Preview:

ATTORNEYS FOR APPELLANT
David L. Taylor Thomas R. Haley III Joseph A. Samreta Jennings Taylor Wheeler & Haley, P.C. Carmel, Indiana

ATTORNEY FOR APPELLEE
James O. McDonald Everett, Everett & McDonald Terre Haute, Indiana

AMICUS CURIAE
Indiana Trial Lawyers Association Adrian P. Smith Smith & DeBonis, LLC Highland, Indiana

______________________________________________________________________________

In the

Indiana Supreme Court
_________________________________ No. 83S01-0501-CV-00007 AUTO-OWNERS INSURANCE COMPANY, v. JON HARVEY AND MISTY JOHNSON, AS CO-PERSONAL REPRESENTATIVES OF THE ESTATE OF BRANDY NICOLE HARVEY, Appellees (Plaintiffs below),
AND

Appellant (Defendant below),

TOBY MICHAEL GEARHEART.

(Co-Defendant below) 1

_________________________________ Interlocutory Appeal from the Vermillion Circuit Court, No. 83C01-0210-CT-43 The Honorable Bruce V. Stengel, Judge _________________________________ On Petition To Transfer from the Indiana Court of Appeals, No. 83A01-0309-CV-343 _________________________________ February 22, 2006 Dickson, Justice.

This interlocutory appeal challenges the denial of summary judgment in an insurance policy coverage dispute. Finding that the insured's statements and his plea of guilty to involuntary manslaughter conclusively established his alleged tortious act was committed "knowingly or in-

This defendant, Toby Michael Gearheart, is not seeking relief on appeal and has not filed a brief as appellant or appellee. Pursuant to Indiana Appellate Rule 17(A), however, a party of record in the trial court is a party on appeal.

1

tentionally," the Court of Appeals held that coverage for the claim was excluded by the policy's definition and requirement of an "occurrence," and it remanded for the entry of summary judgment in favor of the insurer. Auto-Owners Ins. Co. v. Harvey, 813 N.E.2d 1190, 1193-95 (Ind. Ct. App. 2004). We granted transfer and now affirm the trial court.

The case arises from an incident in which Brandy Nicole Harvey, age 16, fell into the Wabash River and drowned. For purposes of this summary judgment proceeding, the parties agree that Toby Michael Gearheart, the co-defendant, states that the incident occurred just after he, age 19, and Brandy one evening visited a Wabash River boat ramp, where they partially disrobed and engaged in sexual intercourse. After five to ten minutes, Brandy told Gearheart to stop, which he did, and both stood up. When Gearheart twice asked Brandy, "What's wrong?," she did not answer but came toward him and repeatedly pushed him toward the water. When she came toward him a third time, he put his hands on her shoulders and pushed her. Brandy lost her balance and fell off of the edge of the boat ramp, down a rocky embankment, and into the river. There is also no dispute that, as a result of the incident, Gearheart entered a plea of guilty to involuntary manslaughter. But the parties disagree regarding the voluntariness of Brandy's presence and activities on the ramp, Gearheart's conduct and intent at the time of the push, and the significance of his intent upon the personal liability insurance coverage provided for Gearheart under a homeowner's policy issued by defendant-appellant Auto-Owners Insurance Company to Gearheart's parents, in whose home Gearheart was residing.

Brandy's surviving parents, Jon Harvey and Misty Johnson, as co-personal representatives of her estate, filed a wrongful death action against Gearheart, alleging that his "negligence and recklessness" had caused Brandy's death. Appellees' App'x. at 1. Three months later, Brandy's parents filed in the same court the present action, denominated as a "Complaint for Damages and Declaratory Judgment," naming as defendants both Gearheart and Auto-Owners. Appellant's App'x. at 8. In part, this second action sought a declaration that Auto-Owners was obligated to pay any judgment entered against Gearheart in the two cases. By agreement, the trial court consolidated these causes "[f]or purposes of discovery," and took under advisement the consolidation of the two actions for trial purposes. Id. at 756. Discovery ensued, and AutoOwners filed a motion for summary judgment asserting "there is no liability coverage under its

