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

Ron and Lorrie Meier investigated the purchase of a life insurance policy for Ron through Monarch Solutions. While they considered a policy offered by Lincoln, a nurse assessed Ron’s health and prepared a “Medical Supplement” and “Examiner’s Report.” Ron ultimately applied for a policy with Pacific. In June 2018, Pacific received a copy of the medical forms previously submitted to Lincoln. On July 26, Ron completed his Pacific application, referencing the Lincoln “medical examination.” Ron agreed to several terms, including a provision requiring him to update Pacific “in writing of any changes” to his health. Pacific accepted Ron’s application on July 30 and began the underwriting process. On August 6, Ron learned he had stage IV lung cancer and immediately began treatment. Ron and Lorrie orally disclosed Ron’s cancer diagnosis to their Monarch representative but did not inform Pacific. On September 6, Pacific delivered Ron's policy. A year later Ron died from lung cancer.After learning that Ron had failed to disclose his terminal cancer before the policy’s issuance date, Pacific rejected Lorrie’s claim. Pursuant to the Illinois Insurance Code, Pacific rescinded the policy and returned the premiums. The district court and Seventh Circuit ruled in favor of Pacific. Ron’s failure to inform Pacific of the diagnosis constituted a material misrepresentation allowing for the policy's rescission. View "Meier v. Pacific Life Insurance Co." on Justia Law

Stant is a manufacturer of products for automobile suppliers and automobile manufacturers, including vapor management systems, fuel delivery systems, and thermal management systems. The spread of COVID-19 in early 2020 and the ensuing government orders curtailing the operation of non-essential businesses resulted in the suspension or reduction in operations by Stant’s customers. Stant alleged that it suffered over $5.3 million in derivative financial losses.Stant sought to recover under an “all-risk” insurance policy sold by FM. Under the Contingent Time Element coverage in that policy, Stant argued it was entitled to coverage for lost income as a result of “physical loss or damage” at its customers’ properties. Stant claimed that the COVID-19 virus caused such “physical loss or damage” to its customers’ properties and that its resulting business interruption losses were covered under the policy. Stant sought a declaratory judgment that it was entitled to recover under a commercial insurance policy issued by FM. The Seventh Circuit affirmed the dismissal of the suit. The temporary loss of use or restrictions on use do not constitute “physical” damage or loss. View "Stant USA Corp. v. Factory Mutual Insurance Co." on Justia Law

Fun's warehouse had a functional sprinkler system with a working water supply. In 2016, an inspector from Legacy found no problems. In 2017, the inspector found the system had no water pressure. South Bend Water Works could not explain the problem and had no record of shutting off the water. Two months later, Fun contacted the fire inspector, who did not know how to restore the water. Fun's owner again called the Water Works and was told there was no record of disconnection. He asked the operator to restore the water and “assumed that she was going to ... figure out what was going on.” Fun never heard from any Water Works personnel and did not check whether the water was restored. In 2018, another Legacy employee performed the inspection. Fun was not notified of any problems. A fire destroyed the warehouse in 2019. Fun claimed losses exceeding $7 million. The city apparently had capped the pipe supplying the sprinkler system in 2017 when the neighboring building was demolished. Fun's Frankenmuth insurance policy contained an exclusion for situations in which the insured knew of any suspension or impairment in any protective safeguard, including sprinkler systems, and failed to notify Frankenmuth.Frankenmuth obtained a declaratory judgment that it did not owe insurance coverage. The Seventh Circuit affirmed. Cao had knowledge in 2017 that the system had no water yet never reported that impairment nor determined that the problem was solved. View "Frankenmuth Mutual Insurance Co. v. Fun F/X II, Inc." on Justia Law

