IN THE
Court of Appeals of Indiana Doug Williams and W.W. Contracting, Inc., FILED Appellants-Petitioners Mar 04 2024, 8:30 am
CLERK Indiana Supreme Court Court of Appeals v. and Tax Court
Pekin Insurance, Inc., Appellee-Respondent
March 4, 2024 Court of Appeals Case No. 23A-PL-995 Appeal from the Tippecanoe Superior Court The Honorable Steven P. Meyer, Judge Trial Court Cause No. 79D02-2107-PL-77
Opinion by Judge Weissmann Chief Judge Altice and Judge Kenworthy concur.
Court of Appeals of Indiana | Opinion 23A-PL-995 | March 4, 2024 Page 1 of 8 Weissmann, Judge.
[1] W.W. Contracting, Inc. and its owner, Doug Williams (collectively, W.W.),
entrusted tools to a W.W. employee but demanded their return at the end of his
employment. When the now-former employee allegedly failed to return all the
tools, W.W. reported them as stolen and sought insurance coverage for the
alleged theft. W.W.’s insurance company denied the claim primarily because
W.W.’s insurance policy excluded coverage for property loss “caused by or
resulting from dishonest acts by anyone entrusted with the property.”
[2] W.W. sued its insurance company for breach of contract, but the trial court
granted summary judgment in the insurer’s favor. On appeal, W.W. claims
there remains a genuine issue of material fact as to whether a dishonest act
occurred because the insurer was unable to determine if W.W.’s former
employee actually stole its tools. Assuming a dishonest act occurred, W.W. also
claims its former employee was no longer a person entrusted with the tools after
W.W. demanded their return. We resolve these issues as follows:
1. The insurance company was not required to prove the occurrence of a dishonest act when moving for summary judgment based on the subject exclusion because W.W. alleged a dishonest act as its basis for coverage.
2. The exclusion requires only a causal connection between the act of entrustment and the resulting loss; thus W.W.’s demand that its former employee return its tools did not render the exclusion inapplicable.
Affirmed.
Court of Appeals of Indiana | Opinion 23A-PL-995 | March 4, 2024 Page 2 of 8 Facts [3] W.W. employed Dante Wells from December 2017 to January 2019. During
this time, Wells allowed W.W. to store its company tools on a piece of real
estate Wells owned in Tippecanoe County. In exchange, W.W. allowed Wells
to use the tools for “side work” in his own name. App. Vol. II, p. 88.
[4] In March 2019, after Wells stopped working for W.W., the company demanded
that Wells return the tools stored on his property. When Wells refused, W.W.
reported the tools as “stolen” to the Tippecanoe County Sheriff’s Department
and sued Wells for replevin. Id. at 120. Wells eventually returned what he
claimed were all of W.W.’s tools. But upon inventorying the returned items,
W.W. determined that “a lot of tools” were missing. Id. at 92. W.W. therefore
submitted an insurance claim to its insurance company, alleging Wells stole the
missing tools.
[5] At all relevant times, W.W. Contracting, Inc. was the named insured on a
commercial general liability insurance policy (the Policy) issued by Pekin
Insurance (the Insurer). Among other things, the Policy provided coverage for
“accidental loss” to W.W.’s tools. Id. at 236. The Policy, however, also
contained the following exclusions:
Dishonest Act/Entrusted Person
“We will not pay for a ‘loss’ caused by or resulting from dishonest acts by anyone entrusted with the property.”
Court of Appeals of Indiana | Opinion 23A-PL-995 | March 4, 2024 Page 3 of 8 Unexplained Disappearance
“We will not pay for a ‘loss’ caused by or resulting from unexplained disappearance.”
Id. at 235 (cleaned up).
[6] The Insurer investigated W.W.’s insurance claim, in part, by interviewing
Williams and Wells about the loss. Wells denied having W.W.’s missing tools,
but Williams insisted that Wells never returned them. Williams therefore
assumed the tools were still in Wells’s possession, but he did not “know that for
a fact.” App. Vol. III, p. 233. If Wells no longer had the tools, Williams had
“no idea what happened to them.” Id.
[7] Through its investigation, the Insurer was not able to determine if Wells
actually stole W.W.’s tools. But either way, the Insurer concluded W.W.’s loss
was excluded from the Policy’s insurance coverage: either the dishonest
act/entrusted person exclusion applied or the unexplained disappearance
exclusion applied. The Insurer therefore denied W.W.’s insurance claim on
these two alternative bases.
