Legend's Creek Homeowners Asso v. Travelers Indemnity Company of

In the
United States Court of Appeals
For the Seventh Circuit
____________________
Nos. 20-3163, 21-1288 & 21-2196
LEGEND’S CREEK HOMEOWNERS ASSOCIATION, INC.,
Plaintiff-Appellant,
v.
TRAVELERS INDEMNITY COMPANY OF AMERICA,
Defendant-Appellee.
____________________
Appeals from the United States District Court for the
Southern District of Indiana, Indianapolis Division.
No. 1:18-cv-02782 — Tanya Walton Pratt, Chief Judge.
____________________
ARGUED JANUARY 18, 2022 — DECIDED MAY 10, 2022
____________________
Before MANION, BRENNAN, and JACKSON-AKIWUMI, Circuit
Judges.
MANION, Circuit Judge. This appeal arises from an insur-
ance contract dispute between Legend’s Creek Homeowners
Association and Travelers Indemnity Company of America,
and centers on a provision that required Legend’s Creek to
bring any “legal action” against Travelers within two years of
the date of damage to its insured property.
2 Nos. 20-3163, 21-1288 & 21-2196
In September 2016, Legend’s Creek filed a claim with
Travelers for hail and wind damage that had occurred in May
of that year to the north-facing sides of insured condominium
buildings. 1 Legend’s Creek retained public adjuster Kris Kas-
sen to discuss the claim with Travelers’ agent Steven Knopp.
Between filing and June 2018, Knopp and Kassen worked
out the scope and cost of the damages under the insurance
policy. Initially, they agreed on repair of the north-facing
sides of the condominium buildings. Travelers issued a
$644,674.87 check to effect that process only two months after
receiving notice of the damage. But in January 2017, Kassen
informed Knopp that the repairs were unacceptable. Travel-
ers investigated and submitted additional checks of
$238,766.88 and $28,438.02 for further repairs. In response,
Kassen told Knopp that the repairs were insufficient; the
north-facing sides had to be completely replaced.
Travelers agreed and, in February 2018, submitted an esti-
mate of the cost to replace the north-facing sides and paint
them to match the undamaged sides. Less than three weeks
before the contractual deadline to bring a legal action, how-
ever, Kassen demanded that Travelers replace all sides of the
condominium buildings because the new sides did not match
to his satisfaction the undamaged ones. After reviewing this
request, Knopp denied it in June. He informed Kassen that
Travelers would only replace the damaged north-facing sides
and paint them to match.
1The claim also encompassed damage to the roofs and gutters of the
insured premises. Travelers issued payments for this damage. The parties
do not dispute this part of the claim.
Nos. 20-3163, 21-1288 & 21-2196 3
In response, Legend’s Creek sued, charging Travelers with
breach of contract and bad faith. Travelers moved for sum-
mary judgment, arguing that the lawsuit was brought outside
the two-year contractual window to bring a legal action.
Shortly thereafter, Legend’s Creek moved to compel Travel-
ers to submit to an appraisal provision in the insurance policy.
The magistrate judge granted the motion and compelled ap-
praisal for discovery purposes. 2 The appraiser granted an
“award” to Legend’s Creek based on the mismatched sides.
But ultimately, the district court judge granted the motion for
summary judgment on the contract and bad faith claims and
determined that the so-called appraisal award was invalid.
Legend’s Creek appeals both issues.
Summary judgment is appropriate when there is no dis-
pute of material fact, and the moving party is entitled to judg-
ment as a matter of law. Miller v. Chi. Transit Auth., 20 F.4th
1148, 1155 (7th Cir. 2021). We review de novo. Id. Under Indi-
ana law, which everyone agrees applies here, one-year con-
tractual deadlines to bring a lawsuit are routinely enforced.
E.g., Summers v. Auto-Owners Ins. Co., 719 N.E.2d 412, 416-17
(Ind. Ct. App. 1999). That being so, we can safely conclude
that more generous deadlines are also acceptable. Since Leg-
end’s Creek filed its lawsuit against Travelers in July 2018, 26
months after the damage occurred in May 2016, the lawsuit
fell outside the two-year window. Were that the whole story,
2 Over Travelers’ objection, the magistrate judge ordered appraisal for
the limited purpose of discovery and not to definitively settle any out-
standing legal issues in the case. He thought that “an appraisal could help
in the fact-finding, and hopefully settlement discussions, while preserving
any legal arguments, coverage, or otherwise, that Travelers believes pre-
cludes its liability.”
