Justia U.S. 5th Circuit Court of Appeals Opinion Summaries

Pamela Edwards, owner of Allure Salon in Starkville, Mississippi, was diagnosed with cancer in 2019 and passed away in 2022. After her death, her husband, Jimmy Edwards, sought payment from her life insurance policy with Guardian Life Insurance. Guardian denied the claim, stating the policy had been canceled because the number of insured employees at Allure dropped to one, triggering their right to cancel the policy. Jimmy Edwards was unaware of the policy until informed by the insurance agent, Debbie Jaudon, who also did not receive a cancellation notice from Guardian.Jimmy Edwards sued Guardian in the Northern District of Mississippi, bringing claims under Mississippi common law and arguing that ERISA entitled him to recover benefits. Guardian moved for partial summary judgment, asserting that ERISA governed the plan and preempted the common-law claims. The district court granted Guardian’s motion, and Jimmy Edwards appealed.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court determined that ERISA applied to the Allure policy, as the salon technicians were considered employees under federal common law. The court found that Guardian had waived its right to cancel the policy by continuing to accept premium payments for 26 months after the right to cancel vested. The court held that Guardian could not avoid its obligation to pay the claim after accepting premiums for such an extended period. Consequently, the Fifth Circuit reversed the district court's judgment and rendered judgment in favor of James Edwards. View "Edwards v. Guardian Life Insurance" on Justia Law

Emergency air medical providers challenged award determinations made under the No Surprises Act (NSA). The NSA, enacted in 2022, protects patients from surprise bills for emergency services from out-of-network providers by creating an Independent Dispute Resolution (IDR) process for billing disputes between providers and insurers. Guardian Flight transported a patient in Nebraska, and a dispute arose with Aetna over the service value. Similarly, Guardian Flight and its affiliates provided emergency services to patients insured by Kaiser, leading to disputes over payment amounts. Both disputes were submitted to Medical Evaluators of Texas (MET) as the IDR entity, which sided with the insurers.The United States District Court for the Southern District of Texas consolidated the cases. The court dismissed Guardian Flight’s claims against Aetna and Kaiser, ruling that the providers failed to plead sufficient facts to trigger vacatur of the awards. However, the court denied MET’s motion to dismiss based on arbitral immunity, leading to MET’s cross-appeal.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court held that the NSA does not provide a general private right of action to challenge IDR awards, incorporating Federal Arbitration Act (FAA) provisions that allow courts to vacate awards only for specific reasons. The court affirmed the district court’s dismissal of the providers’ claims against Aetna and Kaiser, finding that the providers did not allege facts sufficient to show that the awards were procured by fraud or undue means under the FAA.Additionally, the Fifth Circuit addressed MET’s claim of arbitral immunity. The court concluded that MET, functioning as a neutral arbiter in the IDR process, is entitled to the same immunity from suit typically enjoyed by arbitrators. Consequently, the court reversed the district court’s judgment on this point and remanded with instructions to dismiss the providers’ claims against MET. View "Guardian Flight, L.L.C. v. Aetna Health, Inc." on Justia Law

Casey Cotton rear-ended Caleb Crabtree, causing significant injuries. Cotton, insured by Allstate, faced potential liability exceeding his policy limit. Allstate allegedly refused to settle with Crabtree and failed to inform Cotton of the settlement negotiations or his potential liability, giving Cotton a potential bad-faith claim against Allstate. The Crabtrees sued Cotton, who declared bankruptcy. The bankruptcy court allowed the personal-injury action to proceed, resulting in a $4 million judgment for the Crabtrees, making them judgment creditors in the bankruptcy proceeding. Cotton’s bad-faith claim was classified as an asset of the bankruptcy estate. The bankruptcy court allowed the Crabtrees to purchase Cotton’s bad-faith claim for $10,000, which they financed through Court Properties, Inc.The Crabtrees sued Allstate, asserting Cotton’s bad-faith claim. The United States District Court for the Southern District of Mississippi dismissed the action for lack of subject matter jurisdiction, holding that the assignments of Cotton’s claim to Court Properties and then to the Crabtrees were champertous and void under Mississippi law. Consequently, the court found that the Crabtrees lacked Article III standing as they had not suffered any injury from Allstate.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court certified a question to the Supreme Court of Mississippi regarding the validity of the assignments under Mississippi’s champerty statute. The Supreme Court of Mississippi held that the statute prohibits a disinterested third party engaged by a bankruptcy creditor from purchasing a cause of action from a debtor’s estate. Based on this ruling, the Fifth Circuit held that the assignment of Cotton’s claim to Court Properties was void, and thus, the Crabtrees did not possess Cotton’s bad-faith claim. Therefore, the Crabtrees lacked standing to sue Allstate, and the district court’s dismissal was affirmed. View "Crabtree v. Allstate Property" on Justia Law

