Supermarket Not Liable For Employee’s Harassment of Child Patron (NJ)

In Judy Doe v. Sake Shoprites, New Jersey’s Appellate Division analyzed whether the defendant supermarket was vicariously liable for negligently retaining employees who sexually harassed a young girl at the supermarket.

Six-year old Judy Doe and her mother entered a supermarket in the late evening. Unknown to Judy and her mother, supermarket employee J.B. followed them and watched Judy’s movements. When Judy was alone, J.B. approached her , left her shirt, and photographed Judy’s legs and stomach. Judy’s mother soon found Judy crying and shaking. Subsequently, Judy’s mother reported J.B.’s actions to supermarket crew chief A.Z. and the supermarket’s manager. The manager then suspended J.B. because he was “warned earlier about taking pictures of customers.” The supermarket contacted the police, who executed a search warrant of J.B.’s home and discovered several photos of other young female customers.

Plaintiff later sued the supermarket alleging negligent hiring and retention. Plaintiffs opposed the supermarket’s motion for summary judgment, arguing that the supermarket was liable—under a theory of vicarious liability—for the intentional acts of J.B. Specifically, plaintiff argued that the supermarket negligently retained J.B. despite notice that J.B. previously took photographs of customers, and that this known behavior would foreseeably cause customer harm.

The Appellate Division was unpersuaded by plaintiff’s arguments, holding that the evidence of prior notice was insufficient to prove the supermarket was negligent in keeping J.B. employed as a member of its staff. The court found that “taking pictures of customers” was too speculative to prove the supermarket had knowledge that J.B. engaged in similar harmful behavior. Further, the court reasoned that the ages of the customers and the nature of the pictures were not specified in the manager’s statement. Although J.B. was previously warned about taking pictures of customers, the supermarket did not know where or when the photographs were taken, whether they were of young girls, or whether J.B. manipulated the clothing of any juvenile female to expose skin.

This case demonstrates that New Jersey courts require “competent evidential material” beyond mere speculation in order to find an employer vicariously liable for negligent retention of its employees. Such proof may turn on an employee’s employment history, the foreseeability of future wrongful conduct, and the nature of an employee’s past wrongful activity.

Thanks to Ken Eng for his contribution to this post and please write to Mike Bono if you would like more information.

Defense Of “Abusive Acts” Not Covered Under CGL Policy

In a recent New Jersey case regarding allegations of a board of education’s knowledge of a teacher’s inappropriate conduct involving students, the United States District Court for the District of New Jersey held that the board’s commercial general liability insurer properly disclaimed coverage as its policy excluded coverage for “abusive acts.”

In Montville Township Board of Education v Zurich American Insurance Co., Jason Fennes was a teacher at Montville Township Board from September 1998 to June 30, 2010.  Shortly after he resigned from Montville, he began working for Cedar Hill Prep.  In March 2012, while working as a teacher at Cedar Hill, Fennes was arrested for sexually abusing a Montville student in 2005.  At that time, Montville notified Zurich American Insurance Company, its commercial general liability carrier, of a potential claim, and Zurich issued a general reservation of rights.  In August 2012, a six year old student at Cedar Hill, “Child M,” and her parents sued Fennes and Cedar Hill, alleging that Fennes sexually abused her in February 2012.  In January 2015, Child M filed a third amended complaint naming Montville as a defendant, alleging that Montville knew about, or was on notice of, Fennes’ sexual abuse of students at Montville, and that it failed to report Fennes to the authorities, as required by law.  Child M also alleged that Montville entered into an agreement with Fennes in 2010 in which it agreed to limit the information it would pass along to potential employers in exchange for Fennes’ resignation.  Finally, Child M alleged that but for Montville’s failure to report and provide information about Fennes to prospective employers like Cedar Hill, Child M would not have been sexually abused by Fennes.  Cedar Hill filed a cross-claim against Montville for contribution and indemnification based on these allegations.

