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ATTORNEYS FOR APPELLANT
Todd J. Kaiser Matthew S. Effland Ogletree Deakins Law Firm Indianapolis, Indiana

ATTORNEYS FOR APPELLEE
William E. Winingham Wilson Kehoe & Winingham Indianapolis, Indiana Frank D. Otte Indianapolis, Indiana

INTERVENOR
Steve Carter Attorney General of Indiana Scott A. Kreider Deputy Attorney General Indianapolis, Indiana

AMICUS CURIAE BRIEF OF THE INDIANA TRIAL LAWYERS ASSOCIATION
Henry Price Price Jackson Waicukauski & Mellowitz, P.C. Indianapolis, Indiana

______________________________________________________________________________

In the

Indiana Supreme Court
_________________________________ No. 49S02-0402-CV-81 MONROE GUARANTY INSURANCE COMPANY, Appellant (Defendant below), v. MAGWERKS CORPORATION, Appellee (Plaintiff below). _________________________________ Appeal from the Marion Superior Court No. 7, No. 49D07-9902-CP-228 The Honorable Gerald S. Zore, Judge _________________________________ On Petition To Transfer from the Indiana Court of Appeals, No. 49A02-0208-CV-622 _________________________________ June 29, 2005 Rucker, Justice.

This case presents the question of whether a good faith dispute concerning insurance coverage automatically precludes a punitive damages claim for bad faith when coverage is denied. We conclude it does not.

Facts and Procedural History

Magwerks Corporation ("Magwerks") sells manufactured camshafts from its one-story, flat-roofed building in Indianapolis. Constructed of tar and asphalt with individual sections measuring 4' x 8', the roof has no separate suspended ceiling. After a period of heavy rain and snow in February 1997, several of the roof sections began falling to the floor. The resultant water and moisture caused damage to several pieces of Magwerks' equipment.

Monroe Guaranty Insurance Company ("Monroe Guaranty") issued an insurance policy to Magwerks in 1996, which included coverage for certain types of damage to its building and equipment. One provision of the policy excluded payment for such things as "wear and tear" and loss or damage "caused by or resulting from rain [or] snow." Appellant's App. at A052. Although not defining the term, one section of the policy excluded coverage for "collapse" but then another section of the policy specifically included such coverage under certain circumstances. More particularly the policy provided in relevant part: We will pay for loss or damage caused by or resulting from risks of direct physical loss involving collapse of a building or any part of a building caused only by one or more of the following: . . . Weight of rain that collects on a roof . . . . Id. at at A053 (emphasis added). The policy was in effect in February 1997. Patrick Jenkins, president of Magwerks, submitted a "Property Loss Notice" to Monroe Guaranty describing the loss as follows: "Continuous rain had caused damage to roof, actuall [sic] has collapsed in several areas." Appellant's App. at A085. Paul Kelter, a Monroe Guaranty adjuster, observed "[r]oof damage and collapsed interior ceiling panels." Supp. App. to Br. of Appellee at S147. At Kelter's request, Tim Moehl of McComas Engineering inspected the roof and concluded that ponding on the roof, caused by poor design, had occurred over a long period of time resulting in a number of small roof leaks that affected the structural integrity of the roof deck. Moehl added, 2

"At the time of our inspection two sections of the roof were collapsed. Several sections of the roof deck have been temporarily braced to prevent further collapse." Appellant's App. at A088.

Monroe Guaranty ultimately forwarded Magwerks a denial letter rejecting Magwerks' claim of loss. The letter cited several exclusions and limitations in the insurance policy which, according to Monroe Guaranty, justified its refusal to pay for the loss. Those included damage caused by wear and tear, decay, deterioration, and defective design. The denial letter did not mention the provisions in the policy concerning collapse coverage.

Magwerks filed a complaint against Monroe Guaranty for breach of the insurance contract. Seeking punitive damages Magwerks also included a claim for lack of good faith and fair dealing. After conducting discovery, both sides filed cross motions for summary judgment on the breach of contract claim. The primary issue in dispute was whether Magwerks' loss was due to a "collapse" of the roof. Because of a lack of Indiana precedent, Monroe Guaranty cited authority from foreign jurisdictions to support its position. The trial court granted summary judgment in favor of Magwerks and the matter proceeded to trial on the issue of contract damages and on Magwerks' claim of lack of good faith and fair dealing. The jury returned a verdict for Magwerks in the amount of 5.1 million dollars, which included 4 million dollars in punitive damages.

On review, the Court of Appeals reversed the judgment of the trial court and remanded the cause for further proceedings. In so doing the court determined: (1) as a matter of first impression, the modern definition of "collapse" should be adopted in Indiana, thereby rejecting the narrower and traditional definition advocated by Monroe Guaranty; (2) under the modern definition there remains a genuine issue of material fact as to whether there was a collapse of Magwerks' roof and therefore the trial court erred in granting summary judgment in Magwerks' favor; and (3) Monroe Guaranty did not act in bad faith because there was a good faith dispute about coverage and thus "in the event that this case proceeds to trial, punitive damages may not be awarded . . . ." Monroe Guar. Ins. Co. v. Magwerks Corp., 796 N.E.2d 326, 334 (Ind. Ct. App. 2003). Also, the court rejected Magwerks' argument that because of the requirement that

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seventy-five percent of a punitive damages award must be paid to the state treasurer, the punitive damages statute--Indiana Code section 34-51-3-6--is unconstitutional. Id. at 335.

With the exception of that portion of the Court of Appeals' opinion adopting the modern definition of collapse, Magwerks sought transfer challenging the Court of Appeals' determinations. Having previously granted transfer, we now summarily affirm the opinion of the Court of Appeals in all respects except for its treatment of Magwerks' punitive damages claim. See Ind. Appellate Rule 58(A)(2).

Discussion I. What constitutes a collapse has been the subject of a number of articles and treatises. 1 Under the traditional definition, a "collapse" is limited to an event that occurs suddenly and results in complete disintegration. 43 Am. Jur. 2d Insurance

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