Justia Contracts Opinion Summaries

The Tenth Circuit Court of Appeals certified a question of Colorado law to the Colorado Supreme Court. An insurer issued a policy that provided directors and officers of a company liability coverage. The policy required the insured to give prompt notice of a claim, specifically, notice "as soon as practicable" after learning of the claim. The policy also required the insured to give notice of the claim by a date certain (not later than 60 days after the expiration of the policy). Near the end of the one-year policy, a company officer was sued for alleged misrepresentations he made during a merger. Unaware of the insurance policy, the officer defended himself against the suit. When he learned of the policy, approximately sixteen months after the policy had expired, he contacted the insurer. The underlying suit was settled. The officer then sued the insurer for denying coverage under the policy. The insurer removed the case to the federal district court, and then moved to dismiss on grounds that the officer's claim was untimely. The issue of Colorado law before the Tenth Circuit centered on the "notice-prejudice" rule to claims-made insurance policies: (1) whether the notice-prejudice rule applied to claims-made liability policies in general; and (2) if so, whether the rule applied to both types of notice requirements in those policies. The Colorado Court answered the certified questions more narrowly than originally presented because the parties agreed that the prompt notice requirement of the claims-made policy in this case was not at issue. The Colorado Court's analysis was restricted to the date-certain notice requirement. The Court held that the notice-prejudice rule did not apply to date-certain notice requirement in a claims-made insurance policy. In a claims-made policy, the date-certain notice defines the scope of coverage ("to excuse late notice in violation of such a requirement would rewrite a fundamental term of the insurance contract.") The Court reframed the certified questions as a single question: whether the notice-prejudice rule applies to the date-certain notice requirement of claims-made policies, to which the Colorado Court answered in the negative. View "Craft v. Phila. Indem. Ins. Co." on Justia Law

Belasco bought a new Manhattan Beach residence in 2004 from the builder (Wells). In 2006, Belasco filed a complaint with the Contractors State License Board, alleging construction defects. Belasco and Wells settled the dispute in 2006, with Wells paying $25,000 and Belasco executing a release and a Civil Code 15241 waiver of all known or unknown claims. In 2012, Belasco sued, based on an alleged roof defect discovered in 2011. The trial court entered summary judgment, finding the action barred by the settlement. The court of appeal affirmed, rejecting arguments that: the 2006 general release and waiver for patent construction defects is not a “reasonable release” of a subsequent claim for latent defects under section 929 and the Right to Repair Act (section 895); a reasonable release can only apply to a “particular violation” and not to a latent defect under section 945.5(f), and the 2006 settlement was too vague to be a valid; section 932 authorizes an action on “[s]ubsequently discovered claims of unmet standards;” public policy prohibits use of a general release and section 1542 waiver to bar a subsequent claim for latent residential construction defects; and a genuine issue of fact existed concerning fraud and negligence claims that would void the settlement under section 1668. View "Belasco v. Wells" on Justia Law

Sterling Development Group Three, LLC, and Sterling Development Group Eight, LLC, appealed a judgment dismissing their action against James Carlson to collect on two personal guarantees, and an order awarding Carlson costs and disbursements. In 1983, Carlson founded PRACS Institute, Ltd., a medical research facility which began operating in East Grand Forks, Minnesota. In 1999, Sterling Development Group Three entered into a 15-year lease agreement with PRACS for a building located in East Grand Forks. Carlson signed the lease agreement as the president of PRACS. Carlson also signed a personal guaranty. When PRACS expanded in 2004, Sterling Development Group Eight built an expansion to the Sterling Three building, and PRACS entered into a lease agreement with Sterling Eight for a term running simultaneously with the Sterling Three lease. Carlson signed a similar personal guaranty for the Sterling Eight lease. In January 2006, Carlson sold PRACS to Contract Research Solutions, Inc., which the parties refer to as Cetero. The Sterling companies consented to this "change of control." Carlson's daily involvement in PRACS ceased at that point. Carlson received Cetero stock in the sale and became a member of Cetero's seven-member board of directors. In 2010, Cetero suspended its East Grand Forks operations, but continued to pay rent to the Sterling companies. In the spring of 2012, Cetero filed for bankruptcy. The bankruptcy trustee eventually rejected the East Grand Forks Cetero leases with the Sterling companies and stopped paying rent. The Sterling companies then brought this action against Carlson to collect more than $600,000 for unpaid rent under his personal guarantees. Following a bench trial, the district court dismissed the action. The court found Carlson was exonerated from liability under the personal guarantees because the original lease agreements had been altered in three respects by the Sterling companies and Cetero or PRACS without Carlson's knowledge or consent. The Sterling companies argued on appeal to the Supreme Court that the district court erred in finding the original lease agreements were contractually altered without Carlson's knowledge or consent, resulting in exoneration of his personal guaranty obligations. Because the district court's finding that the principal's contractual obligations were altered without Carlson's knowledge or consent was not clearly erroneous, and the court did not abuse its discretion in awarding costs and disbursements, the Supreme Court affirmed the judgment and order. View "Sterling Development Group Three, LLC v. Carlson" on Justia Law

