Justia Contracts Opinion Summaries

In 2000, a fire destroyed a business location of Stone Flood and Fire Restoration Inc., spurring years of litigation with its insurer, Safeco Insurance Company of America. After Stone Flood and its two shareholders, James and Patrice Stone, sued Safeco in 2007, the district court dismissed all claims against Safeco. The court concluded (1) Stone Flood's claims on the insurance policy were filed three days beyond the applicable statute of limitations and were therefore barred; (2) the Stones were not insureds and lacked standing to bring individual claims under the policy; and (3) the Stones lacked standing to bring a claim of intentional infliction of emotional distress (IIED) because their alleged injuries were merely derivative of the corporation's. The Supreme Court reversed in part and affirmed in part, holding (1) the district court's calculation of the tolling of the limitations period was incorrect and a correct calculation saved Stone Flood's claims under the insurance policy; and (2) the district court properly concluded the Stones were not insureds and lacked standing to sue under the policy, and their claim of IIED failed for lack of a distinct, non-derivative injury. Remanded.

In 2003, the Trust sought group accident and life insurance policies as a benefit for its union members. Consistent with the Trust's request, the broker's RFP specifically sought a policy where the "Trust is the owner of the policy and also [a] beneficiary." Defendant's proposal contained only a summary of proposed terms, expressly cautioned that it was not a contract, and omitted reference to the Trust’s desired beneficiary provision. The policy drafts sent to the Trust did not contain the beneficiary provision the Trust wanted and stated that payment of the required premium after delivery of the policies would constitute acceptance. The Trust's chairman signed and paid the first premium in 2003 In May, 2004, the Trust made a claim on the group life policy. Defendant responded that the terms of the policy required it to pay the full benefit to the decedent's beneficiaries. The Trust terminated the policy, stopped paying premiums, and filed suit seeking a declaratory judgment and rescission of the contract. The district court dismissed the Trust's claims and entered judgment for defendant for $95,059.99 in unpaid premiums. The Seventh Circuit affirmed, finding that the parties had an enforceable contract.

Appellant, an LLC, purchased an "all-risks" insurance policy for an office building it owned from Insurer. The building was significantly damaged after a general contractor Appellant had hired to renovate the building removed the waterproof membrane on the roof and the building was exposed to substantial rainfall. Insurer denied coverage, concluding that the damage did not result from a covered cause of loss. Appellant sued Insurer, alleging that Insurer breached the insurance policy and denied coverage in bad faith. The district court granted summary judgment in favor of Insurer, concluding that the policy unambiguously excluded from coverage for the damage sustained to the building. The Supreme Court affirmed, holding that the damages sustained by the building were excluded from coverage based on the policy's rain limitation and the contractor's faulty workmanship in repairing the roof. In addition, although the doctrine of efficient proximate cause did not provide relief under the facts of this case, the Court adopted the doctrine of efficient proximate cause in Nevada.

Plaintiff brought suit against her insurer, asserting claims of breach of contract and bad faith. After a jury awarded plaintiff the full amount of her underinsured motorist (UIM) coverage, but denied her bad faith claim, the district court found the insurer's refusal to pay was "vexatious or without reasonable cause" and awarded plaintiff attorney's fees pursuant to S.D. Codified Laws 58-12-3. The insurer appealed arguing that the jury's rejection of plaintiff's bad faith claims should preclude an award of fees under the statute. The court affirmed the judgment and held that the district court did not err when it determined it could consider whether plaintiff was entitled to attorney's fees on her successful contract claim, notwithstanding the defense verdict on the bad faith claim. The court also held that the district court did not err in finding the insurer's refusal to pay was vexatious or without reasonable cause.

Plaintiff brought suit against her insurer, asserting claims of breach of contract and bad faith. After a jury awarded plaintiff the full amount of her underinsured motorist (UIM) coverage, but denied her bad faith claim, the district court found that the insurer's refusal to pay was "vexatious or without reasonable cause" and awarded plaintiff attorney's fees pursuant to S.D. Codified Laws 58-12-3. The insurer appealed arguing that the jury's rejection of plaintiff's bad faith claim should preclude an award of fees under the statute. The court affirmed the judgment and held that the district court did not err when it determined the statutory fee award did not hinge on the outcome of the bad faith claim and the district court did not err in finding the insurer's refusal to pay was vexatious or without reasonable cause.

