Restaurants in North Carolina were forced to suspend operations due to COVID-19-related government orders. Each restaurant had a commercial property insurance policy with Cincinnati Insurance Company, which covered business income from any "direct physical loss" to property. The dispute centered on whether the government orders constituted a "direct physical loss" under the policy.The Superior Court of Durham County sided with the restaurants, granting partial summary judgment in their favor, finding that the losses were covered under the policy. The Court of Appeals reversed this decision, interpreting the insurance contract to exclude such losses and remanded the case with instructions to enter summary judgment for the defendants.The Supreme Court of North Carolina reviewed the case and disagreed with the Court of Appeals. The court held that a reasonable policyholder could expect "direct physical loss" to include the effects of COVID-19 government orders that restricted the use of and access to the restaurants' physical property. The court noted that the policy did not exclude viruses and construed the ambiguity in favor of coverage. Consequently, the court reversed the judgment of the Court of Appeals and remanded the case for further proceedings consistent with its opinion. View "North State Deli, LLC v. Cincinnati Insurance Co." on Justia Law

A clothing retailer, Cato Corporation, with over 1,300 stores, purchased an "all-risk" commercial property insurance policy from Zurich American Insurance Company in July 2019. In the spring of 2020, Cato alleged that the COVID-19 virus and related government orders forced it to close or severely curtail operations, causing significant revenue losses and expenses for remediation and reconfiguration of its stores. Cato sought coverage for these losses under its insurance policy, but Zurich refused, leading Cato to file a lawsuit seeking a declaratory judgment and damages for breach of contract and violations of North Carolina's Unfair and Deceptive Trade Practices Act.The Superior Court of Mecklenburg County dismissed Cato's claims on a Rule 12(b)(6) motion, relying on the Court of Appeals' decision in North State Deli, LLC v. Cincinnati Insurance Co. The Court of Appeals affirmed the dismissal, concluding that tangible alteration to the property was necessary to recover for a "direct physical loss of or damage" to property, which Cato failed to allege sufficiently.The Supreme Court of North Carolina reviewed the case and agreed with the Court of Appeals' decision to affirm the dismissal but disagreed with its reasoning. The Supreme Court concluded that Cato sufficiently alleged a "direct physical loss of or damage" to property under the precedent set in North State Deli. However, the Court found that the viral contamination exclusion in Cato's policy precluded coverage for the alleged losses. Therefore, the Supreme Court modified the Court of Appeals' decision but affirmed its judgment dismissing Cato's claims. View "Cato Corp. v. Zurich American Insurance Co." on Justia Law

Renee Sevelitte and the Estate of Joseph F. Sevelitte dispute the entitlement to the proceeds of a life insurance policy Joseph purchased during his marriage to Renee. Massachusetts law automatically revokes a spouse's beneficiary status upon divorce unless specific exceptions apply. The life insurance policy named Renee as the beneficiary, but the policy did not address the effect of divorce on beneficiary status. Renee and Joseph's divorce agreement included provisions about life insurance policies but did not explicitly state that Renee would remain the beneficiary of the policy in question.The United States District Court for the District of Massachusetts granted summary judgment to the Estate, determining that Renee could not establish that any exceptions to the automatic revocation applied. Renee appealed, arguing that the district court erred in its decision.The United States Court of Appeals for the First Circuit reviewed the case. The court noted that its previous decision did not determine that the divorce agreement satisfied the statutory exceptions but only that it was plausible. The court emphasized that Renee needed to provide evidence to support her claim that the divorce agreement intended to maintain her beneficiary status. The Estate presented evidence, including an affidavit from Joseph's divorce attorney and an expert report, indicating that the divorce agreement did not intend to retain Renee's beneficiary status.The First Circuit affirmed the district court's decision, concluding that Renee failed to present any evidence to create a genuine dispute about the intended meaning of the divorce agreement. Therefore, the court held that the Estate was entitled to the proceeds of the life insurance policy. View "Sevelitte v. The Guardian Life Insurance Company of America" on Justia Law

Dionicio Rodriguez, an employee of SIR Electric LLC (SIR), was injured while working and filed for workers' compensation benefits under SIR's policy with Hartford Underwriters Insurance Company (Hartford). After receiving benefits, Rodriguez filed a personal injury lawsuit against SIR, alleging negligence, gross negligence, recklessness, and intentional wrongdoing. SIR requested Hartford to defend against the lawsuit, but Hartford refused, citing policy exclusions. SIR then filed a third-party complaint against Hartford, claiming wrongful disclaimer of defense coverage.The trial court granted Hartford's motion to dismiss SIR's complaint, ruling that the policy excluded intent-based claims. SIR's motion for reconsideration and to amend its complaint, arguing that the policy's enhanced intentional injury exclusion (EII exclusion) violated public policy, was denied. The Appellate Division affirmed the trial court's decision.The Supreme Court of New Jersey reviewed the case and held that Hartford has no duty to defend SIR. The court determined that Rodriguez's claims of negligence, gross negligence, and recklessness are subject to the workers' compensation exclusivity bar and are not covered under Part One of the policy. These claims are also excluded from coverage under Part Two of the policy. Additionally, Rodriguez's claims of intentional wrongdoing are excluded under the policy's EII exclusion.The court concluded that the trial judge properly denied SIR's motion to amend its third-party complaint, as the EII exclusion does not violate public policy. The court affirmed the Appellate Division's judgment, upholding the dismissal of SIR's third-party complaint against Hartford. View "Rodriguez v. Shelbourne Spring, LLC" on Justia Law

