Starr Indemnity & Liability Company v. NIBCO INC. ( 2024 )

IN THE
Court of Appeals of Indiana
Starr Indemnity & Liability Co., et al.,
Appellant-Defendant
FILED
v. Feb 26 2024, 10:03 am
CLERK
Indiana Supreme Court
Court of Appeals
NIBCO INC., and Tax Court
Appellee-Plaintiff
February 26, 2024
Court of Appeals Case No.
23A-PL-1343
Appeal from the Elkhart Superior Court
The Honorable Christopher J. Spataro, Judge
Trial Court Cause No.
20D05-1708-PL-178
Opinion by Chief Judge Altice
Judges Weissmann and Kenworthy concur.
Altice, Chief Judge.
Court of Appeals of Indiana | Opinion 23A-PL-1343 | February 26, 2024 Page 1 of 14
Case Summary
[1] NIBCO, Inc.’s declaratory judgment action was dismissed for failure to
prosecute. Two years later, the trial court, despite rejecting NIBCO’s claim that
it was entitled to reinstatement under Ind. Trial Rule 60(B), reinstated the
action. The trial court reasoned that it was required to reinstate the action
because it failed to hold an Ind. Trial Rule 41(E) hearing before the dismissal.
As the only vehicle for reinstatement in this case was T.R. 60(B), we conclude
that the trial court erred by reinstating the action.
[2] We reverse.
Facts & Procedural History
[3] NIBCO filed this action in 2017 against twenty-two of its commercial insurers
seeking a declaration regarding coverage issues in connection with two
underlying class actions against NIBCO for product liability related to
NIBCO’s PEX 1006 plumbing components. Following mediation, the majority
of the insurance-company defendants reached agreements with NIBCO and
were dismissed from this action in June 2019 and April 2020. The six
defendants that remained in the action are the appellants here – Starr Indemnity
& Liability Company, Starr Surplus Lines Insurance Company, Liberty Mutual
Fire Insurance Company, The Ohio Casualty Insurance Company, Mt. Hawley
Insurance Company, and National Fire & Marine Insurance Company
(collectively, Insurers).
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[4] For nearly nine months after the April 2020 dismissals, nothing occurred on the
trial court’s docket involving Insurers, except for the granting of a motion to
withdraw the appearance of an attorney in August 2020. In the meantime, the
trial judge, Charles Cater Wicks, retired and Christopher J. Spataro took over
the case in January 2021.
[5] On February 8, 2021, Judge Spataro, sua sponte, issued an order for hearing for
the purpose of dismissing the case pursuant to T.R. 41(E). In that order, the
court scheduled the T.R. 41(E) hearing for March 19, 2021, at 11:00 A.M. and
directed that an order of dismissal would be entered if “the plaintiff shall not
show sufficient cause why this case should not be dismissed at or before such
hearing.” Appellants’ Appendix at 124. The hearing order was served by email to
John A. Conway (Attorney Conway), one of the three attorneys with
SouthBank Legal who entered appearances in this case for NIBCO. 1 Insurers
were not served with the hearing order.
[6] Thereafter, NIBCO did not attempt to show cause why the case should not be
dismissed and did not appear on the date of the hearing or seek to have the
hearing rescheduled. On March 25, 2021, the trial court dismissed the case
1
NIBCO was separately represented by attorneys with K&L Gates (Coverage Counsel), who did not enter
appearances in this action but “took the lead on insurance coverage strategy [and] settlement and insurer
communications.” Id. at 128. Coverage Counsel’s mediation resulted in settlements of the underlying class
actions and with insurance-company defendants exclusive of Insurers. Thereafter, Coverage Counsel
continued to hold periodic conference calls with Insurers to provide updates on other pending PEX 1006
product liability claims. We will refer to these calls as Update Calls.
Court of Appeals of Indiana | Opinion 23A-PL-1343 | February 26, 2024 Page 3 of 14
with prejudice under T.R. 41(E). Like the order setting the hearing, the order of
dismissal was served by email and only to Attorney Conway.
