The Honor abl e J am es E. Sh adi d, Dis tric tJ udge f or the  U nited States D istri ct C ou rt for the C en tral D istrict of Ill ino is, s i t t i ng by des i gna t i on. 

## In the 

# U n ited S ta tes Co urt o f Ap p ea ls

F o rth eS e v e n th C ir cu it
N o. 11

- 3100 H ARRY F OSTE R, III an d L I NDA F OSTE R, P laint if fs -App el lants , v.
S TATE F A R M F I R E AND C ASU ALT Y C OMPAN Y, D efend a nt-A pp ellee.
Appeal from the United States District Court fo r the N o rthernDi stricto f Indian a, Fo rtWayne D ivisi on. No . 1:10- cv-00020- TLS-RBC

—Th eres a L . Sp ri ngman n, Judg e.
A RG UE D F EB RU AR Y 23, 2012

— D ECI DE D M AR CH 16, 2012

Before F L A U M an d T INDER, C ircu it Judges, a nd S HA D ID , D istrict Judge.  T IND ER, C ircu it Judge. This case pre sents two i ssues , both un d er I nd iana la w : F irst, w he th er the Fost ers2 N o. 11

- 3100 bre ached thei r i nsurance c on tr act w i th S tat e F ar m by f ai l i ngt o c o mpl y wi th a s e c t i o n t i t l e d “ Yo urDuti es A fte r L os s” a n d , sec on d , w h et h er Sta te Fa rm ’s d ela y in deci ding the F ost er s’ cl ai m was i n bad f ai th and ther efore tortious

. Th e d istri ct cou rt grante d State Farm ’s mo t i o n f o r s u mma r y j u d g me n t
. We a ffi r m. O n Jan u ar y 3 , 2 00 9, w h ile H ar ry a n d L in d a F os te r, th eir tw o chi l dren, H ar ry ’ s f ather, an d the f am i l y’ s e i ght dog s w er e o ut, a fire s everely dam age d the F ost er s’ hom e. M r s. F o st ers ubm itted a c l ai m t o S ta te F ar m unde r the fam il y’s ho m e o w ne rs’ poli cy th e nex t d ay. State Farm prom ptl y bega n re questi ng docum ents, authori zati ons, and inte rv i ew s. Based o n i ts i ni ti ali nter vi ew s, S tat e Far m l ear ned that the Fos ter s had at l eas t tw o busi nesse s, he l d numer o us pe r so na l a nd b us ines s ac co unt s, a nd w er e invol ved i n m ult i ple l aw sui ts. A t the e nd o f J a nu a r y, S t a t e F a r m s e nt a l ett er to the F ost er s r est ati ng i ts in itial r equests f ori nfo rm ati on an d do cument s, i nc l udi ngb l ue prints, ut i l i tyb i l l s, a nd re c eip ts for e lec tr ica l co m p o n e n ts in t h e “ th ea te r ro om .” St ate F a r m wr o t e the F o s t e r s a g a i n i n e a r l y Mar c h to r em i nd the m o fthe i r c o nt r ac tu alo bl i g at i o ns , quo tingthe f ol l owing pol i cy provi si ons: 2. Your Du t i es Aft erLoss
. A fter a l oss to w h i ch th is insur an ce may appl y, y o u s ha l l s ee tha t th e f o l l o wi ngdu t i e s a r e p e r f o r med : * * *
c. Pre pare an i nventory o fdam age d or st ole n p er so n al p ro p er ty . Sh ow in d et ailN o. 11

- 3100 3 the quanti ty, descr i pti on, ag e, r ep lacem ent c os t an d am ount o fl oss . A tta ch to the inventory a l l bi l l s, r ecei pts and r el ate d docum ents that substa nti ate the fi gure s i n the i nventory; d. as o ften a s we re aso nabl y r equi re : ( 1) exhibi t the dam age d proper ty; ( 2) pr o vi de us wi thr ec o r ds an d d oc u m en ts w e re q u es t a n d p er m it us to m ake co pie s; ( 3) su b m it t o a n d su b sc rib e, w h ile not i n the prese nce o fany othe r i ns ur e d: ( a) s ta te m en ts ; a nd ( b) e xa m i na ti o ns unde r o ath; an d ( 4) p rod uc e em p loyees, m em bers o fthe i ns ured’ s ho us eh o l d o r o th

er s f orexam i nati on under o ath t o th e ext en t it is w ithin th e insu red ’s po wert o do s o ; a nd
e. s ubmi t to us , wi th i n 60 d ay s afte r the l oss , you r si gned, sworn pr oo fo fl oss w h ich se ts for th , to th e be st of yo u r kn ow ledge a nd bel i ef : [ detai l s about the c ause of the l o s s a nd da mag e d o r de s t r o y e d p r o per ty] * * *4 N o. 11

