Justia Professional Malpractice & Ethics Opinion Summaries
Articles Posted in Insurance Law
Stroud v. Ozark Nat’l Life Ins. Co.
Cathy L. Stroud sued Ozark National Life Insurance Company and its agent, Stephen Guinn, for negligent misrepresentation and breach of fiduciary duty after her husband, Alan Stroud, converted his term life insurance policy to a whole life policy, reducing the death benefit. Cathy claimed that Guinn's advice led to the conversion, which was against their best interests. Alan had a 20-year term life insurance policy with a $60,000 death benefit, which he converted to a whole life policy with a $30,000 death benefit shortly before his death.The Sedgwick District Court granted summary judgment in favor of Ozark and Guinn, concluding that Cathy failed to establish a fiduciary duty and that Guinn did not supply false information. Cathy appealed, and the Kansas Court of Appeals affirmed the district court's judgment, agreeing that Cathy did not present sufficient evidence to establish a fiduciary duty or negligent misrepresentation.The Kansas Supreme Court reviewed the case and affirmed the lower courts' decisions. The court held that Cathy failed to establish a fiduciary relationship because there was no evidence that Guinn consciously assumed fiduciary duties. The court also held that Cathy did not present evidence of an affirmative misrepresentation by Guinn, as required for a negligent misrepresentation claim under Restatement (Second) of Torts § 552. The court noted that Cathy's claim was more akin to fraud by silence, which was not pleaded or argued.The Kansas Supreme Court concluded that summary judgment was appropriate because Cathy did not establish genuine issues of material fact for trial on her claims of breach of fiduciary duty and negligent misrepresentation. Consequently, the court affirmed the district court's denial of Cathy's motion to amend her petition to add a claim for punitive damages. View "Stroud v. Ozark Nat'l Life Ins. Co.
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AIG Specialty Insurance Company v. Conduent State Healthcare, LLC
Conduent State Healthcare, LLC (Conduent) was hired by the State of Texas to administer its Medicaid program. In 2012, Texas began investigating Conduent for allegedly helping orthodontics offices overbill for services. Texas sued several orthodontic providers in 2014, and the providers sued Conduent. Texas terminated its contract with Conduent and sued Conduent under the Texas Medicaid Fraud Prevention Act. Conduent was insured by AIG Specialty Insurance Company, ACE American Insurance Company, and Lexington Insurance Company, among others. The insurers provided defense coverage for the provider actions but denied coverage for the state action, claiming it involved fraudulent conduct excluded by the policies.The Superior Court of Delaware found that the insurers breached their duty to defend Conduent in the state action. The court also ruled that Conduent was relieved of its duties to cooperate and seek consent before settling with Texas due to the insurers' breach. The jury found that Conduent acted in bad faith and fraudulently arranged the settlement but did not collude with Texas or settle unreasonably. The Superior Court granted a new trial due to evidentiary issues and the jury's inconsistent verdicts.The Supreme Court of Delaware affirmed the Superior Court's rulings. It held that the insurers' breach of their duty to defend excused Conduent from its duties to cooperate and seek consent. The court also ruled that the policy's fraud exclusion did not bar indemnity coverage because the settlement was allocated to breach of contract damages. The court found that the evidentiary issues and the jury's inconsistent verdicts justified a new trial to prevent manifest injustice. View "AIG Specialty Insurance Company v. Conduent State Healthcare, LLC" on Justia Law
Philadelphia Indemnity Insurance Co. v Kinsey & Kinsey, Inc.
