On September 30, the Indiana Court of Appeals issued what may be its final decision in the decade-long case of Travelers Insurance v. Maplehurst Farms, ruling in favor of the insurance company for the second time. Judge Michael Barnes wrote for the three-judge panel.
Like another Court of Appeals case we covered recently, this case involved a leaking underground storage tank. But unlike that case, this one turned on the liability of the former owner’s insurance company rather than the former owner itself.
From 1933 to 1997, Maplehurst Farms operated a dairy facility on Holt Road in Indianapolis. In the 1950s, it installed an underground storage tank for heating oil there. As so often happens, the tank leaked and caused extensive ground contamination—but as so often happens, the leak was not discovered until decades later.
Dean Foods bought up Maplehurst in 1997 and closed the Indianapolis facility two years later. But Maplehurst retained just enough of a distinct corporate identity that when the contamination was discovered in 2000, Dean could conveniently demand that “Maplehurst” clean it up.
But since Maplehurst wasn’t really Maplehurst anymore, it took some time for the new Maplehurst to figure out that the old Maplehurst actually had liability insurance back when the leak occurred. And by that time—in 2003—Maplehurst had already entered into a cleanup agreement with the Indiana Department of Environmental Management (IDEM). By a stroke of luck, however, Maplehurst didn’t actually spend anything on the cleanup until after it had notified its long-ago insurer.
Would Travelers have to pay for costs arising from an IDEM cleanup agreement that Maplehurst entered into before giving Travelers notice, but did not actually spend money on until after giving notice?
In the policy agreement, Travelers specified that “no insureds will, except at their own cost, voluntarily make a payment, assume any obligation, or incur any expense, other than for first aid, without our consent.” The key word for this case was “incur.”
The trial court, relying in part on some confusing language in the previous Court of Appeals ruling in the case, held that Maplehurst’s costs were incurred after the notice—in other words, that a cost is not “incurred” until it is actually paid out. The Court of Appeals reversed, holding that Maplehurst “incurred” its costs when it initially entered into the cleanup agreement with IDEM, and therefore Travelers was not liable.
The case came before the Court of Appeals on an appeal of the trial court’s grant of summary judgment in favor of Maplehurst. Technically, the appellate panel only reversed that grant of summary judgment. But now that the Court of Appeals has drawn such tight boundaries around the meaning of “incur,” Maplehurst will surely find it difficult to prevail on the merits.
The case is currently awaiting a ruling on Maplehurst’s motion for rehearing before it returns to the trial court.
In its opinion, the Court of Appeals seemed to have laid down a rule that “incur” has only one legal meaning in Indiana: “bringing a liability or obligation on oneself.” That might prove problematic, since as the court noted, the word does in fact have two meanings, and in other contexts the meaning of “suffer” or “be imposed” could be closer to the mark.
It is not entirely clear why the court opted for this blanket rule rather than applying the presumption against surplusage, since the “incur” language occurs alongside “make a payment” in Maplehurst’s policy agreement.
What do you think? Do you “incur” a cost when you enter into a general agreement that will require you to pay something, or when you actually have to pay a specific amount?
By: Samuel Henderson
Valparaiso University Law School
Translator and J.D. Candidate, 2016