- 3100 6. S u i tAg a i n s tUs
. N o a cti o n s ha l l b e br o ug ht unless ther e has bee n com pli ance with the pol i cy pr o vi si o ns . The a ct ion m ust be s ta r te d wi th i n o ne yea r afterthe date o fl oss o r dam age . By m i d- M ar ch, S ta te F ar m ’ s fi r e i nv es ti g at o r ha d c o ncl ud ed that the fi re was i ntenti onal l y s et and the Fos te rs’ cl a i m was r e fe r r e d t o the i ns ur a nc e c o mpa ny ’ s S pe c i al I nv estiga tive U nit. State Farm i nform ed the Fost ers th at “t h er e is a q u es tio n as to w h et h er th e l o s s is ac c identalas i t r el ate s t o a nam ed i nsured” a nd r eq u est ed add itio nal docum ents, such a s deta i l ed phone r eco r ds, b an ka cc o untt r an sa ct i o n h i st o r i es , t ax r etur ns , a nd m o r tg ag e i nf o r m at i o n. S ta te F ar m a l so r emi nde d the Fos ter s that thei r proo fof lo ss w as du e byM ay 2, 20 09. ( By the w ay, al l si gni fi cant c om m unica ti ons b et w een th e F o st er s an d S ta te F ar m tha t we di sc us s i n the o pi ni o n t o o kpl ac e betw eenthe i r l awy er s be ca us e bo ththe in su re d s a n d th e in su re r re ta in ed co u n se l f r o m n ea rly th e b eg in n in g of t h e c laim p ro c es s.) I n A pri l, the Fos ter s r equested a 60- day exte nsi on f o r fi l i ngthe i r pro o fofl o ss . St at e F ar m gr an te d the e xt en si o n, r emi nde d the F o st er s o fi ts pr ev i o us do cument r eque st s, a nd e nc o ur ag ed th e F o st er s to pr o duce doc um en ts as th ey g o t t h em so th e c laim p ro c es s c ou ld m o ve f o r war d. A f ew da y s afte r the i ni ti al6 0- daye xt en sion, th e Fosters in fo r m ed State Farm that they w ere hi ring a new at torney an d requeste d add i ti onalti m e t o fi l e thei r proo fo fl oss . S tat e F arm g ra nted the Fos ter s’ r equ e s t a n d g a v e th e m u n t i l Au g u s t 5 , 2 0 0 9 t o fi l e . I n t he s a me l e t t e r tha t g r a nt e d tha t s e c o nd e xt e ns i o n, S tat eN o. 11

- 3100 5 Far m r est ate d i ts previ ous r equest for docum ents, adde d the F o st er s’ 2 00 8 ta xe s to i ts r eque stl ist, a nd em phasi zed thatt h e d ocum ents al re ady i n the Fos ter s’ posse ssi on s houl d be p ro du ced “as q uic kl y a s pos sibl e” to f aci l i tat e the cl ai m pro cess and beca use there co uld be f ol l ow-up questi ons and request s. O n M a y 2 0, th e F os te rs se n t St at e F ar m p h on e b ills and a si gned m edi calr el eas e a nd i nd i cate d thatthey w er e t ry i ng to ge t o therr equeste d docum ents, wh i ch th eys ai d the y woul d pr o duce s ho r tly . At the b egi nni ng of Ju ly, the Fos ter s t ol d Sta te Far m thattheywere “cl ose to obt ai ni ng the i nfo rm ati on a nd d ocum ents you’ ve re quested i n yo ur pre vi ous l ett er s. ” The F ost er s pro du ced som e a dd i ti onaldoc u m en ts i n J ulybut m any r em ai ned outst anding. On A ugust 5, t he Fo ste rs del i ver ed cl ose to 1, 000 pages o fdocum ents, i ncl ud i ng the i r proo fo fl oss . On A ugust 1 3 an d 2 5, M r. Fo ste r satf orhi s “ exam i nati on under o ath” ( EU O). O n A ugust 2 6, M rs . Fo ste r bega n h e r E U O
. Ba sed on state m en ts by th e Fosters dur i ngtho se EUOs abo utprevio us l y undi sc l o se d b an k acc o un t s a nd b us i ne s s de a l i ng s , S t a t e F a r m r e qu e s t ed fi n a n c i a l i n f o r ma t i o n da t i n gb a c kt o 2 0 0 2
. O n S e p t e mber 3, S t a t e F a r m s e nt the F o s t e r s l i s t s o f o l d a nd new d o c u me n ta n d i n f o r ma t i o n r e qu e s t s . Mr s . F o s t e r ’ s E UO w as continued o n Se ptem ber9. Duri n g th at continuati on o fher EU O, M r s. F o st ers ai d tha t sh e was s ti l l g athe r i ng re quested d ocum ents. T he next day, d uri ng her thir d day o fque st i o ning, M rs. Foste r t o l d S ta te F ar m tha t th e Fos ter s had actual l y e ar ned m or e m oneythan re port ed i n thei r 2004

- 2007tax re turns. That day’ s inter vi ew ended w i th the f ol l owing exchange:6 N o. 11

- 3100 C ou n se l for St at e F ar m : O ka y. I su p p os e th i s is probabl y a go od pl ace t o s t o p, a nd we ’ l l a dj ourn. A nd by ag re em ent, Counsel, i s that cor re ct? Counsel f orM rs . Fo ste r: Corr ect. C o u n s e l f o r S t a t e F a r m: A n d w e ’ r e g o i n g t o re conve ne ata l ate r date wh en we gather these docum en ts that we’ ve been talk i ng about f orsever aldays. Counsel f orM rs . Fo ste r: Corr ect. On Septem ber21 , S tat e F ar m sent the Fo ste rs a m ast er - l i st ofo l d and new r equests
. A l l to gether, S ta te Far m was as k i ngf o r fi fty
- ni ne c at ego r i es o fi nf o r m at i o n a nd do cum ents. The Fos ter s sent St ate Far m a sta tus re port on October1. Fora m aj or i ty ofthe re ques ts , the Fos ter s s ai d that they we r e e i th e r l o o k i n g i n t o th e m o r th a t th e y h a d t he mse l ve s al r ea dy se ntr eque st s to v ar i o us fi na nc i ali ns tituti ons f orr esponsi ve docum ents. On Decem ber2, S tat e Far m se nt the Fo ste rs i ts own detai l ed sta tus r epor t. Acc o r di ngt o i t s r e co r ds , S t a t e F a r m ha d n o tr e c e i v e d a m ajorityo fthe re quested docum ents oran e xplanat i on for w hy they cou ld n ot be p rod uc ed . S t ate Farm express ed conce rn “ about th e l ack ofdocum ents the F ost er s h ave prov i ded since the l astse ssi on o fN o. 11

