Justia Insurance Law Opinion Summaries

The Court of Appeals held that when an employer pays premiums to a mutual insurance company to obtain a policy for its employee and the insurance company demutualizes, the employee is entitled to the proceeds from demutualization.Medical Liability Mutual Insurance Company (MLMIC) issued professional liability insurance policies to eight medical professionals who were litigants in the cases before the Court of Appeals on appeal. The premiums for the policies were paid by the professionals' employers. After MLMIC demutualized and was acquired by National Indemnity Company, MLMIC sought to distribute $2.502 billion in cash consideration to eligible policyholders pursuant to its plan of conversion. At issue was the employers' claim of legal entitlement to receive the demutualization proceeds. The Supreme Court held that, absent contrary terms in the contract of employment, insurance policy, or separate agreement, the employee, who is the policyholder, is entitled to the proceeds. View "Columbia Memorial Hospital v. Hinds" on Justia Law

In a consolidated appeal each of the insured businesses, SA Palm Beach, LLC, Emerald Coast Restaurants, Inc., Rococo Steak, LLC, and R.T.G. Furniture, Corporation, were denied after seeking coverage under an all-risk insurance policy that provides compensation for losses and expenses incurred in connection with “direct physical loss of or damage to” the covered property or “direct physical loss or damage to” the covered property. The Eleventh Circuit addressed the question of whether under Florida law, all-risk commercial insurance policies provide coverage for “direct physical loss of or damage to” property or “direct physical loss or damage to” property insure against losses and expenses incurred by businesses as a result of COVID-19. The court affirmed in part and vacated in part, the district court’s dismissal of the complaints. The court held that under Florida law there is no coverage because COVID-19 did not cause a tangible alteration of the insured property. The court reasoned that under Florida law, an insurance policy should be read “as a whole, endeavoring to give every provision its full meaning and operative effect.” Further, Florida Supreme Court has explained, that an “all-risk policy” does not extend coverage to “every conceivable loss.” Thus, the court found that it believes that the Florida Supreme Court would hold that, under the allegations in the complaints before the court, there is no coverage. The court vacated in part the dismissal of Emerald Coast’s complaint finding that the district court did not address the Plaintiff’s Spoilage provision claim. View "SA Palm Beach, LLC v. Certain Underwriters at Lloyd's London, et al." on Justia Law

In March 2020, to prevent the spread of Covid-19, Illinois Governor Pritzker ordered all persons living in the state to stay at home except to perform specified “essential activities” and ordered “non-essential” businesses to cease all but minimum basic operations. Childcare providers were permitted to continue operating only with an emergency license to care for the children of essential workers. Michigan’s Governor Whitmer issued a similar order. Both states lifted those restrictions by June 2020. West Bend denied claims by childcare centers under their all-risk commercial property insurance policies.The policies cover the actual loss of income and expense due to the suspension of an insured’s operations “caused by direct physical loss of or damage to property”. The loss or damage must be caused by “[d]irect physical loss.” Lost income and extra expenses are covered when a civil authority prohibits access to insured premises because of damage at nearby property. The policies cover income lost and expenses incurred when an insured’s operations are temporarily suspended by government order "due to an outbreak of a ‘communicable disease’ … at the insured premises.”The district court concluded that the Centers had not plausibly alleged that COVID-19 caused physical loss of or damage to their property—or to nearby property— or that government shutdown orders were due to an outbreak at their premises. The Seventh Circuit affirmed, noting that other circuits have reached the same conclusion. View "Paradigm Care & Enrichment Center, L.L.C. v. West Bend Mutual Insurance Co." on Justia Law

