Insurance Law

Dist. Ct. did not err in dismissing plaintiffs-insureds’ action, seeking declaration that they were entitled to recover under commercial insurance policy issued by defendant-insurance company for lost income as result of “physical loss or damage” done to their customers’ properties, when customers’ businesses were either shut down or reduced in operation because of COVID-19-related government orders. While plaintiffs claimed that COVID-19 virus caused such physical loss or damages to customers’ properties, such that loss of income to plaintiffs arising out of said shutdown/reduction of customer’s businesses was covered by defendant’s policy, Ct. of Appeals held that instant temporary loss of use or restriction on use of customers’ properties did not constitute physical damage or loss. As such, plaintiff’s claims for lost income arising out of closure/restriction of customers’ properties were not covered by defendant’s insurance policy.

Dist. Ct. did not err in granting plaintiff-insurance company’s motion for summary judgment in action seeking declaration that it did not owe coverage to defendant-insured for 2019 fire damages to its warehouse based upon exclusion in relevant insurance policy. Record showed that defendant learned on two occasions in 2017 that its sprinkler system in warehouse lacked working water supply, and that problem with sprinkler system was never fixed. Moreover, policy stated that it would not pay for losses resulting from fire under circumstances, where: (1) insured knows of any “suspension or impairment” to its automatic sprinkler system; and (2) insured failed to notify plaintiff of said suspension or impairment. As such, Dist. Ct. could properly find that instant exclusion applied, where it was undisputed that defendant was aware of sprinkler system impairment and never notified defendant of said impairment. Ct. rejected defendant’s contention that exclusion should not apply because impairment at issue was sealed water line that was located outside warehouse.

Dist. Ct. did not err in granting defendant-insurer’s motion for summary judgment in plaintiff-insured’s action, seeking to have defendant pay insurance policy proceeds to satisfy $14 million settlement of underlying action under section 14 of Securities Exchange Act filed by investors in entity that eventually merged with plaintiff, where investors claimed that entity had failed to disclose some internal projections of entity’s future growth that could have been used to negotiate higher merger price for investors than one agreed to by entity. Exclusion in policy provided that defendant need not indemnify plaintiff for any amount of settlement of any inadequate consideration claim, and Dist. Ct. could properly have found that underlying investors’ lawsuit that resulted in instant settlement was essentially inadequate consideration claim, where, according to investors, reason that alleged disclosures by entity were inadequate was because entity failed to reveal that merger price was too low.

Dist. Ct. erred in: (1) denying plaintiff-insurance company’s motion for summary judgment in action seeking declaration that it did not owe duty to defend insured-swine farm in underlying nuisance action, where plaintiff based its denial on “other insurance” provision in policy issued by plaintiff; and (2) partially granting summary judgment motions filed by two defendants-insurance companies that also issued policies covering swine farm, where said defendants sought reimbursement from plaintiff for some or all of their costs in successfully defending swine farm in underlying action. Relevant language in “other insurance” provision in plaintiff’s policy stated that plaintiff had no duty to defend insured if insurance applicable to plaintiff’s policy was excess coverage to another policy that provided coverage, and record showed that policy issued by one defendant covered loss at issue in underlying action that was also covered by plaintiff’s policy. As such, “other insurance” provision in plaintiff’s policy applied, and plaintiff was not obligated to defend insured in underlying action, and defendants could not seek pro rate share of their defense costs. Fact that plaintiff’s policy did not provide excess coverage with respect to other defendant’s policy did not require different result.

Dist. Ct. erred in granting defendant-insurance company’s motion for summary judgment in plaintiff-employee’s ERISA action, alleging that defendant arbitrarily stopped making payments on long-term disability benefits provided by defendant's policy, and that defendant violated 29 USC section 1133 by failing to tender to plaintiff all documents used by defendant to make determination to stop said benefits prior to making said determination. While plaintiff made initial claim in 2013 for long-term disability benefits that were paid by defendant for six years prior to decision in 2019 to stop said benefits, 2018 Amendment to procedural regulations issued under section 1133 required that defendant provide claimants with any information sufficiently in advance of any adverse determination so as to give claimants reasonable opportunity to respond to said information. Moreover, record showed that defendant based stoppage of benefits on physician report that was not given to plaintiff prior to defendant stopping said benefits. As such, plaintiff was entitled to new determination after he has been given physician’s report and any other information used by defendant to stop his benefits. Ct. also raised possibility that defendant could make same decision after giving plaintiff opportunity to respond to information used to stop plaintiff’s benefits.

Dist. Ct. did not err in finding in favor of defendant, who obtained $400,000 default judgment in personal injury action arising out of car accident with insured’s truck driver, even though plaintiff sought finding in instant declaratory judgment action that certain endorsement in insurance policy issued to insured did not entitle defendant to any proceeds under policy. Under instant endorsement, plaintiff agreed to pay any judgment resulting from negligence in operation or use of insured’s motor vehicle subject to financial responsibility requirements of sections 29 and 30 of Motor Carrier Act (Act). Endorsement applied, where record showed that: (1) accident occurred, while insured’s truck driver, who had driven from Illinois to Indiana to deliver first load, had empty truck but was on route in Indiana to pick up second load for return trip to Illinois; and (2) accident occurred during interstate journey that included arrangements for interchange of property, which in turn was subject to financial responsibility requirements set forth in Act. Ct. further observed that plaintiff was not entitled to re-litigate state court entry of default judgment, even though insured did not cooperate with plaintiff prior to entry of default judgment.