Insurance Law

In an insurance coverage matter, the plaintiff insurance company filed a lawsuit seeking rescission of insurance policies issued to the defendants on the basis that the defendants had not disclosed an ongoing dispute when defendants applied for insurance coverage. The district court granted summary judgment in favor of the plaintiff, finding it was entitled to rescind the insurance policies based on material misrepresentations and defendants appealed. The Seventh Circuit affirmed, finding that the failure to disclose the “very real prospect of litigation” constituted a material misrepresentation in the insurance applications and, contrary to defendants’ arguments, the court did not need to determine whether the companies involved in the dispute operated as alter egos because the answer to that question did not change the outcome. (EASTERBROOK and HAMILTON, concurring)

In an insurance coverage matter, the plaintiff sought indemnification from the defendant for claims that the plaintiff settled. The insurance contract did not require plaintiff to give defendant a choice between approving the settlement or assuming defense of the claims, but the defendant argued that Indiana law required that plaintiff do so. The district court agreed with the defendant and granted summary judgment in its favor. The Seventh Circuit reversed, explaining that insurance companies bargain for the rights and obligations that they hold in a contract, including a promise of indemnification, and that while the contract required that plaintiff provide notice of the settlement the plaintiff otherwise retained control over settlement decisions. The Seventh Circuit further explained that Indiana case law did not hold that the tender of defense was an implied condition in an indemnification agreement and the law instead respected the freedom to contract. (ROVNER and JACKSON-AKIWUMI, concurring)

Plaintiffs filed a lawsuit alleging that the defendant, a health insurance company, violated provisions of the Employee Retirement Income Security Act and the Mental Health Parity and Addiction Equity Act when defendant denied coverage of certain therapies for the plaintiff’s minor child on the basis that they were not “evidence based.” The Seventh Circuit affirmed the district court’s summary judgment order in favor of the insurance company, explaining that the plaintiffs were not able to establish that the defendant imposed age-based treatment limitations less stringently on medical benefits than on mental-health benefits and that plaintiffs were required to focus on treatments as a whole, not on a single kind of treatment. (SYKES and KIRSCH, concurring)