ROBERT LODHOLTZ, as Assignee of Pulliam Enterprises, Inc., Plaintiff-Appellant,
YORK RISK SERVICES GROUP, INCORPORATED, Defendant-Appellee
Argued December 4, 2014
Appeal from the United States District Court for the Northern District of Indiana, South Bend Division. Nos. 3:11-cv-00432-RL-CAN, 3:11-cv-00435-RL-CAN -- Rudy Lozano, Judge.
For ROBERT LODHOLTZ, as Assignee of Pulliam Enterprises, Inc., Plaintiff - Appellant: Charles P. Rice, Attorney, MURPHY RICE, LLP, South Bend, IN.
For YORK RISK SERVICES GROUP, INCORPORATED, Defendant - Appellee: Ginny Lynn Peterson, Attorney, KIGHTLINGER & GRAY LLP, Indianapolis, IN; Crystal G. Rowe, Attorney, KIGHTLINGER & GRAY LLP, New Albany, IN.
Before BAUER, RIPPLE, and SYKES, Circuit Judges.
RIPPLE, Circuit Judge.
Robert Lodholtz sustained injuries in the factory of Pulliam Enterprises, Inc. (" Pulliam" ). He then brought an action in the Superior Court of St. Joseph County, Indiana, against Pulliam, seeking compensation for those injuries. Pulliam in turn filed an insurance claim with its insurer, Granite State Insurance Company (" Granite" ). Granite retained a claims adjuster, York Risk Services Group, Inc. (" York" ). Pulliam assumed, erroneously, that Granite would provide a defense under the insurance policy and defaulted on the state court claim. Neither Granite nor York ever had communicated to Pulliam whether they believed Granite had a duty to defend Pulliam under the terms of the policy.
Pulliam subsequently entered into a settlement agreement with Mr. Lodholtz. Under the terms of that agreement, Pulliam assigned to Mr. Lodholtz any claims it had against Granite or its agents for failing to undertake a defense under the insurance policy. The agreement also provided that Mr. Lodholtz would not seek to recover its damages from Pulliam.
Following the entry of a default judgment in the underlying state case, Granite brought this action in the district court, seeking a declaratory judgment that it had no duty to indemnify Pulliam. Mr. Lodholtz later filed a complaint in the district court against Granite, alleging breach of contract, bad faith, and negligence, and against York for negligence. The district court consolidated the cases. York then moved for judgment on the pleadings, contending that, under Indiana law, a claims adjuster such as itself owes no legal duty to the insured. The district court granted the motion. After the district court entered a final judgment in favor of York and made the requisite certification under Federal Rule of Civil Procedure 54(b), Mr. Lodholtz appealed.
The district court correctly granted the motion to dismiss. As the district court noted, the Court of Appeals of Indiana has held that an insurance adjuster owes no legal duty to the insured, and Mr. Lodholtz has failed to establish that the Indiana Supreme Court would disagree with that decision.
Mr. Lodholtz was employed by Forge Staffing and assigned to perform services at Pulliam's assembly plant. A machine owned and maintained by Pulliam malfunctioned and caused Mr. Lodholtz to be pulled into a laser cutting machine. He suffered severe injuries.
On June 24, 2011, Mr. Lodholtz filed an action against Pulliam in the Superior Court of St. Joseph County, Indiana, alleging that he sustained his injuries as a result of Pulliam's negligence. On June 27, 2011, Pulliam was served with the complaint, which it promptly forwarded to Granite, its insurer. Granite then assigned York the task of handling the Lodholtz complaint for Pulliam.
On July 7, 2011, York notified Pulliam that it had received the complaint and had set up a file on the matter. The next day, York contacted Mr. Lodholtz's counsel and requested an extension for Pulliam to file an answer to the complaint. Mr. Lodholtz's counsel agreed to the extension. On July 11, 2011, York confirmed in a letter to Mr. Lodholtz that Pulliam had received an extension to answer the complaint until August 19, 2011. This letter confirmed that York was the authorized representative of Granite and their insured, Pulliam.
York reassigned the handling of the claim to a more senior adjuster within the company, who began to investigate whether the claim was within the policy's coverage. A third adjuster later assumed internal responsibility for the case and, on August 18, 2011, sent a letter to Pulliam stating that the handling of the claim would " progress as seamlessly as possible." 
Despite these assurances to Pulliam, York did not retain counsel to defend the company against Mr. Lodholtz's claim. Nor did it inform Pulliam that Granite would not defend Pulliam. Granite admitted that York " should have advised Defendant Pulliam before August 19, 2011 that it believed this lawsuit was not covered under the Granite State Policy and that Defendant Pulliam should have retained counsel to protect its interests." 
On August 22, 2011, after Pulliam's extended deadline to file an answer had passed, Mr. Lodholtz filed a motion for default judgment. This motion was served upon Pulliam, who forwarded it to Granite on August 23. On the same day, the court entered a default judgment against Pulliam and ordered that a trial be set on damages. Also on the same day, York sent an email to Pulliam, stating:
Sincere apologies for any miscommunication in the past regarding the assignment of defense counsel. Please note that Pulliam Enterprises, Inc. will need to retain its own defense attorney ...