David Didion and Kristi Didion as Parents and Legal Guardians of Brayden Didion v. Auto-Owners Insurance Company

FOR PUBLICATION

ATTORNEY FOR APPELLANTS: ATTORNEYS FOR APPELLEE:

NICHOLAS J. WAGNER DAVID L. TAYLOR

Stewart & Stewart Attorneys CHRISTOPHER D. SIMPKINS

Carmel, Indiana Taylor Law Firm, P.C.

Indianapolis, Indiana

Dec 10 2013, 9:32 am

IN THE

COURT OF APPEALS OF INDIANA

DAVID DIDION and KRISTI DIDION as Parents )

and Legal Guardians of BRAYDEN DIDION, )

)

Appellants, )

)

vs. ) No. 27A02-1303-PL-232

)

AUTO-OWNERS INSURANCE COMPANY, )

)

Appellee. )

APPEAL FROM THE GRANT SUPERIOR COURT

The Honorable Jeffrey D. Todd, Judge

Cause No. 27D01-1002-PL-184

December 10, 2013

OPINION - FOR PUBLICATION

BRADFORD, Judge

In June of 2008, Braydon Didion was playing in the yard of a Gas City house (“the

House”) being lived in by Michael Carl when he was allegedly bit in the face by Michael’s

dog and injured (“the Loss”). Von Carl and Ginger Hawk, who lived in Kentucky at the

time, owned the House and had home owner’s insurance pursuant to a policy with Appellee

Auto-Owners Insurance Company (“the Policy”). Michael did not notify Auto-Owners, Von,

or Ginger of the Loss. Braydon’s parents, Appellants David and Kristi Didion (“the

Didions”), filed suit against Michael and eventually named Ginger as a defendant.

Ultimately, default judgment was entered against Michael and Ginger, although the judgment

as to Ginger was subsequently set aside. Most likely in July of 2009, Ginger became aware

of the Loss and the lawsuit and soon notified her insurance agent of both. In February of

2012, Auto-Owners filed a complaint, seeking a declaratory judgment that it had no liability

for the Loss. The trial court entered summary judgment in favor of Auto-Owners. The

Didions claim on appeal that the trial court erred in concluding that (1) Michael was not an

insured under the terms of the Policy and (2) Auto-Owners was not given timely notice of the

Loss. Concluding that Michael was not an insured and that Auto-Owners was not given

timely notice of the Loss pursuant to the terms of the Policy, we affirm.

FACTS AND PROCEDURAL HISTORY

In June of 2008, Von and Ginger owned the House, which was being lived in by

Michael, Ginger’s cousin. Ginger, who was born in 1957, had lived in the House at one time,

but had not done so since she was sixteen or seventeen years old. Ginger lived in Kentucky

with her husband and son, and had lived in her current residence for approximately eight

years. Ginger checked on the House “probably every couple months” but “would just drive

by, drive down the driveway, or drive down Broadway in front of the propery[,]” never going

inside. Appellant’s App. p. 35. Von and Ginger had secured home-owner’s coverage

pursuant to the Policy, which provided in part as follows:

HOMEOWNERS POLICY

FORM 3

INSURING AGREEMENT

The attached Declarations describe the property we insure and the Coverages

and Limits of Insurance for which you have paid a premium. In reliance upon

your statements in the Declarations and application(s), we agree to provide

insurance subject to all terms and conditions of this policy. In return, you must

pay the premium and comply with all the terms and conditions of this policy.

This policy applies to losses, bodily injury, property damage, and personal

injury which occur during the policy term shown in the Declarations.

DEFINITIONS

To understand this policy, you must understand the meaning of the following

words. These words appear in bold face type whenever used in this policy

and endorsements attached to this policy.

…

2. Bodily injury means physical injury, sickness or disease sustained by a

person including resulting death of that person. Bodily injury does not

include personal injury.

….

5. Insured means:

a. you;

b. your relatives; and

c. any other person under the age of 21 residing with you who is in

your care or the care of a relative.

….

13. Relative means a person who resides with you and who is related to

you by blood, marriage or adoption.

….

WHAT TO DO IN CASE OF LOSS

….

2. PERSONAL LIABILITY PROTECTION

In the event of bodily injury, property damage or personal injury,

the insured must

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a. notify us or our agency as soon as possible. The notice must

give:

(1) your name and policy number;

(2) the time, place and circumstance of the occurrence or

incident; and

(3) the names and addresses of injured persons and

witnesses;

b. promptly send us any legal papers received relating to any claim

or suit:

c. cooperate with us and assist us in any matter relating to a claim

or suit[.]

