Justia U.S. 1st Circuit Court of Appeals Opinion Summaries

A 2018 data breach at Barracuda Networks exposed protected health information of patients of Zoll Services LLC, a subsidiary of Zoll Medical Corporation. Zoll had contracted with Fusion LLC for data security services, and Fusion in turn relied on Barracuda’s technology. The agreements between these companies included certain liability and indemnification provisions, as well as a right for Barracuda to audit Fusion’s customer contracts. After the breach, Zoll settled a class action brought by its customers whose data was compromised.Following these events, Zoll initiated arbitration against Fusion and filed suit against Barracuda in the U.S. District Court for the District of Massachusetts. Fusion intervened and asserted additional claims against Barracuda. The district court dismissed most claims but allowed Zoll’s equitable indemnification claim and Fusion’s breach of contract and breach of the covenant of good faith and fair dealing claims to proceed. After arbitration and settlements, Axis Insurance Company, as assignee and subrogee of Zoll and Fusion, was substituted as plaintiff. Barracuda moved for summary judgment on the remaining claims, which the district court granted.On appeal, the United States Court of Appeals for the First Circuit reviewed the district court’s summary judgment rulings de novo. The appellate court held that Axis failed to present evidence of a relationship between Zoll and Barracuda that would support derivative or vicarious liability necessary for equitable indemnification under Massachusetts law. The court found that Fusion did not meet a condition precedent in its contract with Barracuda, and Barracuda had not waived or was estopped from asserting that condition. Further, Axis could not show that Barracuda breached the covenant of good faith and fair dealing, as no relevant contractual right existed. The First Circuit affirmed the district court’s grant of summary judgment in favor of Barracuda on all claims. View "Axis Insurance Company v. Barracuda Networks, Inc." on Justia Law

Peterson’s Oil Service, Inc. supplied heating fuel to customers in Massachusetts between 2012 and 2019. The fuel contained higher-than-standard levels of biodiesel, averaging 35% between 2015 and 2018, exceeding the 5% industry standard for ordinary heating oil. Customers alleged that this biodiesel-blended fuel was incompatible with conventional heating systems, caused repeated heat loss, and resulted in permanent damage to their equipment. They brought a class action in Massachusetts state court against Peterson’s and its officers, asserting claims for breach of contract, fraud, and negligence, including allegations that Peterson’s continued supplying the fuel despite customer complaints and only later disclosed the high biodiesel content.United States Fire Insurance Company and The North River Insurance Company had issued Peterson’s a series of commercial general liability and umbrella policies. The insurers initially defended Peterson’s in the class action under a reservation of rights, then filed suit in the United States District Court for the District of Massachusetts seeking a declaration that they owed no duty to defend or indemnify Peterson’s. The insurers moved for summary judgment, arguing that the claims did not arise from a covered “occurrence” and that policy provisions limiting or excluding coverage for failure to supply applied. The district court denied summary judgment, finding a genuine dispute as to whether Peterson’s actions were accidental and holding that the failure-to-supply provisions were ambiguous and did not apply.On appeal, the United States Court of Appeals for the First Circuit affirmed. The court held that the underlying complaint alleged a potentially covered “occurrence” because it was possible Peterson’s did not intend or expect the property damage alleged. The court also held that the failure-to-supply provisions were ambiguous and, under Massachusetts law, must be construed in favor of coverage. The district court’s summary judgment rulings were affirmed. View "United States Fire Insurance Company v. Peterson's Oil Service, Inc." on Justia Law

Customers of a heating oil company in Massachusetts brought a state court class action alleging that, starting in 2012, the company sold home heating oil with excessive biodiesel content, which damaged their heating equipment. The company received a demand letter and complaint in March 2019, before it was insured by the plaintiff insurance company. The insurance company began providing coverage in July 2019 under a commercial general liability policy and an umbrella policy. The policy included provisions excluding coverage for property damage known to the insured before the policy period began.After being asked to defend the company in the state class action, the insurer refused, arguing that the company’s prior knowledge of the alleged damage—based on the demand letter, complaint, and media coverage—triggered the policy’s known loss and loss-in-progress exclusions. The insurer then filed a declaratory judgment action in the United States District Court for the District of Massachusetts, seeking a ruling that it had no duty to defend or indemnify. The state court class had two subclasses: customers who received oil before July 5, 2019, and those who first received oil after that date.The district court found that the insurer had no duty to defend claims by customers who received oil before the policy period, but did have a duty to defend claims by customers who first received oil after coverage began, since the company could not have known of damage that had not yet occurred. Applying the “in for one, in for all” rule, the court held the insurer must defend the entire suit. The court denied summary judgment for the insurer on the duty to defend and granted partial summary judgment to the insured.The United States Court of Appeals for the First Circuit affirmed, holding that the policy’s known loss and loss-in-progress provisions did not bar coverage for claims by customers whose property damage began after the policy period commenced, and thus the insurer has a duty to defend the entire class action. View "Federated Mutual Insurance Co. v. Peterson's Oil Service, Inc." on Justia Law

