Justia Contracts Opinion Summaries

Weitz contracted with Hyatt to build an Aventura, Florida assisted-living facility, which was completed in 2003. Hyatt obtained post-construction insurance from defendants. Weitz was neither a party nor a third-party-beneficiary. The policies exclude faulty workmanship and mold, except to the extent that covered loss results from the faulty workmanship, such as business interruption losses. The construction was defective. Hyatt notified defendants of a $11 million loss involving moisture and mold at the care center, settled that claim for $750,000, and released defendants from claims relating to the care center. Hyatt next discovered moisture, mold, and cracked stucco at the residential towers. Hyatt gave defendants notice, but bypassed inevitable defenses based upon policy exclusions, and sued Weitz. Weitz sued its subcontractors and its own construction contract liability insurers. Weitz settled with Hyatt for $53 million and was indemnified by its insurers for $55,799,684.69. Weitz sued, claiming coverage under defendants’ policies, based on equitable subrogation or unjust enrichment. The Eighth Circuit affirmed dismissal, recognizing that Weitz, as subrogee, was subject to any defense Hyatt would have faced, and that Hyatt had discharged defendants from liability; that suit was barred by the contractual period of limitations; that Weitz was barred from suing for damage to the plaza because Hyatt did not give defendants notice of that damage; and that Weitz had already collected several million more than it paid. View "Weitz Co. v. Lexington Ins. Co." on Justia Law

The Eleventh Circuit Court of Appeals certified a question of law to the Georgia Supreme Court. The certified question arose out of a declaratory judgment action related to underinsured motorist (“UIM”) coverage under a commercial auto insurance policy issued by FCCI Insurance Co. (“FCCI”). The litigation was the result of a 2011 collision between a McLendon Enterprises, Inc. truck driven by McLendon employee Brooks Mitchell, with passengers Elijah Profit, III and Bobby Mitchell (“Bobby”), and an Evans County school bus driven by John Haartje. Profit, Bobby, and Mitchell claimed injuries as a result of the collision. In May 2013, Mitchell filed suit in state court against Haartje and the Evans County Board of Education to recover for his alleged damages. Mitchell served FCCI as McLendon's uninsured motorist (UM) carrier. At the time of the collision, the School District had an insurance policy with GSBA Risk Management Services, under whose policy, paid out the $1,000,000 liability limits for damages related to the collision. It settled with Profit and Bobby for $350,000 combined and agreed to pay Mitchell the remaining $650,000 in exchange for a limited liability release, thereby exhausting its $1,000,000 liability limits. Mitchell filed for UM benefits from FCCI. FCCI denied liability on the basis of the at-fault driver's statutory immunity. The question certified centered on whether an insured party could recover under an uninsured-motorist insurance policy providing that the insurer will pay sums “the insured is legally entitled to recover as compensatory damages from the owner or driver of an uninsured motor vehicle” despite the partial sovereign immunity of the tortfeasor. The Georgia Supreme Court answered the question in the affirmative. View "FCCI Insurance Co. v. McLendon Enterprises, Inc." on Justia Law

Plaintiffs, former police officers and firefighters employed by local public agencies, filed suit alleging that CalPERS's failure to pay enhanced retirement benefits under the Public Employees' Retirement Law (PERL), Gov. Code section 20000 et seq., gave rise to a variety of causes of action. In these consolidated appeals, the court affirmed in part and concluded that neither the PERL nor plaintiffs' contracts entitle plaintiffs to the additional retirement benefits they seek and therefore, their causes of action for breach of statutory duty and breach of contract fail as a matter of law. Further, plaintiffs' causes of action for constitutional torts also fail because, as a matter of law, CalPERS's interpretation of the applicable statutory provisions does not deny plaintiffs due process or equal protection of law and does not effect an unconstitutional impairment of contract. The court reversed, however, as to the causes of action for rescission and breach of fiduciary duty where plaintiffs' pleading was sufficient to survive demurrer and therefore demurrer should have been overruled as to these causes of action. In this case, plaintiffs alleged that CalPERS failed to disclose the potential loss of the value of purchased service credit if plaintiffs suffered disability - a disclosure that CalPERS, as a fiduciary, is alleged to have been required to make. View "Marzec v. CalPERS" on Justia Law

In 2001, representatives from the Moody Bible Institute of Chicago and Sysix Financial signed a master agreement, laying the groundwork for future leases of equipment from Sysix to Moody. In 2008, two lease schedules for computer items were executed; they appeared to have been signed by Moody’s vice president and Sysix’s president. Sysix assigned its interest in both leases to Rockwell, which acquired loans from PNB to finance the leases. PNB procured indemnification coverage for those loans from RLI in the form of a financial institution bond. Sysix’s president had forged the signature of Moody’s vice president on both lease schedules. Moody never agreed to either schedule nor did it ever receive any of the promised equipment. PNB notified RLI of its potential loss, but PNB itself soon went under. As receiver for PNB, the FDIC sued RLI. The district court granted summary judgment in FDIC’s favor. The Seventh Circuit affirmed, finding that the plain language of the bond covered FDIC’s losses The Financial Institutions Reform Recovery and Enforcement Act limitations period applies,12 U.S.C. 1821(d)(14), so the suit was timely. View "Fed. Deposit Ins. Corp. v. RLI Ins. Co." on Justia Law

