Justia Insurance Law Opinion Summaries
Articles Posted in Commercial Law
Southwest Airlines v. Liberty Insurance
In this case, Southwest Airlines filed a suit against Liberty Insurance Underwriters for denial of a claim for reimbursement under its cyber risk insurance policy after a massive computer failure. This computer failure resulted in flight delays and cancellations, causing Southwest to incur over $77 million in losses. Southwest claimed these losses under their insurance policy, but Liberty denied the claim, arguing that the costs incurred by Southwest were discretionary and either not covered under the policy or excluded by certain policy clauses.The United States Court of Appeals for the Fifth Circuit disagreed with the lower court's decision to grant summary judgment for Liberty. The court concluded that the costs incurred by Southwest due to the system failure were not categorically barred from coverage as a matter of law. The court found that Southwest's five categories of costs satisfied the policy's causation standard and were thus "losses" that it "incurred."The court also concluded that the district court erred in finding that the claimed costs were consequential damages excluded from coverage and that the term "third parties" did not apply to Southwest’s customers and did not preclude costs related to Southwest’s payments to its customers.The court reversed the district court's decision and remanded the case back to the lower court for further proceedings consistent with its opinion. View "Southwest Airlines v. Liberty Insurance" on Justia Law
Venequip, S.A. v. Caterpillar Inc.
Venequip, a Venezuelan heavy-equipment supplier, sold and serviced products made by Illinois-based Caterpillar. Venequip’s dealership was governed by sales and service agreements with CAT Sàrl, Caterpillar’s Swiss subsidiary. In 2019 CAT Sàrl terminated the dealership. The contracts contain clauses that direct all disputes to Swiss courts for resolution under Swiss law. In 2021 Venequip brought contract claims against CAT Sàrl in Geneva, Switzerland. Venequip filed applications across the United States seeking discovery from Caterpillar and its employees, dealers, and customers under 28 U.S.C. 1782(a), which authorizes (but does not require) district courts to order any person who resides or is found in the district to give testimony or produce documents “for use in a proceeding in a foreign or international tribunal.” Venequip’s Northern District of Illinois application sought wide-ranging discovery from Caterpillar.Ruling on Venequip’s application, the district judge addressed four factors identified by the Supreme Court (Intel) that generally concern the applicant’s need for discovery, the intrusiveness of the request, and comity considerations, and added the parties’ contractual choice of forum and law and Caterpillar’s agreement to provide discovery in the Swiss court, then denied the application. The Seventh Circuit affirmed. The appeal was not mooted by intervening developments in the Swiss court. The judge appropriately weighed the Intel factors and other permissible considerations. View "Venequip, S.A. v. Caterpillar Inc." on Justia Law
Murray v. UPS Capital Ins. Agency, Inc.
David Murray purchased used computer equipment worth nearly $40,000, which was damaged by the United Postal Service (UPS) while it was being transported from California to Texas. Murray believed he purchased appropriate insurance to cover this loss, but the insurance company denied his claim. Murray sued his insurance broker, UPS Capital Insurance Agency (UPS Capital), for breach of contract and negligence, claiming UPS Capital owed him a special duty to make the insurance policy language understandable to an ordinary person and to explain the scope of coverage. The court granted UPS Capital’s motion for summary judgment after concluding there was no heightened duty of care and dismissed Murray’s lawsuit. On appeal, Murray asked the Court of Appeal to create a new rule that brokers/agents, specializing in a specific field of insurance, hold themselves out as experts, and are subject to a heightened duty of care towards clients seeking that particular kind of insurance. While the Court declined the invitation to create a per se rule, it concluded Murray raised triable issues of fact as to whether UPS Capital undertook a special duty by holding itself out as having expertise in inland marine insurance, and Murray reasonably relied on its expertise. Therefore, the Court reversed the judgment of dismissal and remanded the matter for further proceedings. View "Murray v. UPS Capital Ins. Agency, Inc." on Justia Law
Sapa Extrusions, Inc. v. Liberty Mutual Insurance Co.
