Justia U.S. 9th Circuit Court of Appeals Opinion Summaries

Hiscox sold Ernst a commercial crime insurance policy in 2012. In 2019, an Ernst clerk, in response to a fraudulent email, wired payments to a fraudulent actor she believed to be Ernst's founder and managing broker. In 2019, Ernst submitted a $200,000 claim under the policy. Hiscox denied Ernst’s claim, stating that Ernst’s policy did not cover the fraud because an employee had taken action to initiate the wire transfer. Two provisions of the parties’ 2012 insurance policy were disputed: the “Computer Fraud” and “Funds Transfer Fraud” provisions.The Ninth Circuit reversed the dismissal of Ernst’s suit. The district court incorrectly interpreted the Computer Fraud provision by wrongly relying on precedent with dispositively different facts and improperly relying on an embezzlement-based analysis. Here, Ernst immediately lost its funds when the funds were transferred as directed by the fraudulent email, and there was no intervening event. Taking the pleaded facts as true, Ernst suffered a loss resulting “directly” from the fraud, arguably entitling Ernst to coverage under the policy. The Funds Transfer provision also covered Ernst’s loss resulting directly from the fraudulent email instruction. The district court erred when it reasoned that Ernst’s alleged loss did not result directly from fraudulent instructions. View "Ernst & Haas Management Co., Inc.. v. Hiscox, Inc." on Justia Law

Through a bankruptcy proceeding, Bristol became the successor-in-interest to Haven, an accredited mental-health and substance-abuse treatment center that regularly serviced patients insured by Cigna. Bristol alleged that Cigna violated the Employee Retirement Income Security Act of 1974 (ERISA) and state law by denying Haven’s claims for reimbursement for services provided. Haven was out-of-network for Cigna’s insureds. The district court dismissed Bristol’s ERISA claim, as an assignee of a healthcare provider, for lack of derivative standing, or lack of authority to bring a claim under ERISA, 29 U.S.C. 1132(a)(1)(B).The Ninth Circuit reversed. Under ERISA, a non-participant health provider cannot bring claims for benefits on its own behalf but must do so derivatively, relying on its patients’ assignments of their benefits claims. Other assignees also may have derivative standing if extending standing would align with the goal of ERISA. Refusing to allow derivative standing for Bristol would create serious perverse incentives that would undermine the goal of ERISA. Denying derivative standing to health care providers would harm participants or beneficiaries because it would discourage providers from becoming assignees and possibly from helping beneficiaries who were unable to pay up-front. View "Bristol SL Holdings, Inc. v. Cigna Health and Life Insurance Co." on Justia Law

Former students sued Kamehameha Schools, alleging sexual abuse by a doctor who had practiced on SFMC’s campus. Kamehameha filed crossclaims against SFMC, which sent these crossclaims to its insurer, Argonaut. Argonaut ultimately represented SFMC subject to a reservation of rights. Neither party could determine the terms of the relevant policies from decades earlier. Argonaut sought declaratory relief in federal court under 28 U.S.C. 2201, as to what policies Argonaut had issued to SFMC during the relevant period and the terms of those policies. SFMC asked the district court to decline jurisdiction and, alternatively counterclaimed for declaratory and monetary relief.The Ninth Circuit affirmed the district court’s order, declining to exercise jurisdiction. Generally, a district court has the discretion to decline jurisdiction over a 28 U.S.C. 2201 declaratory-relief claim, after considering the relevant factors but when a declaratory claim is joined with an independent monetary one, the court usually must retain jurisdiction over the entire action. That mandatory jurisdiction rule did not apply; parties can plead a conditional counterclaim and still preserve objections to jurisdiction. SFMC’s counterclaims were conditional. Because SFMC did not waive its threshold defense, the district court still had discretionary jurisdiction. The district court thoroughly considered and correctly concluded that each relevant factor favored declining jurisdiction, noting that the declaratory claims could be filed in state court and that deciding them would not settle all aspects of the controversy or clarify the parties’ legal relationships. View "Argonaut Insurance Co. v. St. Francis Medical Center" on Justia Law

