FILED
Oct 18 2018, 9:48 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEYS FOR APPELLANTS ATTORNEY FOR APPELLEE
George M. Plews Katherine L. Shelby
Sean M. Hirschten Cantrell Strenski & Mehringer,
Plews Shadley Racher & Braun LLP LLP
Indianapolis, Indiana Indianapolis, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Franke Plating Works, Inc., October 18, 2018
Appellant-Plaintiff, Court of Appeals Case No.
49A02-1710-PL-2462
v. Appeal from the Marion Superior
Court
The Cincinnati Insurance The Honorable Timothy W.
Company, Oakes, Judge
Appellee-Defendant. The Honorable Therese A.
Hannah, Commissioner
Trial Court Cause No.
49D12-0703-PL-8448
Brown, Judge.
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[1] Franke Plating Works, Inc. (“Franke Plating”) appeals the trial court’s
September 26, 2016 entry of summary judgment and the denial of its motion to
correct error.1 Franke Plating raises several issues which we consolidate and
restate as whether after fully investigating, defending, settling, and completing a
number of payments relating to four environmental liabilities, it is entitled to
indemnity where the first notice given to the insurer occurred no earlier than
nine years after it knew of the claims against it.2 We affirm.
Facts and Procedural History
A. Background
[2] This is an insurance coverage dispute between Franke Plating and the
Cincinnati Insurance Company (“Cincinnati”) concerning Insurance Policy
No. 49 83 32, effective November 1, 1987 (the “1987 Policy”). Indiana
corporation Franke Plating has metal finishing, plating, and coating operations
that cover parts in zinc and other constituents and which had generated various
hazardous and nonhazardous wastes that were shipped to several waste-
handling facilities for disposal. In connection to its operations, Franke Plating
1
Franke Plating’s Notice of Appeal states that, in addition to appealing the trial court’s entry of summary
judgment, it appeals the trial court’s September 28, 2017 order on its Motion to Compel Discovery, but its
Brief and Reply Brief make no arguments to that effect.
2
We heard oral argument in this case on August 15, 2018, in Indianapolis. We commend counsel for the
quality of their oral advocacy and written presentations in this matter.
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was named as a potentially responsible party (“PRP”) 3 in actions involving
environmental cleanups at three landfill sites and a citizen suit filed by Atlantic
States Legal Foundation, Inc. (“ASLF”) (the four claims collectively, the
“Underlying Claims”).
1. Four County
[3] The Four County State Cleanup site (“Four County”) operated from 1972,
when it began accepting municipal wastes, until 1989, when its owners filed for
Chapter 11 bankruptcy. In later years, it was licensed to accept other wastes,
including industrial and later Resource Conservation and Recovery Act
hazardous wastes. Until the late 1980s, the wastes were placed in unlined pits
and covered with soil. Investigations found the groundwater under the site to
be contaminated with Volatile Organic Compounds, Semi-Volatile Organic
Compounds, and metals.
[4] On October 29, 1991, the PRP Ad Hoc Steering Committee sent the PRPs a
letter which discussed a final participation agreement and checks which were to
be made payable to the Four County Landfill Administrative Fund.4 On
3
In portions of his deposition, Warren Franke (“Warren”), Franke Plating’s President, indicated he
understood PRP to mean “[t]hat [Franke Plating has] a pretty good chance of having our material on that
property, so, therefore, we are partially responsible for the waste at this location.” Appellee’s Appendix
Volume II at 29.
4
The record contains a copy of the “FOUR COUNTY LANDFILL SITE PRP STEERING COMMITTEE
AGREEMENT,” which is stamped “DRAFT” and provides in part: “All Members of the PRP Steering
Committee shall make an initial contribution of $1,000.00 for those members ranked number 1 through
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November 5, 1991, Franke Plating entered into the Four County Landfill
Group Agreement. On February 20, 1992, the Indiana Department of
Environmental Management (“IDEM”) sent Franke Plating a Special Notice of
Potential Liability.
[5] Ultimately, Franke Plating was alleged to have shipped 1,158,000 converted
pounds of waste or 0.1558% of the total waste contribution at Four County.5 Its
allocation was subsequently adjusted to 1,738,800 converted pounds, or
0.2042% of the total waste. On April 6, 1993, Franke Plating signed an Agreed
Order, pursuant to which it paid a “percentage of waste that [it] contributed to
the site.” Appellant’s Appendix Volume III at 22. It completed payments and,
in total, incurred costs of $32,420.09.
2. Fort Wayne Reduction
[6] The Fort Wayne Reduction Superfund site (“Fort Wayne Reduction”), located
in Allen County just east of Fort Wayne, was a chemical recycling factory and
operated from 1967 to 1975 as a waste disposal facility. On February 22, 1989,
a Consent Decree for Remedial Design/Remedial Action was lodged, the
Remedial Design was completed in December 1989, and the construction of the
Remedial Action began in July 1991 and was completed in October 1994. Over
number 58 inclusive on the attached Four County Landfill PRI Volumetric List.” Appellee’s Appendix
Volume II at 136, 144. Warren’s deposition indicates that Franke Plating was “No. 48 on the list.” Id. at 55.
