Justia Insurance Law Opinion Summaries

Articles Posted in US Court of Appeals for the Ninth Circuit
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Plaintiff's son died in a single-vehicle collision. At the time, he was intoxicated and driving the wrong way on a one-way road. The accidental death and dismemberment insurance policy obtained from defendant Life Insurance Company of North America (LINA) by the plaintiff via his employer paid benefits for a “Covered Accident,” defined as “[a] sudden, unforeseeable, external event that results, directly and independently of all other causes.”Applying the Padfield test, Padfield v. AIG Life Ins. Co., 290 F.3d 1121 (9th Cir. 2002), the son’s death was an “accident” because, while the facts demonstrated that the son engaged in reckless conduct, the record did not show that his death was “substantially certain” to result from that conduct. Thus, the Ninth Circuit affirmed the district court's finding. View "SCOTT WOLF V. INS. CO. OF N. AMERICA" on Justia Law

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Liberty Insurance Corporation (“Liberty”) sought to rely on a general coverage exclusion, it was aware that its policy also contained an exception to the general exclusion if the Defendant homeowners, could show that the all-terrain vehicle (ATV) was not subject to motor vehicle registration and was used to “service” their cabin. One of Defendant homeowners was the only witness who testified during a bench trial.   After the trial concluded, the district court (at Liberty’s request) imposed Rule 37(c)(1) sanctions on Defendants for failing to disclose a witness. The district court also excluded one of the homeowner’s testimony about whether the ATV was registered and used to service the cabin, based on the theory that he had not been properly disclosed as a witness. The district court ruled that ATV was used to service the cabin at any time,” and thus found that the Defendants were not entitled to coverage.   The Ninth Circuit reversed the district court’s order imposing sanctions and remanded for a new trial. The court held that because Defendants complied with Rule 26(a)(1)(A)(i)’s requirement to disclose “individuals likely to have discoverable information—along with the subjects of that information” for the purpose of identifying potential fact witnesses, sanctions under Rule 37(c)(1) were not justified. But even Defendants had not complied with Rule 26, the district court abused its discretion by imposing Rule 37(c)(1) sanctions without analyzing (1) whether the alleged defects in the disclosures were harmless and (2) whether the defects involved willfulness, fault, or bad faith. View "LIBERTY INSURANCE CORPORATION V. YVONNE BRODEUR" on Justia Law

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Affirming the district court’s summary judgment in favor of National Railroad Passenger Corporation and other railroad companies, the Ninth Circuit held that, as to railroad employees, the federal Railroad Unemployment Insurance Act preempts California’s Healthy Workplaces, Healthy Families Act, which requires employers to provide employees with paid sick leave that they may use for specified purposes.   RUIA provides unemployment and sickness benefits to railroad employees, and it contains an express preemption provision disallowing railroad employees from having any right to “sickness benefits under a sickness law of any State.” Looking at the plain meaning of the statutory text, the court concluded that the preemption provision broadly refers to compensation or other assistance provided to employees in connection with physical or mental well-being. The court concluded that RUIA’s statutory framework and stated purposes confirm the breadth of its preemptive effect.   The court found unpersuasive an argument by the California Labor Commissioner and union-intervenors that RUIA does not preempt the California Act as to railroad employees because the benefits the Act offers are different in kind than RUIA’s benefits. The court also found unpersuasive (1) an argument that RUIA should be interpreted as preempting only the kinds of state laws that existed at the time RUIA was amended to provide for sickness benefits; and (2) various textual arguments in support of a narrower interpretation of the preemption provision. View "NAT'L RAILROAD PASSENGER CORP. V. JULIE SU" on Justia Law

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Gardineer was involved in an automobile accident. She sued the other driver, Lynette Hill, and the vehicle owner, Dennis Hill (Lynette’s father-in-law). Dennis had both a primary insurance policy and an umbrella policy with ANPAC. After Dennis’s death, the parties reached a settlement wherein ANPAC paid Gardineer the policy limit of Dennis’s automobile insurance policy. Gardineer reserved the right to assert that ANPAC had a duty to indemnify Hill under Dennis’s umbrellas policy for Hill’s liability. ANPAC sought a declaration that it had no duty to indemnify Hill under the umbrella policy.The Ninth Circuit affirmed summary judgment in favor of ANPAC. The umbrella policy, by its plain and unambiguous terms, did not provide coverage for Lynettel’s liability arising from her use of Dennis’s vehicle. The term “insured” meant Dennis, his wife, and any “relative” – defined as a related person living in the household. Lynette did not reside in Dennis’s household; she was not a “relative” and not an “insured” under the policy. View "American National Property & Casualty Co. v. Gardineer" on Justia Law

