Title: Sheehan Construction Company, et al. v. Continental Casualty Company, et al.

State: indiana

Issuer: Indiana Supreme Court

Document:

ATTORNEYS FOR APPELLANT 
 
 
 
 
ATTORNEYS FOR APPELLEE 
David F. McNamar 
 
 
 
 
 
INDIANA INSURANCE COMPANY 
McNamar & Associates, P.C. 
 
 
 
 
Joseph Dietz 
Indianapolis, Indiana 
 
 
 
 
 
Meils Thompson Dietz & Berish 
 
 
 
 
 
 
 
 
Indianapolis, Indiana 
 
 
 
 
 
 
 
 
 
ATTORNEYS FOR APPELLEE 
 
 
 
 
 
 
 
 
CONTINENTAL CASUALTY COMPANY 
 
 
 
 
 
 
 
 
Mary K. Reeder 
 
 
 
 
 
 
 
 
Riley Bennett & Egloff, LLP 
 
 
 
 
 
 
 
 
Indianapolis, Indiana 
 
 
 
 
 
 
 
 
 
OF COUNSEL 
 
 
 
 
 
 
 
 
Joseph Borders 
 
 
 
 
 
 
 
 
Peter G. Daniels 
 
 
 
 
 
 
 
 
Walker Wilcox Matousek LLP 
 
 
 
 
 
 
 
 
Chicago, Illinois 
 
 
 
 
 
 
 
 
 
ATTORNEYS FOR APPELLEE 
 
 
 
 
 
 
 
 
MJ INSURANCE, INC. 
 
 
 
 
 
 
 
 
Philip E. Kalamaros 
 
 
 
 
 
 
 
 
Hunt Suedhoff Kalamaros LLP 
 
 
 
 
 
 
 
 
St. Joseph, Michigan 
 
______________________________________________________________________________ 
 
In the 
Indiana Supreme Court 
_________________________________ 
 
No. 49S02-1001-CV-32 
 
SHEEHAN CONSTRUCTION COMPANY, INC., 
VINCENT B. ALIG, M.D. AND MARY JEAN ALIG 
INDIVIDUALLY, CO-TRUSTEES OF THE MARY 
JEAN ALIG REVOCABLE TRUST, AND AS 
REPRESENTATIVES OF A CLASS OF ALL  
OTHERS SIMILARLY SITUATED, 
 
 
 
 
 
 
 
 
Appellants (Petitioners below), 
 
v. 
 
CONTINENTAL CASUALTY COMPANY, 
INDIANA INSURANCE COMPANY, AND 
MJ INSURANCE, INC., 
 
 
 
 
 
 
 
 
Appellees (Respondents below). 
_________________________________ 
FILED
CLERK
of the supreme court,
court of appeals and
tax court
Dec 17 2010, 3:57 pm
2 
 
Appeal from the Marion Superior Court,  
Civil Div. F-12, No. 49F12-0702-PL-007751 
The Honorable Michael D. Keele, Judge 
_________________________________ 
 
On Petition For Rehearing 
_________________________________ 
 
December 17, 2010 
 
 
Rucker, Justice. 
 
 
Indiana Insurance seeks rehearing of this Court’s opinion in which we determined that 
damage caused by faulty workmanship may be covered under a standard Commercial General 
Liability (CGL) policy.  See Sheehan Constr. Co. v. Cont’l Cas. Co., 935 N.E.2d 160 (Ind. 
2010).  More particularly, on a claim for indemnification made by Sheehan Construction 
Company and a Class of homeowners (hereafter “Sheehan”) against various insurance carriers 
including Indiana Insurance, the trial court entered summary judgment in favor of the insurance 
carriers.  Among other things the trial court determined that under the terms of the CGL polices 
there was no “occurrence” or “property damage” and thus there was no coverage.  Sheehan 
appealed and the Court of Appeals affirmed the judgment of the trial court.  See Sheehan Constr. 
Co. v. Cont’l Cas. Co., 908 N.E.2d 305 (Ind. Ct. App. 2009).  Because the Court of Appeals 
affirmed the trial court’s judgment on the issue of coverage, it did not address Indiana 
Insurance’s alternative argument that summary judgment should also be affirmed on grounds that 
Sheehan provided untimely notice of its claims.  We granted transfer thereby vacating the Court 
of Appeals opinion, see Indiana Appellate Rule 58A, and reversed the judgment of the trial court.  
In so doing we addressed what we characterized as the “main issue” in the case, namely: 
“whether a standard commercial general liability (“CGL”) insurance policy covers an insured 
contractor for the faulty workmanship of its subcontractor.”  Sheehan Constr. Co., 935 N.E.2d at 
162.  We did not address the timeliness of Sheehan’s notice.  Indiana Insurance appropriately 
filed a petition for rehearing which we now grant so that this issue may be addressed.1 
                                                 
