Justia Insurance Law Opinion Summaries

Conduent State Healthcare, LLC (Conduent) was hired by the State of Texas to administer its Medicaid program. In 2012, Texas began investigating Conduent for allegedly helping orthodontics offices overbill for services. Texas sued several orthodontic providers in 2014, and the providers sued Conduent. Texas terminated its contract with Conduent and sued Conduent under the Texas Medicaid Fraud Prevention Act. Conduent was insured by AIG Specialty Insurance Company, ACE American Insurance Company, and Lexington Insurance Company, among others. The insurers provided defense coverage for the provider actions but denied coverage for the state action, claiming it involved fraudulent conduct excluded by the policies.The Superior Court of Delaware found that the insurers breached their duty to defend Conduent in the state action. The court also ruled that Conduent was relieved of its duties to cooperate and seek consent before settling with Texas due to the insurers' breach. The jury found that Conduent acted in bad faith and fraudulently arranged the settlement but did not collude with Texas or settle unreasonably. The Superior Court granted a new trial due to evidentiary issues and the jury's inconsistent verdicts.The Supreme Court of Delaware affirmed the Superior Court's rulings. It held that the insurers' breach of their duty to defend excused Conduent from its duties to cooperate and seek consent. The court also ruled that the policy's fraud exclusion did not bar indemnity coverage because the settlement was allocated to breach of contract damages. The court found that the evidentiary issues and the jury's inconsistent verdicts justified a new trial to prevent manifest injustice. View "AIG Specialty Insurance Company v. Conduent State Healthcare, LLC" on Justia Law

Andrew Murphy, a delivery driver for Grassdoor, was involved in a collision while using his personal vehicle for work. He filed a claim with his insurer, Interinsurance Exchange of the Automobile Club (erroneously sued as AAA Auto Insurance of Southern California), which was denied based on a policy exclusion for transporting property for compensation. Murphy sued for breach of contract, arguing the exclusion was ambiguous and overly broad.The Superior Court of Orange County granted summary judgment in favor of the Exchange, finding the exclusion applied and was neither ambiguous nor against public policy. Murphy appealed, contending the exclusion should only apply to independent contractors and not employees, and that it was overly broad.The California Court of Appeal, Fourth Appellate District, Division Three, reviewed the case de novo. The court held that the policy language was clear and unambiguous, excluding coverage for vehicles used to transport property for compensation. The court found that Murphy's employment status did not affect the applicability of the exclusion and that the exclusion was not contrary to public policy, as employees like Murphy are protected under Labor Code section 2802, which requires employers to indemnify employees for necessary expenditures incurred in the course of their duties.The court affirmed the trial court's judgment, concluding that the Exchange properly denied Murphy's claim based on the compensated carrying exclusion. The court also rejected Murphy's hypothetical scenarios as irrelevant to the case at hand. The judgment was affirmed, and the Exchange was entitled to recover its costs on appeal. View "Murphy v. AAA Auto Insurance of Southern California" on Justia Law

The plaintiffs, Jeffrey Cubberley and Philip Seaver, filed a lawsuit against The Commerce Insurance Company, seeking declaratory relief and compensation for alleged breach of contract. They claimed that Commerce was obligated to cover "inherent diminished value" (IDV) damages to their vehicles, which were damaged in collisions caused by Commerce's insured drivers. Commerce paid for the repairs but refused to compensate for IDV damages, leading the plaintiffs to argue that their vehicles were worth less in the resale market post-repair.The plaintiffs initially filed their lawsuit in the Superior Court, which was later transferred to the business litigation session. The case was stayed pending the outcome of McGilloway v. Safety Ins. Co., which held that IDV damages were recoverable under the 2008 standard Massachusetts automobile policy. After the stay was lifted, the plaintiffs filed a second amended complaint. Commerce moved to dismiss the claims, arguing that the 2016 standard policy excluded IDV damages. The motion judge granted the dismissal, concluding that the policy did not cover IDV damages and that the plaintiffs failed to allege facts suggesting an entitlement to relief. The plaintiffs appealed, and the Supreme Judicial Court granted direct appellate review.The Supreme Judicial Court affirmed the dismissal, holding that the plaintiffs lacked standing to pursue their breach of contract claims because they had not obtained final judgments against the insureds, as required by G. L. c. 175, § 113, and G. L. c. 214, § 3 (9). Additionally, the court found that part 4 of the 2016 standard policy explicitly excluded coverage for IDV damages to third-party vehicles. The court also determined that neither G. L. c. 90, § 34O, nor the decision in McGilloway provided a legal basis requiring insurers to cover IDV damages under the 2016 standard policy. Thus, the plaintiffs' complaint did not plausibly establish an entitlement to relief. View "Cubberley v. The Commerce Insurance Company" on Justia Law

