To Remove or Not To Remove? Federal Court Beckons … (PA)

Plaintiffs get to choose litigation venue by filing a complaint in any court that meets jurisdictional rules – State or Federal. While defendants have limited means to select venue, one consideration is whether a matter can be removed to federal court.  Particularly where an out of State defendant is involved in an action meeting diversity requirements, federal court may provide a more favorable venue.  However, the decision must be made quickly as the rule requires removal in thirty days from service of the complaint.

In JUDITH KOERNER v. GEICO, the defendant insurer removed a UIM claim to Pennsylvania Middle District Court only after the plaintiff amended the complaint some eight months into the State court litigation.  The insurer contended that the only after the amended complaint did the amount in controversy exceed the jurisdictional requirement of $75,000.  The plaintiff sought remand on the grounds that the removal came well after the allotted 30 days.

The plaintiff, Judith Koerner (“Korner”) alleged that she was injured in an auto accident, when objects from an unidentified vehicle were thrust into the roadway and forced her into a guardrail. As a result, she sustained injuries for which she sought uninsured motorist benefits from her insurer, Geico, which denied the claim.

Koerner filed her original complaint in Pike County Court of Common Pleas, without a quantification of damages, but demanded an unspecified judgment in the amount to cover damages she sustained in the accident. Nearly a year later, Koerner amended her complaint, adding individual counts for breach of contract and bad faith against Geico. Notably, Koerner alleged that Geico was liable for Pennsylvania common law and statutory bad faith damages, including punitive damages (which under Pennsylvania jurisprudence can be up to ten times the compensatory award).

Subsequent to Koerner’s amended complaint, Geico filed a notice to remove the case to federal court, based on diversity jurisdiction. In support of its notice, Geico stated that the policy’s UIM limit was $15,000, noting that the demand for punitive damages in Koerner’s amended complaint satisfied the jurisdictional requirement of a $75,000 amount in controversy. Geico argued that the removal was timely because it was not until the filing of the amended complaint that it could ascertain the amount in controversy as meeting the threshold for removal.

Koerner counter-argued that Geico’s petition to remove the case was untimely because Geico should have filed for removal within 30 days of filing the original complaint. Koerner relied on 28 U.S.C. § 1446(b)(3), which states:

(3) Except as provided in subsection (c), if the case stated by the initial pleading is not removable, a notice of removal may be filed within 30 days after receipt by the defendant, through service or otherwise, of a copy of an amended pleading, motion, order or other paper from which it may first be ascertained that the case is one which is or has become removable.

Although the original complaint did not allege damages in excess of $75,000, Koerner argued that under 28 U.S.C. § 1446(b)(3), Geico could surmise that the amount in controversy exceeded $75,000 prior to her amended complaint, based on “other papers” including medical reports.

The Middle District denied plaintiff’s motion reasoning that the use of the word “ascertain” in § 1446(b)(3) means that the thirty-day removal period is triggered only when the documents “make it `unequivocally clear and certain’ that federal jurisdiction lies.” Because Koerner provided no basis to conclude that medical records supplied in response to a request for production of documents makes the amount in controversy ascertainable—the documents did not “make it unequivocally clear and certain that federal jurisdiction lies.” This was particularly so when the operative complaint at the time only alleged with specificity that Koerner was entitled to uninsured motorist benefits from Geico and those benefits under the policy were $60,000 shy of the amount in controversy required for federal jurisdiction. Only when bad faith was alleged did Pennsylvania’s Bad Faith statute make punitive damages in issue and, in theory, increase the amount in controversy in excess of $75,000. Therefore, federal court jurisdiction was proper.

Thanks to Sathima Jones for her contribution.

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

WCM Wins Dismissal Involving Overseas Trip Sponsored By Charitable/Religious Organization (NY)

Senior Partner Paul Clark and Associate Peter Luccarelli III successfully convinced the Appellate Division, First Department to reverse a New York County trial court’s decision denying our client’s motion for summary judgment in an alleged sexual assault case. Lerner involved a claim of a 19 year old participant in an overseas trip by our client, a charitable and religious organization. At the end of the day’s sponsored activities, plaintiff and several other trip participants, all of whom were of legal drinking age, retired to the hotel bar. At the hotel bar, plaintiff met, and later left with other male hotel guests who were not members of the trip. Hotel personnel later found plaintiff disoriented in a hallway, and the investigating officers determined that she may have been sexually assaulted and possibly drugged by her assailants. Plaintiff filed suit against our client for allegedly failing to properly supervise her and prevent her assault at the Hotel after all sponsored activities were over.

