Justia Insurance Law Opinion SummariesArticles Posted in US Court of Appeals for the Second Circuit
Loomis v. ACE American Insurance Company
In this case, the plaintiff, William Loomis, a truck driver who was injured in a car accident in New York, sought recovery from his employer's insurance company, ACE American Insurance Company, for his remaining damages after the underinsured driver's insurer paid out their policy limit. Loomis claimed that ACE failed to comply with both New York and Indiana laws requiring an insurer to provide underinsured motorist coverage.The United States Court of Appeals for the Second Circuit had to determine whether New York's laws requiring insurers to offer optional supplemental uninsured/underinsured motorist coverage could make an insurer liable when it fails to offer this coverage, and whether Indiana law requires an insurer to provide underinsured motorist coverage when the insured suffers damages in excess of the tortfeasor’s policy limit and has no other underinsured motorist coverage to cover damages up to a certain limit.The court concluded that under New York law, Loomis was not entitled to relief. While insurers are required to offer supplemental uninsured/underinsured motorist coverage in New York, this coverage is optional. Even if ACE violated New York law by failing to offer this coverage, Loomis's claim seeking to reform the insurance contract to include this coverage was not supported by New York law. Therefore, the court affirmed the lower court's grant of summary judgment on this claim.In terms of the claim under Indiana law, the court could not confidently predict how the Indiana Supreme Court would interpret the relevant statute, and therefore, certified questions to the Indiana Supreme Court. View "Loomis v. ACE American Insurance Company" on Justia Law
Ezrasons, Inc. v. Travelers Indemnity Co.
In this case, the United States Court of Appeals for the Second Circuit heard an appeal from Ezrasons, Inc., a company engaged in the garment trade, against The Travelers Indemnity Company. Ezrasons suffered a loss of insured goods exceeding $600,000 due to a fire at a warehouse owned by Chamad Warehouse, Inc., in Marion, North Carolina. Travelers paid $250,000, but declined to pay more, asserting that the policy's coverage was limited to $250,000 because the warehouse where the goods were destroyed was not an "Approved Location" under the policy. The district court ruled in favor of Travelers, finding that the warehouse was unambiguously not an "Approved Location" under the policy.On appeal, the Second Circuit Court found that the policy was ambiguous as to whether the warehouse where the destruction occurred was an "Approved Location." It further held that the district court erroneously excluded admissible evidence by which Ezrasons sought to prove that the warehouse was an "Approved Location." As the extrinsic evidence did not provide a basis for favoring either possible meaning of "Approved Location," the ambiguity should be resolved in favor of Ezrasons under New York law. Accordingly, the judgment was vacated and the case remanded with instructions to enter judgment in favor of Ezrasons. View "Ezrasons, Inc. v. Travelers Indemnity Co." on Justia Law
Scottsdale Ins. Co. v. McGrath
In this case, a joint venture between Watershed Ventures, LLC and Patrick M. McGrath failed, leading to bankruptcy and litigation. McGrath and two investment vehicles he controlled sought coverage from Watershed's insurer, Scottsdale Insurance Company, under a directors and officers liability policy. Scottsdale denied coverage and sought a declaratory judgment as to its coverage obligations. McGrath countered with claims against Scottsdale and third-party claims against Watershed. The district court issued two summary judgment decisions. The first ruled that McGrath is an insured under the policy, while the second dismissed one of McGrath's counterclaims. The parties agreed to a "Stipulated Conditional Final Judgment Subject to Reservation of Rights of Appeal," which would become void if either of the district court’s two summary judgment rulings were partly vacated or reversed on appeal. The parties appealed, but the U.S. Court of Appeals for the Second Circuit dismissed both Scottsdale's appeal and McGrath's cross-appeal for lack of appellate jurisdiction, concluding that the Stipulated Conditional Final Judgment was not a "final decision" under 28 U.S.C. § 1291. The court reasoned that the Stipulated Conditional Final Judgment did not resolve all claims of all parties, was not entered under Federal Rule of Civil Procedure 54(b), and did not finally resolve whether Scottsdale breached its duty to defend under the policy. View "Scottsdale Ins. Co. v. McGrath" on Justia Law
The Insurance Company of the State of Pennsylvania v. Equitas Insurance
