Sterling Senechal submitted a claim to Allstate Vehicle and Property Insurance Company for water damage caused by a broken water heater. Allstate issued three payments totaling $12,410.48. After a dispute over the loss amount, an appraisal determined the actual cash value to be $58,396.58, which Allstate paid minus the deductible and prior payments. Senechal then filed a lawsuit alleging breach of contract, violations of the Texas Prompt Payment of Claims Act (TPPCA), bad faith claims under Chapter 541 of the Texas Insurance Code, and breach of the common law duty of good faith and fair dealing. Allstate removed the case to federal court and paid what it calculated as the maximum potential interest owed.The United States District Court for the Southern District of Texas granted summary judgment in favor of Allstate on all claims. Senechal conceded the breach of contract claim but opposed summary judgment on the other claims. The district court ruled that Allstate's payment of the appraisal award and interest defeated Senechal's claims.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court affirmed the summary judgment on Senechal's bad faith claims under Chapter 541 and common law, citing the Texas Supreme Court's decision in Ortiz v. State Farm Lloyds, which held that payment of an appraisal award and interest precludes recovery for bad faith claims unless there is an independent injury. However, the court vacated the summary judgment on Senechal's TPPCA claims, noting that payment of an appraisal award and interest does not automatically absolve an insurer of TPPCA liability. The case was remanded for further proceedings to determine whether Allstate's initial payment "roughly corresponds" with the appraisal award and whether Allstate is liable under the TPPCA. View "Senechal v. Allstate" on Justia Law

The plaintiff, New England Property Services Group, LLC (NEPSG), appealed from a summary judgment in favor of the defendant, NGM Insurance Company (NGM). NEPSG had been assigned the insurance claim benefits by the policyholders, Stephen and Betty Callahan, for storm-related damage to their residence. NGM initially covered some damages but denied others, leading to a series of inspections and disagreements over the loss amount. Eventually, an appraisal process was conducted, resulting in an award that NEPSG found unsatisfactory due to updated labor costs published after the award was signed.The Superior Court granted summary judgment to NGM, finding that NEPSG was not entitled to a modification of the appraisal award or a second appraisal. The court also found that NEPSG failed to establish its claims for breach of contract, bad faith, unjust enrichment, and tortious interference with contractual relations. NEPSG argued that the award should be modified due to a miscalculation of labor costs and that NGM acted in bad faith by using unlicensed appraisers, among other claims.The Rhode Island Supreme Court reviewed the case de novo and affirmed the Superior Court's judgment. The court held that the appraisal award was akin to an arbitration award and thus subject to limited judicial review. NEPSG's request for modification based on post-award labor cost updates was not supported by admissible evidence. The court also found no basis for a second appraisal or for NEPSG's claims of breach of contract and bad faith, as NGM had fulfilled its contractual obligations and there was no evidence of bad faith. Additionally, the court rejected NEPSG's claims of unjust enrichment and tortious interference, finding no inequitable benefit retained by NGM and no evidence of intentional harm to NEPSG's contract with the policyholders. View "New England Property Services Group, LLC v. NGM Insurance Company" on Justia Law

Following a wildfire near their home, plaintiffs Hovik Gharibian and Caroline Minasian submitted a claim to their property insurer, Wawanesa General Insurance Company. Wawanesa paid the plaintiffs over $20,000 for professional cleaning services that were never used. Dissatisfied with the resolution, the plaintiffs filed a lawsuit against Wawanesa for breach of contract and breach of the implied covenant of good faith and fair dealing.The Superior Court of Los Angeles County granted Wawanesa’s motion for summary judgment, finding that the plaintiffs' insurance policy did not provide coverage for the claimed loss. The court determined that there was no evidence of "physical loss" as required by the policy. Plaintiffs appealed the decision.The California Court of Appeal, Second Appellate District, reviewed the case. The court held that the plaintiffs did not demonstrate a "direct physical loss to property" as required by their insurance policy. The court referenced the California Supreme Court's decision in Another Planet Entertainment, LLC v. Vigilant Ins. Co., which clarified that "direct physical loss" requires a distinct, demonstrable, physical alteration to property. The court found that the wildfire debris did not cause such an alteration and could be easily cleaned or removed. Consequently, the court affirmed the trial court's decision, concluding that Wawanesa did not breach the insurance policy since the plaintiffs' claim was not covered. All remaining arguments were deemed moot. View "Gharibian v. Wawanesa Gen. Ins. Co." on Justia Law

