Coverage Analysis
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INDIANA

  ACCIDENTS OR OCCURRENCES

  There are two elements to analyzing whether a claim alleges an "occurrence."  The insured's conduct must involve an "accident" and the resulting injuries must not have been expected or intended by the insured.  City of Jasper v. Employers Ins. of Wausau, 987 F.2d 453 (7th Cir. 1993)(zoning board action not an "occurrence").

  An "occurrence" requires an "accident" that results in harm that is not "expected or intended" by the insured. Transamerica Ins. Co. v. Kopko, 570 N.E.2d 1283, 1285 (Ind. 1991).  In Kopko, the Indiana Supreme Court ruled that a homeowner's suit against a property developer for failing to disclose knowledge that the insured had concerning soil conditions prior to selling the property to the plaintiff was not the result of an "occurrence."   An "accident" is an event that is "unusual, unexpected and unforeseen." 

  Indiana courts will generally not find coverage where injuries are the natural result of intentional acts, even if the insured denies any specific intent to cause harm. Red Ball Leasing, Inc. v. Hartford Acc. & Ind. Co., 915 F.2d 306, 309 (7th Cir. 1990)(repossession of trucks not an "accident"); Fidelity & Guaranty Ins. Underwriters Inc. v. Everett I. Brown Co., 25 F.3d 484 (7th Cir. 1994)(wrongful termination claim); Indiana Ins. Co. v. North Vermillion Community School Corp., 665 N.E.2d 630 (Ind. App. 1996) (wrongful termination) and Wiseman by Wiseman v. Leming, 574 N.E.2d 327 (Ind. App. 1992)(sexual assault).

  Indiana courts have ruled that the terms "expected" and "intended" have distinct meanings.  Thus, an insured will be deemed to have expected an injury if he was "consciously aware that the injury was practically certain to result."  Indiana Farmers Mut. Ins. Co. v. Graham, 537 N.E.2d 510, 512 (Ind. App. 1989)(hog farmer that sold infected swine to other farmers held to have "expected" resulting injury to herds).  Similarly, the court ruled in Bolan v. State Farm Fire & Casualty Co., 557 N.E.2d 1084, 1088 (Ind. Ct. App. 1990), that "expected" requires more than mere foreseeability, declaring that the insurer had an obligation to defend where the complaint alleged that the injury "should have been anticipated" by the insured.  In Indiana Farmers Mutual Ins. Co. v. Ellison, 1997 WL 302397 (Ind. Ct. App. June 6, 1997), the Appellate Court reversed a lower court's ruling that the insurer had a duty to defend allegations that the grandmother had failed to maintain the residence in a reasonably safe condition, holding that the insurer was entitled to look the facts underlying the complaint in assessing whether it had a duty to defend and had reasonably refused to defend where its investigation had determined that the insured was consciously aware of the injuries that her granddaughter was suffering.  By contrast, intent requires proof that the insured acted "with a conscious desire to bring about certain results."  Allstate Ins. Co. v. Herman, 551 N.E.2d 884 (Ind. App. 1990).  Whether the harm was "expected" or "intended" must still be determined subjectively, based upon the insured's actual knowledge. Bolin v. State Farm, 557 N.E.2d 1084 (Ind. App. 1990)(insured not estopped by guilty plea).  

 In certain cases, intent may be inferred as a matter of law if the insured's deliberate acts were inherently injurious.  Home Ins. Co. v. Neilsen, 165 Ind. App. 445, 332 N.E.2d 240 (1975) and Wiseman v. State Farm, 574 N.E.2d 327 (Ind. App. 1991).  Similarly, in Allstate Ins. Co. v. Herman, 551 N.E.2d 844 (Ind. 1990), the Indiana Supreme Court ruled that a homeowner's insurer had no duty to provide coverage for the consequences of an intentional act "which any reasonable person would deem calculated to cause injury."  

  The Indiana Court of Appeals ruled in Erie Ins. Co. v. American Painting Co., 1997 WL 177554 (Ind. App. April 15, 1997), that allegations that the insured painting contractor was negligent in hiring and retaining an employee who burned a home that the insured was painting had failed to allege an "occurrence" since the allegations against the painting contractor were based upon intentional acts, even if phrased as claims in negligence.

  Issues of intent must generally be considerately separately for each insured.  Thus, in  Wayne Township Board of School Commissioners v. Indiana Ins. Co., 650 N.E.2d 1205 (Ind. App. 1995), the Court of Appeals ruled that a sexual assault was inherently injurious and therefore barred coverage for a pupil's claims against a teacher.  However, the teacher's intent could not be imputed to the school board, particularly inasmuch as the policy required that each insured be treated separately.

  A wrongful death claim for fatal injuries to a baby who was intentionally bounced on the insured’s knee was held not to constitute an “accident” under a homeowners policy.  Allstate Ins.  Co.  v.  Davis, 1998 WL 307748 (S.D. Ind.  May 21, 1998).  

  A state trial judge ruled in Summit Corp. v. The Travelers Companies, Marion No. 49B02-9509-CP-1378 (Ind. Super. July 21, 1997) that pollution will not be deemed to be "expected or intended" unless the insured was consciously aware that a particular release was substantially certain to occur.

  The intentional acts of employees will be imputed to a corporate insured. Indiana Gas Co. Aetna Cas. & Sur. Co., 951 F.Supp. 790 (N.D. Ind. 1996). 
 

