Ind. Ins. Co. v. Kopetsky
| Decision Date | 04 June 2014 |
| Docket Number | No. 49A02–1304–PL–340.,49A02–1304–PL–340. |
| Citation | 11 N.E.3d 508 |
| Parties | INDIANA INSURANCE COMPANY, Appellant/Plaintiff/Counterclaim Defendant, v. Patricia KOPETSKY, Appellee/Defendant/Counterclaim Plaintiff, and KB Home Indiana Inc., Appellee/Defendant. |
| Court | Indiana Appellate Court |
OPINION TEXT STARTS HERE
Ginny L. Peterson, Kightlinger & Gray, LLP, Indianapolis, IN, Attorney for Appellant.
W. Brent Threlkeld, Benjamin G. Stevenson, Threlkeld & Associates, Indianapolis, IN, Attorneys for Appellee Patricia Kopetsky.
Peter J. Rusthoven, E. Sean Griggs, David M. Heger, Barnes & Thornburg LLP, Indianapolis, IN, Attorneys for Appellee KB Home Indiana Inc.
In 1998, Appellee/Defendant KB Home Indiana Inc., f/k/a Durabuilders, Inc. (“KB Home”) entered into an agreement (“the Agreement”) to purchase lots from Appellee/Defendant/Counterclaim Plaintiff Patricia Kopetsky's late husband George Kopetsky in Cedar Park, a housing development being developed by George. 1 In the Agreement, George represented that he was unaware of any contamination in Cedar Park at the time of the Agreement's execution. Additionally, George indicated that at each lot closing, he would certify that he had not received any notice from any governmental agency or private person concerning the existence of any toxic or hazardous waste on that lot. After purchasing over sixty lots from George, KB Home became aware that some of the lots it had purchased contained contaminants. In 2007, KB Home filed suit against George and other defendants, alleging that George knew of possible contamination in the Cedar Park lots as early as April of 2002, he was negligent in failing to notify KB Home of potential environmental issues, he breached the Agreement by violating the requirement that he inform KB Home if he received notice concerning the presence of toxic waste, and he committed constructive fraud on KB Home.
In April of 2009, Appellant/Plaintiff/Counterclaim Defendant Indiana Insurance Company, who at relevant times had been George's commercial general liability (“CGL”) insurance carrier, filed a declaratory judgment action against George and KB Home, asking for a declaration that it had no duty to defend and/or indemnify George in KB Home's suit against him. George filed a counterclaim against Indiana Insurance, alleging that it had breached its insurance contracts (“the Policies”) with George in bad faith. In 2010, George passed away, and Patricia was substituted as a defendant and counterclaim plaintiff. Ultimately, the trial court granted summary judgment in favor of Patricia on the coverage question but dismissed her bad faith counterclaim. Indiana Insurance contends that the trial court erred in granting Patricia summary judgment because (1) no damages were alleged by KB Home that qualify as “property damage” under the Policies; (2) the damages alleged were not the result of an “occurrence” under the Policies; (3) the Policies' “expected and intended” exclusion barred coverage; (4) the Policies' “contractual liability” exclusion barred coverage; (5) the “known loss” doctrine barred coverage; (6) Patricia was not properly substituted for George in the underlying lawsuit as counterclaim plaintiff; and (7) the trial court erred in concluding that Indiana Insurance would have to indemnify Patricia for any judgment rendered in KB Home's favor. Patricia cross-appeals, claiming that the trial court erred in dismissing her bad faith claim against Indiana Insurance. Concluding that there is a genuine issue of material fact as to whether the known loss doctrine bars coverage and that the question of whether Indiana Insurance is obligated to indemnify Patricia is not yet ripe for adjudication, we affirm the judgment of the trial court in part, reverse in part, and remand for further proceedings.
On November 17, 1998, KB Home and George entered into the Agreement, which applied to the sale of residential lots in Cedar Park from George to KB Home. Cedar Park is divided into three sections: Section 1 (fifty-seven lots) on the eastern edge, Section 2 (seventy-five lots) in the middle, and Section 3 (seventy-one lots) on the western edge. The Agreement provided, generally, that George would have completed certain infrastructure improvementsto Section 1 by August 15, 1998, and would have made the lots available to KB Home for construction. Individual lots would be purchased by KB Home, who would then construct residences on them for sale. Assuming that development continued as contemplated in the Agreement, Section 1 would be developed first, followed by Section 2 and then Section 3.
