Lodholtz v. York Risk Servs. Grp., Inc.
| Decision Date | 11 February 2015 |
| Docket Number | No. 14–2571.,14–2571. |
| Citation | 778 F.3d 635 |
| Parties | Robert LODHOLTZ, as Assignee of Pulliam Enterprises, Inc., Plaintiff–Appellant, v. YORK RISK SERVICES GROUP, INCORPORATED, Defendant–Appellee. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Charles P. Rice, Attorney, Murphy Rice, LLP, South Bend, IN, for Plaintiff–Appellant.
Ginny Lynn Peterson, Attorney, Kightlinger & Gray LLP, Indianapolis, IN, Crystal G. Rowe, Attorney, Kightlinger & Gray LLP, New Albany, IN, for Defendant–Appellee.
Before BAUER, RIPPLE, and SYKES, Circuit Judges.
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.1
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 in-surer.2 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.”3
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.”4
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 to represent you in this matter for as explained the insurance carrier Granite State does not appear to cover this loss.[ 5 ]
The email explained that the policy did not cover injuries to employees of the insured.6
On August 24, 2011, Pulliam's counsel appeared for Pulliam in the state action and obtained an extension until September 22, 2011, to file an answer. Pulliam also emailed York and requested that Granite provide its official coverage position. Pulliam stated that, in light of what had occurred, Pulliam might have to assert various claims against York and Granite. York responded that Granite has issued or would issue shortly, or direct York to issue, a letter denying coverage. York further suggested that Pulliam take action to vacate the default and defend itself in the state action.
Pulliam reached a settlement with Mr. Lodholtz on September 7, 2011. The agreement provided that Pulliam would not move to vacate the default judgment, nor would it contest the amount of damages that Mr. Lodholtz sought to establish. Pulliam further agreed to assign Mr. Lodholtz all claims that it had against Granite and its agents. Mr. Lodholtz would be entitled to proceed against Granite and York to collect damages on any judgment Mr. Lodholtz obtained against Pulliam. For his part, Mr. Lodholtz agreed not to seek execution against Pulliam's assets for any portion of the judgment.
On November 1, 2011, after an evidentiary hearing, the state court entered a final judgment for Mr. Lodholtz and against Pulliam for $3,866,462.
On November 3, 2011, Granite filed an action in the district court, seeking a declaratory judgment that it had no duty to indemnify Pulliam in the underlying state court lawsuit. The next day, Mr. Lodholtz, as assignee of the claims held by Pulliam, filed a complaint against Granite for breach of contract, bad faith, and negligence, and against York for negligence. The district court consolidated these cases.
Count IV of Mr. Lodholtz's federal complaint alleged that York negligently had breached a duty owed to Pulliam by failing to exercise reasonable care in handling Pulliam's defense in the state-court proceedings. York answered that no relationship existed between either York and Pulliam or between York and Mr. Lodholtz from which a duty or breach could occur. York then filed a motion for judgment on the pleadings, contending that Mr. Lodholtz's complaint does not give rise to a negligence claim. Specifically, York contended that it had no legal duty to Pulliam, Mr. Lodholtz's assignor, and therefore Mr. Lodholtz could not recover.
The district court granted York's motion. The court noted that whether a claims adjuster, such as York, had a common law duty of reasonable care toward an insured, such as Pulliam, is not a novel question under Indiana law. It concluded that “York, as Granite State's insurance adjuster, has no common law duty of reasonable care to Pulliam in handling the defense of the state court case.”7 The court further concluded that York did not assume a duty to Pulliam because York had not specifically and deliberately undertaken the task that it was alleged to have performed negligently.
On June 6, 2014, the district court granted York's motion for entry of final judgment under Federal Rule of Civil Procedure 54(b).8 Mr. Lodholtz now appeals the court's decision to dismiss his claim against York.
We first set forth the standards that govern our decision today. We review de novo a district court's decision to render judgment on the pleadings under Rule 12(c). Adams v. City of Indianapolis, 742 F.3d 720, 727 (7th Cir.2014). A Rule 12(c) motion is governed by the same standards as a motion to dismiss for failure to state a claim under Rule 12(b)(6). Id. at 727–28. In order to survive a motion to dismiss under Rule 12(b)(6), a complaint must “state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). Although we draw all reasonable inferences and facts in favor of the nonmovant, we need not accept as true any legal assertions. Vesely v. Armslist LLC, 762 F.3d 661, 664–65 (7th Cir.2014).
The district court's jurisdiction was based on diversity of citizenship. The district court, and this court on review, is therefore obliged to apply state law to the substantive issue in the case. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) ; Weigle v....
To continue reading
Request your trial
-
Dibble v. Quinn
...identical) and drawing from the allegations all reasonable inferences in plaintiffs' favor. E.g., Lodholtz v. York Risk Services Group, Inc., 778 F.3d 635, 639 (7th Cir.2015). We can affirm on any ground supported by the record so long as the issue was raised and the losing parties had a fa......
-
Consolino v. Dart
...under Rule 12(b)(6), a complaint must 'state a claim to relief that is plausible on its face.'" See, e.g., Lodholtz v. York Risk Serv. Grp., Inc., 778 F.3d 635, 639 (7th Cir. 2015) (citing Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The plaintiff's complaint needs not include "de......