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Hiscox sold Ernst a commercial crime insurance policy in 2012. In 2019, an Ernst clerk, in response to a fraudulent email, wired payments to a fraudulent actor she believed to be Ernst's founder and managing broker. In 2019, Ernst submitted a $200,000 claim under the policy. Hiscox denied Ernst’s claim, stating that Ernst’s policy did not cover the fraud because an employee had taken action to initiate the wire transfer. Two provisions of the parties’ 2012 insurance policy were disputed: the “Computer Fraud” and “Funds Transfer Fraud” provisions.The Ninth Circuit reversed the dismissal of Ernst’s suit. The district court incorrectly interpreted the Computer Fraud provision by wrongly relying on precedent with dispositively different facts and improperly relying on an embezzlement-based analysis. Here, Ernst immediately lost its funds when the funds were transferred as directed by the fraudulent email, and there was no intervening event. Taking the pleaded facts as true, Ernst suffered a loss resulting “directly” from the fraud, arguably entitling Ernst to coverage under the policy. The Funds Transfer provision also covered Ernst’s loss resulting directly from the fraudulent email instruction. The district court erred when it reasoned that Ernst’s alleged loss did not result directly from fraudulent instructions. View "Ernst & Haas Management Co., Inc.. v. Hiscox, Inc." on Justia Law

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Through a bankruptcy proceeding, Bristol became the successor-in-interest to Haven, an accredited mental-health and substance-abuse treatment center that regularly serviced patients insured by Cigna. Bristol alleged that Cigna violated the Employee Retirement Income Security Act of 1974 (ERISA) and state law by denying Haven’s claims for reimbursement for services provided. Haven was out-of-network for Cigna’s insureds. The district court dismissed Bristol’s ERISA claim, as an assignee of a healthcare provider, for lack of derivative standing, or lack of authority to bring a claim under ERISA, 29 U.S.C. 1132(a)(1)(B).The Ninth Circuit reversed. Under ERISA, a non-participant health provider cannot bring claims for benefits on its own behalf but must do so derivatively, relying on its patients’ assignments of their benefits claims. Other assignees also may have derivative standing if extending standing would align with the goal of ERISA. Refusing to allow derivative standing for Bristol would create serious perverse incentives that would undermine the goal of ERISA. Denying derivative standing to health care providers would harm participants or beneficiaries because it would discourage providers from becoming assignees and possibly from helping beneficiaries who were unable to pay up-front. View "Bristol SL Holdings, Inc. v. Cigna Health and Life Insurance Co." on Justia Law

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Former students sued Kamehameha Schools, alleging sexual abuse by a doctor who had practiced on SFMC’s campus. Kamehameha filed crossclaims against SFMC, which sent these crossclaims to its insurer, Argonaut. Argonaut ultimately represented SFMC subject to a reservation of rights. Neither party could determine the terms of the relevant policies from decades earlier. Argonaut sought declaratory relief in federal court under 28 U.S.C. 2201, as to what policies Argonaut had issued to SFMC during the relevant period and the terms of those policies. SFMC asked the district court to decline jurisdiction and, alternatively counterclaimed for declaratory and monetary relief.The Ninth Circuit affirmed the district court’s order, declining to exercise jurisdiction. Generally, a district court has the discretion to decline jurisdiction over a 28 U.S.C. 2201 declaratory-relief claim, after considering the relevant factors but when a declaratory claim is joined with an independent monetary one, the court usually must retain jurisdiction over the entire action. That mandatory jurisdiction rule did not apply; parties can plead a conditional counterclaim and still preserve objections to jurisdiction. SFMC’s counterclaims were conditional. Because SFMC did not waive its threshold defense, the district court still had discretionary jurisdiction. The district court thoroughly considered and correctly concluded that each relevant factor favored declining jurisdiction, noting that the declaratory claims could be filed in state court and that deciding them would not settle all aspects of the controversy or clarify the parties’ legal relationships. View "Argonaut Insurance Co. v. St. Francis Medical Center" on Justia Law

