Insurance Law

In a case involving insurance coverage, the Seventh Circuit considered the narrow issue of whether and to what extent the owner of a home in foreclosure has an insurable interest in the property after a judgment of foreclosure, after a judicial sale, and after expiration of all of the owner’s rights of redemption but before judicial confirmation of the foreclosure sale. The Seventh Circuit affirmed the district court’s finding that although the homeowner still held legal title to the property when it was destroyed by a fire, he had no legal right to redeem it from foreclosure or otherwise to retain it and, as a result, his only insurable interest was in the value of his temporary right of possession. (KIRSCH and JACKSON-AKIWUMI, concurring)

Plaintiff insurance company filed a lawsuit against the defendant seeking to recoup defense costs in an underlying lawsuit, claiming that the defendant had the duty to defend. The district court concluded that the primary policy provided by the plaintiff’s assignor covered the underlying lawsuit and, as a result, the defendant did not have a duty to provide defense costs. The Seventh Circuit agreed and affirmed, explaining that based on the plain language of the insurance contract the defendant would pay defense costs only for losses not covered by any other insurance policy. (SYKES and RIPPLE, concurring)

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)