Justia U.S. 2nd Circuit Court of Appeals Opinion Summaries

Nearly a million barrels of crude oil owned by a U.S. company were seized from a vessel in Venezuelan waters by Venezuelan authorities under threat of force. The oil was insured under a marine cargo reinsurance policy that covered losses arising from war-related risks, including “insurrection.” The insured company claimed that the political turmoil in Venezuela, including the contested presidency and violent suppression of opposition, constituted an insurrection as defined by the policy. The reinsurers denied coverage, arguing that the events did not meet the policy’s definition of insurrection, leading to litigation.The United States District Court for the Southern District of New York reviewed cross-motions for summary judgment. The court found the term “insurrection” in the policy to be ambiguous and, applying New York law and the doctrine of contra proferentem, construed the ambiguity in favor of the insured. The court held that the Maduro regime’s actions constituted an insurrection within the meaning of the policy. The case proceeded to trial on causation and damages, where the jury found in favor of the insured on most issues, awarding over $54 million in damages plus interest.On appeal, the United States Court of Appeals for the Second Circuit considered challenges to the district court’s summary judgment ruling, judicial notice orders, and jury instructions on causation. The Second Circuit held that the district court did not err or abuse its discretion in any of the challenged rulings. It affirmed that the policy’s “arising from” language required only but-for causation, not proximate causation. The court affirmed the district court’s judgment in all respects, upholding the award to the insured. View "CITGO Petroleum Corp. v. Ascot Underwriting Ltd." on Justia Law

A law firm sought defense and indemnification from its professional liability insurer after being sued in New York state court by a judgment creditor of its client. The creditor alleged that the firm facilitated the sale of the client’s diamond ring and received a portion of the proceeds to satisfy past fees and as a retainer for future services, despite a restraining notice prohibiting the client from transferring assets due to an unpaid judgment. The state court complaint accused the firm of fraudulent conveyance, tortious interference with judgment collection, and contempt of court.The United States District Court for the Western District of New York dismissed the law firm’s claims for defense and indemnification and denied its motion for partial summary judgment regarding the insurer’s duty to defend. The district court found that the policy’s misappropriation exclusion applied, concluding that the firm’s handling of the sale proceeds was unauthorized in light of the restraining notice, regardless of the client’s consent.On appeal, the United States Court of Appeals for the Second Circuit reviewed the district court’s rulings de novo. Applying New York law, the Second Circuit held that the allegations in the underlying complaint involved the provision of professional services by the law firm and did not constitute “misappropriation” as commonly understood, since there was no allegation that the firm acted without its client’s authorization. The court found the term “misappropriation” ambiguous and construed it in favor of the insured. The Second Circuit vacated the district court’s dismissal, reversed the denial of partial summary judgment on the duty to defend, and remanded with instructions to enter partial summary judgment for the law firm on the insurer’s duty to defend. The court did not address other policy exclusions or the insurer’s ultimate duty to indemnify. View "Marcus & Cinelli, LLP v. Aspen Am. Ins. Co." on Justia Law

A construction worker employed by a subcontractor was injured when a scaffold collapsed at a Manhattan worksite. The worker sued the property owner and general contractor in New York Supreme Court, alleging negligence and violations of state labor laws. The owner’s insurer, Liberty Insurance Corporation, sought a declaration in federal court that the subcontractor’s insurer, Hudson Excess Insurance Company, was obligated to defend and indemnify the owner as an additional insured under the subcontractor’s commercial general liability policy. The subcontract between the general contractor and the subcontractor required the latter to provide insurance coverage for the owner and general contractor.In the New York Supreme Court, summary judgment was granted to the injured worker on some claims, while other claims remained pending. The court denied summary judgment to the owner on its contractual indemnification claim against the subcontractor, finding factual questions about the scope of the subcontractor’s work. Later, after the federal district court’s decision, the state court dismissed all third-party claims against the subcontractor, finding the indemnity provision in the subcontract invalid due to lack of a meeting of the minds.The United States Court of Appeals for the Second Circuit reviewed the case. It affirmed the district court’s finding, after a bench trial on stipulated facts, that the subcontractor’s actions proximately caused the worker’s injuries and that Hudson owed a duty to indemnify the owner under the policy. The Second Circuit held that the later state court decision did not alter this result. However, the Second Circuit reversed the district court’s award of attorney’s fees to Liberty, holding that Hudson was entitled to a statutory safe harbor under New York Insurance Law, and thus was not required to pay Liberty’s attorney’s fees for the federal action. View "Liberty Insurance Corp. v. Hudson Excess Insurance Co." on Justia Law