Bellin Memorial Hospital hired Kinsey & Kinsey, Inc. to upgrade its computer software. Kinsey failed to implement the agreed-upon software, leading Bellin to sue Kinsey in Wisconsin state court for breach of contract and other claims. Bellin also sued Kinsey’s president and a senior product consultant. Kinsey’s insurer, Philadelphia Indemnity Insurance Company, provided a defense under a professional liability insurance policy. During the trial, Bellin and Philadelphia Indemnity entered into a partial settlement, resolving some claims and specifying the conditions under which Bellin could collect damages from Kinsey. Bellin prevailed at trial and was awarded damages.The Wisconsin circuit court ruled that the limited liability provision in the Agreement did not apply due to Kinsey’s material breach. The court granted a directed verdict on the breach of contract claim against Kinsey, leaving the question of damages to the jury. The jury awarded Bellin $1.39 million, later reduced to $750,000 plus costs. The jury found Kinsey and its president not liable for intentional misrepresentation and misleading representation.Philadelphia Indemnity filed a declaratory judgment action in the United States District Court for the Northern District of Illinois, seeking a declaration that the state court’s judgment was covered by the insurance policy and that the $1 million settlement offset the $750,000 judgment. The district court ruled for Bellin, concluding that the state court judgment was not covered by the insurance policy.The United States Court of Appeals for the Seventh Circuit affirmed the district court’s decision. The court held that the insurance policy covered only negligent acts, errors, or omissions, and the state court’s judgment was based on a breach of contract, not negligence. Therefore, the $1 million set-off provision did not apply, and Bellin could recover the full amount of the judgment. View "Philadelphia Indemnity Insurance Co. v Kinsey & Kinsey, Inc." on Justia Law
BrunoBuilt, Inc. v. Auto-Owners Insurance Company
BrunoBuilt, Inc. contracted with William and Amy Dempsey to build a home in the Boise Foothills. With the help of insurance agent Randy L. Richardson, BrunoBuilt purchased a Tailored Protection Policy (TPP) from Auto-Owners Insurance Company, which included "Builders' Risk" coverage. The policy excluded damage caused by landslides. In 2016, the Dempsey project was not included in the TPP renewal, allegedly due to Richardson's negligence. Shortly after, the nearly completed Dempsey home was damaged by a landslide. BrunoBuilt sued Richardson and Auto-Owners, claiming Richardson negligently failed to advise about landslide coverage and failed to renew the Dempsey project. BrunoBuilt also claimed Auto-Owners was vicariously liable for Richardson's negligence.The District Court of the Fourth Judicial District of Idaho granted summary judgment in favor of Auto-Owners, concluding Richardson was not acting as Auto-Owners' agent and that the policy excluded landslide damage. BrunoBuilt appealed.The Supreme Court of Idaho reviewed the case and found that the district court erred in granting summary judgment. The court held that the 2015 policy, which excluded only naturally occurring landslides, might still apply because Auto-Owners did not provide the required notice of the reduction in coverage in the 2016 policy, which excluded both naturally occurring and human-caused landslides. The court also determined that Auto-Owners bore the burden of proving the applicability of the landslide exclusion. The case was reversed and remanded for further proceedings to determine whether the 2015 policy's coverage continued and whether Richardson was acting as Auto-Owners' agent when he failed to renew the policy. The court did not award attorney fees to either party. View "BrunoBuilt, Inc. v. Auto-Owners Insurance Company" on Justia Law
United Services Automobile Association v. Estate of Minor
