Paint Shuttle, Inc. v. Continental Cas. Co.

• Decision Date: 11 August 2000
• Docket Number: No. 45A03-9911-CV-420.,45A03-9911-CV-420.
• Citation: 733 N.E.2d 513
• Parties: The PAINT SHUTTLE, INC. (Illinois), The Paint Shuttle, Inc. (Indiana), Jacqueline Miller and Peter Miller, Appellants-Third-Party Defendants, v. CONTINENTAL CASUALTY CO., d/b/a CNA, Appellee-Defendant-Third-Party Claimant, and Bosch & Banasiak, Byron E. Bamber, Michael W. Bosch, and Joseph Banasiak, Plaintiffs-Third-Party Defendants.
• Court: Indiana Appellate Court

733 N.E.2d 513

The PAINT SHUTTLE, INC. (Illinois), The Paint Shuttle, Inc. (Indiana), Jacqueline Miller and Peter Miller, Appellants-Third-Party Defendants, v. CONTINENTAL CASUALTY CO., d/b/a CNA, Appellee-Defendant-Third-Party Claimant, and Bosch & Banasiak, Byron E. Bamber, Michael W. Bosch, and Joseph Banasiak, Plaintiffs-Third-Party Defendants.

No. 45A03-9911-CV-420.

Court of Appeals of Indiana.

August 11, 2000.

Mark A. Bates, Schererville, Indiana, Attorney for Appellant.

Robert D. Brown, Spangler, Jennings & Dougherty, P.C., Merrillville, Indiana, Attorney for Appellee.

OPINION

ROBB, Judge.

Paint Shuttle Inc. of Illinois, Paint Shuttle Inc. of Indiana, Jacqueline Miller, and Peter Miller (collectively referred to as "Paint Shuttle") appeal the trial court's grant of summary judgment in favor of Continental Casualty Company ("Continental"). We affirm.

Issue

Paint Shuttle raises the following consolidated and restated issue for our review: whether the trial court properly granted summary judgment in favor of Continental.

Facts and Procedural History

The facts most favorable to the judgment reveal that Continental issued a professional liability policy (the "malpractice policy") to the law firm of Bosch & Banasiak¹ (the "law firm") for the term of November 29, 1993 through November 29, 1994. The law firm consists of two partners, Michael W. Bosch and Joseph Banasiak, both of whom were listed as insureds on the malpractice policy. The law firm obtained the malpractice policy through Clyde Rector, an insurance broker for the Hammond National Company.

Jacqueline and Peter Miller² retained the law firm for assistance in the licensing of the Paint Shuttle business in Illinois and Indiana.³ On March 23, 1994, Paint Shuttle filed suit against the law firm in Will County, Illinois alleging that the law firm was negligent in the rendering of, or in the failure to render, professional legal services relating to the licensing of the Paint Shuttle business. Subsequently, Paint Shuttle obtained a monetary judgment against the law firm and Bosch.⁴

On October 7, 1996, the law firm filed a declaratory action against Continental and Paint Shuttle for relief under the malpractice policy.⁵ In addition, the law firm provided written notice to Continental of the Paint Shuttle malpractice suit. On November 17, 1997, Continental filed an answer, a counterclaim and a third party complaint for declaratory relief under the malpractice policy.⁶ Thereafter, on April 23, 1999, Continental filed a motion for summary judgment on the complaint, third party complaint, and counterclaim. The trial court conducted a hearing on the summary judgment motion on September 10, 1999. Thereafter, the trial court granted summary judgment in favor of Continental.

On October 20, 1999, Continental filed a motion to correct error requesting that the trial court amend the trial court's order granting summary judgment in favor of Continental to reflect that the judgment was also entered against third party defendant Martha Highland, as Special Representative of the Estate of Bryon E. Bamber. On February 22, 2000, the trial court granted Continental's motion to correct error. This appeal ensued.

Discussion and Decision

I. Standard of Review of Summary Judgment

The purpose of summary judgment is to terminate litigation about which there can be no factual dispute and which may be determined as a matter of law. Bastin v. First Indiana Bank, 694 N.E.2d 740, 743 (Ind.Ct.App.1998),trans. denied. When reviewing a grant or denial of summary judgment, this court applies the same standard as does a trial court. USA Life One Ins. Co. v. Nuckolls, 682 N.E.2d 534, 537 (Ind.1997). Summary judgment should be granted only if the designated evidentiary material shows that there is no genuine issue of material fact and the moving party is entitled to summary judgment as a matter of law. Ind. Trial Rule 56(C); Hoskins v. Sharp, 629 N.E.2d 1271, 1276 (Ind.Ct.App.1994). On review, we may not search the entire record to support the judgment, but may only consider that evidence which had been specifically designated to the trial court. North Snow Bay, Inc. v. Hamilton, 657 N.E.2d 420, 422 (Ind.Ct.App.1995). The party appealing the denial of summary judgment has the burden of persuading this court on appeal that the trial court's ruling was erroneous. See Warner Trucking, Inc. v. Carolina Cas. Ins. Co., 686 N.E.2d 102, 104 (Ind. 1997). We resolve any doubt about a fact or any inference to be drawn from it in favor of the nonmoving party. Claxton v. Hutton, 615 N.E.2d 471, 473 (Ind.Ct.App. 1993).

