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United States Supreme Court hands down landmark employment discrimination decision, holding that LGBTQ+ persons are protected by the Civil Rights Act of 964
With the international COVID-19 pandemic changing
daily life as we know it and the resurgence of racial justice protests across
the county, it might be easy to overlook some of the sweeping judicial changes
impacting the civil rights of many citizens. Most notably, in June 2020, the United States Supreme Court made the
bold move to proclaim that the Civil Rights Act of 1964 extended to the LGBTQ+[1]
community, holding that it is unlawful to discriminate against individuals
“because of” their sex, which now includes identifying as a homosexual or
transgender person. Given that the U.S.
Supreme Court, only five (5) years prior, extended the fundamental right to
marry to same sex couples in Obergefell
v. Hodges, 576 U.S. 644, this recent holding is further proof of the
current U. S. Supreme Court’s trajectory towards eliminating discrimination in
other sectors of life as well. This blurb is intended to provide a summary of
the most pertinent findings and conclusions by the United States Supreme Court
in Bostock v. Clayton County, Georgia.
Bostock
v. Clayton County, Georgia, 590 U.S. ___, 140 S.Ct.
1731, 2020 WL 3146686 (June 15, 2020)
Congress passed the Civil Rights Act of 1964 (“the
Act”), which provided that an employer could not discriminate against a person,
based on race, color, religion, sex, or national origin. For the better part of the sixty (60) years
that followed, application of “sex discrimination” was primarily focused upon
biological gender. In Bostock, though, the U.S. Supreme Court,
consolidating three federal employment discrimination cases arising from
different states, held that “sex discrimination,” which is already precluded by
the Act, also extended to a personal sexual orientation and gender identity.
It is important to take note of the Bostock Court’s extension of “sex discrimination”
claims to claims based on sexual orientation and gender identity because this
extends the existing decades of case law on the subject to the LGBTQ+
community.In its holding, the Bostock Court continued to define “sex”
as the “biological distinctions between male and female,” but the Court extended
“sex discrimination” to sexual orientation and gender identity on the grounds
that discriminatory practices based on sexual orientation and gender identity
inherently discriminate based upon the employer’s perception of the employee’s
masculinity and/or femininity, which falls underneath the “sex” umbrella.
The Act prohibits discrimination, in relevant part,
“because of” sex. In analyzing what
“because of” means, the Bostock Court
held that it is discrimination if the employer bases its oppressive actions on
the employee’s “sex,” regardless of whether there might be other motivating
factors. Bostock, 140 S.Ct. at 1741.As the Court put it:
An employer violates Title VII when it intentionally
fires an individual employee based in part on sex. It doesn't matter if other
factors besides the plaintiff 's sex contributed to the decision. And it
doesn't matter if the employer treated women as a group the same when compared
to men as a group. If the employer intentionally relies in part on an
individual employee's sex when deciding to discharge the employee—put
differently, if changing the employee's sex would have yielded a different
choice by the employer—a statutory violation has occurred.
Id. This is particularly significant in states,
like Oklahoma, that are traditionally “at-will” employment states, as this
previously provided that an employer simply needed a non-discriminatory reason
to take action, including termination, against an employee. Now, under the guidelines of the Bostock holding, if sexual orientation
or gender identity was a motivating factor in the employer’s decision, the
employee can take action under the Act.
The Bostock opinion,
while specific to employment discrimination under the Act, opens the door to a
wide array of scenarios extending nondiscriminatory practices to the LGBTQ+
community, as a whole.Comprehensive
policies in the housing and public accommodation sectors need to be addressed,
as well as blanket rules relative to child custody and adoption practices. The next several years are likely to be of
unique focus, as these cases continue to emerge across multiple industries.
[1] For
reference, LGBTQ+ refers to the “lesbian, gay, bisexual, transgender, queer and
other sexual and gender identities” community.
[Posted September 2020]
What's Been Going on during the COVID-19 Pandemic? A Summary of Significant Insurance Law Rulings in 2020
The year of 2020 and the eruption of the COVID-19 pandemic has turned
everyone’s world upside down. Courthouses, restaurants and businesses closed. The
unemployment rate skyrocketed. Politics dominated the headlines. All the while,
it became easy to lose track of important, legal milestones that continued to occur.