- 3100 7 M rs . Fo ste r’ s e xam i nation u nd ero ath o n Se ptem ber10 , 20 09” and concl ud ed the l ett erbyr efer ring to M rs . F o s t e r ’ s i n c o mpl e t e E UO : “ P u r s u a n tt o o u r a g r e e me n t, we agr eed to cance l and re schedule M rs . Fos ter ’ s e xam i nati on under o ath t o al l ow [the Fo ste rs ] addit i on al ti m e t o produce the se docum ents. U pon substa nti alco m pli ance wi ththe r eque st s l i st ed ab o ve , we wi l l r es ch edu l e th e c on tin u at ion of M rs . Fos te r’s ex am in at ion u n d er oa th .” On D ecem ber11 , the Fo ste rs r esponde d: “W e a re di stu rbe d b y S ta te F ar m ’ s uns uppo r te d a l l eg at i o ns tha t th e Fos ter s hav e produced a ‘ l ack ofdocum ents. ’ S peci fi cal l y, w e a re co ncer ne d w i th the gr owing evi dence ofS tat e Fa rm ’s b ad fait h in as se ss in g th e Fo st er ’s c laim

. . . . B y t h is l ett er, i fyo u ar e a tte m pt in g t o cre ate a noncoo perat i on or n on c om p lian c e is su e in [th e F os te rs ’] p oli c y , it is str i ctl y for ecl ose d and w e a re firm ly est abl i shi ng a re aso nabl en es s bo unda r y i n r es po ndi ng to y o urcopi o us and often unr eas onabl e re quests. ” The F ost er s a l so sta t e d tha tthe y b e l i e v e d the y h a d u nt i l J a nu a r y 3 , 2 0 10 to su e o n th e c on tr ac t. T h e F os te rs th en u p d at ed th eir posi ti on o n each ofS tat e F ar m ’ s r equests
. Fo r a m aj or i ty, they decl ar ed that they “posse ss nothi ng furtherto pro duce.” Th e F o st er s en ded th e l et te r b y r emi ndi ng St at e F ar m th at th e y w e r e n otgoin g t o “ ign or e” th eir $2. 6 m i l l i on cl ai m and gav e S tat e F ar m “unti l Decem ber23 , 20 09 t o c o m pl et e y o ure xa m i na ti o ns un dero ath, y o ur ev alu at ion of th is c laim , an d m ak e a d ec isio n .” St ate Fa rm answered o n Dec em b er 15 : “Yourl ett er str i kes a curi ous t one, giv en yo ur pri oracknow l edgem ent o fthe am ou n t of docum ents that w er e s ti l l o ut-8 N o. 11

- 3100 st an di nga t th e ti m e we m ut ua ll y a g r ee d t o c o nt i nue M r s . Fo st er ’s e x am in at ion u n d er oa th

. . . . [W ]h ile [the Foste rs] ha v e p rovide d nu m erou s d ocu m en ts, th ere i s sti l l a si gni fi cant am ount of re l evan t in f or m ati on th at[ th e F o st er s] ha ve i den ti fi ed i n the i r e xam inati o ns und ero ath, ag re ed to pro vi de, an d h ave chose n not to pr o vi de, t o da te
. ” S ta te F ar m a g ai n quo te d the Yo ur Du ti es A fterLoss sect i on o fthe pol i cy, r ej ecte d the F oster s’ deadl i ne o fDecem ber23 , and exp lained that “yo ur stat em ent that s uitm ust be i ni ti ate d by J anuary3, 2 0 1 0 i s n o ta c c ur a t e s i nc e the i mpl e men t ati o n o fI nd

. C od e § 27 -1-1 3-1 7 o n Ju n e 2 7, 20 07es t a b l i sh in g t h e m in im um per i od ofa pol i cyhol der t o bring a n a c tio n aga i nst an ins u re r to no l ess than tw o yea rs fro m the date o f l oss . ” S tat e F ar m ’ s l ett erd id n ot deterthe Fos ter s. They fi l ed thi s s uitf orbr each o fco ntra c t a nd bad f ai th on D ecem ber 30, 2009, j us t shy of th e one-yea r ann iversar y o fthe fi re . A pp ro xi m ate l y tw o yea rs afterr em ova lfro m st ate cour t, the dist ri ct c ourtgr anted S ta te Far m ’ s m oti on f or su m m ar y jud gm en t. Foster v. St at eFa r m Fi r e& Cas
. Co. , N o. 1: 10-cv-20, 2011 W L 36104 2 5 (N
. D
. I ll

. A ug . 17, 2011 ). As u s u a l, w e r e v i e w th e d i s t r i c tc o u r t ’ s g r a n to fs u mm ar y j udg m en t de no vo , v i ewi ngthe facts in a l i g ht m os t fa vo ra b le t o t h e n on -m ov in g p ar ty
. Echo, Inc. v. Tim be rl and M ach s . & Irr . , Inc. , 661 F.3d 9 5 9 , 963 (7th C ir. 2011 )
. A m oti on f orsum m ar y j ud gm ent s houl d be gr anted onl y i f ther e i s no genui ne i ssue of m ate ri alfact and the m ov in g par ty i s e nti tl ed to j ud gm ent a s a m att er ofl aw . N at ’ l At hl e t i c Spor t s wear, Inc
. v. We s t f i e l d Ins . Co. , 52 8N o. 11