  ALLOCATION AND SCOPE ISSUES

  Indiana Court of Appeals ruled in Allstate Insurance Company v. Dana Corporation, 737 N.E.2d 1173 (2nd Dist.  2000) that a waste generator  may obtain coverage in full  for its pollution liabilities under an “all sums” theory and is not required to pro-rate the claim across the entire period of coverage.  The court left open the issue of whether the “triggered” insurer could obtain a set-off or contribution from the amounts that the insured had earlier received from settled insurers.
 

  APPELLATE PROCEDURE

  The Indiana Supreme Court will accept certified questions when there is no controlling precedent and the underlying question would be dispositive.  Indiana Rules of Appellate Procedure 15(O). 
   Indiana has both an intermediate appellate court and a state Supreme Court.
 

  BAD FAITH

  Unfair claims handling by insurers is regulated under Ind. Code § 27-4-1-4.5 (1984).  Unfair or deceptive consumer practices are proscribed by Ind. Code Ann. § 24-5-0.5-1 (West 1980 & Supp. 1992).

  Every contract (including an insurance policy) contains a covenant of good faith and fair dealing that is implied into the contract as a matter of law.  Erie Ins. Co. v. Hickman, 622 N.E.2d 515, 518 (Ind. 1993)(“Indiana law has long recognized that there is a legal duty implied in all insurance contracts that the insurer deal in good faith with its insured”).

  In general, punitive damages may not be claimed for breach of contract but may be recoverable from an insurer on a tort theory.  Erie Ins. Co. v. Hickman, 622 N.E.2d 515, 519 (Ind. 1993) and Miller Brewing v. Best Beers, 608 N.E.2d 976 (Ind. 1993). In Erie, the Indiana Supreme Court recognized a tort-based remedy for breach of the implied covenant, noting that a contract measure of damages is more restrictive because it “is limited to those actually suffered as a result of the breach which are reasonably assumed to have been within the contemplation of the parties at the time the contract was formed.”  The court nevertheless went on to note that “in most instances, tort damages for the breach of the duty to exercise good faith will likely be coterminous with those recoverable in a breach of contract action.”  

  In Erie, the Indiana Supreme Court ruled that punitive damages may only be awarded if there is "clear and convincing evidence" that the insurer acted with "malice, fraud, gross negligence or oppressiveness which was not the result of a mistake or fact or law, honest error or judgment, over-zealousness, mere negligence or other human failing..."  622 N.E.2d at 520.

  “Bad faith” is an intentional tort and that the policyholder cannot prevail unless it satisfies the more onerous standards concerning the insurer’s state of mind.  Patel v. United Fire & Cas. Co., 80 F.Supp.2d 948, 958 (N.D. Ind. 2000)(claim for “bad faith” is an intentional tort and policyholder must establish a “state of mind reflecting dishonest purpose, moral obliquity, furtive design or ill will...Indiana courts require a jury to find that the insurer acted with a state of mind evidencing conscious wrongdoing before it may conclude that the insurer breached its duty to act in good faith”).

  An insurer will be considered to have acted in bad faith only where it “denies liability knowing that there is no rational principled basis for doing so.”  Country Mutual Insurance Co. v. Hunter, 472 N.E.2d 1265, 1268 (Ind. Ct. App. 1985).

  The Indiana Appeals Court ruled that a liability insurer acted in bad faith in persisting in its interpretation of the absolute pollution exclusion to “non-environmental” claims  in light of existing Indiana case law declaring such exclusions to be ambiguous has again struck down the absolute pollution exclusion.  Freidline v. Shelby Insurance Company, 2000 Ind. App. LEXIS 1924 (Ind. App. November 29, 2000).

  An insured's right of action to sue a primary liability insurer for negligent failure to settle within policy limits is not conditional on evidence that the insured has, in fact, paid a portion of the judgment or faces personal liability for the excess verdict.  Schmizzi v. Illinois Farmers Ins. Co., 928 F.Supp. 760 (N.D. Ind. 1996) and Economy Fire & Cas. Co. v. Collins, 643 N.E.2d 382 (Ind. Ct. App. 1994).

  A third party claimant cannot sue an insured for bad faith.  Eichler v.  Scott Pools, Inc., 513 N.E.2d 665, 667 (Ind.  App.  1987). 

  The Seventh Circuit has ruled that the agent of an insurance company cannot be sued for his alleged bad faith in denying the insured’s claim.  Addressing an issue of first impression in Indiana, the court ruled in Schwartz v. State Farm Mutual Automobile Ins. Co., No. 98-2448 (7th Cir. April 15, 1999), that any bad faith claim must be pursued against State Farm, not against individual employees of the company.  

  A federal district court has ruled that where an insurer has acted in bad faith, the insured may recover damages for emotional distress.  Patel v. United Fire and Casualty Company, 80 F.Supp.2d 948 (N.D. Ind.  2000).
 

  "BODILY INJURY"

  Held not to encompass claims for mental distress in Grant v. North River Ins. Co., 453 F.Supp. 1361 (N.D. Ind. 1978)(civil rights violations) and Davidson v. Cincinatti Ins. Co., 572 N.E.2d 502, 506 (Ind. App. 1991)(slander and defamation claims).  But see, Wayne Township Board of School Commissioners v. Indiana Ins. Co., 650 N.E.2d 1205 (Ind. App. 1995)(emotional distress arising from sexual molestation held to be a "bodily injury" since it arose out of a bodily touching).
 

  BREACH OF POLICY CONDITIONS

  The obligation to give prompt notice under an insurance contract is a condition precedent to coverage.  Shelter Mutual Insurance Company v. Barron, 615 N.E.2d 503, 507 (Ind. Ct. App. 1993).  A six month delay in giving notice of an “occurrence” was held to defeat coverage in Askren Hub States Pest Control Services, Inc. v. Zurich Insurance Company, No. 49A02-9902-CV-133 (Ind. App. December 21, 1999).  

