Justia Contracts Opinion Summaries

Mainali filed suit against Covington for breach of contract, breach of the duty of good faith and fair dealing, fraud, and violations of the Texas Insurance Code and Texas Deceptive Trade Practices Act. The Fifth Circuit affirmed the district court's grant of summary judgment for Covington on all of Mainali's claims. The court rejected Mainali's contention that the appraisal award was incomplete because it excluded damage to items covered by the policy where Mainali cited nothing in the record to show that these items were not included. The court also held that Covington did not violate the Prompt Payment of Claims Act where Covington was not trying to avoid payment of the claim; it was invoking a contractually agreed to mechanism for assessing the amount it owed. View "Mainali Corp. v. Covington Specialty Insurance Co." on Justia Law

This case arose out of an insurance dispute between a general contractor, its subcontractor, and the subcontractor’s general liability carrier over water damage to a construction site caused by heavy rains. The United States Department of Veterans Affairs (VA) hired Kadena Pacific, Inc. as the general contractor to oversee construction of a building in Menlo Park. Kadena hired Global Modular, Inc. to build, deliver, and install the 53 modular units that would comprise the building. Because Kadena had hired a different subcontractor to install the roofing, Global agreed to deliver the units covered only by a roof deck substrate. Kadena originally scheduled delivery in the summer months, but delivery was delayed until October and November. Despite Global’s efforts to protect the units by covering them with plastic tarps, the interiors suffered water damage from October through January. In February, Kadena and Global mutually agreed to terminate their contract and Kadena oversaw the remediation of the water-damaged interiors and completion of the project. Global sued Kadena for failure to pay and Kadena countersued, alleging Global had breached the contract in various ways, including by failing to repair the water-damaged interiors. Before trial, the parties entered a partial settlement. Global paid Kadena $321,975 to release all of Kadena’s claims arising from the VA project except for claims covered by Global’s insurance policy with North American Capacity Insurance Company (NAC), and Global received $153,025 to dismiss its failure-to-pay claims. At trial, Kadena presented evidence on the scope and cost of its water remediation and argued Global was contractually responsible for the damage. The jury agreed and awarded Kadena slightly over $1 million. In a separate suit brought by NAC, Kadena and NAC filed competing motions for summary judgment on the issue of whether NAC’s policy required it to indemnify Global for the jury’s damage award. The trial court ruled in favor of Kadena, finding the damage award covered under NAC’s policy as a matter of law. The court also ruled that the award must be offset by the $321,975 Global paid in settlement and that Global was liable to Kadena for $360,000 in attorney fees. The Court of Appeal concluded the trial court properly determined NAC’s policy covered the water damages and Kadena was entitled to fees. However, the Court reversed the offset order because Global’s settlement payment did not compensate Kadena for the costs of its water remediation; the parties agreed to reserve that issue for litigation. View "Global Modular v. Kadena Pacific, Inc." on Justia Law

Defendant Horizon Healthcare Services, Inc., New Jersey’s largest health insurer, maintained a two-tiered provider-hospital system. Plaintiff Saint Peter’s University Hospital, Inc., and plaintiff Capital Health System, Inc. and others, commenced separate lawsuits claiming Horizon treated them unfairly and in a manner that contravened their agreements when they were placed in the less advantageous Tier 2. Plaintiffs assert Horizon’s tiering procedures were pre-fitted or wrongfully adjusted to guarantee selection of certain larger hospitals for the preferential Tier 1. The New Jersey Supreme Court was asked, by way of interlocutory appeal, to settle multiple discovery disputes that arose in the course of the litigation. The Supreme Court concluded the Appellate Division exceeded the limits imposed by the standard of appellate review both by assessing the disputed information’s relevance against the panel’s own disapproving view of the merits and by giving no apparent weight or consideration to the protections afforded by confidentiality orders. Having closely examined the record, the Supreme Court rejected the Appellate Division’s determination that the chancery judges encharged with these matters abused their discretion. It was not an abuse of discretion for the chancery judges to find the information sought was relevant to plaintiffs’ claims that Horizon violated either the network hospital agreements’ contractual terms, or the overarching implied covenant of good faith and fair dealing, when they were relegated to the less desirable Tier 2. View "Capital Health System, Inc. v. Horizon Healthcare Services, Inc." on Justia Law

