Robert Youell and Best One Giant Tire, Inc. v. The Cincinnati Insurance Company a/s/o Greg Dotson , 117 N.E.3d 639 ( 2018 )

FILED
Dec 28 2018, 7:53 am
CLERK
Indiana Supreme Court
Court of Appeals
and Tax Court
ATTORNEYS FOR APPELLANTS ATTORNEYS FOR APPELLEE
Thomas J. Jarzyniecki, Jr. Catherine Siebecker
Jennifer M. Van Dame Doug Fisher
Kightlinger & Gray, LLP Law Offices
Indianapolis, Indiana The Cincinnati Insurance
Company
Crystal G. Rowe
Indianapolis, Indiana
Kightlinger & Gray, LLP
New Albany, Indiana
IN THE
COURT OF APPEALS OF INDIANA
Robert Youell and December 28, 2018
Best One Giant Tire, Inc., Court of Appeals Case No.
Appellants-Defendants, 18A-CT-1466
Appeal from the Marion Superior
v. Court
The Honorable James B. Osborn,
The Cincinnati Insurance Judge
Company a/s/o Greg Dotson, Trial Court Cause No.
Appellee-Plaintiff 49D14-1708-CT-30209
Vaidik, Chief Judge.
Court of Appeals of Indiana | Opinion 18A-CT-1466 | December 28, 2018 Page 1 of 9
Case Summary
[1] A landlord and a tenant entered into a commercial lease that provided that the
landlord would insure the building and the tenant would insure its personal
property inside the building. When the property was later damaged by fire, the
landlord’s insurance covered the loss. The landlord’s insurer later filed a
subrogation action against the tenant to recover the amount paid. The tenant
filed a motion for judgment on the pleadings, arguing that the landlord’s
agreement to obtain property insurance was an agreement to provide both
parties with the benefits of insurance and expressly allocated the risk of loss in
case of fire to insurance, thereby barring a subrogation action as a matter of
law. The trial court denied the motion, and the tenant now appeals. We
reverse and remand.
Facts and Procedural History
[2] In 2013, Greg Dotson (“Landlord”) leased a commercial building on West
Washington Street in Indianapolis to Robert Youell and Best One Giant Tire,
Inc. (referred to collectively as “Tenant”). The Commercial Lease Agreement
addressed insurance as follows:
8. Insurance
A. If the Leased Premises or any other party [sic] of the Building
is damaged by fire or other casualty resulting from any act or
negligence of Tenant or any of Tenant’s agents, employees or
invitees, rent shall not be diminished or abated while such
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damages are under repair, and Tenant shall be responsible for the
costs of repair not covered by insurance.
B. Landlord shall maintain fire and extended coverage
insurance on the Building and the Leased Premises in such
amounts as Landlord shall deem appropriate. Tenant shall be
responsible, at its expense, for fire and extended coverage
insurance on all of its personal property, including removable
trade fixtures, located in the Leased Premises.
C. Tenant and Landlord shall, each at its own expense, maintain
a policy or policies of comprehensive general liability insurance
with respect to the respective activities of each in the Building
with the premiums thereon fully paid on or before due date,
issued by and binding upon some insurance company approved
by Landlord, such insurance to afford minimum protection of not
less than $1,000,000 combined single limit coverage of bodily
injury, property damage or combination thereof. Landlord shall
be listed as an additional insured on Tenant’s policy or policies of
comprehensive general liability insurance, and Tenant shall
provide Landlord with current Certificates of Insurance
evidencing Tenant’s compliance with this Paragraph. Tenant
shall obtain the agreement of Tenant’s insurers to notify
Landlord that a policy is due to expire at least [ten] (10) days
prior to such expiration. Landlord shall not be required to
maintain insurance against thefts within the Leased Premises or
the Building.
Appellants’ App. Vol. II p. 15 (emphasis added). In accordance with the lease,
Landlord maintained property insurance on the building through a policy with
The Cincinnati Insurance Company (CIC).
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[3] On August 8, 2015, a fire occurred at the building. Pursuant to Landlord’s
insurance policy, CIC paid Landlord $227,653 for damages to the building. In
August 2017, CIC, as subrogee of Landlord, filed a complaint against Tenant to
recover that amount. CIC attached the Commercial Lease Agreement to its
complaint.
