Court Opinion

ID: 9947345
Source: CourtListenerOpinion
Date Created: 2024-03-04 17:04:28.015377+00
Date Added: 2024-06-11T14:26:21.949523
License: Public Domain

IN THE

            Court of Appeals of Indiana
                     Doug Williams and W.W. Contracting, Inc.,              FILED
                                        Appellants-Petitioners         Mar 04 2024, 8:30 am

                                                                            CLERK
                                                                        Indiana Supreme Court
                                                                           Court of Appeals
                                                    v.                       and Tax Court

                                     Pekin Insurance, Inc.,
                                         Appellee-Respondent

                                            March 4, 2024
                                    Court of Appeals Case No.
                                           23A-PL-995
                          Appeal from the Tippecanoe Superior Court
                             The Honorable Steven P. Meyer, Judge
                                       Trial Court Cause No.
                                        79D02-2107-PL-77

                             Opinion by Judge Weissmann
                    Chief Judge Altice and Judge Kenworthy concur.

Court of Appeals of Indiana | Opinion 23A-PL-995 | March 4, 2024      Page 1 of 8
      Weissmann, Judge.

[1]   W.W. Contracting, Inc. and its owner, Doug Williams (collectively, W.W.),

      entrusted tools to a W.W. employee but demanded their return at the end of his

      employment. When the now-former employee allegedly failed to return all the

      tools, W.W. reported them as stolen and sought insurance coverage for the

      alleged theft. W.W.’s insurance company denied the claim primarily because

      W.W.’s insurance policy excluded coverage for property loss “caused by or

      resulting from dishonest acts by anyone entrusted with the property.”

[2]   W.W. sued its insurance company for breach of contract, but the trial court

      granted summary judgment in the insurer’s favor. On appeal, W.W. claims

      there remains a genuine issue of material fact as to whether a dishonest act

      occurred because the insurer was unable to determine if W.W.’s former

      employee actually stole its tools. Assuming a dishonest act occurred, W.W. also

      claims its former employee was no longer a person entrusted with the tools after

      W.W. demanded their return. We resolve these issues as follows:

          1. The insurance company was not required to prove the occurrence of a
             dishonest act when moving for summary judgment based on the subject
             exclusion because W.W. alleged a dishonest act as its basis for coverage.

          2. The exclusion requires only a causal connection between the act of
             entrustment and the resulting loss; thus W.W.’s demand that its former
             employee return its tools did not render the exclusion inapplicable.

      Affirmed.

      Court of Appeals of Indiana | Opinion 23A-PL-995 | March 4, 2024         Page 2 of 8
      Facts
[3]   W.W. employed Dante Wells from December 2017 to January 2019. During

      this time, Wells allowed W.W. to store its company tools on a piece of real

      estate Wells owned in Tippecanoe County. In exchange, W.W. allowed Wells

      to use the tools for “side work” in his own name. App. Vol. II, p. 88.

[4]   In March 2019, after Wells stopped working for W.W., the company demanded

      that Wells return the tools stored on his property. When Wells refused, W.W.

      reported the tools as “stolen” to the Tippecanoe County Sheriff’s Department

      and sued Wells for replevin. Id. at 120. Wells eventually returned what he

      claimed were all of W.W.’s tools. But upon inventorying the returned items,

      W.W. determined that “a lot of tools” were missing. Id. at 92. W.W. therefore

      submitted an insurance claim to its insurance company, alleging Wells stole the

      missing tools.

[5]   At all relevant times, W.W. Contracting, Inc. was the named insured on a

      commercial general liability insurance policy (the Policy) issued by Pekin

      Insurance (the Insurer). Among other things, the Policy provided coverage for

      “accidental loss” to W.W.’s tools. Id. at 236. The Policy, however, also

      contained the following exclusions:

              Dishonest Act/Entrusted Person

              “We will not pay for a ‘loss’ caused by or resulting from
              dishonest acts by anyone entrusted with the property.”

      Court of Appeals of Indiana | Opinion 23A-PL-995 | March 4, 2024           Page 3 of 8
              Unexplained Disappearance

              “We will not pay for a ‘loss’ caused by or resulting from
              unexplained disappearance.”

