Justia Insurance Law Opinion Summaries

A subcontractor, CSC, installed the windows defectively at Metro's Chicago condominium. The building sustained significant water damage following a 2006 storm. The unit owners incurred personal-property damage. In 2009 Metro sued the developer, which was insolvent; in 2013 it added a claim against CSC for breach of the implied warranty of habitability. Metro and CSC reached a settlement. Metro dismissed its state court lawsuit; CSC assigned to Metro CSC’s rights to up to $700,000 of insurance coverage from Allied, arising out of the claims asserted against CSC in the lawsuit. The only pending claim against CSC in that lawsuit was for breach of the implied warranty of habitability. The settlement specified that it was not intended to compensate for the cost of repairing or replacing CSC’s defectively installed windows, but rather for the resultant damage to the remaining parts of the condominium and to the unit owners’ personal property. Allied obtained a declaratory judgment that it was not liable under CSC’s standard commercial general liability policy. The Seventh Circuit affirmed. The measure of damages for a breach of the implied warranty of habitability is the cost of repairing the “defective conditions,” here the defectively installed windows. Illinois courts have concluded that CGL policies like Allied’s do not cover the cost of repairing the insured’s defectively completed work; the Allied policy specifically excludes the cost of repairing CSC’s defective work. View "Allied Property & Casualty Insurance Co. v. Metro North Condominium Association" on Justia Law

The Indianapolis Airport Authority sued Travelers Property Casualty over Travelers’ partial denial of a claim for coverage arising from an airport construction accident that occurred in 2007. On motions for summary judgment, the district court interpreted the insurance contract in favor of Travelers on several issues, narrowing the Authority’s case to a claim for unreimbursed inspection costs associated with the incident. Two weeks before trial was set to begin on that claim, the district court entered an evidentiary order that effectively precluded the Authority from proving that sole remaining claim by restricting the testimony of two “hybrid fact/expert” witnesses, leaving the Authority with no designated damages expert. The Seventh Circuit affirmed in part and reversed in part the district court’s summary judgment order, and vacated the evidentiary order. The court upheld the district court’s construction of the General Coverage Provision and agreed that the Authority has no compensable soft cost claim because of the deductible, but stated that, if the Authority can demonstrate with competent evidence that it incurred expenses to reduce soft costs for which Travelers otherwise would have been liable, it may recover those expenses under the “expenses to reduce the amount of loss” provision, subject to policy limits. View "Indianapolis Airport Authority v. Travelers Property Casualty Co." on Justia Law

Flambeau adopted an employee wellness program, requiring its employees, as a condition of receiving employer-subsidized health insurance, to fill out a medical questionnaire and to undergo biometric testing. One employee did not meet those requirements in time for the 2012 benefit year;, he and his family were briefly without health insurance. He filed a complaint with the Equal Employment Opportunity Commission, which filed suit, arguing that Flambeau’s requirement violated the Americans with Disabilities Act (ADA) ban on involuntary medical examinations, 42 U.S.C. 12112(d)(4). The district court dismissed; the Seventh Circuit affirmed. The court declined to address whether wellness programs are exempt from the limits on medical examinations because the ADA does not “restrict … [an] organization … administering the terms of a bona fide benefit plan that are based on underwriting risks, classifying risks, or administering such risks that are based on or not inconsistent with State law” or the EEOC argument that this insurance safe harbor does not apply to wellness programs. The court held that the relief the EEOC sought is either unavailable or moot. The employee resigned before suit was filed. He did not incur damages as a result of Flambeau’s policy and is not entitled to punitive damages. Flambeau abandoned its wellness program requirements for reasons unrelated to the litigation. View "Equal Employment Opportunity Commission v. Flambeau, Inc." on Justia Law