The Agreement includes the following provision regarding disclosure of possible contamination in any part of Cedar Park at the time of the Agreement's execution:
5.2 [George's] Environmental Representation. [George] has previously provided [KB Home] with a copy of all environmental assessments with respect to [Cedar Park] or any portion of which [George] is aware of. With respect to any assessment obtained or paid for by [George] or any of its principals, its affiliates or related persons or entities, [George] shall cause the party who prepared the Assessment to address it to [KB Home] and to specifically state that [KB Home] may rely upon the assessment. Except as may be otherwise disclosed in such Assessments, [George] represents and warrants to [KB Home] that to [George's] knowledge, (i) no portion of [Cedar Park] has been used for any activity involving the use, generation, treatment, release, storage or disposal of any hazardous material, waste or substance or toxic substance or petroleum or PCBs (collectively, “Hazardous Materials”) and [Cedar Park] is free of any Hazardous Materials and [Cedar Park] is not in violation of any Rules governing any type of Hazardous Materials, (ii) no portion of [Cedar Park] is subject to the Indiana Responsible Property Transfer Law, Indiana Code 13–7–22.5 et seq. and no disclosure document is required thereunder and (iii) there has not been there are no underground storage tanks on or under [Cedar Park] and there is no reason to believe or be put on inquiry that any of such matters are not true.
The Agreement also includes the following provision regarding the disclosure of possible contamination in any given lot sold to KB Home over the life of the Agreement:
4.3.9 [George] has not received any notice from any governmental authority or private citizen concerning the existence or possible existence of any toxic or hazardous or regulated waste, material or substance and all utility lines are available to directly connect to mains located in public thoroughfares or over property for which there is a perpetual and adequate easement and no private person, firm or corporation has the right to terminate or impede said utility services to the Lots and [Cedar Park].
The Agreement provided, inter alia, that George would provide the following at the closing of each individual lot sale:
A certification by [George] that no Disclosure Statement needs to be delivered under the Indiana Responsible Property Transfer Law in connection with the Lot and that Items 4.3.1 through 4.3.10 continue to be satisfied.
On December 30, 2002, George and KB Home agreed to an amendment to the Agreement which stated that “[a]ll other terms and conditions of the Agreement as originally executed shall remain in full force and effect.” Appellant's App. p. 693.
Indiana Insurance issued the Policies, which were four CGL policies effective from April 29, 2002, to April 29, 2006, to OK Sand & Gravel Co., Inc., under which George qualifies as a named insured. The Policies contain the following relevant language:
COVERAGE A BODILY INJURY AND PROPERTY DAMAGE LIABILITY
a. We will pay those sums that the insured becomes legally obligated to pay as damages because of “bodily injury” or “property damage” to which this insurance applies. We will have the right and duty to defend the insured against any “suit” seeking those damages. However, we will have no duty to defend the insured against any “suit” seeking damages for “bodily injury” or “property damage” to which this insurance does not apply. We may, at our discretion, investigate any “occurrence” and settle any claim or “suit” that may result.
....
b. This insurance applies to “bodily injury” and “property damage” only if:
(1) The “bodily injury” or “property damage” is caused by an “occurrence” that takes place in the “coverage territory.”
(2) The “bodily injury” or “property damage” occurs during the policy period; and
(3) Prior to the policy period, no insured ... and no “employee” authorized by you to give or receive notice of an “occurrence” or claim, knew that the “bodily injury” or “property damage” had occurred, in whole or in part. If such a listed insured or authorized “employee” knew, prior to the policy period, that the “bodily injury” or “property damage” occurred, then any continuation, change or resumption of such “bodily injury” or “property damage” during or after the policy period will be deemed to have been known prior to the policy period.
c. “Bodily injury” or “property damage” which occurs during the policy period and was not, prior to the policy period, known to have occurred by any insured ..., includes any continuation, change or resumption of that “bodily injury” or “property damage” after the end of the policy period.
d. “Bodily injury” or “property damage” will be deemed to have been known to have occurred at the earliest time when any insured ... or any “employee” authorized by you to give or receive notice of an “occurrence” or claim:
(1) Reports all, or any part, of the “bodily injury” or “property damage” to use or any other insurer;
(2) Receives a written or verbal demand or claim for damages because of the “bodily injury” or “property damage”; or
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