Monthly Archives: March 2014

A Not-so-Common Enemy: PA Commonwealth Court Finds Exception to Stormwater Rule.

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In the case of Bretz v. Central Bucks Sch. Dist., plaintiff Mary Bretz filed a complaint in equity against the Central Bucks School District for water damage the school district’s adjacent property caused to her downstream property. The school district’s land contains a middle school and high school, both of which expanded between 1997 and 1999. Bretz claimed that the school district’s expansion, which included the construction of a detection basin and 36-inch drainage pipe running onto her property, increased the amount and duration of stormwater discharged onto her property, leading to soil erosion, damage to trees and land and threats to septic fields and electrical transformers. Specifically, Bretz requested an injunction, requiring the school district to redesign their stormwater management system.

The trial court did not attribute any damage to Bretz’s property to school district’s negligence. Rather, the trial court pointed to the common enemy rule, that generally treats surface water as a common enemy and requires property owners to fight to get rid of it in any way they can. Further, the trial court held that the school district complied with SALDO provisions during construction, and noted that improvements to the stormwater system that the school district initiated in the course of the court proceedings would improve the impact on Bretz’s property.

On appeal, the Commonwealth court ruled that the school district’s construction qualified as an exception to the common enemy rule as the detection basin had actually increased water volume and duration on Bretz’s property. Additionally, the court overruled the trial court’s denial of Bretz’s request for an injunction.

The lesson to take from all of this is that while stormwater cases can be defended, construction work can create an exception. So plan accordingly and make sure your contractors have insurance!

Special thanks to Nicole Pedi for her contributions to this post. If you have any questions about it, please contact Bob Cosgrove at .

Get the Gist? PA Superior Court Clarifies Coverage for Faulty Workmanship Claims.

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It is well-settled in Pennsylvania that an insurer may properly disclaim coverage where a third-party complaint alleges faulty workmanship in the insured’s own work. Still, it appears that some policyholder law firms have recently latched on to the Pennsylvania Superior Court’s decision in Indalex, Inc. v. National Union Fire Insurance Co. to claim that Pennsylvania’s courts are “opening the door” to coverage of faulty workmanship claims. Convinced as they may be, however, we find that a careful reading of Indalex suggests the Court’s affirmation of the general rule that claims of faulty workmanship do not constitute “occurrences” under Pennsylvania law.

In Indalex, the insured manufacturer of certain watertight doors and windows brought suit against National Union Fire Insurance Co. for, amongst other things, failure to provide insurance coverage under a commercial umbrella policy. Specifically, the insured took exception to National Union’s disclaimer of coverage in several out-of-state suits wherein homeowners alleged strict products liability, negligence, breach of warranties, and breach of contract. Although National Union prevailed on summary judgment by arguing that the claims for breach of warranty and breach of contract barred coverage entirely under Pennsylvania law, the insured appealed to the Superior Court that the trial judge had improperly applied Pennsylvania’s “gist of the action” doctrine to decide an insurance coverage dispute.

On appeal, the three-judge panel of the Superior Court expressly found that the subject umbrella policy unambiguously disclaimed coverage for “property damage in [the insured’s] product” or work. Nevertheless, the Panel noted that the underlying complaints sounded in distinct product-based torts in addition to claims of faulty workmanship in the watertight doors and windows. The trial court it held, therefore, erred as a matter of law when it applied Pennsylvania’s “gist of the action” doctrine to conclude that each of the underlying lawsuits were, taken as a whole, a recasting of uncovered claims of faulty workmanship. Bearing in mind the axiom that the duty to defend is triggered if but a single claim in a multi-claim lawsuit is potentially covered under the policy, the Superior Court ultimately declined to find that the underlying suits were beyond the scope of coverage where they included allegations of damage to persons or property other than the insured’s own work.

Rather than upending Pennsylvania jurisprudence with respect to the insurance coverage of faulty workmanship claims, we believe that the Superior Court’s decision in Indalex merely reaffirms the scope of the duty to defend in multi-claim cases alleging defective workmanship. Consequently, it is our opinion that Indalex far from serves as a polestar for insureds seeking coverage of faulty workmanship claims, and instead reaffirms the fact that damage to the insured’s work does not constitute an “occurrence” under Pennsylvania law.

