Justia Insurance Law Opinion Summaries

Star, a mine staffing company, bought workers’ compensation insurance from Granite. Early in each policy year, Star gave Granite an estimate of its total payroll, which Granite used to calculate an estimated premium. Star paid the preliminary installment. After each year, Granite audited Star’s records to produce an exact payroll number, then charged additional premiums or made reconciliation payments. A 2018 audit revealed that Star had significantly underestimated its 2017 payroll, as it had for 2016. To avoid a similar situation with the 2018 policy, Granite adjusted its estimated premium for Star halfway through the year. In accordance with industry guidelines, Granite increased Star’s 2018 estimated premium to reflect 2017’s actual payroll numbers, giving Star four weeks to pay the difference. Star never paid. Granite canceled the policy three months early. Star closed its business. To determine Star’s final premium—and whether it owed a reconciliation payment—Granite needed to complete its year-end audit. Star would not comply. Granite’s final bill, including the updated estimated premium, prorated for early cancellation, was $1,485,323, including an “audit noncompliance charge” (double 2018’s total estimated premium).Granite sued for breach of contract. The Sixth Circuit affirmed summary judgment for Granite, rejecting Star’s argument that the noncompliance charge is an unenforceable penalty. Kentucky’s insurance regulator approved the rates that Kentucky insurance companies charge, barring their review. View "Granite State Insurance Co. v. Star Mine Services, Inc." on Justia Law

After more than a decade of employment, a seizure disorder ended Dr. Autran’s career as a P&G research scientist. Autran received total-disability benefits under P&G’s Health and Long-Term Disability Plan in 2012-2018. The Committee terminated those benefits after concluding that Autran no longer qualified as totally disabled within the meaning of the Plan, and awarded him his remaining 19 weeks of partial disability benefits. Autran sued under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1132(a)(1)(B). He died while the suit was pending.The Sixth Circuit upheld summary judgment in favor of the Committee. Because the Plan delegates discretionary authority to the Committee to decide benefits claims, the court applied the deferential arbitrary-and-capricious test. The Committee had rational reasons to depart from the earlier total-disability finding. Among other new evidence, a doctor who performed many objective tests on Autran for over six hours found no basis to conclude that he suffered from a debilitating condition. Thorough medical opinions gave the Committee a firm foundation to conclude that Autran did not, in the Plan’s words, suffer from a “mental or physical condition” that the “medical profession” would consider “totally disabling.” View "Autran v. P&G Health & Long Term Disability Benefit Plan" on Justia Law

Plaintiffs in this consolidated appeal are businesses that operate Michigan-based restaurants and entertainment venues that made claims against their commercial property insurance policies, held by Cincinnati Insurance, based on COVID-19 losses. These policies contained three provisions under which Cincinnati Insurance would compensate a policyholder only if the policyholder suffered direct physical loss or damage to its covered property, or if loss to a non-policy holder’s property prevented access to a policyholder’s property. Cincinnati Insurance denied their claims, indicating that neither the presence of the COVID-19 virus nor shutdown orders issued by the Michigan governor constituted physical loss or damage.The district court dismissed the plaintiffs’ claims, finding that, under Michigan law, “direct physical loss” to property covers only tangible harm or damage to property, rather than mere loss of use. The Sixth Circuit affirmed, reasoning that the Michigan Supreme Court would agree with its interpretation of the law–that COVID-19-related shutdown orders do not constitute “direct physical loss or direct physical damage” to property because “a loss of use simply is not the same as a physical loss.” The plaintiffs alleged “not tangible, physical losses, but economic losses.” View "Dino Drop, Inc. v. Cincinnati Insurance Co." on Justia Law

