                                                                  Sep 17 2013, 5:37 am




FOR PUBLICATION


ATTORNEY FOR APPELLANT:                      ATTORNEYS FOR APPELLEES:

KATHERINE J. NOEL                            JAMES P. STRENSKI
Noel Law                                     TARA STAPLETON LUTES
Kokomo, Indiana                              Cantrell Strenski & Mehringer, LLP
                                             Indianapolis, Indiana

                                             DAN J. MAY
                                             Kokomo, Indiana


                            IN THE
                  COURT OF APPEALS OF INDIANA

NANCY A. MISSIG,                             )
                                             )
     Appellant-Plaintiff,                    )
                                             )
            vs.                              )        No. 34A02-1212-CT-1002
                                             )
STATE FARM FIRE & CASUALTY                   )
COMPANY, ANDRE M. MISSIG, and                )
AUTUMN MISSIG,                               )
                                             )
     Appellees-Defendants.                   )


                  APPEAL FROM THE HOWARD CIRCUIT COURT
                       The Honorable Lynn A. Murray, Judge
                         Cause No. 34C01-1008-CT-0829



                                 September 17, 2013

                             OPINION–FOR PUBLICATION
BAKER, Judge

       Today we are confronted with the issue of whether the appellee-defendant State

Farm Insurance Company (State Farm) had a duty to inquire about the circumstances

surrounding a particular land sale transaction before issuing a homeowner’s policy to

individuals who may have had an interest in the insured property. Specifically, it was

contended that the appellant-plaintiff Nancy Missig’s interest in the particular real

property was a matter of public record and, therefore, State Farm had sufficient notice of

Nancy’s interest in the property before issuing the policy to her son and daughter-in-law,

the appellees-defendants Autumn and Andre Missig. As a result, Nancy claims that State

Farm was negligent in issuing the policy without naming her as an insured in the policy.

       The trial court entered sixty-nine findings of fact and conclusions of law, and

granted equitable relief to Nancy against Andre and Autumn for the full unpaid balance

owed under a land contract plus accrued interest. The trial court also granted a lien and

constructive trust in Nancy’s favor with regard to other property that Autumn had

purchased with the insurance proceeds that State Farm had paid her and Andre following

the loss of another residence in a fire. However, it determined that Nancy was not

entitled to relief from State Farm.

       Andre also cross-appealed, claiming, among other things, that State Farm was

liable for failing to take any steps to recover the proceeds of the check that State Farm

had issued where Autumn had forged his signature. Andre also maintained that the trial

court erred in not ordering State Farm to pay Nancy for her insurable interest in the real

                                            2
estate because it had notice or knowledge of Nancy’s claim to the fire loss proceeds, that

State Farm was negligent in issuing the homeowner’s policy, and that it breached a duty

of good faith to its policy holders because it purportedly failed to inquire as to all of the

insurable interests in the residence that sustained a loss in the fire. Finally, Andre

asserted that he is entitled to indemnification by State Farm for an amount that is

allegedly owed to Nancy for her insurable interest in the residence.

       We note that Andre raises several of these issues for the first time in his brief on

cross-appeal. Moreover, the circumstances properly established that Autumn and Andre

were liable to Nancy, and the trial court correctly determined that State Farm had no

liability to Andre for Autumn’s actions, and no evidence was presented that State Farm

breached any duty of good faith and fair dealing to Andre.

       Finally, the circumstances showed that Andre was under a duty to pay Nancy

some of the insurance proceeds, and his failure to do so superseded any alleged wrongful

conduct on State Farm’s part. As a result, we affirm the trial court’s judgment.

                                          FACTS

       In February 1990, Raymond and Nancy Missig (the Missigs) purchased a

residence at 3839 East 250 North in Kokomo (hereinafter referred to as the Kokomo

Property), titling the real estate in both of their names as husband and wife with rights of

survivorship. Raymond died on November 22, 1999. Thus, Nancy became the sole

owner of the property. Raymond and Nancy have one son, Andre.



                                             3
       In 2001, Andre and his girlfriend Autumn, along with Autumn’s minor children,

eventually moved into the home with Nancy. Shortly thereafter, Nancy moved from the

residence because the living arrangements were not working. Thus, Andre, Autumn, and

the children were the sole occupants of the residence. Andre and Autumn were married

sometime in 2002.

       In April 2002, Nancy as the seller, and Andre and Autumn as the buyers, entered

into two nearly identical land installment contracts regarding the property. The contract

provided for a purchase price of the property in the amount of $71,600. It was agreed

that Andre and Autumn would make monthly payments of $400. Under the contracts,

Andre and Autumn were to provide the insurance on the property and pay the property

taxes. Although Andre and Autumn made only seven installment payments, Nancy

continued to pay the property taxes and insurance premiums. As of March 14, 2012,

Andre and Autumn owed a balance of $153,642.28 to Nancy under the April 2002 land

contract.

       In 2005, the Howard County Auditor’s office informed Nancy that the property

was not eligible for a homestead exemption because Nancy no longer lived there. As a

result, the property taxes were going to increase substantially. However, in 2006, Nancy

quitclaimed the property from herself as the sole owner to herself and Andre as co-

tenants with rights of survivorship, so Andre could claim the homestead exemption and

decrease the tax burden. Id.



