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

Allen suffered a fatal heart attack in 2009, leaving a wife of three years, Arlene, and three adult children from a previous marriage. At the time of Allen’s death, his daughter and her children lived with Allen and Arlene. Allen had a will bequeathing $100,000, but his assets passed outside of probate, leaving his estate with insufficient funds for the bequest. Allen had designated his children as beneficiaries of assets, including a home, life insurance policies, retirement accounts, and other savings accounts. Allen had one life insurance policy as part of his compensation package as a pharmacist, which provided $74,000 in basic coverage and $341,000 in supplemental coverage. If the policyholder failed to designate a beneficiary by his date of death, the proceeds would pass to the policyholder’s spouse by default. The insurer never received any indication that Allen wished to designate a beneficiary. In the days following Allen’s death, however, the children found a change-of-beneficiary form, allegedly completed by their father more than a year before his death, but never submitted. The district court ruled in Arlene’s favor, finding that even if Allen had filled out a change-of-beneficiary form he had not substantially complied with policy requirements for changing beneficiaries. The Seventh Circuit affirmed. View "Kagan v. Kagan" on Justia Law

Third Site is a Comprehensive Environmental Response, Compensation and Liability Act (CERCLA) site that was part of a larger area, under common ownership by the Bankerts, used for recycling industrial wastes. Cleanup initially focused on other sites, but in 1987 and 1992 consultants found concentrations of volatile organic compounds; Third Site was transferring pollutants to Finley Creek, which flows to Eagle Creek Reservoir, which supplies Indianapolis drinking water. The creek was realigned. In 1999, the EPA entered into an Administrative Order by Consent (AOC) with potentially responsible parties. Non-Premium Respondents agreed to undertake an Engineering Evaluation and Cost Analysis (EE/CA) of removal alternatives and to settle a trust to bankroll the EE/CA. Premium Respondents, allegedly de minimis contributors, were entitled to settle out with a one-time Trust contribution under 42 U.S.C. 9622(g). Non-Premium Respondents met their obligations. In 2002, the parties entered into a second AOC to perform work described by the Enforcement Action Memorandum: Non-Premium respondents had the same Trust obligations for removal efforts. The Bankerts are Non-Premium Respondents under both AOCs, but have not met their obligations. In 2008, the Trustees sued the Bankerts and their insurers, seeking cost recovery under CERCLA, 42 U.S.C. 9607(a), and Indiana law. One of the insurers argued that its successful litigation in connection with cleanup of the adjoining site precluded a finding of coverage. Entering summary judgment for the Bankerts, the district court construed the CERCLA claim as seeking contribution under 42 U.S.C. 9613(f), and barred by the statute of limitations, so that issues concerning the insurer were moot. The Seventh Circuit remanded reinstated claims under 42 U.S.C. 9607(a)(4)(B), to recover costs incurred under the 2002 AOC and against the insurer. On rehearing, the court clarified that a party responsible for contamination may obtain an immediately effective release from the EPA in a settlement, or it may obtain only a performance-dependent conditional covenant not to sue with an accompanying disclaimer of liability. Whether, and when, a given settlement “resolves” a party’s liability under 42 U.S.C. 9613(f)(3)(B) is case-specific and depends on its terms. In this case, the AOC did not provide for resolution upon entering into the agreement. View "Bernstein v. Bankert" on Justia Law

Plaintiffs, insured under employer health plans, filed a proposed class action alleging that health-insurance companies violated Wisconsin law by requiring copayments for chiropractic care. The insurance code prohibits insurers from excluding coverage for chiropractic services if their policies cover the diagnosis and treatment of the same condition by a physician or osteopath. The policies at issue provide chiropractic coverage, although, like other services, it is subject to copayment requirements. The complaint cited provisions of the Employee Retirement Income Security Act for recovery of benefits due, 29 U.S.C. 1132(a)(1)(B) & 502(a)(3), and for breach of fiduciary duty, sections 1132(a)(3), 1104. The district court dismissed. The Seventh Circuit affirmed. Nothing in ERISA categorically precludes a benefits claim against an insurance company. The complaint alleges that the insurers decide all claims questions and owe the benefits; on these allegations the insurers are proper defendants on the 1132(a)(1)(B) claim. The complaint nonetheless fails to state a claim for breach of fiduciary duty; setting policy terms, including copayments, determines the content of the policy, and decisions about the content of a plan are not themselves fiduciary acts. View "Larson v. United Healthcare Ins. Co." on Justia Law

