Justia Contracts Opinion Summaries

The Supreme Court affirmed in part and reversed in part the judgment of the district court granting class certification in this action alleging breach of contract and violation of Montana's Unfair Trade Practices Act (UTPA), Mont. Code Ann. 33-18-101 et seq., holding that a sufficient factual basis was established to justify certification of the classes.Plaintiffs filed this action against Fergus Farm Mutual Insurance Company (FFM), alleging that FFM breached its insurance contract with Plaintiffs and all other insureds by failing to include general contractor overhead and profit in the cost to repair or replace Plaintiffs' property. The district court granted Plaintiffs' motion for class certification. The Supreme Court reversed in part, holding (1) the district court did not abuse its discretion by determining that common questions of law predominate the litigation and support certification of the class; but (2) certain conclusions reached by the district court were a "bridge too far" at this stage of litigation. View "Kramer v. Fergus Farm Mutual Insurance Co." on Justia Law

In October 2015, Amy Downing purchased a life insurance policy from Country Life Insurance Company. She purchased both an “executive whole life” policy that would pay a flat amount of $500,000 to her beneficiaries upon her death and a “Paid-Up Additions Rider” (PUAR) that provided an additional death benefit and an investment opportunity. Although Amy's father Tom worked for Country, another employee, Robert Sullivan, met with Amy and Tom to describe the terms of the policy. Amy asked Sullivan why she needed one and a half million dollars in insurance coverage because it was a larger benefit than she expected to need and it required higher yearly premiums. Sullivan explained that although she might not need the large death benefit, the structure of the PUAR provided an investment opportunity because it maximized the policy’s cash value. Sullivan later testified that he never represented to Amy that the death benefit associated with the PUAR was a flat amount. After paying the premiums for a year, Amy informed her parents that she intended to abandon the policy and withdraw its existing cash value. Her mother Kathleen decided to look into the policy as an investment. Kathleen decided to take over payment of the premiums on Amy’s life insurance policy, including the PUAR, as an investment. With Tom’s assistance, Amy assigned her policy to Kathleen. Four months later, on January 27, 2017, Amy died in an accident. Her death occurred in the second year of her policy coverage. Country paid the death benefit of $500,000 on Amy’s whole life policy. Country also paid $108,855 on Amy’s PUAR. Kathleen sued, alleging that she was entitled to $1,095,741 on Amy’s PUAR, minus the $108,855 already paid. Judgment was rendered in favor of Country, and Kathleen appealed. The Alaska Supreme Court determined the superior court did not err in its interpretation of the insurance policy at issue, and affirmed the decision. View "Downing v. Country Life Insurance Company" on Justia Law

Following two operation-disabling accidents, Noranda Aluminum Holding Corporation, an insured aluminum-products manufacturer, whose “all-risks” property-insurance policy included business- interruption coverage, did not rebuild its damaged facility and consequently did not resume operations. Noranda and its insurers agreed that the failure to rebuild and resume operations did not negate the business-interruption coverage. But when Noranda submitted its business-interruption claim, the parties could not agree on how to calculate the Noranda's gross-earnings loss, which was the measure of the insurers’ liability under the relevant policy. After a seven-day trial, a jury found in favor of Noranda, and the insurers appealed. At trial, Noranda's damages expert employed a model that measured the insured’s gross-earnings loss by comparing the value of the insured’s production had the accident not occurred with the value of its production after the accidents had it repaired and resumed operations with due diligence. Although the parties disputed whether the insurers took issue with this methodology at trial in this appeal, the insurers contended that the model was inconsistent with the policy’s formula for calculating gross-earnings loss and that it grossly exaggerated the amount of the Noranda's claim. The insurers also challenged Noranda's expert’s factual assumptions and claimed he improperly included amounts that the insured had waived in an earlier property-damage settlement. The Delaware Supreme Court concluded Noranda's expert's damages model was consistent with the relevant policy provisions, and that the trial court's determination that the factual assumptions made by the expert were sufficiently reliable for the jury to consider was not an abuse of discretion. Likewise, the Court held the insurers' claim that the earlier property-damage settlement precluded a portion of Noranda's recovery was without merit. Therefore, the Supreme Court affirmed. View "XL Insurance America, Inc., et al. v. Noranda Aluminum Holding Corporation" on Justia Law

