Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca7-14-02571/USCOURTS-ca7-14-02571-0/pdf.json

Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 

---

In the

United States Court of Appeals

For the Seventh Circuit ____________________

No. 14-2571

ROBERT LODHOLTZ, as Assignee of

Pulliam Enterprises, Inc.,

Plaintiff-Appellant,

v.

YORK RISK SERVICES GROUP,

INCORPORATED,

Defendant-Appellee.

____________________

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.

____________________

ARGUED DECEMBER 4, 2014 — DECIDED FEBRUARY 11, 2015

____________________

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 

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No. 14-2571 2

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 

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No. 14-2571 3

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. 

I

BACKGROUND

A.

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.2 Granite then assigned York the task of handling the 

Lodholtz complaint for Pulliam.

1 The jurisdiction of the district court was based on 28 U.S.C. § 1332. Our 

jurisdiction is based on 28 U.S.C. § 1291.

2 Granite had sold an insurance policy to Pulliam on January 12, 2011. 

Pulliam timely paid all premiums on the policy, which covered January 

2011 to January 2012.

 

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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 

3 R.1-8 at 1. All record citations are to the docket in Case No. 3:11-cv-435.

4 R.1 at 4 ¶ 27 (Lodholtz Compl.).

 

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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 cover5 R.1-7.

6 The Granite insurance policy excluded coverage for bodily injury to an 

employee of the insured that occurred in the course of employment. See

R.1-1 at 16 (Insurance Contract). In a motion submitted to the state court, 

Granite stated that it was not clear whether Mr. Lodholtz, as an employee of Forge Staffing assigned to Pulliam, was an “employee” of Pulliam. 

See R.1-4 at 4 ¶ 23.

 

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age. 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.

B.

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 

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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.

7 Granite State Ins. Co. v. Pulliam Enters., Inc., Nos. 3:11-CV-432, 3:11-CV435, 2014 WL 1094877, at *4 (N.D. Ind. Mar. 19, 2014).

8 Federal Rule of Civil Procedure 54(b) provides:

When an action presents more than one claim for relief—whether as a claim, counterclaim, crossclaim, or 

third-party claim—or when multiple parties are involved, the court may direct entry of a final judgment as 

to one or more, but fewer than all, claims or parties only 

 

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II

DISCUSSION

A.

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 (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 (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).

if the court expressly determines that there is no just reason for delay. Otherwise, any order or other decision, 

however designated, that adjudicates fewer than all the 

claims or the rights and liabilities of fewer than all the 

parties does not end the action as to any of the claims or 

parties and may be revised at any time before the entry 

of a judgment adjudicating all the claims and all the parties’ rights and liabilities.

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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 

(1938); Weigle v. SPX Corp., 729 F.3d 724, 737 (7th Cir. 2013). 

The parties do not dispute that Indiana law governs this action. See Koransky, Bouwer & Poracky, P.C. v. Bar Plan Mut. 

Ins. Co., 712 F.3d 336, 341 (7th Cir. 2013) (noting that, in the 

absence of an assertion to the contrary by the parties, it is 

appropriate to apply the law of the state in which the district 

court sits). Thus, we apply the law that would be applied by 

the Indiana Supreme Court. See King v. Order of United Commercial Travelers of Am., 333 U.S. 153, 160–61 (1948); West v. 

Am. Tel. & Tel. Co., 311 U.S. 223, 236–37 (1940); Home Valu, 

Inc. v. Pep Boys-Manny, Moe & Jack of Del., Inc., 213 F.3d 960, 

963 (7th Cir. 2000). If the Indiana Supreme Court has not 

spoken on the issue, we generally treat decisions by the 

state’s intermediate appellate courts as authoritative, unless 

there is a compelling reason to think that the state supreme 

court would decide the issue differently. See Home Valu, Inc., 

213 F.3d at 963.

B.

The Indiana Supreme Court has not addressed the precise issue before us. Following our established protocol, 

therefore, we turn to the decisions of the Court of Appeals of 

Indiana for guidance. An examination of the cases decided 

by that court sheds considerable light on the path that we 

must follow. In Troxell v. American States Insurance Co., 596 

N.E.2d 921 (Ind. Ct. App. 1992), the Court of Appeals of Indiana noted, albeit briefly, that an insurance adjuster is an 

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agent of the insurer and therefore has no direct relationship 

with the insured. See id. at 925 n.1. The court cited with approval Velastequi v. Exchange Insurance Co., 505 N.Y.S.2d 779 

(N.Y. Civ. Ct. 1986), which held that the adjuster’s duty was 

solely to the insurer, and not to the insured.9 See id. at 782.

