In the

United States Court of Appeals

For the Seventh Circuit ____________

Nos. 04-3287 & 04-3288

EMPLOYERS MUTUAL CASUALTY COMPANY

and HAMILTON MUTUAL INSURANCE COMPANY,

Plaintiffs-Appellees,

v.

JOHN SKOUTARIS, d/b/a OPEN FLAME RESTAURANT,

Defendant-Appellant.

____________

Appeals from the United States District Court

for the Northern District of Indiana, Hammond Division.

Nos. 02 C 112 & 01 C 601—Paul R. Cherry, Magistrate Judge.

____________

ARGUED APRIL 12, 2005—DECIDED JULY 13, 2006

____________

Before MANION, ROVNER, and WILLIAMS, Circuit Judges.

MANION, Circuit Judge. On April 7, 2000, a fire ravaged

the Open Flame Restaurant (“Open Flame”), a Valparaiso,

Indiana establishment owned and operated by John

Skoutaris. Hamilton Mutual Insurance Company (“Hamilton Mutual”), a subsidiary of Employers Mutual Casualty

Company, insured the building, business personal property,

and business lost income. Hamilton Mutual, an Ohio

corporation with its principal place of business in Ohio,

filed a declaratory judgment action in 2001 in the Northern

District of Indiana, claiming that Skoutaris failed to abide by
2 Nos. 04-3287 & 04-3288

1 The “business personal property” covered by the policy refers

to such items as furniture, machinery, equipment, and stock. The

policy’s lost business income coverage provided for payment of

that income that would have been earned but for the interruption

caused by damage to the restaurant.

the insurance policy provisions governing Skoutaris’s duty

to cooperate and duty to submit to an examination under

oath. Skoutaris, in turn, brought claims of breach of contract

and bad faith against Hamilton Mutual. The district court

eventually granted Hamilton Mutual’s motion for summary

judgment and denied Skoutaris’s motion for partial summary judgment. Skoutaris appeals. We affirm.

I

A

John Skoutaris opened the Open Flame on February 26,

2000. He had purchased the Valparaiso building from Porter

National Bank for $225,000 and had personally made a

variety of improvements before opening for business.

Skoutaris held insurance policies from both Hamilton

Mutual and Ohio Casualty Group covering damage to the

Open Flame, and the policies contemplated dividing any

loss between the two insurance companies.

As this case involves the duties and procedures under the

Hamilton Mutual policy once a claim is filed, we examine

the relevant policy provisions in detail. The Hamilton

Mutual policy covered three distinct areas of loss: (1)

building; (2) business personal property; and (3) business

income.1

 When making a claim under the Hamilton Mutual

policy, Skoutaris had certain obligations:
Nos. 04-3287 & 04-3288 3

a. You must see that the following are done in the

event of loss or damage to Covered Property:

(2) Give us prompt notice of the loss or damage.

Include a description of the property involved.

. . .

(5) At our request, give us complete inventories of

the damaged and undamaged property. Include

quantities, costs, values, and amount of loss

claimed.

(6) As often as may be reasonably required, permit

us to inspect the property proving the loss or

damage and examine your books and records.

Also permit us to take samples of damaged and

undamaged property for inspection, testing and

analysis, and permit us to make copies from

your books and records.

. . .

(8) Cooperate with us in the investigation or settlement of the claim.

b. We may examine any insured under oath, while not

in the presence of any other insured and at such

times as may be reasonably required, about any

matter relating to this insurance or the claim, including an insured’s books and records. In the event

of an examination, an insured’s answers must be

signed.

In addition to these provisions relating to the insured’s

duties, the Hamilton Mutual policy also provided an

appraisal process to determine the value of a particular loss.

The policy did not call for the parties to automatically
4 Nos. 04-3287 & 04-3288

undergo the formal appraisal process upon the filing of

a claim. Rather, the parties had the opportunity to conduct some preliminary investigation and attempt to resolve

the claim in a mutually agreeable fashion. However, the

policy stated:

If we and you disagree on the value of the property or

the amount of loss, either may make written demand for

an appraisal of the loss. In this event, each party will

select a competent and impartial appraiser. The two

appraisers will select an umpire. If they cannot agree,

either may request that selection be made by a judge of

a court having jurisdiction. The appraisers will state

separately the value of the property and amount of loss.

