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

In 1989, the Supreme Court held that courts should apply de novo review in suits challenging denials of employee benefits governed by the Employee Retirement Income Security Act (ERISA), 29 U.S.C. 1132(a)(1), but if the benefit plan provided expressly for a different, more deferential standard of review, that specific provision would control over the default rule of de novo review. Insurance companies and plan sponsors began including such provisions in most benefit plans, typically saying the insurer or plan administrator would exercise discretionary judgment in interpreting a plan or deciding whether to pay benefits. Courts would then apply a deferential standard of review under which a denial would stand unless it was “arbitrary and capricious.” Later, state laws were adopted to protect employees and plan beneficiaries from abuse of such discretion. An Illinois insurance law, prohibited provisions “purporting to reserve discretion” to insurers to interpret health and disability insurance policies. The Seventh Circuit rejected a preemption challenge and applied the state law in a case involving a challenge to an insurance provider’s definition of “disability,” The court did not address whether the denial of benefits was arbitrary and capricious. View "Fontaine v. Metropolitan Life Ins. Co" on Justia Law

Religious, not-for-profit organizations challenged the “contraceptive mandate” of the Patient Protection and Affordable Care Act of 2010 (ACA), 42 U.S.C. 300gg-13(a)(4), arguing that the ACA’s accommodations for religious organizations impose a substantial burden on their free exercise of religion, and that the ACA and accompanying regulations are not the least restrictive means of furthering a compelling government interest, in violation of the plaintiffs’ rights under the Religious Freedom Restoration Act of 1993 (RFRA), 42 U.S.C. 2000bb. The district court entered a preliminary injunction. The Seventh Circuit reversed, stating: It is the operation of federal law, not any actions that the plaintiffs must take, that causes the provisions of services that the plaintiffs find morally objectionable. The accommodation has the legal effect of removing from objectors any connection to the provision of contraceptive services. View "Grace Schools v. Burwell" on Justia Law

Castro-Cortes was working for Astro, a subcontractor of JRJ, when he fell through a hole on the jRJ property. He sued JRJ for personal injury in Illinois state court. After being served in that suit, JRJ’s two members, Panfil and Michelon, filed a report with Nautilus under a general commercial liability policy. Nautilus refused to defend, citing three grounds: that the underlying lawsuit was against JRJ, but the named insureds were Panfil and Michelon; the “Contractor-Subcontracted Work Endorsement;” and the “Employee Exclusion.” The JRJ parties filed a federal suit for breach of contract. On summary judgment, the district court determined that Nautilus breached its duty to defend because there was at least the potential for coverage of the underlying lawsuit. The Seventh Circuit affirmed, stating that it is a close case and that the bar to finding a duty to defend is low. The court construed the language of the exclusions in favor of JRJ, noting that the burden of proving that a claim falls within an exclusion rests on the insurer. View "Panfil v. Nautilus Ins. Co." on Justia Law

Vandenberg, attending a cruise on a chartered yacht, was injured when he fell from the upper deck because the bench on which he was sitting tipped over, while the boat was anchored in Lake Michigan. The bench was not secured to the deck, nor did the upper deck have a railing. The fall left Vandenberg paralyzed from the chest down. The yacht was owned by a closely held corporation. Vandenberg alleged that Rose Paving, a company run by Rose, one of three owners of the corporation, was a booking agent that maintained a marketing relationship for the chartering of the yacht. He filed suit, alleging negligence, and settled with the defendants. The defendants agreed to pay $25 million through the assignment of their claims against their insurers. Westfield was the insurance provider for defendant Rose Paving. Westfield disputed that its insurance policies with Rose Paving covered the yacht accident and sought a declaratory judgment. The district court granted Westfield’s motion for judgment on the pleadings. The Seventh Circuit affirmed, finding that injuries came under the policies’ watercraft exclusion. View "Westfield Ins. Co. v. Vandenberg" on Justia Law

Viktor Barengolts was driving a tractor-trailer on Route 30 in Wheatland Township, Illinois when he rear-ended the Bernals in their pickup truck, causing serious injuries and property damage. The Bernals sued Unlimited Carrier, the company whose placard appeared on the tractor at the time; Viktor Barengolts; and Michael Barengolts, who owned the tractor. Viktor contacted Artisan, his insurance provider, which denied coverage, stating that the Contingent Liability Endorsement excluded coverage because he was driving the tractor on behalf of Unlimited Carrier at the time of the accident. The policy lists Viktor as an insured and Michael as an additional insured. Michael’s tractor is covered. Counsel for Unlimited Carrier wrote to Artisan, demanding that it defend the Barengoltses. Artisan refused. Michael disclosed that he did not sign a lease with Unlimited Carrier for use of the tractor until eight days after the accident. Counsel for the Barengoltses again unsuccessfully tendered the defense and sought indemnity. NAICO, the insurer for Unimited Carrier, defended the Barengoltses under a reservation of rights and paid settlements totaling $98,750 to the Bernals. The Seventh Circuit affirmed that Artisan had a duty to defend, that it breached that duty, and that Artisan was estopped from asserting defenses under its policy, stating that Artisan gambled and lost. View "Nat'l Am. Ins. Co. v. Artisan & Truckers Cas. Co." on Justia Law

