Justia Insurance Law Opinion Summaries

Articles Posted in US Court of Appeals for the Fifth Circuit
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The case involves SKAV, L.L.C., the owner of a Best Western hotel in Abbeville, Louisiana, and Independent Specialty Insurance Company. The hotel was damaged by Hurricane Laura in August 2020, and SKAV filed a claim on a surplus lines insurance policy it had purchased from Independent Specialty. The policy contained an arbitration clause requiring all disputes to be settled by arbitration. However, SKAV sued Independent Specialty in the Western District of Louisiana, alleging that the insurance company had failed to adequately cover the hotel's hurricane damage under the policy's terms. Independent Specialty moved to compel arbitration, but the district court denied the motion, citing a prior decision that concluded that § 22:868 of the Louisiana Revised Statutes voids an arbitration provision in a contract for surplus lines insurance.The case was appealed to the United States Court of Appeals for the Fifth Circuit. The main dispute was the effect of § 22:868 of the Louisiana Revised Statutes on the insurance policy's arbitration clause. The statute bars insurance policies from depriving Louisiana courts of jurisdiction and permits, in limited circumstances, forum- and venue-selection provisions. The court noted that there were conflicting decisions on this issue from district courts in Louisiana and New York.The Fifth Circuit Court of Appeals affirmed the district court's decision. The court concluded that the arbitration clause in the surplus lines insurance policy was void under § 22:868. The court reasoned that the Louisiana Legislature's 2020 amendments to the statute did not reverse the state's longstanding anti-arbitration policy. The court also rejected Independent Specialty's argument that the issue of the arbitration clause's validity must itself go to arbitration, stating that when a statute prevents the valid formation of an arbitration agreement, the court cannot compel arbitration, even on threshold questions of arbitrability. View "S. K. A. V. v. Independent Specialty Insurance Co." on Justia Law

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This case involves a dispute between Sentry Insurance and James J. Morgan, who operates a business. Morgan's properties, insured by Sentry, suffered wind and hail damage from a storm. Sentry estimated the damages at $190,768.33 and paid Morgan $61,026.93 after deductions. However, Morgan estimated his loss at $540,426.05 and demanded Sentry pay an additional $349,657.22. When the parties couldn't agree on the loss amount, they turned to an appraisal process outlined in their insurance policy. Both parties appointed an appraiser, but the appraisers couldn't agree on an umpire. Consequently, Sentry filed a petition for the district court to appoint an umpire.The district court dismissed Sentry's petition, ruling that it lacked subject matter jurisdiction because the petition didn't meet the amount-in-controversy requirement for diversity jurisdiction under 28 U.S.C. § 1332. The court reasoned that it couldn't assess the value of the parties' contractual right to have an umpire examine the difference between two appraisers' estimates and determine the loss amount because the appraisers hadn't yet made their estimates.The United States Court of Appeals for the Fifth Circuit reversed the district court's decision. The appellate court disagreed with the district court's narrow interpretation of the right to be protected. It held that in an action seeking the appointment of an umpire for appraisal, the right to be protected is the right to continue with the appraisal process, and the value of this right is the disputed amount set to be resolved through appraisal. The court found that Sentry's petition established an amount in controversy over $75,000, as Morgan had demanded an additional $349,657.22 under the policy. The case was remanded to the district court to consider Morgan's additional jurisdictional arguments. View "Sentry Insurance v. Morgan" on Justia Law

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A car accident occurred during Race Wars 2, an amateur drag racing event organized by Flyin’ Diesel Performance & Offroad, L.L.C. The accident resulted in injuries and deaths among spectators. The injured parties and representatives of the deceased sued Flyin’ Diesel, who turned to their insurer, Kinsale Insurance Company, for legal defense. The dispute centered on whether Kinsale owed a duty to defend Flyin’ Diesel under their commercial general liability insurance policy.The case was first heard in the United States District Court for the Western District of Texas. The district court found the insurance policy ambiguous and ruled that Kinsale owed Flyin’ Diesel a duty to defend. Flyin’ Diesel was granted partial summary judgment, and Kinsale's motion was denied. Kinsale appealed this decision.The case was then reviewed by the United States Court of Appeals for the Fifth Circuit. The appellate court disagreed with the district court's finding of ambiguity in the insurance policy. The court determined that the policy unambiguously excluded the claims made by the injured parties from coverage. Therefore, the court concluded that Kinsale was not obligated to defend Flyin’ Diesel in the lawsuit. The court reversed the district court's partial summary judgment for Flyin’ Diesel and remanded the case with instructions to grant summary judgment to Kinsale. View "Kinsale Ins v. Flyin' Diesel Performance" on Justia Law

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In this case, the plaintiffs, Carl and Mary Ellen Schnell, filed an insurance claim with their home insurer, State Farm Lloyds, after a hailstorm damaged their home's roof. State Farm accepted coverage for some claims but denied others, including the claim that the City of Fort Worth required the Schnells to replace their entire roof, rather than just the damaged tiles. The Schnells sued, and the district court ruled in favor of State Farm. The Schnells appealed this decision.The United States Court of Appeals for the Fifth Circuit found that there were genuine issues of material fact that prevented the case from being resolved through summary judgment. The court found conflicting evidence regarding whether a building code administrator had flatly denied the Schnells' request for spot repairs or had conditioned his decision on the Schnells confirming that the old and new tiles on their roof did not interlock. The court also found a genuine dispute of fact about whether the Schnells' roof tiles were damaged by a covered risk like wind or hail, which would have triggered their insurance coverage.Thus, the court vacated the district court's summary judgment in favor of State Farm on the Schnells' breach of contract and Texas Prompt Payment of Claims Act claims. The court affirmed the remainder of the district court's judgment and remanded the case for further proceedings consistent with its opinion. View "Schnell v. State Farm Lloyds" on Justia Law

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Gold Coast Commodities, Inc., a company that converts used cooking oil and vegetable by-products into animal feed ingredients, was insured under a policy by Travelers Casualty and Surety Company of America. The policy included a pollution exclusion clause. During the policy period, the City of Brandon and the City of Jackson filed suits against Gold Coast, alleging that the company dumped corrosive, high-temperature wastewater into their respective sewer systems, causing damage. Travelers denied coverage for these claims, citing the policy's pollution exclusion clause. Gold Coast appealed this decision, arguing that Travelers had a duty to defend them in these lawsuits and reimburse them for their defense costs.The United States Court of Appeals for the Fifth Circuit upheld the lower court's decision, finding that the claims against Gold Coast were clearly and unambiguously excluded from coverage based on the policy's pollution exclusion. The court noted that the pollution exclusion clause was not ambiguous in this context, as there was no reasonable interpretation of the wastewater's form or qualities that would conclude that it was not an irritant or contaminant, as defined in the policy.The court concluded that because the claims fell outside the policy's coverage, Travelers had no duty to defend or indemnify Gold Coast and its principals in relation to the lawsuits brought against them by the City of Brandon and the City of Jackson. Therefore, the court affirmed the decision of the district court, which had denied Gold Coast's motions for partial judgment on the pleadings and had granted Travelers' motion for partial summary judgment. View "Gold Coast Commodities, Inc. v. Travelers Casualty and Surety Company of America" on Justia Law

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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