[4] Thereafter, Tenant filed a motion for judgment on the pleadings, arguing that
CIC had no right to pursue the subrogation claim because Landlord’s
agreement to provide property insurance was an agreement to provide both
parties with the benefits of insurance. The trial court denied Tenant’s motion.
Appellants’ App. Vol. II p. 9.
[5] At Tenant’s request, the trial court certified its order for interlocutory appeal,
and this Court accepted jurisdiction of the appeal.
Discussion and Decision
[6] Tenant contends that the trial court should have granted its motion for
judgment on the pleadings. According to Indiana Trial Rule 12(C), after the
pleadings are closed but within such time as not to delay the trial, any party
may move for judgment on the pleadings. A written instrument attached to a
pleading is considered a part of that pleading. Ind. Trial Rule 10(C).
A motion for judgment on the pleadings is typically directed toward a
determination of the substantive merits of the controversy. Mourning v. Allison
Transmission, Inc., 72 N.E.3d 482, 486 (Ind. Ct. App. 2017). Such motions
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should be granted only where it is clear from the face of the complaint that
under no circumstances could relief be granted. Id.; see also ESPN, Inc. v. Univ. of
Notre Dame Police Dep’t, 62 N.E.3d 1192, 1195 (Ind. 2016) (judgment on the
pleadings should be granted only “where it is clear from the face of the
pleadings that one party is entitled to prevail as a matter of law”). We review
the trial court’s ruling on such motions de novo. ESPN, 62 N.E.3d at 1195.
[7] In addition, a lease is construed in the same manner as any other contract. T-3
Martinsville, LLC v. US Holding, LLC, 911 N.E.2d 100, 111 (Ind. Ct. App.
2009), aff’d on reh’g, trans. denied. When construing the meaning of a contract,
our primary task is to determine and effectuate the intent of the
parties. Id. First, we must determine whether the language of the contract is
ambiguous. Id. The unambiguous language of a contract is conclusive upon
the parties to the contract and upon the courts. Id. If the language of the
instrument is unambiguous, the parties’ intent will be determined from the four
corners of the contract. Id. If, on the other hand, a contract is ambiguous, its
meaning must be determined by examining extrinsic evidence and its
construction is a matter for the fact-finder. Id.
[8] Tenant asserts that Morsches Lumber, Inc. v. Probst, 180 Ind. App. 202, 388
N.E.2d 284 (Ind. Ct. App. 1979), is controlling here. In that case, the parties
entered into a contract for the construction of a pole barn. According to the
contract, the landowner was required to obtain property insurance for fire and
windstorm damage and the builder was required to obtain general liability
insurance. When a windstorm later destroyed the barn during construction, the
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landowner’s insurance covered only 75% of the loss. The landowner then filed
suit against the builder, alleging that the builder’s negligence was the proximate
cause of the barn’s destruction. The builder responded that regardless of any
negligence on its part, neither the landowner nor his insurer as subrogee could
bring an action for a loss that the parties agreed would be allocated to
insurance. We agreed with the builder, reasoning:
[A]n agreement to insure is an agreement to provide both parties
with the benefits of insurance. Individuals understand that
insurance will protect them against the consequences of their
own negligence and more than likely assume that if one who is a
party to a contract agrees as part of his or its duties to provide
insurance, that the insurance will protect both of them regardless
of the cause of the loss (excepting, of course, wanton and willful
acts). If that were not their intent, each would provide his or its
own insurance protection and there would be no need for the
contract to place the duty on one of them.
Id. at 287. Accordingly, we held that the landowner was “limited in his
recovery to the proceeds of the insurance policy. The fact that he failed to take
out a policy sufficient to cover the cost of the undertaking is a cost he will have
to bear.” Id.; see also Woodruff v. Wilson Oil Co., 178 Ind. App. 428, 382 N.E.2d
1009 (1978) (holding that a contract requiring the lessors to obtain fire
insurance for the leased property was for the benefit of both the lessors and the
lessee and therefore the lessors were limited in recovery to the insurance
proceeds).
