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FLM, LLC v. Cincinnati Ins. Co.

Court of Appeals of Indiana

December 29, 2014

FLM, LLC, Appellant-Plaintiff,
v.
THE CINCINNATI INSURANCE COMPANY, et al., Appellees-Defendants

Page 445

APPEAL FROM THE MARION SUPERIOR COURT. The Honorable David J. Dreyer, Judge. Cause No. 49D10-0501-PL-943.

ATTORNEYS FOR APPELLANT: GEORGE M. PLEWS, JEFFREY D. CLAFLIN, JONATHAN P. EMENHISER, Plews Shadley Racher & Braun LLP, Indianapolis, Indiana.

ATTORNEYS FOR APPELLEE THE CINCINNATI INSURANCE COMPANY: JULIA BLACKWELL GELINAS, MAGGIE L. SMITH, CARRIE G. DOEHRMANN, Frost Brown Todd LLC, Indianapolis, Indiana.

CRONE, Judge. BAKER, J., and PYLE, J., concur.

Page 446

OPINION

CRONE, Judge

Case Summary

This is the second appeal in this case. FLM, LLC (" FLM" ), owns land in Indianapolis that it leased to International Recycling Inc. (" IRI" ). IRI retrieved foundry sand from a Chrysler foundry and stored it on the leased property until it could be disposed of elsewhere. Chrysler stopped paying IRI, which consequently went out of business and abandoned 100,000 tons of sand on FLM's property. Environmental and legal problems ensued, and FLM sought indemnification from The Cincinnati Insurance Company (" Cincinnati" ), IRI's insurer. Cincinnati filed a motion for partial summary judgment asserting that no property damage coverage is available under its policies. FLM filed a cross-motion for summary judgment asserting that both property damage coverage and personal injury coverage are available under Cincinnati's commercial general liability (" CGL" ) and commercial umbrella policies. The trial court issued an order granting Cincinnati's motion " as against any insurance coverage obligation." Appellant's App. at 2174.

FLM appealed and again asserted that both personal injury coverage and property damage coverage are available under Cincinnati's policies. A divided panel of this Court issued an opinion in that appeal. In FLM, LLC v. Cincinnati Insurance Co., 973 N.E.2d 1167 (Ind.Ct.App. 2012), trans. denied (2013), the majority noted that several issues had been raised but found one issue dispositive: whether IRI's abandonment of the sand is covered by the personal injury provisions of Cincinnati's policies. The majority held that it is and did not address property damage coverage. The last line of the majority opinion states: " We therefore reverse the trial court's entry of summary judgment in favor of Cincinnati and remand with instruction to enter summary judgment in favor of FLM." Id. at 1177. The third judge disagreed with the majority's holding but concurred in result on the basis that property damage coverage is available under the policies. Cincinnati filed a petition for transfer to the Indiana Supreme Court, which was denied.

The trial court then asked FLM and Cincinnati to submit proposed orders pursuant to the Court of Appeals' remand. FLM submitted a proposed order finding that both personal injury coverage and property damage coverage are available under the policies, vacating the trial court's prior order, denying Cincinnati's motion for partial summary judgment, and granting FLM's cross-motion for summary judgment. Cincinnati did not submit a proposed order and was granted an opportunity to file an objection or a response to FLM's proposed order. Cincinnati did not file an objection but did file an interpleader motion paying $1.7 million into the trial court ($1 million for the personal injury coverage limits under the CGL policy plus the $1 million aggregate limits under the umbrella policy, minus $300,000 that was

Page 447

paid to a third party). FLM filed a response to the interpleader motion asserting that it is entitled to the $1.7 million and reserving the right to claim that the remaining limits exceed $1.7 million.

After a hearing, the trial court signed FLM's proposed order and an entry stating that the parties had agreed that the order should be entered; that the interpleaded funds should be ordered paid to FLM; and that further issues remained regarding whether additional coverage was available under the policies. FLM filed a summary judgment motion asserting that the CGL policy contains separate $1 million limits for property damage coverage and personal injury coverage. Cincinnati filed a response and a motion to reconsider, rescind and/or modify the trial court's remand order asserting that no court had determined that property damage coverage was available and that Cincinnati had not agreed that the entry of FLM's proposed order was proper. After a hearing, the trial court issued an order granting Cincinnati's motion to reconsider and striking all references to property damage coverage from its prior order. The trial court also issued an order denying FLM's summary judgment motion as to separate coverage limits, entering judgment for FLM on coverage only as to personal injury, and decreeing that the $1.7 million limits of the policies had been interpleaded and released to FLM in full satisfaction of the judgment.