Dow Corning Alabama, Inc., Dow Corning Corporation, Rajesh Mahadasyam, Fred McNett, Zurich American Insurance Company ("Zurich"), and National Union Insurance Company of Pittsburgh, PA ("National Union"), all petitioned the Alabama Supreme Court for a writ of mandamus directing the trial court to transfer the underlying declaratory-judgment action to the Montgomery Circuit Court pursuant to Alabama's forum non conveniens statute. Dow Corning Alabama hired Alabama Electric Company, Inc., an independent contractor, to perform the electrical installation of a vacuum system at Dow Corning Alabama's facility in Montgomery. The contract contained a forum-selection clause. An employee of Alabama Electric was injured while working at Dow Corning Alabama's Montgomery facility. The employee sued the Dow defendants, which in turn tendered their request for defense and indemnity to Alabama Electric and National Trust, both of whom denied coverage. Zurich and National Union settled the Montgomery lawsuit through mediation, and the case was ultimately dismissed. Later, Alabama Electric and National Trust filed an action with the Houston Circuit Court seeking certain declarations concerning their duties and obligations under the master contract and/or the National Trust policy regarding the settlement. The Dow defendants moved to transfer the declaratory judgment action from Houston to Montgomery County pursuant to the forum noon conveniens statute. The Alabama Supreme Court denied the writ application, finding the Dow parties did not satisfy their burden at the trial-court level of demonstrating that a change in venue from Houston County to Montgomery County was warranted under the interest-of-justice prong. View "Ex parte Dow Corning Alabama, Inc." on Justia Law

From 2006-2012 Packerland deceived at least one of its customers about the protein content of its Whey Protein Concentrate. Land O’Lakes purchased Packerland’s protein concentrate for use in making foods for calves and other young animals. Buyers infer protein levels from measuring nitrogen: a seller can add another nitrogen-rich substance to produce higher scores. The Ratajczaks, who owned Packerland, started adding urea to its protein concentrate. in 2006. Land O’Lakes suspected that the concentrate was high in nonprotein nitrogen but could not learn why; the Ratajczaks made excuses that Land O’Lakes accepted. The Ratajczaks sold Packerland in 2012. The new owner kept them as employees; they kept adding urea until the buyer learned what the truth. The Ratajczaks lost their jobs and settled for about $10 million before the buyer filed a complaint. Land O’Lakes stopped buying Packerland’s product and asserted claims of breach of contract, fraud, and violation of the Racketeer Influenced and Corrupt Organizations Act. Packerland’s insurers refused to defend or indemnify it or the Ratajczaks; the Ratajczaks’ personal insurer refused to indemnify them for their settlement with Packerland’s buyer. The district court dismissed Land O’Lakes’s suit and ruled in favor of the insurers. The Seventh Circuit affirmed, rejecting Land O’Lakes’ claim to treble damages under RICO and state-law and the Ratajczaks’ claims that Packerland’s insurers and their own insurers had to defend and indemnify them. View "Land O'Lakes, Inc. v. Ratajczak" on Justia Law

Defendant-appellant American Safety Indemnity Company (“ASIC”) challenged a judgment awarding over $1.4 million in compensatory and punitive damages to plaintiff-respondent Pulte Home Corporation (Pulte), who was the general contractor and developer of two residential projects in the San Marcos area. ASIC issued several sequential comprehensive general liability (CGL) insurance policies to three of Pulte's subcontractors, and during 2003 to 2006, it added endorsements to those policies that named Pulte as an additional insured. The projects were completed by 2006. In 2011 and 2013, two groups of residents of the developments sued Pulte for damages in separate construction defect lawsuits. After American Safety declined to provide Pulte with a defense, Pulte filed this action, asserting that the additional insured endorsements afforded it coverage and therefore required ASIC to provide it with defenses on the construction defect issues. After review, the Court of Appeal concluded the trial court was correct in ruling that the language of ASIC’s additional insured endorsements on the underlying insurance policies created ambiguities on the potential for coverage in the construction defect lawsuits, thus requiring it to provide Pulte with a defense to them. Additionally, the Court upheld the court's decision that Pulte was entitled to an award of punitive damages that was proportional, on a one-to-one basis, to the award of compensatory damages in tort. Although the Court affirmed the judgment as to its substantive rulings, the Court of Appeal was required to reverse in part as to the award of $471,313.52 attorney fees: the trial court abused its discretion in implementing an hourly attorney fee arrangement that Pulte did not arrive at until after trial, to replace the previous contingency fee agreement in a manner that Pulte intended would operate to increase its demand. Since the trial court calculated its $500,000 award of punitive damages by appropriately utilizing a one-to-one ratio to the compensatory, the trial court had to recalculate not only the fees award but also to adjust the amount of punitive damages accordingly. View "Pulte Home Corp. v. American Safety Indemnity Co." on Justia Law