If they fail to agree, they will submit their differences to

the umpire. A decision agreed to by any two will be

binding. Each party will:

a. Pay its chosen appraiser; and

b. Bear the other expenses of the appraisal and umpire

equally.

If there is an appraisal, we will still retain our right to

deny the claim.

In addition, Skoutaris elected for replacement cost

coverage, which entitled him to receive the full replacement

cost of the destroyed property, but only after the property

was repaired or replaced. To allow an insured to begin

reconstruction after a loss, one aspect of this coverage was

that an insured could elect to receive a payment of the

actual cash value, a depreciated portion of the full replacement cost, in advance of the full replacement cost payment.

Having received such an actual cash value payment, an

insured could only recover the remainder of the replacement costs after all repairs or replacements were made.
Nos. 04-3287 & 04-3288 5

2 As stated above, Hamilton Mutual was only responsible for

half the loss based on the coverage provided by Ohio Casualty

Group.

B

Open Flame turned out to be an unfortunately apt name,

as the restaurant suffered a massive fire on April 7, 2000.

Hamilton Mutual and Skoutaris both retained the services of

adjusters to investigate the fire and determine the loss.

There was no suggestion of arson.

The two adjusters produced radically different damage

assessments. Skoutaris’s adjuster found that the building,

including the basement, was a complete loss, with a replacement cost value of $642,700, and concluded that the business

personal property loss was $346,767. Hamilton Mutual

(through its own adjuster) responded with a substantially

lower assessment and claimed that Skoutaris’s submission

lacked the necessary detail or documentation to support the

figures. Hamilton Mutual also concluded that the basement

was not a total loss. It found that the replacement value of

the building was $310,231.21, while pegging the replacement cost value of the business personal property at

$158,292.57. Hamilton Mutual’s adjuster explained that he

assigned values to the business personal property items

claimed by attempting to match the item to an invoice, or,

if an invoice could not be found, looking up the replacement

cost in restaurant catalogs. Hamilton Mutual offered an

actual cash value payment of approximately $128,000 on its

portion of the claim.2

 Eventually Skoutaris accepted the

$128,000 as the actual cash value payment under the

Hamilton Mutual policy.

Although Skoutaris accepted Hamilton Mutual’s payment,

the parties continued to disagree about the replacement
6 Nos. 04-3287 & 04-3288

value of the building and business personal property

destroyed in the fire. For several months, the parties

exchanged correspondence on this subject, culminating

in a November 21, 2000, meeting. At the meeting, the parties

made some progress towards a resolution (Hamilton Mutual

agreed to consider the basement a complete loss and raise

its valuation of the building loss commensurately), but

ultimately the parties continued to have serious disagreements about the value of the business personal property.

Specifically, Hamilton Mutual took issue with Skoutaris’s

valuations of the business personal property because of the

little supporting documentation and the fact that Skoutaris’s

results conflicted with the values determined by Hamilton

Mutual’s adjuster using catalogs and industry standards.

Hamilton Mutual repeatedly asked for more documentation,

as well as any response by Skoutaris or his adjuster explaining how they determined value.

Thereafter, Hamilton Mutual received some additional

documentation and raised the replacement cost value of the

business personal property to approximately $196,000,

based on the inclusion of certain items previously thought

to be leased. Meanwhile, Skoutaris also submitted a revised business personal property replacement cost valuation

of approximately $342,000. Although Skoutaris turned over

further documents to Hamilton Mutual in January 2001,

Hamilton Mutual believed most of these were bills for

purchases of food rather than confirmation of prices for

improvements made to the building or business personal

property.

C

Given the lengthy period of investigation and the persistent gap between the parties’ estimates of the replacement
Nos. 04-3287 & 04-3288 7

cost value, Hamilton Mutual decided to proceed with

appraisal, formally initiating the process in a January 22,

2001 letter. Hamilton Mutual indicated in that letter that

it would be represented by an attorney and that it needed

Skoutaris’s examination under oath (an “EUO”). Hamilton

Mutual appointed James Stivers as its appraiser, while

Skoutaris retained the services of Tim Zeak. Stivers received

from Hamilton Mutual its full file of materials, which he

believed were the same materials given to the initial appraiser. According to Stivers, any additional materials

should have come from Zeak, though Stivers received little

information from him.

