ATTORNEY FOR APPELLANTS
Donald R. Wright
ATTORNEYS FOR APPELLEES
Jeffrey W. Henning
James D. Johnson
Jennifer L. Johnson
SUPREME COURT OF INDIANA
WILLIAM L. BOSECKER and, )
DIANE BOSECKER, Individually, )
Appellants (Plaintiffs Below ), ) Indiana Supreme Court
) Cause No. 82S04-9902-CV-148
WESTFIELD INSURANCE COMPANY ) Indiana Court of Appeals
and SAM T. HESTON & SONS, INC., ) Cause No. 82A04-9711-CV-500
d/b/a HESTON INSURANCE )
Appellees (Defendants Below ). )
APPEAL FROM THE VANDERBURGH SUPERIOR COURT
The Honorable J. Douglas Knight, Judge
Cause No. 82D03-9607-CP-1848
ON PETITION TO TRANSFER
February 23, 2000
This case turns on whether the builders risk policy involved here, acquired for
the specific purpose of repair and renovation of an existing building, covers the
building before any work has started. We hold that the language in
this policy is ambiguous and therefore must be construed in favor of the
insured to provide coverage starting from its effective date.
In the mid-1980s, William and Diane Bosecker purchased a piece of real estate
in Evansville containing a four-unit apartment building and another small structure. In
June of 1995, they sold the property to Jason Bartley under a conditional
sales contract, but on February 22, 1996, Bartley returned the property to the
Boseckers after he was unable to make the payments.
Diane immediately contacted her insurance agency, Heston Insurance Agency, told Diane Terrell, an
agent for Heston, that the property was vacant and had water problems, and
inquired about obtaining insurance on the property.
Terrell first agreed to bind
the property under what was variously described as a standard apartment house or
landlords policy from Westfield Insurance Company, the Boseckers insurer at the time, but
then concluded that she would need additional information. William called Terrell the
next day, February 23, and gave her the size and age of the
buildings and reported that he had received notices from the City of Evansville
Code Enforcement Division requiring that the buildings be vacated and repairs made under
threat of razing the buildings. Based on this information, Terrell and the
president of Heston decided that the property would not be eligible for the
standard apartment building policy, and instead added it as an endorsement to an
existing builders risk policy from Westfield that insured other properties of the Boseckers.
The policy contained two apparently inconsistent provisions defining the covered risks. Section
A(1)(a) defined Covered Property as [b]uildings or structures including foundations while in the
course of construction, installation, reconstruction, or repair. Section A(2)(b) of the policy
described Property Not Covered as [e]xisting buildings or structures to which improvements, alterations,
repairs, or additions are being made. On the face of these two
provisions, a structure is both covered and not covered if it is under
Approximately ten hours after the property was added to the policy, at 2:00
a.m. on the morning of February 24, the apartment building was destroyed by
fire. In its response to the Boseckers claim for the fire loss,
Westfield denied coverage based on the Property Not Covered definition, apparently on the
assumption that improvements, alterations, repairs, or additions were being made.
The Boseckers filed suit against Westfield on July 23, 1996, and amended their
complaint nine months later, on April 25, 1997, to include a claim against
Heston. Heston then cross-claimed against Westfield and all parties filed motions for
summary judgment. Westfield based its motion on the fact that the property
was not Covered Property because the Boseckers had not yet started the anticipated
repairs. The trial court granted Westfields motion for summary judgment and the
Boseckers appealed. The Court of Appeals affirmed the trial courts grant of
summary judgment in favor of Westfield, holding that although the policy was ambiguous
in the respect already noted, the loss was not covered because the Boseckers
had taken no action to start the repairs and the property was therefore
not in the course of reconstruction or repair. Bosecker v. Westfield Ins.
Co., 699 N.E.2d 769, 773 (Ind. Ct. App. 1998). Judge Bailey dissented.
See id. at 774-75.
The parties arguments turn on the construction of the policy language, and there
is no factual dispute. Accordingly, this is a proper case for summary
judgment and our standard of review is de novo.
The Boseckers claim that the trial court erred in granting summary judgment for
Westfield because the insurance policy is ambiguous and should be construed broadly to
include the property as Covered Property. They base their claim on specific
language in the policy that included the property on the declarations page and
the in the course of repair language which they contend covered the property
at the time of the fire because repairs were imminent. Westfield responds
that the trial courts grant of summary judgment was proper because the policy
required Covered Property to actually be under repair or reconstruction, not merely designated
for that purpose.
Contracts of insurance are governed by the same rules of construction as other
contracts. See Eli Lilly & Co. v. Home Ins. Co., 482 N.E.2d
467, 470 (Ind. 1985). The proper interpretation of an insurance policy, even
if it is ambiguous, generally presents a question of law that is appropriate
for summary judgment. See Colonial Penn Ins. Co. v. Guzorek, 690 N.E.2d
664, 667 (Ind. 1997); Tate v. Secura Ins., 587 N.E.2d 665, 668 (Ind.
