American Home Assur. Co. v. Allen

• Decision Date: 09 September 2004
• Docket Number: No. 29A04-0311-CV-570.,29A04-0311-CV-570.
• Citation: 814 N.E.2d 662
• Parties: AMERICAN HOME ASSURANCE CO., Appellant-Defendant, v. Thomas G. ALLEN, Joe M. Gilstrap, Thomas G. Grier, James H. Nelson, Donald K. Owens, Richard K. Patierno, Richard K. Patierno, Jr., Silvine M. Patierno, and John M. Stone, Appellees-Plaintiffs, Great American Reserve Insurance Co. and Glenn H. Guffey, Appellees-Defendants.
• Court: Indiana Appellate Court

814 N.E.2d 662

AMERICAN HOME ASSURANCE CO., Appellant-Defendant, v. Thomas G. ALLEN, Joe M. Gilstrap, Thomas G. Grier, James H. Nelson, Donald K. Owens, Richard K. Patierno, Richard K. Patierno, Jr., Silvine M. Patierno, and John M. Stone, Appellees-Plaintiffs, Great American Reserve Insurance Co. and Glenn H. Guffey, Appellees-Defendants.

No. 29A04-0311-CV-570.

Court of Appeals of Indiana.

September 9, 2004.

Mark D. Gerth, Kightlinger & Gray, LLP, Indianapolis, IN, Attorney for Appellant.

George M. Plews, Jeffrey A. Townsend and John D. Moriarty, Plews Shadley Racher & Braun, Indianapolis, IN, Attorneys for Appellees.

OPINION

VAIDIK, Judge.

Case Summary

American Home Assurance Co. ("American Home") appeals the trial court's grant of summary judgment in favor of insurance agents Thomas G. Allen, Joe M. Gilstrap, Thomas G. Grier, James H. Nelson, Donald K. Owens, Richard K. Patierno, Richard K. Patierno, Jr., Silvine M. Patierno, and John M. Stone (collectively, "Plaintiffs"). This dispute arose over a professional liability policy issued by American Home with limits of liability of $250,000 for each wrongful act or series of continuous, repeated, or interrelated wrongful acts and $750,000 in the aggregate. American Home contends that the clear and unambiguous language of the insurance policy provides that the coverage is limited to $250,000, not $750,000. Because we find the terms of the policy — continuous, repeated, or interrelated wrongful acts — to be ambiguous, we strictly construe them against the insurer, American Home, and in favor of maximum coverage. We therefore affirm the trial court.¹

Facts and Procedural History

This is an appeal from a summary judgment order determining the policy limits of a Life Insurance Agents and Brokers Professional Liability Policy ("the Policy") issued by American Home Policy No. 2417052 to Glenn Guffey. The Policy provides that its limits of liability are $250,000 for "Each Wrongful Act or series of continuous, repeated or interrelated Wrongful Acts" or $750,000 in the aggregate. Appellant's App. p. 74 (emphasis added). The Policy did not define the terms "continuous, repeated or interrelated."

The relevant facts are that Plaintiffs are life insurance agents in North or South Carolina. Over the course of seven years, life insurance agent Glenn Guffey recruited Plaintiffs to sell the Flex II annuity, a tax-deferred annuity offered by Great American Reserve Insurance Co. ("Great American").² In exchange for annual premiums, the Flex II promised annuity income in the future. Guffey individually trained Plaintiffs, and part of that instruction included telling them that the Flex II had no front-end load, meaning that no commission or other fees would reduce the amount of premiums used to build up the value of the policy. In fact, the Flex II did have a front-end load. After some of Plaintiffs' customers complained about misrepresentations in the sale of the Flex II, the South Carolina Department of Insurance launched an investigation. As a result of the investigation, most of the nine Plaintiffs entered into consent decrees with the department admitting that they had misrepresented the Flex II as to the existence of a front-end load.

Plaintiffs initiated this suit in the Hamilton Circuit Court, asserting twelve counts against Guffey and Great American. The substance of many of these claims is that Plaintiffs incurred liability to their customers and costs of regulatory proceedings and defense of civil lawsuits, all as a result of Guffey's and Great American's misrepresentations that the Flex II had no front-end load.³

Because the allegations of the lawsuit centered on Guffey's professional liability, American Home, as Guffey's insurer, represented him. In June of 1999, Guffey filed a motion on behalf of American Home, along with a proposed order, requesting leave to tender to the trial court "the remaining policy limits under American Home Assurance Company Policy No. 2417052 to be held by the Court and used towards any judgment or award rendered in the above captioned case." Appellant's App. p. 92. Plaintiffs filed a response in which they agreed that the policy limits should be tendered to the trial court and suggested that the money be held in an interest-bearing account. In the response, to which Guffey did not reply, Plaintiffs also "contend[ed] that the applicable limit under the policy is $750,000." Appellant's App. p. 96. Later that month, the trial court signed Guffey's proposed order but added the condition that the money be held in an interest-bearing account. Specifically, the order provided that "the remainder of the policy limits from American Home Assurance Company Policy No. 2417052 shall be tendered to this Court and held in an interest-bearing account until such time as a judgment or award is rendered in this case." Appellant's App. p. 99. The order did not specify the amount of the remaining policy limits. Since that order, American Home has not tendered any monies to the trial court.

