My Damon Key colleagues and fellow bloggers, Robert Thomas (inversecondemnation.com) and Mark Murakami (hawaiioceanlaw.com), quickly posted on their respective blogs Judge Sotomayor's decisions on maritime law (Mark's post here) and inverse condemnation (Robert's post here). So . . . , where is the insurance blog's input?
In an effort to keep pace (actually, to catch up), below is a summary of Judge Sotomayor's insurance coverage decisions I have located from her tenure on the Second Circuit. The list is comprised of cases authored by Judge Sotomayor and does not include decisions she merely joined, whether written by another judge or per curium rulings. The results of Judge Sotomayor's decisions are fairly balanced: five in favor of the insurer; three in favor of the insured; and one finding for both the insurer and insured. Although some have questioned whether Judge Sotomayor has the literary flair to contend with a Justice Scalia, the decisions summarized below are well-reasoned, narrowly crafted rulings.
Greenidge v. Allstate Ins. Co., 446 F.3d 356 (2nd Cir. 2006) - Judge Sotomayor's decision affirmed the district court's rejection of a claim for bad faith against Allstate. Because the injury was lead poisoning from a minor's exposure to lead paint for two years, two homeowner's policies were potentially implicated. Allstate offered policy limits of one policy to settle the minor's claim against the insured, but refused to consent to a declaratory judgment action to determine whether the injury triggered the second policy limit. Allstate contended the policies' anti-stacking provision barred recovery under the second policy. The Second Circuit affirmed, finding no bad faith. The insureds failed to show Allstate acted in gross disregard of the insured's interest when rejecting the settlement offer. The insureds could have commenced their own declaratory judgment action to determine the insurer's liability. Result: Decision in favor of Insured.
Palmieri v. Allstate Ins. Co., 445 F.3d 179 (2nd Cir. 2006) - The district court found the insured was entitled to the depreciation value of his dwelling under a flood policy, but was not entitled to the depreciation value of his personal property. The Second Circuit, in a decision by Judge Sotomayor, affirmed. Further, prejudgment interest could not be awarded against Allstate, who was acting as an agent of the federal government in administering the policy pursuant to the National Flood Insurance Act. Result: Mixed decision, granting relief to both Insured and Insurer.
Travelers Ins. Co. v. Carpenter, 411 F.3d 323 (2nd Cir. 2005) - After the claimant was injured in an auto accident while acting within the scope of her employment, Travelers paid workers' compensation benefits. The claimant also settled with Travelers under her underinsured motorist coverage. Travelers contended it was entitled to an offset against its workers' compensation liability. The district court dismissed Travelers' suit on abstention grounds. The Second Circuit, in Judge Sotomayor's decision, held under state law Travelers was not entitled to reimbursement until the claimant received more compensation than the amount of her total damages. Further, the district court erred in dismissing the action on abstention grounds instead of granting judgment in favor of the claimant. Result: Decision in favor of Insured.
Empire Healthchoice Assurance, Inc. v. McVeigh, 396 F.3d 136 (2nd Cir. 2005) - A health plan administrator sued decedent's administratrix for reimbursement following a settlement with third parties who allegedly caused the decedent's injures. The district court dismissed for lack of subject matter jurisdiction because the Federal Employees Health Benefits Act, 5 U.S.C. 8902, did not affirmatively authorize the creation of federal common law in the decedent's case. The plan administrator's claims were breach of contract claims which arose under state and not federal law. The Second Circuit, in a decision by Judge Sotomayor, affirmed. Result: Decision in favor of Insured.
Webster v. Mount Vernon Fire Ins Co., 368 F. 3d 209 (2nd Cir. 2004) - A student injured while attending a privately owned elementary school sued the insured owners. After obtaining a default judgment against them, the student sued Mount Vernon, seeking to force the insurer to indemnify the insureds under their commercial liability policy for the amount of damages awarded by the state court judgment. The district court held that because Mount Vernon had not properly disclaimed coverage as to the wife owner, Mount Vernon was liable for the amount of the judgment. The Second Circuit, through Judge Sotomayor, reversed. Mount Vernon could deny coverage to the owner wife because she had never complied with the notice provisions of the policy. Further, Mount Vernon had timely disclaimed coverage as to the husband owner. Result: Decision in favor of Insurer.
Marcella v. Capital Dist. Physicians' Health Plan, Inc., 293 F.3d 42 (2nd Cir. 2002) - The insured was an independent contractor with a real estate company which was a member of the chamber of commerce. The insured joined the chamber as a sole proprietor of her own business and purchased health insurance from defendant health plan. When defendant refused to pay for the insured's out-of-plan surgery, the insured sued in state court. Defendant removed to federal court, citing ERISA preemption as the basis for federal jurisdiction. The district agreed the insured's claim were preempted by ERISA and granted defendant summary judgment on all claims. The Second Circuit, in a decision by Judge Sotomayor, reversed. The chamber was not an "employer" under ERISA because membership in the chamber was open to sole proprietorships without employees and to individuals. Further, the insured's relationship with the real estate company did not bring her under ERISA. The insured, not the real estate company, paid the premiums. Result: Decision in favor of Insured.
Hugo Boss Fashions, Inc. v. Federal Ins. Co., 252 F.3d 608 (2nd Cir. 2001) - The district court awarded partial summary judgment to the insured, finding that Federal a duty to defend a trademark infringement suit, but denied any recovery for indemnification. The jury also found Federal breached its duty of good faith and fair dealing. The Second Circuit agreed there was no duty to indemnify because of the "intellectual property" exclusion. Nevertheless, the majority determined because it was not certain there was no duty to indemnify at the time the insured sought coverage, the insurer was obligated to defend until the uncertainty was resolved. The uncertainty, however, meant the duty of good faith and fair dealing had not been breached. Judge Sotomayor dissented in part, determining under New York law there was no requirement that the insurer defend if it was "uncertain" of how the court would eventually interpret the exclusion. Result: Judge Sotomayor's dissent in favor of Insurer.
Coregis Ins. Co. v. Am. Health Found., Inc., 241 F.3d 123 (2nd Cir. 2001) - The district court found Coregis had a duty to defend suits charging the insured nursing home failed to repay loans allegedly obtained through fraudulent misrepresentations about their financial health. The Second Circuit reversed in a decision by Judge Sotomayor. The policy excluded claims "arising out of, based upon or related to . . . insolvency." The financial failure of the insured was clearly related to the underlying suit for failure to repay loans. Result: Decision in favor of Insurer.
Maska U.S., Inc. v. Kansa General Ins. Co., 198 F.3d 74 (2nd Cir. 1999) - The district court ordered the insurers to indemnify and reimburse the insured for liability costs and related defense costs associated with environmental contamination at the insured's manufacturing facility. The district court found the policies' pollution exclusions were unenforceable because they contravened the state's public policy. The Second Circuit, in a decision authored by Judge Sotomayor, reversed, finding the absolute pollution exclusions did not violate any established state public policy. Result: Decision in favor of Insurer.
