In the
United States Court of Appeals
For the Seventh Circuit
No. 09-2483
E STATE OF W AVIE L USTER
by its personal representative,
Rick Gikas,
Plaintiff-Appellant,
v.
A LLSTATE INSURANCE C OMPANY,
Defendant-Appellee.
Appeal from the United States District Court
for the Northern District of Indiana, Hammond Division.
No. 2:07-CV-226-RLM—Robert L. Miller, Jr., Judge.
A RGUED D ECEMBER 4, 2009—D ECIDED M ARCH 23, 2010
Before P OSNER, R IPPLE, and W OOD , Circuit Judges.
P OSNER, Circuit Judge. This diversity suit for breach of
an insurance contract was dismissed on summary judg-
ment. The suit is governed, so far as the substantive
issues are concerned, by Indiana law, and the plaintiff’s
appeal presents issues of both contract interpretation
and Indiana insurance law.
2 No. 09-2483
Mrs. Luster was a widow living alone in her house
in Merrillville, Indiana. She had a homeowner’s insur-
ance policy from Allstate. In October 2001, when she was
83, she was injured in a fall and after being released
from the hospital moved into an extended-care facility.
She executed a power of attorney to her lawyer, Rick
Gikas, who is the representative of her estate in this
litigation. She never returned home, and died in April
2006, some four and a half years after her fall. Gikas
had notified Allstate of his power of attorney and had
directed the company to bill the insurance premiums
to his law office. No one lived in the house after she left it.
Three months after her death—her house still unoccu-
pied—a fire caused extensive damage. Gikas submitted a
claim on behalf of the estate. An investigation indicated
that the fire may well have been started by burglars, but
the plaintiff denies this and the district judge made no
finding.
In the course of the investigation Allstate discovered
that the house had been unoccupied for four and a half
years before Mrs. Luster’s death, and denied the claim,
precipitating this suit. Allstate continued billing Gikas
for premiums, however, and he continued paying them
until October 2008, more than two years after the fire,
when Allstate—which claims not to have known that the
policy was still in force until its lawyers read the
estate’s summary-judgment brief that month—purported
to cancel the policy retroactively to November 2001, and
returned the premiums for the subsequent period to the
estate.
No. 09-2483 3
The appeal requires us to consider four provisions of
the insurance policy:
1. The insured “must . . . inform [Allstate] of any
change in title, use or occupancy of the residence
premises.”
2. “If [the insured] die[s], coverage will continue
until the end of the premium period for . . . [the in-
sured’s] legal representative while acting as such.”
3. There is no coverage for loss to property “con-
sisting of or caused by . . . any substantial change or
increase in hazard, if changed or increased by any
means within the control or knowledge of an insured
person.”
4. There is no coverage for loss to property “con-
sisting of or caused by . . . vandalism or malicious
mischief if [the insured’s] dwelling is vacant or unoc-
cupied for more than 30 consecutive days immediately
prior to the vandalism or malicious mischief,” unless
the dwelling is under construction.
1. Gikas didn’t notify Allstate until after the fire that
the house was unoccupied. He argues that the notice he
gave Allstate, shortly after Mrs. Luster left the house for
good—that he had a power of attorney and premiums
should be billed to his office—gave the insurance
company constructive notice that the house was unoccu-
pied, or at least obligated the company to inquire about
its occupancy. That is a frivolous argument. Allstate
knew that Luster was 83, so it would come as no
surprise to learn that she had executed a power of attor-
ney and that the holder of the power would be
4 No. 09-2483
handling her finances. That did not indicate that she’d
moved out of the house.
Alternatively, Gikas argues that anyway the house was
not unoccupied, because right up until her death Luster
expressed the intention of returning to live there when
her health permitted. “Occupancy” in Indiana law (as
in insurance law generally) implies “the presence of
human beings as at their customary place of abode, not
absolutely and uninterruptedly continuous, but that
must be the place of usual return and habitual stoppage,”
Home Ins. Co. v. Boyd, 49 N.E. 285, 291 (Ind. App. 1898). “A
person’s dwelling constitutes not the boundaries but
the focal point of his life. He does not cease to have a
home when he is temporarily absent therefrom, nor
does his home cease to be an occupied dwelling. It is not
his physical presence but the habitual recurrence of
that presence that renders a dwelling occupied.” Foley v.
Sonoma County Farmers’ Mutual Fire Ins. Co., 5 P.2d 1, 3
(Cal. 1941) (Traynor, J.); see also 6A Couch on Insurance
§§ 94:118-19 (3d ed. 2005).