Despite the chaos, the high Courts in Oklahoma, Texas, and Indiana have handed
down several rulings significant to the insurance industry. Here is what you need
to know:
Billy
Hamilton v. Northfield Insurance Co. (Oklahoma)
In Hamilton, the insured
declined a $45,000.00 settlement offer on the eve of trial and then received a
verdict for only $10,652. The issue on appeal was who to name as the prevailing
party for purposes of awarding costs and attorney fees under Okla. Stat. tit.
36, § 3629(B). Per the statute, an insurer has 60-days from receipt of proof
loss to either deny the claim or issue a settlement offer. The statute then
states that the insurer is the prevailing party if a judgment from an ensuing
lawsuit does not exceed a timely settlement offer made under § 3629(B).
The questions at issue were: 1) in
determining the prevailing party under § 3629(B), should a court consider
settlement offers made by an insurer outside the statutory 60-day window?; and
2) if an offer included costs and attorney’s fees, should a Court add costs and
attorney fees incurred up until the settlement offer for a proper comparison?
The Oklahoma Supreme Court, faced with issues of first impression, answered
both questions in the negative. First, the Court found that only timely
settlement offers of the underlying insurance claim, and not offers to resolve
an ensuing lawsuit, can be considered. Secondly, costs and attorney fees are
only added to the verdict when the offer specifically contemplated those items.
The Oklahoma Supreme Court held that because the insurer submitted a written
settlement offer on the eve of trial and after the 60-day window for making
such settlement offers under the statute, the pretrial settlement offer was irrelevant
and the insured was the prevailing party under the statute. Justice Nora Gurich
wrote for the majority and stated that should the court allow insurers to skirt
the sixty-day requirement entirely, offer payment at a later date, and then use
that untimely payment to deny attorney fees owed to the policyholder, the
purpose of a statute, which was to ensure prompt payment of claims, would be
thoroughly thwarted.
This is a big win for insureds in the State of Oklahoma. The Oklahoma Supreme Court makes it clear
that 36 O.S. § 3629(B) is meant to
encourage and facilitate quick claim payments when owed under a policy.
Arguably, an offer to pay benefits owed under an insurance contract is now a
contractual and legal necessity, rather than just a generous reward.
The full opinion is available at:
https://www.oscn.net/applications/oscn/DeliverDocument.asp?CiteID=486527
State
Farm Lloyds v. Richards; Loya Insurance v. Avalos (Texas)
During the pandemic, the Texas Supreme Court remained busy.It entered a ruling in late March and then
another ruling in early May, both of which clarified the scope of the state’s
default rule governing how a court should determine when an insurer has a duty
to defend its policyholder.The Texas Supreme
Court analyzed the “eight corners rule” to determine whether there are any
valid exceptions. The “eight corners rule” applies to situations where an
insured is sued by a third-party and the insurer disputes that it has a duty to
defend that insurer. The “eight corners rule” requires courts to consider only
the insurance policy and the allegations in the pleadings without regard to the
truth or falsity of those allegations.The “eight corners rule” generally prohibits courts from taking into
account any extrinsic evidence when determining whether an insurer has a duty
to defend.These recent rulings provide
clarity on the application of the “eight corners rule” and essentially provides
insurers with direction on how to determine whether there is a duty to defend
their insureds.