                                           4
       There was no mortgage on the residence, and Nancy invested approximately

$48,000 for improvements to the residence, including new flooring, adding a bedroom,

and installing new plumbing. From 2001 until 2008, Nancy paid the taxes and insurance

on the property. After 2006, Nancy obtained homeowners’ insurance through Shelter

Insurance (Shelter) because the previous company, Auto-Owners Insurance, either

cancelled or would not renew the property. The Shelter policy had to be renewed in

2007; however, Nancy told Andre and Autumn that they should begin paying the

homeowners’ insurance premiums. In response, Autumn called to obtain quotes and

decided on a policy with State Farm. Andre told Nancy that he and Autumn would be

obtaining a State Farm homeowners’ policy through agent Linda Newell’s office.

       After Nancy spoke with Andre in May 2007, Nancy telephoned Newell’s State

Farm office and spoke with Sheila Richardson, a State Farm certified service

representative. Nancy told Richardson that her son and daughter-in-law were purchasing

a homeowners’ policy for the residence in which Nancy was a co-owner and wanted to

know if she would be a named insured on the policy. Richardson told Nancy that if she

were an owner of the property, she would be named on the insurance policy as an

additional insured. On the other hand, Richardson made no promise to Nancy that she

would, in fact, be on a policy that would be issued at some point in the future.

       Andre and Autumn waited until January 2008, to apply for the State Farm policy.

On January 22, 2008, Autumn completed the application process with Richardson.

Autumn informed Richardson that she and Andre jointly owned the home and her

                                             5
mother-in-law, Nancy, owned only the land. Autumn requested that the policy be issued

to her and Andre because she wanted to insure their residence and personal property.

Autumn specifically told Richardson that she did not want Nancy’s name on the policy.

       When completing the application, Richardson could not recall whether she

checked the county’s website to obtain information such as the age of the residence or

square footage. However, she indicated that she had probably done so. The county

records would have established that Andre and Nancy were co-owners of the property.

On the other hand, it was Richardson’s experience that information on the assessor’s

website was occasionally inaccurate. Also, sometimes the property owner information

would be on the assessor’s website, and sometimes it would not. Despite recalling her

telephone conversation with Nancy seven months earlier, Richardson accepted Autumn’s

word that Nancy’s interest was limited to the land and honored Autumn’s request that

Nancy not be named as an insured on the policy.

       State Farm does not require that its agents or employees independently verify

ownership of a property before accepting an application for homeowners’ insurance.

State Farm issued an insurance policy listing Andre and Autumn as the insureds,

retroactive to January 22, 2008.

       The relevant portion of the policy provided that

       COVERAGE A—DWELLING

       1. Dwelling. We cover the dwelling used principally as a private residence on the
          residence premises shown in the Declarations.


                                            6
                               ***
       COVERAGE B—PERSONAL PROPERTY

       1. Property Covered. We cover personal property owned or used by an insured
          while it is anywhere in the world. This includes structures not permanently
          attached to or otherwise forming a part of the realty. At your request, we will
          cover personal property owned by others while the property is on the part of
          the residence premises occupied exclusively by an insured.

                                                  ***
       COVERAGE C—LOSS OF USE

       1. Additional Living Expense. When a Loss Insured causes the residence
          premises to become uninhabitable, we will cover the necessary increase in
          costs you incur to maintain your standard of living for up to 24 months. Our
          payment is limited to incurred costs for the shortest of: (a) the time required to
          repair or replace the premises; (b) the time required for your household to
          settle elsewhere; or (c) 24 months. This coverage is not reduced by the
          expiration of this policy.
                                            ***
       COVERAGE A—DWELLING

      We insure for accidental direct physical loss to the property described in Coverage
   A, except as provided in SECTION I—LOSSES NOT INSURED.

       COVERAGE B—PERSONAL PROPERTY

      We insure for accidental direct physical loss to property described in Coverage B
   caused by the following perils, except as provided in SECTION I—LOSSES NOT
   INSURED.

Appellant’s App. p. 310, 319-20, 323.

       Andre and Autumn paid the premiums on the policy and renewed the contract and

paid the premiums that were due in January 2009 and January 2010. After purchasing the

policy, Andre told Nancy that she was included on the policy. Nancy did not request a

copy of the policy or verify her status on the policy.


                                              7
       On May 4, 2010, the residence burned to the ground that resulted in a total loss.

Autumn went to the State Farm office that was currently managed by Andre Brown and

reported the incident. Nancy also went to the State Farm office to obtain information

regarding the claims process. At that time, Brown told Nancy that she was not a named

insured on the policy and could not discuss the claim with her. Brown subsequently

contacted the claims adjuster, Zach Dunham, and informed him that Nancy was claiming

an interest in the policy proceeds.

       When Nancy heard that she was not named in the policy, she contacted

Richardson, who was employed by another insurance agency in Kokomo. Richardson

stated that Nancy was not on State Farm’s policy because Autumn specifically informed

her that Nancy was not an owner of the residence.