But though there is no “require[ment] that some person
must be living in [the house] every moment, . . . there
must not be a cessation of occupancy for any con-
siderable period of time.” Insurance Co. v. Coombs, 49 N.E.
471, 473 (Ind. App. 1898). Most of the cases in which the
insured prevails involve absences of no more than three
months. Monarch Ins. Co. v. Rippy, 369 P.2d 622, 624-25
(Okla. 1962); Republic Ins. Co. v. Watson, 70 S.W.2d 441, 443-
44 (Tex. Civ. App. 1934); Phoenix Ins. Co. v. Burton, 39 S.W.
319 (Tex. Civ. App. 1896). The insurer tends to win when
the absence is longer and the owner’s plans to return
No. 09-2483 5
are uncertain or indefinite, as in Schoeneman v. Hartford
Fire Ins. Co., 267 P. 815 (Ore. 1928), where the insured’s
farm was unoccupied for two years and the owner in-
tended to return only when he could “see [his] way clear
to make the payments on the debt that was still against
it, pay the interest and the taxes and keep up the place,
and eventually that way get it paid for.” The present
case is similar; the insured was away for years, and her
intention to return was conditional on improving health
that, as the years rolled by, became less and less probable.
See also Speth v. State Farm Fire & Casualty Co., 35 P.3d
860, 864 (Kan. 2001); Stivers v. National Am. Ins. Co., 247
F.2d 921, 924-26 (9th Cir. 1956) (California law); Washington
Fire Ins. Co. v. Cobb, 163 S.W. 608, 614 (Tex. App. 1914).
Regardless of the owner’s intentions, a house that
stands unoccupied for four and a half years can hardly be
described as “occupied” throughout that period, particu-
larly when one considers the risk of theft, vandalism, fire,
water damage, and so forth when a house is left empty
for years on end. We need not try to pinpoint the date
on which, regardless of the owner’s intentions, a house
has to be considered to have undergone a “change
in . . . occupancy” within the meaning of the policy,
triggering the duty of the insured (or, in this case, her
representative) to notify the insurance company. Four
and a half years of continuous absence of human occupa-
tion constitutes a change in occupancy.
The duty-to-notify provision entitled Allstate to
cancel the policy in the event the house became unoc-
cupied. Yet while arguing compellingly that Gikas had a
duty to notify it that the house was unoccupied, Allstate
6 No. 09-2483
is seeking to avoid coverage only on the basis of clauses
3 and 4 of the policy. The district judge, who found that
the duty of notification had indeed been breached,
attached no consequences to that breach but instead
based his decision on clause 3. (We’ll see later in this
opinion that the issue of cancellation is raised mainly
by the plaintiff, as presenting an alternative ground
for recovery.)
Although the policy expressly authorizes the insurer
to cancel it for a violation of any of its terms, it also re-
quires the insurer to give 30 days’ notice of intention to
cancel, and Allstate failed to do that after discovering
in the wake of the fire that the house had been
unoccupied for years. The requirement of notice of intent
to cancel is important; it gives the insured an opportunity
to prevent a lapse of coverage, by taking steps to
reinstate the policy or obtain a substitute policy from
another insurer. Conrad v. Universal Fire & Casualty Ins. Co.,
686 N.E.2d 840, 842 (Ind. 1997); Krueger v. Hogan, 780
N.E.2d 1199, 1203 (Ind. App. 2003). Retroactive termination
is inconsistent with the requirement of advance notice.
Plumlee v. Monroe Guaranty Ins. Co., 655 N.E.2d 350, 355-
56 (Ind. App. 1995); Green v. J.C. Penney Auto Ins. Co.,
722 F.2d 330, 332-33 (7th Cir. 1983) (Illinois law).
It might be argued that the duty to notify the insurer
of a change in occupancy is a condition the breach of
which cancels the entire policy. But the remedy of cancel-
lation (“rescission” is the technical legal term) must be
sought by the wronged party, and Allstate did not seek to
cancel the policy when it learned of the change in occu-
pancy. The insured’s actions cannot by themselves void
No. 09-2483 7
the contract. Prudential Ins. Co. v. Smith, 108 N.E.2d 61, 64
and n. 3 (Ind. 1952); New Life Community Church of God
v. Adomatis, 672 N.E.2d 433, 438 (Ind. App. 1996). It
would be paradoxical to allow the wrongdoer’s action
to deprive the victim of the opportunity to sue for
damages for breach or take other action that might be
better from the victim’s standpoint than rescinding the
contract. “The contract is voidable at the election of the
injured party. If he elects to affirm the transaction, he
has his remedy by way of damages. If he elects to
rescind, he must return back what he has received, and
in turn he is entitled to receive what he has parted
with.” Prudential Ins. Co. v. Smith, supra, 108 N.E.2d at 64.
