Coverage Issues Further Complicate Penn State Scandal

Pennsylvania Manufacturer’s Association Insurance  Co. (“PMA”) filed a motion recently in the Philadelphia Court of Common Pleas seeking to bar Penn State University from introducing evidence on why it settled allegedly time-barred claims.  The motion stems from a declaratory action PMA filed against Penn State seeking a judgment on whether it had to provide coverage on a $90 million settlement the school paid to abuse victims in the recent Jerry Sandusky scandal.  PMA is alleging that the potential time-barred claims are blocked by the statute of limitations as it applies to abuse claims.  These claims make up $4 million of the settlement.

PMA argues that it did not consent to the settlements entered into by Penn State and that in order to carry its burden, the school must show that the un-consented to settlements were reasonable.  PMA then stated that during depositions, school officials refused to discuss or elaborate on specifics, making it impossible for its lawyers to determine whether the school sought to toss out or validate time-barred claims.  Because Penn State refused to provide discovery on these claims, PMA is requesting that the school be preclude from introducing any evidence on the subject at trial.

This case highlights the already complicated realm of coverage can become even more so when mixed with multi-million dollar high-publicity cases like the Penn State abuse scandal.  It also stresses the importance of monitoring statutes of limitation, as they can both hurt and help one’s case.  Finally, this case also brings up the important issue of providing adequate discovery and cooperating with the other side so as to avoid adverse motions in the future, as Penn State is now facing.  As if the Sandusky situation at Penn State required further complication…. Thanks to Peter Cardwell for his contribution to this post.  Please email Brian Gibbons with any questions.

Governmental Standards Not Necessarily A Safe Haven For Products Liability Claim (PA)

Is evidence of a product’s adherence to governmental standards admissible in strict liability cases in Pennsylvania?  Short answer, maybe.

The Pennsylvania Superior Court was faced with this issue in Webb v. Volvo Cars of North America.  In Webb, a tangled logic examined whether such evidence, which might be admissible with respect to a negligence claim, should be permitted in an action based in solely in strict liability.  Seemingly at odds were  the Supreme Court decision of Tichner  v. Omega Flex, Inc. that Volvo argued would permit such evidence and plaintiff’s reliance upon Lewis v.  Coffing Heist Division and Gaudio v. Ford Motor Co. that would prohibit it.

In Webb, the trial court allowed evidence that the defendant’s product design adhered to governmental standards.  The jury returned a defense verdict, and the plaintiff appealed.  The Pennsylvania Superior Court concluded that the trial court erred by not instructing the jury to disregard the governmental standards evidence and granted the plaintiff a new trial.

So does this ruling mean that the introduction of the evidence was improper?  It would seem that the Court addressed that issue, right?  Well not exactly.  The issue was whether or not the Pennsylvania Supreme Court overruled Lewis and Gaudio, the cases that prohibited the admission of governmental standards evidence, with its decision in Tincher v. Omega Flex.  The Webb Court left the “admission” question on the table.  That said, until the issue reaches the Pennsylvania Supreme Court it seems that defendants should continue to inform juries of how their products were produced in accord with those standards created by the state and federal government.

Thanks to Marcus Washington for his contribution.

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

Workers Compensation No Cover For Insurer For Intentional Distress Claim (PA)

The Pennsylvania Supreme Court recently refused to review a Superior Court ruling that a tort claim for intentional infliction of emotional distress is not barred by the workers’ compensation exclusion in the Pennsylvania workplace injury statute.

In Charlton v. PMA Insurance Group, Plaintiff Matthew Charlton worked for a company called PMA. He was injured in a workplace accident and subsequently suffered physical and emotional injuries. Charlton brought a Workman’s Compensation Claim, and PMA provided physical and psychiatric treatment to Charlton. During this treatment, Charlton revealed childhood sexual abuse. Notes from the original counseling session made their way into the hands of a senior PMA account claims representative, who told Charlton that PMA would no longer pay for “something that happened to you as a child”, and requested that Charlton settle the Workman’s Compensation Claim. Charlton suffered anxiety, humiliation, and fear that his abuse would be disclosed if he failed to settle the claim, and so he filed a claim for intentional infliction of emotional distress against PMA. PMA argued that under the worker’s compensation exclusion, the Worker’s Compensation Act barred any tort action flowing from a work-related injury.

