Coming up Short – Second Circuit Appellate Court Requires Significant Elevation Difference for Labor Law §240(1)
In Simmons v. City of New York, Plaintiff was injured while working as a plumber on a project for the City of New York. Plaintiff was using a pallet jack to move an air compressor weighing over 600 pounds. The compressor was lifted six inches off the ground and was only secured by two pieces of scrap wood wedged around the sides of the compressor. Plaintiff was pushing the compressor from behind when the pallet jack ran over concrete debris and stopped short causing the compressor to roll off onto plaintiff’s ankle. The lower court granted summary judgment dismissing the Labor Law §240, §241(6), and §200 claims. On appeal, the Second Department affirmed dismissal of the Labor Law §240 claim holding that it was not enough that the injury was caused by the application of gravity, there must be a significant elevation difference. A plaintiff must show that “at the time the object fell, it was being hoisted or secured, or that the falling object required securing for the purposes of the undertaking” and the object fell because the absence of a safety device.” Notwithstanding the Labor Law §240 dismissal, the Second Department reinstated the §241(6), and §200 claims against the general contractor. The Appellate Court’s decision with regards to Labor Law §240(1) could be impactful with how we analyze the “elevation related risks” required by the statute. When an object falls from a short height or tips over from the same level as the plaintiff, courts often look at the weight of the object to determine how much force it was able to generate during its fall. Here, the court did not analyze the weight or the force created by the object, but focused solely on the height it fell from and whether it was the type of activity which required a safety device as enumerate in Labor Law §240. Thanks for Jesse Sussmane for his contribution to this post.Read More
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NJ – Don’t Drink and Operate a Private Water Craft
The Appellate Division recently held that the Dram Shop Act does not apply to a tavern hosting a small party where the guests, who were employees of the tavern, brought their own alcohol to the party. The Dram Shop Act was designed to protect the rights of persons who suffer loss as a result of the negligent service of alcohol by a licensed alcoholic beverage server. In Votor-Jones v. Delly, plaintiff was one of seven employees and patrons of Kelly’s Tavern invited on a social trip organized by the tavern’s owner. The guests brought with them four or five coolers of alcohol on two boats. One guest, Michelle, started drinking before they got on the boat. Michelle continued to drink alcohol after the boats departed for the ocean. Other guests described Michelle as “loud”, “boisterous” and “excited,” but they conceded that they did not know whether she was intoxicated. After stopping the boats, Michelle was allowed to operate Kelly’s boat. Michelle sped away, but turned back toward the other boat at a speed of 40mph. Michelle then struck plaintiff who was swimming in the ocean. To prevail on a Dram Shop Act Claim, a party must present evidence that an establishment served alcohol to a visibly intoxicated person. The Appellate Division rejected as “too attenuated” plaintiff’s contention that the circumstances fell within the scope of the Dram Shop Act because neither Kelly’s Tavern nor Kelly individually were acting as a “licensed alcoholic beverage server” or “server” completed by the statute. Moreover, Michelle was not a “customer” of Kelly’s Tavern or Kelly. The Court summarized the outing as an informal, small-scale get together that required attendees to bring their own food and alcohol. Although there are many instances where an individual is “served” alcohol, not every instance will give rise to liability if that person injures another after imbibing alcohol. Small get-togethers hosted by a tavern where guests bring their own alcohol will not subject a tavern to liability, but the Court acknowledged that a more large scale party for employees where alcohol is provided to them would result in liability to the tavern. Thanks to Michael Noblett for his contribution to this post. Read More
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PA-No Extrinsic Evidence For You
In Lupa v. Loan City, LLC, the Third Circuit Court of Appeals confirmed the standard upon which an insurer’s defense obligations are triggered under Pennsylvania law. In Lupa, the insured sought coverage from its insurer for various claims asserted against it. In response to the insured’s request for defense, the insurer denied the insured’s claim, contending the complaint against the insured did not trigger coverage under the policy. On appeal, the insured contended that the four corners rule should not be applied to determine coverage under a policy. The Court of Appeals disagreed. The court held that, under Pennsylvania law, an insurer’s duty to defend could only be triggered by allegations within the four corners of the complaint. The court continued that there were no exceptions to this rule, which would require an insurer to rely on facts introduced outside of the complaint, i.e. extrinsic evidence. Accordingly, this case confirms that courts applying Pennsylvania law will apply the four corners test to determine whether an insurer’s obligation to defend has been triggered. Thanks to Colleen Hayes for her contribution to this post. Read More
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NY- Third Circuit Untangles Coverage Web of Direct Versus Vicarious Liability
