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Tuesday, April 28, 2009

Ind. Decisions - Supreme Court issues two today

In Dreaded, Inc. v. St. Paul Guardian Ins. Co., a 5-0, 9-page opinion, Justice Dickson writes:

Facing an environmental damage claim, the appellant, Dreaded, Inc., waited over three years to notify its insurer, the defendants-appellees (collectively referred to as "St. Paul"), and now seeks reimbursement for defense costs and expenses incurred during the pre-notice period. We affirm the trial court's grant of St. Paul's motion for summary judgment and hold that, as to claims seeking recoupment of an insured's pre-notice defense costs predicated on an alleged breach of an insurer's duty to defend, the insurer's duty to defend did not arise and prejudice is an irrelevant consideration. * * *

Dreaded's complete failure to comply with the notice requirement is undisputed. For more than three years, Dreaded was aware of IDEM's environmental claim against it and failed to inform St. Paul. Yet Dreaded now asserts that St. Paul breached its policy obligation to defend Dreaded during the time St. Paul knew nothing about the claim. Under the facts of this case, prejudice is irrelevant. The issue is simply whether the insured had any duty to defend at all. St. Paul's duty to defend did not arise until Dreaded complied with the policy's notice requirement. St. Paul is entitled to summary judgment as a matter of law.

Dreaded does not prevail in any of its appellate claims. St. Paul was under no duty to defend the IDEM claim in the absence of any knowledge of the claim, and St Paul did not need to present any separate proof of prejudice to justify its failure to defend during the pre-notice period. We affirm the trial court’s grant of summary judgment in favor of St. Paul.

In Lake County Trust Company v. Advisory Plan Commission of Lake County, a 5-0, 8-page opinion, Justice Dickson writes:
This appeal challenges the trial court's use of sanctions in the course of its enforcement of a mediated settlement in a dispute arising from the denial of an application for subdivision plat approval. We hold that government entities are subject to sanctions under the Indiana Alternative Dispute Resolution Rules, but that in this case the Advisory Plan Commission did not act in bad faith for failing to approve the mediation agreement because it remained subject to the Advisory Plan Commission's final approval at a public meeting. * * *

Until now, this Court has not had occasion to review the proposition espoused in Carter that a trial court may not impose A.D.R. Rule sanctions against a governmental entity. In con- trast to the punitive damage rationale employed in Carter, we find that the sanctions authorized by the A.D.R. Rules are more analogous to the exercise of inherent judicial authority than to the imposition of punitive damage awards in civil law suits. Like other parties to litigation who may be involved in a mediation proceeding, governmental entities are equally obligated to comply with the applicable rules and thus should be equally subject to the sanctions authorized to en- courage compliance. We therefore disapprove of the portion of Carter that expresses a contrary view, and we now hold that governmental entities are not immune from the power of courts to impose sanctions under the A.D.R. Rules, particularly Rules 2.7(E)(3) and 2.10. * * *

We conclude that this statutory scheme operates to preclude the delegation of plan commission authority for final approval of subdivision plats, but instead requires final approval by a majority of the commission members at meetings subject to the Open Door Law. Because the settlement agreement resulting from the mediation was thus not final until its approval by a majority of the Plan Commission at a public meeting, the Commis- sion's failure to promptly approve the subdivision did not constitute bad faith conduct warranting sanctions.

While we generally favor the amicable settlement of disputes and encourage the use of mediation to facilitate such agreements, these processes cannot substitute for legislatively mandated official and public assent to the resulting settlement agreements. Resort to mediation can be extremely beneficial to all parties, but, as observed by the Court of Appeals, it is wise practice "to include language in a settlement agreement that the agreement is contingent upon compliance with the Open Door Law and that it must be approved at an open meeting." Lake County Trust Co., 883 N.E.2d at 136.

Because we conclude that the Plan Commission did not act in bad faith, we do not ad- dress the parties' dispute regarding whether Indiana Code § 36-7-4-1010(a) provides a basis to recover attorney fees in this case.

Conclusion. The trial court's order that the Plan Commission shall reimburse the Developers for their costs of mediation in the sum of $1,578.55 is vacated.

Posted by Marcia Oddi on April 28, 2009 04:14 PM
Posted to Ind. Sup.Ct. Decisions