Second Circuit Rejects Ambiguity Argument Regarding Policy’s Action Over Exclusion (NY)

An additional insured attempted to argue the “separation of insureds” clause rendered the Action Over Exclusion, an iteration of an employer’s liability exclusion, inapplicable, as it was not the employer of the claimant.  The Second Circuit disagreed based on the plain language of the exclusion.

In Endurance American Specialty Insurance Co. v. Century Surety Co., Hayden Building Maintenance Corp. was the general contractor on a construction project at which the plaintiff, who was an employee of Pinnacle Constr. and Renovation Corp., was injured.  Hayden sought coverage as an additional insured under the CGL insurance policy issued to Pinnacle by Century Surety Co.  Century denied coverage based on the policy’s Action Over Exclusion, which provided that there was no coverage for “bodily injury” to an “employee” of the named insured arising out of and in the course of employment by the named insured, or performing duties related to the conduct of the named insured’s business.  Hayden challenged the disclaimer, arguing the exclusion did not apply because Hayden did not employ the plaintiff and the policy’s terms must be applied separately to each insured seeking coverage as per the policy’s Separation of Insureds provision.

Although the district court agreed with Hayden, the Second Circuit reversed and held the Action Over Exclusion unambiguously barred coverage.  In particular, the appellate court held the exclusion barred coverage for bodily injury claims brought by an employee of “the named insured,” as opposed to “the insured.”  The Court further observed the Action Over Exclusion specifically replaced the Employer’s Liability Exclusion, which used the term “the insured.”  The Second Circuit ultimately reversed “because to do otherwise would render the unambiguous language…a nullity.”

Insurance policies are arguably the most hyper-scrutinized class of contracts.  As a result, in evaluating coverage, it is critical to evaluate even the most minute distinction in policy terms.  Here, an endorsement altered an exclusion by redefining the pertinent class of insured by changing “the insured” to “the named insured.”

Thanks to Christopher Soverow for his contribution to this post.  Please contact Colleen E.  Hayes with any questions.

Improper Service: No Harm, No Foul (PA)

A Pennsylvania Court determined that a plaintiff’s good faith attempts to effectuate service tolled the statute of limitations.

In Mandarano v Plink, the Pennsylvania Court of Common Pleas in Lackawanna County heard an interesting case regarding a failure to comply with the Pennsylvania service statute.  In Mandarano, the Plaintiff commenced a premises-liability action one day before the statute of limitations expired by serving the President of the Defendant company via a detective agency.  Under Pa.R.C.P. 400(a), original service in Pennsylvania is only to be effectuated by a Sheriff.  As a result, the Defendant filed preliminary objections seeking that the complaint be dismissed for failure to comply with Pa.R.C.P. 400(a).  The Defendant argued the statute of limitations is tolled only if the plaintiff makes a good faith effort to effectuate service of process on the opposing party, which he argued did not occur. Plaintiff countered, stating that Pa.R.C.P. 126 enables a court to “disregard any error or defect of procedure which does not affect the substantial rights of the parties.”

In analyzing the situation, the Court first relayed the standard for evaluating untimely service.  To warrant the dismissal of an action based upon the untimely service of original process, the record must reflect that either (1) plaintiff demonstrated an intent to stall the judicial machinery by delaying the proper service of process, or (2) the defendant was prejudiced by plaintiff’s failure to comply with the procedural rules governing service.  The type of prejudice required to warrant a dismissal based upon improper service of process involves a “substantial diminution of the defendant’s ability to present factual information in the event of trial which has been brought about by plaintiff’s delay” in the proper service of original process. The Court found no evidence of any prejudice nor that the plaintiff intentionally acted in a manner that was designed to stall the judicial process.  Moreover, since the Defendant’s officer was furnished with timely notice of the filing of this suit, the Court found that the purpose of the statute of limitations was satisfied.

