Canopius US Insurance, Inc. v. Yanhos, Inc. et al

Filing 44

OPINION AND ORDER: The Court GRANTS Canopius' 34 Motion for Summary Judgment; DENIES AS MOOT Canopius' 40 Rule 56 Motion to Strike; DECLARES that Canopius has no obligation to Yanhos, Mr. Hoskins, or Mr. Yanis to cover, to defend against, or to indemnify for Ms. Funk's claims; VACATES the trial on August 29, 2017; and DIRECTS the Clerk to enter judgment accordingly. Signed by Judge Robert L Miller, Jr on 7/10/2017. (jss)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
FORT WAYNE DIVISION
CANOPIUS US INSURANCE, INC.,
Plaintiff,
v.
YANHOS, INC., et al.,
Defendants.

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Cause No. 1:16-cv-154 RLM-SLC

OPINION AND ORDER
Whether Canopius US Insurance must cover a bar’s liability for a brawl
depends on whether the insurance broker was Canopius’s agent. There isn’t
enough evidence for a jury to conclude that he was Canopius’s agent, and so
Canopius has no coverage obligations and the court grants its motion for
summary judgment.

I. BACKGROUND
This is a dispute over whether Canopius has any obligation to provide
insurance coverage for, to defend against, or to indemnify for losses related to a
fight at the Hideaway Bar & Grill. There’s discrepancy about who started the
fight. All agree, though, that bar employee Tequilla Hoskins punched Jordan
Funk in the face, breaking her nose. Ms. Hoskins was then convicted of battery.
Ms. Funk sued in Grant Superior Court I. She sued Ms. Hoskins for
breaking her nose and the related medical expenses, pain, anguish, and
emotional distress. She also sued Yanhos, Inc., which owns the Hideaway, and

Charles Hoskins and Rudolph Yanis, who own Yanhos. She claimed they had
inadequate security at the bar and inadequate control over their employees.
Canopius is Yanhos’s commercial general liability insurer. Canopius sued
Yanhos, Ms. Hoskins, Mr. Yanis, Mr. Hoskins, and Ms. Funk in this court for a
declaration that Canopius has no obligation to cover Ms. Funk’s claims, and that
it has no duty to defend or to indemnify Yanhos, Mr. Yanis, Mr. Hoskins, or Ms.
Hoskins against or for Ms. Funk’s claims. The court already has entered default
judgments against Ms. Hoskins and Ms. Funk. Canopius now seeks summary
judgment against Yanhos, Mr. Yanis, and Mr. Hoskins. The court heard oral
argument on July 6, 2017.
The defendants don’t dispute whether liability from the fight falls beyond
Canopius’s

written

coverage

obligations.1

They

parry

that

Canopius

misrepresented their coverage to include bar-fights. Whether Canopius did this
depends on how the Canopius insurance policy was sold to Yanhos.
John Burnette sold Canopius insurance to Yanhos. He considers himself
an independent insurance agent. Mr. Burnette doesn’t have direct contractual
relationships with insurers that cover high-risk customers, such as bars.
Instead, he goes through a managing general agent to procure policies for these
customers. The customer fills out the application, Mr. Burnette passes it on to
the managing general agent, the managing general agent obtains quotes from

1 By its terms, the policy clearly doesn’t cover this liability. The policy provides no coverage or
duty to defend, for “‘bodily injury’ . . . arising out of, caused by or contributed to . . . from criminal
acts . . . by any insured, [or] any employee . . . of any insured.” It also excludes coverage for “any
claim, suit, cost or expense arising out of assault and/or battery,” and “charges or allegations of
negligent hiring, training, placement or supervision.”

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different insurance companies, and Mr. Burnette then presents one or more
quotes to the customer.
Mr. Burnette worked with Mr. Hoskins to obtain insurance for the
Drunken Chicken, a different bar that Mr. Hoskins used to operate. In his
deposition, Mr. Burnette said that when he sold the policy for the Drunken
Chicken, he explained to Mr. Hoskins that the policy didn’t cover altercations.
He said that commercial general liability policies always exclude assault and
battery claims. He said they discussed the fact that Mr. Hoskins wasn’t buying
a liquor liability policy for the Drunken Chicken. Mr. Burnette later clarified in
his affidavit that the Drunken Chicken policy had limited liability coverage for
assault and battery, but no liquor liability coverage. Mr. Hoskins said he
remembered asking Mr. Burnette for coverage for everything, including bar
fights, for the Drunken Chicken.
Mr. Burnette and Mr. Hoskins worked together again to insure the
Hideaway. Mr. Burnette says he explained the insurance options for the
Hideaway similarly to the way he did for the Drunken Chicken. Mr. Burnette
said he obtained a quote for a liquor liability policy, but because of the price, Mr.
Hoskins opted for a general commercial liability policy, which excludes assault
and battery claims. Mr. Hoskins recalls it differently: he says he remembered
asking for coverage for everything at the Hideaway, just like he did with the
Drunken Chicken, and that when he picked up the policy, Mr. Burnette
explained that it provided coverage for everything Mr. Hoskins wanted.