The Court of Appeals of Indiana confirmed this approach 

in Meridian Security Insurance Co. v. Hoffman Adjustment Co., 

933 N.E.2d 7 (Ind. Ct. App. 2010). In Meridian, an insurer

brought a claim against the insured’s adjuster, alleging that 

the adjuster had interfered with the insurer’s contract with 

the insured and had engaged in fraud. The Indiana court 

held that, by entering into an adjuster agreement with the 

insured, the adjuster was the insured’s agent. As the in9 New York courts continue to apply the rule announced in Velastequi v. 

Exchange Insurance Co., 505 N.Y.S.2d 779 (N.Y. Civ. Ct. 1986). See Columbia Energy Grp. v. Fisher, 851 N.Y.S.2d 12, 13 (N.Y. App. Div. 2008) (holding that insurance adjuster’s obligations flow from its contracts and that 

the insured “provided no authority for its contention that [the adjuster] 

also had a common law duty” to the insured); Bardi v. Farmers Fire Ins. 

Co., 687 N.Y.S.2d 768, 787 (N.Y. App. Div. 1999) (“As agents of a disclosed principal whose actions were undertaken at the direction of the 

insurer, the adjusters cannot be held personally responsible to plaintiffs....”); Youngs v. Sec. Mut. Ins. Co., 775 N.Y.S.2d 800, 801 (N.Y. Sup. Ct. 

2004) (holding that, “[b]ecause there was no contractual relationship between [the adjuster] and the insured, it follows that the absence of any 

other independent duty by [the adjuster] to the insured precludes an action against [the adjuster] individually”); 31 Anne M. Payne & Joseph 

Wilson, New York Practice Series § 31:38 (2014–2015 ed.) (“The insurance 

adjuster owes its duties to the insurance company, as its agent or employee. ...Generally, insurance adjusters, as agents and employees of the 

insurer, do not owe the insured any independent duty that could cause 

the adjuster to be personally liable to the insured for bad faith.”).

 

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sured’s agent, the adjuster could not be liable to the insurer. 

See id. at 12. The court noted that

[a]n agent is not liable for harm to a person 

other than his principal because of his failure 

adequately to perform his duties to his principal, unless physical harm results from reliance 

upon performance of the duties by the agent, 

or unless the agent has taken control of land or 

other tangible things.

Id. (alteration in original) (internal quotation marks omitted). 

In dismissing the claims against the adjuster, the court noted 

that the adjuster’s status as the insured’s agent insulated it 

from liability from the insurer. See id. at 14. Therefore, although dealing with a distinctly different factual situation, 

the Indiana court articulated, and relied upon, the principles 

that it had articulated in Troxell.

These two decisions by Indiana’s intermediate appellate 

court, Troxell and Meridian, provide substantial support for 

the view that a claims adjuster does not owe a duty of care to 

the insured. Mr. Lodholtz offers no compelling reason for 

why the Indiana Supreme Court would not apply the rule 

stated in Troxell.

Mr. Lodholtz first submits that these cases are inapposite 

to the present case because they apply only to first-party 

claims, while the present action presents a third-party claim. 

We cannot accept this argument. Mr. Lodholtz has not been 

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able to invite our attention to any Indiana case or, indeed, a 

case in any other state that recognizes such a distinction.10

He relies on Erie Insurance Co. v. Hickman ex rel. Smith, 622 

N.E.2d 515 (Ind. 1993), to support his view. But in Erie, the 

court only noted that the relationship between an insurer 

and insured is unique because it can be both of an adversarial and of a fiduciary nature. See id. at 518. The court explicitly refused to address whether the first- or third-party distinction would affect the circumstances in which an insurer 

could be held liable. See id. at 519 n.2. It would be remarkable to extend that distinction to claims against an insurance 

adjuster when the Indiana Supreme Court has not yet applied it to claims against an insurer.