The Zurich policy, which was effective July 1, 2011, contained a CGL Part, which provided an exclusion for bodily injury “arising out of or relating in any way to an ‘abusive act’” or “any loss, cost or expense arising out of or relating in any way to an ‘abusive act.’”  An “abusive act” was defined as “any act or series of acts of actual or threatened abuse or molestation done to any person, including any act or series of acts of actual or threatened sexual abuse or molestation done to any person by anyone who causes or attempts to cause the person to engage in a sexual act: a. without the consent of or by threatening the person … b. if that person is incapable of appraising the nature of the conduct or us physically incapable of declining participation in or communicating unwillingness to engage in the sexual act …”.  The Zurich policy also contained an Abusive Act Coverage Part (the “AA Coverage Part”), which provided insurance for “loss because of ‘injury’ resulting from an ‘abusive act.’”  However, the AA Coverage Part excluded coverage for any “‘abusive act’ of which any insured, other than the insured actually committing the ‘abusive act’, has knowledge prior to the effective date of this Coverage Part.”  Zurich disclaimed any duty to defend or indemnify Montville under the CGL and AA Coverage Parts, as Child M’s bodily injury arose out of or related to “abusive acts” per the terms of the CGL Part and its exclusion, and as Child M alleged that Montville knew about Fennes’ abusive acts but failed to report them, bringing the allegations within the exclusion of the AA Coverage Part.  Montville filed an insurance coverage action against Zurich following Zurich’s disclaimer of coverage.

After Montville and Zurich filed cross-motions for summary judgment, the United States Court for the District of New Jersey granted Zurich’s motion and denied Montville’s motion, holding that the CGL Part’s “abusive acts” exclusion was not only clear and unambiguous, but that it was broad and expansive, as it excluded coverage for bodily injury “arising out of or relating in any way to an ‘abusive act’” and therefore barred coverage under the CGL Part.  It did not matter that the abuse to Child M occurred after Fennes’ employment by Montville to a child who was not a Montville student, as the definition of “abusive act” broadly included “any act or series of acts of actual or threatened sexual abuse or molestation done to any person by anyone.”  While the Court did not go into a detailed analysis of the AA Coverage Part, it did outline the substantial evidence to support the allegations that Montville knew about Fennes’ abusive acts, and found that Montville “virtually knew” that Fennes would continue to abuse students at other schools when it agreed not to disclose his past abusive acts to potential employers in exchange for his resignation.

This case serves as a useful reminder that insurance carriers can protect themselves from certain claims when their policies of insurance are clear, unambiguous, and broad reaching.

Thanks to Rebecca Rose for her contribution to this post.

No Flood Insurance… No Flood Coverage (NJ)

Risk transfer is only available if the transfer occurs before the risk becomes reality. Unfortunately for many, the recognition that there is a risk only comes after reality. Insurance brokers who deal in that risk transfer transaction are uniquely situated to bridge that gap. But exactly what can or should a broker do to ensure that a client understands the risk and purchases the proper insurance? In Satec, Inc. v. The Hanover Group, the plaintiff property owner appreciated the risk too late, but the court did not buy that its broker or insurer was to blame.

Satec, Inc. owned property with a warehouse and business offices in a New Jersey flood zone. It consulted with an independent insurance broker, who obtained a proposal for property coverage from Citizens Insurance, a subsidiary of Hanover Insurance. Along with the proposal, the broker provided a letter with a recommendation that Satec carefully review the limits and, in particular, consider additional coverage. Significantly, the optional coverage included flood and earthquake coverage that was otherwise explicitly excluded from the property coverage in the proposal. Satec accepted the proposal without any additional coverage.

Over the next four years, Satec renewed the policy annually. Before each renewal, the broker sent Satec a letter advising of the availability of flood and earthquake insurance, and Satec opted to renew the policy without this coverage.

Of course, the inevitable happened when Hurricane Irene struck New Jersey. The property flooded with a resulting $2.3 million in damages. Satec filed a claim with Hanover that was denied as explicitly excluded by the policy.

