Opinion
Cause No. IP99-0440-C-M/S
November 3, 2000
ORDER ON MOTION FOR SUMMARY JUDGMENT
This matter comes before the Court on defendant State Farm Fire Casualty Company's ("State Farm") motion for summary judgment on plaintiff Cancer and Blood Disease Center's (the "Center") claims for breach of an insurance contract and bad faith denial of a claim. The Center has voluntarily withdrawn the bad faith denial claim, so the only issue left for resolution is the Center's breach of contract claim. The Court has fully considered the parties' arguments and, for the reasons discussed below, GRANTS State Farm's motion for summary judgment.
I. FACTUAL BACKGROUND
The Center operated a business and leased space in a hospital complex in Richmond, Indiana. Statement of Undisputed Facts ¶ 1. State Farm insured the Center under a policy covering the Center's business personal property and loss of income. Id. ¶ 2. The policy had an effective date of March 7, 1996 and expired on March 7, 1997. Id.
On or around March 5, 1997, the Center noticed that its business computer was malfunctioning. Id. ¶ 3. Computer Business Solutions, Inc. ("CBSI") examined the computer and indicated in writing to the Center that the computer had experienced a severe voltage surge resulting in damage to its hard drive. Id. ¶¶ 4-5. The opinion that a voltage surge had caused the damage was an "educated guess," and there was no direct evidence that would support this allegation. Id. ¶ 30. CBSI sent the computer to Ontrack Data Recovery, Inc. to determine if the data could be recovered from the disk. Id. ¶ 6. Ontrack Data Recovery was unable to recover data from the damaged computer medium as it was too heavily damaged. Id. ¶ 7. According to Ontrack Data Recovery, the damage could have been caused by any one or a combination of factors including, but not limited to, hardware failure, human error, software malfunction, computer viruses, natural disasters, and computer crimes. Id. ¶ 25.
The Center submitted a claim to State Farm agent Jerry Lane ("Lane") on March 18, 1997, alleging that a severe power surge damaged its computer and caused the loss of data. Id. ¶ 8. Accompanying the loss report was the CBSI letter dated March 13, 1997. Id. ¶ 9. The Center relied upon this assessment in making its claim under the policy. Id. ¶ 31. On or around March 21, 1997, State Farm verbally and then with a follow-up letter denied the claim based on the letter from CBSI and the company's internal investigation. Id. ¶ 12. On August 19, 1997, the Center requested an appeal of the adjuster's decision. Id. ¶ 13. On August 27, 1997, State Farm notified the Center that its original decision would stand. Id. ¶ 14.
The State Farm policy contains the following clause:
SECTION I — LOSSES INSURED AND LOSSES NOT INSURED
Losses Insured.
We insure for accidental direct physical loss to property covered under this policy unless the loss is:
1. limited in the PROPERTY SUBJECT TO LIMITATIONS section; or
2. excluded in the LOSSES NOT INSURED section that follows.
* * * * Losses Not Insured
* * * *
2. We do not insure for loss either consisting of, or directly and immediately caused by, one or more of the following:
a. artificially generated electrical current, including electric arcing, that disturbs electrical devices, appliances, or wires.
But if accidental direct physical loss by fire results, we will pay for the resulting loss.
Id. ¶ 16.
On March 19, 1999, State Farm received a technical report entitled Strikefax Lightning Verification Report from Global Atmospherics, Inc. Id. ¶ 17. The report will validate the presence of lightning using data from the National Lightning Detection Network. Id. ¶ 18. The report indicated that lightning had not been detected within five miles of the Center from the dates of March 3 to March 7, 1997. Id. ¶ 19.
The Center filed suit in Wayne Superior Court on March 5, 1999 alleging that State Farm unlawfully denied its insurance claim. The Center alleged that during the course of an electrical storm its premises experienced a surge of electrical power that caused substantial accidental direct physical loss to its computer systems and equipment. On April 6, 1999, State Farm removed the matter to this court based upon diversity jurisdiction. State Farm filed a motion for summary judgment on August 22 and the matter is now ripe for ruling.
II. STANDARDS A. SUMMARY JUDGMENT STANDARDS
As stated by the Supreme Court, summary judgment is not a disfavored procedural shortcut, but rather is an integral part of the federal rules as a whole, which are designed to secure the just, speedy, and inexpensive determination of every action. Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986); see United Ass'n of Black Landscapers v. City of Milwaukee, 916 F.2d 1261, 1267-68 (7th Cir. 1990), cert. denied, 111 S. Ct. 1317 (1991). Motions for summary judgment are governed by Rule 56(c) of the Federal Rules of Civil Procedure, which provides in relevant part:
The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.
Once a party has made a properly-supported motion for summary judgment, the opposing party may not simply rest upon the pleadings but must instead submit evidentiary materials which "set forth specific facts showing that there is a genuine issue for trial." Fed.R.Civ.P. 56(e). A genuine issue of material fact exists whenever "there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). The nonmoving party bears the burden of demonstrating that such a genuine issue of material fact exists. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986); Oliver v. Oshkosh Truck Corp., 96 F.3d 992, 997 (7th Cir. 1996), cert. denied, 520 U.S. 1116 (1997). It is not the duty of the court to scour the record in search of evidence to defeat a motion for summary judgment; rather, the nonmoving party bears the responsibility of identifying the evidence upon which he relies. Bombard v. Fort Wayne Newspapers, Inc., 92 F.3d 560, 562 (7th Cir. 1996). When the moving party has met the standard of Rule 56, summary judgment is mandatory. Celotex, 477 U.S. at 322-23; Shields Enters., Inc. v. First Chicago Corp., 975 F.2d 1290, 1294 (7th Cir. 1992).
