Justia Insurance Law Opinion Summaries

In 2007, Steven and Valerie Hruza sought to obtain a loan from Clearwater Mortgage (Clearwater). Clearwater requested Defendant-Respondent Wade Massey to perform an appraisal of their real property located in Caldwell. Massey owned co-defendant Capitol West Appraisals and is a professional appraiser licensed to practice in Idaho. Massey performed the appraisal and sent a Summary Appraisal Report to Clearwater indicating that market value of the property was $1,150,000. Clearwater decided to deny the Hruzas' loan application before considering the appraisal. Massey admitted that both he and Clearwater were aware that the appraisal contained errors. Clearwater's president and Massey agreed that Massey would not fix the errors and Clearwater would not pay Massey for the appraisal. The Hruzas submitted a subsequent loan application to Idahy Federal Credit Union (now known as Icon). Icon approved the loan, secured by a deed of trust on the Hruzas' property. Icon sent a check to Capitol, and Capitol accepted payment. Plaintiff-Appellant CUMIS Insurance Society, Inc. was the fidelity bond insurer for Icon. It paid Icon as a result of the Hruzas' default on their loan. As Icon's subrogee, CUMIS filed suit against Massey and Capitol, alleging professional negligence, negligent misrepresentation, and breach of contract based on Massey's conduct in preparing the appraisal. A central point of dispute between the parties was how Icon obtained the appraisal. CUMIS alleged that the Hruzas included the appraisal with their loan application, thus prompting Icon to pay Capitol for the appraisal. Massey suggested that Icon improperly obtained the appraisal, pointing to Icon's admission that it did not know how it obtained it and that Icon did not request a letter of assignment from Clearwater to use or rely on the appraisal. The district court concluded that CUMIS could not establish that Massey owed a legal duty to Icon, that Idaho does not recognize a cause of action for negligent misrepresentation against appraisers, and that CUMIS had no breach of contract claim. Therefore, the district court granted Massey’s motion for summary judgment and dismissed all claims asserted by CUMIS, with prejudice. Finding that there remained issues of material fact, the Supreme Court vacated the district court's judgment dismissing CUMIS's complaint. The case was remanded for further proceedings. View "CUMIS Insurance Society, Inc. v. Massey" on Justia Law

A bank purchased insurance on a commercial property mortgaged to it by a borrower. The policy prohibited an assignment "of this Policy" without the insurer's consent. After the property was damaged, the bank assigned its loss claim to the borrower. The insurer refused to pay the borrower's claim because of the nonassignment provision, and the borrower sued. The district court held that the suit was barred and awarded judgment for the insurer. The issue before the Tenth Circuit in this case centered on whether the nonassignment provision was enforceable. The Court concluded, after review of the provision in question, that the provision did not apply to the assignment of a postloss claim, so the Court did not determine the enforceability of a provision prohibiting such assignments. Accordingly, the Court reversed and remanded for further proceedings. View "City Center West v. American Modern Home Insurance" on Justia Law

Defendant-sellers obtained a policy from American Family Mutual Insurance Company insuring an apartment building. When preparing for the sale of the building, Defendants signed a real estate condition report stating that they were not aware of the presence of asbestos on the premises. After Plaintiff-buyers purchased the building, their contractor discovered asbestos in the building. Plaintiffs filed an action against Defendants for breach of contract/warranty and negligence in failing to adequately disclose defective conditions. The circuit court held that American Family had no duty to defend or indemnify Defendants because an asbestos exclusion in the American Family policy precluded coverage. The court of appeals affirmed, concluding that the policy precluded coverage. The Supreme Court affirmed, holding that the asbestos exclusion in the American Family policy precluded coverage for the losses alleged by Plaintiffs. View "Phillips v. Parmelee" on Justia Law

Anne Sullivan-Thorne (Defendant) executed a mortgage on her house in favor of IndyMac Bank, FSB. Cambridge Mutual Fire Insurance Company filed an action against Defendant relating to damage done to the home. As part of the litigation, Defendant filed an action against IndyMac seeking to have all insurance proceeds payable to her alone. IndyMac counterclaimed against Defendant, alleging that Defendant had breached the note and mortgage and that Defendant had caused IndyMac not to receive payment of insurance proceeds in an amount sufficient to repair the property. The superior court dismissed IndyMac's counterclaim and entered a final judgment in which the court ordered that Cambridge re-issue the insurance proceeds and make them payable to Defendant alone. IndyMac later assigned the mortgage to Wilmington Trust Company (Plaintiff), who filed this action seeking a judgment of foreclosure against Defendant. The district court entered summary judgment for Defendant, finding that the action was barred by the doctrine of res judicata. The Supreme Court vacated the judgment of the district court, holding that because Wilmington's foreclosure claim did not present matters that "were, or might have been, litigated" in the earlier action, the court erred in entering summary judgment for Defendant on claim preclusion grounds. View "Wilmington Trust Co. v. Sullivan-Thorne" on Justia Law

In a proposed class action, Schilke alleged that Wachovia, her lender and holder of a mortgage on her home, fraudulently placed insurance on her property when her homeowner’s policy lapsed. Wachovia secured the replacement coverage from ASI and charged her for it, as specifically permitted by her loan agreement. The premium was more than twice what she had paid for her own policy and included a commission to Wachovia’s insurance-agency affiliate, also as permitted under the loan agreement. Schilke calls the commission a “kickback” and asserted statutory and common-law claims, most sounding in fraud or contract. The district court dismissed based on federal preemption and the filed-rate doctrine. The Seventh Circuit affirmed. The loan agreement and related disclosures and notices conclusively show that there was no deception at work. Wachovia fully disclosed that lender-placed insurance could be significantly more expensive than her own policy and could include a fee or other compensation to the bank and its insurance-agency affiliate. Maintaining property insurance was Schilke’s contractual obligation and she failed to fulfill it. . View "Schilke v. Am. Sec. Ins. Co." on Justia Law