Not only can Mr. Lodholtz not find case-law support for 

his view, but there are also three additional considerations 

that indicate that the Indiana Supreme Court would adopt

the rule articulated in Troxell. First, the approach adopted by 

the Indiana appellate court in Troxell is the rule adopted by 

the majority of American jurisdictions.11 See Shree Hari Ho10 Courts have applied the same rule insulating claims adjusters from 

liability to the insured in both first- and third-party claims without distinction. See, e.g., Koch v. Bell, Lewis & Assocs., Inc., 627 S.E.2d 636, 638–39 

(N.C. Ct. App. 2006); Dear v. Scottsdale Ins. Co., 947 S.W.2d 908, 917 (Tex. 

App. 1997), overruled on other grounds by Apex Towing Co. v. Tolin, 41 

S.W.3d 118 (Tex. 2001); see also Wolverton v. Bullock, 35 F. Supp. 2d 1278, 

1280–81 (D. Kan. 1998) (applying Kansas law and holding that a claims 

adjuster did not owe the insured a duty of good faith in an action involving a third-party claim).

11 A survey of state-court decisions confirms that the majority of states 

have held that a claims adjuster owes no independent duty to the insured. See Akpan v. Farmers Ins. Exch., Inc., 961 So. 2d 865, 874 (Ala. Civ. 

 

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App. 2007) (holding that an independent adjuster owes no duty to the 

insured); Meineke v. GAB Bus. Servs., Inc., 991 P.2d 267, 271 (Ariz. Ct. 

App. 1999) (same); Sanchez v. Lindsey Morden Claims Servs., Inc., 84 Cal. 

Rptr. 2d 799, 803 (Cal. Ct. App. 1999) (same); Grossman v. Homesite Ins. 

Co., No. FSTCV075004413S, 2009 WL 2357978, at *4–5 (Conn. Super. Ct. 

July 6, 2009) (same); King v. Nat’l Sec. Fire & Cas. Co., 656 So. 2d 1338, 

1339 (Fla. Dist Ct. App. 1995) (per curiam) (holding that “Florida law 

does not recognize a cause of action by an insured against an independent insurance adjuster in simple negligence”); Baugh v. Parish Gov’t Risk 

Mgmt. Agency, 715 So. 2d 645, 647 (La. Ct. App. 1998) (holding that an 

independent adjuster owes no duty to the insured); Haney v. Fire Ins. 

Exch., 277 S.W.3d 789, 792–93 (Mo. Ct. App. 2009) (same); Columbia Energy Grp., 851 N.Y.S.2d at 13 (same); Koch, 627 S.E.2d at 638–39 (citing with 

approval the majority rule and holding that an adjuster did not owe a 

duty to claimants that were not the insured); Trinity Baptist Church v. 

Bhd. Mut. Ins. Servs., LLC, No. 113,072, 2014 WL 6908858, at *8–9 (Okla. 

Dec. 9, 2014) (holding that an independent adjuster owes no duty to the 

insured); Charleston Dry Cleaners & Laundry, Inc. v. Zurich Am. Ins. Co., 

586 S.E.2d 586, 588–89 (S.C. 2003) (same); Dear, 947 S.W.2d at 917 (same); 

Hamill v. Pawtucket Mut. Ins. Co., 892 A.2d 226, 230 (Vt. 2005) (same); see 

also Robertson Stephens, Inc. v. Chubb Corp., 473 F. Supp. 2d 265, 280 (D.R.I. 

2007) (holding that claims adjuster did not owe a duty of reasonable care 

to insured under Rhode Island law). But see Cont’l Ins. Co. v. Bayless & 

Roberts, Inc., 608 P.2d 281, 287–88 (Alaska 1980) (holding that a claims 

adjuster owes the insured a duty of ordinary care); Morvay v. Hanover Ins. 

Cos., 506 A.2d 333, 335 (N.H. 1986) (holding that claims adjusters owe a 

duty to the insured to conduct a fair and reasonable investigation of an 

insurance claim).

To summarize, the state courts of Alabama, Arizona, California, 

Connecticut, Florida, Louisiana, Missouri, New York, North Carolina, 

Oklahoma, South Carolina, Texas, and Vermont have held that a claims 

adjuster does not owe a duty of care to the insured. Similarly, a federal 

court has applied the laws of Rhode Island and reached the same conclusion. In contrast, only Alaska and New Hampshire recognize that an adjuster owes a duty of care to the insured. Indeed, while this appeal was 

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tels, LLC v. Soc’y Ins. Co., No. 1:11-cv-01324, 2013 WL 

1500455, at *3 (S.D. Ind. April 11, 2013) (concluding that, in 

Troxell, Indiana adopted the majority approach).

