Interstate Auction, Inc. v. Central Nat. Ins. Group, Inc.

• Decision Date: 12 May 1983
• Docket Number: No. 4-681A42,4-681A42
• Citation: 448 N.E.2d 1094
• Parties: INTERSTATE AUCTION, INC., Appellant (Plaintiff Below), v. CENTRAL NATIONAL INSURANCE, GROUP, INC., Appellee (Defendant Below).
• Court: Indiana Appellate Court

Page 1094

448 N.E.2d 1094

INTERSTATE AUCTION, INC., Appellant (Plaintiff Below), v. CENTRAL NATIONAL INSURANCE, GROUP, INC., Appellee (Defendant Below).

No. 4-681A42.

Court of Appeals of Indiana,

Fourth District.

May 12, 1983.

James E. Freeman, Jr., Sansberry, Dickmann, Dickmann & Freeman, Anderson, George P. Dickmann, Dickmann, Dickmann & Reason, Greenfield, for appellant.

Jeffrey C. Burris, Burris, Gross, Burris & Margerum, Indianapolis, George B. Davis, Greenfield, for appellee.

MILLER, Judge.

Plaintiff-appellant Interstate Auctions, Inc. (Interstate) appeals an adverse summary judgment rendered in favor of its insurance carrier, Central National Insurance Group, Inc. (Central Insurance). Interstate, an auto auction dealer, filed the instant lawsuit to recover damages for an alleged breach of a contract to insure against bad check losses. Central Insurance moved for summary judgment, contending Interstate had breached a contractual obligation to initiate suit on the policy within one year of its discovery of the loss. Central Insurance claims the loss was discovered when the checks were returned because of insufficient funds. Interstate, on the other hand, contends the loss was discovered when a judgment against the third-party check writer was returned unsatisfied. The trial court granted Central Insurance's motion, and on appeal, Interstate raises the following issues:

1. whether the insurance policy is ambiguous on its face as to when the one-year time limitation begins to run;

2. whether the trial court improperly struck affidavits containing extrinsic evidence proffered by Interstate which tended to show latent ambiguity in the policy as to when such time limitation begins to run;

3. whether genuine issues of material fact remain regarding waiver and estoppel.

For the reasons stated below, we affirm.

FACTS

The matters properly before the trial court most favorable to Interstate, the non-moving party in this summary judgment proceeding, revealed the following:

Interstate received seven checks totaling $54,020.00 from Carl Bair, d/b/a Carl Bair Motors between October 16, 1978, and November 13, 1978. These checks were given in payment for automobiles purchased through Interstate and were returned shortly thereafter marked "non-sufficient funds." During this period, Interstate held an insurance contract issued by Central Insurance, whereby Central Insurance agreed "to pay the Assured all sums which the Assured shall itself lose because of its acceptance ... of a bad check or sight draft." Upon return of the checks, Interstate notified Central Insurance first by telephone on November 16, 1978, and then by a letter of November 28, 1978.

Central Insurance began its investigation of the claim on November 20, 1978, pursuant to a reservation of rights agreement, and on January 12, 1979, it denied coverage, asserting that Interstate's business practices contravened certain policy conditions. ¹ On May 22, 1978, Interstate submitted a reevaluation of the facts to Central Insurance challenging the earlier denial of liability and requesting additional response to its claim. Central Insurance wrote Interstate on June 8, 1978, to repeat its denial of coverage but offered $7,500 to settle the controversy. Interstate did not respond to this letter but subsequently obtained an Ohio judgment against Carl Bair on the checks in question. It notified Central Insurance Interstate then filed suit on the policy January 21, 1980--more than a year after 1) the checks were returned for insufficient funds, 2) Interstate first notified Central Insurance of the loss, and 3) Central Insurance's initial denial of the claim. Central Insurance moved for summary judgment, asserting Interstate's suit was barred by a policy provision requiring legal action to be initiated within one year after the date of the discovery of the loss. The clause stated in relevant part:

of the judgment on August 20, 1979, and forwarded a copy of the Ohio decree to Central Insurance on September 20, 1979.

"Section XIII Suit and Limitations of Actions.... 'In the event that loss shall have been sustained by the Assured then no action shall lie against the Company unless suit is commenced against the Company within one year after the date of discovery of the loss. In the event that the loss shall have been sustained by a third person claiming against the Assured then no action shall lie against the Company until the amount of the Assured's obligation to pay after actual trial or by written settlement of the claimant submitted to and approved in writing by the Company." (Emphasis added.)

Central Insurance's motion was supported by the insurance contract, the reservation of rights agreement and copies of correspondence between the parties relating to the claim, as well as an affidavit by Jeffrey C. Burris, Central Insurance's attorney.

