Justia Contracts Opinion Summaries

An individual purchased a long-term care insurance policy that covered expenses incurred at nursing or assisted living facilities. During the COVID-19 pandemic, at age 94, the insured fractured her hip and, due to concerns about contracting COVID-19 in a communal setting, received post-surgical care at home as prescribed by her physician. When she submitted a claim for these home health care expenses, the insurance company denied coverage, stating that her policy did not include home care benefits. The insured had selected a policy that covered only institutional care, though an alternative plan of care provision allowed for non-institutional benefits if certain conditions were met, including mutual agreement between the insured, her provider, and the insurer.The insured, through her successor trustees, filed a breach of contract action in the United States District Court for the Northern District of Illinois, Eastern Division. Both parties moved for summary judgment. The district court found in favor of the insurer, holding that the policy did not provide home health care benefits, and that the denial of coverage under the alternative plan of care provision was not in bad faith because the insured had not met the necessary conditions to trigger that provision.On appeal, the United States Court of Appeals for the Seventh Circuit reviewed the grant of summary judgment de novo. The court held that the policy did not provide for home health care benefits, as required for the relevant Illinois insurance regulation to apply. The court also determined that the alternative plan of care provision was discretionary and did not guarantee coverage for home care. Additionally, the insurer did not breach the implied covenant of good faith and fair dealing by enforcing the explicit terms of the policy. The Seventh Circuit affirmed the district court’s judgment. View "Hartnett v Jackson National Life Insurance Company" on Justia Law

A group of workers was injured in a workplace accident at a South Texas refinery when a fire-suppression system, supplied and programmed by Scallon Controls, Inc., unexpectedly discharged after losing power. The workers sued S&B Engineers & Constructors, Ltd. and Sunoco Logistics Partners, the companies responsible for the project. S&B and Sunoco then brought third-party claims against Scallon, alleging breach of contract and seeking indemnification under their agreement, which included a proportional indemnity provision. Following four years of litigation, S&B and Sunoco settled with the injured workers, fully resolving the tort claims. S&B and its insurer, Zurich American Insurance Company, subsequently sought to recover from Scallon a proportional share of the settlement, corresponding to Scallon’s alleged share of fault.The trial court granted summary judgment for Scallon, and the Court of Appeals for the Ninth District of Texas affirmed, relying on prior Supreme Court of Texas decisions, notably Beech Aircraft Corp. v. Jinkins and Ethyl Corp. v. Daniel Construction Co. The appellate court held that S&B and Zurich could not maintain an indemnity claim after settling, and that Zurich’s claim was time-barred.The Supreme Court of Texas reversed, holding that neither Jinkins nor Ethyl precludes enforcement of a freely negotiated, proportional indemnification agreement after settlement. The Court clarified that such contracts are distinct from common law or statutory contribution rights and that parties may contract for comparative indemnity, so long as the contract does not require indemnification for the indemnitee’s own negligence unless stated with specific language. The Court also held that Zurich’s claim was timely, as the limitations period began to run at settlement. The case was remanded to the trial court to determine whether S&B and Zurich can establish Scallon’s proportional liability and the reasonableness of the settlement. View "S&B ENGINEERS & CONSTRUCTORS, LTD. v. SCALLON CONTROLS, INC." on Justia Law

A fire severely damaged a church building in southeastern Indiana. The church promptly notified its insurer, which had issued a policy covering actual cash value (subject to depreciation) and additional replacement-cost benefits if the property was repaired or replaced “as soon as reasonably possible.” The parties disputed the cost of rebuilding, but the insurer paid the church nearly $1.7 million—the undisputed actual cash value and additional agreed amounts—while the church continued to contest the estimates and did not begin repairs or replacement. About two years after the fire, the church sued the insurer for breach of contract and bad faith denial of replacement-cost benefits.The insurer removed the case to the United States District Court for the Southern District of Indiana and moved for summary judgment, arguing that the church had not complied with the policy’s requirement to repair or replace the property promptly. The church, represented by counsel, responded with arguments about factual disputes over estimates and the credibility of insurance adjusters, but did not address the legal basis concerning the contractual precondition for replacement-cost benefits. The district court granted summary judgment to the insurer, finding the church had failed to engage with the insurer’s core argument.On appeal, with new counsel, the church raised for the first time that ongoing disputes over replacement-cost estimates excused its failure to begin repairs, citing two Indiana Court of Appeals cases. The United States Court of Appeals for the Seventh Circuit held that this argument was waived because it was not presented to the district court. The Seventh Circuit further held that plain-error review in civil cases is available only in extraordinary circumstances not present here. The court affirmed the district court’s judgment in favor of the insurer. View "Crothersville Lighthouse Tabernacle Church v. Church Mutual Insurance Company" on Justia Law

