Insurance Coverage Case Law – Weekly Update “May 6, 2023 – May 12, 2023”
Last week, an Indiana federal court issued a decision on motions in limine excluding certain evidence in a property damage coverage claim scheduled to go to trial on May 16, 2023. This included a ruling, among others, that bars the policyholder from seeking an additional $14 million in environmental damages (beyond the $11 million initially sought) because the damages were not timely disclosed.
On May 4, 2023, the Indiana Supreme Court denied transfer in two insurance related appeals, one involving the enforceability of a lead exclusion and one involving an exclusion barring coverage for losses caused by the neglect of the insured to save and preserve property after the time of a loss.
Summaries of each decision are included below.
Indiana GRQ, LLC v. American Guar. and Liab. Ins. Co., (N.D. Ind. May 10, 2023)
Case Overview: The policyholder sued seven insurance companies after flooding caused damage to its South Bend facility. The insurers paid part of the claim and denied the rest. The trial is scheduled to begin May 16, 2023. Both sides moved to exclude certain evidence at trial. This opinion addresses those motions.
Ruling: What’s in and what’s out:
Category of Evidence | Ruling and Rationale |
Depreciation of and value of policyholder’s property | Permissible. Recoverability of ACV vs. RCV still at issue. |
Timing of repairs | Permissible. This issue determines whether the policyholder can recover RCV, which was not decided at summary judgment. |
Environmental history of property | Permissible, in part. Policyholder’s environmental losses were caused by presence of PCBs and asbestos. The history of these compounds at the site is thus relevant to whether the flood caused their current presence. |
Use of term “independent adjuster” to describe adjusters hired by insurers | Permissible. Policyholder can cross-examine witnesses to challenge “independent” status. |
Sophistication of policyholder | Permissible. The court noted that while this was potentially prejudicial evidence, it was not unduly prejudicial. |
Increased environmental damage computations ($11M to $25M) | Excluded. The policyholder’s supplemental damages disclosure occurred less than two months before trial and insurers did not have ability to prepare for this or cross-examine witnesses. |
Photos and communications produced after discovery. | Excluded, in part. All communications with EPA were excluded because they occurred and were produced after the close of discovery. However, photos of the flooded property were permissible. |
Communications about “loss reserves” | Excluded, in part. Discussions about insurer’s knowledge of general magnitude of loss permissible, but communications about loss reserves excluded. |
Insurers’ reference to “settlement” in communications | Permissible. The insurers used the words “settle, adjust, and resolve” interchangeably in its communications. Rule 408 not an absolute ban on all evidence related to settlement. |
Financial condition of insurers | Permissible. Policyholder seeks punitive damages as part of its bad faith claim, and the jury is allowed to consider such evidence. |
Issues resolved on summary judgment | Excluded, as to bad faith claim theories besides the two that survived summary judgment: (1) the withholding of cost estimates and (2) the insurers’ hiring of the policyholder’s consultant to pressure settlement. |
One major takeaway: This case highlights the importance of disclosing supplemental damage computations as early and frequently as possible, as the ruling effectively wiped out $14 million in additional potential damages.
Citation: 2023 U.S. Dist. LEXIS 81814
Indiana Farmers Mut. Ins. Co. v. HomeWorks Management Corp (Ind. Ct. App. 2022), trans. denied (Ind. 2023)
Case Overview: Landlord sought coverage for claims by tenant that their children suffered lead poisoning because landlord’s employee scraped lead paint and failed to clean it up. The trial court granted summary judgment in favor of the landlord, finding that the lead exclusion in the policy was ambiguous and unenforceable. The Court of Appeals reversed. It found that the lead exclusion did not carry the same ambiguity and concerns as the pollution exclusions found enforceable in Kiger and its progeny.
Ruling: The Indiana Supreme Court denied transfer on May 4, 2023. This finalized the Court of Appeals’ December 22, 2022 decision.
Citation: 201 N.E.3d 666
Wagner v. United Farm Family Mutual Ins. Co. (Ind. Ct. App. 2022), trans. denied (Ind. 2023)
Case Overview: Homeowners sought insurance coverage for storm damage that occurred in 2010. The insurer covered the loss. The homeowners noticed staining around the chimney in 2012 and submitted an additional claim. The insurer accepted the claim but did not pay anything because it was within the deductible. In 2015, the homeowners noticed water and moisture problems throughout the house, including mold. The insurer denied the 2015 claim, concluding the damage was the same as the damage from the 2012 claim, which had not been repaired. The insurer argued that the loss was not covered because the policy excluded coverage for “loss caused directly or indirectly by […] neglect of the ‘insured’ to use all reasonable means to save and preserve property at and after the time of a loss.” The trial court agreed, and the Court of Appeals affirmed summary judgment in favor of the insurer on the applicability of this exclusion.
Ruling: The Indiana Supreme Court denied transfer on May 4, 2023, with Rush and Goff voting to grant the petition to transfer. This finalized the Court of Appeals’ December 29, 2022 decision. However, this memorandum decision may not be cited as precedent or for persuasive value because it was issued prior to January 1, 2023. See Rule 65(D) of the Indiana Rules of Appellate Procedure.
Citation: 202 N.E.3d 454 (Memorandum Decision)
Categorized: News