Monroe Guar. Ins. Co. v. Magwerks Corp.

• Decision Date: 29 June 2005
• Docket Number: No. 49S02-0402-CV-81.,49S02-0402-CV-81.
• Parties: MONROE GUARANTY INSURANCE COMPANY, Appellant (Defendant below), v. MAGWERKS CORPORATION, Appellee (Plaintiff below).
• Court: Indiana Supreme Court

829 N.E.2d 968

MONROE GUARANTY INSURANCE COMPANY, Appellant (Defendant below), v. MAGWERKS CORPORATION, Appellee (Plaintiff below).

No. 49S02-0402-CV-81.

Supreme Court of Indiana.

June 29, 2005.

COPYRIGHT MATERIAL OMITTED

Todd J. Kaiser, Matthew S. Effland, Ogletree Deakins Law Firm, Indianapolis, for Appellant.

Steve Carter, Attorney General of Indiana, Scott A. Kreider, Deputy Attorney General, Indianapolis, for Intervenor.

William E. Winingham, Wilson Kehoe & Winingham, Frank D. Otte, Indianapolis, for Appellee.

Henry Price, Price Jackson Waicukauski & Mellowitz, P.C., Indianapolis, Amicus Curiae Brief of the Indiana Trial Lawyers Association.

ON PETITION TO TRANSFER FROM THE INDIANA COURT OF APPEALS, NO. 49A02-0208-CV-622.

RUCKER, Justice.

This case presents the question of whether a good faith dispute concerning insurance coverage automatically precludes a punitive damages claim for bad faith when coverage is denied. We conclude it does not.

Facts and Procedural History

Magwerks Corporation ("Magwerks") sells manufactured camshafts from its one-story, flat-roofed building in Indianapolis. Constructed of tar and asphalt with individual sections measuring 4' × 8', the roof has no separate suspended ceiling. After a period of heavy rain and snow in February 1997, several of the roof sections began falling to the floor. The resultant water and moisture caused damage to several pieces of Magwerks' equipment.

Monroe Guaranty Insurance Company ("Monroe Guaranty") issued an insurance policy to Magwerks in 1996, which included coverage for certain types of damage to its building and equipment. One provision of the policy excluded payment for such things as "wear and tear" and loss or damage "caused by or resulting from rain [or] snow." Appellant's App. at A052. Although not defining the term, one section of the policy excluded coverage for "collapse" but then another section of the policy specifically included such coverage under certain circumstances. More particularly the policy provided in relevant part:

We will pay for loss or damage caused by or resulting from risks of direct physical loss involving collapse of a building or any part of a building caused only by one or more of the following: ... Weight of rain that collects on a roof....

Id. at at A053 (emphasis added). The policy was in effect in February 1997. Patrick Jenkins, president of Magwerks, submitted a "Property Loss Notice" to Monroe Guaranty describing the loss as follows: "Continuous rain had caused damage to roof, actuall [sic] has collapsed in several areas." Appellant's App. at A085. Paul Kelter, a Monroe Guaranty adjuster, observed "[r]oof damage and collapsed interior ceiling panels." Supp.App. to Br. of Appellee at S147. At Kelter's request, Tim Moehl of McComas Engineering inspected the roof and concluded that ponding on the roof, caused by poor design, had occurred over a long period of time resulting in a number of small roof leaks that affected the structural integrity of the roof deck. Moehl added, "At the time of our inspection two sections of the roof were collapsed. Several sections of the roof deck have been temporarily braced to prevent further collapse." Appellant's App. at A088.

Monroe Guaranty ultimately forwarded Magwerks a denial letter rejecting Magwerks' claim of loss. The letter cited several exclusions and limitations in the insurance policy which, according to Monroe Guaranty, justified its refusal to pay for the loss. Those included damage caused by wear and tear, decay, deterioration, and defective design. The denial letter did not mention the provisions in the policy concerning collapse coverage.

Magwerks filed a complaint against Monroe Guaranty for breach of the insurance contract. Seeking punitive damages Magwerks also included a claim for lack of good faith and fair dealing. After conducting discovery, both sides filed cross motions for summary judgment on the breach of contract claim. The primary issue in dispute was whether Magwerks' loss was due to a "collapse" of the roof. Because of a lack of Indiana precedent, Monroe Guaranty cited authority from foreign jurisdictions to support its position. The trial court granted summary judgment in favor of Magwerks and the matter proceeded to trial on the issue of contract damages and on Magwerks' claim of lack of good faith and fair dealing. The jury returned a verdict for Magwerks in the amount of 5.1 million dollars, which included 4 million dollars in punitive damages.