This case poses an interesting situation, where the specific requirements of a statute were not met, but where the Plaintiff’s action complied with the spirit and purpose of the statute.  Most states contain statutes and regulations allowing Courts to disregard any defect of procedure that does not prejudice another party.  The Defendant could not provide any evidence that he was prejudiced, and the Plaintiff was allowed to proceed in his lawsuit.  There was no-harm, and, thus, the Court found no-foul.

Thanks to Malik Pickett for his contribution to this post. Please email Colleen  E. Hayes with any questions.

No Coverage for Independent Rideshare Driver (PA)

Ridesharing is a common and convenient mode of transportation. In 2015, the Pennsylvania General Assembly enacted the “Ridesharing Arrangements Act”, an amendment of a law passed in 1982 designed to encourage ridesharing. Under the Ridesharing Arrangements Act, any “provision in an insurance policy which deny coverage for any motor vehicle used for commercial purposes or as a public or livery conveyance shall not apply to a vehicle used in a ridesharing arrangement.” 55 P.S. § 695.5(a).

Recently, the Superior Court of Pennsylvania considered whether the Ridesharing Arrangements Act voided an auto policy exclusion that precluded coverage to an insured “FOR DAMAGES ARISING OUT OF THE OWNERSHIP, MAINTENANCE, OR USE OF A VEHICLE WHILE IT IS BEING USED TO CARRY PERSONS FOR A CHARGE. This exclusion does not apply to the use of a private passenger car on a share-the-expense basis” (“Auto Exclusion”).

In Harley v. Riders’ Club Cooperation, the Superior Court reaffirmed the trial court’s rationale and holding that the insurer, State Farm Mutual Automobile Insurance Company (“State Farm”), was legally permitted to disclaim coverage because the Ridesharing Arrangements Act did not apply, and therefore, did not void the policy’s Auto Exclusion.

According to the trial court, the defendant, Riders’ Club Cooperation (“Riders’ Club”), is a not-for-profit cooperation providing transportation services to its members. Members of Riders’ Club serve as the drivers. Riders’ Club requires the drivers to enter agreements, which classify them as independent contractors, obligates them to obtain/maintain personal insurance coverage, and requires them to driver their own cars when transporting Riders’ Club members. In exchange for their transportation services, the drivers are entitled to receive 75% of the fee paid for each ride provided.

In September 2015, Paul Butler (“Butler”), a member of Riders’ Club, was contacted by Riders’ Club to drive fellow Riders’ Club member, Erin McDonald (“McDonald”), and her nurse, Dana Harley (“Harley”), to McDonald’s school. While transporting McDonald and Harley, Butler struck the rear of a school bus. Unfortunately, Harley sustained injuries from the accident and ultimately asserted a claim for damages against Butler.

At the time of the accident, Butler was insured by State Farm. In reliance on the above-referenced Auto Exclusion, State Farm disclaimed coverage because “Butler’s vehicle was being used to carry persons for a charge.” Subsequently, Harley initiated a declaratory judgment action arguing that the exclusion was void and unenforceable under the Ridesharing Arrangements Act.

The trial court’s decision hinged on whether Butler’s vehicle was being used in a “ridesharing arrangement” and whether Riders’ Club qualified as “ridesharing operator” at the time of the accident. Ultimately, the trial court held that Butler’s car was not being used in a “ridesharing arrangement” because Riders’ Club did not operate or control Butler’s car. Although Butler was a member of Riders’ Club, he was classified as an independent contractor. Accordingly, as a matter of law, Butler’s actions could not be imputed to Riders’ Club. Riders’ Club’s only role involved contacting Butler to determine his availability to drive McDonald and Harley – Riders’ Club merely instructed Butler as to the time, location, and date for the ride. Moreover, Riders’ Club only collected and distributed paid fees to its drivers and did not dictate routes or speed. In further support of its conclusion, the trial court focused on how Riders’ Club organized its services to avoid potential legal liabilities and other responsibilities flowing from a master-servant relationship in its agreements with the drivers. Without any “ridesharing operator”, a “ridesharing arrangement” did not exist. Accordingly, the Auto Exclusion applied to bar coverage to Butler for the accident.