The case involves insurance policies issued by certain surplus lines insurers at Lloyd’s, London, which contain identical arbitration clauses. The insured parties, 3131 Veterans Blvd LLC and Mpire Properties LLC, attempted to sue the insurers in Louisiana state court. The insurers then sued in New York federal court to enforce the arbitration clauses under the Federal Arbitration Act (FAA) and the New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards. The insured parties argued that the arbitration clauses were unenforceable under Louisiana law, which prohibits such clauses in insurance contracts, and that the McCarran-Ferguson Act (MFA) allows state insurance laws to reverse preempt federal legislation and non-self-executing treaty provisions.The United States District Court for the Southern District of New York ruled in favor of the insured parties, holding that Louisiana law prohibits arbitration clauses in insurance contracts and that the FAA and the New York Convention were reverse-preempted under the MFA, based on the Second Circuit’s previous decision in Stephens v. American International Insurance (Stephens I).The United States Court of Appeals for the Second Circuit reviewed the case. The court concluded that its reasoning in Stephens I had been undermined by the Supreme Court’s decision in Medellín v. Texas, which established a different test for determining whether a treaty provision is self-executing. Applying the Medellín test, the court found that Article II Section 3 of the New York Convention is self-executing. As a result, the court abrogated Stephens I to the extent that it held that Article II Section 3 is not self-executing, reversed the district court decisions, and remanded the matters for further proceedings consistent with its opinion. View "Certain Underwriters at Lloyds, London, v. 3131 Veterans Blvd LLC" on Justia Law

GEICO, a group of insurance companies, presented evidence that the defendants, collectively known as the Mayzenberg Defendants, paid third parties for referring patients eligible for no-fault insurance benefits to Mingmen Acupuncture, P.C. GEICO argued that this constituted an illegal kickback scheme, violating New York's rules of professional misconduct, and thus, under the Eligibility Regulation (11 N.Y.C.R.R. § 65-3.16(a)(12)), Mingmen was ineligible to receive no-fault payments. The Mayzenberg Defendants contended that paying for patient referrals might be professional misconduct but did not violate a "licensing requirement" under the Eligibility Regulation.The United States District Court for the Eastern District of New York granted summary judgment in favor of GEICO, agreeing that the Mayzenberg Defendants paid for patient referrals and that this conduct rendered Mingmen ineligible for no-fault benefits. The court also granted GEICO summary judgment on its common law fraud and RICO claims, based on the same conclusions about Mingmen’s ineligibility.The United States Court of Appeals for the Second Circuit reviewed the case and found that while the facts established that the Mayzenberg Defendants paid for patient referrals, the legal question of whether this conduct violated a "licensing requirement" under the Eligibility Regulation was unsettled. Given the lack of clear precedent from the New York Court of Appeals and the significant policy implications, the Second Circuit certified the question to the New York Court of Appeals to determine if paying for patient referrals in violation of New York Education Law § 6530(18) and 8 N.Y.C.R.R. § 29.1(b)(3) disqualifies a provider from receiving no-fault payments under the Eligibility Regulation. View "GEICO v. Mayzenberg" on Justia Law

State Farm Mutual Automobile Insurance Company and State Farm Fire and Casualty Insurance Company (collectively, “State Farm”) provide automobile insurance in New York and are required to reimburse individuals injured in automobile accidents for necessary health expenses under New York’s No-Fault Act. State Farm alleges that several health care providers and related entities engaged in a scheme to fraudulently obtain No-Fault benefits by providing unnecessary treatments and services, and then pursued baseless arbitrations and state-court proceedings to seek reimbursement for unpaid bills.The United States District Court for the Eastern District of New York granted State Farm’s motion for a preliminary injunction in part, enjoining the defendants from proceeding with pending arbitrations and from initiating new arbitrations and state-court proceedings, but denied an injunction of the pending state-court proceedings. The district court found that State Farm demonstrated irreparable harm due to the fragmented nature of the proceedings, which obscured the alleged fraud, and the risk of inconsistent judgments and preclusive effects.The United States Court of Appeals for the Second Circuit reviewed the case and affirmed the district court’s decision to grant the preliminary injunction in part. The appellate court held that the district court did not abuse its discretion in finding that State Farm demonstrated irreparable harm, serious questions going to the merits, a balance of hardships tipping in its favor, and that the injunction was in the public interest. The court also concluded that the Federal Arbitration Act did not bar the injunction of the arbitrations because the arbitrations would prevent State Farm from effectively vindicating its RICO claims.Additionally, the appellate court reversed the district court’s decision not to enjoin the pending state-court proceedings, finding that the Anti-Injunction Act’s “expressly-authorized” exception applied. The court determined that the state-court proceedings were part of a pattern of baseless, repetitive claims that furthered the alleged RICO violation, and that enjoining these proceedings was necessary to give RICO its intended scope. The case was remanded for further proceedings consistent with this opinion. View "State Farm Mutual v. Tri-Borough" on Justia Law