Plaintiff, a Hollywood restaurant, maintained a business interruption insurance policy through Defendant.  In response to COVID-19, the Governor, Mayor of Los Angeles, and several public health agencies ordered Plaintiff to close its restaurant, resulting in the loss of all its business. Plaintiff filed a claim with Defendant insurance company, which was denied based on the grounds that the policy only covered “direct physical loss of or damage to” the property, and expressly excluded coverage for losses resulting from a government order and losses caused by or resulting from a virus. Plaintiff appealed after Defendant's demurrer was sustained without leave to amend.   The California Court of Appeal affirmed the dismissal and held that Plaintiffs cannot establish a breach of contract.  At issue is whether the clause’s requirement can be construed to cover the pandemic-related closure. The court held that under California law a business interruption policy that covers physical loss and damages does not provide coverage for losses incurred by reason of the COVID-19 pandemic. Moreover, the court explained that the fact that loss and damage requirements are sometimes found in exclusionary provisions does not change the plain meaning of the terms. The court noted that even if Plaintiff could bring itself within the coverage clause, the virus exclusion would bar coverage. View "Musso & Frank Grill v. Mitsui Sumitomo Ins. USA" on Justia Law

In March 2012, First Solar, Inc. stockholders filed a class action lawsuit against the company alleging that it violated federal securities laws by making false or misleading public disclosures ("Smilovits Action"). National Union Fire Insurance Company of Pittsburgh, PA (“National Union”) provided insurance coverage for the Smilovits Action under a 2011–12 $10 million “claims made” directors and officers insurance policy. While the Smilovits Action was pending, First Solar stockholders who opted out of the Smilovits Action filed what has been referred to as the Maverick Action. The Maverick Action alleged violations of the same federal securities laws as the Smilovits Action, as well as violations of Arizona statutes and claims for fraud and negligent misrepresentation. In this appeal the issue presented for the Delaware Supreme Court's review was whether the Smilovits securities class action, and a later Maverick follow-on action were related actions, such that the follow-on action was excluded from insurance coverage under later-issued policies. The Superior Court found that the follow-on action was “fundamentally identical” to the first-filed action and therefore excluded from coverage under the later-issued policies. The Supreme Court found that even though the court applied an incorrect standard to assess the relatedness of the two actions, judgment was affirmed nonetheless because under either the erroneous “fundamentally identical” standard or the correct relatedness standard defined by the policies, the later-issued insurance policies did not cover the follow-on action. View "First Solar, Inc. v. National Union First Insurance Company of Pittsburgh, PA" on Justia Law

ATC purchased a commercial general liability insurance policy from Westchester, which provided coverage against liability incurred because of “advertising,” a defined term that included trade dress infringement. BizBox sued ATC for breach of contract and interference with its business expectancies, alleging that ATC manufactured and sold a knock-off trailer using BizBox’s design. ATC sought a declaratory judgment that Westchester owed it a duty to defend and a duty to indemnify. Westchester argued that BizBox’s underlying suit was not covered under the insurance policy because BizBox did not allege, in that litigation, an infringement of its trade dress in ATC’s advertising.The Seventh Circuit affirmed the dismissal of the suit. BizBox’s complaint never alleged a trade dress infringement claim against ATC nor an advertising injury and could not be construed to plausibly allege a trade dress infringement claim against ATC. BizBox alleged no facts that can plausibly be construed to show that it asserted that an advertising injury occurred. Westchester, therefore, has no duty to defend or indemnify ATC under the “personal and advertising injury” provision of the Policy. View "Aluminum Trailer Co. v. Westchester Fire Insurance Co" on Justia Law

An explosion at the Omega Protein Plant in Moss Point, Mississippi killed one man and seriously injured several others. Multiple lawsuits were filed against Omega in federal district court. Colony Insurance Company filed a declaratory judgment action in state circuit court seeking a declaration that it did not cover bodily injuries arising out of the Moss Point facility explosion. Evanston Insurance Company intervened also seeking a declaration of no coverage for the same injuries: Evanston provided a $5 million excess liability policy, which provided coverage after Colony’s $1 million policy was exhausted. Because Colony settled one of the underlying personal injury cases for $1 million (the limits under its policy), Omega sought excess coverage from Evanston for the injuries that occurred at its plant. A special master was appointed, and the trial court granted Evanston’s motion for summary judgment, finding that the pollution exclusion in the insurance contract barred coverage. Omega appealed that grant of summary judgment. The Mississippi Supreme Court found that a pollution exclusion in the insurance contract was ambiguous, and should have been construed in favor of the insured, allowing coverage. Further, the Court found the question of whether coverage was triggered was governed by the language of the contract, and that Evanston failed to prove there could be no coverage under the excess liability policy. Therefore, the Supreme Court reversed the trial court’s grant of summary judgment as to all issues and remanded the case for further proceedings. View "Omega Protein, Inc. v. Evanston Insurance Company" on Justia Law

