A TTORNEYS FOR A PPELLANT A TTORNEYS FOR A PPELLEE Todd J. Kaiser William E. Winingham Matthew S. Effland Wilson Kehoe & Winingham Ogletree Deakins Law Firm Indianapolis, Indiana Indianapolis, Indiana Frank D. Otte Indianapolis, Indiana

I NTERVENOR A MICUS CURIAE BRIEF OF THE Steve Carter I NDIANA T RIAL L AWYERS Attorney General of Indiana A SSOCIATION Henry Price Scott A. Kreider Price Jackson Waicukauski & Deputy Attorney General Mellowitz, P.C. Indianapolis, Indiana Indianapolis, Indiana

______________________________________________________________________________ 

# In the 

# Indiana Supreme Court

_________________________________

No. 49S02-0402-CV-81

M ONROE G UARANTY I NSURANCE C OMPANY , Appellant (Defendant below),

v.

M AGWERKS C ORPORATION , Appellee (Plaintiff below)

.

_________________________________ Appeal from the Marion Superior Court No. 7, No. 49D07-9902-CP-228 The Honorable Gerald S. Zore, Judge

_________________________________

On Petition To Transfer from the Indian a Court of Appeals, No. 49A02-0208-CV-622

_________________________________ June 29, 2005

Rucker, Justice.This case presents the question of whethe r a good faith dispute concerning insurance coverage automatically precludes a punitive damages claim for bad faith when coverage is

denied. We conclude it does not.

Facts and Procedural History

Magwerks Corporation (“Magwerks”) sells manufactured camshafts from its one-story, flat-roofed building in Indianapolis. Construc ted of tar and asphalt with individual sections measuring 4’ x 8’, the roof has no separate susp ended ceiling. After a period of heavy rain and snow in February 1997, several of the roof sections began falling to the floor. The resultant water and moisture caused damage to several pieces of Magwerks’ equipment.

Monroe Guaranty Insurance Company (“Monroe Guaranty”) issued an insurance policy to Magwerks in 1996, which included coverage for certain types of damage to its building and equipment. One provision of the policy excluded payment for such things as “wear and tear” and loss or damage “caused by or resulting from ra in [or] snow.” Appe llant’s App. at A052. Although not defining the term, one section of th e policy excluded coverage for “collapse” but then another section of the policy specifi cally included such coverage under certain circumstances. More particularly the policy provided in relevant part:

We will pay for loss or damage caused by or resulting from risks of direct physical loss involving collapse of a building or any part of a building caused only by one or more of the following: . . . Weight of rain that collects on a roof . . . .

Id. at at A053 (emphasis added). The policy was in effect in February 1997. Patrick Jenkins, president of Magwerks, submitted a “Property Lo ss Notice” to Monroe Guaranty describing the

loss as follows: “Continuous rain had caused dama ge to roof, actuall [sic] has collapsed in several areas.” Appellant’s App. at A085. Paul Kelter, a Monroe Guaranty adjuster, observed “[r]oof damage and collapsed interior ceiling pa nels.” Supp. App. to Br. of Appellee at S147. At Kelter’s request, Tim Moehl of McComas Engin eering inspected the roof and concluded that ponding on the roof, caused by poor design, had occu rred over a long period of time resulting in

a number of small roof leaks that affected the structural integrity of the roof deck. Moehl added,

2“At the time of our inspection two sections of the roof were collapsed. Several sections of the roof deck have been temporarily braced to prevent further collapse.” Appellant’s App. at A088.

Monroe Guaranty ultimately forwarded Magw erks a denial letter rejecting Magwerks’ claim of loss. The letter cited several exclusions and limitations in the insurance policy which, according to Monroe Guaranty, justif ied its refusal to pay for the loss

. Those included damage caused by wear and tear, decay, deterioration, a nd defective design. The denial letter did not mention the provisions in the policy concerning collapse coverage.

Magwerks filed a complaint against Monroe Guaranty for breach of the insurance contract. Seeking punitive damages Magwerks al so included a claim for lack of good faith and fair dealing. After conducting discovery, both si des filed cross motions for summary judgment on the breach of contract claim. The primary issue in dispute was whether Magwerks’ loss was due to a “collapse” of the roof. Because of a lack of Indiana precedent, Monroe Guaranty cited authority from foreign jurisdictions to suppor t its position. The trial court granted summary judgment in favor of Magwerks and the matter proceeded to trial on the issue of contract damages and on Magwerks’ claim of lack of good faith and fair dealing. The jury returned a verdict for Magwerks in the amount of 5.1 milli on dollars, which included 4 million dollars in punitive damages.