Defendant, a reinsurer, appealed from a district court’s ruling granting summary judgment to Plaintiff, its reinsured. On appeal, Defendant argues that the district court erroneously held that its reinsurance obligations to Plaintiff are co-extensive with Appellee’s separate insurance obligations to a third party and that it presented no triable issue of fact on its late-notice defense. The Second Circuit affirmed. The court wrote that the district court correctly determined that English law, which governs the relevant reinsurance policy, would interpret that policy to provide coverage that is coextensive with Plaintiff’s separate insurance obligations. The district court also correctly rejected Defendant’s late-notice defense because Defendant has not shown the extreme facts necessary under English law to support recognition of that defense where, as here, timely notice is not a condition precedent to coverage. View "The Insurance Company of the State of Pennsylvania v. Equitas Insurance" on Justia Law
MSP v. Hereford
Plaintiff, MSP Recovery Claims, Series LLC (“MSP”) appealed from the district court’s judgment dismissing for lack of standing its putative class action against Defendant Hereford Insurance Company (“Hereford”) and denying leave to amend. MSP has brought several lawsuits around the country seeking to recover from insurance companies that allegedly owe payments to Medicare Advantage Organizations (“MAOs”) under the Medicare Secondary Payer Act (the “MSP Act”). In the putative class action brought here, MSP charges Hereford with “deliberate and systematic avoidance” of Hereford’s reimbursement obligations under the MSP Act. The Second Circuit affirmed. The court concluded that MSP lacked standing because its allegations do not support an inference that it has suffered a cognizable injury or that the injury it claims is traceable to Hereford. The court also concluded that the district court did not abuse its discretion when it denied MSP leave to amend based on MSP’s repeated failures to cure. The court explained that the plain language of Section 111 provides that when a no-fault insurance provider such as Hereford reports a claim pursuant to Section 111, it does not thereby admit that it is liable for the claim. The statutory context of the section’s reporting obligation and the purpose of the reporting obligation confirms the correctness of this interpretation. Because MSP’s argument that the payments made by EmblemHealth are reimbursable by Hereford rests entirely on its proposed interpretation of Section 111, MSP has not adequately alleged a “concrete” or “actual” injury or that the injury it alleges is fairly traceable to Hereford. View "MSP v. Hereford" on Justia Law
In re: George Washington Bridge
Plaintiff Tutor Perini Building Corp. appealed from the district court’s order affirming an order of the United States Bankruptcy Court, which held that Plaintiff may not use 11 U.S.C. Section 365(b)(1)(A) to assert a “cure claim” against the Trustee for the Trustee’s assumption of an unexpired lease to which Plaintiff was neither a party nor a third-party beneficiary. The Second Circuit affirmed. The court held that a creditor who seeks to assert a “cure claim” under Section 365(b)(1)(A) must have a contractual right to payment under the assumed executory contract or unexpired lease in question, and the court agreed that Plaintiff is not a third-party beneficiary of the assumed lease. The court explained that Tutor Perini’s expansive view of the priority rights conferred by 11 U.S.C. Section 365(b)(1)(A) is inconsistent with applicable principles of Bankruptcy Code interpretation, and its third-party beneficiary argument is inconsistent with controlling principles of New York contract law. View "In re: George Washington Bridge" on Justia Law
Union Mut. Fire Ins. Co. v. Ace Caribbean Mkt.
Plaintiff Union Mutual Fire Insurance Company (“Union Mutual”) appealed from a district court judgment. On March 4, 2017, a fire started at Liberty Avenue in Queens, New York, spreading to and damaging four neighboring buildings insured by Union Mutual. After an investigation, the fire marshals concluded, but could not determine with certainty, that the fire originated in the extension cords used by Ace Caribbean Market. Union Mutual paid proceeds to the damaged neighboring buildings and subrogated into their owners’ tort claims. Union Mutual then sued Ace Caribbean Market and others (collectively, “Defendants”), alleging that their negligent use of the extension cords caused the fire. The district court granted summary judgment for Defendants. At issue on appeal is whether evidence that a fire may have originated in the extension cords is sufficient to show that (a) the owners and proprietors were negligent in their use of the extension cords and (b) if they were negligent, that negligence was the cause of the fire. The Second Circuit affirmed, holding that such evidence is not sufficient. The court held that, at most, Union Mutual produced weak circumstantial evidence that something wrong with the extension cords caused the fire. But, even assuming a reasonable jury could so conclude, Union Mutual showed no evidence of negligence whatsoever on Defendants’ part, and evidence of causation by itself is not evidence of negligence. The court concluded that there may have been negligence and that negligence may have been the cause of the fire. But no inference that it was Defendants’ negligence is permissible on the facts. View "Union Mut. Fire Ins. Co. v. Ace Caribbean Mkt." on Justia Law
Covington Specialty Ins. Co. v. Indian Lookout Country Club, Inc.
