                                                                  Apr 08 2015, 10:37 am




      ATTORNEYS FOR APPELLANT                                     ATTORNEY FOR APPELLEE
      George M. Plews                                             Ginny L. Peterson
      Colin E. Conner                                             Kightlinger & Gray, LLP
      Plews Shadley Racher & Braun, LLP                           Indianapolis, Indiana
      Indianapolis, Indiana



                                                   IN THE
          COURT OF APPEALS OF INDIANA

      5200 Keystone Limited Realty,                              April 8, 2015
      LLC,                                                       Court of Appeals Cause No.
      Appellant-Plaintiff,                                       49A02-1410-PL-763
                                                                 Appeal from the Marion Superior
              v.                                                 Court
                                                                 Cause No. 49D03-1309-PL-34315
      Netherlands Insurance Comp.,                               The Honorable Patrick L. McCarty,
      Consolidated Insurance Comp.,                              Judge
      and Indiana Insurance Comp.,
      Appellees-Defendants.




      Barnes, Judge.


                                               Case Summary
[1]   5200 Keystone Limited Realty, LLC (“KLR”) appeals the trial court’s grant of

      summary judgment in favor of Netherlands Insurance Company

      Court of Appeals of Indiana | Opinion 49A02-1410-PL-763 | April 8, 2015                 Page 1 of 15
      (“Netherlands”), Consolidated Insurance Company (“Consolidated”), and

      Indiana Insurance Company (“Indiana”) (collectively “the Insurers”). We

      affirm.


                                                        Issue
[2]   KLR raises several issues on appeal. We need only address one issue: whether

      the common law “known loss” doctrine precludes KLR’s action against the

      Insurers to compel them to provide a defense for KLR in an action brought by

      the Indiana Department of Environmental Management (“IDEM”) to remove

      pollution from land owned by KLR.


                                                       Facts
[3]   This suit concerns property located on Keystone Avenue in Indianapolis. In

      2002, Apex Mortgage Company (“Apex”) acquired the property for $240,000 in

      a foreclosure action against the last property owner, Eric Spicklemire.

      Spicklemire and his father had operated a film development business at the site,

      Filmcraft Laboratories, Inc. (“Filmcraft”), from 1974 to 2001. From 1956 to

      1973, a former property owner had operated a dry cleaning facility at the site.


[4]   After the foreclosure, Apex hired a company, KERAMIDA Environmental

      (“KERAMIDA”), to evaluate the property for environmental contamination.

      In 2003, KERAMIDA prepared a report finding extensive soil and water

      contamination by a variety of chemicals, including chlorinated solvents and

      petroleum hydrocarbons. The report concluded:



      Court of Appeals of Indiana | Opinion 49A02-1410-PL-763 | April 8, 2015   Page 2 of 15
              Based upon the results of the investigation, the site soils were found to
              be contaminated in several areas. Shallow soils were found to be
              contaminated in several areas. Shallow soils were found to be
              contaminated above regulatory action levels. . . .
              Groundwater samples confirmed contamination above the IDEM
              action levels from previous historical operations in a shallow perched
              zone. . . .
              . . . . Corrective Action on the Site is necessary due to the exceedances
              of contaminant concentrations being observed above the IDEM
              regulatory action levels. KERAMIDA recommends additional site
              investigation in order to determine the extent and to begin the
              development of a remediation work plan for the site.
      App. p. 675.


[5]   On October 9, 2003, Apex filed suit against Filmcraft to recover costs

      associated with environmental cleanup under Indiana’s Environmental Legal

      Action (“ELA”) statute, Indiana Code Section 13-30-9-2, and Indiana’s illegal

      dumping statute, Indiana Code Section 13-30-3-13(d). The complaint alleged

      that Filmcraft was responsible for the environmental contamination on the site.

      It further stated,

              Apex incurred costs for testing and will incur significant costs for
              future testing to fully delineate the extent of the impact to the soil and
              groundwater at the Site, for subsequent remediation of the soil and
              groundwater at the Site, and to remove the discarded solid waste from
              the Site.
      Id. at 1314-15. Apex sought a judgment requiring Filmcraft to reimburse Apex

      for all sums Apex incurred in remediating the site. Apex later amended its

      complaint to add as defendants a number of other prior owners of the property,

      including Spicklemire personally, and businesses who had used the property.