While the appraisal process started out cordially, relations

between the parties deteriorated. Hamilton Mutual, through

its attorney, wrote Skoutaris’s attorney in February 2001,

requesting a date for the EUO, as well as a litany of documents, including any pre-purchase appraisals of the property by Porter National Bank (the previous owner) and the

specific figures relied upon during the valuation process.

Over the next three months, Hamilton Mutual’s attorney

sent three additional letters asking for the responsive

documents so that he could take Skoutaris’s EUO.

Beginning in May 2001, the correspondence exchanged

between the representatives of the parties began to crystallize certain positions regarding the EUO and further

production of documents. Over the next five months,

Hamilton Mutual consistently and repeatedly asserted

that Hamilton Mutual had a right to take the EUO of

Skoutaris on any and all matters and sought the documents requested in the February letter, including a detailed list of what was destroyed in the fire. Hamilton

Mutual felt that the initiation of the appraisal process had

no effect on its right to receive documents or take the EUO.
8 Nos. 04-3287 & 04-3288

Hamilton Mutual also reminded Skoutaris’s representatives

several times that failure to comply would result in the

denial of his claim. Between May and October, Hamilton

Mutual’s attorney sent seven letters asking for documents

and attempting to set Skoutaris’s EUO. In response,

Skoutaris indicated that he had previously produced all

documents in his possession to Hamilton Mutual’s

initial adjuster and that the documents Hamilton Mutual

sought were either duplicative or had been destroyed.

Skoutaris’s representatives also suggested that Hamilton

Mutual was only entitled to documents or an EUO relating

to the business interruption claim, and not the building

or business personal property claims, since the parties

were in the appraisal process.

Even while the exchanges between the parties were

growing testier, the appraisal process continued. As the

parties were not able to agree upon an umpire, Hamilton

Mutual proceeded under the appraisal clause in the

policy, which provided that the parties could request a court

of competent jurisdiction to appoint an umpire. Hamilton

Mutual filed such a petition in the Porter County Superior

Court, the Indiana state court with jurisdiction over

Valparaiso, and that court appointed attorney Russell

Millbranth as umpire in August 2001. Stivers felt that

he (Stivers) did not have enough documentation for a

meaningful appraisal process, but Millbranth continued

nonetheless.

By late September and early October 2001, the tension

between the parties over Skoutaris’s cooperation boiled

over. After several aborted attempts to set the EUO, Hamilton Mutual resolved to examine Skoutaris on October 3,

2001. However, in a letter on September 27, 2001, Skoutaris’s

attorney stated that Hamilton Mutual had received all
Nos. 04-3287 & 04-3288 9

documentation by November or December 2000, and

contested whether Hamilton Mutual had a right to an EUO.

I am completely bewildered as to your continuing

demand to take my client’s statement when the matter

is, at your option and election, now pending before

an umpire. Please provide me with the authority

which supports your legal conclusion that your client

continues to have right to take the statement when your

client elected to place the matter before an umpire for a

decision.

Hamilton Mutual’s attorney responded on October 1, 2001,

that Hamilton Mutual had never received a complete list

of all improvements to the property, the specific figures

utilized by Skoutaris’s appraiser that produced the $630,000

replacement value, a list of all items of personal property

that were included in the purchase price of the building

from Porter National Bank, and a list of expenses from the

date of purchase to the date of loss. Regarding Skoutaris’s

claim that the request for EUO was improper, Hamilton

Mutual’s attorney stated that the policy clearly provided a

right to take an EUO. Finally, Hamilton Mutual’s attorney

suggested that Hamilton Mutual would be unable to make

an appraisal submission with regard to the damage evaluation “without the documents requested and your client’s

statement under oath.” No EUO occurred on October 3.

In an October 11 letter, Skoutaris’s attorney replied

that Hamilton Mutual’s letter was the first time that Hamilton Mutual had specifically stated that it was missing a

complete list of improvements. Skoutaris’s attorney noted

that the list of business personal property submitted by

Skoutaris’s adjuster, as well as the various building evaluations, should have been sufficient.”It is beyond me how

your client can now say that they do not have a list of all
10 Nos. 04-3287 & 04-3288

improvements made when they based their appraisal and

made partial payment a year ago. . . . I have to consider

your request as again being evidence of your client’s bad

faith . . . .” Skoutaris’s attorney further suggested that

Hamilton Mutual’s initial adjuster had received all documentation in November or December 2000, and had, in fact,

removed certain documents without authorization, which

had never been returned. Turning to the EUO, Skoutaris’s

attorney stated that Hamilton Mutual had met with

Skoutaris about the building and business personal property

claims in November 2000, and that Hamilton Mutual should

have asked any questions at that time. Finally, Skoutaris’s

attorney suggested that Hamilton Mutual alone was to

blame if it did not have sufficient information to proceed

with the appraisal.

