Author Archives: Cheryl D. Fuchs

Be Careful Who You Join

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In construction projects, accidents often occur and there are  many individuals potentially at fault for those accidents.  As a result, many defendants seek to join those additional defendants that may not have been sued to transfer the risk.

In Element Constr., LLC v. Dougherty, Element Construction, LLC was the manager of a renovation project owned by 5th Street, LLC.  Element and 5th Street retained Lunar Agency, Inc., an insurance brokerage company, to obtain the necessary insurance policies and manage any claims.  While working on the  project, a subcontractor allegedly crashed a forklift into a wall resulting in damages of almost $3 million.  Element and 5th Street filed an action against Lunar and its principals for failing to timely notify their insurer of the accident, which resulted in the insurer denying coverage.  Lunar subsequently joined the subcontractor responsible for the accident to the lawsuit seeking contribution, to which the subcontractor filed objections because it claimed it was not a joint tortfeasor.

Addressing that issue, the Court recognized that the joint tortfeasor statute required  “the parties must either act together in committing the wrong, or their acts, in independent of each other, must unite in causing a single injury…A joint tort is defined as where two or more persons owe to another the same duty and by their common neglect such other is injured.”  Neal v. Bavarian Motors, Inc., 882 A.2d 1022, 1028 (Pa.Super. 2005).  The Court found that there was no evidence that the Subcontractor acted together in committing a wrong, or that their independent actions united to cause a single injury.  The Court found that the two negligent acts-Lunar’s purported failure to timely handle an insurance claim, and the Subcontractor’s negligence in crashing the forklift- had nothing in common.  Thus, the Court denied the joinder motion.

Joinder is a great strategy for limiting liability, but care must be taken that those sought to be joined actually share some part in causing the single (specific) injury.  There was no correlation between the subcontractor’s purported negligence and that of the insurance broker.  Although negligence was claimed against both the subcontractor and broker, they were based on two separate actions that caused to separate injuries.

Thanks to Malik Pickett for his contribution to this post.

 

New Jersey Insurer May Be Off the Hook for Defense Obligation Due to Anti-Concurrent Language in Exclusion

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In Wear v. Woodbury Medical Center Associates, LLP, plaintiff, a nurse, alleged she suffered injuries due to exposure to mold and other fragments from the HVAC system at Woodbury Medical Center.

Woodbury tendered its defense to Selective Insurance Company who disclaimed coverage on the basis of the “fungi or bacteria” exclusion in their policy issued to Woodbury.  That clause excluded coverage for bodily injury resulting from the presence of fungi or bacteria.  The exclusion also contained anti-concurrent and anti-sequential language that stated the exclusion applied “regardless of whether any other cause, event, material or product contributed concurrently or in sequence to any such injury or damage.”  Woodbury then filed a declaratory judgment action against Selective, seeking a defense and indemnification in the Wear lawsuit.  The trial judge ruled Selective had to immediately fund the defense and reimburse Woodbury for amounts already spent.

On appeal, the Appellate Division ultimately held  the anti-concurrent and anti-sequential language in the exclusion was not ambiguous, and barred coverage.  While noting that New Jersey law construes exclusions narrowly, the court accepted Selective’s argument that there was no coverage because the complaint did not allege   Plaintiff suffered divisible injuries or that the exposure to mold was the principal cause of her symptoms. Under New Jersey law, where an insurer did not undertake the defense at the inception of the litigation, the duty to defend may be converted into a duty to reimburse pending the outcome of the coverage litigation.  Therefore, the court held that Selective may have to ultimately pay for the defense, but that that decision was on hold until the coverage litigation was completed.

Selective took a firm position with respect to coverage early on the litigation and may be ultimately rewarded as a result.  Many exclusions in insurance policies contain similar anti-concurrent and anti-sequential language in exclusions and insurers would be wise to consider their application where the controlling complaint does not allege divisible injuries.

Thanks to Doug Giombarrese for his contribution to this post.

 

 

 

Lessor Can’t Pass the Buck to the Lessee

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In Bonnie Sanders v. Angela Dukes, Sanders was staying with her friend on the second story of a rooming house in Philadelphia.  As Sanders left the room her shoe got caught in a loose metal strip on top of the staircase.  Dukes’ husband was the property manager for the rooming house, and went there monthly.  He never made any repairs to the stairs or the metal strip.  At the close of plaintiff’s case at trial, Dukes moved to dismiss arguing that the tenant (plaintiff’s friend) was aware of the dangerous condition, therefore, alleviated Dukes’ own liability for the condition. The court rejected the argument, and found that the Dukes, as the lessor was liable for a dangerous condition in the common area that could have been discovered by exercising reasonable care.  Since Sanders was a lawful guest, Dukes owed her a duty of care.

