Justia Insurance Law Opinion Summaries

Articles Posted in US Court of Appeals for the Fifth Circuit
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In this case, Southwest Airlines filed a suit against Liberty Insurance Underwriters for denial of a claim for reimbursement under its cyber risk insurance policy after a massive computer failure. This computer failure resulted in flight delays and cancellations, causing Southwest to incur over $77 million in losses. Southwest claimed these losses under their insurance policy, but Liberty denied the claim, arguing that the costs incurred by Southwest were discretionary and either not covered under the policy or excluded by certain policy clauses.The United States Court of Appeals for the Fifth Circuit disagreed with the lower court's decision to grant summary judgment for Liberty. The court concluded that the costs incurred by Southwest due to the system failure were not categorically barred from coverage as a matter of law. The court found that Southwest's five categories of costs satisfied the policy's causation standard and were thus "losses" that it "incurred."The court also concluded that the district court erred in finding that the claimed costs were consequential damages excluded from coverage and that the term "third parties" did not apply to Southwest’s customers and did not preclude costs related to Southwest’s payments to its customers.The court reversed the district court's decision and remanded the case back to the lower court for further proceedings consistent with its opinion. View "Southwest Airlines v. Liberty Insurance" on Justia Law

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After being involved in a car accident, Kenan Watkins filed a diminished value claim with his insurer, Allstate Property and Casualty Insurance Company ("Allstate"), which was denied. Watkins then filed an action in the United States District Court for the Southern District of Mississippi, alleging that the denial of his claim violated Mississippi law. However, the district court ruled in favor of Allstate, holding that Allstate's policy did not violate Mississippi law and that Watkins failed to state a plausible claim, which led to Watkins' appeal to the United States Court of Appeals for the Fifth Circuit.In the background of the case, Watkins had an insurance policy with Allstate for his 2021 Chevrolet Tahoe. After the accident, Watkins' vehicle sustained substantial damages, and Watkins alleged that his car sustained an additional diminished value. Allstate denied Watkins' diminished value claim, relying upon a provision in its policy that excludes any decrease in the property's value resulting from the loss and/or repair or replacement. Watkins did not dispute this policy exclusion, but argued that Allstate's exclusion provision violates the Mississippi Uninsured Motorist Statute. Allstate moved to dismiss the case under Rule 12(b)(6), arguing that Watkins did not plausibly allege that the other driver's vehicle was an "uninsured motor vehicle" under Mississippi law, and that even if it was, Allstate's provision excluding diminished value is valid under Mississippi law.Upon review, the United States Court of Appeals for the Fifth Circuit affirmed the district court's decision. The court held that Watkins failed to make a plausible claim for relief under Rule 12(b)(6) due to insufficient factual content in the complaint. The court also held that Allstate’s diminished value exclusion is valid under Mississippi law and does not violate public policy. The court reasoned that Watkins had not pointed to any legislative or judicial pronouncement requiring that diminished value be a part of all automobile insurance policies. Therefore, in this instance, the plain meaning of Allstate’s policy controlled, and Allstate’s diminished value exclusion was upheld as valid under Mississippi law. View "Watkins v. Allstate Property & Casualty Insurance Co." on Justia Law

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Connie Bourque, a Louisiana resident insured by State Farm Mutual Automobile Insurance Co., filed a class-action lawsuit, alleging that State Farm breached its insurance contract and violated its duty of good faith and fair dealing under Louisiana Law. The claim was based on the method State Farm used to calculate the actual cash value (ACV) of vehicles in the event of a total loss. State Farm used the Autosource MarketDriven Valuation, which Bourque alleged provided a valuation less than the true ACV.The United States District Court for the Western District of Louisiana certified a class of all persons insured by State Farm in Louisiana whose vehicle's Autosource valuation was less than the value according to the National Automobile Dealers Association (NADA) Official Used Car Guide. State Farm appealed this decision to the United States Court of Appeals for the Fifth Circuit.The Fifth Circuit, citing a similar case (Sampson v. United Services Automobile Ass’n), held that the district court's class certification was error. The Fifth Circuit noted that to establish a breach of contract under Louisiana law, proof of injury is required—proof that Bourque failed to establish can be made on a class-wide basis. The court also noted that the NADA value was just one of many statutorily acceptable methods for calculating ACV, and therefore pinning ACV to NADA value constituted an impermissibly arbitrary choice of a liability model.As a result, the Fifth Circuit vacated the district court’s grant of class certification and remanded the case for further proceedings. View "Bourque v. State Farm Mtl Auto Ins" on Justia Law

