Samaron Corp v. United of Omaha Life Insurance Company

Filing 76

OPINION AND ORDER: DENYING 72 Troyer Products' request for oral arguments; DENYING 60 Troyer Products' Motion for Partial Summary Judgment; GRANTING IN PART AND DENYING IN PART United of Omaha Life Insurance Company's 65 Motio n for Partial Summary Judgment: DENIED as to Count I (breach of contract) and GRANTED as to Counts II (negligent misrepresentation) and III (bad faith); GRANTING third party defendant Buck's Motion for Summary Judgment. Judgment is hereby entered in favor of Buck on Counts I and IV of the Third-Party Complaint. This case remains pending as to Count I of the Second Amended Complaint only. Signed by Judge Rudy Lozano on 9/29/14. (jld)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF INDIANA
SOUTH BEND DIVISION
SAMARON CORP. d/b/a TROYER,
PRODUCTS,

)
)
)
Plaintiff,
)
)
vs.
)
)
UNITED OF OMAHA LIFE
)
INSURANCE COMPANY,
)
)
Defendant.
)
______________________________)
UNITED OF OMAHA LIFE
)
INSURANCE COMPANY,
)
)
Third-Party Plaintiff,
)
)
vs.
)
)
DAVID A. BUCK,
)
)
Third-Party Defendant.
)

No. 3:12-CV-397

OPINION AND ORDER
This matter is before the Court on: Troyer Products’ Motion
for Partial Summary Judgment, filed on September 13, 2013 (DE
60); United of Omaha Life Insurance Company’s Motion for Partial
Summary Judgment, filed on September 27, 2013 (DE 65); David A.
Buck’s Motion for Summary Judgment, filed on September 27, 2013
(DE

63);

and

Plaintiff

Troyer

Products’

Request

for

Oral

Argument on Summary Judgment Motions, filed on October 25, 2013
(DE 72).

The Court finds that oral argument is not necessary,

and Troyer’s request for oral argument (DE 72) is therefore
1

DENIED.

For

the

reasons

set

forth

below,

Troyer

Products’

Motion for Partial Summary Judgment (DE 60) is DENIED; United of
Omaha

Life

Insurance

Company’s

Motion

for

Partial

Summary

Judgment (DE 65) is DENIED as to Count I (breach of contract)
and GRANTED as to Counts II (negligent misrepresentation) and
III (bad faith); and David A. Buck’s Motion for Summary Judgment
(DE 63) is GRANTED.

The Clerk is directed to enter judgment in

favor of Buck on Counts I and IV of the Third-Party Complaint.
This case remains pending as to Count I of the Second Amended
Complaint only (the breach of contract claim).

BACKGROUND
On

July

(“Troyer”)

23,

filed

2012,
a

Samaron

complaint

Corp.

d/b/a

against

Troyer

United

of

Products

Omaha

Life

Insurance Company (“United”), alleging that United breached its
contract when it failed to provide Troyer with life insurance
proceeds from a $1,000,000 policy insuring the life of Ron Clark
(“Clark”).

United then filed a Third-Party Complaint against

David

(“Buck”),

Buck

the

recipient

of

the

death

benefit,

alleging that, if sums were paid to him improperly, Buck owes a
duty

of

alleged

contribution
conversion

and
and

indemnity
theft

to

United.

against

Buck,

United
and

also

sought

prejudgment garnishment of Buck’s assets pending resolution of
this suit.

A motion for prejudgment writ of attachment was
2

filed but later withdrawn by the parties.

It does not, however,

appear that the count of the Third-Party Complaint asserting a
right to prejudgment attachment was ever dismissed.
Troyer

filed

an

amended

complaint

against

United

on

November 9, 2012, alleging both breach of contract and negligent
misrepresentation.

The Second Amended Complaint was filed on

August 14, 2013, again alleging breach of contract and negligent
misrepresentation, but also alleging that United breached its
duty of good faith and fair dealing.

The parties stipulated to

the dismissal of United’s theft and conversion claims against
Buck.
Shortly
judgment

were

thereafter,
filed.

the

Troyer

instant
seeks

motions

summary

for

judgment

summary
on

its

breach of contract claim only (Count I of the Second Amended
Complaint).

United, in turn, seeks summary judgment in its

favor on all of Troyer’s claims.

Buck has filed a separate

motion for summary judgment alleging that judgment should be
entered in his favor on United’s claim for contribution and/or
indemnification because neither is available to United under the
facts of this case.

The motions are now fully briefed and ripe

for adjudication.

3

DISCUSSION
The

standards

that

motions are familiar.

generally

govern

summary

judgment

Pursuant to Rule 56(a) of the Federal

Rules of Civil Procedure, summary judgment shall be granted “if
the movant shows that there is no genuine dispute as to any
material fact and that the movant is entitled to judgment as a
matter of law.”

Fed. R. Civ. P. 56(a); see also Nebraska v.

Wyoming, 507 U.S. 584, 590 (1993); Celotex Corp. v. Catrett, 477
U.S. 317, 322–23 (1986).

In other words, the record must reveal

that no reasonable jury could find for the nonmovant.

Karazanos

v. Navistar Int’l Transp. Corp., 948 F.2d 332, 335 (7th Cir.
1991).

See also Anderson v. Liberty Lobby, Inc., 477 U.S. 242,

250 (1986).
must

view

nonmovant.

In deciding a motion for summary judgment, a court
all

facts

in

the

light

most

favorable

to

the

Anderson, 477 U.S. at 255; Trade Fin. Partners, LLC

v. AAR Corp., 573 F.3d 401, 406 (7th Cir. 2009).
According to Rule 56:
A party asserting that a fact cannot be or
is genuinely disputed must support the
assertion by:
(A)citing
to
particular
parts
of
materials
in
the
record,
including
depositions,
documents,
electronically
stored
information,
affidavits
or
declarations, stipulations (including those
made for purposes of the motion only),
admissions, interrogatory answers, or other
materials; or

4

(B) showing that the materials cited do
not establish the absence or presence of a
genuine dispute, or that an adverse party
cannot
produce
admissible
evidence
to
support the fact.
Fed. R. Civ. P. 56(c).
properly

support

an

Furthermore, “[i]f a party fails to

assertion

of

fact

or

fails

to

properly

address another party’s assertion of fact as required by Rule
56(c), the court may … consider the fact undisputed for purposes
of the motion [or] grant summary judgment if the motion and
supporting materials – including the facts considered undisputed
– show that the movant is entitled to it…”
56(e)(2),(3).

“Whether

a

fact

is

Fed. R. Civ. P.

material

depends

on

the

substantive law underlying a particular claim and ‘only disputes
over

facts

governing

that
law

judgment.’”

might

will

affect

properly

the

outcome

preclude

the

of

the

entry

suit
of

under

summary

Walter v. Fiorenzo, 840 F.2d 427, 434 (7th Cir.

1988) (citing Anderson, 477 U.S. at 248).
Where a party bears the burden of proof on a particular
issue,

the

party

may

not

rest

on

its

pleading,

but

must

affirmatively demonstrate, by specific factual allegations, that
there is a genuine dispute requiring a trial.

See Beard v.

Whitley Cnty. REMC, 840 F.2d 405, 410 (7th Cir. 1988); Hickey v.
A.E.

Stanley

Mfg.,

995

F.2d

1385,

1391

(7th

Cir.

1993).

Therefore, if a party fails to establish the existence of an

5

essential element on which the party bears the burden of proof
at trial, summary judgment will be appropriate.
Where the parties file cross-motions for summary judgment,
the Court must consider each motion, but despite the parties'
agreement that no genuine issue of material fact exists, the
Court can deny all motions if the parties do not establish their
rights to judgment as a matter of law.
Supp. 2d 746, 747 (N.D. Ind. 2002).

Grabach v. Evans, 196 F.
Furthermore, the Court is

permitted to consider materials in the record whether or not
they are cited to by the parties.

Fed. R. Civ. Pro. 56(c)(3).

Facts1
Troyer
Troyer is an Indiana company that distributes upholsterybased and other products to the RV Industry.

