Justia Insurance Law Opinion SummariesArticles Posted in US Court of Appeals for the Sixth Circuit
K.V.G. Properties, Inc. v. Westfield Insurance Co.
Some of KVG’s commercial tenants got caught growing marijuana in their rental units and caused substantial damage to the premises before the police caught them. KVG speedily evicted the tenants and sought coverage from its insurers for nearly $500,000 in related losses. Westfield denied the claims. The Sixth Circuit affirmed summary judgment for Westfield, reasoning that the damage was excluded by the policy, which is the Building and Personal Property Coverage Form. Under this Form, Westfield agreed to pay for “direct physical loss of or damage to Covered Property . . . caused by or resulting from any Covered Cause of Loss.” A “Covered Cause of Loss” is any “Risk Of Direct Physical Loss,” with several exclusions, including that Westfield “will not pay for loss or damage caused by or resulting from” any “[d]ishonest or criminal act by you, any of your partners, members, officers, managers, employees (including leased employees), directors, trustees, authorized representatives or anyone to whom you entrust the property for any purpose.” While cultivating marijuana is a crime under federal law, it is protected by Michigan law under certain conditions but no reasonable jury could find that KVG’s tenants complied with Michigan law. View "K.V.G. Properties, Inc. v. Westfield Insurance Co." on Justia Law
United States v. Walters
In 2010, the defendants formed PremierTox, a urinalysis testing company: Doctors Peavler and Wood owned a substance abuse treatment company, SelfRefind; Doctor Bertram previously worked for SelfRefind. Bottom and Walters owned a drug testing service and laboratory. Physicians at clinics ordered urinalysis tests to check if their patients used illicit drugs and to monitor their medications. PremierTox was to receive those urine samples, perform the testing, and report back. In October 2010, SelfRefind began to send frozen urine samples to PremierTox for testing, but PremierTox did not have the correct equipment. In 2011, after PremierTox bought the necessary, expensive machines, they broke down. Urine samples from SelfRefind piled up. PremierTox started testing them between February and April 2011 and finished testing them in October. Over the same period, it tested and billed for fresh samples as they came in, aiming for a 48-hour turnaround. PremierTox billed insurers, saying nothing about the delays. The defendants were charged with 99 counts of health care fraud and with conspiracy. A jury acquitted them of conspiracy and 82 of the health care fraud charges and convicted them of 17 health care fraud charges. The trial judge imposed sentences of 13-21 months in prison. The Sixth Circuit affirmed the convictions. A reasonable jury could find that the defendants violated 18 U.S.C. 1347 by requesting reimbursement for tests that were not medically necessary. View "United States v. Walters" on Justia Law
Springer v. Cleveland Clinic Employee Health Plan Total Care
Springer, a Utah physician, began a fellowship at the Cleveland Clinic and enrolled his family in its employee benefit plan, administered by Antares. During the enrollment period, Springer had his 14-month-old son, J.S., transported from a Utah hospital to the Cleveland Clinic by Angel Jet’s air ambulance service. J.S. had been hospitalized since birth for multiple congenital abnormalities. He required a mechanical ventilator. J.S.’s physician prepared a letter of medical necessity for the service. Before the flight, Angel Jet contacted Antares, which was unable to confirm that Springer and his son were members of the plan and did not precertify the service. Angel Jet proceeded with the transportation and submitted a bill to Antares for $340,100. Antares denied it for failure to obtain precertification. The Plan affirmed the denial but paid $34,451.75, reflecting the amount their preferred provider would have charged. Angel Jet brought suit under the Employee Retirement Security Act. The district court dismissed the suit, finding that Springer had not properly assigned his rights under the plan to Angel Jet. Springer then brought his own claim under ERISA Section 502(a)(1)(B). The Sixth Circuit affirmed, first finding that Springer had standing despite having received the service and not being billed. The denial was not arbitrary and capricious because J.S.’s transportation was not an emergency or precertified as required for a nonemergency. View "Springer v. Cleveland Clinic Employee Health Plan Total Care" on Justia Law
American Tooling Center, Inc. v. Travelers Casualty & Surety Co.
