                                                                 Aug 24 2015, 9:02 am




ATTORNEY FOR APPELLANTS                                   ATTORNEYS FOR APPELLEE STATE
Sheila M. Sullivan                                        FARM INSURANCE COMPANY
Flynn & Sullivan, PC                                      Dennis F. Cantrell
Indianapolis, Indiana                                     Anna M. Mallon
                                                          Cantrell Strenski & Mehringer LLP
                                                          Indianapolis, Indiana
                                                          ATTORNEYS FOR APPELLEE
                                                          INDIANA RESTORATION &
                                                          CLEANING SERVICES, INC.
                                                          Alexander P. Pinegar
                                                          Leslie M. Damer
                                                          Eric M. Douthit
                                                          Church Church Hittle & Antrim
                                                          Noblesville, Indiana



                                            IN THE
    COURT OF APPEALS OF INDIANA

Thomas Missler and Allison                                August 24, 2015
Missler,                                                  Court of Appeals Case No.
                                                          29A05-1501-PL-30
Appellants-Plaintiffs,
                                                          Appeal from the
        v.                                                Hamilton Superior Court
                                                          The Honorable Gail Bardach, Judge
State Farm Insurance Company                              Cause No. 29D06-1306-PL-5174
and Indiana Restoration &
Cleaning Services, Inc.,
Appellees-Defendants.




Kirsch, Judge.

Court of Appeals of Indiana | Opinion 29A05-1501-PL-30 |August 24, 2015                 Page 1 of 13
[1]   Thomas Missler (“Thomas”) and Allison Missler (“Allison”) (together, “the

      Misslers”) appeal the trial court’s order granting summary judgment in favor of

      State Farm Insurance Company (“State Farm”) and Indiana Restoration &

      Cleaning Services, Inc. (“IRCS”). The Misslers raise the following restated

      issues for our review:

              I. Whether the trial court erred in granting summary judgment in
              favor of State Farm because a genuine issue of material fact exists as to
              whether State Farm breached its duty of good faith and fair dealing in
              its relationship with the Misslers; and
              II. Whether the trial court erred in granting summary judgment in
              favor of IRCS because a genuine issue of material fact exists as to
              whether the contract between IRCS and the Misslers was
              unconscionable.
[2]   We affirm in part, reverse in part, and remand.


                                  Facts and Procedural History
[3]   On June 1, 2011, a fire occurred at the Misslers’ home that destroyed the family

      home, located in Carmel, Indiana, and much of their personal property. State

      Farm insured the Misslers’ home and personal property under a Homeowner’s

      Policy (“the Policy”) that provided dwelling coverage limits of $254,016.00,

      personal property coverage limits of $190,512.00, and additional living

      expenses. As to personal property, the Policy covered the cost to repair or

      replace personal property damaged from the fire.


[4]   While the fire department was still attending to the fire, the Misslers called their

      State Farm insurance agent, Theresa Chapman (“Chapman”), and she came to

      the house. Chapman contacted IRCS, and employees of IRCS arrived shortly

      Court of Appeals of Indiana | Opinion 29A05-1501-PL-30 |August 24, 2015         Page 2 of 13
      thereafter. One of the employees, Kristin Kendall (“Kendall”), who, at the

      time, Allison believed was a State Farm agent, met with the Misslers and

      discussed the cleaning and restoration services that IRCS could perform on

      their personal property. Kendall presented the Misslers with a contract for the

      services of IRCS, and the Misslers asked if they could have time to review the

      contract. Kendall told the Misslers that they needed to sign the contract

      immediately and have IRCS begin removing property immediately so that mold

      would not set in within three days and void the Policy. The Misslers asked

      Chapman for her input, and she told them she was not allowed to recommend a

      specific restoration and cleaning company. However, Chapman did point out

      that IRCS was present at the scene, that IRCS was a preferred provider for State

      Farm, and that IRCS would be easy to use. At that time, the Misslers gave

      IRCS verbal consent to start work, and IRCS employees began carrying away

      boxes of the Misslers’ property that night.