      Court of Appeals of Indiana | Opinion 49A02-1410-PL-763 | April 8, 2015          Page 3 of 15
[6]   In December 2004, Demetrios Emmanoelides founded KLR and, acting on its

      behalf, signed an agreement to purchase the land from Apex for $20,000. The

      purchase agreement contained a number of provisions related to the

      environmental contamination at the site. The agreement stated in part:

              Seller has provided to Buyer, and Buyer acknowledges the receipt,
              review and understanding of, the following documents:
              A. a Phase II Environmental Site Investigation for the Real Estate,
              prepared by Keramida Environmental, Inc., and dated January 31,
              2003;
              B. a Chemical Decommissioning report, prepared by Patriot
              Engineering and Environmental, Inc., dated July 23, 2004;
              C. a Complaint between Apex Mortgage Corporation, plaintiff, and
              Filmcraft Laboratories, Inc., defendant, involving the Real Estate, filed
              on October 9, 2003 (the “Lawsuit”) . . . .
      Id. at 650. The agreement further provided that KLR as buyer agreed to

      indemnify and defend Apex as seller “from and against any and all liability or

      claim arising from or related to the Real Estate, including without limitation

      any and all facts or conditions or concerns described in or arising from the

      foregoing documents or arising under or relating to any environmental law.”

      Id. at 651. The agreement also assigned to KLR as buyer all of Apex’s “right,

      title and interest in and to any claims or causes of action Seller has against third

      parties with respect to all such matters, including without limitation the

      Lawsuit referenced above.” Id.


[7]   Simultaneously with purchase of the land, KLR obtained a commercial general

      liability policy through Netherlands. This policy was in effect from 2004

      through 2005. Thereafter, KLR obtained coverage through Consolidated from

      Court of Appeals of Indiana | Opinion 49A02-1410-PL-763 | April 8, 2015        Page 4 of 15
       the end of 2005 through 2008. KLR then obtained coverage through Indiana

       from the end of 2008 through June 2010.


[8]    KLR has continued to prosecute the lawsuit against Filmcraft and others that it

       acquired from Apex, and it is still not final. On June 18, 2012, this court

       handed down an opinion in Filmcraft Laboratories, Inc. v. 5200 Keystone Limited

       Realty, LLC, No. 49A02-1107-CT-676 (Ind. Ct. App. June 18, 2012). In that

       opinion, we addressed whether Filmcraft had guaranteed Apex (now KLR)

       payment of environmental and property tax liabilities incurred by Spicklemire

       personally. We held that Filmcraft had guaranteed payment of tax liabilities

       but not environmental liabilities.1


[9]    Following handdown of this opinion, an IDEM employee read about the case

       on a blog. Previously, no one from Apex or KLR had ever notified IDEM

       about contamination on the site. On June 21, 2012, the IDEM employee wrote

       an email to counsel for KLR asking if the site was being addressed through any

       IDEM remediation program because she could find no record of it in IDEM’s

       database.


[10]   On August 28, 2012, counsel for KLR responded by informing IDEM of the

       KERAMIDA study and the Filmcraft lawsuit. On that same date, counsel for




       1
         Subsequently, KLR continued prosecution of the lawsuit with respect to environmental claims. Eventually,
       KLR either obtained default judgments against or settled with all defendants, except for Spicklemire
       personally. After a trial on KLR’s ELA claims against Spicklemire, judgment was entered in Spicklemire’s
       favor. That judgment currently is on appeal before this court.

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       KLR sent a “Notice of Claim” to the Insurers. The notice stated that IDEM

       “has recently become aware” of contamination at the site and might require

       remediation in the future, and it requested that the Insurers “provide full

       indemnification and defense for this claim in accordance with the policy terms

       and Indiana law.” Id. at 459. The Insurers did not respond to this notice, nor

       to one sent on November 5, 2012.


