Justia U.S. 6th Circuit Court of Appeals Opinion Summaries

About four years after a driver, insured by State Farm, collided with Phelps’s car and caused a spine injury that required surgery, Phelps filed suit, alleging that State Farm violated Kentucky’s Unfair Claims Settlement Practices Act. The district court granted summary judgment in favor of State Farm on the ground that Phelps had failed to show that the three years taken to settle her claim raised a genuine dispute as to whether State Farm had acted in bad faith. The Sixth Circuit reversed, noting State Farm’s low initial offer, extensive delays, four transfers to new adjusters, and prolonged refusal to disclose policy limits.

OneBeacon and AMICO were insurers of the B.F. Goodrich and, among others, were liable for environmental cleanup at the Goodrich plant in Calvert City, Kentucky. AMICO settled with Goodrich, but OneBeacon’s predecessor went to trial. A state court jury found for Goodrich, and OneBeacon was ordered to pay $42 million in compensatory damages and $12 million in attorney fees. The state court also denied OneBeacon's request for settlement credits to reflect amounts paid by other insurers, such as AMICO, through settlements with Goodrich. OneBeacon sought equitable contribution; AMICO removed to federal court. The district court granted AMICO summary judgment. The Sixth Circuit affirmed. Ohio policy favoring settlements provides that a settled policy is exhausted for purposes of equitable contribution; the court declined to address whether Ohio law permits interclass contribution actions or whether the jury finding of bad faith bars equitable relief.

The National Association of Insurance Commissioners helps to coordinate the state-based regulations of insurance, creating model statutes and regulations and releasing actuarial guidelines. Actuarial Guideline 33 (1995), describing how insurance companies should handle accounting questions connected to annuities sold after 1980. The new guidance prompted plaintiff to change the way it calculated financial reserves for roughly 200,000 annuity contracts it had issued over the prior 15 years, increasing its reserves by approximately $59 million—about 1.2 percent. The company’s parent claimed a deduction for part of that increase on its federal taxes for the following year and sought to do the same for the next nine years, 26 U.S.C. 807(f) The IRS concluded that insurers could not use Guideline 33 in calculating reserves for annuity contracts issued before its effective date. The company paid the disputed taxes under protest and sought to recover $11 million in overpayments and several million more in interest. The district court concluded that Guideline 33 clarified the pre-1995 requirements rather than changing them, granting the company summary judgment. The Sixth Circuit affirmed.

A class of retirees who had worked under a collective bargaining agreement and their survivors and dependents obtained monetary damages and declaratory and injunctive relief requiring that defendants provide vested lifetime healthcare benefits to the class members depending on the relevant date of retirement (Employee Retirement Income Security Act of 1974, 29 U.S.C. 1132(a)(1)(B); Labor-Management Relations Act, 29 U.S.C. 185). The Sixth Circuit affirmed, holding that defendant Newell Window is bound as a successor liable under earlier collective bargaining agreements to which it was not a party; that members of the plaintiff class had vested rights to company-paid health insurance and/or Medicare Part B premium reimbursements; and that the claims were not barred by the applicable six-year statute of limitations.

The attorney represented more than 400 plaintiffs in a class action related to the diet drug Fen-Phen. Lawyers’ fees were to be limited to 30 percent of the clients' gross recovery. The case settled for almost $200 million. Plaintiffs together received $74 million, 37 percent of the settlement; $20 million was used to establish Kentucky Fund for Healthy Living. The attorney served on the Fund’s board, for which he received $5,350 monthly. The attorney knew that the Kentucky Bar Association was investigating fee division in the case and possible unauthorized practice of law by his paralegal. The attorney subsequently applied to renew his malpractice insurance and answered "no" to questions about possible pending claims and investigations. The policy excluded coverage for dishonest acts and omissions. Members of the class subsequently filed malpractice claims and were awarded $42 million. The insurer sought a declaration that it was entitled to rescind the policy. The district court granted the insurer summary judgment and awarded $233,674.49 for its outlay on defense costs. Class members intervened to protect their ability to recover. The Sixth Circuit affirmed. Disbarment constituted a sufficient "regulatory ruling" under the dishonesty exclusion clause and there were material misrepresentations on the application.

