Articles Posted in Insurance Law

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Methodist and Saint Francis are the two largest hospitals in Peoria, Illinois. Saint Francis is considerably larger and more profitable. Methodist filed suit, charging Saint Francis with violating the Sherman Act by entering into exclusive contracts with insurance companies, covering more than half of all commercially-insured patients in the area. Methodist argued that it could not obtain a sufficiently high volume of patients to enable it to invest in improvements. The Seventh Circuit affirmed summary judgment in favor of Saint Francis, noting that health insurers regard Saint Francis as a “must have” hospital, because it provides certain services that the other hospitals in the area do not provide, such as solid-organ transplants, neonatal intensive care, and a Level 1 trauma center. The contracts are a form of requirements contract; an insurance company may get better rates from a hospital by agreeing to an exclusive contract, which will drive more business to the hospital. The contracts are of fixed duration; when they terminate, the insurance companies are free to contract with other hospitals. Competition-for-the-contract is protected by the antitrust laws and is common. The court noted that none of the other four area hospitals had joined the case and the Department of Justice declined to file a case. View "Methodist Health Services Corp v. OSF Healthcare System" on Justia Law

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Seventh Circuit affirms award of permanent disability benefits for fibromyalgia. Kennedy was hired by Lilly in 1982 and became an executive director in Lilly’s human resources division, with a monthly salary of $25,011. In 2008, she quit work because of disabling symptoms of fibromyalgia. She was approved for monthly benefits of $18,972 under the company’s Extended Disability Benefits plan. Three and a half years later her benefits were terminated. Kennedy sued under the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1001. The Seventh Circuit affirmed summary judgment in favor of Kennedy, with an award of $537,843.81 in past benefits and prejudgment interest and reinstatement of benefits. The court characterized Lilly’s evidence as “a hodgepodge” and noted that Lilly did not indicate what kind of work Kennedy would be able to perform. Kennedy’s general internist testified that she is permanently disabled, basing this opinion on his diagnoses of her nonarticular rheumatism (musculoskeletal aches and pains not traceable to joints), fibromyalgia, sleep disorder, depression, irritable bowel syndrome, restless leg syndrome, and her symptoms of pain and fatigue. Her rheumatologist concurred. The court noted the company’s conflict of interest, being both the initial adjudicator of an employee’s benefits claim and the payor of those benefits. View "Kennedy v. Lilly Extended Disability Plan" on Justia Law

Posted in: ERISA, Insurance Law

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In 2008, Chicago Abstract was sued in state court by a title insurance company and financial firms. Chicago Abstract tendered these lawsuits to its “errors and omissions” liability insurer, TIAC. TIAC could defend without reservation; defend while reserving its rights; seek a declaratory judgment concerning the scope of coverage; or decline to defend. Under Illinois law, when a liability insurer unjustifiably refuses to defend, the insurer is estopped from later asserting policy defenses to coverage. TIAC declined to defend. Years passed without further communications between TIAC and its insured. In 2014, a state court plaintiff filed an amended complaint. An attorney appointed by TIAC made an appearance in that case. TIAC then sought a declaration that coverage was unavailable based on policy exclusions. Chicago Abstract did not defend; the company had been involuntarily dissolved. Plaintiffs from the state-court litigation against Chicago Abstract appeared in the federal case as defendants. The Seventh Circuit affirmed judgment in favor of those defendants. The undisputed facts show that TIAC breached its duty to defend in the underlying litigation and is estopped from asserting “at this very late stage” any policy defenses to coverage that might have been available if TIAC had made a different choice when the complaints were first tendered. View "Title Industry Assurance Co., R.R.G. v. First American Title Insurance Co." on Justia Law

