Justia Insurance Law Opinion Summaries

In 2006, Kevin and his wife Marjorie moved to Indiana, to manage car dealerships owned by Savoree. In 2007 Savoree proposed selling the dealerships to the couple through a series of stock purchases to be financed by a $3.5 million loan from CSB. After negotiating the loan with CSB, Kevin took out a life insurance policy with Cincinnati Life that named Marjorie as the beneficiary. Two months later, Kevin assigned that policy to CSB. The couple eventually declared bankruptcy and litigation between all of the parties ensued. Kevin died of cancer in 2010. Cincinnati Life deposited the proceeds, $3 million, with the clerk of court and sought judicial determination of ownership. The district court dismissed Marjorie’s claims with prejudice for failing to meet pleading standards and entered summary judgment for CSB. The Seventh Circuit affirmed, finding that Marjorie did not present any evidence to create a genuine disputed issue of material fact. She identified lack of consideration for the assignment as a potential disputed fact, but the assertion was made and repeated without any support or citation to evidence. View "Cincinnati Life Ins. Co. v. Beyrer" on Justia Law

In 1987, Kenseth underwent surgical gastric banding, covered by her insurer. About 18 years later Dr. Huepenbecker, advised another operation for severe acid reflux and other problems resulting from the first surgery. Her employer provided insurance through Dean, a physician-owned integrated healthcare system, specifically excluding coverage for “surgical treatment or hospitalization for the treatment of morbid obesity” and services related to a non-covered benefit or service. Plan literature refers coverage questions to the customer service department. Huepenbecker worked at a Dean-owned clinic, scheduled surgery at a Dean-affiliated hospital, and instructed Kenseth to call her insurer. Kenseth spoke with a customer service representative, who stated that Dean would cover the procedure. After the surgery, Dean declined coverage. Kenseth was readmitted for complications. Dean denied coverage for the second hospitalization. Kenseth pursued internal appeals to obtain payment of the $77,974 bill before filing suit under ERISA, 29 U.S.C. 1001, and Wisconsin law. The district court granted Dean summary judgment. The Seventh Circuit affirmed as to estoppel and pre-existing condition claims, but remanded concerning breach of fiduciary duty. After the district court again entered summary judgment for Dean, the Supreme Court decided Cigna v. Amara, clarifying relief available for a breach of fiduciary duty in an ERISA action. The Seventh Circuit remanded, stating that Kenseth has a viable claim for equitable relief. View "Kenseth v. Dean Health Plan, Inc." on Justia Law

Atkinson filed suits against Kenray. Kenray filed a separate action against Hoosier, seeking insurance coverage for Atkinson’s claims. Atkinson and Kenray settled their suits. Kenray agreed to entry of judgments in favor of Atkinson. Atkinson agreed not to execute the judgments if Kenray pursued the coverage action against Hoosier. Kenray assigned claims against its insurance agent to Atkinson. State courts entered judgment in favor of Hoosier. Meanwhile, Atkinson sued Kenray’s insurance agent asserting errors and omissions claims. The agent obtained summary judgment. Atkinson returned to the district court that presided over the original suits to set aside the settlement covenant. Atkinson claimed fraudulent inducement: that it entered the agreement based upon Kenray’s representations that its agent had confirmed that Kenray had insurance coverage for Atkinson’s claims. The court held that, because the covenant contained an unambiguous integration clause, parol evidence could not be considered, but that if Atkinson could prove fraud in the inducement specific to the integration clause, it might prevail. Atkinson conceded that it could not establish fraudulent inducement as to the integration clause itself. The court declined to set aside the agreement. The Seventh Circuit reversed, holding that Indiana law does not impose the bright-line rule applied by the trial court. View "Judson Atkinson Candies, Inc. v. Kenray Assocs., Inc." on Justia Law

Prince was the general contractor for construction of an apartment building. Rybaltowski was an employee of a waterproofing company. His boss took Rybaltowski to the project site to perform an unpaid demonstration of the proposed caulking of windows. While Rybaltowski was at the site, a beam supporting masonry equipment fell on him. Less than an hour after the accident, Prince signed a subcontract with the waterproofing company. The insurance policy at issue was a Commercial General Liability Insurance policy with an exclusion from coverage for bodily injury to any contractor arising out of or in the course of the rendering or performing services of any kind or nature whatsoever by such contractor. “Contractor” was defined to include employees of subcontractors. The district court entered judgment in favor of the insurer, finding it had no duty to defend. The Seventh Circuit reversed and remanded, reasoning that the policy can be interpreted so that services are not provided until the contractor begins compensated work on the project. View "Atl. Cas. Ins. Co. v. Prince Contractors, Inc." on Justia Law

Morris died after a 2004 collision in Indiana; he was a passenger in Sampson’s vehicle. Sampson was insured by Mid-Century. The Estate made a claim for $50,000, the highest allowable amount. Nuzzo, a citizen of Ohio, was the assigned claims adjustor. The Estate ultimately filed a wrongful death suit. An Indiana state court awarded $1.2 million. Sampson assigned his rights against Mid-Century for an agreement that the Estate would not pursue collection against Sampson personally. In 2011, the Estate sued Mid-Century in California state court, alleging that its bad faith failure to pay the claim resulted in the excess jury verdict against Sampson. The court dismissed on forum non conveniens grounds. The Estate then sued Mid-Century and Nuzzo in Ohio state court, alleging tortious bad faith failure to pay the claim and breach of contract. The case was removed to an Ohio federal district court, then transferred to the district court in Indianapolis, which found that claims against Nuzzo were potentially viable under Ohio law, but that Indiana law governed both claims, so that Nuzzo was fraudulently joined. The court dismissed claims against Nuzzo and denied the Estate’s motion to remand. The Seventh Circuit vacated with instructions to remand, finding that Nuzzo was not fraudulently joined. View "Morris v. Nuzzo" on Justia Law

