An Assignment of Rights to Sue an Insurer Was a Poor Decision
Internet Failure Causes Loss to On Line Auction
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In Auto-Owners Insurance Company v. Halo Foundation: Helping Art Liberate Orphans, No. 25-1275, United States Court of Appeals, Eighth Circuit (January 27, 2026) the Helping Art Liberate Orphans Foundation challenges Auto-Owners Mutual Insurance Company’s denial of liability under its insurance policy. HALO argued that a broken YouTube link for its virtual auction caused losses covered by the policy. The district court disagreed, granting summary judgment to AutoOwners.
FACTUAL BACKGROUND
HALO, a non-profit organization, hosts an annual art auction. In 2022, it was virtual. To livestream it, HALO contracted with Paradise Productions KC, LLC and Qtego Fundraising Services. Paradise would handle the visual feed, Qtego the bidding software. Paradise created a YouTube link for attendees to view the livestream. Qtego, using the link, synced its software with the livestream. Synced, attendees could view the auction and place bids on one screen.
Minutes before the auction, Paradise lost connection to the internet at its studio. While short lived, the outage permanently broke the YouTube link, ending the connection between the visual feed and bidding software. Attendees could neither place bids nor view the auction. Improvising, HALO diverted the stream to Facebook Live, causing asynchronous visuals and bidding. HALO raised significantly less money than projected due to the broken link.
HALO threatened to sue Paradise for breach of contract and negligence. Unable to pay, Paradise assigned to HALO its claim against its insurer, AutoOwners.
THE POLICY
Auto-Owners’ general liability insurance policy covers “property damage,” including the “[l]oss of use of tangible property that is not physically injured.” The policy, however, excludes: “Damages arising out of the loss of, loss of use of, damage to, corruption of, inability to access, or inability to manipulate electronic data.”
Electronic data was defined as “information, facts or programs stored as or on, created or used on, or transmitted to or from computer software, including systems and applications software, . . . data processing devices or any other media which are used with electronically controlled equipment.”
In the district court, Auto-Owners sued for a declaratory judgment that no coverage exists for the outage. It argued, in part, coverage was barred by policy exclusions. The district court granted summary judgment for Auto-Owners, ruling that the electronic-data exclusion bars recovery. HALO appealed.
ANALYSIS
Insurance contracts are read as a whole to determine the intent of the parties, giving effect to that intent by enforcing the contract as written.
The central issue a court faced with the requirement to interpret contract language is determining whether any ambiguity exists, which occurs where there is duplicity, indistinctness, or uncertainty in the meaning of the words used in the contract. If the policy language is clear and unambiguous, it must be construed as written.
If ambiguities exist, courts construe them in favor of the insured, but only when a reasonable person would expect coverage under the policy terms.
Under Missouri law, the insured has the burden of proving coverage, and the insurer has the burden of proving that an exclusion applies.
HALO argued that the policy’s plain language covers its lost auction revenue. It asserted that the bidders’ inability to access the YouTube livestream on their electronic devices is a loss of tangible property that is not physically injured. The Eighth Circuit agreed with the trial court and concluded that the policy’s electronic-data exclusion bars recovery.
This provision excludes coverage for: “Damages arising out of the loss of, loss of use of, damage to, corruption of, inability to access, or inability to manipulate electronic data.” (emphasis added)
The exclusion’s plain language clearly and unambiguously bars HALO from coverage. The Eighth Circuit found that a policy must be enforced as written when its language is clear and unambiguous and concluded that the district court properly granted summary judgment and the judgment was affirmed.
ZALMA OPINION
When a party, like HALO, has a good case against a potential defendant it can resolve the dispute by settlement or litigation and collect its losses from the assets of the defendant or its insurer. Since the defendants did not have the assets to pay for HALO’s losses it offered to assign its rights against its insurer so that HALO could sue the insurer for freedom from a potential judgment. HALO took a chance, took the assignment and sued the insurer only to find it bought a pig in a poke because there was no coverage. No one should settle by taking an assignment against an insurer unless sure that coverage applies. HALO wasted its legal fees to sue AUTO-OWNERS.
(c) 2026 Barry Zalma & ClaimSchool, Inc.