[11]   On June 19, 2013, IDEM wrote a letter to KLR, Apex, Filmcraft, Spicklemire,

       and others, identifying KLR and the others as potentially responsible persons

       for remediation of the site. The letter required KLR and the others to take

       various steps to remediate the site unless it was later determined it was not a

       responsible person. After receipt of this letter, KLR filed a third “Notice of

       Claim” with the Insurers, informing them that IDEM was requiring KLR “to

       further investigate and remediate the contamination or face civil penalties.” Id.

       at 471. The notice again sought “full defense and indemnification for this claim

       . . . .” Id.


[12]   On July 31, 2013, the Insurers responded to this third notice with a letter

       declining either to defend KLR or indemnify it in relation to IDEM’s

       remediation action. The Insurers gave a number of reasons why they believed

       they owed no obligations to KLR under their policies. Most prominently, the

       Insurers contended there was no coverage because KLR “was aware of the

       contamination at the Site prior to its purchase of the property, which was prior

       to the inception of the . . . policies.” Id. at 314.



       Court of Appeals of Indiana | Opinion 49A02-1410-PL-763 | April 8, 2015   Page 6 of 15
[13]   On September 10, 2013, KLR filed a complaint against the Insurers, seeking to

       compel them to provide a defense in the IDEM action and to indemnify KLR

       for any costs it incurred in cleaning up the property in response to IDEM’s

       action. KLR subsequently filed a motion for partial summary judgment against

       the Insurers with respect to their duty to defend KLR. The Insurers responded

       with a cross-motion for summary judgment in its entirety. In support of its

       summary judgment motion, KLR filed an affidavit from Emmanoelides stating

       in part, “KLR did not believe—and had no reason to believe—that it might ever

       be held responsible for contamination caused by former owners/operators.” Id.

       at 545. The trial court granted the Insurers’ motion for summary judgment.

       KLR now appeals.


                                                     Analysis
[14]   We review a granting of summary judgment de novo, reviewing the matter in

       the same way as the trial court. Hughley v. State, 15 N.E.3d 1000, 1003 (Ind.

       2014). We will affirm only if, after drawing all reasonable inferences in favor of

       the non-moving party, the designated evidence shows that there is no genuine

       issue as to any material fact and the moving party is entitled to judgment as a

       matter of law. Id. A material fact is one the resolution of which would affect

       the outcome of a case, while an issue is “genuine” if a trier of fact must resolve

       the parties’ differing accounts of the truth, or if the undisputed material facts

       support conflicting inferences. Id.




       Court of Appeals of Indiana | Opinion 49A02-1410-PL-763 | April 8, 2015    Page 7 of 15
[15]   A summary judgment movant bears the initial burden of demonstrating the

       absence of a genuine issue of fact on a determinative issue. Id. If the movant

       does so, the non-movant then bears the burden of coming forward with

       contrary evidence showing an issue for the trier of fact. Id. We must carefully

       review a grant of summary judgment to ensure that a party was not improperly

       denied its day in court. Id.


[16]   The trial court here entered a detailed written order explaining its decision. It is

       well-settled that special findings are not required in summary judgment

       proceedings and, even if they are entered, they are not binding on this court on

       appeal. New Albany Historic Preserv. Comm’n v. Bradford Realty, Inc., 965 N.E.2d

       79, 84 (Ind. Ct. App. 2012). We will affirm a grant of summary judgment upon

       any theory supported by the designated evidence, regardless of a trial court’s

       stated theory. Henderson v. Reid Hosp. & Healthcare Servs., 17 N.E.3d 311, 315

       (Ind. Ct. App. 2014).


[17]   On appeal, KLR focuses primarily upon an insurance company’s duty to

       defend its insured, noting that the duty to defend is broader than the duty to

       indemnify. See Liberty Mut. Ins. Co. v. OSI Indus., Inc., 831 N.E.2d 192, 200 (Ind.

       Ct. App. 2005), trans. denied. An insurer’s duty to defend is examined based

       upon the allegations contained within the complaint against the insured, as well

       as upon those facts known or ascertainable by the insurer after reasonable

       investigation. Newnam Mfg., Inc. v. Transcon. Ins. Co., 871 N.E.2d 396, 401 (Ind.