5
The designated Volumetric Rating defines “converted pounds” as the “waste equivalent in pounds for all
volume types given in the annual waste volume reports.” Appellant’s Appendix Volume II at 213.
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27,000 drums were removed from the site and final work was completed in
1996.
[7] Franke Plating was sued as a fourth-party defendant for contribution of
response costs6 associated with remediating Fort Wayne Reduction.
Ultimately, Franke Plating was alleged to have contributed 0.1738% of the total
material at Fort Wayne Reduction and the demand on it was $14,217.40, plus
oversight costs of $1,909.34, for a total demand of $16,126.74. Franke Plating
settled the claims against it, paid its share to clean up the site, and incurred total
costs of $8,000.7
3. Wayne Reclamation
[8] The Wayne Reclamation site covers approximately thirty acres in the southeast
part of Columbia City, Indiana. Wayne Waste Oil deposited about one million
gallons of oil-related wastes at the Wayne Reclamation site from 1975 to 1980.
6
In its April 4, 2016 Supplemental Submission and Designation of Evidence in Support of its Motion for
Summary Judgment and in Opposition to Plaintiff’s Motion for Summary Judgment, Cincinnati included
excerpts from the Deposition of Frank Deveau regarding response, removal, and remedial costs, which
indicate that “[r]esponse costs are costs to investigate or remediate contamination” that may be in the soil
and groundwater; that response costs can include oversight costs for the agency as well. Appellee’s Appendix
Volume IV at 84. Deveau also states in his affidavit that he would include costs of removal in the “overall
term of ‘response costs’”; that removal and remedial costs “ALL fall under the umbrella of response costs”;
that removal costs are “something that may be done to remove sort of, on an expedited basis, drums or
whatever is located at a site”; and that remedial costs differ from removal costs in that “generally, remedial
are costs that are incurred after a remedy has been selected, and those costs involve implementing the
remedial [action].” Id. at 84-85.
7
On December 16, 1994, Franke Plating paid $1,000 to the Fourth-Party Defense Fund, and on June 20,
1995, paid $7,000 in settlement. It was dismissed from the lawsuit in October 1995.
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A de minimis consent decree involving over 800 parties and $5 million was
entered in court in August 1997.
[9] Franke Plating’s involvement with the Wayne Reclamation site began as early
as August 17, 1985, when the United States Environmental Protection Agency
(“EPA”) sent Franke Plating a letter. On August 26, 1985, the father of Warren
Franke (“Warren”), William J. Franke, sent a letter on Franke Plating
stationery to the EPA which stated, “We are in receipt of your certified letter
dated August 17, 1985, in which we are informed that we may be a responsible
party generator with respect to this site and its subsequent clean-up activities.”
Id. at 5. On November 6, 1985, the EPA sent a letter to the Site Management
Section which stated:
U.S. EPA believes that you may be a party responsible for this
release or threat of release. Before the government undertakes
the necessary action at the site, we offer you the opportunity to
perform voluntarily the required work to abate any releases of
hazardous substances, pollutants, or contaminants from the site.
If private party cleanup is not forthcoming and public funds are
expended, you may be liable for the costs incurred. . . .
U.S. EPA intends to perform the following work:
1. Excavate and dispose of approximately 400 drums.
Approximately ninety-one of the drums are located above the
surface.
2. Remove and dispose of contaminated soil around the drums.
3. Conduct a geophysical survey in order to locate any possible
additional buried drums on the site.
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4. Install three cluster monitoring wells between the city well
field and the sludge ravine.
5. Initiate a sampling program for existing wells.
Appellant’s Appendix Volume V at 241-242. On June 16, 1986, Franke Plating
signed its agreement to an Administrative Order by Consent proceeding under
Section 106 of the Comprehensive Environmental Response, Compensation,
and Liability Act (“CERCLA”),8 which states in part that the respondents
agreed to “undertake all actions required by the terms and conditions of this
Consent Order” and that they “shall undertake and assure, at their expense, the
implementation of the Work Plan incorporated herein.” Id. at 188, 195.
[10] On May 26, 1995, the Wayne Reclamation Site Cleanup Settlor sent a demand
letter stating that Franke Plating had “received notices over the years
concerning its status as a [PRP]” under CERCLA, that “to date, [Franke
Plating] has failed to join in the Consent Decree and pay a share of costs of one
or more of the three earlier cleanups,” that it represented Franke Plating’s “final
opportunity to settle its share of responsibility for the cleanup of the Site
without litigation,” and that the “Cleanup Settlors hereby demand the
amount(s) set forth . . . if settlement is reached not later than June 27, 1995.”
8
In the federal arena, the EPA is statutorily authorized to enforce remediation of environmental pollution.
CERCLA provides several ways for the EPA to accomplish its objectives, 42 U.S.C. § 9601 et seq, and
empowers the EPA to respond to contamination and then shift liability for “response costs” to those parties
responsible. Hartford Acc. & Indem. Co. v. Dana Corp., 690 N.E.2d 285 (Ind. Ct. App. 1997) (citing 42 U.S.C. §
9607), trans. denied.