4 Nos. 20-3163, 21-1288 & 21-2196
there’d be no dispute that summary judgment would have
been appropriate.
But Indiana law has a few exceptions to the general rule of
strictly enforcing a suit deadline, and Legend’s Creek seeks to
invoke some. First, Legend’s Creek contends that the contract
in this case was ambiguous because it required “full compli-
ance with the terms” of the insurance policy, along with the
obligation to bring a legal action within two years of the date
of damage. In particular, the policy required Legend’s Creek
to cooperate with Travelers in the investigation and settle-
ment of the claim. In Legend’s Creek’s reading, the policy
makes it impossible for an insured to initiate legal action
against the insurer in situations where the claim investigation
takes more than two years.
Whatever weight such a concern might generally have, it
has little relevance here. Legend’s Creek points to no term in
the policy that it did not or could not have abided by within
the two-year window. Cf. State Farm Mutual Auto. Ins. Co. v.
Jakubowicz, 56 N.E.3d 617, 623 (Ind. 2016) (finding an insur-
ance policy ambiguous when it contained a contractual dead-
line to bring a lawsuit and obliged the insured to comply with
an exhaustion requirement beyond his control). Rather, Leg-
end’s Creek and Travelers consistently cooperated in the
claims process and interacted with reasonable expediency. At
any time before the deadline, Legend’s Creek could have filed
a lawsuit regarding the claim. That Knopp finally denied one
of Kassen’s numerous requests outside the two-year window
is of no moment; there had been full compliance with the
terms of the policy beforehand, so Legend’s Creek could have
brought a legal action before the deadline. Though Legend’s
Creek may not have had a reason to litigate in that period, that
Nos. 20-3163, 21-1288 & 21-2196 5
doesn’t render the policy requirements incomprehensible or
its obligations impossible.
Legend’s Creek next argues that Travelers was obliged to
warn that it might rely on the policy’s suit limitation, and that
the failure to do so amounted to waiver. So far, Indiana courts
have not required an insurer to notify an insured that it in-
tends to rely on express contractual provisions—rather they
appear to reject that principle. Auto-Owners Ins. Co. v. Hughes,
943 N.E.2d 432, 435 (Ind. Ct. App. 2011); Stateman Ins. Co. v.
Reibly, 371 N.E.2d 414, 416 n.4 (Ind. Ct. App. 1978). Perhaps
realizing this, Legend’s Creek marshals various cases in
which Indiana courts have held that insurers waived contrac-
tual deadlines. But those cases are inapposite as none estab-
lish an unqualified duty to speak.
For example, in Summers v. Auto-Owners Ins. Co.,
719 N.E.2d at 415, the Indiana Court of Appeals determined
that insurers can waive contractual limitation periods if they
do something that “would cause the insured to reasonably be-
lieve the limitation period will not be insisted” on. This has
less to do with duty to speak and more with implicit waiver,
which Legend’s Creek also argues occurred here. But as for a
duty to speak, we find no support in Indiana law for requiring
an insurer to inform an insured that it intends to rely on con-
tractual suit limitation deadlines, and Legend’s Creek cites
none.
As mentioned, Legend’s Creek tries to make waiver sal-
vage its case. It contends that Knopp negotiated with Kassen
past the deadline and that this act waived the contractual lim-
itation. But that’s not how the claims process unfolded here.
Knopp granted the original claim and continued to grant Kas-
sen’s supplemental requests throughout their interaction.
6 Nos. 20-3163, 21-1288 & 21-2196
Knopp only disagreed with Kassen’s final request that Trav-
elers replace all the undamaged sides of the condominium
buildings. But this was not a negotiation. It was an eleventh-
hour request that Knopp denied after relatively prompt re-
view. There was no ongoing discussion about cost or scope
that Knopp prolonged past the deadline. So this argument
does not line up with the facts of this case. Cf. Huff v. Travelers
Indem. Co., 363 N.E.2d 985, 992 (Ind. 1977) (holding that there
was sufficient evidence to support a jury finding of implicit
waiver where the parties negotiated the same claim for over a
year and past the contractual deadline); Schafer v. Buckeye Un-
ion Ins. Co., 381 N.E.2d 519, 523 (Ind. Ct. App. 1978) (holding
that waiver applies where an insurer “does not deny coverage
or liability, and proceeds to negotiate with the insured toward
settlement of the claim”).
