1

UNITED STATES DISTRICT COURT 

NORTHERN DISTRICT OF INDIANA 

HAMMOND DIVISION 

BOWMAN, HEINTZ, BOSCIA & ) 

VICIAN, P.C. ) 

 ) 

 Plaintiff, ) 

 ) Case No. 2:13 CV 0079 

 v. ) 

 ) 

VALIANT INSURANCE COMPANY, ) 

 ) 

 Defendant. ) 

 

OPINION AND ORDER 

 Plaintiff Bowman, Heintz, Boscia & Vician, P.C. (“Bowman Heintz”) has sued its 

malpractice insurer, Valiant Insurance Company, claiming that it has failed to provide 

coverage in a dispute involving bankruptcy litigation pending in the Middle District of 

Florida. Bowman Heintz seeks damages associated with defending itself in the Florida 

bankruptcy litigation, attempting to resolve and settle the Florida bankruptcy litigation, 

punitive damages for failing to defend Bowman Heintz, as well as a declaratory judgment 

that Valiant is in default under the insurance policy for a failure to defend. Valiant has 

responded with a counterclaim of its own, seeking a declaratory judgment that Bowman 

Heintz has not incurred damages as defined under the policy and that Bowman Heintz has 

not followed the notice provisions of the Insurance Policy. 

 Before the Court are Bowman Heintz’s Motion for Partial Summary Judgment 

[DE 19], supporting memorandum [DE 20], and supporting exhibits [DE 21], all filed on 

January 15, 2014; Valiant’s cross-motion for summary judgment [DE 22], statement of 

uncontested facts and supporting exhibits [DE 23], also filed on January 15, 2014; the 

parties’ responses to the motions for summary judgment, filed on February 18, 2014 [DE 
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24; DE 25], and their replies to the motions, filed on March 4, 2014 [DE 28; DE 29]. For 

the reasons below, Bowman Heintz’s motion for summary judgment [DE 19] is 

DENIED, and Valiant’s cross-motion for summary judgment is GRANTED [DE 22]. 

I. Factual Background 

 This matter involves six separate lawsuits, a bankruptcy, and two separate claims 

for malpractice coverage. Specifically, it’s a dispute about golf courses at Fiddler’s 

Creek, a planned residential community in Collier County, Florida, located between 

Naples and Marco Island, which includes a number of residences, amenities, and, as most 

pertinent to this litigation, two golf courses [DE 21-8 at ¶¶ 15-20]. 

 Bowman Heintz is the named insured under Valiant’s Lawyers Professional 

Liability Insurance Policy, Policy No. INV00015580, with a policy period of May 12, 

2009 through May 12, 2010 [DE 21-5]. Bowman Heintz is also the named insured under 

the renewal of the policy, with a policy period of May 12, 2010 to May 12, 2011 [DE 21-

6]. 

 The pertinent portions of the policy at issue here state as follows: 

I.A. Coverage 

The Company will pay on behalf of the Insured sums in excess of the 

deductible that the Insured shall become legally obligated to pay as 

damages because of a claim that is first made against the Insured and 

reported to the Company during the policy period or any Extended 

Reporting Period arising out of an act or omission in the performance of 

legal services by the Insured or by any person for whom the Insured is 

legally liable, provided that: 

1. prior to the inception date of the policy period, the Insured did 

not give notice under any other insurance policy of such claim or 

related claim or such act or omission or related act or omission; 

and 
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2. prior to the inception date of the first policy issued by the 

Company, if continuously renewed, no Insured had a basis to 

believe that any such act or omission, or related act or omission, 

might reasonably be expected to be the basis of a claim. 

The Company shall also pay claim expenses in connection with such 

claim. 

*** 

 II.D. Damages 

“Damages” means judgments, awards and settlement is [sic] negotiated 

with the assistance and approval of the Company. Damages do not 

include: 

*** 

1. Legal fees, costs and expenses paid to or incurred or charged by 

the Insured, whether or not claimed as restitution of specific 

funds, forfeiture, financial loss, set-off or otherwise, and injuries 

that are a consequence of any of the foregoing; 

*** 

3. civil or criminal fines, sanctions, penalties, or forfeitures, whether 

pursuant to federal, state, or local law; 

*** 

II.M. Related Claim 

“Related claim” means all claims arising out of a single act or omission 

or arising out of related acts or omissions in the rendering of legal 

services. 

*** 

V.A. Notice of claims and potential claims 

1. The Insured, as a condition precedent to obligations of the 

Company under this, shall give written notice to the Company

during the policy period: 

a. of any claim made against the Insured during the policy

period; 
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b. of the Insured’s receipt of any notice, advice or threat, whether 

written or verbal, that any person or organization intends to 

hold the Insured responsible for any alleged breach of duty. 

2. If during the policy period the Insured shall become aware of any 

act or omission that may reasonably be expected to be the basis of 

a claim against the Insured and gives written notice to the 

Company during the policy period of such act or omission and 

the reasons for anticipating a claim, with full particulars, including 

but not limited to: 

 

a. the specific act or omission; 

b. the date(s) and person(s) involved; 

c. the identity of anticipated or possible claimants; 

d. the circumstances by which the Insured first became aware 

of the possible claim; 

then any such claim that is subsequently made against the Insured arising out of 

such act or omission and reported to the Company shall be deemed to have been 

made at the time such written notice was received by the Company. 

***

The Company shall have the right and duty to defend, subject to and as part of 

the Limits Liability, any suit against the Insured seeking damages which are 

payable under the terms of this policy . . . 

 [DE 21-5]. 

 

 In 2007, Bowman Heintz attorney Glenn Vician, a named partner in the firm, and 

his wife got into a dispute with Fiddler’s Creek regarding the closing of a preconstruction contract to purchase a condominium in Fiddler’s Creek [DE 21-8 at ¶ 23]. 