[5]   On June 2, 2011, the day after the fire, State Farm Claim Representative RJ

      Van Noy (“Van Noy”) met with the Misslers, who told Van Noy that they were

      meeting with IRCS. Van Noy explained that IRCS was a member of the State

      Farm Premier Service Program (“PSP”)1 for dwelling repairs. State Farm only

      provides the PSP for dwelling repairs, but has no PSP contractors for personal




      1
       State Farm’s Premier Service Program (“PSP”) is a voluntary program in which an insured can choose a
      contractor from a list of participating contractors provided by State Farm. If the insured does not have a
      preference as to which contractor to use, State Farm will provide a contractor based on rotation. State Farm
      does not dictate or control how a contractor is to conduct the repairs under the PSP. Contractors who
      participate in the PSP guarantee their workmanship. State Farm does not guarantee the workmanship.

      Court of Appeals of Indiana | Opinion 29A05-1501-PL-30 |August 24, 2015                          Page 3 of 13
      property restoration. When Van Noy met with the Misslers, he explained all of

      the coverages under the Policy and explained the PSP. He also presented the

      Misslers with two letters, one explaining the building, personal property, and

      loss of use coverages, the second confirming that the Misslers were participating

      in the PSP as Van Noy was under the impression that the Misslers had chosen

      to use PSP for their dwelling repairs.


[6]   On June 3, 2011, the Misslers signed a contract with IRCS for personal

      property restoration and repairs. Pursuant to the contract, the contract price for

      IRCS’s services was undetermined at the time the contract was signed. The

      contract stated that the client “agrees to add [IRCS] as a joint payee on all

      insurance reimbursement checks for the Work” and that the client “transfers

      and assigns to [IRCS] all of the Client’s right, title, and interest in and to” the

      reimbursement checks. Appellants’ App. at 54. It further stated, “Client

      understands and agrees that failure to transfer and/or negotiate the

      Reimbursement Checks to [IRCS] may subject Client to various legal claims,

      including but not limited to conversion.” Id. The contract warranted that

      IRCS’s services would be performed in accordance with industry standards and

      assigned all manufacturers’ warranties to the Misslers. The contract also

      disclaimed all other warranties and contained the following language:

              GIVEN THE NATURE OF THE DAMAGE TO THE PERSONAL
              PROPERTY, [IRCS] CANNOT WARRANT THAT ANY
              PARTICULAR ITEM OF PERSONAL PROPERTY WILL BE
              REPAIRED OR RESTORED TO ITS PRE-DAMAGE
              CONDITION. [IRCS] and Client agree that [IRCS] shall not be liable
              for any damages arising from any pre-existing condition or

      Court of Appeals of Indiana | Opinion 29A05-1501-PL-30 |August 24, 2015     Page 4 of 13
              impossibility or repair of the Personal Property. If for any reason
              Client refuses to pay to [IRCS] any funds owed on this project, all
              warranties expressed, written or implied shall be null and void.
      Id. at 55.


[7]   The Misslers signed another contract with IRCS on June 3, 2011 that

      authorized IRCS to remove restorable property from the Misslers’ home. This

      agreement also authorized State Farm to make direct payment to IRCS for the

      restoration and cleaning services or to include IRCS on checks issued by State

      Farm to the Misslers. On June 6, 2011, the Misslers entered into an agreement

      with IRCS that authorized IRCS to dispose of personal property damaged in

      the fire. IRCS then proceeded to clean and restore the Misslers’ personal

      property. These services included: evaluating the personal property that could

      be cost-effectively restored while at the site of the fire; packing these items and

      transporting them to an IRCS facility for restoration; cleaning and deodorizing

      the Misslers’ personal property; and storing the personal property at an IRCS

      facility.


[8]   Around June 10, 2011, Van Noy spoke with Thomas, who expressed that State

      Farm was making the process as easy as possible for the Misslers. However,

      during the course of the claim, the Misslers had issues with whether some of

      their personal property was properly cleaned by IRCS. Van Noy worked with

      the Misslers and IRCS to attempt to resolve the issues. IRCS performed

      additional cleaning and repair services on the property that the Misslers deemed

      inadequately cleaned. Van Noy met with the Misslers and representatives from

      a dry cleaning company used by IRCS and confirmed that some items still

      Court of Appeals of Indiana | Opinion 29A05-1501-PL-30 |August 24, 2015       Page 5 of 13
       smelled of smoke and some items were altered or shrunk, so the dry cleaning

       representative listed such items as non-salvageable.


