West Bend Mutual Insurance Co. v. 1st Choice Insurance Services
Docket: No. 71A03-0905-CV-220
Court: Indiana Court of Appeals; December 28, 2009; Indiana; State Appellate Court
West Bend Mutual Insurance Company appeals a trial court's summary judgment favoring 1st Choice Insurance Services regarding insurance coverage for a fire loss at the Weleo Truck Stop. The appeal centers on whether there is a genuine issue of material fact concerning the negligence of the insurance agent, Carrie Block, in completing the insurance application for Brenda Howard.
The case originates from a Purchase Agreement on April 30, 2004, between Weleo Realty, LLC and the Howards, requiring the buyers to maintain insurance on the property with the seller listed as a mortgagee. Brenda Howard obtained insurance through West Bend, naming Charles and Wilma Kesmodel as additional insureds. After missed premium payments, West Bend issued a cancellation notice effective November 20, 2004.
In late 2004, Brenda sought a quote from 1st Choice and met with Block on December 15, 2004, to fill out an insurance application for the truck stop. Block completed the application based on Brenda's information but failed to verify the ownership details thoroughly, despite knowing Brenda was a first-year business owner. After submitting the application, Block noticed Brenda had documentation indicating the Kesmodels' interest in the property but did not review it before proceeding.
On January 4, 2005, Block received the insurance policy from Auto-Owners and realized the Kesmodels were still listed as insureds. She attempted to contact Brenda to clarify the situation but was unsuccessful until January 16, 2005, when a fire occurred at the truck stop. Brenda informed Block of the loss the following day, confirming the Kesmodels' continued interest, which Block then reported to Auto-Owners. The appellate court reverses the trial court's decision and remands for further proceedings.
Brenda submitted sworn statements for loss claims to Auto-Owners, indicating that the Kesmodels had an interest in the property. Auto-Owners denied payment, stating that policy changes were not permissible post-loss. Subsequently, on November 14, 2006, Weleo Realty and the Kesmodels initiated a forfeiture and termination lawsuit against the Howards (Cause 160). Shortly after, the Kesmodels sued West Bend for negligence and breach of contract regarding cancellation notice and fire loss payment. On December 19, 2006, Brenda filed a complaint against Auto-Owners and the Kesmodels (Cause 206) due to the claim denial. On January 12, 2007, Weleo Realty and the Kesmodels filed a third-party complaint against 1st Choice and a crossclaim against Auto-Owners in Cause 206. West Bend sought to intervene in Cause 160, which the court granted on August 2, 2007, and subsequently filed a motion to consolidate all lawsuits under Cause 160, also granted. On January 3, 2008, the court dismissed Brenda's complaint with prejudice. A summary judgment motion by 1st Choice was filed on July 15, 2008, and after a hearing on January 7, 2009, the court granted it on March 24, 2009. On April 28, 2009, mediation resulted in the Kesmodels and Weleo Realty settling their claims against West Bend for $225,000 and assigning their rights against other parties. The trial court later designated West Bend as the real party in interest. West Bend now appeals the summary judgment ruling. The court will determine if genuine material facts exist and if the law was applied correctly, with the burden on the appellant to demonstrate the ruling was erroneous.
Summary judgment must be reversed if there is an incorrect application of the law to the facts. In this case, the trial court did not provide findings of fact or conclusions of law, which, while not mandatory for summary judgment, would have aided appellate review. West Bend argues that the trial court erred by granting summary judgment to 1st Choice, claiming genuine issues of material fact regarding Block's potential negligence for failing to list the Kesmodels as having an interest in the truck stop, which led to Auto-Owners’ denial of insurance claims after a fire. Although West Bend's reliance on the case Brennan v. Hall was raised for the first time on appeal, it did not waive the argument since 1st Choice was made aware of the negligence claims in the Complaint.
To establish negligence, a plaintiff must prove: (1) a duty of care was owed, (2) the duty was breached, and (3) the breach caused injury. An insurance agent must exercise reasonable care in procuring insurance for clients and inform them if unable to do so. Any material misrepresentation or omission in an insurance application may void the coverage at the insurer's discretion.
A potential insured's accuracy in providing information to an insurance agent does not absolve them of liability for material misrepresentations in the application if they had the chance to review and sign it. If an applicant signs an application with misrepresentations, they are deemed to accept those inaccuracies as their own. West Bend is suing 1st Choice for alleged negligence in the application process, resulting in the Kesmodels lacking fire loss coverage. The Indiana case Brennan v. Hall illustrates this principle, where Hall's application misrepresented the nature of her dogs, leading to a denied claim. Hall did not read the application before signing it. The court differentiated this case from others by referencing Roe v. Sewell, where a signed but incomplete application led to a denied claim. In Roe, the court allowed a claim against the agent for negligence in completing the application, noting that the applicant's failure to review it was a factor for the jury to consider under Indiana's Comparative Fault Act.
Roe's principles were deemed persuasive by the Brennan court, which confirmed that Indiana law mandates insurance agents to exercise reasonable skill, care, and diligence in securing insurance on behalf of clients, with potential liability for damages if they fail to do so. Brennan established that an applicant could pursue damages from an agent if the agent's negligence in completing an insurance application leads to a denial of coverage, even if the applicant subsequently ratified the application. In the current case, evidence indicated that Brenda met with Block to fill out an insurance application for a truck stop, but Block failed to inquire about crucial details such as additional interests or mortgages, despite these being relevant questions on the application. Block did not review critical documentation provided by Brenda before submitting the application to Auto-Owners, which subsequently issued a policy based on the incomplete information. After a fire damaged the truck stop, the Kesmodels were denied coverage due to their omission as additional insureds. The court found a material fact issue regarding Block's potential negligence in handling the application, stating that while there may be some shared fault with Brenda, it is appropriate to evaluate her fault under the Comparative Fault Act. Consequently, the trial court's summary judgment in favor of 1st Choice was reversed, and the matter was remanded for further proceedings.
