In First American Title v. Continental Casualty, the Court analyzed a “claims-made-and-reported” policy under the Louisiana direct action statute, which allows an injured third party to directly sue the responsible party’s insurer.  No. 12-30336 (Feb. 28, 2013).   Notice was not given to the insurer during the required period.  The Court concluded that unlike an occurrence policy, where a notice requirement is intended to protect the insurer and a failure to give notice will not bar a direct action, proper notice under this policy was a condition precedent to coverage and thus barred the direct action.  A concurrence agreed with the result but advocated a narrower ground for decision.

The insured in Mid-Continent Casualty v. Eland Energy recovered a multi-million dollar verdict against its insurer, alleging that the insurer’s efforts to unilaterally settle a claim for environmental damage after Hurricanes Katrina and Rita undermined the defense of an ongoing class action about similar claims.  No. 11-10649 (Feb. 22, 2013).   The district court granted JNOV and the Fifth Circuit affirmed.  Recognizing that “[the insured] is understandably upset,” the court rejected a common-law duty of good faith under Texas law in the handling of third-party insurance claims, dismissing as dicta or distinguishing several cases cited by the insured.   Potential claims under Louisiana law failed for  choice-of-law reasons since the claim was handled in Texas. Claims based on the Texas Insurance Code failed to establish a causal link between the alleged misconduct and the ultimate settlement terms of the class action.

Hisaw & Associates General Contractors (“HIGAC”) defaulted on contracts, requiring Liberty Mutual to pay on a surety bond.  Liberty Mutual v. Hisaw & Associates, No. 11-11012 (Feb. 20, 2013, unpublished).  After it paid, Liberty Mutual sought recovery from HIGAC’s principals; the question for appeal was whether certain transactions involving them violated a covenant about a minimum asset requirement.  The Fifth Circuit affirmed the district court’s conclusion that several payments to third parties by HAGC were not “received by” the principals under the contract, and that loan repayments by HAGC to its principals were not “as a result of . . . loans [to the principals].”  The Court then reversed in favor of the principals on whether a salary payment was a “distribution.”  The Court noted that Liberty Mutual could use more precise contract language, and faulted a senior Liberty Mutual counsel for changing testimony on a relevant issue during a deposition.

The insurers in Pride Transportation v. Continental Casualty faced a claim arising from a truck accident that left the victim a paraplegic, with evidence that the driver falsified her logs to make deliveries on time, and with plaintiff’s counsel who had won personal injury verdicts in the same county for amounts in excess of policy limits.  No. 11-10892 (Feb. 6, 2013, unpublished).  Under these circumstances, the Fifth Circuit agreed with the district court that the insurers did not incur Stowers liability under Texas law for accepting (rather then rejecting, the classic Stowers fact pattern) a settlement offer at policy limits and then withdrawing from the defense of the insured trucking company.  The Court did not address potential issues arising from the specific release in this settlement (it only named the driver, and excluded the company) except to note that potential indemnity claims between them would fall within the “insured-v.-insured” exclusion.

The insured in Kerr v. State Farm filed a claim about a stolen fishing boat, but declined to give an examination under oath (EUO).  No. 12-30332 (Feb. 5, 2013, unpublished).  State Farm claimed that refusal was a material breach that prevented recovery on the policy.  The insured said that State Farm was not prejudiced.  The Fifth Circuit affirmed summary judgment for State Farm, citing “affidavits from members of [State Farm’s] Special Investigative Unit stating that an EUO is an important tool in the claim investigation process and that by refusing an EUO, Kerr impeded State Farm’s ability to gather information about the claim.”  The Court declined to address an argument by State Farm that prejudice need not be shown when an EUO is refused in a first-party case.