Rather than attempt to cancel the policy, Allstate, the
party claiming to have been injured or wronged by the
change of occupancy of which it had not been notified,
accepted premiums for years after learning of the estate’s
breach. It cannot now be permitted to rescind the contract
ab initio—that would be a confession that it should not
have accepted the premiums.
It is not even clear that a change in occupancy is the
kind of breach of contract that would entitle Allstate to
rescind the policy. The Indiana cases limit rescission to
breaches that go “to the heart of the contract,” Collins v.
McKinney, 871 N.E.2d 363, 371 (Ind. App. 2007); Gabriel v.
Windsor, Inc., 843 N.E.2d 29, 45 (Ind. App. 2006), or that
result in a “complete failure of consideration.” Smeekens v.
Bertrand, 311 N.E.2d 431, 435 (Ind. 1974); Van Bibber Homes
Sales v. Marlow, 778 N.E.2d 852, 860 (Ind. App. 2002).
Damages are the default remedy for breach of contract;
injunctive and other relief, including rescission—an equita-
ble remedy and thus similar to an injunction, Seymour
8 No. 09-2483
Water Co. v. City of Seymour, 70 N.E. 514, 517 (Ind. 1904);
Stevens v. Olsen, 713 N.E.2d 889, 891 (Ind. App. 1999); see
Collins v. McKinney, supra, 871 N.E.2d at 371; New Life
Community Church of God v. Adomatis, supra, 672 N.E.2d
at 438—is reserved for extraordinary cases, such as a
complete failure of consideration, which excuses the
performing party from having to perform, because he’s
receiving nothing in return. When one considers the
very limited circumstances in which the Indiana
legislature has approved cancellation of homeowner
policies even when there is notice by the insurer, see
Ind. Code § 27-7-12-6, as there was not here, it seems
unlikely that the Indiana courts would permit cancella-
tion in a case like ours.
2. The plaintiff argues that even if coverage lapsed, the
death clause reinstated it, because Luster died before the
fire. The argument misunderstands the purpose of the
clause. It is to prevent a lapse of coverage when the
insured dies. If coverage had lapsed earlier, the clause
has no significance.
3. The district judge ruled that leaving the house unoccu-
pied constituted a “substantial change or increase in
hazard” within the meaning of clause 3 (no coverage
for loss to property “consisting of or caused by . . . any
substantial change or increase in hazard, if changed or
increased by any means within the control or knowledge
of an insured person”). The judge seems to have thought
that to leave a house unoccupied for however short a
time causes an “increase in hazard” as a matter of law.
Allstate takes the more moderate position that any gap
No. 09-2483 9
in occupation of more than 30 days increases hazard as
a matter of law.
Neither position is correct. Houses are rarely occupied
continuously. A homeowner might take a 31-day trip;
Allstate implies that if a fire occurred during that period
the insured would be uncovered. That is not the law. (In
addition to the cases we cited earlier, see Hill v. Ohio Ins.
Co., 58 N.W. 359 (Mich. 1894).) A person who owns a
vacation home may spend the summer months away
from his primary home; the homeowner’s policy on his
primary home doesn’t lapse. See Farmer’s Mutual Protec-
tive Ass’n v. Wright, 702 S.W.2d 295 (Tex. App. 1985); cf.
Ohio Farmers’ Ins. Co. v. Vogel, 76 N.E. 977, 979 (Ind. 1906)
(“a condition against vacancy and unoccupancy, usually
found in insurance policies, must be construed with
relation to the character or class of property to
which it relates”). What is true is that a homeowner’s
policy is site-specific; a homeowner who has a second
(or a third or a fourth, etc.) home will have either to add
each one as an endorsement to the homeowner’s policy
on his primary home or buy a separate policy covering
his other home(s).