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In this case, the United States Court of Appeals for the Fifth Circuit considered an appeal by Colony Insurance Company against First Mercury Insurance Company related to a settlement agreement for an underlying negligence case. Both companies had consecutively insured DL Phillips Construction, Inc. (DL Phillips) under commercial general liability insurance policies. After the settlement, Colony sued First Mercury, arguing that First Mercury needed to reimburse Colony for the full amount of its settlement contribution, as it contended that First Mercury's policies covered all damages at issue. The district court granted summary judgment in favor of First Mercury, prompting Colony's appeal.In the underlying negligence case, DL Phillips was hired to replace the roof of an outpatient clinic in Texas. Shortly after completion, the roof began leaking, causing damage over several months. The clinic's owner sued DL Phillips for various claims, including breach of contract and negligence. A verdict was entered against DL Phillips for over $3.7 million. Both Colony and First Mercury contributed to a settlement agreement, and then Colony sued First Mercury, arguing it was responsible for all the property damage at issue.The appellate court held that under the plain language of First Mercury's policies and relevant case law, First Mercury was only liable for damages that occurred during its policy period, not all damages resulting from the initial roof defect. The court also found that Colony failed to present sufficient evidence to create a genuine dispute of material fact about whether there was an unfair allocation of damages, which would be necessary for Colony's contribution and subrogation claims. As such, the court affirmed the district court's decision to grant summary judgment in favor of First Mercury and denied summary judgment for Colony. View "Colony Insurance Company v. First Mercury Insurance Company" on Justia Law

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Certain Underwriters at Lloyds, London (“Lloyds”) brought an intervenor complaint against Cox Operating LLC (“Cox”) seeking to recover maintenance and cure benefits Lloyds paid to an injured seaman. Cox filed a motion for summary judgment, arguing that Lloyds bears responsibility for the payments under a protection and indemnity (“P & I”) policy under which Cox is an assured. The district court agreed and granted the motion. Lloyds timely appealed.   The Fifth Circuit affirmed. The court explained that even if there were ambiguity as to the term “intended operations,” as included in the limitation on the waiver of subrogation, any such ambiguity is to be resolved “in favor of coverage.” Because the M/V SELECT 102 was engaged in its “intended operations” at the time of the seaman’s injury and the limitation on the waiver of subrogation does not apply, Lloyds waived its subrogation rights as to Cox. Thus, the court affirmed the he district court’s dismissal of Lloyds’s intervenor complaint. View "Certain Underwriters v. Cox Operating" on Justia Law

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Defendant Compass Minerals Louisiana, Inc. (“Compass”) is part of a mineral company that owns and operates multiple salt mines. Among Compass’s locations is its Cote Blanche salt mine. Compass contracted with Louisiana-based companies Fire & Safety Specialists, Inc. (“FSS”) and MC Electric, LLC (“MCE”). An electrician employed by MCE died in an accident at the Cote Blanche salt mine. Both FSS and MCE held a commercial general liability policy with QBE. QBE filed a declaratory action in federal court, asserting that the indemnification and additional-insured provisions in the FSS and MCE purchase orders are “null, void, and unenforceable” under the Louisiana Oilfield Anti-Indemnity Act (“LOAIA”). The court rejected QBE’s argument that Compass “drills for” salt by using the drill-and-blast method for breaking a salt wall. It concluded, relatedly, that the term “drilling for minerals” in the LOAIA “should be construed as referring to the drilling of a well.” QBE appealed.   Finding no clear and controlling precedent on this issue of Louisiana law, the Fifth Circuit certified two questions to the Louisiana Supreme Court: 1.     Does the Louisiana Oilfield Anti-Indemnity Act, La. Stat. Ann. Section 9:2780, apply to provisions in agreements that pertain to “drilling for minerals,” even where the agreement does not “pertain to a well”? 2.     If the Act applies to agreements that pertain to “drilling for minerals,” irrespective of the agreement’s nexus to a well, does the Act apply to invalidate these indemnification and additional-insured provisions contained in contracts for fire suppression and electrical work in a salt mine, by virtue of the salt mine’s use of a “drill-and-blast” method for mining salt? View "QBE Syndicate 1036 v. Compass Minerals" on Justia Law

