FOR PUBLICATION

ATTORNEYS FOR APPELLANT: ATTORNEYS FOR APPELLEE

ERIE INSURANCE EXCHANGE:

JAMES H. AUSTEN

SHANNON G. STARR JAMES P. STRENSKI

Starr Austen & Miller, LLP ANNA M. MALLON

Logansport, Indiana Cantrell Strenski & Mehringer, LLP

Indianapolis, Indiana

ATTORNEY FOR APPELLEE

ALLIANZ GLOBAL RISKS U.S.

INSURANCE COMPANY:

GINNY L. PETERSON

Kightlinger & Gray, LLP

Indianapolis, Indiana

IN THE

COURT OF APPEALS OF INDIANA

SELECTIVE INSURANCE COMPANY OF )

SOUTH CAROLINA and 500 RANGELINE )

ROAD, LLC, )

)

Appellants-Defendants, )

)

vs. ) No. 73A01-1307-PL-311

)

ERIE INSURANCE EXCHANGE, )

)

Appellee-Plaintiff, )

__________________________________________)

)

WELCH & WILSON PROPERTIES, LLC )

d/b/a HAMMONS STORAGE, ALLIANZ )

GLOBAL RISKS U.S. INSURANCE )

COMPANY, )

)

Appellees-Defendants. )

APPEAL FROM THE SHELBY SUPERIOR COURT

The Honorable Charles D. O’Connor, Special Judge
2

Cause No. 73D01-1109-PL-33

July 30, 2014

OPINION - FOR PUBLICATION

BROWN, Judge

Selective Insurance Company of South Carolina (“Selective”) and 500 Rangeline, 

LLC (“Rangeline,” and collectively with Selective, “Appellants”) appeal the trial court’s 

order granting the cross-motion for partial summary judgment filed by Erie Insurance 

Exchange (“Erie”) and denying the Appellants’ motion for partial summary judgment. 

Additionally, Allianz Global Risks U.S. Insurance Company (“Allianz”) has filed an 

appellee’s brief in this matter as an interested party after intervening below. The 

Appellants raise one issue which we revise and restate as whether the court erred in 

granting partial summary judgment in favor of Erie and denying the Appellants’ motion 

for partial summary judgment. We reverse and remand. 

FACTS AND PROCEDURAL HISTORY

Rangeline purchased a warehouse in late 2006 or early 2007. At the time of the 

purchase, the principals of Rangeline were Jon Smith, Greg Heuer, and Travis May. 

Rangeline did not have any other employees who managed the warehouse or actively 

participated in the business affairs of Rangeline other than Smith, Heuer, and May. 

Selective provided commercial general liability coverage for Rangeline’s warehouse 

beginning on July 1, 2007. In August 2007, Doug Ewing, a Safety Management 

Specialist with Selective, visited the warehouse to conduct a risk evaluation survey, and,
3

based on recommendations made by Ewing, May retained Gardner Fire Protection to 

inspect the sprinkler system at the warehouse. On October 1, 2007, Jason Gardner from 

Gardner Fire Protection wrote a letter to May regarding his findings and identified a 

number of “serious issues, including but not limited to the fact that the system had no 

functioning alarms,” and May later asked Gardner to provide an estimate of what the cost 

would be to repair the issues Gardner had identified. Appellants’ Appendix at 355. 

Gardner Fire Protection was never hired to make repairs to the sprinkler system. 

Selective renewed the policy with Rangeline for the period of July 1, 2008 through July 

1, 2009.

On April 30, 2008, Welch & Wilson Properties, LLC d/b/a Hammons Storage, 

(“Hammons”) and Rangeline entered into a lease of the warehouse for the purpose of 

storing insulation manufactured by Knauf Insulation KnbH, (“Knauf”). By this time, 

Rangeline’s owners were Smith and Heuer, although May remained active in the 

company and negotiated the lease with Hammons on behalf of Rangeline. Hammons 

prepared the first draft of the lease and sent it to Rangeline. The executed lease contains 

the following relevant provisions:

J. INSURANCE AND INDEMNIFICATION . . .

3. TENANT’S PUBLIC LIABILITY INSURANCE: Tenant 

shall, at its own cost and expense, keep and maintain in full force 

during the Lease term, as policy or policies of comprehensive 

commercial general liability insurance on an occurrence basis, 

insuring Tenant’s activities in or about the Leased Premises 

against loss, damage or liability for personal injury or death of 

any person or loss or damage to property occurring in, upon or 

about the Leased Premises during the Lease term, with $1.00 

Million in combined single limit coverage. Landlord, its 
4

successors, assigns and any mortgagee shall be named as 

additional insureds under each policy maintained by Tenant.

Tenant also shall maintain worker’s compensation coverage to 

the extent required by law.

* * * * *

5. WAIVER OF SUBROGATION: Any policy of property 

insurance maintained by either party shall include a clause or 

endorsement denying the insurer any rights of subrogation 

against the other party to the extent rights have been waived by

the insured prior to the occurrence of injury or loss. Landlord 

and Tenant waive any rights of recovery against the other for 

damage or loss due to hazards covered by insurance containing 

such a waiver of subrogation clause or endorsement to the extent 

of the damage or loss covered thereby. Notwithstanding 

anything to the contrary contained in this provision or elsewhere 

in this Lease, neither party shall be deemed to have released or 

waived any claim against the other for damages to property 

within the deductible amount of such party’s insurance policy.

Id. at 58-59. Paragraph K of the lease, titled “UTILITIES AND SERVICES,” assigned 

to Rangeline the duty to pay for certain utilities including the “Heat and/or Gas Service” 

and the “Fire Sprinkler System.” Id. at 59. Also, Paragraph L stated the following:

MAINTENANCE AND REPAIR: During the Lease term, Tenant shall, 

at its own cost and expense, maintain in good condition and repair the 

Leased Premises and every part thereof, except for obligations of Landlord 

provided for elsewhere in this Lease, ordinary wear and tear, and casualty.

Tenant shall not be required to make any roof, foundation or structural 

alterations, repairs or replacements to the Leased Premises except as 

otherwise required by this Lease. Landlord shall allow Tenant the use and 

benefit of each and every warranty to which Landlord is entitled with 

respect to any items repaired or replaced by Tenant. Landlord shall be 

responsible for maintaining the roof, exterior walls (except doors, windows 

and glass), foundation and structural integrity of the building, except for 

damage caused by the negligence or willful act of tenant or its agents, 

officers, employees, contractors, licensees or invitees which is not covered 

or required to be covered under the property insurance to be maintained 

hereunder. Landlord shall be responsible for major component repairs 

and/or replacement of the heating, ventilation and air conditioning 
5

equipment in the Leased Premises, provided that the need for such repair or 

replacement is not due to any abuse, misuse, damage or negligence of 

Tenant or its agents, officers, employees, contractors, licensees, or invitees.

Id.

After the lease was signed and the lease term started, Rangeline conducted some 

operations in the warehouse for the first month, and after that time Hammons had sole

possession of the warehouse. Hammons had seven employees working in the warehouse 

during the term of the lease including Shawn Mayberry, who was the supervisor of

Hammons’ operation. According to Hammons’ principal, Jeffrey Welch, sometime in 

October or November of 2008, May told him that Rangeline was going to drain the water 

in the sprinkler system in the Warehouse and not heat the facility. However, the furnace 

could be turned on by a switch or thermostat on the wall in the warehouse. Mayberry 

does not recall the heat being on in the Warehouse while Hammons stored the insulation

there, and he never touched the furnace.

On or about December 23, 2008, the pipes of the sprinkler system at the 

warehouse burst, causing water to escape and damaging the Knauf insulation being stored 

therein. Origin and cause investigators hired by the insurers involved in this matter 

concurred that the cause of the loss was that the sprinkler system failed due to freezing 

temperatures which caused the water from the system to freeze and crack numerous cast 

iron fittings, causing the failure of the sprinkler heads. The investigators believed that 

there was no antifreeze in the sprinkler system as well as insufficient heat provided to the 

warehouse. Erie investigator Patrick Murphy inspected the warehouse on February 17, 

2009, and he noted that the gas had been turned off at the regulating system located on 
6

the outside of the warehouse. Records from the gas provider indicate that no gas was 

used at the warehouse between July 29, 2008 and March 24, 2009, although gas was 

available to the warehouse during this timeframe.

