Justia Insurance Law Opinion Summaries

National Casualty Company and Nationwide Mutual Insurance Company entered into reinsurance agreements with Continental Insurance Company, which included arbitration clauses. A billing dispute arose, leading Continental to demand arbitration. National Casualty and Nationwide filed a lawsuit in federal court, claiming that prior arbitral awards resolved the billing dispute and precluded new arbitration. They appealed the district court's order compelling arbitration under the Federal Arbitration Act.The United States District Court for the Northern District of Illinois granted Continental's motion to compel arbitration and dismissed the action. National Casualty and Nationwide argued that the prior arbitral awards precluded the new arbitration proceeding, but the district court ruled that the arbitration clauses required the dispute to be arbitrated.The United States Court of Appeals for the Seventh Circuit reviewed the case. The court affirmed the district court's decision, holding that the preclusive effect of prior arbitral awards is an issue for the arbitrator to decide, not the federal court. The court relied on its precedent, which aligns with Supreme Court rulings, stating that procedural questions arising from an arbitrable dispute are for the arbitrator to resolve. The court also rejected Continental's motion to vacate the district court's dismissal order and stay the action pending arbitration, as it was not properly before the court and lacked merit. The court concluded that the district court correctly compelled arbitration and dismissed the case. View "National Casualty Co. v. Continental Insurance Co." on Justia Law

The case involves the Police Jury of Calcasieu Parish, a political subdivision of Louisiana, which suffered property damage from Hurricanes Laura and Delta in 2020. The Police Jury had insurance policies with a syndicate of eight domestic insurers. The insurers sought to compel arbitration in New York under New York law for the approximately 300 property damage claims. The Police Jury alleged underpayment and untimely payments by the insurers and filed suit in state court, which was later removed to the United States District Court for the Western District of Louisiana.The Western District Court granted the Police Jury's motion to certify three questions of Louisiana law to the Louisiana Supreme Court. The questions concerned the validity of arbitration clauses in insurance policies issued to Louisiana political subdivisions, particularly in light of a 2020 amendment to La. R.S. 22:868 and the applicability of La. R.S. 9:2778, which bars arbitration clauses in contracts with the state or its political subdivisions.The Louisiana Supreme Court addressed the certified questions. First, it held that the 2020 amendment to La. R.S. 22:868, which allowed forum or venue selection clauses in certain insurance contracts, did not implicitly repeal the prohibition of arbitration clauses in all insurance contracts under La. R.S. 22:868(A). Second, the court determined that La. R.S. 9:2778 applies to all contracts with political subdivisions, including insurance contracts, thereby prohibiting arbitration outside Louisiana or the application of foreign law. Third, the court held that a domestic insurer cannot use equitable estoppel to enforce an arbitration clause in another insurer’s policy against a political subdivision, as it would contravene the positive law prohibiting arbitration clauses in La. R.S. 22:868(A)(2).The Louisiana Supreme Court answered all three certified questions, maintaining the prohibition of arbitration clauses in insurance policies issued to Louisiana political subdivisions and affirming the applicability of La. R.S. 9:2778 to such contracts. View "POLICE JURY OF CALCASIEU PARISH VS. INDIAN HARBOR INSURANCE CO." on Justia Law