The concept of ridesharing poses numerous questions about the relationship between operators and drivers and whether policies provide or bar coverage. In this case, all of the parties agreed Butler was an independent contractor. Yet, this begs the question as to whether it would have been the same result if Butler was classified as an agent of Riders’ Club. While many questions remain unanswered, this non-precedential decision provides a glimpse into the potential direction Pennsylvania Courts are taking in the context of rideshare arrangements and insurance coverage.

Thanks to Lauren Berenbaum for her contribution to this post. Please email Vito A. Pinto with any questions.

No Notice, Proceed With Destroying The Tape (NY)

In Tanner v. Bethpage, the infant-plaintiff tripped over a metal chain while running during gym class. The accident occurred in April of 2015 but the plaintiff did not commence an action against the school district until January 2016 and did not send a letter to the school asking that they preserve any surveillance video until August of 2016. At the time of its deposition, the school testified that there was no surveillance footage because it was auto-erased 30 days after the accident. The plaintiff moved to sanction the defendant for spoliation of evidence, arguing that the school should be precluded from offering any evidence at the time of trial and that the plaintiff should, thus, prevail on its liability claims. The lower court denied the motion and plaintiff appealed.

The Second Department held that a party will be sanctioned for destroying evidence, such as surveillance videos, if the party had an obligation to preserve the evidence at the time it was destroyed, acted culpably when destroying the evidence, and the evidence was relevant to the plaintiff’s action. The Appellate Division further stated that, without litigation being commenced or without a notice of the claim being served, a party cannot be sanctioned if the evidence is destroyed in good faith and pursuant to normal business practices. Given that the plaintiff did not commence a suit until almost eight months after her accident and did not send a preservation letter to the school prior to that date, the Court held that there was no evidence that the school intentionally or negligently allowed the video to be erased.

Frequently, our clients have surveillance cameras on their property or in their businesses. Typical cameras auto-erase videos every 30 days. Accordingly, our clients rarely maintain videos of accidents that they knew nothing about until being served with litigation papers months, or years later. When counsel for plaintiffs threaten to move to sanction our clients, we can confidently report that such threats are empty, absent direct notice to our clients that an accident occurred and that preserving such a video was required of them.

Thanks to Georgia Coats for her contribution to this post. Please email Vito A. Pinto with any questions.

Recent Class Action Settlement in Federal Court Could Impact Negligent Supervision Cases Involving Allegations of Bullying (NY)

In the case Doe v. New York City Department of Education, twenty-three public school students brought claims against the New York City Department of Education for its alleged failure to prevent or adequately address bullying. The plaintiffs claimed that, in doing so, the DOE violated their rights to procedural due process, substantive due process, equal protection rights, and the Individuals with Disabilities in Education Act. While the plaintiffs in this case sought only declaratory and injunctive (not monetary) relief, the terms of the settlement could provide fader for the plaintiff’s bar in its pursuit of negligent supervision claims.

In particular, according to the terms of the settlement, the DOE is required to: (1) introduce an electronic reporting system allowing parents to report bullying electronically; (2) direct school staff members who witness bullying to report the incident to the principal within one day; (3) require principals to log complaints of bullying in electronic databases; (4) mandate schools to include anti-bullying techniques in their annual training sessions for teachers and staff; (5) investigate complaints of bullying within ten days (except in extenuating circumstances); and, (6) approve requests for school-transfer made by a parent whose child was the victim of a Material Incident.