The case concerns a life insurance policy that was issued by an insurer to Ewanda Ferguson. After the policy had lapsed for nonpayment, Ewanda applied for reinstatement by submitting an application in which she falsely denied having her driver’s license suspended or being convicted of DUI/DWI in the prior ten years. In reality, Ewanda had two operating-while-impaired convictions and a license revocation within that period. She died in an automobile accident a few months later. The insurer reinstated the policy posthumously and the beneficiary, Elizabeth Ferguson, submitted a claim for the death benefit.Following Ewanda’s death and the submission of the claim, the insurer discovered the misrepresentations in the reinstatement application. Because Ewanda died within the two-year contestability period, the insurer reviewed her application, determined that it would not have reinstated the policy had it known of her true driving history, and rescinded the policy. The insurer then refused to pay the death benefit. Elizabeth Ferguson filed suit in Michigan state court, alleging breach of contract. The insurer removed the case to the United States District Court for the Eastern District of Michigan and counterclaimed to confirm the propriety of rescission. The district court granted summary judgment to the insurer, holding that rescission was proper without balancing the equities, because Ferguson was not an “innocent third party” under Michigan law.On appeal, the United States Court of Appeals for the Sixth Circuit held that, under Michigan law, a life insurance beneficiary who is a third-party beneficiary stands in the shoes of the insured and has no greater rights than the insured would have had. Therefore, the insurer was entitled to rescind the policy based on material misrepresentations made by Ewanda, and the district court was not required to balance the equities before ordering rescission. The Sixth Circuit affirmed the district court’s judgment. View "Ferguson v. MetLife Investors USA Insurance Co." on Justia Law

A steel subcontractor was hired to perform work for a university construction project and entered into a subcontract with the general contractor. The general contractor began defaulting on payments, prompting the subcontractor to notify the surety insurance company, which had issued a payment bond guaranteeing payment for labor, materials, and equipment. The surety made partial payment but disputed the remaining amount. The subcontractor then demanded arbitration against the contractor, with the surety notified and invited to participate. The contractor filed for bankruptcy and did not defend in arbitration, nor did the surety participate. The arbitrator awarded the subcontractor damages, including attorneys’ fees and interest, and the award was confirmed in court. The subcontractor sought to enforce the arbitration award against the surety, including attorneys’ fees and prejudgment interest, and also brought a bad faith claim under Pennsylvania’s insurance statute.The Centre County Court of Common Pleas initially excluded evidence of the arbitration award against the surety at trial and ruled the surety was not liable for attorneys’ fees or bad faith damages. A jury found for the subcontractor on the underlying debt, and the court awarded prejudgment interest at the statutory rate. Both parties appealed. The Superior Court held the arbitration award was binding and conclusive against the surety, who had notice and opportunity to participate, and affirmed liability for attorneys’ fees related to pursuing the contractor in arbitration. The court rejected the bad faith claim, holding the statute did not apply to surety bonds, and confirmed the statutory interest rate.On appeal, the Supreme Court of Pennsylvania affirmed in all respects. It held that Pennsylvania’s insurance bad faith statute does not apply to surety bonds, based on statutory language. The court also held that the surety is bound by the arbitration award against its principal, and is liable for attorneys’ fees incurred in arbitration and prejudgment interest at the statutory rate. View "Eastern Steel v. Int Fidelity Ins. Co." on Justia Law

