An Assignment of Rights to Sue an Insurer Was a Poor Decision
Internet Failure Causes Loss to On Line Auction
See the video at https://lnkd.in/gQ-VMf6b and at https://lnkd.in/gfmkwby7, and at https://zalma.com/blog plus more than 5250 posts.
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.
Please tell your friends and colleagues about this blog and the videos and let them subscribe to the blog and the videos.
Subscribe to my substack at https://barryzalma.substack.com/subscribe
Go to X @bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/account/content?type=all; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the InsuranceClaims Library – https://lnkd.in/gwEYk.
Supreme Court of Alabama Grants a Rare Request for Mandate
Read the full article at https://www.linkedin.com/pulse/limitation-defeats-suit-against-insurer-barry-zalma-esq-cfe-eychc, see the video at and at and at https://zalma.com/blog plus more than 5250 posts.
Statute of Limitations Demands Summary Judgment for Insurer
Post number 5296
In Ex parte Alfa Mutual Insurance Company and Jeffery Dimoff, In re Kinsman Investments, LLC v. Alfa Mutual Insurance Company and Jeffery Dimoff, No. SC-2025-0478, Supreme Court of Alabama (February 27, 2026) a rare Petition for Writ of Mandamus was granted and the trial court was ordered to enter summary judgment on behalf of Alfa.
Facts
Kinsman Investments, LLC (“Kinsman”) owned an apartment complex in Mobile, Alabama, which suffered significant damage from Hurricane Katrina in August 2005. At the time, the property was insured by Alfa Mutual Insurance Company (“Alfa”). Jeffery...
Claims File Created During the Pendency of a Lawsuit is Discoverable Regardless of Privilege
Read the full article at https://www.linkedin.com/pulse/production-claims-file-required-regardless-privilege-barry-ehroc, see the video at and at and https://zalma.com/blog plus more than 5250 posts.
In Melissa Eddy, and Alexis Eddy v. Farmers Property Casualty Insurance Company, f.k.a. Metropolitan Property and Casualty Insurance Company, APPEAL NO. C-230298, Court of Appeals of Ohio, First District, Hamilton County, 239 N.E.3d 1003, 239 N.E.3d 1000, 2024-Ohio-1047 (March 22, 2024) ruled on discovery issues with regards to the privileges asserted by Farmers.
Facts
In February 2020, Melissa Eddy was injured in a car accident while her husband, Alexis Eddy, was driving. The accident was caused by another driver, Pamela Shooner. Melissa sustained neck injuries that required surgery. At the time, the Eddys held an ...
ZIFL – Volume 30 Number 5
THE SOURCE FOR THE INSURANCE FRAUD PROFESSIONAL
Read the full article at https://lnkd.in/gsD9eFea, see the full video at https://lnkd.in/gNiQ5zcw, https://lnkd.in/gnG8TAeT and at https://lnkd.in/gzjMXakw and at https://zalma.com/blog plus more than 5250 posts.
Zalma’s Insurance Fraud Letter (ZIFL) continues its 30th 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/ This issue contains the following articles about insurance fraud:
ANTI-SLAPP MOTION STOPS CRIMINAL FROM ATTEMPT TO PROTECT HIS ASSETS FROM CONFISCATION
Convicted Criminal Seeks to Compel Receiver to Protect his Assets
The Work of a Court Appointed Receiver is Constitutionally Protected
In Simon Semaan et al. v. Robert P. Mosier et al., G064385, California Court of Appeals, Fourth District, Third Division (February 6, 2026) the Court ...
Contract Breaches that Allow Multiple Different Grounds to Make a Policy Void
More from Excellence in Claims Handling Substack for Subscribers Only. You can Subscribe to my substack at https://barryzalma.substack.com/subscribe
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 ...
