Justia U.S. 7th Circuit Court of Appeals Opinion Summaries

Mashallah sells handcrafted jewelry at its Chicago store. Ranalli’s operates a bar and restaurant. Both purchased West Bend all-risk commercial property insurance policies. In March 2020, in response to the COVID-19 pandemic, Illinois Governor Pritzker ordered all individuals to stay at home except to perform specified “essential activities” and ordered “non-essential” businesses to cease all but minimum operations. Restaurants were considered essential businesses and permitted to sell food solely for off-premises consumption. Ranalli’s was restricted to filling takeout and delivery orders. Mashallah was not classified as an essential business and had to cease its retail activities. Both businesses sustained heavy financial losses. Their West Bend policies are materially identical. West Bend agreed to pay for actual business income lost and necessary extra expenses incurred if they were caused by “direct physical loss of or damage to” the businesses’ properties. Both policies contain virus exclusions. West Bend denied their claims.The Seventh Circuit affirmed the dismissal of contract and bad faith claims and a claim that West Bend’s retention of full premiums—despite decreased risks occasioned by the reduction in insureds’ business operations—constituted unjust enrichment, requiring rebates. The virus exclusions barred coverage for the purported losses and expenses and the businesses failed to allege viable legal bases for rebate of premiums. View "Mashallah, Inc v. West Bend Mutual Insurance Co." on Justia Law

In March 2020, the Dallas County government issued orders restricting the operations of local businesses in light of the COVID-19 pandemic. Hotels were permitted to continue to provide lodging, and delivery and take-out food services, subject to social-distancing rules. Crescent owns the Dallas Ritz-Carlton hotel, which offers guest rooms, a restaurant and bar, general event space, a salon, spa, and fitness center. Crescent alleges that COVID-19 rendered the air in the hotel unsafe and diminished the functional space available, causing significant losses of income. Crescent also alleges that it incurred expenses to install plexiglass partitions and hand sanitizer stations, to display signs throughout the hotel, and to move furniture to permit social distancing. Crescent’s Zurich insurance policy requires “direct physical loss or damage” to covered property and includes an exclusion for losses attributable to any communicable disease, including viruses, and a microorganism exclusion, which bars coverage for losses “directly or indirectly arising out of or relating to mold, mildew, fungus, spores or other microorganisms of any type, nature, or description, including but not limited to any substance whose presence poses an actual or potential threat to human health.”The Seventh Circuit affirmed the dismissal of Crescent’s suit against Zurich. The phrase “direct physical loss or damage” requires either “a permanent [dispossession] of the property due to a physical change … or physical injury to the property requiring repair.” The microorganism exclusion independently bars coverage for the hotel’s claimed losses. View "Crescent Plaza Hotel Owner, L.P. v. Zurich American Insurance Co." on Justia Law

In March 2020, in response to the rapidly expanding COVID-19 pandemic, Illinois Governor Pritzker issued an order mandating the temporary closure to the public of restaurants, bars, and movie theaters; a subsequent order required all non-essential businesses to shut down partially and temporarily. Bradley operates a Quality Inn & Suites with a restaurant, bar, and general event space and suspended in-person dining at the restaurant and bar, and canceled previously scheduled weddings and meetings.Bradley’s general business property insurance policy from Aspen requires “direct physical loss of or damage to” covered property; its loss of use exclusion bars coverage for “loss or damage caused by or resulting from … [d]elay, loss of use or loss of market” and another exclusion bars coverage for “loss or damage caused directly or indirectly by … [t]he enforcement of or compliance with any ordinance or law: (1) Regulating the construction, use or repair of any property; or (2) Requiring the tearing down of any property.”Affirming the district court, the Seventh Circuit held that the term “direct physical loss of or damage to” property does not apply to a business’s loss of use of the property without any physical alteration. The loss of use exclusion and the ordinance or law exclusion in this policy provide separate bars to coverage. View "Bradley Hotel Corp. v. Aspen Speciality Insurance Co." on Justia Law