The Gulfport Mississippi apartment complex was damaged in Hurricane Katrina. Its insurer, RSUI paid actual-cash-value proceeds. The parties began negotiating for additional replacement-cost proceeds. During negotiations, the named-insured contracted to sell the property in its unrepaired state to Edgewood and notified RSUI of its intention to assign the claim for replacement-cost proceeds. RSUI responded that if the property was sold before repair, there could be no recovery of replacement-cost proceeds. The sale closed. The seller and Edgewood sought a declaration that the insurer was obligated to pay the claim with a related breach-of-contract action. Edgewood repaired the property. The litigation continued for years until it became clear that there had been no assignment. The district court dismissed the claims. The Seventh Circuit affirmed in part and reversed in part. Absent an assignment, Edgewood lacks standing; the seller still owns the claim and remains a proper plaintiff. The seller had an insurable interest when the policy issued and at the time of the loss; the sale of the property in its unrepaired state did not extinguish its right to recover. Although the policy specifies that replacement-cost proceeds will not be paid until the property is repaired, it does not require that the insured complete the repairs itself. View "Southland Mgmt. Corp. v. RSUI Indem. Co." on Justia Law

In 2000, the Schuchmans purchased homeowner’s insurance from State Auto to insure a residence in Junction City, Illinois. About 10 years later, a fire severely damaged the insured house and the Schuchmans made a claim against the homeowner’s policy. After a lengthy investigation, State Auto denied the claim on the basis that the Schuchmans were not residing on the “residence premises,” as that term is defined by the policy, and were maintaining a residence other than at the “residence premises,” in violation of the policy’s Special Provisions. The district court entered summary judgment in favor of State Auto. The Seventh Circuit reversed, agreeing that the term “residence premises” is ambiguous and should be liberally construed in favor of coverage. View "Schuchman v. State Auto Prop. & Cas.Ins. Co." on Justia Law

Plaintiff, the owner of an apartment building, complained when Armory Plaza, the owner of the lot next to Plaintiff's building, began excavating the lot to make way for a new building. The excavation purportedly caused cracks in the walls and foundations of Plaintiff's building. After Plaintiff's insurer (Defendant) rejected Plaintiff's claims under its policy, Plaintiff brought suit. The U.S. district court granted summary judgment for Defendant, holding that the alleged conduct of Armory and its contractors was not "vandalism" within the meaning of the policy. On appeal, the Second Circuit Court of Appeals certified two questions of law to the New York Court of Appeals, which answered by holding (1) for purposes of construing a property insurance policy covering acts of vandalism, malicious damage may be found to result from an act not directed specifically at the covered property; and (2) the state of mind required to find malicious damage is a conscious and deliberate disregard of the interests of others that the conduct in question may be called willful or wanton. View "Georgitsi Realty, LLC v. Penn-Star Ins. Co." on Justia Law

Plaintiff sued the servicer of his loan (Bank) in a putative class action, asserting that the Bank's requirement that he maintain flood insurance coverage in an amount sufficient to cover the replacement value of his home breached the terms of his mortgage contract. The mortgage was insured by the Federal Housing Administration (FHA). Specifically, Defendant contended that the Bank, under a covenant of the mortgage contract, could not require more than the federally mandated minimum flood insurance. The covenant was a standard uniform covenant prescribed by the FHA pursuant to federal law. The district court dismissed the complaint for failure to state a claim. The judgment of dismissal was affirmed by an equally divided en banc First Circuit Court of Appeals, holding that Plaintiff failed to state a claim for breach of contract, as (1) the Bank's reading of the contract was correct and Plaintiff's was incorrect; (2) Plaintiff could not avoid dismissal on the grounds that his specific understanding or the actions of the parties created an ambiguity; and (3) the United States' position articulated in its amicus brief, which stated that Plaintiff's interpretation of the contract was incorrect, reinforced the Court's conclusion. View "Kolbe v. BAC Home Loans Servicing, LP" on Justia Law

Homes built with an exterior insulation and finish system (EIFS) suffer serious water damage that worsens over time. Homebuilder began a remediation program in which it offered to homeowners to remove exterior EIFS from the homes it had built and to replace it with conventional stucco. Almost all the homeowners accepted Homebuilder's offer of remediation. Homebuilder sought indemnification for the costs from its insurers (Insurers). Insurers denied coverage, preferring instead to wait until the homeowners sued. This litigation ensued. Now, only one insurer remained. The court of appeals reversed the trial court's judgment in favor of Homebuilder, finding (1) Homebuilder failed to establish its legal liability to the homeowners to trigger Insurer's coverage; and (2) Homebuilder failed to offer evidence of damages covered by the policy. The Supreme Court reversed, holding (1) Homebuilder's settlements with the homeowners established both Insurer's legal liability for the property damages and the basis for determining the amount of loss; and (2) Insurer's policy covered Homebuilder's entire remediation costs for damaged homes. View "Lennar Corp. v. Markel Am. Ins. Co." on Justia Law