Special thanks to Adam Gomez for his contributions to this post. If you have any questions about it, please contact Bob Cosgrove at .

Even If He Threw the Egg, It’s Privileged.

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In Castiglione v. James F.Q., the plaintiff brought a civil action against the defendant alleging that, on Halloween, his son threw an egg that hit plaintiff’s daughter in the eye – causing her injuries. Criminal charges were filed and defendant’s son pleaded guilty to assault in the third degree and was adjudicated as a youthful offender.

At defendant’s son’s deposition in the civil case, he denied throwing the egg all together. He also refused to answer any questions regarding the youthful offender proceedings or his statements made to the police. Plaintiff’s attorney made a motion to compel defendant to answer the questions asked at his deposition and demanded an authorization for his complete police and court files.

The Supreme Court denied plaintiff’s motion and the Second Department affirmed. The Court held that pursuant to the penal law, a youthful offender adjudication is not a criminal conviction and the records are sealed. The Court noted that the purpose of the law is to avoid stigmatizing a youth for thoughtless acts. The Court held that the defendant’s son did not waive the privilege because he did not affirmatively place the information or conduct at issue, noting that he did not commence an action or assert counterclaims or cross claims in the civil action. Even the defendant’s son’s denial at his deposition that he threw the egg did not waive his statutory protections.

This case clearly establishes the value of knowing the extent of statutory privileges, but, it also is a lesson that sometimes asserting general cross claims and counter claims might not always be in your client’s best interest.

Special thanks to Anne Mulcahy for her contributions to this post. For more information, please contact Dennis Wade at .

Contractors, Owners and Agents: Bring Your “A-game” When You Provide an A-frame.

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Labor Law §240(1) provides protection to workers by (among other things) obligating contractors, owners and agents, to provide ladders (among other devices) “constructed, placed and operated as to give proper protection.” All too often, a worker brings suit alleging a fall from an allegedly faulty A-frame ladder resulting in injuries.

In Morato-Rodriguez v. Riva Construction Group, Inc., 2014 NY Slip Op 01408 (1st Dept. 2014), the Appellate Division dealt with this very situation: an alleged injury caused by an alleged defective A-frame ladder. The plaintiff in Morato-Rodriguez claimed that the defendants’ site foreman directed him to use the only ladder on the floor, an open A-frame ladder “not that far” from the site foreman’s toolbox. While plaintiff was standing on the ladder, it became unstable, wobbled, and fell, causing him to fall and be injured.

The site foreman, in turn, testified that he directed plaintiff not to use certain ladders that were placed by the garbage bins, and, instead, to use one of at least two “A-frame sturdy ladders” available on the floor. According to the foreman, instead of following his directions, the plaintiff used a ladder that he was specifically instructed not to use.

The First Department found an issue of material fact and reversed the Bronx County Supreme Court’s grant of partial summary judgment to plaintiff. However, it is very likely the First Department would have ruled in defendants’ favor on summary judgment under Labor Law §240(1) had the site foreman, or anyone else for that matter, brought his site safety “A-game” and made sure that any defective ladder was removed from the site ASAP to preclude any chance of a laborer using it and being subjected to a fall and injury. Remember, when it comes to construction site safety, bring your “A-game” for any A-frame.

Special thanks to Bryan Lipsky for his contributions to this post. For more information, please contact Dennis Wade at .

New York Applies Wide Definition of “In Transit:” Transit Insurance Covers Cash Stolen from Vault.

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In CashZone Check Cashing Corp. et al. v. Vigilant Insurance Co. et al., Index Number 653245/11 the Appellate Division, First Department, reversed the trial court’s determination that cash that was stolen from the vault of an armored car service company was not “in transit” pursuant to the terms of the insurance contract. The facts of the case are as follows.

Plaintiff CashZone hired Mount Vernon Money Center, an armored car company, to transport currency from the Federal Reserve Bank of New York. Mount Vernon would pick up the money from the Fed and then take the money to its vault where it would be processed for delivery to CashZone locations. While at the facility, Mount Vernon’s principals embezzled $470,000 as part of a fraudulent scheme. Mount Vernon’s principals were indicted of bank fraud and pleaded guilty.

