Justia Insurance Law Opinion Summaries

Articles Posted in Class Action
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The case involves Karen Frohn, who applied for and received a life insurance policy from Globe Life and Accident Insurance Company on behalf of her husband, Greg Frohn. After Greg's death, Karen submitted a claim for death benefits, which Globe denied. Karen then sued Globe, both individually and on behalf of a putative class of beneficiaries, challenging the denial of her claim.Globe moved for summary judgment, arguing that it was entitled to rescind the life insurance policy because Karen was not truthful in her application for insurance. The district court granted Globe’s motion, barring Karen from recovery on her claims against Globe. Karen also asked the court to redact certain portions of that order, but the district court published it without any redactions. Karen appealed these decisions.The United States Court of Appeals for the Sixth Circuit affirmed the district court's decision. The court found that Karen had voluntarily waived her husband's physician-patient privilege by signing an Authorization for Release, allowing Globe to access Greg's medical records. The court also found that Globe was entitled to rescind the policy under Ohio law because Karen had made material misrepresentations in the insurance application. The court concluded that Globe's defense barred Karen's breach-of-contract and bad-faith claims. View "Frohn v. Globe Life and Accident Ins Co" on Justia Law

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The case involves Sherry and David Lewis, who sued their auto insurer, GEICO, for allegedly breaching their insurance contract when their car was totaled. The Lewises claimed that GEICO undercompensated them by applying a "condition adjustment" that artificially reduced its valuation of their car and by failing to reimburse them for taxes and fees necessary to replace the car. They sought to certify a class of similarly underpaid insureds for each instance of underpayment.The District Court certified both classes under Federal Rule of Civil Procedure 23. GEICO appealed the decision, challenging the certification of the classes.The United States Court of Appeals for the Third Circuit affirmed the order certifying the class for the taxes-and-fees claim. However, the court found that the Lewises lacked standing to bring the condition-adjustment claim as they failed to show that GEICO caused them concrete harm when it applied the condition adjustment. Therefore, the court vacated the District Court’s order in part and remanded with instructions to dismiss the condition-adjustment claim.Regarding the taxes-and-fees claim, the court found that the Lewises met the requirements for standing as they alleged financial harm stemming from GEICO's pre-2020 practice of declining to pay taxes and fees to lessee insureds. The court also found that the class was ascertainable, meeting the requirements for class certification. View "Lewis v. GEICO" on Justia Law

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Yasmin Varela filed a class action lawsuit against State Farm Mutual Automobile Insurance Company (State Farm) after a car accident. Varela's insurance policy with State Farm entitled her to the "actual cash value" of her totaled car. However, she alleged that State Farm improperly adjusted the value of her car based on a "typical negotiation" deduction, which was not defined or mentioned in the policy. Varela claimed this deduction was arbitrary, did not reflect market realities, and was not authorized by Minnesota law. She sued State Farm for breach of contract, breach of the covenant of good faith and fair dealing, unjust enrichment, and violation of the Minnesota Consumer Fraud Act (MCFA).State Farm moved to dismiss the complaint, arguing that Varela's claims were subject to mandatory, binding arbitration under the Minnesota No-Fault Automobile Insurance Act (No-Fault Act). The district court granted State Farm's motion in part, agreeing that Varela's claims for breach of contract, breach of the covenant of good faith and fair dealing, and unjust enrichment fell within the No-Fault Act's mandatory arbitration provision. However, the court found that Varela's MCFA claim did not seek the type of relief addressed by the No-Fault Act and was neither time-barred nor improperly pleaded, and thus denied State Farm's motion to dismiss this claim.State Farm appealed, arguing that Varela's MCFA claim was subject to mandatory arbitration and should have been dismissed. However, the United States Court of Appeals for the Eighth Circuit dismissed the appeal for lack of jurisdiction. The court found that State Farm did not invoke the Federal Arbitration Act (FAA) in its motion to dismiss and did not file a motion to compel arbitration. The court concluded that the district court's order turned entirely on a question of state law, and the policy contained no arbitration provision for the district court to "compel." Therefore, State Farm failed to establish the court's jurisdiction over the interlocutory appeal. View "Varela v. State Farm Mutual Automobile Insurance Co." on Justia Law

