Justia Insurance Law Opinion Summaries

Articles Posted in U.S. 7th Circuit Court of Appeals
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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

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Manpower, an international staffing firm, is the parent of Right Management in Paris, France. A building in which Right leased space collapsed, so that Right’s offices were inaccessible. Right relocated without having access and incurred replacement costs and lost income from the interruption of operations. A local insurance policy, issued by ISOP’s French affiliate, provided primary coverage, and a master policy, issued by ISOP and covering Manpower’s operations worldwide, provided excess coverage over the local policy’s limits. Right received $250,000 under the local policy pursuant to a provision covering losses caused by lack of access by order of a civil authority. Another $250,000 was paid under the master policy, exhausting the $500,000 sublimit under a similar lack‐of‐access provision. Manpower also claimed that, under the master policy, it was entitled to reimbursement for business interruption losses and the loss of business personal property: about $12 million. ISOP denied the claim. The district court held that Manpower was covered under the master policy for business interruption losses and loss of business personal property and improvements, but excluded Manpower’s accounting expert, without whom Manpower could not establish those damages and held that the master policy was not triggered because the losses were also covered under the local policy, which had to be fully exhausted before master policy coverage was available. The Seventh Circuit reversed exclusion of the expert and entry of judgment against Manpower on the business interruption claim, but affirmed judgment for ISOP on the property loss claim. The master policy did not provide coverage for Manpower’s property losses.View "Manpower, Inc. v. Ins. Co. of the State of PA" on Justia Law

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Addison filed a class action, alleging that Domino had sent thousands of “junk faxes” in violation of the Telephone Consumer Protection Act, 47 U.S.C. 227, and the Illinois Consumer Fraud Act, and had committed the tort of conversion. Domino’s insurers refused to defend. Domino negotiated a settlement to protect its own interests; Addison and Domino agreed that the state court should certify a class and enter a judgment of $18 million. Addison agreed that the class would not recover any money from Domino, but that Domino would assign to Addison, as class representative and for the class, whatever claims Domino might have against its insurers. The state court approved the settlement. Addison sought a state court declaratory judgment holding Hartford liable for the judgment. Hartford removed the case to federal court. Addison dismissed the case voluntarily and filed another state court suit, naming Addison as the only plaintiff. Hartford again removed the case under the Class Action Fairness Act, 28 U.S.C. 1453. The district court granted remand, finding that the suit did not fit the CAFA definition. Hartford argued that under the assignment in the underlying settlement, Addison had standing only as a class representative. The Seventh Circuit agreed, reversed, and remanded to state court. View "Addison Automatics, Inc. v. Hartford Cas. Ins. Co." on Justia Law

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CE is a small Chicago-area engineering firm that has filed at least 150 class action suits under the Telephone Consumer Protection Act. In this case, CE sued Cy’s Crab House on behalf of a class of junk-fax recipients. Truck is the liability carrier for the Cy’s Crab House restaurants and provided a defense under a reservation of rights. The case was certified as a class action, and went to trial. In the middle of trial, without notifying the insurer, Cy’s settled with the class, for policy limits. State-court coverage litigation ensued. The district court approved the final settlement and entered final judgment. Less than a month later, the Seventh Circuit issued a decision casting doubt on the conduct of class counsel. In light of that decision, Truck moved to intervene to reopen the judgment, challenge the settlement, and seek class decertification based on misconduct by class counsel. Instead of filing a conditional appeal, Truck asked the district court for a 14-day extension of the time to appeal. Ultimately the court denied intervention as untimely. Truck Insurance filed a notice purporting to appeal both the order denying intervention and the final judgment. The Seventh Circuit held that it had jurisdiction to review the order denying intervention, but could not grant any meaningful relief because it lacked jurisdiction to review the final judgment. View "Truck Ins. Exch. v. CE Design Ltd." on Justia Law