       Ct. App. 2007), trans. denied. “If the pleadings reveal that a claim is clearly

       excluded under the policy, then no defense is required.” Id.

       Court of Appeals of Indiana | Opinion 49A02-1410-PL-763 | April 8, 2015    Page 8 of 15
[18]   Additionally, an insurer may go beyond the face of the complaint and refuse to

       defend based upon the factual underpinnings of the claims contained within the

       complaint. Jim Barna Log Sys. Midwest, Inc. v. Gen. Cas. Ins. Co. of Wisconsin, 791

       N.E.2d 816, 823 (Ind. Ct. App. 2003), trans. denied. If an insurer is aware of

       facts outside the pleadings that clearly disclose an absence of coverage, it can

       refuse to defend.2 Id. It is the nature of the claim, not its merits, that

       determines an insurer’s duty to defend. Id.


[19]   Indiana has adopted the common law “known loss” doctrine as applicable to all

       third-party liability insurance policies. See General Housewares Corp. v. National

       Sur. Corp., 741 N.E.2d 408, 413 (Ind. Ct. App. 2000). This doctrine, which is

       not dependent upon particular policy language, derives “from the fundamental

       concept in insurance law that the loss be fortuitous.” Id. at 413, 415. “Simply

       put, the known loss doctrine states that one may not obtain insurance for a loss

       that has already taken place.” Id. at 413. A loss that exists at the time

       insurance is purchased, or one which is “‘probable or imminent,’” is not a

       proper subject of insurance. Id. (quoting 7 Couch on Insurance, § 102:8 at 20

       (3d. ed. 1997)). We further explained in General Housewares:




       2
        Ordinarily, if an insurer has made an independent determination that it has no duty to defend, it must
       protect its interest by either filing a declaratory judgment action for a judicial determination of its obligations
       or hiring independent counsel to defend its insured under a reservation of rights. Freidline v. Shelby Ins. Co.,
       774 N.E.2d 37, 42 n.6 (Ind. 2002). Here, KLR’s complaint obviated the need for the Insurers to file their
       own declaratory judgment action.



       Court of Appeals of Indiana | Opinion 49A02-1410-PL-763 | April 8, 2015                                Page 9 of 15
               The term “probability” indicates the presence of contingency and
               fortuity, the lack of which is the very essence of the known loss
               doctrine. Even if there is a probability of loss, there is some insurable
               risk, and the known loss doctrine should not apply. “Certainty,” on
               the other hand, refers not to the likelihood of an occurrence, but rather
               to the inevitability of an occurrence. Therefore, a “substantially
               certain” loss is one that is not only likely to occur, but is virtually
               inevitable. The inquiry should be more of temporality than
               probability-when an event will occur, not whether an event will occur.
               We also note that, because the effect of the known loss doctrine is to
               avoid coverage, the burden of proving that the loss was known is on
               the party seeking to avoid coverage. Therefore, we hold that if an
               insured has actual knowledge that a loss has occurred, is occurring, or
               is substantially certain to occur on or before the effective date of the
               policy, the known loss doctrine will bar coverage. This is not to say,
               however, that parties may not explicitly agree to cover existing losses.
               Indeed, the known loss doctrine is inapplicable “if the insurer also
               knew of the circumstances on which it bases the defense.”
       Id. at 414 (citations and footnotes omitted).


[20]   In Crawfordsville Square, LLC v. Monroe Guar. Ins. Co., 906 N.E.2d 934 (Ind. Ct.

       App. 2009), trans. denied, we applied the known loss doctrine in a scenario very

       similar to the present one. In that case, after executing a purchase agreement

       but before closing, the property buyer had the land tested and it revealed

       extensive environmental contamination. The buyer then wrote a letter to an

       agent of the seller that stated in part, “Clean up [sic] of both petroleum and

       cleaning agent contamination must happen. The law requires it. . . . After two

       successive quarters of below action level reports, the Indiana Department of

       Environmental Management will issue ‘no further action’ letter is received from

       the state. [sic]” Crawfordsville Square, 906 N.E.2d at 936. Because of the

       environmental contamination, the buyer asked the seller to deposit money in an


       Court of Appeals of Indiana | Opinion 49A02-1410-PL-763 | April 8, 2015        Page 10 of 15
       escrow account to be used for remediation, and the seller agreed to do so.