On review, the Court of Appeals reversed the judgment of the trial court and remanded the cause for further proceedings. In so doing the court determined: (1) as a matter of first impression, the modern definition of “collapse” shoul d be adopted in Indiana, thereby rejecting the narrower and traditional definition advocated by Monroe Guaranty; (2) under the modern definition there remains a genuine issue of material fact as to whether there was a collapse of Magwerks’ roof and therefore the trial court e rred in granting summary judgment in Magwerks’ favor; and (3) Monroe Guaranty did not act in bad faith because there was a good faith dispute about coverage and thus “in the event that this case proceeds to trial, punitive damages may not

be awarded . . . .” Monroe Guar. Ins. Co. v. Magwerks Corp. , 796 N.E.2d 326, 334 (Ind. Ct. App. 2003). Also, the court rejected Magwerks’ ar gument that because of the requirement that

3seventy-five percent of a punitive damages award mu st be paid to the state treasurer, the punitive damages statute—Indiana Code section 34-51-3-6—is unconstitutional. Id. at 335.

With the exception of that portion of the C ourt of Appeals’ opinion adopting the modern definition of collapse, Magwerks sought tr ansfer challenging the Court of Appeals’ determinations. Having previously granted transf er, we now summarily affirm the opinion of the Court of Appeals in all respects except for its treatment of Magwerks’ punitive damages claim.

See Ind. Appellate Rule 58(A)(2).

Discussion

I. What constitutes a collapse has been the subj ect of a number of articles and treatises. 1 Under the traditional definition, a “collapse” is limited to an event that occurs suddenly and results in complete disintegration. 43 Am. Jur. 2d Insurance § 1282 (2004). This definition typically disallows coverage under an insurance po licy where only a “part of a part” of a building

falls. Monroe Guaranty v. Magwerks , 796 N.E.2d 326, 332 (Ind. Ct. App. 2003). In short, under the traditional view, collapse coverage applies only if an insured building is reduced to flattened form or rubble. By contrast, the broader and so-called modern definition, which is followed by a majority of jurisdictions, 2 defines “collapse” as a “substantial impairment of the structural integrity of the building or any part of a building.” 43 Am. Jur. 2d § 1282.

1 See, e.g. , Alan R. Miller et al., What Constitutes a Collapse Under A Property Insurance Policy , 29- WTR Brief 20 (2000); Powell on Real Property §2.02 (Michael Allan Wolf ed., Matthew Bender); Annotation, What Constitutes “Collapse” of a Building With in Coverage of Property Insurance Policy , 71 A.L.R.3d 1072 § 3 (1976 & Supp. 2002); Paul B. Tarr et al., Insurance Coverage for Collapse Claims: Evolving Standards and Legal Theories , 35 Tort & Ins. L. J. 57 (1999).

2 See, e.g.

, Ercolani v. Excelsior Ins. Co. , 830 F.2d 31, 34 (3rd Cir. 1987) (predicting that New Jersey would follow other states in holding that collapse requires only “serious impairment of structural integrity”). See also Sherman v. Safeco Ins. Co. of America, Inc. , 716 P.2d 475, 476 (Colo. Ct. App. 1986) (holding that cracked masonry work, sagging roof, falling bricks, and bowed walls constituted collapse as a matter of law); Beach v. Middlesex Mut. Assur. Co. , 532 A.2d 1297, 1299-1300 (Conn. 1987) (noting dictionary definition of collapse as “a br eakdown in vital energy, strength, or stamina” and “sudden loss of accustomed abilities,” Court held that collapse coverage did not include settling or cracking unless substantial impairment of structural integrity of building ensued); Island Breakers v. Highlands Underwriters Ins. Co. , 665 So.2d 1084, 1085-86 (Fla. Dist. Ct. App. 1995) (Cope, J., concurring) (collapse coverage applies if there is a “s ubstantial impairment of the structural integrity” of part of the building); Nationwide Mut. Fire Ins. Co. v. Tomlin , 352 S.E.2d 612, 615 (Ga. Ct. App. 1986)

4Analyzing arguments in favor of and in oppos ition to the traditional versus modern view of collapse coverage provisions in property insu rance policies, the Court of Appeals declared, “we think the modern view is compelling and should be applied here.” Monroe Guaranty , 796 N.E.2d at 333. Applying the modern view to the facts in this case the court found there were genuine issues of material fact as to whether th ere was a substantial impairment of the structural integrity of Magwerks’ building or any part of the building. The court therefore reversed the trial court’s grant of summary judgment in Magwerks’ favor.