 Prejudice to the insurer’s ability to prepare an adequate defense was presumed in the case where the insured delayed six months in the absence of any reasonable explanation for its delay .  “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.”  Miller v. Dilts, 463 N.E.2d 257, 265 (Ind. 1984).  However, delay creates a presumption of prejudice that the insured must overcome.  Indiana Ins. Co. v. Williams, 463 N.E.2d 257 (Ind. 1984).

  An insured's unreasonable delay in notifying its umbrella carrier of serious accident was presumed to have prejudiced the excess carrier in Allstate Ins. Co. v. Kepchar, 592 N.E.2d 694 (Ind. App. 1992), even though an Allstate agent had actual knowledge of the original "occurrence" because he lived in the neighborhood where it occurred.

  Judge Lee ruled in Governmental Interinsurance Exchange v. City of Angola, Indiana, 9 F.Supp.2d 1120 (N.D. Ind. 1998) that an insured's demand to be reimbursed for clean up costs that it had incurred before giving notice to the insured was not barred by the "voluntary payment" language in its CGL policy as the insured's clean up measures were not "voluntary" and that there was no evidence that the insurer had presented that the clean up could have been conducted differently had it been involved.  
 

  "BROAD FORM COVERAGES"

  Applying Tennessee law, the Court of Appeals ruled in Osco, Inc. v. St. Paul Fire & Marine Ins. Co., 656 N.E.2d 548 (Ind. App. 1995), review denied (Ind. 1996) that pollution claims are not for "personal injury."  See also Employers Mutual Casualty Co. v. DFX Enterprises, Inc., Elkhart No. 20D03-9505-CP-046 (Ind. Super. April 25, 1997)(court refused to find "personal injury" coverage for claims that insured supplied contaminated water to mobile home park tenants, declaring that "the furnishing of a tainted or polluted water supply is not an entry onto land without right and is not trespass any more than the sale of a contaminated can of beans would be a trespass against the household of the individual who bought it.  In the former case, the delivery is via a water pipe, in the later delivery occurs through a tin can of food").

  Notwithstanding Osco, the Court of Appeals has since ruled that claims for trespass and nuisance in a pollution case set forth a claim for “wrongful entry” within the scope of the policy’s “personal injury” coverage.   Travelers Indemnity Company v. Summit Corporation of America,  715 N.E.2d 926 (Ind. App. 1999).  See also  Nibco v. Hartford Acc. & Ind. Co., No. 3:920CV-669 (N.D. Ind. July 6, 1995)(groundwater contamination was not subject to the pollution exclusion insofar as it might allege a claim for "personal injury”) and Recticel Foam Corp. v. Employers Ins. of Wausau, Marion No. 49D03-9501-CP-0009 (Ind. Super. May 20, 1996).

  The Court of Appeals has refused to limit Summit to policies containing “personal injury” coverage for “wrongful entry” claims.  In Allstate Insurance Company v. Dana Corporation, 737 N.E.2d 1173 (Ind. App.  2000), the court ruled that “invasion of the rights of privacy” was ambiguous and could be understood to include “the right of private occupancy” so as to give rise to pollution coverage.  On the other hand, the court found that Dana is not entitled to indemnification for invasions of its own privacy.  “Instead, Dana may only seek personal injury coverage for liabilities at sites due to invasions of rights of privacy where Dana has sent waste to real property of others and allowed contaminated groundwater to migrate from its sites to neighboring land.”  The court therefore ruled that Dana was liable for cleanup costs for the real property of others to which Dana had sent wastes or to which contaminated groundwater migrated from Dana’s property.

  Allegations that the insured had described a product as “patent pending,” thus casting a cloud over the status of the plaintiff’s competing product, were held not to allege a claim for “infringement of copyright, title or slogan.”  Judge Barker ruled in Heritage Mutual Insurance Company v. Advanced Polymer Technology, 2000 WL 680280 (S.D. Ind. May 16, 2000) that patent infringement was not covered under the policy and that “title” referred to names of literary or artistic works, not to ownership of a product.

  The Seventh Circuit has ruled that coverage for "discrimination" includes all types of discrimination, including allegations that the insured engaged in acts of unfair discrimination in setting a price schedule for beer wholesalers in violation of the Robinson-Patman Act.  Federal Ins. Co. Ins. Co. v. Stroh Brewing Co., 1997 WL 58104 (7th Cir. September 19, 1997).
 

  BURDEN OF PROOF

  Under Indiana law, the insured is required to establish a claim within the grant of insurance.  Mutual Hospital Ins., Inc. v. Hagner, 475 N.E.2d 32 (Ind. App. 1984) and Wolverine Ins. Co. v. Eldridge, 326 F.2d 748 (7th Cir. 1964)("insured").  By contrast, the insurer bears the burden of proving the applicability of a policy exclusion. State Farm v. Miles, 730 F.Supp. 1462 (S.D. Ind. 1990).  Whether a term is considered part of the grant of coverage or an exclusion depends on its placement in the policy rather than whether it has an exclusionary or coverage-limiting effect. Erie Ins. Group v. Sears Corp., 102 F.3d 889 (7th Cir. 1996).

  Judge Lee ruled in Indiana Gas Co. Aetna Cas. & Sur. Co., 951 F.Supp. 790 (N.D. Ind. 1996) that insurers have the burden of proving that pollution was expected or intended.
 

