrote.
But Gomez did prevail on his continuous crime doctrine claim.
“Based upon the record and considering Chavez’s testimony describing Gomez’s acts while trying to push her out of the house, we conclude that the acts alleged in Counts II, III, and IV were sufficiently compressed in terms of time, place, singleness of purpose, and continuity of action so as to constitute a single transaction for purposes of the continuous crime doctrine,” Brown wrote.
The COA affirmed Count II and reversed counts III and IV, noting that his sentence will not change because he was ordered to serve concurrent sentences.
Criminal – Burglary/Rape/Sentence
Adrian Anthony v. State of Indiana
The alleged ringleader of six men who brutalized, shot and sexually assaulted three north side Indianapolis residents in their home will still likely spend the rest of his life behind bars after the Indiana Court of Appeals modestly reduced his sentence.
Adrian Anthony led five others into a suburban home occupied by a couple and their 24-year-old daughter after a night of drinking and drugging, according to the record. They entered the home through an open garage door at about 5:15 a.m. on Oct. 29. 2013, and terrorized and brutalized the family for the next two hours. The women were sexually assaulted by the intruders, and the mother was shot in the leg and foot as she attempted to get help.
The men also ransacked the home and forced the women to drive to their bank and withdraw money from an ATM. The burglars ordered the husband, who relied on leg braces and a cane to walk, to stay in bed with his head down or be shot.
“The State maintains that Anthony was a leader of his five fellow defendants, was armed with a revolver when he entered the residence, and did not hesitate to shoot [the mother] on two separate occasions during the two-hour incident,” Judge Elaine Brown wrote for the panel. “It points out that Anthony forced [mother] to the bank for money and sexually assaulted her, that he later separately forced [the daughter] to the bank for cash, and that he ‘acted more as a principal then an accomplice, was highly culpable for commission of the offenses, and ... concedes that the offenses were reprehensible.’”
Anthony was charged with 35 counts, seven of which were dismissed, and a jury convicted him on the 28 remaining counts. Convictions were entered on two counts of rape, three counts of criminal deviate conduct, robbery and burglary all as Class A felonies; robbery and three counts of carjacking as Class B felonies; and robbery as a Class C felony.
The Court of Appeals rejected Anthony’s appeals on the sufficiency of the evidence, whether his two rape convictions constitute double jeopardy, and whether his sentence was inappropriate in light of the nature of the offense and his character.
However, the court found a robbery conviction that was enhanced to a Class A felony charge was impermissible because it was based on the same injury to the mother that also enhanced a burglary conviction to a level punishable by up to 50 years in prison.
“We order that Anthony’s conviction … for robbery as a Class A felony be reduced to robbery as a Class B felony and that his sentence on that count be reduced from fifty years of incarceration to twenty years of incarceration, resulting in an aggregate sentence of 268 years,” Brown wrote for the panel.
Guardianship – Power of Attorney
In re the Guardianship of Hellen Kinney Morris: Mary M. Kinney and Patrick Kinney v. Paul Kevin Kinney
An elaborate court ruling that sought to bring family harmony by appointing each of six siblings as co-guardians over a specific area of their elderly mother’s life may have hit a sour note because of a 12-year-old power of attorney which remains valid.
The adult children of Helen Kinney Morris, 89, divided into factions over disagreements about her need for care. Two of the children contended that despite having dementia, Morris was not incapacitated while the other four asserted her memory problems were getting worse and putting her in danger.
In 2015, the Howard Superior Court found Morris was incapacitated because she could not take care of herself or her property without assistance. Putting the woman’s best interests and welfare at the front as well as attempting to repair the family dynamic, the court appointed all the children as guardians but gave each specific duties.
Two of the children, Mary “Molly” M. Kinney and Patrick Kinney, declined to be appointed and later appealed the ruling on the grounds that the guardians are unnecessary because there is a valid power of attorney.
The Indiana Court of Appeals reversed and remanded the case.
