Justia Insurance Law Opinion SummariesArticles Posted in US Court of Appeals for the Seventh Circuit
Lacko v. United of Omaha Life Insurance Co.
Lacko began working for BKD’s predecessor in 1999 and worked until September 2015, when she was Senior Manager in the Audit Department, with an annual salary of $93,250.04. She applied for benefits under the short term disability (STD) plan, claiming gastroparesis, diabetes, rheumatoid arthritis, congestive heart failure, breathing difficulties, anxiety, musculoskeletal impairments, and cognitive difficulties related to the medication needed to manage the other conditions. Although United approved her claims for STD benefits three times, it denied benefits in June 2016 for the period beyond November 22, 2015, concluding there was no change in Lacko’s medical condition when she stopped working or subsequently. United also denied her claim for long term disability benefits. Lacko sued under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001.. The district court granted United summary judgment. The Seventh Circuit reversed. United failed to adequately address a determination that Lacko was entitled to Social Security disability benefits and failed to recognize the significant distinction between her ability to perform unskilled work and the job of Senior Manager. The court noted that the Plan’s requirement of a “change” in a person’s physical or mental capacity in order to qualify for benefits does not by its terms preclude a degenerative condition from qualifying a claimant for benefits and noted United's conflict of interests, having issued the policies and serving as claims review fiduciary. View "Lacko v. United of Omaha Life Insurance Co." on Justia Law
Fidelity and Deposit Co. of Maryland v. Edward E. Gillen Co.
Chicago awarded a construction contract to a joint venture formed by Gillen and other entities. The joint venture subcontracted some of the work to Gillen, which subcontracted with others for labor and materials. The joint venture obtained over $30 million in Fidelity performance and payment bonds. Fidelity received an indemnity agreement and a net worth retention agreement, both executed by Gillen. Gillen promised to maintain a net worth greater than $7.5 million. During 2012, several subcontractors sued Gillen in state court and named Fidelity as a co-defendant based on its bond obligations. Fidelity sued Gillen in federal court, alleging: breach of the indemnity agreement; a request for an accounting of contract payments; breach of the net worth retention agreement; quia timet; and a demand for access to books and records. Historically, litigants have used bills quia timet to pursue preemptive relief; on that claim, Fidelity sought $2.5 million from Gillen as bond collateral and an order requiring Gillen to satisfy all bond obligations and prohibiting Gillen from disbursing money without court approval. The parties settled all claims in mediation, except for Fidelity’s quia timet claim, agreeing their settlement would not impact the quia timet claim or Gillen’s defenses. The district court granted Gillen summary judgment on the quia timet claim. The Seventh Circuit affirmed. Fidelity negotiated for specific indemnification and collateralization rights, sued on those rights, and settled its breach of contract claims. It may not augment its contractual rights with the ancient equitable doctrine of quia timet. View "Fidelity and Deposit Co. of Maryland v. Edward E. Gillen Co." on Justia Law
Tran v. Minnesota Life Insurance Co.
Llenos hung a noose from a basement ceiling beam, stood on a stool with the noose around his neck, and stepped off. Llenos died as a result. When Tran came home, she found her husband’s body. Though his death was initially reported as suicide, the medical examiner concluded from sexual paraphernalia on Llenos’s body that he died performing autoerotic asphyxiation, a sexual practice by which a person purposefully restricts blood flow to the brain to induce a feeling of euphoria. Llenos was covered by basic and supplemental life insurance policies, providing $517,000 in coverage, and including Accidental Death & Dismemberment (AD&D) policy riders providing an additional $60,000 in coverage. Minnesota Life paid $517,000 but denied Tran’s claim for the additional $60,000 in AD&D coverage, concluding that Llenos’s death was not “accidental” and fell under an exclusion for intentionally self-inflicted injury. Tran filed suit under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1132(a)(1)(B). The district court awarded Tran judgment, reasoning that the insurer had conceded the death was accidental. The Seventh Circuit reversed, finding that autoerotic asphyxiation was the ultimate and the proximate cause of Llenos’s death. Strangling oneself to cut off oxygen to one’s brain is an injury. When that injury kills, it is “an intentionally self-inflicted injury which resulted in death,” regardless of whether it was done recreationally or with an intent to survive. View "Tran v. Minnesota Life Insurance Co." on Justia Law
Surgery Center at 900 North Michigan Avenue, LLC v. American Physicians Assurance Corp., Inc.