  CHOICE OF LAWS

  Indiana will apply the law of the state with the "most significant contacts."  Eby v. Borg-Warner, 455 N.E.2d 623, 626 (Ind. App. 1983).  In Stillwell v. Brock Brothers, 736 F.Supp. 201 (S.D. Ind. 1990), these "most significant contacts" were found to comprise "the place of contracting, the place of negotiation, the place of performance, the location of the subject mater and the place of business of the parties."   See also Rockwood Ins. v. Illinois State Medical Inter-Insurance Exchange, 646 F.Supp. 1185, 1188 (N.D. Ind. 1986) (Indiana law applied where malpractice claims arose out of Illinois physicians' performance of medical services in Indiana).

  In general, Indiana courts have applied a “law of the site” approach to pollution liabilities involving out of state insureds and Indiana pollution claims.   Travelers Indemnity Company v. Summit Corporation of America,  715 N.E.2d 926 (Ind. App. 1999). In Marley v. Wylain Co. v. Liberty Mutual Ins. Co., No. S86-353 (N.D. Ind. 1989), a federal district court ruled that Indiana law should apply to asbestos liabilities involving an Illinois insured where the claims all arose out of a manufacturing facility in Indiana.     Similarly, in Hartford Accident & Indemnity Co. v. Dana Corp., 690 N.E.2d 285 (Ind. App. 1997), the Court of Appeals held that Indiana law should apply, as being where most of the underlying hazardous waste sites were concentrated, even though the insured was an Ohio corporation.
 

  CONFLICTS OF INTEREST

  In the absence of a conflict of interest, defense counsel retained by an insurer represents the interest of the insured and the insurer.  Cincinatti Ins. Co. v. Wills, 717 N.E.2d 151 (Ind. 1999).

  Where a conflict of interest exists, the insurer may either retain independent counsel of its own choosing or should reimburse the insured for independent counsel of the insured's choosing.  Allstar Ins. Corp. v. Steel Bar, Inc., 324 F.Supp. 160, 165 (N.D. Ind. 1971). 
 

  "DAMAGES" 

  "Damages" was held to be ambiguous and therefore deemed to include clean up costs and other CERCLA "response costs" in Travelers Indemnity Company v. Summit Corporation of America,  715 N.E.2d 926 (Ind. App. 1999);  Hartford Accident & Indemnity Co. v. Dana Corp., 690 N.E.2d 285 (Ind. App. 1997); Indiana Gas Co. Aetna Cas. & Sur. Co., 951 F.Supp. 816 (N.D. Ind. 1996); Daniels v. The Cincinnati Ins. Co., 800 F.Supp. 753 (S.D. Ind. 1992); General Housewares Corp. v. CNA Insurance Companies, Marion No. 49D06-9706-CP-0920 (Ind. Super.  September 24, 1999) and Summit Corp. v. The Travelers Companies, Marion No. 49B02-9509-CP-1378 (Ind. Super. July 21, 1997).  But see Ulrich Chemical, Inc. v. American States Ins. Co., Shelby No. 73COa-8901-CP-016 (Indiana Cir. Ct. July 26, 1990)("response costs" are not covered).
 

  DECLARATORY RELIEF

  The Indiana Supreme Court will accept certified questions when there is no controlling precedent and the underlying question would be dispositive.  Indiana Rules of Appellate Procedure 15(O). 
 
  The Indiana Court of Appeals has refused to permit an insurer to intervene in the case against its insured to resolve questions of coverage.  Cromer v. Sefton, 471 N.E.2d 700 (Ind. App. 1994)(citing risk of confusion and conflicting interest).
 

  DISCOVERY ISSUES

   --Claims Manuals
 

   --Drafting History

  Policyholder efforts to compel discovery granted in Northern Indiana Public Service Co. v. Certain London Market Insurers, St. Joseph County No. 71-D05-9509-CP-00850 (Ind. Super. February 1998).

   --Other Policyholder Claims

  Ten and ten ruling adopted for pollution claims in Northern Indiana.

   --Reinsurance Information

  Policyholder efforts to compel discovery granted in Northern Indiana.

   --Reserves

  Policyholder efforts to compel discovery granted in Northern Indiana.
 

  DUTY TO DEFEND
 
  The Indiana Supreme Court has stated that an insurer’s duty to defend is determined solely by the contents of the underlying complaint.  Transamerica Ins. Co. v. Kopko, 570 N.E.2d 1283, 1285 (Ind. 1991).  In that case, the underlying complaint charged that the insureds sold property which had soil conditions unsuitable for building.  They were alleged to have knowledge of this unsuitability and were also alleged to have concealed this information from the purchaser.  The court held that the duty to defend is determined solely by the “nature of the complaint,” and found that there was no duty to defend given the complaints’ allegations of intentional conduct.

  Prior rulings of the Court of Appeals had suggested that insurers should look outside the four corners of the complaint both to accept and reject a claim for coverage.  See  American States Ins. Co. v. Aetna Life & Cas. Co., 379 N.E.2d 510 (Ind. App. 1978); Cincinatti Ins. Co. v. Mallon, 409 N.E.2d 1100, 1105 (Ind. App. 1980); Southbend Escan Corp. v. Chubb, 647 F.Supp. 966 (N.D. Ind. 1986).  Indeed, the Court of Appeal questioned the scope of Kopko in Monroe Guaranty Ins. Co. v. Warner Monroe, 1997 WL 129030 (Ind. App. March 24, 1997), holding that a duty to defend arises in cases where there is a factual dispute unless the insurer's investigation resolves the factual dispute against coverage.  

