The Honorable James E. Shadid, District Judge for the 

United States District Court for the Central District of Illinois,

sitting by designation.

In the

United States Court of Appeals

For the Seventh Circuit

No. 11-3100

HARRY FOSTER, III and LINDA FOSTER,

Plaintiffs-Appellants,

v.

STATE FARM FIRE AND CASUALTY COMPANY,

Defendant-Appellee.

Appeal from the United States District Court 

for the Northern District of Indiana, Fort Wayne Division.

No. 1:10-cv-00020-TLS-RBC—Theresa L. Springmann, Judge.

ARGUED FEBRUARY 23, 2012—DECIDED MARCH 16, 2012

Before FLAUM and TINDER, Circuit Judges, and

SHADID, District Judge.

TINDER, Circuit Judge. This case presents two issues,

both under Indiana law: First, whether the Fosters
2 No. 11-3100

breached their insurance contract with State Farm by

failing to comply with a section titled “Your Duties

After Loss” and, second, whether State Farm’s delay in

deciding the Fosters’ claim was in bad faith and therefore tortious. The district court granted State Farm’s

motion for summary judgment. We affirm.

On January 3, 2009, while Harry and Linda Foster, their

two children, Harry’s father, and the family’s eight dogs

were out, a fire severely damaged the Fosters’ home.

Mrs. Foster submitted a claim to State Farm under the

family’s homeowners’ policy the next day. State Farm

promptly began requesting documents, authorizations,

and interviews. Based on its initial interviews, State

Farm learned that the Fosters had at least two businesses,

held numerous personal and business accounts, and

were involved in multiple lawsuits.

At the end of January, State Farm sent a letter to

the Fosters restating its initial requests for information

and documents, including blueprints, utility bills, and

receipts for electrical components in the “theater room.”

State Farm wrote the Fosters again in early March to

remind them of their contractual obligations, quoting the

following policy provisions:

2. Your Duties After Loss. After a loss to which

this insurance may apply, you shall see that the

following duties are performed:

* * *

c. Prepare an inventory of damaged or

stolen personal property. Show in detail
No. 11-3100 3

the quantity, description, age, replacement cost and amount of loss. Attach to

the inventory all bills, receipts and related

documents that substantiate the figures

in the inventory;

d. as often as we reasonably require:

(1) exhibit the damaged property;

(2) provide us with records and

documents we request and permit

us to make copies;

(3) submit to and subscribe, while

not in the presence of any other

insured:

(a) statements; and

(b) examinations under oath;

and

(4) produce employees, members

of the insured’s household or others for examination under oath to

the extent it is within the insured’s

power to do so; and

e. submit to us, within 60 days after the

loss, your signed, sworn proof of loss

which sets forth, to the best of your knowledge and belief: [details about the cause of

the loss and damaged or destroyed property]

* * *
4 No. 11-3100

6. Suit Against Us. No action shall be brought

unless there has been compliance with the policy

provisions. The action must be started within one

year after the date of loss or damage.

By mid-March, State Farm’s fire investigator had concluded that the fire was intentionally set and the Fosters’

claim was referred to the insurance company’s Special

Investigative Unit. State Farm informed the Fosters

that “there is a question as to whether the loss is accidental as it relates to a named insured” and requested

additional documents, such as detailed phone records, bank account transaction histories, tax returns, and

mortgage information. State Farm also reminded the

Fosters that their proof of loss was due by May 2, 2009.

(By the way, all significant communications between

the Fosters and State Farm that we discuss in the opinion took place between their lawyers because both the

insureds and the insurer retained counsel from nearly

the beginning of the claim process.)

In April, the Fosters requested a 60-day extension

for filing their proof of loss. State Farm granted the extension, reminded the Fosters of its previous document

requests, and encouraged the Fosters to produce documents as they got them so the claim process could

move forward. A few days after the initial 60-day extension, the Fosters informed State Farm that they were

hiring a new attorney and requested additional time to

file their proof of loss. State Farm granted the Fosters’

request and gave them until August 5, 2009 to file. In the

same letter that granted that second extension, State
No. 11-3100 5

Farm restated its previous request for documents,

added the Fosters’ 2008 taxes to its request list, and

emphasized that the documents already in the Fosters’

possession should be produced “as quickly as possible” to

facilitate the claim process and because there could be

follow-up questions and requests.

