Justia Insurance Law Opinion Summaries

A 2018 data breach at Barracuda Networks exposed protected health information of patients of Zoll Services LLC, a subsidiary of Zoll Medical Corporation. Zoll had contracted with Fusion LLC for data security services, and Fusion in turn relied on Barracuda’s technology. The agreements between these companies included certain liability and indemnification provisions, as well as a right for Barracuda to audit Fusion’s customer contracts. After the breach, Zoll settled a class action brought by its customers whose data was compromised.Following these events, Zoll initiated arbitration against Fusion and filed suit against Barracuda in the U.S. District Court for the District of Massachusetts. Fusion intervened and asserted additional claims against Barracuda. The district court dismissed most claims but allowed Zoll’s equitable indemnification claim and Fusion’s breach of contract and breach of the covenant of good faith and fair dealing claims to proceed. After arbitration and settlements, Axis Insurance Company, as assignee and subrogee of Zoll and Fusion, was substituted as plaintiff. Barracuda moved for summary judgment on the remaining claims, which the district court granted.On appeal, the United States Court of Appeals for the First Circuit reviewed the district court’s summary judgment rulings de novo. The appellate court held that Axis failed to present evidence of a relationship between Zoll and Barracuda that would support derivative or vicarious liability necessary for equitable indemnification under Massachusetts law. The court found that Fusion did not meet a condition precedent in its contract with Barracuda, and Barracuda had not waived or was estopped from asserting that condition. Further, Axis could not show that Barracuda breached the covenant of good faith and fair dealing, as no relevant contractual right existed. The First Circuit affirmed the district court’s grant of summary judgment in favor of Barracuda on all claims. View "Axis Insurance Company v. Barracuda Networks, Inc." on Justia Law

Adir International, LLC operates a chain of retail stores, Curacao, which primarily serves low-income, Spanish-speaking immigrants in California, Nevada, and Arizona. Curacao offers store credit to customers, with over 90 percent of sales made on store credit. Since at least 2012, Curacao has offered optional “account protection” services (AGP Basic and AGP Plus) to credit customers, with AGP Plus including a credit property insurance component. Curacao was licensed as a credit insurance agent, but its sales associates, who were not licensed or endorsed, received bonuses for selling these insurance products. The AGP program allowed customers to defer payments under certain circumstances, but the fees for AGP often exceeded finance charges, and the program was highly profitable for Curacao.The People of the State of California filed a civil enforcement action in the Superior Court of Los Angeles County, alleging that Adir and its owner, Ron Azarkman, violated the Unfair Competition Law (UCL) through predicate violations of the Insurance Code and the Unruh Retail Installment Sales Act (Unruh Act). After a bench trial, the Superior Court found that Adir and Azarkman violated the Insurance Code by selling insurance through unlicensed employees, failing to use approved training materials, and providing required disclosures only after enrollment. The court held Azarkman personally liable due to his control and knowledge of the practices. However, the court ruled that the sale of account protection services did not violate the Unruh Act.On appeal, the California Court of Appeal, Second Appellate District, Division Eight, affirmed the trial court’s findings regarding the Insurance Code violations and Azarkman’s personal liability, rejecting arguments about primary jurisdiction, statutory interpretation, and statute of limitations. The appellate court reversed the trial court’s ruling on the Unruh Act, holding that the Act limits all permissible fees to those specifically authorized, and remanded for further proceedings on that claim. In all other respects, the judgment was affirmed. View "P. v. Adir Internat., LLC" on Justia Law