From the mid-1980s

until January 1, 2005, Darlene and Ron Clark owned Troyer.

Ron

Clark was described as honest, straightforward, and someone who
kept his word.

(Darlene Clark Dep. at 21 (DE 65-2)).

Buck began working for Troyer in 1987, while still in high
school.
General

(Buck Dep. at 13 (DE 63-2)).
Manager

and

Chief

Operations

By 1992, Buck was the
Officer

of

Troyer

(a

position he held until he left the company in August of 2012).
1

Because the facts in this case are largely undisputed, albeit not their legal
significance, the Court will provide citations only where directly quoting
the evidence or where the parties dispute the facts.

6

(Id.

at

19,

51

(DE

65-3)).

The

same

year

that

Buck

was

promoted, Clark gave Buck two shares of the company and invited
him to join the Board of Directors (“Board”).

(Id. at 19).

In the mid-1990’s, Troyer implemented an IRA program for
its

employees.

Clark

contacted

Daniel

Holtz

(“Holtz”),

licensed securities dealer, to set up the program.

a

In 1998,

Clark asked Holtz to join Troyer’s Board.

Buck and
United.

Clark

applied

for

a

life

insurance

policy

through

On September 16, 2002, Clark and Buck applied for a life
insurance policy with United. The application identified Clark
as the insured, and Buck as the proposed owner and beneficiary
of the policy.
Holtz, who at the time was only a Troyer Board member, was
not involved in applying for the life insurance policy.

Buck

and Clark never discussed the policy with Holtz when they were
completing the application.

The beneficiary of the policy was changed to Troyer.
Ultimately,
beneficiary.
to be.

the

policy

was

issued

with

Troyer

as

the

There are two competing versions of how this came

According to Troyer, United’s underwriting department

would not allow Buck to be the beneficiary of the policy.

So,

on February 5, 2003, United’s underwriters “approved” the policy

7

and noted, “amend owner as Troyer Products ... amend benef as
Troyer Products.”

(Tylkowski Dep. at 61-62, 87 & Ex. 30 (DE 60-

6)). According to United, due to tax concerns, Clark and Buck
decided to amend the policy so that Troyer was the designated
beneficiary.

(Buck Dep. at 40 (DE 65-3)).

For purposes of the

instant motions, the reason for the change is not material.
On

February

12,

2003,

United

sent

Troyer

the

“policy

output” packet which is “information that goes out in regard to
the issuance of coverage.”
60-6)).

(Tylkowski Dep. at 64 & Ex. 28 (DE

United included in this packet an amendment intended to

change the owner and beneficiary of the policy to Troyer and
asked Troyer to have the amendment “signed by the Applicant and
returned to United of Omaha.”

Id.

On February 17, 2003, Clark and Buck signed the amendment.
The amendment changed the beneficiary of the policy from Dave
Buck to Troyer Products.

United issued the policy with Troyer as owner and beneficiary.
United issued Policy No. BU1096496 (the “policy”) with the
owner and beneficiary as Troyer, effective February 12, 2003.
The policy’s expiration date was February 12, 2039.

The parties

agree that the policy is a valid and enforceable contract.
Under

the

policy,

United

was

required

to

pay

Troyer

$1,000,000 if Clark passed away before the expiration of the

8

policy and no exclusions to coverage applied. If United failed
to pay Troyer the death benefit within 30 days of the date
United received proof of Clark’s death, United agreed to pay
interest on the proceeds at a “guaranteed rate of interest” of
three percent from the date of death to the date of payment.
(Policy at 9, 13 (DE 53-2)).

United “coded” the amendment as a Post Issue Requirement (“PIR”)
in the image folder.
The policy has an electronically-stored image folder that
contains every document related to the policy.

The policy’s

image folder contains a table of contents that identifies each
document in the folder by name and number.

If a United employee

needs to access a particular document, they would click on the
document link and an image of the document would appear on their
computer screen.
United
incoming

has

mail

a

comes

facility
in

in

[and]

[United’s] computer system.”

Blair,
gets

Nebraska

scanned

and

“where
coded

the
into

(Tylkowski Dep. at 32 (DE 60-6)).

“[E]very time a piece of mail comes in or a document comes in
with

respect

to

a

policy”

the

employees

in

United’s

Blair

facility “are responsible for scanning it into the image folder,
sending it into the image folder, and then updating the image
folder to make sure ... the document is coded properly.”
at 32.)
9

(Id.

On March 11, 2003, United scanned the signed amendment into
the Policy’s image folder and improperly coded the amendment as
a

Post-Issue

Requirement

or

“PIR,”

instead

of

a

beneficiary

change.

The Clarks sold the company to Holtz and Buck.
The Clarks decided they wanted to retire.
sell

the

company

to

Buck,

but

Buck

could

They wanted to
not

afford

it.

Ultimately, on January 1, 2005, the Clarks sold all of their
Troyer shares to Holtz and Buck.

This was effectuated through a

leveraged buyout of the Clarks’ shares through a Stock Purchase
Agreement

(“SPA”).

Under

the

SPA,

the

Clarks

loaned

million to Holtz and Buck to purchase their shares.

$1.75

In return,

Holtz and Buck executed promissory notes that would repay the
Clarks

over

time

from

income

they

would

earn

as

Troyer

shareholders.
Holtz became Troyer’s president and Buck continued in his
role as General Manager and Chief Operating Officer.

Since

January 1, 2005, Holtz has owned 61% and Buck has owned the
remaining 39% of Troyer.
Buck had considerably more experience at Troyer than Holtz,
but Holtz indicated he felt he was “in a better position to know
how to do things” than Buck.

(Holtz Dep. at 70 (DE 65-1)).

Buck wanted to run things much as Clark had.

10

(Id. at 49).

This

led to tension between the two.

Nonetheless, Troyer continued

to perform well.

United told Troyer that Buck was the beneficiary of the policy.
On November 12, 2011, Clark passed away.

Up until Clark’s

death, Troyer paid all premiums for the policy.
In

November

of

discussed the policy.

2011,

after

Clark

died,

Holtz

to

and

Holtz

During this discussion, Buck told Holtz

that Troyer was the beneficiary of the policy.
prompted

Buck

call

United

to

verify

This discussion
the

policy’s

beneficiary.
When he called United on December 1, 2011, Holtz was the
President and majority owner of Troyer and was acting on behalf
of the Company.

During the call, United employee Joyce McDaniel

(“McDaniel”) advised Holtz that Buck was the beneficiary of the
policy.

McDaniel

either

obtained

that

information

from

the

policy’s image folder or another system called “Epiphany.”
During his call with McDaniel, Holtz had an unexecuted copy
of the amendment1 and asked McDaniel if United had an executed
copy in the policy’s file.

McDaniel said no.

1

It is not clear where this copy came from, but a copy of the amendment was
attached to the SPA executed in 2005.

11

United informed Troyer, in writing, that Buck was
beneficiary and instructed Troyer to have Buck complete
claim statement.
Kevin Breeling is a life-claims specialist at United.

the
the

On

December 2, 2011, Breeling reviewed the policy’s image folder
and, like McDaniel, concluded that Buck was the beneficiary of
the

policy.

within

the

beneficiary.

Breeling
image

relied

folder

to

upon

the

policy’s

determine

that

application

Buck

was

the

Breeling reviewed only the application and did not

look at any other documents in the image folder because none of
them referenced a “beneficiary update” and that was Breeling’s
“first concern.”

(Breeling Dep. at 68-69 (DE 60-1)).

Breeling

did see a document labeled PIR in the image folder, but he did
not review that document because “[t]he PIR entries wouldn’t
have anything to do with the beneficiary…if there was a change,
it should have been a beneficiary update.”

(Id. at 69). That

document labeled PIR was the amendment that made Troyer the
beneficiary of the policy.
On

December

2,

2011,

Breeling

sent

a

letter

enclosing a blank claim statement for the policy.

to

Troyer

Breeling

addressed the letter to Holtz because, based on United’s system,
Holtz was the person who initiated the claim process. In his
letter, Breeling stated:
[t]he beneficiary of the policy is Dave
Buck. Please ask him to complete and sign
the enclosed claim statement.
12

(Id. at 69-70 & Ex. 7).
application,

and

never

Breeling relied solely on the policy’s
spoke

with

anyone

from

Troyer

before

sending this letter.
Buck called United on December 12, 2011.
was

unaware

that

Holtz

had

called

At that time, he

United,

but

a

United

representative told him that Holtz had already called to report
Clark’s death.

