Justia Insurance Law Opinion Summaries

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Aluminum Recovery Technologies (ART) operates a smelter and during a renovation, one of its furnaces failed, causing molten aluminum to escape and damage the plant and the furnace itself. The insurance company, ACE American Insurance, paid for some of the damages but not the cost of replacing the furnace's refractory. ART sued ACE, arguing that an explosion in the furnace caused the damage and thus, the insurance company should cover the refractory replacement costs. However, the insurer argued that the policy specifically excludes coverage for any damage to the refractory lining unless it directly results from specific perils such as fire, lightning, windstorm, hail, or explosion. The United States Court of Appeals For the Seventh Circuit affirmed the district court's decision in favor of ACE. The court held that the explosion did not necessarily cause the leak, and ART failed to provide engineering evidence to support its claims. Additionally, the court found that ART had consented to the investigation protocol proposed by the insurer's experts, which involved destructive testing that led to the need for the refractory's replacement. Therefore, the insurer was not responsible for the additional expenses incurred due to the replacement of the refractory lining. View "Aluminum Recovery Technologies, Inc. v. Ace American Insurance Co." on Justia Law

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Cobalt International Energy partnered with three Angolan companies to explore and produce oil and gas off the coast of West Africa. Later, the federal Securities and Exchange Commission announced it was investigating Cobalt for allegations of illegal payments to Angolan government officials and misrepresentation of the oil content of two of its exploratory wells. This led to a significant drop in Cobalt’s stock price and prompted a class action lawsuit from Cobalt's investors, led by GAMCO, a collection of investment funds that held Cobalt shares. Prior to these events, Cobalt had purchased multiple layers of liability insurance from a number of insurance companies, collectively referred to as the Insurers in this case. When the allegations surfaced, Cobalt notified the Insurers, who denied coverage on the grounds that Cobalt's notice was untimely and certain policy provisions excluded the claims from coverage.In 2017, Cobalt filed for bankruptcy and began settlement negotiations with GAMCO. Eventually, a settlement agreement was reached, which stipulated that Cobalt would pay a settlement amount of $220 million to GAMCO, but only from any insurance proceeds that might be recovered. Cobalt and GAMCO then jointly sought approval of the settlement from the federal court and the bankruptcy court, both of which granted approval.The Insurers then filed a petition for a writ of mandamus, arguing that the settlement agreement was not binding or admissible in the coverage litigation, that Cobalt had not suffered a "loss" under the policies, and that GAMCO could not sue the Insurers directly.The Supreme Court of Texas held that (1) Cobalt had suffered a “loss” under the policies because it was legally obligated to pay any recoverable insurance benefits to GAMCO, (2) GAMCO could assert claims directly against the Insurers, and (3) the settlement agreement was not binding or admissible in the coverage litigation to establish coverage or the amount of Cobalt’s loss. The court reasoned that the settlement was not the result of a "fully adversarial proceeding," as Cobalt bore no actual risk of liability for the damages agreed upon in the settlement. The court conditionally granted the Insurers' petition for a writ of mandamus in part, ordering the trial court to vacate its previous orders to the extent they relied on the holding that the settlement agreement was admissible and binding to establish coverage under the policies and the amount of any covered loss. View "IN RE ILLINOIS NATIONAL INSURANCE COMPANY" on Justia Law

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The United States Court of Appeals for the Ninth Circuit upheld a district court's default judgment entered against defendants Akop and Anahit Arutyunyan. The defendants were accused by Transamerica Life Insurance Company of engaging in insurance fraud. The district court found that the defendants persistently failed to obey court orders related to discovery and entered a default judgment against them. In the course of the legal proceedings, the court applied escalating sanctions against the defendants for their repeated non-compliance with court orders, eventually leading to the entry of a default judgment. The defendants contested this decision, but the Ninth Circuit Court found that their appeal was frivolous. The court held that the district court had not abused its discretion in entering a default judgment as a sanction for the defendants' violations of court orders. The Ninth Circuit also ordered the defendants and their counsel to show cause why sanctions should not be imposed under various provisions given the frivolous nature of the appeal and multiple misstatements made by counsel during oral argument. View "TRANSAMERICA LIFE INSURANCE CO V. ARUTYUNYAN" on Justia Law

