Justia Contracts Opinion Summaries

Megan Bradley, who was insured by State Farm, was injured in a motor-vehicle accident. State Farm paid $3844 in medical benefits to Bradley. State Farm then pursued a subrogation claim against the tortfeasor's insurer, Farmers Insurance. Bradley responded that the settlement with Farmers Insurance was not sufficient for her to be made whole. State Farm refused to release its subrogation claim. Bradley filed a petition for declaratory judgment and complaint for bad faith against State Farm and later filed an amended declaratory action to invalidate lien and complaint for injunctive relief, deceptive trade practices, bad faith and tortious interference with a contract. The circuit court dismissed count one of Bradley's amended pleading, finding (1) State Farm had a valid but unenforceable lien for sums paid to Bradley, (2) State Farm's right of subrogation arose at the time State Farm paid the medical benefits by operation of law, and (3) State Farm's right of subrogation is not enforceable until a subsequent judicial determination that Bradley was made whole by the settlement. The Supreme Court reversed and remanded for the reasons set forth on the same day in Riley v. State Farm Mutual Automobile Insurance Co.

Gregory Schindler purchased insurance from USAA for a house he owned. The house was destroyed by fire a year and a half later. USAA denied coverage on the basis that Schindler had committed fraud during his application conversation. Specifically, USAA determined that Greg had misrepresented that the house was his primary residence and a single family dwelling when instead it was a rental divided into eight apartment units. Schindler and his wife filed suit against USAA asserting breach of insurance contract and implied obligation of good faith and fair dealing. USAA defended on the basis of fraud. The jury found for USAA and awarded USAA the monies it had advanced to the Schindlers. The Schindlers appealed. The Supreme Court affirmed, holding (1) the district court did not err in denying the Schindlers' motion for summary judgment; (2) the district court did not abuse its discretion in allowing testimony from a USAA employee; (3) the district court did not abuse its discretion in denying the Schindlers' motion in limine to preclude USAA from introducing evidence of fraud; and (4) the district court did not abuse its discretion in requiring the Schindlers to order and pay for additional transcripts.

Wanda Brethorst submitted an uninsured motorist (UM) claim to her insurer, Allstate. Brethorst made a demand for settlement, and Allstate responded with only a partial settlement. Brethorst rejected the offer then filed suit against Allstate for bad faith. Allstate filed a motion asking that Brethorst's contract claim for UM coverage be bifurcated from her bad faith claim and that discovery on the bad faith claim be stayed until the contract claim was resolved. Brethorst opposed the motion on the grounds that she had filed only one claim, and thus no bifurcation or stay of discovery was appropriate. The circuit court agreed with Brethorst and denied Allstate's motion. The Supreme Court affirmed, holding (1) an insured may file a bad faith claim without also filing a breach of contract claim; and (2) Brethorst had supplied the insurer and the court with sufficient evidence of a breach of contract by the insurer to proceed with discovery on her bad faith claim.

In 2006, appellantâs vehicle was stolen from respondent hotelâs valet parking lot. Appellantâs insurer issued a check to appellant for the cost of the vehicle but not including the cost of customizations. Appellant filed a lawsuit in district court against respondent, alleging negligence and breach of a bailment contract and seeking damages exceeding $10,000. The district court determined that Nev. Rev. Stat. 651.101(1) shielded respondent from liability and entered summary judgment in favor of respondent. Appellant appealed, and the Supreme Court reversed. The Court found as a threshold matter appellant to be a real party in interest with standing to sue because appellant was not fully compensated by his insurer for his losses and thus the principle of total subrogation did not apply. The Court also held that Nev. Rev. Stat. 651.101(1) did not protect respondent against liability arising out of the theft of appellantâs vehicle because the statute, which limits the liability of hotels for the theft or destruction of any property brought by a patron upon the premises or "left in a motor vehicle upon the premises," unambiguously places motor vehicles outside of its scope.

The decedent, killed in a motorcycle accident in 2008, was covered by a life insurance policy, subject to the Employee Retirement Income Security Act, 29 U.S.C. 1101. The insurance company denied a claim by the decedent's widow, claiming that the decedent's anti-coagulant medications contributed to his death so that it fell within an exclusion for medical conditions. The district court concluded that the policy gave the company discretionary authority to determine eligibility and entered summary judgment in the company's favor. The Third Circuit reversed in part and remanded. Deferential review was not appropriate, given the language of the policy. The words "proof of loss satisfactory to Us," surrounded by procedural requirements, do not notify participants that the company has the power to re-define the entire concept of a covered loss on a case-by-case basis. The district court's interpretation of the medical exclusion, in favor of the company, was correct; the clause was not ambiguous.

