Justia Insurance Law Opinion Summaries

Defendant is one of several investors (underwriters) in a mortgage bankers blanket bond issued to plaintiff to insure against financial loss resulting from employee misconduct. One of plaintiff's employees engaged in a scheme by which, for a kickback, he caused plaintiff to fund mortgages below its standards. Not knowing the loans were substandard, plaintiff sold them, warranting that they met its standards. Plaintiff was forced to repurchase the loans. The underwriters denied the claim. The district court dismissed a suit, finding that the bond did not cover the loss. The Seventh Circuit affirmed. The fidelity bond at issue contains direct-loss causation language. A financial loss resulting from contract liability to third parties is not directly caused by employee misconduct, even if employee misconduct is the source of the contract liability. Plaintiff's loss resulted from its contractual repurchase obligations; the employee misconduct did not directly cause the eventual financial loss. In addition, a specific exclusion in the bond bars coverage for losses resulting from loan-repurchase obligations.

This case arose from certain hurricane damage claims made by respondent under a 2004 insurance policy issued by respondent's original insurer. When the original insurer became insolvent, the Florida Insurance Guaranty Association (FIGA) then became obligated to respond to certain claims made under that insurance policy. At issue was the proper test to be utilized by a court when determining whether a statute could be applied retroactively, in this case to a contract of insurance. The court held that the court's precedents both before and after the Fourth District's decision required the court to engage in a two-pronged inquiry to determine if the 2005 amendments to section 627.7016, Fla. Stat., were to be applied retroactively. Thus, the Fourth District misapplied this precedent when it omitted the first inquiry into whether the Legislature clearly expressed an intent that the statute be applied retroactively and moved directly to the second inquiry, whether retroactive application would be constitutional. For this reason, and because there was no clear evidence of legislative intent for retroactivity, the court quashed the decision of the Fourth District to the extent it was inconsistent with the opinion and remanded for further proceedings.

Gregory Ternes purchased a residential property from Keith and Sue Eberhard. The Eberhards were insured by State Farm when the house received water damage. Sue reported the damage, and State Form listed the claim on a website report. The Ternes purchased the home without being aware of the website report. The Ternes later attempted to sell the property to the Giardinos, who backed out of the deal. Afterwards, Ternes learned of the website report. Ternes filed a complaint with the state commissioner of insurance, alleging that State Farm put false information on the website, causing the sale of the residence to the Giardinos to fall through. The commissioner advised Ternes that State Farm had not submitted a false report as per State Farm's understanding at the time of the loss. Ternes then filed an action in the district court against State Farm and the Eberhards. The district court granted summary judgment in favor of defendants. On appeal, the Supreme Court affirmed, holding that the district court did not err in granting summary judgment for State Farm and the Eberhards because there were no genuine issues of material fact and both defendants were entitled to judgment as a matter of law.

Petitioner Brady Farr appealed a circuit court judgment in favor of Respondents The Gulf Agency, Orange Beach Insurance Agency and Lexington Insurance Company. Mr. Farr finished renovating his house in 2003. In 2004, he decided to sell his property to a developer who wished to turn the property into condominiums. In anticipation of the sale, Mr. Farr obtained a $1 million loan, secured by a mortgage. As part of the loan process, the mortgage company ordered an appraisal of the property. The property was appraised at $1.3 million and the improvements were valued at $313,000. In 2004, Mr. Farr contacted Orange Beach to insure the property against "total loss." Lexington, acting as Orange Beach's agent, submitted an insurance application for policy limits based on the appraisal to The Gulf Agency, who ultimately served as underwriter for the policy. In the fall of 2004, Mr. Farr was concerned that the policy limits were not sufficient to adequately cover a total loss of the property. In September, Mr. Farr's concerns were realized when Hurricane Ivan destroyed the property. He filed a claim with Orange Beach. In November, Mr. Farr sold his property for $1.18 million. The sales agreement was amended to reflect the total loss he suffered as a result of the hurricane. Lexington's adjuster visited the property to determine the cause of Mr. Farr's loss. The adjuster found the hurricane was the "proximate cause". Lexington subsequently paid Mr. Farr $50,000 for the damage. Alleging that the policy did not provide adequate coverage and that Lexington failed to pay the proper benefits under the policy, Mr. Farr sued the insurance companies for breach of contract, fraud, misrepresentation, negligence, conspiracy, and bad-faith failure to pay an insurance claim. The trial court granted the companies' motion for summary judgment, finding that some of Mr. Farr's claims were barred by a two-year statute of limitations. Upon review of the trial court record, the Supreme Court affirmed the lower court's judgment pertaining to Mr. Farr's tort claims. The Court found that those claims were indeed barred by a statute of limitations. The Court however found that the breach of contract and bad faith claims should not have been dismissed through summary judgment. The Court affirmed part and reversed part of the lower court's order and remanded the case for further proceedings.

