Preview:

FOR PUBLICATION
ATTORNEY FOR APPELLANT: MARY F. SCHMID Indianapolis, Indiana ATTORNEYS FOR APPELLEE: DAVID L. TAYLOR THOMAS R. HALEY III JEFFREY W. FERRAND Carmel, Indiana

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

Apr 15 2009, 9:03 am

IN THE COURT OF APPEALS OF INDIANA
FAITH SADLER, Appellant-Plaintiff, vs. AUTO-OWNERS INSURANCE COMPANY, Appellee-Defendant. ) ) ) ) ) ) ) ) )

CLERK

No. 70A01-0804-CV-188

APPEAL FROM THE RUSH SUPERIOR COURT The Honorable Brian D. Hill, Judge Cause No. 70D01-0511-CT-00135

APRIL 15, 2009 OPINION - FOR PUBLICATION SULLIVAN, Senior Judge

Faith Sadler ("Sadler") appeals from the granting of summary judgment in favor of defendant Auto-Owners Insurance Co. ("Auto-Owners") upon Sadler's complaint for Declaratory Judgment and for damages. Sadler's complaint asserted that Auto-Owners was obligated under property and casualty insurance policies to indemnify Sadler for costs and expenses of an environmental clean-up. The costs and expenses were Sadler has also

occasioned by leakage from underground petroleum storage tanks.

claimed that Auto-Owners breached its duty of good faith and fair dealing and sought compensatory and punitive damages plus attorney fees. Sadler and her now deceased husband operated a gasoline service station on the property from 1975 to 1999 when the storage tanks were removed. Since that time, until 2004, Sadler operated a tobacco retail shop on the property. (App. at 50-55). Auto-Owners filed its Motion for Summary Judgment (App. at 12). In its

supporting memorandum, Auto-Owners alleged that Sadler has suffered no adverse financial effects of the clean-up costs because such costs and expenses were being fully borne by two other insurance companies, Farm Bureau Insurance Co. ("Farm Bureau") and American Economy Insurance Co. ("American Economy"), Auto-Owners asserts that this circumstance reflects an election of remedies by Sadler barring her claim against Auto-Owners. Auto-Owners also claimed that the underground contamination occurred after the policy or policies from Auto-Owners had expired1 and that therefore, in any

1

Auto-Owners claims that its commercial general liability coverage provided coverage only from 1985 to 1988. Sadler concedes that at various times from 1975 to 1999, other commercial general liability coverage was provided by Farm Bureau and American Economy, later known as SAFECO Property and Casualty Insurance Co. (App Br. at 5). Apparently, the Farm Bureau coverage extended from March 1988 to November 1993 and the American Economy policy covered November 1995 through November 1997. (App. at 8).

2

event, there was no coverage for the underground contamination. (App. at 21). Sadler states that in 2000 a contractor hired to remove the underground storage tanks discovered contaminated soils. The Indiana Department of Environmental

Management (IDEM) ordered an investigation of the extent of contamination and that Sadler must remediate the property. Discussions ensued during 2004 and 2005 between Sadler and the three insurance companies concerning participation by the various insurers with respect to investigative and testing costs. Those discussions also dealt, in a general manner, with the remediation clean-up costs. It appears that the insurers contemplated pro-rata payment of some or all of the costs involved with the soil contamination problem. During these discussions, Auto-Owners had discussed payment of between 9 percent and 22 percent of the costs (App. at 371) but did not commit to any particular percentage and stated that it would not "unqualifiedly indemnify." (App. at 372).

Finally, in a letter dated June 9, 2005, Auto-Owners advised that although it would pay for "site investigation and site characterization done to date," Sadler's claim for indemnification "is denied." (App. at 373). Because Sadler did not want to lose a prospective sale of the property, she entered into a Site Release and Settlement Agreement with Farm Bureau and American Economy under which Farm Bureau and American Economy agreed to pay the remediation costs proscribed by the limits of their respective policies. All the parties to the Agreement reserved any rights or claims against Auto-Owners. This litigation ensued and in August 2006, Auto-Owners agreed to continue to provide a defense to Sadler with respect to Sadler's liability for remediation of the property but was doing so under a reservation of 3

rights. With regard to Sadler's claim of bad faith dealing, Auto-Owners maintains that there is no basis for such claim and certainly no evidence sufficient to carry the "clear and convincing" evidence standard for such a claim.2 Following a hearing on March 20, 2008, the trial court, on March 25, 2008, entered its order granting summary judgment to Auto-Owners. In doing so, the court stated that there were no genuine issues of any material fact and that therefore Auto-Owners was entitled to judgment as a matter of law upon the entirety of Sadler's complaint (App. at 6). ELECTION OF REMEDIES It is the position of Auto-Owners that the Settlement Agreement entered into between Sadler and Farm Bureau and American Economy provided that those two insurers would bear the full costs of the remediation and that accordingly Sadler was fully indemnified by those two insurers. In reaching that agreement and executing a release to Farm Bureau and American Economy, releasing the insurers from any claims by Sadler concerning the environmental costs, Auto-Owners maintains that Sadler elected her remedy and restricted herself to payment of the clean-up costs by Farm Bureau and American Economy as a total settlement of any and all claims including any claims against Auto-Owners. Sadler responds by asserting that the election of remedies doctrine was designed to "prevent excessive and repetitive litigation" (citing Hoover v. Hearth & Home Design
2

In Erie Insurance Co. v. Hickman, 622 N.E.2d 515 (Ind. 1993), our Supreme Court noted that the standard for awarding punitive damages was proof by clear and convincing evidence. In Freidline v. Shellby Insurance Co., 774 N.E.2d 37 (Ind. 2002), the court broadened that evidentiary burden to include not only a claim for punitive damages but the basic claim of a breach of the duty to act in good faith.

