Justia Insurance Law Opinion Summaries

A group of insurance policyholders, known as subscribers, challenged the actions of a company that manages a reciprocal insurance exchange. The subscribers alleged that the company, acting as attorney-in-fact, breached its fiduciary duty by setting its management fee at the maximum allowed percentage and by failing to implement procedures to address conflicts of interest in 2019 and 2020. These claims arose after the company had previously changed its fee practices, which had already prompted earlier lawsuits by other subscribers over different time periods and types of fees.Prior to the current appeal, the United States District Court for the Western District of Pennsylvania had dismissed earlier lawsuits—Beltz and Ritz—on grounds including the statute of limitations and claim preclusion. In the Ritz case, the court found that the claims were precluded because they could have been brought in the earlier Beltz litigation, and that the parties were in privity. The Stephenson plaintiffs, whose claims were based on later events, filed suit in state court. The company then sought and obtained a preliminary injunction from the District Court to prevent the Stephenson plaintiffs from proceeding, arguing that the prior federal judgments had preclusive effect.The United States Court of Appeals for the Third Circuit reviewed the District Court’s order granting the preliminary injunction. The Third Circuit held that the prior federal judgments did not have claim or issue preclusive effect over the Stephenson plaintiffs’ claims, as those claims were based on events that occurred after the earlier lawsuits were filed. The court concluded that the District Court abused its discretion in granting the preliminary injunction and vacated the order, remanding the case for further proceedings. View "Erie Indemnity Co v. Stephenson" on Justia Law

A Tennessee resident insured by State Farm had her vehicle declared a total loss after an accident. State Farm calculated the payout for her claim using a valuation method provided by Audatex, which included a “Typical Negotiation Adjustment” (TNA) that reduced the value based on the assumption that used cars typically sell for less than their advertised price. The plaintiff argued that this adjustment did not reflect actual market practices and unfairly reduced the payout, constituting a breach of contract and a violation of Tennessee law. She filed a class action on behalf of similarly situated State Farm policyholders in Tennessee who received payouts calculated with the TNA.After the plaintiff filed suit in Tennessee state court, State Farm removed the case to the United States District Court for the Western District of Tennessee. The district court denied State Farm’s initial summary judgment motion but enforced the policy’s appraisal provision, leading to an appraisal process in which the plaintiff ultimately received a higher payout. State Farm then argued that the plaintiff’s claims were moot or lacked standing because she had been paid the appraised value, but the district court rejected this argument, finding her claims for breach of contract and consequential damages survived. The district court certified a class of Tennessee policyholders who received payouts reduced by the TNA, finding the requirements of Federal Rule of Civil Procedure 23 were met.The United States Court of Appeals for the Sixth Circuit reviewed the class certification. The court held that the plaintiff had standing to pursue her claims and that the class satisfied the requirements of numerosity, commonality, typicality, adequacy, predominance, superiority, and ascertainability. The court distinguished its approach from other circuits, emphasizing that common questions about the propriety of the TNA predominated over individualized damages issues. The Sixth Circuit affirmed the district court’s order certifying the class and remanded for further proceedings. View "Clippinger v. State Farm Automobile Insurance Co." on Justia Law

Curtis Diblin and Monee Gagliardo were housemates when Diblin attacked Gagliardo with a rubber mallet, causing significant injuries. Diblin was criminally prosecuted and pled guilty to assault with intent to commit a sexual crime. Gagliardo then filed a civil suit against Diblin, alleging several intentional torts and negligence, all based on the attack. The operative complaint at trial did not allege any facts suggesting accidental conduct or negligence unrelated to the assault. Diblin’s homeowners insurance policy with State Farm covered injuries arising from an “occurrence,” defined as an “accident,” and excluded coverage for intentional or willful acts.In the San Diego County Superior Court, a jury found Diblin liable for gender violence (an intentional tort) and negligence, awarding Gagliardo over $2.5 million in compensatory damages. The jury also found Diblin acted with malice and oppression, supporting punitive damages, though Gagliardo later waived her right to punitive damages. State Farm, having defended Diblin under a reservation of rights, filed a declaratory relief action seeking a determination that it owed no duty to indemnify Diblin for the judgment.The California Court of Appeal, Fourth Appellate District, Division One, reviewed the trial court’s judgment in favor of State Farm. The appellate court held that the jury’s findings in the underlying action established Diblin’s conduct was intentional, not accidental, and therefore not a covered “occurrence” under the policy. The court rejected arguments that the negligence finding mandated coverage or that the concurrent independent causes doctrine applied, finding the injury-producing conduct was not independent of the intentional act. The court also found no need for a new jury to determine intent for exclusion purposes. The judgment in favor of State Farm was affirmed. View "State Farm Fire and Casualty Co. v. Diblin" on Justia Law