Joseph Mirelez submitted a claim under his homeowner’s insurance policy with State Farm Lloyds for wind damage to his property. Disputes arose regarding the amount of loss and repair costs, leading Mirelez to invoke the appraisal process. In January 2023, an agreement on the loss amount was reached, but coverage issues persisted. Mirelez filed a lawsuit in state court in May 2023, alleging breach of contract, violations of the Texas Prompt Payment of Claims Act (TPPCA), various bad faith claims under the Texas Insurance Code, and breach of the duty of good faith and fair dealing. State Farm removed the case to federal court, citing diversity jurisdiction, and subsequently paid the appraisal award amount, minus the deductible and prior payments, plus interest.The United States District Court for the Southern District of Texas granted summary judgment in favor of State Farm on all claims. Mirelez conceded that summary judgment was appropriate for his breach of contract and TPPCA claims but contested the dismissal of his statutory and common law bad faith claims. The district court concluded that State Farm had paid all benefits owed under the policy and that Mirelez was not entitled to any additional damages under the Texas Insurance Code.The United States Court of Appeals for the Fifth Circuit reviewed the case de novo and affirmed the district court’s decision. The court held that under Texas Supreme Court precedent, specifically Ortiz v. State Farm Lloyds, payment of an appraisal award forecloses an insurer’s liability for breach of contract and bad faith claims unless the insured suffered an independent injury. Since Mirelez only sought policy benefits that had already been paid and did not allege any independent injury, his extracontractual bad faith claims were barred. View "Mirelez v. State Farm" on Justia Law

Sioux Steel Company, a South Dakota corporation, designed and manufactured a new line of hopper bins for grain storage. After selling one of these bins to a distributor in Mexico, the bin failed catastrophically, causing fatalities and property damage. Sioux Steel had an insurance policy with the Insurance Company of the State of Pennsylvania (ISOP), which included a professional services exclusion. ISOP denied coverage based on this exclusion, leading Sioux Steel to settle with the affected party without ISOP's involvement.The United States District Court for the District of South Dakota granted summary judgment in favor of ISOP, finding that the professional services exclusion in the insurance policy was unambiguous and applicable, thus precluding coverage. The court also dismissed Sioux Steel's claims for bad faith, punitive damages, and attorney's fees.The United States Court of Appeals for the Eighth Circuit reviewed the case de novo. The court affirmed the district court's decision, holding that the professional services exclusion was clear and unambiguous. The exclusion applied because the damage arose from professional engineering services provided by Sioux Steel's employee and an external engineering firm. The court also found that ISOP did not breach its duty to defend, as no civil proceeding or alternative dispute resolution process had been initiated with ISOP's consent. Consequently, Sioux Steel's claims for breach of contract and insurance bad faith were dismissed, and the district court's judgment was affirmed. View "Sioux Steel Company v. Ins. Co. of the State of PA" on Justia Law

A&T Maritime Logistics, Inc. had an insurance contract with RLI Insurance Company and a bareboat charter agreement with Alexis Marine, L.L.C. While operating the M/V Uncle John, a vessel owned by Alexis Marine, A&T Maritime caused the ship to allide with an embankment. Believing the damage to be minimal, A&T Maritime did not take immediate action. After a lawsuit was filed, RLI was notified of the claim. A&T Maritime and Alexis Marine sought defense and indemnification from RLI, which denied coverage under the insurance contract. The district court upheld RLI's denial of coverage on summary judgment, finding that RLI was prejudiced by the delayed notice.The United States District Court for the Eastern District of Louisiana initially denied A&T Maritime's and Alexis Marine's motions for partial summary judgment seeking reimbursement for defense costs, noting that the policy did not include a duty to defend. The Champagnes, who had purchased the damaged property, settled their claims for $200,000, funded solely by Alexis Marine. RLI then moved for summary judgment, arguing that the Uncle John was not covered under the policy. The district court disagreed but granted partial summary judgment to RLI, holding that the prompt notice requirements were breached and RLI was prejudiced.The United States Court of Appeals for the Fifth Circuit reviewed the case and affirmed the district court's decision. The court held that RLI was actually prejudiced by the delayed notice from both A&T Maritime and Alexis Marine, as the damage worsened over time and the opportunity to settle for a lower amount was lost. Consequently, the denial of coverage for both A&T Maritime and Alexis Marine was appropriate. The court also concluded that RLI had no duty to reimburse defense costs, as indemnification depended on coverage, which was voided due to the breach of the prompt notice requirement. View "A&T Maritime Logistics v. RLI Insurance Co." on Justia Law

Alexion Pharmaceuticals, Inc. develops therapies for rare disorders and was insured under two director and officer liability insurance programs covering different periods. The first program provided $85 million of coverage for claims made between June 27, 2014, and June 27, 2015 (Tower 1). The second program provided $105 million of coverage for claims made between June 27, 2015, and June 27, 2017 (Tower 2). In 2015, the SEC issued a formal investigation order against Alexion, which led to a subpoena seeking information related to Alexion’s grant-making activities and compliance with the Foreign Corrupt Practices Act (FCPA). Alexion disclosed this investigation to its Tower 1 insurers.The Superior Court of Delaware found that the SEC investigation and a later securities class action against Alexion were unrelated, placing the securities class action coverage in Tower 2. The court applied the “meaningful linkage” standard and concluded that the connection between the SEC investigation and the securities class action was insufficient to make them related.The Supreme Court of Delaware reviewed the case and disagreed with the Superior Court’s conclusion. The Supreme Court found that the securities class action was meaningfully linked to the wrongful acts disclosed in Alexion’s 2015 notice to its Tower 1 insurers. Both the SEC investigation and the securities class action involved the same underlying wrongful acts, including Alexion’s grant-making activities and compliance with the FCPA. The Supreme Court held that the securities class action claim should be deemed to have been first made during the Tower 1 coverage period, and therefore, coverage should be under Tower 1. The judgment of the Superior Court was reversed. View "In re Alexion Pharmaceuticals, Inc. Insurance Appeals" on Justia Law