Second, the rule comports with the general principles of 

Indiana agency law. Generally, an agent is not liable for actions taken on behalf of the principal. See Greg Allen Constr. 

pending, Oklahoma, which originally had applied the minority rule, reversed course and adopted the majority view. See Trinity Baptist Church, 

2014 WL 6908858, at *8–9, overruling Brown v. State Farm Fire & Cas. Co., 

58 P.3d 217 (Okla. Civ. App. 2002).

Some state courts have been more willing to hold that an insurance 

adjuster may be liable to the insured under alternative theories. See Bock 

v. Hansen, 170 Cal. Rptr. 3d 293, 304 (Cal. Ct. App. 2014) (holding “that a 

cause of action for negligent misrepresentation can lie against an insurance adjuster”); Riccatone v. Colo. Choice Health Plans, 315 P.3d 203, 207 

(Colo. App. 2013) (holding that, “absent a financial incentive to deny an 

insured’s claims or coerce a reduced settlement, a third party that investigates and processes an insurance claim does not owe a duty of good 

faith and fair dealing to the insured”); Bass v. Cal. Life Ins. Co., 581 So. 2d 

1087, 1090 (Miss. 1991) (holding that a claims adjuster is not liable for 

simple negligence but may be liable for gross negligence). But see Bleday 

v. OUM Grp., 645 A.2d 1358, 1363 (Pa. Super. Ct. 1994) (holding that insured could not bring a breach of good faith action against an adjuster 

because the adjusters owed no contractual duty). Generally, however, 

courts reject attempts to impose liability on an insurance adjuster. See 14 

Steven Plitt et al., Couch on Insurance § 208:10 (3d ed. 2005 & Supp. 

2014) (“Liability for conduct of adjusters and investigators employed by 

the insurer directly generally falls primarily on the insurer in its status as 

the employer, and personal liability is unusual.”); Thomas R. Malia, Annotation, Liability of Independent or Public Insurance Adjuster to Insured for 

Conduct in Adjusting Claim, 50 A.L.R.4th 900 (1986 & Supp. 2014) (providing an overview of the legal theories under which claims are brought 

against claims adjusters, generally without success).

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Co. v. Estelle, 798 N.E.2d 171, 174 (Ind. 2003) (noting an 

“[a]gent who intentionally or negligently fails to perform 

duties to his principal is not thereby liable to a person whose 

economic interests are thereby harmed,” and “[a]n agent is 

not liable for harm to a person other than his principal because of his failure adequately to perform his duties to his 

principal, unless physical harm results from reliance upon 

performance of the duties by the agent”) (alterations in original) (quoting Restatement (Second) of Agency §§ 352, 357

(1958)); McAdams v. Dorothy Edwards Realtors, Inc., 604 

N.E.2d 607, 612 (Ind. 1992) (holding that real estate broker 

was agent of seller and therefore not liable to buyer under 

agency principles and noting that the wrong was therefore 

perpetrated by the principal).

Mr. Lodholtz also submits that an agent who commits a 

tortious act is liable along with the principal. But Mr. Lodholtz ignores the Indiana Supreme Court’s distinction between acts that would be tortious despite a contractual relationship and those acts that are only tortious because of a 

contractual relationship. See Greg Allen Constr. Co., 798 

N.E.2d at 173–75 (“The proper formulation of the reason Allen is not liable here is that his negligence consisted solely of 

his actions within the scope of his authority in negligently 

carrying out a contractual obligation of the corporation as 

his employer. Nothing he did, and therefore nothing the 

corporation did, constituted an independent tort if there 

were no contract.”). An agent is not liable for the harm that 

befalls a third party by failing to perform under the contract. 

Cf. Brown v. Owen Litho Serv., Inc., 384 N.E.2d 1132, 1135 

(Ind. App. Ct. 1979) (noting an agent is not liable if the principal is disclosed at the time of contracting). These principles 

apply here because the legal duty attached to an insurance 

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claim flows from the parties’ contractual obligations. See Meridian Sec. Ins. Co., 933 N.E.2d at 12; see also Meineke v. GAB 

Bus. Servs., Inc., 991 P.2d 267, 271 (Ariz. Ct. App. 1999) (noting an “adjuster’s obligation is measured by the contract between the adjuster and the insurer”); cf. Erie Ins. Co., 622 

N.E.2d at 518–19. York and Pulliam had no such contractual 

relationship.

