COA affirms for insurer in litigation dispute

Deciding an issue of first impression, the Indiana Court of Appeals affirmed a favorable ruling for an insurance company following arguments that it had no obligation to defend former customers in outside litigation.

Charles Hoefer Jr., the founder of Global Caravan Technologies, Inc., sought to enter the recreational vehicle market in 2013 and had experience and intellectual property rights to materials related to manufacturing RVs.

At some point, Hoefer was removed as the owner of Global, and he sued Global investors Christopher Douglas, Husheng Ding and Kyle Fang, as well as Red Wing Capital, LLC and others. Hoefer alleged, among other things, conspiracy, unjust enrichment, securities fraud, defamation, theft, and interference with contractual relations. Global notified its insurer, The Cincinnati Insurance Company, and requested defense and indemnification for Global, Douglas, Ding, and Fang.

Defense counsel was granted to Douglas, Ding and Fang, but not Global, prompting the latter to retain its own counsel without Cincinnati’s approval. Cincinnati thereafter filed an action seeking declaratory judgment that it had no duty to defend or indemnify Global in the Hoefer litigation, and a district court judge granted the insurer summary judgment.

Meanwhile, more than $50,000 in attorney fees racked up by Douglas, Ding, Fang, and Red Wing was submitted to Cincinnati for payment after those defendants retained separate counsel to defend them in the Hoefer litigation. Global also retained separate counsel and incurred more than $90,000 in attorney fees and costs, none of which Cincinnati had paid or reimbursed.

The insurer sued again, arguing it was not required to defend or indemnify the defendants in the Hoefer litigation, to which the trial court agreed. The Indiana Court of Appeals likewise affirmed, finding Global’s voluntary intervention in the Hoefer litigation did not constitute a “suit” under the plain language of the contract between Global and Cincinnati or the plain and ordinary meaning of the word.

The appellate court addressed an issue of first impression as to whether a voluntary intervention in a pending matter constitutes a suit, pointing to its reference in One-Gateway Associates v. Westfield Ins. Co., 184 F.Supp. 2d 527 (S.D. W. Va. 2002).

“Like in One-Gateway, Global’s intervention in the pending Hoefer Litigation was completely voluntary and there did not exist a claim for damages against Global, even after Hoefer amended his complaint following Global’s intervention,” Judge Melissa May wrote.  “Thus, we conclude the trial court did not err when it determined Global’s action was not a ‘suit’ under the insurance contract with Cincinnati. Cincinnati therefore did not have a duty to defend Global in the Hoefer Litigation.”

It further found the allegations in the Hoefer litigation fell squarely within a category of actions that took place while Hoefer was employed by Global and that the ERP Exclusion precluded coverage by Cincinnati for Douglas, Ding, and Fang. The trial court, it concluded, did not err when it granted summary judgment to Cincinnati.

The case is Global Caravan Technologies, Inc.; Christopher Douglas; Husheng Ding; Kyle Fang; Chris Tzeng; C.H. Douglas & Gray, LLC; Thomas Gray; Doris Roberts; and Red Wing Capital, LLC v. The Cincinnati Company, 18A-PL-2479.

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