Insureds – who operate an annual motorcycle rally in Pattersonville, New York (the “Harley Rendezvous”) – appealed from the district court’s entry of summary judgment in favor of Covington Specialty Insurance Company (“Covington”) in this insurance-coverage dispute. Specifically, the parties disagree as to Covington’s duties, under a general commercial liability policy issued to the Insureds (the “Policy”), to defend and indemnify the Insureds against personal-injury claims asserted in a separate, state-court action by two motorcycle riders who were struck by another attendee’s automobile at the Harley Rendezvous. The district court found that a provision of the Policy (the “Absolute Auto Exclusion”) unambiguously excluded liability coverage for automobile accidents, regardless of whether the Insureds themselves owned or operated the vehicle at issue. On appeal, the Insureds argued that the district court was bound by – and erroneously failed to follow – a case in which a New York intermediate appellate court found ambiguity in a similarly worded exclusion provision in a different insurance policy. The Second Circuit affirmed and found that Grande Stone Quarry is inapposite here and that countless other decisions by New York courts support the district court’s reading of the Absolute Auto Exclusion. The court explained the district court’s “task” here was simply “to determine how the New York Court of Appeals would decide” the issue. Here, the record reflects that the district court carried out that task soundly and carefully. The court concluded that under New York law, the Absolute Auto Exclusion unambiguously precludes coverage of the Insureds’ defense and indemnity in the Underlying Action. View "Covington Specialty Ins. Co. v. Indian Lookout Country Club, Inc." on Justia Law
Admiral Ins. Co. v. Niagara Transformer Corp.
Admiral Insurance Co. (“Admiral”) sought a declaration that it need not defend or indemnify its historical insured, Niagara Transformer Corp. (“Niagara”), in potential litigation between Niagara and nonparties Monsanto Co., Pharmacia LLC, and Solutia Inc. (collectively, “Monsanto”) over harms caused by polychlorinated biphenyls that Monsanto had sold to Niagara in the 1960s and 1970s. Admiral appealed from the order of the district court dismissing its action for lack of a justiciable “case of actual controversy” within the meaning of the Declaratory Judgment Act (the “DJA”). The district court principally relied on (1) the fact that Monsanto has not commenced or explicitly threatened formal litigation against Niagara, and (2) its assessment that Monsanto would not be likely to prevail in such litigation. The Second Circuit affirmed the district court’s order dismissing Admiral’s action to the extent that it sought a declaration of Admiral’s duty to indemnify Niagara, and remanded for the district court to determine whether there exists a practical likelihood that Monsanto will file suit against Niagara. The court explained that while the district court properly concluded that it lacked jurisdiction to declare Admiral’s duty to indemnify Niagara, it did not adequately distinguish between that duty and the insurer’s separate duty to defend its insured. Because a declaratory-judgment action concerning either duty becomes justiciable upon a “practical likelihood” that the duty will be triggered, the justiciability of Admiral’s duty-to-defend claim turns on the practical likelihood that Monsanto will file suit against Niagara – not on whether Monsanto has already in fact done so. View "Admiral Ins. Co. v. Niagara Transformer Corp." on Justia Law
Brettler v. Allianz Life Insurance Company of North America
Plaintiff brought a lawsuit against Allianz Life Insurance Company of North America (“Allianz”) in Plaintiff’s capacity as a trustee of the Zupnick Family Trust 2008A (“Trust”). Plaintiff sought a declaratory judgment that an Allianz life insurance policy (“Zupnick Policy”), which Plaintiff contends is owned by the Trust, remains in effect. The district court concluded that the Trust was not the actual owner of the Zupnick Policy under New York law because any assignment of the policy to the Trust failed to comply with the Zupnick Policy’s provision that assignment would be effective upon Allianz’s receipt of written notice of the assignment. The district court held that the Trust lacked contractual standing to sue on the Zupnick Policy, and granted Allianz’s motion to dismiss. On appeal, Plaintiff argued that failure to comply with the provisions of a life insurance policy requiring written notice of assignment cannot, under New York law, render an assignment ineffective. The Second Circuit certified the question to the Court of Appeals because the argument turns on a question of state law for which no controlling decision of the New York Court of Appeals exists. The court certified the following question: Where a life insurance policy provides that “assignment will be effective upon Notice” in writing to the insurer, does the failure to provide such written notice void the assignment so that the purported assignee does not have contractual standing to bring a claim under the Policy? View "Brettler v. Allianz Life Insurance Company of North America" on Justia Law