At the time of the sprinkler failure, Erie had in full force and effect an “Ultraflex 

Package Policy” of insurance issued to Hammons (the “Policy”), which included 

commercial property coverage and commercial general liability coverage. Id. at 63. The 

Policy contains the following language in the commercial general liability coverage form, 

in pertinent part:

SECTION I - COVERAGES

COVERAGE A BODILY INJURY AND PROPERTY DAMAGE 

LIABILITY

1. Insuring Agreement

a. We will pay those sums that the insured becomes legally 

obligated to pay as damages because of “bodily injury” or 

“property damage” to which this insurance applies. . . .

2. Exclusions

This insurance does not apply to: . . .

j. Damage To Property

“Property damage” to: . . .

4) Personal property in the care, custody or 

control of the insured; . . .

SECTION IV - COMMERCIAL GENERAL LIABILITY CONDITIONS

7. Separation Of Insureds
7

Except with respect to the Limits of Insurance, and any rights 

or duties specifically assigned in this Coverage Part to the 

first Named Insured, this insurance applies:

a. As if each Named Insured were the only Named 

Insured; and

b. Separately to each insured against whom claim is 

made or “suit” is brought. 

Id. at 108, 110-111, 115-117. Additionally, the Policy contained the following 

endorsement, titled “ADDITIONAL INSURED – MANAGERS OR LESSORS OF

PREMISES” (the “A/I Endorsement”), which stated in pertinent part: “WHO IS AN 

INSURED (Section II) is amended to include as an insured the person or organization 

shown in the Schedule but only with respect to liability arising out of the ownership, 

maintenance or use of that part of the premises leased to you and shown in the Schedule . 

. . .” Id. at 123. The Policy listed Rangeline as an additional insured in the relevant

Schedule.

Erie paid $1,000,000 to Knauf to resolve a claim asserted by Knauf due to the loss, 

and on February 10, 2010, following Erie’s payment to Knauf, Erie filed a subrogation 

lawsuit against Rangeline seeking to recover the $1,000,000 (the “Underlying 

Litigation”). On October 4, 2011, Erie filed, as amended, a Complaint for Declaratory 

Judgment seeking a determination of whether or not its policy of insurance afforded 

coverage to Rangeline for the claim Erie asserted in the Underlying Litigation.

Also, on December 23, 2008, Allianz had in full force and effect a policy of 

insurance issued to Knauf and paid to Knauf $398,266 in addition to the $1,000,000 paid 

by Erie as a result of the insulation damage. On March 26, 2010, Allianz moved to 
8

intervene in the Underlying Litigation to assert a claim against Rangeline for recovery of 

the amount paid by Allianz to Knauf, and the court granted its motion. Both Allianz and 

Selective, who had a policy in effect at the time of the loss affording coverage to 

Rangeline for commercial liability, were named as defendants in Erie’s declaratory 

judgment action.

On July 3, 2012, the Appellants filed a motion for partial summary judgment, as 

well as a memorandum in support and designation of evidence, addressing the issue of 

whether or not the Policy afforded coverage for the claim asserted by Erie in the 

Underlying Litigation.1 On January 25, 2013, Erie filed a cross-motion for partial 

summary judgment and response to the Appellants’ motion for partial summary judgment

and memorandum in support addressing the same issue. On February 22, 2013, the 

Appellants filed a memorandum in response to Erie’s cross-motion and reply in support 

of their motion for partial summary judgment and supplemental designation of evidence. 

Also, Allianz filed a memorandum in response to Erie’s cross-motion on February 27, 

2013. On March 6, 2013, Erie filed its response to the Appellants’ reply to Erie’s crossmotion for partial summary judgment.

On March 11, 2013, the court held a hearing and heard arguments on the parties’ 

motions, and on June 21, 2013, issued an order granting Erie’s cross-motion and denying 

the Appellants’ motion for partial summary judgment. In the order, the court specifically 

found that the A/I Endorsement did not provide coverage for Rangeline for the 

 

1 We note that the Appellants did not address in their partial summary judgment motion the issues 

of coverage for the Allianz claim or the effect of any damages claimed by Rangeline arising from Erie’s 

failure to afford coverage to Rangeline.
9

subrogation action in the Underlying Litigation and “provides coverage only under the 

Commercial General Liability Coverage part and does not provide coverage under the 

Ultraflex Commercial Property Coverage part. Liability coverage is provided only with 

respect to liability arising out of the ownership, maintenance or use of that part of the 

premises leased to the lessee.” Id. at 18.2 The court found that Hammons as tenant had 

no duty regarding the sprinkler system, that accordingly there was no duty to breach and

consequently Rangeline cannot be held vicariously liable for any actions or inactions on 

Hammons’ part, that Rangeline maintained control over the sprinkler system, and that the 

anti-subrogation defense is inapplicable. The court concluded that Erie did not owe 

Rangeline a defense or indemnity in the Underlying Litigation and that there was no just 

reason for delay, and it entered its order as a final judgment.

ISSUE / STANDARD OF REVIEW

The issue is whether the court erred in granting partial summary judgment in favor 

of Erie and denying the Appellants’ motion for partial summary judgment. Summary 

judgment is appropriate only where 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); Mangold 

ex rel. Mangold v. Ind. Dep’t of Natural Res., 756 N.E.2d 970, 973 (Ind. 2001). All facts 

and reasonable inferences drawn from those facts are construed in favor of the 

nonmovant. Mangold, 756 N.E.2d at 973. Our review of a summary judgment motion is 

limited to those materials designated to the trial court. Id. In reviewing a trial court’s 

 

2 We note that page 5 of the court’s order was mistakenly excluded from the Appellants’ 

Appendix. However, it does appear at the end of the Appellants’ brief. To the extent that we quote from 

page 5 of the order, we rely on the page contained in the Appellants’ brief.
10

ruling on a motion for summary judgment, we may affirm on any grounds supported by 

the Indiana Trial Rule 56 materials. Catt v. Bd. of Commr’s of Knox Cnty., 779 N.E.2d 

1, 3 (Ind. 2002).

The fact that the parties make cross-motions for summary judgment does not alter 

our standard of review. Sterling Commercial Credit-Mich., LLC v. Hammert’s Iron 

Works, Inc., 998 N.E.2d 752, 756 (Ind. Ct. App. 2013). Instead, we must consider each 

motion separately to determine whether the moving party is entitled to judgment as a 

matter of law. Id. The entry of specific findings and conclusions does not alter the 

nature of a summary judgment which is a judgment entered when there are no genuine 

issues of material fact to be resolved. Rice v. Strunk, 670 N.E.2d 1280, 1283 (Ind. 1996). 

In the summary judgment context, we are not bound by the trial court’s specific findings 

of fact and conclusions of law. Id. They merely aid our review by providing us with a 

statement of reasons for the trial court’s actions. Id.

Insurance contracts “are governed by the same rules of construction as other 

contracts.” Colonial Penn Ins. Co. v. Guzorek, 690 N.E.2d 664, 667 (Ind. 1997). The 

interpretation of an insurance contract is a question of law, and we address it de novo. 

Dunn v. Meridian Mut. Ins. Co., 836 N.E.2d 249, 251 (Ind. 2005). Clear and 

unambiguous policy language is given its ordinary meaning in order to accomplish the 

primary goal of contract interpretation of determining the intent of the parties at the time 

the contract was made as disclosed by the language used to express their rights and 

duties. Holiday Hospitality Franchising, Inc. v. AMCO Ins. Co., 983 N.E.2d 574, 577-

578 (Ind. 2013). Where contractual language is ambiguous, we generally resolve those 
11

ambiguities in favor of the insured, but will not do so if such an interpretation fails to 

harmonize the provisions of the contract as a whole.3 Id. at 578. The failure to define a 

contractual term does not necessarily make that term ambiguous, nor does a simple 

disagreement about the term’s meaning. Id. Rather, an ambiguity exists where the 

provision is susceptible to more than one reasonable interpretation. Id.

We also observe that there exists some disagreement in the current state of Indiana 

law regarding what may be considered in deciding whether an insurer has a duty to 

defend. “Indiana courts have previously held that ‘[t]he duty to defend is determined 

 

3 Erie argues that this Court should construe the language of the Policy from a neutral standpoint 

rather than in favor of the insured, Rangeline. We addressed a similar argument in Liberty Mut. Ins. Co. 

v. Mich. Mut. Ins. Co., 891 N.E.2d 99 (Ind. Ct. App. 2008). As will be discussed more thoroughly below, 

in that case Liberty Mutual Insurance Company (“Liberty Mutual”) insured and was the subrogee of a 

premises owner, and Michigan Mutual Insurance Company (“Michigan Mutual”) insured the tenant of the 

premises under a commercial general liability policy. 891 N.E.2d at 100. Before addressing the main 

issue, the Court discussed an argument by Michigan Mutual that “this is a dispute between insurance 

companies and because neither Liberty Mutual nor [the premises owner] paid any premiums for the 

Michigan Mutual Policy, it must be construed from a neutral stance.” Id. at 102. We observed that the 

Indiana Supreme Court in Ind. Lumbermens Mut. Ins. Co. v. Statesman Ins. Co., 260 Ind. 32, 291 N.E.2d 

897 (1973), stated:

[W]e are in fact in this instance not dealing with the two parties to the contract. The 

party claiming to be an insured in this case never paid a penny’s premium to the insurer.