CashZone filed a claim with Vigilant under its insurance policy’s “in transit” provision. Vigilant denied coverage for the loss, claiming that the money was not “in transit” but rather was within Mount Vernon’s vault. The trial court agreed with Vigilant, finding that the stop at Mount Vernon’s vault was not an “incidental” stop but a substantive interruption of the transit process.

The First Department reversed, noting that New York courts apply a broad definition of the term “in transit” and refused to accept the cases cited by Vigilant from other jurisdictions.
The court ruled that the entire time Mount Vernon possessed the cash was “one continuous shipment process,” and that the stop at the vault “was expressly understood by all concerned as a necessary component of the act of delivery of cash by armored car from the Federal Reserve Bank to plaintiffs’ locations.” The court reasoned that as long as the cash remained in the possession of the armored car service making the delivery, and the stop at issue was in service to that delivery, the property was in transit until the downstream delivery was completed.
The court also rejected the Vigilant’s argument that the endorsement covered only thefts by a third party from the transportation company, and did not cover theft by the transportation company itself, finding that the endorsement provided for no such distinction.

CashZone shows that New York jurisprudence focuses on the purpose of a contract — not the process by which it is achieved. Specifically, the case stands for the proposition that “storage” — if incidental to the object of transport — will be covered by a transit endorsement. WCM believes that CashZone should be read in a larger context. By analogy, its logic reaches past armored car risks to other shipping contracts such as fine art and storage agreements.

If you have any questions about this case please contact Dennis Wade at .

WCM to Co-Host an International Underwriting Association, London Market Briefing on Cyber Security and E-Discovery on April 2, 2014.

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WCM Partner Bob Cosgrove will be a featured speaker at an International Underwriting Association, London market briefing entitled Navigating the Digital Landscape: The Use of E-discovery and Accompanying Cyber Security Challenges. The briefing, which will also feature Waltons and Morse Partner Chris Dunn, will highlight the challenges insurers face in discovery battles in cyber security breaches and other types of lawsuits on both sides of the Atlantic. Strategies to handle e-discovery / e-disclosure disputes will be explored, and an explanation of some of the peculiar legal issues that arise from cyber security and data breach lawsuits will be discussed.

WCM, a regional US firm with offices in NY, NJ and PA and relationships across the U.S., has an active Privacy, Privacy, Cyber Security and E-Discovery practice. Bob Cosgrove, who is a member of the practice group, is a Certified Information Privacy Manager and a Certified Information Privacy Professional, US.

For more information about the seminar or WCM’s Privacy, Cyber Security and E-Discovery practice, please contact Bob at . If you are interested in attending the seminar, please click here.

WCM Partner Quoted in New Jersey Law Journal.

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WCM New Jersey Office Partner Denise Ricci was quoted in the March 5, 2014 issue of the New Jersey Law Journal on the implications of the appellate division’s decision in the case of Prioleau v. Kentucky Fried Chicken. In the case, the plaintiff slipped and fell on her way to the bathroom in a KFC fast food restaurant. She alternately described water or grease on the floor as the cause of her fall. She specifically claimed that a kitchen employee may have carried grease on the bottom of his/her shoes from the kitchen (where the food is deep fried) on the way to the restroom. Employees testified that from time to time, grease does get on the kitchen floor. They used separate mops for the dining area and kitchen. The plaintiff attempted to use the mode of operations argument to reduce her required burden of proof. The majority of a three judge appellate panel held that the mode of operation doctrine is very limited and applies only when self service is involved. The dissenting judge felt that it could apply in this instance. Because of the divided panel, the plaintiff can appeal as of right to New Jersey’s Supreme Court.

The NJLJ asked WCM Partner Denise Ricci (who is familiar with the issue) to comment on the case. Denise was cited as saying that majority was correct and the doctrine is a very limited exception to the rule that a plaintiff must prove notice of the hazardous condition blamed for the injury. She noted that in Prioleau, there was no lettuce or other clearly identifiable part of KFC’s operations that caused the fall.

