Battle of the Pipe Experts Results in Defense Verdict

Paul McCartney isn’t the only one who needs to maintain his pipes.  Apparently building owners in the Western District of Pennsylvania do too.

In Greater New York v. Fire Fighter Sales & Service Co., A Holiday Inn in Braddock Hills, PA hired Fire Fighter Sales & Service Co. to install an automated sprinkler system into an already existing fire suppression system at the hotel. About two years later, a standing pipe that was installed in a stairwell froze and burst, causing $8.1 million in water damage. The Insurance Co. of Greater New York as the subrogee of Holiday sued Fire.

The plaintiff alleged that Fire installed a fire suppression system that could not withstand temperatures below freezing, which was a necessity for systems in the Greater Pittsburgh Area.  The plaintiff’s expert claimed that the freeze was due to faulty placement of the standing pipe, as it was too far from any heat source. The defense expert claimed the freeze was due to cold air infiltrating the stairwell, and that the hotel was responsible for heating the stairwell that housed the pipe, and that its failure to do so is what actually caused the burst.  The jury found in the favor of the defense.

When experts battle, someone’s pipe (dreams) will be burst.

Thanks to Rachel Freedman for her contribution to this post.

 

http://www.thelegalintelligencer.com/id=1202740568703/Defense-Verdict-in-Case-of-Burst-Pipes

 

 

 

Be Careful With Your Pleadings Says the PA Supreme Court.

In Liberty Mutual Insurance Company v. Domtar Paper Co. et al., the Pennsylvania Supreme Court recently affirmed the Superior Court’s ruling (which we had previously reported on) that Section 319 of the Pennsylvania Workers’ Compensation Act (“WCA”), 77 P.S. § 671, does not confer on employers or their workers’ compensation insurers a right to pursue a subrogation claim directly against a third-party tortfeasor when the compensated employee who was injured has not taken against the tortfeasor.

As we previously reported, this case arose when George Lawrence, an employee of Schneider National, Inc. fell at Domtar Paper’s parking lot while acting in the scope of his employment. In an effort to recover the amount of workers’ compensation benefits it paid out to Lawrence, Liberty Mutual designated itself a subrogee of Lawrence and brought a negligence action against Domtar Paper, who allegedly owned and maintained the parking lot. Domtar Paper filed preliminary objections on the basis that Liberty Mutual’s cause of action was barred because Pennsylvania does not recognize an independent cause of action by workers’ compensation insurers when the injured party has not brought suit in his own right and is not a party in the case. The trial court sustained the objections and the Pennsylvania Superior Court affirmed.

In affirming the Superior Court’s decision, the Pennsylvania Supreme Court noted that Liberty Mutual failed to explain why the Court should abandon Superior Court precedent that holds a right of action against the tortfeasor is indivisible and remains in the employee who suffered the entire loss. See Moltz v. Sherwood Bros., Inc., et al., 176 A, 842 (Pa. Super. 1935), Reliance Insurance Co. v. Richmond Machine Co., 455 A.2d 686 (Pa. Super. 1983), and Whirley Indus., Inc. v. Segel, 462 A. 3d 800 (Pa. Super. 1983). The court reasoned that “preventing the employer/ insurer from asserting an independent cause of action against the tortfeasor eliminates the possibility that the third-party tortfeasor could be exposed to multiple suits filed by both the employer and the injured employee, and will preserve the preferred rights of the injured employee who retains a beneficial interest in the cause of action against the tortfeasor. “ Ultimately, the Court concluded that preliminary objections were properly granted and affirmed because Lawrence did not (1) commence an action against Domtar Paper; (2) was not named in the action filed by Liberty Mutual; and (3) did not join the action filed by Liberty Mutual.

To our mind, as we told the press, this appears to be more a case of imprecise pleading and less a case of a substantive change in the law.

Special thanks to Sheri Flannery for her contributions to this post. For more information, e-mail Bob Cosgrove.

PA Supreme Court to Consider Solo Subrogation

The Pennsylvania Supreme Court recently heard arguments as to whether an insurance company can pursue litigation against a third-party tortfeasor if the injured insured does not file suit herself.

At issue before the court in Liberty Mutual Insurance Co. v. Domtar Paper Co. was whether Section 319 of the Pennsylvania Workers’ Compensation Act, 77 P.S. § 671, allows the employer/ insurer to step into the shoes of the insured employee to pursue subrogation against a tortfeasor.   The case arose when George Lawrence, an employee of Schneider National, Inc. fell on his knee at Domtar Paper’s parking lot while acting in the scope of his employment. Liberty Mutual, who issued a workers’ compensation policy to Schneider National, paid approximately $34,000 to Lawrence for his workers’ compensation benefits claim. In an effort to recover the amount it paid out to Lawrence, Liberty Mutual designated itself a subrogee of Lawrence and brought a negligence action against Domtar Paper, who allegedly owned and maintained the parking lot.

Domtar Paper filed Preliminary objections on the basis that Liberty Mutual’s cause of action was barred because Pennsylvania does not recognize an independent cause of action by workers’ compensation insurers when the injured party has not brought suit in his own right and is not a party in the case.  The trial court sustained the objections and the Pennsylvania Superior Court affirmed.  Specifically, the Superior Court explained that Section 319 of the Workers’ Compensation Act does not give an employer or insurer a cause of action in its own right.