During the COVID-19 pandemic, two individuals who held automobile insurance policies with a major insurer in California alleged that the insurer’s rates became excessive due to a significant reduction in driving and traffic accidents. They claimed that the insurer was required by statute to refund a portion of the premiums collected during this period, even though the rates had previously been approved by the state’s insurance commissioner. The insurer did provide partial refunds in response to directives from the insurance commissioner, but the plaintiffs argued these refunds were insufficient and sought further restitution on behalf of a class of similarly situated policyholders.The Superior Court of Alameda County initially allowed the plaintiffs to amend their complaint after sustaining a demurrer. In their amended complaint, the plaintiffs continued to assert claims under California’s Unfair Competition Law and for unjust enrichment, maintaining that the insurer’s failure to provide full refunds violated Insurance Code section 1861.05(a). The trial court, however, sustained the insurer’s subsequent demurrer without leave to amend, holding that the statutory scheme did not require insurers to retroactively refund premiums collected under previously approved rates, even if those rates later became excessive due to changed circumstances.The California Court of Appeal, First Appellate District, Division One, reviewed the case on appeal. The court held that Insurance Code section 1861.05(a) does not impose an independent obligation on insurers to retroactively refund premiums collected under rates approved by the insurance commissioner, even if those rates later become excessive. The court reasoned that the statutory scheme provides for prospective rate adjustments through the commissioner’s review process, not retroactive modifications. The court also found that the insurer’s conduct was affirmatively permitted under the statutory “prior approval” system, and thus not actionable under the Unfair Competition Law. The judgment in favor of the insurer was affirmed. View "Davis v. CSAA Insurance Exchange" on Justia Law

Tody's Service, Inc. (Tody's), a towing company, billed Liberty Mutual Insurance Company (Liberty) a six-figure storage fee after towing and storing a vehicle involved in a fatal crash at the direction of the police. The vehicle, insured by Liberty, was held as evidence for nearly three years. After obtaining the vehicle's title, Liberty refused to pay the accrued storage charges, leading Tody's to sue Liberty to recover those fees.In the Superior Court, a judge granted summary judgment in favor of Liberty on all of Tody's claims, which included unjust enrichment, promissory estoppel, and failure to pay storage fees under G. L. c. 159B, § 6B. The judge found no evidence of unjust enrichment, ruled that § 6B does not provide a private right of action, and concluded that Tody's failed to demonstrate any actionable promise or reasonable reliance to support promissory estoppel.The Supreme Judicial Court reviewed the case and held that Liberty was not unjustly enriched as a matter of law, as there was no measurable benefit conferred on Liberty by Tody's storage of the vehicle. The court also found no evidence of reliance sufficient to support promissory estoppel, as Tody's stored the vehicle in response to a police directive, not in reliance on any promise by Liberty. Additionally, the court held that § 6B does not create a private right of action against a vehicle owner. Consequently, the Supreme Judicial Court affirmed the judgment in Liberty's favor. View "Tody's Service, Inc. v. Liberty Mutual Insurance Company" on Justia Law

John and Deena Dostart were awarded $182,408.30 in compensatory damages and $17,591.70 in exemplary damages by a jury for consumer fraud claims against their general contractor, Tyler Custom Homes, Ltd., and its owner, James Harmeyer. Columbia Insurance Group, which provided a commercial-general-liability (CGL) insurance policy to Tyler Custom Homes, declined to indemnify the judgment, arguing that consumer fraud is excluded from coverage under the CGL policy. Unable to collect directly from Tyler Custom Homes or Harmeyer, the Dostarts filed a suit seeking payment of the unsatisfied judgment from Columbia.The Iowa District Court for Polk County granted Columbia's motion for summary judgment regarding the exemplary damages but found that fact questions existed as to whether the consumer fraud was an "occurrence" under the CGL policy, whether the jury's award was for "property damage," and whether the intentional acts exclusion applied. The Iowa Court of Appeals affirmed the district court's decision, noting the lack of evidence about the underlying dispute beyond the verdict form and jury instructions.The Iowa Supreme Court reviewed the case and concluded that the consumer fraud involved in the underlying action is not a covered "occurrence" under the CGL policy and that the alleged harm does not include covered "property damage" as defined in the policy. The court vacated the decision of the Court of Appeals, reversed the district court's ruling, and remanded the case for entry of summary judgment in favor of Columbia. The court emphasized that defective workmanship or failure to complete construction does not constitute an "occurrence" under a CGL policy and that the damages sought were not for "property damage" as contemplated by the policy. View "Dostart v. Columbia Insurance Group" on Justia Law

