Justia Insurance Law Opinion Summaries

Molly and Mark Johnson were involved in a motor vehicle accident for which they were insured by State Farm. State Farm paid for most of their property losses, except for certain items. After making these payments, State Farm asserted its subrogation rights and was reimbursed by the at-fault driver’s insurer, GEICO. The Johnsons later settled with the at-fault driver and GEICO for the remaining property damage not covered by State Farm, but had to pay attorney fees from this recovery. The Johnsons then sued State Farm, alleging that State Farm’s subrogation violated the made whole doctrine by collecting from GEICO before the Johnsons were fully compensated, including attorney fees, and also brought a claim for conversion.The United States District Court for the District of Montana initially remanded the case to state court for lack of standing, finding the Johnsons had not shown a substantial risk of injury. In the Montana Eleventh Judicial District Court, the Johnsons’ amended complaints were dismissed for lack of standing, as the court found they had not sufficiently alleged that State Farm’s subrogation prevented them from being made whole. The court also dismissed the conversion claim, finding it preempted by statute and lacking standing. The Johnsons’ attempt to further amend their complaint was denied, and their petition for supervisory control to the Montana Supreme Court was also denied.The Supreme Court of the State of Montana reviewed the case and affirmed the district court’s dismissal. The Court clarified that the made whole doctrine requires an insured to be fully compensated, including attorney fees, before an insurer may subrogate. However, it held that because the Johnsons’ remaining losses were not covered by their State Farm policy, State Farm’s subrogation did not violate the made whole doctrine. The Court also affirmed dismissal of the conversion claim, as the Johnsons lacked standing. View "Johnson v. State Farm Insurance" on Justia Law

The plaintiff purchased a life insurance policy for her son and consistently paid the required premiums. She alleges that the insurer failed to provide the statutory notices and protections mandated by California law before terminating her policy for nonpayment. After missing a payment in 2016, her policy lapsed, and following reinstatement, it was terminated again in 2018 after another missed payment. The plaintiff contends that the insurer’s failure to comply with statutory notice requirements rendered the termination ineffective and that her experience was representative of many other policyholders in California.The United States District Court for the Eastern District of California granted in part the plaintiff’s motion for class certification. The court found that the prerequisites of Federal Rule of Civil Procedure 23(a) were met and certified a class under Rule 23(b)(2) for declaratory and injunctive relief. The certified class included all policy owners or beneficiaries whose policies lapsed for nonpayment without the required statutory notice. The court appointed the plaintiff as class representative but denied, without prejudice, certification for monetary relief under Rule 23(b)(3).The United States Court of Appeals for the Ninth Circuit reviewed the district court’s class-certification order. Relying on its intervening decision in Small v. Allianz Life Insurance Co. of North America, the Ninth Circuit held that to recover for violations of the relevant California statutes, plaintiffs must show not only a statutory violation but also that the violation caused them harm. The court found that the plaintiff was not an adequate class representative for beneficiaries and that her claims were not typical of class members who intentionally allowed their policies to lapse. The Ninth Circuit reversed the district court’s class-certification order and remanded the case for further proceedings. View "Farley v. Lincoln Benefit Life Co." on Justia Law

Jessica De'Andrea, a patrol officer with the Montgomery Police Department, was involved in a motor vehicle collision while on duty. The driver of the other vehicle, Clint Walters, later sued De'Andrea individually for negligence, resulting in a $550,000 judgment against her after a jury trial. De'Andrea alleged that the City of Montgomery, which had procured liability insurance and acted as a self-insurer for its employees, failed to properly defend her, did not communicate settlement or appeal options, and refused to satisfy the judgment. She claimed these failures led to her bankruptcy and brought multiple claims against the City, including breach of contract, bad faith, fraudulent misrepresentation, and violations of the Alabama Legal Services Liability Act.The Montgomery Circuit Court denied the City's motions to dismiss, finding it was not apparent beyond doubt that De'Andrea could prove no set of circumstances entitling her to relief. The City then petitioned the Supreme Court of Alabama for a writ of mandamus, seeking dismissal of all claims on the basis of statutory immunity and other defenses.The Supreme Court of Alabama reviewed only the City's immunity defense as to the fraudulent misrepresentation claim, because the City had not preserved immunity arguments for the other claims in the lower court. The Court held that municipal immunity under § 11-47-190, Ala. Code 1975, does not automatically bar all fraudulent misrepresentation claims, as such claims can be based on innocent or mistaken misrepresentations, not just intentional torts. The Court denied the City's petition for a writ of mandamus, allowing De'Andrea's claims to proceed. The City may raise its other defenses on appeal if necessary. View "De'Andrea v. City of Montgomery" on Justia Law