An apartment developer sought recovery on a title insurance policy after unfortunate zoning stopped the project.  Levy Gardens Partners v. Commonwealth Land Title Insurance, No. 12-30010 (Jan. 31, 2013).  The Fifth Circuit affirmed the finding of coverage, concluding, among other matters, that: (1) state court rulings about zoning laws deserved deference by federal courts in later coverage litigation; (2) the state court preliminary injunction litigation about zoning had become a sufficiently “final decree” to trigger coverage; (3) delay in giving notice did not cause prejudice; and (4) the policy did not require the developer to invoke a “conditional use process.”  The Court also found, however, that the policy “unambiguously restricts liability to the difference in the value of the title with and without the zoning encumbrance,” thus limiting the insured’s recovery to roughly $650,000 rather than several million in development expenses.  In rejecting the insured’s arguments about the policy, the Court also found no prejudicial violation of Fed. R. Civ. P. 8(c) about the pleading of defensive matters.

The insured in Jamestown Insurance v. Reeder successfully minimized its liability with a winning appeal to the Texas Supreme Court.  No. 12-20437 (Jan. 17, 2013, unpublished).  He only gave notice of a claim at that point, however, and despite the result, ran afoul of the concept that “[o]ne of the purposes of a notice provisions . . . is to allow an insurer ‘to form an intelligent estimate of its rights and liabilities before it is obligated to pay.'”  Id. at 5 (emphasis in original).  Because the insurer could have helped influence the trial result, or negotiated a settlement at the appellate level, the “delayed tender thwarted the recognized purposes of the notice provisions” and summary judgment was affirmed for the insurer.  Id.   

Several aspects of insurance coverage for hurricane damage to a shopping center were addressed in GBP Partners v. Maryland Casualty, No. 11-20912 (Jan. 4, 2013, unpublished).  The Fifth Circuit concluded that the insured: (1) did not establish a “complete interruption” of business activity to trigger coverage for lost income, (2) raised a fact issue as to whether rent abatements were necessary to prevent possible closure of the entire center, (3) did not distinguish repair fees necessary to avoid suspension of operations from other management fees, (4) the insured was responsible for various delays in replacing a damaged roof, and (5) did not allocate window damage between covered and non-covered causes.   The Court also found that a summary judgment affiant did not create an impermissible conflict with earlier deposition testimony that described the effect of the storm on business operations.  Id. at 6-7 & n.7.

The district court and Fifth Circuit agreed that fraud claims by dissatisfied consumers of weight loss medicine did not allege “bodily injury” so as to trigger a duty to defend.  CSA Nutraceuticals v. Chubb Custom Insurance, No. 12-10137 (Jan. 2, 2013, unpublished): “Failing to achieve weight reduction means the body basically did not change. It does not mean that the body was injured.”  The short opinion summarizes and rejects the plaintiff′s arguments for coverage.

The parties’ agreement said: “State Farm agrees not to remove any Hurricane Ike cases filed by your firm to Federal Court.”  Horn v. State Farm Lloyds, No. 12-40410 (Dec. 21, 2012).  Roughly a year later, the firm filed a 100,000-member class action against State Farm, who removed the case.  State Farm argued that the agreement was intended to resolve large numbers of individual claims and extending it to a class action was not consistent with the specific consideration given.  The Fifth Circuit affirmed the remand order, finding that the terms “any” and “cases” were not ambiguous.  The Court’s emphasis on contract wording, especially in the insurance context, is consistent with other recent cases, see, e.g., Ballard v. Devon Energy, 678 F.3d 360 (5th Cir. 2012).

The Fifth Circuit affirmed summary judgment for an insurer, reasoning: “We do not consider mere use of the phrase ‘property damage’ and parroted Policy language as sufficient factual allegations.  None of the assertions of ‘property damage’ in the underlying lawsuits are accompanied by facts illustrating specific harm or damage to tangbile property.”  PPI Technology Services v. Liberty Mutual Ins., No. 12-40189 (Nov. 29, 2012).  The closest, an allegation that the insured suffered “property damage throughout the lease where the well was drilled,” was characterized as “simply stating that it owns the property in which the drilling occurred . . . .”  Id. at 10.  The case analyzes the pleadings under the Texas “eight-corner” test rather than Twombly or Iqbal.