  The Court of Appeals has also recently ruled that an insurer's duty to defend must be determined based upon the allegations of the complaint and from the facts known or ascertainable by the insurer after an investigation has been made.  Trisler v. Indiana Ins. Co., 575 N.E.2d 1021, 1023 (Ind. Ct. App. 1991).  That court stated that in evaluating the factual basis of a claim and the insurer’s concomitant duty to defend, the court may properly consider the evidentiary materials offered by the parties to show coverage or exclusion.   See also Allstate Ins. Co. v. Herman, 551 N.E.2d 844 (Ind. App. 1990).  If the pleadings fail to disclose a claim within the coverage limits or one clearly excluded under the policy, and investigation also reveals the claim is outside the coverage of the policy, no defense will be required.  Nor is a liability insurer’s defense obligation automatically triggered by an allegation of negligence in the underlying complaint where its investigation discloses facts that defeat coverage.  Indiana Farmers Mutual Ins. Co. v. Ellison, 1997 WL 302397 (Ind. Ct. App. June 6, 1997).  

  Unless the insurer defends the action or brings a declaratory judgment action to resolve the coverage question, it will be collaterally estopped to dispute coverage if the claim is subsequently resolved on the basis of a covered set of facts. Liberty Mutual v. Metzler, 586 N.E.2d 897 (Ind. App. 1992).
  The duty to defend does not arise until the insurer is notified of the litigation and the insured tenders the defense to it.  Eastman v. United States, 257 F.Supp. 315, 319 (S.D. Ind. 1966).   On the other hand, Judge Lee ruled in Governmental Interinsurance Exchange v. City of Angola, Indiana, 9 F.Supp.2d 1120 (N.D. Ind. 1998) that an insured's demand to be reimbursed for clean up costs that it had incurred before giving notice to the insured was not barred by the "voluntary payment" language in its CGL policy as the insured's clean up measures were not "voluntary" and that there was no evidence that the insurer had presented that the clean up could have been conducted differently had it been involved.  

  The term "suit" was held to be ambiguous and therefore deemed to include PRP environmental liability claims from governmental entities in Travelers Indemnity Company v. Summit Corporation of America,  715 N.E.2d 926 (Ind. App. 1999); Hartford Accident & Indemnity Co. v. Dana Corp., 690 N.E.2d 285 (Ind. App. 1997); Governmental Interinsurance Exchange v. City of Angola, Indiana, 9 F.Supp.2d 1120 (N.D. Ind. 1998) and Ulrich Chemical, Inc. v. American States Ins. Co., Shelby County Cir. Ct. No. 73COa-8901-CP-016 (Indiana, July 26, 1990).  See also Sam Winer & Company v. Commercial Union Ins. Companies, Elkhart No. 20D01 9027 CP347 (Ind. Super. February 18, 1994)("suit" is ambiguous and must include PRP letters);  Riverside v. Federated Ins. Co., No. 94-2038 (C.D. Ill. August 19, 1994)(opining that Indiana courts would require a defense to PRP claims) and Dana Corp. v. Hartford Accident & Indemnity Co., Marion No. 49D01-9301-CP-0026 (Ind. Super. December 28, 1995).
 

  ESTOPPEL AND WAIVER

  In general, the doctrine of estoppel cannot be used to create or extend the scope of coverage.  Indiana courts have recognized two exceptions to this general rule, however.  The first exists when an insurer misrepresents the extent of coverage, thereby inducing the insured to purchase coverage which does not, in fact, cover the disputed risk.  Second, an insurer may be estopped from raising the defense of non coverage when it assumes the defense of an action on behalf of its insured without a reservation of rights but with knowledge of facts which would have permitted it to deny coverage.  Transcontinental Insurance Company v. Manta, Inc., 45A03-9811-CV-484 (Ind. Ct. App. August 24, 1999).  

  Thus, the Indiana Court of Appeals has ruled estoppel may not be used to extend the scope of coverage under a policy that has already expired.  Egnatz v. Medical Protective Ins. Co., 581 N.E.2d 438 (Ind. App. 1991).

  An insurer's failure to raise an exclusion as a defense to coverage until it was sued was not a waiver of that coverage defense in the absence of resulting prejudice to the insured.   Terre Haute First National Bank v. Pacific Employers Ins. Co., 627 N.E.2d 454 (Ind. App. 1994).  However, in Federal Ins. Co. Ins. Co. v. Stroh Brewing Co., 1997 WL 58104 (7th Cir. September 19, 1997), the Seventh Circuit ruled that a GL carrier was precluded from raising an exclusion as a defense where it had delayed 6 months in calling this coverage defense to the attention of its insured.
 

  EXCESS INSURERS
  Excess insurers may bring claims against primary insurers for negligent failure to settle on a theory of equitable subrogation but have no rights independent of those belonging to the insured.  Certain Underwriters of Lloyd's v. General Accident Ins. Co., 908 F.2d 228 (7th Cir. 1990).

  An insured may not pursue a claim against excess insurers based upon a "mere possibility" that its aggregate environmental liabilities may someday reach the attachment point of their coverage layers. Indiana Gas Co. v. Aetna Cas. & Sur. Co., 951 F.Supp. 811 (N.D. Ind. 1996).
 

  KNOWN LOSS

  The Indiana Court of Appeals has ruled that the “known loss” doctrine precludes liability insurance “if an insured has actual knowledge that a loss has occurred, is occurring or is substantially certain to occur on or before the effective date of the policy.”    In General Housewares Corp. v. National Surety Corp., 741 N.E.2d 408 (Ind. App. 2000), the court rejected the insured’s Montrose arguments that the “known loss” doctrine is limited to first party claims; should be limited to cases in which the insured’s liability has already become adjudicated and cannot, in any event, extend beyond losses that were “expected or intended.”  On the other hand, even a known loss can be insured if it is known to both contracting parties.
 

