Justia Insurance Law Opinion Summaries
Ghazarian v. Magellan Health
Plaintiffs Rafi Ghazarian and Edna Betgovargez had a son, A.G., with autism. A.G. received applied behavior analysis (ABA) therapy for his autism under a health insurance policy (the policy) plaintiffs had with defendant California Physicians’ Service dba Blue Shield of California (Blue Shield). Mental health benefits under this policy are administered by defendants Magellan Health, Inc. and Human Affairs International of California (collectively Magellan). By law, the policy had to provide A.G. with all medically necessary ABA therapy. Before A.G. turned seven years old, defendants Blue Shield and Magellan approved him for 157 hours of medically necessary ABA therapy per month. But shortly after he turned seven, defendants denied plaintiffs’ request for 157 hours of therapy on grounds only 81 hours per month were medically necessary. Plaintiffs requested the Department of Managed Health Care conduct an independent review of the denial. Two of the three independent physician reviewers disagreed with the denial, while the other agreed. As a result, the Department ordered Blue Shield to reverse the denial and authorize the requested care. Plaintiffs then filed this lawsuit against defendants, asserting breach of the implied covenant of good faith and fair dealing against Blue Shield, and claims for intentional interference with contract and violations of Business and Professions Code section 17200 (the UCL) against defendants. Defendants each successfully moved for summary judgment. As to the bad faith claim, the trial court found that since one of the independent physicians agreed with the denial, Blue Shield acted reasonably as a matter of law. As to the intentional interference with contract claim, the court found no contract existed between plaintiffs and A.G.’s treatment provider with which defendants could interfere. Finally, the court found the UCL claim was based on the same allegations as the other claims and thus also failed. After its review, the Court of Appeal concluded summary judgment was improperly granted as to the bad faith and UCL claims. "[I]t is well established that an insurer may be liable for bad faith if it unfairly evaluates a claim. Here, there are factual disputes as to the fairness of defendants’ evaluation. . . .There are questions of fact as to the reasonability of these standards. If defendants used unfair criteria to evaluate plaintiffs’ claim, they did not fairly evaluate it and may be liable for bad faith." Conversely, the Court found summary judgment proper as to the intentional interference with contract claim because plaintiffs failed to show any contract with which defendants interfered. View "Ghazarian v. Magellan Health" on Justia Law
Karst Robbins Coal Co. v. Director, Office of Workers’ Compensation Programs
In 1983, Rice sought benefits under the Black Lung Benefits Act (BLBA), 30 U.S.C. 901–45. The Department of Labor (DOL) looks to employers that employed the miner for at least one year and are capable of paying benefits. The miner’s most recent employer that meets these requirements is the “responsible operator.” Employers must either qualify as a self-insurer or purchase BLBA insurance. KRCC operated a coal mine where Rice worked in 1982-1983 but he was employed by a separate corporate entity, KRMS, which charged KRCC for the cost of Rice’s labor. The entities' ownership and management overlapped; KRMS had no assets and operated out of KRCC's offices. KRCC obtained BLBA coverage from Bituminous Casualty but only listed 10 employees. The other 150 were employed by KRMS. An ALJ identified KRMS as the responsible operator, then denied Rice’s claim on the merits. Rice appealed; KRCC and Bituminous successfully moved to be dismissed from the case, because the ALJ identified KRMS as the responsible operator.In 2002, Rice filed another BLBA claim. DOL again notified KRCC and Bituminous that KRCC might be the responsible operator. Bituminous claims it “denied coverage based on the fraudulent arrangements” between KRCC and KRMS. DOL refused to dismiss Bituminous.The Sixth Circuit affirmed, rejecting arguments that DOL was collaterally estopped from finding that KRCC was the responsible operator; that Bituminous was entitled to rescind its insurance agreement based on fraud by KRCC; and that delays in DOL administrative proceedings violated its right to due process. View "Karst Robbins Coal Co. v. Director, Office of Workers’ Compensation Programs" on Justia Law
Sellers v. Nationwide Mutual Fire Insurance Co.