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Appellant’s Appendix Volume III at 214-215. On November 13, 1996, Franke
Plating’s attorney, Mark A. Thoma, sent a letter concerning the Wayne
Reclamation site which enclosed “the original of a signature page for the
proposed de minimis [c]onsent [d]ecree signed by Warren T. Franke” as the
representative of Franke Plating.9 Id. at 220. Franke Plating signed a consent
decree relating to Wayne Reclamation10 and made the refund payments. In
total, its response costs at Wayne Reclamation amounted to $49,676.83.
4. ASLF Citizen Suit
[11] ASLF filed a citizen suit on April 9, 1991, in the United States District Court
for the Northern District of Indiana, styled American States Legal Foundations,
Inc. v. Franke Plating Works, Inc., Cause No. F 91-00083 (“Cause No. 83”),
alleging that Franke Plating violated its Industrial Discharge Permit No. FT
00350, issued pursuant to the authority of sections 30l(a), and 307(d) of the
Federal Water Pollution Control Act, 33 U.S.C. 1311(a), l317(d) (the “Clean
Water Act”), to “discharge to the [public-owned treatment works].” Appellee’s
Appendix Volume II at 38.
9
The record contains a copy of a document signed by Warren T. Franke on November 13, 1996, for
“Defendant Franke Plating Works, Inc. . . . in A.H. Choitz action” which indicates Mark A. Thoma as the
agent authorized to accept service on behalf of Franke Plating. Appellant’s Appendix Volume VI at 123.
10
The record contains a copy of a December 22, 1997 consent decree in U.S. v. A.H. Choitz, Cause No. 1:97-
CV-362.
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[12] ASLF citizen suits, like that filed in Cause No. 83, were common and recurring
throughout the 1980s and 1990s. ASLF is a not-for-profit organization that,
according to its complaint in Cause No. 83, is “dedicated to protecting and
restoring the natural resources, particularly the water resources, of the United
States and its territories.” Appellant’s Appendix Volume VII at 216. During
the 1990s, ASLF obtained public records of permitted facilities and initiated
citizen suits against companies that experienced exceedances of the discharge
limits of their National Pollution Discharge Elimination Systems (“NPDES”)
or Industrial Discharge permits.11 The Clean Water Act allowed ASLF to
recover attorney fees, daily penalties, and other costs in such cases.
[13] On June 30, 1992, Franke Plating and ASLF entered a Revised Consent Decree
in Cause No. 83, wherein Franke Plating agreed to pay a $20,000 penalty to the
United States Treasury Department and a $50,000 payment to the Nature
Conservancy in Indiana “to put to use in its Fish Creek Watershed preservation
project,” as well as to reimburse ASLF “in the amount of $5,000 for its efforts
in monitoring [Franke Plating’s] compliance with both the Clean Water Act
and the terms of this settlement” and “its fees and costs . . . up to a maximum
of $20,000.” Appellant’s Appendix Volume III at 234-235. Franke Plating
made the payment pursuant to the Revised Consent Decree from August 17,
11
The designated revised affidavit of Frank Deveau states that NPDES permits set “limits on water
discharges by regulating point sources that discharge pollutants into waters of the United States. An
Industrial Discharge Permit is issued pursuant to the NPDES program, typically as authorized by a local
ordinance. Discharges are self-reported and data is publicly available.” Appellant’s Appendix Volume IV at
58.
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1992, through April 23, 1993, and, in total, incurred costs in the ASLF suit of
$90,002.24.
B. The 1987 Policy
[14] Franke Plating seeks coverage under only the 1987 Policy, a comprehensive
general liability policy, which provides in relevant part:
4. Insured’s Duties in the Event of Occurrence, Claim or Suit
(a) In the event of an occurrence,[12] written notice containing
particulars sufficient to identify the insured and also reasonably
obtainable information with respect to the time, place and
circumstances thereof, and the names and addresses of the
injured and of available witnesses, shall be given by or for the
insured to the company or any of its authorized agents as soon as
practicable.
(b) If claim is made or suit is brought against the insured, the
insured shall immediately forward to the company every
demand, notice, summons or other process received by him or
his representative.
12
The 1987 Policy provides that:
The company will pay on behalf of the insured all sums which the insured shall become legally
obligated to pay as damages because of
Coverage A. bodily injury or
Coverage B. property damage
to which this insurance applies, caused by an occurrence, and the company shall have the right and
duty to defend any suit against the insured seeking damages on account of such bodily injury or
property damage . . . .
Appellant’s Appendix Volume II at 128. The 1987 Policy defines “property damage” in part as “(1) physical
injury to or destruction of tangible property which occurs during the policy period, including the loss of use
thereof at any time resulting therefrom,” and “personal injury” to include “wrongful entry or eviction or
other invasion of the right of private occupancy.” Id. at 113, 133.
