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

Visteon, a worldwide manufacturer headquartered in Michigan, sued National Union, from which it had purchased liability insurance between 2000 and 2002. The policy excluded liability resulting from pollution caused by Visteon, except liability arising from a “Completed Operations Hazard.” In 2001, the toxic solvent TCE that was used to clean machinery in Visteon’s Connersville, Indiana plant was discovered to have leaked into the soil and groundwater. Neighboring landowners sued Visteon. National Union has refused to indemnify or defend. Indiana does not enforce standard pollution-exclusion clauses. Michigan law does enforce the more general kind of pollution-exclusion clause found in the policy. The district court ruled that Michigan law governed and held that Visteon was not entitled to coverage under the Completed Operations Hazard clause. The Seventh Circuit affirmed. The risk materialized in Indiana, but that could not have been foreseen. The Indiana victims were compensated by Visteon, and it is unclear what benefit the state would have derived from reimbursement of Visteon’s costs by National Union.” The court rejected Visteon’s argument that its “work” was “completed” each time a contract to supply products made at the plant was performed and concluded that the exception did not apply. View "Visteon Corp. v. Nat'l Union Fire Ins. Co. of Pittsburgh" on Justia Law

Jonas and his wife purchased life insurance: each owned the policy on his or her life, with the other as beneficiary. When they divorced, the court reassigned ownership: Troy owned the policy on Jennifer’s life. Each policy provided that change in ownership “does not change the Beneficiary Designation.” Troy thought it unnecessary to redesignate himself as beneficiary. Jennifer died. Troy claimed the proceeds ($1 million). State Farm did not pay, concerned that the proceeds might belong to the children (named secondary beneficiaries) or to Jennifer’s estate under Tex. Family Code 9.301, which provides that if a divorce occurs after one spouse has designated the other as beneficiary of an insurance policy, the designation lapses. Texas law requires an insurer to pay within 60 days of receiving a claim and provides for “damages” at 18% a year plus reasonable attorneys’ fees. An insurer that receives “notice of an adverse, bona fide claim” may defer payment and file an interpleader action not later than the 90th day. State Farm did not receive any other claim, but filed an “interpleader” before the 60 days had run. The district court treated concerns about the potential rights of the children and Jennifer’s estate as equivalent to a claim and disbursed the money to Troy, who argued on appeal that he was entitled to attorneys’ fees and interest at 18%. The Seventh Circuit vacated for dismissal. When the litigation began, there was no justiciable controversy. View "State Farm Life Ins. Co. v. Jonas" on Justia Law

Accretive provides cost control, revenue cycle management, and compliance services to non-profit healthcare providers. Accretive and Fairview entered into a Revenue Cycle Operations Agreement (RCA), accounting for about 12% of Accretive’s revenue during the class period, and a Quality and Total Cost of Care (QTCC) contract, promoted as the future for healthcare services. In 2012, the Minnesota Attorney General sued Accretive for noncompliance with healthcare, debt collection, and consumer protection laws. Accretive wound down its RCA contract short of its term, expecting a loss of $62 to $68 million. The AG released a damaging report on Accretive’s business practices. Fairview cancelled its QTCC contract. Accretive’s stock fell from over $24 to under $10 per share. Plaintiffs filed a class action under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, alleging that Accretive concealed its practices to artificially inflate its common stock. The parties negotiated a settlement of $14 million: $0.20 per share ($0.14 with attorneys’ fees and expenses deducted). Notice was sent to 34,200 potential class members. Only one opted out; only Hayes filed an objection. At the fairness hearing, the district court granted approval, awarding attorneys’ fees of 30% and expenses of $63,911.14. Hayes did not attend. The Seventh Circuit affirmed. View "Hayes v. Accretive Health, Inc." on Justia Law