On May 20, the Fosters sent State Farm phone bills

and a signed medical release and indicated that they

were trying to get other requested documents, which

they said they would produce shortly. At the beginning

of July, the Fosters told State Farm that they were “close

to obtaining the information and documents you’ve

requested in your previous letters.” The Fosters produced

some additional documents in July but many remained

outstanding. On August 5, the Fosters delivered close

to 1,000 pages of documents, including their proof of loss.

On August 13 and 25, Mr. Foster sat for his “examination under oath” (EUO). On August 26, Mrs. Foster

began her EUO. Based on statements by the Fosters

during those EUOs about previously undisclosed bank

accounts and business dealings, State Farm requested

financial information dating back to 2002. On September 3, State Farm sent the Fosters lists of old and new

document and information requests. Mrs. Foster’s EUO

was continued on September 9. During that continuation

of her EUO, Mrs. Foster said that she was still gathering

requested documents. The next day, during her third day

of questioning, Mrs. Foster told State Farm that the

Fosters had actually earned more money than reported

in their 2004-2007 tax returns. That day’s interview ended

with the following exchange:
6 No. 11-3100

Counsel for State Farm: Okay. I suppose this is

probably a good place

to stop, and we’ll adjourn. And by agreement, Counsel, is that

correct?

Counsel for Mrs. Foster: Correct.

Counsel for State Farm: And w e ’r e going to

reconvene at a later

date when we gather

these documents that

we’ve been talking

about for several days.

Counsel for Mrs. Foster: Correct.

On September 21, State Farm sent the Fosters a master-list

of old and new requests. All together, State Farm was

asking for fifty-nine categories of information and documents.

The Fosters sent State Farm a status report on October 1.

For a majority of the requests, the Fosters said that they

were either looking into them or that they had themselves already sent requests to various financial institutions for responsive documents. On December 2, State

Farm sent the Fosters its own detailed status report.

According to its records, State Farm had not received a

majority of the requested documents or an explanation

for why they could not be produced. State Farm

expressed concern “about the lack of documents

the Fosters have provided since the last session of
No. 11-3100 7

Mrs. Foster’s examination under oath on September 10,

2009” and concluded the letter by referring to Mrs.

Foster’s incomplete EUO: “Pursuant to our agreement, we

agreed to cancel and reschedule Mrs. Foster’s examination under oath to allow [the Fosters] additional time to

produce these documents. Upon substantial compliance

with the requests listed above, we will reschedule the

continuation of Mrs. Foster’s examination under oath.”

On December 11, the Fosters responded: “We are disturbed by State Farm’s unsupported allegations that the

Fosters have produced a ‘lack of documents.’ Specifically,

we are concerned with the growing evidence of State

Farm’s bad faith in assessing the Foster’s claim. . . . By this

letter, if you are attempting to create a noncooperation

or noncompliance issue in [the Fosters’] policy, it is

strictly foreclosed and we are firmly establishing a reasonableness boundary in responding to your copious

and often unreasonable requests.” The Fosters also

stated that they believed they had until January 3, 2010

to sue on the contract. The Fosters then updated their

position on each of State Farm’s requests. For a majority,

they declared that they “possess nothing further to produce.” The Fosters ended the letter by reminding

State Farm that they were not going to “ignore” their

$2.6 million claim and gave State Farm “until December 23,

2009 to complete your examinations under oath, your

evaluation of this claim, and make a decision.”

State Farm answered on December 15: “Your letter

strikes a curious tone, given your prior acknowledgement of the amount of documents that were still out-
8 No. 11-3100

standing at the time we mutually agreed to continue

Mrs. Foster’s examination under oath. . . . [W]hile

[the Fosters] have provided numerous documents, there

is still a significant amount of relevant information

that [the Fosters] have identified in their examinations

under oath, agreed to provide, and have chosen not to

provide, to date.” State Farm again quoted the Your

Duties After Loss section of the policy, rejected the Fosters’ deadline of December 23, and explained that

“your statement that suit must be initiated by January 3,

2010 is not accurate since the implementation of Ind.

