Michael Dodd and Katherine Dodd v. American Family Mutual Insurance Company

ATTORNEY FOR APPELLANTS ATTORNEY FOR APPELLEE
C. David Little Robert S. O'Dell
Power, Little & Little O'Dell & Associates, P.C.
Frankfort, Indiana Carmel, Indiana
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In the
Indiana Supreme Court Mar 05 2013, 1:06 pm
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No. 12S02-1203-CT-170
MICHAEL DODD AND KATHERINE DODD, Appellants (Plaintiffs),
v.
AMERICAN FAMILY MUTUAL INSURANCE COMPANY, Appellee (Defendant).
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Appeal from the Clinton Superior Court, No. 12D01-0409-CT-412
The Honorable Justin H. Hunter, Judge
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On Transfer from the Indiana Court of Appeals, No. 12A02-1010-CT-1414
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March 5, 2013
Dickson, Chief Justice.
After a fire at a home resulted in an insurance claim, the insurance company denied cov-
erage on grounds that the insureds had failed to disclose prior fire losses on their insurance appli-
cation. In the ensuing litigation, the trial court granted the insurance company's motion for
summary judgment and the Court of Appeals affirmed the trial court in part, reversed in part, and
remanded for further proceedings. Dodd v. Am. Family Ins. Co., 956 N.E.2d 769 (Ind. Ct. App.
2011). We granted transfer and now affirm the trial court's grant of summary judgment.
In 1998, Michael Dodd and Katherine Salmons were living together in Frankfort, Indi-
ana, in a home owned by Katherine and insured by Farm Bureau Insurance ("Farm Bureau"). On
March 24, 1998, that home was destroyed by a fire. Farm Bureau paid a settlement for the loss
in September 1998, but disputed certain aspects of the claim. Seeking to rebuild their home, in
December 1998, Michael and Katherine completed an application for property insurance with
American Family Mutual Insurance Company ("American Family"). The application indicated
that Michael was the titleholder of the property and listed Katherine (then his "girlfriend/fiancé
[sic]") as an unrelated person in the household. Appellants' App'x. at 109. The application also
asked if the "[a]pplicant or any member of household . . . had any past / current losses at any lo-
cations?" Id. This question was answered in the negative. Id. Michael signed the application,
and American Family issued the policy. Michael and Katherine were married in the summer of
2000. On September 19, 2003, their garage was destroyed in a fire and the Dodds filed a claim
with American Family. During follow-up investigations to determine the cause and origin of the
fire, Michael disclosed the 1998 fire to American Family. American Family, treating the prior
fire loss nondisclosure as a misrepresentation, voided the insurance policy ab initio and denied
the Dodds' claims for the 2003 garage fire losses.
The Dodds filed suit against American Family claiming breach of contract and intentional
infliction of emotional distress. The trial court granted American Family's motion for summary
judgment as to both claims, finding that American Family owed no insurance coverage or com-
pensatory damages to the Dodds due to misrepresentations in the insurance application, and that
American Family owed the Dodds neither punitive nor other damages on the Dodds' claim for
intentional infliction of emotional distress. The Dodds brought this appeal, challenging the
grant of summary judgment on grounds that American Family failed to return the premiums paid
by the Dodds. Approximately five months after the entry of final judgment, and three-and-a-half
months after the Dodds filed their notice of appeal, American Family filed a motion with the trial
court to interplead all of the premiums it had collected from the Dodds, totaling $2,079.80. The
trial court agreed to hold the funds until the conclusion of the Dodds' appeal.
The Court of Appeals affirmed the trial court in part, reversed in part, and remanded for
further proceedings on the plaintiffs' breach of contract claim. Dodd, 956 N.E.2d at 770. We
granted transfer, thereby vacating the opinion of the Court of Appeals, Ind. Appellate Rule
58(A), and we now affirm the trial court.
The Dodds' appellate briefs describe these proceedings as an appeal from summary
judgment. Appellants' Br. at 8, 20; Appellants' Reply Br. at 4. Their challenge to the grant of
summary judgment is predicated upon the contention that American Family was not entitled to
void or rescind the policy because it had not first returned all paid premium amounts to the
Dodds.