That dispute resulted in the Vicians filing a lawsuit seeking rescission of the contract 

against GBP Ltd. and GBP LLC in the Circuit Court of the 20th Judicial Circuit of 

Florida, Glenn S. Vician and Dawn J. Vician vs. GBP Development, Ltd., d/b/a Gulf Bay, 

GBP Development, LLC, GP Peninsula, Ltd., and Woodward, Pires, and Lombardo, 
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P.A., Case No. 07-3816 [DE 21-8 at ¶ 23]. GBP filed a counterclaim and a separate 

lawsuit in the 20th Judicial Circuit, GBP Development, Ltd. vs. Glenn S. Vician and 

Dawn J. Vician, Case No. 07-4043 CA, seeking specific performance of the contract [DE 

21-8 at ¶¶ 23 23-24]. 

 On May 20, 2009, the Vicians and another couple, Richard and Kristi Lohmeyer, 

filed a class action lawsuit against Fiddler’s Creek LLC, GBP Development, Ltd., GBP 

Development, LLC, The Golf Club at Fiddler’s Creek, other related entities, and Aubrey 

Ferrao in the United States District Court for the Middle District of Florida, Case No. 

2:09-CV-00314-JES-DNF [DE 21-8 at ¶ 28]. The suit alleged that the Golf Club had 

improperly allowed public play on the golf courses at Fiddler’s Creek and that the 

plaintiffs’ initiation deposits had not been held in escrow [DE 21-8 at ¶¶ 28-36]. In late 

December 2009, the parties settled the lawsuit, and the settlement agreement prohibited 

disclosure of the terms, including payment terms – the Fiddler’s Creek entities agreed to 

make a series of payments to the plaintiffs – and included dismissal of the Vicians’ state 

court suit, GBP’s state court suit, and the Vicians’ and Lohmeyers’ class action suit [DE 

21-8 at ¶¶ 38-39; DE 21-4 at ¶ 7]. 

 In late January or early February 2010, GBP Development and the other Fiddler’s 

Creek entities failed to make payments by the time prescribed under the settlement 

agreement, and Bowman Heintz filed a motion in the District Court seeking to reopen 

and resume the class action and to vacate the settlement agreement [DE 21-4 at ¶ 8; DE 

21-8 at ¶¶ 40-42]. On February 3, 2010, the district court entered an order denying the 

plaintiffs’ motion to reopen the case and declining to review the terms of the settlement 

agreement [DE 21-8 at ¶ 43]. However, in response to the filing of the motion for relief 
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regarding the alleged breach of the settlement agreement, GBP Development and the 

related Fiddler’s Creek entities filed a new lawsuit in the Circuit Court of Collier County, 

Florida, against Glenn S. Vician, as lead counsel for the plaintiffs in the previously-filed 

class action suit, claiming that Vician had disclosed confidential portions of the 

settlement agreement when he filed the Motion for Relief in the District Court [DE 21-4 

at ¶ 9]. 

On February 23, 2010, GBP Development and Fiddler’s Creek, LLC, as well as 

other related entities, filed a Chapter 11 bankruptcy petition with the United States 

Bankruptcy Court for the Middle District of Florida, captioned In re Fiddler’s Creek, 

LLC, Case No. 9:10-BK-03846-ALP [DE 21-4 at ¶ 12; DE 21-8 at ¶ 8; DE 23-3]. On 

March 8, 2010, the bankruptcy court entered an Order Granting Debtor’s Emergency 

Motion for Order Directing Joint Administration of Chapter 11 Cases [DE 21-8 at ¶ 9]. 

On February 5, 2010, Bowman Heintz notified Valiant of GBP’s lawsuit against it 

and Vician for breach of the settlement agreement by filing of the motion to reopen the 

Vician/Lohmeyer class action case [DE 21-4 at ¶ 10; DE 23-2]. Valiant responded that, 

subject to the reservation of its rights because of a number of concerns about coverage, it 

would undertake the defense of Bowman Heintz in the Collier County litigation [DE 21-4 

at ¶ 11; DE 24-1 at 6]. A one-page claim supplement form, which appears to have been 

completed by Vician and submitted to Valiant with other paperwork regarding Bowman 

Heintz’s application for malpractice coverage, dated March 25, 2010, indicated that GBP 

had filed a Chapter 11 bankruptcy petition in the Middle District of Florida on February 

22, 2010 [DE 23-2 at 53]. 
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On April 22, 2010, Bowman Heintz filed a class action lawsuit in the United 

States District Court for the Middle District of Florida, Matthew Suffoletto, Raymond 

David, Steven Taub, and Stephen Shulman individually and on behalf of all persons 

similarly situated, v. Aubrey J. Ferrao, Case No.: 2:10-CV-241-FTM-36-DNF [DE 21-4 

at ¶¶ 14-15; DE 21-7; DE 23-4]. The lawsuit alleged that Ferrao had diverted and 

misappropriated escrow monies that the plaintiffs had deposited for memberships in the 

Fiddler’s Creek golf club [DE 21-4 at ¶ 16; DE 21-7]. Ferrao was not a debtor in the 

bankruptcy action, but the complaint indicated that Ferrao was “the owner of a myriad of 

companies and entities that he operates in Fiddler’s Creek,” including GBP Development, 

Ltd. and GBP Development, LLC, and sought to pierce the corporate veil because the 

entities were, in fact, Ferrao’s alter ego [DE 21-4 at ¶ 16; DE 21-7]. On April 30, 2010, 

the bankruptcy debtors’ counsel sent a letter to Bowman Heintz demanding that it 

voluntarily dismiss the class action because it violated the automatic stay [DE 23-5 at 26-

28], but Bowman Heintz did not do so. 