The Strauss home in Mequon was built in 1994. They insured the home with policies issued by Chubb from October 1994 to October 2005. Water infiltrated and damaged the home through a defect present since the completion of construction; the damage went undiscovered until 2010, after those policies expired. Chubb denied coverage, contending that because the damage manifested in 2010 and the “manifestation” trigger applies to first-party property insurance, it could not be responsible for the damage. Chubb also asserted that the claim was submitted after expiration of the applicable statute of limitations. The district court concluded that the “continuous” trigger theory applied due to the language of the Policy such that coverage existed for the entire loss and that the claims were not time-barred. The Seventh Circuit affirmed. In Wisconsin, under the continuous trigger theory, a progressive loss “occurs continuously from exposure until manifestation.” Here, the loss was ongoing and occurred with each rainfall and the policy itself states that “[c]ontinuous or repeated exposure to substantially the same general conditions unless excluded is considered to be one occurrence.” The loss, for purposes of the statute of limitations, occurred all the way up until the damage manifested in October 2010. View "Strauss v. Chubb Indem. Ins. Co." on Justia Law

In 2006 Western Capital made a $2.77 million loan to finance a Chicago development, which failed. Western initiated foreclosure, resulting in allegations that Western had breached its contract, committed fraud, and violated consumer protection statutes. Western requested that its insurers cover costs associated with its defense. Philadelphia Indemnity is Western’s general liability insurer. The mortgages were insured by CT on the standard ALTA form, which covers losses sustained because of defects in title and lien priority, and requires CT to pay costs, attorneys’ fees and expenses incurred in defense of the title or the lien, but excludes “fees, costs or expenses incurred by the insured in the defense of those causes of action which allege matters not insured against by this policy.” The district court declined to enforce the limitation, applied the “complete defense” rule, and held that CT had a duty to defend the entire lawsuit. The Seventh Circuit reversed. An insurer’s duty to defend is contractual. Title insurance, unlike general liability insurance, only indemnifies against losses incurred by reason of defects in title and specifically limits the duty to defend to claims within that coverage. The Illinois Supreme Court has never applied the complete-defense rule to title insurance. View "Western Capital Partners, LLC v. Chicago Title Ins. Co." on Justia Law

Pine Top, an insurer, sued Banco, an entity wholly owned by Uruguay, claiming that Banco owes $2,352,464.08 under reinsurance contracts. The complaint sought to compel arbitration but alternately proposed that the court enter judgment for breach of contract. Pine Top moved to strike Banco’s answer for failure to post security under Illinois insurance law. The district court denied the motion and later denied the motion to compel arbitration. The Seventh Circuit affirmed, citing the Foreign Sovereign Immunities Act, which prohibits attaching a foreign state’s property, thereby preventing application of the Illinois security requirement, 28 U.S.C. 1609. Banco did not waive its immunity in the manner allowed by that law and Pine Top forfeited contentions that the McCarran-Ferguson Act allows a state rule to govern. On the arbitration question, the court held that denials of motions to compel arbitration under the Panama Convention are immediately appealable under 9 U.S.C. 16(a)(1)(B), but that the contract language, reasonably read, does not transfer the right to demand arbitration. View "Pine Top Receivables of IL, LLC v. Banco de Seguros del Estado" on Justia Law

Jones was murdered, leaving no will. He owned a life insurance policy through his employer. He did not designate a beneficiary. The policy provided that the proceeds ($307,000) would go first to a surviving spouse (Jones never married), second to surviving children, third to surviving parents, and fourth to his estate. Quincy claimed to be Jones’s son; Moore, claimed to be his daughter. The insurance company filed an interpleader action. After paying $24,000 for funeral expenses and $137,000 to Quincy, the company deposited the remainder with the court. Jones’s biological sister also claimed the proceeds, arguing that Jones was homosexual and had not fathered children. Jones’s income tax returns showed that he had claimed various children as dependents, sometimes omitting Quincy. A DNA test established that Moore was not his daughter. The district judge declined to order a test for Quincy because Jones had held Quincy out as his biological son and had signed an order in 1996 acknowledging Quincy (then six years old) as his son. The judge awarded Quincy the deposited funds.. The Seventh Circuit affirmed. Rule 35 would have allowed, but did not require, the judge to order a DNA test, given the presumption of paternity under Illinois law.View "MN Life Ins. Co. v. Jones" on Justia Law