A fire occurred on September 27, 2018, at a multi-building apartment complex in Birmingham, Alabama, owned by Maxus Metropolitan, LLC. The fire destroyed one building and damaged others, including causing soot and water damage. Maxus was insured by Travelers Property Casualty Company of America under a policy covering physical loss or damage and lost business income. After the fire, Maxus and Travelers disagreed over the extent of coverage, particularly regarding remediation costs for microscopic soot and water damage. Maxus hired experts who found widespread soot contamination, prompting evacuation and remediation. Travelers disputed the necessity of remediation and delayed coverage decisions.Maxus sued Travelers in Missouri state court for breach of contract and vexatious refusal to pay, and Travelers removed the case to the United States District Court for the Western District of Missouri. At trial, the jury found for Maxus, awarding substantial damages, additional damages for vexatious refusal, and attorneys’ fees. The district court granted Maxus’s motions for attorneys’ fees and prejudgment interest, including fees for pre-suit work and paralegal support. Travelers moved for judgment as a matter of law and for a new trial, arguing issues with coverage, sufficiency of evidence, jury instructions, and calculation of damages and fees.The United States Court of Appeals for the Eighth Circuit reviewed the case. It affirmed the district court’s denial of Travelers’ motions for judgment as a matter of law and for a new trial, holding that microscopic soot can constitute “direct physical loss or damage” under Missouri law if it renders property uninhabitable, and that sufficient evidence supported the jury’s findings on coverage and vexatious refusal. The court also affirmed the attorneys’ fees award. However, it vacated the prejudgment interest award, finding the calculation method improper, and remanded for recalculation based on the dates payment was demanded from Travelers. View "Maxus Metropolitan, LLC v. Travelers Property Casualty Co." on Justia Law

A dispute arose when an insurance company denied coverage to an entity listed as an "Additional Insured" under a claims-made insurance policy. The insurer had issued the policy to a company operating an elder care facility. The plaintiff, a commercial real estate lender, had provided a loan secured by a mortgage on the property and later sought the appointment of a receiver after the operator defaulted. In January 2022, several residents were removed from the facility, leading to lawsuits alleging wrongful eviction and other claims against entities involved in financing and controlling the facility, including the plaintiff.The United States District Court for the District of Massachusetts reviewed the plaintiff’s suit seeking a declaration that the insurer had a duty to defend it in two underlying lawsuits. The district court granted summary judgment in part to each party, holding that the insurer had a duty to defend the plaintiff in one action (the Frost action) based on a claim related to the collection of an administrative fee, but not in the other (the Salie action), due to the plaintiff’s failure to provide timely notice as required by the policy. The court also granted summary judgment to the insurer on the plaintiff’s state-law claims for unfair and deceptive practices, finding insufficient evidence of bad faith.On appeal, the United States Court of Appeals for the First Circuit reversed the district court’s decision regarding the Frost action, holding that the insurer did not have a duty to defend because the claims did not allege liability solely attributable to the original insured, as required by the policy’s endorsement. The court affirmed the district court’s decision as to the Salie action and the state-law claims, concluding that the plaintiff’s failure to comply with the policy’s notice requirements and the insurer’s reasonable denial of coverage precluded recovery. The case was remanded for further proceedings. View "BI 40 LLC v. Ironshore Specialty Insurance Company" on Justia Law