Upstream litigants and their insurers often to push liability to the downstream contractors or insureds, but the policy terms of an upstream insurer, even an excess insurer, can frustrate expectations. In United Financial Casualty Company v Princeton Excess and Surplus Lines Insurance., Princeton appealed the ruling by the Eastern District of New York that held it had a primary duty to provide coverage in a bodily injury claim for the direct liability of their named insured, Prestige Delivery Services, and Staples, Inc. Prestige was hired to deliver goods by Staples. Joseph Nice, who worked for Prestige, had to stop the delivery van for repairs. In the process of repairs, the repairman, Plaintiff Ken Dunbar, was trapped and dragged under the vehicle, sustaining severe personal injuries. Dunbar sued Nice for negligence, and asserted claims of vicarious liability (respondeat superior) and negligent hiring, supervision, and retention against Prestige and Staples. United, which insured Nice, assumed the defense of all parties, settled all claims, and then sued Princeton for (1) contribution on the vicariously liability claims, and (2) a declaratory judgment establishing Princeton had primary coverage duties with respect to the direct liability claims against Prestige and Staples. The Eastern District of Pennsylvania ruled for United on both accounts, and Princeton appealed only from the latter. The Third Circuit, however, rejected Princeton’s appeal on two grounds. First, the Court held the United policy only insured Nice for claims arising directly from his conduct, and the direct liability at issue pertained to negligent hiring and supervision. As the Court observed, Nice cannot supervise himself. Second, although an excess form policy, the Princeton policy’s terms provided for primary level coverage for liability assumed in an “insured contract.” Because Prestige agreed to hold harmless and indemnify Staples for any negligence attributable to Prestige, the Third Circuit affirmed the district court’s ruling. Such cases are cautionary tales regarding resting on standard assumptions. Often in such delivery or construction claims, liability flows down to the tortfeasor, who is contractually bound to indemnify those above and whose insurance is obligated to answer on a primary basis. Excess policies rarely are obligated to assume primary level responsibilities, but most such policies have conditions and terms that would trigger primary coverage. The details of the policy will trump standard business expectations every time, and the minutiae of the policy should be scrutinized at the outset of every claim as a result. Thanks to Christopher Soverow for his contribution to this post. Read More
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NY-First Department Holds $286 Million SEC Disgorgement Is Not Covered
In J.P. Morgan Sec., Inc. v Vigilant Ins. Co., the First Department held that the insurers of Bear Stearns were not required to pay for the $140 million disgorgement fine, and additional $146 million in statutory interest, resulting from the bank’s settlement with the SEC for improper profits acquired by third-party hedge fund customers. The ruling represents the latest chapter in the costly, decade-old litigation between J.P. Morgan (into which Bear Stearns in 2008) and Bear Stearns’ insurers. As background, in 2006, Bear Stearns paid out almost $215 million to the SEC as part of a settlement after the SEC brought proceedings for various trading violations. Of the $215 million, $160 million was labeled a “disgorgement” and $90 million was labeled a “penalty.” Bear Stearns’s insurance policies, which covered a “Loss,” provided that “Loss shall not include … fines or penalties imposed by law.” When Bear Stearns sought reimbursement for $140 million of the $160 disgorgement from its insurers, the insurers disclaimed coverage on the basis that the $160 million payment was labeled “disgorgement”, and thus it did not represent a covered loss under the insurance policies. In 2013, the New York Court of Appeals held that Bear Stearns was entitled to coverage, as the public policy rule against insuring “ill-gotten gains” “should apply only where the insured requests coverage for the disgorgement of its own illicit gains,” and that “the documentary evidence does not decisively repudiate Bear Stearns’ allegation that the SEC disgorgement payment amount was calculated in large measure on the profits of others. 21 N.Y.3d 324, 336. Thus, because the disgorgement represented the gains of others, the public policy rationale was inapplicable. On remand, the trial court granted summary judgment for J.P. Morgan, which included over $146 million of statutory interest, bringing the total amount to approximately $286 million. In the present case, the First Department reversed the trial court in light of the United States Supreme Court’s 2017 decision in Kokesh v. Securities and Exchange Commission, 137 S.Ct. 1635 (2017). Kokesh involved the application of a federal statute of limitations to any action for the “enforcement of any civil fine, penalty, or forfeiture.” The Supreme Court held that SEC disgorgement was explicitly a penalty, and therefore the statute of limitations did not apply. The First Department held that the Supreme Court’s “rationale at the nature of disgorgement … applies with equal force to the issue of whether the disgorgement … even if representing third-party gains, was a ‘Loss’ within the meaning of the policy.” Because Kokesh established that disgorgement “punishes a public wrong, and its purpose is deterrence,” it was a penalty and not covered under the policy. Given the amount at stake and significance of the claim, it is likely that the Court of Appeals will have a second crack this case. On appeal, however, the argument will not focus on public policy rationales, as it had previously. Rather, J.P. Morgan will attempt to argue that the Supreme Court’s holding in Kokesh is limited to its application to statutes of limitation, and should not be expanded to encompass language in an insurance policy. Thanks to Douglas Giombarrese for his contribution to this post.Read More
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PA- Policyholder Not Entitled to Uninsured or Underinsured Motorist Coverage When Injured in Work Vehicle.
