Justia Insurance Law Opinion Summaries

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In 2010, the Foundations and their insurance broker, Gallagher, discussed the renewal of the Foundations’ $25 million directors and officers (D&O) insurance coverage. The Foundations wanted to obtain the same coverage with a reduced premium. Gallagher offered renewal of the existing Chubb policy or the purchase of a $25 million Chartis policy, stating that the Chartis policy provided the same coverage with a premium that was $3400 lower. Unbeknownst to the Foundations, the Chartis policy contained a broad exclusion of claims related to securities transactions; the Chubb policy contained a narrower exclusion. In 2007, the Foundations sold their Tribune stock for $2 billion during a leveraged buyout. A year later, the Tribune filed for bankruptcy. The Foundations were named in suits filed by aggrieved shareholders, alleging fraud. The Foundations tendered the litigation to Chartis, which denied coverage. The Foundations, asserting that Chubb would have defended and indemnified them, sued Gallagher for breach of contract and professional negligence. Gallagher’s defenses asserted that the Foundations’ conduct was fraudulent and uninsurable and that the Foundations knew of “an ongoing, progressive loss” before changing insurers. Gallagher subpoenaed the Foundations and their attorneys, seeking communications related to the Tribune bankruptcy and the litigation. The Foundations asserted attorney-client privilege. The circuit court applied an exception, finding that Gallagher had a “common interest” with the Foundations because it was “standing in the insurer’s shoes for the purposes of this malpractice issue and may bear the ultimate burden of payment of the underlying claims and defense costs.” The Illinois Supreme Court reversed. The common-interest exception to the attorney-client privilege does not extend to these circumstances, where there is no insured-insurer relationship between the parties and the party claiming the privilege is bringing suit based on the defendant’s negligence in failing to procure appropriate insurance as a broker. View "Robert R. McCormick Foundation v. Arthur J. Gallagher Risk Management Services, Inc." on Justia Law

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This matter came from two separate lawsuits commenced in the Pennsylvania courts of common pleas which were subsequently removed to federal district courts on the basis of diversity jurisdiction, and thereafter consolidated for disposition by the United States Court of Appeals for the Third Circuit. Appellee William Scott was covered by an automobile insurance policy issued by Appellant Travelers Commercial Insurance Company. Appellee Samantha Sayles was covered by an automobile policy issued by Appellant Allstate Insurance Company. Allstate’s policy contained a clause, similar to the one in Scott’s policy, providing that, in order to receive first-party medical benefits, the insured had to submit to mental and physical examinations by physicians selected by the insurance company at the company’s behest before medical benefits were paid. Both appellees were injured in separate car accidents, and their respective insurance companies refused to pay their medical bills. The United States Court of Appeals for the Third Circuit certified a question of Pennsylvania law to the Pennsylvania Supreme Court: Does an automobile insurance policy provision, which required an insured seeking first-party medical benefits under the policy to submit to an independent medical exam whenever the insurer requires and with a doctor selected by the insurer, conflict with 75 Pa.C.S. Section 1796(a) of the Pennsylvania Motor Vehicle Financial Responsibility Law (“MVFRL”), such that the requirement was void as against public policy? After review, the Supreme Court concluded that the provision indeed conflicted with Section 1796(a), and was void as against public policy. View "Sayles. v. Allstate Ins Co." on Justia Law

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The First Circuit affirmed the judgment of the district court granting summary judgment for Insurer and dismissing Insured's complaint alleging breach of contract and violations of Massachusetts General Laws chapters 93A and 176D, holding that Insured failed to produce evidence in support of its assertions. In the complaint, Insured claimed that Insurer breached the parties' contract and violated chapters 93A and 176D in the way that Insurer handled Insured's claim for residential property damage. The district court granted summary judgment in favor of Insurer. The First Circuit affirmed, holding (1) the district court did not err in concluding that no reasonable jury could find that Insurer had violated chapter 176D; and (2) there was no breach of the contract. View "River Farm Realty Trust v. Farm Family Casualty Insurance Co." on Justia Law

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These consolidated actions arose from fatal injuries suffered by James Andrew Brenek, II when he was electrocuted by an electrically-energized generator housing cabinet on a rig in Jefferson County, Texas. Brenek was employed by Guichard, which had leased the generator involved in the accident from Aggreko. Guichard had a primary commercial liability policy with Gray and an excess commercial liability policy with Chartis. Aggreko had a primary insurance policy with Indian Harbor. Indian Harbor appealed the district court's grant of summary judgment for Gray, and Gray conditionally appealed the district court's decision to apply Texas, rather than Louisiana, law to the issues before it. The Fifth Circuit affirmed the district court's judgment, concluding that the outcome of the dispute would be the same under both Texas and Louisiana law. Therefore, the court need not engage in a conflict-of-laws analysis and applied Texas law. Under Texas law, the court held that Gray exhausted its policy limit and its duty to defend Aggreko when it paid $950,000—the remainder of its liability coverage limit—to the Breneks in exchange for the Breneks agreement not to execute any judgment against Aggreko and to recognize Aggreko's entitlement to claim a $950,000 damages credit. View "Aggreko, LLC v. Chartis Specialty Insurance Co." on Justia Law

