Monthly Archives: April 2014

Who Goes First? A Delaware Court Creates New York Law on the Subject.

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In the case of Viking Pump Inc. et al. v. Century Indemnity Co. et al., case number 10C-06-141 FSS CCLD, Superior Court of the State of Delaware, County of New Castle. In the case, Warren and Viking pursued tens of millions of dollars in insurance coverage from 35 excess insurers. The question for the court was whether all policies in a single layer had to be exhausted before the next level of insurance began to provide coverage. The Delaware appellate court ruled that, as a matter of first impression for New York, the answer was “no” and the horizontal exhaustion method (which requires all policies in a single layer to be exhausted before the next level begins to provide coverage) only applies to primary and umbrella policies. In reaching this decision, the court applied California precedent and effectively ruled that the policyholders’ reasonable expectations would be thwarted if a carrier was allowed to disclaim coverage because the underlying policies had not all paid their limits.

Stay tuned for more on this story as we’re certain that appeals will continue. But pay close attention to the reality that in mass tort claims, insurers are likely to hear a lot about Viking Pump.

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

Is the FTC the US Policeman on Cyber Liability Claims?

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One of the biggest US cyber liability questions is – as Congress has not passed a law on point – who is responsible for policing data breaches and enforcing the violations? (The question is of less impact in places like the EU where responsibility is clearly delineated by laws). The recent case of Federal Trade Commission v. Wyndham Worldwide Corporation sheds light on the issue.

In the case, Judge Salas, a New Jersey federal district court trial judge, was asked to rule on the legality of the Federal Trade Commission’s attempt to “be” the enforcer when it filed a 15 U.S.C. § 45(a) FTC Act claim against Wyndham Hotels and Resorts. 15 U.S.C. § 45(a) empowers the FTC to file actions against acts or practices “affecting commerce” that are “unfair” or “deceptive. The violations at issue resulted from Wyndham’s alleged failure to properly deal with unauthorized attacks on its property management systems – attacks that led to the compromise of more than 619,000 consumer payment card account numbers and the resultant sale of those numbers to Russian black market entities.

In response to the claim, Wyndham filed a Fed. R. Civ. P. 12(b)(6) motion to dismiss. It argued that 15 U.S.C. § 45(a) only empowered the FTC to regulate “unfair and deceptive acts or practices” and policing data breaches did not fall within the scope of this power. In a decision of first impression (that is certain to be appealed), Judge Salas held that 15 U.S.C. § 45(a) did, in fact, empower the FTC to police data breaches. She has thus allowed the action to go forward.

What does all of this mean for insurers and their insureds? The answer is two-fold. First, insurers must question whether the policies they write provide coverage for regulatory actions commenced by the FTC. Second, insurers and insureds need to understand that, beyond dealing with consumer claims, a FTC 15 U.S.C. § 45(a) action when a data breach occurs should be expected.

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

Bad Faith Different From Bad Judgment (NY)

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In the recent decision of General Motors Acceptance Corp. v. New York Central Mutual Fire Ins. Co., New York’s First Department reversed the lower court’s decision that denied the underlying general liability carrier’s motion for summary judgment.  The underlying action involved injuries sustained in a motor vehicle accident in which a judgment was entered in excess of the primary policy limits.  The underlying defendant and its excess carrier sued the general liability carrier for acting in bad faith based on its refusal to settle the claim for the full policy amount.  The insured and excess carrier argued that this refusal constituted reckless and gross disregard for the excess insurer’s rights and a failure to acknowledge the injured plaintiff’s potential damages.

The First Department, however, reasoned that the general liability carrier had not acted in bad faith because it had conducted a full investigation that included obtaining the opinions of four independent medical consultants and the use of experienced counsel for the damages trial.  The carrier also reviewed voluminous medical records that contradicted the findings of the injured plaintiff’s treating physicians and highlighted that the injuries were primarily pre-existing.  In sum, the court concluded that while the carrier’s actions may not have been prudent, it did not act in bad faith as the record showed that the carrier did not believe that the plaintiff sustained a serious injury that was causally related to the accident.  Therefore, the carrier did not breach its duty of good faith by making a decision that ultimately may have been a mistake in judgment.

Thanks to Moya O’Connor for her contributions to this post.  For more information, please contact Nicole Y. Brown at .