McCormick bought a single-premium variable life-insurance policy that permits borrowing against its cash value. Loans are secured by moving an equivalent amount from sub-accounts that the policyholder can invest to a “general account” that draws 4% interest. The policyholder owes 4.7% on any borrowed sums, so the net is 0.7% per annum, plus foregoing the opportunity to exercise discretion about how to invest the borrowed sum. If the owner does not pay the annual interest, “it will be added to the principal of the loan and will bear interest.” McCormick borrowed against cash value and did not pay interest. Independence, the insurer, added the unpaid interest “to the principal of the loan” (which caused additional sums to be moved from investments into the general account) and charged interest on the higher indebtedness. Compound interest has increased the debt by $44,000, which, if not repaid, will reduce the death benefit. McCormick sought a declaration that the $44,000 is not owed, because, when unpaid interest was added to principal and moved to the general account, it was “paid” automatically. The court entered judgment for Independence. The Seventh Circuit vacated with instructions to dismiss. Removal rested on diversity of citizenship, and $75,000 is the minimum amount in controversy for that jurisdiction. View "McCormick v. Independence Life & Annuity Co." on Justia Law

Dugan was involved in an automobile accident with a vehicle owned by Rainey and claimed more than $200,000 in damages. Rainey’s insurer, American Family, offered $100,000 (the limit under Rainey’s policy). The Dugans accepted, then sought recovery from Nationwide pursuant to the underinsured motorist provisions of their policy, which insured four vehicles and provided underinsured motorist coverage limits of $100,000 per person and $300,000 per accident for each of the four covered vehicles. The policy declarations page lists each of the vehicles separately with the separate underinsured motorist limit applicable to each vehicle and the separate premium charged for each vehicle. The Dugans made a demand of $400,000, the aggregate limit of the four underinsured motorist coverage limits. Nationwide denied payment, stating that express policy language limited their recovery to $100,000, less the $100,000 American Family payment. Nationwide sought a declaratory judgment and the Dugans counterclaimed, claiming that, because the policy’s language was ambiguous, they were entitled to aggregate, or “stack,” the underinsured motorist limits applicable to each vehicle, subject to the $100,000 setoff. The Seventh Circuit affirmed that, even if the policy permitted stacking, Illinois law entitles Nationwide to apply its setoff four times, once against each “separate, stackable policy” limit, thereby exhausting Nationwide’s underinsured motorist coverage View "Nationwide Agribusiness Ins. v. Dugan" on Justia Law

Procaccio purchased its workers' compensation insurance from West Bend. This litigation concerns three policy years: 2006, 2007, and 2010. Procaccio contends that West Bend’s offset procedure effectively nullified its Illinois Contracting Classification Premium Adjustment Program (ICC) credit for these policy years, resulting in substantial overcharges. The district court agreed and awarded a large sum in damages. The court concluded that the insurance policy contained no agreement to adjust the Schedule Modification credit after the ICC credit became due; West Bend needs parol evidence to prove its version of the parties’ agreement, but the insurance contract was fully integrated so any evidence of an oral understanding with Procaccio’s president is inadmissible; and while West Bend had the unilateral right to issue endorsements, that authority is cabined by contractual and statutory restrictions on its ability to alter its rates. The court further concluded that, even if the Schedule Modification credit was artificially inflated for these policy years, West Bend was not permitted to reduce it based on Procaccio’s ICC credit. Accordingly, the court affirmed the district court's judgment. View "West Bend Mut. Ins. Co. v. Procaccio Painting & Drywall" on Justia Law

Wheaton College, a nondenominational Illinois college, hires from a various Christian traditions and admits students of varied faiths, but requires all to sign a “Covenant” that requires them to “uphold the God-given worth of human beings, from conception to death.” The Covenant does not mention contraception, but Wheaton believes that “emergency contraception” is forbidden on religious grounds if it can destroy a fertilized ovum. Wheaton also opposes intrauterine devices (IUDs) that prevent implantation of a fertilized ovum. Wheaton excludes coverage of emergency contraception and IUDs from its health plans, but covers “traditional contraception.” Of the 20 types of FDA-approved female contraceptives, Wheaton disapproves only emergency contraceptives and certain IUDs. Wheaton challenged the Affordable Care Act as violating the Religious Freedom Restoration Act, 42 U.S.C. 2000bb-1, and the First Amendment, by making it complicit in the provision of emergency-contraception. The district court denied a preliminary injunction. The Seventh Circuit affirmed, stating: What had been Wheaton’s plan, concerning emergency contraception, the Affordable Care Act made the government’s plan when Wheaton refused to comply with the Act’s provision on contraception coverage. When notified that a health insurance provider has religious objections to providing coverage for some government-approved medical procedure, the government directs the insurer to provide the coverage itself. View "Wheaton College v. Burwell" on Justia Law

Plaintiffs (a class of 1,593) alleged that Visteon failed to deliver timely notice to ex-employees, offering them an opportunity to continue health insurance at their own expense, under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA). An employer has 44 days after the end of a person’s employment to provide notice and essential details, 29 U.S.C. 1166(a)(2). The court found that Visteon had provided untimely notice to 741 former employees, and that the notice averaged 376 days late for those persons. The court awarded $2,500 to each class member who had received untimely notice (a total of about $1.85 million), a sum that does not depend on how long the delay was for any given person. While the suit was pending, Visteon was reorganized in bankruptcy. The plan provides that debts of this kind will be paid 50¢ on the dollar, so each of the 741 will receive $1,250. The court also ordered Visteon to pay class counsel $302,780 as attorneys’ fees plus costs of about $11,000. The Seventh Circuit affirmed the award of attorneys’ fees, but otherwise dismissed plaintiffs’ challenge to the penalty as untimely, having been filed several months after the district court’s delayed entry of judgment. View "Pierce v. Visteon Corp." on Justia Law