Satec then filed a complaint against Centric, Hanover, and Citizens. Satec alleged, among other things, a breach of contract, negligence, and professional malpractice. Upon the closing of discovery all defendants moved for summary judgment and, after precluding Satec’s expert’s testimony and opinion, the trial court granted the motion as to all defendants. On appeal Satec argued that (1) an insurance broker owes a fiduciary duty to advise the insured and no expert is needed to establish that the defendants breached this duty; (2) Satec’s expert opinion was valid; and (3) Hanover should be vicariously liable for the negligence of the independent broker, Centric.

The appellate court acknowledged that an insurance broker does owe a duty to his principal to exercise diligence in obtaining coverage in the area his principal seeks to be protected. However, expert opinion is generally needed to establish a breach of this duty. Satec’s expert, while he was able to articulate a broker’s duty of care, failed to site any authority or industry standards beyond his personal experience; thus, rendering his opinion inadmissible.

The court was not persuaded that the plaintiff could sustain the broker malpractice claim on the basis of common knowledge. This doctrine applies where “jurors’ common knowledge as lay persons is sufficient to enable them, using ordinary understanding and experience, to determine a defendant’s negligence without the benefit of specialized knowledge of experts.” Rather, the court found that the field of insurance brokerage is beyond the ken of the average juror, and, thus, expert testimony is necessary.

Satec also argued that the insurer should be vicariously liable for the failings of the broker based upon agency principles. Under this theory, it sought to impute any negligence of the broker in failing to properly assess and advise of its flood insurance needs. Significantly, the broker was an independent of the insurer and not an agent. New Jersey has long recognized that an independent broker’s actions are not imputed to an insurer. Basically, when an independent broker is making recommendations to a client, he is acting on behalf of that client, not the insurance companies.

Thanks to Marcus Washington for his contribution.

 For more information, contact Denise Fontana Ricci at dricci@wcmlaw.com.

 

A Policy Limit is a Policy Limit (NJ)

In 2012, Superstorm Sandy caused millions of dollars in damages to residential and commercial property owners on the Jersey Shore.  Five years later, some claims are still making their way through the Courts.  The New Jersey Supreme Court granted certiorari in Oxford Realty Group Cedar v. Travelers Excess and Surplus Lines Company to interpret an insurance policy at issue in one of the Sandy claims involving flood limits coverage and debris removal coverage.

The plaintiff, a Jersey Shore apartment complex located in a flood zone, was insured by Travelers for property coverage with a $1,000,000 limitation for a flood occurrence.  Travelers paid plaintiff’s $1 million claim – the full policy flood limit.  However, plaintiff sought additional coverage for $207,961.28 of storm-related debris removal costs pursuant to the policy’s Property Coverage Form.  Travelers denied this additional claim, and litigation ensued.

The Trial Court granted partial summary judgment in favor of Travelers finding that there was no ambiguity in the flood coverage language or the terms of the debris removal coverage.  While the Court acknowledged that the policy appeared to allow additional debris removal coverage, it concluded that, “the general condition that the debris removal is an additional coverage [that] must yield to the specific term in the Supplemental Coverage Declarations that the [$1,000,000] coverage [which] applies to ‘all losses’ caused by flood.” In a subsequent motion, the Court granted summary judgment in favor of Travelers on the remaining issues and dismissed the action in its entirety.  Plaintiff appealed.

The Appellate Division reversed the Trial Court finding coverage for plaintiff’s storm-related debris removal costs.  The Appellate Division agreed with the Trial Court that the flood coverage and debris removal coverage were unambiguous. However, the panel ultimately concluded that the policy entitled plaintiff to a maximum of $500,000 for debris removal coverage in addition to the $1 million Flood Limits.  It held that the $1 million limitation in the Supplemental Coverage Declarations applied to insured “buildings” rather than insured “occurrences.”  On the other hand, the Court found that debris removal coverage applied to all “Covered Property,” not just plaintiff’s  buildings.  The Court interpreted the policy’s Flood Endorsement to apply “only to loss or damage to covered property caused by flood, meaning Oxford’s building” [Emphasis added].  Therefore, the Appellate Division awarded plaintiff the $207,961.28 for storm-related debris removal costs reversing the Trial Court.  Travelers appealed.

