Global Caravan Technologies, Inc. v. Cincinnati Insurance Co.

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          Appeal from the Marion Superior Court, The Honorable James B. Osborn, Judge, Trial Court Cause No. 49D14-1709-PL-34008.

         Attorneys for Appellants: George M. Plews, Jonathan P. Emenhiser, Plews Shadley Racher & Braun LLP, Indianapolis, Indiana

         Attorney for Appellee: James J. Hutton, Indianapolis, Indiana

          OPINION

         May, Judge.

         [¶ 1] Global Caravan Technologies, Inc. ("Global"), Christopher Douglas, Husheng Ding, Kyle Fang, and Red Wind Capital, LLC ("Red Wing"), (collectively, "Defendants")^[1] appeal the trial court’s grant of summary judgment in favor of The Cincinnati Insurance Company ("Cincinnati") in Cincinnati’s action requesting a declaration that it had no obligation to defend Defendants in other litigation. Defendants raise multiple issues, which we restate as:

1. Whether Global’s voluntary intervention in a claim filed by Charles Hoefer Jr. is a "suit" under the language of Global’s insurance contract with Cincinnati; and

2. Whether the insurance contract’s Employment Related Practices Exclusion ("ERP Exclusion") relieves Cincinnati of any obligation to provide defense and indemnification coverage to Douglas, Ding, and Fang for Hoefer’s lawsuit.

          We affirm.

          Facts and Procedural History

          [¶ 2] In January 2013, Global was formed by Charles Hoefer Jr. and sought to enter the recreational vehicle market. At relevant times, Hoefer possessed experience and intellectual property rights to materials related to manufacturing recreational vehicles. Douglas, Ding, and Fang were investors in Global; Douglas and Ding were executive officers of Global and Fang was a director at Global. Red Wing is a separate business entity owned by Douglas, Ding, Thomas Gray, Doris Roberts, and Steve Coons. Red Wing is an investor in Global. Cincinnati insures Global.

         [¶ 3] Through a series of events, Hoefer was removed as owner of Global. On May 1, 2014, Hoefer filed a complaint in Marion County ("Hoefer Litigation") against Ding, Douglas, Fang, Red Wing, Gray, Roberts, Christopher Tzeng,^[2] C.H. Douglas & Gray, LLC,^[3] and Steve Coons.^[4] In that complaint, Hoefer presented several claims, including conspiracy, unjust enrichment, securities fraud, common law fraud, constructive fraud, breach of fiduciary duty, defamation, defamation per se, theft, and interference with contractual relations.

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          [¶ 4] On May 14, 2014, Global, as the policyholder, notified Cincinnati of the Hoefer Litigation and requested defense and indemnification for Global, Douglas, Ding, and Fang. Cincinnati agreed to provide defense of Douglas, Ding, and Fang, and it assigned defense counsel for Douglas, Ding, and Fang without consulting Global. Global insisted Cincinnati provide defense to all parties related to Global, including Global, which was not a named defendant in the Hoefer Litigation. Global argued the counsel assigned to Douglas, Ding, and Fang was unacceptable due to an alleged conflict of interest. Cincinnati agreed to assign different counsel to Ding, Douglas, and Fang, but stated it would pay only a portion of the defense if different counsel was selected. Cincinnati denied Global’s request for defense beyond that of Ding, Douglas, and Fang. Global rejected Cincinnati’s response to their request and retained separate counsel unapproved by Cincinnati.

          [¶ 5] On July 7, 2014, Global moved to intervene in the Hoefer Litigation, arguing that some of the claims related to incidents occurring at Global and that Hoefer sought to obtain Global assets as part of his claims. The trial court granted Global’s request over Hoefer’s objection. On October 8, 2014, Hoefer amended his claim. The amended claim did not include any allegations against Global. On December 1, 2014, Ding and Douglas filed offensive counterclaims against Hoefer. Also on December 1, 2014, Global filed an answer to Hoefer’s amended complaint and asserted an offensive counterclaim against Hoefer.

          [¶ 6] Meanwhile, in federal court, on October 8, 2014, Cincinnati filed an action seeking declaratory judgment that it had no duty to defend or indemnify Global in the Hoefer Litigation. Cincinnati and Global cross-moved for summary judgment. The district court granted summary judgment in favor of Cincinnati, and Global appealed. The Seventh Circuit Court of Appeals did not reach the merits of the appeal, as it determined it did not have jurisdiction over the matter because Hoefer was not a citizen of Indiana at the time the district court action was filed.

          [¶ 7] While the federal claims were pending, Douglas, Ding, Fang, and Red Wing retained Delk McNally, LLP, to defend them in the Hoefer Litigation. Douglas, Ding, Fang, and Red Wing incurred $50,715.37 in attorney’s fees and costs and submitted the relevant invoices to Cincinnati for payment. Cincinnati has not paid those invoices. As part of its involvement in the Hoefer Litigation, Global retained Ice Miller, LLC, and incurred $90,661.31 in attorney’s fees and costs, which Cincinnati has not reimbursed.