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In his affidavit, Mr. Burnette explained that because the Hideaway offered
food and drink, it was a low enough risk to qualify for Canopius insurance. The
Drunken Chicken only sold drinks. This made its policy significantly more
expensive, but that more expensive policy also included limited liability coverage
for assault and battery.
Mr. Burnette doesn’t have a contract with Canopius. Roush Insurance
Services was the managing general agent that provided Mr. Burnette with an
insurance quote for the Hideaway. Mr. Burnette gave Mr. Hoskins’s application
to Roush. Roush then obtained quotes from Canopius and Scottsdale Insurance
Company. Roush determined that Canopius had the best policy, and sent Mr.
Burnette the Canopius quote to present to Mr. Hoskins. Because the Canopius
policy’s rate was substantially better than the Scottsdale policy’s rate, Mr.
Burnette presented only the Canopius policy to Mr. Hoskins, and that’s what Mr.
Hoskins purchased.

II. STANDARD OF REVIEW
Summary judgment is appropriate when the pleadings, discovery
materials, disclosures, and affidavits demonstrate no genuine issue of material
fact, such that the movant is entitled to judgment as a matter of law. Fed. R. Civ.
P. 56; Protective Life Ins. Co. v. Hansen, 632 F.3d 388, 391-392 (7th Cir. 2011).
The evidence and all inferences that reasonably can be drawn from it must be
construed in the light most favorable to the non-moving parties. Anderson v.
Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). As the moving party, Canopius

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bears the burden of informing the court of the basis for its motion, together with
evidence demonstrating the absence of any genuine issue of material fact.
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). If Canopius meets that
burden, the defendants can’t rest upon the allegations in the pleadings, but must
“point to evidence that can be put in admissible form at trial, and that, if believed
by the fact-finder, could support judgment in [their] favor.” Marr v. Bank of Am.,
N.A., 662 F.3d 963, 966 (7th Cir. 2011); Hammel v. Eau Galle Cheese Factory,
407 F.3d 852, 859 (7th Cir. 2005) (summary judgment is “not a dress rehearsal
or practice run; it is the put up or shut up moment in a lawsuit, when a party
must show what evidence it has that would convince a trier of fact to accept its
version of events”).

III. DISCUSSION
The defendants argue that there’s at least a genuine issue as to whether
Mr. Burnette was acting as Canopius’s agent when he sold insurance to Mr.
Hoskins. And if so, they argue that there’s a genuine issue as to whether he
promised Mr. Hoskins insurance that would cover Ms. Funk’s claims. If both of
these are true, they argue that Mr. Burnette’s misrepresentations estop
Canopius from arguing that the policy doesn’t cover Ms. Funk’s claims.
The scope of an insurance contract is generally limited to the four corners
of the document. But there are two exceptions for estoppel or waiver. First,
“where an insurer misrepresents the extent of coverage to an insured, thereby
inducing the insured to purchase coverage which does not in fact cover the