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(c) The insured shall cooperate with the company and, upon the
company’s request, assist in making settlements, in the conduct
of suits and in enforcing any right of contribution or indemnity
against any person or organization who may be liable to the
insured because of injury or damage with respect to which
insurance is afforded under this policy; and the insured shall
attend hearings and trials and assist in securing and giving
evidences and obtaining the attendance of witnesses. The
insured shall not, except at his own cost, voluntarily make any
payment, assume any obligation or incur any expense other than
for first aid to others at the time of accident.
Appellant’s Appendix Volume II at 114.
C. Procedural History
[15] On March 1, 2007, Franke Plating filed a complaint against Cincinnati and
other insurers for declaratory relief and damages.13 At the time when the
complaint was filed, there was no ongoing defense being undertaken for any of
the Underlying Claims. On October 31, 2015, Franke Plating sought summary
judgment and designated materials in support of its motion including the
revised affidavits of Warren and Frank Deveau.
13
To the extent that Franke Plating maintains on appeal that it seeks to limit its argument to indemnification
costs, see Appellant’s Brief at 15 (“[I]ndemnification costs are the subject of this case. Franke Plating is not
seeking defense costs.”), we observe the statements in Franke Plating’s complaint that it “was for declaratory
relief and damages” and that Cincinnati was “obligated under each of their policies to pay defense costs
incurred by Franke Plating and/or all sums, subject only to policy limits, incurred by Franke Plating for
response, contribution, and/or settlement costs incurred as a result of the Underlying Claims.” Appellant’s
Appendix Volume II at 95, 98. It also requested, in part, that the court “requir[e] [Cincinnati] to defend and
indemnify Franke Plating in the Underlying Claims.” Id. at 99.
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[16] Warren’s revised affidavit contained attached copies of Damage Summary and
Pre-Judgment Interest spreadsheets pertaining to the Underlying Claims.
Combining the incurred response costs with the corresponding pre-judgment
interest,14 as calculated and presented in the designated spreadsheets, produced
the following:
Pre-Judgment
Underlying Claim Cost Interest (as of Total
Oct. 1, 2015)
Four County $ 32,420.09 $ 20,159.56 $ 52,579.65
Fort Wayne Reduction $ 8,000.00 $ 13,020.05 $ 21,020.05
Wayne Reclamation $ 49,676.83 $ 73,271.28 $ 122,948.11
ASLF $ 90,002.24 $ 164,870.97 $ 254,873.21
Totals $ 180,099.16 $ 271,321.86 $ 451,421.02
See Appellant’s Appendix Volume IV at 33-37.
[17] Deveau’s revised affidavit provides that he was a partner at Taft Stettinius &
Hollister LLP, in Indianapolis, Indiana; that liability under CERCLA is
retroactive, joint and several, strict, and onerous; that defenses to liability are
few; and that the EPA “has long adhered to an ‘enforcement first’ strategy,” has
authority to issue unilateral orders to compel cleanups, and “frequently is able
to compel PRPs to settle cleanup and cost reimbursement claims.” Id. at 49-50.
The affidavit also provides that there is no minimum threshold amount to
impose liability under CERCLA, and that the Clean Water Act governing the
14
Franke Plating maintains it seeks the incurred response costs which, along with the pre-judgment interest,
constitute “total indemnification costs.” Appellant’s Brief at 15.
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ASLF citizen suit “likewise is a strict liability regime” that “imposes strict
liability and statutory penalties for NPDES exceedances.” Id. at 51. It also
states, in part, that Deveau became familiar with both the Underlying Claims
involving Franke Plating and the litigation between it and Cincinnati, that the
“response, contribution and indemnification costs Franke Plating incurred
resolving its liability . . . were reasonable, appropriate, and necessary,” and that
it was “highly unlikely that the costs Franke Plating incurred . . . could have
been further reduced or minimized.” Id. at 59.
[18] On December 2, 2015, Cincinnati filed its own motion for summary judgment
and a brief in opposition to Franke Plating’s motion and in support of its
motion. Cincinnati designated evidence, including Franke Plating’s response to
Cincinnati’s Interrogatory No. 5.f,15 affidavits of Brian Keipert and Debra
Davis, and excerpts from Deveau’s deposition.
[19] Deveau’s deposition includes testimony that he did not ask Attorney Thoma for
a copy of his file in the ASLF litigation or discuss with him any defenses that
were put forth by Franke Plating; that he did not have a copy of the ASLF
complaint that was filed before his first affidavit was signed; and that he did not
believe that a copy of the fourth-party amended complaint in Fort Wayne
15
Cincinnati’s December 2, 2015 submission and designation of evidence states that it “hereby submits and
designates . . . 2. [Franke Plating’s] Answers to Interrogatories, Interrogatory No. 5.f., attached hereto as
Exhibit A.” Appellee’s Appendix II Volume 2 at 2. The included Response to Interrogatory No. 5 states in
part that, “[w]ith regard to f, Franke Plating has not sought coverage with respect to any of the Underlying
claims.” Id. at 13.
