Christopher Schmidt v. Indiana Insurance Company, C&F Insurance Group, LLC, and Bart Stith

ATTORNEYS FOR APPELLANT ATTORNEYS FOR APPELLEE ATTORNEYS FOR APPELLEES

Richard R. Fox INDIANA INSURANCE CO. C&F INSURANCE GROUP, LLC

Kristi L. Fox John C. Trimble AND BART STITH

Steven A. Gustafson Lewis S. Wooton Richard T. Mullineaux

The Law Office of Richard R. Fox Michael R. Giordano Crystal G. Rowe

New Albany, Indiana Lewis Wagner, LLP Ashley G. Eade

Indianapolis, Indiana Kightlinger & Gray, LLP

New Albany, Indiana

____________________________________________________________________________

In the

Indiana Supreme Court

Dec 02 2015, 10:29 am

_________________________________

No. 22S01-1507-PL-412

CHRISTOPHER SCHMIDT, Appellant/Plaintiff,

v.

INDIANA INSURANCE COMPANY,

C&F INSURANCE GROUP, LLC, AND

BART STITH Appellees/Defendants.

_________________________________

Appeal from the Floyd Superior Court

The Honorable Susan L. Orth, Special Judge

Cause No. 22C01-1104-PL-455

_________________________________

On Transfer from the Indiana Court of Appeals, No. 22A01-1403-PL-135

_________________________________

December 2, 2015

Dickson, Justice.

Following the denial of his homeowner's fire insurance claim, the plaintiff commenced

this action against the company that issued his policy, the insurance agency, and the insurance

agent. The trial court granted summary judgment in favor of all the defendants. We reverse in

part the grant of summary judgment favoring the agency and agent, but otherwise affirm as a

partial summary judgment.

In December 2004, the plaintiff, Christopher Schmidt, inherited residential property. He

allowed his cousin to live in the house and did not obtain insurance on the property. From 2007

to 2009 the plaintiff received multiple complaints about animals left on the property and odors

emanating from the property. Plaintiff testified that in 2007, while his cousin was in jail, "two

fire trucks, four Animal Control units, the Health Department, [and] the Police Department"

came and took away seven dogs and about thirty cats. Appellant's App'x at 160. In 2009 the

plaintiff received a call from the New Albany, Indiana Police Department that his cousin had

moved out of the property two months prior, around April of that year, and abandoned animals in

the house. Police called and dispatched New Albany Floyd County Animal Control and Shelter.

On July 1, 2009, Animal Control reported that the property was covered in feces, fleas, and gar-

bage and removed two emaciated dogs and one dead dog. The plaintiff testified that firemen had

to use oxygen masks to go in. The Floyd County Health Department investigated and issued a

Notice of Violation and Order to Abate, declaring the property unfit for human habitation. After

the property was condemned, no one was permitted to enter except for cleaning. Id. The plain-

tiff indicated he began cleaning the property at some time after the condemnation, but as of April

2010 "it wasn't near ready." Id. at 96. The plaintiff had removed multiple truckloads of debris,

but the remediation also required removal of the drywall and the urine-soaked carpeting and sub-

flooring in the home.

In April 2010, the plaintiff contacted Bart Stith, an insurance agent employed by C&F In-

surance Group, LLC, an insurance brokerage agency, (collectively, "the Agents") to procure in-

surance on the property. When examined under oath on October 26, 2010, pursuant to the policy

requirements, the plaintiff explained his purpose for getting insurance on the property:

I never really thought about it as being a hazard until one of my neighbors said you do

have insurance, don't you, and I'm like, why would I need insurance. Well, if

somebody goes in there and gets hurt. So that's when I went and took out a policy.

Appellant's App'x at 277. In his deposition on September 13, 2012, the plaintiff stated:

Well, I didn't know what type of insurance I had to have. So I more or less went in there

with the thought that I was going to have to get liability, you know, in case anybody got

hurt, it covered them. Because, there was a lot of things still there – the house itself that

people could've got hurt on. And so, I just wanted to get insurance on it and get it

covered.

2

Id. at 165. At the time of the insurance application, the property was vacant, uninhabitable, un-

dergoing renovation, and intended for rent (not for the plaintiff's residence), and the plaintiff

claims he provided this information to the Agents. Insurance agent Stith submitted to Indiana

Insurance Company a "Dwelling Fire Application," Id. at 108, that did not disclose the vacancy,

condemnation, renovation, or rental status of the property. Stith testified1 that he went over the

contents of the application with the plaintiff, who signed it. The plaintiff, however, does not re-

member signing the application. Based on the application, the insurance company issued a

"Dwelling Fire Policy" on the property. Id. at 206.