1 In its reply to Indiana Insurance’s petition for rehearing Sheehan contends Indiana Insurance has waived 
this issue because “[i]t did not file for Rehearing to ask the Court of Appeals to address the issue.  Indiana 
did not seek transfer within the appropriate time if it wanted the issue addressed.  Finally, Indiana did not 
3 
 
 
Our standard of review for summary judgment is that used in the trial court:  summary 
judgment is appropriate only where the evidence shows there is no genuine issue of material fact 
and the moving party is entitled to judgment as a matter of law.  Ind. Trial Rule 56(C); Tom-
Wat, Inc. v. Fink, 741 N.E.2d 343, 346 (Ind. 2001).  All facts and reasonable inferences drawn 
from those facts are construed in favor of the non-moving party.  Tom-Wat, Inc., 741 N.E.2d at 
346.  Also, review of a summary judgment motion is limited to those materials designated to the 
trial court.  Mangold v. Ind. Dep't of Natural Res., 756 N.E.2d 970, 973 (Ind. 2001). 
 
 
A detailed recitation of the facts, procedural history, and background of this case is set 
forth in our original opinion.  Here we recite only the facts necessary to our decision on 
rehearing.  
 
 
The record reflects the following language in Indiana Insurance’s CGL policy under 
which Sheehan sought indemnification:  
 
2. 
Duties In The Event of Occurrence, Offense, Claim or Suit. 
 
a. 
You must see to it that we are notified as soon as 
practicable of an “occurrence” or an offense which 
may result in a claim.   
 
. . . . 
 
b. 
If a claim is made or “suit” is brought against any 
insured, you must: 
 
(1) 
Immediately record the specifics of the 
claim or “suit” and the date received; and 
                                                                                                                                                             
raise the issue in its response to Sheehan’s and the Class’ Petition to Transfer.  It did not participate in 
oral argument in this Court.”  Appellants’ Reply to Reh’g Pet. at 2-3.  These contentions lack merit.  First, 
we fail to see the relevance of whether Indiana Insurance participated in oral argument.  In any event, 
Indiana Insurance raised the lack of timely notice in its brief before the Court of Appeals, see Br. of 
Appellee Indiana at 33, as well as its petition in response to Sheehan’s petition to transfer to this Court.  
See Appellee Indiana’s Response to Pet. for Transfer at 8.  “A petition for rehearing is a vehicle that 
affords the reviewing court the opportunity to correct its own omission or errors.  A petitioner may seek 
rehearing only on points raised in the original brief.”  Griffin v. State, 763 N.E.2d 450, 450-51 (Ind. 2002) 
(internal quotation and citations omitted).  If a transfer petition is granted on whatever grounds, “the 
Supreme Court shall have jurisdiction over the appeal and all issues as if originally filed in the Supreme 
Court.”  Ind. App. R. 58(A) (emphasis added).  The record is clear that Sheehan properly preserved the 
issue before us.  
4 
 
(2) 
Notify us as soon as practicable. 
 
You must see to it that we receive written notice of the 
claim or “suit” as soon as practicable. 
 
c. 
You and any other involved insured must: 
 
(1) 
Immediately send us copies of any demands, 
notices, summonses or legal papers received in 
connection with the claim or “suit”; 
. . . .  
 
d. 
No insured will, except at the insured’s own cost, 
voluntarily make a payment, assume any obligation, 
or incur any expense, other than for first aid, 
without our consent. 
 
Appellant’s App. at 702-03.  In addition to the foregoing, Indiana Insurance tendered various 
other exhibits and affidavits in support of its motion for summary judgment.  See Appellant’s 
App. at 688-690.  Among other things the materials establish that Vincent B. Alig and his wife 
Mary Jean Alig – the original plaintiffs in this case – filed a complaint against Sheehan in 
November 2004.  However Sheehan did not provide Indiana Insurance with notice of the 
complaint until September 2006.  In the interim much activity had occurred in this case:  the trial 
court had certified this case as a Class action; the Class litigation had undergone extensive 
discovery including numerous depositions of homeowners, both sides had retained experts, on-
site evaluations of the homes in question had been undertaken, and a settlement had been reached 
in the amount of approximately $2.8 million.  As a result, Indiana Insurance argues it was 
prejudiced by Sheehan’s delay in providing prompt notice.  
 