       Before closing, the buyer obtained insurance without informing the insurer of

       the contamination. Over six years after closing, IDEM learned of the

       contamination and demanded action by the buyer to remediate the property.

       The buyer sought to require the insurer to provide a defense to IDEM’s action,

       and it refused to do so. The insurer then initiated a declaratory judgment action

       to establish its lack of duty to defend, and the trial court granted the insurer’s

       motion for summary judgment, despite submission of an affidavit from the

       buyer suggesting he only knew of potential contamination on the land, not that

       it definitely existed.


[21]   On appeal, we affirmed summary judgment for the insurer on the basis of the

       known loss doctrine. We noted that the letter the buyer sent to the seller

       demonstrated clear knowledge of contamination at the site “and, by its

       references to legally-mandated clean-up and IDEM requirements for successful

       compliance with applicable regulations, that the contamination was at

       actionable levels.” Id. at 938. We went on to hold:

               Moreover, we conclude the lack of evidence in the record of a formal
               IDEM action pending at the time of the sale does not help [the buyer]
               here. A reasonable inference to be drawn from references in the letter
               to the requirements of the law and to IDEM regulations establishes
               that, at the very least, [the buyer] was aware that the Parcel’s
               contamination was at actionable levels and would require remediation,
               even if IDEM had not yet told [the buyer] that it was required to do so.
               Under such circumstances, the lack of formal action (even assuming
               such a lack existed) was essentially irrelevant in this case.
       Id. at 939.


       Court of Appeals of Indiana | Opinion 49A02-1410-PL-763 | April 8, 2015      Page 11 of 15
[22]   Despite KLR’s claim to the contrary, we find Crawfordsville Square to be virtually

       indistinguishable from this case in all pertinent respects. Before KLR purchased

       the property, KERAMIDA’s report revealed the existence of soil contamination

       “above regulatory action levels” and groundwater contamination “above the

       IDEM action levels . . . .” App. p. 675. The report also stated, “Corrective

       Action on the Site is necessary due to the exceedances of contaminant

       concentrations being observed above the IDEM regulatory action levels.” Id.

       Additionally, as a result of these revelations, Apex had filed suit against

       Filmcraft to recover costs for further testing and remediation; Apex further

       alleged that it had “incurred” and “will incur significant costs” as a result of the

       contamination. Id. at 1314-15. Upon purchasing the property, KLR was

       provided the KERAMIDA report and was substituted as plaintiff in Apex’s

       lawsuit against Filmcraft. There is no evidence any of the Insurers ever were

       aware of any environmental contamination on the property when they agreed

       to issue policies to KLR.3


[23]   Thus, just as in Crawfordsville Square, KLR as a purchaser of environmentally

       contaminated property was made aware of the existence of the contamination

       at levels above IDEM regulatory levels and that remediation definitely would




       3
         In the original insurance application, KLR was asked, “Do/have past, present or discontinued operations
       involve(d) storing, treating, discharging, applying, disposing, or transporting of hazardous material? (e.g.
       landfills, wastes, fuel tanks, etc.).” App. p. 637. KLR responded no. In their summary judgment motion,
       the Insurers argued in part that this answer constituted a material misrepresentation in the insurance
       application that voided coverage. The trial court did not address this argument, and the Insurers have not
       raised it on appeal.

       Court of Appeals of Indiana | Opinion 49A02-1410-PL-763 | April 8, 2015                          Page 12 of 15
       be required. KLR, through adoption of Apex’s lawsuit, had taken steps to

       protect its financially against the costs of testing and remediation, just as the

       buyer in Crawfordsville Square had done by demanding an escrow payment by

       the seller to cover such costs. And, as we held in Crawfordsville Square, the lack

       of an existing IDEM enforcement action at the time KLR bought the property

       and obtained insurance is “essentially irrelevant . . . .” Crawfordsville Square, 906

       N.E.2d at 939. This evidence conclusively demonstrates as a matter of law the

       existence of a known loss by KLR prior to the time it obtained insurance from

       the Insurers.


