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This error indicates that the text box in which you are beginning to build your index is not automatically linked. In order to build an index in QuarkXPress you need to have the text cursor active in an automatic text box generated from a Master Page so QuarkXPress can create pages/text boxes needed to contain all the index entries.
When building an index, ensure you are using the Automatic Text Box feature in your layout. If there is no Automatic Text Box in your layout, you can follow the steps below to create one in an existing layout and master page.