Karen Bedwell, as Personal Representative of the Estate of Jeffrey Bedwell v. Auto-Owners Insurance Company (mem. dec.)

MEMORANDUM DECISION
Pursuant to Ind. Appellate Rule 65(D),
this Memorandum Decision shall not be FILED
regarded as precedent or cited before any Jun 13 2017, 6:40 am
court except for the purpose of establishing
CLERK
the defense of res judicata, collateral Indiana Supreme Court
Court of Appeals
estoppel, or the law of the case. and Tax Court
ATTORNEY FOR APPELLANT ATTORNEYS FOR APPELLEE
James R. Fisher Danford R. Due
Miller & Fisher, LLC Charles J. Maiers
Indianapolis, Indiana Due Doyle Fanning & Alderfer,
LLP
Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Karen Bedwell, as Personal June 13, 2017
Representative of the Estate of Court of Appeals Case No.
Jeffrey Bedwell, Deceased, 77A01-1612-CT-2899
Appellant-Defendant, Appeal from the Sullivan Superior
Court
v. The Honorable Hugh R. Hunt,
Judge
Auto-Owners Insurance Trial Court Cause No.
Company, 77D01-1603-CT-154
Appellee-Plaintiff
Crone, Judge.
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Case Summary
[1] About a half hour after he left The Uptown Tavern, Inc., an extremely
inebriated patron, Jeffrey Bedwell, sat on a nearby railroad track and was killed
by a train. Karen Bedwell, as personal representative of Bedwell’s estate (“the
Estate”), filed a wrongful death action against Uptown and its shift
manager/bartender, Leslie D. Chapman. Uptown’s general liability insurer,
Auto-Owners Insurance Company, filed an action for declaratory judgment,
asserting that the Estate’s claims in its underlying wrongful death action were
excluded under the alcohol exclusion in Uptown’s general liability insurance
policy. Auto-Owners filed a motion for summary judgment, contending that all
four of the Estate’s claims were excluded from coverage as a matter of law, and
the trial court granted Auto-Owners’ motion.
[2] The Estate now appeals, maintaining that Auto-Owners waived and/or was
estopped from asserting a coverage defense concerning the Estate’s claim
against Uptown for failure to aid an imperiled person and that the trial court
erred in granting summary judgment. Finding that Auto-Owners was not
precluded by waiver or estoppel from asserting its coverage defense and that the
trial court did not err in granting Auto-Owners’ motion for summary judgment,
we affirm.
Facts and Procedural History
[3] On August 5, 2012, Bedwell arrived at Uptown between 12:30 and 1:00 a.m.
While there, he drank several beers and shots of alcohol, some of which were
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provided courtesy of other Uptown patrons. Bedwell stayed for about two and
a half hours. His former girlfriend, Chapman, was tending bar that night.
Around 3:00 a.m., Chapman went out the back exit to empty some trash in a
dumpster, and Bedwell followed her, grabbed her arm, and held her against the
building. He attempted to persuade her to rekindle their romantic relationship,
and she told him that she was not interested and was married to someone else.
Shortly thereafter, an off-duty employee, Kentz Ward, approached and began
to interact with Bedwell, at which point Chapman pulled her arm away from
Bedwell, and Bedwell either sat down or fell onto the two stairs outside the
back door. Chapman ran inside the building and continued to tend bar.
Bedwell reentered the building with Ward, stayed for a few minutes, and left
again through the back door. At 3:30 a.m., Uptown closed. Chapman went
outside to empty the trash and heard someone urinating behind the dumpster.
She could not see who it was, but Bedwell indicated that he was the one
urinating and urged her to leave with him. Chapman said no, told him to go
home, and reentered the building. She did not see him again.
[4] Just before 4:00 a.m., Bedwell sat down on a railroad track adjacent to
Uptown’s property. A train approached, and the conductor noticed that
Bedwell appeared to be sitting up but was unconscious and unresponsive to the
impending danger. He repeatedly blew the train’s whistle and applied the
brakes but was unable to stop. The train struck and killed Bedwell. An autopsy
revealed that Bedwell’s blood alcohol concentration was .239 percent at the
time of his death.