As argued by the Legal Aid Society in their amicus papers (and freely admitted by Judge Garaufis in his Decision), these measures do nothing to address the root cause of bullying. Rather, they dictate what school staff must do once bullying has already occurred. The heightened documentation requirements will make it easier for the plaintiff’s bar to bring such negligent supervision claims as they create more opportunity for concretely establishing notice, not to mention the occurrence itself. While the settlement shields the DOE from “systemic, bullying-related litigation”, claimants are still permitted to request relief in their individual capacity. By resisting the implementation of measures that would prevent bullying itself while, at the same time, making these types of personal injury cases easier to prove, public city schools are vulnerable to an uptick in negligent supervision cases involving bullying.

Even in cases involving private schools, the plaintiff’s bar can offer the settlement terms as evidence of a “standard” for addressing bullying incidents at school. Are private schools required to implement electronic systems to report bullying? Must private school staff report all instances of bullying (which is not defined by the Decision) within one day? A plaintiff’s attorney could point to this settlement, voluntarily entered into by the Department of Education, and argue that failure to accord with these measures constitutes a departure from a standard widely adopted in this region.

Hopefully the legislature will not be as reluctant to address the root cause of this important issue.

Thanks to Kristina Duffy for her contribution to this post. Please email Vito A. Pinto with any questions.

Stockpiled Materials Cemented Defendants’ Dismissal (NY)

In Kusayev v. Sussex Apts. Assoc., LLC the Appellate Division, Second Department, ruled that a delivery truck driver who fell while using a hand truck loaded with boxes of tile and quick cement, causing the material to land on him, was not entitled to strict liability recovery under Labor Law 240(1) and 241(6) against the building owner because he was neither engaged in construction work nor working in a construction area within the meaning of the statutes.

Plaintiff alleged that he was injured while delivering construction materials to an apartment building owned by defendant Sussex Apartments after pulling the hand truck he had loaded high with tile and quick cement up a single step to the entrance of the property. Plaintiff lost his balance, falling to the ground with the items on the hand truck landing on top of him. He commenced an action pursuant to Labor Law 200, 240(1) and 241(6) against Sussex as property owner.

Sussex moved for summary judgment, which was granted by the lower court. With respect to Labor Law 240(1) and 241(6), Sussex was entitled to dismissal because plaintiff was not engaged in construction work within the meaning of 240(1) and was not working in a construction area within the meaning of 241(6) since the building materials on the hand truck were not being “readied for immediate use” but rather were being “stockpiled for future use”.

The Labor Law 200 claims were also dismissed because Sussex demonstrated that it did not create or have actual or constructive notice of the alleged condition which caused the plaintiff’s injury, and that it did not supervise or control the means and methods of the plaintiff’s work. As the alleged accident involved defects in both the premises and the equipment at the work site, Sussex was obligated to submit sufficient proof to satisfy both liability standards, which the Court determined it did.

The Court therefore affirmed the lower court’s dismissal of plaintiff’s complaint against the property owner. Thanks to Lauren Tarangelo for her contribution to this post. Please email Vito A. Pinto with any questions.

Pennsylvania Court Provides Gateway for Insureds to Keep Lawsuits in State Court (PA)

The Eastern District of Pennsylvania recently issued a decision that may help insureds interested in having their cases heard in state court rather than allowing those cases to be removed to federal court. In Dominque Ellis v. Liberty Mutual Insurance Company, et al., a plaintiff defeated diversity by naming both the insurer and the claims adjuster as defendants.

Initially, a lawsuit was brought by Dominique Ellis (“Ellis”) who was hit by a car while she was walking down the street. At the time, Ellis was insured by a Liberty Mutual auto insurance policy that listed her mother as the “named insured.” Since the motorist was underinsured, Ellis sought to recover medical expenses from Liberty Mutual. Liberty Mutual later denied her claim and Ellis sued both Liberty Mutual and the claims adjuster, Clare MacNabb (“MacNabb”).

MacNabb was added to the lawsuit because Ellis claimed that she dragged her feet during a six-month investigation into whether Ellis lived at the address listed within the policy. Once MacNabb concluded that Ellis was being truthful about her address, she denied her claim on the ground that her medical expenses were less than the limit of the policy owned by the underinsured driver. Ellis alleged that the investigation was fraudulent and meant to intimidate her from pursuing her claim.