Three individuals, two of whom were former insureds of an insurance company, financed their insurance premiums through a separate premium finance company. Under the financing agreements, the finance company paid the full premium to the insurer and the insureds made monthly payments to the finance company. Each agreement authorized the finance company to cancel the insurance policy if the insured defaulted on payments. After defaults occurred, the finance company initiated cancellation of the policies. The plaintiffs alleged that the insurer’s procedures for cancellation did not comply with Louisiana law, resulting in ineffective cancellation and breach of good faith.The plaintiffs initially filed a class action in Louisiana state court against the insurer and the finance company, claiming that the insurer had not properly cancelled their policies and had failed to act in good faith. The case was removed to the United States District Court for the Middle District of Louisiana. Both sides moved for summary judgment on whether the insurer’s cancellation procedures satisfied Louisiana statutory requirements. The district court granted summary judgment for the insurer, finding that its procedures complied with state law, and dismissed all claims with prejudice.On appeal, the United States Court of Appeals for the Fifth Circuit reviewed whether the insurer’s procedures strictly adhered to Louisiana law governing cancellation of financed insurance policies. The court held that Louisiana law does not require a signature on the notice of cancellation sent by the premium finance company to the insurer, and that the insurer’s receipt of notice via its computer system satisfied the statutory requirement of “receipt.” The court declined to certify questions of statutory interpretation to the Louisiana Supreme Court and affirmed the district court’s judgment. View "Williams v. GoAuto Insurance" on Justia Law

Noah Gilbert purchased a motor vehicle insurance policy from Progressive Northwestern Insurance Company, initially declining underinsured motorist (UIM) coverage but later adding a UIM endorsement with $25,000 per person and $50,000 per accident limits. The policy included an offset provision, reducing any UIM payout by amounts received from another party’s insurance. Gilbert paid premiums for this coverage but never filed a UIM claim or experienced an accident triggering such coverage. He later filed a putative class action, alleging that Progressive’s UIM coverage was illusory under Idaho law and asserting claims for breach of contract, breach of the implied covenant of good faith and fair dealing, unjust enrichment, fraud, and constructive fraud.The District Court of the Fourth Judicial District, Ada County, reviewed cross-motions for summary judgment. The court raised the issue of standing and ultimately held that Gilbert lacked standing because he had not filed a claim or been denied coverage, and thus had not suffered an injury-in-fact. Alternatively, the court found that Gilbert’s claims failed on the merits: there was no breach of contract or bad faith without a denied claim, no damages to support fraud or constructive fraud, and unjust enrichment was unavailable due to the existence of a valid contract. The court granted summary judgment for Progressive and denied Gilbert’s motion for class certification as moot.On appeal, the Supreme Court of the State of Idaho held that Gilbert did have standing, as payment of premiums for allegedly illusory coverage constituted a concrete injury. However, the Court affirmed the district court’s judgment, finding that Gilbert’s claims failed on the merits because he never filed a claim, was never denied coverage, and did not incur damages. The Court also affirmed the dismissal of the unjust enrichment claim, as an enforceable contract provided an adequate legal remedy. The judgment in favor of Progressive was affirmed. View "Gilbert v. Progressive Northwestern Insurance Co." on Justia Law