A software company that provides donor management and data hosting services for nonprofit and educational entities experienced a significant ransomware attack. Hackers accessed and exfiltrated sensitive client data over several months, leading to widespread concern among the company’s clients about the adequacy of the company’s response. Rather than conducting a thorough investigation and remediation itself, the company provided clients with a toolkit for self-investigation and remediation. Dissatisfied, the clients undertook their own investigations and incurred expenses for legal counsel, notifications, credit monitoring, and other remedial measures. Insurance carriers that had issued policies covering such cyber incidents paid out claims for these losses, then sought to recover from the software company as subrogees and assignees of their insured clients.The Superior Court of the State of Delaware initially dismissed the insurers’ complaints for failing to state a claim and, after amended complaints were filed, dismissed them with prejudice. The Superior Court reasoned that the insurers failed to provide sufficient factual support for each insured’s claim by pleading in the aggregate, and further found that proximate cause had not been adequately alleged, as the complaints did not link the damages to any specific contractual obligation.On appeal, the Supreme Court of the State of Delaware reviewed the Superior Court’s decision de novo. The Supreme Court held that the insurers, as subrogees/assignees, adequately pled a breach of contract claim under New York law, which governed the agreements, and that Delaware’s notice pleading standard was satisfied. The Court found that the amended complaints sufficiently alleged the existence of contracts, performance by the insureds, breach by the company, and resulting damages, and that proximate cause was properly pled. The Supreme Court reversed the Superior Court’s dismissal and remanded for further proceedings. View "Travelers Casualty and Surety Company of America v. Blackbaud, Inc." on Justia Law

A nonprofit organization, which hosts an annual art auction, held its 2022 event virtually. To facilitate the livestreamed auction and online bidding, it contracted with two vendors: one to provide the video feed and another to supply bidding software. The video vendor created a YouTube link for attendees to view the auction, and the bidding software synced with this feed, enabling participants to watch and bid on a single screen. Minutes before the event, the video vendor lost its internet connection, causing the YouTube link to break and severing the connection between the video feed and the bidding platform. As a result, auction attendees could neither view the auction nor place bids through the intended system. The auction was hurriedly redirected to a different platform, which resulted in a less effective, asynchronous experience and significantly lower fundraising.The nonprofit threatened legal action against the video vendor for breach of contract and negligence. The vendor, unable to pay, assigned its insurance claim to the nonprofit. The vendor’s insurer, Auto-Owners Insurance Company, had issued a general liability policy that covered certain types of property damage but contained a specific exclusion for damages arising out of the loss or inability to access electronic data. Auto-Owners filed for a declaratory judgment in the United States District Court for the Western District of Missouri, seeking a ruling that its policy did not provide coverage. The district court granted summary judgment to Auto-Owners, holding that the policy’s electronic-data exclusion barred recovery.On appeal, the United States Court of Appeals for the Eighth Circuit reviewed the district court’s interpretation of Missouri law de novo. The appellate court held that the policy’s electronic-data exclusion clearly and unambiguously applied to the circumstances, barring coverage for the losses. Therefore, the Eighth Circuit affirmed the district court’s grant of summary judgment in favor of Auto-Owners Insurance Company. View "Auto-Owners Insurance Company v. Halo Foundation: Helping Art Liberate Orphans" on Justia Law

Selina Anderson, a federal employee with a history of severe lung disease, broke her leg in a parking lot accident and subsequently died less than a week later following complications from surgery. Her official cause of death was a pulmonary embolism, but her autopsy noted that her longstanding interstitial lung disease contributed to her death. Anderson’s daughter, Brittany Finney, was the beneficiary of Anderson’s life insurance policy under the Federal Employees’ Group Life Insurance Act (FEGLI), which included both standard and accidental death benefits.After Anderson’s death, Finney submitted claims for both types of benefits to Metropolitan Life Insurance Company (MetLife), the insurer. MetLife paid the standard life insurance benefit but denied the additional accidental death benefit. The denial was based on two grounds: that Anderson’s death was not “accidental” within the policy’s meaning, and that her death was “contributed to by” her pre-existing physical illness, thus falling under an exclusion in the policy. Finney filed suit in the United States District Court for the Northern District of Alabama, arguing that the denial breached the insurance contract. Both parties moved for judgment as a matter of law. The district court ruled in favor of MetLife, finding that the denial was reasonable under the policy’s physical illness exclusion.On appeal, the United States Court of Appeals for the Eleventh Circuit affirmed the district court’s judgment. The Eleventh Circuit held that MetLife’s decision to deny accidental death benefits was not arbitrary or capricious, as the policy clearly excluded coverage when a physical illness contributed to the insured’s death. The court concluded that Anderson’s pre-existing lung disease contributed to her death and that MetLife’s denial was reasonable under the terms of the insurance contract. View "Finney v. Metropolitan Life Insurance Company" on Justia Law

