Justia Contracts Opinion Summaries

The Supreme Court affirmed the judgment of the court of appeals reversing the decision of the circuit court concluding that the notice-prejudice rule adopted in Jones v. Bituminous Casualty Corp., 821 S.W.2d 798 (Ky. 1991), applied in the underlying case, holding that there was no error.At issue was whether the claims-made-and-reported management liability policy issued by Allied World Specialty Insurance Company to Kentucky State University (KSU) provided coverage when KSU did not comply with the policy's notice provisions. The circuit court granted summary judgment for KSU after applying the notice-prejudice rule. The court of appeals reversed, determining that the notice-prejudice rule did not apply. The Supreme Court affirmed, holding (1) the policy's notice provisions were clear and unambiguous and that Allied World was entitled to deny coverage to KSU because KSU did not comply with the notice requirements; and (2) generally, the notice-prejudice rule shall not apply to a claims-made-and-reported policy that contains unambiguous notice requirements as condition precedent to coverage. View "Ky. State University v. Darwin Nat'l Assurance Co." on Justia Law

Endeavor Operating Company, LLC (Endeavor) is a “holding company” that owns “various subsidiaries in the entertainment, sports, and fashion business sectors.” Endeavor sued the insurers for (1) declaratory relief and (2) breach of contract related to COVID-19 closures. The insurers demurred to the complaint. The trial court issued a ruling (1) sustaining the demurrer without leave to amend and (2) denying Endeavor’s motion for a new trial. The court modified its initial ruling to find that the “actual” or “threatened presence” of COVID-19 or the SARS-CoV-2 virus “does not constitute a physical loss or damage required to trigger coverage for property insurance coverage” but reaffirmed its initial ruling that the contamination/pollution exclusion applied, which in the court’s view obviated its need to address the argument Endeavor raised for the first time in its new trial motion. Endeavor appealed.   The Second Appellate District affirmed. The court concluded that the insurance policy unambiguously requires “direct physical loss or damage to property” before Endeavor may recover under the business interruption clauses. The court held that Endeavor failed as a matter of law to plead “direct physical loss or damage to property.” The court explained that California courts are in accord that the phrase “direct physical loss or damage to property” means a “‘distinct, demonstrable, physical alteration’” of the insured property. This is the default definition to be applied where a policy does not provide a different definition of “direct physical loss or damage.” The policy here provides no different definition. View "Endeavor Operating Co., LLC v. HDI Global Ins. Co." on Justia Law

The insurer, in this case, had notice of the hospital’s lien for treatment provided to the patient and, pursuant to a settlement agreement with the patient, gave him a check for the lien amount made payable to both him and the hospital. The hospital, Long Beach Memorial Medical Center, claims this action did not comply with the Hospital Lien Act (HLA) and sued the insurer who wrote the check, Allstate Insurance Company, for violating the HLA. The trial court granted Allstate’s motion for summary judgment, ruling Allstate’s two-payee check, which was never cashed, satisfied its obligation under the HLA.   The Second Appellate District reversed. The court concluded that merely delivering to the patient (or, in this case, his attorney) a check for the lien amount, made payable to both the patient and the hospital, is not a payment in satisfaction of the hospital’s lien under the HLA. The court explained Allstate maintains that it made this payment to the Medical Center concurrent with payment to the patient and that, therefore, the Medical Center cannot establish Allstate made a settlement payment to the patient without paying the Medical Center the amount of its lien. The court explained that Allstate declined to specify which check made payable to the Medical Center as copayee—the February 2020 check or the March 2021 check— Allstate claims satisfied its payment obligation to the Medical Center. However, neither check was a payment to the Medical Center. Moreover, Allstate does not invoke the exception to the general rule here. View "Long Beach Memorial Medical Center v. Allstate Ins. Co." on Justia Law