       During the investigation of the claim, Autumn told Dunham that she and Andre

had purchased the residence on contract from Nancy, and that Nancy no longer held an

interest in the house.    However, Dunham did not request a copy of the real estate

contract. Despite this fact, and despite being called by Andre Brown’s office regarding

Nancy’s purported interest in the real estate, Dunham did not contact Nancy or search the

county property records to confirm or deny Nancy’s claim. According to Dunham, State

Farm does not require its claims adjusters to verify ownership or interest in property

before issuing payment of claims. Moreover, State Farm authorizes its adjusters to pay

claims only to those individuals who are named in the policy. Dunham did not require



                                           8
Andre and Autumn to complete a proof of loss as to the residence, except for a claim

regarding personal property items.

       From May 2010, to August 2010, State Farm issued proceeds from the policy to

Andre and Autumn as follows: $194,876.68 under Coverage A for damages to the home;

$74,259.81 under Coverage B for damage to their personal property; and $1,647.64 under

Coverage C for additional living expenses, for a total of $270,784.13. On May 26, 2010,

State Farm issued a check payable to Andre and Autumn for $206,624.32, representing

partial satisfaction of the policy claims. After receiving State Farm’s check, Autumn

endorsed her name, forged Andre’s signature on the check, and deposited the funds into

their joint checking account.

       Within a few days of depositing the funds, Autumn purchased a new residence in

Windfall (the Windfall Property), at a purchase price of $171,000. Autumn had this

residence titled only in her name. Andre knew that Autumn was using the insurance

proceeds to purchase the Windfall Property, and chose not to join her in purchasing or

owning the property.      Autumn made this purchase while Nancy was in Arizona

conducting personal business, without giving notice to her. Autumn, her children, and

Andre moved into the residence on the Windfall Property in the summer of 2010.

       In August 2010, State Farm issued another check payable to Andre and Autumn in

the amount of $41,125.12, as partial satisfaction of their claims. They both endorsed that

check and deposited those funds into their joint checking account. Andre used a portion

of those proceeds for the purchase of a four-wheeler and some power tools.

                                            9
          Nancy soon learned she would not be receiving any of the policy proceeds from

State Farm; however, she requested that Andre and Autumn share the proceeds with her.

Nancy never received anything from Andre or Autumn.

          Nancy filed her complaint for damages on August 20, 2010, against State Farm,

Andre, and Autumn. Nancy sought to recover a judgment in an amount equal to the

insurance proceeds that State Farm paid to Andre and Autumn, and for an equitable

purchase money lien on the Windfall Property. Nancy claimed that State Farm should

pay her $153,642.28, plus interest on the funds that were paid to Andre and Autumn.

Nancy claimed that Richardson assured her that she would be a named insured under the

policy.

          On January 31, 2012, State Farm filed a motion for summary judgment. Andre

filed a cross-claim against State Farm seeking relief for indemnification regarding any

claims that Nancy had against him for the insurance proceeds. Andre also alleged,

among other things, that State Farm and Autumn were liable to him for forgery and

embezzlement of the policy proceeds.

          Following a hearing on May 7, 2012, the trial court denied State Farm’s motion

for summary judgment, concluding that there were genuine issues of material fact for

trial. As of March 14, 2012, Andre and Autumn owed Nancy a balance of $153,642.28

on the April 2002 land purchase contract.

          The matter proceeded to a bench trial, and following the presentation of the

evidence, the trial court issued an order on September 24, 2012, entering judgment in

                                            10
State Farm’s favor and against Nancy. However, the trial court entered a judgment in

favor of Nancy against Andre and Autumn for the full, unpaid balance of the land

contract, plus interest at 8% per annum accrued since March 14, 2012, until paid. The

trial court determined that no contractual relationship existed between Nancy and State

Farm and that Nancy was not a party to the policy. Moreover, the trial court observed

that Nancy did nothing to confirm that her interest in the property was protected.

       The trial court also ordered an equitable lien and constructive trust in Nancy’s

favor on the Windfall Property. More particularly, the judgment and order entered on

September 24, 2012, provided that

       State Farm has already paid more than $270,000.00 to their named insureds
       Andre and Autumn Missig for property loss from the fire. Nothing
       prevented Andre and Autumn from paying part of these proceeds to Nancy
       except for their own unwillingness to do so. Neither equity nor justice
       dictates a result in which State Farm pays Nancy more, when her contract
       buyer family members were over-compensated for their individual losses
       and should have equitably shared the proceeds with her.

                                           ***

       Thirdly, the court in [Property Owners Ins. Co. v.] Hack,[596 N.E.2d 396
       (Ind. Ct. App. 1990),] provided that if the insurer has knowledge of a
       buyer’s covenant to insure for the seller’s benefit, the insurer is under a
       duty to disburse policy proceeds as though the seller’s interest appeared in
       the policy, even if the buyer breached its covenant. Id., at 400. Here, there
       is no evidence that State Farm’s agents had knowledge of any duty Andre
       and Autumn had to insure the property for Nancy’s benefit, contrary to the
       facts in the Hack case.
                                        ***
       Under Hack, what Nancy told Sheila Richardson seven (7) months before
       Andre and Autumn applied for their policy was not enough to place some
       burden of further inquiry upon State Farm.