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Safety National sold an excess liability insurance policy to TKK, to cover excess losses resulting from liability imposed “by the Workers’ Compensation or Employers’ Liability Laws” of Illinois. The widow of a former TKK employee sued, alleging that TKK’s negligence caused the employee to become ill with and die from mesothelioma. The claim was subject to an affirmative defense: the Illinois Workers’ Occupational Diseases Act bars common law claims by or on behalf of an employee against a covered employer “on account of damage, disability or death caused or contributed to by any disease contracted or sustained in the course of the employment.” After Safety National denied coverage, TKK filed suit. The district court granted TKK summary judgment for its costs in defending and settling the widow’s suit, reasoning that the reference to “Employers’ Liability Laws” included the common law negligence claim even if the claim ultimately must fail because of the statutory bar. The court denied TKK’s claim for attorney fees and costs in the coverage lawsuit itself, except a modest award for what the court considered a vexatious motion to reconsider. The Seventh Circuit affirmed. The key policy term, “Employers’ Liability Laws,” is broad enough to include claims under the common law, including “groundless” claims. View "TKK USA, Inc. v. Safety Nat'l Cas. Corp." on Justia Law

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Allen suffered a fatal heart attack in 2009, leaving a wife of three years, Arlene, and three adult children from a previous marriage. At the time of Allen’s death, his daughter and her children lived with Allen and Arlene. Allen had a will bequeathing $100,000, but his assets passed outside of probate, leaving his estate with insufficient funds for the bequest. Allen had designated his children as beneficiaries of assets, including a home, life insurance policies, retirement accounts, and other savings accounts. Allen had one life insurance policy as part of his compensation package as a pharmacist, which provided $74,000 in basic coverage and $341,000 in supplemental coverage. If the policyholder failed to designate a beneficiary by his date of death, the proceeds would pass to the policyholder’s spouse by default. The insurer never received any indication that Allen wished to designate a beneficiary. In the days following Allen’s death, however, the children found a change-of-beneficiary form, allegedly completed by their father more than a year before his death, but never submitted. The district court ruled in Arlene’s favor, finding that even if Allen had filled out a change-of-beneficiary form he had not substantially complied with policy requirements for changing beneficiaries. The Seventh Circuit affirmed. View "Kagan v. Kagan" on Justia Law

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Third Site is a Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) site that was part of a larger area, under common ownership by the Bankerts, used for recycling industrial wastes. Cleanup initially focused on other sites, but in 1987 and 1992 consultants found concentrations of volatile organic compounds; Third Site was transferring pollutants to Finley Creek, which flows to Eagle Creek Reservoir, which supplies Indianapolis drinking water. The creek was realigned. In 1999, the EPA entered into an Administrative Order by Consent (AOC) with potentially responsible parties. Non-Premium Respondents agreed to undertake an Engineering Evaluation and Cost Analysis (EE/CA) of removal alternatives and to settle a trust to bankroll the EE/CA. Premium Respondents, allegedly de minimis contributors, were entitled to settle out with a one-time Trust contribution under 42 U.S.C. 9622(g). Non-Premium Respondents met their obligations. In 2002, the parties entered into a second AOC to perform work described by the Enforcement Action Memorandum: Non-Premium respondents had the same Trust obligations for removal efforts. The Bankerts are Non-Premium Respondents under both AOCs, but have not met their obligations. In 2008, the Trustees sued the Bankerts and their insurers, seeking cost recovery under CERCLA, 42 U.S.C. 9607(a), and Indiana law. One of the insurers argued that its successful litigation in connection with cleanup of the adjoining site precluded a finding of coverage. Entering summary judgment for the Bankerts, the district court construed the CERCLA claim as seeking contribution under 42 U.S.C. 9613(f), and barred by the statute of limitations, so that issues concerning the insurer were moot. The Seventh Circuit remanded reinstated claims under 42 U.S.C. 9607(a)(4)(B), to recover costs incurred under the 2002 AOC and against the insurer. On rehearing, the court clarified that a party responsible for contamination may obtain an immediately effective release from the EPA in a settlement, or it may obtain only a performance-dependent conditional covenant not to sue with an accompanying disclaimer of liability. Whether, and when, a given settlement “resolves” a party’s liability under 42 U.S.C. 9613(f)(3)(B) is case-specific and depends on its terms. In this case, the AOC did not provide for resolution upon entering into the agreement. View "Bernstein v. Bankert" on Justia Law

