Monthly Archives: February 2014

100 Year Old Skylight Risky Business for Roofer: Business Owner Potentially Liable For Independent Contractor’s Fall (PA)

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In Pennsylvania, generally owners are not liable for injuries of independent contractors if they did not control the means and methods of the contractor’s work.  However, there is a notable exception to this rule.  Known as the “peculiar risk” doctrine, it holds that a landowner owes a duty to warn an unknowing independent contractor of existing dangerous conditions on the landowner’s premises where such conditions are known or are discoverable to the owner.  The question of whether a landowner owes a duty to warn an independent contractor of dangerous conditions on the premises turns on whether the owner possesses “superior knowledge” or information which places him in a better position to appreciate the risk posed to the contractor or his employees by the dangerous conditions. See Gutterige v. A.P. Green Services.

In Beam v. Thiele Manufacturing, the plaintiff Jason Beam was a roofer who fell through a rare skylight that was thought to be over 100 years old.  The skylight was unique and shaped differently than modern versions, as was the roof itself.  In fact, the roof was governed by specific OSHA regulations.  Beam was an experienced roofer and was hired by Theile Manufacturing (the building owner) to modernize the roof.  Despite his experience, Beam did not wear any fall protection while working on the roof, a fact which Theile was allegedly aware of.

The Somerset County Court of Common Pleas initially dismissed the action on the basis that Theile Manufacturing was insulated from liability under Pennsylvania premises liability law since the risk was obvious even to untrained workers.  However, a split three-panel superior court led by Judge Sallie Mundy reversed the earlier decision; agreeing with Beam that the work on this unique roof and skylight involved a peculiar risk.  They further agreed with Beam’s contention that Theile was aware of the special risk but failed to ensure that Beam took special safety precautions.  As such, the summary judgment award for Theile was overturned and the case was remanded back to Common Pleas for trial.

This case should remain a reminder to all building owners that they are not completely insulated from liability to independent contractors.  If you (or your insured) has particular knowledge about a dangerous risk on a property that may not be immediately obvious, it is important to make all visitors to the premises aware of this hidden risk.

Thanks to Remy Cahn for her contribution.

For more information, contact Denise Fontana Ricci at .

 

 

Controversial K2 Decision Reversed In Important Coverage Case (NY)

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After rattling the framework of well-established New York insurance law, the Court of Appeals conceded that it was wrong and reversed its prior decision in K2-II Investment Group, LLC v. American Guarantee & Liability Insurance Company.

In its earlier K2-I decision, the court held that an insurer waives any policy exclusions if the duty to defend is breached. The response to K2-I was immediate: commentators criticized the decision, noting that the Court of Appeals did not mention, let alone analyze, its prior decision of Servidone Construction Corp. v. Security Insurance Co., which came to the opposite conclusion. In September 2013, the Court granted a motion to reargue K2-I, signaling some second thoughts about its prior ruling.

In a 4-2 decision, the Court framed the issue as follows: “In short, to decide this case we must either overrule Servidone or follow it. We choose to follow it.” It stressed that “when our Court decides a question of insurance law, insurers and insureds alike should ordinarily be entitled to assume that the decision will remain unchanged unless or until the Legislature decides otherwise.” In short, the Court acknowledged the uncertainty that K2-I had caused, affirmed the value of predictability in the law, and took the bold step of reversing itself.

The lesson learned is that Servidone remains the controlling case in New York on the consequences of an insurer’s breach of its duty to defend. When an insurer breaches its contractual duty to defend its insured, the insurer is not automatically barred from relying on policy exclusions to dispute any obligation to indemnify the policyholder.

For more information on this post, please contact Paul at .

Even the NY Labor Law Has Its Limits!

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Labor Law sections 240 and 241(6) apply to workers engaged in one of several enumerated construction activities. Typically, these activities include construction, demolition or excavation. Where the plaintiff is not plainly performing one of the enumerated tasks at the time of the accident, the courts have grappled with what it means to be “engaged” in an enumerated activity. In Martinez v. City of New York, the Court of Appeals narrowed the reach of sections 240 and 241(6) by rejecting the plaintiff’s contention that those sections apply to all work that is an “integral and necessary” part of the larger construction project.