In Sosebee v. Steadfast Insurance Co., the Fifth Circuit found that an insurer made an effective reservation of rights, reminding that “Louisiana follows a functional approach to the reservation of rights and we have rejected requirements for technical language . . . .”  No. 11-31134 (Nov. 27, 2012) (citing FDIC v. Duffy, 47 F.3d 146, 151 (5th Cir. 1995)).  The Court then analyzed whether the insurer waived that reservation, in the unusual setting of a direct action suit against the insurer while the insured was in bankruptcy.  Finding no harm or prejudice to the insured from the conduct at issue, the Court held that no waiver occurred, and reversed and rendered summary judgment for the insurer.

A series of clerical errors led an insurer to overpay a $710,000 settlement by $510,000.  National Casualty v. Kiva Construction, No. 12-20217 (Nov. 12, 2012).  The insurer sued for breach of contract and “money had and received”; the insured counterclaimed for bad faith in the initial handling of the settlement.  The Fifth Circuit affirmed the district court’s summary judgment for the insurer.  The Court’s straightforward, unpublished opinion offers two cautionary notes — first, while the settlement agreement did not specify a time for payment of the full amount, a Lousiana statute did so specify (although the insurer complied), and second, the Twombly standards are not in play when the district court obviously considered evidence outside of the pleadings and said in its order that the counterclaims failed “based on the undisputed facts.”

ACE American Insurance v. Freeport Welding presents a thorough analysis of coverage, in the duty to defend context, under Texas law for a party claiming to be an “additional insured.”  No. 12-20002 (Oct. 19, 2012).  Before analyzing the allegations under Texas’s “eight corners” rule, the Court first reviewed whether the party was within the scope of the policy under general contract principles, and found that it was not.  The key to the Court’s analysis was the clarity of the policy documents about the dates for coverage.  Summary judgment was affirmed for the insurer as to the duty to defend, and the related indemnity issues were remanded for further consideration in light of the parties’ settlement.

In Cambridge Integrated Services Group v. Concentra Integrated Services, after reminding that a district court located in a state does not get deference in making an Erie guess about that state’s law, the Fifth Circuit examined the effect of a release obtained by an indemnitor for potential claims against its indemnitee.  No. 11-31032 (Sept. 26, 2012).  The Court found that the release precisely matched the terms of the indemnitor’s obligations to the indemnitee, and thus extinguished its duty to indemnify against such claims in ongoing litigation.  As to the duty to defend, however, the Court found summary judgment improper as issues about the claims “remained to be clarified through litigation.”  Id. at 10.

Echoing its recent action in Sawyer v. du Pont, the Fifth Circuit withdrew its previous opinion in Ewing Construction v. Amerisure Insurance and certified two questions to the Texas Supreme Court about the scope of the “contractual liability” exclusion in a construction contractor’s CGL policy.  No. 11-40512 (Aug. 8, 2012).

“Does the failure to give notice to an excess carrier until after an adverse jury verdict constitute evidence of prejudice that forfeits coverage?”  Berkley Regional Ins. Co. v. Philadelphia Indemnity Ins. Co., 690 F.3d 342 (5th Cir. 2012).  The Court thoroughly reviewed Texas law about untimely claim notice, observing that it can void coverage if the insurer is prejudiced, but “[d]efining the contours of prejudice from the breach of a notice requirement . . . is not easy.”  It applied that general principle to excess carriers, and found that this carrier had raised fact issues about prejudice from untimely notice (here, after an adverse jury verdict), as it was unable to investigate the matter or participate in mediation: “The cows had long since left the barn when [the carrier] was invited to close the barn door.”