At a later deposition, Skoutaris admitted that he was

aware that Hamilton Mutual wished to take his EUO for

several months but decided not to submit based on advice

of counsel. Moreover, Skoutaris also knew that Hamilton

Mutual wanted further documentation, though he was

unaware whether any further documents were produced by

either his initial appraiser or lawyer.

D

On November 2, 2001, Hamilton Mutual rejected

Skoutaris’s claim based on his failure to appear for an EUO

and his refusal to produce either copies of requested records

or a statement advising which documents were destroyed.

According to Hamilton Mutual, these actions constituted a

material breach of the insurance policy, and the company

refused to pay any additional benefits. Three days later,

Hamilton Mutual filed a declaratory judgment action in the

Northern District of Indiana, seeking a judgment that
Nos. 04-3287 & 04-3288 11

3 To be completely clear, the record indicates that Skoutaris

received payment in settlement of his claims from Ohio Casualty

Group, which had contracted to pay half the claim amounts,

as well as the $128,000 initial payment from Hamilton Mutual.

Skoutaris had breached the contract and Hamilton Mutual

was not required to pay any additional sums under the

policy.

Hamilton Mutual also withdrew from the appraisal

process. Despite Hamilton Mutual’s absence, Millbranth

proceeded with the appraisal process, which he conducted

in stages. On November 29, 2001, Millbranth decided

that the replacement cost of the building was $547,900, a

decision which was filed in Porter County Superior Court

on December 11, 2001. At that point, Ohio Casualty Group

was still an active participant in the appraisal and was being

represented by Stivers, who had earlier been retained by

Hamilton Mutual. On February 14, 2002, Skoutaris’s

attorney offered Hamilton Mutual a chance to rejoin the

appraisal process regarding the business personal property

and business interruption claims and offered Skoutaris for

an EUO. Before the final stage of the appraisal concluded,

Ohio Casualty Group settled its liability on the remaining

issues, leaving only the portion attributable to Hamilton

Mutual. On March 19, 2002, Millbranth determined that

Hamilton Mutual was responsible for $172,500 in business

personal property damage and $50,000 for the business

income loss.3

 Skoutaris eventually opened a replacement

restaurant on September 8, 2003.

While the appraisal process was winding down, an

issue regarding the judgment arose before the Porter County

Superior Court, which had appointed Millbranth. After

Millbranth submitted the appraisal of the building replacement cost to the Porter County Superior Court, that court
12 Nos. 04-3287 & 04-3288

indicated that it would enter judgment on the appraisal.

Hamilton Mutual objected and asserted that the Porter

County Superior Court had no jurisdiction to enter such an

award, and the court agreed. On February 21, 2002,

Skoutaris filed claims of breach of contract and bad faith

by Hamilton Mutual in the Porter County Superior Court,

which Hamilton Mutual subsequently removed to the

Northern District of Indiana and designated as counterclaims to Hamilton Mutual’s federal declaratory judgment action. The parties subsequently consented to a federal

magistrate judge presiding over the action.

As part of the federal lawsuit, Skoutaris was deposed in

2003 about the Open Flame, as well as his decisions not to

provide further documentation or attend an EUO. During

his deposition, Skoutaris revealed that most of the improvements made to the Open Flame were done by himself and

that he paid cash for many items of business personal

property and materials for building improvements. He

further testified that he was assisted in his renovations of

the building by two temporary employees whom he also

paid in cash. The deposition revealed that Skoutaris had few

details or documents supporting his valuation of different

items in the Open Flame.