State Farm Mutual Automobile Insurance Company and State Farm Fire and Casualty Insurance Company (collectively, “State Farm”) provide automobile insurance in New York and are required to reimburse individuals injured in automobile accidents for necessary health expenses under New York’s No-Fault Act. State Farm alleges that several health care providers and related entities engaged in a scheme to fraudulently obtain No-Fault benefits by providing unnecessary treatments and services, and then pursued baseless arbitrations and state-court proceedings to seek reimbursement for unpaid bills.The United States District Court for the Eastern District of New York granted State Farm’s motion for a preliminary injunction in part, enjoining the defendants from proceeding with pending arbitrations and from initiating new arbitrations and state-court proceedings, but denied an injunction of the pending state-court proceedings. The district court found that State Farm demonstrated irreparable harm due to the fragmented nature of the proceedings, which obscured the alleged fraud, and the risk of inconsistent judgments and preclusive effects.The United States Court of Appeals for the Second Circuit reviewed the case and affirmed the district court’s decision to grant the preliminary injunction in part. The appellate court held that the district court did not abuse its discretion in finding that State Farm demonstrated irreparable harm, serious questions going to the merits, a balance of hardships tipping in its favor, and that the injunction was in the public interest. The court also concluded that the Federal Arbitration Act did not bar the injunction of the arbitrations because the arbitrations would prevent State Farm from effectively vindicating its RICO claims.Additionally, the appellate court reversed the district court’s decision not to enjoin the pending state-court proceedings, finding that the Anti-Injunction Act’s “expressly-authorized” exception applied. The court determined that the state-court proceedings were part of a pattern of baseless, repetitive claims that furthered the alleged RICO violation, and that enjoining these proceedings was necessary to give RICO its intended scope. The case was remanded for further proceedings consistent with this opinion. View "State Farm Mutual v. Tri-Borough" on Justia Law

Nicholas and Stacy Boerson, owners of New Heights Farm I and II in Michigan, faced a disappointing corn and soybean harvest in 2019. They submitted crop insurance claims to Great American Insurance Company, which were delayed due to an ongoing federal fraud investigation. The Boersons sued Great American, the Federal Crop Insurance Corporation, and the U.S. Department of Agriculture for breach of contract, bad faith adjustment, and violations of insurance laws.The United States District Court for the Western District of Michigan dismissed the Boersons' claims. It ruled that claims related to Great American's nonpayment were unripe due to the ongoing investigation, while claims alleging false measurements and statements by Great American were ripe but subject to arbitration. The court also dismissed claims against the federal defendants on sovereign immunity grounds.The United States Court of Appeals for the Sixth Circuit affirmed the district court's dismissal. It held that the claims related to nonpayment were unripe because the insurance policy barred payment until the investigation concluded. The court also found that the arbitration agreement in the insurance policy covered the ripe claims against Great American, requiring those disputes to be resolved through arbitration. Additionally, the court ruled that sovereign immunity barred the claims against the federal defendants, as there was no clear waiver of immunity for constructive denial claims under the Federal Crop Insurance Act. View "New Heights Farm I, LLC v. Great American Insurance Co." on Justia Law

A motor vehicle collision occurred in Sussex County, Delaware, involving Joanne Dudsak, a New Jersey resident insured by New Jersey Manufacturers (NJM), and Christopher Koester, a Maryland resident insured by Allstate Insurance Company. NJM paid Personal Injury Protection (PIP) benefits to Dudsak and sought inter-company arbitration in Delaware to recover these costs. Allstate opposed, arguing that NJM's policy, being from New Jersey, did not qualify for arbitration under Delaware law, which requires the vehicle to be registered in Delaware for PIP subrogation rights.The arbitrator ruled in favor of NJM, awarding the full amount and rejecting Allstate's jurisdictional challenge. Allstate then filed a Petition to Vacate the Arbitration Award in the Delaware Chancery Court, arguing that the arbitrator exceeded his authority. NJM moved to dismiss the petition, claiming the issue was moot because Allstate had agreed to tender its policy limits, which would extinguish NJM's subrogation rights under Delaware law.The Delaware Chancery Court denied NJM's Motion to Dismiss, finding that a real dispute remained. The court then addressed the merits of Allstate's Motion for Summary Judgment. The court applied the standard of review under 10 Del. C. §5714(a)(5), which allows vacating an arbitration award if the arbitrated claim was barred by limitation and the objection was raised from the outset. The court found that §2118 of the Delaware PIP statute applies only to vehicles required to be registered in Delaware and does not cover out-of-state policies like NJM's. Consequently, the arbitrator exceeded his authority by accepting jurisdiction over the case. The court granted Allstate's Motion for Summary Judgment, vacating the arbitration award. View "Allstate Insurance Co. v. New Jersey Manufacturers Insurance Co." on Justia Law