Appellant’s App. pp. 190-91, 213-14 (all emphases in original).

On June 16, 2008, Braydon was allegedly bit in the face by Michael’s dog as Braydon

played in the yard of the House. On July 24, 2008, the Didions filed a complaint for money

damages against Michael, amending the complaint to add Ginger on September 30, 2008. On

February 9, 2009, the Didions filed a motion for default judgment, which the trial court

granted the next day. On April 16, 2009, the trial court issued an order fixing the Didions’

damages at $250,000.00. At some point, most likely in July of 2009, Ginger notified her

insurance agent of the Loss and the lawsuit. Ginger had first heard of the Loss and the

lawsuit after learning that there was a lien on the House and then speaking with Michael on

the telephone. Very soon after, she notified Auto-Owners of both. On September 1, 2009,

the trial court granted Ginger’s motion to set aside the default judgment against her.

On February 25, 2010, Auto-Owners filed a complaint for declaratory judgment on the

issue of liability against Michael, Ginger, and the Didions. On September 28, 2012, the

Didions filed a motion for partial summary judgment against Auto-Owners, to which Auto-

Owners responded on October 30, 2012. On February 20, 2013, the trial court granted

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summary judgment in favor of Auto-Owners, concluding, inter alia, that

1. Michael Carl did not reside with Von Carl or Ginger Hawk at the time

of the Incident.

….

4. Michael Carl is not an insured under the Policy.

5. Michael Carl failed to provide timely and reasonable notice of the

Incident, claims or Tort Lawsuit of Didions to Auto-Owners, which

was a condition precedent to coverage under the Policy.

Appellant’s App. pp. 17-18.

DISCUSSION AND DECISION

When reviewing the grant or denial of a summary judgment motion, we apply the

same standard as the trial court. Merchs. Nat’l Bank v. Simrell’s Sports Bar & Grill, Inc.,

741 N.E.2d 383, 386 (Ind. Ct. App. 2000). Summary judgment is appropriate only where the

evidence shows there is no genuine issue of material fact and the moving party is entitled to a

judgment as a matter of law. Id.; Ind. Trial Rule 56(C). All facts and reasonable inferences

drawn from those facts are construed in favor of the nonmoving party. Id. To prevail on a

motion for summary judgment, a party must demonstrate that the undisputed material facts

negate at least one element of the other party’s claim. Id. Once the moving party has met

this burden with a prima facie showing, the burden shifts to the nonmoving party to establish

that a genuine issue does in fact exist. Id. The party appealing the summary judgment bears

the burden of persuading us that the trial court erred. Id.

I. Whether Michael Was an “Insured” Under the Policy

The Didions argue that the trial court erred in concluding that Michael was not an

insured pursuant to the policy. Specifically, the Didions contend that Michael is a blood

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relative of Ginger and that he “resided” with Ginger in the Gas City house, making him an

“insured.”

[B]ecause the interpretation of a contract is a matter of law, cases involving the

interpretation of insurance contracts are particularly appropriate for summary

judgment.

Moreover, provisions of insurance contracts are subject to the same

rules of construction as other contracts. We interpret an insurance policy with

the goal of ascertaining and enforcing the parties’ intent as revealed by the

insurance contract. In accomplishing that goal we must construe the insurance

policy as a whole, rather than considering individual words, phrases, or

paragraphs. If the contract language is clear and unambiguous, it should be

given its plain and ordinary meaning.

Additionally, we must accept an interpretation of the contract language

that harmonizes the provision rather than one which supports a conflicting

version of the provisions. Policy terms are interpreted from the perspective of

an ordinary policyholder of average intelligence. If reasonably intelligent

persons honestly may differ as to the meaning of the policy language, the

policy is ambiguous. However, an ambiguity does not exist merely because

the parties proffer differing interpretations of the policy language.

Wright v. Am. States Ins. Co., 765 N.E.2d 690, 692-93 (Ind. Ct. App. 2002) (citations

omitted).

Contracts for insurance are subject to the same rules of interpretation

and construction as are other contracts. Eli Lilly and Co. v. Home Ins. Co.

