Justia Contracts Opinion Summaries

The Court of Appeals correctly applied the principles of Cincinnati Insurance Co. v. Motorist Mutual Insurance Co., 306 S.W.3d 69 (Ky. 2010), to hold that a contractor’s faulty workmanship on the basement and foundation of an existing structure, which resulted in extensive damage to the entire building, was not an accident triggering coverage as an occurrence under the contractor’s commercial general liability (CGL) insurance policy.The policy provided that the insurer (Insurer) would pay for property damage if it resulted from an “occurrence.” The trial court ruled that Plaintiff could recover from Insurer under the policy for the damage to the structure above the basement level because the damage was an unexpected and unintended consequence of the contractor’s faulty work on the basement. The court of appeals reversed, ruling that none of the structural damage qualified as an accident triggering coverage as an occurrence under Insurer’s CGL policy. The Supreme Court affirmed, holding that the trial court failed to focus on the proper elements from Cincinnati. View "Martin/Elias Properties, LLC v. Acuity, a Mutual Insurance Co." on Justia Law

A-1 Self Storage Inc.’s alternative indemnity agreement was not subject to regulation under the Insurance Code because (1) A-1 was not acting as an agent for an insurer, and (2) the indemnification agreement was incidental to the principal object and purpose of renting storage space. See Cal. Ins. Code 1758.7 et seq.In its rental agreements with tenants, A-1 required the tenant to obtain insurance for loss of or damage to a tenant’s stored property, stating that A-1 shall not be liable for such losses. A-1 also offered an alternative to the requirement that the tenant obtain insurance. In exchange for an additional amount in rent per month, A-1 provided that it would reassume the risk of such losses, up to $2,500. Plaintiff brought this putative class action arguing that the alternative constituted an insurance policy, which A-1 was not licensed to sell, and therefore, A-1’s sale of this indemnity agreement violated the Insurance Code. The trial court concluded that the alternative indemnity agreement was not insurance and entered judgment for Defendants. The court of appeal affirmed. The Supreme Court affirmed, holding that the alternative indemnity agreement did not constitute insurance subject to regulation under the Insurance Code. View "Heckart v. A-1 Self Storage, Inc." on Justia Law

Nautilus Insurance Company ("Nautilus") and Lyon Fry Cadden Insurance Agency, Inc. ("LFC"), separately petitioned the Alabama Supreme Court for writs of mandamus directing the the trial court to vacate its orders denying their motions to dismiss the action filed against them by Precision Sand Products, LLC ("Precision"). From June 10, 2015, to June 10, 2016, Precision had in place a commercial general-liability insurance policy it had purchased from Nautilus through LFC, an insurance broker. In March 2016, Terry Williams sued Precision seeking recovery for injuries he allegedly suffered on Precision's property during the period the policy was in effect. Pursuant to the terms of the policy, Precision demanded that Nautilus defend and indemnify it against the Williamses' claims. Nautilus agreed, under reservation of rights, to defend Precision against the Williamses' claims. Then Nautilus filed a declaratory-judgment action against Precision and the Williamses at the federal district court, seeking a judgment declaring that, pursuant to an exclusion in the policy, Nautilus was not obligated to defend and indemnify Precision against the Williamses' claims. Precision filed in the Williamses' action a "crossclaim complaint" against Nautilus and LFC ("the state action"), asserting against both Nautilus and LFC various contract and negligence claims. Before the Alabama Supreme Court, LFC argued Precision could not recover against LFC for fraudulently procuring inadequate insurance or for negligently failing to procure adequate insurance unless and until Precision was actually denied coverage for, or a defense against, the Williamses' claims. The Supreme Court found the trial court, as a court of general jurisdiction, clearly had the constitutional and statutory authority to hear the types of claims Precision asserted against LFC. Thus, LFC did not demonstrate it had a clear legal right to dismissal from the state action based on a lack of subject-matter jurisdiction over Precision's claims. Nautilus has demonstrated that, under section 6-5-440 Ala. Code 1975, it had a clear legal right to dismissal from the state action. Accordingly, the Court granted Nautilus's petition and issued the writ directing the trial court to dismiss Nautilus from the state action. Furthermore, the Court determined LFC failed to carry its burden of demonstrating that it had a clear legal right to dismissal from the state action. Accordingly, LFC's petition was also denied. View "Ex parte Nautilus Insurance Company." on Justia Law