About two months later in June 2010, the property was destroyed by fire. After conduct-

ing an investigation in February 2011, the insurance company denied coverage and exercised its

right to rescind the policy because it contained material misrepresentations and false statements

about the property. The insurance company refunded all premiums paid. In April 2011 the

plaintiff initiated this action against the Agents and the insurance company, alleging that the

Agents had "falsely and wilfully or negligently made false representations as to the occupancy

status of the house on the application submitted to Indiana Insurance, contrary to the Plaintiff's

actual representations . . . ." Id. at 11. The complaint also alleged that the actions of the Agents

constituted offenses against property, namely Forgery,2 Deception,3 and Insurance Fraud,4 under

the Indiana Crime Victims Relief Act. Id. (citing Ind. Code § 34-24-3-1). The plaintiff sought

reinstatement of the policy and a declaration of coverage, compensatory and punitive damages,

and statutory relief under the Indiana Crime Victims Relief Act. The Agents and Indiana Insur-

ance Company filed separate motions for summary judgment. The trial court granted both mo-

tions and, finding no just reason for delay, directed entry of judgments for all of the defendants.

The plaintiff appealed.

The Court of Appeals reversed the grant of summary judgment for the Agents, finding

1

Stith died prior to the trial court's judgment, and his deposition testimony was admitted as evidence.

2

See Ind. Code § 35-43-5-2.

3

See Ind. Code § 35-43-5-3.

4

See Ind. Code § 35-43-5-4.5.

3

genuine issues of material fact as to whether the plaintiff told the insurance agent Stith about the

condition of the property and whether someone forged his signature on his application, but af-

firmed the grant of summary judgment for Indiana Insurance Company, concluding that the in-

surance company properly relied on the representations of fact in the application. Schmidt v.

Ind. Ins. Co., 24 N.E.3d 516, 520 (Ind. Ct. App. 2015). We granted transfer and now review the

Agents' motion for summary judgment, but summarily affirm the decision of the Court of Ap-

peals with respect to the grant of summary judgment in favor of Indiana Insurance Company. In-

diana Appellate Rule 58(A)(2).

In their summary judgment motion, the Agents asserted that there was no genuine issue

of material fact as to "whether [the plaintiff] made a material misrepresentation or omission of

fact on his application for insurance, precluding coverage, or alternatively, [that the plaintiff

could not] prove he was damaged by [the Agents'] conduct . . . ." Appellant's App'x at 65 (em-

phasis added). In its summary judgment motion, Indiana Insurance asserted that it properly de-

nied the plaintiff's claim because the false representations rendered the policy void under the

conditions of the policy and voidable at its discretion under Indiana law.

The trial court granted both motions for summary judgment, finding that the plaintiff's

insurance claim "was properly denied because of the representation made to Indiana Insurance

Company that the property would be tenanted and was not undergoing renovations at the time

the insurance was issued and that such misrepresentation was material," that the plaintiff "failed

to prove the essential elements of causation and damages," and that the plaintiff failed to provide

evidence "that any insurance company would have issued a policy on a house in its state and

condition." Id. at 8-9. Finding no proof on these "key elements," the trial court concluded there

were no genuine issues of material fact. Id. at 9.

In challenging the trial court's grant of summary judgment in favor of the Agents, the

plaintiff essentially argues that the Agents failed to make a prima facie showing of no factual

dispute as to (1) the non-availability of fire insurance that would have covered the plaintiff's

property, and (2) the plaintiff's ratification of a dwelling insurance application that inaccurately

described the dwelling.

4

As the moving party, the defendants carried the initial burden of affirmatively negating

the plaintiff's claim by demonstrating "the absence of any genuine issue of fact as to a determina-

tive issue, at which point the burden shifts to the non-movant to come forward with contrary evi-

dence showing an issue for the trier of fact." Hughley v. State, 15 N.E.3d 1000, 1003 (Ind. 2014)

(internal quotations and citation omitted). We review summary judgment de novo, applying the

same standard as the trial court: summary judgment is appropriate where, drawing all reasonable

inferences in favor of the non-moving party, "the designated evidentiary matter shows that there

is no genuine issue as to any material fact and that the moving party is entitled to judgment as a

matter of law." Id. (quoting Williams v. Tharp, 914 N.E.2d 756, 761 (Ind. 2009) (quoting T.R.

56(C))). "Summary judgment is appropriate when the undisputed material evidence negates one

element of a claim." Estate of Mintz v. Conn. Gen. Life Ins. Co., 905 N.E.2d 994, 998 (Ind.

