Justia Insurance Law Opinion Summaries

Plaintiffs wereconsumers who sued Defendant Security Benefit Life Insurance Company under the Racketeer Influenced and Corrupt Organizations Act (“RICO”), and state law, alleging Security Benefit developed a fraudulent scheme to design and market certain annuity products. The issue this case presented for the Tenth Circuit’s review centered on whether the district court properly dismissed Plaintiffs’ first amended complaint without prejudice for lack of particularity and plausibility in pleading fraud. Because the Tenth Circuit concluded Plaintiffs alleged facially plausible fraud claims with the particularity required under Federal Rule of Civil Procedure 9(b), the district court erred in granting Security Benefit’s motion to dismiss under Federal Rule of Civil Procedure 12(b)(6). View "Clinton, et al. v. Security Benefit Life" on Justia Law

Insureds – who operate an annual motorcycle rally in Pattersonville, New York (the “Harley Rendezvous”) – appealed from the district court’s entry of summary judgment in favor of Covington Specialty Insurance Company (“Covington”) in this insurance-coverage dispute. Specifically, the parties disagree as to Covington’s duties, under a general commercial liability policy issued to the Insureds (the “Policy”), to defend and indemnify the Insureds against personal-injury claims asserted in a separate, state-court action by two motorcycle riders who were struck by another attendee’s automobile at the Harley Rendezvous. The district court found that a provision of the Policy (the “Absolute Auto Exclusion”) unambiguously excluded liability coverage for automobile accidents, regardless of whether the Insureds themselves owned or operated the vehicle at issue. On appeal, the Insureds argued that the district court was bound by – and erroneously failed to follow – a case in which a New York intermediate appellate court found ambiguity in a similarly worded exclusion provision in a different insurance policy.   The Second Circuit affirmed and found that Grande Stone Quarry is inapposite here and that countless other decisions by New York courts support the district court’s reading of the Absolute Auto Exclusion. The court explained the district court’s “task” here was simply “to determine how the New York Court of Appeals would decide” the issue. Here, the record reflects that the district court carried out that task soundly and carefully. The court concluded that under New York law, the Absolute Auto Exclusion unambiguously precludes coverage of the Insureds’ defense and indemnity in the Underlying Action. View "Covington Specialty Ins. Co. v. Indian Lookout Country Club, Inc." on Justia Law

An insured’s general liability insurer defended under a reservation of rights, and paid out its $2 million policy limits to settle the lawsuit. The insured’s workers’ compensation and employers’ liability insurer denied coverage and did not participate in the defense or settlement. This lawsuit followed, with the general liability insurer suing the workers’ compensation and employers’ liability insurer for equitable contribution. Following a bench trial, the trial court entered judgment for the general liability insurer, awarding roughly half the cost of defense and indemnity. The Court of Appeals reversed: an equitable contribution claim only lies if the two insurers share the same level of liability on the same risk as to the same insured. In this case, the general liability insurer is not entitled to equitable contribution because it did not insure the same risk as the workers’ compensation and employers’ liability insurer. View "California Capital Ins. Co. v. Employers Compensation Ins. Co." on Justia Law

Wilmington Trust National Association, acting as securities intermediary for Viva Capital Trust, was the downstream purchaser of two high- value life insurance policies issued by Sun Life Assurance Company of Canada. After the insureds died, Sun Life, believing that the policies were “stranger originated life insurance” ("STOLI") policies that lacked an insurable interest, filed suit in the Superior Court, seeking declaratory judgments that the policies were void ab initio. Sun Life sought to avoid paying the death benefits and to retain the premiums that had been paid on the policies. Wilmington Trust asserted affirmative defenses and counterclaims, alleging that Sun Life had flagged the policies as potential STOLI years before Wilmington Trust acquired them. Wilmington Trust sought to obtain the death benefits or, in the alternative, a refund of all the premiums that it and former owners of the policies had paid on the policies. Sun Life countered that allowing Wilmington Trust to recover the death benefits would constitute enforcing an illegal STOLI policy and that Wilmington Trust could not recover the premiums because, among other arguments, Wilmington Trust knew that it was buying and paying premiums on illegal STOLI policies. The trial court denied Wilmington Trust’s bid to secure the death benefits, but ordered Sun Life to reimburse, without prejudgment interest, all premiums “to the party that paid them.” The Delaware Supreme Court agreed with the trial court’s disallowance of Wilmington Trust’s death-benefit claim, accomplished in part by an earlier dismissal of Wilmington Trust’s promissory- estoppel counterclaim and the striking of certain of its equitable defenses, finding it was consistent with STOLI precedents. But its application of an “automatic premium return” rule—that is, ordering all premiums to be returned without conducting the fault-based analysis we adopted in Geronta Funding v. Brighthouse Life Ins. Co., 284 A.3d 47 (Del. 2022)—was not. Nor was the trial court’s denial of prejudgment interest. Therefore, the Supreme Court affirmed in part, reversed in part, and remanded to the superior court for reconsideration of its ruling on Wilmington Trust’s premium-return claim, including its claim for prejudgment interest. View "Wilmington Trust National Association v. Sun Life Assurance Company of Canada" on Justia Law