A chemical company sought a declaratory judgment to establish its right to insurance coverage for environmental damage resulting from its operation of a DDT plant. The company’s insurers denied coverage based on “qualified pollution exclusions” (QPEs) in their comprehensive general liability policies, which excluded coverage for pollution unless the discharge was “sudden and accidental” or, in some policies, “sudden, unintended and unexpected.” The company argued that “sudden” could reasonably be interpreted to include gradual, unintended pollution events, and sought to introduce extrinsic evidence, including drafting history and industry statements, to support this interpretation.The Superior Court of Los Angeles County, at the parties’ suggestion, divided the case into phases and, in Phase II-A, addressed the interpretation of the QPEs. The parties stipulated to the use of exemplar QPEs for interpretation. The trial court excluded the company’s proffered extrinsic evidence, reasoning that California appellate courts had uniformly held that “sudden” in this context unambiguously does not mean gradual, and that it was bound by this precedent. The court certified a question of law for appellate review regarding whether prior judicial construction of an insurance policy term precludes consideration of extrinsic evidence to determine ambiguity.The California Court of Appeal, Second Appellate District, Division Three, reviewed the case. The court held that, as a general rule, prior judicial construction of a policy term does not categorically preclude a trial court from considering extrinsic evidence to expose a latent ambiguity. However, in this case, the court found that California appellate decisions have uniformly and specifically rejected the interpretation that “sudden” can mean “gradual” in the context of these pollution exclusions. Therefore, the trial court correctly excluded the extrinsic evidence as irrelevant, and the petition for writ of mandate was denied. View "Montrose Chemical Corp. of California v. Superior Ct." on Justia Law

A woman was injured while visiting a property owned by a couple who were seeking tenants for a mobile home located on their land. The injury occurred when she stepped into a gap between the entryway stairs and the mobile home, a gap created during ongoing repairs. The couple had a homeowners insurance policy with State Mutual Insurance Company, but the policy’s declarations page listed a different property as the covered premises. The injured woman sued the couple for negligence, and the parties later entered into a settlement and stipulated judgment, with the couple paying part of the judgment and the woman seeking the remainder from the insurer under Maine’s reach-and-apply statute.The Superior Court of Waldo County granted summary judgment in favor of the insurer, finding that the insurance policy did not cover the property where the injury occurred. The court determined that the property was not an “insured location” under the policy and that the injury arose out of a condition of the uninsured premises, thus falling within a policy exclusion. The woman appealed this decision.The Maine Supreme Judicial Court reviewed the case de novo, considering both the interpretation of the insurance policy and the application of the reach-and-apply statute. The court held that the policy unambiguously excluded coverage for bodily injury arising out of a premises owned by the insured but not listed as an insured location. The court also found that the property in question was not an “insured location” because the insureds did not reside there and it was not listed in the policy declarations. Accordingly, the court affirmed the grant of summary judgment in favor of the insurer, holding that the policy did not provide coverage for the injury. View "Rowe v. State Mutual Insurance Company" on Justia Law

In this case, Christopher C. Brown, through his company Tattooed Millionaire Entertainment (TME), owned a Memphis music studio and insured both the studio and its equipment with Hanover American Insurance Company. John Falls, a musician, leased Studio B and its equipment from Brown and also obtained insurance from Hanover for the equipment and lost business income. In 2015, the studio was damaged by arson, and both Brown and Falls submitted insurance claims. Hanover discovered Brown had forged receipts for equipment purchases and sued to recover advance payments and for a declaratory judgment of no further liability. Brown, Falls, and another lessee counter-sued for breach of contract. After a jury trial in the United States District Court for the Western District of Tennessee, Falls was awarded $2.5 million for equipment loss and $250,000 for business income, while Brown was found to have committed insurance fraud.Hanover moved to set aside the verdict under Rule 50(b), which the district court granted. On appeal, the United States Court of Appeals for the Sixth Circuit reversed, holding Hanover had forfeited its Rule 50(b) motion by failing to make a Rule 50(a) motion as to Falls, and ordered reinstatement of the jury verdict. Subsequent proceedings included a federal interpleader action and a parallel state court action between Falls and TME. The district court enjoined the state action, but the Sixth Circuit reversed the injunction.In the present appeal, the United States Court of Appeals for the Sixth Circuit affirmed the district court’s allocation of the insurance payout, holding that Hanover was precluded by res judicata from challenging Falls’s recovery on grounds that could have been raised earlier. The court found the district court’s error in interpreting the wrong lease was harmless and upheld the allocation of funds based on the value of Falls’s leasehold interest. The court also held that Tennessee public policy barred Brown from recovering his allocated share due to his insurance fraud. The district court’s judgment was affirmed. View "Hanover American Insurance Co. v. Tattooed Millionaire Entertainment" on Justia Law