Posted in: Insurance Law

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Prather, age 31, tore his Achilles tendon. His surgery to repair the injury was uneventful. He returned to work. Four days later he collapsed, went into cardiopulmonary arrest, and died as a result of a blood clot in the injured leg that had traveled to a lung. Prather’s widow applied for benefits under his Sun Life group insurance policy (29 U.S.C. 1132(a)(1)), which limited coverage to “bodily injuries ... that result directly from an accident and independently of all other causes.” Sun Life refused to pay. The Seventh Circuit ruled in favor of Prather’s widow, noting that deep vein thrombosis and pulmonary embolism are risks of surgery, but that even with conservative treatment, such as immobilization of the affected limb, the insured had an enhanced risk of a blood clot. The forensic pathologist who conducted a post-mortem examination of Prather did not attribute his death to the surgery. Prather’s widow then sought attorneys’ fees of $37,170 under ERISA, 29 U.S.C. 1132(g)(1). The Seventh Circuit awarded $30,380, stating that there is no doubt of Sun Life’s culpability or of its ability to pay without jeopardizing its existence; the award of attorneys’ fees is likely to give other insurance companies in comparable cases pause; and a comparison of the relative merits of the contending parties clearly favors the plaintiff. View "Prather v. Sun Life Financial Insurance Co." on Justia Law

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In 1999, the Dribbens purchased a home from the Favres on 42 acres in a four‐parcel development near Saint Louis, Missouri. Davidson represented the Favres in that purchase. Davidson was also one of the developers and owned one parcel. The development has a 30‐acre artificial lake; the dam creating that lake is located on the Dribbens parcel. In a 2006 lawsuit, the Dribbens alleged that Davidson failed to disclose that the original owners/developers had never obtained a permit from the Illinois Department of Natural Resources, which amounted to fraudulent concealment and consumer fraud. Davidson tendered the suit to Diamond State, which had issued her professional liability errors and omissions policy. In 2011, the Dribbens filed a second suit, alleging a pattern of harassment, intimidation, and interference with the Dribbens’ property rights by the Davidsons. Davidson tendered the 2011 lawsuit to Madison Mutual, which had provided her homeowner’s insurance and umbrella coverage. Diamond State refused to supply a defense to the 2011 litigation. Madison Mutual sought a declaratory judgment that Diamond State has breached its duty to defend in the 2011 suit and had a duty to reimburse Madison Mutual. The Seventh Circuit affirmed summary judgment in favor of Diamond State. The 2011 suit does not potentially assert a claim that is plausibly within the Diamond State professional liability coverage. View "Madison Mutual Insurance Co. v. Diamond State Insurance Co." on Justia Law

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Berry worked for Telamon from 2005-2011, under Consulting Agreements between Telamon and Berry’s one-woman company. Berry’s responsibilities expanded beyond those described in the Agreements. She became Telamon’s senior regional manager. She oversaw Telamon’s AT&T Asset Recovery Program, to remove old telecommunications equipment from AT&T sites and sell it to salvagers. Berry removed the equipment and sold it, but kept the profits. The company discovered the scheme in 2011; it had suffered $5.2 million in losses. Berry was convicted of wire fraud and tax evasion; she was sentenced to 60 months’ imprisonment and ordered to pay $3,440,885 in restitution. Telamon sought compensation under its Travelers crime insurance policy and its Charter Oak general commercial insurance policy. Travelers denied coverage because Berry was not, legally, an employee; Charter denied coverage because she was, functionally, an employee. Telamon sued, alleging bad faith, then unsuccessfully sought permission to add claims based on older policies. The request came a year after the deadline for amending pleadings. Telamon filed suit in state court, raising essentially the same claims. The insurers again removed; the district court dismissed the suit as an impermissible attempt to split claims. The Seventh Circuit affirmed both decisions, noting that none of the four ways of establishing bad faith under Indiana law exist in this case. View "Telamon Corporation v. Charter Oak Fire Insurance Co" on Justia Law

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A subcontractor, CSC, installed the windows defectively at Metro's Chicago condominium. The building sustained significant water damage following a 2006 storm. The unit owners incurred personal-property damage. In 2009 Metro sued the developer, which was insolvent; in 2013 it added a claim against CSC for breach of the implied warranty of habitability. Metro and CSC reached a settlement. Metro dismissed its state court lawsuit; CSC assigned to Metro CSC’s rights to up to $700,000 of insurance coverage from Allied, arising out of the claims asserted against CSC in the lawsuit. The only pending claim against CSC in that lawsuit was for breach of the implied warranty of habitability. The settlement specified that it was not intended to compensate for the cost of repairing or replacing CSC’s defectively installed windows, but rather for the resultant damage to the remaining parts of the condominium and to the unit owners’ personal property. Allied obtained a declaratory judgment that it was not liable under CSC’s standard commercial general liability policy. The Seventh Circuit affirmed. The measure of damages for a breach of the implied warranty of habitability is the cost of repairing the “defective conditions,” here the defectively installed windows. Illinois courts have concluded that CGL policies like Allied’s do not cover the cost of repairing the insured’s defectively completed work; the Allied policy specifically excludes the cost of repairing CSC’s defective work. View "Allied Property & Casualty Insurance Co. v. Metro North Condominium Association" on Justia Law

