Justia Insurance Law Opinion Summaries

Third-party defendant Dr. George Likakis was charged with aggravated arson and insurance fraud after a fire destroyed a building he owned (the Property). Plaintiff RSI Bank held a first-priority mortgage on the Property, and defendant/third-party plaintiff The Providence Mutual Fire Insurance Company (Providence) issued a commercial liability policy that covered the Property. Following the fire, Likakis and RSI Bank submitted insurance claims. Providence denied both sets of claims. Providence’s denial of coverage prompted the filing of two actions in the Law Division: (1) filed by Likakis against Providence; and (2) an action gave rise to this appeal: RSI Bank’s claims against Providence for breach of contract, fraudulent misrepresentation, violations of the Consumer Fraud Act, and bad faith. Providence filed a third-party complaint against Likakis, alleging claims for indemnification. Both civil lawsuits were pending when criminal proceedings commenced against Likakis. Likakis was indicted; Providence did not object to Likakis’ admission to the PTI program, provided he paid restitution, committed to protect/compensate Providence from all claims that might be brought by RSI, and dismissal of Likakis’ suit against Providence. With Likakis’s consent - but no assessment of his ability to pay - the court also imposed the three conditions that Providence had requested. During his PTI term, Likakis paid Providence the specific restitution amount and dismissed with prejudice his lawsuit. Likakis did not make any payment related to the separate indemnification provision. With the prosecutor’s consent, the PTI court terminated Likakis’s PTI supervision and dismissed his indictment. RSI Bank and Providence settled their coverage dispute. Providence agreed to pay RSI Bank to settle all of the bank’s claims based on the insurance policy and moved for summary judgment against Likakis based on the provision of the PTI agreement. The court held that the indemnification provision of the PTI agreement was enforceable against Likakis and ordered Likakis to pay Providence the portion of the settlement funds Providence attributed to fire damage, less the amount Likakis had paid during his PTI supervisory period. Likakis appealed, and an Appellate Division panel affirmed. The New Jersey Supreme Court reversed, finding an open-ended agreement to indemnify the victim of the participant’s alleged offense for unspecified future losses was not an appropriate condition of PTI. Moreover, a restitution condition of PTI was inadmissible as evidence in a subsequent civil proceeding against the PTI participant. The indemnification provision of the PTI agreement at issue should have played no role in this civil litigation. View "RSI Bank v. The Providence Mutual Fire Insurance Company" on Justia Law

From 2006-2012 Packerland deceived at least one of its customers about the protein content of its Whey Protein Concentrate. Land O’Lakes purchased Packerland’s protein concentrate for use in making foods for calves and other young animals. Buyers infer protein levels from measuring nitrogen: a seller can add another nitrogen-rich substance to produce higher scores. The Ratajczaks, who owned Packerland, started adding urea to its protein concentrate. in 2006. Land O’Lakes suspected that the concentrate was high in nonprotein nitrogen but could not learn why; the Ratajczaks made excuses that Land O’Lakes accepted. The Ratajczaks sold Packerland in 2012. The new owner kept them as employees; they kept adding urea until the buyer learned what the truth. The Ratajczaks lost their jobs and settled for about $10 million before the buyer filed a complaint. Land O’Lakes stopped buying Packerland’s product and asserted claims of breach of contract, fraud, and violation of the Racketeer Influenced and Corrupt Organizations Act. Packerland’s insurers refused to defend or indemnify it or the Ratajczaks; the Ratajczaks’ personal insurer refused to indemnify them for their settlement with Packerland’s buyer. The district court dismissed Land O’Lakes’s suit and ruled in favor of the insurers. The Seventh Circuit affirmed, rejecting Land O’Lakes’ claim to treble damages under RICO and state-law and the Ratajczaks’ claims that Packerland’s insurers and their own insurers had to defend and indemnify them. View "Land O'Lakes, Inc. v. Ratajczak" on Justia Law

In December 2009, defendant Randell Blake was convicted of filing a false insurance claim in connection with a 2007 fire at his house. Subsequent to his criminal convictions, the trial court ordered defendant to pay restitution to his insurer, Safeco Insurance Company of America (Safeco). Defendant appealed the trial court’s restitution order, arguing the order should be vacated because a general release, signed by Safeco in a related civil case, relieved him of any duty to pay it restitution. He also argued the order should be vacated because the trial court failed to make findings regarding his ability to pay restitution. The Vermont Supreme Court found that restitution and civil damages originated within separate systems, were not substitutes for each other; a civil court’s award of damages to a plaintiff did not discharge the criminal court’s duty or authority to consider and order restitution. Therefore, a civil settlement or release cannot entirely preclude a criminal restitution order because: (1) the statutory obligation to impose restitution when necessary leaves no room for private parties to preclude a court from ordering it; (2) a release does not address the underlying purposes of restitution; and (3) the victim has no standing and is not a party in the restitution proceeding, and may seek a separate remedy in an action for civil damages. Here, defendant initiated a civil suit against Safeco for payment he claimed it owed him relating to the house fire and Safeco counterclaimed. The exchange of releases extinguished these competing civil claims. The release Safeco signed did not, however, preclude an order of restitution in the related criminal proceeding. The Supreme Court therefore affirmed the trial court’s determination on this matter; but reversed because the trial court by not considering his ability to pay. View "Vermont v. Blake" on Justia Law