For more information about the Arroyo case, please contact Denise at .

WCM Partner Quoted in New Jersey Law Journal.

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WCM New Jersey Office Partner Denise Ricci was quoted in the October 23, 2013 issue of the New Jersey Law Journal on the implications of the Appellate Division’s decision in the case of Arroyo v. Durling Realty. In the case, the plaintiff slipped and fell on a phone card outside of a Quick Check store. She argued that the “mode of operation” rule should apply because the Quick Check sold phone cards in a self serve rack near the cashier. In New Jersey, the “mode of operation rule” reduces the plaintiff’s burden of proof if the plaintiff can establish a close interplay between the cause of the accident and the business’s operation. Here, the plaintiff claimed that the phone card was apparently dropped just outside of the store. Specifically, she claimed that she should not have to prove notice since the store should have anticipated that a customer would discard or drop such a card. The Appellate Division held that mode of operation did not apply and that nexus of the card on the ground to the business was too attenuated to justify application of this doctrine.

The NJLJ asked WCM Partner Denise Ricci to comment on the case. Denise was cited as saying that the Appellate Division was probably motivated to publish the opinion to make clear there must be a tie between how a business operates and the danger that allegedly caused the fall, because plaintiffs keep coming up with “creative theories” for applying the doctrine.



For more information about the Arroyo case, please contact Denise at .

Facebook Post Upends Settlement

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A standard part of many settlement agreements is a confidentiality provision.  A recent case, Snay v. the Gulliver Schools, shows that in the internet age, a party can very easily learn that confidentiality has been breached.

Plaintiff Patrick Snay was the headmaster of the Gulliver Schools in South Florida. When Gulliver did not renew Snay’s contract, he sued, alleging age discrimination and retaliation.  The parties reached a settlement, and the school agreed to pay $10,000 in back pay to Snay, $80,000 in damages to Snay,  and $60,000 to Snay’s attorneys.

Part of the settlement agreement was a detailed confidentiality provision, which provided that Snay could not discuss the existence or terms of the agreement with anyone other than his attorneys, professional advisors or spouse.  A breach of the confidentiality provision would cause the $80,000 part of the settlement proceeds to be “disgorged.”

Only four days after the agreement was signed, Gulliver notified Snay that he had breached the agreement based on a Facebook post by Snay’s college-age daughter:

Mama and Papa Snay won the case against Gulliver. Gulliver is now officially paying for my vacation to Europe this summer. SUCK IT.

Snay’s daughter had approximately 1200 Facebook friends, many of whom were either current or past Gulliver students.

 

Snay filed a motion to enforce the agreement, and after conducting a hearing, the trial court ruled in Snay’s favor.  But the appellate court reversed and found that Snay violated the agreement – even though he only shared the terms with his daughter – because it lead to the exact harm the agreement sought to prevent.

Ah, the joys of parenthood in a world with social media!  Please write to Mike Bono for more information.

Tenants Can Be Liable Under NY Scaffold Law

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The Labor Law in New York is the bane of the existence of many landowners and contractors involved in construction projects based, in part, on the strict liability imposed by section 240 when workers are involved with elevation related risks.

By its terms, it applies to owners and contractors and their agents.  But there is another group that needs to take certain care as well:  tenants.

In Morato-Rodriguez v Riva Constr. Group, Inc., the plaintiff was injured when he fell from a ladder while working.  One of the defendants, the tenant — not the owner — of the property where the accident occurred, moved for summary judgment on the basis that Labor Law 240 only applied to owners.  The trial court denied the tenant’s motion.

On appeal, the First Department agreed with the trial court and affirmed, as the status of being a “tenant” does not automatically shield a party from liability under Labor Law 240.   Where the tenant “selected the contractor for the work and substantially directed and controlled it,” and was otherwise actively engaged in the work, the tenant falls under the tentacles of Labor Law 240.   As such, insurers ought to keep that point in mind when deciding whether (or at what price) to insure tenants who are actively engaged in New York construction projects.

Thanks to Jung Lee for his contribution to this post.  Please write to Mike Bono for more information.