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ATTORNEYS FOR APPELLANT George M. Plews Brett E. Nelson Jonathan P. Emenhiser Plews Shadley Racher & Braun LLP Indianapolis, Indiana

ATTORNEYS FOR APPELLEES Mary K. Reeder Riley Bennett & Egloff, LLP Indianapolis, Indiana Richard A. Rocap Rocap Witchger LLP Indianapolis, Indiana Jeffrey C. Gerish Kenneth C. Newa David A. Dworetsky Plunkett & Cooney, P.C. Bloomfield Hills, Michigan

ATTORNEYS FOR AMICI CURIAE COMPLEX INS. CLAIMS LITIG. ASS'N Philip B. McKiernan Joseph M. Hendel Steven W. Krohne Indianapolis, Indiana INSURANCE INSTITUTE OF INDIANA Karl L. Mulvaney Barry C. Cope Barbara A. Jones Indianapolis, Indiana NAT'L SOLID WASTES MGMT ASSOC. AND IND. PETROL. MARKETERS ASSOC. Charles P. Edwards John P. Fischer Christian P. Jones Indianapolis, Indiana

______________________________________________________________________________

In the

FILED
of the supreme court, court of appeals and tax court

Apr 28 2009, 12:41 pm

Indiana Supreme Court
_________________________________

CLERK

No. 49S02-0805-CV-244 DREADED, INC.,
v.

Appellant (Plaintiff),

ST. PAUL GUARDIAN INSURANCE CO., ST. PAUL PROTECTIVE INSURANCE CO., AND ST. PAUL FIRE AND MARINE INSURANCE CO., Appellees (Defendants). _________________________________ Appeal from the Marion Superior Court, No. 49D10-0503-PL-011747 The Honorable David Dreyer, Judge _______________________________ On Transfer from the Indiana Court of Appeals, No. 49A02-0701-CV-78
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April 28, 2009 Dickson, Justice.

Facing an environmental damage claim, the appellant, Dreaded, Inc., waited over three

years to notify its insurer, the defendants-appellees (collectively referred to as "St. Paul"), and now seeks reimbursement for defense costs and expenses incurred during the pre-notice period. We affirm the trial court's grant of St. Paul's motion for summary judgment and hold that, as to claims seeking recoupment of an insured's pre-notice defense costs predicated on an alleged breach of an insurer's duty to defend, the insurer's duty to defend did not arise and prejudice is an irrelevant consideration.

The facts are relatively straightforward. On November 17, 2000, Dreaded received a letter from the Indiana Department of Environmental Management ("IDEM") demanding that it investigate possible soil contamination at a former business site and warning of potential enforcement actions and civil penalties. In response, Dreaded hired an attorney to defend it against the claim and hired an environmental contractor to investigate. The contractor's investigation resulted in two reports, one in mid-2001 and another in late-2002, both of which were forwarded to IDEM. In August of 2003 IDEM replied by a second letter ordering Dreaded to conduct further investigation and to provide a full delineation of the contamination. In March of 2004, three and one-half years after the first IDEM claim letter, Dreaded, which was covered under several commercial general liability insurance policies issued by St. Paul, notified St. Paul of the IDEM claim and requested that St. Paul take up its defense in the IDEM claim and reimburse Dreaded for defense costs incurred to that point. St. Paul responded in May 2004, agreeing that the IDEM claim fell within the policies' provision obligating St. Paul to defend Dreaded from that point forward, but expressly reserving its rights and refusing to reimburse Dreaded for defense costs incurred prior to the March 2004 notice and tender. Dreaded filed suit. Its complaint was in two counts, the first seeking declaratory relief "establishing [St. Paul's] duty to fully defend and indemnify Dreaded against the IDEM Action." Appellant's App'x at 23. In the second count, Dreaded seeks damages for St. Paul's breach of its obligations under the policies requiring St. Paul "to defend Dreaded against the IDEM Action and to indemnify it for all sums that it has incurred and will incur up to policy limits." Id. St. Paul defended by claiming that the insurance policy provisions requiring prompt notice and disclaiming liability for financial obligations incurred or payments made without St. Paul's consent precluded St. Paul's duty to defend prior to receiving notice and Dreaded's claim for pre-notice expenses.

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Both parties sought summary judgment. The trial court denied Dreaded's motion and granted St. Paul's, concluding in part that: "[a] policyholder has a duty to tender claims in order to trigger an insurer's duty to defend under a general liability policy"; "[a] showing of prejudice is not required in the present case"; and "[e]ven if a showing of prejudice was required in this case, this Court finds that Dreaded's delay of nearly three and one-half years in tendering the [u]nderlying IDEM claim to St. Paul is unreasonable as a matter of law, and gives rise to a presumption of prejudice in St. Paul's favor." Id. at 15-16.

