Justia Insurance Law Opinion SummariesArticles Posted in U.S. 1st Circuit Court of Appeals
Merrimon, et al v. Unum Life Insurance Company
Plaintiffs challenged an insurance company's use of "retained asset accounts" (RAAs) as a method of paying life insurance benefits in the ERISA context. They presented the district court with two basic questions: (1) whether the insurer's method of paying death benefits in the form of RAAs constitute self-dealing in plan assets in violation of ERISA section 406(b); and (2) whether this redemption method offended the insurer's duty of loyalty toward the class of beneficiaries in violation of ERISA section 404(a). The district court answered the first question in favor of the insurer and the second in favor of the plaintiff class. The court then awarded class-wide relief totaling more than $12,000,000. Both sides appealed. Upon review, the First Circuit Court of Appeals agreed with the district court that the insurer's use of RAAs in this case did not constitute self-dealing in plan assets. However, the Court disagreed with the district court's answer to the second question and held that the insurer's use of RAAs did not breach any duty of loyalty owed by the insurer to the plaintiff class. View "Merrimon, et al v. Unum Life Insurance Company" on Justia Law
Hansen v. Sentry Ins. Co.
Mark Hansen was a former vice president of Wilcox Industries Corp. After Hansen left Wilcox, he founded his own company, Advanced Life Support Technologies. Wilcox filed a complaint against Hansen, alleging that Hansen stole Wilcox’s customers and spread false and damaging information about Wilcox’s products. Hansen tendered his defense to Wilcox’s insurer, Sentry Insurance Company. Sentry denied coverage, stating that it did not have a duty to defend or indemnify Hansen against Wilcox’s claims. Hansen subsequently filed suit seeking a declaration that Sentry owed a duty to defend and indemnify him with respect to Wilson’s complaint. The district court granted summary judgment for Wilcox, concluding that Hansen did not qualify as an “insured” under Wilcox’s policy. The First Circuit affirmed, holding (1) Sentry owed no duty to defend or indemnify Hansen in the underlying litigation; and (2) there was no evidence in the record that would permit a reasonable jury to find that Sentry breached any contract with Hansen. View "Hansen v. Sentry Ins. Co." on Justia Law
Universal Ins. Co. v. Office of the Ins. Comm’r
In this insurance coverage dispute, the driver involved in an accident filed a claim with the Insurer of the other vehicle involved in the accident. The Insurer denied the claim. The Office of the Insurance Commissioner reviewed the denial and ordered the Insurer to adjust and resolve the claim. The Insurer did not file an appeal and instead filed a complaint for declaratory and injunctive relief in the federal district court. The district court dismissed the federal court action on res judicata grounds. The First Circuit Court of Appeals affirmed, holding that res judicata barred this action and no exceptions to res judicata applied. View "Universal Ins. Co. v. Office of the Ins. Comm'r" on Justia Law
CE Design, Ltd. v. Am. Economy Ins. Co.
Plaintiff filed a class action suit in an Illinois circuit court against Ernida, LLC alleging that Ernida had faxed unsolicited advertisements to Plaintiff and more than thirty-nine other recipients without first obtaining their permission. Ernida’s insurer, American Economy Insurance Company (American), took up Ernida’s defense in Illinois. While the Illinois action was ongoing, Plaintiff filed suit in federal district court against American, asserting diversity jurisdiction and seeking a declaration that American had a duty to defend Ernida in the Illinois action and had a responsibility to indemnify and pay any judgment in that action. The district court granted American’s motion to dismiss, concluding that Plaintiff had not presented a justiciable controversy. On appeal, American claimed that Plaintiff’s claim did not meet the amount-in-controversy requirement for diversity jurisdiction since Plaintiff had expressly waived any right to recover anything over $75,000 in its Illinois complaint. The First Circuit Court of Appeals vacated the district court’s order dismissing the case for lack of standing and remanded with instructions to dismiss for lack of subject-matter jurisdiction, as the matter in controversy did not not exceed the sum or value of $75,000. View "CE Design, Ltd. v. Am. Economy Ins. Co." on Justia Law
Graf v. Hospitality Mut. Ins. Co.
Katie Graf was injured on the premises of Fat Cat Bar & Grill. Graf was awarded $500,000 in damages and $111,124 in prejudgment interest against Torcia & Sons, Inc, the owner of Fat Cat. Torcia was insured by Hospitality Mutual Insurance Company under a liquor liability insurance policy. Hospitality disclaimed liability for the prejudgment interest portion of the award. Consequently, Graf was granted a writ of attachment on Torcia’s liquor license to secure the excess payment. Graf and Torcia sought payment from Hospitality for the cost of a bond to release the attachment. When Hospitality refused, the parties entered into a settlement agreement under which Graf discharged the attachment of the liquor license and Torcia assigned its rights against Hospitality to Graf. Graf sued Hospitality. A federal judge granted Hospitality’s motion to dismiss, concluding (1) the $500,000 damages award represented the full extent of recoverable proceeds under the policy, and (2) to require Hospitality to pay for the cost of the bond would have expanded Hospitality’s liability in contravention of the terms of the policy. The First Circuit affirmed, holding that the policy unambiguously obligated Hospitality to pay the cost of bonds only for bond amounts that, together with any other liabilities, fell within the liability cap of $500,000. View "Graf v. Hospitality Mut. Ins. Co." on Justia Law
Metro. Prop. & Cas. Ins. Co. v. McCarthy
The lawsuit underlying this action alleged that Glynis McCormack’s ward sexually and physically abused a younger boy. In this declaratory judgment action, the district court ruled that Metropolitan Property and Casualty Insurance Company, McCormack’s insurer, had a duty to defend McCormack in the underlying lawsuit. Metropolitan appealed, arguing that the alleged harmful conduct was excluded from coverage under the governing policy. The First Circuit affirmed, holding that, under the facts of this case, McCormack’s policy would cover the harm alleged in the complaint, and therefore, Metropolitan had a duty to defend McCormack in the underlying action. View "Metro. Prop. & Cas. Ins. Co. v. McCarthy" on Justia Law
Feingold v. John Hancock Life Ins. Co.
