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Zurich American Insurance Co. v. Circle Centre Mall, LLC

Court of Appeals of Indiana

November 7, 2018

Zurich American Insurance Company; Schindler Elevator Corporation; and KONE, Inc., [1] Appellants-Defendants,
v.
Circle Centre Mall, LLC; Simon Property Group, Inc.; and XL Insurance America, Inc., Appellees-Plaintiffs. Bates Label Date From To Subject Bates Label Date From To Subject

          Appeal from the Hamilton Superior Court The Honorable Steven R. Nation, Judge Trial Court Cause No. 29D01-1304-PL-2892

          Attorneys for Appellant Zurich American Insurance Company Kevin S. Smith Church, Church, Hittle & Antrim Fishers, Indiana Charles S. Smith Schultz & Pogue Indianapolis, Indiana Brian O'Gallagher Cremer, Spina, Shaugnessy, Jansen & Siegert, LLC Chicago, Illinois

          Attorneys for Interested Party Schindler Elevator Corporation Kevin C. Schiferl Maggie L. Smith Blake N. Shelby Frost Brown Todd LLC Indianapolis, Indiana

          Attorneys for Appellees Michael R. Limrick Hoover Hull Turner LLP Indianapolis, Indiana Gregory A. Neibarger Bingham Greenebaum Doll LLP Indianapolis, Indiana

          FRIEDLANDER, SENIOR JUDGE.

         [¶1] In 2009, Schindler Elevator Corporation had a contract with Circle Centre Mall, LLC and Simon Property Group, Inc. (collectively, "the Simon Plaintiffs") to maintain the escalators at the Circle Centre Mall in Indianapolis. KONE, Inc. had the maintenance contract before 2009. Schindler's general liability insurer in 2009 was Zurich American Insurance Company. In October of 2009, high school student Phillip Caler fell from an escalator in the mall and sustained severe injuries, and, in 2011, Caler's guardians sued the Simon Plaintiffs, Schindler, and KONE, claiming, inter alia, that Schindler had negligently maintained the escalator from which Caler had fallen and had failed to warn the Simon Plaintiffs of the need for fall protection.[2]

         [¶2] As part of Schindler's maintenance contract with the Simon Plaintiffs, Schindler agreed to name the Simon Plaintiffs as additional insureds pursuant to its policy with Zurich. Moreover, Zurich had a separate, so-called "fronting" agreement with Schindler requiring that any money that might have to be paid to the Simon Plaintiffs pursuant to their insurance contract was to ultimately come from Schindler, not Zurich. In August of 2011 and December of 2012, the Simon Plaintiffs asked Schindler for a defense of the Caler suit by both Schindler and Zurich. Schindler denied the Simon Plaintiffs' requests on the basis that any request for coverage under Schindler's policy should have been made to Zurich.

         [¶3] In March of 2013, the Simon Plaintiffs asked Zurich directly for defense and indemnification in the Caler suit. On April 1, 2013, the Simon Plaintiffs filed a complaint in Hamilton Superior Court against Schindler and KONE, contending that the defendants had breached their contractual duties to them in the Caler suit. On June 21, 2013, Zurich responded to the Simon Plaintiffs' request for a defense in the Caler suit with a reservation-of-rights letter, agreeing to defend the Simon Plaintiffs. Zurich represented that it and Schindler had assigned their third-party claim administrator, Broadspire Services, Inc., to "assist in the defense or resolution of this matter on behalf of both Schindler and SIMON." Appellants' App. Vol. V, p. 202. On July 25, 2013, after learning that Schindler was planning to settle the Caler suit, the Simon Plaintiffs wrote to ask whether Zurich would indemnify a settlement by the Simon Plaintiffs. When Zurich did not respond, the Simon Plaintiffs agreed, in principle, to settle the Caler suit on July 26, 2013.

         [¶4] On June 17, 2014, the Simon Plaintiffs and XL Insurance filed a second lawsuit in Marion Superior Court against Zurich and KONE's insurer Old Republic Insurance Company. This lawsuit alleged the Simon Plaintiffs were additional insureds under Schindler's and KONE's insurance policies with Zurich and Old Republic, respectively, giving rise to duties on the part of Zurich and Old Republic to defend and indemnify the Simon Plaintiffs in the Caler suit. The Simon Plaintiffs specifically alleged that not only had Zurich and Old Republic breached their contractual duties to them, they had also breached their duties of good faith and fair dealing. The Simon Plaintiffs sought $960, 310.14 in defense costs and $2, 000, 000.00 of the amount they had paid to settle the Caler lawsuit, or Zurich's policy limit. On May 19, 2015, the two lawsuits filed in Hamilton and Marion Counties were consolidated into the Hamilton County case from which this appeal was taken. While the original 2013 complaint had alleged that Schindler and Kone had contractual duties to defend the Simon Plaintiffs, on March 7, 2016, the trial court permitted the Simon Plaintiffs to amend their complaint to allege duties to indemnify as well.