In 1993, the County and the Orange County Employee Retirement System (OCERS) entered into a Memorandum of Understanding (MOU), allowing the County to access surplus investment earnings controlled by OCERS and depositing a portion of the surplus into an account to pay for county retirees' health insurance. The county adopted the Retiree Medical Plan, funded by those investment earnings and mandatory employee deductions. The Plan explicitly provided that it did not create any vested rights. The labor unions then entered into MOUs, requiring the county to administer the Plan and that retirees receive a Medical Insurance Grant. In 1993-2007, retired employees received a monthly grant benefit to defray the cost of health insurance. In 2004, the county negotiated with its unions to restructure the underfunded program, reducing benefits for retirees.Plaintiffs filed suit. The Ninth Circuit affirmed summary judgment in favor of the county. The 1993 Plan explicitly provided that it did not create any vested right to benefits. The Plan was adopted by resolution and became law with respect to Grant Benefits, part of the MOUs. The MOUs expired on their own terms by a specific date. Absent express language providing that the Grant Benefits vested, the right to the benefits expired when the MOUs expired. The Plan was not unilaterally imposed on the unions and their employees without collective bargaining; the unions executed MOUs adopting the Plan. The court rejected an assertion that the Grant Benefit was deferred compensation and vested upon retirement, similar to pension benefits. View "Harris v. County of Orange" on Justia Law

The Ninth Circuit affirmed the district court's order dismissing Mudpie's claims against its insurer in a putative class action brought by Mudpie, seeking to recover under the insurance policy's "Business Income" and "Extra Expense" coverage after state and local authorities in California issued several public health orders in response to the COVID-19 pandemic. Mudpie claimed that the public health orders prevented it from operating its children's stores. Mudpie sought declaratory relief and asserted claims for breach of contract and breach of the implied covenant of good faith and fair dealing.The panel affirmed the district court's ruling that Mudpie's claimed losses are not covered by the policy and the district court did not err in dismissing the claims for declaratory relief, breach of contract, and breach of the covenant of good faith and fair dealing. The panel explained that California courts would construe the phrase "physical loss of or damage to" as requiring an insured to allege physical alteration of its property. In this case, Mudpie did not identify a distinct, physical alteration of the property. The panel also concluded that the policy's Virus Exclusion bars coverage of Mudpie's claimed losses. View "Mudpie, Inc. v. Travelers Casualty Insurance Co. of America" on Justia Law

HC purchased commercial auto liability, commercial umbrella, and commercial general liability (CGL) coverage from United. An HC employee was operating a company truck and trailer. The trailer detached and hit another vehicle, killing the driver and injuring a passenger. To settle the resulting claims, United paid the combined $3 million limits of the commercial auto and umbrella policies but denied coverage under the CGL policy based on the Aircraft, Auto or Watercraft (AAW) exclusion, and the Multiple Liability Coverages Limitation (MLCL) endorsement. United argued that the injuries arose out of the use of a vehicle pulling a loaded equipment trailer, thus arising out of the use of an “auto,” precluding coverage under the CGL policy under the AAW exclusion. Because coverage was provided under the commercial auto policy, United argued that the CGL policy did not provide coverage, pursuant to the MLCL endorsement.The district court found the provisions unambiguous but unenforceable because they were not listed in a table of contents or notice section of important provisions. The Ninth Circuit certified the question to the Montana Supreme Court: Whether, when an insurance policy does not include either a table of contents or a notice section of important provisions, in violation of Mont. Code 33-15-337(2), the insurer may nonetheless rely on unambiguous exclusions or limitations to the policy’s coverage, given that 33-15-334(2) provides that 33-15-337(2) is “not intended to increase the risk assumed under policies subject to” its requirements? View "High Country Paving, Inc. v. United Fire & Casualty Co." on Justia Law