At age 56, Newman purchased a long-term-care insurance plan MetLife, opting for one of MetLife’s non-standard options for paying her insurance premiums, “Reduced-Pay-at 65.” From the outset, Newman paid the elevated premium associated with her Reduced-Pay option. When she reached age 65, her premium was cut in half. When Newman was 67 years old, she was startled to discover that MetLife that year more than doubled her insurance premium. The Seventh Circuit reversed the dismissal of Newman’s proposed class action, alleging breach of contract, deceptive and unfair business practices, and common-law fraud. The allegations raised in the complaint were enough to entitle Newman to prevail on the liability phase of her contract claim and to go forward on her remaining claims. The policy language is at least ambiguous, because it can be read reasonably to fix a person’s premium, if she had opted for the Reduced-Pay option. Illinois construes ambiguous contracts against the insurer. Newman’s complaint also alleged facts that plausibly show that MetLife’s policy was both deceptive and unfair under the Illinois Consumer Fraud Act and adequately alleged fraudulent concealment and reasonable reliance. View "Newman v. Metropolitan Life Insurance Co" on Justia Law

A wine dealer sold millions of dollars’ worth of counterfeit wine to an unsuspecting wine collector. When the collector discovered the fraud, he filed an insurance claim based on his “Valuable Possessions” property insurance policy. The insurance company denied the claim. The collector sued for breach of contract. The trial court ruled in favor of the insurance company, sustaining its demurrer. The Court of Appeal concurred with the trial court: the collector suffered a financial loss, but there was no loss to property that was covered by the property insurance policy. View "Doyle v. Fireman's Fund Insurance Co." on Justia Law

At issue in this case was whether Aspen Insurance (UK) Ltd. And Lloyd’s Syndicate 2003 (collectively, “Aspen”) had to reimburse Black & Veatch Corporation (“B&V”) for costs B&V incurred due to damaged equipment a subcontractor made for power plants in Ohio and Indiana. The district court held Aspen did not have to pay B&V’s claim under its commercial general liability (“CGL”) insurance policy because B&V’s expenses arose from property damages that were not covered “occurrences” under the Policy. Because the only damages involved here were to B&V’s own work product arising from its subcontractor’s faulty workmanship, the court concluded that the Policy did not provide coverage and granted Aspen’s motion for partial summary judgment. B&V appealed. The Tenth Circuit found that the Policy contained a choice-of-law clause, making the Policy subject to New York law. The Court also found a trend among state supreme courts that supported the contention that construction defects could constitute “occurrences” under CGL policies, and that contractors have coverage for the unexpected damage caused by defective workmanship done by subcontractors. The Tenth Circuit predicted the New York Court of Appeals would decide that the damages here constituted an “occurrence” under the Policy, and as such, vacated the district court’s summary judgment decision and remand for further proceedings. View "Black & Veatch Corp. v. Aspen Insurance" on Justia Law

Arizona equitable indemnity law does not incorporate the Restatement (First) of Restitution section 78 because it conflicts with Arizona’s general equitable indemnity principles.Michael Bovre rented a vehicle from Payless Car Rental System Inc. Payless offered Bovre supplemental liability insurance (SLI) under a policy provided by KnightBrook Insurance Co. Bovre caused an accident while driving the rental vehicle that injured Lorraine and Robert McGill. The McGills sued Bovre. The parties settled. Bovre assigned to the McGills his claims against KnightBrook and Payless for their alleged failure to provide supplemental liability insurance (SLI) and agreed to an adverse judgment. Thereafter, the McGills sued Payless and KnightBrook seeking to recover the judgment. The McGills and KnightBrook entered into a settlement in which the McGills’ claims against Payless were assigned to KnightBrook, which paid the McGills the $970,000 SLI policy limit. KnightBrook then filed an action in federal court against Payless, asserting an equitable indemnification claim for the $970,000 it paid McGills. Relying on the First Restatement section 78, the district court ruled that KnightBrook was entitled to equitable indemnification from Payless for the $970,000 SLI policy limits. On appeal, the Ninth Circuit certified two questions to the Supreme Court. The court answered the first question as set forth above, which rendered moot the second question. View "KnightBrook Insurance Co. v. Payless Car Rental System Inc." on Justia Law