Phillips was beneficiary of a life insurance policy purchased by her fiancé, Strang, issued by Prudential. When Strang died, Prudential informed Phillips that the default method of payment was the “Alliance Account settlement option,” under which the insurer, instead of paying a lump-sum benefit, creates an interest-bearing account for the beneficiary and sends her checks that can be used to draw the funds, in part or in whole, at any time. The funds are held in Prudential’s general investment account, which allows Prudential to profit from the spread between its investment returns and interest paid to the beneficiary, in Phillips’s case, three percent. In a putative class action, Phillips claimed that establishment of the Alliance Account as the default payment method and her enrollment in it breached the insurance policy and unreasonably delayed payment of benefits in violation of the Illinois Insurance Code and that Prudential breached a fiduciary duty by not disclosing information regarding investments made with her funds and by keeping investment profits. The district court dismissed. The Seventh Circuit affirmed. “Whether this practice is disreputable is open to debate,” but It did not breach the policy, did not effect an unreasonable delay, and did not breach any fiduciary duty. View "Phillips v. Prudential Ins. Co." on Justia Law

Central States is a multiemployer pension plan for members of the Teamsters union in the eastern half of the U.S. Ready Mix employed Teamsters labor and participated in the Central States plan. In 2007 Ready Mix ceased employing covered workers and incurred $3.6 million in withdrawal liability to fully fund its pension obligations. Two affiliated companies under common control by Nagy, the owner of Ready Mix, conceded liability for the shortfall under the Employee Retirement Income Security Act, as amended by the Multiemployer Pension Plan Amendments Act of 1980, 29 U.S.C. 1301(b)(1). The district court concluded that Nagy held and leased property to Ready Mix as a passive investment, not a trade or business, so the leasing activity did not trigger personal liability, but that Nagy’s work as a manager for a country club was as an independent contractor, not an employee, and this activity qualified as a trade or business under section 1301(b)(1), which was enough for personal liability. The Seventh Circuit affirmed, holding that Nagy’s leasing activity is categorically a trade or business for purposes of personal liability under 1301(b)(1). View "Cent. States SE & SW Areas Pension Fund v. Nagy" on Justia Law

The 401(k) services industry engages in “revenue sharing,” an arrangement allowing mutual funds to share a portion of the fees that they collect from investors with entities that provide services to the mutual funds, the investors, or both. Until recently the practice was opaque to individual investors and many 401(k) plan sponsors. As the existence and extent of revenue sharing has become more widely known, lawsuits were filed, alleging that the practice violates the Employee Retirement Income Security Act of 1974 (ERISA). The district court awarded summary judgment to AUL, an Indiana-based insurance company that offers investment, record-keeping, and other administrative services to 401(k) plans. The court ruled that AUL was not a fiduciary of the Leimkuehler Profit Sharing Plan with respect to AUL’s revenue-sharing practices. The Seventh Circuit affirmed. Although “very little about the mutual fund industry or the management of 401(k) plans can plausibly be described as transparent,” AUL is not acting as a fiduciary for purposes of 29 U.S.C. 1002(21)(A) when it makes decisions about, or engages in, revenue sharing. View "Leimkuehler v. Am. United Life Ins. Co." on Justia Law

From 1997 through 2009 Sachdeva, the vice president for accounting at Koss, instructed Park Bank, where Koss had an account, to prepare more than 570 cashier’s checks, payable to Sachdeva’s creditors and used to satisfy personal debts. She embezzled about $17.4 million, pleaded guilty to federal crimes, and was sentenced to 11 years’ imprisonment. The SEC sued Sachdeva and an accomplice because their scheme caused Koss to misstate its financial position. Koss and Park Bank are litigating which bears the loss in Wisconsin. In this suit, Park Bank argued that Federal Insurance must defend and indemnify it under a financial-institution bond (fidelity bond) provision that promises indemnity for “Loss of Property resulting directly from . . . false pretenses, or common law or statutory larceny, committed by a natural person while on the premises of” the Bank. Sachdeva did not enter the Bank’s premises. She gave instructions by phone, then sent employees to fetch the checks. The district court entered judgment in the insurer’s favor. The Seventh Circuit affirmed; every court that has considered the subject has held that a fraud orchestrated from outside a financial institution’s premises is not covered under the provision, which is standard in the industry. View "Bankmanagers Corp. v. Fed. Ins. Co." on Justia Law

The law firm represented a potential buyer in the purchase of a drugstore. Buyer and Seller executed the sales contract separately. The firm misfiled the contract executed by Buyer, however, and Seller subsequently attempted to rescind the contract, which it characterized as an offer, because it had not timely received a copy of the contract executed by Buyer. When Seller’s efforts to avoid the purported contract were successful, Buyer sent a “formal notice of claim” to the firm, which sought coverage from its professional liability insurer. That insurer concluded that the firm was not entitled to coverage because it failed to properly notify the insurer of the mistake that ultimately led to the malpractice claim. The firm sought a declaratory judgment. The district court granted the insurer summary judgment. The Seventh Circuit affirmed, finding that the firm’s knowledge of the email exchange with Seller’s counsel and of an Alabama declaratory-judgment action constituted knowledge of “any circumstance, act or omission that might reasonably be expected to be the basis of” a malpractice claim. View "Koransky, Bouwer & Poracky, P. C. v. Bar Plan Mut. Ins. Co." on Justia Law