This case reminds us that a lessor often owes a duty of care to those that enter the premises, regardless of any duty owed by the lessee.

Thanks to Robert Turchik for his contribution to this post.

What is “Lawful Possession” of a Vehicle?

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The Pennsylvania Superior Court recently analyzed the circumstances under which an insured is in “possession” of a vehicle for coverage purposes.

In State Farm Automobile Ins. Co. v. Dooner, Dooner, the passenger, grabbed the steering wheel of the vehicle, while Fonte, the driver, was driving, causing the vehicle to strike a police car. Fonte and the police officer commenced lawsuits against Dooner.  Dooner sought coverage for the lawsuits under his State Farm Policy. State Farm commenced a declaratory judgment action seeking a declaration that its policy did not provide coverage to Dooner for the lawsuits.  The trial court granted State Farm summary judgment.

On appeal, Fonte argued the State Farm Policy provided coverage for a “non-owned” vehicle if that vehicle was in the “lawful possession” of the insured.  Fonte argued Dooner was in possession of Fonte’s vehicle, at the time of the accident, because Dooner had grabbed the wheel of the vehicle that caused the accident.

In analyzing this argument, the court noted the State Farm Policy did not define the term “possession”.  As such, the court looked to the surrounding facts.  The court reasoned that the driver, Fonte, at all times relevant, was in the driver seat and never relinquished control of the gas or brake pedals.  Additionally, the court also noted other jurisdictions had previously held a passenger grabbing a steering wheel did not constitute possession.  Consequently, the court agreed with the trial court and held there was no coverage under the State Farm Policy because Dooner never was in “possession” of the vehicle.

Accordingly, this case offers some insight into the relevant facts a court may look to when analyzing whether an insured is in possession of a vehicle for purposes of coverage under an automobile policy.

Thanks to Colleen Hayes for her contribution to this post.

Dismissal of Social Guest’s Personal Injury Action Upheld on Appeal

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In Marroquin v. Espinoza, plaintiff slipped and fell on black ice on her cousins’ walkway.  Plaintiff and other family members had been staying at the house  to celebrate Thanksgiving.  On the Saturday after Thanksgiving, it had rained and snowed, but plaintiff did not go outside.

Plaintiff went out shopping with her mother the next day.  It was not raining, but it was cold.  She had no difficulty getting to her car  in the driveway.  Upon her return, plaintiff parked her car on the street in front of the house.  She went inside for a few hours and then proceeded to pack her car with luggage.  She had no difficulty walking out of the car with her luggage.  However, when she was approaching the car to go home t, she slipped on the walkway leading to the street.  She claimed to have slipped on black ice.

The trial court dismissed plaintiff’s complaint on summary judgment because, as a social guest, she had the burden of proving that her cousins, the defendants, knew or should have known about the black ice on the walkway.   Residential homeowners in NJ have a duty to render private walkways on the property reasonably safe, and to clear snow and ice that presents a danger to known or expected visitors.  The residential owner also has a duty to warn of any dangerous condition of which he or she has actual knowledge, and of which the social guest is unaware.

The record showed that plaintiff’s cousins were unaware of the icy condition on the front walkway.  Neither plaintiff nor defendants said that they knew of the ice prior to the fall.  The defendants testified that they cleared and salted the walkway the day before plaintiff’s fall, and one of the defendants testified that the walkway was clear the morning before plaintiff’s fall.  Finally, plaintiff proffered no evidence that defendants’ should have known that light rain would cause black ice.  This is because plaintiff had no expert to discuss the meteorological conditions or the nature of the walkway.

This case is a good illustration of how defense counsel can obtain a dismissal in the absence of an appropriate liability expert report from plaintiff.

Thanks to Michael Noblett for his contribution to this post.

 

 

 

 

In Premises Liability Cases, First Step for Business Invitees Is Providing a Dangerous Condition

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In Wasnetsky v. Quinn’s Market, plaintiff and her husband, the decedent, were in the supermarket when the decedent suddenly fell, struck his head on the linoleum floor, and lost consciousness.  Five days later he passed away. Plaintiff sued alleging the decedent slipped on liquid on the floor. At the end of discovery, the supermarket moved for summary judgment on the basis that plaintiff failed to produce any evidence of a dangerous condition at the time of the slip and fall.  In similar slip-and-fall cases, evidence of the condition is shown by eye-witness testimony that liquid or another substance was present on either the floor or the body and clothes of the injured person.  In this case, there were three eye witnesses, and all three testified there was no liquid or other substance.  As a result, the court determined there was no dispute that a dangerous condition did not exist at the time of the slip and fall.