- 3100 9 F. 3d 50 8, 512 ( 7th Ci r. 20 08)
. The part i es ( proper l y) ag re e th at th is d ive rs ity ca se is go ve rn ed by Ind ian a la w . Id. Forthe c on tr ac t c laim , the r el evantI nd i ana l aw i s set o uti n M or r i s v. Econ om y F i re & C as . Co. , 84 8 N
. E.2 d 663 (In d . 200 6). M orris in vol ved a sui t byan insured cl ai m i ngb r ea cho fc o nt r ac t an d b ad fai th b ec au se the i nsurerr efus ed to pro vi de a t ra nscri pt ofr eco rded sta temen t s b e f o r e r e qu i r i nga n a ddi ti onalEUO
. Id. at 665. The c o nt r ac tu alpr o vi si o ns a t i ss ue i n M o rris w ere ne ar l y i den ti ca l t o tho se in thi s ca se : The r e was a Yo ur Du ti es A fterLoss sect i on an d a provi si on s tat i ng tha t th ere cou ld be n o suit un t il t h ose obligati ons w ere s a t i s fi e d. Id. a t6 6 6
. T he I nd i a na S up r e me Courtma de i t cl earthat a Your Duti es A fterLoss provi si on i s not a co oper ati on cl ause that re quires o nl y r eas onabl e a ssi stance w i th the i nvest i gat i on o fa c laim , b ut i s “ an en ti r ely s epa r at e co ndi ti o n tha t exp li ci tly r equi r es the pol i cyhol der t o perf orm speci fi c duti es. ” Id. The i nsured m ust pro du ce docum en ts and si t forEU Os and cannot i m pose prer equi si tes o n the perform ance o ftho se du ti es. Id. “Com pli ance [ i s] noto pti onalo r subj ect to a t ri al cour t dete rm i nati on o fr eas onabl eness . ” Id. a t 66 7. The re aso nabl eness l anguage i n a Y our Du ti es A fterLoss sect i on

— w hi ch requir es EU Os and docum ent pr oducti on “as often a s we [ the insurer ] r eas onabl y r equ ire”

— “descr ibes how o ften the in su re r can m ake r equests , not the n atur e an d e xt en t o fthe i nf o r m at i o n o r s ta te m en t sought

. The pol i cy contr act does not i tse l fi m pose an ex pl i ci t g en eral ‘ r ea so nabl en es s’ r equi r emento n the i nsurerr ega rdi n g whatdocum entat i on the i nsurer10 N o. 11

- 3100 mi g h t d e ma n d o f th e i n s u r e d o r i n w h a t co nt ex t th e i nsurerm i ght a sk f oran e xam i nati on under o ath. ” Id. The c o ur t i n M o rris concl ud ed that “[ t] he M or ris es bre ached the contr act as a m att ero fl aw wh en the y re fu se d to p ro vid e a n ex am in at ion u n d er oa th u n til Eco no m y [ th e i ns ur er ] ful fi l l ed addi ti o na l c o ndi ti o ns presc ribed by the M or ri ses . ” Id. at 66 6-6 7 . I n th is case , si m i l ar l y, the Fos ter s bre ach ed thei r i nsurance c on tr act as a m att ero fl aw wh en the y di d not pro du ce the d o c ume nt s n e c e s s a r y t o c o mpl e t e Mr s . F o s t e r ’ s EUO
. U nd er M orris , the F o st er s wer e no t per m i tt ed to de m an d that M rs . Fos ter ’ s EU O b e com ple ted bef or e they su bsta nti al l y c om pli ed w i th S tat e F ar m ’ s docum ent r equests. Thi s co ncl usi on i s par ti cul ar l y s ecure her e, g i v e n th a tth e p ar ti es a g r e e d th a tMr s . F o s t e r ’ s E UO w oul d be co m ple ted wh en ce rt ai n d oc um ents w er e pr odu c e d. Tha t was al so o urc o nc l us i o n in N ational Athlet ic, 52 8 F. 3d at 508, a re m ar kabl y s i m i l ari nsurance dispute unde r I ndi an a l aw. As in thi s ca se , i n N ational Athlet ic the pol i cyhol der s ued i ts i nsurerforbr each ofco ntra ct and bad f ai th, cl ai m i ng tha t the i nsurerdi d no t m ak e a deci si on o n the poli cy f asteno ugh and, am ong othe r thi ngs, i m proper l y insi ste d on co nti nuing ( orhavi ng a seco nd ) EU O w ith a parti cul arper son afterhe ha d alr ea d y s at for a n ei g h t-h ou r E U O
. Id. at 511. Th e insu ran ce c o m pan y i n N ational Athlet ic, l i ke St ate Far m in th i s c a s e , c l a i me d th a t i t d i d n ’ t h a v e t o p a y b e c a u s e th e in su re d failed t o c o m p let e t h at E U O
. Id. at 516. A nd , j ust as i n thi s ca se , the i ns ur eri n N ational A th le ti cw ou ldN o. 11

- 3100 11 contin u e th e cr i ti calEU O onl y o nce the i nsured p ro d u c ed req u es te d d oc u m en ts
. Id. at 514. A l so l i ke th i s ca se , the pa r ti es i n N ational Athlet ichad a c l earpl an to c o nt i nue the di spu te d EUO afte r the req ue st ed do cum en ts w er e p ro d u c ed