  NUMBER OF OCCURRENCES

  The insured's operation of multiple MGP sites involved more than one "occurrence."  However, while failing to determine how many "occurrences" took place at each individual site, the court held that the claims were subject to a policy aggregate for claims involving exposures at a single premises location. Indiana Gas Co. v. Aetna Cas. & Sur. Co., 951 F.Supp. 773 (N.D. Ind. 1996).

  Earlier, the Court of Appeals had suggested in USF&G v. American Ins. Co., 345 N.E.2d 267 (Ind. App. 1976) that Indiana would limit coverage for an on-going occurrence to the first policy year in which harm became manifest.
 

  POLLUTION EXCLUSION

  On March 27, 1996, the Indiana Supreme Court ruled that the exclusion is limited to polluting acts that are "expected and intended" in American States Ins. Co. v. Kiger, 662 N.E.2d 945 (Ind. 1996).  The court ruled that the term "sudden" is ambiguous when considered in the light of internal insurance industry memoranda and drafting history from 1970 which indicate that the exclusion was only meant to clarify, and not to narrow, existing coverage.  The court expressly declined to adopt a "regulatory estoppel" rationale for its finding, however.  The Supreme Court declared that:

Clearly, this clause cannot be read literally as it would negate virtually all coverage.  For example, if a visitor slips on a grease spill then, since grease is a "chemical," there would be no insurance coverage.  Accordingly, this clause requires interpretation.  As mentioned in Section I, the interpretation of insurance policies is not new to this Court.  We are particularly troubled by the interpretation offered by American States, as it makes it appear that Kiger was sold a policy that provided no coverage for a large segment of the gas station's business operations.  In addition, the language excludes coverage for damage caused by "alleged discharge[s]" of "pollutants," which could be understood to mean that a mere allegation of pollution discharge could defeat all coverage.  In any event, since the term "pollutant" does not obviously include gasoline and, accordingly, is ambiguous, we once again must construe the language against the insurer who drafted it. 

  The Seventh Circuit ruled in Cincinnati Ins. Co. v. Flanders Electric Motor Service, Inc., 40 F.3d 146 (7th Cir. 1994) that CERCLA claims against a waste generator who shipped PCB transformers to the Cape Girardeau site were based upon the release of pollutants had occurred over an extended period of time and were therefore not "sudden."  the court rejected the insured contention that conflicting dictionary definitions or case law mandated a finding of ambiguity holding that it was difficult "to think of sudden without a temporal connotation."  the court also refused to look beyond this unambiguous policy language, rejecting the insured's suggestion that the drafting history of the exclusion was relevant to its interpretation.  Finally, the court refused to engage in a microanalysis of the causes of pollution at the site, holding that the discharges were commonplace events that occurred in the course of the sites operations and therefore could not be considered in isolation as being "sudden and accidental."

  Shortly after issuing its ruling in Kiger, the state Supreme Court also reversed a ruling of the Indiana Court of Appeals, which had declared in Seymour Manuf. Co. Inc. v. Commercial Union Ins. Co., 665 N.E.2d 891 (Ind. 1996), the Fifth District had ruled that the disposal of waste barrels at the insured's waste reclamation facility occurred over an extended period of time and was not "sudden."  In light of its ruling in Kiger, the Indiana Supreme Court ruled that Seymour was entitled to a defense.

  Kiger does not foreclose the possibility that Indiana courts will uphold the pollution exclusion in cases involving intentional disposal.  Indeed, in the first post-Kiger case to focus on the meaning of "accidental," a federal district court has ruled in Indiana Gas Co. v. Aetna Cas. & Sur. Co., 951 F.Supp. 797 (N.D. Ind. 1996) that pollution resulting from the on-going discharge of tar and other waste by-products of a utility's manufactured gas operations are excluded, whether or not the insured realized at the time that the materials were potentially hazardous.  While holding that the insurer had the entire burden of proof with respect to the exclusion, Judge Lee refused to analogize the Indiana Supreme Court's Kiger holding that gasoline was not a "pollutant" in the context of a service station owner's claim to claims arising out of the discharge of waste by-products at the subject MGP sites.  Further, the court refused to adopt a Patz "secondary discharge" analysis, holding that there was no Indiana precedent to support such a claim, nor was there evidence that the areas of discharge were clay-lined or that the insured, in discharging these materials onto the ground, had intended them to be permanently contained there.

  The “accidental” aspect of the exclusion remains viable in Indiana.  A U.S. District Court predicted shortly after Kiger that Indiana would adopt the 7th Circuit’s Patz “secondary discharge” view.  In Continental Casualty Co.  v.  Omnisource Corp., 1997 U.S. Dist.  LEXIS 22916 (N.D. Ind.  January 7, 1997), the Magistrate acknowledged, however, that there must be evidence that the wastes placed into the landfill or other container with an intent that they remain there or that the area be designed with a clay liner or other evidence of an intent to confine the wastes.  By contrast, intentional discharges resulting from breaking open battery casings at a recycling facility were not “accidental.”  the court also recognized that the issue of whether a discharge is “accidental” does not depend on the subjective intent of the insured or the “state of the art” and that intentional releases by site operators are not “accidental” even if the insured was a mere waste generator.  Finally, the court found that coverage might be permitted on the basis of discrete accidents if they had occurred outside the routine business practice of the site operator.  

  In one of the earliest cases to uphold the exclusion, the Court of Appeals also ruled in Barmet of Indiana, Inc. v. Security Ins. Group, 425 N.E.2d 201 (Ind. App. 1981) that it precludes coverage for accidents resulting from regular, known emissions. 