ATC, a Michigan manufacturer, outsources orders, including to YiFeng, a Chinese company. ATC pays vendors in four separate payments, based on manufacturing progress. YiFeng emails ATC invoices. On March 18, 2015, ATC’s vice-president, Gizinski, emailed YiFeng employee Chen requesting all outstanding invoices. An unidentified third party intercepted this email, and impersonating Chen, began corresponding with Gizinski. On March 27, the impersonator emailed Gizinski that, due to an audit, ATC should wire its payments to a different account from usual. YiFeng had previously, legitimately informed ATC it had changed its banking details; ATC had no process for verifying the information. Gizinski wired the money to the new account. On April 3, the impersonator emailed Gizinski, stating that “due to some new bank rules,” the previous transfer was not credited to its account so it would return the payment. The impersonator requested that Gizinski wire the money to a different bank account. Gizinski wired the money to this new account. The impersonator ran this scam twice more. Gizinski wired additional payments of $1575 and $482,640.41. When the real YiFeng demanded payment, ATC paid YiFeng approximately 50% of the outstanding debt; the remaining 50% was contingent on ATC’s insurance claim. ATC sought recovery from Travelers, under the Policy’s “Computer Fraud” provision. Travelers denied the claim. ATC sued for breach of contract. The court granted Travelers summary judgment. The Sixth Circuit reversed. Computer fraud “directly caused” ATC’s “direct loss” and no exclusion applied. View "American Tooling Center, Inc. v. Travelers Casualty & Surety Co." on Justia Law
Heimer v. Companion Life Insurance Co.
Heimer, one year over the legal drinking age, drank alcohol with friends and then rode motorbikes in a field. Heimer and his friend collided. Heimer suffered extensive injuries, incurring more than $197,333.50 in medical bills. Heimer’s blood alcohol level shortly after the crash was 0.152, nearly twice the limit to legally use an off-road vehicle in Michigan. Heimer was insured. As required by his plan, he submitted a medical claim form shortly after the accident. The plan administrator denied coverage based on an exclusion for “[s]ervices, supplies, care or treatment of any injury or [s]ickness which occurred as a result of a Covered Person’s illegal use of alcohol.” After exhausting administrative appeals, Heimer filed suit. The district court held that the plan exclusion did not encompass Heimer’s injuries, reasoning that there is a difference between the illegal use of alcohol—such as drinking while under 21 or drinking in defiance of a court order—and illegal post-consumption conduct, such as the illegal use of a motor vehicle. The Sixth Circuit affirmed. Reading “illegal use of alcohol” to disclaim coverage only for the illegal consumption of alcohol, and not for illegal post-consumption conduct is consistent with the ordinary meaning of “use” and best gives effect to the contract as a whole. View "Heimer v. Companion Life Insurance Co." on Justia Law
Palmer Park Square, LLC v. Scottsdale Ins. Co.
Palmer’s vacant Detroit apartment complex was covered by a Scottsdale fire insurance policy until November 2012. The property was vandalized in February 2012. Palmer reported the loss in October 2013. Scottsdale replied that it was investigating. In November, Palmer sent Scottsdale an itemized Proof of Loss. Scottsdale paid Palmer $150,000 in June 2014. Michigan law provides that losses under any fire insurance policy shall be paid within 30 days after receipt of proof of loss. Palmer requested an appraisal. Scottsdale agreed, noting the claim remained under investigation. Appraisers concluded that Palmer’s actual-cash-value loss was $1,642,796.76. The policy limit was $1,000,000. Scottsdale tendered checks over a period of several months that paid the balance. Palmer requested penalty interest for late payment. Michigan law states that if benefits are not paid on a timely basis, they bear simple interest from a date 60 days after satisfactory proof of loss was received by the insurer at the rate of 12% per annum. The Sixth Circuit reversed the district court’s conclusion that the penalty-interest claim arose “under the policy” and was barred by the policy’s two-year limitations provision. Palmer did not allege that Scottsdale breached the policy agreement. Scottsdale paid the insured loss and the policy had no time limit for paying a loss, Palmer has no unvindicated rights and no claim “under the policy” to assert. His claim is under the statute. View "Palmer Park Square, LLC v. Scottsdale Ins. Co." on Justia Law
Island Fork Construction v. Bowling