Thereafter, Plaintiffs filed a Motion to Enforce Court Order, in which it asked the trial court to enforce its Order requiring American Home to tender the remainder of the policy limits to the court. After a hearing on this motion, the trial court took the matter under advisement.

Before ruling on Plaintiffs' Motion to Enforce Court Order, the trial court entered partial summary judgment rulings that the Indiana Supreme Court ultimately affirmed in part, reversed in part, and remanded to the trial court. Allen v. Great Am. Reserve Ins. Co., 766 N.E.2d 1157, 1170 (Ind.2002). On remand, the trial court did not rule on Plaintiffs' Motion to Enforce Court Order.

Plaintiffs sought leave to add American Home as a party, which the trial court granted, and filed an amended complaint. American Home filed an answer asserting four defenses. Plaintiffs then filed a motion for summary judgment against American Home to establish American Home's indemnity obligations under the Policy. Plaintiffs also filed a Second Motion to Enforce Court Order. Following a hearing on these motions, the trial court issued the following order:

The Policy contains an aggregate limit of $750,000, with a limit of $250,000 for "each wrongful act or series of continuous, repeated or interrelated wrongful acts." The Policy does not define "interrelated wrongful acts." Courts regularly hold that the "interrelated wrongful acts" language is ambiguous and must be construed to provide maximum coverage. The American Home policy is ambiguous as a matter of law. The claims asserted by the Plaintiffs in this action against Guffey are separate, distinct claims, and American Home is obligated to pay under its Policy an amount up to ... the aggregate limit of $750,000.

On June 30, 1999[,] this Court ordered defendant Guffey and American Home to tender to this Court the remainder of the policy limits from the American Home Policy. The remaining amount of the aggregate limit of the Policy, as of June 30, 1999, should have been tendered to the Court at that time. Despite this Court's Order, the remainder of the Policy limits was not tendered to the Court.

Appellant's App. p. 23. Accordingly, the trial court entered summary judgment in favor of Plaintiffs and ordered American Home to tender an amount up to the aggregate limit of $750,000 to the court within twenty days. The trial court stated that the funds would be held in an interest-bearing account "until such time as a judgment or award is rendered in this case. The proceeds shall be released and disbursed according to the judgment and award." Id. American Home appeals this order.

Discussion and Decision

American Home contends that the trial court erred in granting summary judgment in favor of Plaintiffs. "The purpose of summary judgment is to terminate litigation about which there can be no factual dispute and which may be determined as a matter of law." Bushong v. Williamson, 790 N.E.2d 467, 474 (Ind.2003). On appeal, our standard of review is the same as that of the trial court: summary judgment is appropriate only where the evidence shows there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Id. at 473. We construe all facts and reasonable inferences drawn from those facts in favor of the non-moving party. Id. On appeal, the trial court's order granting or denying a motion for summary judgment is cloaked with a presumption of validity. Sizemore v. Erie Ins. Exch., 789 N.E.2d 1037, 1038 (Ind.Ct.App.2003). A party appealing from an order granting summary judgment has the burden of persuading the appellate tribunal that the decision was erroneous. Id. at 1038-39.

Insurance contracts are governed by the same rules of construction as other contracts. Colonial Penn Ins. Co. v. Guzorek, 690 N.E.2d 664, 667 (Ind.1997); see also Bowers v. Kushnick, 774 N.E.2d 884, 887 (Ind.2002). Proper interpretation of an insurance policy, even if it is ambiguous, generally presents a question of law that is appropriate for summary judgment. Guzorek, 690 N.E.2d at 667. Clear and unambiguous policy language must be given its ordinary meaning. Id. However, where there is an ambiguity, insurance policies are to be construed strictly against the insurer. Am. States Ins. Co. v. Kiger, 662 N.E.2d 945, 947 (Ind.1996), reh'g denied."This strict construal against the insurer is driven by the fact that the insurer drafts the policy and foists its terms upon the customer." Id."The insurance companies write the policies; we buy their forms or we do not buy insurance." Id.

Failure to define a term in an insurance policy does not necessarily make it ambiguous. Guzorek, 690 N.E.2d at 667. Rather, an insurance policy is ambiguous only if a provision is susceptible to more than one reasonable interpretation. Id. Additionally, an "ambiguity is not affirmatively established simply because controversy exists and one party asserts...