A dispute arose when an insurance company denied coverage to an entity listed as an "Additional Insured" under a claims-made insurance policy. The insurer had issued the policy to a company operating an elder care facility. The plaintiff, a commercial real estate lender, had provided a loan secured by a mortgage on the property and later sought the appointment of a receiver after the operator defaulted. In January 2022, several residents were removed from the facility, leading to lawsuits alleging wrongful eviction and other claims against entities involved in financing and controlling the facility, including the plaintiff.The United States District Court for the District of Massachusetts reviewed the plaintiff’s suit seeking a declaration that the insurer had a duty to defend it in two underlying lawsuits. The district court granted summary judgment in part to each party, holding that the insurer had a duty to defend the plaintiff in one action (the Frost action) based on a claim related to the collection of an administrative fee, but not in the other (the Salie action), due to the plaintiff’s failure to provide timely notice as required by the policy. The court also granted summary judgment to the insurer on the plaintiff’s state-law claims for unfair and deceptive practices, finding insufficient evidence of bad faith.On appeal, the United States Court of Appeals for the First Circuit reversed the district court’s decision regarding the Frost action, holding that the insurer did not have a duty to defend because the claims did not allege liability solely attributable to the original insured, as required by the policy’s endorsement. The court affirmed the district court’s decision as to the Salie action and the state-law claims, concluding that the plaintiff’s failure to comply with the policy’s notice requirements and the insurer’s reasonable denial of coverage precluded recovery. The case was remanded for further proceedings. View "BI 40 LLC v. Ironshore Specialty Insurance Company" on Justia Law

In January 2015, Paula Appleton was severely injured in a car accident when a pickup truck struck her vehicle from behind. Appleton filed an insurance claim against the driver, whose policy was administered by AIG Claims, Inc. Over four years, Appleton and AIG exchanged settlement offers and attended three mediations but failed to reach a settlement. In March 2019, a Massachusetts state court jury awarded Appleton $7.5 million in damages. Appleton then sued AIG and National Union Fire Insurance Company in federal court, alleging they failed to conduct a reasonable investigation and did not extend a prompt and fair settlement offer as required by Massachusetts law.The United States District Court for the District of Massachusetts granted summary judgment in favor of the defendants. The court concluded that the defendants conducted a reasonable investigation and that their duty to extend a prompt and fair settlement offer was not triggered because the value of Appleton's damages never became clear.The United States Court of Appeals for the First Circuit reviewed the case. The court determined that a reasonable jury could find that Appleton's damages became clear in early 2018 and that the defendants failed to extend a prompt and fair settlement offer afterward. Consequently, the court vacated the district court's summary judgment ruling in part and remanded for trial on Appleton's settlement claim. However, the court affirmed the district court's grant of summary judgment on Appleton's claim that the defendants failed to conduct a reasonable investigation. View "Appleton v. National Union Fire Insurance Co." on Justia Law

After Hurricane Maria damaged its business, Coco Rico, LLC sued its insurer, Universal Insurance Company, for failing to pay its insurance claim and won. The jury awarded Coco Rico higher damages for its business interruption loss claim than it had requested, plus extra, consequential damages. This appeal centers on the district court's rulings on several post-verdict motions: Universal sought to eliminate or reduce the jury's damages awards, while Coco Rico sought attorneys' fees and prejudgment interest from Universal. After the district court denied the motions, both parties appealed.The United States District Court for the District of Puerto Rico denied Universal's renewed motion for judgment as a matter of law on the consequential damages claim and its motion for a new trial or reduction of the contractual damages award. The court reduced the jury's BI & EE award from $873,000 to $750,000, in line with the insurance policy maximum, but rejected Universal's argument that the award should be further reduced to $686,098. The court also denied Coco Rico's motion to amend the judgment to add attorneys' fees and prejudgment interest.The United States Court of Appeals for the First Circuit reviewed the case. The court agreed with Universal that there was no evidentiary basis for the jury to award consequential damages or higher business interruption loss damages than Coco Rico had established at trial. The court reversed the district court's ruling denying Universal's motions regarding the damages awards and affirmed its ruling denying Coco Rico's motion for attorneys' fees and prejudgment interest. The court held that the jury's award of $873,000 for business interruption loss exceeded the evidence presented, which supported only $686,098, and that there was no evidence to support the $250,000 consequential damages award. The court remanded the case for further proceedings consistent with its opinion. View "Coco Rico, LLC v. Universal Insurance Company" on Justia Law