Appearing before the Pennsylvania Supreme Court, counsel for Liberty Mutual argued that the Workers’ Compensation Act permits an employer to be subrogated to the rights of an employee and denying that right would create an economic loss for the carrier. Needless to say, judgment in favor of Liberty Mutual would be important for insurers who pursue subrogation.  Thanks to Sheri Flannery for her contribution to this post.  For more information, please write to Mike Bono.

 

Subrogation Suit Over Laundromat Fire Goes up in Flames (PA)

In Charlie v. Erie Insurance Exchange, the Pennsylvania Superior Court dealt with the important issue of the respective duties of a business invitee and its customer within the context of negligence claims against a bartender and his employer for causing a laundromat fire.

A fire occurred in Egypt Laundromat after a bartender from a local restaurant and pub placed several of the restaurant’s cotton rags in a dryer.  Once placed in the dryer, the rags, used to clean up spilled drinks and spilled grease, spontaneously combusted, causing a fire.  Erie filed a subrogation suit against the bartender and the restaurant, claiming that the bartender was negligent in drying the greasy rags in the scope of his employment, specifically by not taking the rags out of the dryer earlier.

The trial court granted the restaurant’s motion for summary judgment, finding that the bartender had no duty to prevent spontaneous combustion. The trial court analyzed the factors enumerated in Althaus v. Cohen to determine whether a duty existed. These factors include the relationship between the parties, the social utility of the activity, the nature and forseeability of the risk, and the consequences of imposing a duty upon the actor. Ultimately, the court noted that no duty existed because the defendants were business invitees to the laundromat, and the ability for the defendants to clean rags in a public Laundromat has a social value that outweighs any burden this places on the Laundromat. Further, the court noted that the possibility of rags spontaneously combusting was not a foreseeable risk as spontaneous combustion is, by its very nature, not foreseeable. And finally, the court held that imposition of the plaintiff’s proposed mandates, including requiring the use of a commercial restaurant laundry service to clean oil soaked rags, was not feasible.

Erie appealed, claiming that the trial court incorrectly labeled the defendants business invitees. Alternatively, Erie argued that the defendants were “bailees” due to the mutual benefit the laundromat and defendants received from the use of the establishment. On the basis of such a relationship, Erie claimed that the defendants owed a duty of ordinary care to the laundromat as the “bailor.”

The Superior Court rejected Erie’s argument that the trial court’s erroneous categorization of the relationship created a basis for reversing the court’s position on the basis of a duty. The Superior Court noted that all factors had to be weighed when determining whether to impose a new affirmative duty on an actor. Furthermore, the Superior Court noted that the trial court was, in fact, correct in its categorization of the relationship between the appellant and appellees, as the bailor-bailee relationship that the appellant proposed typically would require a contract between the two parties.  As such, the court affirmed the trial court’s decision to grant the defendants motion for summary judgment.

Thanks to Nicole Pedi for her contribution to this post.  Please write to Mike Bono for more information.

Do Subrogation Clauses Need to Be Strengthened?

While there are always questions regarding the insured’s willingness to cooperate in a subrogation lawsuit, there has, until now, been little doubt that the subrogation clauses in insurance policies are sufficient to protect an insurer’s interests. This status quo has been called into question by the case of Chubb Custom Insurance Co. v. Space Systems/Loral, LLC, et al., a 9th Circuit case, which the US Supreme Court denied certiorari on earlier this week.

The facts of the case are as follows.

Chubb insured Taube-Koret, a retirement home that was located on polluted land formerly owned by Sun Microsystems Inc., Ford Aerospace & Communications Corp. and others. Taube-Koret, although it did not cause the problem, was ordered to clean up the pollution on the property pursuant to the provisions of the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”). Chubb paid for the cleanup and then attempted to recover the costs from the original polluters under CERCLA Section 107.

A California federal judge dismissed the claims and the 9th Circuit affirmed. The basis for the dismissal was the courts’ conclusion that CERCLA Section 107 does not allow direct subrogation claims and that therefore the only way an insurer can recover its costs via subrogation is under CERCLA Section 112 that requires the claimant (i.e. the insured) to demand compensation from Superfund or a liable party. Because Taube-Koret never personally made such a claim, the dismissal was warranted. The Supreme Court’s instant refusal to hear the case means that the 9th Circuit’s decision is binding.

Why is all of this important? Because, under this case law, to have a viable pollution subrogation claim, an insurer must first instruct its insured to prosecute a claim again the culpable parties, which, of course, means that the insurer cannot have first paid the claim – otherwise there would be no damages. Even if permissible under the wording of a typical insurance policy (which is doubtful), it seems highly unlikely to expect an insured to first attempt (at its own cost) to sue a polluter before its insurance claim is paid. So, thought will have to be given to how policy wording can be changed to remedy this – perhaps (as in crisis management policies) insurer paid legal counsel can be assigned at first reporting to assist with the prosecution?

For more information about this post, please contact Bob Cosgrove at rcosgrove@wcmlaw.com.