In Erie Insurance Grp. v. Catania, in August 2009, Jack Catania was driving a delivery truck for work when he swerved to avoid another vehicle. In doing so, he lost control of his truck and suffered injuries. The other vehicle fled the scene. Catania had a personal policy with Erie at the time. Because the other driver fled, the other vehicle was considered an uninsured motor vehicle, and Catania made a claim for uninsured motorist coverage with Erie. Erie filed a declaratory judgment action to determine it was not obligated to provide uninsured or underinsured motorist coverage for an employee who was injured while driving a work vehicle and subsequently made a claim under his personal insurance policy. The court held Erie did not have to provide coverage because the work vehicle fit the “regularly used non-owned vehicle” exclusion contained in that policy. While Catania regularly used the truck, he did not own it. As a result, it was excluded under Catania’s personal policy with Erie. Thanks to Robert Turchick for his contribution to this post. Read More
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Dismantling The Designated Ongoing Operations Exclusion
In Tuscarora Wayne Ins. Co. v. Hebron, Inc., the Pennsylvania Superior Court analyzed when a policy’s Designated Ongoing Operations Exclusion may be triggered. In brief, a fire occurred at the insured’s property, when a driver was pumping gas into a vehicle at the insured’s location. The fire caused damage to the insured’s property, and the surrounding neighbors’ property as well. The insured’s policy excluded coverage under its Designated Ongoing Operations Endorsement for ongoing operations including “vehicle dismantling”. On the basis of this exclusion, the insurer commenced a declaratory judgment action seeking a declaration that the policy did not provide coverage for the claimed damages. On summary judgment, the trial court ruled in favor of the insurer. On appeal, the insured argued the trial court erred in finding that refueling a vehicle fell within the policy’s language of “vehicle dismantling”. The Superior Court agreed with the insured. As the phrase “vehicle dismantling” was not defined by the policy, the court looked to the ordinary meaning of the phrase, which generally involved stripping vehicles of their parts. Thus, since the only connection the claimed damages had with “vehicle dismantling” was the fact that the fuel, which started the fire, was being pumped into vehicles that had been dismantled, the Superior Court believed this connection was insufficient to trigger the policy endorsement. Accordingly, this case reveals, Pennsylvania courts will look to the actual operations being performed to determine whether there is a close enough link, as to trigger a policy’s Designated Ongoing Operations Exclusion. Thanks to Colleen Hayes for her contribution to this post.Read More
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Second Circuit Vacates District Court and Remands Sandy Case
It has been just over six years since Hurricane Sandy made its devastating landfall in New York and New Jersey, causing nearly $70 billion in damages, but Sandy-related insurance litigation is still steadily making its way through the courts. In Madelaine Chocolate Novelties Inc v Great Northern Insurance Company., the Second Circuit Court of Appeals recently held that a potential internal ambiguity in the policy mandated that the District Court’s judgment in favor of the insurer be vacated and remanded for further proceedings. The relevant facts are straightforward: Madelaine Chocolate suffered significant damage caused by the Sandy “storm surge,” the water pushed onto land by the force of the storm winds. Madelaine timely submitted its claim to Great Northern for $40 million in property damage, and $13.5 million in extra operational expenses. Great Northern disclaimed most of the claim on the basis that storm surge damage was excluded from coverage. The Policy contained a ‘Windstorm Endorsement’ that provided coverage for “wind, wind-driven rain, erosion of soil….regardless of any other cause or event that directly or indirectly: contributes concurrently to; or contributed in any sequence to, the loss or damage…,” an anti-concurrent causation clause (“ACC”). Great Northern’s disclaimer, upheld by the District Court, was premised on the Policy’s Flood Exclusion, which states that there is no coverage for “waves, tidal water or tidal waves, rising, overflowing…of any.. body of water or watercourse…, regardless of any other cause or event that directly or indirectly contributes concurrently to, or contributes in any sequence to, the loss or damage.” While the District Court agreed that the Flood Exclusion unambiguously excluded storm surge damage, the Appellate Court disagreed, parsing the lower court’s analysis. First, the Court ruled that the District Court relied on non-precedential opinions to decide that a storm surge can be fairly categorized as a “flood,” noting that the cases relied upon did not include endorsements that added an ACC to the definition of covered peril. Second, the Court found that the District Court’s reliance on several 5th Circuit Katrina cases was also misplaced, as none of the policies at issue in those cases likewise added an ACC to the definition of covered peril insured. The key question on remand is whether or not the ACC clause in the Windstorm Endorsement conflicts with, or creates an ambiguity, with respect to the Flood Exclusion, reminding the District Court to “be mindful of well-established precedents requiring exclusions to be set out in clear and unmistakable language.” ACC clauses have been held ambiguous in certain Katrian cases. As Madelaine Chocolate continues its path through the New York court system, further clarity to these complex coverage questions will continue to inform the way coverage is analyzed, and perhaps how coverage is written, as significant storms become more common. Thanks to Vivian Turetsky for her contribution to this post. Read More