On March 20, 2020, in State Farm Lloyds v. Richards, the Texas
Supreme Court shot down an insurer’s argument that for the eight-corners rule
to apply, a policy needs to include a clause requiring it to defend the
policyholder "no matter if the allegations of the suit are groundless,
false or fraudulent."The Texas
Supreme Court looked at the history of the “eight corners rule” and concluded
that because Texas
appellate courts have routinely applied the eight-corners rule, without regard
to whether the policy contained a groundless-claims clause, the insurer had a
duty to defend its policyholder.This
was a clear statement by the Texas Supreme Court in favor of the “eight corner
rule” and in favor of insurers defending their policyholders
On May 1, 2020, in Loya Insurance v. Avalos, the Texas Supreme
Court went the other direction and found in favor of the insurer. In Avalos,
the insured’s husband, who was explicitly excluded from the policy, was in an
accident while driving the insured’s vehicle. The insured colluded with her husband
and the third-party driver to lie and tell the insurance company the insured
was driving. The lie was eventually disclosed and the wife admitted under oath that
she lied. The Texas Supreme Court concluded that the wife’s statement under
oath was not only admissible, but it absolved the insurer of any defense
obligation because there was conclusive evidence of fraud and collusion between
the insured and the third-party driver. The Texas Supreme Court recognized an
exception to the “eight corner rule”. This is important for insurers, who now
know there are circumstances where extrinsic evidence can absolve their duty to
defend when the evidence shows evidence of fraud and collusion.
While it may seem like the decision in Avalos was a win for
insurers in the state of Texas, when considering the Avalos opinion in
conjunction with the Richards opinion, it is clear that the State of Texas
is still in favor of applying the eight corners rule to determine whether an
insurer has a duty to defend.While the
Texas Supreme Court did recognize an exception for circumstances where the
insurer is able to discover clear and convincing evidence of fraud, that
exception is a very narrow exception and the insurer should continue to err on
the side of defending their policyholders until they have obtained a court's
declaration that they don't have to do so.
The full opinions are available at:
http://www.search.txcourts.gov/SearchMedia.aspx?MediaVersionID=a97b735a-6298-4890-9695-b04aec77b7b6&coa=cossup&DT=OPINION&MediaID=5171f744-10eb-4726-9536-03ebc65e70f3
http://www.search.txcourts.gov/SearchMedia.aspx?MediaVersionID=79030b89-91ed-461b-a65f-ee1129552bb7&coa=cossup&DT=OPINION&MediaID=993b3fbd-4687-4429-a219-892463b73d00
G&G
Oil Co. of Indiana v. Continental Western Insurance Co. (Indiana)
This case involves a
matter of national first impression: can a policyholder recover bitcoin ransom
payments under a commercial crime policy? On March 31, 2020, a panel of the Indiana
Court of Appeals found no, it cannot, and concluded that a crime insurance
carrier was not required to cover bitcoin ransom payments a policyholder made
to a hacker to restore access to its computer systems. Because it was a true
case of first impression, the Indiana Court of Appeals’ novel decision may have
set the stage for insurance claims based on computer fraud under commercial
crime insurance policies.
In November of 2017, G&G Oil Co. of Indiana discovered that it had
been the victim of a ransomware attack that left its computer servers and
drives encrypted and inaccessible. G&G agreed to pay the perpetrator four
bitcoins totaling nearly $35,000 in exchange for the decryption passwords. The
petroleum company sought coverage for the payments under the "computer
fraud" prong of its commercial crime policy with Continental Western
Insurance Co., but the insurer refused. Both the trial court and the appellate panel
agreed that while the ransomware attack was a crime, it did not fulfill the
requirements for computer fraud coverage under the policy. The focus of the
appellate panel was the intent of the hijacker, and because the appellate panel
did not believe that the hijacker perverted the truth or engaged in deception
when it induced the petroleum company to purchase the bitcoins, the claim was
not covered. While the hijacker's actions were illegal, the court focused on
the fact that there was no deception involved in the hijacker's demands for
ransom in exchange for restoring G&G's access to its computers.
Considering the recent influx of ransomware attacks nationwide, this
could feel like an unfortunate outcome for policyholders. Policyholders and
their lawyers will need to review all applicable policies and consider the
different categories of damages that may exist when a cyber-crime is committed.
The full opinion is available at:
https://law.justia.com/cases/indiana/court-of-appeals/2020/19a-pl-1498.html
[Posted July 2020]
Oklahoma Appellate Court Rules that Biological Mother's Mental Illness, Which Resulted in Incapacity, Could Not Be Held Against Her in Adoption of Daughter
On July 31, 2018, the Oklahoma Court of Civil Appeals
released an opinion, overruling a trial court’s decision that found a
biological mother’s consent was not necessary to her child’s adoption, in In the Matter of the Adoption of: S.L.D.,
2019 OK CIV APP 19.In so holding, the
Court found that it was an error to calculate a six-month period of
incompetency into the relevant timeframe to mother’s detriment, because “the
six-month period when Mother was adjudicated incompetent and was involuntarily
committed interrupted the relevant time period.”Id.
at ¶ 19. Essentially, the Court opinion found that a biological parent must act
“willfully” before her consent will be found unnecessary to an adoption.