In evaluating a motion for summary judgment, a court should draw all reasonable inferences from undisputed facts in favor of the nonmoving party and should view the disputed evidence in the light most favorable to the nonmoving party. Estate of Cole v. Fromm, 94 F.3d 254, 257 (7th Cir. 1996), cert. denied, 519 U.S. 1109 (1997). The mere existence of a factual dispute, by itself, is not sufficient to bar summary judgment. Only factual disputes that might affect the outcome of the suit in light of the substantive law will preclude summary judgment. Anderson, 477 U.S. at 248; JPM Inc. v. John Deere Indus. Equip. Co., 94 F.3d 270, 273 (7th Cir. 1996). Irrelevant or unnecessary facts do not deter summary judgment — even when in dispute. Clifton v. Schafer, 969 F.2d 278, 281 (7th Cir. 1992). "If the nonmoving party fails to establish the existence of an element essential to his case, one on which he would bear the burden of proof at trial, summary judgment must be granted to the moving party." Ortiz v. John O. Butler Co., 94 F.3d 1121, 1124 (7th Cir. 1996), cert. denied, 519 U.S. 1115 (1997). With this standard in mind, the Court will now address State Farm's motion for summary judgment.
III. DISCUSSION
As a federal court sitting in diversity, we must evaluate Indiana law as it pertains to this dispute. Heritage Mut. Ins. Co. v. Advanced Polymer Technology, Inc., 97 F. Supp.2d 913, 918 (S.D. Ind. 2000), citing Colip v. Clare, 26 F.3d 712, 714 (7th Cir. 1994). The parties do not dispute that our analysis is governed by Indiana's substantive law. Under Indiana law, a contract for insurance is subject to the same rules of interpretation as are other contracts. Id., citing USA Life One Ins. Co. v. Nuckolls, 682 N.E.2d 534, 537-38 (Ind. 1997). The interpretation is "primarily a question of law for the court, even if the policy contains an ambiguity needing resolution." Id., quoting Tate v. Secura Ins., 587 N.E.2d 665, 668 (Ind. 1992). The insured is required to prove that her claims fall within the coverage provision of her policy, but the insurer bears the burden of proving specific exclusions or limitations to policy coverage. Erie Ins. Group. v. Sear Corp., 102 F.3d 889, 892 (7th Cir. 1996) (applying Indiana law).
The Center's initial claim under the policy, the claims in its Complaint, and its answers to interrogatories alleged that a weather-related event caused a surge of electricity that damaged its computer system. See Pl.'s Opposition Brief at p. 11. The Center claimed that as a result, it suffered an "accidental direct physical loss" to property covered under its policy with State Farm. After State Farm filed its motion for summary judgment and accompanying brief — which included data indicating that there was no lightning in the vicinity of the Center on the date the damage allegedly occurred — the Center retreated from its initial position. It now asserts that its computer consultant's report that it relied upon for submitting the claim is "highly suspect," and that the real cause of the damage to its computer is unknown. In fact, it claims that the damage could have been caused by any number of factors, including hardware failure, human error, software malfunction, computer viruses, natural disasters, and computer crimes. It also asserts that had State Farm not relied upon the CBSI report and performed a more thorough investigation, it may have determined the actual cause of the damage. According to the Center, the fact that the cause of the damage is unknown demonstrates a "real factual dispute concerning the cause of the Center's loss." Pl.'s Opposition Brief at p. 14.
The Court disagrees. As the Center acknowledges, it has the initial burden of establishing that its claim falls within the coverage of the policy. In other words, it must initially show that it suffered an "accidental direct physical loss," a term that the policy does not define. Where a policy is clear and unambiguous, however, its terms should be given their plain and ordinary meaning. Worth v. Tamarack American, Div. of Great American, 47 F. Supp.2d 1087, 1095 (S.D. Ind. 1999), aff'd., 210 F.3d 377 (7th Cir. 2000).
The Center argues that because State Farm is relying upon an exclusion in denying coverage, it had the burden of establishing that the exclusion was applicable. Pl.'s Opposition Brief at p. 11. The Center is correct that in its opening brief State Farm relied upon an exclusion in the policy to justify its position. After the Center retracted its position that a weather-related event caused the damage, however, State Farm argued in its reply brief that the policy did not provide coverage, period. Because the Court has determined that the Center has not demonstrated it was entitled to coverage, the Court need not address whether any exclusion applied.
Even assuming the Center has established that it suffered a direct physical loss, it has produced no evidence that the loss was "accidental." In the context of insurance contracts, that term has been defined as follows:
An accident within accident insurance policies is an event happening without any human agency, or, if happening through such agency, an event which, under circumstances, is unusual and not expected by the person to whom it happens. A more comprehensive term than `negligence,' and in its common signification the word means an unexpected happening without intention or design.
BLACK'S LAW DICTIONARY 15 (6th ed. 1990). Instead of offering evidence of an "accidental" loss, the Center simply claims that the cause of its damage is unknown. The Court refuses to speculate, however, that because the cause of its loss is unknown, it must have been accidental and therefore covered under State Farm's policy. With no evidence of an accidental loss, the Center has failed to meet its burden of establishing coverage under State Farm's policy. See Hartford Fire Ins. co. v. Wolf Bldg. Co., 92 F.2d 776, 777 (7th Cir. 1937) (reversing judgment for insured where policy insured against "all Direct Loss and Damage by Windstorm, Cyclone, and Tornado . . . .," yet there was no evidence that the loss resulted from an alleged storm or storms). Accordingly, the Court GRANTS State Farm's motion for summary judgment.
IV. CONCLUSION
The Center has failed to present sufficient evidence from which the Court could find a genuine issue of material fact on its claim that State Farm unlawfully denied its claim. Accordingly, State Farm's motion for summary judgment is GRANTED.