The Pennsylvania Superior Court sided with Charlton, ruling that a tort claim for the intentional infliction of emotional distress should not be barred under the worker’s compensation exclusion. The court agreed that employers are generally immune from tort action. However, the court noted that the claim falls outside the purview of the Worker’s Compensation Act since it alleges injuries arising from Charlton’s prior abuse, not the injuries from the ongoing worker’s compensation claim. By requesting damages for pain and suffering, treatment costs, and future wages, Charlton characterized the claim as one outside the scope of a work-related injury, and thereby outside the scope of any tort exclusions within the Worker’s Compensation Act.

The Supreme Court justices denied allocator, refusing to review the Superior Court’s ruling, and this matter is now expected to go to mediation.

Thanks to Melanie Brother for her contribution.

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

PA Appeals Court Holds that Damages for Dragonetti Violations Must be Proven – Not Presumed

Pennsylvania statute 42 Pa.C.S.A. § 8351 provides for a cause of action, also known as a Dragonetti action, allowing the defendant in a lawsuit to file suit against a plaintiff for abuse of civil proceedings when litigation is filed frivolously.  On June 24, 2016, the Pennsylvania Superior Court issued an opinion clarifying the issue of damages for a Dragonetti violation  in Miller v. St. Luke’s University Health Network.

In Miller, the original lawsuit stemmed from the arrest and conviction of one of St. Luke’s nurses, Charles Cullen (“Cullen”), who admitted to killing patients while acting in his capacity as a nurse for St. Luke’s. The families of two patients that were allegedly killed by Cullen sued St. Luke’s for wrongful death.  Ultimately, the two lawsuits were dismissed on summary judgment.  Thereafter, St. Luke’s filed a Dragonetti action against the two families of the patients, alleging both abuse of process and civil conspiracy.  St. Luke’s, however, voluntarily dismissed this Dragonetti action after two years of litigation.

Following the voluntary dismissal of St. Luke’s Dragonetti action against the two families, the two families turned around and filed their own Dragonetti action against St. Luke’s, alleging that it did not have probable cause to file its Dragonetti action against the two families and that it was filed for an improper purpose.  On July 1, 2014, a Lehigh County Court of Common Pleas jury found that St. Luke’s did not have probable cause to bring the Dragonetti action against the two patients’ families.  The jury, however, while finding St. Luke’s violated 42 Pa.C.S.A. § 8351, did not award any damages to the two families.  Both St. Luke’s and the families appealed, giving rise to the Pennsylvania Superior Court’s June 24, 2016 opinion.

On appeal, the families argued that if a violation of 42 Pa.C.S.A. § 8351 is found, then damages should be presumed otherwise a finding of such a violation would amount to just a “paper judgment.”  Conversely, St. Luke’s argued that 42 Pa.C.S.A. § 8351 requires a plaintiff to prove both liability and damages separately.  Moreover, St. Luke’s argued that while § 8353 states that a plaintiff is entitled to damages, § 8354 places the burden on the plaintiff to prove that she actually suffered damages.  Ultimately, the Pennsylvania Superior Court decided in favor of St. Luke’s, ruling that in a Dragonetti action, damages must be proven – not presumed.

Thanks to Erin Connolly for her contribution.

