49 F.4th 1100
7th Cir.2022Background
- Custom Mechanical Construction, Inc. (CMC), an Indiana contractor registered in Kentucky, purchased workers’ compensation coverage from Accident Fund Insurance Co. of America (AFICA) through Schultheis Insurance/agent Lee Sublett.
- AFICA issued a policy with primary coverage limited to Indiana and "other states" coverage conditioned on notice; AFICA issued a First Policy (Oct 2015–Oct 2016) and a backdated Second Policy effective May 13, 2016 (to Oct 24, 2016).
- CMC performed multiple Kentucky jobs in 2016; on Oct. 16, 2016 Danny Cope (a worker) was seriously injured on a Kentucky job and CMC reported the claim to AFICA the next day.
- AFICA denied coverage on Nov. 11, 2016 because CMC had not notified AFICA it was working in Kentucky before the accident; AFICA sued for a declaratory judgment that the policy did not cover Cope’s claim.
- The district court granted summary judgment for AFICA, holding the policy’s "other states" provisions required pre-accident notice (and a 30‑day notice if work existed on the policy effective date); the court rejected CMC’s agency/imputation arguments.
- On appeal the Seventh Circuit affirmed: no coverage because CMC undisputedly failed to notify AFICA of its Kentucky work before Cope’s injury.
Issues
| Issue | Plaintiff's Argument (AFICA) | Defendant's Argument (CMC/Schultheis) | Held |
|---|---|---|---|
| Does Part Three A.2 obligate AFICA to cover out‑of‑state work begun after the policy effective date absent notice? | A.2 is subject to the policy’s notice requirement (Part B); without notice no coverage. | A.2 independently triggers coverage for work begun after the effective date, regardless of notice. | A.2 must be read with Part B; notice is required and no coverage where insured never notified AFICA before the accident. |
| Does Part Three A.4 (work on the effective date) allow coverage if insured failed to notify within 30 days? | A.4 bars coverage for states where insured had work on the effective date unless insurer was notified within 30 days. | CMC disputes it “had work” on the effective date (points to timing/residency of workers/backdating). | CMC had work in Kentucky on May 13, 2016 and did not notify within 30 days; A.4 precludes coverage. |
| Can Sublett’s knowledge be imputed to AFICA (making notice effective)? | Sublett was not AFICA’s agent; no knowledge imputed. | Sublett acted for AFICA or his knowledge should be imputed to AFICA. | Court found no basis to treat Sublett as AFICA’s agent and Appellants waived challenges to the district court’s agency ruling; knowledge not imputed. |
| Does Schultheis have standing to join the appeal? | AFICA did not dispute standing. | Schultheis sought to appeal because a no‑coverage ruling would fully defend it against CMC’s third‑party claims. | Schultheis has standing as a third‑party defendant with a significant stake and may join the appeal. |
Key Cases Cited
- USA Gymnastics v. Liberty Ins. Underwriters, Inc., 27 F.4th 499 (7th Cir. 2022) (insurance‑policy interpretation rules and summary judgment).
- Everett Cash Mut. Ins. Co. v. Taylor, 926 N.E.2d 1008 (Ind. 2010) (Indiana rule: unambiguous policy language given plain meaning; ambiguities construed for insured).
- Ashby v. Bar Plan Mut. Ins. Co., 949 N.E.2d 307 (Ind. 2011) (insurer notice requirements may limit insurer’s obligation).
- Koransky, Bouwer & Poracky P.C. v. Bar Plan Mut. Ins. Co., 712 F.3d 336 (7th Cir. 2013) (notice requirement defines insurer’s obligation).
- Est. of Mintz v. Conn. Gen. Life Ins. Co., 905 N.E.2d 994 (Ind. 2009) (distinguishing broker (insured’s agent) from insurer’s agent; acts of insurer’s agent imputable to insurer).
- Fid. & Cas. Co. of N.Y. v. Tillman Corp., 112 F.3d 302 (7th Cir. 1997) (agency is voluntary; intermediary may be insured’s agent while shopping for coverage).
- Vesuvius USA Corp. v. Am. Com. Lines LLC, 910 F.3d 331 (7th Cir. 2018) (courts will not consider extrinsic evidence when contract language is clear and unambiguous).