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.
The Largest Residential Burglary of All Time
Post 5407
Fraud & the Fear of Bad Faith Suits
Posted on July 22, 2026 by Barry Zalma
See the full video at https://lnkd.in/gWQQEySW and at https://lnkd.in/gyhdK6wv
This is a Fictionalized True Crime Story of Insurance Fraud explaining why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is one of a collection designed to help 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.
This is a Fictionalized True Crime Story of Insurance Fraud explaining why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is one of a collection designed to help 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.
After ...
Chutzpah is not Enough
Post 5397
Posted on July 20, 2026 by Barry Zalma
See the video and at https://lnkd.in/gNUs2XzT and at https://lnkd.in/g2MawyzX
Magistrate Issues a Search Warrant if there is a Fair Probability that Contraband or Evidence of a Crime will be Found in a Particular Place.
In United States Of America v. Frank Suess, et al., CRIMINAL No. 3:24-308, United States District Court, M.D. Pennsylvania (July 16, 2026) a federal grand jury indicted Frank Suess, Melissa Driscoll, and others in a 55-count health care fraud and anti-kickback prosecution arising from an alleged scheme involving medically unnecessary prescription “foot baths.”
As part of the investigation, the FBI obtained an August 19, 2022 warrant to search Driscoll’s Sterling Pharmacy Yahoo email account for emails from January 1, 2018 through December 31, 2020. Driscoll moved to suppress the resulting evidence, arguing that the warrant lacked probable cause, was overbroad, and rested on material misstatements and omissions.
LAW:
The ...
Fraud Shouldn’t Pay
Post 5396
See the video and at https://rumble.com/v7ctgmq-the-great-jewel-theft.html at https://youtu.be/aRbQ2sJfGwA
This is a Fictionalized True Crime Story of Insurance Fraud explaining why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is one of a collection designed to help 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.
The Insured purchased, for the first time in his life, a policy of Personal Articles Floater Insurance (PAF) scheduling $125,000 worth of ladies jewelry. He advised the insurer that the jewelry was always kept in a class E safe at his residence. He also told the insurer that he was employed full time as the owner of a gasoline service station and that he had never been canceled or suffered a previous loss.
One month after the policy was ...
Day Care Owner Loses Subsidies Because She Criticized State
Post 5421
Posted on August 11, 2026 by Barry Zalma
First Amendment Right Will be Allowed to Go to Trial
In Betsey J. Grant v. Maine State Department Of Heath And Human Services, No. 1:25-cv-00490-JAW, United States District Court, D. Maine (August 6, 2026), Betsey J. Grant, a licensed childcare provider and operator of Tiny Tikes Daycare in Trenton, Maine, sued Maine DHHS and several employees after she publicly criticized DHHS before Maine’s Government Oversight Committee and alleged that officials retaliated against her.
She claimed DHHS imposed and extended a conditional license, published stigmatizing information, interfered with subsidies and program funding, removed her from a food program, rescinded an expansion grant, and used biased or falsified evidence in licensing proceedings. Following the March 10, 2023, GOC testimony, Ms. Grant alleges that foster children's subsidies (approximately $30,000) were withheld; she was removed from the ...
Rescission for Material Misrepresentation
Post 5418
Posted on August 5, 2026 by Barry Zalma
An Insurer May Rescind An Insurance Policy Where The Applicant Made A Material Misrepresentation In The Application.
In Union Mutual Fire Insurance Company v. 844 Knickerbocker, LLC, et al. No. 2024-10359, Index No. 602824/22, 2026 NY Slip Op 04789, Supreme Court of New York, Second Department (July 29, 2026) Union Mutual Fire Insurance Company issued commercial insurance policies to 844 Knickerbocker, LLC, and Sanjaya Mallick based on applications stating that the insured property contained two apartment units. After an underlying personal injury action was filed, Union Mutual determined that the property actually contained three apartment units and rescinded the policies on the ground that the defendants had made a material misrepresentation in the applications.
LAW:
A misrepresentation is material if the insurer would not have issued the same policy, or would have issued it only on different terms, had the true ...
Rescission for Material Misrepresentation
Post 5418
Posted on August 5, 2026 by Barry Zalma
An Insurer May Rescind An Insurance Policy Where The Applicant Made A Material Misrepresentation In The Application.
In Union Mutual Fire Insurance Company v. 844 Knickerbocker, LLC, et al. No. 2024-10359, Index No. 602824/22, 2026 NY Slip Op 04789, Supreme Court of New York, Second Department (July 29, 2026) Union Mutual Fire Insurance Company issued commercial insurance policies to 844 Knickerbocker, LLC, and Sanjaya Mallick based on applications stating that the insured property contained two apartment units.
LAW:
A misrepresentation is material if the insurer would not have issued the same policy, or would have issued it only on different terms, had the true facts been disclosed. To establish materiality as a matter of law, the insurer must submit documentation of its underwriting practices, such as manuals, guidelines, bulletins, or rules addressing similar risks.
DISCUSSION/ANALYSIS:
As a result, the...
