Iemma v. Adventure RV Rentals, Inc.

• Decision Date: 28 April 1994
• Docket Number: No. 20A03-9307-CV-240,20A03-9307-CV-240
• Citation: 632 N.E.2d 1178
• Parties: Michael E. IEMMA, Appellant-Plaintiff, v. ADVENTURE RV RENTALS, INC., and Auto-Owners Insurance Co., Appellees-Defendants.
• Court: Indiana Appellate Court

Page 1178

632 N.E.2d 1178

Michael E. IEMMA, Appellant-Plaintiff, v. ADVENTURE RV RENTALS, INC., and Auto-Owners Insurance Co. Appellees-Defendants.

No. 20A03-9307-CV-240.

Court of Appeals of Indiana Third District.

April 28, 1994.

Anthony J. Iemma, Iemma & Hughes, Elkhart, for appellant.

Robert J. Konopa, Konopa & Murphy P.C., South Bend, for appellee Auto-Owners Insurance Co.

HOFFMAN, Judge.

Appellant-plaintiff Michael E. Iemma appeals from a grant of summary judgment in favor of appellees-defendants Adventure RV Rentals, Inc. (Adventure RV) and Auto-Owners Insurance Co. (Auto-Owners) and a denial of his motion for summary judgment in a dispute arising from an insurance claim filed by Iemma with Auto-Owners, Adventure RV's insurance carrier.

The undisputed facts disclose that Adventure RV, located in Elkhart, Indiana, is a corporation which deals primarily in the storing and repair of recreational vehicles and other related equipment. At all times pertinent to this dispute, Richard Dorman was its sole owner and president. He was also a director of the corporation.

In May 1981, Auto-Owners issued a policy to insure the premises of Adventure RV. The policy listed Adventure RV as the primary insured. Dorman was also listed on the policy as an additional insured.

In June 1981, Iemma brought his 32-foot-long race car trailer to Adventure RV for repairs on a malfunctioning electric step. Thereafter, on June 25, 1981, a fire broke out on the premises of Adventure RV. Iemma's trailer was destroyed. Iemma sought reimbursement for his lost trailer by filing a series of claims with Auto-Owners under Adventure RV's policy. Auto-Owners denied his claims.

Iemma then filed suit against both Adventure RV and Auto-Owners. Count I of Iemma's complaint, directed towards both Adventure RV and Auto-Owners, claimed direct insurer liability. Count II requested punitive damages against Auto-Owners stemming from its manner of handling Iemma's claims. Count III, directed only at Adventure RV, alleged that Adventure RV, as bailee of the trailer, breached its duty of care.

On March 2, 1983, Iemma filed a motion for summary judgment against Auto-Owners on Counts I and II of his complaint. He also filed a motion for summary judgment against Adventure RV on Count III of his complaint on July 17, 1984.

While these motions were pending, the authorities determined that the Adventure RV fire was the result of arson. Dorman was eventually arrested and charged in connection with this crime. A jury convicted Dorman and he appealed.

On February 12, 1985, the trial court determined that Iemma's request for summary judgment was inappropriate for decision at the time due to the pendency of Dorman's appeal. Consequently, the motion was denied. However, the court directed Iemma to request a rehearing on the motions after resolution of Dorman's appeal.

On December 13, 1991, after Dorman's conviction was affirmed by the Court of Appeals of Indiana, Iemma again requested summary judgment on Counts I and III of his complaint. On January 27, 1992, Auto-Owners responded and also requested summary judgment in its favor.

On February 10, 1993, the trial court denied Iemma's request for summary judgment as to both defendants. Instead, it granted summary judgment in their favor. This appeal ensued.

Iemma raises several issues on appeal which we restate as:

(1) whether the trial court erred in granting summary judgment in favor of Adventure RV and denying summary judgment in his favor on the issue of Adventure RV's liability for the value of the trailer; and

(2) whether the trial court erred in granting summary judgment in favor of Auto-Owners and denying summary judgment in his favor on the issue of his claim under Adventure RV's policy.

The purpose of summary judgment is to terminate litigation for which there can be no factual dispute and which can be determined as a matter of law. Chambers v. American Trans Air, Inc. (1991), Ind.App., 577 N.E.2d 612, 614, trans. denied. Our standard of review is the same as that used by the trial court: whether there is a genuine issue of material fact and whether the moving party is entitled to judgment as a matter of law. Webb v. Jarvis (1991), Ind., 575 N.E.2d 992, 994, reh. denied. Summary judgment will be affirmed on appeal if it is sustainable on any theory or basis found in the evidentiary matter designated to the trial court. Ind.Trial Rule 56(C).

