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Granite State Insurance Co. v. Pulliam Enterprises, Inc.

United States District Court, N.D. Indiana, South Bend Division

March 19, 2014

GRANITE STATE INSURANCE COMPANY, Plaintiff,
v.
PULLIAM ENTERPRISES, INC., et al., Defendants. ROBERT LODHOLTZ, as assignee of PULLIAM ENTERPRISES, INC. Plaintiff,
v.
GRANITE STATE INSURANCE COMPANY, et al. Defendants.

OPINION AND ORDER

RUDY LOZANO, District Judge.

This matter is before the Court on Defendant, York Risk Services Group, Inc.'s Motion for Judgment on the Pleadings, filed on July 15, 2013. For the reasons set forth below, this motion is GRANTED. Count IV of the complaint in Case No. 3-11-CV-435 is dismissed with prejudice against York Risk Services.

BACKGROUND

For purposes of the instant motion, the pleadings establish the following. On March 18, 2011, Robert Lodholtz was an employee of Forge Industrial Staffing who was working at one of Pulliam Enterprises Inc.'s assembly plants pursuant to a Work Agreement between Forge and Pulliam. While working at Pulliam, Lodholtz was injured. On June 24, 2011, Lodholtz brought a state court suit in St. Joseph County Superior Court against Pulliam asserting his injuries were a result of Pulliam's negligence.

At the time the state court case was filed, Pulliam had in effect a commercial general liability insurance policy issued by Granite State Insurance Company, Policy No. 02-LX-027560275. Upon receipt of the state court suit, Pulliam forwarded a copy of the complaint to Granite State. Granite State received a copy of the state court complaint from Pulliam and assigned a claim number to the matter. By July 7, 2011, Granite State assigned York Risk Services Group, Inc. to handle the state court complaint for the insured, Pulliam. York is the authorized claim administrator for Granite State. The same day the claim was assigned to York, York notified Pulliam that it was in receipt of the state court complaint and had set up a file on the matter.

On July 8, 2011, York contacted Lodholtz's counsel and requested on behalf of Pulliam and received an extension up to and including August 19, 2011, for Pulliam to file an answer to the state court complaint. On July 11, 2011, York confirmed the extension of time, while stating that it was "the authorized representative of Granite State Insurance Company and their insured Pulliam Enterprises, Inc." (Complaint, Ex. C). By July 14, 2011, York reassigned the handling of the claim to a second, more senior adjuster working for York, John D'Errico. Mr. D'Errico wrote to Pulliam, confirming that the file had been assigned to him. D'Errico then undertook investigation of the claim. The claim was then internally transferred to a third adjuster, Richard Glaser. York sent a letter to Pulliam on August 18, 2011, stating that the handling of the claim would progress seamlessly.

On or before August 19, 2011, Granite and York did not hire or retain legal counsel to defend Pulliam against Lodholtz's state court complaint and did not inform Pulliam that Granite State would not defend Pulliam or would only do so under a reservation of rights. Legal counsel did not appear on Pulliam's behalf in the state court lawsuit by August 19, 2011. Neither Granite nor York sought to obtain an additional extension of time for Pulliam to file and answer before the deadline expired.

Granite State knew Pulliam's answer was due in the state court case by August 19, 2011, and had communicated to York that it was not going to provide a defense for Pulliam. However, Granite State did not tell Pulliam that it would have to defend itself in the state court lawsuit prior to the due date for the answer. And, although York knew Pulliam's answer was due by August 19, 2011, and believed that Granite State was not going to provide a defense for Pulliam, York did not tell Pulliam that it would have to defend itself prior to August 19, 2011.

On August 22, 2011, Lodholtz filed a motion for default judgment against Pulliam. Pulliam forwarded that motion to Granite State on August 23, 2011. As of the date that the motion for default judgment was filed, Granite and York: (1) were aware the state court case involved serious injuries; (2) possessed all the information they needed to trigger Granite State's duty to defend Pulliam; (3) were aware that Granite State had a duty to defend Pulliam (if the underlying lawsuit was covered under the policy); (4) had not denied coverage; (5) had not filed a declaratory judgment action; (6) had not hired defense counsel for Pulliam; (7) had not issued a reservation of rights; (8) failed to seek an additional extension of time in which to answer the complaint; (9) failed to advise Pulliam that Granite State would not be defending the state court case; and (10) failed to advise Pulliam that it needed to retain its own defense counsel.

On August 23, 2011, the St. Joseph Superior Court entered a default judgment as to liability against Pulliam and ordered a trial on damages. After receiving a copy of the motion for default judgment, York sent an e-mail to Pulliam, stating, in part:

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 in the insurance carrier Granite State does not appear to cover this loss. The reason is that the injured party was considered an employee despite his temporary status and there is no coverage in the policy for injuries to an insured employee. An official coverage position will be forwarded to Pulliam Enterprises in the near future. Once you assign to an attorney, they will know how to deal with this situation and protect your interests properly. In the event Granite State determines they do provide coverage, they will reasonable [sic] reimburse any defense costs.

(Complaint, Ex. G)

On August 24, 2011, Pulliam's private counsel, Scott Keller, appeared in the state court lawsuit. On that day, he e-mailed a letter to York requesting Granite State to immediately provide its official coverage position. Attorney Keller also stated that "Pulliam may be forced to assert various claims against York and Granite State including, but not limited to, breach of contract, breach of fiduciary duty and professional negligence. (Complaint, Ex. H). Two days later, York responded by stating, "It is my understanding that the insurer, Granite State, has issued or will shortly issue or direct York to issue a letter denying coverage. Under the circumstances I urge that your client take immediate action to vacate the default and defend itself in this matter." (Complaint, Ex. I).

Pulliam reached a settlement with Lodholtz on September 7, 2011. Under the terms of the settlement, Pulliam agreed not to move to vacate the default judgment, not oppose the amount of damages, and Pulliam assigned any and all of its claims to Lodholtz. Lodholtz agreed not to enforce the judgment against ...


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