Justia Insurance Law Opinion Summaries

This case arose when an ocean-going tanker collided with a barge that was being towed on the Mississippi River, which resulted in the barge splitting in half and spilling its cargo of oil into the river. Following the filing of numerous lawsuits, including personal injury claims by the crew members and class actions by fishermen, the primary insurer filed an interpleader action, depositing its policy limits with the court. At issue was the allocations of the interpleader funds as well as the district court's finding that the maritime insurance policy's liability limit included defense costs. The court affirmed the district court's decision that defense costs eroded policy limits but was persuaded that its orders allocating court-held funds among claimants were tentative and produced no appealable order.

This case arose when plaintiffs filed a nationwide consumer class action against Life of the South Insurance Company (Life of the South). At issue was whether Life of the South had a right to enforce against plaintiffs the arbitration clause in the loan agreement, between plaintiffs and the car dealership where they purchased their vehicle, where the loan agreement lead plaintiffs to enter into a separate credit life insurance contract with Life of the South. The court held that the loan agreement did not show, on its face or elsewhere, an intent to allow anyone other than plaintiffs, the car dealership, and Chase Manhattan, and the assignees of the dealership of Chase Manhattan, to compel arbitration of a dispute and Life of the South was none of those. The court also held that because the only claims plaintiffs asserted were based on the terms of their credit life insurance policy with Life of the South, which did not contain an arbitration clause, equitable estoppel did not allow Life of the South to compel plaintiffs to arbitrate. Accordingly, the court affirmed the district court's denial of Life of the South's motion to compel arbitration.

Plaintiffs appealed from a judgment of the district court dismissing their class-action complaint, which asserted a single claim against MetLife under ERISA, 29 U.S.C. 1001 et seq. Plaintiffs alleged that through the use of "retained asset accounts" (RAAs), MetLife breached fiduciary duties imposed by ERISA by retaining and investing for its own profit life insurance proceeds due them under employee benefit plans that MetLife administered. The court held that the district court correctly determined that plaintiffs failed to state a claim, since MetLife discharged its fiduciary obligations under ERISA when it established the RAAs in accordance with the plans at issue, and did not misuse "plan assets" by holding and investing the funds backing the accounts. Accordingly, the court affirmed the judgment of the district court.

Plaintiff filed suit against Liberty Mutual, both personally and on behalf of a putative class of similarly situated individuals, alleging that the company's failure to disburse "medical payments" coverage (MedPay) benefits to her constituted a breach of contract, a breach of implied covenant of good faith and fair dealing, and a violation of G.L.c. 93A, 2. At issue was whether a claimant could seek medical expense benefits under the MedPay of a standard Massachusetts automobile insurance policy where she had already recovered for those expenses under a separate policy of health insurance. The court held that plaintiff's complaint and the extrinsic materials submitted by Liberty Mutual contained alleged facts sufficient to "raise a right to relief above the speculative level." The court also held that Liberty Mutual had not demonstrated as a matter of law that plaintiff could not receive MedPay benefits when she already had received medical expense benefits under her policy of health insurance. Accordingly, the order allowing Liberty Mutual's motion to dismiss was reversed and the matter remanded.

In 1999, four employees of a Domino Sugar refinery sued parent company Tate & Lyle North America Sugars, Inc. (T&L) for damages from noise exposure during their employment with T&L between 1947 and 1994. Continental Casualty Insurance Company insured T&L with eight general liability policies. Each of the policies contained exclusions for bodily injury to employees arising out of the course and scope of their employees. In one of the eight policies, the exclusion was deleted by a special endorsement effective in 1975. After T&L notified Continental of the lawsuit, Continental retained defense counsel to defend T&L. In 2001, 125 new plaintiffs were added to the suit, and the complaint was amended to allege noise exposure from 1947 to 2001. At some point, trial was continued to allow for settlement. In 2003, without Continental's consent, T&L settled with 1 of 15 "flights" of plaintiffs for $35,000 per plaintiff. After that settlement, Continental was notified. One month later, Continental withdrew from the defense, disclaiming its liability based on a mistaken belief that all of its policies contained the exclusions for injuries to employees. In the subsequent years following the first settlement, additional plaintiffs were added. In 2004, the trial court granted partial summary judgment to T&L, finding that Continental had waived its right to rely on its policy exclusion defenses for "first flight" plaintiffs. The issue before the Supreme Court centered on Continental's exclusions and its disclaiming liability for subsequent plaintiffs. Upon careful consideration of the trial court record, the Court held that an insurer's breach of the duty to defend does not result in a waiver of all coverage defenses when the insured seeks indemnity under the policy. In this case, Continental had disclaimed coverage at the time more plaintiffs were added to the lawsuit, and did not provide a defense to those claims. Therefore, waiver principles did not apply. Continental was only liable to T&L in indemnity on a pro rata basis for the exposures that took place during the coverage period. The Court remanded the case for a determination of whether twelve remaining plaintiff-flights met the settlement criteria.

