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

From 1977-1984 Banco reinsured 2% of the Insurer’s business. The Insurer stopped writing policies in 1985, went into receivership in 1986, and began liquidating in 1987. Through 1993 the liquidator complied with contractual provisions requiring balances to be calculated quarterly and statements sent. If the Insurer owed reinsurers net balances for the previous quarter, it paid them; if the reinsurers owed the Insurer, bills were sent. In 1993, the liquidator stopped sending checks or bills without explanation. In 2008, the liquidator notified Banco that Banco was owed $225,000 as the net on 1993-1999 business. For periods before 1993, the Insurer was owed $2.5 million. In 2010, Banco protested the bill as untimely. Pine bought the Insurer’s receivables and, in 2012, sued Banco. Litigation about procedural issues, arising from the fact that Banco is wholly owned by Uruguay, consumed several years. The Seventh Circuit affirmed summary judgment, holding that Pine’s claim is untimely. Each contract required scheduled netting of claims and payment of the balance. Claims against Banco accrued no later than 1993. The contracts specify application of Illinois law, which allowed 10 years (until 2003) to sue on contracts. A statute concerning insurance liquidation, 215 ILCS 5/206, does not permit a liquidator to wait until the end to net the firm’s debits and credits. View "Pine Top Receivables of Illinois, LLC v. Banco de Seguros del Estado" on Justia Law

Streit set fire to the house where he lived with his parents, which was insured by Metropolitan. Under the Streits’ policy, the act of arson triggered a contractual exclusion of coverage. The Streits still submitted a claim, but Metropolitan refused to cover the fire damage.The Streits sued, claiming that the exclusion was inconsistent with the Illinois Standard Fire Policy. The Streits and Metropolitan then stipulated that the Streits were innocent of any wrongdoing related to the fire. The district court granted the Steits partial summary judgment, awarding $235,000. The Seventh Circuit affirmed. The Illinois Standard Fire Policy sets a minimum threshold for what fire-insurance policies must cover, and Metropolitan failed to provide that coverage. Under the Metropolitan policy, an intentional loss caused by any insured party suspends coverage for all insured parties—even those who were innocent of any wrongdoing. By contrast, the Standard Fire Policy suspends coverage if “the hazard is increased by any means within the control or knowledge of the insured.” View "Streit v. Metropolitan Casualty Insurance Co." on Justia Law

A newly-constructed multi‐story condominium building suffered water damage, allegedly caused by the painting subcontractor, National, failing to apply an adequate coat of sealant to the exterior. In Illinois state court, the condominium association sued the general contractor, developer, and subcontractors. The defendants tendered the defense to Westfield, National’s insurer, Westfield filed a federal action seeking a declaration that it owed no duty to defend in the underlying action. The district court determined that the complaint triggered Westfield’s duty to defend. The Seventh Circuit affirmed the grant of summary judgment, rejecting an argument that failure to apply an adequate amount of paint cannot be considered an “accident” that would constitute a covered “occurrence” under the policy. Westfield also argued that because the damage is to the building itself, which was a new construction and not an existing structure, the association has not demonstrated that there was property damage that is subject to its policy. The policy defines “occurrence” to include the “continuous or repeated exposure to substantially the same harmful conditions,” so the allegation that National acted negligently was sufficient under Illinois law to constitute an “occurrence.” National’s actions allegedly damaged parts of the building that were outside of the scope of its work, so the complaint alleges potentially covered property damage sufficient to invoke the duty to defend. View "Westfield Insurance Co. v. National Decorating Service, Inc." on Justia Law

Drake was involved in a car accident with Burley, who offered to settle the matter with Drake’s automobile insurer, Horace Mann Insurance. The offer expired before Horace Mann accepted it, however, and Burley sued Drake and sent a letter to Drake’s lawyer suggesting that Horace Mann had handled the matter in bad faith. Believing that this letter constituted a “claim” against Horace Mann for extra-contractual damages that had accrued before the start date of Horace Mann’s own insurance policy with Lexington Insurance, Lexington sought a judicial declaration that it had no duty to indemnify Horace Mann under that policy. Horace Mann counterclaimed for breach of contract and requested (pursuant to an Illinois statute) additional damages for “vexatious and unreasonable” claims-handling. Horace Mann also filed a third-party complaint against its insurance broker, Aon, for negligence in reporting the extra-contractual “claim” to Lexington. The district court rejected Lexington’s suit on summary judgment and awarded judgment as a matter of law to Lexington and Aon on Horace Mann’s claims. The Seventh Circuit affirmed. View "Lexington Insurance Co. v. Horace Mann Insurance Co." on Justia Law

Lexington Insurance denied a claim by its insured, Double D Warehouse, for coverage of Double D’s liability to customers for contamination of warehoused products. One basis for denial was that Double D failed to document its warehousing transactions with warehouse receipts, storage agreements, or rate quotations, as required by the policies. PQ was a customer of Double D whose products were damaged while warehoused there. PQ settled its case against Double D by stepping into Double D’s shoes to try to collect on the policies. PQ argued that there were pragmatic reasons to excuse strict compliance with the policy’s terms. The Seventh Circuit affirmed summary judgment in favor of Lexington. PQ accurately claimed that the documentation Double D actually had (bills of lading and an online tracking system) should serve much the same purpose as the documentation required by the policies (especially warehouse receipts), but commercially sophisticated parties agreed to unambiguous terms and conditions of insurance. Courts hold them to those terms. To do otherwise would disrupt the risk allocations that are part and parcel of any contract, but particularly a commercial liability insurance contract. PQ offered no persuasive reason to depart from the plain language of the policies. View "PQ Corp. v. Lexington Insurance Co." on Justia Law

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

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

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

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

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