When Plaintiff learned that a family occupying a residence nearby to a vacant property owned by Plaintiff was pursuing environmental claims against him, he notified his liability carrier, the Indiana Insurance Company. Indiana Insurance provided a defense and eventually settled the claims. Plaintiff later sued Indiana Insurance for bad faith arising from a breach of his insurance contract. The jury awarded Plaintiff $925,000 in emotional distress damages and $2,500,000 in punitive damages. The court of appeals affirmed. On appeal, Indiana Insurance argued that, having provided a defense and indemnification, Plaintiff had no viable bad faith claim. The Supreme Court affirmed, holding (1) Plaintiff presented sufficient evidence to support the jury’s determination that Indiana Insurance breached its contract with Plaintiff and that Indiana Insurance’s acts or omissions violated the Unfair Claims Settlement Practices Act; (2) the trial court did not err in denying Indiana Insurance’s motion for directed verdict or judgment notwithstanding the verdict on Plaintiff’s Kentucky Consumer Protection Act claim; (3) expert testimony is unnecessary to substantiate damages for emotional distress in a bad faith case; and (4) Indiana Insurance’s two remaining allegations of error were not properly before the court for review. View "Indiana Insurance Co. v. Demetre" on Justia Law

In this insurance coverage dispute, the Supreme Court affirmed the denial of summary judgment in favor of Insurer but reversed the denial of summary judgment in favor of General Contractor. Homeowners sued General Contractor and Subcontractor for damages to their home. General Contractor, which was insured under a commercial general liability policy (CGL), requested defense and indemnification from Insurer. Insurer defended General Contractor under a reservation of rights. Insurer then filed a declaratory judgment action seeking a judgment that the CGL policy did not provide coverage for General Contractor in the underlying case. General Contractor and Insurer filed cross-motions for summary judgment. The circuit court denied the motions on the ground that a genuine issue of material fact existed regarding the foreseeability of Homeowners’ damages. The Supreme Court reversed the judgment denying General Contractor’s motion and remanded for further proceedings, holding that the CGL policy required Insurer to defend General Contractor against Homeowners’ suit for damages and that factual questions regarding foreseeability were not relevant to the existence of coverage under the policy. View "Owners Insurance Co. v. Tibke Construction, Inc." on Justia Law

After Exxon settled the underlying personal injury lawsuit, it sought reimbursement from ERS and ORIC, contending that ERS's contractual obligation to insure Exxon as an additional insured and the insurance policy issued by ORIC required ERS and ORIC to pay for the settlement of the suit and the cost of litigation. The Fifth Circuit affirmed the district court's judgment as to ERS's duty to pay the deductible; reversed the portion of the judgment pertaining to the interest award and remanded for calculation of a new interest award; vacated the portion of the judgment that held ORIC jointly and severally liable with ERS for the entire judgment and remanded for modification; reversed the denial of Exxon's attorney's fees for the initial appeal and remanded for determination of amounts; and affirmed the denial of Exxon's previously unrequested attorney's fees. View "ExxonMobil Corp. v. Electrical Reliability Services, Inc." on Justia Law

Novae issued Cunningham an insurance policy. While insured by Novae, Cunningham entered into an agreement with AP to provide claims-handling services. In 2004 AP sued Cunningham in Texas state court, alleging misrepresentation and negligently-handled claims, resulting in unwarranted or underpriced policy renewals. While that litigation was ongoing, AP filed for bankruptcy. Novae then denied Cunningham’s request for coverage and remained largely uninvolved in the state litigation because the policy did not obligate it to defend. In 2012 Cunningham and AP’s bankruptcy trustee entered into a settlement, including a stipulation to the entry of a $5.12 million judgment against Cunningham; an assignment to AP of Cunningham’s purported right to recover against Novae; and a covenant not to execute on the judgment against Cunningham. The settlement stated that Illinois law would govern its interpretation. The Texas court entered judgment in accordance with the settlement. APs bankruptcy trustee then sued Novae in Illinois, asserting the assigned rights. The Seventh Circuit affirmed summary judgment for Novae. In Texas “assignments of choses in action that tend to increase and distort litigation” violate public policy and are invalid. The type of settlement at issue is collusive and distorts the adversarial process. View "Hendricks v. Novae Corporate Underwriting, Ltd." on Justia Law