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

Trying to Claim Your Boss is Doing Two Things At Once? Think Again. (PA)

On June 29, 2016 the PA Superior Court dismissed the appeal by underlying plaintiff Neidert from an order granting compulsory non-suit to underlying defendant Albert Charlie III.  Neidert sued Charlie when he was injured while working at Riley’s Pub.  Charlie owns the business and also owned the building where Riley’s Pub is located.  Neidert sought damages on the theory that Charlie is not exempt under the Workers’ Compensation Act because he was acting in a “dual capacity” with respect to his ownership of the building.  Neidert claimed that as the building owner, Charlie owed him a separate duty to ensure the building was safe.

Charlie moved for summary judgement after he was served with the complaint and was denied.  At trial however, Charlie made an oral motion for compulsory nonsuit, which was granted.  The issue on appeal, among others, was whether the dual capacity exception applied. The Superior Court noted that this doctrine has only been applied in one case and the exception is extremely narrow and that it “does not apply where the employee’s compensable injury occurred while he was actually engaged in the performance of his job”.

This case is useful in understanding truly how narrow the dual capacity exemption is interpreted.  It will serve as a model for future suits and can be used to defeat such claims by plaintiffs.  Thanks to Remy Cahn for her contribution to this post, and please email Brian Gibbons with any questions.

Pipe Rising from the Grave Causes Trip & Fall (PA)

A cemetery director in Newtown, PA was awarded a $400,000 verdict after he claimed he tripped and fell over an exposed pipe in the cemetery he was working in.  Darrin White alleged that on July 23, 2012 he tripped and fell over a pipe that housed electric cables which led to a construction trailer.  There was a construction project that was taking place at the cemetery that was overseen by G&C Fab-Con with Scungio Borst & Associates, LLC as the general contractor and Travis, Inc. as the electrical contractor.  White sued all three contractors who then filed a third-party complaint against Mobil Mini, Inc., the company that installed the trailer, but they were later dismissed.

White’s counsel provided photos of the pipe which showed it protruded several inches out of a gravel path.  They alleged that G&C and Scungio Borst were negligent in failing to ensure that the pipe was properly submerged under the gravel and that Travis was negligent in failing to create a deep enough trench for the pipe.  The companies’ counsel stated that the pipe only protruded a half-inch and that White was not watching where he was going.

White alleged that he hit his head from the fall.  He went to the emergency room and was diagnosed with a concussion and released.  White claimed that he suffered from headaches after the incident.  He went to his family doctor and later a neurologist who diagnosed post-concussion headaches and memory loss and prescribed medication.  White also began to suffer from anxiety and depression.  He sought to recover around $41,000 in medical costs.

White’s neurologist testified that his condition had plateaued and that his headaches are permanent.  White stated that he cannot return to work and that he continues to suffer from anxiety and depression and that he experiences migraine headaches two to three times a week.  The companies’ expert concluded that White suffered a minor concussion which he had recovered from.  White’s expert maintained that headaches from a concussion could last for years.

The parties negotiated a high-low stipulation in which the defendants’ liability could not exceed $2.5 million but could not fall below $400,000. The jury found White to be 20% liable and that G&C and Scungio Borst were 40% liable and awarded White $300,000 which was automatically raised to $400,000 the stipulation.

This case demonstrates the importance of expert medical testimony to establish exactly what is wrong with the plaintiff, so that any damages awarded accurately reflect the proven injuries.  Thanks to Peter Cardwell for his contribution to this post.  Please email Brian Gibbons with any questions.

Sisters’ Slippery Stairs Send Sister Sprawling (PA)

On June 29, 2013, Plaintiff was descending the stairs at Sisters Serving Sisters Night Club in Philadelphia, Pa, when she slipped and fell, suffering a severely sprained ankle.  Reasons given for the cause of Plaintiff’s fall included:  “she missed the last two steps”; “she couldn’t walk due to a virus”; “her foot caught up in the loose carpet”; “she was bitten by an insect in Florida and was paralyzed”; “she drank 4-6 drinks prior to the fall”; “the steps were wet and slippery”; the lighting was “dim and poor”; “there was liquid on the steps”.  Ultimately, the court landed on the theory of a spill and wet stairway as the cause of Plaintiff’s fall.