On summary judgment, we review an appeal through the same lens as that used by the
trial court. Hardy v. Hardy, 963 N.E.2d 470, 473 (Ind. 2012). Summary judgment is proper only
when the moving party demonstrates that there is no genuine issue of material fact with respect
to a claim or its elements. Woodruff v. Ind. Family & Soc. Servs. Admin., 964 N.E.2d 784, 790
(Ind. 2012). Once this prima facie case is made, the non-moving party bears the burden of com-
ing forward with designated evidence to demonstrate the existence of a genuine issue of material
fact. Id. All evidence, and the reasonable inferences drawn from it, must be construed in favor
of the non-moving party. Id. If the facts are undisputed, we reverse only if the law has been in-
correctly applied to those facts; but in all cases we may affirm on any theory supported by the
evidence in the record. Id.It is correct that an insurer must first offer to return the premiums it has collected from
the insured within a reasonable time after the discovery of the alleged breach. Grand Lodge of
Bhd. of R.R. Trainmen v. Clark, 189 Ind. 373, 380, 127 N.E. 280, 282 (1920). Failure to offer
such return of premiums, or if refused, to pay it into court, constitutes a waiver of the alleged
fraud. Id. at 379; Prudential Ins. Co. v. Smith, 231 Ind. 403, 412–13, 108 N.E.2d 61, 65 (1952).
However, in response to American Family's motion for summary judgment, the Dodds did not
assert any claim that American Family had failed to tender the premiums paid or that such failure
was a prerequisite to the voiding of an insurance policy on grounds of material misrepresenta-
tions in the policy application. Further, the Dodds did not identify any designated evidence
showing any failure by American Family to tender the paid premiums. This issue was thus not
before the trial court when it granted summary judgment. The issue was first raised by the
Dodds in their subsequent motion to correct error.
Even if this argument had been made and supported on summary judgment, the law pro-
vides an exception to the requirement that an insurer tender a return of the premiums in order to
rescind a contract. Under this exception, "such a tender is not necessary where . . . the insurer
has paid a claim thereon which is greater in amount than the premiums paid." Am. Standard Ins.
Co. v. Durham, 403 N.E.2d 879, 881 (Ind. Ct. App. 1980) (alteration in original) (quoting 6
Couch on Insurance 779, §§ 34–35 (2d ed. 1961)); see also Great E. Cas. Co. v. Collins, 73 Ind.
App. 207, 211, 126 N.E. 86, 87 (1920) ("The law, as well as equity and good conscience, does
not require appellant to return the premiums where appellee was appellant's debtor for more than
the amount thereof."). The designated evidence shows that American Family had previously
paid a claim to the Dodds, under the policy in question, for hail damage. Appellants' App'x at
106; Tr. at 85–86. The Dodds dispute neither the claim nor the payment amount of $5,500. Ap-
pellants' Br. at 5; Appellants' App'x at 30; Appellee's App'x at 240. Given that the amount of
premiums at issue is $2,079.80, Appellee's App'x at 1351, the Dodds could not prevail on their
claim of failure to tender premiums—the premise upon which all of their appellate arguments are
predicated.1
Conclusion
We affirm the trial court's grant of American Family's motion for summary judgment,
and the final judgment entered thereon. We further direct the trial court to release and return the
tender of premiums to American Family.
Rucker, David, Massa, and Rush, JJ., concur.
1
In the Summary of the Argument section of their appellants' brief, the Dodds assert that, be-
cause the failure to return premiums precludes American Family from voiding or rescinding the insurance
contract, American Family intentionally violated its continuing duty of coverage by failing to pay the
Dodds' insurance claim, and is thus subject to liability for bad faith punitive damages. In their Argument
section, the Dodds explain this contention, stating that the trial court erred in granting summary judgment
on the question of punitive damages because the judge "did not see that where [American Family] did not
return the policy premiums to the Dodds, [American Family] failed to void the policy as a matter of law."
Appellants' Br. at 19. The Dodds' claim of summary judgment error related to their claim for punitive
damages is thus subsumed within their challenge to the summary judgment on grounds of the failure to
tender or return premiums, which we reject.