                                            11
Appellant’s App. p. 32-33.

      As for Andre’s cross-claim, where he alleged that State Farm was liable for failing

to take any steps to recover from Autumn the proceeds of the check in which she had

forged Andre’s name, it was determined that State Farm was not liable to Andre for

Autumn’s actions because those funds were not embezzled.

      The trial court also found that no evidence was presented that State Farm breached

any duty of good faith and fair dealing that was owed to Andre. There was no evidence

that State Farm refused to pay policy proceeds with regard to Andre, caused a delay in

paying those proceeds, deceived the insureds, or exercised unfair advantage in their

settlement of the claim against them.

      The trial court also observed that no evidence was presented that Andre had any

contractual or statutory right of indemnity.    Indeed, it was undisputed that Andre and

Autumn were primarily at fault regarding the claims that Nancy brought against them.

Andre and Autumn made the conscious decision to not pay Nancy the $270,000-plus

policy proceeds that were jointly issued to them by State Farm. It was also determined

that a claim of common law indemnity was not available to Andre. As a result, the trial

court entered judgment for State Farm on Andre’s cross-claim against it. Andre was also

not entitled to recover against Autumn on his cross-claim because he knew that Autumn

had forged his name on the check and deposited it into their joint checking account.

Andre was aware of Autumn’s intent to purchase the property, yet he chose not to sign

the purchase agreement or attend the closing.

                                           12
       Nancy now appeals, and Andre cross appeals.

                              DISCUSSION AND DECISION

                                     I. Nancy’s Claims

       While Nancy does not challenge the trial court’s judgment in her favor as against

Autumn and Andre, she contends that she was also entitled to equitable relief against

State Farm. Specifically, Nancy maintains that she was entitled to the insurance proceeds

from State Farm because the company had “actual knowledge” that she was the titled

owner of the Kokomo Property that was destroyed in the fire. Appellant’s Br. p. 1.

       In reviewing Nancy’s claims, we note that deference is given to the trial court’s

judgment where the proceeding sounds in equity and judgments in equity are clothed in a

presumption of correctness. Mayfair Investment Corp. v. Bryant, 922 N.E.2d 123, 131

(Ind. Ct. App. 2010). When reviewing cases of equity, the trial court’s findings and

judgment will be reversed only if clearly erroneous, that is, only if this Court is left with a

definite and firm conviction that a mistake has been made. We look only to the evidence

and inferences therefrom supporting the judgment. We do not reweigh the evidence or

judge the credibility of the witnesses, and will reverse only where the evidence leads to a

conclusion directly opposite of that reached by the trial court. Indiana Lawrence Bank v.

PSB Credit Services, Inc., 706 N.E.2d 570, 572 (Ind. Ct. App. 1999).

       As noted above, the trial court found in Nancy’s favor with regard to her equitable

claims against Andre and Autumn.           More particularly, the $153,642.28 judgment

represented the balance that Andre and Autumn owed to Nancy on the April 2002 land

                                              13
purchase contract. Appellant’s App. p. 29, 34. The trial court also awarded Nancy a lien

and constructive trust in the judgment amount plus interest in the Windfall Property,

which was the real estate that Andre and Autumn had purchased with the State Farm

proceeds. Appellant’s App. p. 27, 34. Thus, while Nancy may not have prevailed against

State Farm, the trial court awarded her damages against Andre and Autumn beyond the

damages that she requested in her complaint. More specifically, the trial court entered

the following finding and conclusion:

      State Farm has already paid more than $270,000.00 to their named insureds
      Andre and Autumn Missig for property loss from the fire. Nothing
      prevented Andre and Autumn from paying part of these proceeds to Nancy
      except for their own unwillingness to do so. Neither equity nor justice
      dictates a result in which State Farm pays Nancy more, when her contract
      buyer family members were over-compensated for their individual losses
      and should have equitably shared the proceeds with her.

Appellant’s App. p. 33.

      As noted above, prior to the fire on May, 2010, Nancy jointly owned the Kokomo

Property with her son, Andre. However, the result that Nancy sought in this appeal,

including the money damages from State Farm, along with the equitable remedies already

awarded against Andre and Autumn, would lead to the inequitable result of placing her in

a far better position than she was in before the May, 2010 fire at the Kokomo Property.

      The parties agree that this Court’s holding in Property Owners Ins. Co. v. Hack,

559 N.E.2d 396 (Ind. Ct. App. 1990), controls the outcome here. However, the parties

argue about the scope of the holding in Hack as well as the application of its rationale

under the facts and circumstances here.

                                           14
       In Hack, it was shown that Joseph and Jean Hack (collectively, “the Hacks”) sold

some property on an installment land contract to Rex and Betty Lacey (collectively, “the

Laceys”). Under that agreement, the Laceys were required to obtain insurance on the

land for the Hacks’ benefit. In June 1987, the existing insurance carrier notified the

Hacks that the Laceys had permitted the required coverage to lapse for failing to pay the

required premiums.