2

policy for Toby Gearheart's conduct because his acts were intentional and his intent to harm [Brandy] Harvey should be implied as a matter of law." Id. at 100. The trial court denied the motion, finding without elaboration that "there is a material question of fact such that . . . AutoOwners Insurance Company is not entitled to judgment as a matter of law." Id. at 7. At the request of Auto-Owners, the trial court then certified its denial of summary judgment for interlocutory appeal, and the Court of Appeals accepted jurisdiction.

In its appeal, Auto-Owners contends that it was entitled to summary judgment on two separate grounds, which it contends establish as a matter of law that there is no coverage under its policy: (1) Gearheart's conduct does not constitute an "occurrence" as required by the policy's insuring agreement; and (2) Gearheart's conduct falls under the "intended or expected harm" exclusion in the policy. Appellant's Reply Br. at 1-2.

In the appellate review of a denial of summary judgment, we apply the same standard as the trial court. Reeder v. Harper, 788 N.E.2d 1236, 1240 (Ind. 2003). Summary judgment "shall be rendered forthwith if the designated evidentiary matter shows that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Ind. Trial Rule 56(C). During our review, all facts and reasonable inferences drawn from them are construed in favor of the non-moving party. Reeder, 788 N.E.2d at 1240.

Requirement for Occurrence

Auto-Owners first contends that the insurance policy it issued requires an "occurrence" for liability coverage to be available, that the policy defines "occurrence" as "an accident," that Indiana law defines "accident" as something unintentional, and that the drowning death of Brandy Harvey in the Wabash River was the result of intentional conduct by Gearheart. AutoOwners thus argues that the policy provides no liability coverage for Gearheart's conduct.

The relevant portion of the insuring agreement in the Auto-Owners insurance policy provides as follows: "We will pay all sums any Insured becomes legally obligated to pay as damages because of or arising out of bodily injury or property damage caused by an occurrence to

3

which this coverage applies." Appellant's App'x. at 146 (emphasis added). The insurance policy also states that "[t]o understand this policy, you must understand the meaning of the following words," and then defines "occurrence" to mean "an accident that results in bodily injury or property damage and includes, as one occurrence, all continuous or repeated exposure to substantially the same generally harmful conditions." Id. at 129, 130. The word "accident" is not defined in the policy.

To support its contention that Brandy's death did not result from an "occurrence" as defined in the policy, Auto-Owners first argues that it was not an "accident" because Gearheart, though insisting that he did not intend to harm Brandy, admitted that he intended to push her. Auto-Owners asserts that because Gearheart's conduct was intentional, the incident was not an accident. It urges that Gearheart's testimony regarding whether he intended harm to result from his intentional act of pushing "is not relevant as to whether there was an 'occurrence.'" Br. of Appellant at 10. Rather, Auto-Owners urges that Brandy's death was the natural and probable result of Gearheart's voluntary and intentional act of pushing, and thus her death should not be considered an "accident" for insurance purposes.

Certain disparity in bargaining power, which is characteristic of the parties to insurance contracts, has led courts to develop distinct rules of construction for those contracts. Beam v. Wausau Ins. Co., 765 N.E.2d 524, 528 (Ind. 2002). If a contract is clear and unambiguous, its language is given its plain meaning. Id. But if there is ambiguity, the contract is construed strictly against the insurer, and the language of the policy is viewed from the insured's perspective. Bosecker v. Westfield Ins. Co., 724 N.E.2d 241, 244 (Ind. 2000). "An ambiguity exists where a provision is susceptible to more than one interpretation and reasonable persons would differ as to its meaning." Id.

