Justia Insurance Law Opinion Summaries

Jennifer Ploutis’ home was insured under a policy issued by Allstate Property and Casualty Insurance Company when water pipes in the home burst, damaging the home and certain contents. When the parties were unable to reach an agreement on the cost of certain repairs, Ploutis filed a complaint for breach of contract against Allstate. Upon the request of Ploutis, the action was nonsuited. Well after two years after the damage was sustained, Ploutis filed the present action. Allstate filed a demurrer asserting that Ploutis failed to comply with the conditions precedent under the policy by bringing the action within two years “after the inception of loss or damage.” The circuit court overruled the demurrer, concluding that the limitations period was tolled pursuant to Va. Code Ann. 8.01-229(E)(3), which tolls the “statute of limitations” with respect to nonsuited actions. Judgment was entered in favor of Ploutis. The Supreme Court reversed the judgment of the circuit court and entered final judgment for Allstate, holding that the circuit court erred in ruling that section 8.01-229(E)(3) applies to the contractual period of limitations for filing an action under Allstate’s policy. View "Allstate Prop. & Cas. Ins. Co. v. Ploutis" on Justia Law

Defendant Cy Tapia, a teenager living with his aunt and grandmother, was driving a vehicle which crashed, inflicting severe and eventually fatal injuries on his passenger, Cory Driscoll. Before his death Driscoll and his mother filed an action for damages. The parties established that the vehicle driven by Tapia was owned by his grandfather and that Tapia was entitled to $100,000 in liability coverage under an auto policy issued to Melissa McGuire (Tapia’s sister), which listed the vehicle as an insured vehicle and listed Tapia as the driver of the vehicle. The policy was issued by petitioner-defendant 21st Century Insurance Company. 21st Century offered to settle the action for the policy limits of the McGuire policy ($100,000). However, plaintiff1 also believed that Tapia might be covered under policies issued to his aunt and grandmother, each offering $25,000 in coverage and also issued by 21st Century. Plaintiff communicated an offer to settle for $150,000 to Tapia’s counsel; 21st Century contended that it never received this offer (although there was certainly evidence to the contrary). Inferrably having realized the seriousness of its position, 21st Century affirmatively offered the “full” $150,000 to settle the case against Tapia. Plaintiff did not accept this offer, but a month later plaintiff’s counsel served a statutory offer to compromise seeking $3,000,000 for Cory Driscoll and $1,150,000 for his mother Jenny Driscoll. Shortly before the expiration of this offer, 21st Century sent Tapia a letter warning him that it would not agree to be bound if Tapia personally elected to accept the offer. Nonetheless, Tapia agreed to the entry of a stipulated judgment in the amounts demanded by plaintiff. 21st Century paid $150,000 plus interest to the plaintiff. Tapia then assigned any rights he had against 21st Century to plaintiff. This assignment and agreement included plaintiff’s promise not to execute on the judgment against Tapia so long as he complied with his obligations, e.g., to testify to certain facts concerning the original litigation and 21st Century’s actions. This bad faith action followed. Petitioner's unsuccessfully moved for summary judgment, and petitioned the Court of Appeal for a writ of mandate to overturn the trial court's denial. Upon review, the Court of Appeal found that plaintiff’s efforts to pursue essentially a “bad faith” action as assignee of the insured was misguided. Accordingly, petitioner was entitled to summary judgment. View "21st Century Ins. v. Super. Ct." on Justia Law

Pursuant to a scheduling order issued by the magistrate judge that included a report of the parties’ discovery conference, the initial date agreed for disclosures was April 6, 2011. It was undisputed that plaintiff Sun River had a "D&O" insurance policy, which potentially covered securities-related counterclaims asserted by defendants, thus requiring Sun River to disclose the policy pursuant to the scheduling order. No disclosure of the policy was made until eighteen months later, only after counsel for defendants repeatedly pressed the issue based on other information raising suspicions of an undisclosed policy, and then filed a motion to compel its production. By that time coverage under this “claims made” policy had lapsed. When the omission came to light, defendants moved for an order sanctioning Sun River under Rule 37(b)(2)(A) by dismissing Sun River’s claims against defendants and entering a default judgment for defendants on their counterclaims against Sun River. The magistrate judge held an evidentiary hearing on the motion, taking testimony from Sun River's former attorneys, in-house counsel James Pennington and outside counsel (and counsel-of-record) Stephen Csajaghy regarding events surrounding their failure to timely disclose the policy. The magistrate judge ultimately recommended that the motion for sanctions be granted insofar as it sought a default judgment against Sun River on defendants’ counterclaims, but denied insofar as it sought dismissal of Sun River’s claims against defendants, which were not affected by the operative nondisclosure. The district court agreed with the magistrate judge about counsel’s performance with respect to disclosure of the D&O Policy, but concluded that Sun River should not be held responsible in the matter. Instead, the district court decided counsel were culpable for the disclosure violation and should be held personally liable for the attorney fees expended by defendants in pursuing the motion for sanctions. The attorneys moved for reconsideration, arguing: (1) Rule 37(c) did not authorize sanctions on counsel; (2) counsel acted with substantial justification, precluding the imposition of sanctions; (3) any sanction should have been imposed on Sun River, Pennington’s employer at the time of the initial nondisclosure, rather than on counsel; and (4) due process precluded the imposition of a sanction on Csajaghy, who had withdrawn and was not present at a July 2013 pretrial conference when the district court redirected the focus of the requested sanction from Sun River to counsel. The district court reaffirmed the sanction against both counsel and reduced it to judgment. The Tenth Circuit reversed as to the sanction against Pennington, and affirmed it against Csajaghy. While the district court found that the failure to disclose the insurance policy was not substantially justified, it did not find that Pennington acted in bad faith, vexatiously, wantonly, or for oppressive reasons. The district court did not abuse its discretion in concluding that Csajaghy’s unfounded assumption about Pennington’s review of the D&O Policy was insufficient to establish a substantial justification for his failure to disclose the policy. View "Sun River Energy v. Nelson" on Justia Law