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In a maritime insurance dispute between Great Lakes Insurance, a German company, and Raiders Retreat Realty, a Pennsylvania company, the Supreme Court of the United States ruled that choice-of-law provisions in maritime contracts are presumptively enforceable under federal maritime law, with certain narrow exceptions not applicable in this case.The dispute originated when Raiders Retreat Realty's boat ran aground, and Great Lakes Insurance denied coverage, alleging that Raiders breached the insurance contract by failing to maintain the boat’s fire-suppression system. The insurance contract contained a choice-of-law provision that selected New York law to govern future disputes. Raiders argued that Pennsylvania law, not New York law, should apply. The District Court ruled in favor of Great Lakes, finding that the choice-of-law provision was presumptively valid and enforceable under federal maritime law. The Third Circuit Court of Appeals vacated this decision, holding that choice-of-law provisions must yield to the strong public policy of the state where the suit is brought.The Supreme Court reversed the Third Circuit's decision, emphasizing the importance of uniformity and predictability in maritime law. The Court concluded that choice-of-law provisions allow maritime actors to avoid later disputes and the ensuing litigation and costs, thus promoting maritime commerce. Therefore, such provisions are presumptively enforceable under federal maritime law. The Court further clarified that exceptions to this rule exist but are narrow, and none of them applied in this case. View "Great Lakes Insurance SE v. Raiders Retreat Realty Co." on Justia Law

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A former patients of Pediatric Partners for Attention and Learning, Inc. and its founder, Dr. Joni Johnson, sued them in state court after discovering that the clinic’s in-house psychologist, Sharonda Avery, was not a licensed psychologist. The clinic and Dr. Johnson asked their professional liability insurance carrier, Medical Mutual Insurance Company of North Carolina, to defend and indemnify them in those lawsuits. Medical Mutual responded by filing a declaratory judgment action in federal court, arguing that it could rescind the policy covering Pediatric Partners and Dr. Johnson due to Dr. Johnson’s material misstatements in her insurance applications. The United States Court of Appeals for the Fourth Circuit ruled that Medical Mutual has no duty to indemnify or defend Dr. Johnson or Pediatric Partners under Virginia law due to material misstatements made by Dr. Johnson in her policy applications. The court affirmed the district court's decision that Dr. Johnson's misrepresentation that none of her employees had been subject to disciplinary investigative proceedings was a material misstatement, and therefore, Medical Mutual could rescind its professional liability policy covering Pediatric Partners and Dr. Johnson. View "Medical Mutual Insurance Co. of North Carolina v. Gnik" on Justia Law

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The case involves a dispute between Dr. Stan Schiff and Liberty Mutual Insurance Companies. Dr. Schiff, on behalf of himself and a class of similarly situated providers, claimed that Liberty Mutual's practice of reducing provider bills to an 80th percentile cap based on a computer-generated calculation violated Washington's Consumer Protection Act (CPA). Liberty Mutual argued that the statutory requirement to conduct a reasonable investigation into medical expenses is satisfied by determining the 80th percentile of charges for a treatment in the geographic area, and this practice is not an unfair practice under the CPA.The Supreme Court of the State of Washington ruled that Liberty Mutual's practice of using the FAIR Health database to determine the 80th percentile of charges for a treatment in the geographic area is not unfair or unreasonable and does not violate the CPA or the personal injury protection (PIP) requirements to establish standards under which reasonable charges for medical procedures are determined. The court reasoned that comparing charges for the same treatment in the same geographic area is relevant to the determination of reasonableness. The court reversed the Court of Appeals' decision and remanded the case to the trial court to enter a summary judgment order in favor of Liberty Mutual. View "Schiff v. Liberty Mutual Fire Insurance Co." on Justia Law

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The case involves Consolidated Restaurant Operations (CRO), a company that owns and operates dozens of restaurants, and Westport Insurance Corporation (Westport). CRO had an "all-risk" commercial property insurance policy with Westport, which covered "all risks of direct physical loss or damage to insured property." When the COVID-19 pandemic hit, causing CRO to suspend or substantially curtail its operations due to the presence of the virus in its restaurants and government restrictions on nonessential businesses, CRO sought coverage for the ensuing loss of revenue. Westport denied coverage, stating that the coronavirus did not cause "direct physical loss or damage" to CRO's properties. CRO filed a lawsuit seeking a declaration of Westport's obligations under the policy and damages for breach of contract.The Supreme Court of New York dismissed the complaint, declaring that the policy did not cover CRO's alleged losses. The Appellate Division affirmed this decision, interpreting "direct physical loss or damage" to require a tangible alteration of the property, which CRO had not demonstrated.The case was then brought to the New York Court of Appeals. The court held that "direct physical loss or damage" requires a material alteration or a complete and persistent dispossession of insured property. The presence of the virus in the restaurants and the resulting cessation of in-person dining services did not meet this requirement. The court thus affirmed the lower courts’ dismissal of the complaint. View "Consolidated Rest. Operations, Inc. v Westport Insurance Corp." on Justia Law

