Bachman v. AMCO Insurance

Citations: 897 F. Supp. 2d 780; 2012 WL 4322746; 2012 U.S. Dist. LEXIS 134660Docket: Case No. 3:10-CV-461 JD

Court: District Court, N.D. Indiana; September 20, 2012; Federal District Court

SummaryOriginalCytator Case TreatmentBackward CitatorAnalysis

EnglishEspañolSimplified EnglishEspañol Fácil

A breach of contract dispute has arisen between Jeremy and Debra Bachman and AMCO Insurance Company regarding the insurance claim for collector sports cards stolen during a burglary of the Bachmans' home. The core issue is whether AMCO correctly applied a business property coverage limitation in the homeowners insurance policy when determining the recovery amount for the stolen items. 

AMCO filed a motion for summary judgment, which has been denied. The Bachmans operated a sports memorabilia business, Spectator Sportscards, Inc., which Mr. Bachman established in 1990. Although the business began with physical locations, it transitioned to home-based operations in the late 1990s, coinciding with the rise of eBay. Mr. Bachman struggled to maintain accurate records of both his business inventory and personal collection, which he considered separate; however, the personal collection was funded by business assets and intended for future sale. 

The burglary occurred on November 27 or 28, 2009, while the Bachmans were covered under an AMCO homeowners policy with a personal property coverage limit of $176,400 and a special limit of $10,000 for business property. Following the burglary, AMCO compensated the Bachmans for certain stolen items but categorized significant sports memorabilia as business property, thus limiting the recovery. Notably, high-value sports cards, including unopened boxes of 1986-1987 Fleer basketball cards, were among the disputed items, with Mr. Bachman asserting their value was substantially higher than the limits imposed by AMCO's policy.

Mr. Bachman did not consider certain items as part of his business inventory; instead, he viewed them as personal investments, intending to sell them only in the distant future. He had previously rejected an offer for the 1986 Fleer basketball cards since they were part of his personal collection. Bachman estimated the value of his card collection in his garage to be between $150,000 and $250,000 and held a business insurance policy with General Casualty that covered only $50,000 in losses. He did not file a claim with General Casualty for the loss of his personal property, including the disputed investments. Following a theft, the Bachmans' insurance agent negotiated a lower payment from General Casualty for business-related items. The Bachmans also received $35,728.25 from AMCO for losses, subject to certain policy limits, specifically a homeowners policy that included a $10,000 limit for business-related property. Consequently, the Bachmans sued AMCO, claiming a breach of contract for not covering the loss of the basketball cards as personal property. AMCO removed the case to federal court based on diversity jurisdiction, as the amount in controversy exceeded $75,000 and the parties were citizens of different states. The court recognized subject matter jurisdiction under 28 U.S.C. 1332. Additionally, it highlighted the standard for summary judgment, stating that it is appropriate when there is no genuine dispute of material fact and the moving party is entitled to judgment as a matter of law. The court will view evidence in favor of the non-moving party in such determinations.

The Seventh Circuit emphasizes that evidence should not be weighed during summary judgment, asserting that a factual dispute is "genuine" only if a reasonable jury could favor either party. Summary judgment is inappropriate for resolving conflicting testimonies. If the nonmoving party fails to prove an essential element of its case, summary judgment is warranted. As a federal court in diversity jurisdiction, state substantive law will guide the decision, with state appellate court rulings controlling in the absence of a state supreme court ruling, unless persuasive evidence suggests a different outcome.

In breach of contract claims, essential elements include the contract's existence, a breach by the defendant, and damages. The case at hand examines whether AMCO's limitation of insurance coverage for Mr. Bachman's 1986-1987 Fleer basketball cards constituted a breach. Insurance contracts follow standard construction principles, where unambiguous terms are interpreted in their ordinary meaning. Ambiguities in policy language are construed against the insurer, particularly in exclusion cases, to account for the imbalance in bargaining power between insurers and policyholders. Ultimately, the court must honor the intent and reasonable expectations of the parties as articulated in the contract without altering its terms.

The construction of a written contract is primarily a legal issue for the trial court, making summary judgment suitable unless there is ambiguity in the contract's terms that would require a fact-finder to weigh evidence. In cases where the interpretation of a written document is in question, any ambiguity must be resolvable without additional factual inquiry. Insurance policies must be interpreted as a whole, meaning prior cases may not be applicable if the specific policies differ.