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[9] We agree with Tenant that Morsches Lumber is controlling here. Like the
contract in Morsches Lumber, here the Commercial Lease Agreement
unambiguously provides that Landlord would insure the building and Tenant
would insure its personal property inside the building.1 Appellants’ App. Vol. II
p. 33. Landlord and Tenant’s agreement to insure was thus an agreement to
provide both parties with the benefits of the insurance and expressly allocated
the risk of loss in case of fire to insurance. See Morsches Lumber, 388 N.E.2d at
287 (“With agreements to insure, the risk of loss is not intended to be shifted to
one of the parties; it is intended to be shifted to an insurance company in return
for a premium payment. Neither party intends to assume a potential liability;
rather both are demonstrating ‘normal’ business foresight in avoiding liability
and allocating it to an insurer.”). And just like the landowner in Morsches
Lumber, Landlord is limited in its recovery to the insurance proceeds. And
because CIC stands in the shoes of Landlord and takes no rights other than
those that Landlord had, CIC has no subrogation rights against Tenant. Ind.
Erectors, Inc. v. Trs. of Ind. Univ., 686 N.E.2d 878, 880 (Ind. Ct. App. 1997)
(“[T]he party who agreed to purchase insurance has no cause of action against
the party for whose benefit the insurance was intended regardless of the fault of
this intended insured. And, as the rights of a subrogated insurer can rise no
1
Landlord asserts that the lease is ambiguous because (1) the lease did not specify the amount of property
insurance to be obtained (but rather left it to the discretion of Landlord) and (2) the lease did not explicitly
rule out subrogation. But as Tenant points out, the contract in Morsches Lumber neither specified the amount
of property insurance to be obtained nor explicitly ruled out subrogation. The lease is not ambiguous for
these reasons.
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higher than the rights of its insured, the first party’s insurance carrier has no
subrogation cause of action against the intended insured.” (citations omitted)),
reh’g denied; Farm Bureau Ins. Co. v. Allstate Ins. Co., 765 N.E.2d 651, 656-57 (Ind.
Ct. App. 2002), aff’d on reh’g, trans. denied.
[10] Despite Tenant’s explicit reliance on Morsches Lumber in its brief, CIC does not
attempt to distinguish it, or even cite it, in its brief. CIC, however, relies on
LBM Realty, LLC v. Mannia, 19 N.E.3d 379 (Ind. Ct. App. 2014). In LBM
Realty, the tenant entered into a lease with the landlord to rent a unit in an
apartment building. The lease was “silent” as to the landlord’s obligation to
maintain property insurance and only recommended that the tenant obtain
renter’s insurance. Id. at 381. After a fire caused nearly $750,000 in damage to
the apartment building, the landlord’s insurer filed negligence and breach-of-
contract claims against the tenant for causing the fire. In determining whether
the landlord’s insurer could pursue the claims against the tenant, we considered
three alternative approaches to subrogation claims brought against tenants by
insurers of landlords: (1) the no-subrogation approach; (2) the pro-subrogation
approach; and (3) the case-by-case approach. After considering each
alternative, we adopted the case-by-case approach:
Having considered the range of possible approaches, we conclude
that Indiana should hereby adopt the largely case-by-case
approach, finding that a tenant’s liability to the landlord’s insurer
for damage-causing negligence depends on the reasonable
expectations of the parties to the lease as ascertained from the
lease as a whole and any other admissible evidence. Although
the case-by-case approach is said to provide less predictability
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than either the pro- or no-subrogation approaches, we find that
this approach best effectuates the intent of the parties by simply
enforcing the terms of their lease.
Id. at 393-94 (citations omitted).
[11] LBM Realty is distinguishable from this case. In LBM Realty, the lease did not
require the landlord to maintain property insurance and only recommended
that the tenant obtain renter’s insurance; as a result, the parties’ expectations
with respect to liability for damage to the leased premises was unknown. Here,
however, the Commercial Lease Agreement unambiguously provides that
Landlord would insure the building. Accordingly, the test set forth in LBM
Realty does not apply to this case; rather, Morsches Lumber controls. We
therefore reverse and remand with instructions for the trial court to grant
Tenant’s motion for judgment on the pleadings.
[12] Reversed and remanded.
Riley, J., and Kirsch, J., concur.
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