. Id. at5 15
. The pl aint i ffi n Nat i onal A thle ti c f a i l e d t o s i tf o r th e co n t i n u a t i o n o fth e E UO but al so denie d that i t was r e f us i ngto sitfor t h e E U O
. Id. at 516. I t was nota re fusal, pl ain tiffpro tes ted, theyhad m er el y s et “r eas onabl e l i m i tat i ons, ” i d. , or, as the Fost ers p ut i t, “a reason ablen ess b o u n d a ry . ” M orris a nd the ca se s i nt er pr et i ngi t, ho we ve r, “ m ak e cl ea r tha t th e i nsureds c annot pu t co nd i ti ons on thei r exi sting contra ctualduti es. . . . M or e speci fi cal l y i n re gar d to thi s ca se, dem anding that an EU O have ‘ re aso nabl e l i m i tat i ons’ l acks l ega l support. ” Id. at 518. Because a n i nsured ca nnot im pose a r eas onabl eness l i m i t o n “the nature and exte nt of the i nfo rm ati on o r sta tem ent s ought, ” M orris , 8 48 N. E. 2d at6 67, i n N at i onal A thle ti cwe disc ussed wh ethert h e plai nti ffco uld g et an ywh er e byo bj ecting to the num be r or f re quencyo f the i nsurer ’ s request s fo r EU Os ord ocum ents ori nfo rm atio n : Pl ai nti ffal so couches i ts cl ai m i n the conte xt o f Defen dan t’ s m an y r eque st s f o r do cument s an d info r m at i o n. The i m pl i ca ti o n i s th ata fte r the Pl aint i ffpr o vi ded th o us an ds o fpa g es ofdo cum en ts , s pen t m any ho ur s dea l i ngwi thDe fen dan t’ s do cumentr eque sts , a nd s ubmi tt ed to the fi rst E U O , i t w as u nrea son able to m ake P lai nt iff su b mi tt o a n o th e r E UO
. Wh i l e i ti s c l e a r th a tthe12 N o. 11

- 3100 Pl ai nti ffpro vi ded a g reat am ount o fco oper ati on w i th the Defendant’s r equests , o ne pro bl em with thi s a rg u m ent i s that the Pl ai nti ffl eft the fi rs t EU O w ith the unde r st an di ngtha t th e Defen dan t w oul d request, and the Pl ai nti ffwould prov i de, m or e d oc u m en ts , an d th a t a n ot h er E U O w ou ld b e h e l d t o d i s c u s s th e m. 52 8 F .3d at52 2. A n d so it is h er e: H av in g u n am b igu ou sly agreed to p rod uc e d ocu m en ts an d com p lete M rs. Foster’s EU O, th e F o st er s ha ve l eft th emse l ve s no r o o m to argue th atS ta te F ar m ’ s r eque st s wer e so numer o us o r frequ en t th at th ey viol ated the insu ran ce con tract u nd er M o rris. The Fo ste rs em phasi ze that th ey produced f orS tat e F a r m e v e r y thingthe y pos s e s s e d. We a s s ume the y di d. Butthe F o st er s m i su nde r st an d the i r duty unde r the contr act as const rued by M orris : Thei r du ty w as not ( onl y) t o g i v e S t a t e F a r m d o c ume nt s the y ha pp e ne d to posse ss physi cal l y but to acqui re and del i verr equeste d d oc u m en ts rela te d to th eir fina n c ial c on d itio n . See M or r is , 8 48 N
. E. 2d at6 66 ( i ns ur ed m us t co m pl y wi ththe “speci fi c duti es” i m posed b y a “YourDutie s Afte r Loss” p rovisi on); Wood v. A l l s t at eIns . Co. , 21 F. 3d 741, 74 7 ( 7th Ci r . 1 99 4) ( fi na nc i alc o ndi ti o n o fthe i ns ur ed i s r el ev an t w hen a possibi l i ty i s r ai sed thatthe i nsured s et fi re to he r ow n h ou se). A s a m atter of l aw , the Fost ers’ f a ilure to pr o duce r equested doc um en ts o r e ve n e xpl ain why they coul d not, and thei r re l ate d fa i l ure to com ple te M r s. F o st er ’ s EU O, mate r i al l y b r ea ch ed th e co ntr ac t. The cl ose r w e loo k, the cl ear erthi s i s. The Fo ste rs ’ f ai l ures to produce were basi c:N o. 11