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Defendants United Services Automobile Association and USAA General Indemnity Company (“USAA”) contract with insureds to pay “Actual Cash Value” (“ACV”) for totaled vehicles. USAA calculates ACV using the CCC One Market Valuation Report (“CCC”) rather than, e.g., the National Automobile Dealers Association guidebook (“NADA”) or Kelley Blue Book (“KBB”). Plaintiffs are USAA-insureds whose vehicles were totaled and who received ACV as determined by CCC. Plaintiffs alleged that CCC violates Louisiana statutory law, that they would have been paid more if USAA used NADA, and that they are owed the difference. Plaintiffs sought certification for a class of USAA-insureds who were paid less under CCC, and the district court granted it. USAA appealed class certification. On appeal, the parties dispute, among other things, whether common questions across the class involving damages and liability predominate over individual differences between class members, as required for class certification under Rule 23(b)(3).   The Fifth Circuit vacated and remanded. The court held that Plaintiffs failed to show injury and therefore failed to establish USAA’s liability on a class-wide basis because they failed to demonstrate entitlement to the NADA values for their totaled vehicles. The court held that with respect to Plaintiffs’ breach of contract claim, the district court’s choice of NADA is not simply an arbitrary choice among imperfect damages models. It is an arbitrary choice of a liability model, and a district court’s wide discretion to choose an imperfect estimative-damages model at the certification stage does not carry over from the context of damages to the context of liability. View "United Svcs Automobile v. Sampson" on Justia Law

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Sixteen professional models (the Models) sued three Texas strip clubs (the Clubs) following the Clubs’ use of the Models’ likeness for advertising campaigns without the Models’ consent. Relevant to those claims, Princeton Excess and Surplus Lines Insurance Company (PESLIC) filed this declaratory judgment action. PESLIC issued two commercial liability insurance policies to the Clubs covering the time period relevant to the Models’ claims. PESLIC named both the Models and the Clubs as Defendants. The parties disputed whether that policy’s Exhibitions and Related Marketing Exclusion rendered illusory the Personal and Advertising Injury coverage. The district court agreed with the Models and the Clubs that it did. The district court also held that PESLIC had a duty to indemnify the Clubs under the 02 Policy. PESLIC appealed.   The Fifth Circuit reversed, rendered in part, and remanded. The court explained that PESLIC does not have a duty to defend the Clubs under the 01 Policy. Its duty to indemnify under the 01 Policy depends on the final resolution of the state case. As for the 02 Policy, PESLIC does not have a duty to defend or indemnify under it because the 02 Policy does not provide coverage for the claims alleged by the Models. The court held that the district court erred by concluding otherwise. Accordingly, the court reversed the district court’s summary judgment, rendered in part, and remanded the remaining issue of indemnity under the 01 Policy with instructions for the district court to stay disposition of that issue pending final resolution of the underlying state court lawsuit. View "Princeton Excess v. AHD Houston" on Justia Law

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After a fatal truck accident claimed the lives of members of two families, the victims' families filed a personal injury action against the trucking company. The trucking company's insurer ultimately transferred $1 million to the law firm representing one of the families. The insurer then notified the other family that the policy limits had been exhausted. That same day, the insurer submitted two checks: one to the victim's family and one to the law firm.The family that was not party to the settlement filed an involuntary bankruptcy petition against the trucking company. The trustee brought an adversary proceeding against the other victim's family and their law firm, seeking to avoid and recover the transfer of the policy proceeds pursuant to 11 U.S.C. Secs. 547 and 550 of the Bankruptcy Code. The bankruptcy court denied the law firm's motion to dismiss.On appeal, the family that settled and the law firm argued that the district court erred in determining that the trucking company held an equitable property interest in the policy proceeds. The Fifth Circuit affirmed, finding that these facts fit the "limited circumstances" under which the policy proceed are considered the property of the estate. View "Law Office of Rogelio Solis v. Curtis" on Justia Law

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Plaintiff planned on hosting a music festival in Austin, Texas. However, Austin canceled the event due to concerns related to COVID-19. In turn, ticket holders who were refused a refund sued, resulting in a judgment against PLaintiff of over $1 million. Plaintiff sued its insurer for failure to defend against the class action. The district court denied Plaintiff's motion for summary judgment and granted the insurer's motion for summary judgment. Plaintiff appealed.On appeal. the parties agreed that the district court had jurisdiction under 28 U.S.C. 1332(a)(1) and Plaintiff claimed the Fifth Circuit had jurisdiction pursuant to 28 U.S.C. 1291.Exercising its independent judgment, the Fifth Circuit could not find proper allegations or evidence of Plaintiff's citizenship, giving the parties an opportunity to respond. However, the Fifth Circuit found the proffered evidence of Plaintiff's citizenship insufficient, remanding the case for the limited purpose of determining whether jurisdiction exists. View "SXSW v. Federal Insurance" on Justia Law