Court Opinion

ID: 4095598
Source: CourtListenerOpinion
Date Created: 2016-11-04 16:06:24.611016+00
Date Added: 2024-06-11T14:09:13.646174
License: Public Domain

MEMORANDUM DECISION
                                                                      FILED
Pursuant to Ind. Appellate Rule 65(D),                            Nov 04 2016, 9:37 am
this Memorandum Decision shall not be
regarded as precedent or cited before any                             CLERK
                                                                  Indiana Supreme Court
                                                                     Court of Appeals
court except for the purpose of establishing                           and Tax Court

the defense of res judicata, collateral
estoppel, or the law of the case.

ATTORNEYS FOR APPELLANT                                  ATTORNEY FOR APPELLEE
Storrs W. Downey                                         Kevin W. Marshall
Jeffrey E. Kehl                                          Hobart, Indiana
Bryce Downey & Lenkov LLC
Chicago, Illinois

                                          IN THE
    COURT OF APPEALS OF INDIANA

Mt. Vernon Fire Insurance Co.,                           November 4, 2016
Appellant-Respondent                                     Court of Appeals Case No.
                                                         45A05-1607-PL-1696
        v.                                               Appeal from the Lake Superior
                                                         Court
Louis Jancetic,                                          The Honorable Calvin D.
Appellee-Movant                                          Hawkins, Judge
                                                         Trial Court Cause No.
                                                         45D02-1205-PL-12

Baker, Judge.

Court of Appeals of Indiana | Memorandum Decision 45A05-1607-PL-12 | November 4, 2016     Page 1 of 7
[1]   Mount Vernon Fire Insurance Company (Mount Vernon) appeals the judgment

      of the trial court, which, in a proceeding supplemental, found that an insurance

      policy issued by Mount Vernon covered a judgment against its insured, Source

      One Partners, LLC (Source One). Finding that the insurance policy clearly and

      unambiguously excluded intentional misrepresentations from coverage, we

      reverse and remand with instructions to enter summary judgment in Mount

      Vernon’s favor.

                                                    Facts
[2]   In October 2011, Debra Hadu sold a property—through Source One, her real

      estate agent—in Crown Point to Louis Jancetic. As part of the transaction,

      Hadu filled out a disclosure form. On February 28, 2012, Jancetic filed a

      complaint, alleging that Source One and Hadu knew that there was a mold

      problem stemming from a water leak but represented in the disclosure form that

      there was no mold problem on the property. Jancetic further alleged that,

      because of this “fraudulent representation[],” he agreed to purchase the

      property and sustained damages thereby. Appellant’s App. p. 75. Jancetic later

      amended the complaint to add a home inspection company, which he alleged

      had been negligent in failing to find the mold, as a defendant.

[3]   Source One had a “Real Estate Agents Errors And Omissions” insurance policy

      (the Policy) with Mount Vernon. Id. at 188. The Policy protected Source One

      from claims arising from negligent acts, errors, or omissions; personal injuries;

      allegations of discrimination; or improper use of the lock box on houses. The

      Court of Appeals of Indiana | Memorandum Decision 45A05-1607-PL-12 | November 4, 2016   Page 2 of 7
      Policy explicitly excluded from coverage “any claim arising out of . . . any

      actual or alleged . . . dishonest, fraudulent, criminal or malicious act or

      omission or deliberate misrepresentation committed by, at the direction of, or

      with the knowledge of any Insured.” Id. at 191-92. The Policy also states that

      it “does not apply to . . . [claims] arising out of . . . any form of Organic

      Pathogen, whether or not . . . it is alleged that an Insured failed to discover or

      disclose the existence of Organic Pathogens from any source whatsoever.” Id.

      at 192, 179. “Organic Pathogens” was defined as “any organic irritant or

      contaminant, including but not limited to mold . . . .” Id. at 179.

[4]   On March 27, 2012, Source One tendered Jancetic’s complaint to Mount

      Vernon, but Mount Vernon disclaimed coverage the following day, believing

      that Jancetic’s claims were excluded under the Policy. Id. at 96. Source One

      did not dispute Mount Vernon’s analysis, and neither Source One nor any other

      party to the lawsuit involved Mount Vernon further.

[5]   Jancetic eventually settled with Hadu, but Source One filed for bankruptcy

      protection. After obtaining relief from the bankruptcy stay, Jancetic pursued

      his case against Source One at an August 17, 2015, bench trial. Source One did

      not attend the trial. Jancetic presented evidence regarding the expenses he

      incurred fixing the water and mold problems in the house. He also testified that

      the furnace and the sump-pump had to be replaced. Altogether, the cost of

      rebuilding, testing for mold, and removing moisture totaled $149,496.33, and

      the trial court entered judgment against Source One in that amount.

      Court of Appeals of Indiana | Memorandum Decision 45A05-1607-PL-12 | November 4, 2016   Page 3 of 7
[6]   On September 17, 2015, Jancetic filed a verified motion for proceedings

      supplemental, seeking to recover from Mount Vernon pursuant to the Policy.

      After Mount Vernon filed an answer, the parties filed several motions to the

      trial court, including a “Motion for Judgment” from Jancetic and a motion for

      summary judgment from Mount Vernon. On July 1, 2016, the trial court

      granted Jancetic’s “Motion for Judgment,” denied Mount Vernon’s motion for

      summary judgment, and entered judgment against Mount Vernon in the

      amount of $149,496.33. Mount Vernon now appeals.