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[5] In November 2013, the Estate filed a wrongful death action against Uptown
and Chapman, raising three claims under the Dram Shop Act1 and one tort
claim under the Restatement (Second) of Torts § 314A (1965) (“Section 314A”)
for allegedly breaching a “duty not to abandon Mr. Bedwell, as an invitee of the
tavern, in a helpless, perilous state, to which [Uptown and Chapman]
contributed.” Appellee’s App. Vol. 2 at 8. The Estate filed a claim with
Uptown’s liquor liability insurance carrier, United States Liability Insurance
Group (“USLIG”). USLIG paid its policy limits to the Estate and provided
legal representation for the wrongful death action. The Estate also filed a claim
with Auto-Owners, as Uptown’s general liability insurer. In February 2015,
Auto-Owners sent Uptown a coverage position letter in which it expressly
found the Estate’s alcohol-related claims to be excluded under the policy and
stated that it would provide defense and indemnification for any nonalcohol-
related claims “to the extent otherwise covered under this policy.” Appellant’s
App. Vol. 2 at 112. The letter expressly stated that Auto-Owners “completely
reserved” all rights, terms, conditions, and exclusions under the policy. Id.
[6] In March 2016, Auto-Owners filed an action against the Estate for declaratory
judgment that it had no duty to pay any judgment awarded to the Estate in its
wrongful death action against Uptown and Chapman. Several months later,
Auto-Owners filed a motion for summary judgment, asserting that all four of
1
The Dram Shop Act allegations include breach of duty (1) not to serve Bedwell while he was intoxicated;
(2) not to serve Bedwell after last call at 3:00 a.m.; and (3) to remove all alcohol from Bedwell at 3:30 a.m.
Appellee’s App. Vol. 2 at 8.
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the Estate’s underlying claims in its wrongful death action were excluded from
coverage as a matter of law under the alcohol provision in Uptown’s policy.
The trial court granted Auto-Owners’ motion, and the Estate filed a motion to
correct error, which the trial court denied.
[7] The Estate now appeals, challenging the trial court’s grant of summary
judgment. Additional facts will be provided as necessary.
Discussion and Decision
Section 1 – Auto-Owners was not precluded by waiver or
estoppel from asserting its coverage defenses.
[8] The Estate contends that alleged assurances made in Auto-Owners’ coverage
position letter precluded it, by waiver or estoppel, from asserting its coverage
defenses a year later in its action for declaratory judgment. Where an insurer
assumes the defense of an action on behalf of an insured without a reservation
of rights and with knowledge of facts that would have permitted it to deny
coverage, it may be estopped from raising a defense of noncoverage. Transcon.
Ins. Co. v. J.L. Manta, Inc., 714 N.E.2d 1277, 1281 (Ind. Ct. App. 1999). In
other words,
an insured suffers prejudice as a matter of law where an insurer,
without reserving its rights and giving the insured the opportunity to
determine whether to accept the tender of defense, assumes a
complete defense of the underlying suit against the insured and
controls the litigation for an extended period of time after becoming
aware of a coverage defense.
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Id. at 1282 (emphases added).
[9] The Estate cites Auto-Owners’ coverage position letter as evidence that it
agreed to cover Uptown on the Estate’s Section 314A claim for failure to aid.
In contrast, Auto-Owners asserts that it expressly reserved its rights concerning
coverage, that its provision of defense did not amount to an admission of a duty
to indemnify, and that the determination of whether the Section 314A claim
was alcohol-related (and thus excluded) could not be made without conducting
discovery. The coverage position letter reads in pertinent part as follows:
This policy does not provide any coverage for liquor liability. As
such, [Auto-Owners] will not provide coverage for defense or
indemnification in connection with claims or damages arising out
of the allegations for liquor liability in the Wrongful Death
Complaint for Jeffrey Bedwell.
We will provide coverage for defense and indemnification in
connection the [sic] bodily injury and wrongful death allegations
not arising out of liquor liability, to the extent otherwise covered
under this policy.
….
All rights, terms, conditions, and exclusions in your policy are in full
force and effect and are completely reserved. No action by any employee,
agent, attorney or other person on behalf of [Auto-Owners]; or hired by
[Auto-Owners] on your behalf; shall waive or be construed as having
waived any right, term, condition, exclusion or any other provision of the
policy.
Appellant’s App. Vol. 2 at 111-12 (italics in original, underlining omitted).
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[10] As the italicized language indicates, Auto-Owners completely reserved its rights
under the policy. Even the statement that it would defend and indemnify for
nonalcohol-related allegations specified a limitation of “to the extent otherwise
covered under this policy.” Id. The question of whether the Estate’s Section
314A claim was subject to the alcohol exclusion simply could not be answered
without more information, to be collected during discovery. See Ind. Farmers
Mut. Ins. Co. v. N. Vernon Drop Forge, 917 N.E.2d 1258, 1276 (Ind. Ct. App.
