Auto-Owners Ins. Co. v. Bank One
| Decision Date | 15 August 2006 |
| Docket Number | No. 49A04-0511-CV-647.,49A04-0511-CV-647. |
| Citation | 852 N.E.2d 604 |
| Parties | AUTO-OWNERS INSURANCE COMPANY, Appellant-Plaintiff, v. BANK ONE; Bank One Indiana, Corp.; Bank One, N.A., Bank One, Indiana, N.A.; Bank One, Inc., Appellees-Defendants. |
| Court | Indiana Appellate Court |
Bruce N. Elliott, Conlin, McKenney & Philbrick, P.C., Ann Arbor, MI, Thomas R. Haley, III, Jennings Taylor Wheeler & Haley, P.C., Carmel, IN, for Appellant.
Jeffrey C. McDermott, Marc T. Quigley, Krieg DeVault, LLP, Indianapolis, IN, for Appellees.
Auto-Owners Insurance Company ("Auto-Owners") appeals the trial court's order granting Bank One's motion for summary judgment and denying Auto-Owners' motion for partial summary judgment. Auto-Owners raises four issues for our review, which we consolidate and restate as whether the trial court properly granted Bank One's motion for summary judgment and denied Auto-Owners' motion for partial summary judgment. Because the discovery rule does not apply to claims for conversion of a negotiable instrument, Auto-Owners' claims for negligence and conversion based on any checks negotiated before October 30, 1995, are barred by the statute of limitations. Bank One is entitled to summary judgment on Auto-Owners' claims based on checks negotiated after October 30, 1995, because it proved the defense available to it under Indiana Code section 26-1-3.1-405(b), and because Auto-Owners did not show the existence of a genuine issue of material fact regarding whether Bank One failed to exercise ordinary care in taking the checks for deposit. The trial court's order granting Bank One's motion for summary judgment and denying Auto-Owners' motion for partial summary judgment is therefore affirmed.
Between 1988 and 1998, Kenneth Wulf was employed by Auto-Owners as a field claims representative and resident adjuster. Wulf resided in Bloomington, Indiana, but spent a good deal of his time working out of Auto-Owners' Indianapolis branch office. As a claims representative, Wulf was responsible for determining whether Auto-Owners should pursue a subrogation or a salvage claim. Salvage involves an insurance company taking control of certain property, usually a wrecked car, after payment of a claim for loss, and then selling that property. With subrogation, an insurance company steps into the shoes of its insured following the payment of a claim, and then pursues the claim of its insured. If a salvage or a subrogation claim was warranted, the claims representative was responsible for every aspect of the claim process. The claims representative was supposed to place a notation in the file indicating that subrogation or salvage was being pursued. If the claim involved subrogation, the claims representative was responsible for hiring an attorney to pursue the claim, and would be the subrogation attorney's sole contact. The claims representative had the authority to settle a subrogation or a salvage claim up to a certain dollar amount.
When Auto-Owners received a check for subrogation or salvage, the clerical staff initially handled the check. The clerical staff would open the daily mail, remove any subrogation or salvage checks, attach the check to the appropriate file, and give the file to the claims representative. The clerical staff did not keep a record of the subrogation and salvage checks that were received. Furthermore, Auto-Owners did not maintain a list of all pending subrogation or salvage claims. The only way a branch manager could determine whether a salvage or subrogation claim was pending was to look at the file. When the claims representative received a file with a subrogation or salvage check, he or she was responsible for processing the check by making a notation in the file indicating that the check was received. The claims representative was then supposed to complete a transmittal form for the check, and return the check to the clerical staff who would mail the check to Auto-Owners' home office in Lansing, Michigan, where it would be deposited.
While Wulf worked for Auto-Owners, Auto-Owners required its branch managers to review both open and closed claims files every six months. The branch managers would look for any errors in the files and would also examine whether subrogation or salvage claims should be pursued or, if they had been pursued, were being handled properly. Once a file was permanently closed, it would be sent to Auto-Owners' home office for storage. Senior claims examiners at the home office performed random audits on closed files, and would also review all files that involved claims over a certain threshold amount. During these reviews, the senior claims examiners would assess whether subrogation and salvage were handled properly.