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NJ High Court Moves toward Daubert
The Supreme Court of New Jersey has finally adopted the Daubert factors for assessing the reliability of expert testimony and reaffirmed the trial court’s duty to engage in “rigorous gatekeeping” when adjudicating whether an expert opinion is admissible. In re: Accutane Litigation involved allegations that the prescription cystic acne medication caused Crohn’s disease. Despite numerous epidemiological studies finding no association b, plaintiff’s expert gastroenterologist relied on suspect data, animal studies and his own unique theory of biological plausibility to opine that Accutane can, in fact, cause Crohn’s disease. The trial court concluded that there wasno epidemiological evidence establishing a causal link between Accutane and Crohn’s disease, and that plaintiff’s expert report was conclusion driven. The Appellate Division reversed, concluding that plaintiff’s expert relied on methodologies and data of the type reasonably relied upon by comparable experts which wasthe standard in New Jersey for the admission of expert opinions. It also held that it owes less deference to the trial court when making a determination on whether to admit or exclude an expert opinion. New Jersey’s Supreme Court explicitly rejected the Appellate Division’s heightened standard of review and reaffirmed “that the abuse of discretion standard applies in the appellate review of a trial court’s determination to admit or deny scientific expert testimony on the basis of unreliability in civil matters.” The Supreme Court made clear that trial courts must “assess both the methodology used by the expert to arrive at an opinion and the underlying data used in the formation of the opinion”. Trial courts are now instructed to consider Daubert’s non-exhaustive list of factors when assessing the reliability of expert testimony:- Whether the scientific theory can be, or at any time has been, tested;
- Whether the scientific theory has been subjected to peer review and publication, noting that publication is one form or peer review but is not a “sine qua non”;
- Whether there is any known or potential rate of error and whether there exists any standards for maintaining or controlling the technique’s operation; and
- Whether there does exist a general acceptance in the scientific community about the scientific theory.
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Does Discovery Rule Toll Statute of Limitations in Pennsylvania Medical Malpractice Suit? It’s up to the Jury.
In Nicolaou v. Martin, plaintiff was bitten by a tick in 2001 and, as a result, sought medical treatment from three different physicians between 2001 and 2008. All three physicians ordered tests for Lyme disease, but all of the Lyme disease tests came back negative. After an MRI, Nicolaou’s physicians diagnosed her with multiple sclerosis (“MS”) and prescribed treatment. As a part of the treatment, Nicolaou saw a nurse practitioner, who, between July 20, 2009 and February 1, 2010, told Nicolaou that she thought she had Lyme disease. The nurse practitioner had Nicolaou undergo another Lyme disease test, this time from a company called IGeneX, which came back positive on February 12, 2010. On February 10, 2012, Nicolaou sued the three physicians she had consulted with between 2001 and 2008 for medical malpractice. The physicians filed motions for summary judgment, asserting that the two-year statute of limitations already expired. Nicolaou replied that the discovery rule tolled the statute and that she had no reason to know of her Lyme disease until she received the IGenex results on February 12, 2010. The trial court granted the physicians’ motion. The Pennsylvania Superior Court affirmed the trial court in a 5-3 decision. The majority held that reasonable minds would not differ that Nicolaou should have known of her disease and its cause as early as June of 2009, three years before she filed suit. The three-judge dissent stated that there was a question of fact as to whether Nicolaou acted diligently to determine the cause of her injuries and that it should be submitted to a jury. The Pennsylvania Supreme Court reversed and adopted the dissent’s reasoning, holding that it was an error of law for the Superior Court to hold as a matter of law that the statute of limitations had not been tolled by the discovery rule in this particular case. Whether or not Nicolaou should have known or had reason to know that she had Lyme disease and what caused it in 2009 was an issue of fact. Therefore, it was the province of a jury to determine whether or not the discovery rule applied. Thanks to Robert Turchick for his contribution to this post. Read More
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