[8] After receiving the denial, W.W. sued the Insurer for breach of contract
claiming Wells’s alleged theft of the tools was an accidental loss for which the
Policy provided coverage. The Insurer moved for summary judgment on
W.W.’s claim based on the Policy’s dishonest act/entrusted person exclusion
Court of Appeals of Indiana | Opinion 23A-PL-995 | March 4, 2024 Page 4 of 8 and, alternatively, the unexplained disappearance exclusion. The trial court
granted the Insurer’s motion, and W.W. appeals.1
Discussion and Decision [9] “When reviewing a summary judgment ruling, we use the same standard as the
trial court.” State Auto. Mut. Ins. Co. v. Flexdar, Inc., 964 N.E.2d 845, 848 (Ind.
2012). “The court must accept as true those facts alleged by the nonmoving
party and resolve all doubts against the moving party.” Auto-Owners Ins. Co. v.
Harvey, 842 N.E.2d 1279, 1289 (Ind. 2006) (internal quotation omitted).
Summary judgment is appropriate only if “the designated evidentiary matter
shows 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.” Ind. Trial Rule 56(C).
[10] W.W. argues that summary judgment based on the dishonest act/entrusted
person exclusion was inappropriate because there is a genuine issue of material
fact as to whether a dishonest act occurred. Alternatively, W.W. contends the
dishonest act was not committed by an entrusted person as a matter of law. We
conclude W.W.’s allegation that Wells stole its tools established the occurrence
of a dishonest act for purposes of the Insurer’s motion for summary judgment.
We also conclude that Wells was a person entrusted with W.W.’s tools as
matter of law. Because the record reveals no genuine issue of material fact and
1 W.W.’s complaint asserted two claims: breach of contract and tortious bad faith. The Insurer moved for summary judgment on both, and the trial court’s order granting the Insurer’s motion specifically entered judgment in the Insurer’s favor on “all claims.” App. II, Vol. p. 14. On appeal, W.W. indicates that its tortious bad faith claim remains pending in the trial court. The record, however, shows otherwise.
Court of Appeals of Indiana | Opinion 23A-PL-995 | March 4, 2024 Page 5 of 8 that the Insurer was entitled to judgment as a matter of law, summary judgment
was appropriate.2
I. W.W.’s Theft Allegation Established the Dishonest Act [11] As W.W. correctly points out, insurance coverage exclusions are generally
considered to be affirmative defenses upon which the insurer bears the burden
of proof. PSI Energy, Inc. v. Home Ins.
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IN THE
Court of Appeals of Indiana Doug Williams and W.W. Contracting, Inc., FILED Appellants-Petitioners Mar 04 2024, 8:30 am
CLERK Indiana Supreme Court Court of Appeals v. and Tax Court
Pekin Insurance, Inc., Appellee-Respondent
March 4, 2024 Court of Appeals Case No. 23A-PL-995 Appeal from the Tippecanoe Superior Court The Honorable Steven P. Meyer, Judge Trial Court Cause No. 79D02-2107-PL-77
Opinion by Judge Weissmann Chief Judge Altice and Judge Kenworthy concur.
Court of Appeals of Indiana | Opinion 23A-PL-995 | March 4, 2024 Page 1 of 8 Weissmann, Judge.
[1] W.W. Contracting, Inc. and its owner, Doug Williams (collectively, W.W.),
entrusted tools to a W.W. employee but demanded their return at the end of his
employment. When the now-former employee allegedly failed to return all the
tools, W.W. reported them as stolen and sought insurance coverage for the
alleged theft. W.W.’s insurance company denied the claim primarily because
W.W.’s insurance policy excluded coverage for property loss “caused by or
resulting from dishonest acts by anyone entrusted with the property.”
[2] W.W. sued its insurance company for breach of contract, but the trial court
granted summary judgment in the insurer’s favor. On appeal, W.W. claims
there remains a genuine issue of material fact as to whether a dishonest act
occurred because the insurer was unable to determine if W.W.’s former
employee actually stole its tools. Assuming a dishonest act occurred, W.W. also
claims its former employee was no longer a person entrusted with the tools after
W.W. demanded their return. We resolve these issues as follows:
1. The insurance company was not required to prove the occurrence of a dishonest act when moving for summary judgment based on the subject exclusion because W.W. alleged a dishonest act as its basis for coverage.
2. The exclusion requires only a causal connection between the act of entrustment and the resulting loss; thus W.W.’s demand that its former employee return its tools did not render the exclusion inapplicable.
Affirmed.
Court of Appeals of Indiana | Opinion 23A-PL-995 | March 4, 2024 Page 2 of 8 Facts [3] W.W. employed Dante Wells from December 2017 to January 2019. During
this time, Wells allowed W.W. to store its company tools on a piece of real
estate Wells owned in Tippecanoe County. In exchange, W.W. allowed Wells
to use the tools for “side work” in his own name. App. Vol. II, p. 88.