Conduent State Healthcare, LLC (Conduent) was hired by the State of Texas to administer its Medicaid program. In 2012, Texas began investigating Conduent for allegedly helping orthodontics offices overbill for services. Texas sued several orthodontic providers in 2014, and the providers sued Conduent. Texas terminated its contract with Conduent and sued Conduent under the Texas Medicaid Fraud Prevention Act. Conduent was insured by AIG Specialty Insurance Company, ACE American Insurance Company, and Lexington Insurance Company, among others. The insurers provided defense coverage for the provider actions but denied coverage for the state action, claiming it involved fraudulent conduct excluded by the policies.The Superior Court of Delaware found that the insurers breached their duty to defend Conduent in the state action. The court also ruled that Conduent was relieved of its duties to cooperate and seek consent before settling with Texas due to the insurers' breach. The jury found that Conduent acted in bad faith and fraudulently arranged the settlement but did not collude with Texas or settle unreasonably. The Superior Court granted a new trial due to evidentiary issues and the jury's inconsistent verdicts.The Supreme Court of Delaware affirmed the Superior Court's rulings. It held that the insurers' breach of their duty to defend excused Conduent from its duties to cooperate and seek consent. The court also ruled that the policy's fraud exclusion did not bar indemnity coverage because the settlement was allocated to breach of contract damages. The court found that the evidentiary issues and the jury's inconsistent verdicts justified a new trial to prevent manifest injustice. View "AIG Specialty Insurance Company v. Conduent State Healthcare, LLC" on Justia Law

Andrew Murphy, a delivery driver for Grassdoor, was involved in a collision while using his personal vehicle for work. He filed a claim with his insurer, Interinsurance Exchange of the Automobile Club (erroneously sued as AAA Auto Insurance of Southern California), which was denied based on a policy exclusion for transporting property for compensation. Murphy sued for breach of contract, arguing the exclusion was ambiguous and overly broad.The Superior Court of Orange County granted summary judgment in favor of the Exchange, finding the exclusion applied and was neither ambiguous nor against public policy. Murphy appealed, contending the exclusion should only apply to independent contractors and not employees, and that it was overly broad.The California Court of Appeal, Fourth Appellate District, Division Three, reviewed the case de novo. The court held that the policy language was clear and unambiguous, excluding coverage for vehicles used to transport property for compensation. The court found that Murphy's employment status did not affect the applicability of the exclusion and that the exclusion was not contrary to public policy, as employees like Murphy are protected under Labor Code section 2802, which requires employers to indemnify employees for necessary expenditures incurred in the course of their duties.The court affirmed the trial court's judgment, concluding that the Exchange properly denied Murphy's claim based on the compensated carrying exclusion. The court also rejected Murphy's hypothetical scenarios as irrelevant to the case at hand. The judgment was affirmed, and the Exchange was entitled to recover its costs on appeal. View "Murphy v. AAA Auto Insurance of Southern California" on Justia Law

The plaintiffs, Jeffrey Cubberley and Philip Seaver, filed a lawsuit against The Commerce Insurance Company, seeking declaratory relief and compensation for alleged breach of contract. They claimed that Commerce was obligated to cover "inherent diminished value" (IDV) damages to their vehicles, which were damaged in collisions caused by Commerce's insured drivers. Commerce paid for the repairs but refused to compensate for IDV damages, leading the plaintiffs to argue that their vehicles were worth less in the resale market post-repair.The plaintiffs initially filed their lawsuit in the Superior Court, which was later transferred to the business litigation session. The case was stayed pending the outcome of McGilloway v. Safety Ins. Co., which held that IDV damages were recoverable under the 2008 standard Massachusetts automobile policy. After the stay was lifted, the plaintiffs filed a second amended complaint. Commerce moved to dismiss the claims, arguing that the 2016 standard policy excluded IDV damages. The motion judge granted the dismissal, concluding that the policy did not cover IDV damages and that the plaintiffs failed to allege facts suggesting an entitlement to relief. The plaintiffs appealed, and the Supreme Judicial Court granted direct appellate review.The Supreme Judicial Court affirmed the dismissal, holding that the plaintiffs lacked standing to pursue their breach of contract claims because they had not obtained final judgments against the insureds, as required by G. L. c. 175, § 113, and G. L. c. 214, § 3 (9). Additionally, the court found that part 4 of the 2016 standard policy explicitly excluded coverage for IDV damages to third-party vehicles. The court also determined that neither G. L. c. 90, § 34O, nor the decision in McGilloway provided a legal basis requiring insurers to cover IDV damages under the 2016 standard policy. Thus, the plaintiffs' complaint did not plausibly establish an entitlement to relief. View "Cubberley v. The Commerce Insurance Company" on Justia Law