Robert Youell and Best One Giant Tire, Inc. v. The Cincinnati Insurance Company a/s/o Greg Dotson

FILED
Dec 28 2018, 7:53 am

CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court

ATTORNEYS FOR APPELLANTS ATTORNEYS FOR APPELLEE
Thomas J. Jarzyniecki, Jr. Catherine Siebecker
Jennifer M. Van Dame Doug Fisher
Kightlinger & Gray, LLP Law Offices
Indianapolis, Indiana The Cincinnati Insurance
Company
Crystal G. Rowe
Indianapolis, Indiana
Kightlinger & Gray, LLP
New Albany, Indiana

IN THE
COURT OF APPEALS OF INDIANA

Robert Youell and December 28, 2018
Best One Giant Tire, Inc., Court of Appeals Case No.
Appellants-Defendants, 18A-CT-1466
Appeal from the Marion Superior
v. Court
The Honorable James B. Osborn,
The Cincinnati Insurance Judge
Company a/s/o Greg Dotson, Trial Court Cause No.
Appellee-Plaintiff 49D14-1708-CT-30209

Vaidik, Chief Judge.

Court of Appeals of Indiana | Opinion 18A-CT-1466 | December 28, 2018 Page 1 of 9
 Case Summary
[1] A landlord and a tenant entered into a commercial lease that provided that the

landlord would insure the building and the tenant would insure its personal

property inside the building. When the property was later damaged by fire, the

landlord’s insurance covered the loss. The landlord’s insurer later filed a

subrogation action against the tenant to recover the amount paid. The tenant

filed a motion for judgment on the pleadings, arguing that the landlord’s

agreement to obtain property insurance was an agreement to provide both

parties with the benefits of insurance and expressly allocated the risk of loss in

case of fire to insurance, thereby barring a subrogation action as a matter of

law. The trial court denied the motion, and the tenant now appeals. We

reverse and remand.

Facts and Procedural History
[2] In 2013, Greg Dotson (“Landlord”) leased a commercial building on West

Washington Street in Indianapolis to Robert Youell and Best One Giant Tire,

Inc. (referred to collectively as “Tenant”). The Commercial Lease Agreement

addressed insurance as follows:

8. Insurance

A. If the Leased Premises or any other party [sic] of the Building
is damaged by fire or other casualty resulting from any act or
negligence of Tenant or any of Tenant’s agents, employees or
invitees, rent shall not be diminished or abated while such

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 damages are under repair, and Tenant shall be responsible for the
costs of repair not covered by insurance.

B. Landlord shall maintain fire and extended coverage
insurance on the Building and the Leased Premises in such
amounts as Landlord shall deem appropriate. Tenant shall be
responsible, at its expense, for fire and extended coverage
insurance on all of its personal property, including removable
trade fixtures, located in the Leased Premises.

C. Tenant and Landlord shall, each at its own expense, maintain
a policy or policies of comprehensive general liability insurance
with respect to the respective activities of each in the Building
with the premiums thereon fully paid on or before due date,
issued by and binding upon some insurance company approved
by Landlord, such insurance to afford minimum protection of not
less than $1,000,000 combined single limit coverage of bodily
injury, property damage or combination thereof. Landlord shall
be listed as an additional insured on Tenant’s policy or policies of
comprehensive general liability insurance, and Tenant shall
provide Landlord with current Certificates of Insurance
evidencing Tenant’s compliance with this Paragraph. Tenant
shall obtain the agreement of Tenant’s insurers to notify
Landlord that a policy is due to expire at least [ten] (10) days
prior to such expiration. Landlord shall not be required to
maintain insurance against thefts within the Leased Premises or
the Building.

Appellants’ App. Vol. II p. 15 (emphasis added). In accordance with the lease,

Landlord maintained property insurance on the building through a policy with

The Cincinnati Insurance Company (CIC).

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[3] On August 8, 2015, a fire occurred at the building. Pursuant to Landlord’s

insurance policy, CIC paid Landlord $227,653 for damages to the building. In

August 2017, CIC, as subrogee of Landlord, filed a complaint against Tenant to

recover that amount. CIC attached the Commercial Lease Agreement to its

complaint.