(Buck Dep. at 187-88 (DE 65-3)).

Holtz did not object to Buck completing the claim statement.
On Thursday, December 15, 2011, Troyer’s Board of Directors
met to discuss, among other things, the policy.

At that time,

there were three living Directors of Troyer – Holtz, Buck, and
Darlene Clark – all of whom were present at the meeting.

Buck

was the only Board member at the meeting with personal knowledge
of changing the beneficiary to Troyer.

At the meeting, Buck

believed that Troyer was the policy’s beneficiary.
at 192-93 (DE 60-5)).

(Buck Dep.

Holtz indicates he believed that Buck was

the beneficiary because that is what United told him on December
1, 2011 – therefore, at the meeting, Holtz assumed that Buck
“would

be

doing

what

he

needed

to

(Holtz Dep. at 210-11, DE 60-3)).

[do]

to

get

the

money.”

United, however, contends

that Holtz knew Troyer was the beneficiary of the policy because
he had discussed this with Buck.

(Holtz Dep. at 296 (Doc 60-

3)). Likewise, Troyer notes that Darlene Clark testified that
13

she thought Buck was the beneficiary, and she believed this was
said at the meeting on December 15, 2011.
(DE 60-4)).
and

(Clark Dep. at 174-75

She admits her belief was based on an assumption

former

discussions

dating

back

to

2002.

(Id.).

But,

despite her assertion that Buck was the beneficiary, the minutes
which Clark endorsed show that the beneficiary had been changed
to Troyer.

(Clark Dep. at 86 (DE 65-2)).

At the conclusion of the Board meeting, and based upon
United’s
object

representations
to

Buck

on

executing

policy’s death benefit.
what

occurred

Clark,

at

Troyer

that

December
a

claim

1,

2011,

Holtz

statement

not

redeem

to

did

the

The parties offer divergent views of
Board

determined

meeting.

that,

According

regardless

of

to

who

was

beneficiary, the money from the policy would go to Buck.
Dep. at 220-21 (DE 65-2)).

Darlene
the

(Clark

Darlene Clark testified that, in

making this decision, Troyer did not rely on any information
from United.

(Id. at 121).

The meeting was recorded and both Darlene Clark and Dan
Holtz

took

handwritten

notes.

After

the

meeting,

Darlene

Clark’s notes and the audio recording were given to Jennifer
Yoder

(“Yoder”).

meeting.
prepared

She

Yoder

typed

accurately

(DE 65-17 ¶¶ 2-5).

the

was

asked

minutes

reflected

the

to

and

type

minutes

attests

that

discussion

at

the

of

the

what

she

meeting.

Those minutes state, in relevant part, that:
14

Discussion of insurance proceeds for the
term life insurance from United Omaha Life,
Policy Number BU1096496 on the life of
Ronald Clark, who passed away November 12,
2011. David discussed that in 2003 Dave and
Ron took out this policy and on the hand
written application listed David Buck as the
beneficiary then it was changed to Troyer
Products
for
tax
purposes,
with
the
understanding that the proceeds would go to
David Buck for the purpose of buying Troyer
Products.
Board approved proceeding with
filing the paperwork to redeem the monies
with proceeds going to David Buck. It will
be discussed with Stan Hess about how to
disperse the monies legally.
(Id. at Ex. A).
Darlene Clark and Buck testified that these minutes are
accurate.

(Clark Dep. at 86 (DE 65-2); Buck Dep. at 81 (DE 65-

3)). Holtz disputes this.

According to Holtz, the policy was

discussed at the Board meeting, but nobody at the meeting said
that Troyer was the beneficiary:
Q: Did Mr. Buck state that in 2003, Dave and
Ron took out this policy, and on the
handwritten application listed David Buck as
the beneficiary and then it was changed to
Troyer Products for tax purposes with the
understanding that the proceeds would go to
David Buck with the purpose of buying Troyer
Products?
A: That would not be my recollection.
Q: What would your recollection be?
A: That we discussed that he [Buck] was the
beneficiary and I said – and that we
discussed that we – that Ron – Dave and
Darlene wanted to make sure that the
proceeds were distributed properly and were
going to talk to Mr. Hess.
Q: Okay.

15

A: And I indicated that – I remember using
the words, “I don’t have a dog in this fight
because he’s the beneficiary.”
A: Okay.
Did the board approve proceeding
with filing the paperwork to redeem the
monies with the proceeds going to David
Buck?
A: That’s at odds with my recollection
because I firmly recollect that we took no
official board vote or action on the
subject.
* * *
Q: And who said Dave Buck is the beneficiary
of the policy?
A: I know that I did.
Q: Okay. You did. Did Mr. Buck say that?
A: I don’t recall.
Q: Did Ms. Clark say that?
A: I don’t recall.
Q: Okay.
So you’re telling – on behalf of
the company what you’re saying is, we
discussed
that
Dave
Buck
was
the
beneficiary, but what you really mean is I
discussed Dave Buck was the beneficiary
because that’s what Mutual of Omaha told me.
A: Un-huh.
Q: Which conflicted with the company’s own
knowledge based upon the documents in the
file.
A: Okay.
Q: Is that your testimony to the jury?
A: My testimony is also that no one in that
meeting said that the company is the
beneficiary.
(Holtz Dep. at 174, 177-78 (DE 65-1)).

Buck completed the claim statement.
Buck first received Breeling’s December 2, 2011, letter and
blank claim statement on Friday, December 16, 2011, the day
after

the

Troyer

Board

meeting.

Before

he

read

Breeling’s

letter, Buck understood that Troyer was the beneficiary of the
16

policy.
shocked

When he read the letter on December 16, 2011, Buck was
or

surprised

that

he

was

listed

as

the

beneficiary

because he understood that Troyer was the beneficiary.

He knew

that “Dave Buck and Troyer Products [were not] the same thing.”
(Buck Dep. at 204 (DE 60-5)).
After reading Breeling’s letter, Buck never called United
or asked United to check its records.

Instead, Buck signed the

claim form as the policy’s beneficiary on December 16, 2011 –
the same day he received Breeling’s letter.
instructed

United

Bloomingdale,

to

mail

Bristol,

the

Indiana,

policy
46507

The claim form

benefits

–

Troyer’s

to

1090

business

address at the time – and to make the proceeds payable to Buck.
After signing his name on the claim statement as the policy’s
beneficiary,
mistake.

Buck

never

informed

United

that

it

had

made

a

According to Buck, he “had no reason to call them.”

(Id. at 203-04).

United told Troyer
beneficiary.

a

third

time

that

Buck

was

the

policy’s

Holtz called United again on December 19, 2011, to doublecheck about the policy’s beneficiary.

This time he spoke with

United employee Jamie Hickman (“Hickman”).
to

verify

the

policy’s

beneficiary.

Holtz asked Hickman

Like

McDaniel,

Hickman

advised Holtz that the policy’s beneficiary was Buck.

Holtz

asked Hickman to check the policy file again, and specifically
17

asked her if United had an executed copy of the amendment in the
file.

Like before, United told Holtz that it did not have the

signed amendment and that Buck was the policy’s beneficiary.

United approved Buck’s claim and paid Buck $1,000,000.
United received Buck’s completed and signed claim form on
December 20, 2011.

Buck completed and signed the claim form as

the policy’s beneficiary, just as Breeling had instructed in his
December 2, 2011, letter.
paying

the

supervisor,

$1,000,000
Nancy

On January 3, 2012, Breeling approved

death

benefit

Nicholson,

to

Buck,

co-approved

the

and

Breeling’s

claim.