In March 2013, Woodsboro Farmers Cooperative contracted with E.F. Erwin, Inc. to construct two grain silos. Erwin subcontracted AJ Constructors, Inc. (AJC) for the assembly. AJC completed its work by July 2013, and Erwin finished the project in November 2013. However, Woodsboro noticed defects causing leaks and signed an addendum with Erwin for repairs. Erwin's attempts to fix the silos failed, leading Woodsboro to hire Pitcock Supply, Inc. for repairs. Pitcock found numerous faults attributed to AJC's poor workmanship, necessitating complete deconstruction and reconstruction of the silos, costing Woodsboro $805,642.74.Woodsboro sued Erwin in Texas state court for breach of contract, and the case went to arbitration in 2017. The arbitration panel found AJC's construction was negligent, resulting in defective silos, and awarded Woodsboro $988,073.25 in damages. The Texas state court confirmed the award in September 2022. In December 2018, TIG Insurance Company, Erwin's insurer, sought declaratory relief in the United States District Court for the Southern District of Texas, questioning its duty to defend and indemnify Erwin. The district court granted TIG's motion for summary judgment on the duty to defend, finding no "property damage" under the policy, and later ruled there was no duty to indemnify, as the damage was due to defective construction.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court found that there were factual questions regarding whether the damage constituted "property damage" under the insurance policy, as the silos' metal parts were damaged by wind and weather due to AJC's poor workmanship. The court determined that the district court erred in granting summary judgment for TIG and concluded that additional factual development was needed. The Fifth Circuit reversed the district court's decision and remanded the case for further proceedings. View "TIG Insurance Company v. Woodsboro Farmers Coop" on Justia Law

A property-insurance dispute arose between a condominium association and its insurer after storms damaged the property. The association demanded an appraisal of the loss, and both parties selected appraisers who then chose an umpire. The association's appraiser disclosed, on the day of final negotiations, that he believed he had a financial stake in the award due to a contingency-fee retainer. The insurer did not object at that time, and the appraisal panel issued an award over a month later. Subsequently, the insurer moved to vacate the award, claiming the appraiser's partiality.The United States District Court for the Southern District of Florida denied the insurer's motion to vacate the award, ruling that the insurer had waived its objection by not raising it sooner. The court also confirmed the appraisal award.The United States Court of Appeals for the Eleventh Circuit reviewed the case and affirmed the district court's decision. The appellate court held that the insurer waived its objection to the appraiser's partiality by failing to object at the time of the disclosure. The court emphasized that a party must timely object to an arbitrator's or appraiser's partiality when it becomes aware of a potential conflict of interest. By waiting over two months and until after the award was issued, the insurer forfeited its right to challenge the appraiser's impartiality. The court did not address other arguments related to the choice of law or the appraiser's partiality, as the waiver issue was dispositive. View "Biscayne Beach Club Condominium Association, Inc. v. Westchester Surplus Lines Insurance Company" on Justia Law

Charlotte Erdmann, a massage therapist insured by Allied Professionals Insurance Company (APIC), was sued by a patient, Kristin Schantzen, and her husband, Jay, for injuries sustained during a massage session. Erdmann's employer, Valley Chiropractic Clinic, was insured by NCMIC Insurance Company (NCMIC). APIC and Erdmann requested NCMIC to cover the claims, but NCMIC refused and instead filed a declaratory judgment action seeking a declaration that it was not obligated to defend or indemnify Erdmann. The Schantzens settled with Erdmann and Valley, with NCMIC agreeing to pay $250,000 of the settlement, leaving the dispute over who would pay Erdmann’s $1.6 million settlement.The United States District Court for the District of Minnesota denied APIC's motion to compel arbitration based on a clause in APIC’s policy with Erdmann. APIC argued that NCMIC should be compelled to arbitrate under the theory of direct-benefits estoppel. The district court concluded that Minnesota law did not support APIC's position, as NCMIC did not seek direct benefits from the APIC-Erdmann policy and was not a third-party beneficiary.The United States Court of Appeals for the Eighth Circuit reviewed the case de novo. The court predicted that the Minnesota Supreme Court would adopt a limited version of direct-benefits estoppel, only allowing a nonsignatory to be compelled to arbitrate if they directly benefited from the contract containing the arbitration clause. The court found that NCMIC did not directly benefit from the APIC-Erdmann policy and thus could not be compelled to arbitrate. Consequently, the Eighth Circuit affirmed the district court's decision, holding that APIC could not compel NCMIC to arbitrate its claims under Minnesota law. View "NCMIC Insurance Company v. Allied Professionals Ins. Co." on Justia Law