Erin Hughes, the plaintiff, obtained two homeowner’s insurance policies for her property in Malibu. One policy, through the California FAIR Plan Association (FAIR Plan), covered fire loss, while the other, issued by Farmers Insurance Exchange (Farmers), did not. After a fire caused significant damage to her property, Hughes filed a lawsuit against Farmers, alleging it was vicariously liable for the negligence of its agent, Maritza Hartnett, who assisted her in obtaining the FAIR Plan policy, resulting in underinsurance for fire loss.The Superior Court of Los Angeles County granted Farmers’ motion for summary judgment, ruling that Hartnett was not acting within the scope of her agency with Farmers when she assisted Hughes in obtaining the FAIR Plan policy. The court also denied Hughes’s motion for leave to amend her complaint.The Court of Appeal of the State of California, Second Appellate District, reviewed the case. The court affirmed the lower court’s decision, holding that Hartnett was not acting as Farmers’ actual or ostensible agent when she helped Hughes obtain the FAIR Plan policy. The court found that Hartnett’s agent appointment agreement with Farmers did not include authority to transact insurance business on behalf of Farmers for policies issued by unrelated carriers like FAIR Plan. Additionally, the court determined that Hughes failed to present evidence showing that Farmers’ conduct could have led her to reasonably believe Hartnett was acting as its agent in procuring the FAIR Plan policy. The court also upheld the trial court’s denial of Hughes’s motion for leave to amend her complaint, citing her failure to provide an excuse for the delay in filing the motion and the potential prejudice to Farmers. View "Hughes v. Farmers Insurance Exchange" on Justia Law

In 2015, Zongwei Shen, owner of a massage spa, purchased a commercial insurance policy from Continental Casualty Company, which included an exclusion for abuse or molestation. In 2019, Toiah Gordon, Morganne Mersadie Root, and Karina Carrero sued Shen and his wife, Zhong Xin, alleging Shen sexually assaulted them during massage sessions. After Continental declined to provide a defense, Shen and Xin stipulated to liability, resulting in a $6.8 million judgment against them. Shen and Xin assigned their rights against Continental to the plaintiffs in exchange for a covenant not to execute the judgment. The plaintiffs then sued Continental for breach of contract and related claims.The Superior Court of Los Angeles County granted Continental's motion for summary judgment, finding that the abuse or molestation exclusion in the insurance policy applied. The court held that the exclusion's language was unambiguous and did not require Shen to have "exclusive or complete control" over the plaintiffs. The court also found that the claims against Xin for negligent training fell within the exclusion, as negligent training is a form of negligent employment or supervision.The California Court of Appeal, Second Appellate District, affirmed the trial court's decision. The appellate court held that the abuse or molestation exclusion applied to Shen's actions because the plaintiffs were under Shen's care and control during the massages. The court also held that the exclusion applied to Xin's alleged negligent training of Shen, as it fell within the scope of negligent employment or supervision. Consequently, Continental had no duty to defend Shen and Xin, and the summary judgment in favor of Continental was affirmed. View "Gordon v. Continental Casualty Co." on Justia Law

Lawanda Small, a beneficiary and additional insured of her deceased husband's Allianz life insurance policy, filed a class action lawsuit against Allianz Life Insurance Company. She alleged that Allianz violated California Insurance Code sections 10113.71 and 10113.72 by failing to comply with notice procedures required to prevent policies from lapsing due to nonpayment of premiums. Small sought to represent two subclasses: the "Living Insured Subclass" seeking equitable relief to reinstate life insurance coverage, and the "Beneficiary Subclass" seeking damages from death benefits where the insured was deceased.The United States District Court for the Central District of California certified the class, finding that both subclasses satisfied the requirements of Federal Rule of Civil Procedure 23(a) and 23(b). The court granted summary judgment for Small and the class on their breach of contract and declaratory relief claims, ruling that Allianz improperly lapsed the policies by failing to comply with the Statutes. Allianz appealed, arguing that the district court erred in certifying the class and that the summary judgment orders violated the one-way intervention prohibition.The United States Court of Appeals for the Ninth Circuit reversed the district court's order certifying the class and vacated the summary judgment orders. The appellate court held that to recover for alleged violations of the Statutes, plaintiffs must show not only that the insurer violated the notice requirements but also that the violation caused them harm. The court found that individual questions of causation and injury predominated over common questions, making class certification inappropriate. Additionally, the court determined that Small was not an adequate representative with typical questions to represent both subclasses. The case was remanded for further proceedings. View "Small v. Allianz Life Insurance Co. of North America" on Justia Law