Defendants Farmers Insurance Company of Oregon, Mid-Century Insurance Company and Truck Insurance Exchange (Farmers) petitioned the Supreme Court to reconsider an opinion that affirmed a trial court's judgment against it for approximately $8.9 million in compensatory and punitive damages. Farmers contended that the Court's resolution of certain state law issues violated its federal due process rights. Farmers was required by statute and contract to provide personal injury protection to its insureds by covering all reasonable and necessary medical expenses within a year of the insured's injury. Plaintiff Mark Strawn filed a class action suit against Farmers, alleging that Farmers' claims handling process breached its contractual obligations to its insureds. According to Farmers, the Court, in its prior decision, created an "irrebuttable presumption" that altered what was required under state law to prove a fraud claim in a class action in a way that violated due process. The Court held that "Farmers's argument misses the mark" by characterizing the Court's conclusion in its prior holding as "novel" by "assuming the answer to one of the legal questions that [the] Court had to resolve." The Court concluded that Farmers' premises on appeal were incorrect, and that "Farmers's legal arguments therefore fail."

Appellant Robert Petty is sole owner of Co-Appellant R.G. Petty Masonry. Appellants contracted with Respondent Blue Cross of Northeastern Pennsylvania (Blue Cross), a nonprofit hospital corporation that provides health insurance coverage for its employees. Appellants are covered under the group policy as subscribers. Appellants filed a four-count class action suit against Blue Cross, alleging that it violated the state Nonprofit Law by accumulating excessive profits and surplus well beyond the "incidental profit" permitted by statute. The second count alleged Blue Cross breached its contract with Appellants by violating the Nonprofit Law. The third count alleged Blue Cross owed appellants a fiduciary duty by virtue of their status as subscribers, and that duty was breached when it accrued the excess surplus. The fourth count requested an inspection of Blue Cross' business records. The trial court found Appellants lacked standing to challenge Blue Cross' alleged violations of the Nonprofit Law and dismissed the suit. The Commonwealth Court affirmed the trial court. Upon careful consideration of the briefs submitted by the parties in addition to the applicable legal authorities, the Supreme Court found that Appellants indeed lacked standing under the Nonprofit Law to challenge Blue Cross by their four-count complaint. Accordingly, the Court affirmed the lower courts' decisions and dismissed Appellants' case.

Appellant, an African-American resident of Texas, sued appellees alleging that their credit-scoring systems employed several undisclosed factors which resulted in disparate impacts for minorities and violated the federal Fair Housing Act ("FHA"), 42 U.S.C. 3601, 3619. At issue, in a certified question, was whether Texas law permitted an insurance company to price insurance by using a credit-score factor that had a racially disparate impact that, were it not for the McCarran-Ferguson Act, 15 U.S.C. 1012(b), would violate the FHA, absent a legally sufficient nondiscriminatory reason, or would using such a credit-score factor violate Texas Insurance Code ("Code") sections 544.002(a), 559.051, 559.052, or some other provision of Texas law. The court answered the certified question by holding that Texas law did not prohibit an insurer from using race-neutral factors in credit-scoring to price insurance, even if doing so created a racially disparate impact.

Plaintiff purchased a credit disability insurance policy from defendant in connection with credit union financing of an automobile. Following an injury on the job, he received benefits in the form of credit union payments on the auto loan for about three years. The defendant then notified plaintiff that it would not continue to pay because he no longer met the definition of Total Disability under the policy. The district court certified a class action, found the definition of the term âTotal Disabilityâ ambiguous and construed it in favor the insured, entered an injunction that set up a claims review process for class members, then decertified the class. The Third Circuit affirmed with respect to the definition. The court vacated and remanded the rest of the judgment, holding that the court abused its discretion in issuing an injunction in which it retained jurisdiction over the class members' claims throughout the claims procedure process after the class was decertified.

Respondents, on behalf of beneficiaries of the CIGNA Corporation's ("CIGNA") Pension Plan, challenged the new plan's adoption, claiming that CIGNA's notice of the changes was improper, particularly because the new plan in certain respects provided them with less generous benefits. At issue was whether the district court applied the correct legal standard, namely, a "likely harm" standard, in determining that CIGNA's notice violations caused its employees sufficient injury to warrant legal relief. The Court held that although section 502(a)(1)(B) of the Employee Retirement Income Security Act of 1974 ("ERISA"), 29 U.S.C. 1022(a), 1024(b), 1054(h), did not give the district court authority to reform CIGNA's plan, relief was authorized by section 502(a)(3), which allowed a participant, beneficiary, or fiduciary "to obtain other appropriate relief" to redress violations of ERISA "or the [plan's] terms." The Court also held that, because section 502(a)(3) authorized "appropriate equitable relief" for violations of ERISA, the relevant standard of harm would depend on the equitable theory by which the district court provided relief. Therefore, the Court vacated and remanded for further proceedings.