Interstate responded and filed a cross-motion for partial summary judgment on the issue of the timeliness of the complaint, offering the affidavits of Cameron C. Cherry and Donald S. Riggs. The Cherry affidavit averred that Cherry, an insurance agent, was an expert in the insurance field and that in his professional opinion, the limitations period did not begin to run until a determination of Interstate's loss on the bad check was "made by a court of law." Riggs's affidavit recited that he was the president of Interstate and that as a result of 1) his experience with Central Insurance and with a prior bad check incident 2) his reading of the policy and 3) Interstate's legal liability to its bank because of its deposit of the bad checks, he opined that Interstate had either one year and 60 days after it had furnished Central Insurance with proof of loss or, in the alternative, one year after the amount of Interstate's loss was determined by a court of law within which to bring the suit.

On November 6, 1980, the court, on motion by Central Insurance, struck both the Cherry and Riggs affidavits, and on December 9, 1980, the court granted summary judgment to Central Insurance. It concluded the insurance policy was unambiguous, the loss was discovered November 16, 1978, and the suit against Central Insurance was untimely filed. This judgment forms the basis for the instant appeal.

DECISION

Because the case was disposed of by summary judgment, we apply the same standard of review as the trial court, and we will sustain the judgment only if no genuine issue exists as to any material fact and the party is entitled to judgment as a matter of law. Ind.Rules of Procedure, Trial Rule 56(C); Matter of Belanger's Estate, (1982) Ind.App., 433 N.E.2d 39; Donahue v. Watson, (1980) Ind.App., 411 N.E.2d 741. The moving party bears the burden of establishing that no material facts are at issue and any doubts are to be resolved against him. Moll v. South Central Solar Systems, Inc., (1981) Ind.App., 419 N.E.2d 154; Lee v. Weston, (1980) Ind.App., 402 N.E.2d 23. Evidence, pleadings and inferences must be viewed in a light most favorable to the non-moving party. Randolph v. Wolff, (1978) 176 Ind.App. 94, 374 N.E.2d 533. We further note that the motion for summary judgment in insurance contract actions presents a different approach than in negligence actions. Ross v. Farmers Insurance Exchange, (1971) 150 Ind.App. 428, 277 N.E.2d 29, explained the difference in this manner:

"Unlike negligence cases, the undisputed facts are not juxtaposed against the standard of a reasonable man, but rather such facts are interpreted against a specific policy provision, and there are certain situations which clearly show that the insured has not brought himself within the confines of the policy."

Id. at 442, 277 N.E.2d at 37. See also South Tippecanoe School Building Corp. v. Shambaugh & Son, Inc., (1979) Ind.App., 395 N.E.2d 320.

Issue One--Ambiguity in Insuring Agreement

On appeal, Interstate disputes the trial court's conclusion that the insurance contract was clear and unambiguous. To preface our discussion of its arguments in this regard, we recite some of the basic principles utilized in constructing an insurance contract. The law is established that ambiguity exists when reasonably intelligent men, upon reading the policy, would honestly differ as to its meaning. Barmet of Indiana, Inc. v. Security Insurance Group, (1981) Ind.App., 425 N.E.2d 201. However, the mere existence of a controversy as to the meaning of an insurance policy does not establish an ambiguity. Northland Ins. Co. v. Crites, (1981) Ind.App., 419 N.E.2d 164. This court must reasonably construe the language of the policy and may not find coverage unless the language of the policy admits liability. Stockberger v. Meridian Mutual Insurance Co., (1979) Ind.App., 395 N.E.2d 1272. Where an insurance contract is ambiguous so as to be susceptible of more than one meaning, it is to be interpreted most favorably to the insured. Utica Mutual Insurance Co. v. Ueding, (1977) 175 Ind.App. 60, 370 N.E.2d 373. An unambiguous policy, on the other hand, must be enforced according to its terms, Drake Insurance Co. of New York v. Carroll County Sheriff's Department, (1981) Ind.App., 427 N.E.2d 1153, even if this results in a limitation of the insurer's liability. American States Insurance Co. v. Aetna Life & Casualty Co., (1978) 177 Ind.App. 299, 379 N.E.2d 510.

a. "Indemnity" policy. Interstate argues that ambiguity arises in the insurance contract because of its characterization as an "indemnity policy," pointing to the following policy language:

"An Indemnity Policy. All claims payable hereunder are payable solely by the Company to the Assured to indemnify the Assured against actual loss suffered. No person other than the Assured may make any claim under this policy."

Interstate argues the instant policy is an indemnity policy rather than a liability policy and contends that under an indemnity policy no action lies against an insurer unless the action is brought to recover monies...