Amicas agreed to a merger for $5.35 per Amicas share. Shareholders sued in Massachusetts state court, contesting the adequacy of a proxy statement used to seek approval. A preliminary injunction stopped the vote. The suit settled when a third party made a $6.05 per-share tender offer. Amicas shareholders gained $26 million. The lawyers who filed the suit sought attorneys’ fees based on the difference between the bids. Carolina Casualty had issued a policy covering what Amicas and its directors pay their own litigation lawyers and what Amicas must pay adversaries’ lawyers. The state court awarded $3,150,000, using a lodestar of $630,000 (1,400 hours at $450 per hour) times five, to reflect the risk of nonpayment and “an exceptionally favorable result.” Carolina Casualty filed a diversity suit, claiming that coverage was limited to $630,000. The district judge affirmed, but denied damages for bad faith or vexatious failure to pay. The Massachusetts appeal settled with payment of a sum that cannot be affected by the results of federal litigation. The Seventh Circuit held that the case was not moot, but affirmed, rejecting an argument that the award constituted excluded “civil or criminal fines or penalties … punitive or exemplary damages, the multiplied portion of multiplied damages.” View "Carolina Cas. Ins. Co v. Merge Healthcare Solutions, Inc." on Justia Law

The Wehrles were struck by drunk-driver Barth. Robert Wehrle’s injury claim exceeded $750,000 and his wife's claim exceeded $1.5 million. Barth’s auto insurance policy included a $100,000 per-person liability limit. Each recovered that amount from Barth’s insurer. The Wehrle’s own policy, issued by Cincinnati, included underinsured-motorist coverage, for up to $1 million. Cincinnati paid $800,000, reasoning that the Wehrles’ policy reduces its $1 million maximum payout “by all sums paid by anyone who is legally responsible,” and that the Wehrles had recovered $200,000 from Barth’s insurer. The Wehrles claimed that the $100,000 that they each received from the drunk-driver’s insurer should reduce their individual claims. The district court ruled in favor of the insurer. The Seventh Circuit affirmed, holding that the policy language unambiguously supported the insurer’s interpretation and was consistent with the gap-filling purpose of underinsured-motorist insurance. View "Wehrle v. Cincinnati Ins. Co." on Justia Law

In 2006, Kevin and his wife Marjorie moved to Indiana, to manage car dealerships owned by Savoree. In 2007 Savoree proposed selling the dealerships to the couple through a series of stock purchases to be financed by a $3.5 million loan from CSB. After negotiating the loan with CSB, Kevin took out a life insurance policy with Cincinnati Life that named Marjorie as the beneficiary. Two months later, Kevin assigned that policy to CSB. The couple eventually declared bankruptcy and litigation between all of the parties ensued. Kevin died of cancer in 2010. Cincinnati Life deposited the proceeds, $3 million, with the clerk of court and sought judicial determination of ownership. The district court dismissed Marjorie’s claims with prejudice for failing to meet pleading standards and entered summary judgment for CSB. The Seventh Circuit affirmed, finding that Marjorie did not present any evidence to create a genuine disputed issue of material fact. She identified lack of consideration for the assignment as a potential disputed fact, but the assertion was made and repeated without any support or citation to evidence. View "Cincinnati Life Ins. Co. v. Beyrer" on Justia Law