In summary judgment proceedings, as at trial, the burden of establishing the existence of material affirmative defenses is on the defendant. Celina Mut. Ins. Co. v. Forister, 438 N.E.2d 1007, 1009 (Ind.Ct.App.1982). In order to meet this burden, a defendant must show that a genuine issue of material fact exists as to each element of the asserted affirmative defense. Schrader v. Mississinewa Community Sch. Corp., 521 N.E.2d 949, 952-53 (Ind.Ct.App.1988), trans. denied. We will affirm a grant of summary judgment if the defendant, in opposition to the plaintiff's summary judgment motion, failed to designate any evidence from which the trial court could infer the elements of the asserted affirmative defense. Huff v. Langman, 646 N.E.2d 730, 732 (Ind.Ct.App. 1995).

II. The Malpractice Policy

A. Condition Precedent to Insurance Coverage Under the Malpractice Policy

Paint Shuttle contends that the trial court erred in granting Continental's motion for summary judgment because the law firm fulfilled its duty under the malpractice policy of providing Continental with prompt written notice of Paint Shuttle's lawsuit. We disagree.

1. Notice Provision

Paint Shuttle argues that the law firm is entitled to coverage under the malpractice policy because the law firm orally informed Continental about Paint Shuttle's malpractice lawsuit against the law firm shortly after it was filed in Will County, Illinois. Continental argues that the law firm is not entitled to coverage under the malpractice policy because it did not submit written notification of the lawsuit to Continental until after the policy lapsed on November 29, 1994.

We must first determine whether the notice provision contained in the malpractice policy was clear and unambiguous. The malpractice policy contained specific provisions regarding the insured's duty to notify Continental after a loss. The malpractice policy under the title "V. Conditions" provides in pertinent part that:

8. Your Duties

If, during the policy term, or any applicable extended reporting period:

a. you first become aware that a wrongful act has been committed, arising out of your professional services; and

b. you give written notice to us of the:

(1) specific wrongful act,

(2) the injury or damage which has or may result from the wrongful act, and

(3) the circumstances by which you first become aware of such wrongful act,

then any subsequent claim made against you arising out of such wrongful act shall be deemed to have been made during the policy term or extended reporting period. No coverage for such claim shall exist under any subsequent policy written by us to our affiliates.

R. 55 (emphasis in original).⁷ We believe that the notice provision contained in the malpractice policy is clear and unambiguous, and thus, the law firm's duty to provide written notice to Continental of a claim during the policy period is a condition precedent to Continental providing coverage under the malpractice policy for damages arising from a "wrongful act." Because the notice provision is a condition precedent to obtaining coverage under the malpractice policy, we must determine whether the law firm satisfied its duty to provide the insurance company with written notice of claim within the policy period.

We have held that the notice requirement is "material, and of the essence of the contract." London Guarantee & Accident Co. v. Siwy, 35 Ind.App. 340, 66 N.E. 481, 482 (1903). The duty to notify an insurance company of potential liability is a condition precedent to the company's liability to its insured. Shelter Mut. Ins. Co. v. Barron, 615 N.E.2d 503, 507 (Ind.Ct.App.1993), trans. denied. When the facts of the case are not in dispute, what constitutes proper notice is a question of law for the court to decide. Id.

The specific language of the malpractice policy provides that "you must give written notice to us of the: (1) specific wrongful act; (2) the injury or damage which has or may result from the wrongful act, and (3) the circumstances by which you first became aware of such wrongful act." R. 55. Paint Shuttle filed a malpractice suit against the law firm on March 23, 1994. R. 174-78. Although the law firm provided Continental with written notice of Paint Shuttle's malpractice lawsuit, we believe that this written notice was untimely.

The malpractice policy provides that a wrongful act "must happen before the end of the policy term stated on the Declarations and claim therefore must first be made against you and reported to us during the policy period." R. 52. The Declarations of the malpractice policy issued by Continental to the law firm was for the policy term of November 29, 1993 to November 29, 1994. R. 294. In addition, the law firm did not renew the malpractice policy with Continental. R. 216. Moreover, the law firm did not provide Continental with written notice of Paint Shuttle's malpractice lawsuit until October 7, 1996, almost two years after the policy's expiration. R. 204. Thus, the law firm failed to provide Continental notice within the time frame proscribed in the malpractice policy.⁸

In addition, we believe in the present case that the notice was insufficient because the law firm voluntarily undertook the defense of the malpractice suit without allowing Continental to exercise its rights of investigation and defense of a claim...