Edwin Mitchell, a lobster fisherman, was sued by Victor Ames, who alleged that a group of lobster fishermen had conspired to prevent him from fishing for lobster in the area. The Ames complaint alleged that Mitchell had, among other things, converted Ames's personal property. Mitchell held a homeowners policy with Allstate Insurance Company. By the policy's terms, Allstate agreed to provide a defense if the policyholder was sued for such damages. Allstate, however, declined to provide coverage to Mitchell on the Ames litigation, after which Mitchell sued Allstate for breach of contract. The superior court granted summary judgment in favor of Allstate, concluding that Allstate had no contractual duty to defend Mitchell because a policy exclusion for certain intentional acts applied. The Supreme Court vacated the superior court's judgment, holding that Allstate did have a duty to defend because the liability alleged in the Ames complaint had the potential to result in covered liability.

In November 1998, Respondent David Moeller’s 1996 Honda Civic CRX was damaged in a collision. Respondent had an insurance policy through Farmers Insurance Company of Washington (Farmers). Farmers chose to repair Respondent's damaged car, and he authorized the repairs. In May 1999, Respondent brought suit on behalf of himself and other similarly situated Farmers policy holders in Washington State asserting a breach of contract claim on the grounds that Farmers failed to restore his vehicle to its "preloss condition through payment of the difference in the value between the vehicle's pre-loss value and its value after it was damaged, properly repaired and returned." The issue on appeal before the Supreme Court was whether the contract between Farmers and Respondent provided for the diminished value of the post-accident, repaired car. Upon review, the Court affirmed the appellate court which held that the policy language at issue here allowed for recovery for the diminution in value.

Defendant is a captive insurer owned by plaintiff plans across the nation. In 2003 healthcare providers filed class action suits in Florida against all of those plans. Twelve plans, which had errors-and-omissions insurance from defendant, asked it to assume the defense and indemnify. Defendant declined, and the plans demanded arbitration. Acting under the Federal Arbitration Act, 9 U.S.C. 5, the district court held that the arbitrators could determine whether arbitration of a class action or consolidated arbitration were authorized by contract and appointed a third arbitrator. The court dismissed the appeal of the court's first ruling for lack of jurisdiction and affirmed the appointment. If defendant wanted a judge to decide whether the plans' demands should be arbitrated jointly or separately, it should have refused to appoint an arbitrator. Both sides appointed arbitrators, however, and the proceeding got under way. Nothing in the Federal Arbitration Act authorizes anticipatory review of the arbitrators' anticipated decisions on procedural questions.

On June 17, 2006, wife applied for a $500,000 life insurance policy. She paid $100 and signed a conditional receipt agreement for immediate coverage, subject to conditions that "on the Effective Date the Proposed Insured(s) is (are) insurable exactly as applied for under the Company’s printed underwriting rules for the plan, amount and premium rate class applied for; ... (C) the Proposed Insured(s) has/have completed all examinations and/or tests requested by the Company." On June 28, wife was examined and submitted specimens. Her cholesterol level and urine sample raised concerns. The company sought medical records from her physician and a second urine specimen. On July 22, 2006, wife was diagnosed with a brain tumor. On August 9, the company declared wife uninsurable based on her brain surgery. About a year later, she died. Husband claimed that the request for the second urine specimen was communicated in a untimely and ineffective fashion. The district court entered summary judgment for the insurance company on claims of breach of contract, estoppel, bad faith, and negligence. The Seventh Circuit affirmed, finding no evidence of purposeful misconduct; if there was no contract, any duty of good faith did not come into play.

Anthony Alsidez died in a single-car accident after a passenger, Gregory Segura, grabbed the steering wheel of the Jeep Anthony was driving. The Jeep was owned by Melissa Alsidez, Anthony's mother, who had a policy with American Family Mutual Insurance Company. Melissa filed a negligence suit against Segura, combined with a coverage action against American Family. After Melissa settled with Segura at an amount that did not compensate her for her claimed loss, Melissa sought to recover underinsured motorist coverage from American Family. The district court granted summary judgment in favor of Melissa, holding, among other things, that the exclusion from the underinsured coverage in Melissa's policy for vehicles "owned by or furnished or available for the regular use of you or a relative" was not void as against public policy. The Supreme Court affirmed, holding that the district court did not err in its judgment where (1) the Jeep was not an "underinsured vehicle" under the policy, and (2) the "regular use" exclusion was consistent with the Uninsured and Underinsured Motorist Insurance Coverage Act and not void as against public policy.