On transfer neither party challenges the Cour t of Appeals’ adoption of the modern view of collapse coverage. We agree with this view as well. However, Magwerks contends that even

under the modern view the Court of Appeals improperly reversed the trial court’s grant of summary judgment. Magwerks faults the court fo r what it characterizes as the court’s reliance on “Monroe’s waived arguments and untimely evid ence.” Appellee’s Pet. To Trans. at 11. Magwerks’ claim is premised on the notion that (i) Monroe Guaranty advanced arguments on appeal justifying its denial of coverage that were not presented to the trial court in response to Magwerks’ motion for summary judgment, and (ii) Monroe Guaranty’s designated evidence in response to Magwerks’ motion for summary judgment was not timely filed.

When reviewing a grant or denial of su mmary judgment our well-settled standard of

review is the same as it is for the trial court: whet her there is a genuine issue of material fact, and whether the moving party is entitled to judgment as a matter of law. Indiana Univ. Med. Ctr., Riley Hosp. for Children v. Logan , 728 N.E.2d 855, 858 (Ind. 2000). Summary judgment should be granted only if the evidence sanctioned by Indi ana Trial Rule 56(C) shows that there is no

(holding that collapse includes any “reasonably detectab le serious impairment of structural integrity” because such a definition “more realistica lly reflects the purposes of the policy”); Gov’t Employees Ins. Co. v. DeJames , 261 A.2d 747, 750 (Md. 1970) (holding collapse is ambiguous because verb has restrictive meaning and noun has more liberal mean ing, including “breakdown in strength,” and thus resolving ambiguity in favor of insured to include any serious impairment of structural integrity); United Nuclear Corp. v. Allendale Mut. Ins. Co. , 709 P.2d 649, 652 (N.M. 1985) (holding that settling that impairs the structural integrity of the building constitutes collapse); Royal Indem. Co. v. Grunberg , 155 A.D.2d 187, 189 (N.Y. App. Div. 1990) (agreeing with “ numerical majority of American jurisdictions [that] a substantial impairment of the structural inte grity of a building is said to be a collapse” because to require the building to fall down woul d be “unreasonable” in light of an insured’s duty to protect property from further damage); Thomasson v. Grain Dealers Mut. Ins. Co. , 405 S.E.2d 808, 809 (N.C. Ct. App. 1991) (holding that the word collapse is ambiguous becau se to “require that the house fall in completely” would render the coverage illusory).

5genuine issue of material fact and the moving party deserves judgment as a matter of law. Gunkel v. Renovations, Inc. , 822 N.E.2d 150, 152 (Ind. 2005). All evidence must be construed in favor of the opposing party, and all doubts as to the existence of a material issue must be resolved against the moving party. Tibbs v. Huber, Hunt & Nichols, Inc. , 668 N.E.2d 248, 249 (Ind. 1996).

Magwerks’ claim that Monroe Guaranty adva nced arguments on appeal that were not presented to the trial court is of no moment in this case. Rather, the question is whether the designated evidence and all inferences derived from that evidence demonstrate there is no genuine issue of material fact and that Magw erks is thus entitled to summary judgment as a matter of law. Concerning the designated evidence, the record is not at all clear that Monroe Guaranty’s designation was untimely as Magwerks contends. The Chronological Case Summary (CCS) does show that Magwerks filed its Mo tion for Summary Judgment and designation of supporting materials on December 11, 2001. Appella nt’s App. at A006. The CCS also shows that Monroe Guaranty filed its response, cr oss motion for summary judgment, and designated materials on January 11, 2002. Id. Indiana Trial Rule 56(C) provides in pertinent part, “An adverse party shall have thirty (30) days afte r service of [a motion for summary judgment] to

serve a response and any opposing affidavits” (emphasi s added). Therefore, at first blush it does appear that Monroe Guaranty’s response was one da y late. When a party fails to file a response within thirty days, the trial court may not consider materials filed thereafter. Borsuk v. Town of