After suffering personal injuries and property damage in a multi-car collision with an underinsured motorist, Kelly Lynn Christmann filed suit against her insurer, State Farm Mutual Automobile Insurance Company (“State Farm”). Christmann was seeking to obtain the underinsured motorist benefits provided under her contract of insurance, which she claimed State Farm failed to pay in an amount justly due under her policy. She also alleged that certain terms of her insurance agreement violate public policy. State Farm argued that Christmann waived her rights to additional benefits by failing to comply with the contractual obligations of her insurance policy, thereby prejudicing State Farm’s right to subrogation against the underinsured motorist. The district court awarded summary judgment to State Farm in determining it had been prejudiced by Christmann’s conduct and that the terms of the insurance policy were valid. The court also denied Christmann’s motion for reconsideration and her Rule 60(b) motion for relief. Christmann appealed. Because the record showed State Farm fully settled its claims against the underinsured motorist and waived its subrogation rights, the Idaho Supreme Court concluded it suffered no actual prejudice from Christmann’s actions. Accordingly, the judgment was reversed. View "Christmann v. State Farm Mutual Automobile Insurance Co." on Justia Law

Guaranteed Rate, Inc., a mortgage lender, purchased two types of insurance policies from ACE American Insurance Company: management liability and professional liability. Guaranteed Rate sought coverage under the policies for an investigation and eventual settlement of claims brought by the federal government under the False Claims Act. ACE denied coverage under both policies. According to ACE, the Professional Liability Policy expressly excluded False Claims Act charges. ACE also contended that the False Claims Act charges arose from Guaranteed Rate’s professional services, which were excluded under the Management Liability Policy. Only the Management Liability Policy was at issue in this appeal. In Guaranteed Rate’s suit against ACE, a Delaware superior court held that the False Claims Act investigation and settlement did not arise out of Guaranteed Rate’s professional services. Instead, it arose out of false certifications made to the government. Thus, the Management Liability Policy covered the loss. To this, the Delaware Supreme Court agreed with the superior court. View "ACE American Insurance Company v. Guaranteed Rate, Inc." on Justia Law

Saloojas, Inc. (“Saloojas”) filed five actions against Aetna Health of California, Inc. (“Aetna”), seeking to recover the difference in cost between its posted cash price for COVID-19 testing and the amount of reimbursement it received from Aetna. Saloojas argues that Section 3202 of the CARES Act requires Aetna to reimburse out-of-network providers like Saloojas for the cash price of diagnostic tests listed on their websites. The district court dismissed this action on the ground that the CARES Act does not provide a private right of action to enforce violations of Section 3202.   The Ninth Circuit affirmed. The panel held that the CARES Act does not provide a private right of action to enforce violations of Section 3202. Saloojas correctly conceded that the CARES Act did not create an express private right of action. The panel held that there is not an implied private right of action for providers to sue insurers. The use of mandatory language requiring reimbursement at the cash price does not demonstrate Congress’s intent to create such a right. The statute does not use “rights-creating language” that places “an unmistakable focus” on the individuals protected as opposed to the party regulated. View "SALOOJAS, INC. V. AETNA HEALTH OF CALIFORNIA, INC." on Justia Law

The Estate of Josiah Wheeler and Josiah’s parents, Keith and Rhetta Wheeler (collectively, “the Wheelers”) appealed the district court’s grant of summary judgment in favor of Garrison Property and Casualty Insurance Company (“Garrison”).   The Ninth Circuit explained that because this case involves an issue of first impression under Alaska law, it respectfully asks the Alaska Supreme Court to exercise its discretion to decide the following certified question: Does a total pollution exclusion in a homeowners’ insurance policy exclude coverage of claims arising from carbon monoxide exposure? View "THE ESTATE OF JOSIAH WHEELER, ET AL V. GARRISON PROPERTY AND CASUALTY INSURANCE COMPANY" on Justia Law

