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

The Developer converted a vacant building into a residential condominium by gutting and refitting it. The Developer purchased Commercial Lines Policies covering bodily injury and property damage from Nautilus, covering periods from June 1998 through June 2000. The policies define occurrence as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions,” but do not define accident. The policies exclude damage to “that particular part of real property on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the ‘property damage’ arises out of those operations;” eliminate coverage for damage to “that particular part of any property that must be restored, repaired or replaced because ‘your work’ was incorrectly performed on it;” and contain an endorsement entitled “Exclusion—Products-Completed Operations Hazard.’ Construction was completed in 2000; the Developer transferred control to a board of owners. By May 2000, one homeowner was aware of water damage. In 2005, the Board hired a consulting firm, which found that the exterior brick walls were not fully waterproofed and concluded that the deterioration had likely developed over many years, even prior to the condominium conversion, but that the present water penetration was the result of inadequate restoration of the walls. The Board sued the Developer. Nautilus denied coverage and obtained a declaratory judgment. The Seventh Circuit affirmed, reviewing the policy and finding that the shoddy workmanship, of which the board complained, was not covered by the policies; that Nautilus did not unduly delay pursuing its declaratory suit; and that the alleged damage to residents’ personal property occurred after the portions of the building were excluded from coverage.View "Nautilus Ins. Co. v. Bd. of Dirs. of Regal Lofts Condo Ass'n" on Justia Law

Illinois insurance regulators permitted WellPoint to acquire RightCHOICE health insurance. WellPoint caused RightCHOICE Insurance to withdraw from the Illinois market. WellPoint offered the policyholders costlier UniCare policies as substitutes. Those who chose not to pay the higher premiums had to shop for policies from different insurers, which generally declined to cover pre-existing conditions. Former RightCHOICE policyholders filed a purported class action. The district court declined to certify a class and entered judgment against plaintiffs on the merits. No one appealed. Absent certification as a class action, the judgment bound only the named plaintiffs. Their law firm found other former policyholders and sued in state court. Defendants removed the suit under 28 U.S.C. 1453 (Class Action Fairness Act); the proposed class had at least 100 members, the amount in controversy exceeded $5 million, and at least one class member had citizenship different from at least one defendant. Plaintiffs sought remand under section 1332(d)(4), which says that the court shall “decline to exercise” jurisdiction if at least two-thirds of the class’s members are citizens of the state in which the suit began and at least one defendant from which “significant relief” is sought is a citizen of the same state. The district court declined remand, declined to certify a class, and again rejected the case on the merits. The Seventh Circuit affirmed, stating that “Counsel should thank their lucky stars that the district court did not sanction them under 28 U.S.C. 1927 for filing a second suit rather than pursuing the first through appeal."View "Phillips v. Wellpoint Inc." on Justia Law

Hayssen and its employees were parties to a Plant Closing Agreement that promised medical benefits upon retirement. In 1996, Bemis acquired Hayssen and assumed its obligations. Bemis reduced benefits under the Agreement: increasing co-pays and deductibles and eliminating its prescription drug program. Former employees sued under the Employee Retirement Income Security Act, 29 U.S.C. 1132, and the Labor-Management Relations Act, 29 U.S.C. 185(a). The court certified a class, but granted summary judgment to Bemis, reasoning that the Agreement did not establish a lifetime interest in a certain level of benefits. About a month later, Bemis eliminated all medical benefits under the Agreement. The Seventh Circuit reversed, concluding that the parties intended to provide lifetime medical coverage. On remand, the court granted a preliminary injunction forcing Bemis to restore the benefits eliminated in 2009 and provide a basic Medicare Part D drug benefit. The court awarded fees and costs, finding that the company’s position was not substantially justified. The judge struck billing entries that were vague or for time not reasonably expended on the case, concluded that the lawyers’ billing rates were reasonable, and calculated the lodestar amount to reach an award of $403,053.75, for four years of advocacy, including an appeal and trial preparation. The Seventh Circuit affirmed. View "Temme v. Bemis Co., Inc." on Justia Law