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disputed risk.” Transcontinental Ins. Co. v. J.L. Manta, Inc., 714 N.E.2d 1277,
1281 (Ind. Ct. App. 1999), quoted in Conley v. State Farm Fire & Cas. Co., No.
3:13-cv-141, 2015 WL 1486844, at *6 (N.D. Ind. Mar. 31, 2015); Filip v. Block,
879 N.E.2d 1076, 1084 (Ind. 2008) (“[R]easonable reliance upon an agent’s
representations can override an insured’s duty to read the policy.”). Second,
when “an insurer defends an action on behalf of an insured, with knowledge that
would provide a defense to coverage, but without a reservation of rights.”
Transcontinental Ins. Co., 714 N.E.2d at 1281. Only the first is relevant to the
Canopius policy.
For the defendants to benefit from that exception, they must be able to
show that Mr. Burnette acted on behalf of the insurer and that he
misrepresented the extent of coverage. “In general, an insurer is not liable for the
acts of an insurance agent who is merely a broker.” Benante v. Union Pac. Life
Ins. Co., 659 N.E.2d 545, 547-548 (Ind. 1995). Whether an insurance broker is
an insurance company’s agent depends on many factors, including whether: the
broker represents numerous insurance companies, he applied for the product
for the customer, he has a contract with the insurer, he introduced himself as
the insurer’s agent, he uses insurance company policy forms and letterhead, the
customer paid him after signing up for the policy, and the insurance company
controls his actions. See id. at 548; Estate of Mintz v. Conn. Gen. Life. Ins. Co.,
905 N.E.2d 994, 1000-1001 (Ind. Ct. App. 2009). “[I]n Indiana when a broker
makes application for insurance and the insurance policy is issued, the broker

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is the agent of the insurer and can bind it within the scope of his authority.”
Aetna Ins. Co. v. Rodriguez, 517 N.E.2d 386, 388 (Ind. 1988).
Most factors weigh in favor of Mr. Burnette’s independence. He sells
insurance for numerous companies. He has no contract with Canopius. When
finding insurance for high-risk clients, such as bars, he deals only with a
managing general agent, in this case Roush. There’s no evidence that Mr.
Burnette held himself out as an agent for the insurer, or that he uses insurance
company policy forms or letterhead. There’s no evidence that Canopius
controlled Mr. Burnette’s actions or that it interacted with Mr. Burnette at all.
On the other side, Mr. Burnette took Mr. Hoskins’s application and applied
for insurance on Mr. Hoskins’s behalf. Even though Mr. Burnette sent the
application to Roush, not Canopius, it was Mr. Burnette who submitted it, not
Mr. Hoskins. This last factor might be enough on its own for Mr. Burnette to
“bind [Canopius] within the scope of his authority.” Aetna Ins. Co. v. Rodriguez,
517 N.E.2d 386, 388 (Ind. 1988). But that matters only to the extent that
Canopius authorized Mr. Burnette to do anything on its behalf. Without evidence
of such authorization, who submitted the application holds little weight.
Whether an agency relationship exists is a fact-intensive inquiry. But there
must be some relationship between the insurance broker and the insurer for him
to bind the insurer to his own representations. See Benante v. Union Pac. Life
Ins. Co., 659 N.E.2d 545, 547-548 (Ind. 1995) (holding that summary judgment
for insurer was inappropriate in a case where, among other factors, insurance
agent and insurer had a contract); Estate of Mintz v. Conn. Gen. Life. Ins. Co.,

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905 N.E.2d 994, 1000-1001 (Ind. Ct. App. 2009) (holding that an insurance
broker wasn’t the insurer’s agent because, among other reasons, they had no
contract). “[T]here is . . . no liability when an agent exceeds his or her authority
under an agency agreement . . . .” 4 Steven Plitt, Daniel Maldonado & Joshua D.
Rogers, Couch on Insurance § 56:2 (3d ed. 2011). But there’s no agency
agreement to confer actual authority. “Apparent authority to bind an insurer
must be conferred by the actions of the insurer . . . , which would induce third
persons to believe that the agent had authority.” 3 id. § 48:12. And there’s no
evidence that Canopius exerted any control over Mr. Burnette or that Canopius
even knew of Mr. Burnette. There’s no basis for apparent authority either.
Without contract, relationship, or control, nothing shows that Canopius
authorized Mr. Burnette to expand policy coverage beyond the written policy, or
that Canopius is on the hook for any misrepresentation Mr. Burnette might have
made. Without the benefit of estoppel or waiver, the defendants are bound to the
policy as written, which offers no coverage here.

IV. CONCLUSION
Based on the foregoing, the court:
(1) GRANTS Canopius’s motion for summary judgment [Doc. No. 34];
(2) DENIES AS MOOT Canopius’ motion to strike [Doc. No. 40];
(3) DECLARES that Canopius has no obligation to Yanhos, Mr. Hoskins,
or Mr. Yanis to cover, to defend against, or to indemnify for Ms. Funk’s claims;
(4) VACATES the trial on August 29, 2017; and

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(5) DIRECTS the Clerk to enter judgment accordingly.
SO ORDERED.
ENTERED: July 10, 2017
/s/ Robert L. Miller, Jr.
Judge
United States District Court

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