In August 2023, a devastating fire in Lahaina, Maui, caused significant damage, destroying over 3,000 structures and resulting in at least 102 fatalities. Numerous lawsuits were filed by individual plaintiffs and class action plaintiffs against various defendants, including Hawaiian Electric Industries and others. Additionally, several insurance carriers filed subrogation actions to recover benefits paid to their insureds for damages caused by the fires. A global settlement agreement was reached among the plaintiffs and defendants, but the settlement required either a release of all subrogation claims by the insurance carriers or a final judgment that the insurers' exclusive remedy would be a lien against the settlement under Hawai‘i Revised Statutes (HRS) § 663-10.The Circuit Court of the Second Circuit reserved three questions for the Hawai‘i Supreme Court. The Supreme Court of the State of Hawai‘i reviewed the case and issued an opinion. The court held that the holding in Yukumoto v. Tawarahara, which limited subrogation remedies for health insurers to reimbursement from their insureds under HRS § 663-10, extends to property and casualty insurance carriers. Therefore, under HRS § 431:13-103(a)(10)(A), the lien provided for under HRS § 663-10(a) is the exclusive remedy for property and casualty insurers to recover claims paid for damages caused by a third-party tortfeasor in the context of a tort settlement.The court also held that a property and casualty insurer’s subrogation right of reimbursement is not prejudiced by its insured’s release of any tortfeasor when the settlement documents and release preserve those same rights under HRS § 663-10. Finally, the court declined to apply the made whole doctrine to the statutory lien-claim process established by HRS §§ 431:13-103(a)(10) and 663-10 under the circumstances of this mass tort case. View "In re: The Petition for the Coordination of Maui Fire Cases. S.Ct. Order" on Justia Law

Sterling Senechal submitted a claim to Allstate Vehicle and Property Insurance Company for water damage caused by a broken water heater. Allstate issued three payments totaling $12,410.48. After a dispute over the loss amount, an appraisal determined the actual cash value to be $58,396.58, which Allstate paid minus the deductible and prior payments. Senechal then filed a lawsuit alleging breach of contract, violations of the Texas Prompt Payment of Claims Act (TPPCA), bad faith claims under Chapter 541 of the Texas Insurance Code, and breach of the common law duty of good faith and fair dealing. Allstate removed the case to federal court and paid what it calculated as the maximum potential interest owed.The United States District Court for the Southern District of Texas granted summary judgment in favor of Allstate on all claims. Senechal conceded the breach of contract claim but opposed summary judgment on the other claims. The district court ruled that Allstate's payment of the appraisal award and interest defeated Senechal's claims.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court affirmed the summary judgment on Senechal's bad faith claims under Chapter 541 and common law, citing the Texas Supreme Court's decision in Ortiz v. State Farm Lloyds, which held that payment of an appraisal award and interest precludes recovery for bad faith claims unless there is an independent injury. However, the court vacated the summary judgment on Senechal's TPPCA claims, noting that payment of an appraisal award and interest does not automatically absolve an insurer of TPPCA liability. The case was remanded for further proceedings to determine whether Allstate's initial payment "roughly corresponds" with the appraisal award and whether Allstate is liable under the TPPCA. View "Senechal v. Allstate" on Justia Law

