                                                                     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

      Court of Appeals of Indiana | Opinion 18A-CT-1466 | December 28, 2018        Page 2 of 9
        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).




Court of Appeals of Indiana | Opinion 18A-CT-1466 | December 28, 2018       Page 3 of 9
[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


      Court of Appeals of Indiana | Opinion 18A-CT-1466 | December 28, 2018       Page 4 of 9
      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
      Court of Appeals of Indiana | Opinion 18A-CT-1466 | December 28, 2018      Page 5 of 9
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).




Court of Appeals of Indiana | Opinion 18A-CT-1466 | December 28, 2018         Page 6 of 9
[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.

      Court of Appeals of Indiana | Opinion 18A-CT-1466 | December 28, 2018                                Page 7 of 9
       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

       Court of Appeals of Indiana | Opinion 18A-CT-1466 | December 28, 2018        Page 8 of 9
               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.




       Court of Appeals of Indiana | Opinion 18A-CT-1466 | December 28, 2018        Page 9 of 9