[4] In March 2019, after Wells stopped working for W.W., the company demanded
that Wells return the tools stored on his property. When Wells refused, W.W.
reported the tools as “stolen” to the Tippecanoe County Sheriff’s Department
and sued Wells for replevin. Id. at 120. Wells eventually returned what he
claimed were all of W.W.’s tools. But upon inventorying the returned items,
W.W. determined that “a lot of tools” were missing. Id. at 92. W.W. therefore
submitted an insurance claim to its insurance company, alleging Wells stole the
missing tools.
[5] At all relevant times, W.W. Contracting, Inc. was the named insured on a
commercial general liability insurance policy (the Policy) issued by Pekin
Insurance (the Insurer). Among other things, the Policy provided coverage for
“accidental loss” to W.W.’s tools. Id. at 236. The Policy, however, also
contained the following exclusions:
Dishonest Act/Entrusted Person
“We will not pay for a ‘loss’ caused by or resulting from dishonest acts by anyone entrusted with the property.”
Court of Appeals of Indiana | Opinion 23A-PL-995 | March 4, 2024 Page 3 of 8 Unexplained Disappearance
“We will not pay for a ‘loss’ caused by or resulting from unexplained disappearance.”
Id. at 235 (cleaned up).
[6] The Insurer investigated W.W.’s insurance claim, in part, by interviewing
Williams and Wells about the loss. Wells denied having W.W.’s missing tools,
but Williams insisted that Wells never returned them. Williams therefore
assumed the tools were still in Wells’s possession, but he did not “know that for
a fact.” App. Vol. III, p. 233. If Wells no longer had the tools, Williams had
“no idea what happened to them.” Id.
[7] Through its investigation, the Insurer was not able to determine if Wells
actually stole W.W.’s tools. But either way, the Insurer concluded W.W.’s loss
was excluded from the Policy’s insurance coverage: either the dishonest
act/entrusted person exclusion applied or the unexplained disappearance
exclusion applied. The Insurer therefore denied W.W.’s insurance claim on
these two alternative bases.
[8] After receiving the denial, W.W. sued the Insurer for breach of contract
claiming Wells’s alleged theft of the tools was an accidental loss for which the
Policy provided coverage. The Insurer moved for summary judgment on
W.W.’s claim based on the Policy’s dishonest act/entrusted person exclusion
Court of Appeals of Indiana | Opinion 23A-PL-995 | March 4, 2024 Page 4 of 8 and, alternatively, the unexplained disappearance exclusion. The trial court
granted the Insurer’s motion, and W.W. appeals.1
Discussion and Decision [9] “When reviewing a summary judgment ruling, we use the same standard as the
trial court.” State Auto. Mut. Ins. Co. v. Flexdar, Inc., 964 N.E.2d 845, 848 (Ind.
2012). “The court must accept as true those facts alleged by the nonmoving
party and resolve all doubts against the moving party.” Auto-Owners Ins. Co. v.
Harvey, 842 N.E.2d 1279, 1289 (Ind. 2006) (internal quotation omitted).
Summary judgment is appropriate only if “the designated evidentiary matter
shows 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.” Ind. Trial Rule 56(C).
[10] W.W. argues that summary judgment based on the dishonest act/entrusted
person exclusion was inappropriate because there is a genuine issue of material
fact as to whether a dishonest act occurred. Alternatively, W.W. contends the
dishonest act was not committed by an entrusted person as a matter of law. We
conclude W.W.’s allegation that Wells stole its tools established the occurrence
of a dishonest act for purposes of the Insurer’s motion for summary judgment.
We also conclude that Wells was a person entrusted with W.W.’s tools as
matter of law. Because the record reveals no genuine issue of material fact and
1 W.W.’s complaint asserted two claims: breach of contract and tortious bad faith. The Insurer moved for summary judgment on both, and the trial court’s order granting the Insurer’s motion specifically entered judgment in the Insurer’s favor on “all claims.” App. II, Vol. p. 14. On appeal, W.W. indicates that its tortious bad faith claim remains pending in the trial court. The record, however, shows otherwise.
Court of Appeals of Indiana | Opinion 23A-PL-995 | March 4, 2024 Page 5 of 8 that the Insurer was entitled to judgment as a matter of law, summary judgment
was appropriate.2
I. W.W.’s Theft Allegation Established the Dishonest Act [11] As W.W. correctly points out, insurance coverage exclusions are generally
considered to be affirmative defenses upon which the insurer bears the burden
of proof. PSI Energy, Inc. v. Home Ins. Co., 801 N.E.2d 705, 725 (Ind. Ct. App.