A group of businesses and individuals in the vision care industry challenged Texas House Bill 1696, which regulates managed vision care plans by limiting the information these plans can provide to their enrollees. The plaintiffs argued that the bill imposed unconstitutional burdens on their rights of commercial speech, associational freedom, and equal protection under the First and Fourteenth Amendments. They sought a preliminary injunction to prevent the bill's enforcement and the defendants, Texas officials, moved to dismiss the case, claiming sovereign immunity.The United States District Court for the Northern District of Texas denied the defendants' motion to dismiss and granted the preliminary injunction. The court found that the plaintiffs were likely to succeed on their commercial speech claims and that the equities favored a preliminary injunction. The defendants appealed both the denial of their sovereign immunity defense and the grant of the preliminary injunction.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court affirmed the district court's decision to deny the motion to dismiss as it related to Texas Insurance Commissioner Cassie Brown, finding that she had a specific duty to enforce the statute. However, the court vacated the denial of the motion to dismiss as it related to Governor Greg Abbott and Attorney General Ken Paxton, determining that they did not have a sufficient connection to the enforcement of the statute. The court also affirmed the preliminary injunction against Commissioner Brown, concluding that the plaintiffs were likely to succeed on their commercial speech claim and that the balance of equities favored the injunction. The court vacated the preliminary injunction as it applied to Governor Abbott and Attorney General Paxton and remanded the case for modification of the orders. View "Healthy Vision Association v. Abbott" on Justia Law

In 2018, a $200 million mixed-use development project at Louisiana State University experienced issues with its fire-protection sprinkler systems, which began to crack and leak. Allied World National Assurance Company, which paid over $10 million for system replacements, sued Nisus Corporation in 2021, alleging that Nisus falsely represented its product's compatibility with the pipe material, leading to the damage.The United States District Court for the Middle District of Louisiana granted summary judgment in favor of Nisus, concluding that Allied's claims were time-barred under Louisiana law. The court found that while Provident, the insured party, did not have actual or constructive knowledge of the cause of the damage, RISE Residential, Provident's agent, had constructive knowledge of the cause by November 2019. This knowledge was imputed to Provident, starting the prescription period.The United States Court of Appeals for the Fifth Circuit reviewed the case de novo and affirmed the district court's decision. The court held that RISE Residential's constructive knowledge of the sprinkler system issues, which was imputed to Provident, triggered the running of the prescription period well before July 23, 2020. The court also found that Nisus did not prevent Allied from timely availing itself of its causes of action, as a reasonable inquiry by RISE Residential would have uncovered the necessary information. Therefore, Allied's claims were prescribed, and the summary judgment in favor of Nisus was affirmed. View "Allied World National v. Nisus" on Justia Law

Maria Wilson purchased an insurance policy from Union National Fire Insurance Company (UNFIC) through agent Robin Wilson. The policy covered personal property at 2170A Tillman Chapel Road, which included a house and a travel trailer. Maria, who is illiterate, relied on Robin's verbal description of the policy. After a fire destroyed the house and her personal property, Maria filed a claim, which was denied by UNFIC, citing that she did not live in the house, a purported requirement for coverage.Maria sued UNFIC, Kemper Corporate Services, Robin Wilson, and others in the Circuit Court of Claiborne County, Mississippi, alleging breach of contract, negligence, fraud, and other claims. The defendants removed the case to federal court, asserting diversity jurisdiction and claiming that the non-diverse defendants were improperly joined. The district court agreed, denied Maria's motion to remand, and compelled arbitration based on the policy's arbitration clause. The arbitrator ruled in favor of the defendants, and the district court confirmed the arbitration award.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court held that the district court erred in denying Maria's motion to remand because non-diverse defendant Robin Wilson was properly joined. The court found that the insurance policy did not clearly require Maria to live in the house for her personal property to be covered, thus her negligence claim against Robin Wilson was viable. Consequently, the Fifth Circuit reversed the district court's denial of the motion to remand, vacated the order compelling arbitration and the confirmation of the arbitration award, and remanded the case to the district court with instructions to remand it to state court. View "Wilson v. Kemper Corporate Services" on Justia Law

Ellen Williams purchased a residential property in Houma, Louisiana, which was mortgaged by Flagstar Bank. Since Williams did not insure the home, Flagstar obtained a lender-placed hazard insurance policy from Integon National Insurance Company at Williams's expense. The policy named Flagstar as the "Insured" and Williams as the "Borrower." Williams paid all premiums and complied with all policy requirements. The policy included a provision stating that if the loss amount exceeded Flagstar's insurable interest, Integon would pay Williams any residual amount due for the loss, not exceeding the policy limit.In August 2021, Williams's home was damaged by Hurricane Ida. Although Integon inspected the property and exchanged repair estimates with Williams, it ultimately refused to pay for the full property repairs. Williams sued Integon in the 32nd Judicial District Court for the Parish of Terrebonne, asserting breach-of-contract and bad-faith claims under Louisiana law. Integon removed the case to the United States District Court for the Eastern District of Louisiana and filed a Rule 12(b)(6) motion to dismiss, arguing that Williams lacked standing to sue under the policy. The district court agreed with Integon, ruling that Williams was not a named insured, additional insured, or third-party beneficiary, and dismissed the case without allowing Williams to amend her complaint.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court found that the policy's loss payment provision clearly manifested an intent to benefit Williams, provided a certain benefit when the loss amount exceeded Flagstar's insurable interest, and that this benefit was not merely incidental. The court held that Williams might be able to plead plausible facts supporting her status as a third-party beneficiary. Consequently, the Fifth Circuit reversed the district court's decision and remanded the case with instructions to allow Williams to amend her complaint. View "Williams v. Integon National Insurance" on Justia Law

