The 7th Circuit Court of Appeals has ruled in favor of insurers who denied coverage to a Carmel-based communications company, finding that the communications group’s claims were properly denied and that it cannot split its claims against the insurers through two separate lawsuits.
In 2005, Telamon Corp. hired Juanita Berry, who eventually became the communication company’s vice president of major accounts. As part of her duties, Berry was charged with removing old telecommunications equipment from AT&T sites and selling the equipment to salvagers. While Berry successfully removed and sold the equipment, she also pocketed the profits, resulting in a $5 million loss to the company.
In an attempt to recoup its losses, Telamon turned to its crime insurance policy through Travelers Casualty & Surety and a commercial property policy through Charter Oak Fire Insurance. After being denied coverage, Telamon sued in the U.S. District Court for the Southern District of Indiana. The court granted summary judgment to the insurers and further dismissed Telamon’s bad faith claims.
However, before Judge Richard Young handed down that decision, Telamon sought permission to amend its complaint and add another set of claims based on older policies it held under St. Paul Fire and Marine Insurance and Charter Oak. Young denied that request, which was filed nearly one year after the amended pleadings deadline, prompting a second suit. Young also dismissed Telamon’s second case as an impermissible attempt to split claims.
The 7th Circuit Court of Appeals affirmed both of Young’s decision Thursday, with Chief Judge Diane Wood writing for the panel that J. Starr Communications, another company who governed Berry’s employment through a consulting services agreement with Telamon, cannot be considered a “labor leasing firm” for purposes of the Traveler’s insurance policy. Thus, if J. Starr is not a labor leasing firm, then Berry could not be considered an “employee” under the policy, so Telamon’s claim under that policy was correctly denied.
Further, Wood wrote that Telamon’s claim was also properly denied under its Charter Oak policy because of an exception in the policy that does not cover any “dishonest or criminal act by … employees (including leased employees), directors, trustees, authorized representatives or any (other than a carrier for hire or bailee) to whom you entrust the property for any purpose.” Berry was an “authorized representative” of Telamon, Wood wrote, so her conduct falls into Charter Oak’s coverage exception.
The circuit court further rejected Telamon’s request to certify the case to the Indiana Supreme Court for the question of creating of a fifth tort for breach of duty of good faith claim — bad faith in handling an insurance claim. While caselaw in Indiana has left open the possibility of “expanding the grounds that would support the tort of an insurer’s breach of the duty of good faith,” Wood said it has been more than 20 years since that caselaw first went into effect, and the list has not expanded, so the Supreme Court appears to be satisfied with the status quo.
Finally, the 7th Circuit affirmed the district court’s dismissal of Telamon’s second suit, writing, “Under Indiana law, Telamon was not at liberty to split its cause of action and subject insurers to repetitious lawsuits.”
The cases are Telamon Corporation v. Charter Oak Fire Insurance Company and St. Paul Fire and Marine Insurance Company, 16-1205 and Telamon Corporation v. Charter Oak Fire Insurance Company and Travelers Casualty & Surety Company of America, 16-1815.