In the

United States Court of Appeals

For the Seventh Circuit ____________________

No. 14-8015

IN RE: ROBERT LODHOLTZ, et al.,

Petitioners,

____________________

Petition for Permission to Appeal from the

Northern District of Indiana, South Bend Division.

No. 3:11-cv-00435-RL-CAN — Rudy Lozano, Judge

____________________

SUBMITTED JULY 30, 2014— DECIDED OCTOBER 6, 2014

____________________

Before POSNER, KANNE, and WILLIAMS, Circuit Judges.

POSNER, Circuit Judge. Before us is a petition filed under 

28 U.S.C. § 1292(b) for permission to appeal from an order 

by the district court on the ground that though not the final 

order in the litigation it resolved a “controlling question of 

law” incorrectly, and that correction will expedite the resolution of the entire litigation—in fact end it. See Ahrenholz v. 

Board of Trustees of University of Illinois, 219 F.3d 674, 675–76 

(7th Cir. 2000). We grant the petition, and since the papers 

filed by the parties cover the merits adequately, we can proceed to the decision of the appeal.
2 No. 14-8015

The case has a long tail; we’ll simplify. Robert Lodholtz, 

seriously injured in 2011 while working at a plant owned by 

Pulliam Enterprises in Indiana, filed a personal injury suit 

against Pulliam in an Indiana state court. Pulliam asked 

Granite State Insurance Company, its primary liability insurer, along with New Hampshire Insurance Company, its 

umbrella insurer and Granite State’s parent (but we can ignore it and treat Granite State as the only insurer), to defend 

and indemnify it against the suit. Granite State declined to 

do so, believing that Pulliam was not liable because, as an 

employee injured in the course of his employment, Lodholtz 

could not maintain a tort suit but only a claim for workers’ 

compensation. Lodholtz disagreed, contending that he’d

been employed not by Pulliam but by another firm even 

though he’d been injured while working on Pulliam’s premises. Since he wasn’t Pulliam’s employee, he had no basis for 

filing a claim for workers’ compensation.

When Pulliam failed to file an answer to the complaint, 

Lodholtz moved for entry of a default judgment. His motion 

was granted. But he agreed not to execute his default judgment, and in return Pulliam agreed to assign him its rights 

against Granite State.

Worried that it might have to indemnify Lodholtz and 

continuing to insist that he’d been Pulliam’s employee when 

injured, Granite State moved to intervene in Lodholtz’s suit 

in order to assert the defense that Pulliam would have made

had it not defaulted. The Indiana trial court denied the motion to intervene and after taking evidence on the amount of

damages to which Lodholtz was entitled entered judgment 

in his favor for almost $4 million.
No. 14-8015 3

Within days Granite State filed the present suit in federal 

district court in Indiana, a diversity suit against Lodholtz 

and Pulliam seeking a declaratory judgment that Granite 

State has no duty to indemnify Pulliam. Moving on a different front, a month later Granite State appealed to the Indiana 

Court of Appeals from the trial court’s denial of its motion to 

intervene in Lodholtz’s state court suit against Pulliam. It 

argued that it had a sufficient interest in the suit to justify

intervention in order to prove that Lodholtz’s exclusive remedy was under the state’s workers’ compensation act because he had been employed by Pullman, and not merely 

working on its premises, when the accident occurred.

The court of appeals affirmed the denial of Granite 

State’s motion to intervene. Granite State Ins. Co. v. Lodholtz, 

981 N.E.2d 563 (Ind. App. 2012). The court pointed out that 

Granite State had sought leave to intervene in order to defend Pulliam against Lodholtz’s suit under a reservation of 

rights. That is, Granite State wanted to reserve the right, 

should Lodholtz obtain any damages in the suit, to try to

avoid having to reimburse Pulliam for those damages by 

showing that it had no duty to indemnify Pulliam. A reservation of rights is problematic from the insured’s standpoint. 

It creates a risk that the insurer will not put up a strong defense to the suit against the insured (Lodholtz’s suit against 

Pulliam), wishing to economize on legal expense and hoping 

to avoid having to indemnify the insured at all if the latter is 

hit with a judgment. Mindful of this danger, the Indiana 

courts forbid the insurer to control the defense of the insured 

without acknowledging coverage. Cincinnati Ins. Co. v. 

Young, 825 N.E.2d 8, 13–15 (Ind. App. 2006); see also Travelers Indemnity Co. v. Dingwell, 884 F.2d 629, 638–40 (1st Cir. 

1989). “Such intervention [in the defense of the suit] would 
4 No. 14-8015

unfairly restrict the insured, who faces the very real risk of 

an uninsured liability, and grant the insurer ‘a double bite at 

escaping liability.’” Id. at 639, quoting United States Automobile Ass’n v. Morris, 741 P.2d 246, 251 (Ariz. 1987).

Granite State sought review of the appellate court’s decision in the Indiana Supreme Court, and was turned down, 

ending the state court litigation. Although at both appellate 

levels Granite State had argued that the judgment in Lodholtz’s favor should be vacated, neither court addressed the 

argument in refusing to allow the insurance company to intervene. We’ll come back to this omission.

