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

In 2010, Advance obtained a policy from Cincinnati Insurance on Middleton properties. After a 2011 hailstorm, Larson, Advance’s president, filled out a form reporting damage. Larson inspected the roof with Jorgenson, a Cincinnati claims representative. Jorgenson’s estimate “note[d] some dents to soft metal roof vents and AC fins but stated that he “did not observe any damage to roofing.” Jorgenson estimated $1,894.74 for repairs and sent Larson a check, calculating a $1,000 deductible. Six months later, Advance was considering selling the building. The potential buyer, Welton, had the roof inspected. The inspector’s report prompted Advance to ask Jorgenson to reopen Advance’s claim. He arranged for a new inspection. The resulting report noted roof panel denting that “will not affect the performance of the panels (roofs) or detract from the panels[’] (roofs[’]) life expectancy.” Months later, Advance sold the building, without any further developments relating to its claim. Advance sued. The district court held that the policy did cover the hail damage, but that Cincinnati’s refusal to acknowledge coverage was not in bad faith. The parties stipulated to the cost of a replacement roof, $175,500. The court entered a final judgment in that amount in favor of Advance. The Seventh Circuit affirmed. View "Advance Cable Co., LLC v. Cincinnati Ins. Co." on Justia Law

Orr died in a motorcycle accident. His daughters sought benefits under a group life insurance policy governed by the Employment Retirement Income Security Act and issued by USIC to Orr’s former employer. The policy provided accidental death, subject to exclusions, including one for loss resulting “directly or indirectly from … intoxication[.]” USIC asserted that Orr’s death resulted from his intoxication. The letter explained that autopsy and toxicology reports revealed that Orr’s blood alcohol level at the time of the accident exceeded the legal limit and that USIC’s medical consultant opined that Orr “would have been impaired in attention, coordination, and balance,” as a result. The letter advised the Orrs of their right to seek review and included a copy of USIC’s Life Claims Denial Review Procedure, stating, in boldfaced, all-caps print, that a request for review must be submitted in writing within 60 days and warning: “If … you do not complete both the first and second review before filing a lawsuit, a court can dismiss your lawsuit.“ The document encourages claimants to call with any questions. The Orrs filed suit before completing the review process. The Seventh Circuit affirmed summary judgment in favor of USIC on grounds of failure to exhaust administrative remedies. View "Orr v. Assurant Emp. Benefits" on Justia Law

In 2001, representatives from the Moody Bible Institute of Chicago and Sysix Financial signed a master agreement, laying the groundwork for future leases of equipment from Sysix to Moody. In 2008, two lease schedules for computer items were executed; they appeared to have been signed by Moody’s vice president and Sysix’s president. Sysix assigned its interest in both leases to Rockwell, which acquired loans from PNB to finance the leases. PNB procured indemnification coverage for those loans from RLI in the form of a financial institution bond. Sysix’s president had forged the signature of Moody’s vice president on both lease schedules. Moody never agreed to either schedule nor did it ever receive any of the promised equipment. PNB notified RLI of its potential loss, but PNB itself soon went under. As receiver for PNB, the FDIC sued RLI. The district court granted summary judgment in FDIC’s favor. The Seventh Circuit affirmed, finding that the plain language of the bond covered FDIC’s losses The Financial Institutions Reform Recovery and Enforcement Act limitations period applies,12 U.S.C. 1821(d)(14), so the suit was timely. View "Fed. Deposit Ins. Corp. v. RLI Ins. Co." on Justia Law

