Aug 24 2015, 9:02 am
ATTORNEY FOR APPELLANTS ATTORNEYS FOR APPELLEE STATE
Sheila M. Sullivan FARM INSURANCE COMPANY
Flynn & Sullivan, PC Dennis F. Cantrell
Indianapolis, Indiana Anna M. Mallon
Cantrell Strenski & Mehringer LLP
Indianapolis, Indiana
ATTORNEYS FOR APPELLEE
INDIANA RESTORATION &
CLEANING SERVICES, INC.
Alexander P. Pinegar
Leslie M. Damer
Eric M. Douthit
Church Church Hittle & Antrim
Noblesville, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Thomas Missler and Allison August 24, 2015
Missler, Court of Appeals Case No.
29A05-1501-PL-30
Appellants-Plaintiffs,
Appeal from the
v. Hamilton Superior Court
The Honorable Gail Bardach, Judge
State Farm Insurance Company Cause No. 29D06-1306-PL-5174
and Indiana Restoration &
Cleaning Services, Inc.,
Appellees-Defendants.
Kirsch, Judge.
Court of Appeals of Indiana | Opinion 29A05-1501-PL-30 |August 24, 2015 Page 1 of 13
[1] Thomas Missler (“Thomas”) and Allison Missler (“Allison”) (together, “the
Misslers”) appeal the trial court’s order granting summary judgment in favor of
State Farm Insurance Company (“State Farm”) and Indiana Restoration &
Cleaning Services, Inc. (“IRCS”). The Misslers raise the following restated
issues for our review:
I. Whether the trial court erred in granting summary judgment in
favor of State Farm because a genuine issue of material fact exists as to
whether State Farm breached its duty of good faith and fair dealing in
its relationship with the Misslers; and
II. Whether the trial court erred in granting summary judgment in
favor of IRCS because a genuine issue of material fact exists as to
whether the contract between IRCS and the Misslers was
unconscionable.
[2] We affirm in part, reverse in part, and remand.
Facts and Procedural History
[3] On June 1, 2011, a fire occurred at the Misslers’ home that destroyed the family
home, located in Carmel, Indiana, and much of their personal property. State
Farm insured the Misslers’ home and personal property under a Homeowner’s
Policy (“the Policy”) that provided dwelling coverage limits of $254,016.00,
personal property coverage limits of $190,512.00, and additional living
expenses. As to personal property, the Policy covered the cost to repair or
replace personal property damaged from the fire.
[4] While the fire department was still attending to the fire, the Misslers called their
State Farm insurance agent, Theresa Chapman (“Chapman”), and she came to
the house. Chapman contacted IRCS, and employees of IRCS arrived shortly
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thereafter. One of the employees, Kristin Kendall (“Kendall”), who, at the
time, Allison believed was a State Farm agent, met with the Misslers and
discussed the cleaning and restoration services that IRCS could perform on
their personal property. Kendall presented the Misslers with a contract for the
services of IRCS, and the Misslers asked if they could have time to review the
contract. Kendall told the Misslers that they needed to sign the contract
immediately and have IRCS begin removing property immediately so that mold
would not set in within three days and void the Policy. The Misslers asked
Chapman for her input, and she told them she was not allowed to recommend a
specific restoration and cleaning company. However, Chapman did point out
that IRCS was present at the scene, that IRCS was a preferred provider for State
Farm, and that IRCS would be easy to use. At that time, the Misslers gave
IRCS verbal consent to start work, and IRCS employees began carrying away
boxes of the Misslers’ property that night.
[5] On June 2, 2011, the day after the fire, State Farm Claim Representative RJ
Van Noy (“Van Noy”) met with the Misslers, who told Van Noy that they were
meeting with IRCS. Van Noy explained that IRCS was a member of the State
Farm Premier Service Program (“PSP”)1 for dwelling repairs. State Farm only
provides the PSP for dwelling repairs, but has no PSP contractors for personal
1
State Farm’s Premier Service Program (“PSP”) is a voluntary program in which an insured can choose a
contractor from a list of participating contractors provided by State Farm. If the insured does not have a
preference as to which contractor to use, State Farm will provide a contractor based on rotation. State Farm
does not dictate or control how a contractor is to conduct the repairs under the PSP. Contractors who
participate in the PSP guarantee their workmanship. State Farm does not guarantee the workmanship.
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property restoration. When Van Noy met with the Misslers, he explained all of
the coverages under the Policy and explained the PSP. He also presented the
Misslers with two letters, one explaining the building, personal property, and
loss of use coverages, the second confirming that the Misslers were participating
in the PSP as Van Noy was under the impression that the Misslers had chosen
to use PSP for their dwelling repairs.