Arch Specialty Insurance Company appealed the grant of summary judgment in favor of Amerisure Mutual Insurance Company. In 2006, Amerisure issued a Texas Commercial Package Policy to Admiral Glass & Mirror Co. The policy afforded coverage in excess of any coverage afforded by a controlled insurance program policy. Arch issued an Owner Controlled Insurance Program (“OCIP”) policy to Endeavor Highrise, LP and its contractors and subcontractors for bodily injury and property damage arising out of construction of the Endeavor Highrise. Admiral was a subcontractor insured under the OCIP policy. Endeavor sued Admiral and others for faulty work. Amerisure tendered the lawsuit to Arch as the primary insurer. Prior to Arch accepting the defense, Amerisure incurred $23,879.27 in defense fees. In April 2012, Arch withdrew from defense of the Endeavor lawsuit asserting that attorneys’ fees, defense costs, and settlements of $2,000,000.00 from defending Admiral and other subcontractor defendants exhausted policy limits. Amerisure took over the defense and incurred additional fees and costs of $114,957.14 before settling the claims against Admiral. In total, Arch paid a settlement of $1,555,000.00 and defense costs of $159,543.15 under the general coverage limit of the OCIP, and paid settlements totaling $1,472,032.61 and defense costs of $527,967.36 under the products-completed operations coverage of the OCIP policy. Amerisure sued Arch in Texas state court for breach of contract, contending that Arch wrongfully refused to defend and indemnify Admiral. Amerisure argued on appeal that the term “expenses” in the Supplementary Payments provision did not include attorneys’ fees and other costs of defense. It also argued that, even if “expenses” includes defense costs, the effect of the statement “All other terms and conditions of this Policy remain unchanged” read together with the language that the duty to defend expires when “we have used up the [policy limits] in the payment of judgments or settlements” means that the policy limits are eroded only by payment of “judgments or settlements,” not defense costs. For its part, Arch argued that “expenses” included defense costs and that the endorsement controlled over any contrary language such that it converts this policy into an eroding policy. The Fifth Circuit agreed with Arch, concluding that the endorsement transformed the policy into an “eroding limits” policy. The Court affirmed the district court’s judgment regarding the duty to indemnify, reversed the district court’s judgment regarding the duty to defend, and rendered judgment for Arch. View "Amerisure Mutual Ins. Co. v. Arch Specialty Ins. Co." on Justia Law

Blackstone International, Ltd. was insured by Insurers for commercial general liability insurance. The policy included coverage for personal advertising injury liability. Blackstone was sued for breach of contract, among other causes of action, after disputes arose regarding a joint business venture to market and sell lighting products. Blackstone requested coverage and litigation defense under the personal and advertising injury provisions of the policy. Insurers filed a complaint for declaratory judgment seeking a judgment that they had no duty to defend the claims because the complaint did not allege that Blackstone had engaged in advertising, that the plaintiff had suffered an advertising injury, or that there was any causal connection between the plaintiff’s claimed damages and any advertising conducted by Blackstone. The circuit court entered summary judgment for Insurers. The intermediate appellate court reversed. The Court of Appeals reversed, holding that Insurer had no duty to defend Blackstone where Blackstone did not show an advertising injury suffered by the plaintiff. View "Md. Cas. Co. v. Blackwell Int'l Ltd." on Justia Law

Piedmont Office Realty Trust, Inc. purchased two insurance policies: a primary policy issued by Liberty Surplus Insurance Company and an excess coverage policy issued by XL Specialty Insurance Company ("XL"). The excess policy provided that XL will only pay for a "loss" which Piedmont became "legally obligated to pay as a result of a securities claim." The policy also contains a "consent to settle" clause. In addition, the policy contains a "no action" clause which read: "No action shall be taken against the insurer unless, as a condition precedent thereto, there shall have been full compliance with all of the terms of this policy, and the amount of the insureds’ obligation to pay shall have been finally determined either by judgment against the insureds after actual trial, or by written agreement of the insureds, the claimant and the insurer." Piedmont was named as a defendant in a federal securities class action suit in which the plaintiffs sought damages exceeding $150 million. Relatively early in the litigation, Piedmont moved for summary judgment. The district court denied Piedmont’s motion. Thereafter, following years of discovery and litigation, Piedmont renewed its summary judgment motion. The district court granted the renewed motion and dismissed the class action suit. Plaintiffs appealed. While the plaintiffs’ appeal was pending, plaintiffs and Piedmont agreed to mediate plaintiffs’ claim. By that time, Piedmont had already exhausted its coverage limit under its primary policy and another $4 million of its excess policy simply by defending itself. Anticipating a settlement with plaintiffs, Piedmont sought XL’s consent to settle the claim for the remaining $6 million under the excess policy. XL agreed to contribute $1 million towards the settlement, but no more. Without further notice to XL and without obtaining XL’s consent, Piedmont agreed to settle the underlying lawsuit with plaintiffs for $4.9 million. The district court approved the settlement and Piedmont demanded XL provide coverage for the full settlement amount. XL refused. Piedmont filed suit against XL for breach of contract and bad faith failure to settle. XL moved to dismiss the complaint; the district court granted XL’s motion; and Piedmont appealed. The 11th Circuit certified three questions to the Georgia Supreme Court: (1) Under the facts of this case, was Piedmont "legally obligated to pay" the $4.9 million settlement amount, for purposes of qualifying for insurance coverage under the Excess Policy?; (2) In a case like this one, when an insurance contract contains a "consent-to-settle" clause that provides expressly that the insurer's consent "shall not be unreasonably withheld," can a court determine, as a matter of law, that an insured who seeks (but fails) to obtain the insurer's consent before settling is flatly barred from bringing suit for breach of contract or for bad-faith failure to settle?; and (3) In this case, under Georgia law, was Piedmont's complaint dismissed properly? The Georgia Supreme Court responded: absent XL’s consent to the settlement, under the terms of the policy, Piedmont could not sue XL for bad faith refusal to settle the underlying lawsuit in the absence of a judgment against Piedmont after an actual trial. It follows that the district court did not err in dismissing Piedmont’s complaint. View "Piedmont Realty Office Trust v. XL Specialty Insurance Co." on Justia Law