Atlanta Gas Light Company and Southern Company Gas contracted with United States Infrastructure Corporation (USIC) to locate and mark gas lines in Georgia. In 2018, USIC failed to mark a line, leading to a gas explosion that seriously injured three people. The injured parties settled with USIC but not with Atlanta Gas Light. After being sued in Georgia state court, Atlanta Gas Light sought defense and indemnification under USIC’s excess liability policy issued by Navigators Insurance Company, claiming status as an additional insured. Navigators denied coverage, asserting Atlanta Gas Light was not an additional insured for these claims because they were based solely on Atlanta Gas Light's conduct.Before the United States District Court for the Southern District of Indiana, Atlanta Gas Light sued Navigators for breach of contract, breach of fiduciary duty, and bad faith. The district court dismissed claims related to Navigators’s conduct prior to USIC’s primary policy exhaustion but allowed the breach of contract claim to proceed. On summary judgment, the district court ruled that Atlanta Gas Light was an additional insured under the excess policy and denied Navigators's motion as to breach of contract. The court entered final judgment for Atlanta Gas Light, and both parties appealed aspects of the ruling.The United States Court of Appeals for the Seventh Circuit affirmed the district court’s judgment. It held that, under Indiana law and the policies’ language, Atlanta Gas Light was an “additional insured” because its liability in the underlying suits arose, at least in part, from USIC’s acts or omissions. The court also held that Navigators had no duty to defend or indemnify Atlanta Gas Light before the primary policy was exhausted, and that Navigators’s denial of coverage, based on a nonfrivolous interpretation of the policy, did not constitute bad faith or breach any fiduciary duty. View "Atlanta Gas Light Company v Navigators Insurance Company" on Justia Law

Daevieon Towns purchased a new Hyundai Elantra in 2016, and over the next 19 months, the car required multiple repairs for alleged electrical and engine defects. In March 2018, either Towns or his wife, Lashona Johnson, requested that Hyundai buy back the defective vehicle. Before Hyundai acted, the car was involved in a collision, declared a total loss, and Johnson’s insurance paid her $14,710.91.Towns initially sued Hyundai Motor America in the Superior Court of Los Angeles County for breach of express warranty under the Song-Beverly Consumer Warranty Act. As trial approached, Towns amended his complaint to add Johnson as a plaintiff, arguing she was the primary driver and responsible for the vehicle. The trial court allowed the amendment, finding Johnson was not a buyer but permitted her to proceed based on its interpretation of Patel v. Mercedes-Benz USA, LLC. At trial, the jury found for Towns and Johnson, awarding damages and civil penalties. However, the court reduced the damages by the insurance payout and adjusted the prejudgment interest accordingly. Both parties challenged the judgment and costs in post-trial motions.The California Court of Appeal, Second Appellate District, Division Four, reviewed the case. It held that only a buyer has standing under the Act, so Johnson could not be a plaintiff. The court also held that third-party insurance payments do not reduce statutory damages under the Act, following the Supreme Court’s reasoning in Niedermeier v. FCA US LLC. Furthermore, prejudgment interest is available under Civil Code section 3288 because Hyundai’s statutory obligations do not arise from contract. The court affirmed in part, reversed in part, and remanded for the trial court to enter a modified judgment and reconsider costs. View "Towns v. Hyundai Motor America" on Justia Law