         [¶5] During the litigation, a discovery dispute arose about whether Zurich had to produce documents exchanged between Schindler and Zurich during the Caler litigation. On September 22, 2016, the Simon Plaintiffs moved to compel the production of many such documents, which motion Zurich and Schindler opposed, claiming that the documents were protected by the work-product doctrine and/or the attorney-client and/or insurer-insured privileges. Following a hearing on February 2, 2017, the trial court granted the Simon Plaintiffs' motion to compel.

         [¶6] In response to the court's order of February 2, 2017, Zurich produced nearly 300 pages of documents over which Zurich had previously asserted privilege but continued to withhold a total of five documents ("the Group I Documents"). The Group I Documents, which were first sought in the Simon Plaintiffs' September 22, 2016, motion to compel production, are described in Zurich's privilege log as follows:

Bates Label
Date
From
To
Subject

ZURPRI 002-007

March 11, 2013

Kevin Schiferl (Schindler outside counsel)

Tom Quinn (Schindler in-house counsel), Yohanny Nguyen (Schindler paralegal), Vanessa Davis (Schindler outside counsel)

The Simon Plaintiffs' request for insurance coverage

ZURPRI 096-097

April 26, 2013, claim note enclosing March 12, 2013, email

Tom Quinn (Schindler in-house counsel)

Kathleen Fuell (Zurich claims adjuster), Kevin Schiferl (Schindler outside counsel), John Dull (Schindler Risk Manager), John Karnash (Schindler in-house counsel), Thomas Sparno (Schindler in-house counsel), Vanessa Davis (Schindler outside counsel)

The Simon Plaintiffs' request for coverage in Caler suit

ZURPRI 218

April 25, 2014

Kathleen Fuell (Zurich claims adjuster)

Kevin Schiferl (Schindler outside counsel)

The Simon Plaintiffs' claim for reimbursement of attorneys fees

ZURPRI 235-237

May 2, 2013

Kevin Schiferl (Schindler outside counsel)

Tom Quinn (Schindler in-house counsel), Vanessa Davis (Schindler outside counsel)

The Simon Plaintiffs' request for coverage in Caler suit

ZURPRI 258

July 23, 2013

Tom Quinn (Schindler in-house counsel)

Kevin Schiferl (Schindler outside counsel), Vanessa Davis (Schindler outside counsel)

The Simon Plaintiffs' request for coverage in Caler suit

         [¶7] On May 11, 2017, the Simon Plaintiffs filed a motion for sanctions against Zurich and requested the production of the Group I Documents and four more ("the Group II Documents"; collectively with the Group I Documents, "the Documents"), contending that Zurich violated the trial court's February 2, 2017, order by not producing the Documents. The Group II Documents are described as follows:

Bates Label
Date
From
To
Subject

ZURPRI 196-202

February 11, 2013; provided to Zurich March 14, 2013

Venessa Davis (Schindler outside counsel)

Tom Quinn (Schindler in-house counsel), Judy Fritzman (Broadspire Claims Examiner); copied to Yohanny Nguyen (Schindler paralegal), Kevin Schiferl (Schindler outside counsel)

Quarterly evaluation report regarding

Schindler's defense of Caler lawsuit

ZURPRI 205

February 19, 2013; provided to Zurich March 14, 2013

Tom Quinn (Schindler in-house counsel)

Judy Fritzman (Broadspire Claims Examiner), Kevin Schiferl (Schindler outside counsel)

Fault

apportionment analysis of Schindler's defense of Caler lawsuit

ZURPRI 195

March 4, 2013;

provided to Zurich March 14, 2013

Kevin Schiferl (Schindler outside counsel)

Tom Quinn (Schindler in-house counsel); copied to Judy Fritzman (Broadspire Claims Examiner), Yohanny Nguyen (Schindler paralegal), Venessa Davis

Email containing analysis of an expert in the Caler suit

(Schindler outside counsel)

ZURPRI 429

June 24, 2013;

provided to Zurich July 23, 2013

Venessa Davis (Schindler outside counsel)

Kathleen Fuell (Zurich claims adjuster)

Mediation statement

         [¶8] On August 4, 2017, the trial court granted the Simon Plaintiffs' motion for sanctions, ordering Zurich to produce the Documents within thirty days and pay the Simon Plaintiffs' attorney fees, the amount of which would be determined after the Simon Plaintiffs submitted an affidavit of attorney fees. On September 1, 2017, the Simon Plaintiffs filed their attorney fee evidence. On September 26, 2017, the trial court ordered Zurich to pay the Simon Plaintiffs $14, 871 as a sanction. On October 2, 2017, Zurich filed a notice of appeal as a matter of right pursuant to Indiana Appellate Rule 14(A)(1).

         [¶9] Meanwhile, on September 15, 2017, while briefing on the Simon Plaintiffs' attorney fee evidence was ongoing, the Simon Plaintiffs filed a motion for sanctions and entry of default judgment against Zurich, asking that default judgment be entered against Zurich as an additional sanction for Zurich's failure to produce the Documents. Following a hearing on December 1, 2017, the trial court entered default judgment against Zurich on both counts of the Simon Plaintiffs' complaint and stayed further proceedings. On January 17, 2018, the trial court certified its December 1, 2017, order for ...


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