Customers of a securities firm made claims against that firm based on real estate investments the firm’s broker-dealers recommended. An entity that had an interest in and operated each of the real estate investments filed for bankruptcy, and at least some of the real estate investments became debtors in that bankruptcy proceeding. The appointed examiner in the bankruptcy proceeding found that the entity was engaged in a fraudulent “Ponzi scheme.” When the securities firm applied for professional liability insurance, it disclosed one of the customer claims but not the facts that would support other potential customer claims arising out of investments through the same entity as that involved in the disclosed claim. The insurer refused to defend against undisclosed claims because the policy’s application included an exclusion for nondisclosure of facts that might lead to a claim. The court of appeal affirmed judgment in favor of the insurer: There was no insurance coverage because all of the undisclosed claims arose out of the same events as the disclosed claim. The securities firm was aware of facts and circumstances that might result in a claim or claims being made against it, which awareness it was required to disclose. View "Crown Capital Secs., L.P. v. Endurance Am. Specialty Ins. Co." on Justia Law

Plaintiff bought the property in 2007. The last tenants moved out in 2010. Gas and electric utilities were turned off. In 2011, Plaintiff submitted a claim to Fire Insurance Exchange for a fire at the property. Exchange retained a fire investigator, who reported, “it appears the fire may have been initiated as the result of an uncontrolled warming fire started by an unauthorized inhabitant. Signs of possible habitation were present and the relatively isolated location would permit this. … firewood … and the mattress next to the large hole in the floor also supports this theory.” The property did not have a fireplace. The claims adjuster concluded “Likely transient in house and warming fire got out of hand.” The policy did not “cover direct or indirect loss from: . . . Vandalism or Malicious Mischief, breakage of glass and safety glazing materials if the dwelling has been vacant for more than 30 consecutive days just before the loss.” Vandalism is not defined in the policy. After denial of the claim, Plaintiff filed a complaint for breach of contract and insurance bad faith. The trial court granted Exchange summary adjudication. The court of appeal reversed, finding that the exclusion did not apply. View "Ong v. Fire Ins. Exch." on Justia Law

Insurer Cincinnati Specialty Underwriters Insurance Company appealed a trial court's order granting summary judgment to defendants Energy Wise, Inc. and Michael and Shirley Uhler in this declaratory-judgment action. Energy Wise was a Vermont corporation that specialized in insulating buildings and homes. It purchased a commercial general liability (CGL) policy from insurer, effective March 1, 2010 to March 1, 2011. In late 2010, Energy Wise installed spray-foam insulation at the Shrewsbury Mountain School. A school employee, Shirley Uhler, and her husband later filed suit against Energy Wise. Ms. Uhler asserted that she was "exposed to and encountered airborne chemicals and airborne residues" from the spray-foam insulation and suffered bodily injury as a result. The Uhlers raised claims of negligence, res ipsa loquitur, and loss of consortium. Energy Wise requested coverage under its CGL policy, and insurer agreed to defend Energy Wise under a bilateral reservation of rights. In September 2012, insurer filed a complaint for declaratory judgment, asserting that its policy did not cover the claims at issue. Insurer cited the "Total Pollution Exclusion Endorsement" in its policy, which excluded coverage for "[b]odily injury . . . [that] would not have occurred in whole or in part but for the actual, alleged or threatened discharge, dispersal, seepage, migration, release or escape of ‘pollutants' at any time." Insurer argued that the court should have granted summary judgment in its favor because the "total pollution exclusion" in its policy plainly and unambiguously precludes coverage in this case. After review, the Supreme Court agreed with insurer, and therefore reversed the trial court's decision and remanded with instructions to enter judgment in insurer's favor. View "Cincinnati Specialty Underwriters Ins. Co. v. Energy Wise Homes, Inc." on Justia Law