In 1987, Kenseth underwent surgical gastric banding, covered by her insurer. About 18 years later Dr. Huepenbecker, advised another operation for severe acid reflux and other problems resulting from the first surgery. Her employer provided insurance through Dean, a physician-owned integrated healthcare system, specifically excluding coverage for “surgical treatment or hospitalization for the treatment of morbid obesity” and services related to a non-covered benefit or service. Plan literature refers coverage questions to the customer service department. Huepenbecker worked at a Dean-owned clinic, scheduled surgery at a Dean-affiliated hospital, and instructed Kenseth to call her insurer. Kenseth spoke with a customer service representative, who stated that Dean would cover the procedure. After the surgery, Dean declined coverage. Kenseth was readmitted for complications. Dean denied coverage for the second hospitalization. Kenseth pursued internal appeals to obtain payment of the $77,974 bill before filing suit under ERISA, 29 U.S.C. 1001, and Wisconsin law. The district court granted Dean summary judgment. The Seventh Circuit affirmed as to estoppel and pre-existing condition claims, but remanded concerning breach of fiduciary duty. After the district court again entered summary judgment for Dean, the Supreme Court decided Cigna v. Amara, clarifying relief available for a breach of fiduciary duty in an ERISA action. The Seventh Circuit remanded, stating that Kenseth has a viable claim for equitable relief. View "Kenseth v. Dean Health Plan, Inc." on Justia Law

Atkinson filed suits against Kenray. Kenray filed a separate action against Hoosier, seeking insurance coverage for Atkinson’s claims. Atkinson and Kenray settled their suits. Kenray agreed to entry of judgments in favor of Atkinson. Atkinson agreed not to execute the judgments if Kenray pursued the coverage action against Hoosier. Kenray assigned claims against its insurance agent to Atkinson. State courts entered judgment in favor of Hoosier. Meanwhile, Atkinson sued Kenray’s insurance agent asserting errors and omissions claims. The agent obtained summary judgment. Atkinson returned to the district court that presided over the original suits to set aside the settlement covenant. Atkinson claimed fraudulent inducement: that it entered the agreement based upon Kenray’s representations that its agent had confirmed that Kenray had insurance coverage for Atkinson’s claims. The court held that, because the covenant contained an unambiguous integration clause, parol evidence could not be considered, but that if Atkinson could prove fraud in the inducement specific to the integration clause, it might prevail. Atkinson conceded that it could not establish fraudulent inducement as to the integration clause itself. The court declined to set aside the agreement. The Seventh Circuit reversed, holding that Indiana law does not impose the bright-line rule applied by the trial court. View "Judson Atkinson Candies, Inc. v. Kenray Assocs., Inc." on Justia Law

Prince was the general contractor for construction of an apartment building. Rybaltowski was an employee of a waterproofing company. His boss took Rybaltowski to the project site to perform an unpaid demonstration of the proposed caulking of windows. While Rybaltowski was at the site, a beam supporting masonry equipment fell on him. Less than an hour after the accident, Prince signed a subcontract with the waterproofing company. The insurance policy at issue was a Commercial General Liability Insurance policy with an exclusion from coverage for bodily injury to any contractor arising out of or in the course of the rendering or performing services of any kind or nature whatsoever by such contractor. “Contractor” was defined to include employees of subcontractors. The district court entered judgment in favor of the insurer, finding it had no duty to defend. The Seventh Circuit reversed and remanded, reasoning that the policy can be interpreted so that services are not provided until the contractor begins compensated work on the project. View "Atl. Cas. Ins. Co. v. Prince Contractors, Inc." on Justia Law

Morris died after a 2004 collision in Indiana; he was a passenger in Sampson’s vehicle. Sampson was insured by Mid-Century. The Estate made a claim for $50,000, the highest allowable amount. Nuzzo, a citizen of Ohio, was the assigned claims adjustor. The Estate ultimately filed a wrongful death suit. An Indiana state court awarded $1.2 million. Sampson assigned his rights against Mid-Century for an agreement that the Estate would not pursue collection against Sampson personally. In 2011, the Estate sued Mid-Century in California state court, alleging that its bad faith failure to pay the claim resulted in the excess jury verdict against Sampson. The court dismissed on forum non conveniens grounds. The Estate then sued Mid-Century and Nuzzo in Ohio state court, alleging tortious bad faith failure to pay the claim and breach of contract. The case was removed to an Ohio federal district court, then transferred to the district court in Indianapolis, which found that claims against Nuzzo were potentially viable under Ohio law, but that Indiana law governed both claims, so that Nuzzo was fraudulently joined. The court dismissed claims against Nuzzo and denied the Estate’s motion to remand. The Seventh Circuit vacated with instructions to remand, finding that Nuzzo was not fraudulently joined. View "Morris v. Nuzzo" on Justia Law