2004). The insured, however, retains the burden of establishing that their loss
falls within the policy’s coverage. Scottsdale Ins. Co. v. Harsco Corp., 199 N.E.3d
1210, 1219 (Ind. Ct. App. 2022). In this regard, a coverage exclusion effectively
admits the insured’s coverage allegations but asserts some additional matter
barring relief. See Willis v. Westerfield, 839 N.E.2d 1179, 1185 (Ind. 2006).
[12] Here, W.W. claimed its loss was covered by the Policy because it was caused
by Wells’s alleged theft. See Appellants’ Reply Br., p. 5 (emphasizing that W.W.
“never wavered” from its position that Wells stole its tools). The Insurer, in
turn, claimed the Policy’s dishonest act/entrusted person exclusion barred
coverage for W.W.’s loss. In raising this affirmative defense, the Insurer
essentially accepted as true W.W.’s allegation of Wells’s undisputedly dishonest
act. Thus, to prove the dishonest act/entrusted person exclusion barred
2 W.W. also argues that summary judgment based on the unexplained disappearance exclusion was inappropriate because there is a genuine issue of material fact as to whether the tools’ disappearance was unexplained. As we find the trial court appropriately entered summary judgment based on the dishonest act/entrusted person exclusion, we need not consider this alternative argument.
Court of Appeals of Indiana | Opinion 23A-PL-995 | March 4, 2024 Page 6 of 8 coverage of W.W.’s loss, the Insurer was only required to establish that Wells
was a person entrusted with W.W.’s tools.3
II. Wells Was a Person Entrusted with W.W.’s Tools [13] To “entrust” means “to commit to another with confidence.” Entrust, Merriam-
Webster Online Dictionary, https://www.merriam-webster.com/dictionary/
entrustment (last visited Feb. 20, 2024). W.W. does not dispute that it entrusted
Wells with its tools by storing them on Wells’s property during his employment
with the company. Instead, W.W. argues that its entrustment ended when
W.W. demanded Wells return the tools after his employment with the
company ended. Thus, W.W. seems to argue that the dishonest act/entrusted
person exclusion applies only if the dishonest act occurs while the insured still
has confidence in the entrusted person.
[14] We reject such a narrow construction. In the absence of any ambiguity, the
language of the Policy’s dishonest act/entrusted person exclusion “must be
given its ordinary meaning.” Colonial Penn Ins. Co. v. Guzorek, 690 N.E.2d 664,
667 (Ind. 1997). Nothing in the language of the exclusion requires that the
dishonest act be contemporaneous with the insured’s confidence in the
entrusted person. The exclusion applies broadly to loss “caused by or resulting
from” an entrusted person’s dishonest act. App. Vol. II, p. 235. As other
3 This case presents the seemingly unique circumstance in which the insured’s cause of action and the insurer’s affirmative defense effectively have an element in common. Had W.W. claimed its loss was caused by something other than a dishonest act, the Insurer would have had the burden of proving both the dishonest act and entrusted person elements of its affirmative defense.
Court of Appeals of Indiana | Opinion 23A-PL-995 | March 4, 2024 Page 7 of 8 jurisdictions have done, we construe this language to require nothing more than
a “causal connection” between the act of entrustment and the resulting loss.
2900 Rock Quarry, LLC v. Westfield Ins. Co., No. 5:16-CV-100-BO, 2017 WL
2616961, at *6 (E.D.N.C. June 15, 2017) (collecting cases).
[15] The intent of the dishonest act/entrusted person exclusion is to bar coverage for
the insured’s “misplaced confidence” in another. Van Sumner, Inc. v. Penn. Nat.
Mut. Cas. Ins. Co., 329 S.E.2d 701, 704 (N.C. Ct. App. 1985). By entrusting its
tools to Wells, W.W. placed its confidence in Wells not to steal the tools. This
misplaced confidence resulted in W.W.’s loss. The fact that W.W. no longer
had confidence in Wells at the time of his alleged theft is irrelevant under the
terms of the Policy.
[16] We affirm the trial court’s entry of summary judgment in favor of the Insurer
on W.W.’s breach of contract claim.
Altice, C.J., and Kenworthy, J., concur.
ATTORNEY FOR APPELLANT Steven Kyle Dietrich Reiling Teder & Schrier, LLC Lafayette, Indiana
ATTORNEY FOR APPELLEE Scott S. Mandarich McClure McClure & Davis Indianapolis, Indiana
Court of Appeals of Indiana | Opinion 23A-PL-995 | March 4, 2024 Page 8 of 8