A jury in the district court concluded that plaintiff did not breach its homeowners insurance policy with defendants and that one defendant had committed fraud when applying for the policy. Defendants appealed a district court order denying their motion for summary judgment and motions in limine and granting plaintiff's motion that defendants order and pay for additional transcripts on appeal. The court held that defendants were not entitled to estopp plaintiff from defending itself because genuine issues of material fact existed regarding whether the one defendant applied for the policy in good faith. The court held that the district court appropriately permitted plaintiff's customer service representative to testify as to her recollection of the defendant's statements. The court further held that the district court acted within its discretion in permitting plaintiff to defend itself via section 33-15-403, MCA, by allowing the customer service representative to testify about the defendant's alleged fraudulent statements. Accordingly, the district court did not abuse its discretion in denying defendants' motion in limine. The court finally held that the district court did not abuse its discretion in ordering additional transcripts under Montana Rule of Appellate Procedure 8(3)(b).

Plaintiff John Stuart decided to build a new house on a small farm. He contacted his insurance agent of nineteen years, Defendant Ronald Pittman for "course-of-construction" insurance to cover any problems in the course of building his house. Mr. Pittman discussed the scope of coverage that the policy would provide. Relying on Mr. Pittman's oral assurance of what the policy would cover, Plaintiff agreed to it. Construction started in 2003. Plaintiff received a premium statement, but not a written copy of the policy. An ice storm struck Plaintiff's building project. Plaintiff contacted Mr. Pittman to initiate an insurance claim. Mr. Pittman told Plaintiff that damage should be covered by the policy. In 2004, Plaintiff received a declaration page from Country Mutual Insurance Company, and found that damage to his house was not covered. Plaintiff brought an action against both Mr. Pittman and the Insurance Company alleging breach of the oral "policy" that he and Mr. Pittman agreed to at the onset of the building project. At the conclusion of the trial's evidentiary phase, Defendant moved for a directed verdict, arguing that Plaintiff failed to prove that the oral insurance binder covered his project. The trial court denied the motion, and the jury would later rule in favor of Plaintiff. The verdict was overturned on appeal. The court held that there was no evidence from which a jury could have found in favor of Plaintiff. On appeal to the Supreme Court, Plaintiff argued that the appellate court misinterpreted the Oregon law that required him to prove that the oral binder superseded the "usual exclusions" of the written policy. The Supreme Court found that the written policy was, as a matter of law, deemed to include all terms of the oral binder. Accordingly, the Court reversed the appellate court's decision and affirmed the judgment of the trial court.

Plaintiff Denise Perrelli appealed a trial court decision in favor of Defendants Bridget and Paul Pastorelle. Plaintiff believed the last time she sent her car insurance company a check for coverage was in 2005. She believed she had coverage on August 4, 2006, the day she got into an accident with Defendants. Geovanni Velverde, a friend, was driving at the time of the accident. He died of his injuries, and Plaintiff suffered serious injuries. Plaintiff sued Defendants alleging that her injuries were caused by Defendants' negligence. Defendants moved for summary judgment, arguing that as an uninsured motorist, Plaintiff had no right to sue. Upon careful consideration of the arguments and the applicable legal authority, the Supreme Court affirmed the lower court's decision. The Court found that under the state's "No Fault Act," a person injured while a passenger in her on uninsured vehicle was barred from suing for her injuries.

New York Marine & General Insurance Company ("NYMAGIC") and Union Fire Insurance Company of Pittsburgh, Pennsylvania ("NUFIC-PA") were both insuring Bayou Steel Corporation ("Bayou") when an employee of Bayou's Illinois stevedoring contractor, Kindra Marine Terminal ("Kindra"), was injured during Kindra's unloading of Bayou's steel bundles from a vessel belonging to Memco Barge Lines ("Memco"). Memco had contracted with Bayou to haul the cargo for Bayou by barge from Louisiana to Illinois. At issue was whether Kindra was Bayou's contractor or subcontractor for purposes of the provision in NYMAGIC's policy that excluded coverage of Bayou's liability for bodily injury incurred by employees of Bayou's subcontractors but did not exclude coverage of such injuries incurred by Bayou's contractors. The court held that, because Bayou was the principal party, paying party, and not the prime contractor, performance party, under both its barge transportation agreement with Memco and its offloading agreement with Kindra, there was no way for Kindra to have been a subcontractor of Bayou within the intendment of NYMAGIC's policy's exclusion of coverage. Kindra contracted directly with Bayou, not with some contractor of Bayou, to offload Bayou's cargo, so Kindra was Bayou's contractor. Accordingly, NYMAGIC's coverage exclusion did not apply to the employee's injuries because he was the employee of a contractor of Bayou.

A $15,000 insurance policy covering the decedent named his brother as beneficiary. The brother was killed in the same accident that killed the decedent. Although the insurer received notice that the decedent's mother (estate administrator) had assigned the policy to pay for the funeral, the company obtained an order from the state court and paid the benefit to decedent's children, applying a "facility-of-payment" clause, which provided: "if the beneficiary he or she named is not alive at the Employeeâs death, the payment will be made at Our option, to any one or more of the following: Your spouse; Your children; Your parents; Your brothers and sisters; or Your estate." The assignee (finance company) filed suit. The federal district court entered judgment in favor of the insurer. The Seventh Circuit affirmed, exercising jurisdiction under the Employee Retirement Income Security Act, 29 U.S.C. 1132. Insurance companies have broad discretion under facility-of-payment clauses and the insurer's decision was not arbitrary. The court declined to award attorney fees.