      Id. at 235 (cleaned up).

[6]   The Insurer investigated W.W.’s insurance claim, in part, by interviewing

      Williams and Wells about the loss. Wells denied having W.W.’s missing tools,

      but Williams insisted that Wells never returned them. Williams therefore

      assumed the tools were still in Wells’s possession, but he did not “know that for

      a fact.” App. Vol. III, p. 233. If Wells no longer had the tools, Williams had

      “no idea what happened to them.” Id.

[7]   Through its investigation, the Insurer was not able to determine if Wells

      actually stole W.W.’s tools. But either way, the Insurer concluded W.W.’s loss

      was excluded from the Policy’s insurance coverage: either the dishonest

      act/entrusted person exclusion applied or the unexplained disappearance

      exclusion applied. The Insurer therefore denied W.W.’s insurance claim on

      these two alternative bases.

[8]   After receiving the denial, W.W. sued the Insurer for breach of contract

      claiming Wells’s alleged theft of the tools was an accidental loss for which the

      Policy provided coverage. The Insurer moved for summary judgment on

      W.W.’s claim based on the Policy’s dishonest act/entrusted person exclusion

      Court of Appeals of Indiana | Opinion 23A-PL-995 | March 4, 2024            Page 4 of 8
       and, alternatively, the unexplained disappearance exclusion. The trial court

       granted the Insurer’s motion, and W.W. appeals.1

       Discussion and Decision
[9]    “When reviewing a summary judgment ruling, we use the same standard as the

       trial court.” State Auto. Mut. Ins. Co. v. Flexdar, Inc., 964 N.E.2d 845, 848 (Ind.

       2012). “The court must accept as true those facts alleged by the nonmoving

       party and resolve all doubts against the moving party.” Auto-Owners Ins. Co. v.

       Harvey, 842 N.E.2d 1279, 1289 (Ind. 2006) (internal quotation omitted).

       Summary judgment is appropriate only if “the designated evidentiary matter

       shows that there is no genuine issue as to any material fact and that the moving

       party is entitled to a judgment as a matter of law.” Ind. Trial Rule 56(C).

[10]   W.W. argues that summary judgment based on the dishonest act/entrusted

       person exclusion was inappropriate because there is a genuine issue of material

       fact as to whether a dishonest act occurred. Alternatively, W.W. contends the

       dishonest act was not committed by an entrusted person as a matter of law. We

       conclude W.W.’s allegation that Wells stole its tools established the occurrence

       of a dishonest act for purposes of the Insurer’s motion for summary judgment.

       We also conclude that Wells was a person entrusted with W.W.’s tools as

       matter of law. Because the record reveals no genuine issue of material fact and

       1
         W.W.’s complaint asserted two claims: breach of contract and tortious bad faith. The Insurer moved for
       summary judgment on both, and the trial court’s order granting the Insurer’s motion specifically entered
       judgment in the Insurer’s favor on “all claims.” App. II, Vol. p. 14. On appeal, W.W. indicates that its
       tortious bad faith claim remains pending in the trial court. The record, however, shows otherwise.

       Court of Appeals of Indiana | Opinion 23A-PL-995 | March 4, 2024                                 Page 5 of 8
       that the Insurer was entitled to judgment as a matter of law, summary judgment

       was appropriate.2

       I. W.W.’s Theft Allegation Established the Dishonest Act
[11]   As W.W. correctly points out, insurance coverage exclusions are generally

       considered to be affirmative defenses upon which the insurer bears the burden

       of proof. PSI Energy, Inc. v. Home Ins. Co., 801 N.E.2d 705, 725 (Ind. Ct. App.

       2004). The insured, however, retains the burden of establishing that their loss

       falls within the policy’s coverage. Scottsdale Ins. Co. v. Harsco Corp., 199 N.E.3d

       1210, 1219 (Ind. Ct. App. 2022). In this regard, a coverage exclusion effectively

       admits the insured’s coverage allegations but asserts some additional matter

       barring relief. See Willis v. Westerfield, 839 N.E.2d 1179, 1185 (Ind. 2006).

[12]   Here, W.W. claimed its loss was covered by the Policy because it was caused

       by Wells’s alleged theft. See Appellants’ Reply Br., p. 5 (emphasizing that W.W.