Sapa manufactures aluminum extruded profiles, pre-treats the metal and coats it with primer and topcoat. For decades, Sapa supplied “organically coated extruded aluminum profiles” to Marvin, which incorporated these extrusions with other materials to manufacture aluminum-clad windows and doors. This process was permanent, so if an extrusion was defective, it could not be swapped out; the whole window or door had to be replaced. In 2000-2010, Marvin bought about 28 million Sapa extrusions and incorporated them in about 8.5 million windows and doors. Marvin sometimes received complaints that the aluminum parts of its windows and doors would oxidize or corrode. The companies initially worked together to resolve the issues. In the mid-2000s, there was an increase in complaints, mostly from people who lived close to the ocean. In 2010, Marvin sued Sapa, alleging that Sapa had sold it extrusions that failed to meet Marvin’s specifications. In 2013, the companies settled their dispute for a large sum.Throughout the relevant period, Sapa maintained 28 commercial general liability insurance policies through eight carriers. Zurich accepted the defense under a reservation of rights, but the Insurers disclaimed coverage. Sapa sued them, asserting breach of contract. The district court held that Marvin’s claims were not an “occurrence” that triggered coverage. The Third Circuit vacated in part, citing Pennsylvania insurance law: whether a manufacturer may recover from its liability insurers the cost of settling a lawsuit alleging that the manufacturer’s product was defective turns on the language of the specific policies. Nineteen policies, containing an Accident Definition of “occurrence,” do not cover Marvin’s allegations, which are solely for faulty workmanship. Seven policies contain an Expected/Intended Definition that triggers a subjective-intent standard that must be considered on remand. Two policies with an Injurious Exposure Definition also include the Insured’s Intent Clause and require further consideration. View "Sapa Extrusions, Inc. v. Liberty Mutual Insurance Co." on Justia Law
ACE American Insurance Company v. Dish Network
In this appeal, the issue before the Tenth Circuit Court of Appeals was whether the district court correctly held that ACE American Insurance Company (ACE) had no duty to defend and indemnify DISH Network (DISH) in a lawsuit alleging that DISH’s use of telemarketing phone calls violated various federal and state laws. The primary question centered on whether statutory damages and injunctive relief under the Telephone Consumer Protection Act were “damages” under the insurance policies at issue and insurable under Colorado law, or were uninsurable “penalties.” The Court concluded they were penalties under controlling Colorado law, and affirmed the district court’s grant of summary judgment in favor of ACE. View "ACE American Insurance Company v. Dish Network" on Justia Law
ACE American Insurance Company v. Dish Network
In this appeal, the issue before the Tenth Circuit Court of Appeals was whether the district court correctly held that ACE American Insurance Company (ACE) had no duty to defend and indemnify DISH Network (DISH) in a lawsuit alleging that DISH’s use of telemarketing phone calls violated various federal and state laws. The primary question centered on whether statutory damages and injunctive relief under the Telephone Consumer Protection Act were “damages” under the insurance policies at issue and insurable under Colorado law, or were uninsurable “penalties.” The Court concluded they were penalties under controlling Colorado law, and affirmed the district court’s grant of summary judgment in favor of ACE. View "ACE American Insurance Company v. Dish Network" on Justia Law
PQ Corp. v. Lexington Insurance Co.