Ellis’ lawsuit was brought in state court and consisted of three counts against Liberty Mutual: (1) an “underinsured motorist claim,” (2) a claim for bad faith insurance denial, and (3) a claim for violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL). The UTPCPL claim was also brought against MacNabb. As both Ellis and MacNabb were residents of Pennsylvania, there was no diversity of citizenship grounds to remove that case to federal court. However, Liberty Mutual argued that MacNabb was fraudulently joined and removed the case to federal court. As a result, Ellis moved to remand the matter back to state court.

The District Court granted the motion to remand, rejecting all three reasons asserted by Liberty Mutual to support that MacNabb had been fraudulently joined. First, the Court explained that claims under the UTPCPL against claims adjusters were “colorable under Pennsylvania law.” Under the law, UTPCPL claims against individual insurance claims representatives were allowed.

Second, the Court determined that it was too early to tell whether Ellis’s claim was for mere nonfeasance. Ellis’ complaint alleged nonfeasance by MacNabb in MacNabb taking too long to investigate her claim and ultimately denying coverage. However, a UTPCPL claim requires malfeasance, rather than nonfeasance. The Court determined that Ellis’ complaint also supported “an inference of malfeasance” in that the adjuster’s investigation was intended to intimidate or harass Ellis. According to the Court, malfeasance may exist if an insurer conducted a post-loss investigation in an unfair or unreasonable manner. The Court noted that, at this stage, Ellis still had the opportunity to prove malfeasance by MacNabb and that to dive further into this issue would require an assessment of the merits of the claim itself.

Finally, the District Court rejected Liberty Mutual’s argument that Ellis cannot maintain a claim under the UTPCPL because she did not purchase the insurance policy herself. The UTPCPL grants a claim to any person who, among other requirements, purchases or leases goods or services. In the instant matter, Ellis’s mother was the purchaser and the named insured. However, the Court determined that, although support that Ellis herself purchased the policy was “admittedly slim,” it should remain mindful that “all doubts should be resolved in favor of remand” and that remand was required if there was even a possibility that a state court would find the complaint stated a claim against MacNabb. The District Court thus concluded that the “lenient standard” had been satisfied and that it remained unclear whether Ellis had been making payments under the insurance policy. As a result, Ellis’s motion to remand was granted.

Thank you to Zhanna Dubinsky for her contribution to this post. Please email Vito A. Pinto with any questions.

Plaintiff’s (lack of) ED Proof Fails to Satisfy Appellate Court (NJ)

In proving damages in bodily injury claims, most states require expert support to provide objective evidence of a plaintiff’s subjective complaints of pain.  In a recent New Jersey appellate case, the Court address the necessity of expert support for plaintiff’s claimed residual erectile dysfunction after a motor vehicle accident.

In Chetney v. NJM Re-Insurance Company, plaintiff was working as a paramedic when his ambulance was struck by a vehicle operated by an uninsured driver. Plaintiff claimed that the accident caused permanent injury to his lumbosacral spine. Plaintiff had a long history of prior accidents which included three motor vehicle accidents, one slip and fall, and four subsequent non-motor vehicle accidents. Despite the plethora of accidents, plaintiff claimed that he suffered from chronic pain, and that this accident was the principal cause of his permanent injury.

Plaintiff and his wife testified that the injury from this accident caused him to limit various recreational and family-related activities and negatively affected his quality of life. Plaintiff and his wife testified that he lived an active lifestyle which included sports, hunting, tumbling with his two toddlers and maintaining his lawn. Plaintiff built furniture as a hobby and participated in snow removal for himself and his neighbors. The aforementioned activities were severely restricted or eliminated entirely as a result of this accident.