In 2004 Fox was charged with the sexual assault and murder of his three-year-old daughter. Detectives coerced a confession and delayed testing of DNA evidence, leaving Fox imprisoned for eight months, separated from his wife and son. His defense finally obtained the DNA evidence and had it tested at a private lab; the results excluded Fox and charges were dropped. Fox sued under 42 U.S.C. 1983 and state law alleging due process violations, malicious prosecution and intentional infliction of emotional distress. A St. Paul policy required the insurer to defend the detectives to its policy limit, $1 million. Will County also had excess liability policies for $5 million from AAIC (secondary) and Essex (tertiary). Under AAIC’s policy it was not required to assume “settlement or defense” until the underlying policy had been exhausted. None of the policies covered punitive damages. The detectives were represented by a firm retained by St. Paul. The jury awarded $15.5 million, including $6.2 million in punitive damages. Offers to settle for less, before and after the verdict, were rejected. St. Paul exhausted its policy limit; AAIC assumed the defense. The detectives assigned to the Foxes any claims against the insurers in exchange for a covenant not to seek punitive damages from the detectives’ personal assets. The Seventh Circuit upheld $8,166,000 of the damages awarded, including $3.4 million in punitive damages. Fox sought a declaratory judgment that AAIC breached its good faith duties to reasonably settle the claims and inform the detectives of their conflicts of interest. The district court dismissed, reasoning that AAIC, as excess insurer, never had any control over the defense before judgment and therefore had no duty to settle the claims or alert the detectives to any potential conflicts of interest. The Seventh Circuit affirmed View "Fox v. Am. Alt. Ins. Corp." on Justia Law

The Patient Protection and Affordable Care Act, 42 U.S.C. 18002, provides $5 billion to reimburse employers and their proxies for outlays on early retirees’ medical care. WEA, which administers health-care programs on behalf of Wisconsin school districts, told them that it would collect on their behalf. It decided to use the money to reduce future premiums. The school districts claim that WEA should have rebated premiums for the years in which the retirees received the medical care that led to the federal payments. The difference matters to school districts that want to switch carriers. WEA’s plan to cut future rates, rather than provide rebates, gave it a competitive advantage. Districts filed suit, characterizing WEA’s choice to allocate no money to districts, that switch carriers as a form of conversion. All of the claims arise under state law and all litigants are citizens of Wisconsin. WEA removed to federal court, contending that the Act and its implementing regulations are the crux of the litigation. The Seventh Circuit ordered the case returned to state court, reasoning that the suit does not necessarily raise any issue of federal law and that the McCarran-Ferguson Act, 15 U.S.C. 1011–15, gives states preeminence in the domain of insurance regulation. View "Hartland Lakeside Joint No. 3 Sch. Dist. v. WEA Ins. Corp." on Justia Law

Northern, operated by VanDuinen, was a general contractor on public construction projects, legally required to obtain surety bonds. Hanover was Northern’s bonding agent and required Northern to enter into an Indemnity Agreement, which VanDuinen signed in his individual capacity and as Northern’s President. The Midway Airport Project was financed by the FAA and managed by Parsons. In 2008 Northern won the bid and began subcontracting. in 2009 subcontractors complained that Northern failed to pay them in accordance with the bonds and contracts. Work was halted, resulting in a separate complaint, by Parsons, for failure to complete the Project as required. The FAA opted to retain possession of remaining contract funds, $127,086.00, pending resolution of the disputes and completion of the work. Hanover received claims from subcontractors McDaniel ($127,452.78) and Rex Electric ($78,495.00) and a claim for performance from Parsons. Hanover demanded collateral under the Agreement. Northern refused to post collateral or to indemnify Hanover. In 2009 McDaniel filed for bankruptcy; the bankruptcy trustee sued Hanover seeking payment for work performed. In 2012, Hanover paid the trustee $127,452.78 to resolve both McDaniels’s and Rex Electric’s claims. Hanover resolved Parson’s claim by stepping in as general contractor and arranging for completion of the Project. Parsons paid Hanover the $127,086.00 of contract funds the FAA had withheld. Hanover sued Northern and VanDuinen. The district court granted summary judgment in Hanover’s favor. The Seventh Circuit affirmed. The Agreement is unambiguous. Northern breached it, and Hanover is entitled to contractual damages. View "Hanover Ins. Co. v. Northern Bldg. Co." on Justia Law