Plaintiff is a former federal employee and participant in a health-insurance plan (“Plan”) that is governed by the Federal Employees Health Benefits Act (“FEHBA”). The Plan stems from a contract between the federal Office of Personnel Management (“OPM”) and Blue Cross Blue Shield Association and certain of its affiliates (together, “Blue Cross”). Blue Cross administers the Plan under OPM’s supervision. Plaintiff suffered from cancer, and she asked Blue Cross whether the Plan would cover the proton therapy that her physicians recommended. Blue Cross told her the Plan did not cover that treatment. So Plaintiff chose to receive a different type of radiation treatment, one that the Plan did cover. The second-choice treatment eliminated cancer, but it also caused devastating side effects. Plaintiff then sued OPM and Blue Cross, claiming that the Plan actually does cover proton therapy. As against OPM, she seeks the “benefits” that she wanted but did not receive, as well as an injunction directing OPM to compel Blue Cross to reform its internal processes by, among other things, covering proton therapy in the Plan going forward. As against Blue Cross, she seeks monetary damages under Texas common law. The district court dismissed Plaintiff’s suit.   The Fifth Circuit affirmed. The court held that neither the advance process nor the proton-therapy guideline poses an immediate threat of injury, so injunctive relief is therefore unavailable. Further, the court found that FEHBA preempts Plaintiff’s common-law claims against Blue Cross. Accordingly, the court held that no relief is available under the relevant statutory and regulatory regime. View "Gonzalez v. Blue Cross Blue Shield" on Justia Law

Almost two decades prior to this decision, the Mississippi Supreme Court handed down Farmland Mutual Insurance Co. v. Scruggs, 886 So. 2d 714 (Miss. 2004). In that opinion, the Court held that Farmland Mutual Insurance Co., the liability insurer for Mitchell Scruggs, Eddie Scruggs, Scruggs Farms & Supplies LLC, and Scruggs Farm Joint Venture (collectively, Scruggs), had no duty to defend Scruggs in a federal lawsuit by Monsanto Company. The reason no coverage applied was because Monsanto had alleged that Scruggs committed the intentional act of conversion by saving and using unlicensed seeds. Eight years later, a district court judge overturned a jury’s verdict that Scruggs had willfully violated Monsanto’s patents. Consequently, Scruggs was not liable for treble damages and attorney’s fees. Scruggs returned to state court in 2013. Citing Rule 60(b) of the Mississippi Rules of Civil Procedure, Scruggs asked the Lee County Circuit Court to reopen and vacate the final judgment entered in 2004 in favor of Farmland on the coverage issue. Scruggs asserted the Mississippi Supreme Court’s opinion had been erroneously decided based on facts that came to light in the federal case. The state court rejected the motion as untimely under Rule 60(b). Scruggs appealed. While Scruggs asserted the motion was timely, the Mississippi Supreme Court found the motion’s timing is irrelevant: Rule 60(b) was not a procedural vehicle for a trial court to overturn a mandate issued from the Mississippi Supreme Court. Because the trial court lacked jurisdiction to grant Scruggs’s request, the Supreme Court affirmed the circuit court’s denial of the motion. View "Scruggs, et al. v. Farmland Mutual Insurance Co." on Justia Law