[6] On June 3, 2011, the Misslers signed a contract with IRCS for personal
property restoration and repairs. Pursuant to the contract, the contract price for
IRCS’s services was undetermined at the time the contract was signed. The
contract stated that the client “agrees to add [IRCS] as a joint payee on all
insurance reimbursement checks for the Work” and that the client “transfers
and assigns to [IRCS] all of the Client’s right, title, and interest in and to” the
reimbursement checks. Appellants’ App. at 54. It further stated, “Client
understands and agrees that failure to transfer and/or negotiate the
Reimbursement Checks to [IRCS] may subject Client to various legal claims,
including but not limited to conversion.” Id. The contract warranted that
IRCS’s services would be performed in accordance with industry standards and
assigned all manufacturers’ warranties to the Misslers. The contract also
disclaimed all other warranties and contained the following language:
GIVEN THE NATURE OF THE DAMAGE TO THE PERSONAL
PROPERTY, [IRCS] CANNOT WARRANT THAT ANY
PARTICULAR ITEM OF PERSONAL PROPERTY WILL BE
REPAIRED OR RESTORED TO ITS PRE-DAMAGE
CONDITION. [IRCS] and Client agree that [IRCS] shall not be liable
for any damages arising from any pre-existing condition or
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impossibility or repair of the Personal Property. If for any reason
Client refuses to pay to [IRCS] any funds owed on this project, all
warranties expressed, written or implied shall be null and void.
Id. at 55.
[7] The Misslers signed another contract with IRCS on June 3, 2011 that
authorized IRCS to remove restorable property from the Misslers’ home. This
agreement also authorized State Farm to make direct payment to IRCS for the
restoration and cleaning services or to include IRCS on checks issued by State
Farm to the Misslers. On June 6, 2011, the Misslers entered into an agreement
with IRCS that authorized IRCS to dispose of personal property damaged in
the fire. IRCS then proceeded to clean and restore the Misslers’ personal
property. These services included: evaluating the personal property that could
be cost-effectively restored while at the site of the fire; packing these items and
transporting them to an IRCS facility for restoration; cleaning and deodorizing
the Misslers’ personal property; and storing the personal property at an IRCS
facility.
[8] Around June 10, 2011, Van Noy spoke with Thomas, who expressed that State
Farm was making the process as easy as possible for the Misslers. However,
during the course of the claim, the Misslers had issues with whether some of
their personal property was properly cleaned by IRCS. Van Noy worked with
the Misslers and IRCS to attempt to resolve the issues. IRCS performed
additional cleaning and repair services on the property that the Misslers deemed
inadequately cleaned. Van Noy met with the Misslers and representatives from
a dry cleaning company used by IRCS and confirmed that some items still
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smelled of smoke and some items were altered or shrunk, so the dry cleaning
representative listed such items as non-salvageable.
[9] State Farm paid a total of $471,106.34 on the Misslers’ claim, including
$230,542.07 under dwelling coverage, $192,280.00 under personal property
coverage, and $46,284.27 under loss of use coverage. State Farm made
payments totaling $19,006.64 for the cleaning and restoration of personal
property items to the Misslers and IRCS jointly. Although the Misslers were
not satisfied with the cleaning of some of their personal property, they endorsed
the State Farm check over to IRCS due to the contract provision threatening
liability for conversion if they did not do so.
[10] On June 4, 2013, the Misslers filed a complaint against State Farm and IRCS.
The complaint alleged claims for breach of contract and breach of good faith
and fair dealing against State Farm and alleged unjust enrichment and
unconscionable contract against IRCS. Both State Farm and IRCS filed
motions for summary judgment, and after a hearing on the motions, the trial
court granted summary judgment in favor of both State Farm and IRCS. The
Misslers now appeal.
Discussion and Decision
[11] When reviewing the grant of summary judgment, our standard of review is the
same as that of the trial court. FLM, LLC v. Cincinnati Ins. Co., 973 N.E.2d
1167, 1173 (Ind. Ct. App. 2012) (citing Wilcox Mfg. Grp., Inc. v. Mktg. Servs. of
Ind., Inc., 832 N.E.2d 559, 562 (Ind. Ct. App. 2005)), trans. denied. We stand in
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the shoes of the trial court and apply a de novo standard of review. Id. (citing
Cox v. N. Ind. Pub. Serv. Co., 848 N.E.2d 690, 695 (Ind. Ct. App. 2006)). Our
review of a summary judgment motion is limited to those materials designated
to the trial court. Ind. Trial Rule 56(H); Robson v. Tex. E. Corp., 833 N.E.2d
461, 466 (Ind. Ct. App. 2005), trans. denied. Summary judgment is appropriate
only where the designated evidence shows there are no genuine issues of
material fact and the moving party is entitled to judgment as a matter of law.