On March 15, 2020, in response to the rapidly expanding COVID-19 pandemic, Illinois Governor Pritzker issued an order mandating the temporary closure to the public of restaurants, bars, and movie theaters. On March 20, another order required all non-essential businesses to shut down partially and temporarily. As a result of these orders, the plaintiffs (businesses) were each required to close or dramatically scale back operations. The businesses held materially identical commercial-property insurance policies, issued by Cincinnati Insurance Company, providing coverage for income losses sustained on account of a suspension of operations caused by “direct physical loss” to covered property. The policies also provided coverage for income losses sustained as a result of an action of civil authority prohibiting access to covered property, when such action was taken in response to “direct physical loss” suffered by other property. Cincinnati denied their claims.The Seventh Circuit affirmed the dismissal of each suit. The businesses did not adequately allege that either the virus that causes COVID-19, SARS-CoV-2, or the resulting closure orders caused “direct physical loss” to property; the loss of use, unaccompanied by any physical alteration to property, does not constitute “direct physical loss” under the relevant insurance policies. View "Sandy Point Dental, P.C. v. Cincinnati Insurance Co." on Justia Law

Stergiadis, Dimas, and Theo formed 1600 South LLC, executed an operating agreement, purchased land on which to build a fruit market, and began construction. The 2008 recession stopped construction and eventually led to the LLC’s 2009 dissolution. The partners disagreed about whether they impliedly agreed to equalize their capital contributions. The operating agreement provided that the three each held a one-third membership interest in the LLC; each member agreed to make an initial capital contribution on the date of execution but the amount was left blank. In 2008 Stergiadis sued Dimas in state court seeking to equalize the capital contributions. Dimas filed for bankruptcy, triggering the automatic stay. Dimas ultimately filed seven such petitions and received a discharge in 2016. The U.S. Trustee moved to reopen the bankruptcy to recover the value of an undisclosed property. The bankruptcy court agreed. Stergiadis filed a proof of claim in Dimas’s reopened bankruptcy seeking the same amount he was seeking in state court. The partners disputed the amounts of their respective contributions.The bankruptcy court allowed Stergiadis’s claim, awarding $618,974, finding that the members had an implied equalization agreement. The district court and Seventh Circuit affirmed, rejecting an argument that the LLC’s operating agreement precluded an implied equalization contract. The bankruptcy court properly relied on extrinsic evidence in finding such a contract. View "Dimas v. Stergiadis" on Justia Law

Healthcare revenue cycle management contractors manage billing and behind-the-scenes aspects of patient care, from pre-registering patients to reviewing and approving documentation upon release. Reid Hospital contracted with Dell, a revenue cycle management contractor. Their contract limited both sides’ damages in a breach of contract action in the absence of willful misconduct or gross negligence. Dell sold much of its portfolio to Conifer in 2012 while Dell was still losing money on the Reid contract. Conifer began reducing staff and neglecting duties; there was a slowdown throughout the revenue-management cycle and in processing patients’ discharge forms, leading to longer hospital stays that third-party payors refused to reimburse fully. After two years, Reid took its revenue operation back in-house. Reid's consultant found significant errors in Conifer’s work. Reid sued for breach of contract, claiming that Conifer’s actions caused the hospital to lose tens of millions of dollars. The court granted Conifer summary judgment, reading the contract as defining all claims for lost revenue as claims for “consequential damages,” prohibited absent “willful misconduct.”The Seventh Circuit reversed. Even if lost revenue is often considered consequential, this was a contract for revenue collection services and did not define all lost revenue as an indirect result of any breach. Lost revenue would have been the direct and expected result of Conifer’s failure to collect and process that revenue as required under the contract. The parties did not intend to insulate Conifer entirely from damages. View "Reid Hospital and Health Care, Inc. v. Conifer Revenue Cycle Solutions, LLC" on Justia Law