Illinois requires that motor carriers of property, conducting intrastate operations, obtain a license from the Illinois Commerce Commission, which requires appropriate insurance or surety coverage. A carrier complies by submitting proof of insurance or bond coverage and is then issued a public carrier certificate, stating that the holder “certifies to the Commission that it will perform transportation activities only with the lawful amount of liability insurance in accordance with 92 Ill. Admin. Code 1425.” Drivers must have a copy of the license with them at all times. It is a Class C misdemeanor offense for an operator not to produce proof of registration upon request. Three carriers were cited by the ICC police for conducting regulated activity without a license. During a follow-up investigation, the carriers refused to comply, reasoning that documents sought by the ICC would reveal their rates, routes, and services, so the requirement was preempted by the Federal Aviation Administration Authorization Act, 49 U.S.C. 14501(c). The ICC rejected the argument. The Seventh Circuit affirmed summary judgment in favor of the ICC, concluding that the document requests had no significant economic impact on rates, routes or services and, alternatively, that efforts to enforce the licensing requirement are exempted from preemption. View "Nationwide Freight Sys., Inc. v. Ill. Commerce Comm'n" on Justia Law

Most federal employees receive health benefits through the Federal Employee Health Benefits Program (FEHBP). Until the 2010 enactment of the Patient Protection and Affordable Care Act (ACA), members of the U.S. Senate and House of Representatives, and their staff members, were eligible for FEHBP insurance. The ACA limited their options to plans created under the ACA or offered through a health insurance exchange established under the ACA; they could no longer receive insurance through the FEHBP (42 U.S.C. 18032(d)(3)(D)). The Office of Personnel Management conducted notice-and-comment rulemaking and issued the final rule, 78 Fed. Reg. 60653-01. Senator Johnson and his legislative counsel sought to enjoin implementation of that rule, which, they claimed, was contrary to the ACA and other law because it allows the government to make pre-tax employer contributions to non-FEHBP plans and makes members of Congress and their staffs eligible for an ACA insurance exchange reserved for small businesses. The Seventh Circuit affirmed dismissal, finding that the plaintiffs had not identified a judicially cognizable injury that is traceable to aspects of the OPM regulation that they challenge. The court noted that the challenged regulation creates a benefit for Senator Johnson and that he is free to decline that benefit. View "Johnson v. United States Office of Pers. Mgmt." on Justia Law

From 1998 to 2012 Abbott marketed the anticonvulsant medication Depakote for applications that had not been FDA-approved (off-label uses). Physicians may prescribe drugs for off-label uses, but pharmaceutical companies are generally prohibited from marketing drugs for those same applications. Qui tam actions were filed under the False Claims Act. In 2009, Abbott disclosed in an SEC filing that the Department of Justice was investigating its marketing. Abbott pleaded guilty to illegally promoting Depakote from 2001 through 2006 and agreed to pay $1.6 billion to settle the criminal and qui tam actions. Employee benefits funds filed suit 15 months later, alleging that Abbott misrepresented Depakote’s safety and efficacy for off-label uses, paid kickbacks to physicians, established and funded intermediary entities to promote the drug for off-label uses, and concealed its role in these activities, in violation of the Racketeer Influenced and Corrupt Organizations Act. The district court dismissed, finding that the statute of limitations for the RICO claim began to run in 1998, when the funds initially reimbursed a prescription for off-label use. The court refused to toll the limitations period until the guilty plea, finding that Abbott’s concealment efforts were not designed to hinder potential lawsuits. The Seventh Circuit reversed, finding that dismissal was premature without an opportunity for discovery into when a reasonable fund should have known about its injuries from off-label marketing. View "Sidney Hillman Health Ctr. of Rochester v. Abbott Labs., Inc." on Justia Law