Protective Life Insurance Company ("Protective") appealed a circuit court judgment entered on a jury verdict against Protective and in favor of Apex Parks Group, LLC ("Apex"), in the amount of $11,495,890.41. Apex, a California-based corporation, owned and operated 16 moderately sized amusement parks, water parks, and family-entertainment centers nationwide. Apex's founder and chief executive officer was Alexander Weber, who had possessed 43 years' experience in the industry and who was critical to Apex's success. Because of Weber's importance, in early 2016 Apex sought a "key-man" insurance policy on Weber. Protective is a Birmingham-based insurance company owned by the Dai-ichi Corporation. At that time, Weber was 64 years old. Answers from Weber's interview with a paramedical examiner were incorporated into the Apex application for insurance. Weber underwent a series of medical examinations, all of which were reported and incorporated into the key-man policy. In November 2016, after the first premium payment was made and the policy went into effect, while on vacation with his wife, Weber died. Shortly after Weber's death, Apex submitted its claim under the policy for the $10-million benefit. Protective then began a contestable-claim investigation, contending Weber's complete medical history was not disclosed, thereby voiding the policy. Protective thereafter refunded the premium Apex paid. Apex sued Protective asserting claims of breach of contract and bad faith in failing to investigate all bases supporting coverage and in making false promises that the claim would be paid. After review, the Alabama Supreme Court determined Protective was entitled to judgment as a matter of law on Apex's claim of breach of contract, and the trial court erred by submitting this claim to the jury for consideration. Accordingly, that portion of the trial court judgment was reversed. "Because Protective demonstrated that Weber made a material misrepresentation and Apex failed to introduce substantial evidence to the contrary, Protective was entitled to rescind the policy, which was a complete defense to Apex's claims of breach of contract. Thus, the trial court erred in denying Protective's motions for a judgment as a matter of law." View "Protective Life Insurance Company v. Apex Parks Group, LLC" on Justia Law

Todd and Melissa Muller appealed a superior court decision granting summary judgment to their insurer, Progressive Northern Insurance Company. The Mullers challenged the court’s conclusions on how the setoff provision of their insurance policy should have been applied when there were multiple claimants. The Vermont Supreme Court agreed with the trial court that, construing the insurance policy as a whole, the setoff provision is unambiguous: It clearly provided that Progressive was entitled to reduce “all sums . . . paid” regardless of the number of claims made. View "Progressive Northern Insurance Company v. Muller" on Justia Law

The Dais obtained a loan from Apex secured by a mortgage on their laundromat. The laundromat ceased operations; the Dais defaulted. Apex agreed to accept a deed in lieu of foreclosure if the property was marketable. A December 2008 inspection revealed that it was in disrepair, exposed to the elements, and open to vagrants. Apex took measures to preserve the property and returned the deed to the Dais in April 2009. In December 2010, two Chicago firefighters lost their lives battling a blaze at the abandoned laundromat. Their estates sued Apex. Apex and the estates settled. Apex's insurer, Federal, denied coverage, citing a policy exclusion for any liability or loss "arising out of property you acquire by foreclosure, repossession, deed in lieu of foreclosure or as mortgagee in possession.” The district court granted Federal summary judgment.The Seventh Circuit vacated, applying Pennsylvania law. Summary judgment was inappropriate given the open question of material fact: who possessed the property at the time of the fire. Apex instructed its realtor to post a notice informing the Dais how to obtain keys for the new locks. Apex urged the Dais to inspect and secure the property. In July 2009, Dai ordered a handyman to board up the property after being cited for building code violations. In October 2009, Dai entered into a settlement to cure the code infractions by November 2010. He failed to do so and served 180 days in jail. Apex had no contact with the property after April 2009. View "Apex Mortgage Corp. v. Great Northern Insurance Co." on Justia Law

In consolidated appeals, the issue presented for the Pennsylvania Supreme Court's review centered on whether, under the terms of the “replacement cost coverage” policies at issue, the insurer was permitted to withhold from any actual cash value (“ACV”) payment general contractor’s overhead and profit (“GCOP”) expenses, unless and until the insureds undertook repairs of the damaged property, even though the services of a general contractor were reasonably likely to be needed to complete the repairs. Appellants Konrad Kurach and Mark Wintersteen (“Policyholders”) each purchased identical “Farmers Next Generation” insurance policies from Appellee Truck Insurance Company (“Insurer”), to cover their Pennsylvania residential dwellings. Subsequent to the purchase of these policies, both Policyholders sustained water damage to their houses in excess of $2,500, and both filed claims with Insurer under the policies. Thus, where, as here, the cost of repairing or replacing a policyholder’s damaged property exceeds $2,500, Insurer was first required to pay the ACV of the property at the time of the loss to the policyholder (“step one”). Once the repair or replacement of the damaged property is commenced, Insurer was then obligated (in “step two”) to pay the depreciated value of the damaged property and also the expense of hiring a general contractor, “unless the law of [Pennsylvania] requires” payment of GCOP as part of ACV. After careful review, the Pennsylvania Supreme Court affirmed the order of the Superior Court, which found the insurer was entitled to withhold such costs. View "Wintersteen v. Truck Ins. Exchange" on Justia Law