One might have thought that Granite State’s total defeat 

in the Indiana court system would have doomed its federal 

suit, based as it was on the same assertion that Lodholtz had 

been Pulliam’s employee. But no; the federal district court, at 

Granite State’s urging after the state courts had finished with 

the case, ruled that because Lodholtz’s employer had 

“leased” Lodholtz to Pulliam to do work at Pulliam’s plant, 

he had been Pulliam’s employee as well, and that therefore

the Indiana state court judgment in favor of Lodholtz should 

be “disregarded.” For if, as the federal judge believed, Lodholtz had been Pulliam’s employee when injured, the state’s 

workers’ compensation act had deprived the Indiana courts 

of jurisdiction to entertain his tort suit. Indiana courts have 

no jurisdiction to entertain a tort suit by an injured worker 

against his employer. GKN Co. v. Magness, 744 N.E.2d 397, 

400 (Ind. 2001). That is the exclusive domain of workers’ 

compensation, an administrative rather than judicial remedy.

The state trial court, which entered judgment against Pulliam, obviously thought it had subject-matter jurisdiction. 
No. 14-8015 5

The appellate court must have thought so as well. For it 

ruled on Granite State’s motion to intervene, and it would 

have lacked jurisdiction to do so had the trial court lacked 

jurisdiction of Lodholtz’s suit. The trial court and the appellate court knew of course that Granite State wanted to argue 

that the courts had no jurisdiction over Lodholtz’s tort 

case—that jurisdiction to award him compensation lay solely 

in the Workers Compensation Board of Indiana. The trial or

appellate court could easily have said “now that we know 

there may be a question of our subject-matter jurisdiction 

we'd better answer it, mindful of our independent duty to 

police our jurisdiction.” That neither Indiana court said or 

hinted at this indicates that both were satisfied that there 

was jurisdiction. The trial court had awarded millions of dollars in damages to Lodholtz, all premised on a finding that 

he was not Pulliam's employee. The appellate court had no 

reason to doubt that the trial court had had jurisdiction to 

make such an award.

The question for us therefore is whether a federal court 

can ignore a state court judgment on the ground that the 

state court misconceived its jurisdiction over the case, and 

thus whether it is open to Granite State to try to prove in its 

federal case that Lodholtz really was an employee of Pulliam 

and therefore the state courts had no jurisdiction of his suit 

against Pulliam. 

Rule 60(b)(4) of the Federal Rules of Civil Procedure authorizes a federal district court to relieve a party from a final 

judgment if the judgment is “void” (Indiana has the same 

rule for its courts: Indiana Rule of Trial Procedure 60(B)(6).) 

The normal procedure is to file a motion in the court that 

rendered the judgment. But Rule 60(d)(1) authorizes “an in-
6 No. 14-8015

dependent action to relieve a party from a judgment.” This is 

an authority to be exercised rarely; collateral attacks on subject-matter jurisdiction are to be discouraged, as the Supreme Court said in Travelers Indemnity Co. v. Bailey, 557 U.S. 

137, 152–54 (2009). Though the bar is not absolute, see id. at 

153 n. 6, it is to be lifted only in “egregious” cases. As for 

other cases “the courts say that the court that issued the 

judgment in excess of its jurisdiction had jurisdiction to determine jurisdiction, and its jurisdictional finding, even if 

erroneous, is therefore good against collateral attack, like 

any other erroneous but final judgment.” In re Edwards, 962 

F.2d 641, 644 (7th Cir. 1992); United States v. Tittjung, 235 

F.3d 330, 335 (7th Cir. 2000). 

One might have thought that because the Indiana courts 

denied Granite State’s motion to intervene, the insurance 

company never had a chance to argue absence of jurisdiction 

as a party to the litigation. As we know, that is not true; we 

know that Granite State made the argument—indeed the argument was the entire premise of its refusal to cover Lodholtz’s liability to Pulliam. Had Granite State been willing to 

relinquish its reservation of rights, its motion to intervene 

would have been granted. It was not willing; and in asserting a reservation of rights it was trying to undermine the Indiana law that gives the insured the right to manage its own 

defense when the insurer reserves the right to deny coverage.

The Supreme Court of the United States is the only federal court with appellate authority over state courts; that is 

the Rooker-Feldman doctrine. See Rooker v. Fidelity Trust Co., 

263 U.S. 413 (1923); District of Columbia Court of Appeals v. 

Feldman, 460 U.S. 462 (1983). But even the Supreme Court 
No. 14-8015 7

would have had no authority over the Indiana courts in Lodholtz v. Pulliam because no issue of federal law was involved 

in that litigation. Granite State has struck out. The jurisdictional issue on which its federal suit is based was resolved 

against it by the Indiana courts, and there is no ground for a 

collateral attack by another judicial system on that determination.

The judgment is reversed and Granite State’s suit dismissed.