Justia U.S. 3rd Circuit Court of Appeals Opinion Summaries

Articles Posted in Insurance Law
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Basic underinsured motorist (UIM) coverage is equal to the policy's bodily injury limits; Pennsylvania insureds can reduce costs by making a “request in writing” for lower UIM coverage. Gibson signed a State Farm (SF) insurance application for bodily injury coverage of $250,000 with $100,000 in stacked UIM coverage; for the Gibsons' three cars, the total UIM coverage described was $300,000. The application's signature block attested that “the limits and coverages ... were selected by me”; the last page referenced other “required” documents, including an acknowledgment of UIM coverage selection. SF did not provide those additional forms. Gibson was seriously injured in an accident. Weeks later, Gibson returned to SF and signed the form, stating that UIM benefits “are available with limits up to the Liability Coverage limits for bodily injury” and that she had selected “lower limits of $100,000 (per person)/$300,000 (per accident).”Gibson sued for UIM coverage, breach of contract, and bad faith, demanding “the maximum amount of UIM coverage,” of “$300,000.” A Magistrate granted SF summary judgment on the bad faith claim. A jury awarded Gibson $1,750,000. SF moved to mold the verdict to the UIM policy limit, $300,000, listed on the application and in the complaint. Gibson successfully cross-moved to mold the verdict to $750,000 (the $250,000 bodily injury limit stacked for three cars), arguing that the application to elect a lower UIM policy limit did not comply with Pennsylvania’s Motor Vehicle Financial Responsibility Law. The Third Circuit reversed. The statute’s minimal requirement of a “request in writing” for the lower optional UIM coverage was met. The court affirmed the dismissal of the bad faith claim. View "Gibson v. State Farm Mutual Automobile Insurance Co." on Justia Law

Posted in: Insurance Law
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J.L. and D.W. were covered by employer-sponsored Aetna insurance plans that provided out-of-network benefits only in cases of “Urgent Care or a Medical Emergency” (J.L.) or not at all (D.W.). J.L. needed bilateral breast reconstruction surgery and there were no in-network physicians available to perform the procedure. D.W. required facial reanimation surgery—a niche procedure performed by only a few U.S. surgeons. Both were referred for treatment to the Plastic Surgery Center, an out-of-network New Jersey medical practice. The Center negotiated with Aetna, which agreed to pay a “reasonable amount.” The Center billed $292,742 for J.L.’s services, Aetna paid only $95,534.04. Of the $420,750 the Center billed for D.W.’s services, Aetna paid only $40,230.32.The district court dismissed common law breach of contract, promissory estoppel, and unjust enrichment claims, holding that section 514(a) of the Employee Retirement Income Security Act of 1974 (ERISA), 29 U.S.C. 1000, expressly preempted all claims. The Third Circuit reversed as the breach of contract and promissory estoppel claims, which do not require impermissible “reference to” ERISA plans. The claims, as pleaded, plausibly seek to enforce obligations independent of the plan and do not require interpretation or construction of ERISA plans. The claims plausibly arise out of a relationship that ERISA did not intend to govern. View "Plastic Surgery Center, P.A. v. Aetna Life Insurance Co" on Justia Law

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A mortgage conveys an interest in real property as security. Lenders often require borrowers to maintain hazard insurance that protects the property. If the borrower fails to maintain adequate coverage, the lender may buy the insurance and force the borrower to cover the cost (force-placed coverage). States generally require insurers to file their rates with an administrative agency and may not charge rates other than the filed rates. The filed-rate is unassailable in judicial proceedings even if the insurance company defrauded an administrative agency to obtain approval of the rate.Borrowers alleged that their lender, Nationstar, colluded with an insurance company, Great American, and an insurance agent, Willis. Great American allegedly inflated the filed rate filed so it and Willis could return a portion of the profits to Nationstar to induce Nationstar’s continued business. The borrowers paid the filed rate but claimed that the practice violated their mortgages, New Jersey law concerning unjust enrichment, the implied covenant of good faith and fair dealing, and tortious interference with business relationships; the New Jersey Consumer Fraud Act; the Truth in Lending Act, 15 U.S.C. 1601–1665; and RICO, 18 U.S.C. 1961–1968.The Third Circuit affirmed the dismissal of the suit. Once an insurance rate is filed with the appropriate regulatory body, courts have no ability to effectively reduce it by awarding damages for alleged overcharges: the filed-rate doctrine prevents courts from deciding whether the rate is unreasonable or fraudulently inflated. View "Leo v. Nationstar Mortgage LLC of Delaware" on Justia Law