2009) (citing Rhodes v. Wright, 805 N.E.2d 382, 385 (Ind. 2004)).

To succeed at trial on his claim for negligent procurement, the plaintiff needed to demon-

strate (1) a duty defendants owed him, (2) a breach of that duty by the defendants, and (3) an in-

jury to him proximately caused by the breach. See French v. State Farm Fire & Cas. Co., 881

N.E.2d 1031, 1039 (Ind. Ct. App. 2008) (citing Ford Motor Co. v. Rushford, 868 N.E.2d 806,

810 (Ind. 2007)), trans. not sought. Similarly, under the Crime Victims Act, the plaintiff needed

to establish that he suffered the requisite "pecuniary loss as a result of" the Agents' statutory vio-

lation. See Ind. Code § 34-24-3-1.

The complaint filed by the plaintiff is based solely on the alleged failure of the issued

dwelling policy to provide fire coverage for the premises and does not specifically allege the

negligent failure to procure appropriate insurance coverage. Rather, the complaint's sole allega-

tion against the Agents is that they "falsely and wilfully or negligently made false representations

as to the occupancy status of the house on the application submitted to Indiana Insurance, con-

trary to the Plaintiff's actual representations . . . ." Appellant's App'x at 11. For relief, the com-

plaint requested reinstatement of "the policy in question, and declaring that the Plaintiff's loss is

covered under it," damages, and "all other appropriate relief." Id. at 12. The complaint does not

specifically seek damages consistent with a claim for negligent procurement. Notwithstanding

5

Indiana's recognition of notice pleading, a demand for relief must contain "a short and plain

statement of the claim" and "a demand for relief to which the pleader deems entitled." Ind. Trial

Rule 8(A). The complaint itself does not present a claim alleging the negligent failure of the

Agents to procure a more appropriate type of insurance policy.

In his response to the Agents' Motions for Summary Judgment in the trial court, however,

the plaintiff did raise a negligent procurement claim. He asserted: "Other types of insurance be-

sides homeowner policies exist. Insurance can be found for construction and repair projects."

Appellant's App'x at 269. The plaintiff then argued that the Agents "had a duty to find out what

kind of coverage was available, and if they were unwilling or unable to do so, they had a duty to

point him in the direction of someone who could provide that advice." Id. at 269. In their reply

to the plaintiff's response, the Agents did not challenge the propriety of this new claim but re-

sponded to it, arguing in part that the plaintiff failed to designate any evidence of a special rela-

tionship between the plaintiff and the Agents and that the Agents "should not be liable for failing

to obtain coverage for Plaintiff where Plaintiff cannot prove such coverage was available." Id. at

296. The plaintiff raised this negligent procurement claim a second time in his appellant's brief,

and the Agents again responded, asserting that the plaintiff failed to designate any evidence (a) to

establish the special relationship necessary to impose on the agents a duty to advise on appropri-

ate coverage options, and (b) to refute the Agents' designated affidavit of agent Stith that he was

"aware of no insurance company that would have issued a Dwelling Fire Policy for a building

that had been condemned by the Board of Health, was uninhabitable due to debris and the con-

demnation, had no utilities, had been vacant for over a year, and was undergoing renovation."

Id. at 130. And the trial court's order granting summary judgment shows that the court consid-

ered the negligent procurement claim, addressing the burden on summary judgment to prove

"that any insurance company would have issued a policy on a house in its state and condition."

Appellant's App'x at 9.

It is thus clear that the plaintiff asserted his theory of liability based on negligent procure-

ment of insurance on summary judgment, that the Agents not only failed to object but also im-

pliedly consented to litigation of the issue, and that the trial court considered the claim. Indiana's

summary judgment jurisprudence "consciously errs on the side of letting marginal cases proceed

6

to trial on the merits, rather than risk short-circuiting meritorious claims." Hughley, 15 N.E.3d at

1003. An issue not pled as an affirmative defense may by implied consent be considered in sum-

mary judgment procedings. Liberty Country Club v. Landowners of the Country Estates Hous.

Dev., 950 N.E.2d 754, 759 (Ind. Ct. App. 2011) trans. not sought; Paint Shuttle, Inc. v. Conti-

nental Cas. Co., 733 N.E.2d 513, 525 (Ind. Ct. App. 2000) (issues clearly argued during sum-

mary judgment are not waived even if not expressly raised as an affirmative defense in a party's

answer) trans. denied. We therefore find the issues before the trial court in the summary judg-

ment proceedings included both the plaintiff's claims asserting (a) the Agents' fault in accurately

submitting information for a Dwelling Fire Policy to Indiana Insurance Company, and (b) the

Agents' negligent procurement of appropriate insurance.