We are therefore not in a situation where we must construe the contract language any 

certain way and can seek out the general intent of the contract from a neutral stance.

Id. (quoting Ind. Lumbermens, 260 Ind. at 34, 291 N.E.2d at 899). Liberty Mutual suggested that Ind. 

Lumbermens, as well as similar cases, were distinguishable because the premises owner “was not a 

stranger to the contract but, rather, was specifically named as an additional insured in an endorsement 

attached to the policy.” Id. We noted that Liberty Mutual’s argument had “merit” because the premises 

owner “was an additional named insured (under limited circumstances, of course) and the policy was 

procured for its benefit, as well as” the tenant’s. Id. We did not decide the issue, however, noting that we 

would reach the same conclusion regardless of how the policy was construed. Id.

Here, we similarly arrive at the same conclusion regardless of whether the Policy is construed 

from a neutral stance or from a stance favoring Rangeline. However, we note that the argument advanced 

by Liberty Mutual in Liberty Mut. carries more weight than it did in that case because while, the premises 

owner was removed as a real party in interest prior to the appeal in that case, 891 N.E.2d at 101, here, 

Rangeline, who was named as an insured pursuant to the A/I Endorsement, continues as a real party in 

interest.
12

solely by the nature of the complaint.’” Ind. Farmers Mut. Ins. Co. v. North Vernon Drop 

Forge, Inc., 917 N.E.2d 1258, 1268 (Ind. Ct. App. 2009) (quoting Transamerica Ins. Serv. 

v. Kopko, 570 N.E.2d 1283, 1285 (Ind. 1991)), reh’g denied, trans. denied. This Court in 

Ind. Farmers recognized that “[s]ome courts still cite Kopko as representing the current 

state of Indiana law,” id., and indeed a case cited by the Appellants, Travelers Cas. & 

Sur. Co. v. Elkins Constructors, Inc., 2000 WL 724006, at *4 (S.D. Ind. 2000), 

reconsideration denied by 2000 WL 748091 (S.D. Ind. June 6, 2000), does just that while 

at the same time recognizing that “problems . . . can arise when the doctrine of liberal 

notice pleading mixes with the doctrine that the insurer’s duty to defend is determined 

solely by the allegations of the complaint.” Id. at *5 n.12. The Ind. Farmers Court also 

noted that the Indiana Supreme Court, while not specifically overruling Kopko, “has 

more recently entertained extrinsic, designated evidence when assessing an insurer’s duty 

to defend,” and considered facts outside of the complaint. 917 N.E.2d at 1268 (citing 

Auto-Owners Ins. Co. v. Harvey, 842 N.E.2d 1279, 1291 (Ind. 2006)). Based on the 

foregoing, as well as the fact that neither party advocates for the rule in Kopko to be 

applied, we consider the relevant designated evidence in determining whether Erie has a 

duty to defend Rangeline.

DISCUSSION

The Appellants argue that: (A) Rangeline was covered under the Policy as an 

additional insured; and (B) the care, custody, or control exclusion contained in the Policy

does not apply. We address each of the Appellants’ contentions separately.

A. Additional Insured Endorsement
13

The Appellants argue that the A/I Endorsement contained in the Policy afforded 

coverage to Rangeline and that Erie’s contention below that it provides only limited 

coverage for certain types of claims is not supported by the language of the Policy and 

case law. The Appellants note that there is but one case interpreting additional insured 

endorsements in Indiana case law, Liberty Mut. Ins. Co. v. Mich. Mut. Ins. Co., 891 

N.E.2d 99 (Ind. Ct. App. 2008), and they argue that Liberty Mut. is not instructive here 

because the facts are distinguishable. The Appellants argue that Erie misinterprets the 

holding of Liberty Mut., and they note that the accident in Liberty Mut. occurred in an 

adjacent common area rather than on the leased premises as is the case here. The 

Appellants also direct our attention to certain cases for the proposition that the A/I 

Endorsement should be interpreted broadly, that is, “beyond merely the additional 

insured’s vicarious liability for the actions of the named insured.” Appellants’ Brief at 12 

(quoting Elkins, 2000 WL 724006, at *24). The Appellants maintain that “Elkins and the 

other decisions cited [] construing A/I endorsements in a broader fashion set forth the 

better rule that should be applied under the facts of this case,” and they argue specifically 

that Erie wrote the language of the instant A/I Endorsement which “does not attempt to 

restrict coverage to only claims for which Rangeline would have vicarious liability due to 

the actions of Hammons but instead extends a broader grant of coverage to Rangeline for 

 

4 Erie in its brief notes that Elkins is an unpublished decision and cites to Ind. Appellate Rule 

65(D), which states that “not-for-publication memorandum decision[s] shall not be regarded as precedent 

and shall not be cited to any court” except under certain circumstances. Erie’s Brief at 18, 18 n.4. We 

note, however, that Appellate Rule 65(D) concerns memorandum decisions from this Court and does not 

contemplate not-for-publication decisions from other courts. We also note that Elkins has been cited 

previously by both this Court as well as by the Seventh Circuit Court of Appeals. See Peabody Energy 

Corp. v. Roark, 973 N.E.2d 636, 641 n.3 (Ind. Ct. App. 2012); Lewis v. Methodist Hosp., Inc., 326 F.3d 

851 854 (7th Cir. 2003).
14

any liability arising out of the leased premises.” Id. at 16. The Appellants argue that Erie 

asserts in the Underlying Litigation a claim for insulation stored in a warehouse damaged 

as a result of a sprinkler system failure which “clearly falls within the grant of coverage 

of its policy.” Id.

The Appellants also argue that the court in its order “focused extensively on 

whether or not the sprinkler system failed as a result of the fault of Rangeline” which 

“was not the issue before the Trial Court.” Id. They assert that the court “determined 

that Rangeline’s negligence caused the loss and therefore Erie, as the insurer for 

Hammons, should be able to obtain reimbursement,” but this reasoning was “error as the 

sole question before it was whether [the Policy] afforded coverage for the loss” and that 

“the impact of that coverage will be addressed by the court handling the Underlying 

Litigation.” Id. The Appellants assert that the “Separation of Insureds” language in the 

Policy further supports the conclusion that the A/I Endorsement affords Rangeline 

coverage, noting that this Court has previously addressed a similar provision and held 

that “even if the policy excluded coverage for an additional insured, the named insured 

might still have coverage . . . .” Id. at 18. The Appellants argue that “solely from 

Rangeline’s standpoint, Erie has coverage for Rangeline if Rangeline’s liability ‘arises 

out of the ownership, maintenance or use of that part of the premises leased to 

[Hammons]’” which is “precisely the type of claim asserted by Erie . . . .” Id. at 18-19. 

Finally, the Appellants argue that Erie’s argument that Hammons had no duty to maintain 

the sprinkler system is without merit because “[e]ven assuming, without conceding, that 
15

Hammons had no such duty . . . . Nothing in the A/I [E]ndorsement states that coverage 

only exists if the additional insured is free from all fault.” Id. at 19.

Erie begins its argument by noting the A/I Endorsement “provides coverage only

under the Commercial General Liability Coverage Part (Section II) of the [] Policy; it 

does not provide coverage under the Ultraflex Commercial Property Coverage Part.” 

Erie’s Brief at 13. Erie also emphasizes that the A/I Endorsement states that it provides 

coverage “only with respect to liability arising out of the ownership, maintenance, or use 

of that part of the premises leased to Hammons,” that accordingly no coverage exists for 

Rangeline under the Policy for liability arising out of a part of the warehouse “not leased 

to Hammons,” and that “[i]t then logically follows that the [A/I Endorsement] only 

provides coverage for [] Rangeline for its vicarious liability with respect to those parts of 

the premises over which Hammons has physical control and thus legal responsibility.” 