Lexington Insurance denied a claim by its insured, Double D Warehouse, for coverage of Double D’s liability to customers for contamination of warehoused products. One basis for denial was that Double D failed to document its warehousing transactions with warehouse receipts, storage agreements, or rate quotations, as required by the policies. PQ was a customer of Double D whose products were damaged while warehoused there. PQ settled its case against Double D by stepping into Double D’s shoes to try to collect on the policies. PQ argued that there were pragmatic reasons to excuse strict compliance with the policy’s terms. The Seventh Circuit affirmed summary judgment in favor of Lexington. PQ accurately claimed that the documentation Double D actually had (bills of lading and an online tracking system) should serve much the same purpose as the documentation required by the policies (especially warehouse receipts), but commercially sophisticated parties agreed to unambiguous terms and conditions of insurance. Courts hold them to those terms. To do otherwise would disrupt the risk allocations that are part and parcel of any contract, but particularly a commercial liability insurance contract. PQ offered no persuasive reason to depart from the plain language of the policies. View "PQ Corp. v. Lexington Insurance Co." on Justia Law
Wheeling & Lake Erie Ry. v. Keach
Creditor extended to Debtor a line of credit, and Debtor granted Creditor, pursuant to an agreement, a security interest in payments due to Debtor under an insurance policy. The agreement provided that Maine law governed all rights under the agreement. Insurer subsequently issued a commercial property insurance policy to Debtor. After a freight train owned by Debtor derailed, Creditor filed a claim under the policy, which Insurer denied. Debtor then filed for Chapter 11 bankruptcy. Creditor instituted an adversary proceeding seeking a declaration regarding the priority of its asserted security interest in any payments due under the policy. Insurer subsequently settled with Debtor and the trustee requiring Insurer to pay $3,800,000 to Debtor in satisfaction of all claims under the policy. Creditor objected to approval of the proposed settlement, arguing that the agreement granted it a first-priority security interest in the settlement. The bankruptcy court concluded that Debtor was entitled to the settlement proceeds free and clear of Creditor’s asserted interest because Creditor had failed to perfect its interest under Maine law. The bankruptcy appellate panel affirmed. The First Circuit affirmed, holding that the courts below did not err in concluding that Debtor was entitled to the proposed settlement payment free and clear of Creditor’s asserted security interest. View "Wheeling & Lake Erie Ry. v. Keach" on Justia Law
Hartford Fire Ins. Co. v. United States
Between July 30, 2003, and August 31, 2003, Sunline imported eight entries of freshwater crawfish tailmeat from Chinese producer Hubei, which were subject to a U.S. Department of Commerce antidumping duty order covering freshwater crawfish tailmeat from China. The Hubei Entries were entered following approval by Customs of eight single-entry bonds that covered the estimated antidumping duties and designated Hartford as surety. The Hubei Entries were made during the pendency of Hubei’s “new shipper review.” After Hubei’s new shipper review was rescinded, meaning Hubei did not qualify for an individual antidumping duty rate, Customs liquidated the Entries at the 223.01% country-wide rate. After Sunline failed to pay, Customs demanded payment from Hartford, which filed a complaint at the Court of International Trade, seeking to void its obligations under the bonds because Customs had been investigating Sunline for possible import law violations during the period in which the bonds were secured and did not inform Hartford of the investigation. The Trade Court dismissed. The Federal Circuit affirmed. Hartford did not allege any facts that establish a connection between the investigation and Sunline’s failure to pay its antidumping duties after liquidation. View "Hartford Fire Ins. Co. v. United States" on Justia Law
Nipponkoa Ins. Co., L v. Atlas Van Lines, Inc.
TAMS, a medical device manufacturer, hired Comtrans to coordinate shipment of equipment to a trade show in Chicago. Comtrans is not a carrier. It used its affiliate, ACS, which retained Atlas to perform the actual shipment. The Atlas truck was involved in a serious accident, leaving TAMS with more than $1 million in losses. TAMS’s insurance company sued on behalf of TAMS. Atlas is an interstate motor carrier authorized by the Federal Motor Carrier Safety Administration to transport goods in interstate commerce. Claims are subject to the Carmack Amendment, 49 U.S.C. 14706, which provides that a carrier of property in interstate commerce is liable for the actual loss or injury to the property caused b” the carrier, which may be limited “to a value established by written or electronic declaration of the shipper or by written agreement between the carrier and shipper if that value would be reasonable under the circumstances.” Atlas relied on the contract it had in place with ACS and the bill of lading delivered signed by a Comtrans warehouse manager when Atlas picked up TAMS’s shipment, as limiting liability to $0.60 per pound. The district court entered summary judgment for Atlas. The Seventh Circuit remanded for further development of the facts. View "Nipponkoa Ins. Co., L v. Atlas Van Lines, Inc." on Justia Law