The Mundens own ranching property in Bannock County, Idaho. They purchased 768 acres in 2012 and 660 acres in 2014 and purchased title insurance for the first purchase through Stewart and for the second purchase through Chicago Title. The property contains a gravel road. A 2019 ordinance amended a 2006 ordinance that closed specified snowmobile trails, including that gravel road, to motor vehicles except snowmobiles and snow-trail-grooming equipment during winter months. The 2019 ordinance deleted the December-to-April closure, giving the County Public Works Director the discretion to determine when to close specified snowmobile trails, and increased the maximum fine for violations. The Mundens sought an injunction. The county asserted that the road had been listed as a public road on county maps since 1963 and that the Mundens purchased their property expressly subject to easements and rights of way apparent or of record.The Mundens filed a federal complaint, seeking declaratory relief, indemnification, and damages. The district court granted the insurance companies summary judgment. The Ninth Circuit reversed as to Chicago Title, finding that the county road map is a “public record” within the meaning of its policy so that coverage applied. Stewart has no duty to indemnify or defend; its policy disclaims coverage for damages “aris[ing] by reason of . . . [r]ight, title and interest of the public in and to those portions of the above-described premises falling within the bounds of roads or highways.” View "Munden v. Stewart Title Guaranty Co." on Justia Law

Plaintiffs, domestic entities, entered into an insurance contract providing coverage for a Texas townhome complex that they own and operate. The Policy was underwritten by Lloyd’s, members of a foreign organization, and contains a mandatory arbitration provision, providing that the seat of the Arbitration shall be in New York and the Arbitration Tribunal shall apply the law of New York. In 2017, Hurricane Harvey caused an estimated $5,660,000 in damages to the townhome complex. A third-party claims administrator for Lloyd’s concluded that the Policy’s deductible was $3,600,000.Plaintiffs filed a complaint in the Western District of Washington asserting breach of contract, failure to communicate policy changes, and unfair claims handling practices in violation of Washington law, asserting that the deductible should be $600,000. Lloyd’s moved to compel arbitration and stay proceedings, arguing that the Policy’s arbitration provision falls within the scope of the Convention on the Recognition and Enforcement of Foreign Arbitral Awards. Plaintiffs did not contest that the arbitration provision falls within the Convention’s scope but argued the provision is unenforceable because Washington law specifically prohibits the enforcement of arbitration clauses in insurance contracts. Plaintiffs cited the McCarran-Ferguson Act, 15 U.S.C. 1011–15, which provides that state insurance law preempts conflicting federal law. On interlocutory review, the Ninth Circuit upheld an order granting Lloyd’s motion. Article II, Section 3 of the Convention is self-executing, and therefore is not an “Act of Congress” subject to reverse-preemption under the McCarran-Ferguson Act. View "CLMS Management Services Limited Partnership v, Amwins Brokerage of Georgia" on Justia Law

The Ninth Circuit affirmed the district court's grant of summary judgment to Starr in an action brought by Adir, seeking insurance defense coverage. The panel held that California Insurance Code section 533.5(b) — which nullifies an insurance company’s duty to defend — does not facially violate a party's due process right to retain counsel. The panel explained that, in civil cases, courts have recognized a denial of due process only if the government actively thwarts a party from obtaining a lawyer or prevents it from communicating with counsel. In this case, Adir has made no such allegation.The panel also rejected Adir's statutory argument that section 533.5 applies to actions involving only monetary relief. Rather, under the plain text of the statute, it applies to actions that seek injunctive relief along with monetary relief. Because it turns out that there is no duty to defend nor to indemnify, the panel affirmed the district court's determination that Starr is entitled to reimbursement under the explicit language of the insurance policy. View "Adir International, LLC v. Starr Indemnity and Liability Co." on Justia Law

In 2020, the Academy filed suit in state court alleging that Continental breached an insurance policy by denying coverage for a claim asserted against it by a former executive. After removal to the district court, the district court issued a sua sponte order remanding the case to state court.The Ninth Circuit concluded that the district court's transmittal of its sua sponte order remanding this civil action to a state court based solely on the notice of removal does not deprive federal courts of jurisdiction. The panel also concluded that despite the district court's characterization of its order, 28 U.S.C. 1447(d) does not bar the panel's review because jurisdiction could not be determined when the district court issued its sua sponte order. The panel explained that section 1447(d) bars review only of a remand order that is based on a colorable section 1447(c) ground. In this case, the district court's requirement that a notice of removal prove subject matter jurisdiction is contrary to Dart Cherokee Basin Operating Co., LLC v. Owens, 574 U.S. 81, 89 (2014), and accordingly, is not a "colorable" ground under section 1447(c). Accordingly, the panel vacated the district court's remand order. View "Academy of Country Music v. Continental Casualty Co." on Justia Law