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This and That by Dennis Wade

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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

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“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)

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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)

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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 .

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

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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

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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

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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.

Late Joinder No Reason to Dismiss (PA)

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In Pennsylvania, joinder of additional defendants to a lawsuit is governed by Pennsylvania Rule of Civil Procedure 2252.  A Pennsylvania trial court rejected an  additional defendant’s objections joinder on the grounds that it was untimely in Lemoncelli v. Newell Rubbermaid, Inc.

Lemoncelli involved a products liability claim for a defective propane cylinder.  The plaintiff allegedly sustained second-degree burns to his lower extremities.  As a result of the accident, the plaintiff sued Newell Rubbermaid as the manufacturer and seller of the propane cylinder.  Plaintiff and Newell’s initial discovery revealed, however, that a valve manufactured by Schrader-Bridgeport, Inc. may have been the cause of the product’s malfunction.

As a result of this revelation, Newell, with the cooperation and assistance of Schrader, conducted various tests on the valve in an effort to re-create the plaintiff’s accident.  After the testing procedures, on December 3, 2015, Newell learned of the likelihood that Schrader’s valve did, in fact, malfunction and cause the accident.

Nearly six months after the testing, Newell filed a motion for leave to join Schrader to the lawsuit as an additional defendant.  Newell’s motion was granted, and it filed its joinder complaint.  Schrader objected to the joinder complaint, arguing (1) it was untimely filed and Newell did not provide a “reasonable justification or excuse” for the untimely filing of the joinder; and (2) it would be prejudiced by the untimely joinder.

First, the court outright rejected Schrader’s first argument regarding the lack of “reasonable justification or excuse” because the plaintiff did not oppose the joinder and this argument is reserved exclusively for plaintiffs under the Pennsylvania Rules of Civil Procedure.  In support of Schrader’s second argument, Schrader merely posited that it would be prejudiced by the joinder because of its inability to conduct a prompt post-accident investigation.  The court, however, noted that discovery was still ongoing and the initial testing that was done on the valve was done in the presence of Schrader.  As such, the court concluded that Schrader did not provide any evidence of actual, real prejudice to Schrader as a result of being joined to the lawsuit.  Accordingly, the court rejected Schrader’s objections to the joinder complaint.

Thanks to Erin Connolly for her contribution.

For more information, contact Denise Fontana Ricci at .

Preview of PA Supreme Court’s Coming Decision on Bad Faith Claims

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In this Of Interest post, we highlight a notable matter that is currently unfolding in the Pennsylvania Supreme Court. Here, we provide an up-to-date history of Rancosky DBN v. Washington National Insurance Company in order to prepare readers for the significance of the eventual PA Supreme Court ruling.

In 1998, LeAnn Rancosky purchased a Cancer Policy from Washington National Insurance Company (now “Conseco”) to be paid through automatic payroll deductions from her employer, the United States Postal Service. LeAnn was diagnosed with Stage III ovarian cancer on February 4, 2003 and was unable to work from that day forward. However, due to accrued vacation time and sick days, LeAnn was paid – and therefore her Cancer Policy premiums were paid – through June 24, 2003.

Beginning May 20, 2003, LeAnn sent multiple Waiver of Premium (“WOP”) forms to Conseco, and assumed these forms were accepted, as Conseco continued to pay LeAnn’s cancer treatment bills through 2005. But when LeAnn relapsed in 2006, Conseco refused coverage on the grounds that LeAnn’s policy lapsed in May 2003 because they never received a completed WOP form correctly identifying a valid date of disability. LeAnn continued to send in form after form over the next five years, but Conseco was firm in denying coverage. In truth, Conseco needed only to tell LeAnn that she made a simple date error on her WOP form that, if corrected, would remedy all coverage issues, but Conseco never did this.

As a result, on December 22, 2008, LeAnn sued Conseco for, among other counts, bad faith. The case continued after LeAnn’s death in February 2010, and a non-jury trial conducted in June 24, 2014 ruled in Conseco’s favor on the bad faith claims. The lower court ruled against LeAnn because she failed to show that Conseco had a “dishonest purpose” or “motive of self-interest or ill-will” against her.

The appeals court reversed this ruling under 42 Pa. C.S.A. § 8371, holding that “ill-will” is not a third requirement to prove bad faith, but rather a point of consideration to be determined in connection with the second aspect of the well-settled two-prong bad faith test: (1) whether the insurer had a reasonable basis for denying benefits under the policy; and (2) whether the insurer knew of or recklessly disregarded its lack of reasonable basis in denying the claim. The appeals court ordered a new trial for LeAnn on her bad faith claims against Conseco, and the Pennsylvania Supreme Court is currently reviewing that decision.

In light of this background, is important to note that 42 Pa. C.S.A. § 8371 does not actually define “bad faith”, nor has the PA Supreme Court ever done so. Thus, this pending case has the potential to both clarify and expand – or narrow – the scope of an insurer’s bad faith depending on how the Court chooses to incorporate the “ill-will” consideration. We will update this posting with a report on the decision of the PA Supreme Court as it becomes available.

Thanks to Melanie Brother for her contribution.

For more information contact Denise Fontana Ricci at .

 

This and That by Dennis Wade

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Unless a candidate for a law or insurance job commits the unpardonable sin of allowing a resume to spill over to a second page, a resume offers little insight. A glimpse of pedigree, a job history, perhaps—but really nothing telling about the person—and the talent needed to build the winning team. And, I find, the Personal Interests resume blur invariably cites “cooking” as an extracurricular passion. But let that go.

Recently, to help third year students and LLM candidates for the “real world,” my alma mater recruited me to conduct “mock interviews” for legal positions. After years of trial and error, I developed my favorite candidate questions. But the challenge of this pro bono exercise prompted me to get  behind the curtain to find out what “deep thinkers “ deemed to be  telling questions for law and insurance related jobs. What I learned from  my research in the blog sphere may well shape the course of my next interview. Here are some of the thought-provoking teasers (with my brief editorial comments):

  • How would your friends describe you? (Tricky because it invites a third person perspective)
  • What is the latest non-business book you’ve read? (Is the candidate well-read and well-rounded?)
  • Who is your hero/heroine? (Can they think on their feet, or do they revert to the hackneyed?)
  • What would make you a good advocate? (Is creativity a component?)
  • What’s the biggest mistake you’ve ever made? (Can a mistake be spun into a positive outcome?)
  • What constitutes success in your mind? (Practical results or pie-in-the sky thinking?)
  • What qualifications do you have that will make you successful at this job? (Is humility a virtue?)
  • What two or three things are most important to you in a job?  (Are growth and challenge in the response?)
  • What qualities do you think a good lawyer/ claim professional should have?  (Open-ended, very telling, and I can’t wait for answers to his one)

In the end, the search for claims or legal talent is hard work. And while there is no substitute for due diligence, the decision to hire is an act of faith, a matter of gut-instinct, and a firm belief that the new hire will be an asset to the team. Credentials are important. But as sport often teaches, the wholly subjective criterion, sometimes called “fit,” is often what leads to a winning combination. And that’s it for this This and That. If you have any comments about this post, please call or email Dennis.