The first claim—alleging Agent negligence related to the contents of the application for

Dwelling Fire Policy—is foreclosed by the plainitiff's failure to rebut the Agents' prima facie

showing that a dwelling fire insurance policy would not have been issued based on the plaintiff's

claimed representations regarding the condition of the property. As the parties moving for sum-

mary judgment, the Agents designated portions of the plaintiff's deposition and insurance agent

Stith's deposition and affidavit showing that the plaintiff suffered no damage because, even if the

insurance application had fully disclosed the accurate condition and usage of the property, no

dwelling fire policy would have been issued providing fire coverage on property that was con-

demned, uninhabitable, without utilities, vacant for over a year, and undergoing renovation. For

example, in his affidavit, Stith testified:

Based on C&F Insurance Group's underwriting guidelines, I would not have accepted

Plaintiff's Dwelling Fire Application and submitted this application for insurance to Indi-

ana Insurance Company or any other insurance company for issuance of a policy if Plaintiff

had disclosed to me that the property . . . was uninhabitable due to debris, that it had been

condemned, that it had no utilities, that it had been vacant for over a year, and that it was

undergoing renovation . . . . I am aware of no insurance company that would have issued

a Dwelling Fire Policy for a building that had been condemned by the Board of Health,

was uninhabitable due to debris and the condemnation, had no utilities, had been vacant

for over a year, and was undergoing renovation.

Appellant's App'x at 130. This "no damages" evidence was bolstered by other evidence before

the trial court. In its motion for summary judgment, Indiana Insurance designated a portion of

the plaintiff's deposition where the plaintiff admitted "the house was in such bad shape that [he]

7

didn't even think [he] could get insurance on it to begin with . . . ." Id. at 179. Indiana Insurance

also designated the affidavit of one of its underwriters, stating:

Based on Indiana's underwriting guidelines, Indiana would not have issued this particular

policy of insurance if it had been disclosed that the property was vacant and was under-

going renovations because it had been condemned by the Health Department.

Id. at 198; see id. at 148. With this designated evidence the Agents met their burden to establish

a prima facie case demonstrating the absence of any genuine issue of fact as to the issue of dam-

ages proximately caused by the alleged breach of duty, at which point the burden shifted to the

plaintiff as the non-moving party to come forward with contrary evidence. The plaintiff, how-

ever, failed to designate contrary evidence to show that, despite the condition and usage of the

property, it would have qualified for a dwelling fire insurance policy issued by Indiana Insurance

or another insurance company. Even if the owner provided the Agents with truthful and com-

plete information and the Agents failed to accurately report the information to the insurance

company, as alleged by the owner, there remains no genuine issue of fact regarding proximate

causation. No dwelling fire insurance policy would have been issued based on such information.

Although the Agents did not establish their entitlement to summary judgment as to the elements

of duty and breach, they did establish a prima facie case to negate the element of proximate cau-

sation of damages from the alleged inaccurate reporting, to which the plaintiff failed to ade-

quately respond. Similarly, with respect to the claimed negligence in providing information for

the issuance of a dwelling fire policy, the requisite element of causation of the plaintiff's alleged

claims under the Crime Victims Act, "pecuniary loss as a result," see Ind. Code § 34-24-3-1, was

likewise sufficiently negated by the Agents as the parties moving for summary judgment, and the

plaintiff did not designate any evidence showing any genuine issue of material fact to the con-

trary.

We reach a different conclusion, however, as to the plaintiff's claim for negligent failure

to procure appropriate insurance. As the parties moving for summary judgment, the Agents must

establish a prima facie case negating at least one of the dispositive elements of the plaintiff's

claim. The Agents did show that even if the application had completely and truthfully reported

the condition and use of the property, no dwelling fire insurance policy would have been issued.

But the Agents failed to exclude the possibility that other types of fire insurance coverage for the

property could have been obtained and issued. For this reason, summary judgment was improper

8

on the plaintiff's claim of negligent procurement of appropriate insurance.

Conclusion

We reverse in part the trial court's entry of summary judgment for the Agents to the ex-

tent that it may apply to the plaintiff's claim for negligent procurement of insurance, but we di-

rect the entry of partial summary judgment for the Agents as to the plaintiff's claim alleging the

Agents failed to accurately report dwelling fire policy information to the insurance company. As

to summary judgment in favor of Indiana Insurance Company, we summarily affirm the Court of

Appeals.

Rush, C.J., and Rucker, David, and Massa, JJ., concur.

9