From

December 1, 2011, when United opened the claim, to January 3,
2012, when United approved and paid the claim to Buck, Breeling
never spoke with Buck, Holtz, or anyone from Troyer; he had no
knowledge of any discussions between Buck and Holtz regarding
the policy; and he had no knowledge of the December 15, 2011,
meeting
policy.2

–

or

any

Instead,

other

meetings

Breeling

relied

at

Troyer

only

on

–

the

regarding
image

the

folder,

application, and completed claim statement before approving the
claim and paying the $1,000,000 death benefit to Buck.
did

not

review

or

rely

upon

the

improperly-coded

Breeling
amendment

because, based on the way it was coded (PIR), Breeling assumed
that the document did not relate to the policy’s beneficiary.
2

Nobody at United was aware of the December 15, 2011, Troyer Board meeting
until after United approved and paid the claim to Buck.

18

On January 3, 2012, United sent Buck a letter approving the
claim and a check for $1,000,000.
no mention of Troyer.

United’s approval letter made

United’s $1,000,000 check was paid “TO

THE ORDER OF DAVE BUCK” and made no mention of Troyer.

In

reality, when United paid the $1,000,000 death benefit to Buck,
the beneficiary under the policy was actually Troyer, not Buck.

Buck attempted to purchase Holtz’ shares of
removed from Troyer’s Board shortly thereafter.
Buck
2012.

received

the

$1,000,000

from

United

Troyer

on

and

was

January

9,

He donated $100,000 to his church and used a portion of

the money to pay a variety of personal expenses, including a
debt owed to Darlene Clark as a result of a loan under the SPA.
He and Darlene Clark also attempted to buy out Holtz’ interest
in Troyer.

Buck, Darlene Clark, and Holtz met to discuss a

possible buyout in late January 2012, but the discussions went
nowhere.

Following the attempted buyout, Holtz used his status

as a majority shareholder to call a shareholder’s meeting on
February 6, 2012, and to kick Buck off the Board.

19

(DE 65-21).

Holtz revised the minutes of the December 15, 2011, meeting.
Prior to April 3, 1012, Holtz revised the minutes of the
December 15, 2011, meeting.3

As revised, the meeting minutes

read in relevant part as follows:
Discussion of company-owned life insurance
policy on the life of Ron Clark; no action
taken.
(DE 65-23). Holtz testified that he revised the minutes after a
conversation with counsel.
On April 3, 2012, the next shareholder’s meeting occurred.
Holtz voted in a new Board.

That new Board met for the first

time the same day and approved the revised minutes.

According

to

unanimous

the

although

minutes

of

Darlene

that
Clark

meeting,

the

testified

approval

that

she

was
voted

against

approving the minutes because they were not truthful.

Troyer asked for a complete copy of the policy and received only
the application.
On
complete

March

27,

copy

of

2012,
the

Holtz

wrote

policy’s

file

United
in

and

order

asked
to

see

for

a

“all

documentation of changes in owner or beneficiary” of the policy.
(Breeling Dep. at 88-89 & Ex. 15 (DE 60-1)).

On April 12, 2012,

in response to Holtz’s letter, Breeling sent Holtz only a copy
of the policy’s application.

Breeling neither looked for nor

3

Holtz contends that these revisions were made in January of 2012. (Holtz
Dep. at 255). United argues that documentation shows the revision was not
made until April 2, 2012. Ultimately, this is not a dispute that matters.

20

sent Holtz any other documents from the image folder because
“[h]e’s asking specifically about beneficiary” and there were
“no coding changes that would indicate to [Breeling] that there
was a beneficiary change done.”

(Id. at 91-92).

United discovered that it “screwed up.”
On May 2, 2012, Holtz called United again and asked for
documentation

showing

a

beneficiary of the Policy.

change

of

either

ownership

or

Breeling received notice of Holtz’s

request and, this time, Breeling went “back through the Image
documents and look[ed] at everything in there.”

(Id. at 103).

When he went back through the image folder, Breeling discovered
the executed amendment coded as a PIR.
When Breeling discovered the executed amendment coded as a
PIR, he was “surprised where [he] found the document” because it
“was miscoded, and wasn’t coded as it was supposed to be.” (Id.
at 107).

Breeling was “upset because they didn’t code [the

amendment] properly.”

(Id. at 108).

According to Breeling, the

amendment “shouldn’t have been a PIR; it should have been a
beneficiary change.”

(Id. at 151).

When asked whether someone

at United “had screwed up,” Breeling responded: “Pretty much.”
(Id. at 108).
Breeling

met

with

his

department

a

day

or

two

after

discovering that United had miscoded the amendment as a PIR and

21

informed them that he had “found some information that was in a
miscoded

item”

and

instructed

his

team

to

“watch

out

for

potential miscodes” and “review the documents more thoroughly.”
(Id. at 108-10).

Troyer demanded payment and United refused.
On May 2, 2012, Breeling emailed a copy of the executed
amendment to Holtz.
United
benefit.

demanding

On May 8, 2012, Troyer sent a letter to

payment

of

the

policy’s

$1,000,000

death

Breeling first reviewed Troyer’s demand letter on June

12, 2012, and the same day forwarded the letter to Susan Lewis
(“Lewis”), one of United’s in-house attorneys.
At 10:34 a.m. on June 13, 2012, Lewis sent the following
email to Troyer’s attorney, Cassidy Fritz (“Fritz”):
Mr. Fritz, to follow-up on our telephone
conversation earlier today, attached is the
letter and claim forms that were sent to
your client in December 2011. Your client
knew that United of Omaha was going to pay
the benefits to Mr. Buck and failed to raise
any concerns. As I mentioned, United of
Omaha is not going to send your client a
check. Research has revealed that Dave Buck
is an owner of Troyer. You mentioned he was
a minority shareholder, but nonetheless,
your client knew what was happening and
should
seek
money
from
Mr.
Buck.
If
necessary, United of Omaha will file a
declaratory judgment action against Troyer,
Buck and Holtz.
Please let me know if you have any questions
or would like to discuss further.

22

(Breeling Dep. at 124 & Ex. 26 (DE 60-1)).

After receiving

United’s

commenced

June

litigation.4

12,

2012,

denial,

Troyer

this

Shortly thereafter, Holtz asked Darlene Clark to

leave the Board.

The Board also restructured Holtz’ pay so that

his salary increased significantly and was no longer tied to the
corporation’s performance.

At the same time, Troyer stopped

making distributions to its shareholders, including Buck.

A dispute of fact regarding waiver precludes summary judgment
for either Troyer or United on Troyer’s breach of contract
claim.
To prevail on its breach of contract claim against United,
Troyer must prove that a contract exists, that United breached
that contract, and that it suffered damages.

See Rogier v. Am.

Testing & Eng’g Corp., 734 N.E.2d 606, 614 (Ind. Ct. App. 2000).
The parties do not dispute that a binding contract exists, but
they disagree regarding whether a breach occurred.
It
proceeds

is

clear

were

that

paid

to

the

beneficiary

Buck.

However,

was

Troyer,

United

but

argues

the

that,

because Buck was an Officer and Director of Troyer at the time
United made payment to him, United fulfilled its obligation of
paying the money to Troyer.

In other words, United asserts that

it simply did what Troyer told it to do.

Unfortunately for

United, it has not bothered to support this argument with any
4

United notes that the decision to commence litigation was made by Holtz
without Board approval and in violation of the corporate bylaws. This is not
material to the outcome of the instant motions.

23

citation to legal authority.

This Court will not make United’s

arguments for it.

Vaughn v. King, 167 F.3d 347, 354 (7th Cir.

1999)(“It

the

is

not

responsibility

of

this

court

to

make

arguments for the parties.”).
Additionally, for United to prevail on its argument, this
Court must ignore other relevant undisputed facts: United had
told Holtz that Buck was the beneficiary, and it was United that
told Troyer, in writing, to have Buck complete the beneficiary
form.

These facts at least suggest that United did not just “do

what they were told to do” by Troyer; perhaps it was Troyer who
simply did what it was told by United.
United also argues that Troyer suffered no damages, citing
to testimony from Darlene Clark and Buck indicating that they do
not believe Troyer suffered damages.