An entity engaged in the bail bond business may not retain the premium paid on a criminal defendant’s behalf when bail is denied and the defendant is never released from custody.Arthur Bogoraz was indicted on state law fraud charges. Plaintiffs, Bogoraz’s wife and family friends, entered into an indemnity agreement with Ira Judelson, a licensed bail bond agent affiliated with the International Fidelity Insurance Agency, to secure Bogoraz’s release from custody in exchange for a premium of $120,560. The district court denied the bail bond after a hearing, however, and Bogoraz was never released from custody. Judelson refused to return the $120,560 to Plaintiffs. The district court found that the indemnity agreement permitted Judelson to retain the premium. On appeal, the United States Court of Appeals for the Second Circuit certified a question of law regarding the issue to the Court of Appeals. The Court of Appeals held that, under the Insurance Law, an entity engaged in the bail bond business does not earn a premium for a bail bond if a court refuses to accept the bond following a bail source hearing and the principal is not released on bail. View "Gevorkyan v. Judelson" on Justia Law

Defendant-appellant John Riddles pled guilty to one count of workers' compensation insurance fraud. His conviction grew out of his application for workers' compensation insurance, which fraudulently represented that a number of nurses who had been placed in residential care and skilled-nursing facilities by Riddles' staffing agency were computer programmers. His misrepresentation of the nurses as computer programmers substantially reduced the premium his agency was charged by the workers' compensation insurer that accepted his company's application; accordingly, the trial court required that Riddles pay, as restitution to the insurer, $37,000 in premiums the insurer would have earned in the absence of his misrepresentation. Contrary to his argument on appeal, a workers' compensation insurer could recover, as restitution under Penal Code section 1202.4, the premiums it would have earned in the absence of misrepresentations by an insurance applicant. The fact Riddles may have been able to establish that the Labor Code did not require that he provide workers' compensation coverage for the nurses did not relieve him of responsibility for providing the insurer with a fraudulent application or alter the fact the nurses were covered by the policy he obtained. View "California v. Riddles" on Justia Law

Kielar, a pharmacist, got many patients from Dr. Barros, whose office was in the same building, and began defrauding two insurance companies. Kielar forged prescriptions for Procrit under Barros’s name and submitted them for payment, knowing that Procrit had neither been prescribed, nor provided, to the individuals under whose policies he sought reimbursement. The insurers lost $1,678,549. Kielar was indicted for health care fraud, 18 U.S.C. 1347, with a forfeiture allegation, 18 U.S.C. 982(a)(7) that identified properties subject to forfeiture, including a Florida property. Kielar asserted that he needed the proceeds of its sale to pay legal fees. The court granted a motion to release lis pendens and ordered that the proceeds of the sale be placed in escrow with the U.S. Marshals Service. Kielar unsuccessfully requested that the court allow him to use the sale proceeds “for taxes, legal fees and other expenses.” He was convicted of six counts of health care fraud; three counts of aggravated identify theft, 18 U.S.C. 1028A(a)(1); and of using false records to impede a federal investigation, 18 U.S.C. 1519. The Seventh Circuit affirmed, rejecting arguments that the court erred in failing to hold a hearing on his request to release his escrowed funds, by limiting cross-examination of Barros, and by preventing Kielar from calling a former patient as a defense witness. View "United States v. Kielar" on Justia Law

Defendant "L.A." was employed by the Trenton Board of Education as an elementary school security guard. While at work, L.A. allegedly had unlawful sexual contact with two minor students, N.F. and K.O. The allegations were referred to the Institutional Abuse Investigation Unit (IAIU) of the Department of Children and Families (DCF) and defendant was subsequently indicted. In the N.F. indictment, L.A. was charged with third-degree aggravated criminal sexual contact and second-degree endangering the welfare of a minor. In the K.O. indictment, L.A. was charged with two counts of second-degree sexual assault and one count of second-degree endangering the welfare of a minor. L.A. pled guilty to one count of second-degree endangering the welfare of a minor (N.F.) in exchange for dismissal of the remaining charges regarding N.F. and complete dismissal of the K.O. indictment. K.O. s guardian ad litem subsequently filed a civil complaint alleging that L.A. sexually assaulted K.O. and that the Board negligently hired L.A. The Board answered the complaint, taking no position with regard to the allegations against L.A. However, L.A. was assigned counsel by the Horace Mann Insurance Agency, pursuant to a private insurance policy maintained by the New Jersey Education Association. Ultimately, K.O.'s civil action was settled without any admission of wrongdoing by L.A. or the Board. After the settlement, L.A., through counsel provided by Horace Mann, filed a verified petition against the Commissioner of Education seeking reimbursement for the attorney's fees and costs incurred in defending against K.O.'s civil action. The matter was transferred to the Office of Administrative Law and L.A.'s counsel and the Board filed cross motions for summary judgment. The Administrative Law Judge (ALJ) granted L.A.'s motion, denied the Board's, and awarded L.A. attorney's fees and costs pursuant to N.J.S.A.18A:16-6, the statute that addressed the right to indemnification for officers and employees of boards of education in civil actions. The issue this case presented for the Supreme Court's review centered on whether N.J.S.A. 18A:16-6 entitled a school board employee to indemnification for attorney's fees and costs spent in defense of a civil action arising from the same allegations contained in a dismissed criminal indictment. The Court concluded that in such circumstances N.J.S.A. 18A:16-6 requires indemnification unless there was proof by a preponderance of the evidence that the employee's conduct fell outside the course of performance of his or her employment duties. Here, rather than conducting an evidentiary hearing, the ALJ disposed of the matter by way of summary judgment. Because there are disputed issues of material fact regarding whether L.A. was acting within the scope of the responsibilities of his employment, the judgment of the Appellate Division was reversed. The matter was remanded to the Commissioner of Education for a hearing to determine whether L.A.'s conduct fell outside the course of performance of his employment duties. View "L.A. v. Board of Education of the City of Trenton" on Justia Law