Periodically, Auto-Owners branch managers received salvage sheets from salvage buyers. The salvage sheet identified the vehicles that had been received at the salvage yard, listed the claim number, and stated whether the vehicle had been sold. It was Auto-Owners' policy to reconcile lists that identified when salvage was due with the salvage sheets.
In 1991, Wulf opened a sole proprietorship account ("the Account") at a Bank One branch in Bloomington. The name on the Account was "Auto Owners Insurance," and Wulf was the only signer on the Account. Bank One's policies and procedures for opening a new account specified that the customer must produce identification and a social security number. In opening a business account, Bank One required the customer to provide a number of legal documents in order to establish ownership. These documents included, where applicable, an assumed business name certificate, a certificate of incorporation, and a corporate resolution.
Wulf stated that in opening the Account, Bank One did not require him to produce any documents. He specifically related that Bank One did not ask for the articles of incorporation, a resolution from the board of directors, or any other document authorizing him to open the account. During discovery, Bank One stated that it was "unable to locate any documents relating to the opening of the account." Appellant/Plaintiff's Appendix at 481. At his deposition, Wulf testified that he did not have permission or authorization from Auto-Owners to open the Account.
Shortly after opening the Account, Wulf began stealing subrogation and salvage checks. To do this, Wulf would pursue either a subrogation or salvage claim but not leave a notation about this in the claim file. Without a notation in the file, no one working at Auto-Owners' Indianapolis branch anticipated the arrival of a subrogation or salvage check. When a subrogation or salvage check arrived in the mail, the clerical staff would attach the check to the claim file and give the file to Wulf. Wulf then would pocket the check. The checks were made payable to Auto-Owners and had payee names such as "Auto-Owners Insurance Company," "Auto-Owners Insurance," "Auto-Owners Insurance Co.," and "Auto-Owners Insurance as Subrogee of —." Id. at 558-71. Wulf fraudulently endorsed the checks using a stamp he had specially made that said, "Auto Owners Insurance Deposit Only." Id. at 295. Wulf deposited the fraudulently endorsed checks into the Account even though he had no authority to sign or endorse checks on behalf of Auto-Owners. Bank One accepted each of the checks deposited by Wulf.
Auto-Owners discovered Wulf's illegal conduct in 1998. After conducting an investigation, Auto-Owners learned that Wulf embezzled over 106 checks totaling more than $545,000. Criminal charges were later filed against Wulf, who pled guilty to two counts of forgery and one count of theft.
On October 30, 1998, Auto-Owners filed suit against Bank One alleging that Bank One was negligent. It later amended its complaint to add a claim for conversion under Indiana Code section 26-1-3.1-420(a). Bank One filed an answer to Auto-Owners' complaint raising several affirmative defenses including the statute of limitations. On December 3, 2003, Auto-Owners filed a partial motion for summary judgment on Bank One's statute of limitations defense. Bank One filed a motion for summary judgment on both of Auto-Owners' causes of action and a response to Auto-Owners' motion for partial summary judgment on March 12, 2004. The trial court held a hearing on both parties' motions for summary judgment on September 21, 2005. On October 14, 2005, the trial court issued an order denying Auto-Owners' motion for partial summary judgment, granting Bank One's motion for summary judgment, entered judgment in favor of Bank One, and dismissed Auto-Owners' complaint. This appeal ensued.
Auto-Owners argues that the trial court erred in granting Bank One's motion for summary judgment and in denying Auto-Owners' motion for partial summary judgment. We disagree.
When we determine the propriety of an order granting summary judgment, we use the same standard of review as the trial court. Ryan v. Brown, 827 N.E.2d 112, 116 (Ind.Ct.App.2005). Summary judgment is appropriate only if there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Ind. Trial Rule 56(C). "The party moving for summary judgment has the burden of making a prima facie showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law." Ryan, 827 N.E.2d at 117. If the moving party meets these two requirements, then the burden shifts to the non-moving party to show the existence of a genuine issue of material fact by setting forth specifically designated facts. Id. "We must accept as true those facts alleged by the nonmoving party, construe the evidence in favor of the nonmoving party, and resolve all doubts against the moving party." Id. Summary judgment will be affirmed if it is sustainable on any theory or basis found...
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