On May 11, 2010, the bankruptcy debtors filed a Motion for an Order (I) 

Enforcing the Automatic Stay, (II) Awarding Sanctions for Intentional and Willful 

Violation of the Automatic Stay, and (III) Holding Plaintiffs Matthew Suffoletto, 

Raymond David, Steven Taub, and Stephen Shulman and Attorneys Robert Stochel, 

Glenn Vician, and Eric Vasquez in Contempt of Court [DE 21-4 at ¶17; DE 21-8; DE 23-

5]. The motion alleged that the Suffoletto class action violated the automatic stay in 

bankruptcy because it sought an adjudication and determination of the Debtors’ rights, 

obligations, and liabilities under the Golf Membership Agreements” [DE 21-8 at 3]. The 

motion asked the bankruptcy court to enforce the stay of bankruptcy and find the 
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Suffoletto class action suit void ab initio, to hold the Plaintiffs in the suit and their 

counsel in contempt for willfully violating the automatic stay of bankruptcy, and “impose 

sanctions in the form of attorneys fees, damages, and any other relief deemed 

appropriate” [DE 21-8 at ¶ 70]. The plaintiffs were not served with the Motion 

Regarding the Stay, but Bowman Heintz hired local counsel to appear at a hearing on the 

motion scheduled for June 4, 2010, and on the same day, filed a response to the motion to 

stay in the bankruptcy court [DE 21-4 at ¶¶ 18-21; DE 21-9]. During the hearing, the 

bankruptcy judge noted that the class action was not a lawsuit against the bankruptcy 

debtor, nor against the property of the debtor, as Ferrao was not named as a debtor in the 

bankruptcy. However, he took the matter under advisement “just to look at the issue of 

alter ego” [DE 21-4 at ¶ 23-24; DE 21-9 at 2]. 

On September 15, 2010, the bankruptcy court issued an order granting the motion 

to enforce the automatic stay of bankruptcy and reserving ruling on the debtor’s request 

for sanctions and to hold the plaintiffs and their counsel in contempt of court [DE 21-4 at 

¶ 26; DE 21-10; DE 23-6]. As the bankruptcy court noted, the same counts pleaded in 

the Suffoletto class action “were pled in a pre-petition related lawsuit brought by other 

plaintiffs and current Plaintiffs’ counsel (as a Golf Club Member) against both the 

Debtors and Mr. Ferrao” and were essentially the same claims as had been previously 

raised, but were subject to the bankruptcy stay [DE 21-10 at 2-3, 5 at n.4]. On September 

23, 2010, the bankruptcy court set a final evidentiary hearing on the motion for sanctions 

for December 17, 2010 [DE 23-7]. Following the ruling on the motion, Bowman Heintz 

sought new counsel to represent it and its clients [DE 21-4 at ¶27]. 
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 On December 7, 2010, for the first time, Bowman Heintz, by letter under Vician’s 

signature, wrote to Valiant and informed it of “a claim that has arisen with respect to the 

bankruptcy of Fiddler’s Creek, LLC., Case No. 9:10-bk-03846-ALP, filed in the U.S. 

Bankruptcy Court for the Middle District of Florida” [DE 21-1 at 8; DE 21-4 at ¶ 28]. 

Vician indicated that “[o]ur firm had filed a lawsuit against a non-debtor, Aubrey Ferrao 

in the U.S. District Court, Middle District of Florida, relating to the civil theft of golf 

escrow deposits” [DE 21-1 at 8]. The letter described the Motion to Enforce Automatic 

Stay and for Sanctions and attached a copy of the motion, and informed Valiant that the 

bankruptcy court had made a finding that the lawsuit violated the bankruptcy stay and 

that a Sanctions Hearing had been set for December 17, 2010, and that Bowman Heintz 

had hired local bankruptcy counsel to represent Bowman Heintz and its clients at the 

hearing [DE 21-1 at 8; DE 21-11]. 

 On December 14, 2010, Valiant responded to Bowman Heintz’s letter and 

indicated that based on its reading of the policy, its position was that it had no duty to 

defend or indemnify Bowman Heintz because “sanctions are specifically excluded under 

the definition of Loss,” and accordingly, “the relief sought is not considered ‘Loss’ under 

the Policy,” and reserved its rights to file a declaratory judgment action or to rely on any 

other applicable policy provision [DE 21-4 at ¶ 29; DE 21-12; DE 23-2 at 65]. The letter 

referenced Valiant claim number PGM-CLM-001114-10 [DE 21-12 at 1; DE 23-2 at 63]. 

However, Valiant’s internal filekeeping note from December 15, 2010 indicated that 

Claim Number PGM-CLM-0002221-10, which was a “[c]omplaint for sanctions” was 

received in December 2010, and that Valiant reviewed the claim for coverage and 

relatedness to PGM-CLM-0001114-10 – the claim regarding the Collier County state
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court litigation [DE 21-13]. Valiant indicated that a denial was in order, but that the 

“matter was in fact related to PGM-CLM-0001114-10 and should be handled under that 

file” [Id.]. Thereafter, Bowman Heintz continued to defend itself and the class action 

plaintiffs in the bankruptcy litigation [DE 21-4 at ¶ 30]. 

 Following the December 17, 2010 sanctions hearing, the bankruptcy court issued 

an order on July 6, 2012, awarding sanctions against Bowman Heintz for willfully and 

intentionally violating the automatic stay [DE 23-8]. 

 On February 15, 2013, Bowman Heintz, by counsel, sent a demand letter to 

Valiant, requesting that it “immediately assume the defense of the claims made against 

Bowman Heintz Boscia & Vician, P.C. and its lawyer, Glenn S. Vician, in the Florida 

litigation,” pay all amounts due to the firm that Bowman Heintz hired to represent it in 

the matter, and “to reimburse and pay the law firm for the costs and expenses, including 

attorney fees, that it has incurred to date to defend itself and Mr. Vician in the Florida 

litigation” [DE 21-1 at 9; DE 21-4 at ¶ 33; DE 21-14]. 

 On March 1, 2013, Bowman Heintz filed its complaint in this action, alleging 

breach of contract and seeking punitive damages because it alleges that Valiant willfully 

and intentionally refused to undertake its defense on the Motion for Sanctions [DE 1]. 

 On March 20, 2013, Bowman Heintz and the bankruptcy debtors filed a motion 

asking the bankruptcy court to approve a settlement agreement, including the award of 

sanctions [DE 23-9]. On March 29, 2013, the bankruptcy court entered an order granting 

the Motion to Approve the Settlement Agreement [DE 23-10]. 