Legend’s Creek next argues that Travelers waived strict
compliance with the suit limitation provision when Knopp
failed to answer an email from Kassen asking about a dead-
line to apply for “replacement cost benefits.” There was no
deadline in the policy for requesting replacement cost bene-
fits. It’s unclear how Knopp’s failure to respond to a request
about a non-existent deadline could have made Kassen be-
lieve that Travelers would not insist on an actual deadline.
Furthermore, the fact that Kassen inquired about deadlines
suggests he thought that Travelers would insist on contractual
deadlines. And even if Kassen had asked about the suit limi-
tation and received no answer, we don’t see why that would
have made him reasonably believe that Travelers waived the
provision. For example, were a college student to ask a pro-
fessor to extend a paper deadline and receive no answer, com-
mon sense tells us that no extension was granted and that the
original deadline remained.
Nos. 20-3163, 21-1288 & 21-2196 7
In any case, we find Legend’s Creek’s position here some-
what hard to credit. In the course of discovery, Travelers
found out that Kassen, as early as February 2018, expected the
new sides not to match the undamaged sides to his satisfac-
tion. Despite this, he did not discuss this prediction with
Knopp. In Kassen’s words to the Legend’s Creek Board, the
claims process was a “game of chess.” His plan was to let
Travelers replace the north-facing sides and then argue there-
after that the purported mismatch required Travelers to re-
place and paint the rest of the sides. To “win this game,” Kas-
sen told the Board, they had to stay “several turns ahead of
Travelers.” Unfortunately for Legend’s Creek, it lost the game
because Kassen failed to foresee that Travelers might check-
mate it by raising the contractual suit limitation. Had Kassen
been upfront with Knopp in February 2018, it would likely
have received Travelers’ denial within the two-year limitation
period. 3 Such is the price of gamesmanship.
As for the appraisal process and award, the district court
properly disposed of them. During the litigation, Legend’s
Creek filed a motion to compel Travelers to submit to ap-
praisal procedures contained in the policy. The magistrate
judge granted that motion because he thought it might pro-
vide useful information on potential damages but noted that
it did not prevent Travelers from raising any defenses. The
appraiser determined that Travelers owed Legend’s Creek for
the mismatch between the new and undamaged sides, and
calculated the cost to Travelers. In the summary judgment
3 Legend’s Creek also claims that Travelers acted in bad faith. Under
Indiana law, a party cannot be liable for bad faith without contractual
breach. Troxell v. Am. States Ins. Co., 596 N.E.2d 921, 925 (Ind. Ct. App.
1992).
8 Nos. 20-3163, 21-1288 & 21-2196
order, the district court judge ended the appraisal process and
determined that the award was invalid. We agree. The two-
year deadline applied not only to contractual claims, but to
any “legal action.” A motion to compel appraisal falls under
this category. It would be nonsensical to conclude that Leg-
end’s Creek’s lawsuit was barred as untimely under the con-
tract, but not the motions filed within that lawsuit. Accord-
ingly, Legend’s Creek had no right under the policy to peti-
tion the district court to compel Travelers to submit to the ap-
praisal process outside the two-year suit limitation, and there-
fore the so-called award is void. Since Legend’s Creek raised
this argument in a motion for reconsideration, we review for
abuse of discretion. See Sandy Point Dental, P.C. v. Cin. Ins. Co.,
20 F.4th 327, 335 (2021). We find none in this matter.
Finally, Legend’s Creek argues that the suit limitation pe-
riod should be tolled in equity according to Continental Ins.
Co. v. Thornburg, 219 N.E.2d 450 (Ind. Ct. App. 1966). We dis-
agree. Continental stands for the limited proposition that
courts can toll suit limitation periods when the insurer en-
gages in conduct that induces the insured to refrain from fil-
ing a lawsuit. For the reasons outlined above, such circum-
stances did not obtain here.
The district court provided thorough opinions explaining
why summary judgment was appropriate and the appraisal
award invalid. Having reviewed the briefs and relevant law,
we see no reason to disagree with its judgment.
AFFIRMED