This argument would make

sense if United had fulfilled its obligation under the contract
to pay the insurance proceeds to Troyer, but United failed to
support that argument with any legal authority.
its

argument

on

damages

also

fails:

if

As a result,

Troyer

should

have

received $1,000,000 that it did not receive, then clearly the
company suffered damages.
Additionally, United argues that Troyer waived its right to
obtain the insurance proceeds at the December 15, 2011, Board
meeting.

According

to

United,

minutes demonstrate a waiver.

the

original

Board

meeting

With regard to waiver, United’s
24

argument is more convincing.

The Indiana Supreme Court has

noted the following regarding waiver in Tate v. Secure Ins.:
Technically, there is a distinction between
“waiver” and “estoppel.”
A waiver is an
intentional relinquishment of a known right
and is a voluntary act, while the elements
of estoppel are the misleading of a party
entitled to rely on the acts or statements
in question and a consequent change of
position to his detriment.
But in the law
of
insurance,
the
distinction
between
“estoppel” and “implied waiver” is not easy
to
preserve,
and,
quite
commonly,
in
insurance cases, the courts have found it
unnecessary
or
inadvisable
to
make
a
distinction between them and have used the
terms interchangeable.
587 N.E.2d 665, 671 (Ind. 1992); see also Welty Bldg. Co., Ltd.
v. Indy Fedreau Co., LLC, 985 N.E.2d 792, 798 (Ind. Ct. App.
2013); Westfield Nat. Ins. Co. v. Nakoa, 963 N.E.2d 1126, 1132
(Ind. Ct. App. 2012).

For an insurer to have waived coverage,

an

“knowledge

insurer

permitted

it

must
to

have
deny

coverage.”

of

facts

Ill.

which

Founders

would
Ins.

have

Co.

v.

Horace Mann Ins. Co., 738 N.E.2d 705, 707 (Ind. Ct. App. 2000).
Waiver also requires a “distinct act of affirmance.” See Am.
Family Mut. Ins. Co. v. Kivela, 408 N.E.2d 805, 811 (Ind. Ct.
App. 1980).

But this case, while it does involve insurance,

does not involve an insurer who allegedly waived a defense to
coverage – it involves an insured who allegedly waived the right
to receive insurance proceeds.

25

In response to United’s waiver argument, Troyer argues that
United lacked knowledge of the Board meeting when it paid the
proceeds to Buck, and therefore could not have relied upon the
Board’s decision when it decided to pay insurance proceeds to
Buck.

Troyer’s argument assumes that detrimental reliance is

required for waiver.5
implied

waiver

or

An explicit waiver, however, unlike an
estoppel,

does

not

require

detrimental

reliance: it requires knowledge of the existence of the right
and the intent to relinquish it. See Westfield, 963 N.E.2d at
1132.
Both Troyer and United have sought summary judgment on this
claim.

United asserts that Troyer unquestionably intended to

relinquish its rights at the December 15, 2011, meeting.

But

United, in so asserting, asks this Court to close its eyes to
Holtz’ assertions that no action was taken at the December 15,
2011, meeting.

In short, United invites this Court to weigh the

evidence and determine that the accounts of Darlene Clark and
Buck (who both affirm the original meeting minutes are accurate)
are more believable than the account of Holtz (who disputes the
accuracy of the original meeting minutes in several material
respects).

Similarly, Troyer, in asking for summary judgment on

5

An earlier order by this Court addressed estoppel in the context of a motion
to dismiss, noting that United’s own negligence might prevent it from relying
on estoppel, but this Court is now addressing waiver, not estoppel, and in
the context of this case, those concepts are not one in the same. (See DE 44
at 13; Tate, 587 N.E.2d 671).

26

this claim, asks this Court to endorse its version of the facts.6
This Court cannot and will not weigh the evidence on summary
judgment.

Because there is a dispute regarding what occurred at

the

meeting

Board

on

December

15,

2011,

this

matter

is

not

appropriate for summary judgment.

Troyer’s Negligent Misrepresentation Claim
United

argues

that

Troyer’s

negligent

misrepresentation

claim should be dismissed on summary judgment for two reasons:
(1) Indiana would not recognize the tort in the context of this
case; and (2) Troyer cannot show justifiable reliance.

The

first argument is dispositive, and the Court therefore will not
address justifiable reliance.
This

Court

raised

the

issue

of

whether

the

tort

of

negligent misrepresentation was available to Troyer in response
to an earlier motion to dismiss, noting in a footnote that:
The Court has some uncertainty as to whether
negligent misrepresentation is a viable
cause of action under the facts of the
present case.
Under Indiana law, negligent
misrepresentation is a limited cause of
action that is only available in certain
6

Troyer argues that no reasonable juror could find that Troyer intentionally
relinquished a known right to recover the death benefit. According to
Troyer, this would require that United prove Troyer knew that it was the
policy beneficiary before it allowed Buck to submit the claim form. Troyer
believes this cannot be proven. Troyer’s argument assumes the truth of its
version of the facts, but there is a dispute regarding what happened at the
Board meeting on December 15, 2011, and if the version memorialized in the
original meeting minutes was accepted by the jury, then a reasonable jury
could find that Troyer had knowledge that they were the beneficiary of the
policy prior to the claim form being submitted.
Accordingly, this argument
must fail.

27

circumstances.
See Mart v. Forest River,
Inc., 854 F. Supp. 2d 577, 595 n. 18 (N.D.
Ind. 2012); U.S. Bank, N.A. v. Integrity
Land Title Corp., 929 N.E.2d 742, 747 (Ind.
2010); Westfield Ins. Co. v. Yaste, Zent &
Rye Agency, 806 N.E.2d 25, 30 n. 4 (Ind. Ct.
App. 2004) (citing Darst v. Illinois Farmers
Ins. Co., 716 N.E.2d 579, 584 (Ind. Ct. App.
1999)); Jim Barna Log Sys. Midwest, Inc. v.
General Cas. Ins. Co. of Wisconsin, 791
N.E.2d 816, 830 (Ind. Ct. App. 2003).
Nonetheless, United does not raise this
argument, and this Court will not make the
parties arguments for them. Vaughn v. King,
167 F.3d 347, 354 (7th Cir. 1999)(“It is not
the responsibility of this court to make
arguments for the parties.”).
(DE 44 at 8).
Indiana generally follows the economic loss rule.

See

U.S. Bank N.A. v. Integrity Lane Title Corp., 929 N.E.2d 742
(Ind. 2010).
a

tort

Under this rule, “a defendant is not liable under

theory

for

negligence[.]”

any

Id.

purely

(citing

economic

loss

caused

Indianapolis-Marion

by

Cnty.

its
Pub.

Library v. Charlier Clark & Linard, P.C., 929 N.E.2d 722, 726-27
(Ind. 2010)).
Id.

One

of

There are, however, certain limited exceptions.
those

exceptions

is

the

tort

of

negligent

misrepresentation.
Indiana

has

misrepresentation”

adopted
contained

the
in

definition
the

of

Restatement

“negligent
(Second)

Torts § 552(1), which provides that:
One who, in the course of his business,
profession or employment, or in any other
transaction in which he has a pecuniary
28

of

interest, supplies false information for the
guidance
of
others
in
their
business
transactions, is subject to liability for
pecuniary loss caused to them by their
justifiable reliance upon the information,
if he fails to exercise reasonable care or
competence in obtaining or communicating the
information.
Integrity, 929 N.E.2d at 747.

Indiana recognized the tort of

negligent misrepresentation in the context of employer-employee
relations in Eby v. York-Division, Borg-Warner, 455 N.E.2d 623,
628-29 (Ind. Ct. App. 1983).

In Eby, the plaintiff alleged that

he had been promised a job, but when he relocated, he learned
that the job was not available.

Id. at 625.

Following the Eby decision, the Seventh Circuit described
the state of Indiana law regarding negligent misrepresentation
as “one of ‘relative chaos.’”
715, 721 (7th Cir. 1994).

Trytko v. Hubbell, Inc., 28 F.3d

The Court in Trytko noted that, since

Eby, Indiana’s appellate courts have declined to recognize the
tort outside the employment context.

Id. at 720.