The Supreme Court reversed the judgment of the court of appeals in the underlying insurance dispute, holding that the insurance policy at issue did not incorporate the payout limits in an underlying service agreement.ExxonMobil Corporation hired Savage Refinery Services to work as an independent contractor at Exxon's Baytown refinery, and the parties memorialized their arrangement with a service agreement. Under the agreement, Savage promised to obtain at least a minimum stated amount of liability insurance for its employees and to name Exxon as an additional insured. Savage ultimately procured five different insurance policies, three of which were underwritten by National Union Fire Insurance Company and Starr Indemnity & Liability Insurance Company. After a workplace accident at the Baytown Refinery two injured employees sought compensation. Plaintiffs settled with Exxon for $24 million. When National Union and Starr denied Exxon coverage under their umbrella policies Exxon sued for breach of contract. The trial court ruled for Exxon. The court of appeals reversed, concluding that Exxon was not insured under National Union's umbrella policy. The Supreme Court reversed, holding that Exxon was an "insured" under National Union's umbrella policy and that the lower court's ruling with respect to Starr's bumbershoot policy was predicated on a similar error. View "ExxonMobil Corp. v. Nat'l Union Fire Insurance Co. of Pittsburgh, PA" on Justia Law

Husband Steven McAnulty was married twice: once to Plaintiff Elizabeth McAnulty, and once to Defendant Melanie McAnulty. Husband's first marriage ended in divorce; the second ended with his death. Husband’s only life-insurance policy (the Policy) named Defendant as the beneficiary. But the Missouri divorce decree between Plaintiff and Husband required Husband to procure and maintain a $100,000 life-insurance policy with Plaintiff listed as sole beneficiary until his maintenance obligation to her was lawfully terminated (which never happened). Plaintiff sued Defendant and the issuer of the Policy, Standard Insurance Company (Standard), claiming unjust enrichment and seeking the imposition on her behalf of a constructive trust on $100,000 of the insurance proceeds. The district court dismissed the complaint for failure to state a claim. Plaintiff appealed. By stipulation of the parties, Standard was dismissed with respect to this appeal. The only question to be resolved was whether Plaintiff stated a claim. Resolving that issue required the Tenth Circuit Court of Appeals to predict whether the Colorado Supreme Court would endorse Illustration 26 in Comment g to § 48 of the Restatement (Third) of Restitution and Unjust Enrichment (Am. L. Inst. 2011) (the Restatement (Third)), which would recognize a cause of action in essentially the same circumstances. Because the Tenth Circuit predicted the Colorado Supreme Court would endorse Illustration 26, the Court held Plaintiff has stated a claim of unjust enrichment, and accordingly reversed the previous dismissal of her case. View "McAnulty v. McAnulty, et al." on Justia Law

Princeton Excess and Surplus Lines Insurance Company (PESLIC) filed this declaratory judgment action. PESLIC issued two commercial liability insurance policies to the Clubs covering the time period relevant to the Models’ claims: Number 1RA3GL0000179–01, with a policy period of November 9, 2015, to November 9, 2016 (the 01 Policy); and Number 1RA3GL0000179–02, with a policy period of November 9, 2016, to November 9, 2017 (the 02 Policy). The policies have identical coverage provisions but contain slightly different exclusions. The parties dispute whether this exclusion renders illusory the Personal and Advertising Injury coverage provided in the 02 Policy. If it does not, then the Clubs have no coverage applicable to the Models’ claims; if it does, then they have coverage, as the district court held.   The Fifth Circuit reversed the district court’s summary judgment ruling. The court held PESLIC does not have a duty to defend or indemnify the Clubs in the underlying lawsuit because neither the 01 Policy nor the 02 Policy provides coverage for the claims alleged by the Models. The court explained that the text of the 02 Policy is not ambiguous, and Texas law “presumes that the party knows and accepts the contract terms.” Those terms disclose that the policy’s Personal and Advertising Injury coverage comprises a single category of coverage and further that the Exhibition and Related Marketing Exclusion removes much but by no means all, of that coverage. The 02 Policy is, therefore, not illusory, and the exclusion must be enforced, constraining the court to conclude there is no coverage for the Models’ underlying claims under the 02 Policy. View "Princeton Excess v. AHD Houston" on Justia Law