Mediation halts negligence insurance question in murder

The Indiana Supreme Court is no longer tasked with providing clarification on two conflicting rulings related to insurance coverage for parties accused of acting negligently when a co-insured is accused of acting intentionally or criminally, now that the parties to the underlying case have submitted the case for mediation.

In May, the justices accepted a certified question for the U.S. District Court for the Northern District of Indiana in American Family Mutual Insurance Company v. Dustin McCowan, et al., 2:14-cv-46. After Dustin McCowan was convicted of fatally shooting Amanda Bach, her parents sued both McCowan and his father, Joseph, who was accused of negligently failing to secure the firearm that was used in Bach’s murder.

The McCowan house, where Dustin lived at the time of the shooting, was covered under an American Family Mutual Insurance Company homeowners policy that carved out coverage exclusions for “bodily injury … caused intentionally by … any insured” and for “bodily injury … arising out of … violation of any criminal law for which any insured is convicted.” After the Bachs sued, American Family sought declaratory judgment that it had no obligation under those terms to either Dustin or Joseph.

The district court granted summary judgment to American Family on that issue as it related to Dustin, but not to Joseph. Relying on Frankenmuth Mutual Insurance Co. v. William, 690 N.E.2d 675 (Ind. 1997), the judge determined that the “intentional injury” exclusion did not preclude coverage of a co-insured who is accused only of negligence, as is the case in the complaint against Joseph.

Following that ruling, the district court granted Joseph’s request to certify the following question to the justices: “Under Indiana law, does the American Family Policy serve to provide a duty to defend and indemnify an insured being sued only for negligence, notwithstanding any intentional or criminal acts of a co-insured which result in the exclusion of coverage for that co-insured, in light of the severability clause in the Policy?” That question was premised on the notion that the holding in Frankenmuth conflicts with a similar ruling in Holiday Hospitality Franchising, Inc. v. AMCO Ins. Co., 983 N.E.2d 574 (Ind. 2013).

The Supreme Court had set a briefing schedule requiring counsel for both parties to file their briefs and appendices by June 15. Oral argument was then scheduled for June 28, but the court announced Friday, the day the briefs were due, that the parties had submitted the case to mediation, resolved their outstanding issues and agreed to dismiss the certified question proceeding.

The Supreme court previously addressed McCowan’s case in 2015, when it upheld his conviction in Dustin E. McCowan v. State of Indiana, 64S03-1408-CR-516. It also used the decision to impose an instruction that every criminal defendant must now receive upon request: “The presumption of innocence continues in favor of the defendant throughout the trial. You should fit the evidence to the presumption that the defendants is innocent if you can reasonably do so.” Relatedly, McCowan unsuccessfully argued on appeal that the trial court should have given his proffered jury instruction related to the presumption of innocence.