Hurricane Katrina destroyed Paul and Sylvia Minor’s home in 2005. The Minors had a homeowner’s insurance policy with United Services Automobile Association (USAA) that covered wind damage but excluded storm surge or flood damage. USAA issued payments for wind damage but not for storm surge or flood damage, leading to a dispute. The Minors claimed a total loss due to wind and demanded policy limits. In 2013, a jury awarded the Minors $1,547,293.37 in compensatory damages.The Minor Estate appealed a pretrial order granting partial summary judgment to USAA on the Minors’ bad faith claim. The Mississippi Court of Appeals reversed the trial court’s decision, finding a genuine issue of material fact regarding USAA’s denial and delay of payment. The case was remanded for further proceedings on the bad faith claim. On remand, a jury awarded the Minors $10,000,000 in punitive damages and $457,858.89 in extra-contractual damages (attorneys’ fees). USAA appealed, and the Minor Estate cross-appealed the denial of its post-trial motion for additional attorneys’ fees.The Supreme Court of Mississippi reviewed the case and found no reversible error, affirming the jury’s award of $10,457,858.89 in damages. The court also reversed and rendered attorneys’ fees on behalf of the Estate in the amount of $4,500,000, plus post-judgment interest. The court held that the trial judge did not err in submitting the issue of punitive damages to the jury and that the $10 million punitive damages award was not unconstitutionally disproportionate. The court also found no error in the jury’s award of extra-contractual damages and no errors warranting a new trial. View "United Services Automobile Association v. Estate of Minor" on Justia Law
GEICO v. Mayzenberg
GEICO, a group of insurance companies, presented evidence that the defendants, collectively known as the Mayzenberg Defendants, paid third parties for referring patients eligible for no-fault insurance benefits to Mingmen Acupuncture, P.C. GEICO argued that this constituted an illegal kickback scheme, violating New York's rules of professional misconduct, and thus, under the Eligibility Regulation (11 N.Y.C.R.R. § 65-3.16(a)(12)), Mingmen was ineligible to receive no-fault payments. The Mayzenberg Defendants contended that paying for patient referrals might be professional misconduct but did not violate a "licensing requirement" under the Eligibility Regulation.The United States District Court for the Eastern District of New York granted summary judgment in favor of GEICO, agreeing that the Mayzenberg Defendants paid for patient referrals and that this conduct rendered Mingmen ineligible for no-fault benefits. The court also granted GEICO summary judgment on its common law fraud and RICO claims, based on the same conclusions about Mingmen’s ineligibility.The United States Court of Appeals for the Second Circuit reviewed the case and found that while the facts established that the Mayzenberg Defendants paid for patient referrals, the legal question of whether this conduct violated a "licensing requirement" under the Eligibility Regulation was unsettled. Given the lack of clear precedent from the New York Court of Appeals and the significant policy implications, the Second Circuit certified the question to the New York Court of Appeals to determine if paying for patient referrals in violation of New York Education Law § 6530(18) and 8 N.Y.C.R.R. § 29.1(b)(3) disqualifies a provider from receiving no-fault payments under the Eligibility Regulation. View "GEICO v. Mayzenberg" on Justia Law
Stormo v. State National Insurance Co.
Joan Stormo and her siblings hired attorney Peter Clark for a real estate transaction, but Clark's actions caused the deal to fall through. Stormo sued Clark for malpractice and won. Clark's insurer, State National Insurance Company, denied coverage based on a prior-knowledge exclusion and Clark's delay in reporting the lawsuit. Stormo, as Clark's assignee, then sued State National for breach of contract and unfair claim-settlement practices.The U.S. District Court for the District of Massachusetts found that factual questions necessitated a trial on the breach-of-contract claim but granted summary judgment to State National on the unfair claim-settlement practices claim. The jury found for Stormo on the breach-of-contract claim, awarding over $1 million in damages. However, the district court granted State National's motion for judgment as a matter of law, ruling that Clark's late notice of the claim voided coverage under the policy.The United States Court of Appeals for the First Circuit affirmed the district court's judgment. The court held that under Massachusetts law, a claims-made policy like Clark's does not require the insurer to show prejudice from late notice to deny coverage. Since Clark failed to provide timely notice, State National had no duty to indemnify or defend him. Consequently, Stormo's claims for breach of contract and unfair claim-settlement practices failed. View "Stormo v. State National Insurance Co." on Justia Law
Badaruddin v. 19th Judicial District