Indiana case law has held that, "in the context of insurance coverage, an accident means an unexpected happening without an intention or design." Terre Haute First Nat. v. Specific Employers Ins. Co., 634 N.E.2d 1336, 1338 (Ind. Ct. App. 1993), trans. not sought; Nat. Mut. Ins. Co. v. Eward, 517 N.E.2d 95, 100 (Ind. Ct. App. 1987), trans. not sought. This description is consistent with the plain meaning of "accident," as indicated by the primary definition pro-

4

vided in several modern dictionaries: "1. an unintentional or unexpected happening that is undesirable or unfortunate, esp. one resulting in injury, damage, harm, or loss," THE RANDOM HOUSE COLLEGE DICTIONARY 9 (1984); "1. a: an unforeseen and unplanned event or circumstance b: lack of intention or necessity," WEBSTER'S NINTH NEW COLLEGIATE DICTIONARY 49 (1987); "1. An unexpected and undesirable event. 2. Something that occurs unexpectedly or unintentionally," THE AMERICAN HERITAGE DICTIONARY 71 (2d ed. 1985). We agree with Auto-Owners that implicit in the meaning of "accident" is the lack of intentionality.

Indiana courts have often been confronted with claims disputing the application of "occurrence" or "accident" language in liability insurance policies. The closest parallel to the present case is Eward, which addressed an insurer's claim of no liability coverage for claims against its insured who allegedly drove a vehicle while intoxicated, striking a pedestrian. The insuring agreement there provided liability coverage for bodily injury claims "caused by an accident" and expressly defined "accident" to require "bodily injury or property damage the insured neither expected nor intended." Eward, 517 N.E.2d at 100. Focusing on the plain meaning of "accident," the court emphasized: In fact, in practically every incident out of which liability arises under such a policy there is a violation of some traffic law or regulation. It is obvious that protection against liability for negligence is the primary reason for holding such a policy. Is it reasonable then to say that one who is driving while intoxicated is so negligent that (1) his manner of driving may be said to be willful and wanton, (2) no accident occurred, and (3) the injured party's injury was not suffered accidentally? We think not. The contract at hand insures against loss as a result of an accident. There is no limitation as to how the accident may occur. Id. at 101 (citations omitted).

In contrast, several decisions have involved whether "occurrence" applies to circumstances remote from instances of specific personal physical conduct, but rather arising from claims based on commercial or professional conduct. See, e.g., Transamerica Ins. Serv. v. Kopko, 570 N.E.2d 1283, 1284-85 (Ind. 1991) (holding that a liability policy's "occurrence" requirement, which was defined to require an "accident," did not cover a claim against an insured home builder by the home purchaser claiming the house settled due to the instability of the sub-soil); Erie Ins. Co. v. Am. Painting Co., 678 N.E.2d 844, 845-46 (Ind. Ct. App. 1997) (finding a claim

5

of negligent hiring and retaining of a painter who allegedly burglarized a home did not arise from an accident, and thus was not an occurrence covered under the liability insurance contract), trans. not sought; R.N. Thompson & Assoc. v. Monroe Guar. Ins. Co., 686 N.E.2d 160, 164-65 (Ind. Ct. App. 1997) (finding economic losses arising from inadequate materials and substandard construction work were not an accident or occurrence), trans. denied; Terre Haute First Nat'l , 634 N.E.2d at 1338 (finding a claim for Bank's negligence and breach of fiduciary duty in acting as plaintiff's guardian was not covered as an accident or occurrence under a liability insurance policy); City of Muncie v. United Nat'l Ins. Co., 564 N.E.2d 979, 982 (Ind. Ct. App. 1991) (affirming summary judgment for a liability insurer where insured asserted that an action for wrongful discharge of employees was covered as "occurrence" defined as conduct of insured that results in harm "neither expected nor intended"), trans. not sought.

