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Granite State Insurance Co. v. Pulliam Enterprises Inc.

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

March 21, 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: (1) Granite State Insurance Company and New Hampshire Insurance Company's Rule 60(b)(4) Motion and Summary Judgment Motion (DE# 125); and (2) Granite State Insurance Company and New Hampshire Insurance Company's Motion Requesting Oral Argument on Their Rule 60(B)(4) Motion and Summary Judgment Motion (DE# 127), both filed in Case No. 3-11-CV-432 on July 15, 2013. For the reasons set forth below, the motion for summary judgment is GRANTED to the extent that this Court will disregard the default judgment entered in Robert Lodholtz v. Pulliam Enterprises, Inc., Cause No. 71-D04-1106-CT-00135, filed in the Superior Court of St. Joseph's County, Indiana. Because this Court finds oral argument unnecessary, and considering that Pulliam believes it to be unnecessary as well, the motion requesting oral argument is DENIED.

BACKGROUND

This case arises out of an underlying default judgment awarded in the lawsuit captioned Robert Lodholtz v. Pulliam Enterprises, Inc., cause no. 71-D04-1106-CT-00135 filed in the Superior Court of St. Joseph County, Indiana (hereinafter "state case"), which was brought by Robert Lodholtz against Pulliam Enterprises, Inc.

On March 18, 2011, Robert Lodholtz was an employee of Forge Industrial Staffing, a staffing agency. Forge Staffing had a "Work Agreement" with Pulliam Enterprises, Inc., whereby Forge agreed to supply employees to Pulliam. Lodholtz worked at one of Pulliam's assembly plants pursuant to that Work Agreement. While working at Pulliam, Lodholtz suffered a crushed pelvis and severe disfiguring injuries when a "laser cutting machine" owned and maintained by Pulliam malfunctioned and caused him to be pulled into the machine.

At the time Lodholtz was injured at Pulliam's facility, Granite State Insurance Company insured Pulliam under a commercial general liability policy and New Hampshire Insurance Company insured Pulliam under a commercial umbrella policy.

On June 24, 2011, Lodholtz filed suit against Pulliam in the Superior Court of St. Joseph County, Indiana, for personal injuries and other damages that he sustained. The complaint alleged that Lodholtz was an "invitee" when he was injured at Pulliam's plant. The complaint in the state case alleged a negligence/premises liability against Pulliam. The complaint further alleged that Lodholtz "was an employee of Forge" and "perform[ing] services for Forge" when injured and that he was "not making a claim for worker's compensation" against Pulliam.

On June 27, 2011, the complaint was served upon Pulliam. On July 6, 2011, Pulliam provided notice -which was apparently received July 7, 2011- of the lawsuit to its primary insurer, Granite State, and its umbrella insurer, New Hampshire, (collectively "Insurers"). York Risk Services, Inc. ("York") served as Granite State's claims administrator. On July 8, York contacted Lodholtz's counsel "and requested and received an extension to answer the complaint on or before August 19, 2011."

No answer to the complaint was filed by August 19, 2011. On August 22, 2011, Lodholtz filed a motion for default judgment against Pulliam. On August 23, the state court granted the default as to the negligence/liability against Pulliam and ordered a trial be set on damages. The same day that default judgment was entered against Pulliam, York advised Pulliam that it needed to retain its own defense counsel as "Granite State does not appear to cover this loss." In response, Pulliam advised York of the default judgment and stated that it would hire independent defense counsel. Pulliam also requested that Granite State provide a definitive coverage position. Pulliam retained private counsel, who entered his appearance and requested an extension of time to file Pulliam's answer; he did not, however, move to vacate the default judgment. The state court gave Pulliam until September 22, 2011, to file its answer.

On August 25, 2011, Granite State[1] told York that it "remains" Granite State's belief that "there likely is no coverage, " and "instructed [York] not to assign counsel to try to vacate default." The next day, York's General Counsel responded to Pulliam's private counsel for an "official coverage position, " stating that Granite State would be denying coverage.

On September 7, 2011, without Granite State's knowledge or consent, Lodholtz and Pulliam settled this case, by entering into a covenant-not-to-execute. Pulliam agreed not to vacate the default judgment or to contest damages, and to assign to Lodholtz its rights against its insurers - including any claims for breach of the insurance contracts and bad faith. In exchange, Lodholtz agreed not to execute on the judgment against Pulliam.

On September 13, 2011, Granite State, through York, issued its coverage position. Granite State advised that while the policy likely excluded coverage for the claim, Granite State would defend Pulliam under a reservation of rights. Pulliam rejected the defense, however, stating that it was no longer requesting a defense in light of the settlement. Pulliam did not answer the complaint.

On September 28, 2011, Granite State sought to intervene as of right on the basis that it had an interest in the subject of the lawsuit and its interest was not represented. Granite State also argued that Lodholtz was an employee of Pulliam and that Lodholtz's complaint was therefore barred by the exclusive-remedy provision of the "Indiana Workers' Compensation Act." On October 28, 2011, the state trial court held a hearing, denied Granite State's request to intervene, and proceeded to a bench trial to determine damages. Pulliam did not appear at the bench trial and Granite State, was not allowed to participate. On November 1, 2011, the state trial court entered judgment for Lodholtz and against Pulliam in the amount of $3, 866, 462.

On November 3, 2011, Granite State filed in this Court a "Complaint for Declaratory Judgment, " seeking this Court declare that Granite State has "no duty to indemnify ...


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