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In 1993, the County and the Orange County Employee Retirement System (OCERS) entered into a Memorandum of Understanding (MOU), allowing the County to access surplus investment earnings controlled by OCERS and depositing a portion of the surplus into an account to pay for county retirees' health insurance. The county adopted the Retiree Medical Plan, funded by those investment earnings and mandatory employee deductions. The Plan explicitly provided that it did not create any vested rights. The labor unions then entered into MOUs, requiring the county to administer the Plan and that retirees receive a Medical Insurance Grant. In 1993-2007, retired employees received a monthly grant benefit to defray the cost of health insurance. In 2004, the county negotiated with its unions to restructure the underfunded program, reducing benefits for retirees.Plaintiffs filed suit. The Ninth Circuit affirmed summary judgment in favor of the county. The 1993 Plan explicitly provided that it did not create any vested right to benefits. The Plan was adopted by resolution and became law with respect to Grant Benefits, part of the MOUs. The MOUs expired on their own terms by a specific date. Absent express language providing that the Grant Benefits vested, the right to the benefits expired when the MOUs expired. The Plan was not unilaterally imposed on the unions and their employees without collective bargaining; the unions executed MOUs adopting the Plan. The court rejected an assertion that the Grant Benefit was deferred compensation and vested upon retirement, similar to pension benefits. View "Harris v. County of Orange" on Justia Law

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The Ninth Circuit affirmed the district court's order dismissing Mudpie's claims against its insurer in a putative class action brought by Mudpie, seeking to recover under the insurance policy's "Business Income" and "Extra Expense" coverage after state and local authorities in California issued several public health orders in response to the COVID-19 pandemic. Mudpie claimed that the public health orders prevented it from operating its children's stores. Mudpie sought declaratory relief and asserted claims for breach of contract and breach of the implied covenant of good faith and fair dealing.The panel affirmed the district court's ruling that Mudpie's claimed losses are not covered by the policy and the district court did not err in dismissing the claims for declaratory relief, breach of contract, and breach of the covenant of good faith and fair dealing. The panel explained that California courts would construe the phrase "physical loss of or damage to" as requiring an insured to allege physical alteration of its property. In this case, Mudpie did not identify a distinct, physical alteration of the property. The panel also concluded that the policy's Virus Exclusion bars coverage of Mudpie's claimed losses. View "Mudpie, Inc. v. Travelers Casualty Insurance Co. of America" on Justia Law

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HC purchased commercial auto liability, commercial umbrella, and commercial general liability (CGL) coverage from United. An HC employee was operating a company truck and trailer. The trailer detached and hit another vehicle, killing the driver and injuring a passenger. To settle the resulting claims, United paid the combined $3 million limits of the commercial auto and umbrella policies but denied coverage under the CGL policy based on the Aircraft, Auto or Watercraft (AAW) exclusion, and the Multiple Liability Coverages Limitation (MLCL) endorsement. United argued that the injuries arose out of the use of a vehicle pulling a loaded equipment trailer, thus arising out of the use of an “auto,” precluding coverage under the CGL policy under the AAW exclusion. Because coverage was provided under the commercial auto policy, United argued that the CGL policy did not provide coverage, pursuant to the MLCL endorsement.The district court found the provisions unambiguous but unenforceable because they were not listed in a table of contents or notice section of important provisions. The Ninth Circuit certified the question to the Montana Supreme Court: Whether, when an insurance policy does not include either a table of contents or a notice section of important provisions, in violation of Mont. Code 33-15-337(2), the insurer may nonetheless rely on unambiguous exclusions or limitations to the policy’s coverage, given that 33-15-334(2) provides that 33-15-337(2) is “not intended to increase the risk assumed under policies subject to” its requirements? View "High Country Paving, Inc. v. United Fire & Casualty Co." on Justia Law