Id. Erie points to the Liberty Mut. case as well as Ins. Corp. of N.Y. v. Cohoes Realty 

Assocs., L.P., 854 N.Y.S.2d 815, 818 (N.Y. App. Div. 2008), for the proposition that no 

coverage exists under the A/I Endorsement where “the accident occurred in an area 

outside the leased premises . . . .” Id. at 15.

Erie acknowledges that the facts of this case, including that the sprinkler system is 

located inside the warehouse, makes “this case a closer call,” but it maintains that no 

coverage exists under the A/I Endorsement because “the sprinkler system was not ‘part 

of’ the premises leased to Hammons.” Id. at 15-16. Erie points to a provision of the 

Indiana Administrative Code which “impose[s] a non-delegable duty on the part of [] 

Rangeline to inspect, test and maintain the sprinkler system,” notes that Hammons “had 
16

no duty whatsoever regarding the sprinkler system . . . under Indiana law and had no 

control over it” and that “Rangeline explicitly retained control of the sprinkler system as 

it advised Hammons that it would drain it and not heat the Warehouse,” and that “[i]f one 

accepts the proposition that Hammons had no legal duty to control vis-à-vis the sprinkler 

system, then there was no duty for Hammons to breach, and [] Rangeline therefore cannot 

be vicariously liable for any actions or inactions on the part of Hammons” and “[a]s such, 

the sprinkler system was not ‘that part’ of the premises leased to Hammons . . . .” Id. at 

16.

In their reply brief, the Appellants argue that the Cohoes decision is 

distinguishable because it relies on a “different exclusion than at issue in this case,” and it 

stated without discussion that the applicable Additional Insured endorsement “only 

applied to third party actions.” Appellants’ Reply Brief at 4. The Appellants argue that 

to the extent Erie asserts that “Rangeline shut off the gas service to the warehouse . . . off 

the leased premises” which supports applying Liberty Mut., the designated evidence 

“showed that an issue of fact existed as to whether the gas had been shut off . . . prior to 

the loss.” Id. at 5. The Appellants suggest that accordingly, “if the issue of whether the 

gas service was turned off was determinative . . . summary judgment must be denied to 

all parties.” Id. The Appellants maintain that Erie’s contention that Rangeline had a nondelegable duty to maintain the sprinkler system is erroneous and that Indiana case law 

holds that such a duty can be delegated. The Appellants also distinguish the case of

Northbrook Ins. Co. v. Am. States Ins. Co., 495 N.W.2d 450 (Minn. Ct. App. 1993), 

discussed in Liberty Mut., noting that the court framed the issue “as whether a given 
17

liability arises out of a hazard associated with a named insured’s business” and “the 

insulation that was damaged was precisely Hammons’ business.” Id. at 8. With respect 

to how to interpret the A/I Endorsement, the Appellants suggest that “[a] narrow 

construction makes more sense when the loss does not occur on the premises leased to 

the tenant, but occurs in some area close to the leased premises . . . .” Id. at 9. The 

Appellants lastly note that to the extent Erie suggests in its brief that Rangeline will be 

covered by Selective regarding any subrogation payments it makes to Erie, Selective’s 

policy has not been designated as evidence and “[t]his Court should not assume without 

an examination of the Selective policy that Rangeline will have insurance coverage with 

Selective . . . .”5 Id. at 10-11.

We begin by discussing this Court’s decision in Liberty Mut. As alluded to in the 

parties’ arguments, in Liberty Mut. Linda Swann, who worked for Trilithic, Inc. 

(“Trilithic”), slipped and fell on a snow- and ice-covered pathway while walking from the 

employee parking lot to the Trilithic facility. 891 N.E.2d at 100. Trilithic was a tenant of 

Duke Realty Corporation (“Duke”). Id. Liberty Mutual Insurance Company (“Liberty 

Mutual”) insured and was the subrogee of Duke, and Michigan Mutual Insurance 

Company (“Michigan Mutual”) insured Trilithic under a commercial general liability 

policy. Id. Duke was named insured on an additional insured endorsement to the 

Michigan Mutual policy “for no additional premium,” in which the endorsement 

contained language identical to the A/I Endorsement of the instant case. Id. Swann and 

 

5 The Appellants note specifically that had the Selective policy been designated as evidence by 

Erie, “Rangeline could have argued to the Trial Court that Selective’s policy also contains an exclusion 

for coverage for damage to personal property owned by others that is within Rangeline’s control at the 

time of the loss.” Appellants’ Reply Brief at 10.
18

her husband filed a personal injury action against Duke in February 2002, Duke tendered 

the defense of the action to Michigan Mutual pursuant to the additional insured 

endorsement, and Michigan Mutual declined to defend or indemnify Duke against the 

Swanns’ claims. Id. Duke filed a complaint for declaratory judgment with the trial court 

in which it sought a declaration that the insurance policy issued by Michigan Mutual 

provided coverage to Duke for the injury claims asserted by the Swanns, and Michigan 

Mutual filed an answer and counterclaim for declaratory judgment, claiming the policy 

did not provide coverage to Duke for the Swanns’ claims. Id. at 101. 

The parties subsequently filed cross-motions for summary judgment, and 

Michigan Mutual requested that Liberty Mutual be substituted for Duke as the real party 

in interest. Id. At the hearing on the motions for summary judgment, Duke’s counsel 

acknowledged that Liberty Mutual, as subrogee of Duke, was the real party in interest. 

Id. The trial court substituted Liberty Mutual in place of Duke as the plaintiff in the 

declaratory judgment action. Id. On June 25, 2007, the court denied Liberty Mutual’s 

motion for summary judgment and granted Michigan Mutual’s cross-motion for summary 

judgment, declaring that Michigan Mutual had no obligation to defend or indemnify 

Duke against the Swanns’ claims. Id.

On appeal, in addressing whether Michigan Mutual owed Duke a duty to defend 

and indemnify, we began by noting that “[a]lthough a liability insurer’s duty to defend its 

insured against suit is broader than its duty to indemnify, this principle only applies when 

the risk is insured against” and that “‘[w]here an insurer’s independent investigation of 

the facts underlying a complaint against its insured reveals a claim is patently outside of 
19

the risk covered by the policy, the insurer may properly refuse to defend.’” Id. at 102-

103 (quoting Freidline v. Shelby Ins. Co., 774 N.E.2d 37, 42 n.6 (Ind. 2002)). The Court 

recited Liberty Mutual’s argument that it interpret the additional insured endorsement 

broadly, noting Liberty Mutual’s argument that “although the fall occurred outside the 

leased premises and as a result of Duke’s negligence, liability for Swann’s fall arose out 

of the use of that part of the premises leased to Trilithic” because she was injured “as she 

was reporting to work on the leased premises while using the only route to the only door 

into the premises which she was permitted to use by Trilithic.” Id. at 103.

Liberty Mutual directed the Court’s attention to Md. Cas. Co. v. Chicago & N.W. 

Transp. Co., 466 N.E.2d 1091 (Ill. App. Ct. 1984), in which the Illinois Court of Appeals 

held that the lessee’s general liability insurance covered the additional insured lessor 

against claims asserted by the lessee’s employee when she was raped in the lessor’s 

passenger terminal as she reported to work at a news stand leased to her employer. Id. 

The Illinois court observed that the situation, in which an employee of the named insured 

suffered injury caused by the alleged negligence of an additional insured under a liability 

policy “immediately outside the leased premises as she was about to begin her daily 

employment,” favored

construing the policy liberally in favor of the insured—a procedure 

necessitated by the ambiguity of the “arising out of” language—the instant 

injuries appear to have arisen from the operation and use of the leased 

premises, since they would not have been sustained “but for” the victim’s 

employment on those premises. She was about to commence her 

employer’s operation when she was assaulted.

Id. (quoting Md. Cas. Co., 466 N.E.2d at 1094-1095).
20

We proceeded to observe that “[s]everal cases from other jurisdictions, however, 

have rejected such a broad interpretation of additional insured endorsements such as the 

one in the instant case” and included the following citation:

Hilton Hotels Corp. v. Employers Ins. of Wausau, 629 So.2d 1064, 1065 

(Fla. Dist. Ct. App. 1994) (“isolated connection insufficient to bring this 

accident within coverage of the policy” where lessee’s employee’s fall did 

not occur on leased premises, but rather in lessor’s lobby, and “[t]he only 

way that this accident was even remotely related to the gift shop, was due 

to the pure coincidence that the injured party was a [gift shop] employee on 

her way to work”); Northbrook Ins. Co. v. American States Ins. Co., 495 

N.W.2d 450 (Minn. Ct. App. 1993) (no coverage for landlord under 

tenant’s general liability insurance policy with similar additional insured 

provision where tenant’s employee fell on ice in alley behind leased 

premises, an area under the control of landlord); United States Fid. & Guar. 

v. Drazic, 877 S.W.2d 140 (Mo. Ct. App. 1994) (no coverage where 

employee of tenant fell in parking lot of landlord’s commercial building). 