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Neither Defense nor Indemnity Available Because of Exclusion
Post number 5293
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Security at Low Income Housing to Risky for Insurer
In Everest Indemnity Insurance Company v. Kates Detective & Security Services Agency, Inc., et al., No. 25 C 5488, United States District Court, N.D. Illinois, Eastern Division (February 18, 2026) dealt with a clear and unambiguous exclusion.
Facts
Everest Indemnity Insurance Company sued Kates Detective & Security Services Agency, Inc. and the Chicago Housing Authority (CHA) seeking a ...
Fraud Perpetrators Have no Honor
Post number 5294
See the video at and at and at https://zalma.com/blog plus more than 5250 posts.
First Circuit Affirms Sentence
In United States Of America v. Chang Goo Yoon, No. 24-1520, United States Court of Appeals, First Circuit (February 20, 2026) Chang Goo Yoon, a licensed physical therapist operating clinics in Massachusetts, engaged in a fraudulent scheme between November 2014 and November 2018. He submitted over a million dollars in false health insurance claims to private insurers, including Blue Cross Blue Shield and Aetna, as well as personal injury claims to MAPFRE, his own car insurer.
Facts
Yoon fabricated treatment notes, billed for services never rendered, and used his office address as patients’ addresses to ensure reimbursement checks were sent directly to him. This arrangement prevented patients from receiving paperwork for services they did not...
Fraud Perpetrators Have no Honor
Post number 5294
See the video at and at and at https://zalma.com/blog plus more than 5250 posts.
First Circuit Affirms Sentence
In United States Of America v. Chang Goo Yoon, No. 24-1520, United States Court of Appeals, First Circuit (February 20, 2026) Chang Goo Yoon, a licensed physical therapist operating clinics in Massachusetts, engaged in a fraudulent scheme between November 2014 and November 2018. He submitted over a million dollars in false health insurance claims to private insurers, including Blue Cross Blue Shield and Aetna, as well as personal injury claims to MAPFRE, his own car insurer.
Facts
Yoon fabricated treatment notes, billed for services never rendered, and used his office address as patients’ addresses to ensure reimbursement checks were sent directly to him. This arrangement prevented patients from receiving paperwork for services they did not...
Contract Breaches that Allow Multiple Different Grounds to Make a Policy Void
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Posted on February 24, 2026 by Barry Zalma
You’re reading from the free part of Excellence in Claims Handling until you reach the paywall. You should consider joining as a paid member to get full access to articles for members only, to our news, analysis, insurance coverage, claims, insurance fraud and insurance webinars, by clicking at the “subscribe” link below.
If an insured breaches one or more material warranties and increases the risk covered by the policy, the contract may be voided by the insurer, depending on the jurisdiction. It is, therefore, essential that every claims investigation include efforts to establish compliance with every warranty.
In Cummings v. Fire Insurance Exchange, 292 Cal. App. 3d 1407, 249 Cal. Rptr. 568 (1988), the Court of Appeal ...
Passover for Americans
Posted on February 19, 2026 by Barry Zalma
“The Passover Seder For Americans”
For more than 3,000 years Jewish fathers have told the story of the Exodus of the enslaved Jews from Egypt. Telling the story has been required of all Jewish fathers. Americans, who have lived in North America for more than 300 years have become Americans and many have lost the ability to read, write and understand the Hebrew language in which the story of Passover was first told in the Torah. Passover is one of the many holidays Jewish People celebrate to help them remember the importance of G_d in their lives. We see the animals, the oceans, the rivers, the mountains, the rain, sun, the planets, the stars, and the people and wonder how did all these wonderful things come into being. Jews believe the force we call G_d created the entire universe and everything in it. Jews feel G_d is all seeing and knowing and although we can’t see Him, He is everywhere and in everyone.We understand...
Passover for Americans
Posted on February 19, 2026 by Barry Zalma
Read the full article at https://www.linkedin.com/pulse/passover-americans-barry-zalma-esq-cfe-5vgkc.
“The Passover Seder For Americans”
For more than 3,000 years Jewish fathers have told the story of the Exodus of the enslaved Jews from Egypt. Telling the story has been required of all Jewish fathers. Americans, who have lived in North America for more than 300 years have become Americans and many have lostthe ability to read, write and understand the Hebrew language in which the story of Passover was first told in the Torah.
Passover is one of the many holidays Jewish People celebrate to help them remember the importance of G_d in their lives. We see the animals, the oceans, the rivers, the mountains, the rain, sun, the planets, the stars, and the people and ...