WCM Grows In New Jersey

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WCM is pleased to announce that it has relocated its New Jersey office to new and expanded space in Springfield, New Jersey. Conveniently located in Union County, the new office is larger and more efficiently configured to address our staffing needs. As important, the Springfield office has more robust digital connectivity to enhance our connections with clients, courts, and adversaries whether by email, video-link, or other electronic means. The driving force for the move was to better serve our increasing client base throughout the Garden State.

We never forget that our mission is to provide our clients with superior and cost-effective legal services. We thank you for your business and look forward to working with you whether your matter relates to New Jersey, New York, or Pennsylvania.

For further information, please contact our Communications Director, Diana Mauriello at .

NJ Dealership Hit With Punitive Damages For Failing To Detect Bald Tires

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In the recent unreported decision of Ceasar v. Flemington Car and Truck Company, New Jersey’s Appellate Court upheld the trial court’s award of punitive damages to the plaintiffs who were injured in a motor vehicle accident.  Plaintiff Carla Cesar was driving a 2004 Chevy Trailblazer when the right tire blew out, causing the vehicle to roll over multiple times.  All occupants of the vehicle suffered personal injuries.  The plaintiffs filed suit against the dealership where the car was purchased and maintained.  During the discovery process, it was revealed that the dealership had inspected the vehicle prior to the accident, failed to detect a bald spot on the tire and failed to recommend that the tires be replaced.  The jury determined that the dealership acted with reckless disregard for the safety of others and awarded $5.5 million in punitive damages.  The trial court reduced the award of punitive damages to $3 million.

The car dealership appealed, arguing that punitive damages should have not been awarded and that the award was excessive. The Appellate Court upheld the trial court’s decision, finding that the jury was permitted to award punitive damages since the dealership’s failure to detect a bald spot could reasonably constitute wanton and willful disregard for the high probability of injury.  The court also upheld the amount of the award, finding that the dealership’s behavior was reprehensible.

Thanks to Heather Aquino for her contributions to this post.  For more information, please contact Nicole Y. Brown at .

Why Does the Definition of “Interior Stairs” Matter in New York City?

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In Rondon v. Victoria’s Secret Stores, LLC, Victoria’s Secret appealed a trial verdict that found it negligent and apportioned it 75% liability.  At issue was whether the set of stairs that the plaintiff tripped on were interior stairs.  On appeal, Victoria’s Secret argued that the plaintiff’s accident was not caused by a defective staircase as the subject staircase had an acceptable height differential between the first and second stairs and was in compliance with NYC Administrative Code section 27-735 that regulates interior stairs.

The First Department disagreed, finding that the NYC Administrative Code defined interior stairs as stairs within a building that serve as a required exit.  The stairs that the plaintiff tripped over descended from the mezzanine to the lobby of the building and did not serve as an exit to the outside.  So while the subject stairs allowed for exit from the Victoria’s Secret store, they did not exit the building itself and were not subject to the mandates of section 27-735.  Since these were not an interior staircase, the National Fire Protection Association Life Safety Code applied and provides that the tolerance between the largest and smallest tread cannot exceed 3/8 of an inch.  As the differential on the subject stairs was 1/2 an inch, the verdict establishing the defendant’s negligence was permitted to stand.

Thanks to Michael Nunley for his contributions to this post.  For more information, please contact Nicole Y. Brown at .

PA Court Interprets Gist Of The Action Doctrine

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A Pennsylvania court has held that an insured’s fraud claim against its insurer based on the same facts as its breach of contract claim was barred by the gist of the action doctrine.  In Havice v. Erie Ins. Co., the plaintiff initially filed a complaint following her insurer’s refusal to pay for damages to her roof after a hail storm.  The plaintiff’s complaint alleged a breach of contract claim as well as claims based on fraud and deceit after her insurer determined that there was no damage to her roof despite numerous contractor estimates.

In response to the plaintiff’s complaint, the insurer filed preliminary objections arguing that the plaintiff’s fraud claim was barred by the gist of the action doctrine.  In its analysis, the court noted that the gist of the action doctrine was established to maintain the difference between breach of contract and tort claims.  Further, the court noted that the doctrine foreclosed tort claims that arose solely from a contractual relationship between the parties, any duties alleged to have been breached arising from a contract, liability that stemmed from a contract, and any claims that were dependent on the success of a breach of contract claim.

Based on the foregoing, the court determined that the plaintiff’s fraud claim was barred by the gist of the action doctrine because any alleged misrepresentations committed by the insurer were committed in an attempt to avoid its obligations under the insurance policy and that the significance of those misrepresentations was dependent on a showing of a breach of the insurance policy by the insurer.  Nevertheless, the court noted, that the plaintiff was entitled to punitive damages if she could establish the insurer’s misrepresentations were made in bad faith.