Despite the Court of Appeals’ rejection of the “integral and necessary” test, the lower courts have nonetheless expanded the reach of 240 and 241(6) by applying a slightly different standard: whether the work the plaintiff was performing was part of the construction project. In performing this analysis, the courts have relied on a variety of factors, including the time frame as to when the work was performed, the plaintiff’s specific task, and the plaintiff’s employer’s purpose at the site.

In Simon v. Granite Bldg 2. LLC, the reach of Labor Law 240 and 241(6) nearly expanded to an untenable level. There, the plaintiff and his wife, the decedent, were hired to hang wallpaper at a newly constructed office building that was nearly complete. On the morning of the accident, the plaintiff and decedent drove through an opening in a fence onto the upper deck of a parking garage that was still under construction. They took this route because the front entrance was closed. When the vehicle was halfway between the fence and the building, the decedent informed the plaintiff and she could not stop the vehicle. The vehicle slowly slipped on ice until it reached the edge of the incomplete deck, broke through a steel cable guardrail system, and fell 32 feet to the lower level.

The Supreme Court held that Labor Law 240 and 241(6) applied, but the Second Department reversed. In reaching this determination, the Second Department found that the plaintiff and decedent were not engaged in an enumerated activity, that they were not working in the construction area, and that the accident did not occur in connection with construction, demolition, or excavation work being performed by them.   The court rejected the plaintiff’s claim that wallpapering is itself an enumerated activity or that the work the two planned to perform was part of the larger construction project. Finally, the court reasoned that the accident occurred before the plaintiff and decedent had begun any work that conceivably could have been covered under these sections of the Labor Law.

The Second Department’s reasoning is a bit of a mixed-bag. In reaching its decision, it surprisingly analyzed whether the work the plaintiff and decedent were hired to perform was an enumerated activity, implying that had the plaintiff and decedent been hired to perform an enumerated task, sections 240 and 241(6) may have applied. On the other hand, the court concluded its reasoning by underscoring that the plaintiff and decedent had not even begun work. If there is a takeaway from Simon, it is that determining whether a worker is engaged in an enumerated activity will remain fact-specific and must be determined on a case-by-case basis.

Thanks to Gabe Darwick for his contribution.

For more information, contact Denise Fontana Ricci at .

Insurance Fraud By Any Other Name Smells As … Fishy (NJ)

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The New Jersey Insurance Fraud Protection Act was enacted to aggressively confront such fraud by facilitating detection and requiring the restitution of fraudulently obtained insurance benefits.  Recently the New Jersey Appellate Division considered a case in which it certainly looked like fraud and smelled like fraud.  Despite the insured’s protestations, the Court concluded it indeed was fraud.

A.I.G. insured a yacht against all risk and physical loss or damage. When the engine developed problems and emitted black smoke, the insureds learned that it had been damaged to the tune of $23,975.  They presented a claim to A.I.G., which promptly paid them $15,975 (an amount less their $8,000 deductible).

During the course of A.I.G.’s investigation into possible subrogation , it learned that the entire cost of the repairs had been covered by the manufacturer.  Naturally A.I.G. notified its insureds to recover the amount it had paid on the claim.  When the insureds declined, A.I.G. stepped up its efforts – to which the insureds took offense.

In A.I.G. v Walsh,  when A.I.G. sought recovery of the claim payment, the Walshes counterclaimed for bad faith.  Going on the offense, they claimed that A.I.G. had badgered them excessively to return the funds.  The Walshes contended that nothing in their policy required them to return the money once the manufacturer picked up the tab.

The Appellate Division did not agree.  By concealing the manufacturer’s repair payment, the Walshes had a double recovery for the claim.  This violated the terms of the Fraud Prevention Act.  Not only did they owe restitution, the court remanded the matter for proceedings for A.I.G.’s claim under the Act.  Needless to say, the court was not impressed with the Walshes’ bad faith claims.