Then, in 2010, the Indiana Supreme Court carved out another
exception – it allowed a claim of negligent misrepresentation by
a lender who relied upon a title search by a title insurance
company.

Integrity,

conclusion,
comment

the

regarding

Court
the

929
in
tort

N.E.2d

at

Integrity
of

In

considered

negligent

codified in the Restatement (Third):

29

749.

reaching
the

this

following

misrepresentation

as

An actor may undertake a duty when it
supplies specific information in response to
a specific request that makes it clear the
recipient intends to attach significant
importance to the information in making a
decision that exposes the recipient to a
risk
of
loss
if
the
information
is
inaccurate.
Id. (citing Restatement (Third) of Economic Torts and Related
Wrongs § 9, Cmt. F (Council Draft No. 2, 2007)).
The Indiana Supreme Court’s ruling in Integrity did not
completely eliminate the state of relative chaos described in
Trytko,

but

it

did

somewhat

clarify

misrepresentation claims in Indiana.

the

scope

of

negligent

In Integrity, it was the

lender who brought the claim for negligent misrepresentation,
and

the

Indiana

Supreme

Court

specifically

noted

that

the

insurance company could be liable to the lender under the tort
theory of negligent misrepresentation “if the title company and
the lender did not have a contractual relationship.”
Chicago

Title

Ins.

Co.,

963

N.E.2d

592,

597

Izynski v.

(Ind.

2012)(describing the Court’s holding in Integrity).

Ct.

App.

The Indiana

Supreme Court noted that Integrity had denied privity at every
stage.

Integrity, 929 N.E.2d at 745.

According to the Court,

this point was critical: “[w]ere there to be a contract between
Integrity and U.S. Bank, the parties in all likelihood would be
relegated

to

their

contractual

remedies.”

Id.

(citing

Indianapolis-Marion Cnty. Pub. Library, 902 N.E.2d at 729).

30

The

Court only considered the tort claim after it had determined
that there was not privity between the parties.

If this was not

clear enough, later, in a footnote, the Court again noted that
it

does

not

“adopt

the

proposition

that

a

tort

claim

for

negligent misrepresentation may be brought where the parties are
in contractual privity.”

Integrity, 929 N.E.2d at 749; see also

Izynski, 963 N.E.2d at 597.
Troyer asserts in one of its briefs that it is in privity
with United.7 (DE 70 at 12, n. 44).

Based on this concession, it

would appear at first glance that Integrity would direct that
summary judgment be granted in United’s favor.
Troyer’s

assertion

of

privity,

the

Court

However, despite

cannot

ignore

the

capacity in which Troyer brings the claim: this suit is about
life insurance proceeds, and Troyer’s alleged damages do not
flow from its status as owner of the policy but its status as
beneficiary.

Accordingly,

while

Troyer

is

in

privity

of

contract with United, under the facts of this case, it is not
clear that the insistence on a lack of privity in Integrity
would bar this claim.
This

Court

must,

therefore,

consider

whether,

based

on

Integrity, it is likely that Indiana would recognize the tort of
negligent misrepresentation under the facts of this case.

7

Troyer relies on its asserted contractual privity to support its argument
that its bad faith claim is permissible.

31

In

other words, is the difference between title insurance and life
insurance such that the concepts adopted by the Indiana Supreme
Court in Integrity are transferable to this context?
Troyer notes that, in Integrity, the Court relied upon the
fact

that

title

commitments

are

normally

relied

upon

by

insureds, that there was an advisory relationship between the
commitment

issuer

and

the

plaintiff,

that

the

issuer

had

superior knowledge and was in the business of providing such
knowledge, and that the information was provided in response to
a specific request and designed to guide the plaintiff in making
a decision.

See Integrity, 929 N.E.2d at 748-49.

some of these same factors are present here.

Certainly,

But Integrity also

relied upon prior Indiana cases that showed a willingness in the
title insurance industry to go beyond the terms of the insurance
contract and explore the existence of a duty in tort.

Id. at

748 (citing Altman v. Circle City Glass Corp., 484 N.E.2d 1296,
1300 (Ind. Ct. App. 1985) and Lawyers Title Ins. Corp. v. Capp,
174 Ind. App. 633, 637 n.1, 369 N.E.2d 672, 674 n.1 (1977)).
While Troyer’s argument that Integrity would allow for the tort
of negligent representation under the facts of this case is
certainly not frivolous, it does represent an expansion of the
tort as currently recognized in Indiana.
role

to

expand

upon

the

availability

It is not this Court’s
of

tort

remedies

Indiana has made clear are to be very limited in scope.
32

that
In

solidarity with other judges of this Court, “a more expansive
view of the tort than that adopted to date in Indiana” will not
be adopted here.
577,

598

(N.D.

Mart v. Forest River, Inc., 854 F. Supp. 2d
Ind.

2012)

(quoting

Trytko,

28

F.3d

at

721,

quoting in turn Indus. Dredging & Eng’g v. S. Ind. Gas & Elec.
Co., 840 F.2d 523, 526 (7th Cir. 1988)).

Accordingly, summary

judgment will be granted in United’s favor on Troyer’s negligent
misrepresentation claim.

Troyer’s Bad Faith Claim
Insurers
insured.

have

duty

to

deal

in

good

with

their

that

“the

A plaintiff can demonstrate bad faith by
insurer

had

knowledge

legitimate basis for denying liability.”
Ins.

faith

Erie Ins. Co. v. Hickman by Smith, 622 N.E.2d 515,

518-19 (Ind. 1993).
showing

a

Co.,

774

N.E.2d

37,

40

(Ind.

that

there

was

no

Friedline v. Shelby

2002).

“As

a

general

proposition, ‘[a] finding of bad faith requires evidence of a
state

of

mind

reflecting

dishonest

furtive design, or ill-will.”

purpose,

moral

obliquity,

Monroe Guar. Ins. Co. v. Magwerks

Corp., 829 N.E.2d 968, 977 (Ind. 2005)(quoting Colley v. Ind.
Farmers Mut. Ins. Group, 691 N.E.2d 1259, 1261 (Ind. Ct. App.
1998)).

Mere negligence is insufficient to support a claim of

bad faith.

Erie, 622 N.E.2d at 520.

33

But, “an insurer which

denies liability knowing that there is no rational, principled
basis for doing so has breached its duty.”

Id.

In Indiana, third-party beneficiaries cannot sue an insurer
in tort for bad faith.
(Ind. 2006).

See Cain v. Griffin, 849 N.E.2d 507, 515

In Cain, the plaintiff slipped and fell in a

restaurant parking lot.
covering

claims

plaintiff.

for

That restaurant had an insurance policy
injuries

like

those

alleged

by

the

The plaintiff claimed that the restaurant’s insurer

acted with bad faith toward her.

The Court noted that the

obligation in tort to act in good faith arises not just from the
contractual relationship between the insurer and insured, but
from the “special relationship” that exists between them.
at 510.

Id.

The Court in Cain held “that a third-party beneficiary

may sue the insurer directly to enforce the contract between the
insurer and the insured...[b]ut [the court did] not find…that a
third-party

beneficiary

and

the

insurer

[had]

the

‘special

relationship’ described in Erie that would impose on the insurer
a duty under tort law to deal with the third party in good
faith.”
could

Id.
not

at 514-15.

bring

a

bad

restaurant’s insurer.

Accordingly, the injured plaintiff
faith

claim

in

tort

against

the

Id.

One year after the Cain decision, this Court questioned
whether the Cain holding applied to the facts of the Eberle
case.

Eberle v. Prudential Ins. Co., 2007 WL 541821, at *10.
34

(N.D.Ind. Feb. 14, 2007).

The Court noted that, based on the

facts of the case, “Eberle seems to be more than a third party
beneficiary.”

Id.

However,

that

statement

was

ultimately

dicta: this Court dismissed the bad faith claim because there
was not sufficient evidence of bad faith to survive summary
judgment.

Id.

In 2006, the Indiana Court of Appeals, in an unpublished
case, addressed Cain in the context of a claim of bad faith by a
beneficiary of a life insurance contract.

Blesch v. American

General Life Ins., No. 82A05-0512-CV-701, 2006 WL 3593491, at *2
(Ind. Ct. App. Dec. 12, 2006).