Id. at 104. This Court held that it agreed “with these cases that more than an incidental 

connection with the leased premises is required to obtain coverage under an additional 

insured endorsement.” We went on to state that “[o]ne of the primary functions of an 

additional insured endorsement in the landlord-tenant context is to protect the landlord 

from vicarious liability for acts of its tenant on the leased premises,” and that “[t]he 

additional insured endorsements in these settings are meant to provide specialized 

protection rather than all-encompassing coverage.” Id. We found the Northbrook Ins. 

Co. case to be “particularly instructive,” and discussed the case as follows:

[W]hile loading a truck, an employee of the lessee bakery slipped and fell 

on ice in the alley behind the shopping center in which the bakery was 

located. The employee subsequently sued the landlord, Fine Properties, 

alleging failure to maintain the alleyway. Like in the instant case, the 

landlord was an additional insured on the lessee’s general liability 

insurance policy with respect to liability arising out of the ownership, 
21

maintenance, or use of the leased premises. Concluding that the policy did 

not provide coverage for the landlord, the court explained:

The question whether coverage is afforded for a particular 

claim depends on whether liability arises out of a hazard 

associated with the named insured’s business. Fine Properties 

is entitled to coverage only if the claimed liability is based on 

a hazard associated with the bakery’s business.

The American States policy described the premises 

insured as the 3,200 square feet the bakery occupied in the 

Texa-Tonka Shopping Center. The premium charged was 

based on insuring the bakery, not the common areas of the 

shopping center. The additional insured endorsement under 

which Fine Properties was added as an insured specified it 

provided coverage, only with respect to liability arising out of 

the ownership, maintenance or use of the insured premises, 

i.e., the bakery. By its terms, the endorsement provides 

coverage for Fine Properties’ negligence in the bakery. 

Coverage is not provided for the rest of the Texa-Tonka 

Shopping Center.

The lease agreement between Fine Properties and the 

bakery required Fine Properties to maintain the alley. Failure 

to maintain the alley is a claim unrelated to the business of 

the bakery, and the American States policy therefore does not 

cover such a claim against Fine Properties.

Id. at 104-105 (quoting Northbrook Ins. Co., 495 N.W.2d at 453). 

This Court held that Michigan Mutual did not owe a duty to defend or indemnify 

Duke. Id. at 105. We observed that as in Northbrook Ins. Co., Swann’s fall occurred “in 

a common area outside of the leased premises and under Duke’s control.” We further 

noted that “there was no physical connection between the accident and the leased 

premises or Trilithic’s business operations thereon,” and that “[t]here is no allegation that 

the ice and snow on which Swann slipped originated on the leased premises, was caused 

by the leased premises, was connected to work done on the leased premises, or had any 
22

other significant connection with the leased premises,” which we found to be similar to

the Hilton Hotels case. Id. (citing Hilton Hotels, 629 So.2d at 1065 (“accident was not a 

result of any physical condition which emanated from the premises, such as flowing 

liquid, an escaped animal, or a runaway vehicle”)). We deemed the fact that Swann was 

on her way to work when she fell as an “‘isolated connection’ insufficient to bring the 

accident within the coverage of the policy under the additional insured endorsement.” Id.

(quoting Hilton Hotels, 629 So.2d at 1065).

More recently, this Court again addressed additional insured endorsements in 

Peabody Energy Corp. v. Roark, 973 N.E.2d 636 (Ind. Ct. App. 2012), aff’d on reh’g, 

978 N.E.2d 503 (Ind. Ct. App. 2012), trans. denied. In Peabody, an employee of 

Beelman, who provided trucking services to Peabody Energy Corporation (“Peabody”),

the owner of a site where mining operations were conducted, was injured when the 

“ground gave away” while he was standing near his truck to deliver a load of ash from a 

power plant to the mine. 973 N.E.2d at 637-638. Peabody was listed as an additional 

insured on Beelman’s commercial general liability insurance policy provided by North 

American Capacity Insurance Company (“NAC”) pursuant to their Master Performance 

Agreement (“MPA”), in which the endorsement stated as follows: “WHO IS AN 

INSURED (Section II) is amended to include as an insured the person or organization 

shown in the Schedule as an insured but only with respect to liability arising out of your 

operations or premises owned by or rented to you.” Id. at 638 (emphasis omitted). 

Roark, the employee, filed a complaint against Peabody alleging negligence, Peabody 

demanded coverage from NAC, and NAC rejected Peabody’s demand, concluding that 
23

“Roark’s claim did not arise ‘from Beelman’s work’ . . . .” Id. at 639. Peabody filed a 

third-party complaint requesting indemnification from Beelman and seeking a declaratory 

judgment regarding NAC’s duty to defend, and Peabody subsequently filed a motion for 

partial summary judgment against NAC. Id. NAC and Beelman both filed motions for 

summary judgment against Peabody, and following a hearing the court entered final 

judgment in favor of Beelman and NAC and against Peabody. Id.

On appeal, this Court discussed Liberty Mut. and noted that there we applied a 

narrow interpretation of the “arise out” language of the additional insured endorsement. 

Id. at 640-641. The Peabody court summarized the holding of Liberty Mut. as follows:

[W]e considered that the accident occurred in a common area outside of the 

leased premises and under Duke’s control, that there was no physical 

connection between the accident and the leased premises or Trilithic’s 

business operations thereon, and that there was no allegation that the ice 

and snow on which Swann slipped was caused by the leased premises, was 

connected to work done on the leased premises, or had any other significant 

connection with the leased premises. We observed that the accident arose 

out of Duke’s own failure to maintain the pathway from the parking lot to 

the employee entrance and that “[t]he only way Swann’s fall was even 

remotely related to the leased premises was due to the fact Swann was on 

her way to work.” We deemed this “isolated connection” to be insufficient 

to bring the accident within the coverage of the policy under the additional 

insured endorsement and held that Michigan Mutual had no duty to defend 

or indemnify Duke.

Id. at 641. In a footnote, the Peabody court observed that in rejecting a “broad 

interpretation” of the provision and requiring “that more than an incidental connection 

with the leased premises is required to obtain coverage under an additional insured 

endorsement,” id. at 641 (quoting Liberty Mut., 891 N.E.2d at 104), the Liberty Mut.

court did not reference the Elkins case (also referenced by the Appellants in their brief) 
24

which observed in the year 2000 that although it could not locate Indiana case law 

discussing “‘additional insured’ provisions . . . the majority of courts to have considered 

the issue construe such provisions . . . broadly, encompassing coverage to extend to 

liability beyond merely the additional insured’s vicarious liability for the actions of the 

named insured.” Id. at 641 n.3 (quoting Elkins, 2000 WL 724006 at *2). This Court

went on to state that “[e]ven if” it agreed with Liberty Mut. that the additional insured 

endorsement should be interpreted narrowly rather than broadly, the facts and language 

of the endorsements in the two cases were distinguishable. Id. at 641.

The Peabody Court first noted that, under the applicable endorsement language,

“[a]t issue here is whether the liability arises ‘out of [Beelman’s] operations,’ not whether 

the liability arises out of ‘ownership, maintenance or use of’ a leased premises,” and that

“although Liberty Mutual’s focus on the ‘connection with the leased premises’ may be 

appropriate in the landlord-tenant context, [it] is of limited application here.” Id. (quoting 

Liberty Mut., 891 N.E.2d at 104). The Court stated that “NAC’s suggestion that 

Peabody’s potential liability arises out of Peabody’s own alleged negligence in 

maintaining its own property misses the mark because it does not resolve the question of 

whether Peabody’s potential liability arises out of Beelman’s operations.” Id. at 642. 

The Court further observed that Liberty Mut. was also factually distinguishable in that 

“Roark was not on Peabody’s property as a means to an end—to get to work—as 

[Swann] was. Instead, Roark was at Peabody’s mine as part of his employment as a truck 

driver for Beelman.” Id. The Court held that “[r]egardless of whether Roark was injured 

because of Peabody’s sole negligence, the designated evidence shows that Roark’s 
25

injuries—the basis of Peabody’s potential liability—arose out of Beelman’s operations,”

that further, “[u]nlike in Liberty Mutual, the connection between Roark’s presence at the

mine and his injuries was not ‘incidental’ or ‘isolated;’ instead, Roark’s injuries were 

directly related to his work as a truck driver for Beelman,” and that accordingly Peabody 

was an additional insured under the policy for the purposes of Roark’s complaint. Id.

