Justia Insurance Law Opinion Summaries

This insurance coverage dispute between a public entity joint insurance fund (JIF) and Star Insurance Company (Star), a commercial general liability insurance company, turned on whether the JIF provided “insurance” to its members or, instead, the JIF members protect against liability through “self-insurance.” That distinction was pertinent here because Star’s insurance policy included a clause under which its coverage obligations began only after coverage available through “other insurance” has been exhausted; the clause, however, did not mention “self-insurance.” Star argued the JIF provided insurance and therefore Star’s coverage was excess to the JIF; the JIF disagreed, contending that because its members were instead “self-insured,” Star’s coverage was primary. The New Jersey Supreme Court found that under the plain language of N.J.S.A. 40A:10-48, a JIF “was not an insurance company or an insurer under New Jersey law, and its “authorized activities . . . do not constitute the transaction of insurance nor doing an insurance business.” By the statute’s plain terms, JIFs cannot provide insurance in exchange for premiums, as insurance companies typically do; instead, JIF members reduce insurance costs by pooling financial resources, distributing and retaining risk, and paying claims through member assessments. Therefore, JIFs protect members against liability through “self-insurance.” “Self-insurance” is not insurance. The Court affirmed the grant of summary judgment to the JIF and denial of summary judgment to Star. View "Statewide Insurance Fund v. Star Insurance Company" on Justia Law

The Supreme Court affirmed the judgment of the trial court in this dispute over whether a property insurance policy providing coverage for "direct physical loss of or physical damage to" covered property provided coverage for business income losses arising from the suspension of business operations during the COVID-19 pandemic, holding that the trial court correctly granted Defendant's motion for summary judgment.Plaintiffs, who suspended their business operations during the COVID-19 pandemic and consequently lost business income and incurred other expenses, filed claims for losses with Defendants. After Defendants denied the claims Plaintiffs brought this actin seeking a judgment declaring that the relevant insurance policies covered their economic losses under the circumstances. The trial court granted summary judgment for Defendants. The Supreme Court affirmed, holding that because Plaintiffs did not suffer any "direct physical loss" of covered property, there was no genuine issue of material fact as to whether the policies did not cover Plaintiffs' claims. View "Connecticut Dermatology Group, PC v. Twin City Fire Insurance Co." on Justia Law

ResCap Liquidating Trust (“ResCap”) pursued indemnification claims against originator Primary Residential Mortgage, Inc. (“PRMI”), a Nevada corporation. ResCap asserted breach of contract and indemnification claims, seeking to recover a portion of the allowed bankruptcy claims for those holding units in the liquidating trust. The district court concluded that ResCap had established each element of its contractual indemnification claim. The district court awarded ResCap $10.6 million in attorney’s fees, $3.5 million in costs, $2 million in prejudgment interest, and $520,212 in what it termed “post-award prejudgment interest” for the period between entry of judgment and the order awarding attorney’s fees, costs, and prejudgment interest. Defendant appealed.   The Eighth Circuit remanded for a recalculation of postjudgment interest but otherwise affirmed. The court explained that the district court held that, as a matter of Minnesota law governed by Section 549.09, a final judgment was not “finally entered” until its Judgment in a Civil Case resolving attorney’s fees, costs, and interest was entered on April 28, 2021, and therefore Minnesota’s ten percent prejudgment rate applied in the interim period. But Section 1961(a) does not say “final judgment,” it says “money judgment.” The district court, on August 17, 2020, entered a “money judgment.” Thus, the district court erred in applying Minnesota law to calculate interest after August 17, 2020, rather than 28 U.S.C. Section 1961(a). View "ResCap Liquidating Trust v. Primary Residential Mortgage" on Justia Law

Joy Global and Komatsu agreed to merge. Joy sent its investors disclosures required under the Securities Exchange Act, 15 U.S.C. 78n. Subsequent suits contended that Joy violated the Act by not disclosing some internal projections of Joy’s future growth that could have been used to negotiate a higher price, rendering the proxy statements fraudulent, and that Joy’s directors violated their state law duties by not maximizing the price for the shareholders. The suits settled for $21 million.The district court held that the $21 million loss is not covered by insurance. The policies do not require indemnification for “any amount of any judgment or settlement of any Inadequate Consideration Claim other than Defense Costs.” An “inadequate consideration claim” is that part of any Claim alleging that the price or consideration paid or proposed to be paid for the acquisition or completion of the acquisition of all or substantially all the ownership interest in or assets of an entity is inadequate.The Seventh Circuit affirmed. The suits assert the wrongful act of failing to disclose documents that could have been used to seek a higher price and are within the definition of “inadequate consideration claim.” The claims do not identify any false or deficient disclosures about anything other than the price. The only objection to this merger was that Joy should have held out for more money, and that revealing this would have induced the investors to vote “no.” View "Joy Global Inc. v. Columbia Casualty Co." on Justia Law

