ATTORNEY FOR APPELLANT: ATTORNEYS FOR APPELLEE:
ARNOLD H. BRAMES CHARLES T. JENNINGS
Brames & Oldham THOMAS R. HALEY III
Terre Haute, Indiana Jennings Taylor Wheeler &
IN THE COURT OF APPEALS OF INDIANA
FIFTH THIRD BANK, )
vs. ) No. 83A01-0112-CV-472
INDIANA INSURANCE COMPANY, )
2. At the time of the fire, Hardys insured the premises through [Indiana], Policy
No. 47 323 889 with effective dates of coverage from January 19, 1995
through April 19, 1995.
3. James P. and Mary L. Hardy are named insureds under the [Indiana] policy.
4. [Bank], formerly Citizens Bank of Western Indiana is a mortgagee under the [Indiana]
5. Subsequent to the fire loss, Citizens Bank of Western Indiana was merged with
6. Following the fire loss, James P. and Mary Hardy submitted a Proof of
Claim for insurance proceeds pursuant to the policy provisions.
7. [Bank] did not inquire into pursuing a claim with [Indiana] for fire proceeds
until July 13, 1995.
8. In response to [Banks] inquiry, counsel for [Indiana] provided the bank with a
blank Proof of Loss form and a copy of the applicable policy of
insurance on August 9, 1995.
9. [Bank] provided a completed Proof of Loss form to [Indiana] dated October 11,
1995. The banks Proof of Loss requested Twenty-Seven Thousand Seven Hundred Eighty-Two
Dollars and 43/100 ($27,782.43).
10. After receipt of the banks Proof of Loss, counsel for [Indiana] advised counsel
for [Bank] that [Indiana] was having problems with Mr. and Mrs. Hardy substantiating
their claim, but that a decision on the Hardy claim would be made
shortly at which time [Indiana] would adjust [Banks] claim.
11. [Indiana] denied James P. and Mary Hardys claim for insurance proceeds on January
12. On February 13, 1996, [Indiana] forward[ed] [Banks] counsel a copy of the settlement
draft made payable to the bank in the amount of Twenty-Seven Thousand Seven
Hundred Eighty-Two Dollars and 43/100 ($27,782.43) with a proposed Release. The bank
was advised to execute the Release in exchange for the original settlement draft.
13. The bank refused to execute the Release and requested an additional Two Thousand
One Hundred Forty Dollars and 95/100 ($2,140.95) from [Indiana] for attorneys fees and
14. On March 22, 1996[,] [Indiana] forwarded the banks counsel the original settlement draft
in the amount of Twenty-Seven Thousand Seven Hundred Eight-Two Dollars and 43/100 ($27,782.43)
representing the amount of the banks Proof of Loss. [Indiana] advised the
bank that no additional amounts were due to the bank under the [Indiana]
15. [Bank] now seeks additional attorneys fees and costs totaling Twenty-Nine Thousand Eighty-Five Dollars
and 32/100 ($29,085.32) since the date of the fire for attorneys fees and
costs incurred through October 19, 2000 by [Bank] for pursuing a foreclosure claim,
complaint on the note and mortgage, and for defending the Hardys tort claims
against the bank. The additional attorneys fees also include expenses incurred by
the bank for pursuing its claim in bankruptcy and for pursuing its claims
against the Hardys and the other lienholders including Woodco, Graber Brothers Construction, Daviess
County Metal Sales and Carter Crouch. All attorneys fees and costs incurred
by the bank accrued after the date of the fire loss at the
16. Upon review of the applicable policy of insurance, the Court concludes that [Banks]
right to policy proceeds were limited to the amount due on the note
and mortgage at the time of loss.
17. Indiana case law has defined the term identified in [Indianas] mortgagee clause as
interests appear to mean the rights of the mortgagee to the insurance proceeds
as of the time of the loss.
18. The banks right to insurance proceeds as of the time of the loss
does not include proceeds for events transpiring after the loss.
19. The policy of insurance issued to James and Mary Hardy, at page 10
of 16 under paragraph 10, entitled Loss Payment, requires [Indiana] to adjust all
losses with the Hardys and first attempt to reach an agreement with the
20. The mortgagee clause at page 10 of 16 of the policy under paragraph
12 indicates that the Loss Payment section of the policy applies to the
mortgagee thereby requiring the mortgagee to first allow [Indiana] to adjust the loss
directly with its insured.
21. The policy of insurance at page 11 of 16 allows [Indiana] to deny
payment to the Hardys and still pay the mortgagee by either subrogating to
the rights of the mortgagee or at the insurance companys option, paying the
mortgagee the whole principle [sic] plus accrued interest in exchange for a full
assignment and transfer of the mortgage and all securities held as collateral to
the mortgage debt. The Court concludes that [Indiana] attempted to choose the
first option by becoming subrogated to the rights of the mortgagee. Since
the bank refused to execute the Release provided with the original copy of
the settlement draft, [Indianas] attempts to exercise this portion of the policy with
the mortgagee were thwarted.