Thanks to Robert Turchick for his contribution to this post.

 

 

 

Caveat Employer—Coverage Triggered for Failure to Supervise

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Although intentional acts are typically excluded from coverage under a commercial general or professional liability policy, an employer is still entitled to coverage in a claim for failure to supervise according to the Second Circuit Court of Appeals in Pacific Employers Insurance Co. v. Saint Frances Care Inc.

For thirty years, from 1963 until 1993 when he retired in a cloud of suspicion, Dr. George Reardon sexually abused children in his care as an endocrinologist at St. Francis Hospital.  The details and scale of his horrific actions came to light when, following his death in 1998, his home was purchased and the new home owners found a secret room housing pornographic materials and logs of his actions.  Approximately 160 individuals sued the hospital for, among other things, corporate negligence, breach of fiduciary or confidential relationship, and breach of the special duty of care owed to children.  The excess insurer of the hospital argued sexual assault falls outside the purview of coverage, and also raised concurrency and priority issues.

The District of Connecticut rejected the excess insurer’s arguments, and the Second Circuit affirmed in a summary order.  With respect to coverage for the sexual assault, the Second Circuit stated coverage is triggered under either the commercial general or professional liability at the primary level of coverage for the claims of failure to supervise.

In reviewing claims, it can be difficult to separate the character of an action from the specific nature of a claim.  In New York, the duty to defend arises when at least one claim fails within the scope of coverage.  Here, it is incumbent to assess the nature of the claims against the actual insured, the hospital, to determine coverage.  This matter sounds in negligent supervision, and negligence is typically covered.  An important exception is when the character of an intentional act cannot be separated from the alleged negligence.  We see this in cases where an assailant may not have intended injury, so the victim sues under an intentional tort and negligence (e.g., reckless disregard).  As both causes of action pertain to the intentional act of an assault, coverage would be excluded even for the negligence action.  By contrast, here, the intentional act is separate and apart from the hospital’s alleged negligence in failing to supervise the doctor.  Thus, when analyzing claims arising from an intentional act, it is important to focus on two things:  the character of the act itself, and whether the claim itself is removed from the act.

Thanks to Christopher Soverow for his contribution to this post.

Asbestos Insurers Beware: New Jersey Decision Aims to “Maximize Insurance Resources”

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In Continental Insurance Company v. Honeywell International, the New Jersey Supreme Court held that Honeywell was not required to contribute to damages related to brake and clutch pads containing asbestos, even though the company continued to make those products for more than a decade after 1987, when it could no longer obtain insurance coverage.  Specifically, the Court held “an insured is not forced to assume responsibility in that allocation during the insurance coverage block for years in which insurance coverage is not reasonably available for purchase.”

Asbestos coverage disputes are unique in that, because asbestos-related diseases generally do not emerge until decades after exposure, many years of coverage are implicated, and determining what policies will pay has proven to be a complicated task.  Under New Jersey law, each insurer pays based on the degree of risk assumed, and the amount of time each policy was on the risk.  Normally, if the policyholder did not purchase insurance for a particular period, they would be on the hook for that portion of liability.  However, the Honeywell court affirmed prior New Jersey precedent that, if no insurance was available, then the unavailability exception applies and the policyholder will not be required to contribute.  This is the case even though asbestos exclusions became ubiquitous in 1987 and Honeywell continued to manufacture asbestos products.  To that end, the court focused on the goals of “maximizing insurance resources” and spreading risk across the insurance industry.

In dissent, Justice Albin noted the negative impact of the holding, writing, “This court compels insurance carriers that previously insured the corporation – but later refuse to do so – to remain guarantors for claims arising during the years the corporation continues to manufacture its dangerous products.”  This underscores the potential negative effects that could follow should other states follow the New Jersey Supreme Court.  Given the thousands of outstanding asbestos cases throughout the country, and because this issue could come up over again, asbestos insurers may be required to pay for millions in future lawsuits.

Thanks to Douglas Giombarrese for his contribution to this post.

Second Circuit Rules: A “Spoofing” Attack on Insured’s Email System Is a Covered “Computer Violation”

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The U.S. Court of Appeals for the Second Circuit struck the final blow to an insurer’s attempt to narrowly construe a policy provision insuring against computer crimes in Medidata Solutions Inc v Federal Insurance Company.