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The Inganamorts docked their 65-foot fishing vessel behind their part-time Boca Raton, Florida residence. In 2011, while they were at their New Jersey home, the ship sank enough to sustain serious damage. They reported the loss to their insurer, Chartis, with whom they had an all-risk policy. Chartis sent a claims specialist, who reported three inches of standing water in the starboard forward cabin bilge and multiple potential sources of water ingress, including a hole in the hull the size of a screw. He found that the electrical breakers were severely rust-stained and blackened from an electrical failure; subsequent testing revealed obvious water intrusion. The final review confirmed the initial findings and identified that the battery charger was not working; without a source of power, the ship’s bilge pumps had ceased functioning.Chartis sought a declaratory judgment that it was not liable for the damage and claimed that the Inganamorts were liable for misrepresentation. The Inganmorts neither filed a statement of facts nor opposed Chartis’s statement of undisputed facts. The district court treated Chartis’s statement of facts as undisputed and granted Chartic summary judgment, finding that the Inganamorts “ha[d] no evidence to demonstrate a fortuitous loss[.]” The Third Circuit affirmed. An insured bears the burden of proving fortuity; the Inganamorts did not meet that burden. View "Chartis Property Casualty Co. v. Inganamort" on Justia Law

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Sapa manufactures aluminum extruded profiles, pre-treats the metal and coats it with primer and topcoat. For decades, Sapa supplied “organically coated extruded aluminum profiles” to Marvin, which incorporated these extrusions with other materials to manufacture aluminum-clad windows and doors. This process was permanent, so if an extrusion was defective, it could not be swapped out; the whole window or door had to be replaced. In 2000-2010, Marvin bought about 28 million Sapa extrusions and incorporated them in about 8.5 million windows and doors. Marvin sometimes received complaints that the aluminum parts of its windows and doors would oxidize or corrode. The companies initially worked together to resolve the issues. In the mid-2000s, there was an increase in complaints, mostly from people who lived close to the ocean. In 2010, Marvin sued Sapa, alleging that Sapa had sold it extrusions that failed to meet Marvin’s specifications. In 2013, the companies settled their dispute for a large sum.Throughout the relevant period, Sapa maintained 28 commercial general liability insurance policies through eight carriers. Zurich accepted the defense under a reservation of rights, but the Insurers disclaimed coverage. Sapa sued them, asserting breach of contract. The district court held that Marvin’s claims were not an “occurrence” that triggered coverage. The Third Circuit vacated in part, citing Pennsylvania insurance law: whether a manufacturer may recover from its liability insurers the cost of settling a lawsuit alleging that the manufacturer’s product was defective turns on the language of the specific policies. Nineteen policies, containing an Accident Definition of “occurrence,” do not cover Marvin’s allegations, which are solely for faulty workmanship. Seven policies contain an Expected/Intended Definition that triggers a subjective-intent standard that must be considered on remand. Two policies with an Injurious Exposure Definition also include the Insured’s Intent Clause and require further consideration. View "Sapa Extrusions, Inc. v. Liberty Mutual Insurance Co." on Justia Law

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Favero’s car struck Alpizar-Fallas's car, causing Alpizar-Fallas serious injuries. Both drivers were insured by Progressive. The next day, Barbosa, a Progressive claims adjuster, went to Alpizar-Fallas's home to inspect her car and have her sign “paperwork” that would “expedite the processing of the property damage claim.” Alpizar-Fallas alleges that he stated that her signature was “necessary” for Progressive to advance her payment. Alpizar-Fallas signed the document. The document was actually a broadly written comprehensive general release of all claims. Barbosa failed to advise Alpizar-Fallas to seek legal counsel and did not communicate with her in Spanish, her native language. Alpizar-Fallas sought damages for the personal injuries she sustained in the accident and amended her complaint to include a class action claim against Progressive and Barbosa under the New Jersey Unfair Claims Settlement Practices Regulations (UCSPR) and the Consumer Fraud Act (CFA). The district court dismissed Alpizar-Fallas’s class action claim to the extent it alleged a violation of the UCSPR because those regulations do not provide a private right of action, then dismissed Alpizar-Fallas’s CFA claim, as a claim for denial of insurance benefits, and construing the CFA to only apply to the “sale or marketing” of insurance policies. The Third Circuit vacated, finding that Alpizar-Fallas’s complaint alleged deception that would be covered by the CFA. View "Alpizar-Fallas v. Favero" on Justia Law

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Dissatisfied with NYCM’s handling of his insurance claim related to a serious car accident, Clemens filed suit, asserting a contractual underinsured motorist (UIM) claim and a claim under the Bad Faith Statute, 42 Pa. Cons. Stat. 8371. After NYCM removed the case to federal court, the parties settled the UIM claim for $25,000. The bad faith claim proceeded to trial. A jury awarded Clemens $100,000 in punitive damages. As the prevailing party under the Bad Faith Statute, Clemens then sought $946,526.43 in attorneys’ fees and costs. The district court reviewed every time entry submitted, performed a traditional lodestar analysis, and concluded that 87 percent of the hours billed had to be disallowed as vague, duplicative, unnecessary, or inadequately supported by documentary evidence. In light of that substantial reduction, the court deemed Clemens’s request “outrageously excessive” and exercised its discretion to award no fee. Represented by new counsel, Clemens appealed. The Third Circuit affirmed, formally endorsing a view adopted by several other circuits: where a fee-shifting statute provides a court discretion to award attorney’s fees, such discretion includes the ability to deny a fee request altogether when, under the circumstances, the amount requested is “outrageously excessive.” View "Clemens v. New York Central Mutual Fire Insurance Co." on Justia Law