The plaintiff, after her vehicle was declared a total loss in a collision, received a payment from her insurer based on the “actual cash value” of her car, as determined by a third-party valuation system. This system used comparable vehicle listings and, when actual sales prices were unavailable, applied a “Projected Sold Adjustment” to estimate market value. The plaintiff accepted the insurer’s offer, paid her deductible, and did not contest the valuation or invoke the policy’s appraisal process. Despite this, she filed suit alleging breach of contract, claiming the insurer’s use of the adjustment resulted in underpayment, and sought to represent a class of similarly situated South Carolina policyholders.The United States District Court for the District of South Carolina certified a class of individuals who received total loss payments calculated using the Projected Sold Adjustment. The court found that the plaintiff’s claims were typical of the class and that common questions predominated, thus meeting the requirements for class certification under Federal Rule of Civil Procedure 23.On interlocutory appeal, the United States Court of Appeals for the Fourth Circuit reversed the class certification order. The Fourth Circuit held that the plaintiff lacked standing because she did not suffer a concrete injury—she accepted the insurer’s payment, was not out-of-pocket beyond her deductible, and never demonstrated that her vehicle’s value exceeded the amount paid. The court further held that, even if standing existed, class certification was improper because determining whether the insurer breached its obligation to pay actual cash value would require individualized inquiries into each class member’s vehicle and circumstances. Thus, the requirements of commonality and predominance under Rule 23 were not met. The district court’s order certifying the class was therefore reversed. View "Freeman v. Progressive Direct Insurance Company" on Justia Law

CVS Health Corporation sought insurance coverage from its insurers for thousands of lawsuits brought by government entities, hospitals, and third-party payors. These lawsuits alleged that CVS’s opioid dispensing practices contributed to the opioid epidemic, resulting in significant public health and economic costs. CVS’s insurance policies, issued by Chubb and AIG, generally covered damages that CVS became legally obligated to pay “because of bodily injury or property damage” caused by an “occurrence.” Some policies included endorsements related to pharmacist or druggist liability, which CVS argued broadened coverage.The insurers filed a declaratory judgment action in the Superior Court of the State of Delaware, seeking a declaration that they owed no duty to defend or indemnify CVS in these lawsuits. The Superior Court granted summary judgment in favor of the insurers, holding that the underlying lawsuits did not seek damages for specific, individualized bodily injury or property damage as required by the policies. Instead, the court found that the lawsuits sought recovery for the plaintiffs’ own economic losses, such as increased public spending and general harm to public health systems. The court also determined that the policy endorsements did not alter the requirement that damages must be “because of” bodily injury or property damage. The court further held that the insurers had no duty to indemnify CVS, as the underlying claims did not depend on proof of personal injury or property damage.On appeal, the Supreme Court of the State of Delaware affirmed the Superior Court’s decision. The Supreme Court held that the insurance policies and their endorsements did not provide coverage for the lawsuits at issue because the claims did not allege specific and individualized bodily injury or property damage. The court also concluded that the duty to indemnify was not triggered, as there were no unresolved factual issues that could lead to coverage. The judgment of the Superior Court was affirmed. View "In Re: CVS Opioid Insurance Litigation" on Justia Law

Two insurance companies entered into a quota share reinsurance agreement in 2014, under which one company (the reinsurer) agreed to indemnify the other (the reinsured) for a portion of claims arising from short-term medical insurance policies. The agreement required the reinsured to provide prompt notice to the reinsurer of any claims that might result in a covered loss and developments that could materially affect the reinsurer’s position. In 2017, the reinsured was sued in Montana by policyholders alleging underpayment of claims, and the litigation later expanded into a class action. The reinsured did not notify the reinsurer of the lawsuit until after the district court had entered summary judgment for the plaintiffs, certified the class, and the Ninth Circuit denied interlocutory appeal. The reinsured eventually settled the case for $8 million and sought indemnification from the reinsurer, which was refused on grounds of late notice.The United States District Court for the Northern District of Texas, with the parties’ consent, ruled on cross-motions for summary judgment. The court granted summary judgment for the reinsured, holding that the notice provision in the reinsurance treaty was triggered only by the reinsured’s subjective belief that a claim might arise, and that the reinsurer had not shown evidence of the reinsured’s subjective intent. Alternatively, the court found that even if there was a breach, the reinsurer was not prejudiced by the late notice and remained obligated to indemnify, including for attorneys’ fees.On appeal, the United States Court of Appeals for the Fifth Circuit reviewed the case de novo. The Fifth Circuit held that the notice provision required an objective standard—what a reasonable reinsured would believe might result in a claim—rather than a purely subjective belief. The court found that the reinsured’s notice was unreasonably late as a matter of law and that this delay materially prejudiced the reinsurer by depriving it of its contractual right to participate in the defense. The Fifth Circuit reversed the district court’s judgment, holding that the reinsurer was absolved of its duty to indemnify due to the material breach. View "US Fire Ins v. Unified Life Ins" on Justia Law