In Blesch, the Court noted that

the Indiana Supreme Court had “recently addressed the status of
beneficiaries under insurance policies in Cain…” and concluded
that “they were not in a fiduciary relationship so that the
third-party

beneficiary

fiduciary duty.”

Id.

might

sue

in

tort

for

breach

of

Thus, Indiana courts have applied the

Cain holding to a situation factually similar to the one before
this Court.
The issue was addressed more recently by the Indiana Court
of Appeals in another unpublished opinion. Cashner v. WesternSouthern

Life

Assurance

Co.,

No.

64A04-1311-PL-555,

2918272 (Ind. Ct. App. June 25, 2014).8

8

2014

WL

Cynthia Cashner, who had

The Cashner opinion was issued after the parties filed their briefs in this
case.

35

a life insurance policy with Western-Southern, was murdered by
her husband.

Her husband was the Class I beneficiary of the

policy, and Cashner’s parents were the class II beneficiaries of
the policy.

Because Cashner was murdered by her husband, he was

disqualified from receiving the insurance proceeds and a dispute
arose between Cashner’s estate and her parents (the Class II
beneficiaries)
proceeds.
claim

regarding

who

should

get

the

life

insurance

Ultimately, Cashner’s parents brought a bad faith

against

Western-Southern.

The

bad

faith

claim

was

dismissed and Western Southern was awarded costs and attorney’s
fees.

Cashner’s parents appealed the order granting costs and

attorney’s fees.

The Court of Appeals held that, in awarding

attorney’s fees, the trial court implicitly found that Cashner’s
parents’ bad faith claim was frivolous.

On appeal, Cashner’s

parents argued that their position was not frivolous, citing to
the dissent in Cain and this Court’s decision in Eberle.

Like

Troyer, Cashner’s parents attempted to distinguish the facts of
their case from Cain, noting that they were more than thirdparty beneficiaries.

Id. at *3.

The Indiana Court of Appeals

correctly called this Court’s commentary in Eberle dicta, noted
that even if it were not dicta it would not be binding upon it,
and found that there was no valid legal basis under Indiana law
for Cashner’s parents’ bad faith claim.
of attorney’s fees was affirmed.
36

Id.

Id. at *4.

The award

Although both Blesch and Cashner were unpublished opinions,
these cases, taken together, show unwillingness on the part of
Indiana Courts to make exceptions to the Indiana Supreme Court’s
holding in Cain.

Troyer, like Eberle and Cashner’s parents, has

argued that it is more than a third-party beneficiary.

And,

perhaps, its argument is more persuasive than that of either
Eberle or Cahsner: although not an insured, as owner of the
policy,

Troyer

is

in

privity

of

contract

with

United.

But

privity alone has never been enough in Indiana to substantiate
the type of special relationship needed to impose a tort duty to
act in good faith. Cain, 849 N.E.2d at 510.

And, Troyer’s bad

faith claim does not arise from its status as owner of the
policy; it arises from Troyer’s status as beneficiary of the
policy.

Troyer has pointed to no legal authority that would

demonstrate it is entitled to bring a bad faith claim against
United.9

This Court can find no meaningful distinction between

Troyer’s

bad

faith

claim

and

the

9

type

of

bad

faith

claim

The Court notes that Troyer’s reliance on Rex Ins. Co. v. Baldwin, 323
N.E.2d 270 (Ind. App. 1975), as precedent for allowing a bad-faith judgment
with punitive damages is wholly unfounded. The Rex case was not based on a
tort theory of liability at all – it was based on breach of contract, at a
time when Indiana allowed punitive damages in breach of contract cases. Id.
Rex was decided in 1975; since then, Indiana’s law has changed such that
Indiana does not allow punitive damages to be recovered in breach of contract
actions.
See Miller Brewing Co. v. Best Beers of Bloomington, Inc., 608
N.E.2d 975 (Ind. 1993)(“We hold that in order to recover punitive damages in
a lawsuit founded upon a breach of contract, the plaintiff must plead and
prove the existence of an independent tort of the kind for which Indiana law
recognizes that punitive damages may be awarded.”).

37

prohibited by the Indiana Supreme Court in Cain.

Accordingly,

summary judgment will be granted on Troyer’s bad faith claim.

United’s claim for Indemnification or Contribution from Buck
Count

I

contribution

of
and/or

requested

that

United’s

claim

this

United’s

Third-Party

indemnification
Court

seeking

enter

Complaint

against
judgment

contribution

alleges

Buck.

Buck

in

favor

and/or

his

has
on

indemnification.

United argues that the Court should delay ruling on this claim
until it is found that United is liable to Troyer.

Indeed, if

United

claim

has

no

contribution

or

liability

to

indemnification

Troyer,
against

United’s
Buck

would

be

for
moot.

While this Court is tempted to follow this course, ultimately,
because Buck has argued that United’s claims against him are
legally deficient, the issue is ripe for ruling and a delay in
ruling is unfounded.

Summary judgment exists for this reason –

to weed out unmeritorious claims without forcing a litigant to
endure the hardship of further litigation.
The facts presented in Buck’s motion for summary judgment
largely parrot the facts presented earlier in the context of
Troyer’s motion for summary judgment.

Ultimately, Buck’s motion

for summary judgment turns not on any disputed facts but the
law, so the Court will not spend time sifting through minor

38

discrepancies

between

Buck’s

summary

judgment

motion

and

the

facts as set out above.
Contribution
Buck argues that United’s claim for contribution must fail
on summary judgment because Indiana has abolished common law
contribution, and even before the abolishment, it only applied
to

joint

complaint

tortfeasors.
makes

Additionally,

clear

that

Buck

United

is

argues

that

really

the

seeking

indemnification rather than contribution.
Contribution

is

defined

as

follows

in

Black’s

Law

Dictionary:
1. The right that gives one of several persons who are
liable on a common debt the ability to recover ratably
from each of the others when that one person discharges
the debt for the benefit of all; the right to demand that
another who is jointly responsible for a third party’s
injury supply part of what is required to compensate the
third party. – Also termed right of contribution.
2. A tortfeasor’s right to collect from others responsible
for the same tort after the tortfeasor has paid more than
his or her proportionate share, the shares being
determined as a percentage of fault.
3. The
actual
payment
by
a
joint
proportionate share of what is due.

tortfeasor

of

a

Black’s Law Dictionary 329 (7th ed. 1999).
Contribution involves the partial reimbursement of one who
has

discharged

a

common

liability.

N.E.2d 400 (Ind. Ct. App. 1994).

Mullen

v.

Cogdell,

Indemnity, on the other hand,

requires full reimbursement of the common liability.
39

643

Id.

A

review of the Third-Party Complaint makes clear that United is
seeking full reimbursement, not partial:
To the extent that Buck improperly received
any of the proceeds from the death benefit
paid by United of Omaha under the Policy,
Buck owes a duty to United of Omaha for
contribution and indemnity for all amounts
incurred by United of Omaha as a result of
Buck’s wrongdoing.
(DE 14 at ¶ 23).

United did not respond to Buck’s argument

that, in actuality, what United seeks is full indemnification not

partial

contribution.

Because

Buck’s

argument

is

well-

founded and United has offered no response, this Court finds
that the relief requested in the Third-Party Complaint, despite
the label, is more appropriately categorized as indemnification
rather than contribution.10

10

Buck also argues that United’s contribution claim must fail because it has
been abolished in Indiana, but that argument is less persuasive.
In tort
cases, contribution has been abolished in Indiana:
In an action under this chapter…there is no right of
contribution
among
tortfeasors.
However,
this
section does not affect any rights of indemnity.

Ind. Code. § 34-51-2-12. But, the status of contribution in Indiana actions
arising under contract law rather than tort law is unclear.
At least one
case has found that, because fault is not an issue in breach of contract or
breach of warranty claims, cross-claims for breach of contract and warranty
were not barred by the ban on contribution set forth in I.C. § 34-51-2-12.
See Elanco Animal Health v. Archer Daniels Midland Co., 1:08cv386-RLY-TAB,
2008 WL 4371339, at *3 (S.D. Ind. Sept. 18, 2008). Elanco, however, did not
involve a stand-alone claim for contribution.
Furthermore, the case is not
binding on this Court. Nonetheless, this issue need not be decided because
the plain language of the Third-Party Complaint makes clear that United is
seeking not partial but full reimbursement, and thus the claim is more
properly treated as a claim for indemnification.