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Reduction was provided to him but he remembered being “part of the group
that prepared and filed it.” Appellee’s Appendix Volume IV at 34. In response
to the question of whether he asked Attorney Thoma for a copy of his files for
any of the sites in which he represented Franke Plating in the Underlying
Claims, Deveau testified, “Yeah. We talked about his files. . . . I’m pretty sure
he said they couldn’t find anything. Certainly, as to Atlantic States, he said
they couldn’t find anything.” Id. at 32. When asked, with regard to Fort
Wayne Reduction, where he obtained information for the statement in his
original affidavit that Franke Plating’s total response costs were $14,250.00, he
stated it “was a number provided to me by counsel” and that he did not look at
any documentation in preparing the affidavit that supported that number, and
that he made the assumption that “the numbers provided by counsel for this
payment . . . was the payment” made for Fort Wayne Reduction Site. Id. at 36.
Deveau also agreed that he had not reviewed the shipping records for Franke
Plating and stated, “I think as to Wayne Reclamation, there were some
payment documents, or some record of payments for shipments sent there that I
saw.” Id. at 38.
[20] On April 18, 2016, the trial court held a hearing on the summary judgment
motions and, on September 26, 2016, granted Cincinnati’s summary judgment
motion and denied Franke Plating’s motion. The court’s September 26, 2016
order excerpted the “Insured’s Duties in the Event of Occurrence, Claim or
Suit” section of the 1987 Policy and found that paragraph 4(a) set “forth the
insured’s responsibility for an occurrence”; paragraph 4(b) set forth “the
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insured’s responsibilities for a claim or lawsuit”; and paragraph 4(c) set forth
“the insured’s cooperation clause.” Appellant’s Appendix Volume II at 37. It
additionally stated in relevant part:
It is undisputed that [Cincinnati] first learned of the four
[Underlying Claims] against Franke Plating when the lawsuit
was filed. (Aff. Of Brian Keipert, . . . p.1, ¶3.)
It is undisputed that Franke Plating failed to provide notice of a
loss to [Cincinnati] until it filed this declaratory judgment action.
There is also no dispute that Franke Plating paid all sums
resulting from the [Underlying Claims] before [Cincinnati] was
notified of the claims.
DECISION
The Parties to this case make arguments based on the Policy’s
notice requirement and the cooperation clause. [Cincinnati]
urges that recent decisions compel this Court to find the
presumption of harm becomes irrebutable when untimely notice
is given, such as notice after a settlement. Or, in Judge Posner’s
words, “when notice is that late the insurer is off the hook.” Nat’l
Union Fire Ins. Co. of Pittsburgh v. Mead Johnson & Co. LLC, 735
F.3d 539, 544 (7th Cir. 2013) (Court found Indiana adhered to
rebuttable presumption of harm even if notice of loss occurred
after verdict[).]
In[] Dreaded, Inc. v. St. Paul Guardian Ins. Co., 904 N.E.2d 1267
(Ind. 2009), our Supreme Court held an insured who failed to
comply with a notice requirement could not prevail in a cause of
action claiming its insurer breached a duty to defend because an
insurer “cannot defend a claim of which it has no knowledge.”
Dreaded at 1273. Under this holding, the insurer bears no
responsibility for pre-notice costs.
In Travelers Ins. Companies v. Maplehurst Farms, Inc.[,] 953 N.E.2d
1153 (Ind. Ct. App. 2011)[,] trans. denied [(“Maplehurst Farms I”)],
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and the case on remand, Travelers Cas. And Sur. Co. v. Maplehurst
Farms, Inc.[,] 18 N.E.3d 311 (Ind. Ct. App. 2014)[,] trans. denied
[(“Maplehurst Farms II”)], the Indiana Court of Appeals held an
insurer was not responsible for any costs incurred by the insured
prior to receiving notice of the loss. Travelers Cas. And Sur. Co. v.
Maplehurst Farms, Inc.[,] 18 N.E.3d [at 313].
[Cincinnati] argues recent decisions treat an insured’s notice
requirement clause as a condition precedent to the insurer’s duty
to defend, [Dreaded, 904 N.E.2d 1267, 1271 fn.1]. The Maplehurst
Court abandoned a prejudice requirement when a genuine issue
of fact that late notice did not prejudice an insurer was of no
consequence. [Maplehurst Farms I,] 953 N.E.2d [at 1163]. Under
this analysis, an insurer is absolved of responsibility for expenses
incurred by an insured before the insurer receives policy notice
regardless of prejudice.
The Court, following recent precedent, finds that Franke
Plating’s failure to forward notice of the four claims and Franke
Plating’s payment and settlement of the claims prior to
[Cincinnati’s] receipt of notice of a claim, excuse [Cincinnati]
from any obligation to pay Franke Plating for settlement costs or
interest thereon.
Id. at 37-39. Franke Plating filed a motion to correct error which, after a hearing,
the court denied.
Discussion
[21] The issue is whether the trial court erred in entering summary judgment in
favor of Cincinnati and against Franke Plating. The purpose of summary
judgment is to terminate litigation about which there can be no factual dispute
and which may be determined as a matter of law. Sheehan Const. Co., Inc. v.
Continental Cas. Co., 938 N.E.2d 685, 689 (Ind. 2010) (citing Bushong v.