Selective denied coverage of Creation's insurance claim. Creation sued for breach of contract and won. Creation then pursued costs and fees for Selective’s vexatious and unreasonable delay under the Illinois Insurance Code, 215 ILCS 5/155. The Seventh Circuit held that the remedy was unavailable. Creation then sued Selective’s in-house lawyer, the lawyer’s supervisor, and its outside counsel, alleging they tortiously interfered with the contract between Selective and Creation.The Seventh Circuit affirmed the dismissal of the suit. The suits were an attempt at double recovery—one from the principal and one from its agents. The corporate form limits, not doubles, liability. In Illinois, tortious interference requires some sort of interloper and precludes applying the economic loss doctrine to claims for tortious interference. Illinois provides a corporation’s agents with a conditional privilege, rooted in the business judgment rule, from tortious interference suits. When an agent acts in the corporation’s interests, she is protected from liability for interfering in her principal’s contractual affairs. When an agent interferes with a contract, she is presumed to do so for the company’s benefit. Under Illinois law, overcoming the privilege was Creation’s burden to plead, and its failure to do so with more than mere conclusory allegations dooms its suit. View "Creation Supply, Inc. v. Hahn" on Justia Law

Joy Global and Komatsu agreed to merge. Joy sent its investors disclosures required under the Securities Exchange Act, 15 U.S.C. 78n. Subsequent suits contended that Joy violated the Act by not disclosing some internal projections of Joy’s future growth that could have been used to negotiate a higher price, rendering the proxy statements fraudulent, and that Joy’s directors violated their state law duties by not maximizing the price for the shareholders. The suits settled for $21 million.The district court held that the $21 million loss is not covered by insurance. The policies do not require indemnification for “any amount of any judgment or settlement of any Inadequate Consideration Claim other than Defense Costs.” An “inadequate consideration claim” is that part of any Claim alleging that the price or consideration paid or proposed to be paid for the acquisition or completion of the acquisition of all or substantially all the ownership interest in or assets of an entity is inadequate.The Seventh Circuit affirmed. The suits assert the wrongful act of failing to disclose documents that could have been used to seek a higher price and are within the definition of “inadequate consideration claim.” The claims do not identify any false or deficient disclosures about anything other than the price. The only objection to this merger was that Joy should have held out for more money, and that revealing this would have induced the investors to vote “no.” View "Joy Global Inc. v. Columbia Casualty Co." on Justia Law

Department of Labor regulations required the administrator of an employee benefit plan to give a claimant, “upon request,” copies of “all documents, records, and other information” that the administrator considered in making an adverse benefit determination. In 2018, the regulations were amended to eliminate “upon request” and require an administrator to provide such information “sufficiently in advance” of an adverse determination “to give the claimant a reasonable opportunity to respond.”Zall, a dentist for 20 years, sought long-term disability benefits in 2013 after pain and numbness forced him to stop working. His insurer, Standard denied the claim. In 2014, after considering additional medical information and consulting an orthopedic surgeon, Standard approved Zall’s claim, including retroactive payments. Less than a year later, Standard began reviewing his case to see if his condition was subject to a 24-month benefit limit applicable to any disability “caused or contributed to by … carpal tunnel or repetitive motion syndrome” or “diseases or disorders of the cervical, thoracic, or lumbosacral back and its surrounding soft tissue.” Standard ultimately terminated Zall’s benefits.Zall filed suit under the Employee Retirement Income Security Act, 29 U.S.C. 1001, arguing that the decision was arbitrary and capricious and that Standard violated ERISA’s procedural requirements by failing to afford him “a full and fair review.” The district court granted Standard summary judgment. The Seventh Circuit reversed and remanded. The plain language shows that the amended regulation applies; Standard failed to comply. View "Zall v. Standard Insurance Co." on Justia Law

Sandstone operated large-scale swine farms in Scott County. Its owner also owned Red Oak. In 2007-2008, Westfield insured Sandstone. After 2008, Indemnity insured Sandstone. Star provided insurance to Red Oak. Sandstone was named as an additional insured under Star’s policy in 2009. In 2010, neighbors brought private nuisance claims against Sandstone in Illinois state court (“Marsh action”). Sandstone notified the three insurance companies. Each agreed to defend Sandstone, subject to a reservation of rights. Indemnity, citing a coverage exclusion for claims involving ”pollutants,” sought a declaratory judgment that it had no duty to defend. Sandstone withdrew its tender of defense to Indemnity, which dismissed its suit without prejudice. Star and Westfield split the defense of the Marsh action. An Illinois appellate court held that odor claims involving a hog facility are not “traditional environmental pollution” and are not excluded under insurance policy pollution exclusions, which foreclosed Indemnity’s earlier argument. Sandstone notified Indemnity, which filed another federal declaratory judgment action. In the Marsh action, a jury returned a verdict in favor of Sandstone. Westfield and then sought reimbursement of their defense costs.Reversing the district court, the Seventh Circuit ruled in favor of Indemnity. Its insurance is "excess" and Star had a duty to defend, so Indemnity’s “other insurance” provision relieves it of any duty to defend Sandstone. Indemnity is not estopped from asserting that defense because it promptly responded to Sandstone’s tender of defense. View "Indemnity Insurance Co. of North America v. Westfield Insurance Co." on Justia Law