St. John , 820 N.E.2d 118, 124 n.5 (Ind. 2005); Markley Enterprises, Inc. v. Grover , 716 N.E.2d 559, 563 (Ind. Ct. App. 1999); Carroll v. Jagoe Homes, Inc. , 677 N.E.2d 612, 616 n.1 (Ind. Ct. App. 1997); Seufert v. RWB Med. Income Properties I Ltd. Partnership , 649 N.E.2d 1070, 1073 (Ind. Ct. App. 1995). Thus, if the tr ial court in fact considered untimely submissions in this case, then Magwerks’ claim of error may be of some merit.

However, there is nothing in this record s howing when Monroe Guaranty “served” its response on Magwerks. The record merely s hows the date on which Monroe Guaranty’s response was filed with the trial court. We thus cannot say as a matter of fact Monroe Guaranty’s response was late at all. More impor tantly, the record does not show that Magwerks objected to the alleged untimely submissions, either by a motion to strike or otherwise. See, e.g.

,

6Logan , 728 N.E.2d at 858 (rejecting claim that trial court erred in failing to strike untimely affidavit filed in opposition to motion for summary judgment). Failure to object waives the issue

for review. Francies v. Francies , 759 N.E.2d 1106, 1113 (Ind. Ct. App. 2001).

Waiver notwithstanding, and even assuming Monroe Guaranty’s submissions were untimely and thus inadmissible, Magwerks still ca nnot prevail on this issue. The record shows that in support of its motion for summary judgm ent Magwerks submitted, among other things, an engineering report compiled by Tim Moehl of McCo mas Engineering, Inc. The report says in

part:

The building was constructed with inadequate roof slope to properly relieve rainwater from the structure. Although the roof was maintained annually, the l ack of roof slope has caused rainwater to pond on the roof covering. The long-term ponding conditions, eventually affected the structural integrity of the roof deck . Rainwater infiltrates the underlying structure when it is allowed to pond. . . . Due to the ex tent of damage to the existing deck, the removal of the existing deck is warranted. Any repairs to the existing deck cannot be accomp lished due to the extent of existing damage.

Appellant’s App. at A088 (emphasis added). On the other hand Magwerks submitted a portion of a deposition of Paul A. Kelter, a Monroe Guar anty adjuster. When asked whether he agreed or disagreed that the “roof collapsed in seve ral areas,” Kelter responded, “I would say it [the roof] sagged in some areas, but we wouldn’t consider it a collapse.” Id. at A022. Kelter also testified that after receiving the engineering re port he conducted his own investigation of the building which included climbing onto the roof to take photographs. Id. at A027. The

reasonable inference to be drawn from this evidence is that at most the structural integrity to a part of the building—namely, the roof—may have been compromised. However, neither the foregoing evidence, nor the remainder of Magwer ks’ Rule 56 materials, fails to eliminate a genuine issue of material fact as to whethe r the building or any part thereof suffered “ substantial impairment of [its] structural integrity.” Monroe Guaranty , 796 N.E.2d at 332 (emphasis added).

A party moving for summary judgment bears the initial burden of showing no genuine issue of material fact and the appropriateness of j udgment as a matter of law. If the movant fails

7to make this prima facie show ing, then summary judgment is precluded regardless of whether the non-movant designates facts and evidence in response to the movant’s motion. Tankersley v. Parkview Hosp., Inc. , 791 N.E.2d 201, 203-04 (Ind. 2003). In this case, even if Monroe Guaranty’s designated materials were excluded fr om consideration, Magwerks’ failure to carry its initial burden of showing that the structural integrity to its building or any part thereof suffered substantial impairment is fatal to Magw erks’ coverage claim. We therefore summarily affirm the opinion of the Court of Appeals revers ing the trial court’s grant of summary judgment in Magwerks’ favor.



