Insurance Law

Plaintiff filed a lawsuit seeking to enforce an order entered against the defendant pursuant to a mandatory arbitration requirement contained in a dispute-resolution clause of an insurance policy issued by the plaintiff. Defendant argued that the arbitrators had exceeded their authority by directing defendant to pay the attorneys fees of the plaintiff insurance company. The district court ordered defendant to pay the award in full, defendant appealed, and the Seventh Circuit affirmed. The Seventh Circuit also noted that the defendant was barred from challenging the arbitrators’ findings of fact or legal conclusions under the Federal Arbitration Act and ordered defendant to show cause as to why it should not be sanctioned for bringing a frivolous appeal. (KIRSCH and LEE, concurring)

In an insurance coverage matter arising out of the plaintiff’s alleged violation of the Illinois Biometric Information Privacy Act, the Seventh Circuit sitting in diversity jurisdiction was tasked with determining if there was coverage under any of three insurance policies issued by the defendant, a basic policy, an excess policy, and an umbrella policy. The appellate court affirmed the judgment of the district court, concluding that there was no coverage under the basic and excess policies due to exclusionary language contained in those policies but that there was no language in the umbrella policy that would exclude coverage. The appellate court also noted that because there was at least one other policy that applied to the plaintiff’s BIPA claims, the duty to defend under the umbrella policy would only arise when the limits of that policy were exhausted. The appellate court did not address whether there was a duty to indemnify. (FLAUM and PRYOR, concurring)

Plaintiffs filed a lawsuit for personal injuries against the defendant and defendant entered into an agreement with plaintiffs where defendant stipulated to a judgment and assigned his rights and claims against his automobile insurance company to the plaintiffs. Plaintiffs also executed a covenant not to execute the judgment against defendant personally and then initiated a citation proceeding seeking to discover if defendant’s insurance held any of the defendant’s assets. The insurance company removed the matter to federal court and the district court entered summary judgment for the insurance company after concluding that plaintiffs were not entitled to anything under the insurance policy and had no claim for breach of duty. The Seventh Circuit affirmed, finding that the trial court did not err when it concluded that the insurance company satisfied its duty to defend by providing counsel to the defendant and that the insurance company’s duty to settle was never triggered and, as a result, that the insurance company could raise the legally responsible provision in the insurance policy as a defense to coverage. (HAMILTON and PRYOR, concurring)

Plaintiff filed a lawsuit under the Employee Retirement Income Security Act after his claim for long-term disability benefits was denied, arguing that the insurance company’s finding that he was not disabled within the meaning of the plan was arbitrary and capricious. The Seventh Circuit affirmed, finding that while the denial letters were not thorough in their explanation of the denial, the plan administrator nevertheless communicated rational reasons for its decision that were based on a fair reading of the plan and the plaintiff’s medical records and this met the requirements under ERISA. (JACKSON-AKIWUMI and PRYOR, concurring)

Plaintiff, an insurance company, sought declaratory judgment arguing that a commercial general liability policy it issued to the defendant did not cover expenses incurred by the insured to repair defective steel columns that the insured contracted with a third company to fabricate and install in a construction project. The Court of Appeals affirmed the judgment of the trial court finding that there was no duty to defend or indemnify, explaining that the defects in the columns did not constitute “property damage” as it was defined under the policy. (LEE, concurring and SCUDDER, concurring in part and dissenting in part) 

Plaintiff filed a malpractice lawsuit against a janitorial company that cleaned a medical facility that provided dialysis treatments after developing sepsis. The parties entered into an agreement where defendant agreed not to defend the case and plaintiff agreed to seek recovery only from defendant’s insurance company. The trial court held an uncontested bench trial and entered judgment for the plaintiff. The insurance company then removed the action to federal court and the district court concluded that a bacteria exclusion in the policy excluded coverage. The Seventh Circuit affirmed, finding that the district court did not err when it found that a bacteria exclusion in an insurance policy excluded coverage. (WOOD and SCUDDER, concurring)