(1985), Ind., 482 N.E.2d 467; Sharp v. Indiana Union Mut. Ins. Co. (1988),

Ind. App., 526 N.E.2d 237, trans. denied. Whenever summary judgment is

granted based upon the construction of a written contract, the trial court has

either determined as a matter of law that the contract is not ambiguous or

uncertain, or the contract ambiguity, if one exists, can be resolved without the

aid of a factual determination. Kutche Chevrolet, Inc. v. Anderson Banking

Co. (1992), Ind. App., 597 N.E.2d 1307. Generally, construction of a written

contract is a question of law for the trial court and therefore summary

judgment is particularly appropriate. Id. However, if reasonable minds differ

as to the meaning of the contract’s terms, then an ambiguity exists rendering

summary judgment inappropriate. Id.

Plumlee v. Monroe Guar. Ins. Co., 655 N.E.2d 350, 354 (Ind. Ct. App. 1995), trans. denied.

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As a general rule, “[w]here provisions limiting coverage are not clearly and plainly

expressed, the policy will be construed most favorably to the insured, to further the policy’s

basic purpose of indemnity.” Meridian Mut. Ins. Co. v. Auto-Owners Ins. Co., 698 N.E.2d

770, 773 (Ind. 1998).

There is no dispute that Michael is a blood relative of Ginger’s, but he would have to

“reside” with her in the House in order to qualify as an insured pursuant to the Policy.

“Reside” may be defined as “[t]o be in residence; to occupy a fixed abode; [or] to dwell

permanently or continuously (reside in the district).” WILLIAM P. STATSKY, WEST’S LEGAL

THESAURUS/DICTIONARY 655 (1985). While we acknowledge that the word “reside” may be,

perhaps, not without some inherent ambiguity, that potential ambiguity is not even remotely

broad enough to support a conclusion that Ginger “resided” in the House with Michael. The

Indiana Supreme Court has made it clear that, while ambiguities will be strictly construed

against the insurer, “for ambiguity to confer coverage, the covered item must be somewhere

within the circle of ambiguity.” Allstate Ins. Co. v. Dana Corp., 759 N.E.2d 1049, 1057 (Ind.

2001).

The uncontradicted designated evidence indicates that Ginger lived permanently and

continuously in Kentucky with her immediate family and drove by the House every couple of

months to check on its condition, never even going inside. While Ginger had lived in the

House in the past, she had not done so since the early 1970s. There is no designated

evidence tending to show that Ginger had any personal property in the House or that she had

ready access to the house or any of its contents. Were we to interpret the word “reside” in the

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broad fashion urged by the Didions, it would render similar “insured’ clauses in other

insurance contracts meaningless and without effect. In summary, we do not believe that any

ordinary policyholder of reasonable intelligence would understand an absentee landlord who

does no more than drive by a house every so often to “reside” in that house. The trial court

did not err in concluding that Michael was not an “insured” under the Policy.1

II. Whether Auto-Owners Received Adequate Notice

The Didions also contend that the trial court erred in concluding that Auto-Owners did

not receive timely notice of the Loss. Although the trial court concluded that notice was

inadequate because Michael failed to notify Auto-Owner’s, we have already concluded that

Michael was not an “insured.” As previously mentioned, the notice provision of the Policy

provides, in part, that, “In the event of bodily injury, property damage or personal injury, the

insured must … notify us or our agency as soon as possible.” Appellant’s App. p. 214 (bold

emphasis removed and italics added). Michael had absolutely no obligation to notify Auto-

Owners of the Loss, and his failure to do so is therefore irrelevant. The only question, then,

is whether Ginger, as a named “insured” and party to the underlying lawsuit, provided

adequate notice to Auto-Owners pursuant to the policy.

We have held that the notice requirement is “material, and of the

essence of the contract.” London Guarantee & Accident Co. v. Siwy, 35 Ind.

App. 340, 66 N.E. 481, 482 (1903). The duty to notify an insurance company

of potential liability is a condition precedent to the company’s liability to its

1

The Didions rely on our decision in Erie Insurance Exchange v. Stephenson, 674 N.E.2d 607 (Ind.

Ct. App. 1996), a case in which we found coverage pursuant to an homeowner’s liability policy even though

the owner no longer lived in the house. Id. at 610. In that case, however, the question was not whether the

owner “resided” in the house but whether she could be a member of the “household” despite not living in the

house. Id. Consequently, our decision in Erie Insurance Exchange is inapposite and does not help the

Didions.

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insured. Shelter Mut. Ins. Co. v. Barron, 615 N.E.2d 503, 507 (Ind. Ct. App.

1993), trans. denied. When the facts of the case are not in dispute, what

constitutes reasonable notice is a question of law for the court to decide. Id.