FLM now appeals, raising three issues: (1) whether Cincinnati waived any challenge to FLM's proposed order by failing to make a timely objection and expressly agreeing to it; (2) whether property damage coverage is available under the CGL policy; and (3) whether the CGL policy has separate $1 million limits for property damage coverage and personal injury coverage. We decide these issues as follows: (1) regardless of any waiver by Cincinnati, the trial court had inherent power to reconsider and revise its nonfinal order; (2) property damage coverage is available under the CGL policy; and (3) the CGL policy has separate $1 million limits for property damage coverage and personal injury coverage. Therefore, we reverse and remand with instructions to enter summary judgment in FLM's favor as to property damage coverage and separate coverage limits. The amount of coverage over $1.7 million to which FLM may be entitled must be determined in further proceedings.

Facts and Procedural History[1]

The relevant facts are largely undisputed. In 1999, FLM leased some Indianapolis property to IRI, which retrieved foundry sand from a Chrysler foundry and stored it on the property until it could be disposed of elsewhere. In 2002, Chrysler stopped paying IRI, which consequently went out of business and abandoned over 100,000 tons of sand on FLM's property. CSX Transportation, Inc. (" CSX" ), which owned and operated an adjacent railroad right-of-way, complained that the sand was migrating onto its property and interfering with its operations. The Indiana Department of Environmental Management (" IDEM" ) investigated complaints about the sand and issued a notice of violation to IRI, FLM, and Chrysler in 2004 and ordered them to remove the sand. Also, the City of Indianapolis (" the City" ) issued a notice of municipal code violation to FLM due to sand migration and " ordered that sediment controls be installed and that the sand be removed unless a drainage permit

Page 448

was obtained. FLM, in turn, sought indemnity under the lease from IRI." Id. at 1171.

In 2005, FLM filed a complaint against Cincinnati, IRI's insurer, seeking a declaration that IRI has coverage under its CGL policy and umbrella policy " for the environmental liabilities asserted by IDEM and the City, as well as FLM's own action against IRI arising from those claims." Id. at 1172 (footnote omitted). Cincinnati filed its answer and counterclaim, seeking a declaration that no coverage is available under the policies. Cincinnati also filed a third-party complaint for declaratory judgment " in order to bring Chrysler, IRI, IDEM, and the City as indispensable parties into the coverage action." Id. " CSX filed a cross-complaint against IRI and FLM seeking trespass and nuisance damages related to the migration of foundry sand onto its property." Id.

In December 2007, Cincinnati filed a motion for partial summary judgment requesting a determination that no coverage exists under the policies for the claims made by IDEM, the City, Chrysler, or FLM against IRI; the motion specifically excluded CSX's claims. In February 2008, FLM filed a response and a cross-motion for summary judgment seeking a determination that coverage is available for those claims, including those made by CSX, under both the property damage and personal injury provisions in the policies. " Chrysler opposed Cincinnati's motion, joined FLM's cross-motion and filed its own cross-motion for summary judgment." Id. In November 2008, the trial court issued an order granting summary judgment to Cincinnati " as against any insurance coverage obligation" as to the claims made by IDEM, the City, and FLM, as well as denying FLM's cross-motion for summary judgment. Appellant's App. at 2174. The court also denied Chrysler's cross-motion for summary judgment as moot.

Both FLM and Chrysler filed an appeal, which was delayed several years by Chrysler's bankruptcy. While the appeal was pending, Cincinnati settled with CSX for $300,000. In August 2012, a divided panel of this Court issued an opinion in that appeal. The majority (Judge Kirsch, joined by Judge Vaidik) stated, " FLM and Chrysler appeal raising several issues, of which we find the following dispositive: whether IRI's abandonment of sand constitutes a 'wrongful entry' or 'invasion of the right of private occupancy' covered by the 'personal injury' provisions of the insurance policies." FLM, 973 N.E.2d at 1169-70. The majority held that it does and stated: " We therefore reverse the trial court's entry of summary judgment in favor of Cincinnati and remand with instruction to enter summary judgment in favor of FLM." Id. at 1177. The majority did not address property damage coverage. Judge Bradford disagreed with the majority's holding but concurred in result on the basis that property damage coverage is available under the policies. Cincinnati filed a petition for transfer to the Indiana Supreme Court, which was denied in April 2013.