[24]   As mentioned by KLR, it designated an affidavit from Emmanoelides stating in

       part, “KLR did not believe—and had no reason to believe—that it might ever

       be held responsible for contamination caused by former owners/operators.” Id.

       at 545. This is an entirely self-serving affidavit; if accepted at face value, it

       would tend to negate application of the known loss doctrine. We recognize

       that, in Hughley, our supreme court recently addressed the use of self-serving

       affidavits in response to a summary judgment motion. In that case, the State

       sought civil forfeiture of the defendant’s money and vehicle after he was

       convicted of dealing in cocaine. In response, the defendant filed a perfunctory

       and self-serving affidavit stating that the money seized by police during his

       arrest was not related to any criminal activities, nor was his car used in any

       criminal activities. Although our supreme court found this uncorroborated

       affidavit “thin” and the defendant’s credibility likely to be dubious, it held the




       Court of Appeals of Indiana | Opinion 49A02-1410-PL-763 | April 8, 2015     Page 13 of 15
       affidavit was sufficient to defeat the State’s summary judgment motion.

       Hughley, 15 N.E.3d at 1005.


[25]   We observe that Hughley did not purport to overrule a line of cases beginning

       with Gaboury v. Ireland Rd. Grace Brethren, Inc., 446 N.E.2d 1310 (Ind. 1983). In

       Gaboury, a plaintiff submitted an affidavit in response to the defendant’s

       summary judgment motion that directly contradicted statements the plaintiff

       had made in a previous deposition. Our supreme court held that the affidavit

       did not create a genuine issue of material fact and concluded that a party cannot

       create such an issue simply by submitting an affidavit contradicting his or her

       own prior testimony. Gaboury, 446 N.E.2d at 1314. This proposition has since

       been cited in at least forty-four Indiana cases. See, e.g., Brown v. Buchmeier, 994

       N.E.2d 291, 296 (Ind. Ct. App. 2013).


[26]   In fact, in Crawfordsville Square we applied Gaboury outside the context of a

       conflict between and affidavit and a prior deposition. We held that the property

       buyer could not create a material issue of fact by designating an affidavit

       disclaiming definite knowledge of environmental contamination on the land

       that conflicted with the earlier letter he had written informing the seller of the

       contamination and the need for remediation. Crawfordsville Square, 906 N.E.2d

       at 939. Here, there is even more reason to disregard Emmanoelides’s affidavit

       claiming that KLR lacked knowledge that it could be responsible for

       remediation of the property. Not only did KLR have conclusive proof via the

       KERAMIDA report that the land was contaminated above IDEM regulatory

       levels, it accepted assignment of Apex’s lawsuit against Filmcraft asserting that

       Court of Appeals of Indiana | Opinion 49A02-1410-PL-763 | April 8, 2015   Page 14 of 15
       Apex—and then KLR—had incurred and would continue to incur “significant

       costs” related to the contamination. App. at pp. 1314-15. KLR has actively

       prosecuted that lawsuit for over a decade and continues to do so. It would be

       illogical to allow KLR to be substituted as plaintiff in such a lawsuit and to

       continue to pursue it, seeking recovery from third parties of past and future

       costs related to the environmental contamination, while simultaneously

       pronouncing that it had no idea it could be responsible for such costs. KLR

       cannot have it both ways. Emmanoelides’s affidavit is insufficient to create a

       genuine issue of material fact regarding application of the known loss doctrine.

       As such, there is no genuine issue of material fact regarding the doctrine, and

       the Insurers owe no coverage to KLR.4


                                                       Conclusion
[27]   Any claim by KLR against the Insurers related to the IDEM remediation action

       is conclusively barred by the known loss doctrine. The trial court properly

       granted summary judgment in favor of the Insurers, and they are not required

       either to defend or indemnify KLR. We affirm.


[28]   Affirmed.


       May, J., and Pyle, J., concur.




       4
         Given our resolution of this issue, we need not address alternative arguments regarding whether summary
       judgment should have been granted. Also, our affirmance of the grant of summary judgment negates KLR’s
       claim that it is entitled to attorney fees for having to bring suit against the Insurers in response to their denial
       of coverage.

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