OSBORN v. AUTO OWNERS INSURANCE COMPANY (2025)

MEMORANDUM DECISION

[1] Francis E. Osborn (“Osborn”) appeals, following the denial of his motion to correct error, the trial court's decision (1) to allocate $71,518.31 of settlement funds to Regions Bank (“Regions”) and (2) to decline to order Regions to contribute toward attorney fees incurred in obtaining the settlement funds, where Osborn claimed Regions had been unjustly enriched. We affirm.

Facts and Procedural History

[2] In 2004, Osborn's parents—Linda O. Osborn (“Linda”) and Francis Emsley Osborn (“Francis”) (collectively, “Parents”)—obtained a mortgage (“the Mortgage”) with Regions Bank (“Regions”) to purchase residential real estate in Noblesville (“the Real Estate”), which included a trailer home (“the Home”). The Mortgage provided that “any insurance proceeds ․ shall be applied to restoration or repair of the Property,” but if “restoration or repair is not economically feasible or Lender's security would be lessened, the insurance proceeds shall be applied to the sums secured by” the Mortgage. Appellant's App. Vol. 2 p. 58–59. Parents maintained homeowner's insurance on the Real Estate through a policy (“the Policy”) with Auto Owners’ Insurance Company (“Auto Owners”). The Policy named Regions as an additional insured and contained a standard mortgage clause (“the Mortgage Clause”) providing that “[l]oss covered by the policy, if any, shall be payable to the mortgagee, as their interest may appear, under all present or future mortgages upon the property described in the Declarations of this policy in which the mortgagee may have an interest.” Id. at 92–93. The Policy also contained a subclause (“the Denial Subclause”) stating: “If [Auto Owners] den[ies] your claim, [i.e., the homeowner's claim,] such denial will not apply to a valid claim of the mortgagee,” provided the mortgagee satisfied certain conditions. Id. at 93.

[3] Linda died in September 2010, and Francis died in January 2020. After Parents died, Osborn moved into the Home, inherited the Real Estate, and continued making payments on both the Mortgage and the Policy. On May 30, 2022, the Home was destroyed by fire, prompting Osborn to file a claim with Auto Owners. When payment was not immediately forthcoming, Osborn filed a complaint against Auto Owners in June 2023, alleging Auto Owners “failed to make even a partial payment” on his claim. Id. at 14. In March 2024, Osborn and Auto Owners participated in mediation and entered into a settlement agreement (“the Settlement Agreement”). Under the Settlement Agreement, Auto Owners agreed to pay $81,000 (“the Settlement Funds”) to “[Osborn], Regions Bank, Huntington National Bank, and Plaintiff's Counsel Raymond Adler.” Ex. Vol. 3 p. 22. The Settlement Agreement also provided that, as consideration for the Settlement Funds, Osborn was obligated to “pay and fully satisfy all liens or mortgages of any kind or type as to the Property[.]” Id. at 24.

[4] On May 31, 2024, the trial court held an attorney conference and ordered Auto Owners to issue a check to the Hamilton County Clerk's Office for the benefit of the named payees “as their interest may appear.” Appellant's App. Vol. 2 p. 31. The court also permitted Osborn to add Regions and Huntington National Bank as defendants to determine the proper allocation among the payees. Regions and Huntington National Bank were then added as defendants.

[5] On June 3, 2024, Osborn filed a Motion to Determine Proper Allocation of Insurance Funds, claiming Regions was not entitled to any portion of the Settlement Funds. Therein, Osborn asserted that his counsel had “earned a contingent fee of one-third (1/3) of the sums recovered and reimbursement of expenses of litigation.” Id. at 35. On July 31, 2024, Regions filed its response, asserting it was entitled to Settlement Funds in the amount of $71,518.31—the outstanding balance on the Mortgage. The trial court held a hearing on August 12, 2024, where Osborn asked that the Settlement Funds “be set off to [Osborn] to pay attorney fees [with] the balance to [Osborn].” Tr. Vol. 2 p. 10.

[6] On August 22, 2024, the trial court issued an order allocating $71,518.31 of the Settlement Funds to Regions, with Osborn entitled to the remainder. The trial court explained that Regions was entitled to the $71,518.31—which was the balance of the mortgage—because the Mortgage Clause in the Policy was “clearly a standard ․ mortgage clause” that “entitle[d] Regions to receive proceeds to the extent of the mortgage debt.” Appellant's App. Vol. 2 pp. 9–12. The trial court also declined to order Regions to contribute toward attorney fees incurred in obtaining the Settlement Funds. On August 27, 2024, Osborn filed a motion to correct error, which the trial court denied. Osborn now appeals.

Discussion and Decision

[7] Osborn appeals following the denial of his motion to correct error, which challenged the allocation of $71,518.31 of the Settlement Funds to Regions, with no obligation for Regions to contribute toward the attorney fees Osborn incurred in reaching the Settlement Agreement with Auto Owners. In general, we review a ruling on a motion to correct error for an abuse of discretion, which occurs when the trial court's decision was clearly against the logic and effect of the facts and circumstances or it misinterpreted the law. Santelli v. Rahmatullah, 993 N.E.2d 167, 173–75 (Ind. 2013). To the extent the trial court's ruling involved a question of law, we review all questions of law de novo. Bruder v. Senaca Mortg. Servs., LLC, 188 N.E.3d 469, 471 (Ind. 2022).