  The Court of Appeals has also ruled that the exclusion should not apply to "products liability" claims involving the planned, legal application of the insured's soil fumigant (EDB) product. Great Lakes Chemical Corporation v. International Surplus Lines Ins. Co., 638 N.E.2d 487 (Ind. App. 1994).

  The Indiana Supreme Court has ruled that the "absolute" pollution exclusion did not preclude coverage for the cost of cleaning up a gasoline spill from the insured's service station, holding in American States Ins. Co. v. Kiger, 662 N.E.2d 945 (Ind. 1996) that the meaning of "pollutant" was ambiguous as far as gasoline sold by a service station was concerned.  The court noted that it was odd that a garage policy would be sold to a gasoline station including an exclusion that specifically deleted the major source of potential liability.  Two of the five justices dissented as to this holding.  Accord, Indy Corp., Inc. v. Amerisure, Inc., No. 18A02-9608-CV-516 (Ind. App. July 10, 1997) (unpublished) (gasoline not a "pollutant"). 

  Shortly after Kiger, a bill was introduced in the Indiana legislature to preclude any finding of ambiguity in the absolute exclusion.  Although the bill was enacted by the legislature, it was vetoed by Governor O'Bannon in May 1997.  The governor declared that the definition of "pollutants" in the bill was too broad and that the problem would be better dealt with by insurers adopting clearer policy language

  Relying on Kiger, the Court of Appeals ruled in Travelers Indemnity Company v. Summit Corporation of America,  715 N.E.2d 926 (Ind. App. 1999) that the exclusion is ambiguous and did not preclude coverage for Superfund claims against a waste generator.  Similarly, Judge  Lee had declared in Governmental Interinsurance Exchange v. City of Angola, Indiana,  9 F.Supp.2d 1120 (N.D. Ind. 1998) that the exclusion did not apply to claims involving the leakage of gasoline from a 300 gallon underground storage tank on the insured's property.  The District Court held that the definition of "pollutants" was ambiguous in accordance with the Indiana Supreme Court's analysis of similar facts in Kiger.  The court took particular note of the fact that the insurance industry had unsuccessfully lobbied the Indiana legislature in 1997 to statutorily amend the scope of coverage to include gasoline as a pollutant but that this bill had been vetoed by Governor O'Bannon.  

  In light of Kiger, several Indiana courts have ruled that pollution exclusions are per se ambiguous without any specific analysis or consideration of the wordings at issue.  See General Housewares Corp. v. CNA Insurance Companies, Marion No. 49D06-9706-CP-0920 (Ind. Cir. Ct.  September 24, 1999) and  Henschen Oil, Inc. v. Burris Equipment Company, Inc., Elkhart County Circuit Court No. 20C01-9805-CT-036 (Ind. Cir. Ct. June 15, 2000)(gasoline spill).  In The Indiana Appeals Court has again struck down the absolute pollution exclusion.  In Freidline v. Shelby Insurance Company, 2000 Ind. App. LEXIS 1924 (Ind. App. November 29, 2000), the court concluded that the exclusion was ambiguous as it applied to allegations of bodily injury resulting from a building occupants’ exposure to  toxic fumes from substances that a contractor was using to install carpeting in the building.   In keeping with the Supreme Court’s analysis in Kiger, the court ruled that the word “fumes” could not be given its literal meaning.  Rather, the court declared that the focus of the exclusion should be on the substances that released those fumes.  As the exclusion was not intended to apply to carpet glue, the court declared the exclusion ambiguous and inapplicable.    Further, the court declared that Shelby had acted in bad faith in persisting in its interpretation of this exclusion notwithstanding existing Indiana case law declaring such exclusions to be ambiguous.

   Earlier, the Court of Appeals had upheld the exclusion in a hazardous waste case.  Seymour Manuf. Co. Inc. v. Commercial Union Ins. Co., 648 N.E.2d 1214 (Ind. App. 1995), rev'd on other grounds, 665 N.E.2d 891 (Ind. 1996).  A trial court ruled in Employers Mutual Casualty Co. v. DFX Enterprises, Inc., Elkhart No. 20D03-9505-CP-046 (Ind. Super. April 25, 1997) that the exclusion defeated coverage for claims by mobile home park tenants that the insured and other defendants had exposed them to harmful bacteriological and virological agents by failing to supply them with potable drinking water. the court refused to read Kiger as barring the application of the exclusion to any substance not expressly listed, nor did the insured have a reason to expect coverage as was the case in Kiger with the garage operator.  See also Muncie Sanitary District v. The Harleysville Ins. Co., No. IP-94-1401 (S.D. Ind. 1996)(no coverage for cleaning up landfill).
 

  "PROPERTY DAMAGE"

  The Indiana Supreme Court has ruled that CGL coverage protects against "tort liability for physical damage to others, not for contractual liability of the insured for economic loss because the product or completed work is not that for which the damaged person bargained." Indiana Ins. Co. v. DeZutti, 498 N.E.2d 1275 (Ind. 1980).  More recently, the Court of Appeals has ruled in Aetna Life & Cas. Co. v. Patrick Industries, Inc., 645 N.E.2d 656 (Ind. App. 1995) that economic loss or diminution in the value of a product as the result of the incorporation of a defective component is not "property damage" where the component has not physically injured the product. 
 

  PUNITIVE DAMAGES
  An insurer’s misconduct must be proved by clear and convincing evidence in order to warrant an award of punitive damages.  Travelers Indemnity Company v. Armstrong, 442 N.E.2d 349 (Ind. 1982).  