In this case, the plaintiff, Shandor S. Badaruddin, was sanctioned by the Nineteenth Judicial District Court, Lincoln County, for his conduct as defense counsel in a criminal trial involving his client, Kip Hartman, who faced multiple felony charges related to securities and insurance fraud. The trial was conducted under strict time constraints due to the COVID-19 pandemic, and the court allocated equal time for both the prosecution and defense. Badaruddin was accused of mismanaging his allotted time, leading to a mistrial declaration by the District Court.The District Court found that Badaruddin had deliberately delayed the trial, which led to the mistrial. Consequently, the court imposed monetary sanctions amounting to $51,923.61 against Badaruddin for the costs associated with the trial. Badaruddin appealed the sanctions, arguing that he was not given adequate notice of the court's concerns and that his actions were not deliberate but rather a result of the challenging circumstances.The Supreme Court of the State of Montana reviewed the case and noted that the U.S. District Court had previously ruled that the mistrial declaration was erroneous. The U.S. District Court found that Badaruddin's actions did not constitute deliberate delay and that his efforts to manage the trial time were competent. The U.S. District Court's ruling was affirmed by the U.S. Court of Appeals for the Ninth Circuit, which held that Hartman could not be retried due to double jeopardy protections.Given the federal court's findings, the Supreme Court of Montana concluded that there was no basis for the sanctions under § 37-61-421, MCA, as there was no multiplication of proceedings. The court reversed the District Court's sanction order, determining that the costs incurred were not "excess costs" as defined by the statute. View "Badaruddin v. 19th Judicial District" on Justia Law
Medical Mutual Insurance Co. of North Carolina v. Gnik
A former patients of Pediatric Partners for Attention and Learning, Inc. and its founder, Dr. Joni Johnson, sued them in state court after discovering that the clinic’s in-house psychologist, Sharonda Avery, was not a licensed psychologist. The clinic and Dr. Johnson asked their professional liability insurance carrier, Medical Mutual Insurance Company of North Carolina, to defend and indemnify them in those lawsuits. Medical Mutual responded by filing a declaratory judgment action in federal court, arguing that it could rescind the policy covering Pediatric Partners and Dr. Johnson due to Dr. Johnson’s material misstatements in her insurance applications. The United States Court of Appeals for the Fourth Circuit ruled that Medical Mutual has no duty to indemnify or defend Dr. Johnson or Pediatric Partners under Virginia law due to material misstatements made by Dr. Johnson in her policy applications. The court affirmed the district court's decision that Dr. Johnson's misrepresentation that none of her employees had been subject to disciplinary investigative proceedings was a material misstatement, and therefore, Medical Mutual could rescind its professional liability policy covering Pediatric Partners and Dr. Johnson. View "Medical Mutual Insurance Co. of North Carolina v. Gnik" on Justia Law
Schulman v. Axis Surplus Ins. Co., Inc.
This case involves Jeremy Schulman, a former shareholder at the Maryland law firm Shulman, Rogers, Gandal, Pordy & Ecker. Schulman sued insurance companies AXIS Surplus Insurance Company, Endurance American Specialty Insurance Company, and Prosight Syndicate 1110 at Lloyd’s, for breach of contract, detrimental reliance, and lack of good faith, claiming that they wrongfully denied his claim for coverage under his law firm's professional liability insurance policy. The dispute hinges on whether Schulman's indictment in a criminal case qualifies as a "claim" under his professional liability insurance policy, and whether a letter from the insurance companies promising to cover certain costs relating to a subpoena also covered costs related to the later indictment. Schulman also alleges that the insurers acted in bad faith.The United States Court of Appeals for the Fourth Circuit affirmed the district court's decision, granting summary judgment to the defendants. The court held that Schulman's indictment in the criminal case did not constitute a "claim" under his professional liability insurance policy, and that the insurers' letter did not promise to cover costs related to the indictment. The court also held that Schulman's claim of bad faith could not succeed because he was not entitled to coverage under the policy and the insurers did not breach any tort duty by denying coverage. View "Schulman v. Axis Surplus Ins. Co., Inc." on Justia Law