On April 2, 2013, Valiant filed its answer and asserted a counterclaim for 

declaratory judgment [DE 8]. 
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II. Summary Judgment Standards 

On summary judgment, the moving party bears the burden of demonstrating that 

there “is no genuine dispute as to any material fact and the movant is entitled to judgment 

as a matter of law.” Fed.R.Civ.P. 56(a). So the Court must construe all facts in the light 

most favorable to the nonmoving party, making all legitimate inferences and resolving all 

doubts in its favor. Cung Hnin v. TOA, LLC, 751 F.3d 499, 503-04 (7th Cir. 2014). A 

“material” fact is one the substantive law identifies as impacting the outcome of the suit. 

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). When there is a genuine 

issue as to any such material fact and a reasonable jury could return a verdict in favor of 

the nonmoving party, summary judgment is inappropriate. Id. Conversely, where a 

factual record exists that would not allow a rational jury to find for the nonmovant, there 

is no genuine issue of fact for trial and summary judgment is appropriate. Matsushita 

Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (citing First Nat’l Bank 

of Ariz. v. Cities Serv. Co., 391 U.S. 253, 289 (1968)). Though the Court must construe 

the facts in the light most favorable to the non-moving party, she cannot simply rest on 

the allegations or denials contained in her pleadings: she has to present sufficient 

evidence to show the existence of each element of her case on which she will bear the 

burden at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 322–23 (1986). 

Though the parties in this case have filed cross-motions for summary judgment, 

this does not change the standard of review. M.O. v. Ind. Dep't of Educ., 635 F. Supp. 2d 

847, 850 (N.D. Ind. 2009). Cross-motions are treated separately under the standards 

applicable to each. McKinney v. Cadleway Props, Inc., 548 F.3d 496, 504 n.4 (7th 

Cir.2008). 
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III. Policy Coverage 

As an initial matter, and as agreed by both parties, Indiana law governs the 

present case, which is in front of this court by virtue of its diversity jurisdiction. Nat’l 

Fire & Cas. Co. v. West, 107 F.3d 531, 534 (7th Cir. 1997); Fed. Ins. Co. v. Stroh 

Brewing Co., 127 F.3d 563, 566 (7th Cir. 1997). Accordingly, the court’s duty is to 

figure out how the Indiana Supreme Court would resolve the dispute. Nat’l Fire, 107 

F.3d at 534. 

“Under Indiana law, the interpretation of an insurance policy presents a question 

of law to be decided by the court.” Id. at 534-35, quoting Cincinnati Ins. Co. v. Flanders 

Elec. Motor Serv., Inc., 40 F.3d 146, 151 (7th Cir.1994). In the case of a policy dispute 

like this one, “the insured has the burden of proving that the coverage applies, and the 

insurer, if relying on an exclusion to deny coverage, has the burden of demonstrating that 

the exclusion is applicable.” Nat’l Fire, 107 F.3d at 535. Generally speaking, contracts 

for insurance are subject to the same rules of construction as other contracts, and if the 

policy’s language is clear and unambiguous, it is given its plain and ordinary meaning; on 

the other hand, ambiguous terms are construed against the drafter, the insurer, and in 

favor of the insured. Id. 

Here, the claim at issue is Bowman Heintz’s claim for coverage for defending 

itself on the Motion for Sanctions filed in the Florida bankruptcy court, as well as 

indemnity. Bowman Heintz argues that its claim for coverage falls explicitly under the 

policy’s terms, because Valiant has the “ . . . duty to defend . . . any claim against the 

insured seeking damages which are payable under the terms of this Policy” [DE 20 at 14]. 

“Claim,” Bowman Heintz argues, is clearly defined as “a demand received by the Insured 
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for money or services arising out of an act or omission, including personal injury, in 

rendering or failing to render legal services” [DE 20 at 14]. Thus, because it was 

engaged in the rendering of legal services, Bowman Heintz argues that because there is a 

possibility of coverage, the policy and Indiana law obligate Valiant to defend it under the 

Policy [DE 20 at 15]. 

Valiant has responded that it had no duty to defend for two reasons: first, that 

coverage is not appropriate on the claim because Bowman Heintz failed to give proper 

notice of the motion for sanctions; and second, that there is no coverage because 

sanctions are explicitly excluded from the definition of “damages” under the policy [DE 

22 at 2]. The Court will address each of these arguments in turn. 

1. Notice 

A quick review of the facts relevant to the timing of Bowman Heintz’s notice to 

Valiant of the claim at issue here is in order. Bowman Heintz gave notice of the Florida 

state court litigation – the lawsuit filed by Fiddler’s Creek for Bowman Heintz’s alleged 

breach of the confidentiality provisions of the settlement agreement -- in February 2010. 

Valiant responded on February 18, 2010 that it would defend Bowman Heintz on that 

claim, subject to Bowman Heintz reaching the deductible amount under the policy. 

Bowman Heintz then filed a class action complaint in Florida federal court on behalf of 

Suffoletto and other plaintiffs on April 22, 2010. The bankruptcy debtors’ counsel sent a 

letter to Bowman Heintz demanding the withdrawal of the class action suit, and after 

Bowman Heintz did not do so, the debtors filed the motion to enforce the automatic stay 

and for sanctions on May 10, 2010. The first hearing on the motion for sanctions was 

held on June 4, 2010. The bankruptcy court issued its order determining that the class 
14

action suit violated the automatic stay on September 15, 2010, and reserved ruling on the 

sanctions issue. The following week, the bankruptcy court issued an order setting the 

motion for sanctions for a hearing on December 17, 2010. Bowman Heintz did not 

provide notice to Valiant about the pending motion for sanctions until December 7, 2010. 

Valiant denied coverage on December 14, 2010. 

Valiant claims that under Indiana law, proper notice of a claim is a condition 

precedent to coverage [DE 22 at 3-4, citing Miller v. Dilts, 463 N.E.2d 257, 265 (Ind. 

1984)1]. Additionally, the policy itself states that “[t]he Insured, as a condition precedent 

to obligations of the Company under this Policy, shall give written notice to the Company 

during the policy period . . . of any claim made against the Insured,” and “of the Insured’s 

receipt of any notice, advice, or threat, whether written or verbal, that any person or 

organization intends to hold the Insured responsible for any alleged breach of duty” [DE 

22 at 3]. 

