INS Investigations Bureau, Inc. v. Lee
| Decision Date | 21 April 1999 |
| Docket Number | No. 40A01-9807-CV-268,40A01-9807-CV-268 |
| Citation | 709 N.E.2d 736 |
| Parties | INS INVESTIGATIONS BUREAU, INC., Vernon Large and Richard Murphy, Appellants-Defendants, v. Lester L. LEE, William R. Lee, Cubeco, Inc., and Lees Inns of America, Inc., as Assignees of the Rights of the Home Indemnity Company, Appellees-Plaintiffs. |
| Court | Indiana Appellate Court |
This is an interlocutory appeal from the denial of summary judgment requested by INS Investigations Bureau, Inc. (INS), Vernon Large, and Richard Murphy in an action filed by Lester L. Lee, William R. Lee, Cubeco, Inc. and Lees Inns of America, Inc. (Lees), as assignees of the rights of Home Indemnity Company. INS presents three issues for review:
1. Could Home Indemnity validly assign its cause of action against INS to its adversary in the underlying proceeding or should such an assignment be void as against public policy?
2. Should the cause of action, if assignable, be properly characterized as a negligence action requiring a two-year statute of limitations?
3. Should the trial court strike certain designated evidentiary matter submitted by the Lees as improper and inadmissible?
We affirm.
The facts disclose that in January 1992, a structure owned by the Lees was damaged by fire. Home Indemnity insured the building. The Lees maintained other policies of insurance with Home Indemnity as well. Home Indemnity's employee, Richard Clasen, met with the Lees on the day after the fire. Clasen concluded that the fire was suspicious and determined that further investigation was warranted.
Clasen contacted INS and requested that INS perform an investigation. Clasen engaged INS's services through a telephone conversation. Home Indemnity and INS did not execute a written contract. INS was to report to Home Indemnity's attorney.
Initially, INS was instructed to investigate the cause of the fire. Home Indemnity then expanded the request to include a "full investigation" with background information on the insureds.
INS employees started the investigation at the fire scene two days after the fire. Approximately one week later, Vernon Large, a chief investigator for INS, went to the scene. He reviewed the INS investigative work, conducted his own examination, and took additional photographs and samples. Based upon the investigation, Large concluded that the fire was intentionally set. The last INS report was forwarded to Home Indemnity's attorney on October 6, 1992.
Home Indemnity pursued an independent investigation of the Lees's financial condition as a possible motive for arson. Home Indemnity hired an accounting firm. The accounting firm concluded that the insureds were under severe financial stress, that the building was on unproductive property with lease payments of $180,000 per year, and that the insureds had a substantial investment in an inventory of materials that depreciated in value.
Home Indemnity's attorney, together with four adjusters for Home Indemnity, including Clasen, determined that the Lees's claim should be denied. The adjusters did not claim any particular expertise in fire investigation. They based their decision upon discussions regarding the various reports. In a November 1992 letter, Clasen informed the Lees that Home Indemnity denied the fire loss claim on the grounds that the fire was attributable to an intentional act by someone in authority and responsible for the insureds, that false or misleading information was provided by representatives of the insureds, and that the insureds refused to 1) provide material information regarding financial records of affiliates, and 2) allow contact with a lender-investor in the business.
Shortly after the denial, the Lees filed suit against Home Indemnity. The lawsuit was removed to federal court in February 1993. The federal court action was settled in January 1995. Home Indemnity paid $3.5 million to the Lees to settle the breach of contract and bad faith claims. As part of the settlement, Home Indemnity assigned to the Lees any claims it may have against INS.
In July 1995, the Lees filed this action against INS. The complaint, in three counts, alleged in pertinent part:
COUNT I
Come now the Lees, as assignees of the Home Indemnity Company, and for their cause of action against INS, allege and say as follows:
* * *
2. That the Home Indemnity Company employed INS to conduct a cause and origin investigation of the subject fire, a background check of the Lees and, further, to serve as technical advisors and experts in connection with the denial of the Lees' claims under their insurance policy and later in preparation for litigation and trial on the issue of insurance coverage.