Under Indiana Code 29-3-5, the court has the ability to appoint guardians. However, I.C. 30-5-3-4 limits a guardian’s power. The Court of Appeals found a durable power of attorney that Morris executed in 2004, which gave Mary Kinney and Paul Kevin Kinney broad powers, was still valid.
“… it does not appear that the trial court considered the effect of the power of attorney when it determined that guardians were necessary,” Chief Judge Nancy Vaidik wrote. “Accordingly, we reverse and remand this case for the trial court to determine whether any guardians are necessary in light of the 2004 power of attorney and, if so, to give due consideration to the matters listed in Section 29-3-5-5, including (Morris’s) wishes and her existing attorneys in fact (Molly and Kevin).”
Civil Plenary – Damages/Breach of Contract
Randy Faulkner & Associates, Inc. and Randall W. Faulkner v. The Restoration Church, Inc. 41A01-1506-PL-706
A trial court erred when it determined that a church was entitled to $322,000 on its breach of contract claim after its building lessor ordered the church to vacate the premises before the end of its contract, the Indiana Court of Appeals ruled.
Randy Faulkner, owner of Randy Faulkner & Associates, leased premises it owned to The Restoration Church Inc. in Greenwood, where Faulkner attended. The lease, which charged the church $100 a month in rent, began in October 2009. In 2012, RFA gave the church written notice to vacate the premises. The notice came in response to the church’s pastor’s wife, Cindy Stephenson, manufacturing false documents that purported to show the church’s timely notices of intent to renew for the prior years. The church actually never provided RFA with timely written notices of its intent to renew the lease; instead, it wrote out checks for $1,200 to RFA for the years 2011 and 2012.
The church sued Falkner and RFA for breach of contract, among other claims; Faulkner and RFA countersued for breach of contract and various tort claims. After a bench trial, the judge ruled in favor of the church on the breach of contract claims and awarded damages of $322,000.
Also, the trial court ruled in favor of RFA and Faulkner on their claim of tortious interference with a business relationship. Faulkner claimed an employee of RFA and his other business, The Christian Phonebook, left because of statements made by Pastor David Stephenson. However, the judge did not award any damages because the evidence of damages was speculative.
The church was fined $2,500 as a sanction for Cindy Stephenson manufacturing false documents.
The Court of Appeals reversed the ruling in favor of the church.
“In sum, case law, the lease agreement, and the undisputed facts make clear that the Church was a holdover tenant following the expiration of the lease agreement’s original term. As a holdover tenant, the Church continued to pay the same rent it had been paying, and RFA waived its right to the increased rent payments due from the Church as a holdover tenant. But the lease agreement makes clear that RFA’s waiver of its right to collect the increased rent cannot operate to waive another right under the lease agreement,” Judge Margret Robb wrote.
“Accordingly, the trial court erred when it found that the Church’s continued occupancy and RFA’s continued acceptance of rent demonstrated RFA’s intent to waive its right to written notice from the Church of the Church’s intent to exercise the option terms. Because RFA was dealing with a holdover tenant in July of 2012, RFA was within its rights under the lease agreement to evict the Church so long as RFA provided the Church with at least thirty days’ written notice, which it is undisputed that RFA did. Hence, RFA did not breach its contract with the Church, and it owes the Church no damages on that claim.”
The judges also affirmed the ruling that RFA and Faulkner aren’t entitled to damages on their tortious interference claim, noting that their argument on damages is simply a request for the COA to credit evidence that the trial court expressly refused to credit, which the judges will not do. Faulkner’s only evidence was that he had to sell The Christian Phonebook company at a discounted price after the employee left, which the trial court found to be speculative.
Criminal – Reckless Homicide/Invalid Drug Prescriptions
State of Indiana v. John K. Sturman
The Indiana Court of Appeals had to decide two issues of first impression in an appeal regarding charges of reckless homicide and issuing an invalid prescription for legend drugs by a practitioner against an Indianapolis doctor.
Dr. John Sturman has a subspecialty in pain management. He worked for a pain management clinic operated by Indiana University Hospital in Indianapolis, but left in 2012 after the hospital suspended his medical privileges for not completing documentation and deviating from the standard of care.