In this case, Allied Professionals Insurance Company (APIC) sought to compel arbitration in a dispute with NCMIC Insurance Company (NCMIC). The dispute arose after a patient sued Charlotte Erdmann, a massage therapist insured by APIC, for injuries sustained during a massage. Erdmann's employer, Valley Chiropractic Clinic, was insured by NCMIC. NCMIC declined to defend or indemnify Erdmann and instead filed a declaratory judgment action seeking a declaration that it was not obligated to cover Erdmann or, alternatively, that its coverage was secondary to APIC's. The patient settled with Erdmann and Valley, leaving the question of whether NCMIC or APIC was responsible for Erdmann's $1.6 million settlement.The United States District Court for the District of Minnesota denied APIC's motion to compel arbitration. The court concluded that Minnesota law did not support APIC's argument for direct-benefits estoppel, which would have allowed APIC to compel NCMIC to arbitrate based on a clause in APIC's policy with Erdmann. The district court found that NCMIC did not seek or obtain direct benefits from the APIC-Erdmann policy and thus could not be compelled to arbitrate under the doctrine of direct-benefits estoppel.The United States Court of Appeals for the Eighth Circuit affirmed the district court's decision. The appellate court held that Minnesota law would likely adopt a limited version of direct-benefits estoppel, which only applies when a nonsignatory directly benefits from the contract containing the arbitration clause. The court found that NCMIC did not directly benefit from the APIC-Erdmann policy and therefore could not be compelled to arbitrate. The court also noted that neither the Eighth Circuit nor the Minnesota Supreme Court had applied direct-benefits estoppel in a similar fact pattern, where a signatory sought to compel a nonsignatory to arbitrate. Thus, the judgment of the district court was affirmed. View "United States v. Osorio" on Justia Law

Martin Brauner transmitted HPV to M.O. through sexual activity in Brauner’s GEICO-insured automobile. M.O. threatened to sue Brauner for negligence and demanded $1,000,000 from GEICO, which denied the claim and sought a federal court declaration that the policy did not cover M.O.’s injuries. Brauner and M.O. settled the threatened lawsuit, agreeing that M.O. would collect only from GEICO if an arbitrator found Brauner negligent. The arbitrator awarded M.O. $5,200,000, which M.O. sought to confirm in Missouri state court. The Supreme Court of Missouri vacated the confirmation and remanded the case to allow GEICO to intervene.The United States District Court for the District of Kansas initially handled the case but transferred it to the United States District Court for the Western District of Missouri due to lack of personal jurisdiction over M.O. The district court granted GEICO’s motion for summary judgment, ruling that the policy required bodily injury to arise out of the use of the automobile, and that sexual activity in an automobile did not constitute “use” under Kansas insurance law. Brauner and M.O. appealed.The United States Court of Appeals for the Eighth Circuit reviewed the grant of summary judgment de novo. The court affirmed the district court’s decision, holding that the insurance policy unambiguously required bodily injury to arise out of the ownership, maintenance, or use of the automobile. The court found that sexual activity in an automobile did not meet this requirement, as the automobile was merely the situs of the injury and not causally connected to the negligent act. Therefore, M.O.’s injuries were not covered under the policy. View "GEICO General Insurance Co. v. M.O." on Justia Law