[7] On December 7, 2022, more than twenty months after the dismissal, NIBCO
filed a motion for relief from judgment seeking reinstatement of its action
against Insurers under T.R. 60(B)(8). NIBCO argued that “equitable
considerations” weighed in favor of granting relief, including that the hearing
and dismissal orders had been sent only to one attorney of record, there was no
evidence that a T.R. 41(E) hearing had been held, NIBCO had a good-faith
belief that the case was still active, Insurers would not be prejudiced by
reinstatement of the action, and Indiana’s strong preference for deciding cases
on the merits. Appellants’ Appendix at 126.
[8] NIBCO claimed that it did not become “actually aware” of the dismissal until
November 21, 2022, when counsel for Starr Indemnity & Liability Company
and Starr Surplus Lines Insurance Company (collectively, Starr) referenced the
dismissal during an Update Call. 2 Appellants’ Appendix at 127. In a reservation
of rights letter to Coverage Counsel dated June 6, 2022, however, Starr’s
counsel had already expressly noted the dismissal. 3 And a reservation of rights
2
After the March 2021 dismissal, Coverage Counsel had three Update Calls with Insurers. These were in
April and October 2021 and then more than a year later in November 2022.
3
On the second page of this letter, Starr’s counsel wrote:
NIBCO filed a declaratory judgment action against Starr, as well as its other primary, excess
and umbrella insurers that issued policies to NIBCO between 2006 and 2017, seeking coverage
for certain of the PEX Lawsuits, captioned NIBCO, Inc. v. Zurich American Insurance Company, et
al., Case No. 20D05-1708-PL000178, Elkhart Superior Court, Indiana (“Coverage Lawsuit”).
Starr has filed responsive pleadings in the Coverage Lawsuit. On March 25, 2021, the Coverage
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letter from another Insurer, sent on July 12, 2022, similarly referenced the
dismissal order. 4
[9] Insurers opposed NIBCO’s request for relief from judgment and argued that
NIBCO had not satisfied the requirements of T.R. 60(B)(8). Insurers claimed,
among other things, that NIBCO failed to show circumstances beyond simple
neglect/mistake by Attorney Conway, who was served with the hearing order
and the dismissal order on behalf of NIBCO, that NIBCO failed to establish
exceptional circumstances warranting relief, and that NIBCO failed to seek
relief from judgment within a reasonable time.
[10] The trial court held oral argument on NIBCO’s T.R. 60(B)(8) motion. At the
hearing on February 7, 2023, Attorney Conway acknowledged that he had
received the orders in question and that there was “nothing excusable about [his
failure to attend to them].” Transcript at 11. But he noted that the two other
Lawsuit was dismissed with prejudice for lack of progress. Accordingly, the Coverage Lawsuit
was resolved in favor of the primary, excess and umbrella insurers involved in that lawsuit,
including Starr, with respect to coverage for the PEX Lawsuits.
Appellee’s Appendix at 11.
4
This letter provided in relevant part:
We note as an initial or threshold matter that, aside from the express provisions in the Liberty
Mutual Policies, coverage thereunder for the Blappert Action is precluded by the fact that
NIBCO’s declaratory judgment action against its insurers, including Liberty Mutual, was
dismissed with prejudice on March 25, 2021. See Order Dismissing Case Pursuant to T.R.
41(E), NIBCO Inc. v. Zurich Am. Ins. Co., et al., Case No. 20D05-1708-PL-000178 (Elkhart Sup.
Ct., Ind.) (case “dismissed with prejudice”). NIBCO’s Complaint for Declaratory Judgment
sought a declaration as to whether it was entitled to coverage for “PEX lawsuits throughout the
country.” The Court’s March 2021 dismissal with prejudice is fully dispositive of NIBCO’s
coverage action, which cannot be relitigated.
Appellee’s Appendix at 43.
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attorneys on the case were not served with the orders and that Coverage
Counsel was separately handling the underlying claims with SouthBank Legal
“kind of in standby capacity in the event that [] the litigation [] heated up”
against Insurers. Id. at 9. Attorney Conway explained that there was “kind of a
wait and see approach” by Insurers as other PEX 1006 cases continued to
develop and as Coverage Counsel and Insurers periodically communicated
about the pending claims. 5 Id. at 13. Under the circumstances, he claimed that
there “wasn’t a need to be checking the docket, because things weren’t … really
going on.” Id. at 24. Ultimately, NIBCO’s claim of exceptional circumstances
was based on there being “some … issues … with the service and then the
conduct of the parties.” Id. at 51.