The parties each moved for summary judgment. Hamilton

Mutual sought a judgment that the failure to attend

the EUO and produce the documents was a material

breach excusing it from any further obligations under the

policy and that it acted in good faith. Skoutaris, on the other

hand, wanted a judgment declaring that he cooperated in

the investigation of the claim, finding the appraisal to be

binding, and requiring Hamilton Mutual to pay the amount

of the appraisal. The district court granted summary

judgment to Hamilton Mutual, finding that the breach of the
Nos. 04-3287 & 04-3288 13

EUO was a material breach that excused any further

performance. The district court did not reach the issue of

whether the failure to produce documents also breached the

insurance policy. The district court further found that, since

Hamilton Mutual was not liable to Skoutaris, Hamilton

Mutual was neither bound by the appraisal amount nor was

it required to pay any award resulting from the process.

II

We conduct de novo review of the district court’s decision

granting Hamilton Mutual’s motion for summary judgment

and denying Skoutaris’s partial motion for summary

judgment. Employers Ins. of Wausau v. Stopher, 155 F.3d 892,

895 (7th Cir. 1998). Summary judgment is proper if the

“pleadings, depositions, answers to interrogatories, and

admissions on file, together with the affidavits, if any, show

that there is no genuine issue as to any material fact and that

the moving party is entitled to a judgment as a matter of

law.” Fed. R. Civ. P. 56(c). As this case involved crossmotions for summary judgment, our review of the record

requires that we construe all inferences in favor of the party

against whom the motion under consideration was made.

See Huntzinger v. Hastings Mut. Ins. Co., 143 F.3d 302, 307

(7th Cir. 1998). Accordingly, we review the record in the

light most favorable to Skoutaris, drawing all reasonable

inferences from those facts in his favor, and reversing if we

find a genuine issue concerning any fact that might affect

the outcome of the case.

As this case is brought under diversity jurisdiction, we

apply the law of the forum state, Indiana, since neither party

has challenged the district court’s choice of law. See Wausau,
14 Nos. 04-3287 & 04-3288

155 F.3d at 895; see also Wolverine Mut. Ins. v. Vance, 325 F.3d

939, 942 (7th Cir. 2003); 28 U.S.C. § 1332. “We must apply

the law of the state as we believe the highest court of the

state would apply it.” Wolverine, 325 F.3d at 942; see also

State Farm Mut. Auto. Ins. Co. v. Pate, 275 F.3d 666, 669 (7th

Cir. 2001).

Skoutaris presents several issues on this appeal. First,

he asserts that the district court used the incorrect standard

in analyzing whether he breached the policy by refusing

to submit to an EUO. Second, Skoutaris contends that

the district court erred when it denied his motion for partial

summary judgment to enforce the umpire’s decision in the

appraisal proceeding. Third, he claims that, by conceding

the existence of a valid claim, Hamilton Mutual waived

strict compliance with the cooperation provisions of the

policy. Finally, Skoutaris argues that the district court

improperly granted summary judgment to Hamilton

Mutual on Skoutaris’s claim of breach of the duty of good

faith. We examine each in turn.

A

Skoutaris first contends that the district court misapplied

Indiana law by failing to require that Hamilton Mutual

show actual prejudice stemming from Skoutaris’s breach of

the EUO clause. When arguing before this court, the parties

properly briefed this issue in light of relevant cases from the

Indiana Court of Appeals, since the Supreme Court of

Indiana had not ruled on this issue previously. See Wausau,

155 F.3d at 895. That has changed during the pendency of

this appeal, and thus, to a large extent, subsequent events

have overtaken the parties’ arguments. See Morris v. Econ.
Nos. 04-3287 & 04-3288 15

4 After the Supreme Court of Indiana granted transfer in the

Morris case, we held our consideration of the present appeal until

after the Supreme Court of Indiana ruled, given the significant

overlap between the major issues.

Fire & Cas. Co., No. 49S02-0503-CV-98, ___ N.E.2d ___, 2006

WL 1530026 (Ind. June 6, 2006).4

Skoutaris asserted that the Supreme Court of Indiana

would treat the breach of an EUO provision in an identical

fashion to the breach of a cooperation clause in a contract.