Judge Carter for the Court of Appeals recently upheld a S.D.N.Y. ruling that Federal Insurance owed coverage to its insured, Medidata Soultions, Inc., under its policy Computer Fraud Insuring Clause.  In so holding, the Second Circuit, like the District Court before it, refused to countenance Federal’s argument that the policy definition for “Computer Violation” covered instances of hacking only, and not spoofing.

Medidata’s policy with Federal insured it against any “direct loss… resulting from Computer Fraud committed by a Third Party.”  A Computer Fraud was defined to result from a “Computer Violation,” which, in turn, was defined as the fraudulent entry, change or deletion of data from a computer system.

In 2014, Medidata fell victim to a sophisticated spoofing attack in which unknown (and never apprehended) criminals manipulated computer code so that apparently genuine emails from a Medidata executive were sent to other Medidata employees.  The recipients of the emails, believing that they were following the instructions of their boss with respect to Medidata’s acquisition of another company, transferred $4.7 million into the fraudster’s account.

Federal insurance denied coverage for the loss, claiming that spoofed emails do not fall within the policy definition of a “Computer Violation,” because a spoofing attack is not a covered “hacking.” The S.D.N.Y. disagreed, finding that the unambiguous policy language plainly covered the spoofing attack at issue, because the fraudsters manipulated and changed the company email system with the spoofing code used to create the emails.  Medidata was awarded $5,841,767 by the district court, representing their total losses plus interest.

On appeal, Federal argued that the S.D.N.Y. decision created an overbroad precedent for computer fraud insurance coverage by allowing it “to cover all transfers that involve both a computer and fraud at some point in the transaction.”  Federal also unsuccessfully argued that Medidata’s loss was not “direct” (and therefore not covered) because Medidata employees transferred the funds themselves.    The Second Circuit affirmed the S.D.N.Y.’s reasoning that the manipulation of email coding was a clearly covered Computer Violation, and also held that the employee’s unwitting transfer of millions of dollars to the criminals was part of the spoofing attack, and not an intervening event.

This decision provides further assurance to companies in New York that their computer fraud coverage insures against many variations of computer attacks and fraud.

Thanks to Vivian Turetsky for her contribution to this post.

Be Wary of Title of “Subcontractor” in Labor Law Actions

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In Dan Eliassian v. G.F. Construction, Inc., plaintiff, an owner of a single-family house, hired defendant to perform excavation work to prepare for the addition of a room to the home.  Plaintiff did so in his capacity as president of Alliance Real Estate, Inc.  After defendant completed phase one of the project, and was off-site, plaintiff visited the property to “inspect the work” when he slipped on oil which he alleged leaked from a defective hydraulic line of a backhoe brought to the site by defendant and used by the defendant in its work.

Plaintiff sued defendant alleging violations of Labor Law 200, 240, and 241(6).Defendant moved for summary judgment on the Labor Law 240(1) and 241(6) causes of action on the basis that plaintiff was not “employed” at the site within the meaning of the Labor Law, and defendant was not an owner, agent, or general contractor responsible for the work site.  Plaintiff opposed the motion with an affidavit in which he stated that he was on site specifically to inspect the work.  The lower court denied defendants’ motion for summary judgment.

On appeal, the Second Department found that an individual inspecting the work on behalf of a general contractor is a protected activity covered by Labor Law 240(1) and 241(6) if the individual can show that they were both permitted to work on a building or structure, and were hired by someone.  Here, as plaintiff was on his own property on behalf of his company Alliance to inspect the progress of the work of the defendant, a subcontractor hired by Alliance to perform excavation work, he was a proper plaintiff under Labor Law 240(1) and 241(6).

Further, the defendant’s claim that it was not the general contractor or agent of the owner was insufficient to defeat summary judgment, as a subcontractor may be liable for violations of those provisions if the owner or general contractor delegated to the subcontractor the duty to conform to the requirements of the Labor Law by granting the subcontractor authority to supervise and control the work that brought about the injury.

Since defendant was the only contractor working at the site, and had exclusive control over directing the work and implementing safety measures, and plaintiff was merely on site to inspect the progress of the work, there were triable issues of fact as to whether the defendant could be liable under Labor Law 240(1) and 241(6) on the ground that it had control of the work site and was delegated the duty to enforce safety protocols at the time of the incident, despite the fact that the defendant was not the owner or acting as the general contractor. As such, the Second Department affirmed the denial of defendant’s motion for summary judgment.

This case is significant in reminding defendants that regardless of the titles assigned to construction companies in contracts (“contractor,” “general contractor,” or “subcontractor”), a defendant may still be found liable under the Labor Law if it had control over, and ability to direct, the work, and control over safety procedures at the project site.

Thanks to Valerie Prizimenter for her contribution to this post.