Thorne v. Member Select Ins. Co.

• Decision Date: 28 September 2012
• Docket Number: No. 2:09 CV 87.,2:09 CV 87.
• Parties: David THORNE, Plaintiff, v. MEMBER SELECT INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Northern District of Indiana

899 F.Supp.2d 820

David THORNE, Plaintiff,

v.MEMBER SELECT INSURANCE COMPANY, Defendant.

No. 2:09 CV 87.

United States District Court,

N.D. Indiana,

Hammond Division.

Sept. 28, 2012.

Thomas F. Macke, Blachly Tabor Bozik & Hartman, LLC, Valparaiso, IN, for Plaintiff.

Edward W. Hearn, Johnson & Bell Ltd., Crown Point, IN, for Defendant.

OPINION and ORDER

JAMES T. MOODY, District Judge.

On February 24, 2008, plaintiff David Thorne's (“David”) house at 726 Arbogast Street, Griffith, Indiana (the “Arbogast house”), was damaged by fire. ¹ David's homeowner's insurer, defendant Member Select Insurance Company (“Member Select”) ² denied his claim, concluding that the fire had been intentionally set by him (or by someone acting at his direction), and so a policy exclusion applied to void coverage. David then filed the present action,³ claiming breach of contract, and breach of the insurer's duty of good faith and fair dealing. Member Select has moved for summary judgment, contending that its denial of coverage is not a breach of contract because of the applicable exclusion; or, at the very least, there is no evidence that its denial on the basis of the exclusion was an action taken in breach of its duty of good faith.

Summary Judgment Standard

Rule 56 of The Federal Rules of Civil Procedure states that a district court “shall grant summary judgment if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). A summary judgment is required, after adequate time for discovery, against a party “who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (commenting on portions of Rule 56(c) which, on December 1, 2010, were moved to subpart (a)). “[S]ummary judgment is appropriate—in fact, is mandated—where there are no disputed issues of material fact and the movant must prevail as a matter of law. In other words, the record must reveal that no reasonable jury could find for the non-moving party.” Dempsey v. Atchison, Topeka, & Santa Fe Ry. Co., 16 F.3d 832, 836 (7th Cir.1994) (citations and quotation marks omitted).

The court's role in deciding a summary judgment motion is not to evaluate the truth of the matter, but instead to determine whether there is a genuine issue of triable fact. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249–50, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Doe v. R.R. Donnelley & Sons Co., 42 F.3d 439, 443 (7th Cir.1994). In viewing the facts presented on a motion for summary judgment, the court must construe all facts in a light most favorable to the non-moving party and draw all legitimate inferences in favor of that party. NLFC, Inc. v. Devcom Mid–Am., Inc., 45 F.3d 231, 234 (7th Cir.1995); Doe, 42 F.3d at 443.

Undisputed Facts Pertinent to Analysis

None of the underlying material facts in this case are in dispute, and so there no need to engage in a lengthy recitation of them. As will be seen, this case boils down to the proper application of the summary judgment standard to those facts, in particular, deciding what reasonable inferences can be drawn from those facts. Many of the facts are taken from examinations under oath (“EUO”) conducted by Member Select of both plaintiff David and of his brother, Scott Thorne (“Scott”), pursuant to the insured's duty to cooperate in the investigation of a claim. The facts leading Member Select to conclude that the exclusion applies and which are necessary to understand the court's ruling, briefly summarized, are these.

Prior to the fire, the Arbogast house had been unoccupied, for days if not weeks. David considered it to be his residence, but he had been spending most of his nights staying either at a warehouse he rented in Valparaiso, Indiana, where he kept cars he was working on, or at his girlfriend's house. (DE # 14–4 (hereinafter, “David's EUO”) at 5–8.) At the time of the fire he had not been at the house since February 1, 2008, when he stopped there to pick up his mail. ( Id. at 44.) Scott also had been living in the house, paying David roughly $400 a month for doing so, but had moved out in early February to move back in with his parents. (DE # 14–3 (hereinafter, “Scott's EUO”) at 9; 23–24; 29.) ⁴ As far as David and Scott were both aware, they were the only individuals with keys to the house.

In addition to being unoccupied at the time of the fire, both the gas and the electricity to the house had been turned off because of non-payment. (David's EUO at 36–37; Scott's EUO at 36.) As of February15, 2008, David owed his mortgage holder $495.15 in late charges. (DE # 14–10 at 2.)