In its memorandum opinion, the court held that as a business invitee at Defendant-Club, Plaintiff was owed the highest duty of care.  Therefore, the Club had an obligation to maintain the stairways and keep them safe for all patrons.  Furthermore, the Club had a heightened responsibility to monitor the stairs because patrons were required to use said stairs to access the restroom.  However, the court also found that an invitee has a duty to avoid a recognized hazard and Plaintiff, as a frequent patron, knew or should have known to hold onto the railing because of spills and for her own safety.  As such, the court found Plaintiff 10% liable.

In addition to claims against the Club, Plaintiff sought to hold the building owner personally liable for her injuries and damages.  Plaintiff attempted to pierce the corporate veil, but was unable to point to any of the factors necessary for piercing the corporate veil.  Accordingly, the court declined to do so.  Plaintiff also argued that Defendant-Owner should be personally liable predicated on a finding that he participated in tortious activity.  The court, citing to Wicks v. Milzoco Builders, Inc., 470 A.2d 86 (Pa. 1983), held that Corporate officers may not be held liable for mere nonfeasance.

Ultimately, the court awarded Plaintiff $112,500 against the Club, and nothing against the building owner.  Certainly, a frustrating result for the club, considering the myriad of reasons given for plaintiff’s fall, and also considering the modest injury.  Thanks to Hillary Ladov for her contribution to this post.  Please email Brian Gibbons with any questions.

 

 

Insurer Not Estopped From Withdrawing ROR After Defending For Several Years (PA)

The Third Circuit Court of Appeals recently dealt with a challenge by an insured to the withdrawal of a Reservation of Rights in Nationwide Ins. Co. v. Shearer.  The underlying claims arose from damage caused by the discharge of sewage and other waste by Nationwide’s policyholders, which had drained onto the Shearers’ property and subsequently contaminated their groundwater. The Policyholders were insured by Nationwide, who agreed to provide a defense but stated in Reservations of Rights letters that the claims may be subject to a pollution or biological deterioration exclusion and that it was not waiving its rights to later disclaim coverage.

Nationwide subsequently filed a declaratory judgment action and moved for summary judgment, arguing that the claims were excluded from coverage. The policyholders did not challenge the applicability of the exclusionary language and instead claimed that Nationwide should be equitably estopped from withdrawing because it had been defending them for several years and that an untimely withdrawal would be prejudicial.

The District Court rejected the policyholders’ arguments and awarded summary judgment in favor of Nationwide. The District Court noted that Nationwide’s reservation of rights letters made clear that its defense “shall not be deemed to be a waiver of or estoppel” of its rights under the policy. The District Court also rejected the policyholders’ claim that Nationwide was required to take steps to withdraw its defense within a certain period of time after issuing reservation of rights letters and that it was instead the burden of the insured to establish “actual prejudice.” Finding no allegations or evidence of prejudice, the Court held that there was no basis to estop Nationwide from asserting its coverage defenses. The policyholders appealed, and the Third Circuit affirmed. Echoing the lower court’s decision, the Third Circuit determined that Nationwide had preserved its coverage defenses in its reservation of rights letters. The appellate court also rejected the Policyholders’ claims that they would be prejudiced as a result of allowing the withdrawal of the defense at such a late stage in the case.

Thanks to Jorgelina Foglietta for her contribution to this post and please write to Mike Bono for more information.

Injured Landscaper Settles for Philadelphia Record $26.55 Million

In the largest single personal injury settlement from the Philadelphia Court of Common Pleas, plaintiff David Williams recently resolved his lawsuit for $26.55 million dollars.  Williams, a landscaper for TruGreen lawn care, was ejected from a TruGreen-owned truck after crashing in a rainstorm.  Williams suffered a fractured spinal cord, resulting in paralysis.