 
Before the Court of Appeals, Sheehan did not dispute that it failed to give timely notice.  
Instead, according to Sheehan, “[Indiana Insurance] failed to present any evidence that it was 
harmed or prejudiced in any way by reason of Sheehan[’s] failing to notify it.”  Appellant’s Br. 
at 25.  Sheehan misapprehends the law in this area.  Requiring prompt notice allows insurers the 
opportunity to investigate the circumstances surrounding claimed losses in a timely and adequate 
manner.  P.R. Mallory & Co. v. Am. Cas. Co. of Reading, Pa., 920 N.E.2d 736, 746 (Ind. Ct. 
App. 2010), trans. denied.  In Miller v. Dilts, this Court determined that “[p]rejudice to the 
5 
 
insurance company’s ability to prepare an adequate defense can therefore be presumed by an 
unreasonable delay in notifying the company about the accident or about the filing of the 
lawsuit.”  463 N.E.2d 257, 265 (Ind. 1984) (emphasis added).  Once prejudice is presumed, the 
burden is on the insured to “establish some evidence that prejudice did not occur in the particular 
situation.”  Id.; see also Askren Hub States Pest Control Svcs., Inc. v. Zurich Ins. Co., 721 
N.E.2d 270, 279 (Ind. Ct. App. 1999) (“The presumption of prejudice essentially means that if 
the delay in giving the required notice is unreasonable, the injured party or the insured has the 
burden to produce evidence that prejudice did not actually occur in the particular situation.”).  
The duty to notify is a condition precedent to the insurance company’s liability to its insured.  
Miller, 463 N.E.2d at 263.  “Where prejudice is created by the insured’s noncompliance with the 
policy’s provisions, the insurance company is relieved of its liability under the policy.”  Id. at 
261.  
 
 
The purpose of summary judgment is to terminate litigation about which there can be no 
factual dispute and which may be determined as a matter of law.  Bushong v. Williamson, 790 
N.E.2d 467, 474 (Ind. 2003) (internal quotation and citation omitted).  Once the moving party 
has sustained its initial burden of proving the absence of a genuine issue of material fact and the 
appropriateness of judgment as a matter of law, the party opposing summary judgment must 
respond by designating specific facts establishing a genuine issue for trial.  Stephenson v. 
Ledbetter, 596 N.E.2d 1369, 1371 (Ind. 1992).  If the opposing party fails to meet its responsive 
burden, the court shall render summary judgment.  Bushong, 790 N.E.2d at 474.  
 
 
 
In this case Sheehan conceded it did not give Indiana Insurance timely notice of 
Sheehan’s claims under the CGL policy.  Because prejudice to the insurer was therefore 
presumed, Indiana Insurance carried its initial burden of demonstrating it had no liability to 
Sheehan under the policy of insurance.  Sheehan has not directed this Court to any evidence it 
presented to the trial court rebutting the presumption of prejudice.2  Thus the trial court properly 
granted summary judgment in favor Indiana Insurance on this point. 
                                                 
2 The trial court’s order in this regard declares: 
 
Class/Sheehan failed to notify Indiana Insurance of the claims which 
form the basis of this action until at least 22 months after Sheehan knew 
6 
 
 
We grant rehearing and modify our original opinion as set forth herein.  In all other 
respects the original opinion is affirmed.3 
 
Shepard, C.J., and Dickson, Sullivan and David, JJ., concur. 
                                                                                                                                                             
of said claims.  As a matter of law, this delay in notification was 
unreasonable and untimely.  As such, under Indiana law, prejudice to 
Indiana Insurance is presumed.  Further, because the Class/Sheehan 
failed to designate evidence to rebut the presumption of prejudice, and 
because Indiana Insurance further designated materials to this Court 
establishing actual prejudice, there is no coverage afforded under the 
Indiana Insurance policies to any claims asserted by the Class/Sheehan, 
as a matter of law. 
 
Appellant’s App. at 28.  
 
3 Over the dissent of Justice Sullivan in which Chief Justice Shepard joins, we issue contemporaneous 
with this opinion an order denying without further comment the separate Petition For Rehearing filed by 
Continental Casualty Company.