In the present case, the policy states that Auto-Owners will pay for its insured's legal liability for "damages because of or arising out of bodily injury or property damage caused by an occurrence." Appellant's App'x. at 146. Under the facts of this case, however, the meaning and application of this provision is unclear. The language used by Auto-Owners can reasonably be understood in two different ways, depending on whether "occurrence" means Gearheart's push or Brandy's drowning. The policy language does not require that the "occurrence" or "accident" be limited to the actions of the insured. The claimed damages clearly arise out of Brandy's death, and the coverage ambiguity thus is whether the death should be considered to have been caused by the event of Gearheart's pushing or by the event of Brandy's drowning. If the required "accident" refers to Gearheart's push, then it is undisputed that it did not occur unexpectedly or unintentionally. If it applies to Brandy's slip, fall, and drowning, however, it is not clear that the drowning was clearly unexpected and unintentional. It was obviously unexpected and unintentional from Brandy's perspective, and possibly so from Gearheart's point of view. We thus find the policy language ambiguous and must construe it against Auto-Owners, holding that the term "occurrence" applies to Brandy's slip, fall, and drowning, and not to Gearheart's push.

The issue is whether Brandy's death by drowning was an accident, that is, whether it was "an unexpected happening without an intention or design." Terre Haute First Nat'l, 634 N.E.2d at 1338; Eward, 517 N.E.2d at 100. Auto-Owners seeks narrow application of the "occurrence"

6

clause by contending only that Gearheart intended to push Brandy, not that Gearheart specifically intended to push her into the river to drown. We decline to hold that Brandy's drowning death, even though resulting from Gearheart's conscious and intentional act of pushing her, necessarily falls outside the concept of "accident" upon which "occurrence" is defined in the AutoOwners insuring agreement.

Auto-Owners cites federal cases as reaching a contrary conclusion. Red Ball Leasing v. Hartford Accident & Indem. Co., 915 F.2d 306, 312 (7th Cir. 1990) (holding that the intentional repossession of trucks was not an "accident" or "occurrence" and not covered"); Allstate Ins. Co. v. Davis, 6 F.Supp.2d 992, 994-95 (S.D.Ind. 1998) (finding no "occurrence" coverage for the death of child resulting from the insured intentionally bouncing the child on her knee); Allstate Ins. Co. v. Norris, 795 F.Supp. 272, 275 (S.D.Ind. 1992) (finding no "occurrence" coverage for the deliberate firing of a rifle at one person and hitting another).

We value the insight gained from federal court opinions interpreting Indiana law, but such decisions are not stare decisis and do not absolve us from our ultimate responsibility for determining state law. Chaffin v. Nicosia, 261 Ind. 698, 703, 310 N.E.2d 867, 870 (1974). The court in Red Ball Leasing, citing largely cases from jurisdictions other than Indiana, concludes that a volitional act "does not become an accident simply because the insured's negligence prompted the act." 915 F.2d at 311. The opinion continues: Injury that is caused directly by negligence must be distinguished from injury that is caused by a deliberate and contemplated act initiated at least in part by the actor's negligence at some earlier point. The former injury may be an accident. However, the latter injury, because it is intended and the negligence is attenuated from the volitional act, is not an accident. Id. (citations omitted). This approach governed Davis and Norris, two subsequent decisions of the United States District Court for the Southern District of Indiana. The court in Norris describes the Red Ball Leasing analysis as drawing a clear distinction between an event that is unexpected or unintended (which is an accident), and an event or act that is intended, but causes unexpected consequences (which is not). Under this distinction, a volitional act--which is always intended--does not constitute an accident, even where the results may be unexpected or unforeseen.