22. The Court further finds that the mortgagee clause implies that subrogation will not
impair the right of the mortgagee to recover the full amount of the
mortgagees claim. The policy language implies that the mortgagee may need to
pursue an action against the Hardys to make itself whole.
23. The Court further finds that it is implicit in Indiana case law that
a foreclosure after the loss is possible and will not affect the insurers
liability to the mortgagee.
24. Since [Bank] did not file its Proof of Loss as required by the
policy of insurance until October 11, 1995, approximately eight (8) months after the
date of loss, the Court finds that the offer to make payment on
February 13, 1996 and eventual payment made on March 22, 1996 were not
unduly delayed. [Bank] delayed pursuing its claim under the policy for a
considerable time following the fire and [Indiana] made payment to [Bank] within two
(2) months of denial of the Hardy claim.
25. Accordingly, the Court determines no additional amounts are due and owing from [Indiana]
to [Bank] pursuant to the policy of insurance to James P. and Mary
Hardy. No additional genuine issues of fact remain for trial concerning [Banks]
claims against [Indiana] and therefore the Court hereby grants summary judgment in favor
of [Indiana] as to [Banks] claims against [Indiana].
(Appellants App. pp. 404-09).
On October 29, 2001, Bank filed a Motion to Correct Errors. In its motion, Bank argued that the trial court erred in its Findings of Fact 9, 15, and 16. Bank also argued that the trial court erred in its Conclusions of Law 17, 18, 23, and 25. On November 14, 2001, the trial court denied Banks Motion to Correct Errors.
Bank now appeals. Additional facts will be supplied as necessary.
a. Notifies us of any change in ownership, occupancy or substantial change in risk
of which the mortgagee is aware;
b. Pays any premium due under this policy on demand if you have neglected
to pay the premium; and
c. Submits a signed, sworn statement of loss within 60 days after receiving notice
from us of your failure to do so. Policy conditions relating to
Appraisal, Suit Against Us and Loss Payment apply to the mortgagee.
a. We are subrogated to all the rights of the mortgagee granted under the
mortgage on the property; or
b. At our option, we may pay the mortgagee the whole principal on the
mortgage plus any accrued interest. In this event, we will receive a
full assignment and transfer of the mortgage and all securities held as collateral
to the mortgage debt.
(Appellants App. p. 66-7) (emphasis added).
In the present case, Indiana paid Bank the mortgages principal balance plus accrued interest as of the time of the loss, and not for any subsequent costs and/or attorneys fees incurred by Bank. The contested phrase here is as interests appear, as applied in Conclusions of Law 17, 18, 23, and 25. Bank maintains that this phrase covers the mortgages principal balance plus interest and late fees as of the time of the loss, as well as accrued interest, accrued costs of collection and accrued attorneys fees incurred in its collection efforts. Whereas, Indiana maintains that this phrase only covers the mortgages principal balance plus accrued interest as of the time of the loss.
In Loving v. Ponderosa Systems, Inc., 444 N.E.2d 896, 906-07 (Ind. Ct. App. 1983), vacated on other grounds, 479 N.E.2d 531 (Ind. 1985), this court held:
Case law has recognized that the provision in mortgages or insurance policies calling for insurance proceeds to be paid to the mortgagee as its interest appears are words of art and entitle the mortgagee to the proceeds to the extent of the mortgage debt. The analysis underlying this position posits the mortgagees interest as one in the indebtedness, not in the property, and also finds that under such standard, or union, mortgage clause the mortgagee has entered into a separate agreement with the insurer.
5A John Alan Appleman & Jean Appleman, Insurance Law and Practice § 3401
285-86 (1970). Furthermore, other jurisdictions have similar interpretations of the meaning of
the phrase as interests appear. See, e.g., New Hampshire Ins. Co. v.
American Emp. Ins. Co., 492 P.2d 1322, 1325 (Kan. 1972) (Again the authorities
are clear that a clause making a fire insurance policy payable to named
insureds as their interest may appear refers to the interests existing at the
time of the loss.); Cooper v. Alford, 446 So. 2d 1093, 1094 (Fla.
Dist. Ct. App. 1984) (Absent an agreement or provision to the contrary, a
loss-payable mortgagee with interest as may appear may recover the amount of that
interest at the time of the loss despite recovery under the loss-payable mortgagees
separate policy in which he is the named insured.).
As stated above, when interpreting an insurance policy, our goal is to ascertain and enforce the parties intent as manifested in the insurance contract. If the language of the policy is clear and unambiguous, it must be given its plain and ordinary meaning. Great Lakes Chemical Corp., 638 N.E.2d at 850 (citation omitted). The phrase as interests appear, while not necessarily a well-known phrase outside of the insurance industry, has been consistently interpreted by various courts and other sources as referring to monies owed on an insurance policy as of the time of the loss, and not for any subsequent time or for any subsequent costs that may occur. With this in mind, we find that the insurance policy at issue here is clear and unambiguous. Indiana appropriately paid Bank the mortgages principal balance plus accrued interest as of the time of the loss. Therefore, we find that the trial court did not err in granting summary judgment in favor of Indiana.