- 3100 13 Tax Ret ur ns f

r om 20 02, 200 3, and 2008
. S tat e F ar m r equested the F o st er s’ t ax r etur ns f o r 2 00 2- 20 08
. As o fthe beginning ofS eptem ber20 09, the Fos ter s had pro du ced th ei r r etur ns f o r 2 00 4- 20 07b utnot for 20 02 , 2 00 3, a nd 2008 . On S eptem ber21 , S tat e F ar m r est ate d i ts re quest f orthe m i ssi ng r etur ns. The Fo ste rs r esponded ten days l ate r that “Linda [ Fos ter ] i s l oo king t o find thes e t ax r etur ns . Othe rw ise , we wi l l s ubmi t a r eque stt o the I RS .
. . . ” Tw o m onths l ate r, o n Decem ber2, 20 09, S tat e F ar m t o l d the F o st er s th ati t ha d no t r ec eived the m i ss i ngr etur ns a nd tha t i t was wi l l i ng to reimbur se the Fo sters forfees theywould i ncur i ftheyhad to ge t new cop ies from the IRS. A p p roxim ately one w eek later, w i thout havi ng pro du ced thei r 2002 , 20 03, and 200 8 t a x r e t urns , the F o s t e r s de c l a r e d tha tthe y h a d p r ovi ded “neces sar y a uthor iza tio ns to o btain fi nanci ali nfo rm ati on. Pl eas e see al l previ ous re sponses or i nfo rm ati on i n yo ur pos ses si on r el ate d to thi s cl ai m . [ The Fo ste rs ] p os se ss n ot h in g fu rt h er to p ro d u c e.” Inc om ef r om e Bay
. Du r i ng he r Aug us t 2 6 , 2009 EUO, Mr s . F o s t e r i n f o r me d S t a t e F a r m th a ts h e h a d i n c o me from sell ing item s on eB ay. I n S e p tem ber, S tate Farm requ ested d o c u m en tation of that i nc om e. I n O ctob er, th e F o st er s r es po nde d thi s way : “ W e ar e m ak i nga r ea so nabl e inquir y into thi s r equest and to the ex te nt o ther i tem s pro du ced orye t t o b e produced d o not evi dence th e s ale of E B ay [sic ] ite m s, w e w ill c o n t in u e t o in ve st igat e. ” Tw o m onths l ate r, S tat e F ar m wrote thati t had not re cei ved the re quested docum ents. On Decem ber11 , w ith ou t hav i ng g i ven S tat e F ar m r esponsi ve docum ents,14 N o. 11

- 3100 the F ost er s s tat ed that they “posse ss nothi ng further to p ro d u c e.” M or tgageAppl i ca t i ons . I n Sep tem ber 2009 , State Farm twi ce r eque st ed th e F o st er s’ a pp li catio ns f o r the fi r sta nd secon d m ortgages on their hom e. I n Oct ober, th e Fo s ters sai d that they did not have copi es of thei r m or tgage appli cati ons. Tw o m onths l ate r, S tat e F ar m i nfo rm ed th e F o st er s th atthe y had recei ve d b an kr ec o r ds ab o ut a l i ne o fc r edi t th atM r s. F o st ers ai d was f or th e s ec o nd m or tga ge. The re cor ds did not conta i n the m ortga ge appli cati on, howe ve r. S tat e F ar m sa i d i t would r equest the seco nd m or tga ge appli cati on i tse l f

. A s f or the first m ortgage, w hich w as w ith a d iffere n t b an k, State Farm r eque st ed th e appl i ca ti o n di r ec tly f rom the b an kb ut w as re fus ed . State Far m co m m unica ted thatr efusalto the F o s t e r s , i nd i c a t i ngtha tthe y n e e de d t o g e ttha ta ppli cati on them sel ves. On Decem ber11 , the Fos ter s a cknowle dged that they had n ot produced the a pp l i cati ons and s ai d that i f St ate Far m ’ s own re quests for m ortgage ap p li cation s had been refused , i t shou ld inform th e F o st er s o fthe protoco l t o r eque sta ppl i ca ti o ns a nd they w oul d execute the r equest. Other w i se, they“pos ses s n ot h in g fu rt h er to p ro d u c e.” B ankStatem ents . I n Sep tem ber 2009 , State Farm re quested st ate m ents f ortwenty- one different acco unts and lin es ofcr edi t dating ba ck to 2002
. The Fo ste rs r esponded i n Octobe r w i th st ate m ents forthr ee acco unts and a m ess age that, f or m ost of the othe r ac c ou n ts, th ey h ad se n t r e q u e s t s t o c re d ito rs for s ta te m en ts . In Decem ber, S tat e F ar m g av e the Fo ste rs an a ccount-by-N o. 11

- 3100 15

acco unt i nventor y: The F os te rs had prov i ded atl eas t s o me r e c o r d s f o r f o u r a c c o u n t s , s a i d th a t th r ee o ft he ac co unt s m ayr el ate to M r . F o st er ’ s l aw pr ac ti ce , b ut had not pr oduced st ate m ents ( oran e xplanat i on f or n o n p r od uc tion) f or the rem aining ac cou nt s. T he Fosters re sponded to S tat e F ar m ’s in ventorywith a ge nera l sta tem ent about al l the acco unts: They had m ade r equests , produced to S ta te Far m the sta tem ents that had been del i ver ed to them , pro vi ded S tat e Far m with a uthor i zatio n s, an d n ow “p os se ss n ot h in g fu rt h er to p ro d u c e.” P ossi bleSuspe ct
. F i n ally , a n on -fin an c ial ex am p le: In S ept embe r 2 00 9, State F ar m r eque st ed “[ t] he na m e o fthe p oli ce offi cer th at acc ord ing to M rs. Foster, h a d a heart at ta cka s a r es ul t o fM r . F o st er[ a l awy er ] que st i o ni ng h im w h ile on th e s ta n d . M rs . Fos te r als o m en tio n ed h im as a s uspect t o sta rt i ng the fi re duri ng [ her] S eptem ber10 , 2009 exam i nati on under o ath. ” The F ost er s r esponded that they “do notr em em b er the nam e o fthe offi cer th at su ffered a heart a t tack on th e stan d du ring H arry F o s t e r I I I ’ s c r o s s - e x a mi n a t i o n o fh i m. T h e F o s t e r s r e me mberthe pol i ce o ffi cerwas and m ay sti l l be a m al l se curi ty gu ar d .” A t t h e b eg in n in g of D ec em b er , Sta te Fa rm ag ain as k ed f or “ i nf o r m at i o n r eg ar di ngthe mal l wher e th e offi ceri s a se curi ty guar d.” To that, th e Fo ste rs sa i d they “ar e unaware o fthe m al l wh er e the o ffi cerm ay be a se c u rit y g u ar d .” I n shor t: The Fo ste rs di d not pro vi de St ate Fa rm with docum ents and in for m ati on a s r equeste d. I fwe sto p right t h e r e , this i s an ea sy case un d er M o rris a nd N at i onal A thle ti c . A nd t h e d istri ct c ourtcas e the Fo ste rs r el y o n16 N o. 11