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Williamson, 790 N.E.2d 467, 474 (Ind. 2003)), reh’g denied. Once the moving
party has sustained its initial burden of proving the absence of a genuine issue
of material fact and the appropriateness of judgment as a matter of law, the
party opposing summary judgment must respond by designating specific facts
establishing a genuine issue for trial. Id. (citing Stephenson v. Ledbetter, 596
N.E.2d 1369, 1371 (Ind. 1992)). If the opposing party fails to meet its
responsive burden, the court shall render summary judgment. Id. (citing
Bushong, 790 N.E.2d at 474). We construe all factual inferences in the
nonmoving party’s favor and resolve all doubts as to the existence of a material
issue against the moving party. Reed v. Reid, 980 N.E.2d 277, 285 (Ind. 2012).
“The fact that the parties have filed cross-motions for summary judgment does
not alter our standard for review.” Asklar v. Gilb, 9 N.E.3d 165, 167 (Ind. 2014)
(citing Reed, 980 N.E.2d at 289). Instead, we must consider each motion
separately to determine whether the moving party is entitled to judgment as a
matter of law. Id.
[22] An insurance policy is a contract, and as such is subject to the same rules of
construction as other contracts. Dunn v. Meridian Mut. Ins. Co., 836 N.E.2d 249,
251 (Ind. 2005) (citations omitted). Interpretation of a contract is a pure
question of law and thus, is reviewed de novo. Harrison v. Thomas, 761 N.E.2d
816, 818 (Ind. 2002). When construing the language of an insurance policy, a
court “should construe the language of an insurance policy so as not to render
any words, phrases or terms ineffective or meaningless.” State Farm Mut. Auto.
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Ins. Co. v. Jakubowicz, 56 N.E.3d 617, 619 (Ind. 2016) (citing Wert v. Meridian
Sec. Ins. Co., 997 N.E.2d 1167, 1170 (Ind. Ct. App. 2013) (citation omitted)).
[23] Clear and unambiguous terms are given their clear and ordinary meaning,
Jernas v. Gumz, 53 N.E.3d 434, 444 (Ind. Ct. App. 2016), trans. denied, in order
“to accomplish the primary goal of contract interpretation: ‘to determine the
intent of the parties at the time the contract was made as disclosed by the
language used to express their rights and duties.’” Holiday Hospitality
Franchising, Inc. v. AMCO Ins. Co., 983 N.E.2d 574, 577-578 (Ind. 2013) (quoting
First Fed. Sav. Bank of Ind. v. Key Markets, Inc., 559 N.E.2d 600, 603 (Ind. 1990)).
Insurance policies with directly conflicting terms are ambiguous. Jakubowicz, 56
N.E.3d at 619 (citing Wert, 997 N.E.2d at 1171). Under Indiana law, an
insurance policy is ambiguous if reasonable persons may honestly differ as to
the meaning of the policy language. Eli Lilly & Co. v. Home Ins. Co., 482 N.E.2d
467, 470 (Ind. 1985) (citing Benefit Tr. Life Ins. Co. v. Waggoner, 473 N.E.2d 646
(Ind. Ct. App. 1985); Huntington Mut. Ins. Co. v. Walker, 392 N.E.2d 1182 (Ind.
Ct. App. 1979)). Where there is ambiguity, insurance policies are construed
strictly against the insurer, and the policy language is viewed from the
standpoint of the insured. Jakubowicz, 56 N.E.3d at 619 (citing Allstate Ins. Co. v.
Dana Corp., 759 N.E.2d 1049, 1056 (Ind. 2001)).
[24] In a case involving a claim for indemnification under a standard commercial
general liability policy, the Indiana Supreme Court has provided:
Requiring prompt notice allows insurers the opportunity to
investigate the circumstances surrounding claimed losses in a
Court of Appeals of Indiana | Opinion 49A02-1710-PL-2462 | October 18, 2018 Page 18 of 26
timely and adequate manner. P.R. Mallory & Co. v. Am. Cas. Co. of
Reading, Pa., 920 N.E.2d 736, 746 (Ind. Ct. App.2010), trans.
denied. In Miller v. Dilts, this Court determined that “[p]rejudice
to the insurance company’s ability to prepare an adequate
defense can therefore be presumed by an unreasonable delay in
notifying the company about the accident or about the filing of
the lawsuit.” 463 N.E.2d 257, 265 (Ind. 1984) (emphasis added).
Once prejudice is presumed, the burden is on the insured to
“establish some evidence that prejudice did not occur in the
particular situation.” Id.; see also Askren Hub States Pest Control
Svcs., Inc. v. Zurich Ins. Co., 721 N.E.2d 270, 279 (Ind. Ct. App.
1999) (“The presumption of prejudice essentially means that 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.”).
The duty to notify is a condition precedent to the insurance
company’s liability to its insured. Miller, 463 N.E.2d at 263.
“Where prejudice is created by the insured’s noncompliance with
the policy’s provisions, the insurance company is relieved of its
liability under the policy.” Id. at 261.
Sheehan Const. Co., Inc., 938 N.E.2d at 689.