This case stemmed from a dispute over damage to a leased commercial space. The case was tried before a jury, which awarded plaintiff-landlord David Walsh, just under $11,000 in damages attributable to defendant-tenant Frank Cluba. Following the jury verdict, the trial court awarded Walsh over $44,000 in attorney's fees. Cluba appealed, arguing that the court erred by allowing Walsh to testify on the reasonableness of repair work done after Cluba vacated the property and by awarding Walsh an unreasonable amount of attorney's fees under the circumstances. Walsh cross-appealed, arguing that the court erred by dismissing his claims against defendant Good Stuff, Inc., the business that Cluba and his partner incorporated shortly after Cluba signed the initial lease of the subject property. Finding no reversible error, the Supreme Court affirmed. View "Walsh v. Cluba" on Justia Law

In 1999, Allstate reorganized its business and terminated the at-will employment contracts of about 6,200 sales agents, offering them conversion to independent contractor status; $5,000 and an economic interest in their accounts, to be sold to buyers approved by Allstate; severance pay equal to one year’s salary; or severance pay of 13 weeks’ pay. Employees who chose independent contractor status received a bonus of at least $5,000, were not required to repay any office-expense advances, and acquired transferable interests in their business two years after converting. All employees who chose not to convert and left the company were bound by noncompetition covenants in their original contracts. As a condition of becoming independent contractors, agents were required to sign a release waiving existing legal claims against Allstate. The Equal Employment Opportunity Commission sued, claiming that the company violated federal anti-retaliation laws. The district court reversed. The Third Circuit affirmed, noting the settled rule that employers can exchange consideration for releases of claims and that EEOC established neither protected activity nor an adverse action. View "Equal Emp't Opportunity Comm'n v. Allstate Ins. Co" on Justia Law

Travelers Home and Marine Insurance Company ("Travelers") appealed the grant of summary judgment in favor of Dianne and Martin Gray in the Grays' action arising from injuries Dianne suffered as the result of a motor-vehicle accident. In 2010, Lawana Coker and Dianne were involved in a motor-vehicle accident in Elmore County; Coker was without motor-vehicle insurance at the time of the accident. Two years later, the Grays filed in the trial court a three-count complaint naming as defendants Coker and Travelers and a fictitiously named defendant. Travelers answered the complaint, denying the material allegations therein and asserting certain affirmative defenses. Coker, however, failed to answer the complaint. In 2013, the Grays moved the trial court to enter a default judgment in their favor and against Coker, requesting that the trial court assess damages in the amount of $500,000 for Dianne and $50,000 for Martin. The Grays' motion requested no relief as to Travelers. Shortly thereafter, the Grays filed a new summary-judgment motion in which, for the first time, they sought relief against Travelers. The Grays did not base their summary judgment motion against Travelers on the ground that there was no genuine issue of fact as to whether tortious conduct by Coker caused them to suffer injury. Instead, they based their summary-judgment motion against Travelers solely on the fact that they previously had obtained a default judgment against Coker. In this regard, the Grays argued that they were entitled to a judgment as a matter of law against Travelers because, they said, "Travelers as a party defendant had notice and adequate opportunity to intervene and present any defenses and arguments necessary to protect its position with respect to the entry of or the amount of damages in the Default Judgment. By failing to do so, Defendant Travelers legally is bound by the judgment." After review, the Supreme Court reversed: because Travelers as the Grays' UM carrier, was not bound by the default judgment entered against Coker, Travelers was not required to submit evidence in opposition to a motion for a summary judgment that relied solely on that default judgment. Consequently, the trial court erred in entering a summary judgment in favor of the Grays and against Travelers. View "Travelers Home & Marine Ins. Co. v. Gray" on Justia Law