Olympia Williams was driving a Chrysler 200 on a public roadway with Mary Thomas as a passenger when they were struck by an ATV operated by Patricia Cole. The Chrysler 200, owned by Alonzo Johnson, was insured through Mississippi Farm Bureau Casualty Insurance Company (Farm Bureau) and included uninsured motorist coverage. Cole had no applicable insurance. Farm Bureau sought a declaratory judgment that it owed no uninsured motorist benefits, citing a policy exclusion for vehicles designed mainly for off-road use and not capable of being licensed for public roads.The Issaquena County Circuit Court granted summary judgment in favor of Farm Bureau, agreeing that the policy's exclusion applied to the ATV involved in the collision. Williams, Thomas, and Johnson argued that they were entitled to the full amount of the policy’s uninsured motorist coverage and that the exclusion unlawfully restricted coverage required by Mississippi’s Uninsured Motorist Act. They appealed the decision.The Supreme Court of Mississippi reviewed the case de novo and affirmed the circuit court's judgment. The court held that the policy's language was clear and unambiguous, excluding ATVs from the definition of "uninsured motor vehicle." The court also found that the exclusion did not unlawfully restrict or reduce coverage mandated by Mississippi’s Uninsured Motorist Act. The court concluded that the ATV operated by Cole did not qualify as an uninsured motor vehicle under the policy, and thus, Farm Bureau was not obligated to provide uninsured motorist benefits. View "Williams v. Mississippi Farm Bureau Casualty Insurance Company" on Justia Law

In 2014, McDonnel Group, L.L.C. served as the general contractor for the renovation of Jung, L.L.C.'s property. In 2015, McDonnel obtained insurance from Starr Surplus Lines Insurance Company and Lexington Insurance Company. In 2017, the project experienced significant water damage, leading McDonnel to file a claim for $3,226,164.30. The dispute arose over the flood deductible amount, with McDonnel asserting it was $500,000, while the insurers claimed it was $3,443,475, resulting in no payout under the policy.The United States District Court for the Eastern District of Louisiana granted summary judgment in favor of the insurers, determining that the policy language regarding the flood deductible was clear and unambiguous. The plaintiffs appealed, and the United States Court of Appeals for the Fifth Circuit found the policy language ambiguous and remanded the case for further proceedings to consider extrinsic evidence and the presumption in favor of coverage.Upon remand, the district court reviewed supplemental briefings and extrinsic evidence, ultimately finding in favor of the insurers. The court concluded that the extrinsic evidence resolved the ambiguity, showing that the industry standard interpretation of "VARTOL" (value-at-risk-at-time-of-loss) supported the insurers' deductible calculation. The plaintiffs appealed again.The United States Court of Appeals for the Fifth Circuit affirmed the district court's decision. The appellate court agreed that the extrinsic evidence provided by the insurers, including industry standards and expert testimony, resolved the ambiguity in the policy language. The court also held that the district court did not err in not applying the presumption in favor of coverage, as the ambiguity had been resolved through extrinsic evidence. View "McDonnel Group v. Starr Surplus Lines" on Justia Law

In 2016, Daniel Zeljkovich, driving a tractor trailer, collided with Donald Matthews, who was insured by Protective Insurance Company. Zeljkovich was insured by Spirit Commercial Auto Risk Retention Group. Matthews sued Zeljkovich for negligence in Virginia, and Spirit negotiated a $700,000 settlement. Before finalizing the settlement, Spirit became insolvent and was placed into receivership and liquidation. Matthews then sought uninsured/underinsured motorist (UM/UIM) benefits from Protective, which paid him $700,000 and claimed subrogation rights against Spirit’s estate.The Special Deputy Receiver categorized Protective’s claim under the residual priority category, NRS 696B.420(1)(g), due to insufficient funds. Protective objected, arguing its claim should fall under the higher-priority classification, NRS 696B.420(1)(b). The Eighth Judicial District Court in Clark County, Nevada, affirmed the Special Deputy Receiver’s decision, leading Protective to appeal.The Supreme Court of Nevada reviewed the case and held that NRS 696B.420(1)(b) excludes a private insurance company’s subrogation claim. The court reasoned that subrogation law, the statute’s text, and public policy all support this exclusion. The court emphasized that the statute prioritizes claims by policyholders and statutory insurance guaranty associations, not private insurers. The court also found that including private insurers’ subrogation claims would undermine the statute’s purpose of protecting vulnerable insurance consumers. Consequently, the court affirmed the district court’s decision, relegating Protective’s claim to the residual category, NRS 696B.420(1)(g). View "Protective Insurance Company v. State" on Justia Law