Gregory Schindler purchased insurance from USAA for a house he owned. The house was destroyed by fire a year and a half later. USAA denied coverage on the basis that Schindler had committed fraud during his application conversation. Specifically, USAA determined that Greg had misrepresented that the house was his primary residence and a single family dwelling when instead it was a rental divided into eight apartment units. Schindler and his wife filed suit against USAA asserting breach of insurance contract and implied obligation of good faith and fair dealing. USAA defended on the basis of fraud. The jury found for USAA and awarded USAA the monies it had advanced to the Schindlers. The Schindlers appealed. The Supreme Court affirmed, holding (1) the district court did not err in denying the Schindlers' motion for summary judgment; (2) the district court did not abuse its discretion in allowing testimony from a USAA employee; (3) the district court did not abuse its discretion in denying the Schindlers' motion in limine to preclude USAA from introducing evidence of fraud; and (4) the district court did not abuse its discretion in requiring the Schindlers to order and pay for additional transcripts.

A jury in the district court concluded that plaintiff did not breach its homeowners insurance policy with defendants and that one defendant had committed fraud when applying for the policy. Defendants appealed a district court order denying their motion for summary judgment and motions in limine and granting plaintiff's motion that defendants order and pay for additional transcripts on appeal. The court held that defendants were not entitled to estopp plaintiff from defending itself because genuine issues of material fact existed regarding whether the one defendant applied for the policy in good faith. The court held that the district court appropriately permitted plaintiff's customer service representative to testify as to her recollection of the defendant's statements. The court further held that the district court acted within its discretion in permitting plaintiff to defend itself via section 33-15-403, MCA, by allowing the customer service representative to testify about the defendant's alleged fraudulent statements. Accordingly, the district court did not abuse its discretion in denying defendants' motion in limine. The court finally held that the district court did not abuse its discretion in ordering additional transcripts under Montana Rule of Appellate Procedure 8(3)(b).

Plaintiff John Stuart decided to build a new house on a small farm. He contacted his insurance agent of nineteen years, Defendant Ronald Pittman for "course-of-construction" insurance to cover any problems in the course of building his house. Mr. Pittman discussed the scope of coverage that the policy would provide. Relying on Mr. Pittman's oral assurance of what the policy would cover, Plaintiff agreed to it. Construction started in 2003. Plaintiff received a premium statement, but not a written copy of the policy. An ice storm struck Plaintiff's building project. Plaintiff contacted Mr. Pittman to initiate an insurance claim. Mr. Pittman told Plaintiff that damage should be covered by the policy. In 2004, Plaintiff received a declaration page from Country Mutual Insurance Company, and found that damage to his house was not covered. Plaintiff brought an action against both Mr. Pittman and the Insurance Company alleging breach of the oral "policy" that he and Mr. Pittman agreed to at the onset of the building project. At the conclusion of the trial's evidentiary phase, Defendant moved for a directed verdict, arguing that Plaintiff failed to prove that the oral insurance binder covered his project. The trial court denied the motion, and the jury would later rule in favor of Plaintiff. The verdict was overturned on appeal. The court held that there was no evidence from which a jury could have found in favor of Plaintiff. On appeal to the Supreme Court, Plaintiff argued that the appellate court misinterpreted the Oregon law that required him to prove that the oral binder superseded the "usual exclusions" of the written policy. The Supreme Court found that the written policy was, as a matter of law, deemed to include all terms of the oral binder. Accordingly, the Court reversed the appellate court's decision and affirmed the judgment of the trial court.