       The Hacks contacted Victor McGill, an insurance broker for Property Owners

Insurance, and explained the situation. The Hacks informed McGill that there were three

interested parties; the bank as mortgage holder, the Hacks as sellers, and the Laceys as

the buyers. Insurance was then issued that listed the Hacks on the policy in some

capacity. Later, when a fire destroyed the property at issue, the insurance company

refused to pay Hack the proceeds. Id. at 398.

       In light of these circumstances, the Court recognized that entitlement to proceeds

arises in one of three ways. First, as was the situation in Hack, the seller is entitled to the

insurance proceeds if its name appears on the policy under one or more of several

designations. Second, if a buyer covenants to keep the property insured for the seller’s

benefit and obtains insurance without assigning it or making it payable to the seller, the

covenant creates an equitable lien in the seller’s favor upon the proceeds that the buyer

holds after a loss. Third, if the insurer has knowledge of a buyer’s covenant to insure for

the seller’s benefit, the insurer is under a duty to pay the policy proceeds as though the



                                              15
seller’s interest appeared in the policy, even if the buyer breached its covenant. Id. at

400.

          The circumstances show that the Hacks sought insurance to protect their interests

in the property at issue after the Laceys had allowed the coverage to lapse. Mr. Hack

clearly spelled out the respective interests of himself, the Laceys, and the mortgage

company when he contracted for the insurance. Indeed, Hack was the customer and

premium payer on the policy that was taken out through Property Owners, the insurance

company. Id. at 398.

          Here, unlike the circumstances in Hack, Nancy was not the State Farm customer

and did not pay the premiums. Rather, Autumn was the customer and premium payer,

and it is undisputed that she told State Farm staff member Richardson, that: 1) Nancy

only owned the land, and Andre owned the structure at the Kokomo Property; and, 2) she

did not want Nancy listed on the policy. State Farm then followed the wishes of its

customer and premium payer and did not include Nancy as a named insured on the

policy.

          Nancy appears to claim that State Farm had some legal or equitable duty to place

her on the policy despite Autumn’s explicit instructions not to do so. Such a finding

would create an absurd result because insurance companies would be charged by law or

equity to disregard the express wishes of its customer and premium payer and put entities

on policies as additional insureds despite the policyholder’s explicit instructions to the

contrary. Under Indiana law, an insurance broker who undertakes to procure insurance

                                             16
for another is the agent of the proposed insured. T.R. Bulger, Inc. v. Indiana Ins. Co.,

901 N.E.2d 1110, 1116 (Ind. Ct. App. 2009). Here, had State Farm placed Nancy on the

policy contrary to Autumn’s instructions, it would have breached a duty to Autumn. For

these reasons, the holding in Hack does not apply in this instance.

       Nancy also directs us to the May 2007 telephone conversation with Richardson as

evidence that State Farm was put on notice of her interest in the Kokomo Property, which

in turn triggered a duty of further inquiry. However, Nancy’s call to Richardson took

place more than seven months before Autumn even applied for coverage. As noted

above, that call was with regard to a hypothetical scenario, and there was no promise of

coverage either then or in the future made during the call. Tr. p. 43-44.

       Also, as pointed out above, the fact that distinguishes this matter from all the cases

that Nancy cites in her appellate brief is that the representations made in those cases were

made by an applicant for the insurance policy. In this case, Nancy never applied for State

Farm insurance. And again, Autumn was the applicant who unequivocally stated that she

did not want Nancy on the policy. Under these facts, the trial court’s finding and

conclusion that, “what Nancy told Sheila Richardson seven (7) months before Andre and

Autumn applied for their policy was not enough to place some burden of further inquiry

upon State Farm” was correct, and not clearly erroneous. Appellant’s App. p. 37.

       Finally, we note that Nancy attempts to establish that State Farm had both actual

and constructive knowledge of her ownership interest in the Kokomo Property. Even

assuming that this is true for the sake of argument, there was no equitable duty on State

                                             17
Farm’s part to pay policy proceeds to Nancy. The Hack Court specifically found that a

seller’s insurable interest alone does not guarantee entitlement to the proceeds of a

buyer’s insurance. Id. at 399.

        In our view, the primary inquiry is not State Farm’s knowledge of Nancy’s

ownership interest in the Kokomo Property; rather, it is State Farm’s knowledge (or lack

thereof) of any covenant that Andre and Autumn had to insure the Kokomo Property for

Nancy’s benefit. And there was absolutely no evidence presented at trial that State Farm

had any knowledge whatsoever of such a covenant. No witness informed Richardson of

any such covenant in the April, 2002 land purchase contract when the insurance was

applied for, and it is undisputed that Nancy never recorded the land purchase contract.

Tr. p. 307.

        Finally, Autumn represented to Dunham, the State Farm claims representative,

that she and Andre had purchased the house on contract and that Nancy no longer had an

interest in it. Tr. p. 116. In short, State Farm was not placed on any notice that Andre

and Autumn had covenanted to insure the Kokomo Property for Nancy’s benefit. Hence,

State Farm never had a duty to pay Nancy any of the policy proceeds.

