August 7, 2014
INDIANA INSURANCE COMPANY, Appellant/Plaintiff/Counterclaim Defendant,
PATRICIA KOPETSKY, Appellee/Defendant/Counterclaim Plaintiff, and KB HOME INDIANA INC., Appellee/Defendant
APPEAL FROM THE MARION SUPERIOR COURT. Cause No. 49D04-0904-PL-16903. The Honorable Cynthia J. Ayers, Judge.
ATTORNEY FOR APPELLANT: GINNY L. PETERSON, Kightlinger & Gray, LLP, Indianapolis, Indiana.
ATTORNEYS FOR APPELLEE PATRICIA KOPETSKY: W. BRENT THRELKELD, BENJAMIN G. STEVENSON, Threlkeld & Associates, Indianapolis, Indiana.
ATTORNEYS FOR APPELLEE KB HOME INDIANA INC.: PETER J. RUSTHOVEN, E. SEAN GRIGGS, DAVID M. HEGER, Barnes & Thornburg LLP, Indianapolis, Indiana.
BRADFORD, Judge. CRONE, J, and PYLE, J., concur.
OPINION ON REHEARING -- FOR PUBLICATION
Appellee/Defendant/Counterclaim Plaintiff Patricia
Kopetsky has petitioned for
rehearing. Patricia requests that we correct a factual error
in our original opinion and clarify our holding regarding a possible finding
that George Kopetsky knew (or did not know) of contamination in Cedar Park prior
to obtaining CGL coverage from Appellant/Plaintiff/Counterclaim Defendant
Indiana Insurance Company. In its response to Patricia's petition, Indiana
Insurance also requests that we clarify our holding regarding George's
knowledge. We grant Patricia's rehearing petition in order to correct our
factual error and in order to clarify our original holding.
I. Factual Description of Cedar Park
In our original opinion, section A of the "Facts and
Procedural History" contained the following passage: "Cedar Park is divided into
three sections: Section 1 (fifty-seven lots) on the eastern edge, Section 2
(seventy-five lots) in the middle, and Section 3 (seventy-one lots) on the
western edge." All agree that this is incorrect, as Section 3 is actually on the
eastern edge of Cedar Park and Section 1 is on the western edge.
II. Effect of a Finding that George Knew of the
Before Obtaining CGL Coverage
from Indiana Insurance
Also in our original
opinion, we concluded, inter alia, that a genuine issue of material fact existed
regarding whether George knew of the contamination in Cedar Park before
obtaining coverage with Indiana Insurance. While we do not revisit that
conclusion, we grant rehearing in order to clarify our original disposition.
A. Factual Background and Parties' Arguments
The first of four, one-year CGL policies obtained by
George from Indiana Insurance took effect on April 29, 2002, and coverage under
the Polices was in effect until April 29, 2006. There is no dispute that George
first learned of contamination in parts of Cedar Park on May 2, 2002,
during the first year of coverage. There is likewise no dispute that Indiana
Insurance also learned of contamination in Cedar Park at some point during the
first year of coverage. It is primarily the legal effect of Indiana Insurance's
knowledge of the contamination that we address in this opinion on rehearing.
Patricia contends that, pursuant to the common-law
"known loss" doctrine, even if a jury were to find that George knew of the
contamination before taking out insurance with Indiana Insurance, coverage would
be barred during only the first of the four coverage years at issue. Indiana
Insurance, citing the "known claim" exclusionary language from the Policies,
argues that (1) there is no coverage for the final three coverage years
regardless of what a jury might find regarding George's knowledge and (2) a
finding that George knew of the loss before obtaining coverage would bar
coverage in the first year as well. We agree with Indiana Insurance because we
conclude that, consistent with the Indiana Supreme Court's approach in Sheehan
Construction Co., Inc. v. Continental Casualty Co., 935 N.E.2d 160 (2010),
opinion adhered to as modified on reh'g, 938 N.E.2d 685 (Ind. 2010), the
Policies' "known claim" exclusionary language controls.
B. "Known Loss" Doctrine
Patricia relies on our holding in General Housewares Corp. v. National Surety Corp., 741 N.E.2d 408 (Ind. Ct. App. 2000),
in which we recognized the "known loss" doctrine: "The 'known loss' doctrine is
a common law concept deriving from the fundamental requirement in insurance law
that the loss be fortuitous." Id. at 416 (citing Pittston Co., Ultramar Am. Ltd.