Based on this Court’s previous statements in Peabody and Liberty Mut., we find 

Rangeline to be an additional insured under Erie’s Policy in the Underlying Litigation. 

As noted above, the A/I Endorsement contains language identical to the language of the 

endorsement in Liberty Mut. and states that: “WHO IS AN INSURED (Section II) is 

amended to include as an insured the person or organization shown in the Schedule but 

only with respect to liability arising out of the ownership, maintenance or use of that part 

of the premises leased to you and shown in the Schedule . . . .” Appellants’ Appendix at 

123. Unlike in Liberty Mut., however, the failure of the sprinkler system, which caused 

the damage to the Knauf insulation, occurred within the warehouse. Also, the placement 

of the insulation within the warehouse for storage was precisely the business of 

Hammons, the tenant who was the named insured on the Policy. Thus, there is a 

significant, rather than isolated, connection between the accident and the leased premises.

Also, just as it was undisputed in Peabody that Roark’s injuries arose out of 

Beelman’s operations under the applicable additional insured endorsement, here it is 

undisputed that the damage to Knauf’s insulation arose out of Hammons’ use of the 

warehouse, which is within the scope of the A/I Endorsement. And just as Beelman’s 

argument regarding negligence on the part of Peabody “miss[ed] the mark” because it did 
26

not resolve the question of whether Peabody’s potential liability arose out of Beelman’s 

operations, Erie’s argument similarly fails because it does not address whether 

Rangeline’s potential liability arose out of Hammons’s “ownership, maintenance or use 

of that part of the premises leased . . . .” To the extent Erie suggests that the sprinkler 

system is not “part of the premises leased,” we decline its suggestion to construe the 

provision so narrowly as to find that the sprinkler system was not part of the leased 

premises.6

B. Care, Custody, or Control Exclusion

As noted in the facts section, the Policy contained the following exclusion (the 

“Care Exclusion”):

 

6 We note that the dissent would find that although “there is a significant connection between the 

accident and the leased premises . . . there is no connection between the accident and Hammons” because 

“Rangeline retained control over and responsibility for the sprinkler system . . . .” Slip op. at 38. We 

believe such a rule to be too narrowly focused, even by the standard set forth in Liberty Mut. Again, in 

that case this Court found “particularly instructive” the Northbrook Ins. Co. case, which framed the issue 

as “whether coverage is afforded for a particular claim depends on whether liability arises out of a hazard

associated with the named insured’s business.” 891 N.E.2d at 104-105 (quoting Northbrook Ins. Co., 495 

N.W.2d at 453) (emphasis added). Hammons’ business was storing Knauf’s insulation. It is a hazard of 

storing goods in a warehouse facility that such warehoused goods might become damaged by water, fire, 

pests, etc. Further, we disagree with the dissent’s focus on a connection (or lack thereof) between the 

accident and the conduct of Hammons and note that the rule of Liberty Mut. focused on the accident’s 

connection to the leased premises when this Court specifically stated that there was no duty to defend or 

indemnify Duke on the part of Michigan Mutual because “there was no physical connection between the 

accident and the leased premises or Trilithic’s business operations thereon” and observed that there was 

“no allegation that the ice and snow on which Swann slipped originated on the leased premises, was

caused by the leased premises, was connected to work done on the leased premises, or had any other 

significant connection with the leased premises.” Id. at 105 (emphasis added). By the language of the 

A/I Endorsement, which provides specifically that “WHO IS AN INSURED (Section II) is amended to 

include as an insured the person or organization shown in the Schedule but only with respect to liability 

arising out of the ownership, maintenance or use of that part of the premises leased to you and shown in 

the Schedule,” the focus of the inquiry is on the accident’s connection to the leased premises. Appellants’ 

Appendix at 123 (emphases added). 

Finally, as noted above we reject the notion that the sprinkler system was not a part of the 

premises leased by Hammons. Hammons leased the warehouse, which made up the leased premises, and 

we see no basis for the assertion that the sprinkler system, located within such leased premises, was 

excluded from the scope of the A/I Endorsement.
27

This insurance does not apply to: . . .

j. Damage To Property

“Property damage” to: . . .

4) Personal property in the care, custody or control of 

the insured; . . .

Id. at 108, 110-111.

The Appellants argue that the plain language of the Care Exclusion does not apply 

because Erie concedes that Hammons had custody of the damaged personal property, the 

insulation. The Appellants assert that Erie made a two-pronged argument to the trial 

court that the exclusion applied – first, that Rangeline had a non-delegable duty to 

maintain the sprinkler system so the instrumentality causing the loss was within 

Rangeline’s control, and second, that Rangeline exercised dual control over the insulation 

“so the exclusion still applied in spite of Hammon’s [sic] custody of the insulation.” 

Appellants’ Brief at 20. The Appellants argue regarding Rangeline’s alleged duty to 

maintain the sprinkler system that the Care Exclusion “says nothing about excluding 

coverage for personal property that is not within a party’s control but which is damaged 

by a fixture . . . in the building that is within a party’s control.” Id. at 21. The Appellants 

contend that Erie conceded that Hammons had custody of the insulation, that the 

separation of insureds provision noted in the facts section above applies in which “Erie 

must apply th[e Care Exclusion] as if Rangeline were the only insured,” and “there is no 

question that Rangeline did not have custody of the insulation.” Id. To the extent Erie 

asserted below that Rangeline maintained dual control over the insulation, the Appellants 
28

argue that the out-of-state cases relied upon by Erie are factually distinguishable and their 

rationale should not be applied under the present facts. The Appellants maintain that they 

have not found “any Indiana decision which has applied a concept of dual control when 

interpreting a ‘care, custody’ insurance exclusion” and that this Court should apply the 

rule in Am. Fam. Mut. Ins. Co. v. Bentley, 170 Ind. App. 321, 352 N.E.2d 860 (1976), 

which held under similar facts that certain equipment contained in a building “was not 

within the building owner’s custody.” Id. at 25.

Erie “does not dispute that . . . Hammons exercised care, custody and/or control 

over the Knauf insulation,” but “it is undisputed that [] Rangeline also exercised ‘control’ 

over the Knauf insulation as that term is defined” recently by the Indiana Supreme Court 

in Holiday Hospitality Franchising. Appellee’s Brief at 20. Specifically, Erie argues that 

Rangeline had a non-delegable duty to maintain the sprinkler system, that Rangeline 

controlled the sprinkler system, that the failure of the sprinkler system was the proximate 

cause of the loss, and that “[t]hus, Hammons and [] Rangeline exercised joint ‘control’ or 

‘power of influence’ over the Knauf insulation . . . .” Id. at 21. Erie also acknowledges 

that the Appellants’ argument regarding the separation of insureds provision in the Policy 

applies for the purpose of the Care Exclusion.

Also, Allianz, who is Knauf’s insurer and who filed an appellee’s brief as an 

interested party, argues that “Erie’s arguments fail because case law clearly establishes 

that the party in possession of stored personal property is the party with the care, custody, 

and control, not the owner of the storage building.” Allianz’s Brief at 4. Allianz argues 

that the “argument that warehouse maintenance amounted to care, custody, and control of 
29

the stored property . . . ‘confuse[s] responsibility for the premises with responsibility for 

property stored on the premises,’” and that “[o]nly a bailee, not a lessor, assumes this . . . 

responsibility.” Id. at 5 (quoting Marine Indem. Ins. Co. of Am. v. Lockwood 

Warehouse & Storage, 115 F.3d 282, 288 (5th Cir. 1997), reh’g denied, cert. denied, 522 

U.S. 967, 118 S. Ct. 414 (1997)). Allianz argues that both Lockwood and Bentley

“demonstrate that there is no joint control of stored property between a party that merely 

maintains a warehouse and the party that possesses the stored property.” Id. at 6. Allianz 

also maintains that the cases cited by Erie below and on appeal are distinguishable and 

unpersuasive.