- 3100 in th eir br iefs , Keten v . State F a rm , N o . 2 : 0 6

- c v - 3 4 1 , 2 0 1 0 WL 1 2 5 8 1 9 8 ( N. D
. I n d

. Ma r . 2 9 , 2 0 1 0 ) , w h e r e th e i n s ur e ds pr o duce d a l l r eque st ed do cuments n o t des tr o y ed i n a fi r e, a nd the di st r i ctc o ur t ca se the F o st er s ci ted ata r g um ent b ut not in th eir br iefs , N ew B e r e a n M ission a ry Baptis tChur ch , Inc . v. St at eFa r m Fi r e& Cas
. Ins . Co
. , N o. 1: 08- cv- 1584, 2010 W L 2 0104 64 ( S. D. I nd

. M ay 18, 20 10 ) , do no t per su ade us t o r ea cha di ffer en t co nc l us i o n. Butthe F o st er s al so a tt empt t o move the i r c as e o ut f r o m unde r M o rris a nd N ational Athlet icbyi nsi sting tha t thei r hand was f or ced

— thei r h u n t fo r docum ents had to en d an d th ey h ad to su e w h en th ey d id

—be ca use th e o ne - y ea r l i m i ta ti o ns pe r i o d i n the i r c o nt ract w as abo ut to e xpi r e. The i r a ppar en t no nc o m pl i an ce wi ththe c o ntr ac t’s express te rm s, es peci al l y the r equi re m ent that

“ [ n ] o a c t i o n s ha l l b e b r o u g h tu n l e s s th e r e h a s b e e n c o mpl i an ce wi ththe po l i cypr o vi si ons , ” was a func ti o n o fthe l i mi t a t i o ns p e r i o d. Ho w c o ul d the y h a v e b e e n r e qu i re d to w ai t t o sue a nd risk facing a w i nning l i m i tat i onsp er iod d efe n se from Sta te Fa rm ? T h e s h o r t a n sw er is th atthe y f aced no s uchr i sk, r eg ar dl es s o fwhatthe c o nt r a c ts a i d. I n 2007, I nd i ana pass ed a l aw r equi ring tha t insurance p ol i ci es cove ring “fi rs t party l oss to proper ty l oca ted in I nd i ana” that “i nsures ag ain st lo ss ordam age to
. . . r eal proper ty
. . . wh i ch i s the pri nci pal p lace ofr esi dence of th e na m ed in su re d

. . . m ay n ot b e is su ed , r enew ed , o r del i ver ed to any perso n i n I nd i ana i fthe pol i cy l i m i ts a p olic yhol der’ s r i ght t o bring an acti on a gainst a n i ns ur ert o a pe r i o d o fl es s than tw o (2 ) y ea r s f r o m the d ate of l oss.” Ind

. Cod e § 27-1-13-17 (em p ha sis ad d e d ).N o. 11

- 3100 17 The Fo ste rs r enewed the pol i cy on thei r I nd i ana ho m e, th eir p rin c ip al p lac e o f res id en c e, in20 08 . Th ey are ob viousl y c ove re d by the s tatute. A nd S tat e F ar m sa i d as m uch

. W he n the F o st er s to l d S ta te F ar m th ey wer e co nc er n ed abo ut the contr actuall i m i tat i ons peri od, S tat e Fa rm w ro te : I w ou ld p oin t o u t t h at you r st a t em en t t h at su it mus tb e i ni t i a t e d b y J a nu a r y 3 , 2 0 1 0 i s n o ta ccurat e s i nce the i m ple m entat i on ofI nd

. Code § 27- 1- 13

- 17o n J une 2 7, 2 00 7 es tabl i sh i ngthe min i m um peri od of a p ol i cyhol der to bring an acti on a gainst ani nsurert o no l es s th ant wo y ea r s f r o m the date o fl oss . N otwithstandi ng the enact m ent o f th i s l e g i s l a t i o n, i t i s s t i l l S t a t e F a r m’ s i nt ent t o c om p l et e it s in ve st iga tio n int o t h e F os te rs ’ cla im a s qui c k l y a nd e ffi c i e nt l y a s p o s s ib l e . T o tha te nd , Iwoul d ur g e y o u a nd yourc l i en ts t o pr o vi de th e outst anding docum ents as quick l y a s pos sibl e. Bu t the Fo ste rs were unsure i ft h is actual l y guarant eed th em at l east tw o years to sue becau se o f t he l etter’s ne xtpa r ag r aph : F i na l l y, S ta te F ar m F i r e an d Ca su al tyCo m pan y has a ske d m e t o re m i nd yo u and yo u r c li ents that th ey are co n tin u in g t o in ve st iga te th is c laim unde r a ful l r es er va ti o n o fri gh ts an d tha t no acti on bythe Com pany shoul d be co nstr ued as a w ai vero fany ofyou r c l i ents’ r i ghts, duti es or obl iga tio n s under the pol i cy, noras a w ai vero f any o fS tat e F ar m ’ s r i ghts ordefenses , al l o f w h ich are sp ec ifica lly re se rv ed