In response to the COVID-19 pandemic, Kentucky temporarily (for about six weeks) barred healthcare corporations like Estes, which operates two dental clinics from providing nonemergency care. Estes lost substantial income as a result. Estes’ property insurance policy required Cincinnati Insurance to pay Estes for lost business income that results from a “direct” “physical loss” to its dental offices.The Sixth Circuit affirmed the dismissal of Estes’ suit against Cincinnati, noting that circuit courts have uniformly interpreted this “physical loss” language not to cover similar pandemic-related claims under the laws of many other states. The court concluded that Kentucky’s highest court would agree with those decisions. The phrase “physical loss” would convey to the “average person” that a property owner has been tangibly deprived of the property or that the property has been tangibly destroyed. COVID-19 and the government shutdown orders caused only intangible or economic harm. View "Estes v. Cincinnati Insurance Co." on Justia Law

In 1955-1976, WPC, a manufacturer of industrial valves, bought primary and excess level liability insurance policies from OneBeacon’s predecessor. In 2001, asbestos lawsuits started coming against WPC. OneBeacon began its defense. The parties reached an impasse over several issues.WPC sought declaratory relief in Ohio state court concerning OneBeacon’s obligations. WPC also sued OneBeacon in federal court, alleging breach of contract. OneBeacon unsuccessfully moved to dismiss or stay the case. The district court rejected OneBeacon’s argument that the federal and state proceedings were parallel. WPC amended its state complaint, adding breach of contract claims. The state court held that OneBeacon had not committed the alleged breaches. OneBeacon again moved to dismiss WPC’s federal lawsuit, arguing that the state court’s ruling precluded WPC’s federal claims. The court acknowledged that the state court judgment likely satisfied the elements of claim preclusion, but declined to dismiss. The court stayed the case, noting that WPC’s amended state court complaint made the state and federal proceedings parallel. After OneBeacon filed its federal notice of appeal, the Ohio Court of Appeals reversed in part, finding that OneBeacon breached some of the policies. Pennsylvania subsequently liquidated OneBeacon and stayed all litigation.The Sixth Circuit reversed, first holding that exercising appellate jurisdiction here will in no way “hinder [the] operation” of Pennsylvania’s claims process and priority scheme. Claim preclusion bars the federal suit. View "William Powell Co. v. National Indemnity Co." on Justia Law

To combat the spread of COVID-19, the Ohio government ordered child-care programs to shut down for around two months beginning in March 2020. As a result, Dakota Girls and the other plaintiffs could not use their facilities for their intended purpose—as private preschools. They sued their insurer, the Philadelphia Indemnity, citing policy provisions concerning business and personal property, business income, civil-authority orders, and (communicable disease and water-borne pathogens. The suit sought damages for breach of contract and the insurer’s alleged bad faith.The Sixth Circuit affirmed the dismissal of the suit, citing the plain language of the policies. A loss of use is not the same as a physical loss. Reading the communicable-disease coverage to not require an actual illness at the premises, therefore, would engender serious inconsistency within the policy. The court declined to consider the policy’s “virus exception.” Dakota Girls has never shown that it had coverage, much less that Philadelphia’s agents knew it had coverage or that coverage was so obvious it could not have been reasonably denied. View "Dakota Girls, LLC v. Philadelphia Indemnity Insurance Co." on Justia Law

In March 2020, the Governor of Ohio declared a state of emergency in connection with the COVID-19 pandemic. A few days later, the Director of the Ohio Department of Health ordered restaurants across the state to close their doors to in-person diners, forcing Santosuossos restaurant in Medina to halt ordinary operations. Although the closure order permitted restaurants to offer takeout services, in-person dining generates the substantial majority of Santosuossos’s revenue.” The restaurant sustained significant losses and laid-off employees. The restaurant filed a claim with Acuity, seeking recovery under its commercial property insurance policy. After Acuity denied coverage, the owner filed suit.The Sixth Circuit affirmed the dismissal of the suit. The policy covers business interruption “caused by direct physical loss of or damage to property.” The cause of the suspension of operations—the prohibition on in-person dining—did not arise from a physical loss of property or physical damage to it. The court also noted policy exclusions for “loss or damage caused directly or indirectly by . . . [a]ny virus . . . capable of inducing physical distress, illness or disease” and for “loss or damage caused directly or indirectly by [ordinance or law] . . . [r]egulating the construction, use or repair of any property.” View "Santo's Italian Cafe LLC v. Acuity Insurance Co." on Justia Law