We turn first to Bentley, in which this Court affirmed the trial court in a 

declaratory judgment action ruling in favor of defendant owner Bentley. 170 Ind. App. at 

323, 352 N.E.2d at 861. In Bentley, a Boy Scout Troop rented a portion of a “storage 

place and garage” located on Bentley’s property “for storage of a trailer, three aluminum 

canoes and other camping equipment.” Id. at 323, 352 N.E.2d at 861. Bentley informed 

the Troop that his insurance policy with American Family Mutual Insurance Company 

(“American”) would not cover the Troop’s property, and the Troop purchased insurance 

with the Indiana Insurance Company (“Indiana Insurance”). Id. at 323, 352 N.E.2d at 

861. Bentley received compensation for the use of the building. Id. at 323, 352 N.E.2d 

at 861. On June 10, 1970, the building was completely destroyed in a fire along with its 

contents, and, after paying for the Troop’s loss, Indiana Insurance demanded 

reimbursement from Bentley. Id. at 323, 352 N.E.2d at 862. Bentley notified American, 

and American informed Bentley that the property in question was not covered by the 
30

policy in part pursuant to the following exclusion: “This section does not apply: Under 

any of the coverages, . . . j. to property damage to property used by, rented to or in the 

care, custody or control of any insured or property as to which the insured for any 

purpose is exercising physical control, . . .” Id. at 324, 352 N.E.2d at 862. American 

sought a declaratory judgment against Bentley and Indiana Insurance “praying that the 

rights of American and Bentley under an insurance policy sold Bentley by American be 

fixed, determined and declared.” Id. at 323, 352 N.E.2d at 861. The trial court ruled in 

part “[t]hat the property of [the Troop] was not in the care, custody or control of 

defendant Bentley, nor did [Bentley] exercise physical control over said property,” and 

“[t]hat [American’s] insurance policy does provide property damage coverage to the 

defendant Bentley, and [American] is obligated by the terms of its policy to defend him 

in the pending lawsuit filed by the defendant, Indiana Insurance Company . . . .” Id. at 

327, 352 N.E.2d at 864.

On appeal, this Court addressed the question of whether the trial court erred in 

ruling that the Troop’s property “was not in the care, custody or control of Bentley and 

Bentley did not exercise physical control over said property.” Id. at 325, 352 N.E.2d at 

862. American argued that the exclusion cited above “excludes from coverage any third 

party property over which an insured has control, and further contend[ed] that the facts 

adduced in evidence were that the insured did have physical control of the property of” 

the Troop. Id. at 327, 352 N.E.2d at 864. Bentley argued that the exclusion did not apply 

because he had no control over the Troop’s property “and specifically permitted them 

access to their property at all times.” Id. at 327, 352 N.E.2d at 864. The Court agreed 
31

with the trial court’s finding that Bentley did not have care, custody, or control of the 

property and held that the exclusion did not apply. Id. at 328-329, 352 N.E.2d at 864-

865.

Additionally, we find the Lockwood case cited by Allianz instructive. In 

Lockwood, a fire destroyed a warehouse owned by Grand Lockwood Partners Limited 

Partnership and managed and leased by Lockwood Warehouse & Storage (“Lockwood”). 

115 F.3d at 284. Lockwood maintained insurance coverage with Insurance Company of 

America (“Marine Indemnity”) for certain property inside the warehouse, and numerous 

owners of property stored inside the warehouse made claims against Marine Indemnity 

for the value of their damaged property. Id. Marine Indemnity initiated an interpleader 

action to resolve conflicting claims for the insurance proceeds, and the district court 

determined the amount of insurance available to be $1,275,610 plus accrued interest. Id. 

The court ordered Marine Indemnity to pay that amount to the court’s registry, and a 

magistrate judge was appointed as special master to “recommend findings of facts and 

conclusions of law on the issues of insurable interests, calculation of damages, and 

priority of claims.” Id.

On appeal, two of the intervenor-defendants, Enterplast, Inc. (“Enterplast”) and H. 

Muehlstein & Company (“Muehlstein”), objected to the district court’s order denying 

them recovery from the interpleaded funds and sought review of the court’s interpretation 

of the Marine Indemnity insurance policy. Id. at 284-285. Lockwood had subleased 

space in the warehouse to Ultra Warehouse (“Ultra”) and Lance Cowan, doing business 

as Shippers International (“Shippers”), who each stored, respectively, the property of 
32

Muehlstein and Enterplast. Id. at 285. The district court found “given Enterplast’s and 

Muehlstein’s bailment relationship with sublessees of Lockwood, the Marine Indemnity 

policy provisions governing covered property barred the two entities from recovery.” Id.

The court observed the following:

The Marine Indemnity policy provided coverage of the following 

property:

(A) Personal Property of the Insured pertaining to the conduct 

of the Insured’s business.

(B) Personal Property of others which is directly connected 

with the Insured’s business while in the care, custody or 

control of the Insured, and for which the Insured is 

responsible, or for which the Insured has agreed in writing 

prior to loss to insure.

(C) Real Property of the Insured.

(D) To the extent of the Insured’s business interests only, 

improvements and betterments to buildings occupied, but not 

owned by the Insured.

The special master determined that the policy had three coverage 

requirements with respect to the property belonging to those other than 

Lockwood that was stored in the warehouse. First, the property must have 

been “directly connected” with Lockwood’s business. Second, the property 

must have been in the “care, custody, or control” of Lockwood. Third, 

Lockwood must either have been “responsible” for the property or have had 

agreed in writing, prior to the fire, to insure the property. In construing the 

first requirement, the special master determined that the policy covered the 

property of those who stored property directly with Lockwood, but did not 

cover the property of those, including Enterplast and Muehlstein, who 

stored property with a sublessee of Lockwood. Because Enterplast and 

Muehlstein did not enter into an agreement with Lockwood for the storage 

of property, the court adjudged that neither entity could establish that it had 

a direct relationship or involvement with Lockwood, and thus also 

concluded that their property could not be found to have been “directly 

connected” with Lockwood’s business.
33

Id. The special master also found under the third requirement that Enterplast and 

Muehlstein were barred from recovery in that they failed to establish that Lockwood was 

“responsible” for their property. Id. at 285-286. The special master further found that 

Ultra’s and Shippers’ leases with Lockwood “exonerated Lockwood and its insurers from 

any damage claims for Ultra’s and Shippers’ property,” and that “based on these waiver 

of liability provisions, Lockwood was not responsible for the goods of Ultra and Shippers 

or the goods of their bailees, including Muehlstein and Enterplast.” Id. at 286.

Muehlstein and Enterplast argued that Lockwood was responsible for their 

property under its insurance policy because Lockwood “maintained control over the 

warehouse: that is, by directing and performing warehouse maintenance, repairs, security, 

housekeeping, and fire protection, among other things, Lockwood thereby assumed 

obligations and duties with regard to all property in the warehouse,” and that Lockwood’s

“negligent performance of these duties . . . rendered it, as landlord, liable, and hence 

responsible, for the destruction to their property.” Id. at 287-288. The Fifth Circuit 

Court agreed with the district court that Lockwood was not responsible under the 

insurance policy, specifically the district court’s findings that “the sublease agreement 

between Ultra and Lockwood, and also that between Shippers and Lockwood, established 

a lessor-lessee relationship. Consequently, the court found that . . . Lockwood was not 

responsible for the property of Ultra or Shippers, or the property of their bailors, 

Muehlstein and Enterplast.” Id. at 286, 288. The court, applying Texas law regarding 

landlord-tenant and bailment relationships, noted that 
34

responsibility for goods is dependent on the existence of a bailor-bailee 

relationship. A bailee, in contrast to a lessor, assumes a duty of care with 

regard to both the premises and the goods in its possession. As a lessor, 

Lockwood had a duty to exercise care respecting the portions of the 

warehouse it controlled, but did not have a general duty to exercise care as 

to the sublessees’ property stored on the premises or care with relation to

the property of the sublessees’ bailors. Thus, as lessor, Lockwood was not 

responsible for the property of the Muehlstein and Enterplast.

Id. (footnote omitted).7

Here, we first note that Indiana law regarding landlord-tenant and bailment 

relationships are sufficiently similar to the provisions of Texas law cited by the court in 

Lockwood, and we accordingly find Lockwood to be persuasive authority in determining 

whether Rangeline controlled the Knauf insulation. See Pitman v. Pitman, 717 N.E.2d 

627, 631 (Ind. Ct. App. 1999) (noting that “[a] bailment is an agreement, either express or 

implied, that one person will entrust personal property to another for a specific purpose 

and that when the purpose is accomplished the bailee will return the property to the 

bailor” and that “[t]he standard of care required of a bailee is determined by the benefit 

each party derives from the bailment”); see also Houin v. Burger by Burger, 590 N.E.2d

593, 597 (Ind. Ct. App. 1992) (noting that “[i]n the absence of statute, covenant, fraud or 

concealment, a landlord who gives a tenant full control and possession of leased property 

 

7 The Court summarized the relevant Texas law as follows:

Under Texas law, a bailment is a delivery of goods to another which creates a duty of 

trust on the part of the bailee to return the deposited goods as directed. A bailee has the 

duty to exercise ordinary care over the goods and is therefore “responsible” for the 

bailor’s goods. In contrast, a lease is “a transfer of interest in and possession of property 

for a prescribed period of time in exchange for an agreed consideration called ‘rent.’”