[25] Franke Plating characterizes the instant case as one of forfeiture, or where an
insurer “seeks to work a forfeiture due to late notice,” Appellant’s Brief at 32,
and argues that “barring coverage absent a showing of prejudice” is an extreme
remedy. Id. at 18. It also argues that Dreaded and Maplehurst Farms I do not
control, because the 1987 Policy lacks a consent requirement, and that the trial
court should have instead relied on Governmental Interinsurance Exch. v. City of
Angola, 8 F. Supp. 2d 1120, 1134-1135 (N.D. Ind. 1998), which it asserts
involved the same policy language used in the 1987 Policy and which held that
Court of Appeals of Indiana | Opinion 49A02-1710-PL-2462 | October 18, 2018 Page 19 of 26
the voluntary payments provision involved therein did not operate to bar
coverage. It contends that without a consent requirement “the only issue under
the voluntary payments clause is whether the liability costs paid are ‘voluntary
payments’” and it is “reasonable to construe the clause as City of Angola did,
barring only truly ‘voluntary’ payments.” Appellant’s Brief at 27, 30. It
contends that Dreaded dealt with defense costs and not indemnity costs, and
asserts that “[b]ecause the duty to defend is broader than the duty to indemnify,
and requires the involvement of the insurer, . . . it makes sense that late notice
of a defense claim would be more problematic than late notice of an indemnity
claim.” Id. at 33.
[26] In response, Cincinnati argues that Dreaded and Maplehurst Farms I found “pre-
notice defense and indemnity costs were not covered due to failure to comply
with the notice requirements of the policies.” Appellee’s Brief at 22. It argues
that Franke Plating’s settlements and indemnity payments were voluntarily
made and contends that, even with the additional language of “without our
consent” in the voluntary payments clause in Maplehurst Farms I, the “costs
must still be voluntarily made before the ‘without our consent’ language would
apply.” Id. at 31. Cincinnati points to several actions of Franke Plating,
including its joining of the Land County Landfill PRP Group in 1991, signing
of the “1986 Consent Order” concerning the Wayne Reclamation site, and
settling of the Fort Wayne Reduction lawsuit “brought against it by other PRPs,
not the EPA,” and asserts that Franke Plating’s conduct in the Underlying
Court of Appeals of Indiana | Opinion 49A02-1710-PL-2462 | October 18, 2018 Page 20 of 26
Claims contradicts the argument that its actions were not voluntary. Id. at 32-
33.
[27] We first find that the plain language of Sections 4(a) and 4(b) of the 1987 Policy
is clear regarding the provision of notice to Cincinnati by Franke Plating, and
unambiguously requires that, in the event of an occurrence, written notice
containing particulars shall be given by or for Franke Plating to Cincinnati “as
soon as practicable” and that, if a claim is made or suit is brought against
Franke Plating, it “shall immediately forward to [Cincinnati] every demand,
notice, summons or other process received.” Appellant’s Appendix Volume II
at 114 (emphasis added). Per the record, it is undisputed that the first notice of
any loss that Franke Plating gave to Cincinnati was when it filed the March 1,
2007 complaint. With respect to the Wayne Reclamation site the first notice
was given to Cincinnati either, at the very least, nine years or, at the very most,
twenty-two years after it had knowledge of any loss. We also note that Franke
Plating did not give notice until more than eleven years had passed after making
the June 20, 1995 payment with respect to Fort Wayne Reduction; thirteen
years had passed after signing the April 6, 1993 Agreed Order with respect to
Four County; and fourteen years had passed after starting to pay pursuant to
the June 20, 1992 Revised Consent Decree with respect to the ASLF citizen
suit. Accordingly, we cannot say that Franke Plating satisfied the 1987 Policy’s
section 4(a) and 4(b) notice provisions.
[28] We further find that Franke Plating’s delay in giving Cincinnati notice was
unreasonable and that prejudice is, therefore, presumed here. See Sheehan Const.
Court of Appeals of Indiana | Opinion 49A02-1710-PL-2462 | October 18, 2018 Page 21 of 26
Co., Inc., 938 N.E.2d at 689. At oral argument, counsel for Franke Plating
admitted that Franke Plating breached the 1987 Policy and indicated that
“nothing prevented it from giving notice except a lack of understanding of [its]
legal rights.” Oral Argument at 7:53-7:58.
[29] Franke Plating’s arguments concerning remedies – and characterizing the
instant case as one involving forfeiture – essentially assert, at their core, that the
notice provisions, as conditions precedent, should be excused because
enforcement would otherwise cause it to suffer a disproportionate forfeiture. In
its brief and at oral argument, Franke Plating referred to Restatement (Second)
of Contracts § 229 (1981) in support of this position. Section 229 provides:
To the extent that the non-occurrence of a condition would cause
disproportionate forfeiture, a court may excuse the non-
occurrence of that condition unless its occurrence was a material
part of the agreed exchange.