In an insurance coverage case that is also a careful review of basic contract interpretation principles, the Court determined that a decedent was “legally intoxicated” and thus fell within a policy exclusion.  Likens v. Hartford Life, No. 11-20653 (July 19, 2012).  Recognizing that some authority  requires a “legal intoxication” exclusion to involve a criminal act, the Court disagreed with those cases, reviewing comparable terms elsewhere in Texas law, as well as a line of admiralty authority.

In GuideOne Specialty Mutual Ins. Co. v. Missionary Church, a coverage case arising from a car accident by church workers on a lunch break, the Court reversed on the duty to defend, disagreeing with the district court’s decision to consider evidence about the state tort litigation as inconsistent with Texas’s “eight corners” rule.  No. 11-10894 (July 17, 2012), op. at 9-12.  Under that rule, the pleadings about the driver’s status and activities could potentially trigger coverage, creating a duty  to defend.  Id. at 13.  The Court declined to apply a “very narrow’ exception that could apply if a coverage issue did not “overlap with the merits of or engage the truth” of the facts of the case.  Id. at 14 (citing GuideOne Elite v. Fielder Road Baptist Church,  197 S.W.3d 305 (Tex. 2006)).  The Court ended by reversing an injunction against state proceedings about the accident, citing general cases about the scope of declaratory judgment actions and noting that the “relitigation exception” to the Anti-Injunction Act did not apply.  Id. at 15-16.     

In the case of Downhole Navigator LLC v. Nautilus Insurance, an insured retained independent counsel after receiving a reservation of rights letter from its insurer, arguing that the insurer’s chosen counsel had a conflict at that point.    686 F.2d 325 (5th Cir. 2012).  Applying Northern County Mutual v. Davalos, 140 S.W.3d 685 (Tex. 2004), the Court found no conflict because “‘the facts to be adjudicated’ in the underlying . . . litigation are not the same ‘facts upon which coverage depends.'”  The Court did not see the recent case of Unauthorized Practice of Law Committee v. American Home Assurance Co., 261 S.W.2d 24 (Tex. 2008), which dealt with the responsibilities of insurers’ staff attorneys who defend a claim for an insured, as changing the basic analysis under Texas law.

The Court adddressed the contractual liability exclusion in a Texas CGL policy in the case of Ewing Construction v. Amerisure Insurance, No. 11-40512 (June 15, 2012).  The Court applied the “plain language of the exclusion,” guided by Gilbert Texas Construction LP v. Underwriters at Lloyd’s London, 327 S.W.3d 118 (Tex. 2010), and concluded that it reached a contractual commitment to complete a construction project.  Op. at 8.  The Court then examined whether an exception applied for liability that would exist even without the contract, and concluded that there was no such liability under Texas’s “con-tort” cases.  Id. at 9 (quoting Southwestern Bell v. DeLanney, 809 S.W.2d 493 (Tex. 1991).  The Court concluded by deferring the issue of the duty to indemnify, and acknowledging a point raised by the dissent about overlap between the “contract” and “your work” exclusions in a typical CGL contract.  Id. at 10.

Mid-Continent Casualty v. Davis presented an insurance coverage dispute about a wrongful death claim by a construction worker.  No. 11-10142 (June 8, 2012).  Coverage turned on whether the worker was an employee or an independent contractor.   Applying the five-factor test from Limestone Products Distribution v. McNamara, 71 S.W.3d 308 (Tex. 2002), the Court affirmed a finding that the worker was an independent contractor.  Key facts were that the worker provided his own tools and supplies, largely controlled his own schedule and tasks, and was provided a 1099 rather than a W-2.  Op. at 13-14.

In Continental Casualty v. North American Capacity Ins. Co., the district court required three primary carriers to split defense costs, while not allowing the excess insurer to recover defense costs from the primaries.  No. 10-20262 (May 30, 2012).  The Fifth Circuit affirmed on the cost-splitting issue, after careful review of the policies’ coverage triggers, scope, and “other insurance” clauses.  Op. at 15-20.  The Court reversed as to the excess carrier, finding it had a right of contractual subrogation, and distinguishing Mid-Continent Insurance v. Liberty Mutual, 236 S.W.3d 765 (Tex. 2007).

