Justia Contracts Opinion Summaries

Michael Bryant, an owner and employee of Prime Cut Meat Market, assaulted another motorist, Francis Latanowich, in an apparent incident of road rage. Prime Cut and its employees were insured by a policy issued by The Travelers Indemnity Company. Latanowich and his wife sued Bryant and Prime Cut. Prime Cut successfully moved for summary judgment, and Bryant and the Latanowiches agreed to a settlement that included Bryant assigning all of his rights related to potential insurance coverage to the Latanowiches. Travelers later filed a complaint against Bryant and the Latanowiches seeking a declaratory judgment that it had no duty to indemnify Bryant for claims arising from the altercation because Bryant was not an insured under its policy issued to Prime Cut for purposes of that conduct. The superior court concluded that the policy language did not cover the incident, and it granted Travelers's motion for summary judgment. The Latanowiches appealed. The Supreme Court affirmed, holding that, pursuant to the unambiguous language of the policy, the court correctly concluded that Bryant's assault of Latanowich was not covered by the policy and properly entered summary judgment.

The Indiana Department of Environmental Management (IDEM) informed Flexdar, Inc. that Flexdar would be liable for the costs of cleaning up trichloroethylene (TCE) contamination on a site where Flexdar previously had operations. State Automobile Mutual Insurance Company (State Auto), with whom Flexdar maintained general liability and umbrella insurance policies for the period when the contamination occurred, filed a declaratory judgment action, contending that coverage for the TCE contamination was excluded pursuant to a pollution exclusion in the policies. The trial court entered summary judgment in favor of Flexdar, concluding that the language of State Auto's pollution exclusion was ambiguous and therefore should be construed against State Auto and in favor of coverage. The Supreme Court affirmed, holding that the language of the pollution exclusion at issue was ambiguous, and therefore, in accordance with precedent, the policies were construed in favor of coverage.

This case arose when R&R sued the Insurance Company of Pennsylvania, a subsidiary of AIG, for breach of contract, unfair competition, and tortious bad faith denial of an insurance claim to recover damages from a wildfire. In Case No. 10-55115, R&R appealed from the district court's grant of judgment as a matter of law on its bad faith tort claim. In Case No. 10-55888, R&R appealed from the district court's grant of costs in favor of AIG. The court reversed the district court's grant of judgment in AIG's favor on R&R's bad faith tort claim after addressing the disclosure requirements of Rules 26(a) and 26(e), as well as exclusion of the invoices at issue under Rule 37(c)(1). Therefore, the court remanded for further proceedings. The court's reversal of the district court's judgment on R&R's claims necessitated reversal of the district court's award of costs as well.

Several family members were injured in a car accident and divided the benefits paid by the tortfeasor's insurer. One family member, Hannah Lakes, also sought to recover under the underinsured motorist (UIM) endorsement of an insurance policy provided by Grange Mutual Casualty Company that applied to all the family members involved in the accident. The trial court granted Grange's motion for summary judgment, holding that the tortfeasor's vehicle was not underinsured because the per-accident limit of his policy was equal to the UIM coverage under the family members' policy. The Supreme Court reversed after reaffirming its decision in Corr v. American Family Insurance, holding that the tortfeasor's vehicle was underinsured because the amount actually paid to Lakes was less than the per-person limit of liability of the under-insurance endorsement.

The predecessor insurance companies to Plaintiff, Arrowood Indemnity Company, brought a declaratory judgment action in the U.S. district court claiming they did not have a duty to defend or to indemnify Defendants, the King family, for liability arising out of injuries sustained by a third party while the King's child was driving his parents' ATV on a private road in a private residential community, claiming that the accident had not occurred on an insured location and the Kings' notice of a claim was untimely. The district court rendered summary judgment in favor of Plaintiff. The Supreme Court accepted certification to answer questions of unresolved state law and concluded (1) with respect to a claim for negligent entrustment under a liability policy that provides coverage for accidents involving ATVs that occur on insured locations, the relevant location is the site of the accident; (2) the private road in this case did not fall under the coverage provision; and (3) social interactions between the insured and the claimant making no reference to an accident do not justify delayed notice, but an insurer must prove prejudice to disclaim its obligation to provide coverage based on untimely notice.