40

Indemnification
According

to

Buck,

indemnification

is

not

available

to

United because: (1) United is not without fault; (2) United’s
liability to Troyer is not derivative or constructive; and (3)
Buck has committed no wrongful act.
The

Indiana

Supreme

Court

summarized

Indiana’s

law

regarding indemnification in Rotec v. Murray as follows:
Generally, the right of indemnification
arises only by contract, express or implied,
or by statutory obligation.
However, a
right to indemnity may be implied at common
law.
In the absence of any express
contractual
or
statutory
obligation
to
indemnify, such action will lie only where
a party seeking indemnity is without actual
fault but has been compelled to pay damages
due to the wrongful conduct of another for
which he is constructively liable.
Rotec v. Murray Equip., Inc., 626 N.E.2d 533 (Ind. Ct. App.
1994)(citations omitted).
available

to

“one

In addition, indemnification is only

whose

liability

to

another

is

solely

derivative or constructive and only against one whose wrongful
act

has

caused

such

liability

to

be

imposed.”

Mullen

v.

Cogdell, 643 N.E.2d 390, 400 (Ind. Ct. App. 1994).
If

liable

to

Troyer,

derivative nor constructive.

that

liability

will

be

neither

Derivative liability is liability

for a wrong that a person other than the one wronged has a right
to redress.

See Black’s Law Dictionary 925-26 (7th ed. 1999).

Here, Troyer seeks a judgment on its own behalf – there is no
41

other person or entity who is seeking a judgment on behalf of
another injured party.
are

based

on

direct

All of Troyer’s claims against United
liability:

that

United

breached

its

contract, that United made a negligent representation, and that
United breached the duty of good faith and fair dealing.11

In

other words, each claim is based on United’s acts, not Buck’s.
Troyer is not seeking liability based on any wrongful act of
Buck.
Again, United made no argument that Troyer’s claims against
it were derivative or constructive.

If United is liable to

Troyer, United hints that it is because the fact-finder did not
believe Buck’s version of events surrounding the December 15,
2011, Board meeting.

And, according to United, if the events of

that Board meeting were not as Buck says they were, then Buck
did

engage

fraud.

in

wrongdoing;

namely,

Buck

engaged

in

insurance

But, if United wanted to make a claim against Buck for

insurance fraud, they could have done so.

They did not, and the

fact that Buck could be liable to United on a claim that United
has not asserted is not enough to support indemnification in
Indiana.

In other words, while perhaps Buck should not get

$1,000,000 free and clear if he engaged in wrongdoing, United

11

Because Troyer’s claims of negligent misrepresentation and bad faith fail
on summary judgment, they could be completely disregarded here. Nonetheless,
the Court has considered them to demonstrate that the result of Buck’s
summary judgment motion would not be altered if the claims of negligent
misrepresentation and bad faith had survived summary judgment.

42

cannot

short-circuit

the

litigation

process

by

seeking

indemnification without making its direct legal claim against
Buck.

Buck is not liable to Troyer for breach of contract,

negligent

misrepresentation,

or

bad

faith,

and

he

therefore

cannot be forced to indemnify United on those claims.
Similarly, United suggests that, if a fact-finder rejects
Buck’s

version

of

events

at

the

December

15,

2011,

Board

meeting, then Buck may be liable to Troyer for breach of his
fiduciary duties to the corporation.

Again, Troyer has not sued

Buck for breach of fiduciary duties.

But, even if it had, if

United is found liable on the current claims Troyer has lodged
against it, that liability is due to United’s own acts - breach
of contract, negligent misrepresentation, or bad faith – not due
to any breach of fiduciary duty by Buck.
Accordingly, indemnification is not available to United.
Whether

other

remedies

exist

is

for

United’s

attorneys

to

determine.
Superseding / Intervening Cause.
In

its

response

to

Buck’s

motion

for

summary

judgment,

United argues for the first time that Buck “is a superseding or
intervening cause of Troyer’s damages, and he should be held
liable to Troyer in tort.”

(DE 73 at 8).

United asks this

Court to “look beyond the formal names of causes of action and
construe the allegations as appropriate.”
43

(Id.).

According to

United,

their

claim

for

contribution

or

indemnification

is

really a claim that Buck should be held accountable for Troyer’s
damages as a superseding or intervening cause.
The

doctrine

of

superseding

or

(Id.).

intervening

cause

was

described by the Indiana Supreme Court in Control Techniques,
Inc. v. Johnson:
The doctrine of superseding or intervening
causation has long been part of Indiana
common law.
It provides that when a
negligent act or omission is followed by a
subsequent negligent act or omission so
removed in time that it breaks the chain of
causation,
the
original
wrongdoer
is
relieved of liability.
A subsequent act is
“superseding” when the harm resulting from
the original negligent act “could not have
reasonably been foreseen by the original
negligent actor.”
Whether the resulting
harm is “foreseeable” such that liability
may be imposed on the original wrongdoer is
a question of fact for a jury.
Control Techniques, Inc. v. Johnson, 762 N.E.2d 104, 107 (Ind.
2002)(citations omitted).
United’s argument is problematic for two reasons.
the

issue

is

being

raised

response to summary judgment.

by

United

for

the

first

First,
time

in

See Shanahan v. City of Chi., 82

F.3d 776, 781 (7th Cir. 1996)(“A plaintiff may not amend his
complaint through arguments in his brief in opposition to a
motion for summary judgment.”); Howard v. Ealing, 876 F.Supp.2d
1056, 1072 (N.D. Ind. 2012).

Secondly, the theory United relies

upon is an affirmative defense to liability, not a separate
44

cause of action.

See Houseman v. U.S. Aviation Underwriters,

171 F.3d 1117, 1127 (7th Cir. 1999); Fed. Deposit Ins. Co. v.
Mahajan,

923

F.Supp.2d

1133,

1141

(N.D.

Ill.

2013).

Accordingly, this Court declines United’s invitation to treat
its claim for contribution or indemnification as a claim based
on Buck being a superseding or intervening cause.

If such a

cause of action exists (and that is doubtful), United will need
to follow the normal procedure for amending its complaint or
file a separate cause of action based on this theory.
For
judgment

all

of

is

these

granted

reasons,

as

to

Buck’s

Count

I

of

motion
United’s

for

summary

Third-Party

Complaint.

United’s Claim for Prejudgment Attachment
Count
alleges

IV

of

United’s

Prejudgment

Third-Party

Attachment.

Complaint

Buck

argues

judgment motion that this count is moot.

in

against
his

Buck

summary

Indeed, a motion for

prejudgment writ of attachment was filed early in the litigation
and later withdrawn by agreement of the parties.

Although no

party

Third-Party

ever

Complaint,

moved
United’s

to

dismiss

response

Count
to

the

IV

of

summary

the

judgment

motion

expressed no disagreement with Buck’s suggestion that the count
is moot.

Accordingly, Count IV of the Third-Party Complaint is

DISMISSED AS MOOT.

45

CONCLUSION
For

the

foregoing

reasons,

Troyer

Products’

request

for

oral argument (DE 72) is DENIED; Troyer Products’ Motion for
Partial Summary Judgment (DE 60) is DENIED; United of Omaha Life
Insurance Company’s Motion for Partial Summary Judgment (DE 65)
is DENIED as to Count I (breach of contract) and GRANTED as to
Counts II (negligent misrepresentation) and III (bad faith); and
David A. Buck’s motion for summary judgment (DE 63) is GRANTED.
The Clerk is directed to enter judgment in favor of Buck on
Counts I and IV of the Third-Party Complaint.

This case shall

remain pending as to Count I of the Second Amended Complaint
only (the breach of contract claim).

DATED: September 29, 2014

/s/RUDY LOZANO, Judge
United State District Court

46