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A storm caused minor hail damage at the Winding Ridge condominium complex located in Indiana, which was not discovered until almost a year later when a contractor inspected the property to estimate the cost of roof replacement. Winding Ridge submitted an insurance claim to State Farm. The parties inspected the property and exchanged estimates but could not reach an agreement. Winding Ridge demanded an appraisal under the insurance policy. State Farm complied. After exchanging competing appraisals, the umpire upon whom both sides agreed issued an award, which became binding. Winding Ridge filed suit alleging breach of contract, bad faith, and promissory estoppel. The Seventh Circuit held that the appraisal clause is unambiguous and enforceable; there is no evidence that State Farm breached the policy or acted in bad faith when resolving the claim. Winding Ridge’s own appraiser found no hail damage to the roofing shingles on 20 buildings. The fact that Winding Ridge independently replaced the shingles on all 33 buildings for $1.5 million while its claim was pending does not obligate State Farm under the policy or mean State Farm breached the policy. There is no evidence that State Farm delayed payment, deceived Winding Ridge, or exercised an unfair advantage to pressure Winding Ridge to settle. View "Villas at Winding Ridge v. State Farm Fire and Casualty Co." on Justia Law

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Allstate Insurance Company ("Allstate") petitioned the Alabama Supreme Court for a writ of mandamus to direct the Perry Circuit Court ("the trial court") to vacate its order denying Allstate's motion to transfer an action filed against it by Devin Harrison in Perry County to Shelby or Bibb County. Harrison, a resident of Bibb County, was driving an automobile in Perry County. The automobile was owned by Thomas Hobson, a resident of Bibb County ("Hobson"), and was insured by Allstate, whose principal place of business is in Shelby County. Dylan Gardner and Alexander Hobson, Hobson's grandson, were passengers in the vehicle Harrison was driving. While Harrison was driving, the automobile was involved in a single-vehicle accident. Gardner died as a result of injuries sustained in the accident, and Alexander Hobson was injured. Gardner's estate filed a wrongful-death action against Harrison and obtained a $2 million dollar judgment. At some point, Alexander Hobson also filed an action in the trial court against Harrison and Allstate seeking damages for injuries relating to the accident. In May 2018, Harrison filed the action underlying this petition in the trial court against Allstate in which he asserted claims of breach of contract and bad faith based on Allstate's alleged refusal to defend or indemnify him in the wrongful-death action. Allstate removed the action to the United States District Court for the Southern District of Alabama. After that court remanded the case to the trial court, Allstate filed a motion to transfer the action to Shelby County or Bibb County, arguing that venue in Perry County was improper. The Alabama Supreme Court concluded after review of the trial court record that Allstate demonstrated venue was improper in Perry County, and was proper in Shelby or Bibb County. The trial court was directed to vacate its order denying Allstate’s motion for a change of venue and to transfer the action. View "Ex parte Allstate Insurance Company." on Justia Law

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The Fourth Circuit vacated the district court's declaratory judgment in favor of the insurer, holding that the district court abused its discretion when it assumed jurisdiction under the Declaratory Judgment Act. In this case, without addressing the decision to exercise its discretionary jurisdiction, the district court reached the merits despite a thin and ambiguous record. The court held that the district court created both a substantial question about whether Article III jurisdiction existed and a serious potential to interfere with ongoing state proceedings. Therefore, the court remanded with instructions to dismiss the action without prejudice. View "Trustgard Insurance Co. v. Collins" on Justia Law