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Plaintiffs, insured under employer health plans, filed a proposed class action alleging that health-insurance companies violated Wisconsin law by requiring copayments for chiropractic care. The insurance code prohibits insurers from excluding coverage for chiropractic services if their policies cover the diagnosis and treatment of the same condition by a physician or osteopath. The policies at issue provide chiropractic coverage, although, like other services, it is subject to copayment requirements. The complaint cited provisions of the Employee Retirement Income Security Act for recovery of benefits due, 29 U.S.C. 1132(a)(1)(B) & 502(a)(3), and for breach of fiduciary duty, sections 1132(a)(3), 1104. The district court dismissed. The Seventh Circuit affirmed. Nothing in ERISA categorically precludes a benefits claim against an insurance company. The complaint alleges that the insurers decide all claims questions and owe the benefits; on these allegations the insurers are proper defendants on the 1132(a)(1)(B) claim. The complaint nonetheless fails to state a claim for breach of fiduciary duty; setting policy terms, including copayments, determines the content of the policy, and decisions about the content of a plan are not themselves fiduciary acts. View "Larson v. United Healthcare Ins. Co." on Justia Law

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Amicas agreed to a merger for $5.35 per Amicas share. Shareholders sued in Massachusetts state court, contesting the adequacy of a proxy statement used to seek approval. A preliminary injunction stopped the vote. The suit settled when a third party made a $6.05 per-share tender offer. Amicas shareholders gained $26 million. The lawyers who filed the suit sought attorneys’ fees based on the difference between the bids. Carolina Casualty had issued a policy covering what Amicas and its directors pay their own litigation lawyers and what Amicas must pay adversaries’ lawyers. The state court awarded $3,150,000, using a lodestar of $630,000 (1,400 hours at $450 per hour) times five, to reflect the risk of nonpayment and “an exceptionally favorable result.” Carolina Casualty filed a diversity suit, claiming that coverage was limited to $630,000. The district judge affirmed, but denied damages for bad faith or vexatious failure to pay. The Massachusetts appeal settled with payment of a sum that cannot be affected by the results of federal litigation. The Seventh Circuit held that the case was not moot, but affirmed, rejecting an argument that the award constituted excluded “civil or criminal fines or penalties … punitive or exemplary damages, the multiplied portion of multiplied damages.” View "Carolina Cas. Ins. Co v. Merge Healthcare Solutions, Inc." on Justia Law

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The Wehrles were struck by drunk-driver Barth. Robert Wehrle’s injury claim exceeded $750,000 and his wife's claim exceeded $1.5 million. Barth’s auto insurance policy included a $100,000 per-person liability limit. Each recovered that amount from Barth’s insurer. The Wehrle’s own policy, issued by Cincinnati, included underinsured-motorist coverage, for up to $1 million. Cincinnati paid $800,000, reasoning that the Wehrles’ policy reduces its $1 million maximum payout “by all sums paid by anyone who is legally responsible,” and that the Wehrles had recovered $200,000 from Barth’s insurer. The Wehrles claimed that the $100,000 that they each received from the drunk-driver’s insurer should reduce their individual claims. The district court ruled in favor of the insurer. The Seventh Circuit affirmed, holding that the policy language unambiguously supported the insurer’s interpretation and was consistent with the gap-filling purpose of underinsured-motorist insurance. View "Wehrle v. Cincinnati Ins. Co." on Justia Law