Writing for a majority of the Court, Justice Fernandez-Vina held that the policy’s sublimit for debris removal coverage could not be interpreted as a self-contained policy provision separate and apart from the policy’s $1,000,000 flood limit.  Once the Court decided the terms of the Policy were unambiguous, plaintiff’s reasonable expectations argument failed.  This rule of contract construction is also known as verba fortius accipiuntur contra proferentem roughly translated that every presumption is construed against the drafter.  In upholding the policy’s $1 million flood Limit in favor of  the insurer, the New Jersey Supreme Court took the position that the contra proferentem rule is a “doctrine of last resort” when interpreting terms of a policy of insurance.  “If the language is clear, that is the end of the inquiry.”  In addition, the Court explained that “sophisticated commercial insureds … do not receive the benefit of having contractual ambiguities construed against the insurer.”

Thanks to Ann Marie Murzin for her contribution.

For more information, contact Denise Fontana Ricci at dricci@wcmlaw.com.

 

Deemer Statute Inapplicable to Out-of-State Pedestrians (NJ)

New Jersey’s Deemer Statute, N.J.S.A. 17:28-1.4, applies to out-of-state drivers who are injured in accidents in New Jersey.  Under the Deemer Statute, if you are an out-of-state resident and you are hurt in an accident in New Jersey, you will be subject to New Jersey’s restrictive limitation on lawsuit or “verbal threshold” if your insurance company is licensed to transact business in New Jersey.  The verbal threshold places limitations on the right to recovery for injuries sustained in a motor vehicle accident.

In Leggette v. GEICO, plaintiff, a Virginia resident, was struck by a N.J. licensed driver as she crossed a street in Princeton. The trial court granted defendant’s summary judgment dismissal of her declaratory judgment complaint against GEICO. Plaintiff appealed the trial court’s decision, seeking PIP benefits pursuant to the Deemer Statute, since her Virginia policy was deemed to provide standard PIP coverage while her vehicle was in this state. The trial judge concluded that the Deemer Statute was inapplicable.

Plaintiff drove her Virginia registered vehicle insured by GEICO to Princeton University to visit her daughter. Plaintiff parked her vehicle and was walking across the street when she was struck by an automobile. Plaintiff settled her claims against the driver of the automobile, and then initiated a declaratory judgment action against defendant GEICO for PIP coverage to satisfy the $113,825.47 in medical bills.  Plaintiff argued that GEICO was authorized to conduct business in New Jersey and was therefore legally obligated under the Deemer Statute to provide minimum standard automobile insurance policy PIP benefits.

Defendant GEICO refuted this interpretation, arguing that plaintiff, a pedestrian, was not using or operating her vehicle at the time of the accident and so coverage required by the Deemer Statute was not triggered.  Defendant argued that a nexus between the out-of-state automobile and the accident is necessary.

The Appellate Court agreed with GEICO, since the Deemer Statute specified the terms “occupying…or using” an automobile in the context of eligibility for PIP benefits.  Here, plaintiff parked her car, locked the doors, walked away, exited the parking lot, and was crossing a street when she was struck by a vehicle. At the time she sustained her injuries, her “use” of her vehicle had ended. As such, the Deemer Statute was not triggered and the Appellate Court affirmed the trial court’s decision.  Thanks to Steve Kim for his contribution to this post.  Please email Brian Gibbons with any questions.

Plaintiff Cannot be Labeled Malingerer by Expert (NJ)

In a case of first impression, a New Jersey appellate court issued a “bright line” rule disallowing expert opinion on the concept of symptom magnification, malingering, or any other negative terminology impugning a plaintiff’s believability.  

In Rodriguez v. Wal-Mart Stores, Inc., the plaintiff filed suit after she allegedly sustained injuries in an un-witnessed incident involving a metal display rack alleged to have fallen on her while shopping.  At trial, the plaintiff’s medical experts diagnosed Complex Regional Pain Syndrome.  The defense presented the testimony of an expert neurologist who testified that the plaintiff had some initial soft tissue injury but no damage to her nerves.  He denied that the plaintiff had any objective findings to support the diagnosis of Complex Regional Pain Syndrome.  Further, he opined that the plaintiff was exaggerating and magnifying her injury symptoms.  The jury returned a defense verdict.