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In this case heard before the Supreme Court of Kentucky, the primary issue was whether the Breathitt Circuit Court correctly dismissed Teresa Spicer's lawsuit against James Combs for intentional infliction of emotional distress (IIED). Spicer's suit arose from damages linked to Combs' actions, following a fatal ATV accident which resulted in the death of Tiara Combs, James Combs’ wife and Spicer's daughter. Prior to the lawsuit, Combs and Spicer, as co-administrators of Tiara's estate, had signed a release settlement with Progressive Casualty Insurance Company, effectively absolving both Combs and Progressive of any further liability relating to the accident.After learning that Combs was intoxicated at the time of the accident, a fact he allegedly hid from her, Spicer sought to sue Combs personally for IIED. Combs moved to dismiss Spicer's complaint on the grounds that the previous release signed by Spicer barred her claim, and that her complaint did not meet the standard for an IIED claim. The circuit court dismissed the action, holding that the release was intentionally broad and included all potential claims, including IIED.On appeal, the Court of Appeals reversed the dismissal, ruling that the release did not prevent Spicer from asserting a personal cause of action against Combs. The Supreme Court of Kentucky affirmed the Court of Appeals' decision. The court ruled that the language of the release only covered claims possessed by the estate and not Spicer's individual claims. Furthermore, the Court held that Spicer's complaint was sufficient to proceed under a motion to dismiss for failure to state a claim, leaving it to the circuit court to resolve whether Spicer can sufficiently establish her claim at a later time. View "COMBS V. SPICER" on Justia Law

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The City of Richmond Heights, Missouri filed a claim with Mt. Hawley Insurance Company under a commercial property policy for losses of tax revenue due to government-mandated COVID-19 closures. Mt. Hawley denied the claim and sued for a declaratory judgment that it was not obligated to cover the losses. Richmond Heights counterclaimed with five counts: (1) breach of contract, (2) vexatious refusal to pay, (3) fraudulent inducement and misrepresentation, (4) negligent misrepresentation, and (5) breach of fiduciary duty. The United States District Court for the Eastern District of Missouri dismissed the counterclaims, denied amendments to two of them, and granted declaratory judgment to Mt. Hawley. On appeal, the United States Court of Appeals for the Eighth Circuit affirmed the decision of the lower court.The appellate court held that the insurance policy required "direct physical loss of or damage to property" for coverage which was not met by the COVID-19 shutdowns. The court also rejected the city's argument that the Additional Covered Property Endorsement in the policy removed the "physical damage or loss" requirement for losses of sales tax revenues. Furthermore, the court found that the city's claims of fraud, misrepresentation and breach of fiduciary duty were not distinct from its breach of contract claim and thus were properly dismissed by the district court. Lastly, the court affirmed the district court's denial of the city's motion to amend its breach of contract and vexatious refusal claims, concluding that the proposed amendments would not have survived a motion to dismiss. View "Mt. Hawley Insurance Company v. City of Richmond Heights" on Justia Law

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In the case of Brett Lane v. the State of Alaska, Department of Family & Community Services, Office of Children’s Services, the Supreme Court of the State of Alaska affirmed the lower court's decision denying the Office of Children's Services's (OCS) post-trial motion for a new trial on liability. The court concluded that the weight of the evidence supported the jury's verdict on Lane's theories of retaliation. However, the court found an error in the jury instruction relating to noneconomic damages caused by a dangerous client, Wilson. As a result, the court vacated the damages judgment and remanded for a new trial solely on noneconomic damages. The court also remanded the matter back to the lower court for an evidentiary hearing on OCS's claim that the jury award duplicated workers’ compensation benefits that Lane received. The court held that OCS should be given the opportunity to prove that the jury award created an impermissible duplication of damages. View "State of Alaska v. Lane" on Justia Law