Mt. Vernon Fire Insurance Co. v. Louis Jancetic (mem. dec.) ( 2016 )

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.
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[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
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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.
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[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.
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[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.
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[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.
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[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.
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