We moved for summary judgment on the basis that there was no duty to supervise an adult who drank in a hotel bar not owned, maintained, or controlled by our client. We further argued that any duty of care owed by our client to plaintiff was severed by the acts of the criminal third-parties who were unknown to our client. The trial court initially denied our motion on the basis that our client failed to prevent plaintiff from drinking excessively. On appeal, the First Department unanimously reversed the trial court order and granted our motion for summary judgment. The First Department held that even assuming a duty to prevent an adult plaintiff from drinking excessively, there was nothing our client could have done to prevent plaintiff’s alleged assailants from perpetrating an unforeseeable—and unfortunate—criminal act against her.

If you have any questions about this post, please email Paul at pclark@wcmlaw.com.

Hotel Owed No Duty to Shooting Victims at Music Event (NJ)

In Higgins v. Holiday Inn, the Appellate Division analyzed whether a hotel owed a duty to take reasonable precautions by providing security for an event held at the hotel.

For nineteen weeks, Disc Jockey Clarence Francis hosted and performed at a weekly “Caribbean Nights” event held at the hotel without any incidents of violence. However, on the twentieth week, plaintiffs were smoking outside the hotel when an unidentified, masked gunman approached and shot them, wounding them in their legs. Subsequently, plaintiffs sued the hotel and during discovery found information relating to criminal activity at the hotel, which included assault, robbery, and rape.

Plaintiffs argued that the hotel had a duty to provide security at the Caribbean Nights event because the hotel’s history of criminal activity created a reasonable foreseeable risk of harm to the plaintiffs. Specifically, plaintiffs contended that the circumstances involving the prior criminal activity at the hotel, the late hour, and the festive environment of the Caribbean Night event should have caused defendant to anticipate “loitering, under-age drinking, drugs and fights.” Thus, plaintiffs argued when these circumstances are considered together, they imposed upon the hotel a heightened duty to take safeguards against criminal acts of third parties, which include the shooting that caused plaintiffs’ injuries.

The Appellate Division disagreed with the plaintiffs, holding that there was no competent evidence supporting a finding that the hotel could have reasonably foreseen plaintiffs’ shooting. The court reasoned that during the nineteen prior Caribbean Night events there were no criminal incidents. Further, during the hotel’s entire ten-year history, there were no incidents of shooting. Although the hotel had some past criminal activity, the court found this history was not so “alarming” or “escalating” that it would be reasonably predictive that attendees at the event could be affected by such a random act of violence.

Thus, this case demonstrates that New Jersey courts utilize a “totality of the circumstances” analysis to determine an owner’s liability to prevent third-party criminal conduct on the owner’s premises.

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

This and That by Dennis Wade

May you live in interesting times!—a blessing and a purported Confucian curse.

 On late Tuesday afternoon my iPhone 7 pinged: Trump fires Comey. The next morning, sleepy-eyed, and really focused on the day’s crossword puzzle, I snatched the NYT and WSJ from outside my apartment door and opened both to the editorial page. The NYT blared: A Saturday Night Massacre akin to dismissal of Watergate prosecutor Archibald Cox. The WSJ said, in essence, Comey had to go: Why did it take so long?  Interesting times, indeed.

 But political  alliances aside (and here I mask my views), POLITICS do matter in insurance,  As defense and coverage counsel, we must assess risk, venue by venue, bench by bench, bias by bias, appointment by appointment;  How, in the relevant jurisdiction do the sitting judges view insurance contracts: “As written” or in light of the “reasonable expectations” of the insured. Of course, other variables do exist, but political leaning is a factor that must be digested. Why else, for example, is Judge Gorsuch’s elevation to the high bench deemed such a liberal defeat (when his job is to “apply the law” as written)?

 We don’t have any definitive answers. But our job is to predict, to forecast, the ultimate outcome of a legal controversy.  As such, we take on board the political climate of the jurisdiction controlling the outcome. But, in these interesting times, WCM begs your indulgence,  because the leaves, on the bottom of the cup, are susceptible to differing interpretations. Meanwhile, embrace the interesting times in which we live and work.

 If you have any questions about politics and insurance, please call  or email Dennis.

 

This and That by Dennis Wade

 

“If you can’t explain it simply, you don’t understand it well enough.” – Albert Einstein

The truth of Einstein’s dictum, to be sure, applies to quantum physics. But equally, it applies to “legal writing.” Yet “legal writing,” so far as I am concerned, is really a misnomer. There’s good writing and bad writing. If the writing sounds “legal,” it’s likely bad writing. And bad writing often occurs, as Einstein’s quote suggests, when the writer doesn’t fully understand the subject, whether it’s the facts or the legal principles applying to the facts.

In my experience, clients and judges welcome simplicity. Yet achieving simplicity in a complicated matter requires hard work. Distilling essential facts and identifying controlling issues in a jungle of irrelevancy take great care. The effort to explain your point simply, as if to the person on the street, requires a deep understanding of just what is at stake in the controversy. But remember simple usually trumps complicated.