Sterling Senechal submitted a claim to Allstate Vehicle and Property Insurance Company for water damage caused by a broken water heater. Allstate issued three payments totaling $12,410.48. After a dispute over the loss amount, an appraisal determined the actual cash value to be $58,396.58, which Allstate paid minus the deductible and prior payments. Senechal then filed a lawsuit alleging breach of contract, violations of the Texas Prompt Payment of Claims Act (TPPCA), bad faith claims under Chapter 541 of the Texas Insurance Code, and breach of the common law duty of good faith and fair dealing. Allstate removed the case to federal court and paid what it calculated as the maximum potential interest owed.The United States District Court for the Southern District of Texas granted summary judgment in favor of Allstate on all claims. Senechal conceded the breach of contract claim but opposed summary judgment on the other claims. The district court ruled that Allstate's payment of the appraisal award and interest defeated Senechal's claims.The United States Court of Appeals for the Fifth Circuit reviewed the case. The court affirmed the summary judgment on Senechal's bad faith claims under Chapter 541 and common law, citing the Texas Supreme Court's decision in Ortiz v. State Farm Lloyds, which held that payment of an appraisal award and interest precludes recovery for bad faith claims unless there is an independent injury. However, the court vacated the summary judgment on Senechal's TPPCA claims, noting that payment of an appraisal award and interest does not automatically absolve an insurer of TPPCA liability. The case was remanded for further proceedings to determine whether Allstate's initial payment "roughly corresponds" with the appraisal award and whether Allstate is liable under the TPPCA. View "Senechal v. Allstate" on Justia Law

Joseph Mirelez submitted a claim under his homeowner’s insurance policy with State Farm Lloyds for wind damage to his property. Disputes arose regarding the amount of loss and repair costs, leading Mirelez to invoke the appraisal process. In January 2023, an agreement on the loss amount was reached, but coverage issues persisted. Mirelez filed a lawsuit in state court in May 2023, alleging breach of contract, violations of the Texas Prompt Payment of Claims Act (TPPCA), various bad faith claims under the Texas Insurance Code, and breach of the duty of good faith and fair dealing. State Farm removed the case to federal court, citing diversity jurisdiction, and subsequently paid the appraisal award amount, minus the deductible and prior payments, plus interest.The United States District Court for the Southern District of Texas granted summary judgment in favor of State Farm on all claims. Mirelez conceded that summary judgment was appropriate for his breach of contract and TPPCA claims but contested the dismissal of his statutory and common law bad faith claims. The district court concluded that State Farm had paid all benefits owed under the policy and that Mirelez was not entitled to any additional damages under the Texas Insurance Code.The United States Court of Appeals for the Fifth Circuit reviewed the case de novo and affirmed the district court’s decision. The court held that under Texas Supreme Court precedent, specifically Ortiz v. State Farm Lloyds, payment of an appraisal award forecloses an insurer’s liability for breach of contract and bad faith claims unless the insured suffered an independent injury. Since Mirelez only sought policy benefits that had already been paid and did not allege any independent injury, his extracontractual bad faith claims were barred. View "Mirelez v. State Farm" on Justia Law

A&T Maritime Logistics, Inc. had an insurance contract with RLI Insurance Company and a bareboat charter agreement with Alexis Marine, L.L.C. While operating the M/V Uncle John, a vessel owned by Alexis Marine, A&T Maritime caused the ship to allide with an embankment. Believing the damage to be minimal, A&T Maritime did not take immediate action. After a lawsuit was filed, RLI was notified of the claim. A&T Maritime and Alexis Marine sought defense and indemnification from RLI, which denied coverage under the insurance contract. The district court upheld RLI's denial of coverage on summary judgment, finding that RLI was prejudiced by the delayed notice.The United States District Court for the Eastern District of Louisiana initially denied A&T Maritime's and Alexis Marine's motions for partial summary judgment seeking reimbursement for defense costs, noting that the policy did not include a duty to defend. The Champagnes, who had purchased the damaged property, settled their claims for $200,000, funded solely by Alexis Marine. RLI then moved for summary judgment, arguing that the Uncle John was not covered under the policy. The district court disagreed but granted partial summary judgment to RLI, holding that the prompt notice requirements were breached and RLI was prejudiced.The United States Court of Appeals for the Fifth Circuit reviewed the case and affirmed the district court's decision. The court held that RLI was actually prejudiced by the delayed notice from both A&T Maritime and Alexis Marine, as the damage worsened over time and the opportunity to settle for a lower amount was lost. Consequently, the denial of coverage for both A&T Maritime and Alexis Marine was appropriate. The court also concluded that RLI had no duty to reimburse defense costs, as indemnification depended on coverage, which was voided due to the breach of the prompt notice requirement. View "A&T Maritime Logistics v. RLI Insurance Co." on Justia Law