A construction worker employed by a subcontractor was injured when a scaffold collapsed at a Manhattan worksite. The worker sued the property owner and general contractor in New York Supreme Court, alleging negligence and violations of state labor laws. The owner’s insurer, Liberty Insurance Corporation, sought a declaration in federal court that the subcontractor’s insurer, Hudson Excess Insurance Company, was obligated to defend and indemnify the owner as an additional insured under the subcontractor’s commercial general liability policy. The subcontract between the general contractor and the subcontractor required the latter to provide insurance coverage for the owner and general contractor.In the New York Supreme Court, summary judgment was granted to the injured worker on some claims, while other claims remained pending. The court denied summary judgment to the owner on its contractual indemnification claim against the subcontractor, finding factual questions about the scope of the subcontractor’s work. Later, after the federal district court’s decision, the state court dismissed all third-party claims against the subcontractor, finding the indemnity provision in the subcontract invalid due to lack of a meeting of the minds.The United States Court of Appeals for the Second Circuit reviewed the case. It affirmed the district court’s finding, after a bench trial on stipulated facts, that the subcontractor’s actions proximately caused the worker’s injuries and that Hudson owed a duty to indemnify the owner under the policy. The Second Circuit held that the later state court decision did not alter this result. However, the Second Circuit reversed the district court’s award of attorney’s fees to Liberty, holding that Hudson was entitled to a statutory safe harbor under New York Insurance Law, and thus was not required to pay Liberty’s attorney’s fees for the federal action. View "Liberty Insurance Corp. v. Hudson Excess Insurance Co." on Justia Law

Two drivers, McGee and Hudgins, were involved in a road-rage incident that ended with McGee crashing into Green’s vehicle, causing her injuries. Green and her husband sued both drivers. Before filing suit, Green received $100,000 from McGee’s insurer in exchange for a covenant not to execute judgment against McGee. Green’s underinsured motorist (UIM) carrier, Progressive, defended the suit in McGee’s name. The jury found McGee 60% at fault and Hudgins 40% at fault, and determined both acted recklessly, willfully, and wantonly. The jury awarded Green $88,546.78 in actual damages and $35,000 in punitive damages against each defendant.The Circuit Court for Spartanburg County combined the actual and punitive damages for a total of $158,546.78, subtracted the $100,000 payment from McGee’s insurer, and allocated the remaining $58,546.78 between McGee and Hudgins based on their respective percentages of fault. On appeal, the South Carolina Court of Appeals altered the setoff calculation, allocating the $100,000 payment first to McGee’s share, then applying any remainder to Hudgins’ share, resulting in a net judgment of $58,546.78 against Hudgins and $0 against McGee.The Supreme Court of South Carolina reviewed the setoff calculation. It held that, because the jury found both defendants acted recklessly, willfully, and wantonly, joint and several liability applied to the actual damages, making the percentage allocation of fault irrelevant. The court further held that the $100,000 payment could only be set off against the actual damages, not the punitive damages, as punitive damages are not for the “same injury.” The court reversed the Court of Appeals, holding Green is entitled to a net judgment of $23,546.78 against McGee and $35,000 against Hudgins, and remanded for entry of judgment in those amounts. View "Green v. McGee" on Justia Law