Humphrey was a Riteway driver. His trips began in Illinois, often ending in another state. In 2013 Humphrey drove a truck to Indiana. After he delivered the freight, Riteway directed him to another site in Fort Wayne. While driving to the pickup site, Humphrey’s truck collided with Wright's car. After cooperating with the police, Humphrey picked up his load and delivered it to Illinois. Wright sued Riteway in Indiana state court and obtained a default judgment. Riteway's Prime Insurance policy contained an endorsement that provides payments to an injured party even when the insurer need not defend or indemnify its client. A federal court determined that Riteway had forfeited the benefit of Prime’s policy but reserved questions about whether Wright could recover under the endorsement. The Indiana judiciary declined to allow Prime to attack the default judgment.Prime sought a declaratory judgment that the endorsement did not apply. The endorsement applies to any judgment “resulting from negligence ... subject to the financial responsibility requirements of Sections 29 and 30 of the Motor Carrier Act of 1980.” Those statutes have been repealed but the parties stipulated that 49 U.S.C. 31139(b)(1) applies and provides that all motor freight transportation from a place in one state to a place in another is covered. The district court ordered Prime to pay. The Seventh Circuit affirmed. Humphrey was engaged in interstate freight transportation under the statutory definition regardless of intent, whether a truck was carrying freight, or the “totality” of the circumstances. View "Prime Insurance Co. v. Wright" on Justia Law

Jane held a minority stake in Du-Kane and Crush-Crete, companies owned by her husband, Paul, and other family members. The couple divorced in 2009. Jane died in 2017. Paul died months later. In 2017 Jane’s estate sued, alleging that Jane’s ownership interest was wrongfully diluted after the divorce. The complaint named only Du-Kane as the defendant, though the allegations concerned the actions of the couple's four sons as officers, directors, and shareholders. An amended complaint filed in 2018 added Crush-Crete and the Dunteman brothers as codefendants. The codefendants were insured under “claims made” liability policies issued in 2017 and 2018 by Hanover. With “claims made” insurance, the insured must notify the insurer of a “claim” in the policy period in which it is first “made.” If a claim goes unreported in the relevant policy period, the insurer owes no duty to defend or indemnify. The defendants notified Hanover and sought coverage under the 2018 policy. Hanover denied the request because the claim was first made in 2017 and had not been timely reported during that policy period.Hanover sought a declaration that it owed no defense or indemnity. The insureds counter-claimed breach of contract. The Seventh Circuit affirmed judgment for Hanover. The original complaint triggered a reportable claim during the 2017 policy period. Subsequent amendments to that complaint did not commence a new, distinct claim first made in 2018. View "Hanover Insurance Co. v. R.W. Dunteman Co." on Justia Law

Bernacchi was a passenger in a taxicab insured by First Chicago when an uninsured driver struck the cab. In February 2021, an Illinois court concluded that Bernacchi was covered under the First Chicago policy up to $350,000. On February 11, 2021, Bernacchi sent First Chicago documentation, requesting $350,000, though she valued her entire loss at $680,000. On May 11, 2021, Bernacchi filed suit in federal court, alleging that First Chicago had still not done anything to adjust her claim.The district dismissed, reasoning that Bernacchi’s complaint failed to cite any contract language creating an obligation to adjust her claim or to do so within a certain timeframe; Bernacchi’s claim relied upon the Illinois Insurance Code, which does not provide a private right of action. The Seventh Circuit affirmed. The district court did not violate the party presentation rule. The parties squarely argued about Illinois insurance statutes and administrative regulations; 215 ILCS 5/215 ILCS 5/154.6 enumerates a list of acts that constitute improper claims practice, but neither it nor its surrounding statutes provide a private right of action. View "Bernacchi v. First Chicago Insurance Co." on Justia Law