       “never wavered” from its position that Wells stole its tools). The Insurer, in

       turn, claimed the Policy’s dishonest act/entrusted person exclusion barred

       coverage for W.W.’s loss. In raising this affirmative defense, the Insurer

       essentially accepted as true W.W.’s allegation of Wells’s undisputedly dishonest

       act. Thus, to prove the dishonest act/entrusted person exclusion barred

       2
         W.W. also argues that summary judgment based on the unexplained disappearance exclusion was
       inappropriate because there is a genuine issue of material fact as to whether the tools’ disappearance was
       unexplained. As we find the trial court appropriately entered summary judgment based on the dishonest
       act/entrusted person exclusion, we need not consider this alternative argument.

       Court of Appeals of Indiana | Opinion 23A-PL-995 | March 4, 2024                                   Page 6 of 8
       coverage of W.W.’s loss, the Insurer was only required to establish that Wells

       was a person entrusted with W.W.’s tools.3

       II. Wells Was a Person Entrusted with W.W.’s Tools
[13]   To “entrust” means “to commit to another with confidence.” Entrust, Merriam-

       Webster Online Dictionary, https://www.merriam-webster.com/dictionary/

       entrustment (last visited Feb. 20, 2024). W.W. does not dispute that it entrusted

       Wells with its tools by storing them on Wells’s property during his employment

       with the company. Instead, W.W. argues that its entrustment ended when

       W.W. demanded Wells return the tools after his employment with the

       company ended. Thus, W.W. seems to argue that the dishonest act/entrusted

       person exclusion applies only if the dishonest act occurs while the insured still

       has confidence in the entrusted person.

[14]   We reject such a narrow construction. In the absence of any ambiguity, the

       language of the Policy’s dishonest act/entrusted person exclusion “must be

       given its ordinary meaning.” Colonial Penn Ins. Co. v. Guzorek, 690 N.E.2d 664,

       667 (Ind. 1997). Nothing in the language of the exclusion requires that the

       dishonest act be contemporaneous with the insured’s confidence in the

       entrusted person. The exclusion applies broadly to loss “caused by or resulting

       from” an entrusted person’s dishonest act. App. Vol. II, p. 235. As other

       3
         This case presents the seemingly unique circumstance in which the insured’s cause of action and the
       insurer’s affirmative defense effectively have an element in common. Had W.W. claimed its loss was caused
       by something other than a dishonest act, the Insurer would have had the burden of proving both the
       dishonest act and entrusted person elements of its affirmative defense.

       Court of Appeals of Indiana | Opinion 23A-PL-995 | March 4, 2024                               Page 7 of 8
       jurisdictions have done, we construe this language to require nothing more than

       a “causal connection” between the act of entrustment and the resulting loss.

       2900 Rock Quarry, LLC v. Westfield Ins. Co., No. 5:16-CV-100-BO, 2017 WL

       2616961, at *6 (E.D.N.C. June 15, 2017) (collecting cases).

[15]   The intent of the dishonest act/entrusted person exclusion is to bar coverage for

       the insured’s “misplaced confidence” in another. Van Sumner, Inc. v. Penn. Nat.

       Mut. Cas. Ins. Co., 329 S.E.2d 701, 704 (N.C. Ct. App. 1985). By entrusting its

       tools to Wells, W.W. placed its confidence in Wells not to steal the tools. This

       misplaced confidence resulted in W.W.’s loss. The fact that W.W. no longer

       had confidence in Wells at the time of his alleged theft is irrelevant under the

       terms of the Policy.

[16]   We affirm the trial court’s entry of summary judgment in favor of the Insurer

       on W.W.’s breach of contract claim.

       Altice, C.J., and Kenworthy, J., concur.

       ATTORNEY FOR APPELLANT
       Steven Kyle Dietrich
       Reiling Teder & Schrier, LLC
       Lafayette, Indiana

       ATTORNEY FOR APPELLEE
       Scott S. Mandarich
       McClure McClure & Davis
       Indianapolis, Indiana

       Court of Appeals of Indiana | Opinion 23A-PL-995 | March 4, 2024          Page 8 of 8