[9]    State Farm paid a total of $471,106.34 on the Misslers’ claim, including

       $230,542.07 under dwelling coverage, $192,280.00 under personal property

       coverage, and $46,284.27 under loss of use coverage. State Farm made

       payments totaling $19,006.64 for the cleaning and restoration of personal

       property items to the Misslers and IRCS jointly. Although the Misslers were

       not satisfied with the cleaning of some of their personal property, they endorsed

       the State Farm check over to IRCS due to the contract provision threatening

       liability for conversion if they did not do so.


[10]   On June 4, 2013, the Misslers filed a complaint against State Farm and IRCS.

       The complaint alleged claims for breach of contract and breach of good faith

       and fair dealing against State Farm and alleged unjust enrichment and

       unconscionable contract against IRCS. Both State Farm and IRCS filed

       motions for summary judgment, and after a hearing on the motions, the trial

       court granted summary judgment in favor of both State Farm and IRCS. The

       Misslers now appeal.


                                       Discussion and Decision
[11]   When reviewing the grant of summary judgment, our standard of review is the

       same as that of the trial court. FLM, LLC v. Cincinnati Ins. Co., 973 N.E.2d

       1167, 1173 (Ind. Ct. App. 2012) (citing Wilcox Mfg. Grp., Inc. v. Mktg. Servs. of

       Ind., Inc., 832 N.E.2d 559, 562 (Ind. Ct. App. 2005)), trans. denied. We stand in

       Court of Appeals of Indiana | Opinion 29A05-1501-PL-30 |August 24, 2015    Page 6 of 13
       the shoes of the trial court and apply a de novo standard of review. Id. (citing

       Cox v. N. Ind. Pub. Serv. Co., 848 N.E.2d 690, 695 (Ind. Ct. App. 2006)). Our

       review of a summary judgment motion is limited to those materials designated

       to the trial court. Ind. Trial Rule 56(H); Robson v. Tex. E. Corp., 833 N.E.2d

       461, 466 (Ind. Ct. App. 2005), trans. denied. Summary judgment is appropriate

       only where the designated evidence shows there are no genuine issues of

       material fact and the moving party is entitled to judgment as a matter of law.

       T.R. 56(C). For summary judgment purposes, a fact is “material” if it bears on

       the ultimate resolution of relevant issues. FLM, 973 N.E.2d at 1173. We view

       the pleadings and designated materials in the light most favorable to the non-

       moving party. Id. Additionally, all facts and reasonable inferences from those

       facts are construed in favor of the non-moving party. Id. (citing Troxel Equip.

       Co. v. Limberlost Bancshares, 833 N.E.2d 36, 40 (Ind. Ct. App. 2005), trans.

       denied).


[12]   A trial court’s grant of summary judgment is clothed with a presumption of

       validity, and the party who lost in the trial court has the burden of

       demonstrating that the grant of summary judgment was erroneous. Id. Where

       a trial court enters specific findings and conclusions, they offer insight into the

       rationale for the trial court’s judgment and facilitate appellate review, but are

       not binding upon this court. Id. We will affirm upon any theory or basis

       supported by the designated materials. Id. When a trial court grants summary

       judgment, we carefully scrutinize that determination to ensure that a party was

       not improperly prevented from having his or her day in court. Id.

       Court of Appeals of Indiana | Opinion 29A05-1501-PL-30 |August 24, 2015    Page 7 of 13
                                                I. State Farm
[13]   The Misslers argue that the trial court erred when it granted summary judgment

       in favor of State Farm. They contend that disputed material facts existed as to

       whether State Farm breached its duty to deal with the Misslers in good faith

       and use fair dealing. The Misslers allege that the fact that their State Farm

       agent called IRCS representatives to the scene of their house fire, steered them

       to use IRCS for their services, and endorsed IRCS as part of its PSP are all

       disputed material facts that make summary judgment inappropriate as to their

       claim of breach of good faith and fair dealing. The Misslers specifically assert

       that, because State Farm endorsed IRCS as part of the PSP, State Farm should

       have been aware that the IRCS contract terms stripped away the Misslers’ right

       to decide what items would be cleaned or to take a cash settlement instead of

       having the items cleaned. The Misslers claim that State Farm’s actions of

       calling a personal property restoration company to the scene of the fire to begin

       work, before the Misslers could assess their options, created a genuine issue of

       material fact as to whether State Farm exercised an unfair advantage.