The lessor has the duty of ordinary care in maintaining the premises it controls, but does 

not have a duty to exercise care regarding the lessee’s property stored on the premises. 

The lessor is therefore not “responsible” for the property of the lessee.

Lockwood, 115 F.3d at 286 (internal citations omitted).
35

will not be liable for personal injuries sustained by the tenant and other persons lawfully 

upon the leased property”).

This court specifically ruled in Bentley that an exclusion similar to the instant 

Care Exclusion did not apply to circumstances in which the building owner had no 

physical control over the destroyed property. Also, as in Lockwood, we find that simply 

because Rangeline allegedly had a duty to maintain certain aspects of the premises

including the sprinkler system, this duty does not include a duty of care with respect to 

the property stored on the premises which was governed by the contract for storage 

between Hammons and Knauf. Indeed, to the extent that Erie cites Holiday Hospitality 

Franchising for the proposition that Rangeline exercised “control” over the insulation, we 

observe that that the Indiana Supreme Court in that case, citing to Webster’s Dictionary, 

defined control as “[t]o exercise authority or influence over” or “[t]o hold in restraint,” 

983 N.E.2d at 579 (quoting WEBSTER’S II NEW COLLEGE DICTIONARY 246 (1995)), and 

further noted the Black’s Law Dictionary definition as “[t]o exercise power or influence 

over.” Id. (quoting BLACK’S LAW DICTIONARY 378 (9th ed. 2009)). Our review of the 

facts and relevant case law does not reveal that Rangeline exercised influence over the 

insulation located in the warehouse leased by Hammons. It was Hammons, and not 

Rangeline, who entered into a contractual relationship with Knauf and who was a bailee 

in favor of Knauf and assumed such a duty of care. We therefore conclude that 
36

Rangeline did not exercise “joint control” over the Knauf insulation, and that accordingly 

the Care Exclusion does not preclude coverage in favor of Rangeline.

8

 

CONCLUSION

For the foregoing reasons, we reverse the trial court’s grant of summary judgment 

in favor of Erie and denial of the Appellants’ motion for partial summary judgment, and 

we remand for further proceedings consistent with this opinion.

Reversed and remanded.

BARNES, J., concurs.

ROBB, J., dissents with opinion.

 

8 We observe that the cases cited by Erie are distinguishable from the facts present here. First, in 

Cashmere Pioneer Growers, Inc. v. Uniguard Sec. Co., 891 P.2d 732 (Wash Ct. App. 1995), rev. denied, 

Cashmere Pioneer Growers, Inc. (“Cashmere”), the storage facility at issue, was running a “controlled 

atmosphere” storage business in which their facility froze the stored produce. 891 P.2d at 733. Thus, the 

relationship between Cashmere and Taplett Fruit Picking, Inc. is properly understood to be one of 

bailment rather than a lessor-lessee relationship. Second, in Liberty Mut. Ins. Co. v. Zurich Ins. Co., 930 

N.E.2d 573 (Ill. App. Ct. 2010), Liberty Mutual insured a hotel in which certain guest property was stolen 

from a wall safe located in their hotel room. 930 N.E.2d at 575. The parties asked the court to construe a 

“care, custody or control” exclusion similar to the Care Exclusion in this case, and the court ruled that the 

property was excluded. Id. at 578. In doing so, the court reasoned that “[a]s an innkeeper, [the hotel] had 

a duty to safeguard the property of its guests,” that “[t]he innkeeper has duties similar to those involved in 

a bailment with respect to property brought onto the innkeeper’s premises,” and that “the innkeeper has 

custody of the property of its guests, and, in the course of its work, it assumes a duty to protect that 

property.” Id. at 577. Finally, Stewart Warner Corp. v. Burns Int’l Sec. Servs., Inc., 527 F.2d 1025 (7th

Cir. 1975), involved a security company hiring a watchman to guard a warehouse, and the watchman 

intentionally set fire to the warehouse causing damage to certain stored goods. 527 F.2d at 1027. The 

owner of the goods sought recovery from the security company’s insurer in which the policy contained a 

care, custody, and control exclusion. Id. The court held that “the core of [the security company’s] 

workmanship is to provide a trustworthy and capable watchman to care for the premises and their 

contents. If the ‘care, custody or control’ exclusion does not apply to such contents, the general liability 

insurer would bear the burden of guaranteeing such workmanship.” Id. at 1030.
37

IN THE

COURT OF APPEALS OF INDIANA

SELECTIVE INSURANCE COMPANY )

OF SOUTH CAROLINA and )

500 RANGELINE ROAD, LLC, )

)

Appellants-Defendants, )

 )

 vs. ) No. 73A01-1307-PL-311

)

ERIE INSURANCE EXCHANGE, )

)

Appellee-Plaintiff, )

____________________________________)

)

WELCH & WILSON PROPERTIES, LLC )

d/b/a HAMMONS STORAGE, ALLIANZ )

GLOBAL RISKS U.S. INSURANCE )

COMPANY, )

)

Appellees-Defendants. )

ROBB, Judge, dissenting

Because I agree with the trial court that the A/I Endorsement of the Policy does 

not provide coverage for Rangeline in the Underlying Litigation, I respectfully dissent 

from the majority’s decision reversing the trial court. 

Rangeline is an additional insured under the Policy “only with respect to liability 

arising out of the ownership, maintenance or use of that part of the premises leased to 

[Hammons] . . . .” Slip op. at 7. As noted in Liberty Mut. Ins. Co. v. Michigan Mut. Ins. 

Co., 891 N.E.2d 99, 104 (Ind. Ct. App. 2008), which construed an identical provision, 

additional insured endorsements in this context are “meant to provide specialized 
38

protection rather than all-encompassing coverage.” The Policy, entered into between 

Erie and Hammons, does not provide blanket coverage for Rangeline. “One of the 

primary functions of an additional insured endorsement in the landlord-tenant context is 

to protect the landlord from vicarious liability for acts of its tenant on the leased 

premises.” Id. I agree with the majority that there is a significant connection between the 

accident and the leased premises. See slip op. at 26. However, because there is no

connection between the accident and Hammons, extending coverage to Rangeline in this 

circumstance would not serve the purpose of such coverage. As the trial court found, 

Rangeline retained control over and responsibility for the sprinkler system; Hammons 

had no duty with respect to the system. Under these circumstances, there could be no 

expectation that the tenant’s insurance would cover the landlord who had the sole 

responsibility for the instrument of the damage. 

As the majority notes in footnote 6, the sprinkler system was physically a part of 

the premises leased to Hammons. Whether Rangeline maintained responsibility for its 

care and maintenance by the terms of the lease or simply by its actions, Hammons had 

nothing to do with system. I therefore do not believe the inquiry can or should be 

singularly focused on the connection between the accident and the leased premises 

themselves. That the A/I Endorsement includes the arising out of the “ownership, 

maintenance or use” language suggests to me that a consideration of which entity is 

responsible for the failure on the leased premises causing or contributing to the loss is 

reasonable and appropriate. Rangeline’s potential liability for a failure of the sprinkler 

system did not arise out of Hammons’s maintenance or use of the premises; it arose out 
39

of its own failures. It did not maintain the sprinkler system; it told Hammons it was 

going to drain the sprinkler system but then did not do so; it did not apprise Hammons 

that the sprinkler system had not been drained; and it did not tell Hammons that because 

the sprinkler system had not been drained, the warehouse temperature needed to be 

maintained above a certain degree. Not only did Hammons have no responsibility with 

regard to the sprinkler system; it had no knowledge regarding it. There is no vicarious 

liability here; Rangeline’s liability is its own. 

Accordingly, I would affirm the trial court’s grant of partial summary judgment to 

Erie and denial of partial summary judgment to Rangeline on this issue.9

 

9

 Because I would hold the Policy does not cover Rangeline as an additional insured under the 

circumstances presented, I would not reach the issue of whether the Care Exclusion applies, and I do not 

address that portion of the majority opinion.