[4] Thereafter, Tenant filed a motion for judgment on the pleadings, arguing that

CIC had no right to pursue the subrogation claim because Landlord’s

agreement to provide property insurance was an agreement to provide both

parties with the benefits of insurance. The trial court denied Tenant’s motion.

Appellants’ App. Vol. II p. 9.

[5] At Tenant’s request, the trial court certified its order for interlocutory appeal,

and this Court accepted jurisdiction of the appeal.

Discussion and Decision
[6] Tenant contends that the trial court should have granted its motion for

judgment on the pleadings. According to Indiana Trial Rule 12(C), after the

pleadings are closed but within such time as not to delay the trial, any party

may move for judgment on the pleadings. A written instrument attached to a

pleading is considered a part of that pleading. Ind. Trial Rule 10(C).

A motion for judgment on the pleadings is typically directed toward a

determination of the substantive merits of the controversy. Mourning v. Allison

Transmission, Inc., 72 N.E.3d 482, 486 (Ind. Ct. App. 2017). Such motions

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 should be granted only where it is clear from the face of the complaint that

under no circumstances could relief be granted. Id.; see also ESPN, Inc. v. Univ. of

Notre Dame Police Dep’t, 62 N.E.3d 1192, 1195 (Ind. 2016) (judgment on the

pleadings should be granted only “where it is clear from the face of the

pleadings that one party is entitled to prevail as a matter of law”). We review

the trial court’s ruling on such motions de novo. ESPN, 62 N.E.3d at 1195.

[7] In addition, a lease is construed in the same manner as any other contract. T-3

Martinsville, LLC v. US Holding, LLC, 911 N.E.2d 100, 111 (Ind. Ct. App.

2009), aff’d on reh’g, trans. denied. When construing the meaning of a contract,

our primary task is to determine and effectuate the intent of the

parties. Id. First, we must determine whether the language of the contract is

ambiguous. Id. The unambiguous language of a contract is conclusive upon

the parties to the contract and upon the courts. Id. If the language of the

instrument is unambiguous, the parties’ intent will be determined from the four

corners of the contract. Id. If, on the other hand, a contract is ambiguous, its

meaning must be determined by examining extrinsic evidence and its

construction is a matter for the fact-finder. Id.

[8] Tenant asserts that Morsches Lumber, Inc. v. Probst, 180 Ind. App. 202, 388

N.E.2d 284 (Ind. Ct. App. 1979), is controlling here. In that case, the parties

entered into a contract for the construction of a pole barn. According to the

contract, the landowner was required to obtain property insurance for fire and

windstorm damage and the builder was required to obtain general liability

insurance. When a windstorm later destroyed the barn during construction, the
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landowner’s insurance covered only 75% of the loss. The landowner then filed

suit against the builder, alleging that the builder’s negligence was the proximate

cause of the barn’s destruction. The builder responded that regardless of any

negligence on its part, neither the landowner nor his insurer as subrogee could

bring an action for a loss that the parties agreed would be allocated to

insurance. We agreed with the builder, reasoning:

[A]n agreement to insure is an agreement to provide both parties
with the benefits of insurance. Individuals understand that
insurance will protect them against the consequences of their
own negligence and more than likely assume that if one who is a
party to a contract agrees as part of his or its duties to provide
insurance, that the insurance will protect both of them regardless
of the cause of the loss (excepting, of course, wanton and willful
acts). If that were not their intent, each would provide his or its
own insurance protection and there would be no need for the
contract to place the duty on one of them.

Id. at 287. Accordingly, we held that the landowner was “limited in his

recovery to the proceeds of the insurance policy. The fact that he failed to take

out a policy sufficient to cover the cost of the undertaking is a cost he will have

to bear.” Id.; see also Woodruff v. Wilson Oil Co., 178 Ind. App. 428, 382 N.E.2d

1009 (1978) (holding that a contract requiring the lessors to obtain fire

insurance for the leased property was for the benefit of both the lessors and the

lessee and therefore the lessors were limited in recovery to the insurance

proceeds).