Interestingly, Scott was a prior owner of the Arbogast house, but had lost it in foreclosure. (Scott's EUO at 14.) His brother David bought the house during the foreclosure process, but Scott didn't know whether David had gotten it for a “cheap” reduced price. ( Id. at 15, 20, 38–39). David knew the price that had been paid for the house, knew how much was being asked for it, and bought it because he thought it was “a good deal.” (David's EUO at 20.)

David was at his warehouse in Valparaiso when a neighbor called his cell phone and told him that his house was on fire. (David's EUO at 51.) David then called his parent's house to find out where Scott was,⁵ and spoke to his father; apparently Scott was there, and then told of the fire. (David's EUO at 55; Scott's EUO at 34.) Scott is unsure, however, whether his father spoke to David on the phone, or to the neighbor, who may have also called the Thorne parents about the fire. (Scott's EUO at 34–35.)

The fire was investigated by Jeff Roseboom, a Certified Fire and Explosion Examiner with the Indiana State Fire Marshal Investigations Division. (DE # 14–5 at 1.) He was assisted by Lake County Deputy Sheriff Brian Marsh “and his arson dog, Pyro.” ( Id.) Pyro indicated the presence of accelerants. ( Id.) Along with Roseboom's other observations, such as the fact that the utilities were turned off; the lack of any indication of mechanical/electrical faults in the furnace, water heater, other electrical and gas fixtures and appliances, etc.; and the pattern of burn marks, Roseboom determined that the fire was incendiary in origin (that is, caused by someone starting it) and resulted from the ignition of a flammable liquid that had been poured on the floor in the living room, hallway and bedrooms. ( Id. at 2–3; DE # 14–6 at 13.) An engineering firm hired by Member Select to do a “cause and origin analysis” arrived at the same conclusion, although sections of the flooring material obtained from Roseboom did not test positively for accelerants in a laboratory analysis.⁶ (DE # 14–7 at 2.)

There were no signs the house had been broken into prior to the fire. (David's EUO at 58.) On David's and Scott's last visits to the house it was secure, with the doors and windows locked. (David's EUO at 45–47; Scott's EUO at 30–32.)

Keith Quintaville is a Member Select claims representative and he ultimately handled the claim. He asked David for permission to conduct a credit check, in an effort to determine whether David had a financial motive to set the fire, and David declined to give permission. (DE # 14–1 at 5, ¶ 12.) David also refused to provide cell phone records which could indicate where he was at the time of the fire, or to submit to a polygraph examination. ( Id. at 6, ¶ 13.) Quintaville found these refusals suspicious. ( Id.)

The homeowner's insurance policy covering the Arbogast house excludes coverage for a loss which is cause by “[a]n action by or at the direction of an insured person committed with the intent to cause a loss.” (DE # 14–2 at 10 (p. 9 of the policy), ¶ 9.) As is typical in insurance contracts,the use of bold text indicates a defined term, and “insured person” is defined as including “any resident relative.” ( Id. at 5 (p. 4 of the policy), ¶ 6(b).) The term “resident relative” is defined to include a resident of the insured premises who is related to the policy owner by blood. ( Id., ¶ 4.)

Based on the above (and additional undisputed facts which the court has omitted from this brief summary), Quintaville in an affidavit states:

I concluded that the insured claim should be denied due to exclusion from coverage. Specifically, I concluded that an exclusion under the Policy applied because the loss was caused by “an action by or at the direction of an insured person committed with the intent to cause a loss.” ... I denied Thorne's claim for the fire loss because after my investigation was concluded, the results led me to believe that Thorne caused, or directed his brother, Scott Thorne, to cause the fire intentionally.

(DE # 14–1 at 7, ¶ 17, ¶ 19.)

Analysis

The parties agree that the policy at issue, and this case, is governed by Indiana law. Under Indiana law, an insurer relying on a policy exclusion from coverage has the burden of proof on the issue whether the exclusion applies. PSI Energy, Inc. v. Home Ins. Co., 801 N.E.2d 705, 725 (Ind.Ct.App.2004). A party with the burden of proof on an issue can obtain a summary judgment only where the evidence is so one-sided that it “points inescapably” in the moving party's favor, and every reasonable jury would decide that party has met its burden of proof. See Frobose v. American Sav. and Loan Ass'n of Danville, 152 F.3d 602, 615 (7th Cir.1998) ( citing Visser v. Packer Eng'g Assocs. Inc., 924 F.2d 655, 660 (7th Cir.1991)). Member Select contends that it is entitled to a summary judgment in this case, because the undisputed evidence establishes one thing: that either David or Scott intentionally started the fire, and because both meet the definition of “insured person” (Scott being a “resident relative”), Member Select is properly relying on the policy exclusion for an...