Equinox on the Battenkill Management Association, Inc., appealed a superior court's grant of summary-judgment denying insurance coverage. The appeal arose from a declaratory judgment action against management association’s insurer, Philadelphia Indemnity Insurance Company, Inc., to determine coverage under a commercial general liability policy for damage to cantilevered balconies on condominium units it managed in Manchester. The issue this case presented for the Vermont Supreme Court's review centered on whether "Gage v. Union Mutual Fire Insurance Co,." (169 A.2d 29 (1961)) was still good law with regards to the meaning of "collapse" and whether "Gage" controlled the result here. After review, the Court concluded that the policy language in this dispute was broader than the language in Gage and that therefore Gage did not control. The Court reversed the trial court’s summary judgment and remanded the case for that court to resolve disputed questions of fact and interpret the applicable policy language. View "Equinox on the Battenkill Management Assn., Inc. v. Philadelphia Indemnity Ins. Co." on Justia Law

During his employment with a subsidiary of Santander Holdings, Stevens received treatment for ankylosing spondylitis, a chronic inflammatory disease, and participated in a short-term disability plan (STD) and a long-term disability plan (LTD). When Stevens’ condition worsened, Liberty Mutual, the administrator of Santander’s plans, initially awarded STD benefits to Stevens, then determined that Stevens no longer suffered from a qualifying disability and terminated his benefits. Stevens sued under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001. The district court found that Liberty Mutual’s decision to terminate Stevens’s STD benefits was arbitrary and capricious and remanded with instructions to reinstate Stevens’s STD benefit payments retroactively and to determine his eligibility for LTD benefit payments. The Third Circuit dismissed an appeal for lack of jurisdiction, finding that the remand order to the plan administrator was not a “final decision” appealable pursuant to 28 U.S.C. 1291 at that time. The district court retained jurisdiction over the case and the order is not yet appealable. View "Stevens v. Santander Holdings USA Inc." on Justia Law

Federated, a Minnesota corporation, insured Missouri property owned by Hubbard and leased to the McKees. A fire damaged the property. Both Hubbard and the McKees, who said they exercised an option to purchase the property, made claims. Federated claimed it owed $40,980.95 and that Hubbard and the McKees disputed the distribution. Asserting that Federated owed more, Hubbard counterclaimed for vexatious refusal to pay. The district court authorized Federated to deposit $40,980.95 and dismissed Hubbard’s counterclaim. The parties mediated. In an e-mail to Federated’s counsel and the McKees’ counsel, Hubbard’s counsel wrote that the McKee claim was resolved by payment of $10,879.39. The email stated: As the sum owed to the McKee defendants is less than $11,000.00, there is no possible way that the McKee defendants should have to proceed further as Federated has asserted it owes no less than $40,980.95. Seven months later, Hubbard sued Federated and the McKees in state court. Federated removed the case; Hubbard moved to remand. Concluding that Hubbard fraudulently joined the McKees, the court dismissed them, denied remand, and applied res judicata and collateral estoppel to Hubbard’s claim. The Eighth Circuit affirmed, noting that in the original case, the district court has distributed the interpleaded funds and dismissed with prejudice. View "Hubbard v. Federated Mut. Ins. Co." on Justia Law

After his car was hit by a car driven negligently by Sheffer, Behlmann was billed $89,884.79 for medical treatment. Behlmann settled with Sheffer for $50,000, the limit of Sheffer’s policy. Behlmann sued his insurer, Century, for underinsured motorist benefits. Century argued that Behlmann’s medical treatment cost less than $50,000 and resulted from pre-existing conditions. The jury found for Century. Behlmann unsuccessfully requested a new trial, challenging the admission of evidence on the value of his medical treatment and the strike of the only African-American venire person. The Eighth Circuit affirmed, noting Missouri law: “Parties may introduce evidence of the value of the medical treatment rendered to a party that was reasonable, necessary, and a proximate result of the negligence of any party.” Behlmann did not establish that Century’s reasons for the strike were pretextual. Juror 4 was a long-time autoworker; he failed to disclose he was an autoworker despite relevant questioning; and he failed to disclose involvement in prior litigation. View "Behlmann v. Century Sur. Co." on Justia Law

