Sellers Failed To Disclose Known Defect To Property

Location: Indiana

My partner and I recently purchased a home. On the seller's disclosure, they stated that the air conditioning unit was in good working order. The inspection revealed that it was not cooling any air (no difference between air temperature at the intake vs the outflow). The sellers told us (verbally) at closing that they had it fixed.

We recently turned on the AC unit and noticed that it was not cooling the air at all. Since it is covered by the home warranty the sellers provided to us as part of the sale, we called the warranty company to get it serviced. The warranty company informed us that they could not send a technician out because "you had a previous service appointment and refused to pay the uncovered amount, so the work was not completed".

We had not, in fact, made any prior service calls under the warranty. I asked for more information about the call, and it turns out the sellers had made a service call under the warranty about 2 weeks prior to the closing date and before transferring the warranty policy to us. The technician reported that a key component of the system was broken beyond repair and in need of replacement, and the sellers refused to pay for the work so the repair work was not done.

Basically, we learned that the sellers became aware of a defect after the initial disclosure but before closing, and they did not disclose this information either verbally or in writing. They also told us verbally that the issue had been fixed, but it seems that was not the case.

As I understand it, they're required by law to disclose any new information about the condition of the home that may affect the sale value if they become aware of it between the initial disclosure and the closing date... But I'm not a lawyer. So my question is:

1. Would it count as failure to disclose, or falsifying documents if they did not tell us about the air conditioner being broken? i.e. might we have cause here to pursue legal action?
2. Would the inspection report stating the AC was not cooling undermine any case we might have?
3. Having never dealt with anything like this before... What are we supposed to do? What are the steps/order of operations in a case like this?

Thank you in advance for any input in the comments, much appreciated.

Edit: Formatting