Third, the decision comports with the logic underlying 

insurer liability in Indiana. In Indiana, insurer liability for 

negligence is premised on the unique nature of insurance 

contracts. See Erie, 622 N.E.2d at 518–19. In Erie, the court 

noted that “[t]his contractual relationship is at times a traditional arms-length dealing between two parties,...but it is 

also at times one of a fiduciary nature, and, at other times, an 

adversarial one.” Id. at 518 (citation omitted). The court concluded that, “[g]iven the sui generis nature of insurance contracts,” it was appropriate to recognize “a cause of action for 

the tortious breach of an insurer’s duty to deal with the insured in good faith.” Id. at 519. But the adjuster is not a party 

to that contract. Consequently, courts have held that the adjuster’s liability is premised on its contract with the insurer

and is thus limited to the insurer. See Meineke, 991 P.2d at 

270–71 (“[T]he duties of an insurance adjuster vary and are 

defined by the terms of the contract between the insurer and 

the adjuster....We conclude that the relationship between 

adjuster and insured is sufficiently attenuated by the insurer’s control over the adjuster to be an important factor that 

militates against imposing a further duty on the adjuster to 

the insured.”); see also 46A C.J.S. Insurance § 1876 (2007 & 

Supp. 2014) (“An adjuster who is retained by an insurance 

company is subject to a duty which runs to the company and 

not to the insured in adjustment of a claim, and, where not a 

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party to the contract of insurance, he or she is not subject to 

an implied duty of good faith and fair dealing to the insured.” (footnote omitted)).

C.

Mr. Lodholtz not only disputes the applicability of the 

specific doctrinal approach adopted by the Court of Appeals 

of Indiana, but offers alternate approaches that, in his view, 

the Indiana Supreme Court would adopt: that York owed a 

common law duty to Pulliam and, alternatively, that York 

assumed a duty to Pulliam. Neither of these approaches 

casts serious doubt on the approach taken by the Court of 

Appeals of Indiana nor provides any basis for questioning 

whether the State’s Supreme Court would depart from the 

view of its intermediate appellate court.

In this respect, Mr. Lodholtz contends that the Indiana 

Supreme Court would rely on the three-part test articulated 

in Webb v. Jarvis, 575 N.E.2d 992 (Ind. 1991),12 and hold that 

York owes a common law duty to Pulliam under Indiana 

law. In Webb, the Indiana Supreme Court set forth three factors to determine whether a common law duty exists: “(1) 

the relationship between the parties, (2) the reasonable foreseeability of harm to the person injured, and (3) public poli12 In Webb v. Jarvis, 575 N.E.2d 992 (Ind. 1991), the court addressed 

whether a physician could be held liable for prescribing steroids to a patient who subsequently became violent. According to the court, the 

plaintiff “sought recovery from Dr. Webb on the theory that his overprescribing of anabolic steroids turned Neal into a toxic psychotic who was

unable to control his rages.” Id. at 994.

 

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cy concerns.” Id. at 995. Pointing to a series of communications between York and Pulliam, Mr. Lodholtz submits that 

Pulliam, like any insured, relied upon the adjuster. Specifically, Mr. Lodholtz relies on York’s representation that it 

was the authorized representative of Pulliam, York’s securing for Pulliam an extension to answer the complaint, York’s 

handling the Lodholtz complaint for Pulliam, York’s investigation of the lawsuit and potential coverage issues, and 

York’s letter to Pulliam stating that the handling of the claim 

would progress as seamlessly as possible. Mr. Lodholtz argues that, in light of these activities, York had actual 

knowledge that Pulliam was relying on its services, thus creating a relationship “akin to that of a third party beneficiary 

of a contract, where the professional has actual knowledge 

that the services being provided are, in part, for the benefit 

of such third persons.” Id. at 996.

We cannot accept this argument. We think that the Indiana courts would regard the content of York’s communications with Pulliam simply as evidence of York’s position as 

an agent of Granite. Indeed, other parts of the record, when 

read with the areas suggested by Mr. Lodholtz, add additional support for such a view.13 Because the record demonstrates an agency relationship between Granite and York and

because agents are generally only liable to the principal un13 See R.1-3 (York representing itself as “the authorized representative of 

Granite State Insurance Company and their insured Pulliam Enterprises 

Inc.”); R.1-12 at 1 (Pulliam asking York to inform Granite that it declines 

the defense with reservation of rights); R.1-10 at 2 (Pulliam assigning all 

claims against Granite and its agents, without ever mentioning York by 

name).