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Lupu refinanced his home loan and mortgage with Loan City, which transferred both to IndyMac, then they went to Fannie Mae, next to OneWest, and finally to the current holder, Ocwen. After defaulting, Lupu sued to void the instruments evidencing his debt, challenging the use of the MERS System, a private mortgage registry that allows its members to avoid county-level public recordation when transferring mortgage interests. MERS is named as the mortgagee, as its members’ nominee, so members can transfer mortgage interests among themselves without recording. The system is generally in accord with Pennsylvania law. At one point, Lupu alleged forgery, The district court dismissed his action. A Stewart Title policy insured Loan City, its successors, and assignees, requiring Stewart to pay costs, attorneys’ fees and expenses incurred in defense of the title or the lien, but not “those causes of action which allege matters not insured against.” Steward denied Ocwen's request for defense coverage, except with respect to the forgery claim, stating “Lupu’s arguments concerned the securitization of the note secured by the insured mortgage and the validity of assignments of the insured mortgage rather than the execution and witnessing of the insured mortgage.” The Third Circuit ruled in favor of Stewart, predicting that state courts would not apply the “complete defense" rule, whereby a single covered claim triggers an obligation for the title insurer to defend the entire action. The court applied Pennsylvania’s rule that potentially covered claims are identified by “comparing the four corners of the insurance contract to the four corners of the complaint.” View "Lupu v. Loan City LLC" on Justia Law

Posted in: Insurance Law
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LifeWatch is one of the two largest sellers of telemetry monitors, a type of outpatient cardiac monitoring devices used to diagnose and treat heart arrhythmias, which may signal or lead to more serious medical complications. An arrhythmia can be without noticeable symptoms. Other outpatient cardiac monitors also record the electrical activity of a patient’s heart to catch any instance of an arrhythmia but they vary in price, method of data capture, and mechanism by which the data are transmitted for diagnosis. LifeWatch sued the Blue Cross Blue Shield Association and five of its member insurance plan administrators under the Sherman Act, 15 U.S.C. 1, claiming they impermissibly conspired to deny coverage of telemetry monitors as “not medically necessary” or “investigational,” although the medical community, other insurers, and independent arbiters viewed it as befitting the standard of care. The Third Circuit reversed the dismissal of the complaint. LifeWatch plausibly stated a claim and has antitrust standing. That so many sophisticated third parties allegedly view telemetry monitors as medically necessary or meeting the standard of care undercuts Blue Cross’s theory that nearly three dozen Plans independently made the opposite determination for 10 consecutive years. Read in the light most favorable to LifeWatch, the complaint alleges competition among all outpatient cardiac monitors such that they are plausibly within the same product market. LifeWatch has alleged actual anticompetitive effects in the relevant market. View "Lifewatch Services Inc. v. Highmark, Inc." on Justia Law

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Viviani left Stone Mansion with Hoey. Their vehicle crashed, killing Viviani and seriously injuring Hoey. Hoey sued Viviani’s estate, which tendered the defense to Encompass, which paid Hoey $600,000. Hoey released her claims. Encompass sued Mansion, alleging: it stands in the shoes of the insured estate; Mansion served Viviani alcohol while he was visibly intoxicated; under Pennsylvania’s Dram Shop law, a business that serves alcohol to a visibly intoxicated person is legally responsible for any damage that person might cause; and under the Uniform Contribution Among Tortfeasors Act (UCATA).In email correspondence, Mansion’s counsel informed Encompass that “I will be authorized to accept service.” Encompass sent counsel a copy of the filed complaint and an acceptance form via email. Counsel replied, “I will hold the acceptance ... [for] the docket n[umber].” That same day, Encompass provided the docket number. Mansion later claimed that, because it had not been properly served, it could remove the case to federal court. Encompass sought remand. The court concluded that the forum defendant rule precludes removal only if any of the parties in interest properly joined and served as defendants is a citizen of the state and that counsel did not accept service. The court then dismissed: The Dram Shop law indicates that a licensee is liable only to third persons (Hoey), for damages inflicted upon the third person (off premises) by the licensee's customer when the licensee furnishes that customer with alcohol when he was visibly intoxicated. … Encompass is acting as if it were Viviani in order to recover under [UCATA]. Because there is no potential cognizable Dram Shop claim between Viviani/Encompass and Mansion, there is no contribution claim.The Third Circuit upheld removal of the case, rejecting an argument that it is “inconceivable” that Congress intended the rule to permit an in-state defendant to remove an action by delaying service of process. Stone Mansion’s conduct did not preclude removal. The court reversed the dismissal. Encompass does not argue that it is entitled to recovery in tort against Stone Mansion but presents a distinct claim for contribution under the UCATA. Pennsylvania’s Dram Shop law does not prohibit this manner of recovery. View "Encompass Insurance Co v. Stone Mansion Restaurant Inc" on Justia Law