A paint company was sued by Santa Clara County, California, along with other governmental entities, for promoting and selling lead-based paint, which was alleged to have created a public nuisance. The lawsuit sought abatement, not damages, to mitigate the hazards of lead paint. The California trial court ordered the paint companies to pay $1.15 billion into an abatement fund, later reduced to $409 million, to be used for future lead hazard control measures. The paint companies eventually settled, agreeing to pay $101,666,667 each into the fund.The paint company then sought indemnification from its insurers in the Cuyahoga County Court of Common Pleas, arguing that the payment into the abatement fund constituted "damages" under their insurance policies. The trial court granted summary judgment in favor of the insurers, concluding that the payment was not for "damages" as it was intended to prevent future harm rather than compensate for past harm.The Eighth District Court of Appeals reversed the trial court's decision, holding that the payment into the abatement fund did qualify as "damages" under the insurance policies, as it was essentially to reimburse the government for its ongoing efforts to remediate lead paint hazards.The Supreme Court of Ohio reviewed the case and reversed the Eighth District's decision, reinstating the trial court's summary judgment in favor of the insurers. The Supreme Court held that the payment into the abatement fund was not "damages" under the insurance policies because it was intended to prevent future harm rather than compensate for past harm. The court emphasized that the abatement fund was an equitable remedy aimed at eliminating the hazard of lead paint to prevent future injuries, not to compensate for any prior harm. View "Sherwin-Williams Co. v. Certain Underwriters at Lloyd's London" on Justia Law

Jennings Plant Services, LLC, and its members, Spencer and Tarin Jennings, filed a lawsuit against Ellerbrock-Norris Agency, Inc., and Elliot Bassett, alleging that Ellerbrock-Norris failed to provide competent insurance advice. Specifically, Jennings claimed that Ellerbrock-Norris advised them not to add a company-owned vehicle, a Ford F-150, to their commercial insurance policies, which led to a lack of coverage when the vehicle was involved in a fatal collision. This resulted in a significant judgment against Jennings in a federal wrongful death case brought by Kacey Kimbrough, the special administrator of the estate of Shawn Thomas Kimbrough.In the U.S. District Court for the District of Nebraska, Kimbrough obtained a judgment of $5,436,266.87 against Jennings Plant Services. As part of a partial settlement, Jennings assigned Kimbrough a right to 85% of any proceeds from their state lawsuit against Ellerbrock-Norris. Kimbrough then sought to intervene in the state lawsuit under Neb. Rev. Stat. § 25-328, claiming an interest in the litigation due to her assigned right to a portion of the proceeds.The District Court for Washington County denied Kimbrough's motion to intervene, finding that she had no direct cause of action against either Jennings or Ellerbrock-Norris and no legal interest in the subject matter of the underlying litigation. The court determined that Kimbrough's interest was indirect and insufficient to warrant intervention under § 25-328.The Nebraska Supreme Court affirmed the district court's decision, holding that Kimbrough's alleged interest in the proceeds of the lawsuit was too attenuated to constitute a direct and legal interest in the litigation. The court concluded that Kimbrough, as a mere creditor with an indirect interest, did not meet the statutory requirements for intervention. View "Jennings Plant Services, LLC v. Ellerbrock-Norris Agency" on Justia Law

Hurricane Katrina destroyed Paul and Sylvia Minor’s home in 2005. The Minors had a homeowner’s insurance policy with United Services Automobile Association (USAA) that covered wind damage but excluded storm surge or flood damage. USAA issued payments for wind damage but not for storm surge or flood damage, leading to a dispute. The Minors claimed a total loss due to wind and demanded policy limits. In 2013, a jury awarded the Minors $1,547,293.37 in compensatory damages.The Minor Estate appealed a pretrial order granting partial summary judgment to USAA on the Minors’ bad faith claim. The Mississippi Court of Appeals reversed the trial court’s decision, finding a genuine issue of material fact regarding USAA’s denial and delay of payment. The case was remanded for further proceedings on the bad faith claim. On remand, a jury awarded the Minors $10,000,000 in punitive damages and $457,858.89 in extra-contractual damages (attorneys’ fees). USAA appealed, and the Minor Estate cross-appealed the denial of its post-trial motion for additional attorneys’ fees.The Supreme Court of Mississippi reviewed the case and found no reversible error, affirming the jury’s award of $10,457,858.89 in damages. The court also reversed and rendered attorneys’ fees on behalf of the Estate in the amount of $4,500,000, plus post-judgment interest. The court held that the trial judge did not err in submitting the issue of punitive damages to the jury and that the $10 million punitive damages award was not unconstitutionally disproportionate. The court also found no error in the jury’s award of extra-contractual damages and no errors warranting a new trial. View "United Services Automobile Association v. Estate of Minor" on Justia Law