Geiger, an account executive, received Aetna group disability insurance coverage. In 2009, Geiger stopped working and obtained short term disability precipitated by lumbar back pain and a 2007 L5S1 discectomy and bilateral ankle pain caused by avascular necrosis of the talar bones. In 2010, Geiger had several ankle surgeries. Aetna determined that Geiger was disabled from her occupation and approved long-term disability benefits, citing “required walking and driving for this occupation.” Geiger received $4,012 per month, 50% of her predisability earnings. Upon her approval for Social Security disability benefits, the amount was reduced to $784. After 24 months, the Plan requires a claimant to be unable to work at any reasonable occupation. In 2012, Aetna’s physician examined Geiger and found her capable of sedentary work. Under surveillance, Geiger was observed driving and visiting stores. The Plan terminated her benefits. In 2013, Aetna reinstated Geiger’s benefits. In 2014, under surveillance, Geiger was seen climbing into and driving an SUV, shopping, and carrying a bag. Aetna again terminated her benefits, citing the surveillance, prior independent peer reviews, a comprehensive clinical review, and occupational information. Geiger filed suit, citing her lack of medical improvement, her worsening medical condition, and the impact of severe pain on her ability to work. The court granted Aetna summary judgment. The Seventh Circuit affirmed, finding that Aetna minimized any conflict of interest stemming from its roles as administrator and insurer; presented sufficient evidence supporting its decision; and properly considered Geiger’s impairment and pain and the surveillance video. View "Geiger v. Aetna Life Insurance Co." on Justia Law

WCPP is a risk purchasing group for commercial property insurance. MGSA, an insurance broker, acts as WCPP’s program administrator, representing more than 600 properties. In 2011, MGSA sought renewal coverage for the WCPP properties. MGSA contracted with MC, which engaged NCAIG, which had previous insurance‐placement experience with Ward and his company JRSO. The chain of brokers for the WCPP renewal was: from MGSA, to MC, to NCAIG, to Ward and JRSO. In reality, Ward had created a fictitious policy for WCPP that was not actually backed by a legitimate insurer. Ward was convicted of wire fraud, sentenced to 10 years in prison, and ordered to pay restitution. One of the property groups in the WCPP program, Myan, had a history of losses, so MC had split it off from the main WCPP group for placement directly with JRSO for insurance. The Myan coverage used Norman-Spencer as program administrator, at the recommendation of NCAIG. Norman‐Spencer was paid $25,000 and issued policies for Myan’s coverage. Norman-Spencer wanted, but never obtained, additional contracts from WCPP. Norman-Spencer discovered an order issued against Ward and JRSO that could implicate Ward’s ability to bind coverage and, when Norman asked for a copy of Ward’s reinsurance agreement, Ward delayed for over a month and produced an agreement that contained irregularities. Norman‐Spencer did not inform WCPP or MGSA about these problems. None of the proposals or pricing information for WCPP came through Norman‐Spencer. MC and NCAIG received a commission from the WCPP premium; Norman‐Spencer did not. After Ward’s fraud was discovered, MGSA and WCPP sued Norman-Spencer. The Seventh Circuit affirmed summary judgment in favor of Norman-Spencer, concluding that Norman-Spencer owed no duty of care to either company. View "M.G. Skinner and Associates v. Norman-Spencer Agency, Inc" on Justia Law

Frye was seriously injured in an accident while driving for his job. Frye accepted $100,000, the per-person limit, from the other driver’s insurer, assigning it to his lawyer and to his employer’s insurer, Auto-Owners, from which Frye had received $692,895.79 in workers’-compensation benefits. Frye’s injuries were also covered by commercial automobile and commercial umbrella policies, issued by Auto-Owners to Frye’s employer. The automobile policy required Auto-Owners to pay any compensatory damages Frye was legally entitled to recover for bodily injuries caused by an underinsured motorist. The umbrella policy afforded follow-on coverage. Auto-Owners agreed to pay Frye $1,282,314.21: $900,000 under the automobile policy ($1 million in total coverage, less $100,000 from the other insurer); and $382,314.21 under the umbrella policy ($1 million in UIM coverage, less $617,685.79 in net workers’-compensation payments). Frye argued that Indiana law required Auto-Owners to provide through its umbrella policy UIM coverage in an amount equal to the policy’s general liability limit ($5 million) and that the setoff for workers’-compensation payments was impermissible under the contract and Indiana public policy. The district court awarded AutoOwners summary judgment. The Seventh Circuit reversed. While Indiana law allowed Auto-Owners to abstain from providing UIM coverage in the umbrella policy, once it provided such coverage it was required under Section 27-7-5-2(a) to provide that coverage in limits equal to the policy’s general liability limit: $5 million. It cannot decrease that cap based on workers’ compensation payments. View "Frye v. Auto-Owners Insurance Co." on Justia Law