An investigation by the Indiana Attorney General’s Office led to 19 criminal charges being filed against Sturman: counts 1-3 for reckless homicide and 4-19 for issuing an invalid prescription for legend drugs by a practitioner. The state alleges as a result of excessive prescriptions written by Sturman, three people died from drug overdoses or reactions.
The trial court ended up dismissing counts 8-10, 12, 14-16, 18 and 19 because the charges identified a range of dates during which invalid prescriptions were issued, some of which were beyond the statute of limitations. The trial court gave the state 20 days to amend the charges into a singular offense within the statute of limitations. Counts 1 and 11 were dismissed because they were beyond the statute of limitations; the judge dismissed the reckless homicide charges for failing to state an offense. The court also rejected Sturman’s claim that I.C. 16-42-19-20 is unconstitutionally vague.
This case raises two issues of first impression: when the statute of limitations period should be calculated for reckless homicide and whether the phrase “legitimate medical purpose,” which is not defined by statute, is unconstitutionally void for vagueness.
Sturman argued that the dates alleged by the state in which prescribed drugs lead to someone’s death should determine when the statute of limitations is calculated. The state countered that it is the person’s death that should be used. The appellate court sided with the state.
“While we agree with the trial court that the act of writing a prescription, by itself, is not a criminal offense, the charging Information in the present case clearly indicates that the alleged crime is that of reckless homicide,” Judge Patricia Riley wrote.
Sturman argued that Indiana Code 16-42-19-20 of the Indiana Legend Drug Act is unconstitutionally vague. The statute says a prescription for a legal drug is not valid unless it is issued for a “legitimate medical purpose” by a practitioner acting within the usual course of his or her business. He maintained that “legitimate medical purpose” fails to put a person of ordinary intelligence on notice as to what does or does not constitute a legitimate legal purpose.
“Ultimately, we find that the phrase ‘for a legitimate medical purpose’ is clearly intended to permit doctors, acting within the bounds of the standards of the medical field, to treat patients with diagnosed medical conditions,” Riley wrote. “At the same time, the statute is intended to prevent physicians from acting as common drug dealers by prescribing drugs to individuals with contraindications for controlled substances and without first examining the patient, establishing a diagnosis, formulating a treatment plan, and monitoring the effects of the prescribed medications.
“Because the statute plainly informs physicians that they must look to the accepted standards of care of the medical profession, we conclude that the statute provides sufficient notice of the prohibited conduct.”
The Court of Appeals reversed dismissal of the reckless homicide counts and affirmed the denial of Sturman’s motion to dismiss counts 1-6 and 4-19. The case was remanded for further proceedings.
Civil Tort – Underinsured Motorist Coverage
Fireman’s Fund Insurance Company v. Matthew W. Ackerman and American Casualty Co.
A trial court erred by denying an insurance company’s motion for summary judgment regarding underinsured motorist coverage because a law change in 2005 no longer required it to provide that coverage.
Matthew Ackerman was injured in a car accident in January 2009 allegedly caused by Janet Sipes, resulting in the amputation of one of Ackerman’s legs. He was employed by Evansville Marine Service Inc., which had an excess or umbrella policy with Fireman’s Fund Insurance Co., and uninsured/underinsured motorist coverage, and workers’ compensation benefits with separate insurance companies.
Ackerman sued Fireman’s Fund after he received only $1 million in payout from Sipes’ policy and Evansville’s UM/UIM coverage. He sought additional UM/UIM coverage from the Fireman’s Fund.
It filed for summary judgment, arguing its policy didn’t provide that coverage and that coverage could not be imputed to the policy, which the trial court denied. The Indiana Court of Appeals accepted the case on interlocutory appeal.
The policy in question was first issued in March 2004 to Evansville Marine and beginning in September 2004, it was issued or renewed each year effective Sept. 16.