On appeal, the court found that the defense expert’s opinion was an improper attack on the plaintiff’s overall credibly. Ultimately, the Appellate court held that such opinion evidence from a doctor should be categorically disallowed at trial.

The Rodriguez opinion is important since it will restrict defense medical experts from classifying a plaintiff as a malingerer during trial. We note that a qualified expert may still testify that a plaintiff’s subjective complaints appear to be inconsistent with objective medical testing, without using labels such as “malingerer” or “symptom magnification.”  Going forward, it will be important for defense expert witnesses to properly frame any testimony surrounding inconsistent subjective complaints so that the testimony will be admissible at trial. 

Thanks to Heather Obregon for her contribution.

For more information, contact Denise Fontana Ricci at dricci@wcmlaw.com.

 

Clear and Unambiguous AI Endorsement Trumps Lease Language (NJ)

In Killeen v. J&M, plaintiff, a firefighter, was injured while responding to a fire after falling through a glass panel on the roof. He filed a complaint against defendant NSPC, Inc., the owner of the building, and Jenson & Mitchell, Inc. (J&M), the tenant of the property. The lease  required J&M to obtain general liability insurance, naming NSPC as an additional insured against liability on the premises. J&M procured insurance through Travelers Property Casualty Company of America (Travelers), and an additional insured endorsement provision provided coverage to NSPC for “liability arising out of the ownership, maintenance or use” of the premises leased by J&M, but Travelers disclaimed coverage as to NSPC because the lease itself required NPSC to maintain the roof.  NSPC to filed third-party complaint against Travelers seeking coverage.

NSPC moved for summary judgment, seeking an order declaring that Travelers owed coverage under the policy, or, in the alternative, a ruling that J&M breached the lease by failing to procure insurance coverage. Travelers filed a cross-motion for summary judgment, seeking an order that NSPC was not entitled to coverage under the insurance policy. The motion court  granted Travelers’ motion, dismissing the third-party complaint against Travelers, because the lease obligated NSPC to maintain the roof.  Therefore, no coverage for NSPC.

Pursuant to an assignment of NSPC’s rights, plaintiff appealed the finding of summary judgment in favor of Travelers.  The appellate court reversed, since the additional insured endorsement under the Travelers policy provided NSPC coverage “with respect to liability arising out of the ownership, maintenance or use of that part of any premises leased to J&M.” The appellate court opined that the roof was a vital part of the “premises” leased to J&M, and the insurance policy was clear and unambiguous.  As such, there was no need to look to the lease to determine coverage.

Had the AI endorsement been vague, then the Court may have looked to the lease provision, and ruled differently.  But the clear policy language rendered the lease moot. Thanks to Steve Kim for his contribution to this post.  Please email Brian Gibbons with any questions.

 

You Can’t Have it Both Ways: No Recovery for Quantum Meruit if there is a Contract

Sometimes there is no specific contract or agreement for work one party performs for another.  Under general contract of law principals, courts may award quantum meruit damages—a reasonable sum of money to be paid for services rendered or work done when the amount due is not stipulated in a legally enforceable contract.

In New York-Connecticut Development Corp. v. Blinds-To-Go (U.S.) Inc., Blinds-To-Go hired a NYCT, as general contractor to build its corporate headquarters pursuant to a comprehensive construction contract.

On March 6, 2012 NYCT contractor presented its eleventh requisition for payment.  Blinds-To-Go advised it would pay the requisition upon receipt of the certificate of occupancy, the release of liens, and the completion of the punch list.  In response, the NYCT informed Blinds-To-Go it would not return to the job site.  Blinds-To-Go paid the eleventh requisition after it received the certificate of occupancy, but NYCT did no further work and failed to complete the punch list.  Soon thereafter, NYCT submitted a final requisition containing seventeen additional unapproved change orders with charges in excess of $1,000,000.

NYCT sued alleging breach of contract or, in the alternative, a claim for quantum meruit.  Throughout the trial and at the time of the jury charge conference, the parties had been in agreement that there was an express contract governing the construction project.  However, the trial judge allowed the jury to consider awarding the equitable remedy of quantum meruit damages in the event it found that NYCT breached its contractual obligations and thus not be entitled to recover breach of contract damages.