7

Norris, 795 F.Supp. at 275. 2

We find these distinctions, however, to be rather unclear, potentially confusing, and likely to result in subjective and unpredictable judicial applications. Determining the availability of coverage based on whether negligence is "attenuated from the volitional act" is an unsatisfactory standard. Application of such a tool for construction of an "occurrence" or "accident" runs counter to our well-established principle that where insurance policies are ambiguous, they are to be "construed strictly against the insurer" and the policy viewed from the insured's standpoint. Beam, 765 N.E.2d at 528; Bosecker, 724 N.E.2d at 244; Am. States Ins. Co. v. Kiger, 662 N.E.2d 945, 947 (Ind. 1996). "Any doubts as to the coverage under the policy will be construed against the insurer in order to further the policy's basic purpose of indemnity." PSI Energy, Inc. v. Home Ins. Co., 801 N.E.2d 705, 723 (Ind. Ct. App. 2004), trans. denied (quoting Am. Family Life Assurance Co. v. Russell, 700 N.E.2d 1174, 1177 (Ind. Ct. App. 1998)). For these reasons, we believe that the cited line of federal cases does not accurately state Indiana law.

Auto-Owners further contends that Brandy's death did not result from an "accident" (and thus was not an "occurrence" covered by the policy) because of Gearheart's plea of guilty to involuntary manslaughter, which it asserts conclusively establishes that Gearheart battered Brandy by pushing her, resulting in her death. It argues that "[i]ntentional conduct is not accidental and thus not an occurrence for purposes of insurance coverage," Br. of Appellant at 8, and that the intentionality of Gearheart's conduct was conclusively established in the criminal proceedings and may not be relitigated in this case. Auto-Owners urges that by this guilty plea, Gearheart admitted that pushing Brandy posed a serious risk of injury and that he intended to batter her.
After noting federal decisions in Red Ball Leasing, Norris, and GATX Leasing Corp. v. Nat'l Union Fire Ins. Co, 64 F.3d 1112, 1117 (7th Cir. 1995) (applying Texas law to find negligent supervision resulting in theft was not a covered "occurrence"), the Davis court explains: The distinguishing factor between the facts in the instant case and this hypothetical [a driver negligently changing lanes] is that the intentional act of changing lanes was not the direct cause of the injury. Rather, it was the unintentional act of crashing into the other car that directly caused the injury. If the driver had intentionally crashed his car into the other car, then it would not be an accident. Davis, 6 F.Supp.2d at 995 n.4. If we were to apply the same analysis to the present case, the facts here presented on summary judgment would permit us to analogously conclude that Gearheart's act of pushing Brandy was not the "direct cause of the injury," but rather it was the "unintentional act" of her falling into the river that caused her death.
2

8

Appellant's Reply Br. at 13.

The appendices submitted by the parties contain the plea agreement and the judgment of conviction, but not the charging information, the contents of which are not reflected in the plea agreement or judgment. These documents show that Gearheart pleaded guilty to, and was convicted of and sentenced for, involuntary manslaughter, a class C felony, in a particular cause number, but without naming the victim or describing any details regarding the charged conduct. The plea agreement also reflects that Gearheart acknowledged "that entry of a guilty plea pursuant to this Agreement constitutes an admission of the truth of all facts alleged in the charge." Appellant's App'x. at 159.

In its Appellant's Brief, Auto-Owners asserts that Gearheart pleaded guilty to the charge that he "did kill another human being, to wit: Brandy Nicole Harvey, while committing or attempting to commit battery." Br. of Appellant at 15 (citing Appellant's App'x. p. 159-61). But the quoted language does not appear in the plea agreement as Auto-Owners has cited, and we do not find it elsewhere in the record. The plaintiffs, however, do not dispute that Gearheart's involuntary manslaughter conviction arose from the incident resulting in Brandy's death, but they confirm that the acceptance of Gearheart's guilty plea constituted a judicial determination "that [Gearheart] committed a 'knowing' touching of Brandy in a rude, insolent or angry manner, resulting in her death, and that there was a factual basis for the plea." Br. of Appellees at 40. They argue, however, that Gearheart's plea judicially admitted only the unlawful touching, but nothing concerning his "motive, mental operations, intentions or purpose in pushing Brandy." Id.

The crime of battery, which is the knowing or intentional touching of another person in a rude, insolent, or angry manner, Ind. Code

Download Auto-Owners Insurance Company v. Jon Harvey, Misty Johnson, as Co-Personal Repre

Indiana Law