          [¶ 8] On September 5, 2017, CIC filed the present action, which was a complaint for declaratory judgment asking the trial court to declare that CIC is not required to defend or indemnify Defendants in the Hoefer Litigation. Defendants filed an answer and counterclaim. On March 7, 2018, Defendants filed a motion for partial summary judgment. On April 20, 2018, CIC filed a cross-motion for summary judgment. The trial court held oral argument on the motions on July 31, 2018, and September 17, 2018. The trial court denied Defendants’ partial motion for summary judgment and granted summary judgment in favor of CIC, finding in relevant part: (1) CIC had no obligation to defend Global because "suit" as defined by the insurance contract does not include Global’s act of voluntarily intervening in the Hoefer Litigation, and (2) the ERP Exclusion relieves CIC from any obligation to provide defense or indemnification coverage for Douglas, Ding, and Fang.

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          Discussion and Decision

          Summary Judgment Standard of Review

         [¶ 9] We review summary judgment using the same standard as the trial court: summary judgment is appropriate only where the designated evidence shows there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Rogers v. Martin, 63 N.E.3d 316, 320 (Ind. 2016). All facts and reasonable inferences are construed in favor of the non-moving party. City of Beech Grove v. Beloat, 50 N.E.3d 135, 137 (Ind. 2016). Where the challenge to summary judgment raises questions of law, we review them de novo. Rogers, 63 N.E.3d at 320.

         [¶ 10] We do not modify our standard of review when the parties make cross motions for summary judgment. State Auto Ins. Co. v. DMY Realty Co., LLP, 977 N.E.2d 411, 419 (Ind.Ct.App. 2012). "Instead, we must consider each motion separately to determine whether the moving party is entitled to judgment as a matter of law." Id. When the trial court makes findings and conclusions in support of its order regarding summary judgment, we are not bound by such findings and conclusions, but they aid our review by providing reasons for the decision. Allen Gray Ltd. P’ship IV v. Mumford, 44 N.E.3d 1255, 1256 (Ind.Ct.App. 2015). We will affirm a summary judgment order on any theory or basis found in the record. Id.

          Insurance Policy Interpretation Standard of Review

          [¶ 11] When interpreting an insurance policy, we give plain and ordinary meaning to language that is clear and unambiguous. Meridian Mut. Ins. Co. v. Auto-Owners Ins. Co., 698 N.E.2d 770, 773 (Ind. 1998). Policy language is unambiguous if reasonable persons could not honestly differ as to its meaning. Id. To this end, we look to see "if policy language is susceptible to more than one interpretation." Id. If an insurance policy contains ambiguous provisions, they are construed in favor of the insured. Id. "This strict construal against the insurer is driven by the fact that the insurer drafts the policy and foists its terms upon the customer. The insurance companies write the policies; we buy their forms or we do not buy insurance." Id.

          Duty to Defend Global

          [¶ 12] The insurance contract between Global and Cincinnati provides for defense of the insured "against any ‘suit’ seeking damages." (App. Vol. II at 72.) The policy further defines:

21. "Suit" means a civil proceeding in which money damages because of "bodily injury", "property damage" or "Personal and advertising injury" to which this insurance applies are alleged. "Suit" includes:

a. An arbitration proceeding in which such damages are claimed and to which the insured must submit or does submit with our consent;

b. Any other alternative dispute resolution proceeding in which such damages are claimed and to which the insured submits with our consent; or

c. An appeal of a civil proceeding.

(Id. at 85.)

          [¶ 13] The trial court determined Global’s voluntary intervention in the Hoefer Litigation did not qualify as a "suit" under the insurance policy:

An insurer’s duty to defend its insured is broader than its duty to indemnify. Yet, the duty to defend is determined by the examination of the "allegations of the complaint coupled with those facts

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known to or ascertainable by the insurer after reasonable investigation." " ‘[A]n insurer may properly refuse to defend where an independent investigation reveals a claim patently outside the risks covered by the policy.’ " Moreover, when a policy exclusion applies to preclude coverage, the insurer has no duty to defend its insured. Therefore, while an insurer’s duty to defend is broader than its duty to indemnify an insured, it is not boundless. When an insurer has no duty to defend, it also has no duty to indemnify its insured under the policy.

The Coverage B insuring agreement provides that [Cincinnati] has the right and duty to defend [Global] against any "suit" seeking to hold the named insured legally liable for damages because of covered "personal and advertising injury." However, [Cincinnati] has no duty to defend insured [Global] under the [Cincinnati] Policy unless a "suit" has been brought against the insured for potentially covered damages in the [Hoefer Litigation]. The term "suit" is defined in the [Cincinnati] Policy to mean, in relevant part, "a civil proceeding in which money damages because of ‘bodily injury,’ ‘property damage’ or ‘personal and advertising injury’ to which this insurance applies are alleged." While [Global] is an insured, it still has the burden to prove the ...