France had a Chicago dental business and fraudulently billed insurers for city employees. France closed his practice after being injured in an accident and started collecting benefits from a disability income policy. In 1999, he exchanged monthly payments, for a limited time, for a lump sum of $300,000. He transferred this money to other people, including his wife, Duperon, before filing a Chapter 7 bankruptcy petition. He failed to disclose the payment or transfers. He later pleaded guilty to mail fraud, 18 U.S.C. 1341, and to knowingly making a false declaration under penalty of perjury, 18 U.S.C. 152(3). The district court sentenced France to 30 months in prison and ordered him to pay $800,000 in restitution. The bankruptcy trustee obtained title to ongoing disability insurance payments. France and Duperon divorced. A California court approved a settlement with payments for child support from the disability payments. France’s insurance company sued in California to resolve conflicting claims. The parties reached an agreement, which the bankruptcy court approved, purporting to control all other judgments, but did not mention the criminal restitution lien. The government filed Illinois citations to discover assets. France moved to quash, but the insurance company responded and began withholding $9,296 that had been going to France. The government moved to garnish the entire distribution under the Mandatory Victims Restitution Act (MVRA), 18 U.S.C. 3613(a). The Seventh Circuit affirmed a ruling allowing the government to garnish the entire disability payment. View "United States v. France" on Justia Law

A large commercial development in Kansas City, Missouri was aborted in the middle of construction due to cost overruns. When the developer would not cover the shortfall, the construction lender stopped releasing committed loan funds, and contractors filed liens against the property for their unpaid work on the unfinished project. Bankruptcy followed, and the contractors’ liens were given priority over the lender’s security interest in the failed development, leaving little recovery for the lender. The lender looked to its title insurer for indemnification. The title policy generally covers lien defects, but it also contains a standard exclusion for liens “created, suffered, assumed or agreed to” by the insured lender. The Seventh Circuit affirmed judgment in favor of the title company. The exclusion applies to the liens at issue, which resulted from the lender’s cutoff of loan funds, so the title insurer owed no duty to indemnify. The liens arose from insufficient project funds, a risk of loss that the lender, not the title company, had authority and responsibility to discover, monitor, and prevent. View "BB Syndication Servs, Inc. v. First Am. Title Ins. Co" on Justia Law

Lodholtz was injured in the Pulliam factory and sued, seeking compensation. Pulliam filed a claim with its insurer, Granite State, which retained a claims adjuster, York. Pulliam assumed, erroneously, that Granite would provide a defense and defaulted on the state court claim. Neither Granite nor York ever had communicated to Pulliam whether they believed Granite had a duty to defend Pulliam under the terms of the policy. Pulliam subsequently entered into a settlement agreement with Lodholtz, assigning to Lodholtz any claims it had against Granite or its agents for failing to undertake a defense. The agreement also provided that Lodholtz would not seek to recover its damages from Pulliam. Granite sought a declaratory judgment that it had no duty to indemnify Pulliam. Lodholtz later filed a complaint against Granite, alleging breach of contract, bad faith, and negligence, and against York for negligence. The district court consolidated the cases. After the district court entered a final judgment in favor of York, Lodholtz appealed. The Seventh Circuit affirmed. The Court of Appeals of Indiana has held that an insurance adjuster owes no legal duty to the insured, and Lodholtz failed to establish that the Indiana Supreme Court would disagree with that decision. View "Lodholtz v. York Risk Servs. Grp., Inc." on Justia Law

Footstar operated the footwear departments in various Kmart stores as though they were islands. Footstar employees could only work in those departments unless they had written permission from Kmart. In 2005, a Footstar employee tried to help a customer get an infant carrier off a shelf outside the footwear department and the customer was injured. She sued. Kmart sought indemnification from Footstar and its insurer, Liberty Mutual. A magistrate judge found that Footstar and Liberty Mutual both had a duty to defend beginning the day Kmart formally requested coverage since the injury was potentially coverable under the agreement between Kmart and Footstar and the insurance policy. The Seventh Circuit reversed, holding that neither Liberty Mutual nor Footstar had a duty to indemnify Kmart because the injury did not occur “pursuant to” or “under” the agreement between Kmart and Footstar. That agreement specifically precluded Footstar employees from working outside of the footwear department, where the injury occurred, and actions taken in contravention of the agreement were not “pursuant to” or “under” it. Liberty Mutual did not deny coverage in bad faith and that Kmart did not breach the relevant notice provisions such that Liberty Mutual and Footstar could withhold defense costs. View "Kmart Corp. v. Footstar, Inc." on Justia Law