        Finally, it is undisputed that Nancy made no inquiry between the issuance of the

State Farm policy in January 2008 and the May 2010 fire regarding whether she was in

fact listed as an insured on the State Farm policy. Tr. p. 58; 299. For all these reasons,

we decline to set aside the trial court’s judgment denying relief to Nancy against State

Farm.

                                           18
                                II. Andre’s Cross-Appeal

       Andre cross-appeals, asserting, among other things, that State Farm breached its

contract of insurance with Nancy and/or breached its duty to deal with him in good faith

when State Farm placed Autumn’s name on the fire loss proceeds check. Andre argues

that State Farm should have tendered a check regarding the fire loss to the residence only

to him and Nancy, the joint owners of the real estate, and then issued a separate check for

the loss of personal property. In other words, Andre contends that State Farm failed to

indemnify him for the losses that he sustained, and points out that State Farm should have

had actual notice of Nancy’s interest in the property.

       Andre’s initial argument on cross-appeal is that the trial court’s finding that Nancy

did not appear on the policy at the request of the policy’s purchasers and insureds—

Andre and Autumn—is not supported by the evidence and/or was contradictory.

However, as stated above, the record reflects that Richardson testified at trial that

Autumn affirmatively told her that Nancy was not to be included on the homeowners’

policy. Tr. p. 49, 51. Autumn also testified that she did not want Nancy listed as a

policyholder. Id. at 240-41. Therefore, Andre’s argument that there was no evidence

presented at trial to support the court’s finding that Nancy was not on the State Farm

policy at Autumn’s request lacks merit.

       We next observe that a party may not change theories on appeal and argue an issue

that was not properly presented at the trial court level. Smither v. Asset Acceptance,

LLC, 919 N.E.2d 1153, 1157 (Ind. Ct. App. 2010). The notion of fairness requires that

                                            19
the opposing party have some notice that an issue is before the court which has not been

pleaded or has been agreed to in a pretrial order. Pardue v. Smith, 875 N.E.2d 285, 289-

90 (Ind. Ct. App. 2007).

       Andre’s arguments in his cross-claim against State Farm are that: 1) State Farm

issued one of the settlement checks in the sum of $200,524.22 [sic] for payment of the

fire claim in the names of Andre and Autumn; 2) Autumn forged Andre’s name on the

check; 3) State Farm was timely notified of the forgery but failed to take any steps to

recover the proceeds of the check from Autumn and order a reissuance of the check; 4)

Andre is entitled to one-half of the proceeds of the check for the sum of $200,524.22

[sic]; and, 5) Andre is entitled to reissuance of the check for the sum of $200,524.22 [sic]

in his and Nancy’s names. Appellee’s Supp. App., p. 6.

       In response to these claims, the trial court specifically found that there was no

evidence presented at trial that State Farm breached its duty of good faith and fair dealing

owed to Andre.     More specifically, it was determined that Andre had no claim of

contractual, statutory or common law indemnity against State Farm in relation to the

claims brought against him and Autumn by Nancy because they were primarily at fault

for making the decision not to pay Nancy any of the policy proceeds that State Farm had

issued to them. Appellant’s App. p. 35-36.

       Notwithstanding the above, Andre submits several new claims and theories of

recovery on appeal that he did not raise at trial. As a result, Andre has waived these

contentions.   Smither, 919 N.E.2d at 1157.       However, even if Andre raised these

                                             20
contentions in a timely manner, State Farm directs us to Hack and again points out that

Nancy was not the customer, applicant, and payer of the premiums. Rather, it was

Autumn who occupied these positions, and it is undisputed that she informed Richardson

that Nancy owned only the land, that Andre owned the structure at the Kokomo Property,

and that she did not want Nancy named in the policy.

         As discussed above, State Farm followed Autumn’s wishes and did not include

Nancy as a named insured on the policy. Like Nancy, Andre’s position in this matter

appears to be that State Farm had some legal or equitable duty to place Nancy on the

policy despite Autumn’s explicit instructions that it not do so. Again, had State Farm

placed Nancy on the policy contrary to Autumn’s instructions, it would have breached its

duty to Autumn. For these reasons, we reject Andre’s contention that the holding in

Hack dictates the result here.

         Andre also directs us to Nancy’s May 2007 telephone conversation with

Richardson as evidence that State Farm was put on notice of Nancy’s interest in the

Kokomo Property that should have triggered a duty of further inquiry.            However,

Nancy’s call to Richardson took place more than seven months before Autumn applied

for insurance. As discussed above, the call involved a hypothetical scenario, and there

was no promise of coverage either then or in the future when that call was made. Tr. p.

43-44.

         Andre also asserts for the first time on cross-appeal that State Farm breached the

insurance contract issued by it to him and Autumn. However, Andre does not direct us to

                                             21
any evidence in the record that supports this proposition. Indeed, the State Farm policy

provided coverage for accidental physical loss to the Kokomo Property and the personal

property therein, unless it was otherwise excluded. It is undisputed that State Farm paid

over $270,000 to Andre and Autumn for the May 4, 2010 fire at the Kokomo Property.