Plaintiffs were catastrophically injured in automobile accidents. All sustained traumatic brain injuries and are now mentally impaired. State Farm initially paid no-fault insurance benefits for the cost of attendant care services rendered at home, but reduced the rates on the basis of market surveys of the cost of the services. State Farm refused to raise the rates because it could not verify whether plaintiffs had received the type of care that would justify paying higher rates. Plaintiffs refused to submit documentation regarding the nature and extent of the care they were receiving. Plaintiffs sued. The district court awarded plaintiffs monetary sanctions, instead of default judgment, in response to State Farm’s violation of discovery orders. A jury rendered a verdict in State Farm’s Favor. The Sixth Circuit dismissed appeal regarding the discovery sanctions, for lack of jurisdiction, but otherwise affirmed.

Plaintiff filed a class-action lawsuit against the insurance company, claiming breach of contract because the company began interpreting the "actual charges" provision of his cancer-insurance policy to mean the charges that the medical provider accepts as full payment from the primary insurer and the insured. Plaintiff claims that the policy entitles him to be paid the higher "list prices" that appear on his hospital bills before the primary insurer negotiates a lower rate. The company made payments to the insured, not directly to hospitals. The district court certified the class and issued a preliminary injunction, requiring the company to pay plaintiff according to his interpretation. Meanwhile, an Arkansas state court certified a nearly identical class, and the Arkansas Supreme Court affirmed a settlement in that action. The Sixth Circuit vacated class certification, based on the intervening Arkansas case. The court dismissed appeal of the injunction for lack of jurisdiction because was not a decision on the merits.

Plaintiffs sought insurance coverage for settlement and defense costs related to thousands of asbestos-exposure products-liability lawsuits that began in 1981. Many of the underlying asbestos claims arose from exposure to products manufactured by Reardon, a corporation that sold its assets and liabilities to plaintiff and became a division of plaintiff's business in 1966. The policies did not expressly identify Reardon or its later incarnation as "Named Insureds," but provided coverage for asbestos claims related to the Reardon products, and each has paid pursuant to the policies' aggregate limits for "Products Hazard" claims. The insurance companies, collectively, have paid more than $100 millions plaintiffs sought more than $125 million in additional coverage, arguing that the Products Hazard caps did not apply to the Reardon claims. The district court granted summary judgment to the insurance companies. The Sixth Circuit affirmed, finding that the policy language supported application of the cap,

Hit by a vehicle in 2004, plaintiff had medical bills of $82,036 that were paid in full by Medicare. The owner of the vehicle settled with plaintiff for $125,000. Medicare sought reimbursement of $62,338 under 42 U.S.C. 13955y(b)(2)(B)(i)., which plaintiff paid under protest. An ALJ rejected plaintiff's argument that an unknown motorist was responsible for 90 percent of the damage so that only 10 percent of the settlement was for medical expenses and the rest was for pain and suffering. The Medicare Appeals Council, district court, and Sixth Circuit affirmed, noting that plaintiff presented no evidence of hardship.

Two members of a program advertised as providing healthcare discounts to consumers sued, seeking to represent a class of 30,850. They claimed violations of the Ohio Consumer Sales Practices Act as well as Ohio’s common law prohibition against unjust enrichment in that healthcare providers listed in the discount network that had never heard of the program, and that newspaper advertisements, designed to look like news stories were deceptive. The district court exercised jurisdiction under the Class Action Fairness Act of 2005, 28 U.S.C. 1332(d), which grants jurisdiction over class actions in which the amount in controversy exceeds $5 million and the parties are minimally diverse. The district court dismissed. The Sixth Circuit affirmed. The consumer-protection laws of many states, not just of Ohio, govern the claims and there are many factual variations among the claims, making a class action neither efficient nor workable nor above all consistent with the requirements of Rule 23 of the Federal Rules of Civil Procedure.