Section 229 of the Restatement requires performance by the party seeking to
avoid the forfeiture. Hoosier Energy Rural Elec. Co-op., Inc. v. Amoco Tax Leasing
IV Corp., 34 F.3d 1310, 1320 (7th Cir. 1994). Comment b of Section 229
provides: “[F]orfeiture is used to refer to the denial of compensation that results
when the obligee loses his right to the agreed exchange after he has relied
substantially, as by preparation or performance on the expectation of that
exchange. . . .” In this case, Franke Plating did not prepare to perform or
perform in any way: after having learned of the Underlying Claims, it waited
until after it had fully investigated, defended, settled, and paid on each of the
Court of Appeals of Indiana | Opinion 49A02-1710-PL-2462 | October 18, 2018 Page 22 of 26
claims before eventually notifying Cincinnati of its losses. Accordingly, Franke
Plating’s argument about remedies does not overcome the plain language of the
1987 Policy.
[30] For these reasons, we conclude that Franke Plating has not met its burden of
establishing evidence that prejudice did not occur in the particular situation and
the trial court did not err in entering summary judgment in favor of Cincinnati.
Conclusion
[31] For the foregoing reasons, we affirm the trial court’s entry of summary
judgment.
Bailey, J., concurs.
Crone, J., concurs in part and dissents in part.
Court of Appeals of Indiana | Opinion 49A02-1710-PL-2462 | October 18, 2018 Page 23 of 26
IN THE
COURT OF APPEALS OF INDIANA
Franke Plating Works, Inc., Court of Appeals Case No.
49A02-1710-PL-2462
Appellant-Plaintiff,
Appeal from the Marion Superior
v. Court
The Honorable Timothy Oakes,
The Cincinnati Insurance Judge
Company, The Honorable Theresa Hannah,
Magistrate
Appellee-Defendant.
Trial Court Cause No.
49D02-0703-PL-8448
Crone, Judge, concurring in part and dissenting in part.
[32] Citing Sheehan, 938 N.E.2d at 689, the majority finds that “Franke Plating’s
delay in giving Cincinnati notice was unreasonable and that prejudice is,
therefore, presumed here[,]” and holds that Franke Plating failed to designate
sufficient evidence to rebut that presumption. Slip op. at 22, 23. I believe that
Deveau’s affidavit is sufficient to establish genuine issues of material fact
regarding whether Cincinnati was prejudiced by Franke Plating’s delay.
Denying Franke Plating the coverage that it paid for in the absence of any
prejudice to Cincinnati would result in a disproportionate forfeiture, and
“forfeitures are generally disfavored by the law.” Gates v. Houston, 897 N.E.2d
532, 536 (Ind. Ct. App. 2008).
Court of Appeals of Indiana | Opinion 49A02-1710-PL-2462 | October 18, 2018 Page 24 of 26
[33] For its part, Cincinnati relies on Maplehurst Farms I, in which a divided panel of
this Court stated that “where an insured enters into a settlement agreement
without the insurer’s consent in violation of a voluntary payment provision, that
obligation cannot be recovered from the insurer, and prejudice is irrelevant.”
953 N.E.2d at 1161 (emphasis added).16 This begs the question, unanswered by
my colleagues, of whether Franke Plating entered into its settlement agreements
in violation of the 1987 Policy’s voluntary payment provision. Franke Plating
argues that it did not, and I believe that it designated enough evidence to
establish genuine questions of fact on this issue. 17
[34] There is a fundamental difference between not being able to recover defense
costs and forfeiting the indemnification rights pursuant to the policy. Upon
remand, Cincinnati would still be permitted to argue prejudice sufficient to
warrant forfeiture of their indemnification obligation, but I do not think that
summary judgment on that issue is appropriate on this record. In sum, I would
reverse the trial court’s entry of summary judgment for Cincinnati, affirm its
16
As did Judge May in her dissent, I disagree with the Maplehurst “majority’s apparent premise that after
[Dreaded v. St. Paul Guardian Insurance Co.], reasonableness is no longer a permissible consideration in our
analysis of late-notice disputes[,]” because “[s]uch a premise is inconsistent with the explicit language of
[Miller v. Dilts], and nothing in [Dreaded] suggests reasonableness must, should, or can be disregarded.” 953
N.E.2d at 1163 (May, J., dissenting).
17
The voluntary payment provision in Maplehurst Farms I reads, “No insureds will, except at their own cost,
voluntarily make a payment, assume any obligation, or incur any expense, other than for first aid, without our
consent.” 953 N.E.2d at 1156 (emphasis added). The italicized phrase is absent from the 1987 Policy in this
case. I do not agree with Franke Plating that the absence of this phrase is dispositive of whether it violated
the 1987 Policy’s voluntary payment provision, but I do believe that it militates against a denial of coverage.
Court of Appeals of Indiana | Opinion 49A02-1710-PL-2462 | October 18, 2018 Page 25 of 26
denial of summary judgment for Franke Plating, and remand for further
proceedings.18
18
I believe that genuine issues of material fact exist regarding whether the “known loss” doctrine applies to
the Wayne Reclamation claim, whether the Atlantic States claim involves “property damage,” and whether
Franke Plating is entitled to prejudgment interest.
Court of Appeals of Indiana | Opinion 49A02-1710-PL-2462 | October 18, 2018 Page 26 of 26
Franke Plating Works, Inc. v. The Cincinnati Insurance Company
Combined Opinion