In the end, fraud is fraud – and double compensation for the loss is just that.

For more information, contact Denise Fontana Ricci at .

WCM Obtains Another Victory in NY’s Highest Court.

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WCM Partners Dennis Wade, Cheryl Fuchs and Mike Bono obtained a unanimous affirmance of the dismissal of a Labor Law indemnification action from New York’s Court of Appeals, NY’s highest court. In the case of New York Hospital Medical Center of Queens v. Microtech Contracting Corp., the Court of Appeals was asked to consider a corollary to its decision in Balbuena v. IDR Realty, LLC, which held that an undocumented worker was not precluded from recovering lost wages in a personal injury action against a landowner under the state’s Labor Law.

In New York Hospital, the Hospital hired Microtech to perform demolition work. Two of Microtech’s employees, who were undocumented, were injured during the course of the work. The employees collected workers compensation benefits under Microtech’s policy, and thus were precluded from suing Microtech for personal injuries pursuant to New York State’s Workers’ Compensation Law. Instead, the employees sued the Hospital and were successful on their Labor Law 240 and 241(6) causes of action. The Hospital, then sued Microtech for common law indemnification claiming that though there was no “grave injury” or indemnification contract, Microtech should be stripped of its Workers Compensation Law Section 11 defense since it violated federal immigration statutes (the IRCA) by hiring undocumented workers.

WCM immediately moved to dismiss, which was granted. The Appellate Division affirmed, but granted leave to the Hospital to appeal to the Court of Appeals. On appeal, the Court of Appeals was asked to decide whether an employer is stripped of its Section 11 defenses if it hires an undocumented worker in violation of the IRCA. The Hospital argued that since the “employment contract” between Microtech and the undocumented workers was illegal, the Court could not enforce it, and thus Microtech could not benefit from the Workers Compensation Bar. In opposition, Microtech argued that the existence of an employment contract was irrelevant, since Microtech was not asking the Court to enforce any contract, nor was Microtech raising it as a defense to the common law indemnification action. Instead, Microtech was asking the Court to apply the statute to the facts of the case (i.e. the Bar applied since there was no “grave injury” or indemnification contract with the Hospital). The Court of Appeals agreed agreed with us and affirmed the Appellate Division order, holding that if the illegality of an employment contract did not defeat the employees’ rights under an otherwise applicable state statue, as was the case in Balbuena, it would not annul the employer’s statutory rights in our case.

This decision is obviously welcome news for contractors and their insurers. As it stands, the realities of the New York construction industry are that many contractors do in fact hire undocumented workers. If the Court had changed the law by creating an exception where an employer hires undocumented workers, it would open up exposure to many of our contractor clients and their insurers despite the bar raised by Section 11 of the New York workers compensation law. It also happens to be WCM’s second victory in New York’s highest court in the past two months!

For more information regarding this post, contact Cheryl Fuchs at

 

Court Finds that Rules Are Meant to Be Broken (PA)

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Recently, a three-judge panel of the Superior Court reaffirmed the notion that Pennsylvania judges should accommodate the plaintiff’s procedural misgivings when doing so would promote fairness and justice.

In the case of Jones v. Mercy Suburban Hospital, the plaintiff commenced suit as administratrix of her mother’s estate for wrongful death and survival as a result of medical malpractice.  Following years of protracted discovery and motion practice, trial in the matter was ultimately delayed due to an illness affecting plaintiff’s counsel.  Less than a month later, the plaintiff again moved the trial court to delay the proceeding, citing her own inability to appear due to illness.  The trial court, however, denied plaintiff’s motion to adjourn, and instead dismissed the case in its entirety for failure to prepare for trial.