Allstate’s argument thus implies that if you have a
second home the homeowner’s policy on your primary
residence is illusory; you’re away a lot and so coverage
lapses. That’s nonsense. And even if the house is unoccu-
pied in the relevant sense—the sense that triggers the
duty to notify the insurance company of a change in
occupancy—it doesn’t follow that you have created a
“substantial . . . increase in hazard.” Maybe you fitted the
10 No. 09-2483
house with an array of locks and alarms and hired a
security company to check on the house daily and so made
the house more secure than when you were living
there—an especially plausible inference if you happen to
be an elderly person who might if in residence damage
it inadvertently by leaving appliances on or failing
to remove combustibles like cans containing paint or oil-
soaked rags or to attend to defects in the electrical wiring
of the house. There is no rule that moving out of a
house per se increases the hazards against which the
insurance company has insured you. Smith v. Peninsular
Ins. Co., 181 So. 2d 212, 214 (Fla. App. 1965); cf. German
Fire Ins. Co. v. Stewart, 42 N.E. 286, 288 (Ind. App. 1895).
The court in Kinneer v. Southwestern Mutual Fire Ass’n,
185 A. 194, 195 (Pa. 1936), did say that “it is a matter of
common knowledge that there is more danger of an
unoccupied house being destroyed by fire than of one
occupied.” But this is in general rather than in every case.
To make it a flat rule of law would be inconsistent not
only with the cases but also with the language of the
insurance policy. That clause 3 was not intended to
create a conclusive presumption of increased hazard
after 30 days of nonoccupancy is confirmed by clause 4,
which excludes coverage for loss caused by vandalism or
mischief committed more than 30 days after the house
became unoccupied. Were there an automatic inference
of greater hazard when a house has been empty for
30 days, there would be no need specifically to exclude
loss caused by vandalism or mischief, as distinct from
other loss-causing events, such as fire. Allstate has in
effect merged provisions 3 and 4 into a rule that any
No. 09-2483 11
break of more than 30 days in continuous occupancy
voids the policy. That’s rewriting the policy.
4. There may well have been vandalism, by burglars, and
if so it occurred more than 30 days after the house
became unoccupied, whenever precisely occupancy
ceased—sometime during the four and a half years be-
tween Luster’s fall and her death. But we do not know
whether the vandalism caused the loss—there is no
judicial finding that the fire that was the immediate
cause of the loss was the result of vandalism. To decide
whether it was will require an evidentiary hearing, as
will Allstate’s alternative ground that nonoccupancy
substantially increased the risk of loss.
So the plaintiff is entitled to a remand, but it wants
more and argues that Allstate waived denial of coverage
by continuing to collect premiums for more than two
years after learning, when the fire occurred, that the
house had long been unoccupied. Eventually, as we
know, it did return all the premiums that it had col-
lected since 30 days after Luster had moved out of the
house. Allstate’s argument that it did not receive notice
that the policy was in force because its employee in the
claims department whom Gikas advised of Luster’s
death failed to relay the information to the responsible
department in the company fails; the information was
properly provided and Allstate’s careless handling of it
cannot be charged to the Luster estate’s account.
See Madison County Bank & Trust Co. v. Kreegar, 514 N.E.2d
279, 281 (Ind. 1987); Sunnyside Coal & Coke Co. v. Reitz, 43
N.E. 46, 49-50 (Ind. App. 1896); Cange v. Stotler & Co., 826
12 No. 09-2483
F.2d 581, 592 n. 8 (7th Cir. 1987) (Illinois law); Prudential
Ins. Co. v. Saxe, 134 F.2d 16, 31 (D.C. Cir. 1943).
Allstate’s delay in returning the premiums was not a
deliberate attempt to keep money that Gikas had paid on
behalf of Luster under the assumption that the insurance
policy was in force (which in fact it was). In any event the
delay does not bar Allstate from denying coverage of the
loss caused by the fire. Although Allstate concedes that
it was obligated to return all the premiums that it had
collected after it cancelled the policy, Bushnell v. Krafft,
183 N.E.2d 340, 343 (Ind. App. 1962); Aetna Ins. Co. v.
Robinson, 10 N.E.2d 601, 605 (Ind. 1937); Arkwright-Boston
Mfrs. Mutual Ins. Co. v. Calvert Fire Ins. Co., 887 F.2d 437,
441 (2d Cir. 1989) (North Carolina law); 6A John Alan
Appleman & Jean Appleman, Insurance Law and Practice
§ 4189, pp. 578-85 (1972), the premise of the concession
is that it did cancel the policy, retroactively to long
before the fire occurred, and we said earlier that retro-
active cancellation is not possible.
