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 (“Hamil-
ton 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
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 sum-
mary 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:
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.
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 settle-
ment 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, in-
cluding 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 con-
duct 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 replace-
ment 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 replace-
ment costs after all repairs or replacements were made.
Nos. 04-3287 & 04-3288 5
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 replace-
ment 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 replace-
ment 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
2
As stated above, Hamilton Mutual was only responsible for
half the loss based on the coverage provided by Ohio Casualty
Group.
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 disagree-
ments 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 explain-
ing 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 re-
vised 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 persis-
tent 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 ap-
praiser. 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 docu-
ments, including any pre-purchase appraisals of the prop-
erty 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 crystal-
lize 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 docu-
ments requested in the February letter, including a de-
tailed 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, Hamil-
ton 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 evalua-
tion “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 Hamil-
ton 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 evalua-
tions, 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 docu-
mentation 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
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 replace-
ment cost to the Porter County Superior Court, that court
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.
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 counter-
claims to Hamilton Mutual’s federal declaratory judg-
ment 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 improve-
ments 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 cross-
motions 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
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 estab-
lished 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 con-
tended 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
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.
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 distin-
guish 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 state-
ments 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
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 Hamil-
ton 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 contrac-
tual 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
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 litiga-
tion 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 improve-
ments.
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 deter-
mined. 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 proposi-
tion—that once an insurance company had signaled accep-
tance 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 Hamil-
ton Mutual breached its duty of good faith and fair deal-
ing. 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) exercis-
ing 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 neces-
sary 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 responsi-
ble 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 Hamil-
ton 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