In this action challenging an insurance company’s doubling of Plaintiff’s insurance premium, the Seventh Circuit reversed the district court’s dismissal of Plaintiff’s complaint for failure to state a claim, holding that Plaintiff was entitled to relief on her contract claim and that the allegations Plaintiff raised were enough to permit her to go forward on her other theories.When Plaintiff was sixty-seven years old, she discovered that Metropolitan Life Insurance Company (MetLife) more than doubled her insurance premium. Plaintiff brought this lawsuit against MetLife on behalf of herself and a proposed class, alleging breach of contract, deceptive and unfair business practices, and common-law fraud. The district court granted MetLife’s motion to dismiss for failure to state a claim, concluding that the insurance policy unambiguously permitted MetLife to raise Plaintiff’s premium. The First Circuit disagreed, holding that the allegations raised in the complaint were enough to entitle Plaintiff to prevail on the liability phase of her contract claim and to go forward on her remaining claims. View "Newman v. Metropolitan Life Insurance Co." on Justia Law

The underlying action was initiated by homeowners from two residential developments in Rocklin against appellants Centex Homes and Centex Real Estate Corporation (Centex) for alleged defects to their homes. Centex and cross-defendant and respondent St. Paul Fire and Marine Insurance Company (St. Paul) have a history of insurance coverage disputes. St. Paul was an insurer for subcontractor Ad Land Venture (Ad Land), and agreed to defend Centex as an additional insured subject to a reservation of rights. Centex filed a cross-complaint against its subcontractors and St. Paul that sought, as the seventh cause of action, a declaration that Centex was entitled to independent counsel under Civil Code section 28601 because St. Paul’s reservation of rights created significant conflicts of interest. Centex appealed after the trial court granted St. Paul’s motion for summary adjudication of Centex’s seventh cause of action. Centex argued any possible or potential conflict was legally sufficient to require St. Paul to provide independent counsel. The Court of Appeal disagreed. Alternatively, Centex contended independent counsel was required because counsel appointed by St. Paul could influence the outcome of the coverage dispute and St. Paul controlled both sides of the litigation. The Court of Appeal concluded that because Centex failed to establish a triable issue of material fact regarding these assertions, the Court affirmed the judgment. View "Centex Homes v. St. Paul Fire & Marine Ins. Co." on Justia Law

The United States Court of Appeals for the Ninth Circuit certified a certified question of Oregon law to the Oregon Supreme Court. The question related to claims under ORS 124.110 for financial abuse of “vulnerable persons” (here, elderly persons) who purchased long-term care insurance from defendant Bankers Life & Casualty Co. (Bankers) and sought to receive insurance benefits under their policies. Specifically, the Ninth Circuit asked whether a plaintiff states a claim under ORS 124.110(1)(b) for wrongful withholding of money or property where it is alleged that an insurance company has in bad faith delayed the processing of claims and refused to pay benefits owed under an insurance contract. Plaintiffs were elderly Oregonians or their successors who purchased long-term healthcare insurance policies sold by Bankers and its parent company. Plaintiffs alleged Bankers developed onerous procedures to delay and deny insurance claims: failing to answer phone calls, losing documents, denying claims without notifying policyholders, denying claims for reasons that did not comport with Oregon law, and paying policyholders less than what they were owed under their policies. Bankers allegedly collected premium payments and, without good cause, delayed and denied insurance benefits to which Plaintiffs were entitled. The Oregon Supreme Court answered in the negative: allegations that an insurance company, in bad faith, delayed the processing of claims and refused to pay benefits owed to vulnerable persons under an insurance contract do not state a claim under ORS 124.110(1)(b) for wrongful withholding of “money or property.” View "Bates v. Bankers Life and Casualty Co." on Justia Law