These consolidated appeals arose from the same facts: in 1990, Richard L. Parker applied to American Family Life Assurance Company of Columbus (Aflac) for a cancer-indemnity insurance policy. Aflac issued Parker a policy. The term of the 1990 policy was month-to-month; the monthly premium was $28.50. Aflac received payments for the 1990 policy from August 25, 1990, to August 17, 1996. Parker applied for a new policy in May 1996 for when the 1990 policy was set to terminate. The 1996 policy took effect August 16, 1996, and used the same number as the 1990 policy. Parker renewed the policy once again in 2009, but the 2009 policy contained an arbitration clause. By a special waiver, the 2009 policy's language stated that Parker would give up his "current" policy and its benefits for the benefits in the new one. Parker paid according to the term of the 2009 policy. But in 2010, Parker sued Aflac asserting a claim of bad faith for Aflac's alleged failing to pay policy benefits owed under the 1990 policy. Aflac responded by filing a motion to compel arbitration according to the terms of the 2009 policy. The circuit court conducted a hearing on the motion and denied it. Upon review, the Supreme Court concluded that Aflac satisfied its burden of proving that an arbitration agreement existed that applied to Parker's claims against it. Because there was no issue as to whether the contract containing the arbitration agreement affected interstate commerce, the burden then shifted to Parker to offer evidence refuting the evidence offered by Aflac and Hunter; Parker offered no evidence to refute that evidence and presented "no persuasive argument" that Aflac failed to meet its burden. The Court reversed the circuit court's decision and remanded the case for further proceedings.

In 2008, MDS purchased a vessel and executed a note in favor of FirstBank, secured by a preferred ship mortgage, under an agreement that required that they maintain insurance. In 2009, Customs and Border Protection seized the vessel as part of a drug enforcement action. The search and seizure damaged the vessel, significantly decreasing its value. Customs notified FirstBank, which initiated an administrative forfeiture proceeding, intervened in the criminal case, obtained voluntary dismissal of the indictment against the vessel, then submitted an insurance claim for "loss of the vessel including, without limitation, the value of the Bank's collateral, legal fees incurred in attempting to secure its release, as well as any applicable costs and interests." The insurer denied the claim. The district court granted FirstBank partial summary judgment and awarded $74,512.50 in attorneys' fees for costs and expenses incurred in securing release of the vessel and defending the validity of the policy. The First Circuit affirmed, finding no genuine issues of material fact.

Vicor manufacturers electronic equipment, including power converters. Ericsson designs, manufactures and sells electronic equipment, including radio base stations (RBSs) used to operate cellular telephone towers and networks. Ericsson purchased Vicor power converters for use in RBSs sold to wireless providers worldwide. The power converters began failing due to a manufacturing change in a component computer chip. Severe outages occurred in wireless networks. Ericsson sued Vicor and obtained a settlement of $50 million. Vicor's insurers paid $13 million. Vicor sought the additional $37 million. A jury awarded $17.3 million. The district court reduced the verdict by $4 million. The First Circuit vacated. The policies refer to "loss of use of property that is not physically injured." The district court should fashion jury instructions making clear that classic loss of use damages (lost profits or rental value of substitute property) incurred while repairs are pending may be recovered, but the actual costs of repairs may not. The court also may instruct the jury regarding the duty to mitigate loss and explain that costs of reasonable mitigation measures are recoverable, provided that the mitigation measures are distinguishable from ordinary repairs and result in a net savings.

In 1989 Dominguez was arrested and in 1990 he was convicted of home invasion and sexual assault. In 2002 he was exonerated by DNA; in 2005 he received a pardon. Under Illinois law, his claim for malicious prosecution accrued in 2002. Under federal law, constitutional claims (42 U.S.C. 1983) accrued in 1989 and 2002. Wrongful arrest claims accrue on the date of arrest, but wrongful conviction claims accrue when conviction is invalidated. The Seventh Circuit affirmed an award of about $9 million for malicious prosecution and concealment of exculpatory evidence. The city has been insured by different companies and each asserted that the policy for another year applied. None provided a defense. The district court held that the issuer of the "occurrence" policy in force at exoneration must defend and indemnify. The Seventh Circuit affirmed. The city's misconduct occurred in 1989 and 1990, but the policy does not define the "occurrence" as misconduct by a law-enforcement officer. It defines the occurrence as the tort under state or federal law, and, in both, the tort occurs witn its last element, exoneration. Until then, Dominguez could not establish "malicious prosecution" or "violation" of section 1983.

In 2009, fire severely damaged the insureds' home. They submitted a claim to under their homeowners’ policy the next day. The insurer began requesting documents, authorizations, and interviews and learned that the insureds had at least two businesses, held numerous personal and business accounts, and were involved in several lawsuits. A fire investigator concluded that the fire was intentionally set. The insurer requested additional documents: detailed phone records, bank histories, tax returns, and mortgage information and reminded the insureds that proof of loss was due by May 2. The insurer granted extensions; on the day of the final deadline the insureds delivered almost 1,000 pages of documents. Several months later, the insurer had not received most of the requested documents or an explanation why they could not be produced. After initially acknowledging their failure to produce the documents, the insureds attempted to impose a deadline for settlement of the $2.6 million claim. The district court entered summary judgment for the insurer in the insureds' breach of contract suit. The Seventh Circuit affirmed. The insureds failed to perform the specific "duties after loss" listed in the policy.