Valiant argues that Bowman Heintz failed to notify it of the motion for sanctions 

in a timely manner, and thus, did not satisfy the condition precedent to coverage. 

Valiant’s position is that because it didn’t know about the motion for sanctions for 

months after it was filed, after the preliminary hearing had been conducted and the 

bankruptcy court had granted the motion to enforce the stay, and until the eve of the 

hearing on the part of the motion that requested contempt sanctions, it simply couldn’t

conduct a defense, and the terms of the policy and Indiana law provide that in such 

situations, there is no coverage under the policy. Valiant is correct that under Indiana 

																																																								

1 In Miller, the Indiana Supreme Court considered three separate cases all involving the issue of 

notice to insurers. In its brief, Valiant refers to Miller by the name of one of the three 

consolidated cases, Indiana Ins. Co. v. Williams [DE 22 at 4]. The Court refers to the case as 

Miller v. Dilts, as have other courts that cite the case.			
15

law, notice is a condition precedent to coverage, a “threshold requirement which must be 

met before an insurer is even aware that a controversy or matters exists.” Dreaded, Inc. 

v. St. Paul Guardian Ins. Co., 904 N.E.2d 1267, 1271 n.1 (Ind. 2009) (citation and 

quotation omitted). “The requirement of prompt notice gives the insurer an opportunity 

to make a timely and adequate investigation of all the circumstances surrounding the 

accident or loss.” Miller 463 N.E.2d at 265; see also Republic-Franklin Ins. Co. v. 

Silcox, 92 F.3d 602, 604 (7th Cir. 1996) (“In return for its agreement to indemnify the 

policyholder, the insurer contracts for a right to prompt notice so that it can do the 

necessary things to avoid or minimize liability”); Officer v. Chase Ins. Life and Annuity 

Co., 541 F.3d 713, 718 (7th Cir. 2008) (“[P]rompt notice . . . serves an important 

purpose, in that it allows the insurance company to begin to investigate and defend a 

claim”). 

From a common sense perspective, this makes perfect sense: if Valiant wasn’t 

told that there was a game to play, it can’t be faulted with failing to suit up. As the 

Indiana Supreme Court noted in Miller, many liability insurance policies – like the one at 

issue here -- explicitly require the insured to provide the insurer with notices or papers 

relating to claims, and make such notification a condition precedent to coverage. “Where 

this is the case, compliance with such a condition is essential in the absence of a 

sufficient excuse or a waiver, in order to permit a recovery on the policy.” 463 N.E.2d at 

264, quoting Lomont v. State Farm Mut. Auto Ins. Co., 151 N.E.2d 701, 704 (Ind. Ct. 

App. 1958). And in cases where the policy itself does not give a prescribed length of 

time by which the insured must provide notice, timeliness is then “measured by 
16

prejudice—if the insurance company is prejudiced, the notice is not timely.” Officer, 541 

F.3d at 718. 

The Seventh Circuit Court of Appeals has helpfully summarized the approach 

outlined by Miller: 

. . . the duty to notify must be strictly observed . . . any substantial delay in 

notification constitutes a breach; but they have also held that breaches of 

the duty can be excused when they cause no prejudice to the insurer. If an 

insured breaches the duty but seeks to rely on the excuse in court, he or 

she must offer evidence showing that the insurer suffered no prejudice. 

Without any such evidence, courts will presume prejudice as a matter of 

law,” and the insurer is not required to provide coverage because the 

insured has failed to satisfy a condition precedent to coverage. 

Republic-Franklin, 92 F.3d at 604; see also Tri-Etch, Inc. v. Cincinnati Ins. Co., 909 

N.E.2d 997, 1005 (Ind. 2009) (“. . . prejudice to the insurer is presumed by the insured's 

late notice, but the insured may rebut the presumption with evidence showing that the late 

notice created no prejudice”). 

Here, the policy at issue specifically required Bowman Heintz to provide Valiant 

with written notice of the receipt of “any notice, advice or threat, whether written or 

verbal, that any person or organization intends to hold the Insured responsible for any 

alleged breach of duty” [DE 21-5 at 11]. Bowman Heintz was first notified of the 

“threat” that it would be held responsible for the breach of a duty as early as April 30, 

2010, when it received the bankruptcy debtors’ counsel’s letter. The letter constitutes a 

“threat” of the kind outlined in the policy. But even construing that piece of evidence in 

the light most favorable to Bowman Heintz, if it did not consider the letter a “threat,” it 

was certainly on notice when it received the motion for sanctions, which was filed on 
17

May 10, 2010, though Bowman Heintz argues that it wasn’t served with the motion.2

 It 

is clear from the record, however, that even if it was not served, Bowman Heintz was 

certainly aware of the filing of the motion on or before June 4, 2010 -- the date on which 

it appeared, through local counsel, in front of the bankruptcy court to defend itself on the 

motion to enforce the automatic stay and for contempt sanctions and on which it filed a 

written response to the motion. The bankruptcy court granted the motion to enforce the 

automatic stay on September 15, 2010. At the very least, it was absolutely in receipt of a 

“notice, advice, or threat” that it was perhaps going to be held “responsible for any 

alleged breach of duty” on September 23, 2010, when the bankruptcy court set the motion 

for sanctions for a December 17, 2010 hearing. Bowman Heintz did not notify Valiant of 

that order until December 7, 2010 – nearly three months later, and only ten days before 

the hearing on the motion. 

In Miller, the Indiana Supreme Court considered the notification requirement in 

three separate cases involving auto accidents: in one case, the insurer received no notice 

of the accident until six months afterward and ten days after the filing of a lawsuit; in the 

second, the insurer was notified of the accident after a month but was not informed of a 

lawsuit until after default judgment was entered; and in the third case, the insurer was 

given notice five days after a lawsuit was filed and nearly seven months after the accident 

had occurred. 463 N.E.2d at 266. In each of the three cases, the Court found that timely 

notice was not given. Id. Here, as discussed above, many months before Bowman 

																																																								

2 Though Bowman Heintz was not formally served with the motion for sanctions, there is no 

dispute that it did in fact have notice of the motion, as evidenced by the fact that it retained 

counsel to represent it at the June 4 hearing on the motion, appeared at the hearing, and filed a 

written response to the motion. The policy terms do not require the insured to merely notify the 

insurer once it received formal service of process – rather, it required the insured to notify the 

insured of “any threat” that it might be held liable for breach of “any duty.” Accordingly, the 

formal receipt of process is not relevant here.
18

Heintz informed Valiant of the motion for sanctions, it knew that it was at risk of being 

held in contempt. Under Miller, it is clear that Bowman Heintz’s notice was untimely. 