The first plaintiffs alleged that Fidelity failed to provide a discount, required by its filed rates, when issuing title insurance to homeowners who had purchased a title insurance policy for the same property from any other insurer within the previous 10 years. The second plaintiff brought the same claims against First American. The district court denied their motion to certify a class. The Sixth Circuit affirmed. Although the claims involve small amounts, so that the plaintiffs are likely unable to recover except by class action, the plaintiffs did not establish that issues subject to generalized proof and applicable to the whole class predominate over issues subject to individualized proof. The need to establish entitlement to join the class and the need to prove individual damages are not fatal to class certification, but the Ohio insurance rate structure would necessitate individual inquiries on the issue of liability. The plaintiffs phrased their claims in a way that would require examination of individual policies and whether the company received the requisite documentation for the discount.

Duane Peterson, Mid Am Group, LLC, and Mid Am Group Realty (collectively âMid Amâ), Village Homes at Harwood Groves, LLC (Village Homes), and First International Bank and Trust (First International) all had a stake in the insurance proceeds from a 2007 hail storm that damaged their respective properties. The trial court granted summary judgment to Village Homesâ Homeownersâ Association that represented ten property owners of the Village Homes community impacted by the storm. Mid Am developed and built the insured properties, but Mid Am had only sold ten of fifty units. When the hail storm hit, Mid Am submitted a proof of loss with its insurance company for the residences it still owned. First American was in the process of foreclosing on those unsold Mid Am properties. The insurance check was sent to Mid Am, but First American sued to get possession of the proceeds, and the individual owners were permitted to intervene. The court took control of the proceeds, and held that neither Mid Am nor First International were entitled to them. The court ruled that Mid Am, as fiduciary to the ten owners, should distribute the proceeds among them. Mid Am appealed, arguing that the ownersâ association did not have standing to intervene in the suit for the proceeds. The Supreme Court concluded that the ownersâ association had standing to intervene, and that it was not an error of the trial court to allow the owners to make their claim for the proceeds. The Court affirmed the grant of summary judgment.

Homeowners Kenneth and Larissa Trinder filed a declaratory judgment action to establish Defendant Connecticut Attorneys Title Insurance Companyâs (Company) obligation to defend or indemnify them regarding an encroachment of their septic system onto their neighborâs property. The Trinders purchased the land in question in 2005. In conjunction with the sale, they purchased title insurance from the Company to defend themselves against situations that might make their title unmarketable or where they would be forced to remove an existing structure on their property because it extends onto someone elseâs. The Trindersâ neighbor was the Mount Holly Community Historical Museum. The Museum called the Trinders to inform them that the Museum intended to expand its facility, and it wanted to reach a settlement with the Trinders that implicated the use of their septic system. The Trinders perceived the Museumâs call (and subsequent letter) as a threat to their title, and contacted their real estate closing attorney, who filed a claim to the Company on their behalf. The Company responded that the matter didnât impact their title. In September, 2008, the Trinders filed suit against the Company seeking to protect its right to have the septic system on the museumâs land, based on the âforced removal and marketabilityâ provisions of the title insurance. Following a bench trial, the court ordered judgment in favor of the Company. The court concluded a plain reading of the insurance policy showed there was no coverage under the forced removal clause, and that the marketability provision did not apply. The Supreme Court agreed with the lower courtâs reasoning and affirmed its order on appeal.