T.R. 56(C). For summary judgment purposes, a fact is “material” if it bears on
the ultimate resolution of relevant issues. FLM, 973 N.E.2d at 1173. We view
the pleadings and designated materials in the light most favorable to the non-
moving party. Id. Additionally, all facts and reasonable inferences from those
facts are construed in favor of the non-moving party. Id. (citing Troxel Equip.
Co. v. Limberlost Bancshares, 833 N.E.2d 36, 40 (Ind. Ct. App. 2005), trans.
denied).
[12] A trial court’s grant of summary judgment is clothed with a presumption of
validity, and the party who lost in the trial court has the burden of
demonstrating that the grant of summary judgment was erroneous. Id. Where
a trial court enters specific findings and conclusions, they offer insight into the
rationale for the trial court’s judgment and facilitate appellate review, but are
not binding upon this court. Id. We will affirm upon any theory or basis
supported by the designated materials. Id. When a trial court grants summary
judgment, we carefully scrutinize that determination to ensure that a party was
not improperly prevented from having his or her day in court. Id.
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I. State Farm
[13] The Misslers argue that the trial court erred when it granted summary judgment
in favor of State Farm. They contend that disputed material facts existed as to
whether State Farm breached its duty to deal with the Misslers in good faith
and use fair dealing. The Misslers allege that the fact that their State Farm
agent called IRCS representatives to the scene of their house fire, steered them
to use IRCS for their services, and endorsed IRCS as part of its PSP are all
disputed material facts that make summary judgment inappropriate as to their
claim of breach of good faith and fair dealing. The Misslers specifically assert
that, because State Farm endorsed IRCS as part of the PSP, State Farm should
have been aware that the IRCS contract terms stripped away the Misslers’ right
to decide what items would be cleaned or to take a cash settlement instead of
having the items cleaned. The Misslers claim that State Farm’s actions of
calling a personal property restoration company to the scene of the fire to begin
work, before the Misslers could assess their options, created a genuine issue of
material fact as to whether State Farm exercised an unfair advantage.
[14] Indiana law recognizes a legal duty, implied in all insurance contracts, for the
insurer to deal in good faith with its insured. Missig v. State Farm Fire & Cas. Co.,
998 N.E.2d 216, 229 (Ind. Ct. App. 2013) (citing Freidline v. Shelby Ins. Co., 774
N.E.2d 37, 40 (Ind. 2002)). An insurance company’s duty of good faith and
fair dealing includes the obligation to refrain from: (1) making an unfounded
refusal to pay policy proceeds; (2) causing an unfounded delay in making
payment; (3) deceiving the insured; and (4) exercising an unfair advantage to
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pressure an insured into settlement of his claim. Id. (citing Erie Ins. Co. v.
Hickman, 622 N.E.2d 515, 519 (Ind. 1993)). To prove bad faith, the plaintiff
must establish by clear and convincing evidence that the insurer had knowledge
that there was no legitimate basis for denying liability. Id. “‘Poor judgment or
negligence do not amount to bad faith; the additional element of conscious
wrongdoing must also be present.’” Mahan v. Am. Standard Ins. Co., 862 N.E.2d
669, 677 (Ind. Ct. App. 2007) (quoting Colley v. Ind. Farmers Mut. Ins. Grp., 691
N.E.2d 1259, 1261 (Ind. Ct. App. 1998), trans. denied), trans. denied. “Thus, “[a]
finding of bad faith requires evidence of a state of mind reflecting dishonest
purpose, moral obliquity, furtive design, or ill will.’” Id.
[15] In the present case, there is no dispute that State Farm paid the Misslers the
policy limits under the Policy and that there was no delay in paying the claims.
The evidence designated by State Farm showed that State Farm was not a party
to and did not sign any of the contracts that the Misslers entered into with
IRCS. Appellants’ App. at 38, 54-55, 57, 59. Although Chapman, their State
Farm agent, may have called an IRCS representative to come to the scene on
the night of the fire, the Misslers were not required by State Farm to use IRCS
for their cleaning and restoration services. IRCS was an independent contractor
and not an agent of State Farm and was not a participant in State Farm’s PSP
for personal property restoration as State Farm did not provide PSP contractors
for personal property restoration. The evidence also showed that, when the
Misslers experienced problems with their personal property cleaning, Van Noy
assisted them to try to resolve the problems. Id. at 39-40. Further, it is
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undisputed that, in making the joint payments to both the Misslers and IRCS,
State Farm was complying with the Policy and the contract between the
Misslers and IRCS, and in fact under the contract, State Farm could have paid
IRCS directly. Id. at 40, 57. We conclude that there are no genuine issues of
material fact to support the Misslers’ claim that State Farm breached its duty to
deal with them in good faith and use fair dealing. The trial court properly
granted summary judgment in favor of State Farm.