4

Center, Inc., 654 N.E.2d 744, 745 (Ind. 1995)), and while designed to prevent double recovery by a claimant, the doctrine contemplates multiple remedies available to the claimant and does not prohibit pursuit of the same remedy against multiple parties. We note that to a certain degree Sadler's position is well taken. The election of remedies doctrine does not prohibit pleading and pursuing inconsistent theories of recovery at trial but does prohibit double recovery under alternative theories. Cahoon v. Cummings, 734 N.E.2d 535, 543 (Ind. 2000). Stated somewhat differently, the Cahoon court held

that the doctrine presupposes that the claimant has "two co-existing but inconsistent remedies." Id. at 542. If that party elects to pursue one remedy to a conclusion he may

not thereafter "pursue a subsequent claim on a second inconsistent theory" Id. (Emphasis supplied). Our first observation in this regard is that the claim against Auto-Owners is not inconsistent with Sadler's claims against Farm Bureau and American Economy. A claim against Auto-Owners upon its insurance policy issued to Sadler is not inconsistent with claims against Farm Bureau and American Economy upon policies issued by those insurers. Furthermore, we would note that Auto-Owners misconstrues the effect of the Settlement Agreement and Release. The Settlement Discharge and Release specifically stated that Sadler "expressly reserves all rights and claims against Auto-Owners and specifically states that this release shall not inure to the benefit of Auto-Owners." (App. at 95). Farm Bureau and American Economy also specifically reserved all rights and claims against Auto-Owners and stated that their release of Sadler "shall not inure to the 5

benefit of Auto-Owners." (App. at 95). It should be observed that the usual phrasing of the election of remedies doctrine and a consideration of the general doctrine does not address whether a claimant may pursue a theory of recovery against one defendant to a conclusion and thereafter assert the same theory of recovery against a different defendant. A collateral question concerns whether the election of remedies doctrine applies only in such instance when the first theory of recovery is concluded following litigation or whether it also applies to an amicable settlement of the claim without litigation between the initial parties. With respect to the facts of the case before us, Sadler relies heavily upon Allstate Insurance Co. v. Dana Corp., 759 N.E.2d 1049 (Ind. 2001). In that case, as here, Dana Corporation had multiple insurers and made claims against them for indemnity for environmental contamination clean-up costs. After litigation and an initial appeal, Dana settled with all insurers except Allstate. Following further litigation a judgment for Dana against Allstate was appealed. An election of remedies issue was not presented or discussed by the Indiana Court of Appeals. See Allstate Insurance Co. v. Dana Corp., 737 N.E.2d 1177 (Ind. Ct. App. 2000). However, upon transfer our Supreme Court's opinion clearly, if not explicitly, permitted the litigation against Allstate notwithstanding Dana's settlement arrangement with all the other insurers. Accordingly, we can only deduce that the election of remedies doctrine does not preclude separate claims against multiple insurance company defendants involving coverage liability for environmental clean-up costs. The Dana case also tells us that a settlement of a claim rather than litigation to 6

conclusion does not prohibit a subsequent claim against another insurer.

This,

however, does not end our inquiry because Auto-Owners contends that to permit the litigation to continue upon its possible insurance coverage liability is to permit Sadler to obtain recovery in excess of her liability for the clean-up costs. This circumstance is seen as a violation of the purpose of the election of remedies doctrine to prohibit double recovery. This appellate position rests upon the contention that Sadler "has been fully

compensated and will continue to be fully compensated by operation of [the] Settlement Agreement [with Farm Bureau and American Economy, now SAFECO.] (Appellee's Brief at 16-17). This contention, in turn, rests upon the portion of the Settlement

Agreement which acknowledged that all remediation costs to date had been paid and the provision that the insurers would pay 100% of future reimbursable costs incurred by Sadler.3 Sadler counters, somewhat creatively, that because she "is not directly paying the remedial and defense costs . . . no money is flowing from the other insurers into Sadler's pocket, nor would any proceeds paid by Auto-Owners if it would provide coverage." (Appellant's Reply Brief at 11). This posture implies that because Farm Bureau and American Economy are paying the remediation costs directly to the environmental firm and that that firm had not billed nor would, in the future, bill Sadler for any remediation costs, she is not precluded from seeking indemnity from Auto-Owners. This seems to

3

The Agreement specified that the costs would be allocated with 73 percent to be borne by Farm Bureau and 27 percent by American Economy. To be sure, Sadler "is not entitled to a windfall because [she] was insured by [multiple] insurance companies." Liberty Mutual Insurance Co. v. OSI Industries, 831 N.E.2d 192, 206 (Ind. Ct. App. 2005), trans. denied. This proposition is related to the concept that double recovery is precluded. As earlier noted, however, such does not prevent assertion of the same claim against multiple parties.

7

address Auto-Owners' double recovery argument, but it does not bear upon whether Sadler has an independent claim against Auto-Owners. That Farm Bureau and American Economy, instead of Sadler, were paying all of the remediation costs directly to the environmental firm does not deprive Sadler of her claim. Despite the circumstances, those remediation costs were incurred by Sadler. Scott v. Irmeger, 859 N.E.2d 1238 (Ind. Ct. App. 2007). It may well be that Farm Bureau and/or American Economy have a claim for equitable contribution from Auto-Owners. See 44A Am Jur. 2d Insurance

Download Faith Sadler v. Auto-Owners Insurance Co..pdf

Indiana Law