McCormick bought a single-premium variable life-insurance policy that permits borrowing against its cash value. Loans are secured by moving an equivalent amount from sub-accounts that the policyholder can invest to a “general account” that draws 4% interest. The policyholder owes 4.7% on any borrowed sums, so the net is 0.7% per annum, plus foregoing the opportunity to exercise discretion about how to invest the borrowed sum. If the owner does not pay the annual interest, “it will be added to the principal of the loan and will bear interest.” McCormick borrowed against cash value and did not pay interest. Independence, the insurer, added the unpaid interest “to the principal of the loan” (which caused additional sums to be moved from investments into the general account) and charged interest on the higher indebtedness. Compound interest has increased the debt by $44,000, which, if not repaid, will reduce the death benefit. McCormick sought a declaration that the $44,000 is not owed, because, when unpaid interest was added to principal and moved to the general account, it was “paid” automatically. The court entered judgment for Independence. The Seventh Circuit vacated with instructions to dismiss. Removal rested on diversity of citizenship, and $75,000 is the minimum amount in controversy for that jurisdiction. View "McCormick v. Independence Life & Annuity Co." on Justia Law

The Pennsylvania Supreme Court granted review to consider an issue of first impression regarding whether an insured forfeits insurance coverage by settling a tort claim without the consent of its insurer, when the insurer defends the insured subject to a reservation of rights, asserting that the claims may not be covered by the policy. In 1994, a class action lawsuit was filed against Appellant-Insureds Babcock & Wilcox Company (B&W) and Atlantic Richfield Company (ARCO) (collectively, Insureds) brought by plaintiffs claiming to have suffered bodily injury and property damage caused by emissions from nuclear facilities owned by Insureds. Over time, the class action grew to include over 500 named plaintiffs, who lived near the nuclear facilities. Insureds denied that the facilities released any emissions or that the harm suffered by plaintiffs resulted from the facilities. While the underlying tort action was pending in federal court, disputes arose between Insureds and their insurers, Appellees American Nuclear Insurers and Mutual Atomic Energy Liability Underwriters (collectively ANI or Insurer). At the outset of the litigation, Insurer acknowledged that it would defend Insureds but contested whether the policy covered aspects of the claims, and thus defended subject to a reservation of rights. While staying various claims for future determination, including the breach of the duty to cooperate claim, the court decided issues regarding the trigger of coverage and held that B&W and ARCO were entitled to separate counsel. During the course of the litigation, Insurer refused consent to any settlement offers presented to it due to its conclusion that the case had a strong likelihood of a defense verdict given the lack of medical and scientific support for plaintiffs’ claims and decisions by the federal trial court regarding procedural and evidentiary issues in the pending retrial, which Insurer viewed as highly favorable to Insureds’ ultimate outcome. After presenting the settlement offers to Insurer and being denied consent, Insureds ARCO and B&W, respectively in 2008 and 2009, settled with the class action plaintiffs for a total of $80 million, which was substantially less than the $320 million of potential coverage. Insureds then sought reimbursement of the settlement amount from Insurer. The Supreme Court found that after an extensive trial where the jury was presented with voluminous evidence relating to the strength of the underlying action and the settlement offer, the jury determined that the settlement was “fair and reasonable from the perspective of a reasonably prudent person in the same position of [Insureds] and in light of the totality of the circumstances,” a standard which the Court adopted as the proper standard to apply in a reservation of rights case where an insured settles following the insurers’ refusal to consent to settlement. The Court concluded that the Superior Court erred by requiring an insured to demonstrate bad faith when the insured accepts a settlement offer in a reservation of rights case. Accordingly, the Superior Court's decision was reversed and the trial court's judgment reinstated. View "Babcock & Wilcox Co. v. American Nuclear Insurers & Mutual Atomic Energy Liability Underwriters" on Justia Law

Plaintiffs (a class of 1,593) alleged that Visteon failed to deliver timely notice to ex-employees, offering them an opportunity to continue health insurance at their own expense, under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). An employer has 44 days after the end of a person’s employment to provide notice and essential details, 29 U.S.C. 1166(a)(2). The court found that Visteon had provided untimely notice to 741 former employees, and that the notice averaged 376 days late for those persons. The court awarded $2,500 to each class member who had received untimely notice (a total of about $1.85 million), a sum that does not depend on how long the delay was for any given person. While the suit was pending, Visteon was reorganized in bankruptcy. The plan provides that debts of this kind will be paid 50¢ on the dollar, so each of the 741 will receive $1,250. The court also ordered Visteon to pay class counsel $302,780 as attorneys’ fees plus costs of about $11,000. The Seventh Circuit affirmed the award of attorneys’ fees, but otherwise dismissed plaintiffs’ challenge to the penalty as untimely, having been filed several months after the district court’s delayed entry of judgment. View "Pierce v. Visteon Corp." on Justia Law