  Federal courts have generally ruled that liability insurers need not indemnity policyholders for punitive damages.  See Norfolk & Western Railway Co. v. Hartford Acc. & Ind. Co., 420 F.Supp. 92 (N.D. Ind. 1976) and Grant v. North River Ins. Co., 453 F.Supp. 1361 (N.D. Ind. 1978).  However, coverage may be allowed where the insured’s liability is vicarious only.
 

  STANDARDS FOR POLICY INTERPRETATION

  Ambiguous insurance policies are construed against the insurer.  Sur v. Glidden-Durkee, 681 F.2d 490, 496-97 (7th Cir. 1982).  The test for determining whether a contract is ambiguous is whether reasonable men would find the contract subject to more than one interpretation. Tastee-Freez Leasing Corp. v. Milwid, 173 Ind. App. 675, 365 N.E.2d 1388 (1977).  The courts look to the plain meaning of all contract provisions and endeavor to give effect to the intent of the parties at the time they entered into the contract.  Keystone Square Shopping Ctr. C. v. Marsh Supermarkets, Inc., 459 N.E.2d 420, 422 (Ind. App. 1984).  "Reasonable expectations" doctrine was recognized in Eli Lilly & Co. v. Home Ins. Co., 794 F.2d 710 (D.C. Cir. 1986)(Indiana law).

  Where there is a conflict between the master policy and the other informational materials prepared and distributed at the insurer's request, the insured is not bound by the more restrictive terms in the policy.  Palsce v. Guarantee Trust Life Ins. Co., 588 N.E.2d 897 (Ind. App. 1992).

  Policy provisions that have the effect of rendering coverage illusory will not be enforced as a matter of public policy.  Landis v. American Interinsurance Exchange, 542 N.E.2d 1351, 1354 (Ind. App. 1989).

  A policy term will not be deemed ambiguous merely because different courts have come to different conclusions concerning its meaning. Erie Ins. Group v. Sears Corp., 102 F.3d 889 (7th Cir. 1996) (Indiana law).  
     

  THEORIES OF ALTERNATIVE LIABILITY

  None adopted to date.
 

  TRIGGER OF COVERAGE

  The Indiana Court of Appeals appears to have adopted an "injury in fact" trigger, holding in Great Lakes Chemical Corporation v. International Surplus Lines Ins. Co., 638 N.E.2d 487 (Ind. App. 1994) that coverage for pollution claims is triggered when soil and groundwater is contaminated, not when the plaintiff suffers "damages" because of this pollution.

  In Allstate Insurance Company v. Dana Corporation, 737 N.E.2d 1173 (2nd Dist.  2000), the Court of Appeals declared that the continuing presence of pollutants in the ground and groundwater triggers coverage under successive policies for both “property damage” and “personal injury” coverage.

  The Indiana Supreme Court adopted a "continuous trigger" for DES claims in response to a certified question from the D.C. Circuit in Eli Lilly & Co. v. Home Ins. Co., 482 N.E.2d 467 (Ind. 1985).  Earlier, the Indiana Court of Appeals had adopted a "discovery"-type trigger for property claims, holding in U.S.F.&G. v. American Ins. Co., 169 Ind. App. 1, 345 N.E.2d 267 (1976) that the insurer on the risk when the "spalling" to the brick facade of a building "first becomes apparent is responsible for all damage to the structure."  In Stillwell v. Brock Brothers, 736 F.Supp. 201 (S.D. Ind. 1990), the court affirmed that coverage is triggered at the time damage is sustained, not at the time of the insured's wrongful act.

  A federal district court has ruled that Eli Lilly does not compel the application of a "continuous trigger" for pollution claims.  Since it was undisputed that all of the polluting activity had begun prior to Ranger's policy, the court held that the mere fact that there was a "continuing effect on the groundwater" or that pollutants were otherwise persisting was not a basis for coverage since there was no evidence that new pollutants were discharged so as to trigger coverage. Indiana Gas Co. Aetna Cas. & Sur. Co., 951 F.Supp. 806 (N.D. Ind. 1996).   However, the court ruled in a separate order that coverage is triggered by any damage to real property during the policy period, including the insured's own property.  The court rejected the insurers' contention that only damage to third party property is a trigger of coverage.   the court did grant summary judgment to Lloyd's under various policies that insured an "event" or "accident", holding that those policies required that disposal operations had occurred during the policy period in order to trigger coverage. 

  A state trial court has ruled that an insured is not entitled to coverage for liabilities arising out of operations and properties with which it had no connection until after the subject policies expired.  In  Inland Paperboard and Packaging, Inc. v. Affiliated FM Insurance Company, Marion No. 49D05-9708-CP-1142 (Ind. Super. February 23, 2000), Judge Eicholtz ruled that there must be a connection between the property and operations of the insured at the time the policies were issued and the insured’s subsequent rights to coverage.  “The policies did not contemplate, and were not structured or written to extend to liabilities that [the insured] might acquire into the future in perpetuity.  The policy language, read fairly and in context, is clear and unambiguous.  It does not cover liabilities acquired by [the insured] after the policy period where, as here, [the insured] had no factual or legal connection with those liabilities, or the activities, persons or properties involved in creating them, during the policy period.”

  An Indiana trial court has ruled that only a single policy year was triggered for pollution liabilities where the insured’s shipments and the discovery of pollution all occurred in the course of the policy year.   Dana Corporation v. Hartford Accident & Indemnity Company, No. 49 DO1 9301 CP 0026 (Ind. Super. Ct. May 7, 1999).  

  Allegations that the insured negligently failed to detect the presence of termite damage in the plaintiff’s home have been held to trigger coverage as of the date of the negligent inspection.  Askren Hub States Pest Control Services, Inc. v. Zurich Insurance Company, No. 49A02-9902-CV-133 (Ind. App. December 21, 1999).

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