Property Owners Insurance Co. v. Hack

ON PETITION FOR REHEARING

Property Owners petitions for rehearing on several grounds. We grant the petition to clarify our earlier decision in Property Owners Ins. Co. v. Hack (1990), Ind.App., 559 N.E.2d 396.

I

Preliminarily, Property Owners argues Mr. Hack was not a party to the insurance contract, and that, accordingly, we cannot enforce his reasonable expectations. Property Owners is mistaken because persons other than the named insured, including beneficiaries, are entitled to have their reasonable expectations enforced. See American Economy Ins. Co. v. Liggett. (1981), Ind.App., 426 N.E.2d 136, 141, citing Keeton, Insurance Law (1971), § 6.8(a).

II

The sum of Property Owners' argument is that the insurance contract's terms render the Hacks mere nominees of the named insureds, the Laceys. Following this argument to its logical conclusion, Property Owners asserts its payment of $186,000 to the Hacks and their mortgagee was a gesture of settlement because the question of a contract seller's rights under a standard mortgage clause is not resolved in Indiana. This view is incorrect for two reasons.

First, the rule in this state that contract sellers are analogous to mortgagees for purposes of disbursement of insurance proceeds was established over half a century ago in Hoverstock v. Darrow (1934), 94 Ind.App. 83, 179 N.E. 790. Second, and more importantly, this case does not revolve around a contract seller's rights under a standard mortgage clause, but rather a contract seller's rights independent of a standard mortgage clause.

Property Owners concedes contract sellers can have rights independent of a standard mortgage clause through a contract of sale clause. See West Bend Mutual Ins. Co. v. Salemi (1987), 158 Ill.App.3d 241, 110 IIl.Dec. 608, 511 N.E.2d 785, ap*403peal denied, 116 Ill.2d 577, 113 Ill.Dec. 320, 515 N.E.2d 129. Such a clause specifically insures the benefit of the seller's bargain, even if the amount due under the contract of sale is greater than the cash value of the damaged or destroyed property. In the absence of a contract of sale clause, an insurer insures only the value of the lost property, not the benefit of the seller's bargain. See Keeton and Widiss, Insurance Law § 8.9(a), 15 Couch on Insurance § 54.124 for customary valuation formulas.

Because there was no contract of sale clause attached to the contract at issue here, Property Owners argues the Hacks cannot recover the benefit of their bargain. This argument begs the question: there was no contract of sale clause because Property Owners did not attach one to the contract. As we stated in our earlier opinion, Mr. Hacks' affidavit, which Property Owners never refuted, shows Mr. Hack requested the elements necessary for a contract of sale clause. We repeat also that the Hacks are neither lawyers nor insurance specialists; Mr. Hacks' reasonable expectations were worthy of enforcement, and Property Owners cannot avoid liability merely because the Hacks lacked the expertise to ask specifically for a contract of sale clause.

TII

In our previous opinion, we stated that "[tlhe dispute arises because the policy at issue is ambiguous." 559 N.E.2d at 339. Property Owners correctly points out that the resolution of ambiguities in a written contract generally is a question for the trier of fact. See Seibert v. Mock (1987), Ind.App., 510 N.E.2d 1373. When the ambiguity stems not from extrinsic facts, however, but from the language of the contract itself, resolution of the ambiguity is a question of law for the trial court. Kordick v. Merchant's National Bank and Trust Co. (1986), Ind.App., 496 N.E.2d 119.

Here, the ambiguity stems from the fact that the policy merely lists the Hacks as contract holders, and does not define the seope or extent of their coverage. Property Owners failed to supply a contract of sale clause, and this failure to "ascertain the true situation is [the insurer's] responsibility." 559 N.E.2d at 402. (citation omitted). Mr. Hacks' affidavit showed an absence of any genuine issue of material fact regarding the coverage requested. This showing shifted the burden to Property Owners to demonstrate a genuine issue necessitating a trial. See Kahf v. Charileston South Apartments (1984), Ind.App., 461 N.E.2d 728, trans. denied; McCullough v. Allen (1983), Ind. App., 449 N.E.2d 1168. Property Owners did not attempt to meet the burden, and accordingly, the grant of partial summary judgment was proper.

IV

Our previous decision remains unaltered, the judgment of the trial court is affirmed, and the cause is remanded to the trial court for further proceedings consistent with this opinion and our earlier opinion.

ROBERTSON and CONOVER, JJ., concur.