2009) (where insurer defended its insured in underlying lawsuit but its duty to
indemnify could not be assessed until much later, when litigation concluded),
trans. denied (2010). Thus, as of the date of its coverage position letter, Auto-
Owners did not have knowledge of facts that would have permitted it to deny or
admit coverage at that time. Moreover, we note that a significant portion of the
Estate’s wrongful death action was not in the “control” of Auto-Owners for an
extended period but was also being managed by Uptown’s liquor liability
insurance carrier, USLIG. Finally and importantly, Manta applied estoppel
where the insurer’s conduct resulted in prejudice to its insured, which was
Uptown and not the Estate. As such, Manta does not apply. Consequently,
Auto-Owners was not precluded by waiver or estoppel from asserting its
coverage defenses.
Section 2 – The trial court did not err in granting summary
judgment in favor of Auto-Owners.
[11] The Estate also maintains that the trial court erred in granting summary
judgment in favor of Auto-Owners. We review a summary judgment de novo,
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applying the same standard as the trial court and drawing all reasonable
inferences in favor of the nonmoving party. Hughley v. State, 15 N.E.3d 1000,
1003 (Ind. 2014). In conducting our review, we consider only those matters
that were designated at the summary judgment stage. Haegert v. McMullan, 953
N.E.2d 1223, 1229 (Ind. Ct. App. 2011). Summary judgment is appropriate if
the designated evidence shows that there is no genuine issue as to any material
fact and that the moving party is entitled to judgment as a matter of law.
Hughley, 15 N.E.3d at 1003; Ind. Trial Rule 56(C).
[12] The moving party bears the initial burden of demonstrating the “absence of any
genuine issue of fact as to a determinative issue.” Williams v. Tharp, 914 N.E.2d
756, 761 (Ind. 2009). Then the burden shifts to the nonmoving party to “come
forward with contrary evidence” showing a genuine issue for the trier of fact.
Id. at 762. The nonmoving party cannot rest upon the allegations or denials in
the pleadings. Syfu v. Quinn, 826 N.E.2d 699, 703 (Ind. Ct. App. 2005). In
Hughley, our supreme court emphasized that the moving party bears an onerous
burden of affirmatively negating the opponent’s claim. 15 N.E.3d at 1003. This
approach is based on the policy of preserving a party’s day in court, thus erring
on the side of allowing marginal cases to proceed to trial on the merits rather
than risking the short-circuiting of meritorious claims. Id. at 1003-04.
[13] In determining whether issues of material fact exist, we neither reweigh
evidence nor judge witness credibility. Peterson v. Ponda, 893 N.E.2d 1100, 1104
(Ind. Ct. App. 2008), trans. denied (2009). Rather, we must accept as true those
facts established by the designated evidence favoring the nonmoving party. Brill
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v. Regent Commc’ns, Inc., 12 N.E.3d 299, 309 (Ind. Ct. App. 2014), trans. denied.
A trial court’s grant of summary judgment arrives on appeal clothed with a
presumption of validity. Williams, 914 N.E.2d at 762. We may affirm a grant
of summary judgment on any legal basis supported by the designated evidence.
Harness v. Schmitt, 924 N.E.2d 162, 165 (Ind. Ct. App. 2010).
[14] “The construction of an insurance policy is a question of law for which
summary judgment is particularly appropriate.” Property-Owners Ins. Co. v. Ted’s
Tavern, Inc., 853 N.E.2d 973, 977 (Ind. Ct. App. 2006). “[I]f an insurance
contract is clear and unambiguous, the language therein must be given its plain
and ordinary meaning.” Id. at 978 (quoting Beam v. Wausau Ins. Co., 765
N.E.2d 524, 527 (Ind. 2002)). This includes unambiguous terms that limit the
insurer’s liability. Id. “[I]nsurers have the right to limit their coverage of risks
and, therefore, their liability by imposing exceptions, conditions, and
exclusions. However, to be enforced, these limitations must be clearly
expressed and … consistent with public policy.” Id. (citation omitted). An
insurance contract is not deemed ambiguous merely because the parties have
asserted contrary interpretations of its language or a controversy exists. Id.
Rather, it “will be deemed ambiguous only if reasonable people would honestly
differ as to the meaning of its terms.” Id. (citation omitted).