Previously, the Supreme Court of Indiana clearly established what an insurer needs to prove in a case of a breach

of a policy’s cooperation clause. See Miller v. Dilts, 463

N.E.2d 257, 261 (Ind. 1984). Specifically, “[a]n insurance

company must show actual prejudice from an insured’s

noncompliance with the policy’s cooperation clause before

it can avoid liability under the policy.” Id. Skoutaris contended that since cooperation clauses and the EUO clauses

both allow an insurer to recover information from an

insured, they should be subject to the same standard. The

district court erred, according to Skoutaris, because it rested

its decision solely on his breach of the EUO clause, and

never considered whether that breach prejudiced Hamilton

Mutual.

The Supreme Court of Indiana, however, subsequently

decided to treat EUO clauses in a different way than

cooperation clauses. See Morris, at *2. In Morris, the Supreme

Court of Indiana considered the failure of married insureds

to submit to examinations under oath as expressly required

in their insurance contract. Id. at *1-2. The EUO provision in

that case was contained in a portion of the contract detailing

the insureds’ duties after a loss. Id. at *2. The Indiana Court

of Appeals had analyzed the breach of this EUO clause
16 Nos. 04-3287 & 04-3288

using the framework developed by Indiana courts in

cooperation clause cases, and thus required a showing of

prejudice. Morris v. Econ. Fire & Cas. Co., 815 N.E.2d 129, 135

(Ind. Ct. App. 2004). The Supreme Court of Indiana rejected

this approach, stating: “[t]his case does not involve a

‘cooperation clause.’ ” Morris, 2006 WL 1530026, at *2. The

Supreme Court of Indiana proceeded to expressly distinguish the EUO provision from a cooperation clause, which

it defined as a “policy provision requiring that the insured

assist the insurer in investigating a claim.” Id. (quoting

Black’s Law Dictionary 359 (8th ed. 2004)). The EUO

provision, on the other hand, was an “entirely separate

provision that explicitly requires the policy holder to

perform specific duties.” Id. The insured’s failure to comply

with the EUO clause resulted in a material breach of the

contract. Id. at 3. (“In expressly refusing to submit to

examinations under oath until their prior recorded statements were furnished by [the insurance company], the

[insureds] breached their policy contract.”). In such a case,

“prejudice is not a necessary consideration.” Id. at *2. In the

context of a breach of an EUO clause, therefore, the Supreme

Court of Indiana has established that an insurance company

need only show a material breach to prevail.

Applying this rule to the present case, Skoutaris clearly

breached the EUO clause through his actions over a nine- or

ten-month period. As in the Morris case, the EUO clause

here is contained in a section of the contract setting forth the

insured’s “Duties in the Event of Loss or Damage” and

imposes a specific duty on the insured to submit to an

examination under oath as reasonably required. Using

catalogs, Hamilton Mutual initially valued the building and

business personal property of the Open Flame several

hundred thousand dollars less than Skoutaris. Once it

became clear that the parties could not bridge the gap,
Nos. 04-3287 & 04-3288 17

5 The perplexing question is why exactly Skoutaris decided to

pursue such a bizarre strategy, seemingly daring the insurance

company to deny his claim for failure to submit to an EUO.

Although only Skoutaris knows the answer, a partial explanation

might be found in the deposition taken in this civil litigation following the denial of the claim. At several points, Skoutaris

was quite unclear about the prices he paid for different objects

and revealed that he made several black market purchases.

Further, Skoutaris indicated that he paid straight cash for several

laborers who assisted him with various of the building improvements.

Hamilton Mutual invoked the appraisal process and

requested an EUO to find out exactly how Skoutaris came

up with his figures (as most documents were ostensibly

destroyed in the fire). Despite over ten letters from Hamilton Mutual and its attorney, including many referencing the

specific policy provision allowing an EUO, Skoutaris would

not submit to an EUO. Skoutaris was aware throughout that

Hamilton Mutual wanted his EUO and nonetheless he

refused. Although the policy never qualified the time period

for an EUO, Skoutaris claimed, apparently without contractual or legal support, that the EUO would be improper and

that his off-the-record discussions in November 2000 were

all that Hamilton Mutual was entitled to receive. The

contract does not allow Skoutaris to ignore his express

duties because he felt that he had done enough. See id. at *2-

3 (“[T]he contract does not provide that an insured can

impose this prerequisite upon the insurer before complying

with agreed duties.”). Skoutaris’s intransigence constituted

a willful and intentional breach of the EUO clause, and the

district court properly granted summary judgment in favor

of Hamilton Mutual on this ground.5
18 Nos. 04-3287 & 04-3288

B

Having resolved the central issue, we now address the

remaining arguments. First, Skoutaris asserts that Hamilton

Mutual was bound by the appraisal despite Hamilton

Mutual’s withdrawal from the process after Skoutaris’s

breach of the EUO and before the award was ever determined. Skoutaris believes that once the appraisal process

was invoked, Hamilton Mutual could not avoid its results.