A Milwaukee County General Ordinance prospectively eliminated Medicare Part B premium reimbursement upon retirement for employees who did not retire before retirement dates established by Milwaukee County. Plaintiffs were of retirement age, had fifteen years of credited service to the County, but did not retire by the dates established in the ordinance. Plaintiffs claimed that the ordinance impaired their vested contract right to reimbursement of Medicare Part B premiums when they retire. The court of appeals granted summary judgment to Milwaukee County. The Supreme Court affirmed, holding (1) the County did not abrogate a vested contract right when it prospectively modified a health insurance benefit it offered for employees who had not yet retired; (2) County employees have a vested contract right to Medicare Part B premium reimbursement when they fulfill all three criteria for its payment, including actual retirement; and (3) because Plaintiffs did not meet all three criteria in this case, they did not fulfill the requirements necessary to establish a vested contract right to reimbursement. View "Wis. Fed’n of Nurses and Health Prof’ls v. Milwaukee County" on Justia Law

Give Kids the World, Inc. is a non-profit organization that provides free vacations to seriously ill children and their families at its resort village. Stacy and Eric Sanislo were vacationing at the village with their seriously ill child when Stacy sustained injuries. The Sanislos brought this negligence action against Give Kids the World. Give Kids the World moved for summary judgment on its affirmative defense that the Sanislos signed releases that precluded an action for negligence. The trial court denied the motion. After a jury trial, judgment was entered in favor of the Sanislos. The Fifth District Court of Appeal reversed the trial court’s denial of summary judgment, concluding that an exculpatory clause in the liability release form signed by the Sanislos was effective to bar the negligence action despite the absence of express language referring to release of Give Kids the World for its own negligence or negligent acts. The Supreme Court approved of the Fifth District’s decision, holding that the absence of the terms “negligence” or “negligent acts” in an exculpatory clause does not render the agreement per se ineffective to bar a negligence action. View "Sanislo v. Give Kids The World, Inc." on Justia Law

In 2004, K-Con entered into a contract with the federal government to construct a Coast Guard building in Port Huron Michigan for $582,641. Once K-Con finished, the government imposed liquidated damages of $109,554 for tardiness of 186 days in completion. KCon sued, seeking remission of the liquidated damages on two grounds—that the contract’s liquidated-damages clause was unenforceable and that KCon was entitled to an extension of the completion date. KCon also requested additional compensation based on work performed in response to government requests that K-Con alleges amounted to contract changes. The Court of Federal Claims held that the contract’s liquidated damages clause was enforceable; that K-Con did not comply with the written-notice precondition for invoking the contract clause governing changes; and that K-Con’s claim for an extension on the completion date must be dismissed for lack of jurisdiction. The Federal Circuit affirmed. K-Con failed to comply with the changes clause, and its after-the-fact speculations about what would have happened had it complied do not create a genuine dispute of material fact regarding whether it should be excused for its failure. View "K-Con Bldg. Sys., Inc. v. United States" on Justia Law

During a highway paving project a storm caused recently applied primer to emulsify in rainwater. The oil splashed onto passing vehicles, causing damage. The vehicle owners brought claims against the State, which the State paid. A.M. Welles, Inc. (Welles), the general contractor on the job, reimbursed the State for what it paid to the vehicle owners. The State then sued Liberty Mutual Fire Insurance Co. (Liberty), the insurer for the job, seeking indemnification for the costs that Welles did not cover. Welles, in turn, sued the subcontractors for the project, Montana Materials, Inc., RSJ, Inc., and GLJ, Inc. (collectively, “Jensen”), seeking indemnification under the subcontract. The district court granted summary judgment for Jensen on Welles’s indemnification claim and dismissed the State’s action against Liberty for failure to prosecute. The Supreme Court vacated and remanded, holding that the district court (1) erred in denying Welles’s motion for summary judgment, as Welles was entitled to indemnification under the subcontract; and (2) abused its discretion by dismissing the State’s action against Liberty for failure to prosecute. Remanded. View "A.M. Welles, Inc. v. Mont. Materials, Inc." on Justia Law