And neither Andre nor Autumn claimed that State Farm did not pay enough for the loss.

Thus, because there was no evidence that State Farm breached a specific provision of the

policy that State Farm issued to Andre and Autumn that resulted in damage to Andre, his

contention that State Farm breached the contract of insurance fails.

       As stated above, Andre’s only allegations that were initially asserted in his cross-

claim against State Farm were that Autumn forged his name on the check, that State Farm

was notified of the forgery but refused to take any steps to recover any of the proceeds

from Autumn, and that he is entitled to one-half of the proceeds of the check.

       With regard to these claims, the trial court specifically found that following the

alleged forgery, Autumn deposited the check into her and Andre’s joint checking

account, and informed Andre that she had done so. Thus, the trial court determined that

Autumn did not embezzle these proceeds because Andre was aware of the deposit and

had access to the funds that were deposited in the joint checking account. Appellant’s

App. p. 36.     Therefore, any liability on State Farm’s part for Autumn’s alleged

embezzlement cannot lie where the evidence demonstrated that the funds were not

embezzled in the first instance. And even if the evidence conclusively showed that



                                            22
Autumn forged Andre’s signature on the check and embezzled the proceeds, State Farm

would not be liable to Andre for Autumn’s actions.

        Indeed, as we observed in Graves v. Johnson, 862 N.E.2d 716, 721-22 (Ind. Ct.

App. 2007), and in accordance with Indiana Code section 26-1-3.1-310(b)(1), once a

check is paid, it extinguishes the debt for which it is presented and such debt is

extinguished even where a jointly payable check is sent to one co-payee and that co-

payee embezzles the funds.1

        Andre also apparently contends on cross-appeal that State Farm breached its duty

of good faith and dealing, and maintains that the trial court erred in its September 24,

2012 order that “no evidence was presented at trial that State Farm breached any duty of

good faith and fair dealing owed to Andre.” Appellant’s App. p. 35. Notwithstanding

this contention, Indiana law recognizes a legal duty, implied in all insurance contracts, for

the insurer to deal in good faith with its insured. Freidline v. Shelby Insurance Co., 774

N.E.2d 37, 40 (Ind. 2002). An insurance company’s duty to deal in 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 pressure an insured into settlement of

his claim. Erie Ins. Co. v. Hickman, 622 N.E.2d 515, 519 (Ind. 1993). A cause of action

will not arise every time an insurance claim is denied. Freidline, 774 N.E.2d at 40. A

1
  Interestingly, while Andre continues to press his claim against State Farm for Autumn’s alleged
forgery and embezzlement, Andre dismissed all cross-claims against Autumn prior to trial.
Appellant’s App. p. 216-217.

                                                   23
good faith dispute about whether the insured has a valid claim will not supply the

grounds for recovery in tort for the breach of the obligation to exercise good faith. Id.

This is true even if it is ultimately determined that the insurer breached the insurance

contract. Id. On the other hand, an insurer that denies liability knowing there is no

rational, principled basis for doing so has breached its duty. Id. 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.

       As a preliminary matter, we note that no evidence was introduced at trial that State

Farm breached the insurance policy that it issued to Autumn and Andre, no evidence was

presented that State Farm refused to pay policy proceeds to Andre, caused an unfounded

delay in paying proceeds, deceived the insureds, or otherwise exercised any unfair

advantage in their settlement of the claim. Appellant’s App. p. 35. Indeed, Andre

testified that he was not accusing State Farm of shorting himself or Autumn with regard

to the fire claim. Thus, the trial court correctly found that there was no evidence of any

breach of the duty of good faith and fair dealing owed to Andre on State Farm’s part.

       Andre further alleges that State Farm owed a duty to indemnify him if any

judgment was entered against him in Nancy’s favor.              However, no evidence was

presented at trial demonstrating that State Farm owed any contractual or statutory

indemnity to Andre. Absent any contractual or statutory right to indemnity, a party may

only bring an action for common law indemnity only if he or she is without fault. INS

Investigations Bureau, Inc. v. Lee, 784 N.E.2d 566 (Ind. Ct. App. 2003).

                                             24
       Here, the trial court found that Andre had no common law indemnity claim

because it was undisputed that he and Autumn bore primary fault in this matter in relation

to any claims brought against them by Nancy.          More particularly, the trial court

determined that Andre and Autumn made a conscious decision not to pay Nancy any of

the $270,000 policy proceeds that State Farm had issued jointly to them. Appellant’s

App. p. 35-36. Because Andre and Autumn were at fault with regard to the claims that

Nancy brought against them, there is no claim of common law indemnity for Andre.

       Finally, we note that Andre’s general proposition in his cross-appeal appears to be

that State Farm is liable to him because it failed to discharge its duty under Hack.