Katherine Martinez was severely injured as a passenger in a multi-vehicle accident in Florida. The driver of the truck that struck the SUV, Diana Guevara, was insured by GEICO, but the truck was not listed on her policy, raising a coverage issue. GEICO investigated the accident, requested medical information from the victims, and, thirty-two days after receiving notice, tendered the full $20,000 policy limit for a global settlement. Martinez rejected the offer and sued Guevara in state court, ultimately obtaining a stipulated final judgment for $2,000,000. Guevara assigned her claims against GEICO to Martinez, who then sued GEICO in federal court for bad faith, seeking to recover the excess judgment.The U.S. District Court for the Southern District of Florida granted summary judgment to GEICO, adopting the magistrate judge’s finding that GEICO did not act in bad faith as a matter of law. The court found that Martinez failed to present sufficient evidence for a reasonable jury to infer bad faith, particularly regarding GEICO’s investigation and settlement efforts. Martinez appealed, arguing that the totality of the evidence could support a finding of bad faith due to alleged delays and handling of the claim.The United States Court of Appeals for the Eleventh Circuit reviewed the case de novo and affirmed the district court’s decision. The Eleventh Circuit held that, under Florida law and the federal summary judgment standard, Martinez did not present sufficient evidence for a reasonable jury to find that GEICO acted in bad faith in investigating or settling the claim. The court clarified that mere negligence or delay does not meet the standard for bad faith and found GEICO’s actions reasonable given the circumstances, including the coverage dispute and multiple claimants. The district court’s summary judgment for GEICO was affirmed. View "Martinez v. GEICO Casualty Company" on Justia Law

The case concerns an automobile accident that occurred in rural Tuscaloosa County, Alabama, on January 3, 2024. James Godwin, a resident of Dallas County and employee of Talton Communications, Inc., was driving a company vehicle when he was rear-ended by Desi Bernard Peoples, a resident of Fayette County. Godwin subsequently filed suit in the Dallas Circuit Court against Peoples, his employer Talton, and Penn National Security Insurance Company, which provided uninsured/underinsured motorist coverage. Godwin’s claims included negligence and wantonness, a claim for uninsured/underinsured motorist benefits, and a workers’ compensation claim against Talton. Godwin received all medical treatment for his injuries in Dallas County, where he and his wife reside and work.After the complaint was filed, Penn National moved to sever the workers’ compensation claim and to transfer the remaining claims to the Tuscaloosa Circuit Court, arguing that transfer was warranted for the convenience of the parties and witnesses and in the interest of justice under Alabama’s forum non conveniens statute, § 6-3-21.1. The Dallas Circuit Court denied the motion to sever but ordered the workers’ compensation claim to be tried separately. The court also denied the motion to transfer, finding insufficient evidence that Tuscaloosa County was a significantly more convenient forum or that Dallas County had only a weak connection to the case.The Supreme Court of Alabama reviewed Penn National’s petition for a writ of mandamus seeking to compel transfer. The Court denied the petition, holding that Penn National failed to meet its burden of showing that Tuscaloosa County was significantly more convenient or that Dallas County’s connection to the case was weak. The Court emphasized that the plaintiff’s choice of venue is entitled to deference when both venues are proper and that the evidence presented did not justify overriding that choice. View "Ex parte Penn National Security Insurance Company" on Justia Law