Recognizing that the trial court’s sua sponte decision completely disposed the case, plaintiff’s counsel took direct appeal to the Pennsylvania Superior Court.  Arguing before the three-judge panel, plaintiff’s counsel contended that trial court abused its discretion in coarsely denying the petition for continuance and dismissing the case.  Unsurprisingly, the Superior Court agreed, and reaffirmed the accepted belief that Pennsylvania’s procedural rules must be interpreted to promote adjudication on the merits.  More specifically,  the  Superior Court announced unambiguously that Pennsylvania judges may disregard any error or defect in procedure provided the same does not result in substantial prejudice to the other parties.  Further, the appellate panel strongly condemned the trial court’s decision to dismiss the case as an improper exercise of the courts’ most severe sanction, and reminded judges throughout the Commonwealth that their decisions must be guided towards a “fair and just” disposition of the matter.

While Jones is a run-of-the-mill procedural appeal, the Superior Court’s approach reinforces the concept that Pennsylvania’s procedural rules are not intended to act as technicalities that undermine the merits of the case.  In fact, the opinion in Jones tells quite a different tale that is well known to most Pennsylvania lawyers: there is an exception to every rule, especially for the plaintiff. Let’s hope that the courts demonstrate the same magnanimous leniency and sense of justice when a defense lawyer becomes ill.

Thanks to Adam Gomez for his contribution to this post.  If you have any questions, please contact Paul at .    

Just Because There’s an Expert, Doesn’t Mean There’s a Case (NY)

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In Kalish v. HEI Hospitality, LLC, plaintiff’s complaint was dismissed as defendants made a prima facie showing that plaintiff’s accident was not attributable to any defect.  Plaintiff was injured when he slipped and fell on the bath mat provided by the hotel in his room’s bathroom.   He claimed that the hotel failed to provide non-skid backing to its bath mat which created a dangerous condition.  In support of his claim, plaintiff submitted an expert affidavit that stated that the bath mat was merely a cotton towel and was therefore defective.  The expert cited the industry standard, which he claimed requires mats to be fixed in place or provide slip resistant backing.

The trial court granted the hotel’s motion for summary judgment dismissing plaintiff’s claims and the plaintiff appealed.  The First Department affirmed, holding that plaintiff’s expert’s affidavit was purely speculative, pointing out that the expert never actually examined the floor or the bath mat in question.  Plaintiff’s expert relied on a photograph and did not make any references to his methodology to determine that the mat was defective.  Further, the industry standard cited was not even applicable to bathrooms.  The court held that there was no evidence of a defect in the bath mat and the complaint was properly dismissed.

Although on the surface an expert’s affidavit may appear to create a question of fact, it is always worth examining further how they actually arrived at their conclusions and pointing out the lack of objective support for their opinions.

Thanks to Anne Mulcahy for her contribution to this post. If you have any questions, please contact Paul at .

UM/UIM Step-Down Provisions May Not Limit Coverage to Employees (NJ)

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Step-down provisions in insurance policies are not uncommon. These limitations allow an insurer to decrease the policy limits for certain insureds or risks. For example, a commercial general liability policy may have a limit of liability of $1,000,000, which is decreased to $250,000 for any claims arising out of sexual abuse or molestation. Other policies have a lesser limit of liability for suits involving family members due to the danger of collusion between the parties.

In the past, New Jersey permitted a commercial motor vehicle liability policy to provide less uninsured (UM) or underinsured (UIM) motorist coverage for anyone other than the “named insured” on the policy. In 2007, the New Jersey legislature enacted legislation that prohibited commercial auto policies from enforcing step-down provisions that limited UM/UIM benefits available to employees of the named insured. The statute was made effective on September 10, 2007.

In James, plaintiff was injured in a car accident before the enactment of the statute. After settling with the adverse driver for the limit of his insurance ($100,000), James demanded UIM coverage under his employer’s commercial auto policy. Of note, his employer’s policy had a UIM limit of $500,000, but its step-down provision reduced UIM benefits available to employees at the limit contained in the employee’s own policy or, in this case, $50,000.