The plaintiff in Patrick v. Wal-Mart alleged: “Defendants have engaged in a continuing pattern of bad faith . . . [and] have among other things, unreasonably delayed and/or denied authorization and/or payment of reasonable, neceessary and worker’s comp related medical treatment, as well as permanent indemnity benefits, as ordered by [the state agency].”  No. 11-60217 at 11-12 (May 17, 2012).  The Court found that this allegation “invokes three potentially cognizable theories of liability,” but was “devoid of facts to make it plausible” under Twombly — the pleading “fails to identify the specific time or nature of such wrongs . . . [and] does not identify by date or amount or type of service, any of the alleged bad-faith denials and delays . . . .”  Id.   It found no abuse of discretion in not allowing further amendment, noting “repeated failure[s] to cure deficiencies . . . .”  Id. at 12-13 (quoting United States v. Humana Health Plan, 336 F.3d 375, 387 (5th Cir. 2003)).

In Grissom v. Liberty Mutual, the trial court awarded $212,000 in damages for negligent misrepresentation, based on the difference between the coverage a homeowner actually had at the time of Hurricane Katrina, and the coverage he could have had under a “preferred risk policy.”  No. 11-60260 (April 23, 2012).  The Fifth Circuit reversed on preemption issues unique to flood insurance as well as the viability of the claim itself, stating: “Because Liberty Mutual was not offering insurance advice, was not a fiduciary of Grissom, and did not offer any statement to Grissom to imply the lack of alternative insurance options, Mississippi law would not recognize negligent misrepresentation as a cause of action against Liberty Mutual . . . .”  Op. at 9-10.

LRK Architects v. State Farm presented the question whether a “breach of contract” exclusion should be analyzed under a “but for” or an “incidental relationship” test to determine whether an insurance policy covered a claim for copyright infringement.  No. 11-30121 (April 4, 2012).   After reminding that under Erie its job “is to attempt to predict state law, not to create or modify it,” the Court concluded that Louisiana would use a “but for” test.  Op. at 7-8.  Because the copyright claim “would exist even in the absence” of the parties’ contractual relationship, the exclusion did not apply and the insurer had a duty to cover and defend.  Op. at 9, 10.

In Technical Automation Services Corp. v. Liberty Surplus Ins. Corp. the Court addressed, sua sponte, an issue about the jurisdiction of a U.S. magistrate judge after the Supreme Court’s recent opinion limiting bankruptcy court jurisdiction, Stern v. Marshall, 131 S. Ct. 2594 (2011).  No. 10-20640 (March 5, 2012).  The Court concluded that Stern did not directly overrule the prior Circuit precedent of Puryear v. Ede’s, Ltd., 731 F.2d 1153 (5th Cir. 1984) and held: “[W]e will follow our precedent and continue to hold, until such time as the Supreme Court or our court en banc overrules our precedent, that federal magistrate judges have the constitutional authority to enter final judgments on state-law counterclaims.”  Op. at 12.  On the merits, the Court reversed the lower court’s ruling that an “eight corners” analysis of an insurance coverage issue precluded consideration of a claim of mutual mistake.  Op. at 15.

In National Casualty Co. v. Western World Insurance, the Court addressed basic coverage issues under Texas law about auto insurance.  No. 10-41012 (Feb. 3, 2012).  It held that loading a patient into an ambulance is “use” of a an auto within the meaning of one policy, op. at 6 (citing Mid-Century Ins. v. Lindsey, 997 S.W.2d 153 (Tex. 1999)), but did not fall within a “use” exclusion to another policy, reminding that the standard for construing a coverage provision is different than for an exclusion from coverage. Op. at 11.  The Court also found that a “professional services” and an “other insurance” exclusion did not apply.