Stillwater Mining Company filed suit against its directors’ and officers’ liability insurers to recover the expenses it incurred defending a Delaware stockholder appraisal action. The superior court granted the insurers’ motions to dismiss after it found that Delaware law applied to the dispute and the Delaware Supreme Court’s decision in In re Solera Ins. Coverage Appeals (“Solera II”) precluded coverage for losses incurred in a stockholder appraisal action under a similar D&O policy. The primary issue on appeal was whether Delaware or Montana law applied to the claims in Stillwater’s amended complaint. Stillwater argued that the superior court should have applied Montana law because Montana had the most significant relationship to the dispute and the parties. If Montana law applied, according to Stillwater, it could recover its defense costs because Montana recognized coverage by estoppel, meaning the insurers were estopped to deny coverage when they failed to defend Stillwater in the appraisal action. Before the Delaware Supreme Court issued Solera II, the Solera I court held that D&O insureds could recover losses incurred in a stockholder appraisal action. Taking advantage of that favorable ruling, Stillwater argued in its complaint that Delaware law applied to the interpretation of the policies. Then when Solera II was issued, Stillwater reversed position and claimed that Montana law applied to the policies. Its amended complaint dropped all indemnity claims for covered losses in favor of three contractual claims for the duty to advance defense costs and a statutory claim under Montana law. In the Supreme Court's view, Stillwater’s amended claims raised the same Delaware interests that Stillwater identified in its original complaint – applying one consistent body of law to insurance policies that cover comprehensively the insured’s directors’, officers’, and corporate liability across many jurisdictions. It then held the superior court did not abuse its discretion when it denied Stillwater's motions. View "Stillwater Mining Company v. National Union Fire Insurance Company of Pittsburgh, PA" on Justia Law

Sagome, Inc.’s restaurant, L’Hostaria, suffered significant financial losses from reduced customer traffic and government lockdowns and restrictions relating to the COVID-19 pandemic. It sought to recover under its comprehensive general insurance policy. And like many insurers, The Cincinnati Insurance Company denied coverage because the virus did not impose physical loss or damage as required by the policy. Sagome sued, but the district court concluded its financial losses were not covered. Addressing Sagome’s coverage under Colorado law, the Tenth Circuit Court of Appeals agreed and affirmed: COVID-19 did not cause Sagome to suffer a qualifying loss because there was never any direct physical loss or damage to L’Hostaria. View "Sagome v. Cincinnati Insurance Company" on Justia Law

John’s Grill in San Francisco was closed or operating at limited capacity during the pandemic. The restaurant was covered by Sentinel’s “Spectrum Business Owner’s Policy,” providing first-party property coverage, third-party liability coverage, and umbrella liability coverage. Sentinel denied the Grill’s claim for business interruption coverage. The trial court upheld the denial.The court of appeal reversed. A nearly uniform line of cases has held that temporary loss of use of property due to the COVID-19 pandemic does not constitute “direct physical loss of or damage to” property for purposes of first-party insurance coverage; nearly all of these cases involved standard form language that was not customized in any material way. Sentinel’s policy, however, has customized language. Other cases have analyzed the undefined term “direct physical loss of or damage to” property. Sentinel’s policy, by endorsement, affirmatively grants coverage for “loss or damage” caused by a virus; a special definition of “loss or damage” is broad enough to encompass pervasive infiltration of virus particulates onto the surfaces of covered property. The coverage is expressly limited to situations in which the virus is the “result of” a listed cause, none of which John’s Grill has alleged. The court rejected Sentinel’s proposed broad reading, citing the illusory coverage doctrine. Insuring agreements should be read broadly in favor of coverage, View "John's Grill, Inc. v. Hartford Financial Services Group, Inc." on Justia Law

Amy’s employs 2,500 people to manufacture vegetarian meals. It purchased comprehensive property insurance from Fireman’s for a period ending in July 2020. The policy included coverage extensions for communicable diseases and for loss avoidance and mitigation: Fireman’s “will pay for direct physical loss or damage to Property" caused by or resulting from a "communicable disease event at a location.” The policy defines “communicable disease event” as one in which “a public health authority has ordered that a location be evacuated, decontaminated, or disinfected due to the outbreak of a communicable disease.” Amy’s incurred costs “to mitigate, contain, clean, disinfect, monitor, and test for the effects of” the coronavirus at insured locations, and to avoid or mitigate potential coronavirus-related losses, including temperature-screening equipment to test for COVID, protective shields to prevent transmission on assembly lines, masks and goggles, cleaning supplies, and “hero pay.” People with confirmed COVID-19 cases were on Amy’s premises. The complaint cited “various require[d safety measures] for all essential businesses.”Fireman’s denied Amy’s claim. The court of appeal affirmed the dismissal of the complaint. Under communicable disease extension, the need to clean or disinfect infected or potentially infected covered property constitutes “direct physical loss or damage” of the property; Amy’s has not pled a “communicable disease event” but should be given leave to amend to do so. View "Amy's Kitchen, Inc. v. Fireman's Fund Insurance Co." on Justia Law

Cope, injured on a Kentucky job site, filed a workers’ compensation claim. The subcontractor who hired him for the project, CMC, is based in Southern Indiana, and had an insurance policy with AFICA. Schultheis Insurance Agency procured the policy for CMC, but failed to inform AFICA that CMC did business in Kentucky. AFICA sought a declaration that its policy does not cover Cope’s claim.The district court granted AFICA summary judgment. The Seventh Circuit affirmed. The plain text of the policy is unambiguous: because CMC failed to notify AFICA until after Cope’s accident that it was working in Kentucky, AFICA is not liable for Cope’s workers’ compensation claim. The policy states : “If you have work on the effective date of this policy in any state [other than Indiana], coverage will not be afforded for that state unless we are notified within thirty days.” View "Accident Fund Insurance Co. v. Schultheis Insurance Agency, Inc." on Justia Law

Insured Huntington Ingalls Industries, Inc. and insurer Huntington Ingalls Industries Risk Management LLC seek a declaratory judgment stating there is coverage under a property insurance policy for certain losses incurred by Huntington Ingalls Industries due to the COVID-19 pandemic. The trial court concluded that the complaint did not allege facts that would trigger coverage under the policy and granted judgment on the pleadings in favor of reinsurers. After review, the Vermont Supreme Court disagreed, reversed the trial court. and remanded for further proceedings. View "Huntington Ingalls Industries, Inc. et al. v. Ace American Insurance Company et al." on Justia Law