1992). An ambiguity exists where a provision is susceptible to more than
one interpretation and reasonable persons would differ as to its meaning. See
Eli Lilly, 482 N.E.2d at 470; see also Colonial Penn, 690 N.E.2d at
667. It is well settled that [w]here there is ambiguity, insurance policies
are to be construed strictly against the insurer and the policy language is
viewed from the standpoint of the insured. American States Ins. Co. v.
Kiger, 662 N.E.2d 945, 947 (Ind. 1996); accord Erie Ins. Co. v. George,
681 N.E.2d 183, 191 (Ind. 1997); Tate, 587 N.E.2d at 668.
Ambiguities are construed strictly against the insurer to further the general purpose of
the insurance contract to provide coverage. Tate, 587 N.E.2d at 668.
This is particularly true where, as in this case, the policy is not
the product of an equal bargaining relationship and the language has been chosen
by the insurer.
Insurance policies are prepared in advance by insurance and legal experts, having in
view primarily the safeguarding of the interests of the insurer against every possible
contingency. The insurer not only fully knows the contents of the writing,
but also adequately comprehends its legal effect. The insured has no voice
in fixing or framing the terms of [the] policy, but must accept it
as prepared and tendered, usually without any knowledge of its contents, and often
without ability to comprehend the legal significance of its provisions.
Glens Falls Ins. Co. v. Michael, 167 Ind. 659, 677, 74 N.E. 964,
Westfield notes the policys use of the term existing to modify only buildings
that are Property Not Covered. It contends that Property Not Covered is
defined to be buildings other than new construction. Under this view, the
policy covers new construction in progress and, to the extent a previously existing
building is under the policy, only the improvements and additions are covered, not
the pre-existing building. This, however, seems contradicted by references in Covered Property
to reconstruction and repair as well as construction. In sum, we agree
with the Court of Appeals that the policy is quite unclear in its
delineation between property covered and not covered.
The issue then becomes whether the building was in the course of reconstruction
or repair at the time of the fire. The policy states its
effective dates to be April 27, 1995 to April 27, 1996. The
house and apartment building are listed as added covered property on a Commercial
Inland Marine Coverage Part Endorsement. Under the Commercial Inland Marine Conditions, Provision
D concerning the policy period specifically states that [w]e [Westfield] cover loss commencing
during the policy period shown in the Declarations. Still yet another
section states that coverage for the apartment building and house begins on February
22, 1996 at 4:00 p.m. Finally, the policy has a section entitled
When Insurance Begins and Ends. That section states that [w]e [Westfield] cover
from the time the Covered Property is at your risk starting on or
after the date this coverage begins . . . . In sum,
it is reasonably clear that some risks of repair to these properties were
covered as of February 22, but it is unclear whether repair needed to
be underway before coverage attached.
The majority in the Court of Appeals held that the Covered Property provision
was a condition precedent to Westfields obligation to insure the building and that
until the repair work was started, the insurance was not effective because the
building was not in the course of reconstruction. We agree with Judge
Bailey that the policy was sufficiently ambiguous on this point that it must
be construed to provide coverage. A builders risk policy ordinarily indemnifies a
builder or contractor against the loss of, or damage to, a building he
or she is in the process of constructing. 1 Lee R. Russ
& Thomas F. Segalla, Couch on Insurance 3d § 1:53 (1997). These
contracts for insurance may be for a fixed period of time or for
a specified project. 9 id. § 132.20. The policy here specifically
added reconstruction and repair to constructing. According to the undisputed facts, the
President of Heston, Boseckers agent, believed the property was in the process of
reconstruction when it was reacquired with the specific purpose of accomplishing the repairs
needed to bring it into compliance with the building code. He apparently
reached this conclusion by reference to a general understanding of builders risk policies
and also a reading of the specific language of Westfields policy. We
cannot say that the conclusion he reached was an unreasonable interpretation of the
policy that was issued. Accordingly, the policy is construed to afford coverage
under the principles already discussed.
We also believe this result makes sense from a practical viewpoint. If
the builders risk insurance were not effective until the repairs started, then the
Boseckers and anyone else acquiring a building for purposes of rehabilitation would have
to obtain two separate insurance policies, one to cover the two days before
the repairs started, and one to cover the property while it was being
repaired. Alternatively, the policy construction Westfield urges would force a concurrent driving
of the first nail at the time of closing the acquisition of the
property as a symbolic commencement of repairs. Both results seem unnecessarily cumbersome
and artificial. Unoccupied buildings that are being held for long periods before
repairs are to be initiated may present risks different from those contemplated by
the builders risk policy, but if Westfield intended to differentiate between the two,
it needed to set this out in clear terms in the policy.
Not having done so here, the risk remained with the insurer.
The judgment of the trial court is reversed and the cause is remanded
with instruction to enter partial summary judgment on the issue of coverage in
favor of the Boseckers and for further proceedings.
SHEPARD, C.J., and DICKSON and SULLIVAN, JJ., concur.
RUCKER, J., not participating.
At that time the Boseckers had both a builders risk insurance
policy and an apartment policy on other properties, which were provided by Westfield