ACTUAL DAMAGES REQUIRED TO BREACH INSURANCE CONTRACT
Post 4972
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Ira and Patricia Potovsky bought an insurance policy for long term care from Lincoln Benefit Life Company in 2002. They sued Lincoln after it denied them coverage. The district court dismissed the case because the complaint failed to allege damages.
Ira Potovsky; Patricia Potovsky v. Lincoln Benefit Life Company, No. 23-4130, United States Court of Appeals, Ninth Circuit (January 7, 2025) the Ninth Circuit applied the law.
BACKGROUND
The Potovskys’ policy covered “actual expenses incurred” for qualified long term care should one of them become “chronically ill”- which the policy defined as requiring “[s]ubstantial [s]upervision to protect [themselves] from threats to health and safety due to severe [c]ognitive [i]mpairment.” The policy only covered those who had been receiving qualifying care for ninety days or more and then submitted a claim for reimbursement.
Mrs. Potovsky began to experience mental decline in her eighties. Mr. Potovsky contacted Lincoln to begin filing a claim under the policy in September 2022, because he intended to hire a caregiver for Mrs. Potovsky. Out of caution, Mr. Potovsky first asked Lincoln for a determination of Mrs. Potovsky’s eligibility.
Lincoln denied the claim. In its denial letter, after summarizing the medical record, Lincoln determined: “The supervision does not rise to the level of Substantial Supervision secondary to severe Cognitive Impairment as per the policy definitions…. There is no clear indication that Ms. Potovsky requires supervision on a continuous basis ….
“While the medical documentation on file does support Ms. Potovsky has a Cognitive Impairment, there is nothing in the file to support the Cognitive Impairment is severe and requires Substantial Supervision. The claim will now be closed.”
Although the Potovskys internally appealed this denial, Lincoln’s decision was unchanged.
The Potovskys filed suit. The district court predicted “[t]he breach of contract claim ultimately may be better suited as an anticipatory breach claim, which the plaintiff’s opposition seems to suggest.” The Potovskys added a claim for anticipatory breach to their original suit. They claimed that Lincoln’s denial confirmed it would not perform under the contract, and that this repudiation excused any lack of additional performance. Lincoln moved to dismiss again because the anticipatory breach lacked the element of damages. The district court granted dismissal with prejudice.
ANALYSIS
The elements of a cause of action for breach of contract are (1) the existence of the contract, (2) plaintiff’s performance or excuse for nonperformance, (3) defendant’s breach, and (4) the resulting damages to the plaintiff. In short, the Potovskys failed to allege any recoverable damages, an essential element of a breach of contract claim. Damages are an element that must be proved to prevail on the merits of a contract claim.
Damages excluded from coverage by an insurance policy are typically not within the contemplation of the parties. The Potovskys’ only alleged damages are in the form of home health care services that Mrs. Potovsky would have received had Lincoln acknowledged her entitlement to be reimbursed for supervised care or in the form of the care provided by Mr. Potovsky.
Care given by family members is expressly exempted from the policy’s coverage.
Lincoln’s denial letter and its course of conduct were not inconsistent with an intent to enforce the right to wait until expenses were actually incurred.
The Potovskys’ two other claims-bad faith and elder abuse-cannot prevail without a predicate breach of contract.
ZALMA OPINION
People, and some lawyers, forget that an insurance policy is a contract. In this case the breach of contract claim failed because the Potovskys’ incurred no damage because Mr. Potovsky wanted assurance (or didn’t have the funds) before spending money to care for Mrs. Potovsky. The Potovskys’ incurred no damages and could not, therefore, prove a breach of contract and claims of bad faith.
(c) 2025 Barry Zalma & ClaimSchool, Inc.
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Jury’s Findings Interpreting Insurance Contract Affirmed
Post 5105
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Madelaine Chocolate Novelties, Inc. (“Madelaine Chocolate”) appealed the district court’s judgment following a jury verdict in favor of Great Northern Insurance Company (“Great Northern”) concerning storm-surge damage caused by “Superstorm Sandy” to Madelaine Chocolate’s production facilities.
In Madelaine Chocolate Novelties, Inc., d.b.a. The Madelaine Chocolate Company v. Great Northern Insurance Company, No. 23-212, United States Court of Appeals, Second Circuit (June 20, 2025) affirmed the trial court ruling in favor of the insurer.
BACKGROUND
Great Northern refused to pay the full claim amount and paid Madelaine Chocolate only about $4 million. In disclaiming coverage, Great Northern invoked the Policy’s flood-exclusion provision, which excludes, in relevant part, “loss or damage caused by ....
Failure to Name a Party as an Additional Insured Defeats Claim
Post 5104
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Contract Interpretation is Based on the Clear and Unambiguous Language of the Policy
In Associated Industries Insurance Company, Inc. v. Sentinel Insurance Company, Ltd., No. 23-CV-10400 (MMG), United States District Court, S.D. New York (June 16, 2025) an insurance coverage dispute arising from a personal injury action in New York State Supreme Court.
The underlying action, Eduardo Molina v. Venchi 2, LLC, et al., concerned injuries allegedly resulting from a construction accident at premises owned by Central Area Equities Associates LLC (CAEA) and leased by Venchi 2 LLC with the USDC required to determine who was entitled to a defense from which insurer.
KEY POINTS
Parties Involved:
CAEA is insured by Associated Industries Insurance Company, Inc. ...
Exclusion Establishes that There is No Duty to Defend Off Site Injuries
Post 5103
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Attack by Vicious Dog Excluded
In Foremost Insurance Company, Grand Rapids, Michigan v. Michael B. Steele and Sarah Brown and Kevin Lee Price, Civil Action No. 3:24-CV-00684, United States District Court, M.D. Pennsylvania (June 16, 2025)
Foremost Insurance Company (“Foremost”) sued Michael B. Steele (“Steele”), Sarah Brown (“Brown”), and Kevin Lee Price (“Price”) (collectively, “Defendants”). Foremost sought declaratory relief in the form of a declaration that
1. it owes no insurance coverage to Steele and has no duty to defend or indemnify Steele in an underlying tort action and
2. defense counsel that Foremost has assigned to Steele in the underlying action may withdraw his appearance.
Presently before the Court are two ...
ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:
Health Care Fraud Trial Results in Murder for Hire of Witness
To Avoid Conviction for Insurance Fraud Defendants Murder Witness
In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...
Professional Health Care Services Exclusion Effective
Post 5073
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This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.
In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:
Insurance Coverage Dispute:
Travelers issued a Commercial General Liability ...
A Heads I Win, Tails You Lose Story
Post 5062
Posted on April 30, 2025 by Barry Zalma
"This is a Fictionalized True Crime Story of Insurance Fraud that explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help everyone to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the Perpetrators than any Other Crime."
Immigrant Criminals Attempt to Profit From Insurance Fraud
People who commit insurance fraud as a profession do so because it is easy. It requires no capital investment. The risk is low and the profits are high. The ease with which large amounts of money can be made from insurance fraud removes whatever moral hesitation might stop the perpetrator from committing the crime.
The temptation to do everything outside the law was the downfall of the brothers Karamazov. The brothers had escaped prison in the old Soviet Union by immigrating to the United...