SC, an outpatient surgical center, permits outside physicians to perform day surgery at its facility. Its insurance limited APA’s liability to $1 million per claim. In 2002, Dr. Hasson, an outside physician, performed outpatient laparoscopic surgery on Tate at SC. Hasson did not see Tate or sign her discharge instructions before SC released her; SC’s anesthesiologist discharged Tate, giving Tate's boyfriend discharge instructions. Days later, Tate checked into the hospital with a perforated bowel that rendered the previously-healthy 34‐year‐old a quadriplegic. Tate sued Hasson and SC. APA hired attorneys to defend SC. APA set the “Reserve” (money the Michigan Department of Insurance required APA to put aside to cover an adverse verdict) at $560,000. APA believed the damages could exceed the policy limit but that SC was not likely to be found liable. In 2007, APA rejected Tate's offer to settle for policy limits. Hasson’s insurer settled for his policy limit ($1 million). After the Illinois Appellate Court remanded the issue of whether SC’s nursing staff breached the standard of care, APA raised the Reserve to $1 million, stating that it still believed the case was defensible. Before the second trial, APA rejected Tate's second settlement demand for the policy limit. The jury returned a $5.17 million verdict. SC then sued APA for bad faith. The Seventh Circuit affirmed judgment as a matter of law in favor of APA. SC did not establish that anyone involved in litigating the case believed there was more than a mere possibility SC would be found liable; the mere possibility of liability is insufficient under the Illinois Supreme Court’s reasonable probability standard. View "Surgery Center at 900 North Michigan Avenue, LLC v. American Physicians Assurance Corp., Inc." on Justia Law
Posted in: Insurance Law, Medical Malpractice, Personal Injury, US Court of Appeals for the Seventh Circuit
Cooke v. Jackson National Life Insurance Co.
A district court ordered Jackson National Life to pay about $191,000 on a policy of life insurance. The court added that the insurer had litigated unreasonably and ordered it to reimburse Cooke’s legal fees under 215 ILCS 5/155. The insurer paid the death benefit and appealed the attorneys’ fees. Because the district court had not specified the amount, the Seventh Circuit dismissed the appeal as premature. The district court then awarded $42,835 plus interest. The district judge concluded that there had been a good faith coverage dispute, so the insurer could not be penalized for insisting that a judge resolve the parties’ dispute, but added, “Jackson’s behavior in this litigation has been much less reasonable.” The Seventh Circuit reversed, first rejecting Cooke’s appeal on the merits award. Cooke did not appeal within 30 days of the order specifying the amount payable on the policy, and a later award of fees did not reopen that subject. The court erred in applying Illinois state law to the conduct of litigation in federal court and Jackson’s litigation conduct did not violate the Federal Rules of Civil Procedure. View "Cooke v. Jackson National Life Insurance Co." on Justia Law
Posted in: Civil Procedure, Insurance Law, Legal Ethics, US Court of Appeals for the Seventh Circuit
Medical Protective Co. of Fort Wayne, Indiana v. American International Specialty Lines Insurance Co.
In 2002, in Texas, Dr. Phillips performed a laparoscopic hysterectomy on Bramlett, a 36-year-old mother. While hospitalized, Bramlett suffered internal bleeding and died. Her family filed a wrongful death lawsuit against the hospital and Dr. Phillips, who held a $200,000 professional liability insurance policy with MedPro. He notified MedPro of the lawsuit. In 2003, the hospital settled with the Bramletts for approximately $2.3 million. The Bramletts wrote to Dr. Phillips’s attorney, Davidson, with a $200,000 Stowers demand; under Texas law, if an insurer rejects a plaintiff's demand that is within the insured’s policy limit and that a reasonably prudent insurer would accept, the insurer will later be liable for any amount awarded over the policy limit. MedPro twice refused to settle. The family won a $14 million verdict. The Supreme Court of Texas capped Dr. Phillips’s liability. The family sued MedPro, which settled. MedPro was insured by AISLIC, which declined to cover MedPro’s settlement. The district court granted AISLIC summary judgment, concluding that coverage was excluded because MedPro should have foreseen the family’s claim. An exclusion precluded coverage for “any claim arising out of any Wrongful Act” which occurred prior to June 30, 2005, if before that date MedPro “knew or could have reasonably foreseen that such Wrongful Act could lead to a claim.” The Seventh Circuit reversed in part, finding genuine issues of material fact regarding whether MedPro’s failure to settle was a Wrongful Act and whether MedPro could have foreseen a "claim" before the malpractice trial. View "Medical Protective Co. of Fort Wayne, Indiana v. American International Specialty Lines Insurance Co." on Justia Law
Posted in: Contracts, Insurance Law, Medical Malpractice, Personal Injury, Professional Malpractice & Ethics, US Court of Appeals for the Seventh Circuit
Anderson v. Country Life Insurance Co.