Brown was injured at a Gurnee, Illinois Target store when a fitting room door came off its hinges and fell on her. In Brown’s negligence suit, Target filed a third-party complaint against Harbor, Target’s supplier of fitting rooms for the store, seeking contribution and indemnification. Discovery revealed that the same door fell on another Target customer approximately one week before it fell on Brown. Target and Harbor settled with Brown. Target tendered its defense of Brown’s lawsuit to Harbor’s insurer, Selective, claiming that it was an additional insured under its contract with Harbor. Selective sought a declaratory judgment that it had no duty to defend or indemnify. The Seventh Circuit affirmed summary judgment of $714,450.24 in favor of Target, concluding that: Target was an additional insured on Harbor’s policy because of a Supplier Qualification Agreement that required Harbor to designate Target as an additional insured and their Program Agreement for the fitting rooms; Brown’s allegations fell within the scope of the policy, since they could reasonably be read to assert a bodily injury caused by Harbor’s product; and Target had settled the lawsuit Brown in reasonable anticipation of liability. View "Selective Insurance Co. of South Carolina v. Target Corp." on Justia Law

Prather, age 31, tore his left Achilles tendon playing basketball. He scheduled surgery for July 22. On July 21, he called the surgeon’s office complaining of swelling and that an area of the left calf was sensitive and warm to the touch. The surgery was uneventful and he was discharged from the hospital the same day. He returned to work and was doing well in a follow-up visit to his surgeon on August 2. Four days later he collapsed, went into cardiopulmonary arrest, and died as a result of a blood clot in the injured leg that had traveled to a lung. Prather’s widow applied for benefits under his Sun Life group life insurance policy (29 U.S.C. 1132(a)(1)), which limited coverage to “bodily injuries ... that result directly from an accident and independently of all other causes.” The district court granted Sun Life summary judgment. The Seventh Circuit reversed, noting that deep vein thrombosis and pulmonary embolism are risks of surgery, but that even with conservative treatment, such as immobilization of the affected limb, the insured had an enhanced risk of a blood clot. The forensic pathologist who conducted a post-mortem examination of Prather did not attribute his death to the surgery. View "Prather v. Sun Life & Health Insurance Co." on Justia Law

After a 2013 fire at the Milwaukee County Courthouse, the county filed a claim with its primary insurer, the State of Wisconsin Local Government Property Insurance Fund. The Fund had engaged Lexington as either its reinsurer or excess insurer (the parties disagree) and maintained a separate insurance policy with Cincinnati Insurance that covered machinery and equipment at the Courthouse. The Fund paid all but a small portion of the county’s claimed losses, filed a reimbursement claim with Lexington, and insisted that the remaining unpaid portion of the county’s claim should be paid by Cincinnati. Pursuant to separate Joint Loss Agreements (JLA) in the county’s policies, the Fund and Cincinnati agreed to arbitrate their dispute. The district court denied Lexington’s motion to be allowed to participate in the arbitration. The Seventh Circuit affirmed. The Fund policy JLA provides a procedure whereby the parties could “signify” an agreement to arbitrate. No such signals were exchanged between Lexington and any other party; no agreement to arbitrate exists between Lexington and the other insurers. Absent such an agreement, Lexington is not entitled to insert itself into the arbitration between the Fund and Cincinnati. View "State of Wisconsin Local Government Property Insurance Fund v. Lexington Insurance Co." on Justia Law

In 2014, Lend Lease, the construction manager of the Chicago River Point Tower Project, hired Cives as a subcontractor. Cives hired Midwest Steel. Midwest had, years before, hired AES to supply Midwest with additional workers, who were co‐employed by Midwest and AES. Lend Lease entered into a “contractor-controlled insurance program” with Starr Liability with a $500,000 deductible. All subcontractors were to join in the policy. AES had, several years earlier, obtained workers’ compensation for its workers from TIC, so that injured AES‐Midwest workers could obtain workers’ compensation from either Starr (or Lend Lease under the deductible) or TIC. Four ironworkers, jointly employed by Midwest and AES and performing work for Midwest were injured on the job and sought workers’ compensation. The claims exceeded $500,000, so Lend Lease had to pay its full deductible. Starr paid the remaining claims. Lend Lease filed suit against TIC, AES’s insurer, and AES, seeking reimbursement of the $500,000. The district court dismissed. The Seventh Circuit affirmed. Lend Lease made a deal with Starr and is bound by it. The court rejected an argument that AES has been unjustly enriched; AES was not obligated to purchase an insurance policy that would cover Lend Lease's deductible. View "Lend Lease (US) Construction, Inc. v. Administrative Employer Services, Inc." on Justia Law