Malcolm H. Wiener, the plaintiff, purchased three life insurance policies from AXA Equitable Life Insurance Company in 1986. Over the years, Wiener's policies lapsed multiple times due to insufficient funds, but he managed to reinstate them each time. In 2013, the policies lapsed again, and AXA terminated them after Wiener failed to make the necessary payments within the grace period. Wiener claimed that AXA and his insurance agent, David Hungerford, caused the lapse by not sending premium notices and by changing the mailing address without his authorization. He also alleged that AXA wrongfully denied his application to reinstate the policies.The United States District Court for the Southern District of New York granted summary judgment in favor of AXA and Hungerford on all claims. The court found that AXA was not obligated to send premium notices after the policies lapsed and that Wiener had waived any objection to the address change by acquiescing for nearly five years. The court also concluded that Hungerford had no duty to notify Wiener of the lapse. Regarding the reinstatement claim, the court ruled that AXA's denial was not arbitrary and capricious, as it was based on Wiener’s low serum albumin levels, which were consistent with AXA’s underwriting guidelines.The United States Court of Appeals for the Second Circuit affirmed the district court’s summary judgment on the termination claims, agreeing that Wiener could not show that AXA’s failure to send premium notices caused the policies to lapse and that he had waived any objection to the address change. However, the appellate court vacated the summary judgment on the reinstatement claim, finding that there were genuine disputes of material fact regarding the actual reasons for AXA’s denial and whether those reasons were arbitrary. The case was remanded for further proceedings on the reinstatement claim. View "Wiener v. AXA Equitable Ins. Co." on Justia Law

The case involves Indemnity Insurance Company of North America ("Indemnity") and Unitrans International Corporation ("Unitrans"). Indemnity, as the insurer of Amgen, a pharmaceutical company, paid for the loss of a pallet of pharmaceutical drugs that was damaged while being unloaded from a truck at an airport. The pallet was being transported from Amgen's facility in Dublin, Ireland to Philadelphia, and Unitrans, a logistics company, had been engaged to arrange the transportation. Indemnity, as Amgen's subrogee, sued Unitrans for breach of contract, negligence, and breach of bailment.The United States District Court for the Eastern District of New York granted Unitrans's motion for summary judgment, ruling that Unitrans qualified as a contracting carrier under the Montreal Convention, and therefore, Indemnity's action was time-barred by the Convention's statute of limitations.The United States Court of Appeals for the Second Circuit agreed that contracting carriers are subject to the Montreal Convention, but found that there was a genuine dispute of material fact as to whether Unitrans was a contracting carrier. The court vacated the judgment and remanded the case for further proceedings. The court held that a contracting carrier, as defined by Article 39 of the Montreal Convention, is a person that, as a principal, makes a contract of carriage governed by the Montreal Convention with a consignor, and an actual carrier performs the whole or part of the carriage by virtue of authority from the contracting carrier. The court found that there was enough evidence cutting both ways to create a genuine question as to whether Unitrans qualifies as a contracting carrier. View "Indemnity Inssurance Co. of North America v. Unitrans International Corp." on Justia Law

The United States Court of Appeals for the Second Circuit heard an appeal involving Timothy Daileader, the independent director and manager of an affiliated group of companies, collectively known as "Oaktree," which were in financial distress. Daileader was seeking coverage from his insurer, Certain Underwriters at Lloyds London Syndicate 1861 (Syndicate 1861), for his defense in litigation involving Oaktree. However, Syndicate 1861 denied Daileader’s insurance claim. Daileader subsequently sought a preliminary injunction to enforce Syndicate 1861’s duty to defend. The United States District Court for the Southern District of New York denied Daileader’s motion, and Daileader appealed.The Court of Appeals affirmed the district court's decision, finding that the district court did not abuse its discretion in denying Daileader's motion for a preliminary injunction. The court held that Daileader had not shown a clear or substantial likelihood of success on the merits of his claim. The court also found that Daileader had not made a strong showing of irreparable harm. The court concluded that the Syndicate's refusal to continue paying under its policy did not disrupt the status quo of ongoing payments between the two parties. Therefore, the court determined that Daileader's desired injunction was mandatory and not prohibitory, thus subject to a more stringent standard for relief. View "Daileader v. Certain Underwriters" on Justia Law

In this case, the plaintiff, William Loomis, a truck driver who was injured in a car accident in New York, sought recovery from his employer's insurance company, ACE American Insurance Company, for his remaining damages after the underinsured driver's insurer paid out their policy limit. Loomis claimed that ACE failed to comply with both New York and Indiana laws requiring an insurer to provide underinsured motorist coverage.The United States Court of Appeals for the Second Circuit had to determine whether New York's laws requiring insurers to offer optional supplemental uninsured/underinsured motorist coverage could make an insurer liable when it fails to offer this coverage, and whether Indiana law requires an insurer to provide underinsured motorist coverage when the insured suffers damages in excess of the tortfeasor’s policy limit and has no other underinsured motorist coverage to cover damages up to a certain limit.The court concluded that under New York law, Loomis was not entitled to relief. While insurers are required to offer supplemental uninsured/underinsured motorist coverage in New York, this coverage is optional. Even if ACE violated New York law by failing to offer this coverage, Loomis's claim seeking to reform the insurance contract to include this coverage was not supported by New York law. Therefore, the court affirmed the lower court's grant of summary judgment on this claim.In terms of the claim under Indiana law, the court could not confidently predict how the Indiana Supreme Court would interpret the relevant statute, and therefore, certified questions to the Indiana Supreme Court. View "Loomis v. ACE American Insurance Company" on Justia Law