[11] The trial court took the matter under advisement and then issued its order on
March 31, 2023. Despite expressly concluding that NIBCO was not entitled to
relief under T.R. 60(B)(8), the trial court determined that it was required to
reinstate the case because the scheduled T.R. 41(E) hearing had not actually
been held. Appellants’ Appendix at 119 (“Because the record does not reflect that
an actual [T.R.] 41(E) hearing was conducted, and because the undersigned
knows that no [such] hearings were conducted during (at least) the first half of
5
Attorney Conway acknowledged that the Update Calls did not amount to ongoing litigation activity in this
case. See id. at 50 (indicating with respect to the Update Calls that he was “not trying to imply at all that we
were litigating” and that he “[c]ertainly, [didn’t] want to leave that implication”).
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2021, the Court finds that it is required to reinstate the case and hereby does
so.”).
[12] Insurers filed a motion to correct error in which they argued that T.R. 41(E)’s
hearing requirement was satisfied because “[a] hearing was set, scheduled,
notice was provided, and NIBCO did not attend or respond in any way, despite
having a full and fair opportunity to do so.” Appellants’ Appendix at 177. In
essence, Insurers’ argument assumed that the hearing was not held because
NIBCO did not attend.
[13] In denying Insurers’ motion to correct error, the trial court clarified that it did
not reinstate the case because NIBCO failed to respond or appear at a duly
noticed hearing but because of the court’s own failure to conduct a hearing. In
its order, the trial court discussed several cases and then concluded:
Indiana law requires that if a court dismisses a case under Trial
Rule 41(E), it must both schedule and conduct a hearing before
entering an order of dismissal. There is no dispute here that the
Court did not conduct a hearing before dismissing NIBCO’s
claims and that NIBCO did not demonstrate sufficient good
cause for the delay before the scheduled hearing. Therefore, the
Court correctly reinstated NIBCO’s case on March 31, 2023.
Id. at 122.
[14] Insurers appeal from the reinstatement of the declaratory judgment action.
Additional information will be provided as needed below.
Court of Appeals of Indiana | Opinion 23A-PL-1343 | February 26, 2024 Page 7 of 14
Discussion & Decision
[15] T.R. 41(E) provides:
Whenever there has been a failure to comply with these rules or
when no action has been taken in a civil case for a period of sixty
[60] days, the court, on motion of a party or on its own motion shall
order a hearing for the purpose of dismissing such case. The court shall
enter an order of dismissal at plaintiff’s costs if the plaintiff shall not show
sufficient cause at or before such hearing. Dismissal may be withheld
or reinstatement of dismissal may be made subject to the
condition that the plaintiff comply with these rules and diligently
prosecute the action and upon such terms that the court in its
discretion determines to be necessary to assure such diligent
prosecution.
(Emphasis supplied.)
[16] As the trial court observed in this case, a court is required to hold a hearing
prior to dismissing a case for failure to prosecute. See, e.g., Rumfelt v. Himes, 438
N.E.2d 980, 984 (Ind. 1982) (“Trial Rule 41(E) clearly requires a hearing on a
motion to dismiss[.]”); Caruthers v. State, 58 N.E.3d 207, 214 (Ind. Ct. App.
2016) (holding that T.R. 41(E) requires a trial court to hold a hearing, not just
schedule one, before dismissing a case). Judgments of dismissal entered
without such a hearing are prone to reversal. See generally Rumfelt, 438 N.E.2d
980; Smith v. State, 90 N.E.3d 691 (Ind. Ct. App. 2017), trans. denied; Caruthers,
58 N.E.3d 207. The Caruthers court recognized that “there may be
circumstances where a trial court’s dismissal of an action without first holding a
hearing will not constitute reversible error” but did not elaborate further, as it
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determined that strict compliance with the hearing requirement was warranted
in that case. 58 N.E.3d at 214 n.7.