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[9] We agree with Tenant that Morsches Lumber is controlling here. Like the

contract in Morsches Lumber, here the Commercial Lease Agreement

unambiguously provides that Landlord would insure the building and Tenant

would insure its personal property inside the building.1 Appellants’ App. Vol. II

p. 33. Landlord and Tenant’s agreement to insure was thus an agreement to

provide both parties with the benefits of the insurance and expressly allocated

the risk of loss in case of fire to insurance. See Morsches Lumber, 388 N.E.2d at

287 (“With agreements to insure, the risk of loss is not intended to be shifted to

one of the parties; it is intended to be shifted to an insurance company in return

for a premium payment. Neither party intends to assume a potential liability;

rather both are demonstrating ‘normal’ business foresight in avoiding liability

and allocating it to an insurer.”). And just like the landowner in Morsches

Lumber, Landlord is limited in its recovery to the insurance proceeds. And

because CIC stands in the shoes of Landlord and takes no rights other than

those that Landlord had, CIC has no subrogation rights against Tenant. Ind.

Erectors, Inc. v. Trs. of Ind. Univ., 686 N.E.2d 878, 880 (Ind. Ct. App. 1997)

(“[T]he party who agreed to purchase insurance has no cause of action against

the party for whose benefit the insurance was intended regardless of the fault of

this intended insured. And, as the rights of a subrogated insurer can rise no

1
Landlord asserts that the lease is ambiguous because (1) the lease did not specify the amount of property
insurance to be obtained (but rather left it to the discretion of Landlord) and (2) the lease did not explicitly
rule out subrogation. But as Tenant points out, the contract in Morsches Lumber neither specified the amount
of property insurance to be obtained nor explicitly ruled out subrogation. The lease is not ambiguous for
these reasons.

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 higher than the rights of its insured, the first party’s insurance carrier has no

subrogation cause of action against the intended insured.” (citations omitted)),

reh’g denied; Farm Bureau Ins. Co. v. Allstate Ins. Co., 765 N.E.2d 651, 656-57 (Ind.

Ct. App. 2002), aff’d on reh’g, trans. denied.

[10] Despite Tenant’s explicit reliance on Morsches Lumber in its brief, CIC does not

attempt to distinguish it, or even cite it, in its brief. CIC, however, relies on

LBM Realty, LLC v. Mannia, 19 N.E.3d 379 (Ind. Ct. App. 2014). In LBM

Realty, the tenant entered into a lease with the landlord to rent a unit in an

apartment building. The lease was “silent” as to the landlord’s obligation to

maintain property insurance and only recommended that the tenant obtain

renter’s insurance. Id. at 381. After a fire caused nearly $750,000 in damage to

the apartment building, the landlord’s insurer filed negligence and breach-of-

contract claims against the tenant for causing the fire. In determining whether

the landlord’s insurer could pursue the claims against the tenant, we considered

three alternative approaches to subrogation claims brought against tenants by

insurers of landlords: (1) the no-subrogation approach; (2) the pro-subrogation

approach; and (3) the case-by-case approach. After considering each

alternative, we adopted the case-by-case approach:

Having considered the range of possible approaches, we conclude
that Indiana should hereby adopt the largely case-by-case
approach, finding that a tenant’s liability to the landlord’s insurer
for damage-causing negligence depends on the reasonable
expectations of the parties to the lease as ascertained from the
lease as a whole and any other admissible evidence. Although
the case-by-case approach is said to provide less predictability

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 than either the pro- or no-subrogation approaches, we find that
this approach best effectuates the intent of the parties by simply
enforcing the terms of their lease.

Id. at 393-94 (citations omitted).

[11] LBM Realty is distinguishable from this case. In LBM Realty, the lease did not

require the landlord to maintain property insurance and only recommended

that the tenant obtain renter’s insurance; as a result, the parties’ expectations

with respect to liability for damage to the leased premises was unknown. Here,

however, the Commercial Lease Agreement unambiguously provides that

Landlord would insure the building. Accordingly, the test set forth in LBM

Realty does not apply to this case; rather, Morsches Lumber controls. We

therefore reverse and remand with instructions for the trial court to grant

Tenant’s motion for judgment on the pleadings.

[12] Reversed and remanded.

Riley, J., and Kirsch, J., concur.

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