[14]   Indiana law recognizes a legal duty, implied in all insurance contracts, for the

       insurer to deal in good faith with its insured. Missig v. State Farm Fire & Cas. Co.,

       998 N.E.2d 216, 229 (Ind. Ct. App. 2013) (citing Freidline v. Shelby Ins. Co., 774

       N.E.2d 37, 40 (Ind. 2002)). An insurance company’s duty of good faith and

       fair dealing includes the obligation to refrain from: (1) making an unfounded

       refusal to pay policy proceeds; (2) causing an unfounded delay in making

       payment; (3) deceiving the insured; and (4) exercising an unfair advantage to

       Court of Appeals of Indiana | Opinion 29A05-1501-PL-30 |August 24, 2015    Page 8 of 13
       pressure an insured into settlement of his claim. Id. (citing Erie Ins. Co. v.

       Hickman, 622 N.E.2d 515, 519 (Ind. 1993)). To prove bad faith, the plaintiff

       must establish by clear and convincing evidence that the insurer had knowledge

       that there was no legitimate basis for denying liability. Id. “‘Poor judgment or

       negligence do not amount to bad faith; the additional element of conscious

       wrongdoing must also be present.’” Mahan v. Am. Standard Ins. Co., 862 N.E.2d

       669, 677 (Ind. Ct. App. 2007) (quoting Colley v. Ind. Farmers Mut. Ins. Grp., 691

       N.E.2d 1259, 1261 (Ind. Ct. App. 1998), trans. denied), trans. denied. “Thus, “[a]

       finding of bad faith requires evidence of a state of mind reflecting dishonest

       purpose, moral obliquity, furtive design, or ill will.’” Id.


[15]   In the present case, there is no dispute that State Farm paid the Misslers the

       policy limits under the Policy and that there was no delay in paying the claims.

       The evidence designated by State Farm showed that State Farm was not a party

       to and did not sign any of the contracts that the Misslers entered into with

       IRCS. Appellants’ App. at 38, 54-55, 57, 59. Although Chapman, their State

       Farm agent, may have called an IRCS representative to come to the scene on

       the night of the fire, the Misslers were not required by State Farm to use IRCS

       for their cleaning and restoration services. IRCS was an independent contractor

       and not an agent of State Farm and was not a participant in State Farm’s PSP

       for personal property restoration as State Farm did not provide PSP contractors

       for personal property restoration. The evidence also showed that, when the

       Misslers experienced problems with their personal property cleaning, Van Noy

       assisted them to try to resolve the problems. Id. at 39-40. Further, it is

       Court of Appeals of Indiana | Opinion 29A05-1501-PL-30 |August 24, 2015      Page 9 of 13
       undisputed that, in making the joint payments to both the Misslers and IRCS,

       State Farm was complying with the Policy and the contract between the

       Misslers and IRCS, and in fact under the contract, State Farm could have paid

       IRCS directly. Id. at 40, 57. We conclude that there are no genuine issues of

       material fact to support the Misslers’ claim that State Farm breached its duty to

       deal with them in good faith and use fair dealing. The trial court properly

       granted summary judgment in favor of State Farm.


                                                    II. IRCS
[16]   The Misslers argue that the trial court erred when it granted summary judgment

       in favor of IRCS. They contend that material facts were in dispute as to

       whether the contract between IRCS and the Misslers (“the Contract”) was

       unconscionable. The Misslers assert that the Contract was procedurally

       unconscionable due to the facts that a representative from IRCS came to the

       scene of the fire while the house was still burning and that she pressured them

       into signing the Contract. The Misslers also allege that the Contract was

       substantively unconscionable because it contained terms that were

       “oppressively one-sided,” and due to the facts designated, it was error to grant

       summary judgment in favor of IRCS. Appellants’ Br. at 12.