Hennessy, a car parts manufacturer, beset by asbestos-related personal injury claims, sought coverage by National Union. The companies entered into a cost sharing agreement in 2008. As claims occurred, Hennessy asked National Union to indemnify its settlement and defense costs. To resolve their differences about what was owed, Hennessy demanded arbitration under the agreement, which instructs arbitrators to apply Illinois law. Hennessy filed suit under the Illinois Insurance Code 215 ILCS 5/155(1), which provides that, in cases involving vexatious and unreasonable delay, the court may award reasonable attorney fees, other costs, plus an additional amount. Hennessy claimed that National Union’s delays in providing coverage were vexatious and unreasonable. The district judge declined to dismiss, acknowledging a provision that “the arbitrators shall not be empowered or have jurisdiction to award punitive damages, fines or penalties,” but expressing a belief that Hennessy’s claim arose under statutory law rather than under the cost-sharing agreement. National Union appealed under 9 U.S.C. 16(a)(1)(A), (B), the Federal Arbitration Act. The Seventh Circuit reversed. Hennessy waived any right to ask the arbitrator to award punitive damages, fines, or penalties for an allegedly unreasonable delay. Having submitted a dispute to arbitration that explicitly excludes a particular remedy, a party cannot sue in court for that remedy.View "Hennessy Indus., Inc. v. Nat'l Union Fire Ins. Co." on Justia Law

Berrey was injured in an automobile accident at work. The at‐fault driver, who did not work with Berrey, carried liability insurance, but the cost of Berrey’s injuries exceeded the policy’s limit. Berrey received partial compensation under her employer’s workers’ compensation scheme but, because her employer was not responsible for the accident, state law granted the workers’ compensation carrier a lien on any recovery from the at‐fault driver. The at‐fault driver’s insurer paid its full policy limit directly to the workers’ compensation carrier. Travelers provided underinsured motorist coverage to Berrey’s employer. The policy covered an employee injured by a third-party who did not carry adequate auto insurance to fully compensate for the employee’s loss. Travelers paid Berrey the difference between her total calculated damages and the at‐fault driver’s policy limit. Berrey claims that Travelers improperly deducted the at-fault driver’s insurance payment from the total it owed to Berrey because that payment was made directly to the workers’ compensation carrier rather than to Berrey herself. The district court entered summary judgment in favor of Travelers. The Seventh Circuit affirmed, finding that the language of the policy supported Travelers’s calculation and that Berrey’s reading would undermine the purpose of underinsured motorist coverage.View "Berrey v. Travelers Indem. Co. of Am." on Justia Law

Lodholtz, injured in 2011 while working at a Pulliam plant in Indiana, filed suit against Pulliam in state court. Pulliam asked Granite State, its insurer, to defend and indemnify. Granite State declined, believing that Pulliam was not liable because Lodholtz could claim workers’ compensation. Lodholtz argued that he was employed by another firm although he was injured on Pulliam’s premises and obtained default judgment for $4 million. Pulliam assigned him its rights against Granite State, which had unsuccessfully moved to intervene in Lodholtz’s suit, then sought a federal declaratory judgment that it had no duty to indemnify. Meanwhile, the Indiana court of appeals affirmed, reasoning that Granite State had sought leave to intervene under a reservation of rights. Indiana courts forbid the insurer to control the defense of the insured without acknowledging coverage. The Indiana Supreme Court declined review. The federal district court subsequently ruled that because Lodholtz’s employer had “leased” Lodholtz to Pulliam, he had been Pulliam’s employee, and that the Indiana judgment should be “disregarded.” The Seventh Circuit granted a petition under 28 U.S.C. 1292(b) and dismissed Granite State’s suit. The U.S. Supreme Court is the only federal court with appellate authority over state courts, but would have had no authority in this case because it involved no issue of federal law.View "Lodholtz v. Granite State Ins. Co." on Justia Law