 

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der Indiana law, we do not believe that the Indiana Supreme 

Court would extend the liability of York further. See Greg Allen Constr. Co, 798 N.E.2d at 174.

Mr. Lodholtz also points out that Pulliam was a reasonably foreseeable victim injured by a reasonably foreseeable 

harm. See Webb, 575 N.E.2d at 997. It should be reasonably 

foreseeable to any claims adjuster, he continues, that the insured is relying on them to coordinate the insured’s defense 

and that the entry of a default judgment is a foreseeable consequence of failing to answer a complaint. York responds 

that, as an agent of Granite, Granite was the only foreseeable 

victim of York’s negligence. It would seem that, as a practical matter, it is foreseeable that negligence by a claims adjuster may harm the insured. However, this factor alone 

cannot be relied upon to impose a legal duty.14 See id. at 995 

(noting factors must be balanced).

Turning to the public policy factor, Mr. Lodholtz relies 

on Key v. Hamilton, 963 N.E.2d 573 (Ind. Ct. App. 2012), 

which held that a driver who waves another driver through 

an intersection, after engaging in a thorough examination of 

traffic in order to ensure another driver’s safety, has a duty 

14 For example, in Rodriguez v. United States Steel Corp., No. 45A04-1407-

CT-350, 2014 WL 7450436 (Ind. Ct. App. Dec. 31, 2014), the Court of Appeals of Indiana, recognizing that the foreseeability component should 

not be narrowly applied, held that “a third-party motorist could be a reasonably foreseeable victim of an injury inflicted by an employee suffering from work-induced fatigue.” See id. at *4. Nonetheless, the court concluded that “public policy strongly counsels against the imposition of a 

duty” and held that an employer did not have a duty to monitor worker 

fatigue. Id.

 

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to third parties that may be harmed as a result. See id. at 584. 

The court noted that public policy demands that the court 

hold individuals responsible for the results of their behavior 

because “allowing an individual to escape liability for damage he causes would fly in the face of the normal expectations of our civil society.” Id. at 583.

It is, of course, the prerogative of the Indiana courts to 

fashion state common law according to the public policy of 

Indiana, and Mr. Lodholtz’s contentions continue to ignore 

that, in Indiana, torts alleged in the context of an insurance 

contract are not run-of-the-mill torts. Indiana courts have 

imposed a duty on insurers because of their unique relationship with the insured through the insurance contract. See 

Erie, 622 N.E.2d at 519 (noting “it is in society’s interest that 

there be fair play between insurer and insured” because of 

the “sui generis nature of insurance contracts”). Absent an 

insurance contract, the policy rationales for imposing a duty 

on a claims adjuster cease to exist. Mr. Lodholtz also ignores 

that the relationship between the parties implicate agency 

principles. That York was an agent of Granite appears to 

provide a particularly strong public-policy rationale for refusing to conclude that the Indiana Supreme Court would 

recognize a duty here.

Mr. Lodholtz further contends that York assumed a duty 

to Pulliam by working as an adjuster on the Pulliam insurance claim. Indiana recognizes, as a general principle, an assumption of duty when a party affirmatively assumes or 

undertakes a duty to act. See Griffin v. Simpson, 948 N.E.2d 

354, 359 (Ind. Ct. App. 2011). To have assumed a duty, 

“‘[t]he defendant must have specifically and deliberately 

undertaken the duty which he is charged with having done 

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negligently.’” Id. at 359–60 (quoting Holtz v. J.J.B. Hilliard 

W.L. Lyons, Inc., 185 F.3d 732, 744 (7th Cir. 1999)). “[T]he party on whose behalf the duty is being undertaken [must] relinquish control of the obligation; the party who adopts the 

duty must be acting ‘in lieu of’ the original party.” Id. at 360 

(quoting Holtz, 185 F.3d at 744). “While the issue of whether 

a defendant has assumed a duty generally rests with the 

trier of fact, if no facts or reasonable inferences in the record 

create material issues of genuine fact, the question can be determined by law.” Holtz, 185 F.3d at 744 (citation omitted).

Here, the uncontroverted evidence shows that York, in undertaking various actions in the underlying transactions, 

acted in fulfillment of its contractual duties to Granite and 

on behalf of Granite. 

Conclusion

We conclude that the district court appropriately dismissed the claim against York. The judgment of the district 

court is affirmed.

AFFIRMED

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