Insurance Law

In ERISA action by plaintiffs-chiropractors and others alleging that defendant-insurance company used wrong procedure when determining how much to pay plaintiffs for services rendered to patients under health plan, Dist. Ct. erred in finding that plaintiffs were “beneficiaries” of health plan so as to entitle them to bring instant action under ERISA. Section 1132(a)(1)(B) grants to plan participants or beneficiaries ability to enforce in federal court instant procedure sought by plaintiffs. However, plaintiffs conceded that they were not participants of plan as defined in section 29 USC section 1002(7), and record showed that plaintiffs were not “beneficiaries” of plan where they did not show either that they had been designated by any participant in terms of assignment of claim or had been designated as participant in any employee benefit plan. As such, plaintiffs could only bring instant action in state court.

Dist. Ct. did not err in dismissing plaintiff-insured’s action alleging that defendant-insurance company breached its commercial general liability policy by failing to defend or indemnify plaintiff in underlying lawsuit that alleged that plaintiff recorded clients’ phone calls that contained confidential information without their permission and without notifying them of said recording. Defendant had no duty to defend or indemnify plaintiff on underlying lawsuit, where: (1) language in policy provided plaintiff with coverage only if there was oral or written “publication” of material that violated person’s right of privacy; and (2) allegations of lawsuit did not accuse plaintiff of communicating contents of subject recordings to anyone or that plaintiff accessed or listened to recordings after they were made so as to qualify as “publication” for purposes of coverage under policy. Ct. rejected plaintiff’s argument that publication was achieved where clients’ confidential matters were transmitted to plaintiff’s recording devices.

Dist. Ct. did not err in granting plaintiff’s motion for summary judgment in ERISA action alleging that defendant-insurance company wrongfully determined that plaintiff was ineligible for long-term disability benefits because, according to defendant, plaintiff’s vision impairment failed to meet definition of disability in subject insurance policy. Under de novo review, plaintiff proved by preponderance of evidence that she was disabled under terms of policy. Moreover, Dist. Ct. could properly find that State of Illinois insurance regulation (i.e., 50 Ill. Admin. Code section 2001.3) applied so as to nullify provision in policy that reserved discretion to defendant to interpret terms of policy, even though defendant argued that section 2001.3 was preempted by ERISA, since section 2001.3 was specifically directed toward entities engaged in insurance and it substantially affected risk pooling arrangement between insurer and insured.

Dist. Ct. erred in granting defendant-insurance company’s motion for summary judgment in action alleging that defendant breached contract to insure life insurance policies developed by parties and brokered by plaintiff, where defendant informed plaintiff four months after signing contract that it was terminating agreement because instant policy had not been approved by defendant’s internal review process. Contract contained ambiguity as to whether defendant could terminate contract at will, which precluded issuance of summary judgment, where parties presented conflicting extrinsic evidence as to said issue. Ct. also found existence of material fact as to: (1) whether defendant breached implied covenant of good faith, where plaintiff produced internal email from defendant’s CEO indicating that defendant was not acting “with integrity” in denying approval of proposed policy; and (2) whether proposed policy had actually been approved by defendant. Ct. rejected defendant’s argument that it could terminate contract at any time because termination provision contained no limit on timing of termination. (Partial dissent filed.)

Dist. Ct. did not err in granting plaintiff-insured’s motion for summary judgment in action alleging that defendant-insurance company breached terms of general commercial liability policy by failing to defend plaintiff in underlying action by employee of subcontractor, who was injured while performing insulation work at insured’s property. While “Employee Exclusion” clause in policy supported defendant’s contention that instant accident was not covered event, policy’s “Contractor-Subcontracted Work Endorsement” provided coverage for work “being performed specifically and solely for you.” As such, policy contained ambiguity with respect to coverage that must be resolved in favor of providing coverage, where defendant had drafted terms of policy.