Justia Contracts Opinion Summaries

Eric Walters was a federal employee covered by a Standard Option health insurance plan (the Plan) administered by Blue Cross Blue Shield of Kansas City (Blue Cross). In November 2007 he went to Weight Loss Healthcare Centers of America, Inc. (Weight Loss) to inquire about surgical treatment for obesity. Because Weight Loss had no contractual arrangement with Blue Cross as either a preferred provider or a participating provider, Walters would expect to pay more than if he used a provider that had a contract. Nevertheless, Walters had outpatient laparoscopic surgery at Weight Loss to help him better control his weight. Although Walters obtained preauthorization from Blue Cross for the surgery, there was no indication in the record that he requested or received information about his out-of-pocket costs. Weight Loss billed Blue Cross for the procedure. The Blue Cross Plan paid $2,300 according to the Planâs benefit for out-of-network providers. Weight Loss appealed the payment to the federal Office of Personnel Management (OPM), which held that Blue Crossâs interpretation of Waltersâs Plan was correct and it had paid the proper amount. The district court affirmed OPMâs decision. Upon review, the Tenth Circuit determined that OPM reasonably interpreted the Plan language. However, the Court reversed the district courtâs decision because OPM neither (1) reviewed the evidence that would show whether Blue Cross had correctly calculated the Plan allowance, nor (2) explained why such review was unnecessary.

When it was sued by its former president and CEO, the Equine Assisted Growth and Learning Association (EAGALA) requested coverage for the costs of its defense from its insurance carrier, Carolina Casualty. Carolina Casualty denied coverage, contending that the complaint was brought "by, on behalf of, or in the right of" EAGALA, a type of claim excluded from coverage by the insurance policy. EAGALA sued Carolina Casualty to establish coverage for the costs of defending the suit. The district court granted Carolina Casualty's motion for judgment on the pleadings and dismissed EAGALA's complaint after determining that it was unnecessary and improper for the court to consider extrinsic evidence to discern whether Carolina Casualty had a duty to defend EAGALA. The court of appeals reversed, concluding that under the language of the insurance policy, extrinsic evidence was admissible to determined whether the complaint was actually filed by, on behalf of, or in the right of EAGALA. On review, the Supreme Court affirmed the court of appeals' decision, holding that the district court erred when it refused to consider extrinsic evidence as required by the terms of the insurance policy.

Appellant/Respondent Harleysville Mutual Insurance Company ("Harleysville") issued a series of standard CGL policies to the Respondent developers or their predecessors (collectively "Crossmann") for a series of condominium projects in the Myrtle Beach area of South Carolina. The exterior components of the condominium projects were negligently constructed, which resulted in water penetration and progressive damage to otherwise nondefective components of the projects. The homeowners settled their lawsuits against Respondents. Crossmann then filed this declaratory judgment action to determine coverage under Harleysville's policies. Upon review of the lower courtâs order, the Supreme Court reversed a finding of joint and several liability against the developers and its insurer, and found the scope of Harleysville's liability was limited to damages accrued during its "time on the risk." In so ruling, the Court adhered to its holding in âJoe Harden Builders, Inc. v. Aetna Casualty & Surety Co.â: â[u]sing our âtime on riskâ framework, the allocation of the damage award against Crossmann must conform to the actual distribution of property damage across the progressive damage period. Where proof of the actual property damage distribution is not available, the allocation formula adopted herein will serve as an appropriate default method for dividing the loss among Crossmann's insurers.â The Court remanded the case to the trial court for further consideration of the "time on risk" allocation.

Appellant Zebuleon Whitney collided with a bicyclist in his pick-up truck, seriously injuring the bicyclist. The bicyclist sought a settlement agreement in excess of the maximum coverage of the driverâs insurance policy. Appellee State Farm Mutual Automobile Insurance Company (State Farm) responded with an offer to tender policy limits, which the bicyclist refused. After a series of court proceedings in both state and federal court, Appellant sued his insurance company, complaining in part that his insurance company had breached its duty to settle. State Farm moved for partial summary judgment on a portion of the duty to settle claims. The superior court granted the motion. The parties then entered a stipulation by which Appellant dismissed all remaining claims, preserving his right to appeal, and final judgment was entered in the insurance companyâs favor. Because State Farmâs rejection of the bicyclistâs settlement demand and its responsive tender of a policy limits offer was not a breach of the duty to settle, the Supreme Court affirmed the superior courtâs grant of summary judgment to that extent. But because the superior courtâs order exceeded the scope of the insurance companyâs motion for partial summary judgment, The Court reversed the superior courtâs order to the extent it exceeded the narrow issue upon which summary judgment was appropriate. The Court remanded the case for further proceedings concerning the surviving duty to settle claims.

