Sheehan Const. Co., Inc. v. Cont'l Cas. Co.

• Decision Date: 17 December 2010
• Docket Number: No. 49S02-1001-CV-32.,49S02-1001-CV-32.
• Citation: 938 N.E.2d 685
• Parties: SHEEHAN CONSTRUCTION COMPANY, INC., Vincent B. Alig, M.D. and Mary Jean Alig Individually, Co-Trustees of the Mary Jean Alig Revocable Trust, and as Representatives of a Class of All Others Similarly Situated, Appellants (Petitioners below), v. CONTINENTAL CASUALTY COMPANY, Indiana Insurance Company, and MJ Insurance, Inc., Appellees (Respondents below).
• Court: Indiana Supreme Court

938 N.E.2d 685

SHEEHAN CONSTRUCTION COMPANY, INC., Vincent B. Alig, M.D. and Mary Jean Alig Individually, Co-Trustees of the Mary Jean Alig Revocable Trust, and as Representatives of a Class of All Others Similarly Situated, Appellants (Petitioners below),

v.CONTINENTAL CASUALTY COMPANY, Indiana Insurance Company, and MJ Insurance, Inc., Appellees (Respondents below).

No. 49S02-1001-CV-32.

Supreme Court of Indiana.

Dec. 17, 2010.

David F. McNamar, McNamar & Associates, P.C., Indianapolis, IN, Attorneys for Appellant.

Joseph Dietz, Meils Thompson Dietz & Berish, Indianapolis, IN, Attorneys for Appellee Indiana Insurance Company.

Mary K. Reeder, Riley Bennett & Egloff, LLP, Indianapolis, IN, Joseph Borders, Peter G. Daniels, of counsel, Walker Wilcox Matousek LLP, Chicago, IL, Attorneys for Appellee Continental Casualty Company.

Philip E. Kalamaros, Hunt Suedhoff Kalamaros LLP, St. Joseph, MI, Attorneys for Appellee MJ Insurance, Inc.

On Petition for Rehearing

RUCKER, Justice.

Indiana Insurance seeks rehearing of this Court's opinion in which we determined that damage caused by faulty workmanship may be covered under a standard Commercial General Liability (CGL) policy. See Sheehan Constr. Co. v. Cont'l Cas. Co., 935 N.E.2d 160 (Ind.2010). More particularly, on a claim for indemnification made by Sheehan Construction Company and a Class of homeowners (hereafter "Sheehan") against various insurance carriers including Indiana Insurance, the trial court entered summary judgment in favor of the insurance carriers. Among other things the trial court determined that under the terms of the CGL polices there was no "occurrence" or "property damage" and thus there was no coverage. Sheehan appealed and the Court of Appeals affirmed the judgment of the trial court. See Sheehan Constr. Co. v. Cont'l Cas. Co., 908 N.E.2d 305 (Ind.Ct.App.2009). Because the Court of Appeals affirmed the trial court's judgment on the issue of coverage, it did not address Indiana Insurance's alternative argument that summary judgment should also be affirmed on grounds that Sheehan provided untimely notice of its claims. We granted transfer thereby vacating the Court of Appeals opinion, see Indiana Appellate Rule 58(A), and reversed the judgment of the trial court. In so doing we addressed what we characterized as the "main issue" in the case, namely: "whether a standard commercial general liability ("CGL") insurance policy covers an insured contractor for the faulty workmanship of its subcontractor." Sheehan Constr. Co., 935 N.E.2d at 162. We did not address the timeliness of Sheehan's notice. Indiana Insurance appropriately filed a petition for rehearing which we now grant so that this issue may be addressed. ¹

Our standard of review for summary judgment is that used in the trial court: summary judgment is appropriate only where the evidence shows there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Ind. Trial Rule 56(C); Tom-Wat, Inc. v. Fink, 741 N.E.2d 343, 346 (Ind.2001). All facts and reasonable inferences drawn from those facts are construed in favor of the non-moving party. Tom-Wat, Inc., 741 N.E.2d at 346. Also, review of a summary judgment motion is limited to those materials designated to the trial court. Mangold v. Ind. Dep't of Natural Res., 756 N.E.2d 970, 973 (Ind.2001).

A detailed recitation of the facts, procedural history, and background of this case is set forth in our original opinion. Here we recite only the facts necessary to our decision on rehearing.

The record reflects the following language in Indiana Insurance's CGL policy under which Sheehan sought indemnification:

2. Duties In The Event of Occurrence, Offense, Claim or Suit.

a. You must see to it that we are notified as soon as practicable of an "occurrence" or an offense which may result in a claim.

....

b. If a claim is made or "suit" is brought against any insured, you must:

(1) Immediately record the specifics of the claim or "suit" and the date received; and

(2) Notify us as soon as practicable.

You must see to it that we receive written notice of the claim or "suit" as soon as practicable.

c. You and any other involved insured must:

(1) Immediately send us copies of any demands, notices, summonses or legal papers received in connection with the claim or "suit";

....

d. No insured will, except at the insured's own cost, voluntarily make a payment, assume any obligation, or incur any expense, other than for first aid, without our consent.

Appellant's App. at 702-03. In addition to the foregoing, Indiana Insurance tendered various other exhibits and affidavits in support of its motion for summary judgment. See Appellant's App. at 688-690. Among other things the materials establish that Vincent B. Alig and his wife Mary Jean Alig—the original plaintiffs in this case—filed a complaint against Sheehan in November 2004. However Sheehan did not provide Indiana Insurance with notice of the complaint until September 2006. Inthe interim much activity had occurred in this case: the trial court had certified this case as a Class action; the Class litigation had undergone extensive discovery including numerous depositions of homeowners, both sides had retained experts, onsite evaluations of the homes in question had been undertaken, and a settlement had been reached in the amount of approximately $2.8 million. As a result, Indiana Insurance argues it was prejudiced by Sheehan's delay in providing prompt notice.

Before the Court of Appeals, Sheehan did not dispute that it failed to give timely notice. Instead, according to Sheehan, "[Indiana Insurance] failed to present any evidence that it was harmed or prejudiced in any way by reason of Sheehan['s] failing to notify it." Appellant's Br. at 25. Sheehan misapprehends the law in this area. Requiring prompt notice allows insurers the opportunity to investigate the circumstances surrounding claimed losses in a timely and adequate manner. P.R. Mallory & Co. v. Am. Cas. Co. of Reading, Pa., 920 N.E.2d 736, 746 (Ind.Ct.App.2010), trans. denied. In Miller v. Dilts, this Court determined that "[p]rejudice to the insurance company's ability to prepare an adequate defense can therefore be presumed by an unreasonable delay in notifying the company about the accident or about the filing of the lawsuit." 463 N.E.2d 257, 265 (Ind.1984) (emphasis added). Once prejudice is presumed, the burden is on the insured to "establish some evidence that prejudice did not occur in the particular situation." Id.; see also Askren Hub States Pest Control Svcs., Inc. v. Zurich Ins. Co., 721 N.E.2d 270, 279 (Ind.Ct.App.1999) ("The presumption of prejudice essentially means that if the delay in giving the required notice is unreasonable, the injured party or the insured has the burden to produce evidence that prejudice did not actually occur in the particular situation."). The duty to notify is a condition precedent to the insurance company's liability to its insured. Miller, 463 N.E.2d at 263. "Where prejudice is created by the insured's noncompliance with the policy's provisions, the insurance company is relieved of its liability under the policy." Id. at 261.

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. Bushong v. Williamson, 790 N.E.2d 467, 474 (Ind.2003) (...