The plaintiffs retired from the Louisville Metropolitan police department and received free health insurance, administered by Kentucky Retirement Systems. Kentucky initially paid all of their healthcare costs. After the officers turned 65, Medicare became the primary payer, leaving Kentucky to cover secondary expenses. Each officer came out of retirement, joining county agencies different from the ones they served before retiring. They became eligible for healthcare benefits in their new positions. Kentucky notified them that federal law “mandate[d]” that it “cannot offer coverage secondary to Medicare” for retirees “eligible to be on [their] employer’s group health plan” as “active employees.” Some of the officers then paid for insurance through their new employers; others kept their retirement insurance by quitting or going part-time. The officers sued.The district court granted summary judgment to the officers, ordered Kentucky to reinstate their retirement health insurance, and awarded the officers some of the monetary damages requested. The Sixth Circuit affirmed. The officers have a cognizable breach-of-contract claim. Under Kentucky law, the Kentucky Retirement Systems formed an “inviolable contract” with the officers to provide free retirement health insurance and to refrain from reducing their benefits, then breached that contract. The Medicare Secondary Payer Act of 1980 did not bar Kentucky from providing Medicare-eligible police officers with state retirement insurance after they reentered the workforce and became eligible again for employer-based insurance coverage, 42 U.S.C. 1395y. View "River City Fraternal Order of Police v. Kentucky Retirement Systems" on Justia Law

After a car accident, Wilkerson filed a claim with her insurer, American Family. Her policy will pay for “loss of or damage to your insured car and its equipment, less the deductible[.]” A“Limits of Liability” section adds that American Family will pay no more than the lesser of “the actual cash value of the stolen or damaged property” or “the amount necessary to repair or replace the property.” American Family concluded that the cost to “repair or replace” her Impala exceeded its pre-accident “actual cash value,” and contracted with AudaExplore to calculate that value. AudaExplore estimated the Impala’s market value based on its location, mileage, condition, and the recent advertised prices of 2010 Impalas in the area ($8,218-$10,033). AudaExplore valued Wilkerson’s car at $9,979. American Family subtracted Wilkerson’s deductible and paid her $9,479.Wilkerson brought suit under the Class Action Fairness Act, 28 U.S.C. 1332(d), arguing that “actual cash value” includes sales taxes and fees that a party typically must incur when buying a replacement car (whether or not a party actually incurs those expenses in a given case). She sought $673.58 for the taxes and $19.50 for fees Ohio charges to transfer a car’s title and registration. The Sixth Circuit affirmed the dismissal of her complaint. American Family’s policy indicates that “actual cash value” is best read to refer to market value, not replacement costs less depreciation. View "Wilkerson v. American Family Insurance Co." on Justia Law

Davis, insured under a Hartford long-term disability policy, began missing work due to chronic back pain, neuropathy, and fatigue caused by multiple myeloma. Relying on the opinion of Davis’s oncologist, Dr. Reddy, Hartford approved Davis’s claim for short-term disability benefits through April 17, 2012. In June, Hartford approved Davis for long-term disability benefits, retroactive to April, for 24 months. Davis could continue to receive benefits beyond that time if he was unable to perform one or more of the essential duties of “Any Occupation” for which he was qualified by education, training, or experience and that has comparable “earnings potential.” Reddy's subsequent reports were inconsistent. An investigator found “discrepancies" based on surveillance. Davis’s primary care physician and neurologist both concluded that Davis could work full-time under described conditions. Reddy disagreed, but would not answer follow-up questions. An orthopedic surgeon conducted an independent review and performed an examination, and reported that Davis was physically capable of “light duty or sedentary work” within certain restrictions. Other doctors agreed. Hartford notified Davis that he would be ineligible for benefits after April 17, 2014.Davis filed suit under the Employee Retirement Income Security Act, 29 U.S.C. 1132(a). The Sixth Circuit affirmed summary judgment in favor of Hartford. Hartford reasonably concluded that Davis could work full-time, under certain limitations; the decision was not arbitrary. View "Davis v. Hartford Life & Accident Insurance Co." on Justia Law