### II.

Monroe Guaranty contends that Freidline v. Shelby Ins. Co. , 774 N.E.2d 37 (Ind. 2002) controls the outcome of this case supporting the proposition that Magwerks should not be allowed to pursue a claim for punitive damages on remand. In Freidline , several employees who worked in a building owned by John and Donna Fr eidline complained that fumes from carpet glue made them sick. The employees sued the Fr eidlines who in turn contacted their insurance carrier, Shelby Insurance Company. Citing a pollu tion exclusion in the insurance policy, Shelby

denied the claim and refused to defend the Frie dlines in the underlying action. The Freidlines contended that Shelby had no legitimate basis for denying coverage and thus acted in bad faith. And this was so, according to the Freidlines, because existing Indiana case authority had found the definition of pollutants ambiguous and thus had consistently construed the pollution exclusion against insurance companies. Id. at 40. We agreed with th e Freidlines that precisely because of existing authority, Shelby was in breach of the insurance contract by failing to pay for the coverage and in failing to provide the Freid lines with a defense to the lawsuit that the employees had filed against them. Id. at 42. However, we noted that Shelby had distinguished the existing case authority, and we observed that the scope of the pollution exclusion was an evolving area of the law subject to differing interpretations.

Affirming the trial court’s grant of summary judgment in Shelby’s favor we concluded,

“Inasmuch as we find there is a rational basi s for Shelby’s actions, and Shelby supports its position with good faith legal argument, the Freidlines have failed to establish by clear and

8convincing evidence that Shelby breached its duty to act in good faith.” Id. Before reaching this conclusion we articulated the long recognized rule that insurers have a duty to deal in good faith

with their insureds. Id. at 40 (citing Erie Ins. Co v. Hickman , 622 N.E.2d 515, 518 (Ind. 1993)). We emphasized that a good faith dispute over whether an insured has a valid claim will not support the grounds for recovery in tort for the breach of the obligation to exercise good faith.

Friedline , 774 N.E.2d at 40. We then said, “ To prove bad faith , the plaintiff must establish, with clear and convincing evidence, that the insurer had knowledge that there was no legitimate basis for denying liability.” Id. (emphasis added). It is this quote upon which our colleagues on the Court of Appeals partly relie d to reach the conclusion that “punitive damages may not be awarded in light of our determination that a genuine issue of material fact exists as to whether Magwerks’s building ‘collapsed’ with in the meaning of the policy.” Monroe , 796 N.E.2d at 334. The quote also provides the underlying basis for Monroe Guaranty’s contention that Magwerks is not entitled to punitive damages. Accord ing to Monroe Guaranty, just as in Freidline , here there was also a legitimate basis for denying the insured’s claim, namely: the lack of Indiana precedent on the meaning of “collapse” and a number of cases from foreign jurisdictions defining the term in a way that would preclude coverage on the facts presented here.

If the allegations of bad faith in this case re sted solely on a dispute about coverage then Monroe Guaranty would be co rrect. We reaffirm that a good faith dispute concerning insurance coverage cannot provide the basis for a claim in to rt that the insurer breached its duty to deal in good faith with its insured. See Hickman , 622 N.E.2d at 520; Hoosier Ins. Co v. Audiology

Found. of America , 745 N.E.2d 300, 310 (Ind. Ct. App. 2001), trans. denied ; Becker v. American Family Ins. Group , 697 N.E.2d 106, 108 (Ind. Ct. App. 1998). A nd “[t]his is so even if it is ultimately determined that the insurer breached its contract. That insurance companies may, in good faith, dispute claims, has long been the rule in Indiana.” Hickman , 622 N.E.2d at 520. But an insurer’s duty to deal in good faith with its insured encompasses more than a bad faith coverage claim. And Freidline should not be read to suggest otherwise. In that case the only dispute at issue concerned a good faith differen ce of opinion over whethe r a claim was or was

not covered. As a result we sa id “[t]o prove bad faith” etc. the plaintiff must establish “that the insurer had knowledge that there was no legitimate basis for denying liability.” Freidline , 774

9N.E.2d at 40. This was not meant however to suggest that this is the only way to demonstrate

bad faith.

In Hickman we specifically declined to determine the precise extent of an insurer’s duty to deal in good faith. Instead we made a few general observations as follows:

The obligation of good faith and fair dealing with respect to the discharge of the insurer’s contractual obligation includes the obligation to refrain from (1) making an unfounded refusal to pay policy proceeds; (2) causing an unfounded delay in making payment; (3) deceiving the insured; and (4) exercising any unfair advantage to pressure an insured into a settlement of his claim.