Code § 27-1-13-17 on June 27, 2007 establishing the minimum period of a policyholder to bring an action against

an insurer to no less than two years from the date of

loss.” State Farm’s letter did not deter the Fosters.

They filed this suit for breach of contract and bad faith

on December 30, 2009, just shy of the one-year anniversary of the fire.

Approximately two years after removal from state

court, the district court granted State Farm’s motion for

summary judgment. Foster v. State Farm Fire & Cas. Co.,

No. 1:10-cv-20, 2011 WL 3610425 (N.D. Ill. Aug. 17, 2011).

As usual, we review the district court’s grant of summary judgment de novo, viewing the facts in a light

most favorable to the non-moving party. Echo, Inc. v.

Timberland Machs. & Irr., Inc., 661 F.3d 959, 963 (7th Cir.

2011). A motion for summary judgment should be

granted only if there is no genuine issue of material fact

and the moving party is entitled to judgment as a matter

of law. Nat’l Athletic Sportswear, Inc. v. Westfield Ins. Co., 528
No. 11-3100 9

F.3d 508, 512 (7th Cir. 2008). The parties (properly) agree

that this diversity case is governed by Indiana law. Id.

For the contract claim, the relevant Indiana law is set

out in Morris v. Economy Fire & Cas. Co., 848 N.E.2d 663

(Ind. 2006). Morris involved a suit by an insured

claiming breach of contract and bad faith because the

insurer refused to provide a transcript of recorded statements before requiring an additional EUO. Id. at 665.

The contractual provisions at issue in Morris were

nearly identical to those in this case: There was a Your

Duties After Loss section and a provision stating that

there could be no suit until those obligations were

satisfied. Id. at 666. The Indiana Supreme Court made

it clear that a Your Duties After Loss provision is not

a cooperation clause that requires only reasonable assistance with the investigation of a claim, but is “an

entirely separate condition that explicitly requires the

policyholder to perform specific duties.” Id. The insured

must produce documents and sit for EUOs and cannot

impose prerequisites on the performance of those duties.

Id. “Compliance [is] not optional or subject to a trial

court determination of reasonableness.” Id. at 667. The

reasonableness language in a Your Duties After Loss

section—which requires EUOs and document production

“as often as we [the insurer] reasonably require”—

“describes how often the insurer can make requests, not

the nature and extent of the information or statement

sought. The policy contract does not itself impose an

explicit general ‘reasonableness’ requirement on the

insurer regarding what documentation the insurer
10 No. 11-3100

might demand of the insured or in what context the

insurer might ask for an examination under oath.” Id.

The court in Morris concluded that “[t]he Morrises

breached the contract as a matter of law when they

refused to provide an examination under oath until

Economy [the insurer] fulfilled additional conditions

prescribed by the Morrises.” Id. at 666-67. In this

case, similarly, the Fosters breached their insurance

contract as a matter of law when they did not produce

the documents necessary to complete Mrs. Foster’s EUO.

Under Morris, the Fosters were not permitted to demand

that Mrs. Foster’s EUO be completed before they substantially complied with State Farm’s document requests. This conclusion is particularly secure here,

given that the parties agreed that Mrs. Foster’s EUO

would be completed when certain documents were produced.

That was also our conclusion in National Athletic, 528

F.3d at 508, a remarkably similar insurance dispute

under Indiana law. As in this case, in National Athletic

the policyholder sued its insurer for breach of contract

and bad faith, claiming that the insurer did not make a

decision on the policy fast enough and, among other

things, improperly insisted on continuing (or having a

second) EUO with a particular person after he had

already sat for an eight-hour EUO. Id. at 511. The insurance company in National Athletic, like State Farm in

this case, claimed that it didn’t have to pay because the

insured failed to complete that EUO. Id. at 516. And, just

as in this case, the insurer in National Athletic would
No. 11-3100 11

continue the critical EUO only once the insured

produced requested documents. Id. at 514. Also like

this case, the parties in National Athletic had a clear plan

to continue the disputed EUO after the requested documents were produced. Id. at 515. The plaintiff in National

Athletic failed to sit for the continuation of the EUO

but also denied that it was refusing to sit for the EUO. Id.

at 516. It was not a refusal, plaintiff protested, they had

merely set “reasonable limitations,” id., or, as the Fosters

put it, “a reasonableness boundary.” Morris and the

cases interpreting it, however, “make clear that the

insureds cannot put conditions on their existing contractual duties. . . . More specifically in regard to this case, demanding that an EUO have ‘reasonable limitations’ lacks

legal support.” Id. at 518.