BP retained the Responders (O’Brien’s and NRC) for nearly $2 billion to assist with the cleanup of the Deepwater Horizon oil spill. Thousands of the Responders' workers filed personal injury lawsuits against BP, which were consolidated and organized into “pleading bundles.” The B3 bundle included “all claims for personal injury and/or medical monitoring for exposure or other injury occurring after the explosion and fire of April 20, 2010.” In 2012, BP entered the “Medical Settlement” on the B3 claims with a defined settlement class. The opt-out deadline closed in October 2012. The Medical Settlement created a new type of claim for latent injuries, BackEnd Litigation Option (BELO) claims. After the settlement, plaintiffs could bring opt-out B3 claims if they did not participate in the settlement, and BELO claims if they were class members who alleged latent injuries and followed the approved process. Responders were aware of the settlement before the district court approved it but neither Responder had control over the negotiations, nor did either approve the settlement.In 2017, BP sought indemnification for 2,000 BELO claims by employees of the Responders. The Fifth Circuit held that BP was an additional insured up to the minimum amount required by its contract with O’Brien’s; the insurance policies maintained by O’Brien’s cannot be combined to satisfy the minimum amount. O’Brien’s is not required to indemnify BP because BP materially breached its indemnification provision with respect to the BELO claims. View "O'Brien's Response Management, L.L.C. v. BP Exploration & Production, Inc." on Justia Law

In response to the COVID-19 pandemic, Kentucky temporarily (for about six weeks) barred healthcare corporations like Estes, which operates two dental clinics from providing nonemergency care. Estes lost substantial income as a result. Estes’ property insurance policy required Cincinnati Insurance to pay Estes for lost business income that results from a “direct” “physical loss” to its dental offices.The Sixth Circuit affirmed the dismissal of Estes’ suit against Cincinnati, noting that circuit courts have uniformly interpreted this “physical loss” language not to cover similar pandemic-related claims under the laws of many other states. The court concluded that Kentucky’s highest court would agree with those decisions. The phrase “physical loss” would convey to the “average person” that a property owner has been tangibly deprived of the property or that the property has been tangibly destroyed. COVID-19 and the government shutdown orders caused only intangible or economic harm. View "Estes v. Cincinnati Insurance Co." on Justia Law

Vitamin Energy is the defendant in 5-hour Energy’s 2019 lawsuit under the Lanham Act for trademark infringement, false designation of origin, false advertising, and trademark dilution; 5-hour also made claims under Michigan law for trademark infringement, indirect trademark infringement, and unfair competition. Vitamin Energy was insured by Evanston. In a declaratory judgment action, the district court decided Evanston had no duty to defend. The Third Circuit vacated. Pennsylvania law imposes on insurers a broad duty to defend lawsuits brought against those they insure. An insured’s burden to establish its insurer’s duty to defend is light, and Vitamin Energy has carried it. The policy excludes coverage for Advertising Injury, defined as an injury “arising out of oral or written publication of material that libels or slanders.” While some allegations of the complaint involve disparagement, others do not. An underlying complaint need only contain at least one allegation that falls within the scope of the policy’s coverage for the duty to defend to be triggered. The duty to defend is broader than the duty to indemnify. Similarly, exclusions for suits based on “Intellectual Property,” “Incorrect Description,” “Failure to Conform,” and “Knowing” actions do not defeat the duty to defend. View "Vitamin Energy LLC v. Evanston Insurance Co" on Justia Law