However, as discussed above, it was established that State Farm did not breach such a

duty. Moreover, Andre and Autumn had an independent duty to disburse some of the

policy proceeds to Nancy, which they chose not to do. Thus, because Autumn and Andre

breached their own duty under the Hack rationale, the trial court decided that it made no

sense for State Farm to have to pay additional funds to Nancy. More particularly, the

trial court found that

       53. Even if Nancy has some equitable claim in this case, the appropriate
       remedy would not require State Farm to pay additional monies to her.
       Equity courts possess discretionary power to award damages to do
       complete justice, and courts are able to adjust remedies to grant necessary
       relief. W & W Equip. Co., Inc. v. Mink, 568 N.E.2d 564, 577 (Ind. Ct.
       App. 1991).

       54. State Farm has already paid more than $270,000 to their named insured,
       Andre and Autumn Missig for property loss from the fire. Nothing
       prevented Andre and Autumn from paying part of these proceeds to Nancy
       except for their own unwillingness to do so. Neither equity nor justice

                                           25
       dictates a result in which State Farm pays Nancy more, when her contract
       buyer family members were over-compensated for their individual losses
       and should have equitably shared the proceeds with her.

Appellant’s App. p. 33.

       Andre’s continued focus on State Farm’s alleged breach of its duty under Hack

disregards the trial court’s conclusion that any action or inaction on State Farm’s part was

superseded when Andre and Autumn breached their duty by consciously refusing to pay

Nancy any of the insurance proceeds. In short, the fact that Andre disapproves of the trial

court’s remedy does not render it erroneous.

       Also, Andre argues in his brief on cross-appeal that State Farm had both actual

and constructive knowledge of Nancy’s ownership interest in the Kokomo Property.

Assuming this to be true, this fact did not create an equitable duty on the part of State

Farm to pay policy proceeds to Nancy. The precise language in Hack provides that an

insurer is under a duty to disburse policy proceeds to a contract seller as though the

seller’s interest appeared on the policy if the insurer has knowledge of a buyer’s covenant

to insure for the seller’s benefit. Hack, 596 N.E.2d at 400. Further, the court in Hack

specifically found that a seller’s insurable interest alone does not guarantee entitlement to

the proceeds of a buyer’s insurance. Id. at 399. Thus, the main inquiry is not State

Farm’s knowledge of Nancy’s ownership interest in the Kokomo Property; rather, the

operative inquiry under Hack is State Farm’s knowledge of any covenant that Andre and

Autumn had to insure the Kokomo Property for Nancy’s benefit. And no evidence was

presented at trial that State Farm had knowledge of any such covenant. No one told

                                             26
Richardson of any such covenant in the April 2002 land purchase contract at the time that

the policy was applied for. It is also undisputed that Nancy never recorded the land

purchase contract. Tr. p. 307. Finally, Autumn represented to Dunham after the fire that

she and Andre had purchased the house on contract and that Nancy no longer had an

interest in it. Id. at 116.

       In sum, State Farm was never on notice that Andre and Autumn had covenanted to

insure the Kokomo Property for Nancy’s benefit, and thus State Farm did not have a duty

to pay Nancy the policy proceeds. And under Andre and Nancy’s theory of liability, an

insurer would be legally obligated to pay policy proceeds to all parties that had a

recorded interest in an insured property because the insurer would have constructive

notice of the interest. Again, such a result would run contrary to the holding in Hack,

which provides that an insurable interest alone does not guaranty entitlement to the

proceeds of a buyer’s insurance. Hack, 596 N.E.2d at 400. Also, neither Andre nor

Nancy have directed us to any case that requires an insurer to affirmatively check the

recorder’s office to verify all interested parties on a given property before issuing a policy

or disbursing the proceeds.

       Even if State Farm had been put on notice of the April, 2002 land purchase

contract between Nancy, Andre and Autumn (which it was not), that contract merely

required Andre and Autumn to pay for the insurance—it did not require Andre and

Autumn to obtain homeowners’ insurance for Nancy’s benefit. As a result, the trial

court’s finding and conclusion that, “There is no evidence that State Farm’s agents had

                                             27
knowledge of any duty Andre and Autumn had to insure the property for Nancy’s benefit,

contrary to the facts in the Hack case,” appellant’s app. p. 32, was correct, and its

September 24, 2012 Judgment and Order was not contrary to the rule announced in Hack.

For all of these reasons, Andre’s cross-claim fails.

                                    VI. CONCLUSION

       In light of our discussion above, we conclude that the trial court properly entered

judgment for Nancy against Andre and Autumn for the full unpaid balance of the land

contract including interest, plus a lien and constructive trust as to the Windfall Property.

We also conclude that the trial court properly determined that State Farm was not

obligated to pay additional proceeds to Nancy because it already paid the required funds

to Andre and Autumn, the named insureds under the policy. Indeed, Autumn and Andre

could have shared the proceeds they received from State Farm with Nancy, but chose not

to do so.

       As for Andre’s cross-claim, we conclude that the trial court properly entered

judgment for State Farm. Andre waived many of the issues, and there was no evidence

that State Farm breached any duty of good faith and fair dealing to Andre. Moreover, no

evidence was presented that Andre had any contractual or statutory right of indemnity

against State Farm.

       The judgment of the trial court is affirmed.

FRIEDLANDER, J., and VAIDIK, J., concur.



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