Thanks to Colleen Hayes for her contributions to this post.  For more information, please contact Nicole Y. Brown at .

Continued Expansion of Labor Law 240 Liability

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Earlier this year, we reported on the First Department’s ever expanding Labor Law 240 liability based largely on a plaintiff’s ability to show foreseeability in accidents that do not involve a scaffold or gravity related falls.  The court recently again addressed this issue in Hettich v. 125 East 50th Street Co., LLC a case in which Hettich was inside a dumbwaiter working to replace its controller when the hoist cable broke causing the dumbwaiter to plummet 40 feet.  In denying all parties summary judgment, the court concluded that the ultimate cause of Hettich’s injury was a dangerous condition on the defendants’ property, namely, the malfunctioning hoist cable and not the manner in which Hettich performed his work based on evidence that the breaking strength of the cable was roughly seven times the combined weight of the dumbwaiter with Hettich inside.  The court concluded that if the hoist cable had been functioning properly it would not have snapped.  In reaching its decision, the court cited to our previously reported case, Garcia v. Neighborhood Housing Dev. Fund. Co., Inc., for its holding that a plaintiff in a case involving collapse of a permanent structure must establish that the collapse was foreseeable.  Notably absent from the court’s opinion in Hettich is any reference to the trial court’s conclusion that the record shows that the possibility of the hoist cable breaking was not considered a foreseeable risk with this particular dumbwaiter.  Thus, just how far Garcia expands Labor Law 240 liability remains to be seen.

Thanks to Alicia Sklar for her contribution to this post.  For more information, please contact Nicole Y. Brown at .

Poor Lighting Claim Revives Premises Liability Claim (NY)

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A plaintiff who alleges she was injured due to a defective condition must describe or identify the condition to satisfy her proof burden.  Where the plaintiff cannot identify the defect, the claim against the property owner will generally not survive a summary judgment motion.   Yet, In Palahnuk v. Tiro Restaurant Corp., the plaintiff convinced the Second Department that her claim should not have been dismissed despite this major gap in her proofs.

In Palahnuk, the plaintiff allegedly tripped and fell in a restaurant hallway.  The defendant convinced the trial judge to dismiss the claim because she failed to identify the specific defect.  In her appeal, plaintiff conceded that she was unable to identify the specific defect, but only because the lighting in the restaurant hallway was too dark, and she could not see her surroundings.  In what was undoubtedly a frustrating decision for the landowner, the Court found that there was a triable issue of fact as to whether the “lack of adequate lighting was a proximate cause of the accident,” and remanded the matter back to the trial court.

We look to decisions like this one for guidance for avoiding similar pitfalls.  Here, the question is whether the defendant could have rebutted the claim of poor lighting.   Of course, even then, a judge might find a triable issue of fact regarding the different descriptions of the lighting conditions.

Judges in New York tend to deny summary judgment motions far more often than granting them;  cases like Palahnuk illustrate why many such judges err on the side of caution and, as they say, “let the jury decide.”

Thanks to Brian Gibbons for his contribution.

For more information, contact Denise Fontana Ricci at .

Wrongly Named in Suit? Only Documents Prove For Sure. (NY)

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It can be frustrating and expensive when a party is incorrectly named in litigation.  Court rules provide an expedited out through a pre-answer motion.  However, the requirements for such a motion are stringent and require clear documentary evidence that is “essentially undeniable.”  Anything less will only succeed in prolonging the process.

In Wang v. Diamond Hill Realty, LLC, , the plaintiff fell in front of a building and sued the owner and the purported tenant.  However, the tenant named in the suit was not actually in possession of the property at the time in question.  In a pre-answer motion the tenant informed the Court that it had not yet moved into the premises at the time of the accident.  In fact, a hold-over tenant was occupying the space at that time.  To support its motion, the tenant submitted its vice-president’s affidavit and a stipulation between the tenant and the prior occupant.  Despite this evidence, the court denied the motion.

Noting that affidavits rarely suffice for such motions, the Court found that the affidavits and stipulation did not resolve whether the defendant tenant had responsibility for the property.  The Court suggested that proper “documentary evidence” would include the lease and other such records.

Presumably, the tenant will eventually satisfy the court with competent documentation.  However, no doubt it will be subject to needless discovery before it can extricate itself.

Thanks to Georgia Stagias for her contribution.

For more information, contact Denise Fontana Ricci at .