Liberty Mutual sued Pella in the district court for declaratory judgment where the suit was sought to determine the scope of Liberty Mutual's obligation, under general commercial liability (GCL) policies issued to Pella, to reimburse Pella's defense costs in two underlying lawsuits. Both parties appealed the judgment of the district court. The court held that the district court did not err in concluding that Liberty Mutual's duty to reimburse Pella's defense costs should be determined by looking at the allegations in the complaint to determine if they stated a covered claim where Liberty Mutual would still have no duty to defend even if it had to reimburse defense costs in a suit where an "occurrence" was alleged but not yet an established fact. The court also held that because the underlying suits did not allege an "occurrence," Liberty Mutual did not owe Pella a duty to reimburse its costs in defending either action. Therefore, the court need not address Liberty Mutual's alternative argument. The court further held that the district court did not commit reversible error in granting summary judgment to Liberty Mutual. The court finally held that, in light of its conclusion that Liberty Mutual had no duty to reimburse Pella's defense costs in the underlying suits, the court need not address the issue of defense costs. Accordingly, the court affirmed the district court's grant of summary judgment to Liberty Mutual on Pella's bad-faith counterclaim. The court reversed the district court's order granting summary judgment to Pella on Liberty Mutual's claim for declaratory judgment and remanded with instructions to enter declaratory judgment in favor of Liberty Mutual.

Appellants Samantha Young and Rebekah Alley were injured while riding in a vehicle driven by Joshua Weeks. Appellants appealed from a judgment entered in the superior court in which the court held Weeks liable but permitted North East Insurance Company to rescind its automobile insurance policy on the vehicle Weeks was driving. Specifically, Young and Alley challenged the court's entry of summary judgment in favor of North East on its complaint seeking a declaratory judgment that it had no duty to defend or indemnify the driver because Weeks' mother had made material, fraudulent misrepresentations in applying for the automobile insurance. The Court of Appeals vacated the judgment, holding that genuine issues of material fact existed regarding whether Weeks' mother made a material, fraudulent misrepresentation to North East in obtaining the insurance policy. Remanded.

This action arose from a final arbitration award made in favor of defendant where plaintiff sought to vacate the award. At issue was whether the Arbitration Award should be filed under seal. Also at issue was whether the arbitrator concealed material information about past adversarial relationships with plaintiff-related entities amounting to evident partiality requiring the court to vacate the Arbitration Award. The court held that the existence of a confidentiality order did not necessarily require, without regard for whether it applied to the Arbitration Award or not, the sealing of the award. Rather, Court of Chancery Rule 5(g) controlled the treatment of that award and mandated that plaintiff show good cause as to why the Arbitration Award should be sealed. The court also held that because plaintiff was entitled to limited discovery into the arbitrator's alleged adversarial relationship with it, the court denied defendant's motion for a protective order and held in abeyance the entry of a scheduling order on motions for summary judgment.

Auto Owners Insurance Company (Auto Owners) appealed an order granting summary judgment in favor of appellee and awarding her $124,500, the face value of the insurance policy sold to her by Auto Owners. Because Schubert owned a one-half interest in the dwelling covered by the policy, which was completely destroyed by fire, Auto Owners offered to pay her half of the policy value. Auto Owners cited a provision within the policy which limited recovery to "[no] more than the insurable interest the insured had in the covered property at the time of the loss." The district court declared this provision void as contrary to the public policy expressed in the Missouri valued policy statute, Mo. Rev. Stat. 379.140, and alternatively found its language ambiguous so as to allow appellee to recover the face value of the insurance policy. The court agreed with the district court's conclusions as to both points and affirmed the judgment. The court also held that, after initially questioning its jurisdiction over the matter, the case satisfied the $75,000 amount-in-controversy requirement and jurisdiction was proper.

A developer was required to make public improvements to be turned over to the city and, in 2006, obtained bonds to ensure performance, as required by ordinance. Work began, but the subdivision failed and subcontractors filed mechanics' liens. The developer notified the city that three foreclosures were pending and recommended that it redeem the bonds. The insurer refused to pay. The city did not follow up, but a subcontractor sued, purporting to bring its case in the name of the city for its own benefit. The subcontractor contends that it should be paid out of the proceeds of the bonds. The case was removed to federal court. The district court dismissed, finding that the subcontractor did not have standing to assert claims on the bonds because it was not a third-party beneficiary to the bonds. The Seventh Circuit affirmed, based on the language of the contract.

This case arose when Robert Morrison, Jr. pleaded guilty to, among other things, four counts of assault and battery on a public employee (the arresting police officer) and the officer consequently brought a civil suit against Morrison for his injuries. Morrison and Metropolitan Property and Casualty Insurance Company (Metropolitan) subsequently applied for direct appellate review on the issue of whether Metropolitan had a duty to defend and indemnify Morrisson in the civil suit. The court held that an exclusion in a liability policy for "intentional and criminal acts" applied where the insured intended to commit the conduct that caused injury and where the conduct was criminal. The court also held that a guilty plea did not negate an insurer's duty to defend, even where the duty to defend would be negated by a criminal conviction after trial, because a guilty plea was not given preclusive effect and was simply evidence that the insured's acts were intentional and criminal. The court further held that one of the consequences of such a breach of its duty to an insured by failing to provide a defense was that, in determining whether the insurer owed a duty to indemnify the insured for the default judgment, the insurer was bound by the factual allegations in the complaint as to liability. The court finally held that, because the judge based her conclusion that Metropolitan had no duty to indemnify in large part on Morrison's guilty pleas and because the judge determined that Metropolitan had no duty to indemnify without first determining whether it owed a duty to defend at the time of the default judgment, the court vacated the declaratory judgment and set aside the allowance of Metropolitan's motion for summary judgment as well as the denial of Morrison's motion for partial summary judgment. Accordingly, the court remanded for further proceedings.