Iemma contends that the trial court erred in granting summary judgment in favor of Adventure RV and denying his motion for summary judgment on the issue of Adventure RV's liability for his destroyed trailer. More specifically, he claims that a bailment relationship existed between himself as bailor and Adventure RV as bailee. Iemma argues that by failing to deliver the trailer on demand, Adventure RV breached its duty of care and as such is liable to Iemma for its full value.

A bailment is an express or implied agreement between a bailor and a bailee in which the bailee is entrusted to accomplish a specific purpose with the bailor's personal property; when the purpose is accomplished, the property is returned to the bailor. Turner v. Clary (1993), Ind.App., 606 N.E.2d 878, 880. No transfer of ownership occurs. Id. A bailment arises when: (1) personal property belonging to a bailor is delivered into the exclusive possession of the bailee, and (2) the property is accepted by the bailee. Norris Automotive Service v. Melton (1988), Ind.App., 526 N.E.2d 1023, 1025.

It is undisputed that Iemma delivered his trailer to Adventure RV which accepted it. Delivery was made with a specific purpose, that is, for Adventure RV to make repairs on a malfunctioning electric step. When the fire occurred, the trailer was on Adventure RV's premises and in its exclusive possession. Thus, a bailment existed.

The standard of care owed by a bailee to a bailor is measured by the amount of benefit each party derives from the bailment. ¹ Id. However, a bailee may be guilty of conversion where the object of the bailment is destroyed by his willful or positive acts. Daugherty v. Reveal (1913), 54 Ind.App. 71, 78, 102 N.E. 381, 384. Although the issue of whether a bailee has met the applicable standard of care is normally a question of fact for the trier of fact, Norris, 526 N.E.2d at 1025, the undisputed facts disclose that Dorman's acts of arson were the direct cause of Iemma's trailer being destroyed. His acts of arson, being positive and willfull, see IND.CODE § 35-43-1-1 (1981 Supp.), support the conclusion, as a matter of law, that Dorman is liable for the full value of Iemma's trailer under a theory of conversion.

Next, Iemma contends the trial court erred by granting summary judgment in favor of Auto-Owners and denying his motion for summary judgment on the issue of Auto-Owner's duty to cover Iemma's claim. Iemma does not dispute that due to his acts, the policy is void as to Dorman. ² Rather, he alleges inter alia that Adventure RV is an innocent co-insured entitled to coverage.

Iemma is correct that under certain circumstances the wrongful acts of one insured under a fire policy are not imputed to other innocent co-insureds to whom recovery is still available. See American Economy Ins. Co. v. Liggett (1981), Ind.App., 426 N.E.2d 136. In general, whether or not there is recovery depends on whether the co-insureds' obligations and interests are considered to be joint or severable.

McCauley Enterprises v. New Hampshire Ins. Co. (D.Conn.1989), 716 F.Supp. 718, 720;

see also Schaefer (Right Of Innocent Insured To Recover Under Fire Policy Covering Property Intentionally Burned By Another Insured), Annotation, 11 A.L.R. 4th 1228 (1982).

If rights and obligations are deemed to be joint, then recovery is generally not allowed. 11 A.L.R. 4th at 1229. When they are severable, then the wrongful acts of one co-insured are not imputable to other innocent co-insureds and recovery is possible. Id. at 1231.

Iemma argues that Adventure RV, as a corporation and separate legal entity, cannot be imputed with any wrongdoing committed by its co-insured Dorman. As such, it should not be denied coverage. Auto-Owners disagrees. It claims that since the policy is void as to Dorman, it is void as to any and all potential insureds.

An insurance policy is a contract. Thus, it is subject to the same rules of interpretation as are other contracts. The purpose of this Court on appeal is to ascertain and enforce the intent of the parties to the policy. Construction of an insurance policy, as a contract, is a question of law for which summary judgment is particularly appropriate. Pennington v. American Family Ins. Group, (1993), Ind.App., 626 N.E.2d 461, 464.

Iemma relies heavily on Liggett. In Liggett, a husband and wife were co-insureds under a homeowners insurance policy. While the policy was in effect, a fire destroyed their home. The husband died in the fire. The insurance carrier subsequently denied coverage to the wife claiming that the fire was due to acts of arson by the co-insured husband.

On appeal, this Court affirmed the grant of summary judgment in favor of the wife on the issue of her recovery under the policy. The Liggett Court held that even if the co-insured husband did intentionally start the fire, she was still entitled to coverage.

In Liggett, under a written exclusion, the policy was void if the insured "willfully concealed or misrepresented any material fact" or if there was any "fraud or false swearing" by the insured relating to the insurance. Liggett, 426 N.E.2d at 138. The husband, dead, was no longer an insured. The Court reasoned that since the wife, the only "insured" left under the policy, was absent from the home at the time of the fire and entirely innocent of any wrongdoing, such a provision could not have applied to deny her coverage. Id.

There being no applicable express exclusion, coverage could only be denied if any "implied exceptions" existed. Id....