James argued that the new legislation should be given retroactive application, which would void the step-down provision in his employer’s commercial auto policy and make an additional $400,000 available to him. Rejecting his argument, the New Jersey Supreme Court held that the law ordinarily favors prospective application of a new statute. Further, the statute’s plain language did not evidence any explicit intent to apply the law retroactively to accidents that occurred before its effective date. Thus, the court ruled that the statute in question only reformed policies that were in existence on the effective date of the statute but had no application to accidents that occurred earlier.

In summary, a commercial auto insurer must provide UM/UIM coverage to an employee on the same basis as provided to the named insured (employer) regardless of its policy language. Given the effective date of the remedial legislation addressing UM/UIM limits in a commercial auto policy, this key policy requirement applies to all motor vehicle accidents on or after September 10, 2007.

For more information about this post, please email Paul at 

Place of Contract Not Place of Accident Remains Key Factor in Determining Which Law Governs an Insurance Policy’s Interpretation(NY/NJ).

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In the case of Certain Underwriters at Lloyd’s of London v. Illinois Nat’l Insurance, et al., the Second Circuit Court of Appeals was asked to decide whether New York or New Jersey law applied to an insurance contract’s interpretation. The coverage dispute arose out of an underlying New York construction accident wherein a construction worker was injured while working on the construction of Goldman Sachs’ New York headquarters.

Continental Insurance Company insured one of the liable contractors under both a primary and an excess policy. It argued that New York law (which was more favorable to its coverage position) applied to its policies’ interpretation under the “center of gravity” test. The federal trial court judge rejected that claim and instead applied New Jersey law to the policies’ construction on the grounds that the insurance contracts were issued in New Jersey to a New Jersey domiciled company. Continental appealed the decision to the Second Circuit.

The Second Circuit has just affirmed the trial court’s decision. It agreed with the trial court that “ all of the relevant contacts” favored the application of New Jersey law since the location of the accident is not determinative of which law governs the interpretation of an insurance contract. A copy of the full decision can be found here — Continental.

So, the long and short of it is – think place of contract not place of accident when deciding which law governs the interpretation of an insurance contract.

For more information about this post, please contact Bob Cosgrove at .

Perelman’s Fraud Suit Against Gagosian Gallery Allowed to Proceed (NY)

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A decision was recently rendered in the longstanding lawsuit between Ron Perelman’s investment group, MAFG Art Fund, LLD, and the Gagosian Gallery.   As the value of art continues to climb, more transactions will involve investment groups rather than individual collectors, and this decision touches on some interesting issues in that regard.

The suit arises out of convoluted claims involving a series of art purchases made by the investment group in exchange for cash and credit given to the group for consigning other art to the gallery. One of plaintiffs allegations was that, based on the Gallery’s superior knowledge of art, the Gallery had a fiduciary duty to accurately value the price of works involved in the exchange transactions, and that the Gallery breached its duty.  The Court, however, pointed out the extensive art collection and art investment experience touted by the plaintiff in its complaint; the fact that they were engaged in the business of art investments; that they alleged they had “staffs to work out paperwork;” that they were represented by counsel; and that they were owned by the renowned businessman, Ronald Perelman.    Based in part on this “arm’s length” transaction, the Court dismissed the breach of fiduciary duty count.

The other point of interest concerned plaintiff’s claims that the Gallery fraudulently represented the value of certain artwork.  Generally, even when a party possesses unique and superior knowledge, statements concerning value of art are “non-actionable opinion.”  Here, however, plaintiffs alleged that the Gallery repeatedly represented the value of the art was based on market data and sales information, and that the Gallery’s statements about those existing facts were knowingly false.  Although the Gallery tried to establish through the use of redacted invoices that plaintiffs received higher credits than the valuations provided by the Gallery, the Court refused to consider such proof on a pre-answer motion to dismiss and allowed the lawsuit to proceed into discovery.

Apparently the Judge urged the litigations to settle the matter “at a cocktail party in the Hamptons” so we will see whether the case actually goes forward.  Please write to Mike Bono for more information.