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

Plaintiffs' insurance policy indemnifies them against liability under several federal environmental protection laws or the state-law equivalents. They attempted to invoke their policy for up to $10 million in coverage following an explosion on one of their vessels that resulted in an oil spill in the Chicago Sanitary and Ship Canal. The district court granted the insurer judgment on the pleadings that: it owed $5,000,000 per vessel, per incident and had fully honored the policy with respect to one vessel; it owed no coverage for either two others for in rem liability. It granted the insureds summary judgment on their breach of contract claim, finding that the insurer owed $5,000,000 in coverage for a vessel, was obligated to pay defense costs up to that amount, and had breached its contract by not doing so. It denied summary judgment on a claim of breach of the duty of good faith and fair dealing. The Seventh Circuit affirmed.

The company, an egg producer, was charged in class action suits with conspiring to fix the price of eggs, in violation of section 1 of the Sherman Act. and requested that its liability insurers defend. The company argued that the complaints sought damages for what its policies call "personal and advertising injury," defined as injury. arising out of a list of torts that includes use of another's advertising idea in your advertisement. The insurer refused and the district court granted summary judgment in favor of the insurer. The Seventh Circuit affirmed, noting that the antitrust complaints make no mention of the company's theory that consumers might believe that advertised "free-roaming" chicken management policies are an attempt to justify prices.

The class action alleges that the company committed fraud by charging for uninsured or underinsured motorist coverage that is worthless in light of policy restrictions. The district court remanded to state court based on the representative plaintiff's argument that the amount in controversy was less than $5,000,000. The Seventh Circuit reversed, calculating the cost if the company were to stop charging a premium or change the terms so that policyholders receive indemnity more frequently, and the availability of punitive damages in Illinois, and concluding that it is not "legally impossible" that policyholders would recover the jurisdictional amount.

After being diagnosed with fibromyalgia, chronic pain, anxiety, and depression, plaintiff was awarded long-term disability benefits under an employee benefit plan issued and administered by defendant. Benefits were discontinued a little more than 24 months later, when defendant determined that plaintiff had received all to which she was entitled under the plan’s self-reported symptoms limitation. Because plaintiff had retroactively received social security benefits, defendant also sought to recoup equivalent overpayments as provided by the plan. On rehearing, the Seventh Circuit reversed the district court ruling in favor of defendant. The application of the self-reported symptoms clause was unreasonable under ERISA, 29 U.S.C. 1001; the disabling illness, fibromyalgia, is not primarily based on self-reported symptoms, but rather can be based on the verifiable evidence of its manifestations. The Social Security Act, 42 U.S.C. 407(a), does not preclude recovery of any overpayment that resulted from receipt of social security benefits.

Before his death, the orthodontist designated his sons as beneficiaries of a pension plan he had established for his business. Because the Employee Retirement Income Security Act, 29 U.S.C. 1001. The Plan moved for summary judgment.guarantees surviving spouses certain benefits, his wife signed a written consent form. After her husband died, wife claimed her consent was invalid because it was not witnessed, as required by ERISA. The pension plan denied her claim for benefits. The district court upheld that decision, invoking the substantial-compliance doctrine. The Seventh Circuit affirmed, but held that the substantial-compliance doctrine did not apply because ERISA is not silent on the issue of witnessing. The plan was within its discretion to deny the claim. Although no witness signed the consent form as a witness, it is clear that the orthodontist, then the plan representative, witnessed his wife's written consent to the waiver, as required by ERISA.

In attempting to enroll his infant daughter, a covered employee failed to complete parts of the form indicating whether the child resided with employee, was dependent upon employee for more than 50 percent support and maintenance, and whether the child qualified to be claimed as a tax exemption on employee's federal tax return. The plan made several inquiries before sending a notice that coverage was denied. The employee did not appeal. The plan sued under the Employee Retirement Income Security Act , 29 U.S.C. 1001, to recover $472,357.84 paid to the medical college and $1,199,538.58 paid to the hospital on behalf of the child. The district court dismissed. The Seventh Circuit affirmed dismissal of the ERISA claim. The plan reserves the right to recover against "covered persons" if it has paid them or any other party on their behalf. Neither the treating entities nor the child are covered persons. Because the plan is not implicated, state law claims were not preempted; the court reversed dismissal of those claims. Plaintiffs' position was not unreasonable; the district court abused its discretion in awarding attorney fees.

When plaintiffs left their jobs, they did not receive notices describing how to extend their health insurance coverage within the period prescribed by statute (COBRA notices). Responding to solicitation from a lawyer, they became named plaintiffs in a proposed class action seeking damages from and statutory penalties against their former employer. The district court declined to certify the class and, on consideration of the individual claims, denied the request for statutory penalties and one of the plaintiffs' requests for damages. The Seventh Circuit affirmed. The district court properly denied class certification because it found the proposed class counsel inadequate to represent the class, based on observations about counsel's diligence, respect for judicial resources, and promptness. Denial of statutory penalties under 29 U.S.C. 1132 was appropriate; there was no evidence of an administrator's bad faith (such as misrepresentations or willful delay in response to requests for information) or gross negligence. The district court was within its discretion in denying damages as compensation for expenses, where there was no evidence to indicate that the expenses were incurred as a result of the failure to provide timely notice of COBRA rights.

A developer was required to make public improvements to be turned over to the city and, in 2006, obtained bonds to ensure performance, as required by ordinance. Work began, but the subdivision failed and subcontractors filed mechanics' liens. The developer notified the city that three foreclosures were pending and recommended that it redeem the bonds. The insurer refused to pay. The city did not follow up, but a subcontractor sued, purporting to bring its case in the name of the city for its own benefit. The subcontractor contends that it should be paid out of the proceeds of the bonds. The case was removed to federal court. The district court dismissed, finding that the subcontractor did not have standing to assert claims on the bonds because it was not a third-party beneficiary to the bonds. The Seventh Circuit affirmed, based on the language of the contract.

The company previously gave retirees credit toward their share of health care costs, based on unused sick-leave. Union workers could take that sum in cash or put it toward the premium. Executives who quit before retirement, or decided not to participate in the plan, did not receive any other form of compensation for unused leave. It had value only as a credit toward retirement health-care costs. In 2008 the company amended the plan and stopped paying any part of retirees' health-care costs. Money for employees who could have taken their balances in cash is put in an account administered by the health-care plan. Retirees, including executives who never had an option to take balances in cash, plus one who had that option but elected to leave the money on deposit, filed suit under the Employee Retirement and Income Security Act, 29 U.S.C. 1081. The district court granted judgment on the pleadings to the company. The Seventh Circuit affirmed. The company, which did not take anything out of the plan, but simply reduced the amount it would pay in, reserved the right to amend its health-care plan. It is a business decision, not a legal question, whether to use that authority to retirees’ detriment.

A developer built a subdivision in a floodplain. The developer and buyers knew that the land is low-lying and prone to flooding. The developer constructed levees, floodwalls, retention ponds, and a stormwater holding system. The company that handled construction and sale of buildings in Parcel D had the developer fill one of the retention ponds, so that it could build additional homes; it also constructed duplexes where the developer had planned single-family housing. In 2003 several homes were inundated when a retention pond overflowed. In a state court suit, the company settled with homeowners for$335,000; homeowners agreed to take $35,000 from the company and seek the rest from its insurer. A federal court concluded that the company's insurance policy did not apply, reasoning that homeowners had not suffered "property damage" as defined by the policy because the state court complaint sought changes to curtail future loss. The Seventh Circuit affirmed, noting that neither party had asked the court to apportion the settlement between losses and improvements and that it was too late to do so.