Plaintiffs Rafi Ghazarian and Edna Betgovargez had a son, A.G., with autism. A.G. received applied behavior analysis (ABA) therapy for his autism under a health insurance policy (the policy) plaintiffs had with defendant California Physicians’ Service dba Blue Shield of California (Blue Shield). Mental health benefits under this policy are administered by defendants Magellan Health, Inc. and Human Affairs International of California (collectively Magellan). By law, the policy had to provide A.G. with all medically necessary ABA therapy. Before A.G. turned seven years old, defendants Blue Shield and Magellan approved him for 157 hours of medically necessary ABA therapy per month. But shortly after he turned seven, defendants denied plaintiffs’ request for 157 hours of therapy on grounds only 81 hours per month were medically necessary. Plaintiffs requested the Department of Managed Health Care conduct an independent review of the denial. Two of the three independent physician reviewers disagreed with the denial, while the other agreed. As a result, the Department ordered Blue Shield to reverse the denial and authorize the requested care. Plaintiffs then filed this lawsuit against defendants, asserting breach of the implied covenant of good faith and fair dealing against Blue Shield, and claims for intentional interference with contract and violations of Business and Professions Code section 17200 (the UCL) against defendants. Defendants each successfully moved for summary judgment. As to the bad faith claim, the trial court found that since one of the independent physicians agreed with the denial, Blue Shield acted reasonably as a matter of law. As to the intentional interference with contract claim, the court found no contract existed between plaintiffs and A.G.’s treatment provider with which defendants could interfere. Finally, the court found the UCL claim was based on the same allegations as the other claims and thus also failed. After its review, the Court of Appeal concluded summary judgment was improperly granted as to the bad faith and UCL claims. "[I]t is well established that an insurer may be liable for bad faith if it unfairly evaluates a claim. Here, there are factual disputes as to the fairness of defendants’ evaluation. . . .There are questions of fact as to the reasonability of these standards. If defendants used unfair criteria to evaluate plaintiffs’ claim, they did not fairly evaluate it and may be liable for bad faith." Conversely, the Court found summary judgment proper as to the intentional interference with contract claim because plaintiffs failed to show any contract with which defendants interfered. View "Ghazarian v. Magellan Health" on Justia Law

This matter arose from alleged violations of the Health Care Consumer Billing and Disclosure Protection Act (“Balance Billing Act” or “Act”). The Louisiana Supreme Court granted certiorari review to resolve the question of whether a patient’s claims against a contracted healthcare provider for an alleged violation of La. R.S. 22:1874(A)(1) were delictual in nature. The consolidated lawsuits in this matter were filed by Matthew DePhillips and Earnest Williams, individually and on behalf of putative classes, against Hospital District No. 1 of Tangipahoa Parish d/b/a North Oaks Medical Center/North Oaks Health System (“North Oaks”). In February, 2011, Williams was injured in a motor vehicle accident. He sought emergency medical treatment from North Oaks. At the time of the accident, Williams was insured under an insurance policy administered by Louisiana Health Service & Indemnity Company d/b/a Blue Cross and Blue Shield of Louisiana (“BCBS”). North Oaks is a contracted healthcare provider with BCBS pursuant to a certain Member Provider Agreement (the “MPA”) between North Oaks and BCBS. After Williams’ treatment, North Oaks filed a claim with BCBS, and BCBS paid a discounted rate on the claims as provided by the MPA. Thereafter, North Oaks sought to collect from Williams by filing a medical lien against his liability insurance claim for the full and undiscounted charges. Williams alleged that North Oaks filed this lien despite being a contracted healthcare provider with BCBS and despite its legal and contractual requirements to accept the insurance as payment in full. The trial court denied the exceptions of no right of action for breach of contract and prescription, but granted the North Oaks’ exception of no cause of action for claims arising before the effective date of the Balance Billing Act. The court of appeal granted writs in part, finding DePhillips did not have a right of action to assert a claim for breach of the MPA, as he was neither a party nor a third-party beneficiary to that agreement. The appellate court denied North Oaks’ writ application insofar as it related to the trial court’s denial of its exception of prescription. After review, the Supreme Court determined plaintiff's claims were delictual in nature, subject a one-year prescriptive period. View "DePhillips v. Hospital Service Dist. No. 1 of Tangipahoa Parish d/b/a North Oaks Medical Center et al." on Justia Law

Plaintiff Skanska USA Building Inc. served as the construction manager on a renovation project for Mid-Michigan Medical Center–Midland (the Medical Center); plaintiff subcontracted the heating and cooling portion of the project to defendant M.A.P. Mechanical Contractors, Inc. (MAP). MAP obtained a commercial general liability insurance policy (the CGL policy) from defendant Amerisure Insurance Company (Amerisure). Plaintiff and the Medical Center were additional named insureds on the CGL policy. In 2009, MAP installed a steam boiler and related piping for the Medical Center’s heating system. MAP’s installation included several expansion joints. Sometime between December 2011 and February 2012, plaintiff determined that MAP had installed some of the expansion joints backward. Significant damage to concrete, steel, and the heating system occurred as a result. The Medical Center sent a demand letter to plaintiff, asserting that it had to pay for all costs of repair and replacement. Plaintiff sent a demand letter to MAP, asserting that MAP was responsible for all costs of repair and replacement. Plaintiff repaired and replaced the damaged property, at a cost of $1.4 million. Plaintiff then submitted a claim to Amerisure, seeking coverage as an insured. Amerisure denied the claim. The issue this case presented for the Michigan Supreme Court's review centered on whether the unintentional faulty subcontractor work that damaged an insured’s work product constituted an “accident” under a commercial general liability insurance policy. Because the Court concluded the answer was yes, it reversed the Court of Appeals’ judgment to the contrary. View "Skanska USA Building, Inc. v. M.A.P. Mechanical Contractors, Inc." on Justia Law