The jury did find that NYCT breached various contractual duties, but it also awarded quantum meruit damages.  In New Jersey, it has long been established that the existence of an express contract precludes the award of damages under the equitable remedy of quantum meruit.  While a party may plead inconsistent alternative theories of liability, a party may not recover on inconsistent theories.  Once the jury found that there was an enforceable contract, NYCT was not entitled to recover damages under quantum meruit.  Accordingly, the verdict was reversed and the matter remanded for a new trial.

Thanks to Michael Noblett for his contribution to this post.

 

 

 

 

 

NJ Discovery Sanctions – IME Fees for No Show

Defense litigators in New Jersey now have a published trial court decision to support motions compelling plaintiffs to pay an independent medical examination “no show” or “late cancellation” fee.

In McInroy v. Village Supermarket, Inc., defendants scheduled plaintiff an IME with an orthopedic surgeon.  Not having attended her IME, defense counsel re-scheduled it.  Plaintiff again failed to attend, and defendants were charged a $375 “no show” fee from the examiner. Defendants re-scheduled the IME, this time expressly advising that plaintiff’s failure to comply with the examiners late cancellation/no show fee policy would result in those fees being passed onto her personally.  She once again failed to attend.  Defendants filed a motion to compel the IME, and reimbursement of the no show fees.

The court ordered plaintiff to reimburse defendants for the missed appointments.  Under New Jersey Court Rule 4:19, defendant was entitled to an order compelling the IME and/or dismissing plaintiff’s complaint.  Additionally, and because New Jersey trial court judges have broad discretionary powers to impose discovery sanctions which are “just and reasonable,” defendant was entitled to an order compelling plaintiff to reimburse it for the examiner’s now show fees.  The Court rejected the notion that plaintiff should be excused from paying the no show fees because her sole source of income was Social Security Disability since it was plaintiff who failed to proffer a reasonable explanation for the failure to keep the appointments.

Defense litigators in New Jersey are now armed with the rationale of Judge Savio when moving to compel plaintiff’s to undergo medical examinations, in addition to moving to compel reimbursement of late cancellation/no show fees under appropriate circumstances.

Thanks to Michael Noblett for his contribution to this post.

 

 

 

Untimely Expert Report Leads to Dismissal (NJ)

In New Jersey, the verbal threshold limits plaintiffs from bringing a lawsuit for injuries sustained in an automobile accident.  Specifically, this limitation requires a permanent injury or one that results in a whole or partial loss of a body member or function in order to file suit. Plaintiffs must produce expert reports or documents that support a finding of some level of permanent injury in order to vault the limitation-on-lawsuit threshold as soft-tissue injuries are not sufficient.

In Resua v. Hachkian, plaintiffs were rear-ended by a vehicle operated by an intoxicated defendant. The principal issue was plaintiffs’ damages, as both plaintiffs alleged various soft-tissue injuries that were not sufficient to vault the limitation-on-lawsuit threshold without an expert report supporting a finding of permanent injuries.

During the lawsuit, plaintiffs’ attorney had a relapse on an illness that caused delays in discovery. As such, he failed to produce expert reports within the discovery deadline. After an unsuccessful arbitration, defendants filed a motion for summary judgment. Plaintiffs produced expert reports in late August and additionally filed a cross-motion seeking an extension of the discovery end date.

The trial court denied plaintiff’s motion and granted defendant’s motion for summary judgment, opining that plaintiffs’ attorney’s illness did not constitute an exceptional circumstance warranting an extension of discovery, and finding that plaintiff’s medical records without the support of expert opinion did not suffice to establish permanent injuries.  On appeal, the appellate court agreed that that plaintiffs’ attorney failed to show how his illness impacted his ability to function in the months leading up to the latest discovery end date when his expert reports were due.  As such, the plaintiffs’ expert reports were to be disregarded and without expert reports, plaintiffs failed to show permanent injury.  Thanks to Steve Kim for his contribution to this post.  Please email Brian Gibbons with any questions.