And that’s it for this This and That. If you would like to comment on the virtue of simplicity, please call or email Dennis.

Lender Beware– Suit Against Motorcycle Owner Survives MSJ (NY)

The Tompkins County Supreme Court recently denied summary judgment to a motorcycle owner in Perkins v. Cnty of Tompkins, 2014-0037 (March 2017) because of an issue of fact as to the owner’s entrustment to the operator of her motorcycle.

Perkins arose in 2012 when a motorcycle owner lent her motorcycle to her 30 year old brother, an experienced rider.  She also spent 10 minutes showing her brother how to operate that specific motorcycle.  Shortly thereafter, the operator’s brother collided with another motorist.

The motorcycle operator brother brought suit against the other motorist claiming negligence.  The motorist then brought a third party action against the motorcycle owner, seeking contribution/indemnification claiming the operator negligently entrusted the motorcycle to her brother.

The motorcycle owner moved for summary judgment arguing that the motorist lacked standing for his claims since the operator is not a third party injured by the entrustment. The court found that “unquestionably the harm to third parties in this case is not the direct, physical injury ordinarily caused by dangerous instruments.”  Id.  But that the financial harm resulting from potential liability of a ‘concurrent tort-feasor’ is sufficient to give rise to a cause of action for indemnification.  Here, the operator had standing to bring a claim against the motorcycle owner.

The court found that although most cases of negligent entrustment involve an adult entrusting a dangerous instrumentality to a minor,  negligent entrustment can be based upon “the degree of knowledge the supplier had concerning the entrustee’s propensity to use the chattel in an improper fashion.” The Owner argued that the operator was not a minor and she was aware that the operator had previously owned and operated a motorcycle.  Unfortunately, she denied knowledge of knowing whether the operator had a license to operate a motorcycle or whether the operator had undergone any training or instruction on the motorcycle.  The court found that as a matter of law, it cannot be said that Owner exercised reasonable care in determining whether the operator possessed the requisite intelligence and training, finding at a minimum she should have inquired as to the status of his license.

The Court’s ruling demonstrates the extreme importance of taking precaution before lending your vehicle — especially a motorcycle.  Frankly, the ruling is not surprising, considering that motor vehicle owners are often kept in lawsuits under similar circumstances.  Thanks to Patrick Burns for his contribution to this suit.  Please email Brian Gibbons with any questions.

Court Spurns Request for Claims Reps’ Personnel Files While Compelling Underwriting Materials in DJ Action (PA)

Underwriting manuals and files and claims professionals’ personnel files are guarded business records for any insurance company.  These proprietary and confidential documents were the subject of discovery demands in a declaratory judgment action involving denial of defense and indemnity to a law firm in a professional liability action.  In Westport Insurance Corp. v. Hippo Fleming & Pertile Law Offices, the federal court sitting in the Western District of Pennsylvania grappled with whether to compel production these sensitive documents.

The law firm contended that Westport’s coverage denial was made in bad faith and in breach of contract.  To establish its claims, it sought Westport’s underwriting manual and file.   The firm specifically sought information shared between claims and underwriting professionals in connection with an increase in premium tied to the underlying litigation. In opposition, Westport argued that the underwriting materials were irrelevant because there were no claims related to the underwriting of Hippo’s policy.

The court, however, found that although Hippo did not make any specific claims regarding the underwriting of its policy, the bad faith and breach of contract claims supported the discovery sought.  The firm pointed to premium increases imposed by the insurer that were related to the underlying litigation.  Given this allegation, the Court ruled that the underwriting files may be relevant and compelled production.

On the other hand, the Court was not inclined to order the insurer to produce personnel files of three claims adjusters who worked on Hippo’s underlying claim.  Hippo argued the personnel files would help Hippo establish Westport’s corporate policy, standards, training, procedures and relationship with its employees.  The court, however, did not believe Hippo’s reasoning for the request was sufficient to overcome the general privacy concerns when production of personnel files is at issue.  Rather, the court noted that Hippo could obtain the information it needed through other, less invasive means, e.g. depositions of the employees.

In making both of these discovery rulings, the court noted that the case law in both areas (production of underwriting files and personnel files) is murky at best.  Thus, the court reiterated that production of such information will depend on the specific facts and circumstances a on a case by case basis.

Thanks to Erin Connolly for her contribution.

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

Second Department Reinstates Trip and Fall Action, due to Issue of Fact (NY)

In Kelly v Mall at Smith Haven LLC., the Second Department recently discussed how a personal injury plaintiff can defeat summary judgment motions based on differing theories of how the accident occurred.