622 N.E.2d at 519. In this case Magwerks asserts th at the duty to deal in good faith includes also the “manner of handling the claim.” Pet. to Tr ans. at 4. Magwerks does not elaborate on the contours of this duty. And because neither part y provides us with much guidance on the issue, we decline at this time to expand on the extent of the duty an insurer owes its injured beyond those we have already expressed in Hickman

.

Nonetheless, from our review of the record, it appears that Magwerks’ claim is that from the very beginning Monroe Guaranty knew that th e roof had collapsed. According to Magwerks, there was never any dispute on this point. In support of its contention Magwerks points out, for example, that: (i) it submitted a loss of claim no tice identifying the problem as a collapsed roof due to rain; (ii) Monroe Guaranty’s adjuster observed “[r]oof damage and collapsed interior ceiling panels”; (iii) an independent engineering firm hired by Monroe Guaranty noted that “two sections of the roof were collapsed” and that “[ s]everal sections of the roof deck [had] been temporarily braced to prevent further collapse”; and (iv) in its letter denying coverage, Monroe Guaranty made no reference to the collapse provision of the policy. See Supp. App. to Br. of Appellee at S147; Oral Arg. Ex. 7; Appellant’s App. at 88. Magwerks suggests that Monroe Guaranty’s asserted denial of coverage base d on its understanding of the meaning of the term

10collapse was a manufactured excuse appearing for th e first time in Monroe Guaranty’s answer to Magwerks’ complaint for damages. 3

As a general proposition, “[a] finding of bad faith requires evidence of a state of mind reflecting dishonest purpose, moral ob liquity, furtive design, or ill will.” Colley v. Indiana Farmers Mut. Ins. Group , 691 N.E.2d 1259, 1261 (Ind. Ct. App. 1998), trans. denied . Here, apart from Monroe Guaranty’s denial of Ma gwerks’ claim based on a good faith dispute over whether coverage did or did not exist, the question is whether Monroe Guaranty’s conduct leading up to and including the i ssuance of the denial letter rose to the level of bad faith. Stated somewhat differently, before Magwerks filed its complaint, did Monroe Guaranty essentially acknowledge that the cause of Magwerks’ loss wa s a “collapse of a buildi ng or any part of a building caused [by the] [w]eight of rain that co llects on a roof”? Appella nt’s App. at 53. If so, then a jury could reasonably have reached th e conclusion that Monroe Guaranty’s conduct amounted to “an unfounded refusal to pay policy proceeds.” Hickman , 622 N.E.2d at 519. In the end this is the jury’s call. And the jury ha s already decided this issue in Magwerks’ favor.

We find no error.

III.

Finally, before the Court of Appeals, Monroe Guaranty also argued that the amount of punitive damages was excessive. In support, Monroe Guaranty cited State Farm Mut. Auto. Ins. Co. v. Campbell , 538 U.S. 408 (2003) (reversing a decision of the Utah Supreme Court, which upheld a jury award of $145 million in punitive damages upon an award of $1 million in compensatory damages). Because the Court of A ppeals reversed the judgment of the trial court on other grounds, it did not address this issue. We do so here but only to note that this issue is waived because Monroe Guaranty made this claim fo r the first time in its reply brief. The law is

3 Specifically Magwerks claims: “The trial evidence view ed in the light most favorable to the verdict was overwhelming that Monroe knew it had no rational basis to deny the claim, misled Magwerks by offering a pretense for denial, failed to explain the basis for its denial, failed to construe the policy in the light most favorable to its insured, and, when sued, fabr icated a pretense for denial. This pattern of misconduct allowed the jury to infer bad faith, and Monroe’s use of pretenses to cover its misconduct proved its consciousness of its culpability.” Br. of Appellee at 36. In Magwerks’ view, “Monroe knew this was a ‘collapse’ under the policy.” Id. at 38.

11well settled that grounds for error may only be fr amed in an appellant’s initial brief and if addressed for the first time in the reply brief, they are waived. See French v. State , 778 N.E.2d 816, 826 (Ind. 2002) (holding that the appellant waived an issue by not raising it in his principal brief); Crossmann Communities, Inc. v. Dean , 767 N.E.2d 1035, 1044 (Ind. Ct. App. 2002) (issues raised for the first time in a reply brief are deemed waived); see also Ind. Appellate Rule 46(C) (“No new issues shall be raised in the reply brief.”).