Valiant has demonstrated that Bowman Heintz unreasonably delayed in providing 

notice of the motion for sanctions to it, depriving it of its opportunity to investigate the 

claim and control the defense of the matter. Accordingly, the Court may presume 

prejudice to Valiant. The burden thus shifts to Bowman Heintz to articulate evidence 

showing that Valiant was not in fact prejudiced. It has not done so. 

First, Bowman Heintz argues that it provided notice of the Collier County state 

court litigation in February 2010, and because that state court litigation was related to the 

filing of the class action lawsuit, Valiant was on notice of the contempt motion claim 

because it “related back” to the Collier County litigation [DE 25 at 12]. This argument is 

meritless. The policy itself defines “related claim” as “all claims arising out of a single 

act or omission or arising out of related acts or omissions in the rendering of legal 

services” [DE 21-5 at 9]. The claim that Bowman Heintz made in February 2010 related 

to a Florida state court case, filed by a number of Fiddler’s Creek entities, for a breach of 

the terms of the settlement agreement that related to a class action lawsuit involving 

Glenn Vician, his wife, and another couple. The motion for sanctions, on the other hand, 

though involving some of the same players and relating to some of the same events, 

concerned a wholly different litigation: the class action that Vician filed, on behalf of 

completely different plaintiffs, that was then found to be in violation of the automatic 

bankruptcy stay (which was also a separate litigation). The problem with Bowman 

Heintz’s argument here is that it fundamentally misunderstands the policy terms 

regarding “related acts or omissions in the rendering of legal services.” The separate 
19

lawsuits, while dealing with the same or similar underlying events, did not all arise from 

related “acts or omissions in the rendering of legal services.” To the contrary, the Collier 

County litigation arose from Bowman Heintz’s alleged breach of a settlement agreement. 

The motion for sanctions arose from Bowman Heintz’s separate violation of the 

automatic stay of bankruptcy by the filing of a different class action lawsuit. Nothing 

about the notice provided in February 2010 could have possibly alerted Valiant to the 

underlying claim for which Bowman Heintz now seeks defense and indemnity. 

Second, Bowman Heintz argues that the bankruptcy court’s statements at the June 

4, 2010 hearing on the motion to enforce the automatic stay and for contempt sanctions 

somehow justified its failure to notify Valiant of the pending motion [DE 25 at 17-18]. 

At the June 4, 2010 hearing on the motion regarding stay, the bankruptcy court stated on 

the record that it intended to take the matter under advisement to “look at the issue of 

alter ego,” that the matter was “not a lawsuit against the Debtor, it’s not against property 

of the Debtor,” but that the court intended to look at whether “the torts that are being 

asserted in the complaint offer a twist that change [sic] the ordinary black letter law that 

this is not . . . against the property of the Debtor.” [DE 21-4 at ¶ 23-24; DE 21-9]. 

Bowman Heintz argues that it was somehow excused from providing notice earlier than it 

did because the bankruptcy court’s statement is “a clear indication on June 4, 2010 that 

there was no stay violation” [DE 20 at 7]. Though Bowman Heintz never explicitly 

makes the point, this Court understands the argument to mean that somehow, Bowman 

Heintz was thus under the impression that it was going to win the motion to enforce the 

automatic stay, so there was no need for it to notify Valiant of the claim. 
20

This argument is a non-starter: it represents a fundamental misapprehension of the 

policy terms. The policy explicitly states that the insured is to notify Valiant of “receipt 

of any notice, advice or threat, whether written or verbal, that any person or organization 

intends to hold the Insured responsible for any alleged breach of duty.” Bowman Heintz 

appears to read in some kind of term indicating that it need provide notice to Valiant only 

in the case that the insured thinks that the claim against it is likely to succeed on the 

merits. However, there is no such language, and the terms are clearly to the contrary: the 

policy is clear and unambiguous that as a condition precedent to coverage, Bowman 

Heintz was required to notify Valiant of “any notice, advice, or threat” that it could be 

held responsible for a breach of any duty, and the use of the terms “any” and “threat” 

indicate that the instigation of a formal lawsuit, receipt of process, or indication from a 

presiding court that the insured is likely to be held responsible are far beyond what is 

required to trigger the insured’s notice obligation.3

 

 In other words, Bowman Heintz’s parsing of the bankruptcy court’s statements is 

simply not relevant here, because the notice provisions of the policy are not triggered by 

some kind of credible threat that the insured will be held liable. Rather, as a condition 

precedent to coverage, the policy terms unambiguously state that notice must be given 

once the insured receives “any” threat or other indication that any party intends to hold it 

responsible for “any” breach of duty. 

																																																								

3 Additionally, and worthy of only a brief mention, the bankruptcy court’s on the record 

statement that it was taking the matter under advisement is, in itself, an obvious indication that 

Bowman Heintz could, in fact, lose the motion. Second, and without getting into the details	of	

the underlying lawsuit, the Court’s statement is certainly not an indication that Bowman Heintz 

could not be liable, as it now claims. To the contrary, the statement seems to indicate that the 

alter ego claims alleged in the class action complaint would somehow alter the implications of not 

explicitly naming the bankruptcy debtors as the defendants in the lawsuit. 
21

Moreover, as a matter of law, Bowman Heintz’s undertaking of its defense against 

the motion without notifying Valiant of the claim nullifies its notice as a matter of law. 

This case bears similarity to Paint Shuttle, Inc. v. Cont’l Cas. Co., 733 N.E.2d 513 (Ind. 