Continued acceptance of premiums after cancellation
can, as we also said, fool the insured into thinking he’s
covered and therefore deflect him from seeking sub-
stitute protection. And if as a result of being deceived in
this way he fails to obtain substitute coverage and incurs
a loss as a result, the company is estopped to deny cover-
age. Home Ins. Co. v. Strange, 123 N.E. 127, 129 (Ind. App.
1919); Sur v. Glidden-Durkee, 681 F.2d 490, 493-94 (7th Cir.
1982) (Indiana law); see also Hargis v. United Farm Bureau
Mutual Ins. Co., 388 N.E.2d 1175, 1179 (Ind. App. 1979);
C.A. Enterprises, Inc. v. Employers Commercial Union Ins. Co.,
No. 09-2483 13
376 N.E.2d 534, 536 (Ind. App. 1978). But since Allstate
could not cancel the policy retroactively, it remained in
force until October 2008, when Allstate cancelled it pro-
spectively, as the policy permitted it to do. So during
that period the Luster estate remained covered by the
policy except (because the house continued to be unoccu-
pied) for losses attributable to an increase in hazard by
reason of nonoccupancy, or to vandalism. The coverage
was not as comprehensive as it would have been had
the house not been unoccupied; but that was not
Allstate’s fault. Insurance coverage is not illusory just
because the insured has done something to bring himself
within an exclusion. That is why an insurer doesn’t
have to return premiums for the period in which the
insurance policy is in force even if an exclusion (or exclu-
sions) is (are) in effect and the policy is later cancelled.
Red Men’s Fraternal Accident Ass’n of America v. Rippey,
103 N.E. 345, 347 (Ind. 1913); Continental Life Ins. Co. v.
Houser, 89 Ind. 258, 260 (Ind. 1883); Aetna Life Ins. Co. v.
Doerr, 115 N.E. 700, 703 (Ind. App. 1917). Allstate did
the estate a favor by returning the premiums.
Since Gikas knew from the beginning that the house
was unoccupied and knew that a change in occupancy
within the meaning of the policy could eliminate
Allstate’s liability under the vandalism and increase-in-
hazard exclusions, there is no basis for estopping Allstate
to deny coverage. Ticor Title Ins. Co. v. Graham, 576 N.E.2d
1332, 1337 (Ind. App. 1991); Johnson v. Payne, 549 N.E.2d
48, 51-53 (Ind. App. 1990). The doctrine of estoppel bars
a person from enforcing a legal right only if enforcing
it would give him a benefit to which he is not entitled. E.g.,
Brown v. Branch, 758 N.E.2d 48, 51-52 (Ind. 2001); Employers
14 No. 09-2483
Ins. v. Recticel Foam Corp., 716 N.E.2d 1015, 1027-28 (Ind.
App. 1999); Steuernagel v. Supreme Council of Royal
Arcanum, 137 N.E. 320, 322-23 (N.Y. 1922) (Cardozo, J.).
There is no suggestion that an Allstate agent said some-
thing to Luster or Gikas to suggest that the company
wouldn’t rely on the vandalism or increase-in-hazard
exclusions.
Some Indiana cases speak of an “implied waiver” rather
than of estoppel, see, e.g., Tate v. Secura Ins., 587 N.E.2d
665, 671 (Ind. 1992); and generally a waiver is enforceable
without regard to prejudice or wrongful conduct. Johnson
v. Spencer, 96 N.E. 1041, 1043 (Ind. App. 1912); Cabinetree
of Wisconsin, Inc. v. Kraftmaid Cabinetry, Inc., 50 F.3d 388,
390 (7th Cir. 1995). But that is because “waiver” in normal
legal usage is a voluntary relinquishment of a known
right, Indiana State Highway Comm’n v. Curtis, 704
N.E.2d 1015, 1019 (Ind. 1998); T-3 Martinsville, LLC v.
US Holding, LLC, 911 N.E.2d 100, 116 (Ind. App. 2009); cf.
United States v. Olano, 507 U.S. 725, 733 (1993), rather than
an accidental, though perhaps careless, failure to assert a
right. The latter type of failure is a forfeiture, United States
v. Richardson, 238 F.3d 837, 841 (7th Cir. 2001), and is
often excused if no prejudice results. E.g., Lander Co. v.
MMP Investments, Inc., 107 F.3d 476, 479-80 (7th Cir. 1997);
Lorenzen v. Employees Retirement Plan of the Sperry & Hutch-
inson Co., 896 F.2d 228, 232-33 (7th Cir. 1990).