The Zylstras purchased their RV from a non-party dealership for $91,559.15. A one-year warranty covered portions of the RV manufactured by DRV. “Written notice of defects subject to warranty coverage must be given to the selling dealer or DRV … within 30 days after the defect is discovered.” The owner is required to take the RV to the selling dealer or factory for repair. Each DRV vehicle is custom-built for the purchaser. The Zylstras took the vehicle in for punch-list items and for warranty repairs. During a subsequent long trip, Zylstra discovered that the black waste tank valve was leaking and that sewage had been leaking into the insulation throughout the RV's underbelly. He could not find a DRV authorized dealer but an independent mobile technician came and completed the repair. After the leak, the Zylstras stopped using the RV out of concern for their health. They contend that it is not, and never has been, fit for its ordinary purpose of recreational use.They filed a complaint alleging breach of express and implied warranty, violation of the Magnuson-Moss Warranty Act (MMWA), and violation of state consumer protection laws. The Seventh Circuit affirmed summary judgment in favor of DRV. Even in the light most favorable to the Zylstras, DRV never had a reasonable opportunity to repair the defects as required under the warranty. View "Zylstra v. DRV, LLC" on Justia Law

Meinders offers chiropractic services. United provides or administers insurance plans nationwide. In 2006, Meinders became a “participating provider” with United to expand his customer base; he signed a provider agreement with ACN. which provided administrative and network management services for chiropractors, and had a preexisting master services agreement with United. The agreement allowed ACN, “in its sole discretion,” to “assign its rights, duties or obligations” under the agreement.“ The agreement stated that if a dispute arose, either party “may” submit the issue “to arbitration” and any arbitration decision would be “final and binding.”Meinders submitted claims for United-insured patients directly to United; United paid those claims. Those claims were submitted on United forms and if an explanation of benefits was requested, United provided it. Meinders confirmed a patient’s eligibility either through United’s website or through a United phone number. ACN became a wholly-owned subsidiary of United.In 2013, United sent a fax to Meinders, who believed that United had violated the Telephone Consumer Protection Act and filed suit. After remands, the district court held that “United … assumed the material obligations of ACN …, a wholly-owned subsidiary of United, under the Provider Agreement, which authorizes United to enforce the arbitration clause.” The Third Circuit affirmed. View "Dr. Robert L. Meinders, D.C., Ltd. v. United HealthCare Services, Inc." on Justia Law

Gradei’s withdrew from a multi-employer pension plan, asserting that it had ceased all operations covered by the governing multi-employer collective bargaining agreement and was no longer required to contribute to the Fund, which sought to collect $221,932.55 in withdrawal liability. Gradei’s did not respond to payment demands and filed for bankruptcy. The Fund sued the Pitellos (Gradei’s owners) and another corporation owned by the Pitellos (GX), on the theory that they were businesses under common control. The district court found that Gradei’s and GX were conducting business rent-free on property owned by the Pitellos, which was enough to establish common control.The Seventh Circuit affirmed. Under the Employee Retirement Income Security Act, 29 U.S.C. 1381(a), 1404(a) withdrawal liability applies to the withdrawing employer and to “all trades or businesses ... under common control” with that employer. The court rejected Pitello’s argument that the property was only a passive investment. It is possible to rebut the presumption that leasing property to a withdrawing employer is a business but the Pitellos failed to do that. The court noted the economic equivalence between a return on investment in the form of rent collection and return on investment in the form of dividends or salaries made possible by the absence of any rent obligation. The land is part of the business. View "Local 705 International Brotherhood of Teamsters Pension Fund v. Pitello" on Justia Law

Companies that tow or recycle used cars alleged that Milwaukee and its subcontractor, engaged in anticompetitive behavior to self-allocate towing services and abandoned vehicles, a primary input in the scrap metal recycling business. They alleged that an exclusive contract the city entered into with one of the area’s largest recycling providers, Miller Compressing, violated the Sherman Act, 15 U.S.C. 1, and that the contract provided direct evidence of an agreement to restrain trade. They cited laws that require a city-issued license to tow vehicles from certain areas, that obligate towing companies to provide various notices, and that cap maximum charges imposed on vehicle owners who have illegally parked or abandoned their vehicles, as having been enacted to squeeze them out of the market.The Seventh Circuit affirmed the dismissal of the suit. The arrangement between the city and Miller is not per se unreasonable on the basis of horizontal price-fixing. The court also rejected a claim of “bid-rigging.” View "Always Towing & Recovery Inc. v. City of Milwaukee" on Justia Law