Julian Omidi and his business, Surgery Center Management, LLC (SCM), were involved in a fraudulent scheme called "Get Thin," which promised weight loss through Lap-Band surgery and other medical procedures. Omidi and SCM defrauded insurance companies by submitting false claims for reimbursement, including fabricated patient data and misrepresented physician involvement. The scheme recruited patients through a call center, pushing them towards expensive medical tests and procedures regardless of medical necessity.A grand jury indicted Omidi and SCM for mail fraud, wire fraud, money laundering, and related charges. After extensive pretrial litigation and a lengthy jury trial, both were convicted on all charges. The district court sentenced Omidi to 84 months in prison and fined SCM over $22 million. The government sought forfeiture of nearly $100 million, arguing that all proceeds from the Get Thin scheme were derived from fraud. The district court agreed, finding that even proceeds from legitimate procedures were indirectly the result of the fraudulent scheme.The United States Court of Appeals for the Ninth Circuit reviewed the case. The court affirmed the district court's forfeiture judgment, holding that under 18 U.S.C. § 981(a)(1)(C), all proceeds directly or indirectly derived from a health care fraud scheme must be forfeited. The court rejected the argument that only proceeds from fraudulent transactions should be forfeited, noting that the entire business was permeated with fraud. The court concluded that there is no "100% Fraud Rule" in forfeiture cases seeking proceeds of a fraud scheme, and all proceeds from the Get Thin scheme were subject to forfeiture. View "United States V. Surgery Center Management, LLC" on Justia Law

Liberty Mutual Insurance Company ("Liberty") and Atain Specialty Insurance Company ("Atain") were involved in a contract dispute. Liberty sued Atain for breach of contract after Atain refused to indemnify Liberty for a $1 million appeal bond related to a racial discrimination case against McClure Hotel. Atain argued that it was not obligated to indemnify Liberty based on equitable estoppel, claiming it relied on Liberty's misrepresentation that the bond was closed.The United States District Court for the Northern District of West Virginia granted summary judgment in favor of Liberty, rejecting Atain's equitable estoppel defense. The court found that Liberty had not misrepresented the status of the appeal bond to Atain.The United States Court of Appeals for the Fourth Circuit reviewed the case and affirmed the district court's decision. The Fourth Circuit held that even if Liberty had made a misrepresentation, Atain could not demonstrate detrimental reliance because it had access to all necessary information to understand its obligations under the indemnity agreement. Atain, as a sophisticated party, should have known that the appeal bond remained in effect until the judgment in the underlying action was satisfied, regardless of the outcome of the separate coverage action. Therefore, Atain's equitable estoppel defense failed, and the grant of summary judgment to Liberty was affirmed. View "Liberty Mutual Insurance Co. v. Atain Specialty Insurance Co." on Justia Law

Bellin Memorial Hospital hired Kinsey & Kinsey, Inc. to upgrade its computer software. Kinsey failed to implement the agreed-upon software, leading Bellin to sue Kinsey in Wisconsin state court for breach of contract and other claims. Bellin also sued Kinsey’s president and a senior product consultant. Kinsey’s insurer, Philadelphia Indemnity Insurance Company, provided a defense under a professional liability insurance policy. During the trial, Bellin and Philadelphia Indemnity entered into a partial settlement, resolving some claims and specifying the conditions under which Bellin could collect damages from Kinsey. Bellin prevailed at trial and was awarded damages.The Wisconsin circuit court ruled that the limited liability provision in the Agreement did not apply due to Kinsey’s material breach. The court granted a directed verdict on the breach of contract claim against Kinsey, leaving the question of damages to the jury. The jury awarded Bellin $1.39 million, later reduced to $750,000 plus costs. The jury found Kinsey and its president not liable for intentional misrepresentation and misleading representation.Philadelphia Indemnity filed a declaratory judgment action in the United States District Court for the Northern District of Illinois, seeking a declaration that the state court’s judgment was covered by the insurance policy and that the $1 million settlement offset the $750,000 judgment. The district court ruled for Bellin, concluding that the state court judgment was not covered by the insurance policy.The United States Court of Appeals for the Seventh Circuit affirmed the district court’s decision. The court held that the insurance policy covered only negligent acts, errors, or omissions, and the state court’s judgment was based on a breach of contract, not negligence. Therefore, the $1 million set-off provision did not apply, and Bellin could recover the full amount of the judgment. View "Philadelphia Indemnity Insurance Co. v Kinsey & Kinsey, Inc." on Justia Law

Home Depot, Inc. and Home Depot U.S.A., Inc. (collectively, "Home Depot") experienced a data breach where hackers accessed their computer system and stole payment card information from customers. Home Depot settled claims with financial institutions for approximately $170 million, which included costs for reissuing payment cards and losses from reduced card usage. Home Depot's cyber insurers covered up to $100 million, and Home Depot sought additional coverage from Steadfast Insurance Company and Great American Assurance Company under their commercial general liability policies. The insurers denied coverage, arguing that the policies did not cover electronic data losses.The United States District Court for the Southern District of Ohio granted summary judgment in favor of the insurers, finding that the policies did not cover the claims related to the data breach. Home Depot appealed the decision.The United States Court of Appeals for the Sixth Circuit reviewed the case de novo and affirmed the district court's decision. The court held that the electronic data exclusion in the insurance policies unambiguously barred coverage for both the reissuance and reduced usage claims. The court found that the payment card data qualified as "electronic data" under the policies, and the damages arose from the loss of use of this electronic data. Additionally, the court determined that the insurers had no duty to defend Home Depot in the lawsuits filed by the financial institutions, as the claims were not covered by the policies. The court concluded that the plain language of the policies excluded coverage for the damages arising from the data breach. View "Home Depot, Inc. v. Steadfast Insurance Co." on Justia Law