An “implied waiver” is neither waiver nor forfeiture;
in Indiana insurance law it is a synonym for estoppel and
so requires proof of reliance. Tate v. Secura Ins., supra,
587 N.E.2d at 671; Summers v. Auto-Owners Ins. Co., 719
No. 09-2483 15
N.E.2d 412, 414-15 (Ind. App. 1999); United Services Auto-
mobile Ass’n v. Caplin, 656 N.E.2d 1159, 1162-63 (Ind. App.
1995). Pennsylvania has a similar rule. Goodwin v. Hartford
Life Ins. Co., 491 F.2d 332, 333 n. 1 (3d Cir. 1974) (“under
Pennsylvania law an implied waiver exists only when
the elements of an estoppel are present . . . . [T]he two
doctrines have precisely the same requirements”). In
most states, it is true, implied waiver is a confusing
hybrid of waiver and estoppel. Tibbs v. Great Central Ins.
Co., 373 N.E.2d 492, 493 (Ill. App. 1978); Continental Assur-
ance Co. v. Hendrix, 20 So. 2d 851, 853-54 (Ala. 1945); Schwab
v. Brotherhood of American Yeomen, 264 S.W. 690, 692
(Mo. 1924); 9 Holmes’ Appleman on Insurance 2d § 57.3,
pp. 382-83 (1999). But in Indiana it is a synonym for
estoppel, and that is all that matters.
The plaintiff cites cases that say that a failure of prompt
return of premiums waives the insurance company’s right
to deny coverage, whether or not the company’s failure
prejudiced the insured. Farmers’ Conservative Mutual
Ins. Co. v. Neddo, 40 N.E.2d 401, 405 (Ind. App. 1942);
Buehler Corp. v. Home Ins. Co., 495 F.2d 1211, 1213 (7th Cir.
1974) (Indiana law); Lititz Mutual Ins. Co. v. Lengacher, 248
F.2d 850, 854 (7th Cir. 1957) (Indiana law). The cases are
inapposite. In Neddo and Lilitz the insurer would have
had to cancel the policy retroactively in order to prevail,
not just, as in this case (and Buehler, a case much like
this—and decided in favor of the insurer), to deny cover-
age for a specific loss.
Failure to attend to the distinction between cancellation
and a denial of coverage is the Achilles’s heel of the plain-
16 No. 09-2483
tiff’s argument that the continued collection of premiums
barred Allstate from denying coverage for the loss
caused by the fire. A denial of coverage is governed
by estoppel (or its synonym in Indiana, “implied
waiver”), and relief from the denial requires proof of
prejudice in order to avoid conferring windfalls on
insureds. (Besides the cases cited earlier, see Terre Haute
First Nat’l Bank v. Pacific Employers Ins. Co., 634 N.E.2d 1336,
1338 (Ind. App. 1993); Allstate Ins. Co. v. Tozer, 392 F.3d
950, 956 (7th Cir. 2004) (Indiana law).) There is no such
proof in this case. Cancellation is governed by waiver in
its conventional sense of the voluntary relinquishment
of a known right.
By accepting premiums for years after learning (or being
deemed to have learned, since it was properly notified,
even if the notice got lost in Allstate’s bureaucracy) of the
change of occupancy that would have entitled it to
cancel Mrs. Luster’s policy, Allstate waived its right to
cancel, as we said. Each check that Gikas sent and that
Allstate cashed after it knew the house was unoccupied
was an offer made and accepted to continue the policy
in force. The right to cancel is not an exclusion of
coverage for particular losses but, as we explained earlier,
an option for the insurer to exercise or not as it pleases.
Aetna Ins. Co. v. Robinson, 10 N.E.2d 601, 605 (Ind. 1937).
The insurer’s continuing to accept premiums after
learning that circumstances entitling it to exercise its
option have arisen is evidence that he’s decided not to
exercise it; and after a reasonable time has elapsed, the
right to exercise the option (like any other contract offer)
lapses, Farmers’ Conservative Mutual Ins. Co. v. Neddo, supra,
No. 09-2483 17
40 N.E.2d at 405; Lititz Mutual Ins. Co. v. Lengacher, supra,
248 F.2d at 854. The problem for the plaintiff is that
the district court’s decision was based not on can-
cellation but on the hazard exclusion. Still, the plain-
tiff is entitled to a hearing on whether the exclusion
applies (and Allstate to a hearing on the applicability of
the vandalism exception, should the hazard exclusion
be found inapplicable), and therefore the judgment is
reversed and the case remanded.
R EVERSED AND R EMANDED.
3-23-10