Richard Feingold’s mother purchased a life insurance policy from an Insurer listing her husband as the only beneficiary. Feingold's mother died in 2006. In 2012, Richard informed Insurer of his mother's death. The Insurer issued Feingold a check for death benefits but did not provide a copy of his mother's life insurance policy. Feingold filed a class action complaint against Insurer in 2013, alleging that the Insurer owed Feingold and the putative class of similarly situated beneficiaries damages based on the Insurer’s handling of unclaimed benefits under its life insurance policies. Specifically, Feingold claimed that the Insurer had an obligation, arising from a regulatory agreement (“Agreement”) between the Insurer and several states, to discover the death of its insureds and notify beneficiaries. The district court dismissed the complaint for failure to state a claim, noting that the Agreement was a contract only between Insurer and participating states. The First Circuit affirmed, holding that because Feingold was neither a party nor a third-party beneficiary of the Agreement, he had no authority to enforce the terms of the Agreement. View "Feingold v. John Hancock Life Ins. Co." on Justia Law
Lopez-Munoz v. Triple-S Salud, Inc.
Plaintiff sought insurance coverage for gastric lap band surgery. Defendant, a health-care insurer that covered Plaintiff by virtue of Plaintiff’s husband’s employment with the federal government, refused to cover the full cost of the surgery. Plaintiff brought tort and breach of contract claims against Defendant in the Puerto Rico Court of First Instance. Defendant removed the action to the federal district court, asserting, inter alia, that the Federal Employees Health Benefits Act of 1959 (FEHBA) completely preempted Plaintiff’s local-law claims, thus conferring original jurisdiction on the federal court. Defendant then moved to dismiss the case, arguing that the FEHBA demanded exhaustion of administrative remedies. Plaintiff, in the meantime, requested that the district court remand the case to the Court of First Instance. The district court (1) denied Plaintiff’s motion to remand, holding that the FEHBA completely preempted Plaintiff’s claims and, thus, federal jurisdiction attached; and (2) dismissed the action for Plaintiff’s failure to exhaust administrative remedies. The First Circuit Court of Appeals reversed the district court’s judgment of dismissal and its order denying remand, holding that the court erred in concluding that the FEHBA afforded complete preemption. View "Lopez-Munoz v. Triple-S Salud, Inc. " on Justia Law
W Holding Co., Inc. v. AIG Ins. Co. – P.R.
After Westernbank of Puerto Rico was ordered closed in the late 2000s and the Federal Deposit Insurance Corporation (“FDIC”) was appointed receiver, the FDIC discovered that certain bank directors and officers had breached their fiduciary duty by jeopardizing the bank’s financial soundness, causing over $176 million in damages to the bank. The directors and officers asked their insurer, Chartis Insurance Company, to confirm coverage under a directors’ and officers’ liability-insurance policy issued by Chartis to Westerbank’s owner, W Holding Company, Inc. Chartis denied coverage. The directors and officers and the FDIC sued Chartis. In this “procedurally complicated” case, a district judge eventually issued an order requiring Chartis to advance defense costs to the directors and officers. The First Circuit Court of Appeals affirmed, holding (1) the Court had jurisdiction to hear the parties; and (2) the district judge did not err in making its cost-advancement ruling. View "W Holding Co., Inc. v. AIG Ins. Co. - P.R." on Justia Law
Ardente v. Standard Fire Ins. Co.
Evan Ardente’s yacht was insured by Standard Fire Insurance Company. After Ardente purchased the yacht, it stopped navigating properly, and its top speed had decreased due to water damage to the yacht’s hull. Specifically, water was seeping into balsa wood, which is not waterproof, around installation holes and spreading throughout the hull. Ardente presented a claim to Standard Fire. Standard Fire denied coverage on the ground that the claim fell within an exclusion for manufacturing defects. Ardente sued Standard Fire for breach of contract, among other claims. The district court granted summary judgment for Standard Fire on all claims except for the breach of contract allegation. On that claim, the court granted Ardente summary judgment with respect to liability, concluding that the damage fell within an exception to the exclusion for manufacturing defects. The First Circuit Court of Appeals reversed the district court’s order granting Ardente summary judgment on his breach of contract claim, holding that the damage to the yacht did not fall within the exception to the manufacture-defect exclusion, and therefore, Standard Fire was entitled to summary judgment on the breach of contract claim. View "Ardente v. Standard Fire Ins. Co." on Justia Law