Because an insured cannot impose a reasonableness

limit on “the nature and extent of the information or

statement sought,” Morris, 848 N.E.2d at 667, in National

Athletic we discussed whether the plaintiff could get

anywhere by objecting to the number or frequency of

the insurer’s requests for EUOs or documents or information: 

Plaintiff also couches its claim in the context of

Defendant’s many requests for documents and

information. The implication is that after the

Plaintiff provided thousands of pages of documents, spent many hours dealing with Defendant’s document requests, and submitted to the

first EUO, it was unreasonable to make Plaintiff

submit to another EUO. While it is clear that the
12 No. 11-3100

Plaintiff provided a great amount of cooperation

with the Defendant’s requests, one problem with

this argument is that the Plaintiff left the first

EUO with the understanding that the Defendant

would request, and the Plaintiff would provide,

more documents, and that another EUO would

be held to discuss them.

528 F.3d at 522. And so it is here: Having unambiguously

agreed to produce documents and complete Mrs. Foster’s

EUO, the Fosters have left themselves no room to argue

that State Farm’s requests were so numerous or frequent

that they violated the insurance contract under Morris.

The Fosters emphasize that they produced for State

Farm everything they possessed. We assume they did.

But the Fosters misunderstand their duty under the

contract as construed by Morris: Their duty was not (only)

to give State Farm documents they happened to

possess physically but to acquire and deliver requested

documents related to their financial condition. See

Morris, 848 N.E.2d at 666 (insured must comply with the

“specific duties” imposed by a “Your Duties After Loss”

provision); Wood v. Allstate Ins. Co., 21 F.3d 741, 747 (7th

Cir. 1994) (financial condition of the insured is relevant

when a possibility is raised that the insured set fire to

her own house). As a matter of law, the Fosters’ failure

to produce requested documents or even explain why

they could not, and their related failure to complete

Mrs. Foster’s EUO, materially breached the contract. The

closer we look, the clearer this is. The Fosters’ failures

to produce were basic:
No. 11-3100 13

Tax Returns from 2002, 2003, and 2008. State Farm requested the Fosters’ tax returns for 2002-2008. As of the

beginning of September 2009, the Fosters had produced

their returns for 2004-2007 but not for 2002, 2003, and

2008. On September 21, State Farm restated its request

for the missing returns. The Fosters responded ten days

later that “Linda [Foster] is looking to find these tax

returns. Otherwise, we will submit a request to the

IRS . . . .” Two months later, on December 2, 2009, State

Farm told the Fosters that it had not received the

missing returns and that it was willing to reimburse the

Fosters for fees they would incur if they had to get new

copies from the IRS. Approximately one week later,

without having produced their 2002, 2003, and 2008

tax returns, the Fosters declared that they had provided

“necessary authorizations to obtain financial information. Please see all previous responses or information

in your possession related to this claim. [The Fosters]

possess nothing further to produce.”

Income from eBay. During her August 26, 2009 EUO,

Mrs. Foster informed State Farm that she had income

from selling items on eBay. In September, State Farm

requested documentation of that income. In October,

the Fosters responded this way: “We are making a reasonable inquiry into this request and to the extent other

items produced or yet to be produced do not evidence

the sale of EBay [sic] items, we will continue to investigate.” Two months later, State Farm wrote that it had

not received the requested documents. On December 11,

without having given State Farm responsive documents,
14 No. 11-3100

the Fosters stated that they “possess nothing further

to produce.”