Nationwide appealed both the district court's order denying Nationwide's motion in limine and the final judgment entered in favor of plaintiff, as assignee of Gary Gardner & Gary Gardner Builders, Inc. At issue is the preclusive effect of a judgment entered by a federal court exercising diversity jurisdiction on a nonparty to an earlier federal action.The Eleventh Circuit held that when determining the preclusive effect of an earlier judgment rendered by a federal court exercising diversity jurisdiction, federal common law adopts the rules of issue preclusion applied by the State in which the rendering court sits. In this case, the court held that the district court was required to apply Alabama's rules of issue preclusion. Instead, the district court applied a federal rule of issue preclusion and that federal rule is not substantively similar to Alabama's rule on nonparty issue preclusion. Therefore, the court reversed the district court's order denying Nationwide's motion in limine, vacated the final judgment in favor of plaintiff, and remanded for further proceedings. View "Sellers v. Nationwide Mutual Fire Insurance Co." on Justia Law
Gunn v. Continental Casualty Co.
Gunn brought a putative class action against Continental, which had issued a group long-term care insurance policy to Gunn’s employer, the federal judiciary, in Washington D.C. Gunn alleged that Continental breached its contract, committed torts, and violated consumer protection laws by raising his premiums dramatically. The district court dismissed the case on the pleadings based on Continental’s assertion of a filed-rate defense, relying on the Washington state Insurance Commissioner’s approval of the new, higher premiums for individual insureds in Washington.The Seventh Circuit reversed, noting that choice of law is critical in this case, which involves employees in every state. It is unclear which state’s or states’ law creates Gunn’s causes of action, whether that jurisdiction recognizes an applicable filed-rate defense and within what contours, and which state or states have authority to approve premium rates under the group policy. The court remanded to allow the district court to address those questions. View "Gunn v. Continental Casualty Co." on Justia Law
Topp’s Mechanical, Inc. v. Kinsale Insurance Co.
The Eighth Circuit affirmed the district court's grant of Kinsale's motion to dismiss actions brought by TMI for breach of an indemnity policy. TMI bought a liability insurance policy from Kinsale and the policy excluded a "pollution incident" unless properly reported by TMI. The court held that TMI cannot invoke waiver and estoppel because timely notice "modifies coverage" to include pollution incidents. In this case, TMI learned that an employee suffered injury from a pollution incident, but TMI did not timely report the incident per the plain language of the contract. View "Topp's Mechanical, Inc. v. Kinsale Insurance Co." on Justia Law
Balfour Beatty Construction, LLC v. Liberty Mutual Fire Insurance Co.
Appellants filed suit against Liberty in Texas state court claiming breach of contract and violations of Sections 541 and 542 of the Texas Insurance Code. After Liberty removed to federal court, the district court granted Liberty's motion for summary judgment and denied appellants' partial motion for summary judgment.After determining that it has appellate jurisdiction, the Fifth Circuit affirmed, holding that the insurance policy does not provide coverage for appellants' claims. The court need not determine whether the policy at issue is an all-risks policy because the court construed the policies one at a time. The court held that an ensuing loss provision like the one presented here is only triggered when one (excluded) peril results in a distinct (covered) peril, meaning there must be two separate events for the exception to trigger. In the underlying action, appellants' welding operation involved falling slag, which damaged the exterior glass of Energy Center 5. The court explained that the welding operation is inseparable from the falling slag and that they are not two separate events. Furthermore, the court held that the policy is not illusory. Therefore, appellants have not met their burden to show that the exception to the exclusion reinstates coverage. Finally, appellants' ambiguity argument is forfeited. View "Balfour Beatty Construction, LLC v. Liberty Mutual Fire Insurance Co." on Justia Law
Peterson v. Western National Mutual Insurance Co.