[17] In this appeal, the parties spill much ink debating whether a hearing was in fact
held – though they agree that none of the parties attended – and if a hearing was
not held, whether the circumstances of this case would warrant reversal of the
judgment of dismissal. On the latter point, Insurers contend that a hearing was
scheduled, and NIBCO was duly served with notice of the hearing but did not
attempt to attend or reschedule the hearing or otherwise respond to the hearing
notice. Insurers argue that under these circumstances a trial court should not
have to commence a hearing simply to go on the record to note the plaintiff’s
non-attendance.
[18] These disputes are beside the point, however, because, unlike the cases cited
above and relied upon by the trial court, this case does not involve an appeal
from the judgment of dismissal. NIBCO missed that opportunity. Thus,
pursuant to T.R. 41(F), its only recourse was to seek reinstatement of the
declaratory judgment action via T.R. 60(B). See T.R. 41(F) (providing for
reinstatement following a dismissal with prejudice “for the grounds and in
accordance with the provisions of Rule 60(B)”); see also Baker & Daniels, LLP v.
Coachmen Indus., Inc., 924 N.E.2d 130, 137 n.6 (Ind. Ct. App. 2010) (“Rule
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41(F) plainly states that reinstatement of claims dismissed with prejudice must
be in accordance with Rule 60(B).”), trans. denied. 6
[19] Due to the belated filing of its T.R. 60(B) motion twenty months after the
dismissal, NIBCO’s options were even more limited, which is reflected by the
fact that NIBCO sought reinstatement only pursuant to T.R. 60(B)(8). T.R.
60(B)(8) is a catch-all provision that permits the trial court to grant relief for
“any reason justifying relief from the operation of the judgment, other than
those reasons set forth in sub-paragraphs (1), (2), (3), and (4).” It provides the
trial court with broad equitable power and imposes a time limit based only on
reasonableness. Baker & Daniels, 924 N.E.2d at 140. Nevertheless, “subsection
(8) may only be invoked upon a showing of exceptional circumstances
justifying extraordinary relief[,]” which requires more than a showing that a
party’s failure to act was merely due to mistake, surprise, or excusable neglect –
the reasons set out in subsection (1) that are subject to a one-year time limit. Id.[20] Here, the trial court expressly determined that NIBCO was not entitled to relief
under T.R. 60(B)(8) because (1) NIBCO did not seek relief within a reasonable
6
The Baker & Daniels case involved the reinstatement of an action dismissed for failure to prosecute. On
appeal, this court observed that a T.R. 41(E) hearing had been scheduled but not held (as neither party
responded to the hearing notice) and that this “may have been a procedural flaw.” Baker & Daniels, 924
N.E.2d at 137. In this regard, we noted our Supreme Court’s emphasis on the importance of the rule’s
hearing requirement and observed that “judgments of dismissal entered without such a hearing are subject to
reversal.” Id. Nevertheless, presumably because this was an appeal of a reinstatement order rather than a
dismissal order, we proceeded with determining the propriety of the reinstatement pursuant to T.R. 60(B).
Id. at 138-43.
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time and (2) NIBCO had not shown exceptional circumstances justifying relief. 7
The trial court explained:
It is an attorney’s duty to stay apprised of the status of pending
matters before the court. That duty includes the due diligence of
regularly checking court records for the status of pending cases.
Given this duty, the Court finds that 20 months, nearly two
years, after the dismissal order was entered is an unreasonable
amount of time to elapse before a motion to vacate the judgment
was filed. The Court further finds that service on one of three
attorneys for NIBCO is not an exceptional circumstance that
justifies relief from the Dismissal Order.
Appellants’ Appendix at 118 (citations omitted).
[21] NIBCO observes that the decision of whether to reinstate the case under T.R.
60(B)(8) was within the trial court’s discretion. Indeed, we review a trial court’s
decision in this regard for an abuse of discretion, “which occurs only when the
trial court’s decision is clearly against the logic and effect of the facts and
circumstances before it or if the court has misinterpreted the law.” Baker &
Daniels, 924 N.E.2d at 136. What NIBCO ignores is that the trial court
exercised its discretion and determined that NIBCO was not entitled to relief
under T.R. 60(B)(8). NIBCO seems to ask us to consider the issue anew rather
than review for an abuse of discretion. That would be improper.
7
T.R. 60(B)(8) also requires that the movant allege a meritorious claim. The trial court did not make a
finding against NIBCO on this basis.