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A massage parlor, Elegant Massage LLC, filed a class action lawsuit against State Farm Mutual Automobile Insurance Company, asserting claims of breach of contract and other related claims. The suit stemmed from State Farm's denial of insurance coverage to businesses that had to shut down partially or fully due to Virginia executive orders during the COVID-19 pandemic. Elegant Massage claimed that the forced closure constituted a "direct physical loss" under its insurance policy. The district court certified the class and denied State Farm’s motion to dismiss. State Farm appealed.The United States Court of Appeals for the Fourth Circuit used its pendent appellate jurisdiction to review the district court's denial of State Farm’s motion to dismiss in conjunction with the appealable class certification order. The appellate court referred to the precedent set in Uncork & Create LLC v. Cincinnati Insurance Co., which held that a similar business closure during the pandemic did not constitute a "direct physical loss" requiring material destruction or harm to the property. The court found that this precedent was directly applicable to the case at hand.Consequently, the court of appeals held that the district court had erred in denying State Farm's motion to dismiss. It ruled that the temporary closures ordered by the executive did not result in a "direct physical loss" under the policy terms. As a result, the court also found no basis for class certification. The court reversed the district court’s decisions and instructed it to dismiss the entire case. View "Elegant Massage, LLC v. State Farm Mutual Automobile Insurance Co." on Justia Law

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The Eleventh Circuit Court of Appeals ruled on a class action lawsuit that involved a life insurance policy dispute between plaintiff Worth Johnson and defendant Protective Life Insurance Company. Johnson alleged that Protective breached its contract by not reassessing and adjusting its cost of insurance (COI) rates based exclusively on expectations of future mortality experience. The district court granted Protective’s motion for judgment on the pleadings, concluding that Protective did not breach its insurance contract.On appeal, the Eleventh Circuit affirmed the district court's decision in part, agreeing that the policy did not require Protective to reassess and redetermine its COI rates based exclusively on its expectations as to future mortality experience. However, the court reversed the district court's dismissal of Johnson's alternative claim that Protective did reassess and redetermine its COI rates, but ignored its expectations as to future mortality experience when doing so. The court remanded the case for further proceedings consistent with its ruling. View "Johnson v. Protective Life Insurance Company" on Justia Law

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Cobalt International Energy partnered with three Angolan companies to explore and produce oil and gas off the coast of West Africa. Later, the federal Securities and Exchange Commission announced it was investigating Cobalt for allegations of illegal payments to Angolan government officials and misrepresentation of the oil content of two of its exploratory wells. This led to a significant drop in Cobalt’s stock price and prompted a class action lawsuit from Cobalt's investors, led by GAMCO, a collection of investment funds that held Cobalt shares. Prior to these events, Cobalt had purchased multiple layers of liability insurance from a number of insurance companies, collectively referred to as the Insurers in this case. When the allegations surfaced, Cobalt notified the Insurers, who denied coverage on the grounds that Cobalt's notice was untimely and certain policy provisions excluded the claims from coverage.In 2017, Cobalt filed for bankruptcy and began settlement negotiations with GAMCO. Eventually, a settlement agreement was reached, which stipulated that Cobalt would pay a settlement amount of $220 million to GAMCO, but only from any insurance proceeds that might be recovered. Cobalt and GAMCO then jointly sought approval of the settlement from the federal court and the bankruptcy court, both of which granted approval.The Insurers then filed a petition for a writ of mandamus, arguing that the settlement agreement was not binding or admissible in the coverage litigation, that Cobalt had not suffered a "loss" under the policies, and that GAMCO could not sue the Insurers directly.The Supreme Court of Texas held that (1) Cobalt had suffered a “loss” under the policies because it was legally obligated to pay any recoverable insurance benefits to GAMCO, (2) GAMCO could assert claims directly against the Insurers, and (3) the settlement agreement was not binding or admissible in the coverage litigation to establish coverage or the amount of Cobalt’s loss. The court reasoned that the settlement was not the result of a "fully adversarial proceeding," as Cobalt bore no actual risk of liability for the damages agreed upon in the settlement. The court conditionally granted the Insurers' petition for a writ of mandamus in part, ordering the trial court to vacate its previous orders to the extent they relied on the holding that the settlement agreement was admissible and binding to establish coverage under the policies and the amount of any covered loss. View "IN RE ILLINOIS NATIONAL INSURANCE COMPANY" on Justia Law

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Connie Bourque, a Louisiana resident insured by State Farm Mutual Automobile Insurance Co., filed a class-action lawsuit, alleging that State Farm breached its insurance contract and violated its duty of good faith and fair dealing under Louisiana Law. The claim was based on the method State Farm used to calculate the actual cash value (ACV) of vehicles in the event of a total loss. State Farm used the Autosource MarketDriven Valuation, which Bourque alleged provided a valuation less than the true ACV.The United States District Court for the Western District of Louisiana certified a class of all persons insured by State Farm in Louisiana whose vehicle's Autosource valuation was less than the value according to the National Automobile Dealers Association (NADA) Official Used Car Guide. State Farm appealed this decision to the United States Court of Appeals for the Fifth Circuit.The Fifth Circuit, citing a similar case (Sampson v. United Services Automobile Ass’n), held that the district court's class certification was error. The Fifth Circuit noted that to establish a breach of contract under Louisiana law, proof of injury is required—proof that Bourque failed to establish can be made on a class-wide basis. The court also noted that the NADA value was just one of many statutorily acceptable methods for calculating ACV, and therefore pinning ACV to NADA value constituted an impermissibly arbitrary choice of a liability model.As a result, the Fifth Circuit vacated the district court’s grant of class certification and remanded the case for further proceedings. View "Bourque v. State Farm Mtl Auto Ins" on Justia Law