Unlike other policy provisions requiring the cooperation of the insured,

noncompliance with notice of claim provisions resulting in an unreasonable

delay triggers a presumption of prejudice to the insurer’s ability to prepare an

adequate defense. Miller v. Dilts, 463 N.E.2d 257, 265 (Ind. 1984). The

Indiana Supreme Court stated in Miller that:

The requirement of prompt notice gives the insurer an opportunity to

make a timely and adequate investigation of all the circumstances

surrounding the accident or loss. This adequate investigation is often

frustrated by a delayed notice.

Askren Hub States Pest Control Servs., Inc. v. Zurich Ins. Co., 721 N.E.2d 270, 277-78 (Ind.

Ct. App. 1999).

We must conclude that Ginger’s failure to notify Auto-Owners of the Loss until over

year had passed did not satisfy her obligation to do so “as soon as possible.” We have little

trouble concluding that the length of delay in this case was unreasonable. The facts of this

case amply support our conclusion: in the over one year that passed between the Loss and

Ginger’s notification to her agent, the Didions’ lawsuit had not only been filed but had

already proceeded to default judgment regarding liability and damages. In other words,

Auto-Owners had been denied of all opportunity to timely investigate the Loss and to control

the litigation from the early stages. See, e.g., Miller, 463 N.E.2d at 266 (concluding that

summary judgment should be entered in favor of three insurance companies which received

notice of the accidents giving rise to liability one month, six months, and seven months after

their occurrence and which received notice of the resulting lawsuits as early as five days after

filing).

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Moreover, we cannot excuse Ginger’s delay on the basis that she was ignorant of the

Loss and notified Auto-Owners almost immediately upon being made aware of it. Indiana

courts have been consistent in holding that there is no “discovery rule” in the insurance

context. In Brunner v. Economy Preferred Insurance Co., 597 N.E.2d 1317 (Ind. Ct. App.

1992), we adopted the rule that, for purposes of notice provisions in insurance contracts, “the

insured’s failure to discover the loss until some time after it occurred was immaterial[.]” Id.

at 1319; see also United Techs. Auto. Sys., Inc. v. Affiliated FM Ins. Co., 725 N.E.2d 871,

875 (Ind. Ct. App. 2000) (“In addition, we note that Indiana courts have followed the

reasoning of the vast majority of state courts in holding that failure to discover damages does

not toll the contractual period of limitation; rather, a policy’s period of limitation begins to

run at the time the loss occurs, regardless of whether the insured knew of it.”), trans. denied.

Ginger’s obligation to report the Loss to Auto-Owner’s was not altered by her ignorance of

it. The trial court correctly concluded that Auto-Owner’s did not receive timely notice.

We affirm the judgment of the trial court.

MAY, J., concurs.

BAILEY, J., concurs in result with opinion.

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IN THE

COURT OF APPEALS OF INDIANA

DAVID DIDION and KRISTI DIDION as Parents )

and Legal Guardians of BRAYDEN DIDION, )

)

Appellants, )

)

vs. ) No. 27A02-1303-PL-232

)

AUTO-OWNERS INSURANCE COMPANY, )

)

Appellee. )

BAILEY, Judge, concurring in result

I agree with the majority that the trial court did not err when it entered summary

judgment against the Didions on the question of the availability of insurance coverage for

Michael under the homeowners’ insurance policy of his sister, Ginger, and I concur in the

majority’s reasoning on that point. I write separately because I do not think there is any need

to examine the question of the timeliness of notice.

I reach this conclusion for two reasons. First, the lack of coverage inquiry is

dispositive. Michael does not fall within the scope of an insured under the policy, and thus I

think we need not reach the question of timely notice of an occurrence. And “statements not

necessary in the determination of the issues presented are obiter dictum. They are not

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binding and do not become the law.” Koske v. Townsend Eng’g Co., 551 N.E.2d 437, 443

(Ind. 1990). It would be better, then, for us to remain silent on the issue.

Second, while the majority is correct that Indiana courts have regularly held as

untimely notice of an occurrence or claim that occurred over the span of time at issue here, it

does not appear that our courts have been faced squarely with a case like this one. Here, the

party responsible for providing notice of an occurrence under the policy appears not to have

been aware of an occurrence, might have been actively prevented from obtaining the

requisite knowledge, and the policy language required notice “as soon as possible.” Neither

the majority nor the parties cite any cases that fit this fact pattern. Since we need not reach

that issue, and in the apparent absence of prior decisive law, I think it better as a matter of

judicial restraint that we not comment on the matter and permit our courts to address such

matters when those issues are squarely and necessarily before them.

For the foregoing reasons, I concur with the result reached by the majority.

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