The Supreme Court affirmed the judgment of the district court awarding taxable costs for denying a first-party insurance claim in violation of Minn. Stat. 604.18, subd. 2(a), holding that the district court did not clearly err.After a bench trial, the district court found that Western National Mutual Insurance Company did not have a reasonable basis for denying Alison Joel Peterson's claim for insurance benefits and acted in reckless disregard of its lack of a reasonable basis in denying the claim. The Supreme Court affirmed, holding (1) the district court did not clearly err in determining that a reasonable insurer, who had the information that Western National had, would not have denied Peterson's claim for benefits; and (2) the district court did not clearly err by finding that Western National knew, or recklessly disregarded information that would have allowed it to know, that it lacked an objectively reasonable basis for denying benefits to Peterson. View "Peterson v. Western National Mutual Insurance Co." on Justia Law
Shelter Insurance Co. v. Gomez
The Supreme Court held that a federal regulation does not impose a duty on insurers to issue policies that satisfy a motor carrier's minimum level of financial responsibility because compliance with the financial responsibility requirements under Neb. Rev. Stat. 75-363 and the pertinent federal regulations is the duty of the motor carrier and not its insurer.Through Neb. Rev. Stat. 75-363 the Nebraska Legislature adopted several parts of the Federal Motor Carrier Safety Regulations and made those regulations applicable to certain intrastate motor carriers otherwise not subject to the federal regulations. One of the federal regulations adopted by section 75-363(3)(d) sets out minimum levels of financial responsibility for motor carriers. At issue before the Supreme Court was whether 49 C.F.R. 387 imposes a duty on an insurer to issue a policy with liability limits that satisfy the motor carrier's financial responsibility. The Supreme Court held that compliance with section 75-363 and section 387 is the responsibility of the motor carrier, not on the insurer. View "Shelter Insurance Co. v. Gomez" on Justia Law
AEGIS Electric & Gas International Services Ltd. v. ECI Management LLC
AEGIS filed suit alleging that it does not have a duty to defend or indemnify its insured ECI in an underlying state court action brought by a former tenant against ECI. In the underlying action, the tenant alleged that ECI wrongfully withheld the security deposits of current and former tenants in violation of Georgia's security deposit law.The Eleventh Circuit reversed the district court's grant of summary judgment in favor of AEGIS, holding that AEGIS has a duty to defend ECI in the underlying state court lawsuit against it because that action and certain relief sought, if proved, would constitute a covered "Loss" under the insurance policy. Although an award of the allegedly wrongfully withheld security deposit would not constitute a "Loss" under the policy, the court explained that any award of attorney's fees that ECI might become obligated to pay as part of the judgment in the underlying litigation would also fall within the policy's definition of "Loss." The court held that any award of attorney's fees under Georgia's security deposit law could constitute a potential "Loss" under the policy, and thus AEGIS maintains a duty to defend ECI. The court declined to offer any opinion as to whether AEGIS, in addition to its duty to defend, has any duty to indemnify ECI. View "AEGIS Electric & Gas International Services Ltd. v. ECI Management LLC" on Justia Law
Meemic Ins. Co. v. Fortson
Meemic Insurance Company filed suit against Louise and Richard Fortson, individually and as conservator of their son, Justin Fortson, alleging that Richard and Louise had fraudulently obtained payment for attendant-care services they did not provide to Justin. In 2009, Justin was injured when he fell from the hood of a motor vehicle, necessitating constant supervision and long-term care. Richard and Louise opted to provide attendant care to Justin in their home on a full-time basis. Justin received benefits under his parents’ no-fault policy with Meemic, and from 2009 until 2014, Louise submitted payment requests to Meemic for the attendant-care services she and her husband provided, asserting that they provided full-time supervision; Meemic routinely paid the benefits. In 2013, Meemic investigated Richard and Louise’s supervision of Justin, and discovered Justin had been periodically jailed for traffic and drug offenses and had spent time at an inpatient substance-abuse rehabilitation facility at times when Richard and Louise stated they were providing full-time supervision. The underlying policy contained an antifraud provision stating that the policy was void if any insured person intentionally concealed or misrepresented any material fact or circumstance relating to the insurance, the application for it, or any claim made under it. Louise and Richard counterclaimed, arguing that Meemic breached the insurance contract by terminating Justin’s benefits and refusing to pay for attendant-care services. Meemic moved for summary judgment, and the trial court initially denied the motion, reasoning that under the innocent-third-party rule, Meemic could not rescind the policy on the basis of fraud to avoid liability for benefits owed to Justin, an innocent third party. Meemic moved for reconsideration of that decision after the Court of Appeals later concluded in Bazzi v. Sentinel Ins. Co., 315 Mich App 763 (2016), the innocent-third-party rule was no longer good law. On reconsideration, the trial court granted summary judgment in favor of Meemic. Louise and Richard appealed. The Court of Appeals reversed, first reasoning that Bazzi did not apply because the fraud in this case did not occur in the procurement of the policy and did not affect the validity of the contract. The court concluded, however, that the policy’s antifraud provision was invalid because it would enable Meemic to avoid the payment of personal protection insurance (PIP) benefits mandated by MCL 500.3105. The Michigan Supreme Court affirmed, holding that contractual provisions like the one asserted by Meemic, in the context of the mandate of the no-fault act, are valid when based on a defense to mandatory coverage provided in the no-fault act itself or on a common-law defense that has not been abrogated by the act. Because Meemic’s fraud defense was grounded on neither the no-fault act nor the common law, it was invalid and unenforceable. Accordingly, the Court of Appeals was affirmed on different grounds, and the case remanded to the trial court for further proceedings. View "Meemic Ins. Co. v. Fortson" on Justia Law