The case arises from injuries plaintiff allegedly sustained in 2010 while walking toward the entrance of Smith Haven Mall (the mall). The plaintiff alleged that a defect on the curb leading up to the entrance of the mall caused him to fall, resulting in injury. Plaintiff commenced an action against the mall and E.W. Howell Co., Inc. (Howell) and RF Paving Corp.  In 2007, Howell performed renovation work at the mall, sub-contracted with RJ Paving to construct the sidewalk where the plaintiff allegedly fell. After discovery, each defendant moved for summary judgment , arguing that the plaintiff did not identify the cause of his fall. The Supreme Court granted all three motions and dismissed the plaintiff’s complaint in its entirety.

On appeal, the Second Department held that while the complaint should have been dismissed as to Howell and RF Paving, the Supreme Court wrongly granted summary judgment for the mall. In essence, the crux of all three defendants’ arguments was that the plaintiff failed to identify the cause of his fall, and therefore failed to make out a claim for negligence. The Court pointed out that it had to view all evidence in the light most favorable to plaintiff, as the non-moving party. Here, the plaintiff testified that as he tried to step onto the curb, he felt his foot get “caught in the crack of the curb.” According to the Second Department, this testimony was sufficient to isolate the chip in the sidewalk that allegedly caused his fall.

The Second Department held that the plaintiff presented sufficient evidence to present a question of fact as to the existence of the alleged curb defect, and reinstated the complaint against the mall. However, Howell and RF Paving demonstrated their prima facie entitlement to judgment as a matter of law by establishing that they did not create the defect and that they had no continuing duty to maintain the sidewalk years after performing construction.  Thanks to Evan King for his contribution to this post.  Please email Brian Gibbons with any questions.

Greenbrier Classic Loses Hole-in-One Case, Now Sues Broker

One of the events at the well-known Greenbrier Classic golf tournament in West Virginia is the Hole-in-one Jackpot, where the fans seated in the grandstands win cash prizes if the golfers land a hole-in-one on the 18th hole.

In order to limit their exposure, the operators of the golf tournament (Old White) obtained an insurance policy that would pay out in the event they awarded prize money.  One of the conditions of the policy required that the 18th hole be at least 150 yards from the tee.

During the 2015 tournament, two golfers nailed holes-in-one, and the operators paid out about $200,000 in prize money.  But the insurers disclaimed coverage because the hole was only 137 yards.

The organizers sued, claiming that they made it plain when they applied for coverage that the PGA was in charge of pin placement and that they would not know — or have any control — over the distance of the hole.  Each party moved for summary judgment, and the insurers’ argument was simple: that despite whatever expectation that the organizer had, the language of the policy regarding the 150 yard minimum was very clear.  The Court thus ruled in favor of the insurers.

But Old White has now sued their insurance brokers, claiming that the brokers were fully aware that the organizers had no control over pin placement, that the organizers were never advised about the distance limits, and that the brokers knew that Old White did not want a policy with a distance limit.

WCM will continue to follow this saga, and please write to Mike Bono for more information.

Punitive Damages Not Insurable in PA

In Bensalem Racing Ass’n, Inc. v. Ace Prop. and Cas. Ins. Co., a Pennsylvania court recently dealt with whether an insurer must provide coverage for punitive damages – even when the policy has no specific exclusion for such damages.

In the related underling case, Mario Calderon was killed after falling off of a horse that was spooked by a chicken on a Parx racetrack. Calderon’s estate sued  Parx, who held a commercial umbrella liability policy with Ace which did not contain a written exclusion for punitive damages. Despite the lack of an exclusion, Ace issued reservation of rights letter wherein Ace reserved ts right to disclaim coverage under the policy for any punitive damages that might be awarded in the underlying case.

At the end of the trial, the jury returned a verdict in favor of the Calderon and against Parx, but Ace declined to indemnify Parx for the punitive damage award. Parx filed post-trial motions which the court ultimately denied. The parties, including Ace, finally came to a settlement agreement, with Ace agreeing to tender payment for its share of compensatory and delay damages, but it did not make any payments toward the punitive damages component.

Parx commenced a breach of insurance contract and bad faith action against Ace seeking coverage for the punitive damages. The parties cross moved for summary judgment. Ace relied on Pennsylvania’s established rule that a claim for punitive damages against a tortfeasor, who is personally guilty of outrageous and wanton misconduct, is excluded from insurance coverage as a matter of law. The court explained that public policy does not allow a tortfeasor to shift burden of punitive damages to insurer, as punitive damages are not intended as compensation but instead are a penalty imposed to punish the defendant and deter him and others from similar conduct.

Parx tried to utilize a “vicarious liability” exception, claiming that the punitive damages award was based on vicarious liability in the underlying case. However, the court rejected this argument, explaining that Parx was undoubtedly directly liable in the underlying case based on their status as landowners of the racetrack.

The court reasoned that their decision was consistent with Pennsylvania law and public policy, and therefore, punitive damages based on Parx’s direct liability were not insured and not recoverable from Ace.

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