3. That INS holds itself out as an international professional investigative company which provides a broad array of professional services to the insurance industry and those affiliated with it.
4. That implicit in the contract between the Home Indemnity Company and INS pertaining to the investigation of the Lees' fire was a duty to perform the work agreed to be done skillfully, carefully, diligently, and in a workmanlike manner.
5. That also implicit in the contract between the Home Indemnity Company and INS concerning the investigation of the Lees' fire was the requirement that INS possess and make use of that degree of skill, efficiency, and knowledge which is possessed by those of ordinary skill, competency, and standing in the fire investigation and insurance investigation trade.
6. That INS assigned Large and Murphy to carry out the primary duties related to the services requested by the Home Indemnity Company in connection with the investigation of the Lees' fire.
7. That INS breached its contract with the Home Indemnity Company in that it completely failed to perform its obligations to the Home Indemnity Company in a skillful, careful, diligent and workmanlike manner resulting in substantial losses and damages to the Home Indemnity Company.
8. That those employees assigned by INS to the investigation of the cause and origin of the Lees' fire and subsequent services undertaken to be performed for the benefit of the Home Indemnity Company lacked the degree of skill, efficiency, and knowledge which is possessed by those of ordinary skill, competency and standing in the fire investigation profession or trade.
* * *
10. That as a result of INS's breach of its contract with the Home Indemnity Company, the Home Indemnity Company initially denied the Lees' fire claim under its insurance policy resulting in litigation and a subsequent settlement greatly in excess of the Lees' insurance policy limits.
11. That the Home Indemnity Company expended significant sums for investigative services, legal expenses and costs, and in the settlement of the Lees' claims as a result of the breaches of the contract entered into between the Home Indemnity Company and INS.
COUNT II
Come now the Lees, and for their cause of action against the defendants, INS, Large, and Murphy, allege and say as follows:
* * *
15. That at all times pertinent to this litigation, Vernon Large and Richard Murphy were employees of INS acting within the course and scope of their employment in connection with all of their actions pertaining to the investigation of the Lees' fire.
16. That Vernon Large, Richard Murphy, and INS owed a duty to the Home Indemnity Company to perform their services pertaining to the investigation of the Lees' fire, and related services, in a skillful, careful, diligent, and workmanlike manner.
17. That Large, Murphy, and INS breached their duty of care to the Home Indemnity Company and committed many negligent acts in connection with the services they performed for or on behalf of the Home Indemnity Company in connection with the Lees' fire claims.
18. That as a proximate cause of the negligence of Vernon Large, Richard Murphy, and INS, the Home Indemnity Company suffered significant damages due to their erroneous denial of the Lees' fire claim, and the subsequent litigation arising therefrom.
19. That Vernon Large, Richard Murphy and INS negligently supplied false, inaccurate, and misleading information to the Home Indemnity Company and its representatives, concerning their background investigation of the Lees, their investigation of the cause and origin of the Lees' fire, and related matters pertaining to the subsequent litigation between the Home Indemnity Company and the Lees, all of which proximately resulted in substantial damages to the Home Indemnity Company.
* * *
COUNT III
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20. That Vernon Large, Richard Murphy, and INS, committed the following conduct tortious in nature, which gives rise to a claim for punitive damages herein:
a. knowingly misrepresented the source and presence of petroleum products on the floor of the industrial facility owned by the Lees with the intent to create the false impression that arson was the cause of the subject fire.
b. made false statements of fact in connection with their purported investigation of the Lees' fire losses.
c. made false statement of fact to a purported technical expert concerning the electric furnace which caused the subject fire.
d. knowingly and intentionally disregarded accepted scientific facts while fabricating evidence to support the denial of the Lees' claim.
e. knowingly and intentionally suppressing exculpatory evidence concerning the subject fire which would have revealed its source as accidental rather than intentionally set.
f. violating the duty of good faith which each and every insurance company and its agents and employees owe to an insured in the investigation of a first party claim.
21. That the defendants' actions were wrongful, tortious in nature, committed in bad faith, and committed with malice and/or...
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