A clothing retailer, Cato Corporation, with over 1,300 stores, purchased an "all-risk" commercial property insurance policy from Zurich American Insurance Company in July 2019. In the spring of 2020, Cato alleged that the COVID-19 virus and related government orders forced it to close or severely curtail operations, causing significant revenue losses and expenses for remediation and reconfiguration of its stores. Cato sought coverage for these losses under its insurance policy, but Zurich refused, leading Cato to file a lawsuit seeking a declaratory judgment and damages for breach of contract and violations of North Carolina's Unfair and Deceptive Trade Practices Act.The Superior Court of Mecklenburg County dismissed Cato's claims on a Rule 12(b)(6) motion, relying on the Court of Appeals' decision in North State Deli, LLC v. Cincinnati Insurance Co. The Court of Appeals affirmed the dismissal, concluding that tangible alteration to the property was necessary to recover for a "direct physical loss of or damage" to property, which Cato failed to allege sufficiently.The Supreme Court of North Carolina reviewed the case and agreed with the Court of Appeals' decision to affirm the dismissal but disagreed with its reasoning. The Supreme Court concluded that Cato sufficiently alleged a "direct physical loss of or damage" to property under the precedent set in North State Deli. However, the Court found that the viral contamination exclusion in Cato's policy precluded coverage for the alleged losses. Therefore, the Supreme Court modified the Court of Appeals' decision but affirmed its judgment dismissing Cato's claims. View "Cato Corp. v. Zurich American Insurance Co." on Justia Law

The plaintiffs, Shane and Maura Pelissier, insured their automobile through GEICO General Insurance Company. They sought underinsured motorist benefits four and a half years after a motor vehicle accident with an underinsured driver. GEICO moved for summary judgment, citing a policy provision requiring lawsuits for underinsured motorist benefits to be filed within three years of the accident. The trial court denied the motion and transferred three interlocutory appeal questions to the Supreme Court of New Hampshire.The trial court found that the contractual limitations provision was unenforceable because it could require insureds to file suit before a justiciable cause of action exists. It also found that using the date of the accident as the triggering event for the limitations period was contrary to public policy and that there was a material factual dispute regarding the plaintiffs' ability to discover the tortfeasor’s policy limits before the limitations period expired. The trial court denied GEICO’s motion for reconsideration but granted an interlocutory appeal.The Supreme Court of New Hampshire reviewed whether the contractual limitations provision violated public policy. The court held that the provision was unenforceable because it could force insureds to file suit before their cause of action for underinsured motorist benefits had accrued, thus restricting their ability to recover damages. The court noted that the provision contravened the public policy underlying New Hampshire’s uninsured motorist statute, RSA 264:15, which aims to place insured persons in the same position as if the offending motorist had adequate liability insurance. The court affirmed the trial court’s decision in part, did not address the second interlocutory question, and remanded the case for further proceedings. View "Pelissier v. GEICO Gen. Ins. Co" on Justia Law

The case involves a dispute between an insurer, GEICO, and a windshield repair shop, Glassco, regarding the Florida Motor Vehicle Repair Act. From 2016 to 2019, Glassco performed nearly 1,800 windshield repairs for GEICO’s insureds, who assigned their insurance payment rights to Glassco. GEICO paid these claims at a discounted rate, leading to litigation. GEICO sought to recover payments and claimed that Glassco violated the Repair Act by not providing written estimates and other disclosures.The U.S. District Court for the Middle District of Florida ruled in favor of Glassco, concluding that GEICO did not have a private right of action under the Repair Act because it was not a "customer" as defined by the statute. The court also held that Glassco’s violations did not render its invoices void. GEICO appealed, and the U.S. Court of Appeals for the Eleventh Circuit certified two questions to the Supreme Court of Florida regarding the insurer's rights under the Repair Act.The Supreme Court of Florida answered both certified questions in the negative. First, it held that Fla. Stat. § 559.921(1) does not grant an insurance company a cause of action when a repair shop fails to provide a written repair estimate. The court emphasized that the statute defines a "customer" as the person who signs the repair estimate, and GEICO conceded it did not meet this definition.Second, the court held that the Repair Act violations do not void a repair invoice for completed windshield repairs, nor do they preclude a repair shop from being paid by an insurance company. The court noted that the statute allows for penalties and damages to be adjusted if repairs were authorized and properly performed, indicating that voiding invoices was not intended as a remedy. The court also found that subsequent amendments to the Repair Act rendered previous case law, which might have supported GEICO’s position, obsolete. View "Government Employees Insurance Company v. Glassco Inc." on Justia Law