[15] Our function in this appeal is not to resolve the ultimate question of whether
Uptown is liable to the Estate under Section 314A but rather to determine
whether this claim was properly excluded from coverage as a matter of law
under Uptown’s general liability policy with Auto-Owners. The trial court
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granted summary judgment for Auto-Owners (not Uptown) in its action for
declaratory judgment concerning coverage under the policy for any of the
Estate’s claims against Uptown. The only claim relevant to this appeal is the
Estate’s Section 314A claim for failure to aid. That said, we discuss Section
314A only as it relates to the issue of Auto-Owners’ obligations under the
general liability policy.
[16] The alcohol exclusion in Uptown’s general liability policy with Auto-Owners
reads, in pertinent part,
2. Exclusions
This insurance does not apply to:
c. Liquor Liability
“Bodily injury” or “Property damage” for which any insured
may be held liable by reason of:
(1) Causing or contributing to the intoxication of any person.
(2) The furnishing of alcoholic beverages to a person under the
legal drinking age or under the influence of alcohol; or
(3) Any statute, ordinance or regulation relating to the sale, gift,
distribution or use of alcoholic beverages.
This exclusion applies only if you are in the business of
manufacturing, distributing, selling, serving or furnishing
alcoholic beverages.
Appellee’s App. Vol. 2 at 4.
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[17] In its wrongful death complaint against Uptown and Chapman, the Estate
raised its failure to aid allegation as follows: “The Defendants breached the
duty not to abandon Mr. Bedwell, as an invitee of the tavern, in a helpless,
perilous state, to which the Defendants contributed.” Appellee’s App. Vol. 2 at
8. The trial court determined as a matter of law that Bedwell’s perilous state
was related to his intoxication, and therefore his claim was subject to the
alcohol exclusion.
[18] A landowner owes to its invitee “a duty to exercise reasonable care for his
protection while he is on the landowner’s premises.” Pfenning v. Lineman, 947
N.E.2d 392, 406 (Ind. 2011) (quoting Burrell v. Meads, 569 N.E.2d 637, 639
(Ind. 1991)). Section 314A reads, in pertinent part,
(1) A common carrier is under a duty to its passengers to take
reasonable action
(a) to protect them against unreasonable risk of physical harm,
and
(b) to give them first aid after it knows or has reason to know that
they are ill or injured, and to care for them until they can be
cared for by others.
….
(3) A possessor of land who holds it open to the public is under a
similar duty to members of the public who enter in response to
his invitation.
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[19] The Estate argues that its Section 314A claim is not subject to the alcohol
exclusion because alcohol consumption is not an element of the tort. However,
protection from peril/unreasonable risk is an element of the tort, and that peril
may stem from any number of acts or omissions by the landowner, including,
but certainly not limited to, furnishing alcoholic beverages to the invitee while
he is on the premises. Auto-Owners asserts that Bedwell’s intoxication (three
times the legal limit) was inextricably related to his (in)ability to evaluate the
risk of his being struck by a train and that, as such, the alcohol exclusion
precludes coverage under the general liability policy. In contrast, the Estate
submits that Bedwell’s peril was independent of his alcohol consumption,
particularly, that (1) Chapman saw him sitting on the railroad track and should
have acted to protect him from danger; and (2) he was placed in peril due to an
alleged altercation with Chapman on the steps outside Uptown’s back door.
The designated materials are devoid of any evidence to support these assertions.
First, Chapman testified in her deposition that she never saw Bedwell sitting on
the railroad tracks; instead, the only place/time that she saw him sitting or
standing outside was on the two steps by the back door the first time that she
went out to empty the trash. Appellee’s App. Vol. 2 at 19. After she heard him
urinating and told him to go home, she never saw him again. Id.
[20] As for any alleged altercation, the undisputed evidence shows that the first time
Chapman went outside, Bedwell held on to her arm and begged her to leave
with him. When Ward approached them on the back steps, Bedwell turned to
greet him and Chapman pulled her arm away, after which Bedwell either sat
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down or fell onto the stair. Id. at 19-20. Bedwell was clearly able to get up,
reenter the tavern, and visit awhile before leaving again. To say that this
incident amounted to such peril as to require Uptown to protect Bedwell from a
train that would come one hour later simply defies reason. See Section 314A
cmt. f (defendant “is not required to take any action beyond that which is
reasonable under the circumstances”).
[21] Because the source of Bedwell’s peril was his extreme intoxication, the Estate’s
claim for failure to aid an imperiled person was subject to the alcohol exclusion
in Upland’s general liability policy with Auto-Owners. As such, the trial court
did not err in granting Auto-Owners’ motion for summary judgment.
Accordingly, we affirm.
[22] Affirmed.
Baker, J., and Barnes, J., concur.
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