Indiana High Court Allows Negligence Claim Against Agent

Indiana’s high court has confirmed a lower court’s summary judgment favoring a property insurer that denied a homeowner’s claim after discovering that misleading information about the condition of the property had been submitted in the policy application. But in an opinion issued on Dec. 2, the Indiana Supreme Court negated a summary judgment in favor of the agent and agency that submitted the policy to Indiana Insurance Co. and allowed a negligence claim to proceed.

The case, Christopher Schmidt v. Indiana Insurance Company, C&F Insurance Group, LLC, and Bart Stith, involved a house that Schmidt inherited in 2004 and subsequently rented to his cousin. From 2007 to 2009 Schmidt received numerous “complaints about animals left on the property and odors emanating from the property,” the court’s opinion states. At one point in 2007 while the cousin was in jail, local authorities removed seven dogs and about 30 cats from the house.

The cousin moved out in 2009 but left animals in the house. “On July 1, 2009, Animal Control reported that the property was covered in feces, fleas, and garbage and removed two emaciated dogs and one dead dog,” the written opinion states.

In April 2010, Schmidt contacted Bart Stith, an insurance agent who worked for C&F Insurance Group LLC, seeking insurance coverage for the property.

“At the time of the insurance application, the property was vacant, uninhabitable, undergoing renovation, and intended for rent (not for the plaintiff’s residence),” the opinion states. Schmidt maintained that he had provided information about the condition of the property to the agent, but it was not included in the policy application submitted to Indiana Insurance.

Stith testified he discussed the application’s contents with Schmidt and that Schmidt signed it. Schmidt said he didn’t remember signing the application.

Indiana Insurance issued a dwelling fire policy on the property, based on the application.

In June 2010 the home was destroyed by fire. After finding that that the policy application had misrepresented the property, the insurer denied coverage, rescinded the policy and refunded all premiums paid.

The lower court, appeals court and the Indiana Supreme Court all agreed that Indiana Insurance Co. acted within its rights in denying the claim and rescinding the policy. But they differed when it came to the action against Stith and the agency, C&F Insurance Group.

The original complaint filed by Schmidt was “based solely on the alleged failure of the issued dwelling policy to provide fire coverage for the premises and does not specifically allege the negligent failure to procure appropriate insurance coverage,” the Court wrote.

Court documents showed that Stith said he was unaware of the condition of the property at the time of the application. In the request for summary judgement he said he was “aware of no insurance company that would have issued a Dwelling Fire Policy for a building that had been condemned by the Board of Health, was uninhabitable due to debris and the condemnation, had no utilities, had been vacant for over a year, and was undergoing renovation.”

Schmidt raised the negligence claim in response to the agent’s request for summary judgment, asserting that other types of insurance, other than a homeowners’ policy, may have been found to cover the property.

He argued that Stith and his agency employers “had a duty to find out what kind of coverage was available, and if they were unwilling or unable to do so, they had a duty to point him in the direction of someone who could provide that advice.”

While the Supreme Court agreed that Stith had proved his point that no dwelling policy could have been procured for the property, it also agreed with Schmidt that the agent had “failed to exclude the possibility that other types of fire insurance coverage for the property could have been obtained and issued.”

The Court ruled that the lower court’s summary judgment in favor of the agent “was improper on the plaintiff’s claim of negligent procurement of appropriate insurance.”