On May 6, 2013, the trial court asked the parties to submit proposed orders or an agreed proposed order pursuant to this Court's remand. On May 9, 2013, FLM submitted a proposed order to the trial court and Cincinnati finding coverage under both the personal injury and property damage provisions of the policies, vacating the trial court's prior order, denying Cincinnati's motion for partial summary judgment, and granting FLM's cross-motion for summary judgment. Cincinnati did not submit a proposed order and instead was granted until May 31, 2013, to file an

Page 449

objection or a response to FLM's proposed order. Cincinnati did not file an objection but did file an interpleader motion paying $1.7 million into the trial court ($1 million for the personal injury limits under the CGL policy plus the $1 million aggregate limits under the umbrella policy, minus the $300,000 that was paid to CSX). FLM filed a response to the interpleader motion asserting that it was entitled to the entire $1.7 million. In a footnote, FLM stated, " By responding to Cincinnati's 'Interpleader' and asserting a claim for the deposited funds, FLM does not concede that $1.7 million is the remaining balance. To the contrary, FLM expressly reserves the right to claim that the remaining limits exceed $1.7 million." Appellant's App. at 2191 n.1.

The trial court held a hearing on July 10, 2013. FLM's counsel, George Plews, stated, " You got no objections from anybody [on FLM's proposed order] and so we think that one probably should be entered." Tr. at 6.[2] When the trial court asked if the parties still had " differences" regarding the interpleader, Plews replied,

Well here's__ the difference is I think__ the difference between Cincinnati and ourselves is we're only__ as to the limits there are on the policy.... We say there's 3 Million Dollars limits available for coverage of this claim [$1 million each for personal injury and property damage limits under the CGL policy plus the $1 million aggregate limits under the umbrella policy] and they say there's 2 Million Dollars.

Id. at 7-8. After a brief discussion about policy limits, the following colloquy occurred:

THE COURT: I don't know if Rick [Skiles, Cincinnati's counsel] had expected that or not or it's fair to expect him to respond to this or not or how should we proceed and I don't mind you saying whatever you want to do but Rick what do you want to do?
MR. SKILES: Well George has been totally accurate with what he said. When FLM filed its brief there was a footnote where they said, hey we're not really agreeing that there's only 1.7 Million and we're going to reserve that argument if we want to argue it at a later date and I immediately sent an email to John [Emenhiser, Plews's cocounsel] and said hey, you know, are you serious about this because if you're serious I need to know it. Jonathan emailed me last__ YESTERDAY and said you know here's why we think that there is an additional amount of money and he also sent me some cases I think this morning but I haven't been to my office. So, while I have no problem with Jonathan and George arguing their position it seems to me that it would help Cincinnati if I knew what their position was in terms of a briefing schedule.... In other words, I have a summary of Jonathan's argument but I really don't know where they're coming from. I'd like to respond to it formally.

Id. at 11-12. The trial court asked Plews for his thoughts:

MR. PLEWS: We don't have any problem with__ this was the third issue, the third issue was the limits and so I think that what we have established, maybe, that the first two__ as to the first two issues which is the entry of summary

Page 450

judgment and the release of the 1.7 there's no controversy.
THE COURT: Is that true?
MR. SKILES: Yeah, Judge I__ as long as it has no__ as long as it has no prejudicial effect on Cincinnati I don't care if the court releases the 1.7 to George and Jonathan and his client because he's correct nobody has challenged that and under Cincinnati's belief we tendered that money into court for the Court to divide it up how it saw fit.
THE COURT: Okay. So we all agree to that so what's remaining...
MR. PLEWS: So the third issue are the...
THE COURT: ...what's remaining as I indicated the issue is whether or not there's any other limits that should be paid in.
MR. PLEWS: Right.
MR. SKILES: And our position is__ our position is that there are two One Million Dollar policies...

Id. at 13-14.

The parties agreed to further briefing on the limits issue, and the trial court said, " So I guess what I'm going to do as a result of this discussion or hearing is enter by everybody's agreement I guess [FLM's] Proposed Order Granting their Motion for Summary Judgment." Id. at 32. The trial court signed the order (" the July 10 Order" ) that day. ...


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