Renee Sevelitte and the Estate of Joseph F. Sevelitte dispute the entitlement to the proceeds of a life insurance policy Joseph purchased during his marriage to Renee. Massachusetts law automatically revokes a spouse's beneficiary status upon divorce unless specific exceptions apply. The life insurance policy named Renee as the beneficiary, but the policy did not address the effect of divorce on beneficiary status. Renee and Joseph's divorce agreement included provisions about life insurance policies but did not explicitly state that Renee would remain the beneficiary of the policy in question.The United States District Court for the District of Massachusetts granted summary judgment to the Estate, determining that Renee could not establish that any exceptions to the automatic revocation applied. Renee appealed, arguing that the district court erred in its decision.The United States Court of Appeals for the First Circuit reviewed the case. The court noted that its previous decision did not determine that the divorce agreement satisfied the statutory exceptions but only that it was plausible. The court emphasized that Renee needed to provide evidence to support her claim that the divorce agreement intended to maintain her beneficiary status. The Estate presented evidence, including an affidavit from Joseph's divorce attorney and an expert report, indicating that the divorce agreement did not intend to retain Renee's beneficiary status.The First Circuit affirmed the district court's decision, concluding that Renee failed to present any evidence to create a genuine dispute about the intended meaning of the divorce agreement. Therefore, the court held that the Estate was entitled to the proceeds of the life insurance policy. View "Sevelitte v. The Guardian Life Insurance Company of America" on Justia Law

A general contractor, Tocci Building Corporation, and its affiliates were involved in a dispute with their insurers, including Admiral Insurance Company, over coverage under a commercial general liability (CGL) insurance policy. The issue was whether the CGL policy covered damage to non-defective parts of a construction project caused by a subcontractor's defective work on another part of the project. Tocci sought defense and indemnity coverage under the Admiral policy for a lawsuit filed by Toll JM EB Residential Urban Renewal LLC, which alleged various issues with Tocci's work on a residential construction project.The United States District Court for the District of Massachusetts concluded that Admiral had no duty to defend Tocci. The court found that the lawsuit did not allege "property damage" caused by an "occurrence" as required for coverage under the policy. The court reasoned that the damage alleged was within the scope of the project Tocci was hired to complete and thus did not qualify as "property damage." Additionally, the court held that faulty workmanship did not constitute an "accident" and therefore was not an "occurrence" under the policy.The United States Court of Appeals for the First Circuit reviewed the case and affirmed the district court's decision, but for different reasons. The appellate court focused on the policy's exclusions, particularly the "Damage to Property" exclusion (j)(6), which excludes coverage for property that must be restored, repaired, or replaced because the insured's work was incorrectly performed on it. The court concluded that this exclusion applied to the entire project since Tocci was the general contractor responsible for the entire construction. The court also noted that Tocci did not meet its burden of showing that any exceptions to the exclusion applied, such as the "products-completed operations hazard," because Tocci's work was not completed or abandoned. Thus, the appellate court held that Admiral had no duty to defend Tocci in the underlying lawsuit. View "Admiral Insurance Company v. Tocci Building Corporation" on Justia Law

A school bus owned by First Student, Inc., and insured by National Union Fire Insurance Company of Pittsburgh, PA, collided with two underinsured vehicles in Rhode Island, injuring Tiffany Briere and her minor daughter. Briere submitted a claim for underinsured motorist benefits to National Union, which was denied on the grounds that First Student had rejected such coverage. Briere then sued National Union, arguing that Rhode Island law required the policy to offer underinsured motorist coverage.The United States District Court for the District of Rhode Island granted summary judgment to National Union and First Student. The court found that the Rhode Island statute requiring underinsured motorist coverage did not apply because the insurance policy was not "delivered or issued for delivery" in Rhode Island. The policy had been issued by a New York-based broker and delivered to FirstGroup's headquarters in Ohio. Consequently, the court ruled that the policy was exempt from the statutory requirement.The United States Court of Appeals for the First Circuit reviewed the case and vacated the district court's summary judgment. The appellate court held that National Union had waived its defense based on the delivery requirement because it had not mentioned this ground in its initial denial letter to Briere. The court emphasized that insurers must notify their insureds of all grounds for denying coverage in their denial letters. Since National Union failed to do so, it could not later rely on the delivery requirement defense. The case was remanded for further proceedings to address other potential defenses and issues not considered by the district court. View "Briere v. National Union Fire Insurance Co. of Pittsburgh, PA" on Justia Law

Joan Stormo and her siblings hired attorney Peter Clark for a real estate transaction, but Clark's actions caused the deal to fall through. Stormo sued Clark for malpractice and won. Clark's insurer, State National Insurance Company, denied coverage based on a prior-knowledge exclusion and Clark's delay in reporting the lawsuit. Stormo, as Clark's assignee, then sued State National for breach of contract and unfair claim-settlement practices.The U.S. District Court for the District of Massachusetts found that factual questions necessitated a trial on the breach-of-contract claim but granted summary judgment to State National on the unfair claim-settlement practices claim. The jury found for Stormo on the breach-of-contract claim, awarding over $1 million in damages. However, the district court granted State National's motion for judgment as a matter of law, ruling that Clark's late notice of the claim voided coverage under the policy.The United States Court of Appeals for the First Circuit affirmed the district court's judgment. The court held that under Massachusetts law, a claims-made policy like Clark's does not require the insurer to show prejudice from late notice to deny coverage. Since Clark failed to provide timely notice, State National had no duty to indemnify or defend him. Consequently, Stormo's claims for breach of contract and unfair claim-settlement practices failed. View "Stormo v. State National Insurance Co." on Justia Law