In the case at hand, the insurance policy limits coverage for business property if the residence is used mainly for business purposes, defining "business" broadly. AMCO argues that the 1986-1987 Fleer basketball cards fall under this business property limitation, asserting they were stored like business inventory and acquired with resources from Spectator Sportscards, Inc. However, AMCO's referenced cases, including Asbury v. Indiana Union Mutual Insurance Co., actually support denying summary judgment. In Asbury, the court ruled that the insured's animal pelts were not clearly excluded as business property, emphasizing that incidental income from a hobby does not automatically classify property as business-related, particularly when the exclusion lacks clear definition.

Defining "business" as encompassing trade, profession, or occupation may not significantly alter its interpretation. The determination of whether an activity qualifies as 'business' or involves 'business property' is fact-sensitive. In this case, Mr. Asbury reasonably interpreted "business property" and "business" in relation to his employment as a mill operator and believed his animal skins were personal property covered by his homeowners policy. The appellate court emphasized that whether an activity is classified as a "business" or property as "business property" is generally a factual question for the jury.

The case referenced two prior decisions: Bentley and Hitch. In Bentley, it was found that an exclusion for "business pursuits" in a homeowners policy did not apply to Mr. Bentley, who occasionally rented storage space, as the evidence did not show he did so regularly for profit. Conversely, in Hitch, Mr. Hitch's practice of selling reloaded shotgun shells was deemed a "business pursuit," as he regularly sold them for profit to customers. 

In Asbury, the court noted that Mr. Hitch's activity could not be dismissed as a mere hobby, unlike Mr. Bachman's situation, where he claimed his Fleer basketball cards were personal investments not intended for sale. Although Bachman operated a sports memorabilia business, the court stated that merely having a business does not automatically categorize his personal items as business property, thus denying AMCO's summary judgment motion. The court reiterated that consistent, regular activity aimed at earning a livelihood is essential for classifying an activity as a business pursuit.

The limitation in AMCO's insurance policy is contingent upon the primary use of the property, specifically whether it is used mainly for business purposes. A genuine dispute exists regarding whether Mr. Bachman's 1986-1987 Fleer basketball cards were personal property or business property at the time of the burglary. Evidence supporting Mr. Bachman includes that the cards were part of his personal collection, were not for sale, and he did not report them under his business policy. Conversely, AMCO argues that Mr. Bachman used business funds to purchase the cards, stored them with his business inventory, and intended to sell them in the future. The court notes that differing inferences can be drawn from these facts, and Mr. Bachman is entitled to have these inferences viewed in his favor on summary judgment. The jury could reasonably conclude that the cards were personal property, thereby making them eligible for coverage under his homeowners policy. The court emphasizes that the insurance policy did not exclude property used for business purposes "at any time" or property "to be used" for business. Furthermore, past or future business motives do not negate personal use at the time of the theft. The court cites several cases to support the position that the determination of 'use' should focus on the time of the incident, and mere presence in a business context does not automatically classify property as business-related.

The ruling aligns with the precedent set in *Allstate Ins. Co. v. Parker*, where the court determined that a homeowners policy excluded coverage for bodily injury or property damage related to the insured's business activities, defined as activities engaged in for economic gain. In Parker, the insured's profit motive was established through his own testimony, leading to a finding that his actions were business-related and thus not covered by the policy.

In contrast, Mr. Bachman’s intention for his basketball card collection was to maintain it as a personal investment rather than for economic gain. The court noted that the language in AMCO's policy did not clearly limit coverage for such personal investments, making the classification of the property as business-related a factual question that required examination of evidence and credibility assessments, suitable for resolution by a jury.

Therefore, the court deemed it inappropriate to grant summary judgment on the breach of contract claim from the Bachmans, thereby denying AMCO's motion. The court also addressed procedural aspects, confirming that the policies under review were substantively similar. Regarding jurisdiction, the court confirmed that this case, being one of an insured suing their insurer, does not qualify as a direct action under diversity jurisdiction rules, thereby maintaining subject matter jurisdiction. The court noted that the burglary involved Bachman's home, where the cards were stolen. Additionally, a motion to strike AMCO’s expert witness would be addressed separately.