September 29, 2016
from the United States District Court for the Southern
District of Indiana, Indianapolis Division. Nos.
1:15-cv-01446-RLY-DML, 1:13-cv-00382-RLY-DML Richard L.
Wood, Chief Judge, and Ripple and Williams, Circuit Judges.
this insurance dispute is a regrettably common tale of greed
and dishonesty. Telamon, an Indiana telecommunications firm,
engaged Juanita Berry to work for it from 2005 to 2011 as its
Vice President of Major Accounts. Berry used that position to
steal over $5 million from the firm. Upon discovering this
loss, Telamon then turned to two insurance policies in an
effort to recover its money: a crime insurance policy with
Travelers Casualty & Surety (Travelers), and a commercial
property policy with Charter Oak Fire Insurance (Charter
Oak). At that point, Telamon crashed into a brick wall.
Travelers denied coverage because Berry was not,
legally speaking, an employee. And Charter Oak refused to pay
because, in practice, she was.
cried foul and filed a lawsuit in which it argued that
Berry's actions were covered under both policies and that
the insurers had breached their duty of good faith. At the
eleventh hour, it tried to add St. Paul Fire and Marine
Insurance (St. Paul) as a defendant. The court rejected the
amendment, at which point Telamon filed a new action against
St. Paul and Charter Oak. That case promptly found its way
back to the same court and was dismissed as an impermissible
effort to split the claim. Telamon appealed (case 16-1205).
Later the court granted summary judgment in favor of the
defendants in the original case. Again, Telamon appealed
(case 16-1815). We consolidated the appeals for disposition.
Finding no error in either of the district court's
decisions, we affirm.
refer to the original suit against Charter Oak and Travelers
as Telamon I, and the suit against Charter Oak and
St. Paul as Telamon II. The critical background
facts are the same for both cases.
worked for Telamon from 2005 to 2011. Her employment was
governed by a series of Consulting Services Agreements
(Agreements) between Telamon and J. Starr Communications,
Berry's one-woman company through which she provided her
services. The terms of the Agreements remained largely
unchanged during Berry's six-year association with
Telamon. Her role, however, did not. Berry's
responsibilities expanded well beyond those described in the
Agreements, and she eventually became Telamon's Vice
President of Major Accounts, making her the company's
senior manager in the New York and New Jersey region. In this
capacity she oversaw Telamon's AT&T Asset Recovery
Program, which was supposed to remove old telecommunications
equipment from AT&T sites and sell it to salvagers. Berry
removed the equipment and sold it, but she pocketed the
profits. By the time the company realized something was amiss
in 2011, it had suffered $5.2 million in losses. Telamon
fired Berry and she was later convicted in the District of
New Jersey on federal charges of wire fraud and tax evasion;
she was sentenced to 60 months' imprisonment and was
assessed $3, 440, 885 in restitution payable to Telamon.
misdeeds left Telamon with the problem of recouping its
losses. Undoubtedly dubious that it would ever see much of
the required restitution, it turned to two insurance policies
for that purpose: its crime insurance policy with Travelers
and its general commercial insurance policy with Charter Oak.
These two insurers are subsidiaries of a larger Travelers
entity, and so Telamon asked them to work together to avoid
duplicative claims investigations. They obliged, but in late
2012 they each gave Telamon the disappointing news that they
were denying coverage. Telamon fought back by filing
Telamon I, which started out in Indiana state court
and landed in the federal court via removal. Telamon asserted
that its loss was covered under both policies and that the
insurers had acted in bad faith (a tort under Indiana law).
The district court granted summary judgment for the insurers
on the coverage issues in December of 2015, and dismissed the
remaining bad faith claims the following April.
in June 2014, Telamon sought permission to amend its
complaint in Telamon I to add another set of claims
based on older policies issued by St. Paul and Charter Oak.
Because this request came almost a year after the deadline
for amending pleadings had expired, the court said no. At
that point, Telamon filed Telamon II in Indiana
state court, raising essentially the same claims. The
insurers again removed, and in January 2016, the district
court dismissed the suit as an impermissible attempt to split
these cases rest on diversity jurisdiction, we resolve
Telamon's claims under Indiana law. See Native Am.
Arts, Inc. v. Hartford Cas. Ins. Co., 435 F.3d 729, 731
(7th Cir. 2006). Indiana courts interpret insurance policies
under "the same rules of construction as other
contracts/' taking "the perspective of an ordinary
policyholder of average intelligence." Bradshaw v.
Chandler, 916 N.E.2d 163, 166 (Ind. 2009). An insured
has the burden of proving the existence of coverage, while
the insurer must show that an exclusion applies.
Nat'l Fire & Cas. Co. v. W. By &
Through Norris, 107 F.3d 531, 535 (7th Cir. 1997);
Home Fed. Sav. Bank v. Ticor Title Ins. Co., 695
F.3d 725, 732 (7th Cir. 2012).
analysis of an insurance policy proceeds in two steps. First,
the court examines whether the terms of a policy are
unambiguous. If they are, then the court adopts the ordinary
meaning of the words. Beam v. Wausau Ins. Co., 765
N.E.2d 524, 528 (Ind. 2002); Allgood v. Meridian Sec.
Ins. Co.,836 N.E.2d 243, 246-47 (Ind. 2005) (referring
to the dictionary). If there is ambiguity, the court advances
to the second step, where it construes any ambiguity strictly
against the insurer and in favor of coverage.
Bradshaw, 916 N.E.2d at 166. A policy is ...