In 1999, the Indiana Supreme Court decided United National Insurance Co. v. DePrizio, 705 N.E.2d 455 (Ind. 1999), which concerned whether an insurance policy, like the one at issue in the instant case, was required to provide UM/UIM coverage. It concluded that “absent an explicit statutory exemption to the contrary,” an umbrella liability policy, even if it does not provide for UM/UIM coverage by its own terms, yet provides coverage for liability arising from the ownership maintenance or use of motor vehicles, falls under I.C. 27-7-5-2(a). As such, it is required to provide UM/UIM coverage.
In response, the Legislature enacted I.C. 27-7-5-1.5, effective July 1, 2005, which eliminated that coverage.
The parties in Ackerman’s case dispute whether that statute applies or if Fireman’s Fund was still required to provide UIM coverage at the time the 2008 policy, which did not expressly provide UIM coverage, was issued.
The Court of Appeals relied on Hall v. Travelers Property Cas. Co. of America, No. 3:08-CV-0007RLYWGH, 2009 WL 1148231 (S.D. Ind. 2009), to reverse the trial court.
“The term ‘issuance’ is not explicitly limited to newly-issued policies and encompasses renewal policies,” Judge Michael Barnes wrote.
“As in Hall, we conclude that Indiana Code Section 27-7-5-1.5(b) applied to both newly-issued policies and renewal policies. Regardless of whether the 2008 policy was a renewal or a newly issued policy, Fireman’s Fund was not required to include UM/UIM coverage in the policy. Both Ackerman and AER assert that a genuine issue of material fact exists as to whether the 2008 policy was a newly issued or renewal policy, but we conclude that fact is not material.”
The case was remanded for further proceedings.
Indiana Tax Court
Tax – Sales Tax Refund
Fresenius USA Marketing, Inc. v. Indiana Department of State Revenue
The Indiana Department of State Revenue should have granted a medical equipment company’s request for a sales tax refund, the Indiana Tax Court ruled, finding the department is bound by its published ruling interpreting the exemption at issue.
Fresenius USA Marketing Inc., a Delaware corporation that sells products such as dialysis machines and blood lines, collected sales tax on the medical equipment and supplies it sold in Indiana to medical clinics that provide dialysis to patients. It then sought a refund with the revenue department in December 2007 for sales tax paid between Jan. 1, 2004, to Oct. 31, 2007. The department denied the refund in 2010, leading to this tax appeal. Both parties filed for summary judgment in 2013.
In 1998, the revenue department interpreted the predecessor to the Durable Medical Equipment Exemption to apply to sales of medical equipment made to health care service providers for treating patients with a prescription. In 2008, the department issued two Revenue Rulings that again exempted those purchases. But the department later revoked those 2008 rulings and replaced them with new ones that changed the interpretation of the Durable Medical Equipment Exemption to exempt only sales made directly to patients with a prescription, according to the court opinion.
Fresenius argued that it’s entitled to the exemption because the department is bound to follow the interpretation of the exemption from the 1998 ruling, which was published in the Indiana Register. Because it was published there, the department is bound by it, despites its claims otherwise, Judge Martha Wentworth wrote.
“Fresenius designated evidence demonstrating that its facts are substantially identical to those in the 1998 Ruling. Moreover, the Department did not demonstrate that Fresenius’s factual situation varied in some material respect to the facts set forth in the 1998 Ruling,” she wrote. “Indeed, the Department has stipulated, among other things, that Fresenius has facts identical to the facts in the 1998 Ruling. For example, the parties have stipulated that, like the taxpayer in the 1998 Ruling, Fresenius sold medical equipment and supplies to healthcare service providers to treat patients, that the healthcare service providers used the equipment to treat patients with prescriptions for its use, and that federal law required the equipment to be used by licensed practitioners or under a licensed practitioners’ direction.”
Wentworth granted Fresenius’ motion for summary judgment and ruled against the department. She remanded the matter to the department to grant the refund, with applicable interest, after Fresenius provides the department with verification that it has refunded to its customers the full amount of sales tax it erroneously collected from them during the period at issue.•