Mortgage Applications. In September 2009, State Farm

twice requested the Fosters’ applications for the first and

second mortgages on their home. In October, the Fosters

said that they did not have copies of their mortgage

applications. Two months later, State Farm informed

the Fosters that they had received bank records about

a line of credit that Mrs. Foster said was for the second

mortgage. The records did not contain the mortgage

application, however. State Farm said it would request

the second mortgage application itself. As for the first

mortgage, which was with a different bank, State Farm

requested the application directly from the bank but

was refused. State Farm communicated that refusal to

the Fosters, indicating that they needed to get that application themselves. On December 11, the Fosters acknowledged that they had not produced the applications and said that if State Farm’s own requests for mortgage applications had been refused, it should inform

the Fosters of the protocol to request applications and

they would execute the request. Otherwise, they “possess

nothing further to produce.”

Bank Statements. In September 2009, State Farm

requested statements for twenty-one different accounts

and lines of credit dating back to 2002. The Fosters responded in October with statements for three accounts

and a message that, for most of the other accounts,

they had sent requests to creditors for statements. In

December, State Farm gave the Fosters an account-by-
No. 11-3100 15

account inventory: The Fosters had provided at least

some records for four accounts, said that three of the

accounts may relate to Mr. Foster’s law practice, but

had not produced statements (or an explanation for

nonproduction) for the remaining accounts. The Fosters

responded to State Farm’s inventory with a general

statement about all the accounts: They had made requests,

produced to State Farm the statements that had been

delivered to them, provided State Farm with authorizations, and now “possess nothing further to produce.”

Possible Suspect. Finally, a non-financial example: In

September 2009, State Farm requested “[t]he name of the

police officer that according to Mrs. Foster, had a heart

attack as a result of Mr. Foster [a lawyer] questioning

him while on the stand. Mrs. Foster also mentioned him

as a suspect to starting the fire during [her] September 10,

2009 examination under oath.” The Fosters responded

that they “do not remember the name of the officer

that suffered a heart attack on the stand during Harry

Foster III’s cross-examination of him. The Fosters remember the police officer was and may still be a mall security

guard.” At the beginning of December, State Farm again

asked for “information regarding the mall where the

officer is a security guard.” To that, the Fosters said they

“are unaware of the mall where the officer may be a

security guard.”

In short: The Fosters did not provide State Farm with

documents and information as requested. If we stop

right there, this is an easy case under Morris and National

Athletic. And the district court case the Fosters rely on
16 No. 11-3100

in their briefs, Keten v. State Farm, No. 2:06-cv-341, 2010 WL

1258198 (N.D. Ind. Mar. 29, 2010), where the insureds

produced all requested documents not destroyed in a

fire, and the district court case the Fosters cited at argument but not in their briefs, New Berean Missionary

Baptist Church, Inc. v. State Farm Fire & Cas. Ins.

Co., No. 1:08-cv-1584, 2010 WL 2010464 (S.D. Ind. May 18,

2010), do not persuade us to reach a different conclusion.

But the Fosters also attempt to move their case out

from under Morris and National Athletic by insisting that

their hand was forced—their hunt for documents had

to end and they had to sue when they did—because the

one-year limitations period in their contract was about

to expire. Their apparent noncompliance with the contract’s express terms, especially the requirement that

“[n]o action shall be brought unless there has been compliance with the policy provisions,” was a function of the

limitations period. How could they have been required

to wait to sue and risk facing a winning limitationsperiod defense from State Farm? The short answer is

that they faced no such risk, regardless of what the

contract said.

In 2007, Indiana passed a law requiring that insurance

policies covering “first party loss to property located in

Indiana” that “insures against loss or damage to . . . real

property . . . which is the principal place of residence of

the named insured . . . may not be issued, renewed, or

delivered to any person in Indiana if the policy limits

a policyholder’s right to bring an action against an

insurer to a period of less than two (2) years from the

date of loss.” Ind. Code § 27-1-13-17 (emphasis added).
No. 11-3100 17

The Fosters renewed the policy on their Indiana home,

their principal place of residence, in 2008. They are obviously covered by the statute. And State Farm said as

much. When the Fosters told State Farm they were concerned about the contractual limitations period, State

Farm wrote: 

I would point out that your statement that suit

must be initiated by January 3, 2010 is not accurate since the implementation of Ind. Code § 27-

1-13-17 on June 27, 2007 establishing the minimum

period of a policyholder to bring an action against

an insurer to no less than two years from the

date of loss. Notwithstanding the enactment of

this legislation, it is still State Farm’s intent to

complete its investigation into the Fosters’ claim

as quickly and efficiently as possible. To that end,

I would urge you and your clients to provide the

outstanding documents as quickly as possible.