Plaintiffs, current and former employees of RingCentral, participated in RingCentral’s employee welfare benefits plan. The plan participated in the “Tech Benefits Program” administered by Sequoia Benefits and Insurance Services, LLC, a management and insurance brokerage company. The Tech Benefits Program was a MEWA that pooled assets from employer-sponsored plans into a trust fund for the purpose of obtaining insurance benefits for employees at large-group rates. Plaintiffs filed this putative class action on behalf of the RingCentral plan and other Tech Benefits Program participants, asserting that Sequoia owed fiduciary duties to the plan under ERISA because Sequoia allegedly exercised control over plan assets through its operation of the Tech Benefits Program. Plaintiffs alleged that Sequoia violated its fiduciary duties by receiving and retaining commission payments from insurers, which Plaintiffs regarded as kickbacks, and by negotiating allegedly excessive administrative fees with insurers, leading to higher commissions for Sequoia.   The Ninth Circuit affirmed the district court’s dismissal for lack of Article III standing. The court held that Plaintiffs failed to establish Article III standing as to either of their two theories of injury. The panel held, as to the out-of-pocket-injury theory, Plaintiffs failed to establish the injury in fact required for Article III standing because their allegations did not demonstrate that they paid higher contributions because of Sequoia’s allegedly wrongful conduct. And Plaintiffs failed to plead the third element, that their injury would likely be redressed by judicial relief. View "RACHAEL WINSOR, ET AL V. SEQUOIA BENEFITS & INSURANCE, ET AL" on Justia Law

National Union Fire Insurance Co. of Pittsburgh (National Union) filed suit to obtain a declaration that it owed no payment to Cargill, Inc. under the employee theft clause of the insurance policy held by Cargill. Cargill counterclaimed for breach of contract. The district court granted judgment on the pleadings for Cargill, ruling that Cargill had suffered a covered loss resulting directly from an employee’s theft. National Union appealed.   The Eighth Circuit affirmed and held that the district court did not err by concluding there were no disputes as to any material facts that precluded granting Cargill’s Rule 12(c) motion. Further, the court wrote that Cargill’s insurance policy provided coverage for employee “theft,” which was defined in the policy as “the unlawful taking of property to the deprivation of the Insured.” Additionally, the insured’s loss must have resulted “directly from” employee theft to be covered by the policy. Finally, the court concluded that the date of Cargill’s notice letter was the appropriate date to begin calculating prejudgment interest. View "National Union v. Cargill" on Justia Law

Lindenwood Female College (Lindenwood) asserted class action claims against its casualty insurer, Zurich American Insurance Company (Zurich), alleging a wrongful denial of coverage for COVID-19 business interruption at its Missouri and Illinois properties. The district court granted Zurich’s motion to dismiss, finding no plausible allegation of coverage.   The Eighth Circuit affirmed. The court concluded that Lindenwood’s argument fails to identify an ambiguity. The court explained that in its view, no lay person—no reasonable insured—could look at the policy as a whole and fail to appreciate that the state-specific endorsements are intended to apply in the respective states. The references to Louisiana and other states are not mere titles; they serve to establish the structure of the policy as a whole. And it would simply make no sense to define a contamination exclusion with express reference to viral contamination in the main body of the policy only to wholly eliminate that same exclusion nationwide in a later endorsement that references an individual state. View "Lindenwood Female College v. Zurich American Insurance Co." on Justia Law

Martinique Properties, LLC filed a complaint against Certain Underwriters at Lloyd’s, London (Underwriters), seeking to vacate an arbitration award. The district court dismissed the complaint for failure to state a claim for vacatur. Martinique Properties appealed. Martinique Properties argues that the appraisal award must be vacated because the appraisers “used figures and measurements which are contrary to the actual conditions of the Property” and failed to “consider certain buildings” and certain portions of a damaged roof when determining the appraisal award. These alleged errors, Martinique Properties argues, show that the appraisers were either “guilty of misconduct” or “so imperfectly executed” their powers that “a mutual, final, and definite award . . . was not made,” two of the four grounds for vacating an award under the FAA.   The Eighth Circuit affirmed. The court found that Martinique Properties has alleged only factual errors that challenge the merits of the appraisal award, and the court has no authority to reconsider the merits of an arbitration award, even when the parties allege that the award rests on factual errors. Accordingly, the appraisers’ use of certain figures and measurements in calculating the amount of loss here, and their alleged failure to consider particular buildings and portions of roof damage, even if incorrect, are not sufficient for vacatur under the FAA. View "Martinique Properties, LLC v. Certain Underwriters at Lloyd's of London" on Justia Law