Plaintiff sued TruGreen, his employer who owned the truck involved in the accident; ServiceMaster, TruGreen’s parent company; and vehicle maintenance companies Dickinson Fleet Services and Brooks Auto Repair.  Williams claimed that TruGreen had a duty to ensure its work vehicles were in safe working condition, yet failed to do so.  Williams also argued that Dickinson Fleet Services was at fault as it failed to take the truck out of service when inspecting it three days prior to the accident.  Although a Dickinson field technician found that the right rear tire had insufficient tread and needed to be replaced, he neglected to “sticker” the truck to indicate that it should be taken out of service.  Williams also claimed that Brooks Auto repair failed to replace or rotate the back tires and just replaced the front tires.

TruGreen contended that Dickinson was at blame as it failed to provide adequate notice about the tire treads and further argued that Williams was contributorily negligent because he drove too fast for the road conditions.  Dickinson argued it did not have the authority to remove the truck from service and fulfilled the extent of its obligation.

Ultimately, the parties agreed that ServiceMaster and TruGreen would contribute $16.75 million to settlement, while Dickinson would contribute $9.5 million and Brooks Auto Repair $300,000.

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

Pennsylvania Court Rules On The Effectiveness of An Insurer’s Cancellation of a Policy

In Philadelphia Showcase Lounge, LLC, et al. v. Landmark American Ins. Co., et al., the Pennsylvania Superior Court was asked to analyze the effectiveness of a cancellation of an insurance policy.

Landmark American Ins. Co. insured Philadelphia Showcase Lounge, LLC, which operated a bar/restaurant.  The Policy was in effect from December 24, 2011 to December 24, 2012, at 12:01 a.m.  On November 28, 2012, Landmark sent a renewal quotation at the same price and on the same terms to Showcase.  Showcase made no effort to renew the Policy.  Rather, Showcase looked to secure quotes from other insurance companies in December 2012.

On December 24, 2012, at approximately 1:00 p.m. there was a fire at the Property.  Following the loss, on December 24, 2012 at 7:21 a.m., Showcase attempted to bind coverage with Landmark.  However, Showcase was informed that the Policy expired at 12:01 a.m. on December 24, 2012.  Showcase attempted to seek coverage under the Policy for the loss by commencing a lawsuit.

Eventually, all parties moved for summary judgment.  Showcase argued that since Landmark never sent a notice of midterm cancellation or nonrenewal pursuant to Pennsylvania statute 40 P.S. Section 3403, the Policy remained in effect.  Conversely, Landmark argued Showcase was not entitled to protection under Section 3403 and, thus, the Policy was properly cancelled.  The trial court agreed with Landmark.

On appeal, Showcase argued the lower court erred in failing to apply the protections of Section 3403.  Section 3403 requires insurers to provide written notice to insureds 60 days in advance of “midterm cancellations or nonrenewals”.  In analyzing the validity of Showcase’s appeal, the Superior Court ultimately concluded Section 3403 was not applicable.  The Court reasoned that the Policy was in effect from December 24, 2011 to December 24, 2012, 12:01 a.m.  At no time during the Policy period did Landmark terminate the Policy.  Also, Landmark did not provide notice to Showcase that it intended to non-renew the Policy.  Conversely, Landmark sought to renew the Policy by sending a renewal quotation.  However, Showcase opted not to accept the renewal offer.  Thus, the Court concluded, since Section 3403 does not prescribe a responsibility onto insurers to send out a nonrenewal notice if the insured fails to respond to or reject the insurer’s prior renewal offer, Section 3403 was not applicable under the circumstances.  Additionally, the Policy’s Cancellation Endorsement also did not require such action.  Therefore, since Landmark was not in violation of any applicable statute and had cancelled the Policy in accordance with the Policy’s terms, the Policy was not in effect at the time of the fire.

This case illustrates the importance of ensuring that policy cancellations not only comply with the language of the applicable policy but also any relevant statutes – as statutory noncompliance could result in coverage, notwithstanding an insurer’s intent to cancel.

Thanks to Colleen Hayes for her contribution to this post.