In particular, plaintiff and his wife testified that he suffered from erectile dysfunction after the subject accident. His wife testified that she was pregnant at the time of the accident but had a miscarriage shortly after. Plaintiff’s wife testified that as a result of this accident, they were unable to conceive a third child or engage in intimacy. The salient point on the appeal pertained to the testimony about erectile dysfunction.

Defendant NJMRe filed a pre-trial motion to bar any testimony about the condition, contending that it was not adequately disclosed during discovery and that expert witness testimony was required to establish that plaintiff suffered from the condition.  Further, NJMRe sought to redact portions of plaintiff’s orthopedic expert’s testimony in which he explained how nerve impingement in the lumbosacral spine could affect urologic function.

The trial court granted the motion as to expert’s testimony, concluding that he lacked the expertise to address urologic conditions, but denied it as to the testimony of plaintiff and his wife regarding erectile dysfunction. The court reasoned that expert testimony was not necessary to establish what plaintiff experienced himself. Although the appellate court agreed that the specific diagnosis of erectile dysfunction is outside the expertise of a lay witness, it noted that plaintiff and his wife avoided medical nomenclature and instead described in lay terms what he experienced and what she observed. As such, the appellate court found no issue with the testimony.

However, the appellate court found that expert testimony was required to establish causation. Quoting J.W. v. L.R., the appellate court held that competent expert testimony would be required to establish causation of a current medical or psychological condition. Based on this premise, the appellate court reversed and remanded the matter to the trial court.

It remains unclear, objectively, whether 1) plaintiff truly suffered from ED, and 2) if so, whether the ED was causally related to the accident.  To put that claim before a jury, expert support would have been required.   Thanks to Steve Kim for his contribution to this post.  Please email Brian Gibbons with any questions.

Frozen Pizza Quest no Excuse of PA Fall

Recently, a Pennsylvania court evaluated a grocery store’s liability for injuries caused by known or obvious conditions. 

In Walker v. Save-a-Lot. Plaintiff was shopping in a grocery store when she tripped and fell on a pallet displaying cases of water in the middle of the frozen food aisle.  Plaintiff walked toward the pallet on her way to the freezer and situated her cart adjacent to the pallet.  After grabbing a frozen pizza, plaintiff stepped away from the freezer and tripped over the pallet.  

Defendant sought summary judgment on the ground that the pallet created a known or obvious condition.  Plaintiff claimed she did not see the pallet as she was focused on finding a frozen pizza.  Surveillance footage showed that the plaintiff walked by one pallet displaying cases of water before she approached a second pallet displaying the same.  

The court turned to prior decisions addressing the duty of care owed to invitees and concluded that it is established Pennsylvania law that a person must look where he is going, further explaining that customers are not relieved of this responsibility even if they are distracted by sales displays.  

The court concluded that the fact that the plaintiff claims she did not see the pallet because she was focused on finding her frozen pizza does not excuse the fact that the pallet was a known or obvious condition that she failed to avoid by the exercise of ordinary care.  

Thanks to Chelsea Rendelman for her contribution to this post and please write to Mike Bono for more information.

Plaintiff Stuffed on Missed Slam Dunk (NY)

In Osmond v. Hofstra University, et. al, plaintiff was part of a slam dunk contest held at the summer basketball camp. She attempted a dunk and came down awkwardly and suffered a serious injury. Plaintiff sued for negligent supervision and defendants moved to dismiss under a theory of assumption of risk. The lower court denied the defendants’ motions and defendants appealed.

The Second Department Appellate Court reversed and found that plaintiff assumed the risk by voluntarily participating in the dunk contest and an injury is possible when attempting to dunk a basketball. Under the doctrine of primary assumption of risk, “[i]f the risks[of a sporting activity are known by or perfectly obvious to a voluntary participant, he or she has consented to them and the defendant has discharged its duty of care by making the conditions as safe as they appear to be.” The decision was reversed and the defendants were granted summary judgment. 

Thanks to Paul Vitale for his contribution to this post and please write to Mike Bono for more information.