I. Priority to Settlement Funds

[8] Osborn challenges the trial court's decision to allocate a portion of the Settlement Funds to Regions, where the allocation paid and satisfied the existing debt on the Mortgage. As the Indiana Supreme Court has explained: “Insurance policies are contracts ‘subject to the same rules of judicial construction as other contracts.’ ” Erie Indem. Co. v. Estate of Harris, 99 N.E.3d 625, 630 (Ind. 2018) (quoting State Farm Mut. Auto Ins. Co. v. Jakubowicz, 56 N.E.3d 617, 619 (Ind. 2016)). The meaning of a contract is a pure question of law subject to de novo review. Jakubowicz, 56 N.E.3d at 619. “When confronted with a dispute over the meaning of insurance policy terms, Indiana courts afford clear and unambiguous policy language its plain, ordinary meaning.” Estate of Harris, 99 N.E.3d at 630. Policy language is unambiguous “if reasonably intelligent policyholders could not legitimately disagree as to what the policy language means.” Id. “Where there is ambiguity, insurance policies are construed strictly against the insurer, and the policy language is viewed from the standpoint of the insured.” Jakubowicz, 56 N.E.3d at 619.

[9] We need not engage in extensive interpretation to affirm the allocation of the Settlement Funds. As Regions pointed out below and on appeal, Regions was a valid mortgagee. As a result, Regions had a lien on the Property. Ind. Code §§ 32-28-1-1, -4-1 (governing mortgage liens); Appellant's Br. p. 7 (“The Mortgage was ․ recorded in the Hamilton County Recorder's Office on April 21, 2024.”). And the Settlement Agreement mandated that Osborn “pay and fully satisfy all liens or mortgages of any kind or type as to the Property” in accepting the Settlement Funds. Ex. Vol. 3 p. 24.

[10] Osborn is challenging the allocation of $71,518.31 to Regions, which was the amount of debt on the Mortgage. In short, then, the allocation fulfilled the contractual requirement that Osborn use the Settlement Funds to fully satisfy the Mortgage. To the extent Osborn is challenging the trial court's direct allocation to Regions—as opposed to a complete allocation to Osborn, who would then be obligated to pay Regions—Osborn has not established any prejudice from the procedure used, where the trial court directly accomplished what Osborn was contractually obligated to accomplish. See Ind. Appellate Rule 66(A) (directing us to affirm any error that is harmless, i.e., “sufficiently minor so as not to affect the substantial rights of the parties”). Under these circumstances, we affirm the trial court's allocation of $71,418.31 to Regions.

II. Contribution to Attorney Fees

[11] Osborn claims the trial court should have ordered Regions to contribute to the attorney fees he incurred to secure the Settlement Funds, arguing Regions was unjustly enriched under the circumstances. Unjust enrichment is an equitable doctrine permitting a party to recover where “the circumstances are such that under the law of natural and immutable justice there should be a recovery.” Zoeller v. E. Chicago Second Century, Inc., 904 N.E.2d 213, 220 (Ind. 2009) (quoting Bayh v. Sonnenburg, 573 N.E.2d 398, 408 (Ind. 1991)). A party asserting unjust enrichment must establish that a “measurable benefit has been conferred on the defendant under such circumstances that the defendant's retention of the benefit without payment would be unjust.” Id. To implicate unjust enrichment, the “measurable benefit” to the defendant must be a new benefit, rather than the satisfaction of a pre-existing obligation, such as the plaintiff's obligation to pay a mortgage. See Flannagan v. Lakeview Loan Servicing, LLC, 184 N.E.3d 691, 698 (Ind. Ct. App. 2022).

[12] Flannagan involved essentially the same circumstances as the case at hand, where a home was destroyed by fire, the insured hired counsel who ultimately reached a settlement agreement with the insurer, and the mortgagee was given priority to the settlement funds without any obligation to contribute toward attorney fees incurred to obtain the funds. Id. at 694–95. We explained that the doctrine of unjust enrichment did not apply because the mortgagee did not receive a “new benefit” from the litigation efforts, but instead, the funds merely “reduced [the insured's] indebtedness.” Id. at 698. We distinguished the scenario involved—where the insured's efforts led to the reduction of existing debt—from a scenario involving a “common fund,” where the efforts led to the creation of new benefit. See id. In the latter scenario, equity would intervene so that “those who benefit[ted] from the creation of the fund or from the creation of any other legal benefit ․ share[d] in the expense of producing the benefit.” Id. (quoting N. Ind. Pub. Serv. Co. v. Citizens Action Coal. of Ind., Inc., 548 N.E.2d 153, 161 (Ind. 1989)).

[13] In this case, Regions—which did not direct or participate in litigation against Auto Owners—did not obtain a windfall justifying equitable intervention but instead received a sum satisfying a debt already owed. Because the efforts to secure the Settlement Funds did not result in a new benefit to Regions, there was no viable claim for unjust enrichment. Thus, the trial court did not err in rejecting Osborn's theory for ordering Regions to contribute to attorney fees.

Conclusion

[14] The trial court did not err in its allocation of the Settlement Funds, or in declining to order Regions to contribute toward Osborn's attorney fees.

[15] Affirmed.

Foley, Judge.

Mathias, J. and Felix, J., concur.