Plaintiffs, David Miller and Miller’s Auto Body, alleged that they were subject to a malicious investigation into suspected insurance fraud that Defendants, three insurance companies, believed was taking place at Plaintiffs’ auto-body shop. Miller was charged with, among other charges, four counts of insurance fraud. The criminal information was dismissed by the Attorney General, but the dismissal was conditioned on an agreement between Miller and the Attorney General requiring Miller to execute a general liability release in favor of Defendants. More than one year after executing the release, Plaintiffs filed a complaint against Defendants. The trial court granted pretrial summary judgment for Defendants on the majority of Plaintiffs’ claims. Only Plaintiffs’ abuse-of-process claim went to trial. The jury returned verdicts in favor of Plaintiff against the two remaining defendants. The trial court subsequently granted judgment as a matter of law in favor of one defendant but denied the other defendant’s motion for judgment as a matter of law. The Supreme Court affirmed in part and reversed in part, holding that the release executed by Miller before he initiated suit barred all his claims against the defendants. View "Miller v. Metro. Prop. & Cas. Ins. Co." on Justia Law

Fire Insurance Exchange (FIE) insured Defendant’s home in Clancy, Montana. When Defendant’s home was broken into and robbed, Defendant made a claim under her homeowner’s policy. FIE paid Defendant $22,602, representing property damage and actual cash value for the items Defendant claimed were stolen from the home. Defendant then submitted a supplemental claim in the amount of $23,102 for personal property she asserted she had replaced. When FIE concluded that the receipts Defendant provided to substantiate her replacement claims were fraudulent, FIE made a referral for criminal charges. Defendant subsequently pleaded guilty to felony insurance fraud and theft. The district court ordered Defendant to pay restitution to FIE in the amount of $22,602. The Supreme Court affirmed, holding that the district court did not err when it ordered Defendant to pay restitution to FIE even where Defendant’s initial claim was legitimate because Defendant’s subsequent fraudulent replacement value claim voided her policy, and FIE suffered a pecuniary loss in the amount of Defendant’s initial claim. View "State v. Henderson" on Justia Law

In 2004 Fox was charged with the sexual assault and murder of his three-year-old daughter. Detectives coerced a confession and delayed testing of DNA evidence, leaving Fox imprisoned for eight months, separated from his wife and son. His defense finally obtained the DNA evidence and had it tested at a private lab; the results excluded Fox and charges were dropped. Fox sued under 42 U.S.C. 1983 and state law alleging due process violations, malicious prosecution and intentional infliction of emotional distress. A St. Paul policy required the insurer to defend the detectives to its policy limit, $1 million. Will County also had excess liability policies for $5 million from AAIC (secondary) and Essex (tertiary). Under AAIC’s policy it was not required to assume “settlement or defense” until the underlying policy had been exhausted. None of the policies covered punitive damages. The detectives were represented by a firm retained by St. Paul. The jury awarded $15.5 million, including $6.2 million in punitive damages. Offers to settle for less, before and after the verdict, were rejected. St. Paul exhausted its policy limit; AAIC assumed the defense. The detectives assigned to the Foxes any claims against the insurers in exchange for a covenant not to seek punitive damages from the detectives’ personal assets. The Seventh Circuit upheld $8,166,000 of the damages awarded, including $3.4 million in punitive damages. Fox sought a declaratory judgment that AAIC breached its good faith duties to reasonably settle the claims and inform the detectives of their conflicts of interest. The district court dismissed, reasoning that AAIC, as excess insurer, never had any control over the defense before judgment and therefore had no duty to settle the claims or alert the detectives to any potential conflicts of interest. The Seventh Circuit affirmed View "Fox v. Am. Alt. Ins. Corp." on Justia Law