The Court of Appeals reversed, concluding that Dreaded's delay in notifying St. Paul of the IDEM claim was unreasonable; that prejudice must be shown by St. Paul, but would be presumed due to the unreasonably late notice; and that the presumption is rebuttable and Dreaded "has designated sufficient evidence to raise a genuine issue of material fact as to whether St. Paul was prejudiced as a result of the delayed notice." Dreaded, Inc. v. St. Paul Guardian Ins. Co., 878 N.E.2d 467, 474 (Ind. Ct. App. 2007). We granted transfer.

In this appeal, Dreaded is challenging the trial court's grant of St. Paul's motion for summary judgment. When reviewing a grant of summary judgment, our standard of review is the same as that of the trial court. Shambaugh & Son, Inc. v. Carlisle, 763 N.E.2d 459, 461 (Ind. 2002). Considering only those facts that the parties designated to the trial court, we must determine whether there is a "genuine issue as to any material fact" and whether "the moving party is entitled to a judgment as a matter of law." Ind. Trial Rule 56(C); Freidline v. Shelby Ins. Co., 774 N.E.2d 37, 39 (Ind. 2002); Shell Oil Co. v. Lovold Co., 705 N.E.2d 981. 983-84 (Ind. 1998). In answering these questions, the reviewing court construes all factual inferences in the non-moving party's favor and resolves all doubts as to the existence of a material issue against the moving party. N. Ind. Pub. Serv. Co. v. Bloom, 847 N.E.2d 175, 180 (Ind. 2006). The moving party bears the burden of making a prima facie showing that there are no genuine issues of material fact and that the movant is entitled to judgment as a matter of law; and once the movant satisfies the burden, the burden then shifts to the non-moving party to designate and produce evidence of facts showing the existence of a genuine issue of material fact. Mullin v. Mun. City of South Bend, 639 N.E.2d 278, 281 (Ind. 1994).

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Dreaded presents the following principal issues on appeal: (1) neither the St. Paul policies nor Indiana law contain a "tender" requirement that excludes coverage for defense costs incurred prior to the insured's giving notice to the insurer; (2) Dreaded is entitled to recover its pre-notice defense costs unless St. Paul can prove that it was prejudiced by Dreaded's late notice; and (3) St. Paul failed to present specific evidence of actual prejudice. St. Paul, in contrast, asserts that it had no duty to defend Dreaded against the IDEM claim until Dreaded first complied with the notice provision. It is undisputed that this compliance did not occur until more than three years after Dreaded was first notified of the IDEM claim and that, upon receiving the notice, St. Paul assumed the defense of Dreaded as to this claim. St. Paul emphasizes that it is "not seeking to avoid all obligations under the policies." Br. of Appellees at 15 (italics in original).

The insuring agreement in the comprehensive general liability policy contract provides in relevant part that St. Paul has "the right and duty to defend any protected person against a claim or suit for injury or damage covered by this agreement," but that it does not "have a duty to perform any other act or service." Appellant's App'x at 76. Relevant to Dreaded's claim for indemnification defense costs incurred prior to notice, the following policy language is germane: Additional payments. We'll have the duty to make only the additional payments shown below in connection with any claim or suit under this agreement against a protected person when we:  investigate or settle the claim or suit; or  defend the protected person against the claim or suit. * * * Expenses incurred by protected persons. We'll pay all reasonable expenses that any protected person incurs at our request while helping us investigate or settle, or defend a protected person against, a claim or suit. . . . Id. at 77 (emphasis by underscore added).

St. Paul alleges that it has no obligation to pay for pre-notice expenses incurred by Dreaded because of the notice provision and the voluntary payment provision located in a section of the St. Paul policies that prescribes the insured's obligations in the event of loss. This section is prefaced with the following introduction: You or other protected persons are required to perform the duties described below when a property loss that may be covered under this policy happens or an accident or incident happens that could result in liability damages covered under this policy. Failure to comply could affect coverage. The insuring agreements contained in this policy

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determine what is covered. As a result, you should read them carefully to understand the extent of the coverage provided. Id. at 330. The specific notice and voluntary payment conditions at issue in this case provide in relevant part as follows: When This Policy Provides Liability Protection If an accident or incident happens that may involve liability protection provided in this policy, you or any other protected person involved must: * * * 2. Tell us or our agent what happened as soon as possible. Do this even though no demand for damages has been made against you or any other protected person, but you or another person is aware of having done something that may later result in a demand for damages. The notice should include all of the following:  The time and place of the accident or incident;  The protected person involved;  The specific nature of the accident or incident including the type or demand for damages that may result; and  The names and addresses of any witnesses and injured people. * * * 5. Not assume any financial obligation or pay out any money without our consent. But this rule doesn't apply to first aid given to others at the time of an accident. Id. at 236. The language of these conditions requiring prompt notice and prohibiting the assumption of financial obligation is clear and unambiguous and thus must be given its plain and ordinary meaning. Morris v. Econ. Fire and Cas. Co., 848 N.E.2d 663, 666 (Ind. 2006).

Dreaded contends that the trial court erred and argues that there is no obligation to tender claims in order to trigger an insurer's duty to defend under the commercial general liability policy. Treating the notice and voluntary payment clauses asserted by St. Paul as "coverage defenses

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