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Defendants United Services Automobile Association and USAA General Indemnity Company (“USAA”) contract with insureds to pay “Actual Cash Value” (“ACV”) for totaled vehicles. USAA calculates ACV using the CCC One Market Valuation Report (“CCC”) rather than, e.g., the National Automobile Dealers Association guidebook (“NADA”) or Kelley Blue Book (“KBB”). Plaintiffs are USAA-insureds whose vehicles were totaled and who received ACV as determined by CCC. Plaintiffs alleged that CCC violates Louisiana statutory law, that they would have been paid more if USAA used NADA, and that they are owed the difference. Plaintiffs sought certification for a class of USAA-insureds who were paid less under CCC, and the district court granted it. USAA appealed class certification. On appeal, the parties dispute, among other things, whether common questions across the class involving damages and liability predominate over individual differences between class members, as required for class certification under Rule 23(b)(3).   The Fifth Circuit vacated and remanded. The court held that Plaintiffs failed to show injury and therefore failed to establish USAA’s liability on a class-wide basis because they failed to demonstrate entitlement to the NADA values for their totaled vehicles. The court held that with respect to Plaintiffs’ breach of contract claim, the district court’s choice of NADA is not simply an arbitrary choice among imperfect damages models. It is an arbitrary choice of a liability model, and a district court’s wide discretion to choose an imperfect estimative-damages model at the certification stage does not carry over from the context of damages to the context of liability. View "United Svcs Automobile v. Sampson" on Justia Law

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Current and former policyholders filed a class action lawsuit in Illinois against Country Mutual and 46 of its current and former officers and directors. Every member of the proposed class is an Illinois citizen under the Class Action Fairness Act, CAFA, 28 U.S.C. 1332(d)(2), as are Country Mutual and 45 of the individuals. The 46th defendant, Bateman, is a citizen of Massachusetts. The plaintiffs alleged that the firm accumulated and retained excess surplus of over $3.5 billion from premium revenues exceeding the cost of claims and thereby failed to supply those policies at cost. They claimed breach of contract, violations of the Illinois Consumer Fraud and Deceptive Business Practices Act, unjust enrichment, and breach of fiduciary duty.Based on putative class size, the amount in controversy, and the minimal diversity created by Bateman, Country Mutual removed this case to federal district court, 28 U.S.C. 1332(d); 1453(b). The Seventh Circuit remanded to state court. Under CAFA’s internal affairs exception, each claim sounds in allegations of corporate mismanagement that cannot be adjudicated without immersion into the boundaries of the discretion afforded by Illinois law to officers and directors of a mutual insurance company to set capital levels and make related decisions about surplus distributions to policyholder members. The case is also within CAFA’s home-state controversy exception, 28 U.S.C. 1332(d)(4)(B), as Bateman, who creates minimal diversity, is not a “primary defendant.” View "Sudholt v. Country Mutual Insurance Co." on Justia Law

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United Behavioral Health (“UBH”) appeals from the district court’s judgment finding it liable to classes of Employee Retirement Income Security Act of 1974, 29 U.S.C. Section 1001 et seq. (“ERISA”) Plaintiffs under 29 U.S.C. Sections 1132(a)(1)(B) and (a)(3), as well as several pre- and posttrial orders, including class certification, summary judgment, and a remedies order. UBH contends on appeal that Plaintiffs lack Article III standing and that the district court erred at class certification and trial in several respect.   The Ninth Circuit reversed in part. The panel held that Plaintiffs had Article III standing to bring their claims. Plaintiffs sufficiently alleged a concrete injury as to their fiduciary duty claim because UBH’s alleged violation presented a material risk of harm to plaintiffs’ interest in their contractual benefits. Plaintiffs also alleged a concrete injury as to the denial of benefits claim. Further, plaintiffs alleged a particularized injury as to both claims because UBH’s Level of Care Guidelines and Coverage Determination Guidelines for making medical necessity or coverage determinations materially affected each Plaintiff. And Plaintiffs’ alleged injuries were “fairly traceable” to UBH’s conduct. The panel held that the district court did not err in certifying the three classes to pursue the fiduciary duty claim, but the panel reversed the district court’s certification of the denial of benefits classes. The panel held that, on the merits, the district court erred to the extent it determined that the ERISA plans required the Guidelines to be coextensive with generally accepted standards of care. View "DAVID WIT, ET AL V. UNITED BEHAVIORAL HEALTH" on Justia Law