V. Allianz Ins. Co., 124 F.3d 508, 516 (3d Cir. 1997)). Essentially, the known
doctrine states that one may not obtain coverage for a loss that has
already taken place. Id. In General Housewares, we held that "if an insured has
actual knowledge that a loss has occurred, is occurring, or is substantially
certain to occur on or before the effective date of the policy, the known loss
doctrine will bar coverage." Id. at 414. We further concluded, however, that if
the insurer also knew of the loss, it would be not be able to assert the known
loss doctrine to defeat coverage. Id. at 414 (citation omitted). Patricia argues
that because Indiana Insurance knew of the loss before the second Policy took
effect, Indiana Insurance is estopped from asserting the known loss doctrine to
bar coverage in the second through fourth years in any event.
C. The "Known Claim" Exclusion
The fortuity principle is also explicitly addressed
in the coverage clause of the Policies:
insurance applies to "bodily injury" and "property damage" only if:
to the policy period, no insured ... and no "employee" authorized by you to give
or receive notice of an "occurrence" or claim, knew that the "bodily injury" or
"property damage" had occurred, in whole or in part. If such a listed insured or
authorized "employee" knew, prior to the policy period, that the "bodily injury"
or "property damage" occurred, then any continuation, change or resumption of
such "bodily injury" or "property damage" during or after the policy period will
be deemed to have been known prior to the policy period.
d. "Bodily injury"
or "property damage" will be deemed to have been known to have occurred at the
earliest time when any insured ... or any "employee" authorized by you to give
or receive notice of an "occurrence" or claim:
Reports all, or any part, of the "bodily injury" or "property damage" to use or
any other insurer;
(2) Receives a written or
verbal demand or claim for damages because of the "bodily injury" or "property
(3) Becomes aware by any other means
that "bodily injury" or "property damage" has occurred or has begun to occur.
Appellant's Br. pp. 11-12.
Despite the fact that this language is found in the coverage clause, at
least one court has referred to it as a "known claim exclusion." The language's
effect is to
exclude coverage under certain circumstances, so we too
adopt the convention of referring to it as the known claim exclusion. In any
event, pursuant to this known claim exclusion, if George knew that any loss had
occurred, coverage would be barred, just as it would be pursuant to the known
loss doctrine. The difference, however, is that the known claim exclusion does
not make an exception for cases where the insurer also knew of the loss
beforehand. Because only George's prior knowledge is relevant pursuant to the
Policies' known claim exclusion, Indiana Insurance argues that there is no
question that coverage is barred for the second through fourth years of
coverage. The question, then, is whether the known loss doctrine or the known
claim exclusion applies.
D. Applicability of Known Loss Doctrine or Known Claim Exclusion
In our original opinion, we addressed the question of whether KB Home's allegations in the underlying suit could qualify as property damage pursuant to the language of the Policies, or whether the " economic loss" doctrine barred coverage. Without recounting the entirety of our disposition, we concluded that the Indiana Supreme Court's approach in Sheehan required us to " start with the policy language and determine if (1) the loss would be covered under the general coverage clause and (2) if any exclusions apply that would preclude coverage, without regard to whether the loss constituted 'economic loss.'" We take the same general approach here, and so apply the language of the known claim exclusion as it appears in the Policies, without regard to the common-law known loss doctrine.
Application of the known claim exclusion to undisputed facts is straightforward: George knew of contamination in Cedar Park no later than May of 2002, during the first of four years of CGL coverage that George obtained from Indiana Insurance. Coverage is therefore barred for the second through fourth years, regardless of the jury's finding of any prior knowledge. Any finding regarding whether George had any knowledge of contamination prior to the first year of coverage applies only to the first year.
One final note of clarification is in order. Previously, we concluded that " the designated evidence creates a genuine issue of material fact as to whether George had actual knowledge 'that a loss ha[d] occurred, [wa]s occurring, or [wa]s substantially certain to occur on or before the effective date of the policy[,]' Gen. Housewares, 741 N.E.2d at 414[.]" This standard of " knowledge," however, is the one used under the known loss doctrine, which we have concluded has no applicability in
this case. The correct legal standard for " knowledge" to be applied at trial is the one dictated by the language of the known claim exclusion in the Policies.
We reaffirm our original disposition in all other respects.
CRONE, J, and PYLE, J., concur.