Telamon Corporation v. Charter Oak Fire Insurance Co, 850 F.3d 866

Background

Telamon contracted with Juanita Berry (via her single‑employee company J. Starr) from 2005–2011; Berry rose to VP of Major Accounts and ran Telamon’s AT&T asset recovery program.
Berry stole equipment proceeds, causing Telamon a $5.2 million loss; she was later criminally convicted and ordered to pay restitution.
Telamon sought recovery under a Travelers crime policy (coverage for theft by an “Employee” including leased employees) and a Charter Oak commercial property policy (excluding losses from dishonest acts by employees/authorized representatives).
Travelers denied coverage on the ground Berry was not an “Employee” because J. Starr was not a labor‑leasing firm; Charter Oak denied coverage under the exclusion because Berry was an “authorized representative”/entrusted with property.
Telamon sued Travelers and Charter Oak (Telamon I); district court granted summary judgment for insurers and dismissed bad‑faith claims. Telamon attempted to add St. Paul and older policies (motion denied), filed a second suit (Telamon II) adding insurers — that suit was dismissed as impermissible claim‑splitting.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Berry qualified as an “Employee” (including leased employee) under Travelers’ policy	J. Starr’s written agreement with Telamon made Berry a leased employee; “labor leasing firm” means any entity that places workers for a fee	J. Starr was merely Berry’s single‑person corporate vehicle, not a business in the labor‑leasing trade	Berry was not an “Employee”: J. Starr was not a labor‑leasing firm, so Travelers’ coverage does not apply
Whether Charter Oak’s employee/authorized‑representative exclusion bars coverage	Berry’s acts exceeded any authority and were not authorized; Agreements didn’t specifically authorize sale of equipment	Berry was Telamon’s senior regional manager and was authorized to act on its behalf and entrusted with the equipment	Exclusion applies: Berry was an “authorized representative” and entrusted with property, so Charter Oak’s policy excludes the loss
Whether insurers breached Indiana’s duty of good faith by denying coverage	Insurers handled claims in bad faith; plaintiffs need not prove traditional ill will to state a claim for bad‑faith claim handling	Indiana law requires one of established grounds (including proof of insurer’s ill will); Indiana has not recognized a separate claims‑handling tort	Bad‑faith claim fails: Indiana law does not recognize the broader claims‑handling theory urged by Telamon, and Telamon conceded none of the established grounds applied
Whether Telamon II was barred as impermissible claim‑splitting after being denied leave to amend in Telamon I	Telamon needed to add St. Paul and older policies and thus filed a separate suit; denial to amend was arbitrary	The new suit asserts the same transaction and loss; Indiana bars splitting a cause of action and relitigating previously available theories	Telamon II barred: district court correctly dismissed it under Indiana claim‑splitting principles

Key Cases Cited

Native Am. Arts, Inc. v. Hartford Cas. Ins. Co., 435 F.3d 729 (7th Cir.) (applying state law rules of contract construction to insurance policies)
Bradshaw v. Chandler, 916 N.E.2d 163 (Ind. 2009) (use ordinary‑policyholder perspective in construing insurance contracts)
Stop & Shop Cos., Inc. v. Fed. Ins. Co., 136 F.3d 71 (1st Cir.) (construing “authorized representative” under similar policy language)
Erie Ins. Co. v. Hickman by Smith, 622 N.E.2d 515 (Ind.) (recognizing Indiana tort of insurer’s breach of duty of good faith and listing accepted grounds)
Monroe Guar. Ins. Co. v. Magwerks Corp., 829 N.E.2d 968 (Ind.) (refusing to expand Indiana bad‑faith tort to claims‑handling ground)
Semtek Int'l Inc. v. Lockheed Martin Corp., 531 U.S. 497 (U.S.) (federal courts use state rules for preclusive effect of diversity judgments)
Hilliard v. Jacobs, 957 N.E.2d 1043 (Ind. Ct. App.) (bar on claim‑splitting; litigate multiple theories arising from one transaction in one action)