Holder was an Illinois correctional officer since 2006. His wife began to suffer from mental health problems relating to opiate dependency. The Family and Medical Leave Act (FMLA) entitles eligible employees to 12 work weeks of leave during a 12-month period to care for a spouse with a serious medical condition, 29 U.S.C. 2612(a)(1). In October 2007, Holder submitted an FMLA certification form. His wife’s psychiatrist indicated that it would “be necessary for the employee to take off work only intermittently or to work less than a full schedule as a result of the condition,” and that the need for leave would continue for an “unknown” duration. The request was approved. The state never asked for additional medical documentation and paid its share of his health insurance premium until April 18, 2008. About 130 days of absence were recorded on a day-by-day basis. On April 18, 2008, Holder was advised that his FMLA leave had expired and that additional leave would be under the Illinois Family Responsibility Leave program, which allows up to a year of unpaid leave; the state only covers insurance premiums for six months. In April-June 2008, Holder took 29 absences, citing the state program. The Warden disapproved requests for June 8-9 and on the denied form, Holder wrote “last one!!!” Eight months later Central Management Services informed Holder that the state had mistakenly paid for his health insurance premiums beyond his entitlement and began deducting 25% of his earnings until he had refunded $8,291.83. Holder sued, claiming interference with FLMA rights. The jury returned a verdict in favor of the state, but the judge entered judgment awarding Holder $1,222.10 for January 2008, but entered a judgment for the state for the rest of the months. The Seventh Circuit affirmed. View "Holder v. IL Dep't of Corrs." on Justia Law

Hall, the debtor in bankruptcy, is a former distributor of asbestos products. Tens of thousands of asbestos claims were filed against Hall, which had $10 million remaining in insurance coverage from one of its insurers, Integrity, itself bankrupt. Integrity challenged whether the policy covered the loss for which Hall was seeking indemnity. The parties agreed to settle for $4.125 million; the bankruptcy judge approved the settlement. Columbia, an excess insurer of Hall’s asbestos liabilities, with maximum coverage of $6 million, was concerned that Hall, having settled against Integrity rather than persisting in litigation, increased the likelihood of Columbia’s having to honor its secondary‐coverage obligation. Columbia filed an objection to the settlement. The bankruptcy judge refused to consider the objection, on the ground that Columbia had no right to object. The district judge affirmed. The Seventh Circuit, affirmed, stating that the matter was not a question of “standing,” but whether the Bankruptcy Code, in providing that “a party in interest, including the debtor, the trustee, a creditors’ committee, an equity security holders’ committee, a creditor, an equity security holder, or any indenture trustee, may raise and may appear and be heard on any issue in a case [arising] under” the Code, 11 U.S.C. 1109(b), conferred a right to be heard on a debtor’s insurer. View "In Re: C.P. Hall Co." on Justia Law

The general contractor of a Wisconsin construction project, hired Harsco to supply scaffolding. Krien, injured in a fall when a plank on a scaffold on which he was standing, broke, sued Harsco. The parties settled his claim for $900,000. Harsco filed a third‐party complaint against the contractor, seeking indemnification plus interest and attorneys’ fees. The district judge granted the contractor summary judgment. The Seventh Circuit reversed and remanded after examining the complex provisions of the contract between the two. The plank may or may have been supplied by Harsco and may or may not have been defective, as claimed by Krien, who could not sue Riley in tort, because against his employer his only remedy for a work‐related accident was a claim for workers’ compensation, but there has never been judicial resolution of these questions, because Krien’s suit was settled before there was any judgment. Indemnification, however, is a form of insurance, and could apply even if the party seeking indemnification was negligent. Riley’s duty to indemnify Harsco extends to legal expenses incurred by Harsco in defending against Krien’s suit and in litigating this suit. View "Krien v. Harsco Corp." on Justia Law

Lewis was injured in an automobile accident and her health plan paid $180,000 for her medical treatment Lewis filed a tort suit against the driver (her son-in-law), represented by Georgia lawyer Lashgari, and obtained a $500,000 settlement. Lashgari knew the plan had a subrogation lien, but split the proceeds between himself and Lewis. He claimed that the plan was owed nothing. The plan filed suit under ERISA to enforce the lien, 29 U.S.C. 1132(a)(3). The defendants argued that because the settlement funds have been dissipated, the suit was actually for damages, not authorized by ERISA. The district judge ordered the defendants to place $180,000 in Lashgari’s trust account pending judgment. The defendants did not comply. A year later, the defendants having neither placed any money in a trust account nor produced any evidence of their inability to pay, the judge held them in civil contempt, ordered them to produce records that would establish their financial situations, and ordered Lashgari to documents relating to the contempt to the General Counsel of the State Bar for possible disciplinary proceedings against him. The defendants appealed the contempt order. The Seventh Circuit dismissed, characterizing the appeal as frivolous and the defendants’ conduct as outrageous. View "Cent. States, SE & SW Areas Health & Welfare Fund v. Lewis" on Justia Law