Ct. App. 2000). In Paint Shuttle, a law firm sued its malpractice insurance carrier for 

breach of the insurer’s duty to defend and indemnify. The law firm had orally notified 

the insurer of the malpractice suit soon after it was filed, but waited to provide the written 

notice required under the policy until several months later, after the firm had chosen to 

defend the early stages of the malpractice suit on its own, without the insurer’s assistance. 

In that case, the court held that the law firm’s notice to the insurer was insufficient 

because the firm voluntarily undertook defense of the suit “without allowing Continental 

to exercise its rights of investigation and defense of a claim under the malpractice 

policy,” depriving the insurer of its “. . . right to promptly investigate a claim or to 

control the defense of a lawsuit with which it might be subjected to liability as an insurer 

of an insurance policy.” Id. at 520-21. The Paint Shuttle court held that there are two 

requirements for notice to be proper under an insurance policy like the one in place here: 

first, notice “must be . . . timely as proscribed by the language of the insurance policy,” 

and second, it must be ‘true’ in the sense that the insured allows the insurer to exercise its 

rights of investigation and defense of a claim under the policy.” Id. at 521. Accordingly, 

“[i]t follows that if an insured notifies an insurer of a claim, but defends the claim in 

contravention of an insurance company’s rights of investigation and defense, the notice is 

insufficient for purpose of obtaining coverage under an insurance policy.” Id. at 521. 

This is the very situation presented here: in lieu of reporting the claim to Valiant, 

Bowman Heintz chose to defend itself in the bankruptcy court when the motion to 
22

enforce the stay and for contempt sanctions was filed. By doing so, it took away 

Valiant’s right as the insurer to investigate and defend the claim, meaning that notice, 

even if timely, was not “true.” 

Bowman Heintz’s failure to give “true” notice is fatal to its claims here for two 

reasons. First, unlike some of the insurance policies discussed in the case law outlined 

above, there is no specific mention in the policy at issue here about “prompt” notice or 

prescribing a time for giving notice. Though it seems abundantly clear from the terms of 

the policy that “prompt” notice was clearly what was intended (and Bowman Heintz does 

not even attempt to argue otherwise), under Indiana’s rules of contract interpretation, any 

ambiguity in a policy term must be resolved against the insurer, Nat’l Fire, 107 F.3d at 

535, though “[m]ere controversy doesn't establish ambiguity; ambiguity is established 

‘only if reasonable persons would differ as to the meaning.’” Lafayette Life Ins. Co. v. 

Arch Ins. Co., 784 F. Supp. 2d 1034, 1040 (N.D. Ind. 2011), quoting Allgood v. Meridian 

Sec. Ins. Co., 836 N.E.2d 243, 248 (Ind. 2005). Here, even if the Court were to find that 

reasonable people could somehow find that the terms of the policy did not require 

“prompt” notice (which it does not), and then construe the policy in Bowman Heintz’s 

favor on this point, even if Bowman Heintz’s notice was considered timely, it wouldn’t 

be true, because it deprived Valiant of its rights to investigate and defend – the litigation 

of the motion was well underway and Bowman Heintz had already been subject to an 

adverse ruling in the matter by the time Valiant was notified that the motion was pending. 

See Paint Shuttle, 733 N.E.2d at 521. 

Second, even if the Court were to accept Bowman Heintz’s argument regarding 

the relatedness of the two claims because Valiant indicated that they should be handled 
23

under the same file number or because the matters were related under the terms of the 

policy, the notice is still defective: Bowman Heintz’s actions in conducting the 

bankruptcy court litigation without informing Valiant so that it could investigate and 

conduct the defense of the matter renders the notice ineffectual. 

The point of the “related claims” term is to provide the insured a longer period of 

coverage for subsequent acts that it reports to the insurer, to protect the insured in the 

case that the act or omission that was the source of the initial claim occurred during the 

policy period, but subsequent claims regarding the same act or omission occurred outside 

the policy period. See Wellpoint, Inc. v. Nat’l Union Fire Ins. Co., 952 N.E.2d 254, 262 

(Ind. Ct. App. 2011), citing FDIC v. Booth, 82 F.3d 670, 678 (5th Cir. 1996) (“[I]n 

claims-made policies, the notice requirement actually serves to aid the insured by 

extending claims-made coverage beyond the policy period”). It does not somehow mean 

that Bowman Heintz is absolved of its duty to notify its insurer that it was in peril of 

being held in contempt of court as part of a bankruptcy that the insurer has no notice of, 

and may conduct the defense of those contempt proceedings without notice to the insurer. 

2. Sanctions 

Moreover, even if the Court were to find that Bowman Heintz provided Valiant 

with appropriate notice as required under the policy or assuming that Bowman Heintz 

could show that Valiant was not prejudiced by the delayed notice and that the condition 

precedent to coverage was satisfied, summary judgment for Valiant would still be 

appropriate, because the terms of the policy do not require coverage for sanctions [DE 

21-5 at 7].4

 Section I.A. of the policy, titled “Coverage,” explicitly states that “[t]he 

																																																								 4 Though not addressed by the parties, Valiant did not initially deny coverage on the basis 

of late notice: it denied the claim because sanctions were not covered under the policy. However, 
24

Company will pay on behalf of the Insured sums in excess of the deductible that the 

Insured shall become legally obligated to pay as damages because of a claim that is first 

made against the Insured and reported to the Company during the policy period.” And as 

to the duty to defend, the Policy states that “[t]he Company shall have the right and duty 

to defend . . . any suit against the Insured seeking damages which are payable under the 

terms of the policy” [DE 21-5 at 6, emphasis added]. In other words, coverage only 

applies – as to both defense and indemnity – where the insured has to pay or has sought 

against it “damages,” a term explicitly defined under the policy. As pertinent here, under 

the policy, “damages” specifically “. . . do not include . . . civil or criminal fines, 

sanctions, penalties, or forfeitures” [DE 21-5 at 7]. 

Valiant argues that because the policy terms specifically provide that “sanctions” 

are not “damages,” it had no duty to defend or indemnify Bowman Heintz on the motion 

for sanctions. Bowman Heintz asserts that the duty to defend is broad, that it was 

engaged in the rendering of legal services, that the motion for contempt sanctions sought 

actual damages in addition to sanctions, and that Valiant was accordingly required to 

defend it [DE 25 at 15, 22-23]. 