II. IRCS
[16] The Misslers argue that the trial court erred when it granted summary judgment
in favor of IRCS. They contend that material facts were in dispute as to
whether the contract between IRCS and the Misslers (“the Contract”) was
unconscionable. The Misslers assert that the Contract was procedurally
unconscionable due to the facts that a representative from IRCS came to the
scene of the fire while the house was still burning and that she pressured them
into signing the Contract. The Misslers also allege that the Contract was
substantively unconscionable because it contained terms that were
“oppressively one-sided,” and due to the facts designated, it was error to grant
summary judgment in favor of IRCS. Appellants’ Br. at 12.
[17] “A contract is unconscionable if a great disparity in bargaining power exists
between the parties, such that the weaker party is made to sign a contract
unwillingly or without being aware of its terms.” Brumley v. Commonwealth Bus.
Coll. Educ. Corp., 945 N.E.2d 770, 777 (Ind. Ct. App. 2011) (citing Sanford v.
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Castleton Health Care Ctr., LLC, 813 N.E.2d 411, 417 (Ind. Ct. App. 2004), trans.
dismissed). Our unconscionability jurisprudence is sub-divided into two
branches: substantive and procedural. DiMizio v. Romo, 756 N.E.2d 1018, 1023
(Ind. Ct. App. 2001) (citing Hahn v. Ford Motor Co., 434 N.E.2d 943, 951 (Ind.
Ct. App. 1982)), trans. denied. Substantive unconscionability refers to
oppressively one-sided and harsh terms of a contract, while procedural
unconscionability involves the manner and process by which the terms become
part of the contract. Id. at 1023-24.
[18] The designated evidence showed that, under the terms of the Contract, the
Misslers were not given the option of deciding to take a cash settlement for their
personal property in lieu of having IRCS clean all of their property; in fact, the
contract did not discuss how IRCS determined what property to clean and what
property they would dispose of. Appellants’ App. at 54-55. The Contract also
contained language stating that IRCS would perform their services in
accordance with industry standards, but did not explain what those standards
were. Id. Additionally, the Contract stated that IRCS was not required to
successfully clean the items for which they would charge the Misslers. Id. at 55.
Further, the Contract’s language provided that the Misslers could be subject to
legal claims, including conversion, if they did not endorse the checks issued by
State Farm over to IRCS, which meant that the Misslers were forced to pay the
insurance proceeds to IRCS even if they were not satisfied with the cleaning
services or risk legal claims. Id. at 54.
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[19] IRCS presented designated evidence that it provided cleaning and restoration
services in accordance with industry standards and that it only charged the
Misslers for services that were performed on property that was properly restored
or cleaned. Id. at 122. However, the Misslers stated in their designated
evidence that none of their personal property was properly cleaned. Id. at 138-
40. IRCS also introduced evidence that the services provided to the Misslers,
included, but were not limited to: completing, while at the site of the fire and
with input from the Misslers, an evaluation of the personal property that could
be cost-effectively restored; packing said items and transporting them to an
IRCS facility for restoration; cleaning and deodorizing the personal property;
and storing the property at an IRCS facility. Id. at 122. IRCS does not state if
these services are industry standards, and they are not included in the Contract
as industry standards. Further, the Misslers presented evidence that some of
these services were not actually performed, particularly the completion at the
site of the fire of an evaluation of what could be cost-effectively cleaned or the
consideration of the Misslers’ input as to what items to transport for restoration.
Id. at 139.
[20] We conclude that, based on the designated evidence, there remain genuine
issues of material fact as to whether the terms of the Contract entered into by
the Misslers with IRCS were so oppressively one-sided and harsh as to make
the Contract unconscionable. Therefore, the trial court erred when it granted
summary judgment in favor of IRCS. We remand to the trial court for further
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proceedings to determine whether the Contract between the Misslers and IRCS
was enforceable.2
[21] Affirmed in part, reversed in part, and remanded.
Najam, J., and Barnes, J., concur.
2
The Misslers also contend that the trial court erred when it found that IRCS was not unjustly enriched by
charging the Misslers over $19,000.00 from their State Farm coverage payment. As we have determined that
issues of material fact exist as to whether the Contract between the Misslers and IRCS was unconscionable,
we also conclude that issues of material fact exist as to whether IRCS was unjustly enriched.
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