The plaintiff in Kocurek v. CUNA Mutual Insurance sued for fraud about the sale of an insurance policy in 2005 on her husband’s life.  (No. 10-51042, Jan. 24, 2012).  The defendant persuaded the district court to dismiss on the pleadings, arguing that she lacked standing because she was not a beneficiary of the 2005 policy, and that the policy had a “one policy only” clause that barred claims under an earlier policy.  The Court disagreed and reversed, characterizing the plaintiff’s claims as relating to the “practice of selling multiple policies to the same individual,” op. at 4-5, and finding the “one policy only” provision potentially ambiguous and thus not a proper basis for dismissal on the pleadings.  Op. at 5.   The Court affirmed dismissal of a DTPA claim, as the plaintiff was not the “consumer” who brought the policy.  Op. at 5-6.

The case of International Fidelity Insurance v. Sweet Little Mexico Corporation (No. 11-40449, Dec. 22, 2011) rejected an argument that the U.S. Court of International Trade (“CIT”) had exclusive jurisdiction over a case between an importer and its surety about certain customs liabilities.  Op. at 4-10.  The Court then found no abuse of discretion in proceeding with that case even though there was a first-filed action in the CIT between the importer and U.S. Customs.  Acknowledging some overlap between the basic issue of customs liability and the secondary issue of the surety’s responsibility for that liability, the Court found that on these facts, “the ‘core issues’ in the two forums are not the same.”  Op. at 11.  The Court concluded that, based on the terms of the surety contract, the importer had to reimburse the surety for payments made “regardless of the outcome of the proceedings before the CIT.”  Op. at 13-16.  While the Court’s analysis of the “first-filed” and surety issues turns on the specific facts of the case, the issues addressed and the basic legal principles cited are broadly applicable to those topics.

The case of Gilbane Building Co. v. Admiral Insurance (No. 10-20817, Dec. 12, 2011) involved an insurer’s duty to defend and indemnify an injury claim under Texas law.  The Court first reviewed the basic rules in the Circuit for an “Erie guess” about state law.  Op. at 4-5 & 8 n.2.  The Court found that Texas’s “express negligence” rule was limited to contractual indemnity and did not bear on whether the plaintiff was an “additional insured.”  The Court then applied Texas’s “eight corners” rule and found no duty to defend, reminding that this rule “consider[s] only the facts alleged in the pleadings and . . . not . . . factual assumptions or inferences that were not pleaded.”  Id. at 13.   The Court declined to recognize an exception to the “eight corners” rule for claims involving a plaintiff’s unpleaded contributory negligence.  Id. at 14-17.  The Court concluded by affirming the district court’s summary judgment for the insured on the duty to indemnify, applying a broader standard based on “the facts proven in the underlying suit.”  Id. at 17-18 & n.4 (acknowledging that “this may seem like an unusual result,” but referring to a similar result in D.R. Horton v. Markel Int’l Ins., 300 S.W.3d 740, 744 (Tex. 2009)).

Thompson v. Zurich American Insurance, No. 10-51013 (Dec. 2, 2011) presented a common law “bad faith” action under Texas law about handling of a workers compensation claim (Insurance Code rights being limited after Texas Mutual v. Ruttiger, No. 08-0751 (Tex. Aug. 26, 2011)).  After reminding that Rule 56 asks “whether a rational trier of fact could find for the non-moving party,” op. at 4, the Court reviewed Texas case law on several issues in light of Ruttiger, and found that on the facts presented, none of the following showed bad faith: (1) conflict between expert reports; (2) lack of personal treatment of the plaintiff by the expert; (3) the expert’s record of primarily working for insurance companies; (4) the expert’s analysis of “aggravation”; or (5) the insurer’s conduct after the initial review.  Op. at 5-13.  The footnotes in the opinion summarize the present state of Texas law on several “bad faith” claims-handling issues.