[17]   “A contract is unconscionable if a great disparity in bargaining power exists

       between the parties, such that the weaker party is made to sign a contract

       unwillingly or without being aware of its terms.” Brumley v. Commonwealth Bus.

       Coll. Educ. Corp., 945 N.E.2d 770, 777 (Ind. Ct. App. 2011) (citing Sanford v.


       Court of Appeals of Indiana | Opinion 29A05-1501-PL-30 |August 24, 2015   Page 10 of 13
       Castleton Health Care Ctr., LLC, 813 N.E.2d 411, 417 (Ind. Ct. App. 2004), trans.

       dismissed). Our unconscionability jurisprudence is sub-divided into two

       branches: substantive and procedural. DiMizio v. Romo, 756 N.E.2d 1018, 1023

       (Ind. Ct. App. 2001) (citing Hahn v. Ford Motor Co., 434 N.E.2d 943, 951 (Ind.

       Ct. App. 1982)), trans. denied. Substantive unconscionability refers to

       oppressively one-sided and harsh terms of a contract, while procedural

       unconscionability involves the manner and process by which the terms become

       part of the contract. Id. at 1023-24.


[18]   The designated evidence showed that, under the terms of the Contract, the

       Misslers were not given the option of deciding to take a cash settlement for their

       personal property in lieu of having IRCS clean all of their property; in fact, the

       contract did not discuss how IRCS determined what property to clean and what

       property they would dispose of. Appellants’ App. at 54-55. The Contract also

       contained language stating that IRCS would perform their services in

       accordance with industry standards, but did not explain what those standards

       were. Id. Additionally, the Contract stated that IRCS was not required to

       successfully clean the items for which they would charge the Misslers. Id. at 55.

       Further, the Contract’s language provided that the Misslers could be subject to

       legal claims, including conversion, if they did not endorse the checks issued by

       State Farm over to IRCS, which meant that the Misslers were forced to pay the

       insurance proceeds to IRCS even if they were not satisfied with the cleaning

       services or risk legal claims. Id. at 54.




       Court of Appeals of Indiana | Opinion 29A05-1501-PL-30 |August 24, 2015   Page 11 of 13
[19]   IRCS presented designated evidence that it provided cleaning and restoration

       services in accordance with industry standards and that it only charged the

       Misslers for services that were performed on property that was properly restored

       or cleaned. Id. at 122. However, the Misslers stated in their designated

       evidence that none of their personal property was properly cleaned. Id. at 138-

       40. IRCS also introduced evidence that the services provided to the Misslers,

       included, but were not limited to: completing, while at the site of the fire and

       with input from the Misslers, an evaluation of the personal property that could

       be cost-effectively restored; packing said items and transporting them to an

       IRCS facility for restoration; cleaning and deodorizing the personal property;

       and storing the property at an IRCS facility. Id. at 122. IRCS does not state if

       these services are industry standards, and they are not included in the Contract

       as industry standards. Further, the Misslers presented evidence that some of

       these services were not actually performed, particularly the completion at the

       site of the fire of an evaluation of what could be cost-effectively cleaned or the

       consideration of the Misslers’ input as to what items to transport for restoration.

       Id. at 139.


[20]   We conclude that, based on the designated evidence, there remain genuine

       issues of material fact as to whether the terms of the Contract entered into by

       the Misslers with IRCS were so oppressively one-sided and harsh as to make

       the Contract unconscionable. Therefore, the trial court erred when it granted

       summary judgment in favor of IRCS. We remand to the trial court for further




       Court of Appeals of Indiana | Opinion 29A05-1501-PL-30 |August 24, 2015   Page 12 of 13
       proceedings to determine whether the Contract between the Misslers and IRCS

       was enforceable.2


[21]   Affirmed in part, reversed in part, and remanded.


       Najam, J., and Barnes, J., concur.




       2
         The Misslers also contend that the trial court erred when it found that IRCS was not unjustly enriched by
       charging the Misslers over $19,000.00 from their State Farm coverage payment. As we have determined that
       issues of material fact exist as to whether the Contract between the Misslers and IRCS was unconscionable,
       we also conclude that issues of material fact exist as to whether IRCS was unjustly enriched.

       Court of Appeals of Indiana | Opinion 29A05-1501-PL-30 |August 24, 2015                       Page 13 of 13