On review, the Court of Appeals reversed the judgment of the trial court and remanded the cause for further proceedings. In so doing the court determined: (1) as a matter of first impression, the modern definition of "collapse" should be adopted in Indiana, thereby rejecting the narrower and traditional definition advocated by Monroe Guaranty; (2) under the modern definition there remains a genuine issue of material fact as to whether there was a collapse of Magwerks' roof and therefore the trial court erred in granting summary judgment in Magwerks' favor; and (3) Monroe Guaranty did not act in bad faith because there was a good faith dispute about coverage and thus "in the event that this case proceeds to trial, punitive damages may not be awarded...." Monroe Guar. Ins. Co. v. Magwerks Corp., 796 N.E.2d 326, 334 (Ind.Ct.App.2003). Also, the court rejected Magwerks' argument that because of the requirement that seventy-five percent of a punitive damages award must be paid to the state treasurer, the punitive damages statute — Indiana Code section 34-51-3-6 — is unconstitutional. Id. at 335.

With the exception of that portion of the Court of Appeals' opinion adopting the modern definition of collapse, Magwerks sought transfer challenging the Court of Appeals' determinations. Having previously granted transfer, we now summarily affirm the opinion of the Court of Appeals in all respects except for its treatment of Magwerks' punitive damages claim. See Ind. Appellate Rule 58(A)(2).

Discussion

I.

What constitutes a collapse has been the subject of a number of articles and treatises.¹ Under the traditional definition, a "collapse" is limited to an event that occurs suddenly and results in complete disintegration. 43 Am.Jur.2d Insurance § 1282 (2004). This definition typically disallows coverage under an insurance policy where only a "part of a part" of a building falls. Monroe Guaranty v. Magwerks, 796 N.E.2d 326, 332 (Ind.Ct.App.2003). In short, under the traditional view, collapse coverage applies only if an insured building is reduced to flattened form or rubble. By contrast, the broader and so-called modern definition, which is followed by a majority of jurisdictions,² defines "collapse" as a "substantial impairment of the structural integrity of the building or any part of a building." 43 Am.Jur.2d § 1282.

Analyzing arguments in favor of and in opposition to the traditional versus modern view of collapse coverage provisions in property insurance policies, the Court of Appeals declared, "we think the modern view is compelling and should be applied here." Monroe Guaranty, 796 N.E.2d at 333. Applying the modern view to the facts in this case the court found there were genuine issues of material fact as to whether there was a substantial impairment of the structural integrity of Magwerks' building or any part of the building. The court therefore reversed the trial court's grant of summary judgment in Magwerks' favor.

On transfer neither party challenges the Court of Appeals' adoption of the modern view of collapse coverage. We agree with this view as well. However, Magwerks contends that even under the modern view the Court of Appeals improperly reversed the trial court's grant of summary judgment. Magwerks faults the court for what it characterizes as the court's reliance on "Monroe's waived arguments and untimely evidence." Appellee's Pet. To Trans. at 11. Magwerks' claim is premised on the notion that (i) Monroe Guaranty advanced arguments on appeal justifying its denial of coverage that were not presented to the trial court in response to Magwerks' motion for summary judgment, and (ii) Monroe Guaranty's designated evidence in response to Magwerks' motion for summary judgment was not timely filed.

When reviewing a grant or denial of summary judgment our well-settled standard of review is the same as it is for 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. Indiana Univ. Med. Ctr., Riley Hosp. for Children v. Logan, 728 N.E.2d 855, 858 (Ind.2000). Summary judgment should be granted only if the evidence sanctioned by Indiana Trial Rule 56(C) shows that there is no genuine issue of material fact and the moving party deserves judgment as a matter of law. Gunkel v. Renovations, Inc., 822 N.E.2d 150, 152 (Ind.2005). All evidence must be construed in favor of the opposing party, and all doubts as to the existence of a material issue must be resolved against the moving party. Tibbs v. Huber, Hunt & Nichols, Inc., 668 N.E.2d 248, 249 (Ind.1996).

Magwerks' claim that Monroe Guaranty advanced arguments on appeal that were not presented to the trial court is of no moment in this case. Rather, the question is whether the designated evidence and all inferences derived from that evidence demonstrate there is no genuine issue of material fact and that Magwerks is thus entitled to summary judgment as a matter of law. Concerning the designated evidence, the record is not at all clear that Monroe Guaranty's designation was untimely as Magwerks contends. The Chronological Case Summary (CCS) does show that Magwerks filed its Motion for Summary Judgment and designation of supporting materials on December 11, 2001. Appellant's App. at A006. The CCS also shows that Monroe Guaranty filed its response, cross motion for summary judgment, and designated materials on January 11, 2002. Id. Indiana Trial Rule 56(...