Bowman Heintz is correct that “[t]ypically, an insurer has a duty to defend its 

insured against suits alleging facts that might fall within the coverage. While the insurer 

does not have an unconditional duty to defend, the insurer’s duty is expansive, since the 

duty to defend is considerably broader than the duty to indemnify.” Stroh Brewing Co., 

																																																																																																																																																																					

it bears noting here that an insurer’s denial of coverage on grounds other than deficient notice 

does not rebut the presumption of prejudice from late notice as a matter of law. Tri-Etch, Inc. v. 

Cincinnati Ins. Co., 909 N.E.2d 997, 1005 (Ind. 2009) (“There is no reason why an insurer should 

be required to forego a notice requirement simply because it has other valid defenses to 

coverage”). 
25

127 F.3d at 566, citing Seymour Mfg. Co., Inc. v. Commercial Union Ins. Co., 665 N.E.2d 

891, 892 (Ind.1996); see also Nat’l Fire, 107 F.3d at 535, quoting Terre Haute First Nat'l 

Bank v. Pac. Emp’rs Ins. Co., 634 N.E.2d 1336, 1339 (Ind. Ct. App. 1993) ( “[a]n 

insurer's duty to defend its insureds against suit is broader than its coverage liability or 

duty to indemnify”). However, under Indiana law, “the insurer’s duty to defend” is 

dependent upon the “underlying nature of the claim, and not its merits.” Nat’l Fire, 107 

F.3d at 535 (internal quotation omitted). The insurer is only required to defend the 

insured where “the allegations of the complaint, including the facts alleged . . . if proved 

true, coverage would attach.” Stroh Brewing Co., 127 F.3d at 566. In other words, in a 

policy dispute, if “. . . the underlying factual basis of the complaint, even if proved true, 

would not result in liability under the insurance policy, the insurance company can 

properly refuse to defend.” Nat’l Fire, 107 F.3d at 535, quoting Wayne Twp. Bd. of Sch. 

Comm'rs v. Indiana Ins. Co., 650 N.E.2d 1205, 1208 (Ind. Ct. App. 1995) (“When the 

nature of the claim is obviously not covered by the policy of insurance, there is no duty to 

defend”). 

Here, even if the allegations in the motion for contempt sanctions were true and 

Bowman Heintz was in violation of the automatic stay of bankruptcy, in contempt, and 

responsible for sanctions (as the bankruptcy court here eventually found that it was, 

though that is not relevant to the matter before this court), Valiant is correct that there is 

no coverage under the policy. The policy is clear that for coverage to apply in terms of 

both defense and indemnity, the insured must be in peril of having to pay damages as 

defined under the policy, which, in this case, specifically excludes sanctions. Bowman 

Heintz argues that in addition to sanctions, the Debtors sought actual damages and 
26

attorneys’ fees, which would properly be considered “damages” under the policy, 

triggering Valiant’s duty to defend [DE 25 at 19-21]. Valiant counters that Bowman 

Heintz has misrepresented the relief requested in the debtor’s motion, and that the motion 

itself asks the bankruptcy court to “hold the Plaintiffs and the Plaintiffs’ Counsel in 

contempt for willfully violating the Automatic Stay, and impose sanctions in the form of 

attorneys fees, damages and any other relief deemed appropriate” [DE 28 at 5]. 

Valiant has the better of the argument here: the motion is clear that while it uses 

the term “actual damages,” that request explicitly refers to the debtors’ statement that 

they had been damaged as a result of the Plaintiffs’ willful violation of the Automatic 

Stay, including, without limitation, the attorneys’ fees, actual damages, and costs 

associated with the prosecution of this Motion” [DE 21-8 at ¶¶ 69-70]. The debtors then 

specifically requested that the bankruptcy court “. . . hold the Plaintiffs and the Plaintiffs’ 

Counsel in contempt for willfully violating the Automatic Stay, and impose sanctions in 

the form of attorneys fees, damages and any other relief deemed appropriate” [DE 21-8 

at ¶ 70, emphasis added]. In other words, the damages sought were all explicitly labeled 

sanctions – not, as Bowman Heintz would have the court believe, damages of the kind 

outlined as payable under the policy. Accordingly, the denial of coverage was 

appropriate. 

IV. Bad Faith 

Finally, there is the matter of Bowman Heintz’s claim that Valiant acted in bad 

faith in denying coverage for the Motion for Sanctions. Under Indiana law, an insurer 

has a duty to deal with its insured in good faith. Freidline v. Shelby Ins. Co., 774 N.E.2d 

37, 40 (Ind. 2002). “[A] good faith dispute about whether the insured has a valid claim 
27

will not supply the grounds for recovery in tort for the breach of the obligation to exercise 

good faith,” but “an insurer that denies liability knowing there is no rational, principled 

basis for doing so has breached its duty.” Id. To prove that an insurer acted in bad faith 

in denying a claim, the insured must establish, by clear and convincing evidence, that the 

insurer knew that it had no legitimate basis upon which to deny liability, but did so 

anyway. Id. 

Here, there is simply no evidence whatsoever that Valiant denied coverage, 

knowing that it had no legitimate basis for doing so. As discussed at length above, 

Valiant’s denial of the claim in this case was proper on two grounds: first, because it had 

insufficient notice, and second, because sanctions were explicitly excluded as damages 

under the policy. Accordingly, Bowman Heintz has failed to meet its burden on this 

claim, and summary judgment is appropriate in favor of Valiant. 

CONCLUSION 

For the foregoing reasons, Bowman Heintz’s motion for summary judgment [DE 

19] is DENIED, and Valiant’s cross-motion for summary judgment is GRANTED [DE 

22]. The Clerk is DIRECTED to enter judgment in favor of the Defendant and against 

the Plaintiff.

SO ORDERED. 

 ENTERED: August 1, 2014 

s/ Jon E. DeGuilio 

 JON E. DEGUILIO, JUDGE 

 UNITED STATES DISTRICT COURT 

.