Res judicata bars property owner’s insurance suit, COA rules

A trial court properly rejected a second lawsuit brought by a Gary property owner who had already sued its insurer for coverage in a previous case involving the same parties, losses and issues, the Indiana Court of Appeals ruled Wednesday.

The dispute involves an apartment building owned by HERCO LLC. The building caught fire in April 2012, and HERCO reported the loss to Auto-Owners Insurance Company. HERCO also reported a loss in July 2012 after unknown persons vandalized and stole property from the building. Auto-Owners provided partial compensation, but the parties disagreed on the value of the loss and amount due to HERCO.

Thus, in February 2013, HERCO filed for an umpire to complete an insurance appraisal. The appraiser found the cash value of damages from the fire to be $435,000 and the business interruption to be $36,000. As for the July 2012 incident, the appraiser found damages totaling $109,739 and business interruption losses totaling $10,000.

Auto-Owners paid out the policy limit for the fire claim and in September 2015 agreed to pay the balance of the appraisal as to the theft and vandalism. Then in October 2015, HERCO filed a second suit, claiming Auto-Owners had breached the contract by not issuing payment until nearly two years after the appraisal award was entered. Meanwhile, the parties filed a release and satisfaction appraisal award in the first suit.

Auto-Owners moved for summary judgment in the second suit in November 2019, claiming, among other things, that HERCO’s second case was barred by the doctrine of res judicata. The Lake Superior Court agreed, granting summary judgment to Auto-Owners.

HERCO appealed, relying on Huber v. United Farm Family Mutual Insurance Company, 856 N.E.2d 713 (Ind. Ct. App. 2006), for the proposition that the release and satisfaction entered in the first case was not a judgment on the merits. The Indiana Court of Appeals, however, distinguished Huber.

“Huber differs from the case at bar because HERCO and Auto-Owners continued to litigate the First Suit for years after entry of the appraisal award,” Judge Melissa May wrote Wednesday. “The parties engaged in discovery and Auto-Owners contested whether its policy covered the theft and vandalism portion of the appraisal award. Thus, the release and satisfaction filed in the First Suit constitutes judgment on the merits by a court of competent jurisdiction for res judicata purposes.”

The appellate court also rejected HERCO’s argument that the issues in the two cases were different, writing that “HERCO will need to prove that the insurance contract clearly covered the full appraisal award and that Auto-Owners’ continued litigation of the First Suit after entry of the appraisal award was unfounded. … HERCO will therefore need to rely on the same evidence used in the First Suit to prove it was entitled to the full appraisal award.”

“HERCO’s designation of the settlement of the First Suit in opposition to Auto-Owners’ motion for summary judgment as evidence of Auto-Owner’s liability for the theft and vandalism portions of the appraisal award demonstrates the connection between the First Suit and the Second Suit,” May continued. “Thus, the identity of the issues requirement is met.”

Finally, the COA rejected the claim that HERCO could not bring the second suit until after Auto-Owners agreed to pay in full because that is when the claims raised in the second case accrued.

“Here, HERCO and Auto-Owners were already involved in the First Suit when the appraisal award was entered. HERCO could have pursued both a claim for judgment on the appraisal award and claims for bad faith and breach of contract in the First Suit by amending its complaint, but HERCO did not do so,” May wrote.

“The issues in the First Suit and the Second Suit are inextricably intertwined, and the trial court did not err in grating Auto-Owners’ motion for summary judgment.”

The case is Herco, LLC v. Auto-Owners Insurance Company, 20A-PL-1682.