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Erie Insurance Exchange (Erie Insurance) claims that the trial court erred in granting partial summary judgment in favor of Icon, d/b/a Allure on the Lake (Icon), on Icon’s complaint for breach of contract. Erie Insurance contends that the trial court improperly determined as a matter of law that the commercial insurance policy (the Policy) it issued to Icon was ambiguous and entitled Icon to additional income protection coverage after a fire had destroyed Icon’s building.
In Erie Insurance Exchange v. Icon, Inc., d/b/a Allure on the Lake, et al., No. 23A-PL-664, Court of Appeals of Indiana (January 12, 2024) the Court of Appeals interpreted the entire policy.
FACTS
On June 3, 2019, a fire in Chesterton, Indiana destroyed a banquet hall (the Hall) that Icon owned. At the time of the fire, the Hall was insured by Erie Insurance. The Policy stated that “in return for your timely premium payment, your compliance with all of the provisions of this policy . . . [Erie Insurance agrees] to provide the coverages you have purchased.” [emphasis added]
The Declarations page specifically directed the insured to refer to the Supplemental Declarations to find additional information about included coverages under the Policy. Income protection coverage-as identified in “Coverage 3” of the Declarations-is defined as loss of “income” and/or “rental income” you sustain due to partial or total “interruption of business” resulting directly from “loss” or damage to property on the premises described in the “Declarations” from a peril insured against. “Loss” or damage also includes property in the open, or in a vehicle, on the premises described in the “Declarations” or within 1,500 feet thereof.
The Supplemental Declarations specifically indicate what “amount of insurance” the Policy provides for by displaying a dollar amount under the “amount of insurance” column.
The Policy further provided that when additional income coverage is not purchased by the insured, a minimal, i.e., “standard” protection coverage is provided as part of the basic package.
CLAIM PAYMENTS
After the Hall was destroyed, Icon submitted a timely claim to Erie Insurance under the Policy. Although Erie Insurance paid both the property damage and building contents portion of Icon’s claim, it maintained that the maximum income protection afforded under the Policy was $25,000 and not $1 million because Icon did not pay a premium for additional income protection coverage.
REFUSAL TO PAY INCOME LOSSES
When Erie Insurance refused to pay for those additional losses, Icon filed an amended complaint against Erie Insurance on March 10, 2020, for breach of contract and bad faith. Thereafter, Erie Insurance filed a motion for partial summary judgment, claiming that it was entitled to judgment as a matter of law because Icon did not pay a premium for additional income protection and, therefore, the $1 million maximum coverage was not available to Icon for its income losses.
The trial court granted Icon’s cross-motion for partial summary judgment, concluding that the Policy was ambiguous as to the available amount of income protection coverage to which Icon was entitled.
DISCUSSION AND DECISION
Insurance policies are contracts subject to the same rules of judicial construction as other contracts. Insurance policies must be read as a whole. That is, specific words and phrases cannot be construed exclusive of other policy provisions. Furthermore, the language of an insurance policy should be construed so as not to render any words, phrases or terms ineffective or meaningless.
In this case, the first page of the Declarations in the Policy denotes the coverages for which Icon paid a premium. The Policy’s plain language was clear that the “Each Occurrence Limit” is specifically limited to include the total amount of insurance that will be paid for bodily injury or property damage liability and for medical expenses under the liability portion of the Policy. Hence, the unambiguous language of the Policy demonstrates that the “Each Occurrence Limit” on page l of the Declarations, which Icon relies upon, is a limit for general liability coverage, not a limit for property coverage. As a result, the $1 million “Each Occurrence Limit” shown there is irrelevant to the amount of income protection coverage afforded under the Policy.
The lack of a dollar amount for Coverage 3 is a clear and unambiguous statement that additional income protection coverage was not included for the subject property.
The Declarations show that Icon paid no premium for Coverage 3-income protection-and, in accordance with the plain language of the Policy, Erie Insurance did not provide such coverage to Icon. Thus, Icon is limited to income protection coverage up to $25,000 in accordance with the standard protection section of the Policy.
The trial court’s conclusion was reversed and the trial court was instructed to enter partial summary judgment for Erie Insurance and to conduct further proceedings consistent with this opinion.
ZALMA OPINION
Insurance contracts must be read before accepting the offer from an insurer to insure. In this case the insured, Icon, either failed to read the coverages provided or decided to not purchase income coverages. The Court of Appeals found that since Icon did not pay a premium for the income coverage it had no coverage. Regardless of why it did not pay the premium by not doing so Icon recovered the minimal coverage for Income but not the coverages they wanted after a real loss.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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