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[22] The trial court’s determination that NIBCO did not file its motion within a
reasonable time was not clearly against the logic and effect of the facts and
circumstances before it. “Determining what is a reasonable time period
depends on the circumstances of each case, as well as the potential prejudice to
the party opposing the motion and the basis for the moving party’s delay.”
State v. Collier, 61 N.E.3d 265, 268 (Ind. 2016).
[23] It is undisputed that NIBCO was actually served with the hearing and dismissal
orders through Attorney Conway 8 and that those orders were also reflected on
the CCS for more than twenty months before NIBCO sought reinstatement.
Attorney Conway, by his own admission, inexcusably disregarded the orders,
and he and the two other attorneys in his firm who appeared for NIBCO also
failed to monitor the CCS for nearly two years. See Baker & Daniels, 924 N.E.2d
at 140-41 (observing that attorneys have a duty to keep apprised of the status of
matters before the court).
[24] Moreover, NIBCO’s suggestion that “litigation proceeded after dismissal” is
belied by the record. Appellee’s Brief at 27. The Update Calls, which Attorney
Conway acknowledged were not litigation activity, did not take place between
October 2021 and November 2022. And to the extent there was other
communication between Coverage Counsel and Insurers during that time, such
8
NIBCO suggests in passing that service on only one of its three attorneys constituted “[d]efective service”
and that this combined with the court’s failure to serve Insurers with the hearing order made the resulting
dismissal order void. Appellee’s Brief at 26. Aside from not being supported by cogent argument on appeal,
we observe that this argument, presumably based on T.R. (60)(B)(6), was not presented below.
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included two letters from Insurers in June and July 2022 that should have made
NIBCO aware of the March 2021 dismissal order.
[25] Despite clearly and definitively rejecting reinstatement on T.R. 60(B) grounds,
the trial court reinstated the action only because it had not held a T.R. 41(E)
hearing. In essence, the trial court applied a per se rule of reinstatement making
dismissals subject to reinstatement indefinitely – that is, beyond a reasonable
time – in any case where the trial court failed to hold a T.R. 41(E) hearing.
This was clearly erroneous. Relief from the judgment of dismissal was
available to NIBCO only under T.R. 60(B). 9 Because it failed to act within the
time permitted by the rule, NIBCO was not entitled to reinstatement.
[26] Judgment reversed.
Weissmann, J. and Kenworthy, J., concur.
9
We recognize that in Somerville Auto Transp. Serv., Inc. v. Auto. Fin. Corp., 12 N.E.3d 955, 962 (Ind. Ct. App.
2014), trans. denied, this court affirmed a trial court’s reinstatement of an action that was based on T.R. 60(A).
There, the trial court sua sponte reinstated the action eight days after dismissal because it had not held the
scheduled T.R. 41(E) hearing due to a mistaken belief that counsel had not appeared for the hearing. In fact,
counsel had appeared to show cause at the hearing, but court staff advised that the judge was not available
and directed counsel to submit a written response, which was done that same day but not seen by the court
until days later. In affirming the reinstatement, we concluded that the trial court had discretion to promptly
correct this error via T.R. 60(A), rather than T.R. 60(B), because it was “more akin to a mechanical mistake
than a substantive mistake in character” and because the trial court still retained power and control over the
judgment under Ind. Code § 33-23-2-4. Somerville, 12 N.E.3d at 964. Among other things, the twenty-month
delay in this case clearly takes it out of the Somerville realm.
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ATTORNEYS FOR APPELLANTS
James P. Strenski
Carmel, Indiana
Matthew O. Sitzer
David E. Schoenfeld
Kathleen M. Ryan
Chicago, Illinois
Michael D. Prough
Walnut Creek, California
Daniel P. Johnston
Chicago. Illinois
Jeffrey C. Gerish
Bloomfield Hills, Michigan
James W. Riley, Jr.
Indianapolis, Indiana
James M. Weck
Michigan City, Indiana
ATTORNEYS FOR APPELLEE
John A. Conway
John D. LaDue
Erin Linder Hanig
Tiernan B. Kane
South Bend, Indiana
Court of Appeals of Indiana | Opinion 23A-PL-1343 | February 26, 2024 Page 14 of 14