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In 2006, Verizon divested its print and electronic directories business to its stockholders in a tax-free “spin-off” transaction. As part of the transaction, Verizon created Idearc, Inc. and appointed John Diercksen, a Verizon executive, to serve as Idearc’s sole director. Verizon then distributed Idearc common stock to Verizon shareholders. Idearc launched as a separate business with $9.1 billion in debt. In connection with the Idearc spinoff, Verizon and Idearc purchased primary and excess Executive and Organizational Liability Policies (“Idearc Runoff Policies"). The Idearc Runoff Policies covered certain claims made against defined insureds during the six-year policy period that exceeded a $7.5 million retention. Relevant here, Endorsement No. 7 to the policies stated that “[i]n connection with any Securities Claim,” and “for any Loss . . . incurred while a Securities Claim is jointly made and maintained against both the Organization and one or more Insured Person(s), this policy shall pay 100% of such Loss up to the Limit of Liability of the policy.” “Securities Claim” was defined in pertinent part as a “Claim” against an “Insured Person” “[a]lleging a violation of any federal, state, local or foreign regulation, rule or statute regulating securities (including, but not limited to, the purchase or sale or offer or solicitation of an offer to purchase or sell securities).” Under the policy, Verizon could recover its “Defense Costs” when a Securities Claim was brought against it and covered directors and officers, and Verizon indemnified those directors and officers. Idearc operated as an independent, publicly traded company until it filed for bankruptcy in 2009; a litigation trust was set up to pursue claims against Verizon on behalf of creditors. Primary amongst the allegations was Dickersen and Verizon saddled Idearc with excessive debt at the time of the spin-off. This appeal turned on the definition of a "Securities Claim;" the Superior Court found the definition ambiguous. Using extrinsic evidence, the court held that fiduciary duty, unlawful dividend, and fraudulent transfer claims brought by a bankruptcy trustee against Verizon Communications Inc. and others were Securities Claims covered under the policy. The Delaware Supreme Court disagreed, finding that, applying the plain meaning of the Securities Claim definition in the policy, the litigation trustee’s complaint did not allege any violations of regulations, rules, or statutes regulating securities. Thus, the Superior Court’s grant of summary judgment to Verizon was reversed and that court directed to enter summary judgment in favor of the Insurers. View "In Re Verizon Insurance Coverage Appeals" on Justia Law

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Neither the Worker's Compensation exclusion or the Employee Indemnification and Employer's Liability exclusion in a standard commercial automobile insurance policy barred coverage for the liability of a third-party permissive user of an insured vehicle who caused personal injuries to an employee of a named insured. While employees of Milton Hardware were performing construction work at the home of Rodney Perry, Milton Hardware's owner authorized Perry to move one of Milton Hardware's trucks. In doing so, Perry accidentally struck a Milton Hardware employee, Greg Ball, and caused him serious injuries. Ball requested indemnification from Milton Hardware's insurer, United Financial, but United Financial denied coverage. The district court granted a declaratory judgment in favor of United Financial, holding that the policy it issued to Milton Hardware did not cover Perry's liability for Ball's injuries. The Fourth Circuit vacated and held that, because Ball's negligence claim against Perry was a claim against a third party, rather than a claim against his employer for workers' compensation, the Worker's Compensation exclusion did not apply. The court also held that the policy's broader exclusion for Employee Indemnification and Employer's Liability, which on its face would apply to exclude coverage for Perry's liability to Ball, was inoperable because its limitation of coverage contravened West Virginia Code 33-6-31. Therefore, the court remanded for further proceedings. View "United Financial Casualty Co. v. Ball" on Justia Law

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Plaintiff Barbara Orientale brought a personal-injury lawsuit against defendant Darrin Jennings for allegedly setting off an automobile accident that caused her to suffer permanent injuries. The trial court entered partial summary judgment against Jennings, finding that he was at fault for causing the accident. Orientale and Jennings then settled the lawsuit for $100,000, the full amount of liability coverage on Jennings’s vehicle. Orientale maintained an underinsured motorist policy with defendant Allstate New Jersey Insurance Company (Allstate) that provided coverage for damages up to $250,000. Orientale initiated a claim for her personal-injury damages in excess of $100,000 allegedly caused by the accident. Although the jury returned a verdict finding that Orientale suffered a permanent injury, it awarded damages in the amount of only $200. Because the jury award did not exceed Orientale’s $100,000 settlement with Jennings, Allstate’s underinsured motorist coverage policy was not triggered. Orientale moved for a new damages trial or an additur. The judge vacated the damages award, finding that it constituted a miscarriage of justice, and granted an additur in the amount of $47,500, the lowest award in his estimation that a reasonable jury could have returned in light of the evidence presented at trial. Plaintiff challenged the constitutionality of additur on the basis that the judge acts as a “super jury” in setting a damages award in violation of the right to a jury trial. The New Jersey Supreme Court held that when a damages award is deemed a miscarriage of justice requiring the grant of a new trial, the acceptance of a damages award fixed by the judge must be based on the mutual consent of the parties. "Going forward, in those rare instances when a trial judge determines that a damages award is either so grossly excessive or grossly inadequate that the grant of a new damages trial is justified, the judge has the option of setting a remittitur or an additur at an amount that a reasonable jury would award given the evidence in the case. Setting the figure at an amount a reasonable jury would award -- an amount that favors neither side -- is intended to give the competing parties the greatest incentive to reach agreement. If both parties accept the remittitur or additur, then the case is settled; if not, a new trial on damages must proceed before a jury." View "Orientale v. Jennings" on Justia Law