Plaintiffs hold participating life-insurance policies from State Farm and Country Life that guarantee policyholders annual dividends from their insurers’ surpluses. The insurers decide the dividend amounts. Dissatisfied with their dividends, Plaintiffs filed nearly identical class-action complaints claiming that the dividend provisions in their policies violate the Illinois Insurance Code by failing to include a provision mandated by the Code. Plaintiffs concede that their annual dividends satisfied the terms of their respective policies. In consolidated appeals, the Seventh Circuit affirmed the dismissal of the claims. Illinois requires only that life-insurance policies of this type contain a provision for policyholders to participate in their insurers’ surpluses. The policies at issue here contain the required provision and are in compliance, despite allowing insurers discretion to set dividend amounts. View "Anderson v. Country Life Insurance Co." on Justia Law
Martinsville Corral, Inc. v. Society Insurance
MCI held a business owners insurance policy with an “Employment-Related Practices Liability Endorsement” from Society Insurance. When DirecTV sued MCI under 47 U.S.C. 521 for publicly displaying its programming in MCI’s two restaurants without paying the commercial subscription rate, Society denied MCI’s claim. MCI sued Society; the Seventh Circuit affirmed summary judgment for Society. The Endorsement requires Society to cover MCI for “damages resulting from a ‘wrongful act’ to which [the Policy] applies” and defines “wrongful act” to include, “[l]ibel, slander, invasion of privacy, defamation or humiliation.” There is no reasonable interpretation of the DirecTV complaint that could arguably fall within the category of libel, slander or defamation. That complaint alleged that MCI damaged DirecTV’s goodwill by showing its programming without paying the correct subscription fee; there are no allegations that MCI made any false, defamatory statement about DirecTV. DirecTV’s actions did not include allegations that MCI made any kind of statement at all. View "Martinsville Corral, Inc. v. Society Insurance" on Justia Law
Griffin v. Teamcare
Dr. Griffin provided medical care to T.R., a participant in a Central States health plan. Before receiving treatment, T.R. assigned to Griffin the rights to “pursue claims for benefits, statutory penalties, [and] breach of fiduciary duty ….” Griffin confirmed through a Central representative that the plan would pay for the treatment at the usual, reasonable, and customary rate, then treated T.R. and submitted a claim for $7,963. Griffin later challenged the benefits determination, requesting a copy of the summary plan description and documents used to determine her payment. Six months later, Central responded that iSight, a third party, used “pricing methodology” to determine the fee and telling her to negotiate with iSight before engaging in the appeals process that the plan required before a civil suit. Griffin missed a call from iSight, returned the call, and left a message that she “would not take any reductions.” iSight never called back. Central provided a copy of the summary plan description, but no fee schedules or tables. Griffin sued under ERISA, 29 U.S.C. 1132(a)(1)(B), (a)(3), alleging that Central did not pay her the proper rate under the plan; breached its fiduciary duty by not adhering to plan terms; and failed to produce, within 30 days, the summary plan description she requested, nor iSight’s fee schedules. The court dismissed. The Seventh Circuit affirmed in part and vacated in part. Griffin adequately alleged that she is eligible for additional benefits and statutory damages. View "Griffin v. Teamcare" on Justia Law
Hammer v. United States Department of Health and Human Services
The Affordable Care Act’s three premium‐stabilization programs were designed to redistribute money among insurance companies and mitigate each company’s exposure to market risks, 42 U.S.C. 18061–18063. The Department of Health and Human Service (HHS) intended to implement these programs in a budget‐neutral way paying out only the funds that each program had taken in from other insurance companies. Land of Lincoln participated in these premium‐stabilization programs and incurred a debt of roughly $32 million but HHS owed Land of Lincoln over $70 million. HHS was not able to pay what it owed because it was taking in far less money than expected, and it refused to dip into its discretionary funds. Like other insurance companies, Land of Lincoln sought the overdue payments in an unsuccessful suit. Land of Lincoln became insolvent and began liquidation. Despite an Illinois court order, HHS began to offset its overdue payments against Land of Lincoln’s debt, as its own regulations permitted. The Director of the Illinois Department of Insurance, Land of Lincoln’s appointed liquidator, asked the state court for a declaration that HHS violated the order, but HHS removed the motion to federal district court arguing that the federal government was not subject to state court jurisdiction. The district court remanded the case back to state court relying on a narrow reading of 28 U.S.C. 1442, and principles of abstention. The Seventh Circuit reversed on both grounds and remanded to the district court. View "Hammer v. United States Department of Health and Human Services" on Justia Law
Posted in: Civil Procedure, Government & Administrative Law, Insurance Law, US Court of Appeals for the Seventh Circuit