                                   Discussion and Decision
[7]   A proceeding supplemental is not an independent action asserting a new or

      different claim from the claim upon which the judgment was granted, but is

      merely a proceeding to enforce the earlier judgment. Hermitage Ins. Co. v. Salts,

      698 N.E.2d 856, 858-59 (Ind. Ct. App. 1998). In proceedings supplemental to

      recover judgment from a liability insurer, the judgment creditor bears the

      burden of showing a judgment, the insurance policy, and facial coverage under

      the policy. Id. at 859. Once the judgment creditor establishes this prima facie

      case, it is incumbent upon the liability insurer to go forward with evidence

      creating a genuine issue of fact. Id. Where the evidence is entirely

      documentary or the decision is based upon an admission or stipulation by the

      parties, this Court is in as good a position as the trial court to determine its

      force and effect. Williamson v. Rutana, 736 N.E.2d 1247, 1249 (Ind. Ct. App.

      2000). Thus, this court’s review of the trial court’s decision is de novo, and no

      presumption in favor of the trial court exists on appeal. Id.

      Court of Appeals of Indiana | Memorandum Decision 45A05-1607-PL-12 | November 4, 2016   Page 4 of 7
[8]   The interpretation of an insurance policy is generally a question of law

      appropriate for summary judgment. Liberty Mut. Ins. Co. v. Michigan Mut. Ins.

      Co., 891 N.E.2d 99, 101 (Ind. Ct. App. 2008). We review an insurance policy

      using the same rules of interpretation applied to other contracts; if the language

      is clear and unambiguous, we will apply the plain and ordinary meaning. Id.

[9]   Here, we find that the Policy clearly and unambiguously excludes from

      coverage any “dishonest, fraudulent, criminal or malicious act or omission or

      deliberate omission or deliberate misrepresentation committed by, at the

      direction of, or with the knowledge of any Insured.” Appellant’s App. p. 192.

      While the Policy does cover “any Claim arising out of any negligent act, error,

      [or] omission . . . committed by the Insured in the rendering or failure to render

      Professional Services for others,” id. at 188, Jancetic has never alleged that

      Source One acted negligently. In his original complaint, he charged “[t]hat at

      the time [of] the representations relating to the hazardous conditions present on

      the property, both Defendant Hadu and Defendant Source One [], by and

      through its agent knew that these representations were false.” Id. at 75. The

      complaint continued, “Source One [] made fraudulent representations to the

      Plaintiff in order to sell a home . . . .” Id. Moreover, Jancetic alleged that

      Source One “knew at the time they were making false representations that they

      were inducing the Plaintiff to buy a home that had hazardous conditions . . . .”

      Id. at 76. Although he amended his complaint to include another defendant,

      the allegations made against Source One remained the same. Id. at 91-94.

      Court of Appeals of Indiana | Memorandum Decision 45A05-1607-PL-12 | November 4, 2016   Page 5 of 7
[10]   Further, at his August 17, 2015, bench trial, Jancetic only charged Source One

       with intentional behavior. His counsel told the court, “we have admissions by

       the realtor about things that he knew about the property before an offer was

       made.” Id. at 101. Counsel showed the court a request for admission in which

       it was admitted that

               the realtor was informed that a water pipe burst in the house; and
               that, as a result, the entire floor of the house was replaced . . .
               [and] that on October 9, 2011, the realtor had informed the seller
               that there was a dip in the floor. And the floor was checked, and
               there was discovered water in the crawl space.

       Id. at 101-02. Counsel then presented other evidence to show that “the realtor

       was informed there was a problem with [the] HVAC . . . .” Id. at 102. After

       showing the court a copy of the disclosure form, in which Hadu and Source

       One said there were no issues with the house, the trial moved on to establishing

       the amount of damages. Because he has never alleged that Source One acted

       negligently, Jancetic has failed to meet his initial burden of showing facial

       coverage under the Policy.

[11]   In different circumstances, we have held that “when an insurance company

       assumes the defense of an action against its insured, without reservation of

       rights, and with knowledge of facts which would have permitted it to deny

       coverage, it may be estopped from subsequently raising the defense of

       noncoverage.” Salts, 698 N.E.2d at 859. But this can only arise where “the

       insurer had notice of the litigation and an opportunity to control the defense.”

       Id.

       Court of Appeals of Indiana | Memorandum Decision 45A05-1607-PL-12 | November 4, 2016   Page 6 of 7
[12]   These circumstances are certainly not present in this case: unlike the insurer in

       Salts, who defended its insured’s case at trial but failed to raise any defense of

       noncoverage, Mount Vernon asserted the defense of noncoverage from the first

       and had no further involvement in the case until the proceeding supplemental.

[13]   In short, Mount Vernon agreed to insure Source One against its negligence but

       not against its intentional misrepresentations. Jancetic has only ever alleged

       that Source One committed intentional misrepresentations and has never

       alleged that Source One was negligent. Finally, Mount Vernon has not

       engaged in any conduct that would estop it from asserting its defense of

       noncoverage. The trial court should have denied Jancetic’s “Motion for

       Judgment” and granted Mount Vernon’s motion for summary judgment.

[14]   The judgment of the trial court is reversed and remanded, with instructions to

       enter summary judgment in Mount Vernon’s favor.

       Vaidik, C.J., and Najam, J., concur.

       Court of Appeals of Indiana | Memorandum Decision 45A05-1607-PL-12 | November 4, 2016   Page 7 of 7