Monroe Guaranty counters that Campbell , which was handed down April 7, 2003, over three months after Monroe Guaranty filed its initial brief, “provides new guidance in the evaluation of punitive awards” and therefore M onroe Guaranty’s “failure to raise this

constitutional issue in its initial brief should not cons titute a waiver of the issue . . . .” Reply Br. of Appellant at 47. We observe that although Campbell may very well have provided additional guidance on the subject of punitive damages awards , it certainly did not announce a new rule of

constitutional law. In fact the Campbell Court cited extensively from BMW of North America,

Inc. v. Gore , 517 U.S. 559 (1996), a case in which the Court refused on due process grounds to sustain a $2 million punitive damages award whic h accompanied a jury verdict of only $4,000 in compensatory damages. As the Campbell Court declared, “[u]nder the principles outlined in [ Gore ] this case is neither close nor difficult.” Id. at 418. In sum, the Court in Campbell merely reaffirmed what it had already declared in Gore . As such, Monroe Guaranty’s attempt to avoid waiver on the ground that Campbell announced a new rule of constitutional law is unavailing.

Conclusion

We hold that a good faith dispute concerning insurance coverage does not automatically preclude a punitive damages claim for bad faith when coverage is denied. We therefore vacate that portion of the Court of A ppeals opinion holding to the contrary. In all other respects we summarily affirm the opinion of the Court of Appeals, under which the judgment of the trial court is reversed and this cause remanded for further proceedings.

Dickson and Boehm, JJ., concur. Shepard, C.J., concurs in result with separate opinion. Sullivan, J., dissents with separate opinion.

12SHEPARD, Chief Justice, concurring in result.

I join in the decision to reverse and rema nd for a new trial, including Magwerks’ claim

for breach of contract.

I do not embrace what my colleagues have to say about the standard under which a party may be sanctioned for raising novel legal claims duri ng the course of a dispute. Here, the central legal issue has been: “What’s the Indiana definition of the word ‘collapse’ in an insurance contract?” Our Court of Appeals called this a “question of first impression” and our Court acknowledges “a lack of Indiana precedent” and exam ines at some length both decisions in other jurisdictions and various scholarly works in the search for useful analysis.

In the end, the Court holds that sanctioning th e party that raised this question of first impression is appropriate for two reasons: the pa rticipants to the dispute frequently used the word “collapse” and the jury found that the pa rty who advanced the claim had no good faith reason for doing so. This merely declares a legal answer by repeating the question.

It also moves us some distance away from our previous position that courts ought not impose sanctions on litigants who advance novel and plausible legal contentions.

13Sullivan, Justice, dissenting.

I respectfully dissent from the Court’s conclusion that the trial court improperly granted summary judgment to Magwerks on th e question of whether Magwerks’s building’s roof had suffered a “collapse.” In my view, the evidence designated by Magwerks in support of its motion for summary judgment was sufficient to establish that there had been “collapse” as a matter of law and Monroe Guaranty’s response did not establish a genuine issue of material fact with respect thereto.

The roof and ceiling in question consis ted of approximately four foot-by-eight foot sections. Photographs in the recor d, the deposition testimony of Magwerks’s president, Patrick Jenkins, the deposition testimony of Monroe Guaranty’s adjuster, Paul A.Kelter, and the written report of an engineering firm, McComas Engineering, Inc., engaged by Monroe Guaranty to inspect Magwerks ’s building all indicate that at least two of the sections dropped all the way down to the ground from the ceiling. (App. at 148- 154, 157-158, 35, and 88.) The McComas report actua lly says that “two sections of the roof were collapsed.” (App. at 88.) Kelter also used the word “collapse” in a Monroe Guaranty “Confidential Risk Report” (App. at 103; “collapsed interior ceiling panels”), but later testified in his deposition that this “was a poor, improper use of the word it appears (App. at 34). Reviewing this evidence in the light most favorable to Monroe Guaranty, the material fact of th e roof’s condition simply was not in dispute and the legal question for the trial court was whether this condition constituted a collapse. A collapse, according to the Court, is “a substantial impa irment of the structural integrity of the building or any part of the building.” I see no genuine issue of material fact but that there was a substantial impairment of the structural integrity of part of Magwerks’s building. I believe summary judgment was properly entered in Magwerks’s favor on that issue.

I would affirm the judgment of the trial court.

14