.18 N o. 11

- 3100 Si m i l arbo i l er pla te conc luded ev er y l ett erfro m S tat e Far m . But, gi vi ng the Fo ste rs the benefi t o fthe doubt, l et ’ s as su m e tha t the l et te r was no t a cl ea r s ta te m en t th at th ey h ad atlea st tw o ye ar s t o s u e. T he exp ress t e rm s of th eir p oli cy w ith State Farm shoul d have a l l aye d any l i nger i ng doubts: C on form ity to S tate La w . W hen a pol i cy provi si on i s in confl i ct with the ap pli cabl e l aw o fthe St ate i n whi chthi s po l i cyi s i ss ue d, the l aw o fthe St ate wil l apply

. A n d if th is d id n ’t g ive th e F os te rs ce rt ain ty , th ey co u ld have consul ted Ind i ana co m m on l aw , w h ich pro vi des f o r the s ame r es ul t: “ The term s a nd c o ndi ti o ns o fthe contr act i ncl u de the re l evantst atuto rypro vi si ons w hi ch ex istatth e t im e t h e c on tr ac t i s m ad e a s if su c h p ro visi ons w er e e xpressl y incor pora ted. ” Wenckev . Indianap olis , 429 N
. E
. 2d 295, 297 (I nd

. Ct
. A p p . 1 9 8 1). Bu t the Fosters com pla i n that, o n to p ofal l thi s, S tat e F ar m di d n ot offer a t ol l i ng ag re em ent. A nd i t i s t rue, S tat e F ar m di d not. Bu t th at would onl y b e r el evanti fthe Fos ter s had as ked f o r o n e . T h e y d i d n o t
. T h e l i mi t a t i o n s p e r i o d w a s t wo years an d i t w as th e Fos t e r s ’ r esp ons ibi li ty to un d ersta nd that

. I n addition to thei r contr act cl ai m , the Fos ter s a pp eal the di str i ct c ourt ’ s g ra nt o fsum m ar y j ud gm ent o n th eir bad f aith claim

. U nd er I nd iana law , i f S t a t e Farm w ro ngfull y s l ow-w al ked the Fo ste rs ’ req uest f or cove ra ge, ev en if th ey h ad not yetdeni ed paym ent o n th e p o li cy, State Farm cou ld be li able for th e tort of insu ran c e b a d fait h

. Se eEr i eIns . Co. v. H i ck m an , 62 2 N
. E.2 dN o. 11

- 3100 19 51 5, 51 9 (In d . 199 3); but cf. Ka rtm a n v . S ta te Fa rm , 63 4 F
. 3d 883, 89 1 ( 7 th Ci r . 2 0 1 1 )
. T ha ts a i d, o n thi s r e c o r d, S ta te F ar m i s en ti tled t o j udg m en t as a matt ero fl aw. To prove bad f ai th, ther e m ust be an ele m ent o f“di shones t p u rp os e, m or al ob liqu ity , fur tiv e d es ign , or ill w ill.” M onroeGuar . In s . Co. v. M agwe rks Corp. , 82 9 N
. E.2 d 968, 977 ( Ind. 20 05)
. There i s no r eco rd ev i dence ofthat

. To the co ntra ry, the re cor d re ve als nothi ng m or e than St at e F ar m ’s a tt em p t t o in ve st iga te a su b st an tia l cla im m ade afteran intenti on allyse t fi re . “[ A ] go od f ai th di s pu t e c o nc e r ningi ns ur a nc e c o v e r a g e c a nn o tp r o v i de the b asi s f ora cl ai m i n to rtthatthe i nsurerbr eached i ts duty t o de ali n g o o d f ai thwi thi ts insu red

. . . . And

‘ [ t] hi s i s so e ve n i fi t i s ul ti m at ely de te r m i ne d tha t th e i nsurerbr eached i ts cont ra ct. That insurance com panie s m ay , in goo d fait h, d isp u te cla im s h as lon g b e e n th e ru le i n Ind iana. ’ ” Id. at97 6 ( quoti ng H i ck m an , 62 2 N
. E.2 d at 520)
. The Fos ter s ar gu e t hat Ham ed & M ichigan Fo ods, Inc. v. Ge neral A cc i de ntIns . Co. , 84 2 F
. 2d 170 ( 7th Ci r. 19 88) re quir es a di ffer en t co ncl usi on. I t ce rt ai nl y doe s no t: I n M i ch igan Food s ( as the p ar tie s ca l l i t) the i nsurer dragg ed i ts feet f orm onths afterthe i nsured had sat i sfi ed the i nsurer ’ s r eque sts f ordocum ents and EU Os. Id. at1 71
. Tha t co ul d b e ba d f ai thb ut, a s w e ha ve e xpla i ned, nothi ng si m i l arhappened to the Fo ste rs . The dis tr i ct cour t proper l y gr anted St ate Fa rm ’ s m oti on f orsum m ar y j ud gm ent o n bot h i ssues . Our co ncl usi on sh o ul d no t be o ve r read , h o wev er : W e do no t unde r st an d M o rris t o l i c e ns e b a dg e r i nga nd i r r e l e v a ntde man ds f ordocu m en ts and i nfo rm ati on o r endle ss EU Os. But, notwiths tandi ng the Fo ste rs ’ r epres entat i ons, t h at i s no t th is c as e; M o rris d oes req u ire p oli cyh olders to p erform20 N o. 11

- 3100 th eir sp ecifi c “d ut ies after loss. ” A nd that the Fost ers d id n otd o. A FFI RMED .

3- 16- 12