Given our ruling that Hamilton Mutual had no further

liability under the policy because of the material breach

of the EUO, Hamilton Mutual obviously is not bound by the

results of the post-breach appraisal process. Further,

Skoutaris’s contention runs aground on the language of the

contract. “Clear and unambiguous policy language must be

given its ordinary meaning.” Colonial Penn Ins. Co. v.

Guzorek, 690 N.E.2d 664, 667 (Ind. 1997). Here, the policy

clearly states, “[i]f there is an appraisal, we [Hamilton

Mutual] will still retain our right to deny the claim.”

Hamilton Mutual denied the claim, as was its contractual

right, before the appraisal was completed. Hamilton Mutual

acted properly under the contract and was not bound by an

appraisal on a claim it had already denied under the policy.

Skoutaris also argues that Hamilton Mutual waived

strict compliance with the cooperation provisions by making

an initial offer and payment on the claim. Skoutaris bases

his argument on venerable Indiana precedent that holds

once an insurer undertakes its investigation and enters into

an appraisal process, the insurer can no longer deny the

claim based on a failure to supply a formal proof of loss. See

Providence Wash. Ins. Co. v. Wolf, 80 N.E. 26, 28 (Ind. 1907).

Skoutaris attempts to stretch this rather unremarkable rule

to cover what would be a very remarkable proposition—that once an insurance company had signaled acceptance of some loss, no cooperation would be required. We
Nos. 04-3287 & 04-3288 19

decline the opportunity to contort Indiana law in such a

fashion. Obviously, the acceptance of some claim should not

remove the obligation of the insured to cooperate with the

insurer, which is necessary to determine the appropriate

loss value.

This brings us to Skoutaris’s final argument, that Hamilton Mutual breached its duty of good faith and fair dealing. The Supreme Court of Indiana has held that the

“obligation of good faith and fair dealing with respect to the

discharge of the insurer’s contractual obligation includes the

obligation to refrain from (1) making an unfounded refusal

to pay policy proceeds; (2) causing an unfounded delay in

making payment; (3) deceiving the insured; and (4) exercising any unfair advantage to pressure an insured into a

settlement of his claim.” Erie Ins. Co. v. Hickman by Smith,

622 N.E.2d 515, 519 (Ind. 1993). “[A] good faith dispute

about the amount of a valid claim or about whether the

insured has a valid claim at all will not supply the grounds

for a recovery in tort for the breach of the obligation to

exercise good faith.” Id. at 520. Hamilton Mutual did not

breach its duty of good faith. Rather, Hamilton Mutual

valued the amount of loss based on the limited information

available to it and, during November and December 2000,

repeatedly asked Skoutaris to explain the differences in his

valuation. Further, once the appraisal process started,

Hamilton Mutual offered Skoutaris repeated opportunities

to avoid rejection of the claim. Over several months,

Hamilton Mutual continually asked for documents necessary for an EUO, as well as the EUO itself, and warned of

the likely consequences of Skoutaris’s litigation strategy.

Hamilton Mutual acted reasonably and properly as it

attempted to resolve this claim. Skoutaris is solely responsible for this unnecessary result.
20 Nos. 04-3287 & 04-3288

III

Skoutaris had the opportunity and obligation under his

insurance policy to provide an examination under oath to

Hamilton Mutual in order for the insurer to reach some

resolution on his claim. Hamilton Mutual made almost a

year of good faith attempts to secure this examination, but

Skoutaris, for whatever reason, would not budge. This made

little sense as the issues between the parties seemed ripe for

a reasonable settlement. Nonetheless, Skoutaris’s breach of

the examination under oath clause terminated all of Hamilton Mutual’s further liability. We therefore AFFIRM the

judgment of the district court.
Nos. 04-3287 & 04-3288 21

A true Copy:

Teste:

 _____________________________

Clerk of the United States Court of 

Appeals for the Seventh Circuit 

USCA-02-C-0072—7-13-06