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The Indianapolis Airport Authority sued Travelers Property Casualty over Travelers’ partial denial of a claim for coverage arising from an airport construction accident that occurred in 2007. On motions for summary judgment, the district court interpreted the insurance contract in favor of Travelers on several issues, narrowing the Authority’s case to a claim for unreimbursed inspection costs associated with the incident. Two weeks before trial was set to begin on that claim, the district court entered an evidentiary order that effectively precluded the Authority from proving that sole remaining claim by restricting the testimony of two “hybrid fact/expert” witnesses, leaving the Authority with no designated damages expert. The Seventh Circuit affirmed in part and reversed in part the district court’s summary judgment order, and vacated the evidentiary order. The court upheld the district court’s construction of the General Coverage Provision and agreed that the Authority has no compensable soft cost claim because of the deductible, but stated that, if the Authority can demonstrate with competent evidence that it incurred expenses to reduce soft costs for which Travelers otherwise would have been liable, it may recover those expenses under the “expenses to reduce the amount of loss” provision, subject to policy limits. View "Indianapolis Airport Authority v. Travelers Property Casualty Co." on Justia Law

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Flambeau adopted an employee wellness program, requiring its employees, as a condition of receiving employer-subsidized health insurance, to fill out a medical questionnaire and to undergo biometric testing. One employee did not meet those requirements in time for the 2012 benefit year;, he and his family were briefly without health insurance. He filed a complaint with the Equal Employment Opportunity Commission, which filed suit, arguing that Flambeau’s requirement violated the Americans with Disabilities Act (ADA) ban on involuntary medical examinations, 42 U.S.C. 12112(d)(4). The district court dismissed; the Seventh Circuit affirmed. The court declined to address whether wellness programs are exempt from the limits on medical examinations because the ADA does not “restrict … [an] organization … administering the terms of a bona fide benefit plan that are based on underwriting risks, classifying risks, or administering such risks that are based on or not inconsistent with State law” or the EEOC argument that this insurance safe harbor does not apply to wellness programs. The court held that the relief the EEOC sought is either unavailable or moot. The employee resigned before suit was filed. He did not incur damages as a result of Flambeau’s policy and is not entitled to punitive damages. Flambeau abandoned its wellness program requirements for reasons unrelated to the litigation. View "Equal Employment Opportunity Commission v. Flambeau, Inc." on Justia Law

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Geiger, an account executive, received Aetna group disability insurance coverage. In 2009, Geiger stopped working and obtained short term disability precipitated by lumbar back pain and a 2007 L5S1 discectomy and bilateral ankle pain caused by avascular necrosis of the talar bones. In 2010, Geiger had several ankle surgeries. Aetna determined that Geiger was disabled from her occupation and approved long-term disability benefits, citing “required walking and driving for this occupation.” Geiger received $4,012 per month, 50% of her predisability earnings. Upon her approval for Social Security disability benefits, the amount was reduced to $784. After 24 months, the Plan requires a claimant to be unable to work at any reasonable occupation. In 2012, Aetna’s physician examined Geiger and found her capable of sedentary work. Under surveillance, Geiger was observed driving and visiting stores. The Plan terminated her benefits. In 2013, Aetna reinstated Geiger’s benefits. In 2014, under surveillance, Geiger was seen climbing into and driving an SUV, shopping, and carrying a bag. Aetna again terminated her benefits, citing the surveillance, prior independent peer reviews, a comprehensive clinical review, and occupational information. Geiger filed suit, citing her lack of medical improvement, her worsening medical condition, and the impact of severe pain on her ability to work. The court granted Aetna summary judgment. The Seventh Circuit affirmed, finding that Aetna minimized any conflict of interest stemming from its roles as administrator and insurer; presented sufficient evidence supporting its decision; and properly considered Geiger’s impairment and pain and the surveillance video. View "Geiger v. Aetna Life Insurance Co." on Justia Law

Posted in: Insurance Law