But the Fosters were unsure if this actually guaranteed

them at least two years to sue because of the letter’s

next paragraph:

Finally, State Farm Fire and Casualty Company

has asked me to remind you and your clients that

they are continuing to investigate this claim

under a full reservation of rights and that no

action by the Company should be construed as a

waiver of any of your clients’ rights, duties or

obligations under the policy, nor as a waiver of

any of State Farm’s rights or defenses, all of

which are specifically reserved. 
18 No. 11-3100

Similar boilerplate concluded every letter from State

Farm. But, giving the Fosters the benefit of the doubt,

let’s assume that the letter was not a clear statement

that they had at least two years to sue. 

The express terms of their policy with State Farm

should have allayed any lingering doubts:

Conformity to State Law. When a policy provision

is in conflict with the applicable law of the State

in which this policy is issued, the law of the

State will apply.

And if this didn’t give the Fosters certainty, they could

have consulted Indiana common law, which provides

for the same result: “The terms and conditions of the

contract include the relevant statutory provisions which

exist at the time the contract is made as if such provisions were expressly incorporated.” Wencke v. Indianapolis,

429 N.E.2d 295, 297 (Ind. Ct. App. 1981). But the Fosters

complain that, on top of all this, State Farm did not offer

a tolling agreement. And it is true, State Farm did not.

But that would only be relevant if the Fosters had asked

for one. They did not. The limitations period was two

years and it was the Fosters’ responsibility to understand that.

In addition to their contract claim, the Fosters appeal

the district court’s grant of summary judgment on

their bad faith claim. Under Indiana law, if State Farm

wrongfully slow-walked the Fosters’ request for

coverage, even if they had not yet denied payment on

the policy, State Farm could be liable for the tort of insurance bad faith. See Erie Ins. Co. v. Hickman, 622 N.E.2d
No. 11-3100 19

515, 519 (Ind. 1993); but cf. Kartman v. State Farm, 634

F.3d 883, 891 (7th Cir. 2011). That said, on this record,

State Farm is entitled to judgment as a matter of law. To

prove bad faith, there must be an element of “dishonest

purpose, moral obliquity, furtive design, or ill will.”

Monroe Guar. Ins. Co. v. Magwerks Corp., 829 N.E.2d 968,

977 (Ind. 2005). There is no record evidence of that.

To the contrary, the record reveals nothing more than

State Farm’s attempt to investigate a substantial claim

made after an intentionally set fire. “[A] good faith

dispute concerning insurance coverage cannot provide

the basis for a claim in tort that the insurer breached

its duty to deal in good faith with its insured. . . . And

‘[t]his is so even if it is ultimately determined that the

insurer breached its contract. That insurance companies

may, in good faith, dispute claims has long been the rule

in Indiana.’ ” Id. at 976 (quoting Hickman, 622 N.E.2d at

520). The Fosters argue that Hamed & Michigan Foods, Inc.

v. General Accident Ins. Co., 842 F.2d 170 (7th Cir. 1988)

requires a different conclusion. It certainly does not:

In Michigan Foods (as the parties call it) the insurer

dragged its feet for months after the insured had

satisfied the insurer’s requests for documents and EUOs.

Id. at 171. That could be bad faith but, as we have explained, nothing similar happened to the Fosters.

The district court properly granted State Farm’s motion

for summary judgment on both issues. Our conclusion

should not be overread, however: We do not understand

Morris to license badgering and irrelevant demands

for documents and information or endless EUOs. But,

notwithstanding the Fosters’ representations, that is not

this case; Morris does require policyholders to perform
20 No. 11-3100

their specific “duties after loss.” And that the Fosters

did not do. 

AFFIRMED.

3-16-12