Bowling worked as a coal miner for 29 years, most recently for Island Fork. In 2002, Bowling unsuccessfully sought Black Lung Benefits Act (BLBA) benefits. In 2010, Bowling filed the current claim. In the meantime, the Affordable Care Act amended the BLBA to reinstate a rebuttable presumption that claimants with respiratory disabilities and 15 years or more of underground coal-mining work experienced those disabilities as a result of pneumoconiosis, 30 U.S.C. 921(c)(4). The District Director designated Island Fork as the responsible operator and awarded benefits. At a hearing, the ALJ learned that Island Fork and its insurer, Frontier were insolvent. Frontier declared insolvency after the Proposed Order issued. At the initial stages, if the District Director determines that an operator is not financially capable, the Director can select another operator—such as a previous employer—to be the responsible operator; once the claim reaches the ALJ, there is no mechanism to designate a different responsible operator. The Trust Fund, created by the BLBA, provides benefits when there are no responsible operators available, including when an operator is deemed at the ALJ stage not to be financially capable. KIGA, created by the Kentucky Insurance Guaranty Association Act, provides benefits when a member insurance company is insolvent. The ALJ decided that Island Fork was still the responsible operator because benefits could be paid by KIGA. The Sixth Circuit affirmed. The exclusions in the Guaranty Act do not apply; KIGA is liable. View "Island Fork Construction v. Bowling" on Justia Law
Evanston Insurance Co. v. Housing Authority of Somerset
A tree fell on Kaitlyn and Joshua. Kaitlyn died. She was pregnant. Doctors delivered the baby, but he died an hour later. Joshua survived with serious injuries. A state jury found the Somerset Housing Authority liable and awarded $3,736,278. The Authority belonged to the Kentucky Housing Authorities Self-Insurance Fund, which provided a policy with Evanston. Evanston sought a declaratory judgment limiting its liability under the Fund’s policy to $1 million. Meanwhile, through mediation of the state court case, Evanston agreed to pay the “policy limits” in return for an agreement to dismiss the state court action and release the Authority from further liability. Evanston claimed that $1 million was the coverage cap; the defendants claimed it was $2 to $4 million. The district court determined that there was complete diversity and ruled for Evanston on the merits. The Sixth Circuit affirmed. The district court properly aligned the parties given their respective interests in the primary dispute at the time of filing, so that diversity jurisdiction was not destroyed. The policy obligates Evanston to provide a maximum of $1 million of coverage per “occurrence,” with an aggregate limit of $2 million for more than one occurrence. The contract defines “occurrence” as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” When one tree falls at one time, that is one occurrence and one accident. View "Evanston Insurance Co. v. Housing Authority of Somerset" on Justia Law
Jackson v. Professional Radiology, Inc.
Jackson, injured in an accident, taken to University Hospital, where she stated that she had health insurance coverage through United. Jackson received treatment from PRI, which uses MDB for billing services. PRI did not submit charges to United but sent Jackson a letter seeking payment of $1,066 and requesting that Jackson’s attorney sign a letter of protection against any settlement to prevent Jackson’s account from being sent to collections. Jackson did not pay. Her account was submitted to CCC, which sent Jackson a collection letter. Jackson’s attorney negotiated a $852 payment to CCC as final settlement of the charges. PRI or MDB later contacted Jackson, stating that she still owed $3.49. Jackson paid that amount. She brought a class action against CCC, PRI, and MDB for violation of Ohio Rev. Code 1751.60(A), which prohibits directly billing patients who have health insurance when the healthcare provider has a contract with the patient’s insurer to accept that insurance. The complaint also alleged breach of contract, breach of third-party beneficiary contract, violation of the Ohio Consumer Sales Practices Act, violation of the Fair Debt Collection Practices Act, fraud, conversion, unjust enrichment, and punitive damages. The Sixth Circuit reversed dismissal of the claims under section 1751.60 against PRI and MDB, but affirmed as to CCC, which is not subject to the section. View "Jackson v. Professional Radiology, Inc." on Justia Law
Indian Harbor Insurance Co. v. Zucker
Reid founded Capitol, which owned commmunity banks, and served as its chairman and CEO. His daughter and her husband served as president and general counsel. Capitol accepted Federal Reserve oversight in 2009. In 2012, Capitol sought Chapter 11 bankruptcy reorganization and became a “debtor in possession.” In 2013, Capitol decided to liquidate and submitted proposals that released its executives from liability. The creditors’ committee objected and unsuccessfully sought derivative standing to sue the Reids for breach of their fiduciary duties. The Reids and the creditors continued negotiation. In 2014, they agreed to a liquidation plan that required Capitol to assign its legal claims to a Liquidating Trust; the Reids would have no liability for any conduct after the bankruptcy filing and their pre-petition liability was limited to insurance recovery. Capitol had a management liability insurance policy, purchased about a year before it filed the bankruptcy petition. The liquidation plan required the Reids to sue the insurer if it denied coverage. The policy excluded from coverage “any claim made against an Insured . . . by, on behalf of, or in the name or right of, the Company or any Insured,” except for derivative suits by independent shareholders and employment claims (insured-versus-insured exclusion). The Liquidation Trustee sued the Reids for $18.8 million and notified the insurer. The Sixth Circuit affirmed a declaratory judgment that the insurer had no obligation with respect to the lawsuit, which fell within the insured-versus-insured exclusion. View "Indian Harbor Insurance Co. v. Zucker" on Justia Law