In relevant part, the Oklahoma Adoption Code (“Code”)
provides that “[c]onsent to adoption is not required from a parent who fails to
establish and/or maintain a substantial and positive relationship with a minor
for a period of twelve (12) consecutive months out of the last fourteen (14)
months immediately preceding the filing of a petition for adoption of the
child.”Okla.
Stat. tit. 10, § 7505-4.2(H)(1).“For purposes of this
subsection, 'fails to establish and/or maintain a substantial and positive
relationship' means the parent: a. has not maintained frequent and regular
contact with the minor through frequent and regular visitation or frequent and
regular communication to or with the minor, or b. has not exercised parental
rights and responsibilities.”Okla. Stat. tit. 10, § 7505-4.2(H)(3).
Here, it was undisputed birth mother had not had any
contact with her daughter during the 14-month relevant time period. However, it was also undisputed that mother
suffered from a serious mental health condition and that this condition not only
caused her to be found legally incompetent by a federal court but also to be
hospitalized for six months of this 14-month timeframe.
In coming to its decision, the Court recognized “the
general public policy of protecting persons who lack the capability of
comprehending the significance of their actions or failure to act.” S.L.D.,
2019 OK CIV APP 19 at ¶ 17.The
petitioners in this case argued that the 2001 modification of the Code, which
removed the word “willfully,” removed the requirement that mother’s lack of
relationship be willful.The Court
disagreed.“Simply removing the term
'willful' does not equate to removing the presumption that a parent who fails
to establish or maintain a substantial relationship is competent to choose to
act otherwise, particularly when the failure to act will compromise the
parent's recognized constitutional rights in the parent-child bond.” Id.
While this holding is factually limited in scope, S.L.D. is a reminder that parental
rights should not be terminated unless the parent has failed to grasp the
opportunity to have a relationship with their child(ren).This holding marks an important spotlight
that the courts recognize that public policy protects, instead of punishes,
those persons who lack competency or capacity to act, so long as the best
interests of the minor child(ren) are being met.
Christopher Brecht served as the mother’s guardian ad
litem in the case. Brecht joined the firm McDaniel
Acord & Lytle, PLLC, subsequent to the publication of this case.
[Posted April 9, 2019]
Third Time's a Charm? For the Third Time, the Oklahoma Supreme Court Strikes Oklahoma's Professional Negligence Affidavit of Merit Requirement as Unconstitutional
On October 24, 2017, the
Oklahoma Supreme Court, for the third time, struck down Oklahoma’s Affidavit of
Merit requirement in John v. Saint
Francis Hospital, 2017 OK 81. The
Affidavit of Merit requirement was codified in Okla. Stat. tit. 12 § 19.1.Section 19.1 followed two previous statutory
enactments requiring a similar affidavit of merit. Both statutory enactments
were struck down as unconstitutional, first in Zeier v. Zimmer, 2006 OK 98, 152 P.3d 861 and then seven years later in Wall
v. Marouk, 2013 OK 36, 302 P.3d 775. The Oklahoma Legislature tried, yet
again, to codify an Affidavit of Merit requirement by enacting Section 19.1 in
2013, but the constitutionality of that enactment was also challenged, leading
to the ruling in John v. Saint Francis
Hospital, 2017 OK 81.
Under Section 19.1, if a
plaintiff in any civil action for negligence was “required to present the
testimony of an expert witness to establish breach of the relevant standard of
care and that such breach of duty resulted in harm to the plaintiff,” that
plaintiff must attach to the petition an affidavit attesting that they had: 1) consulted
and reviewed the facts of their claim with a qualified expert; 2) obtained a
written opinion from that qualified expert that clearly identified the
plaintiff and concluded that, based upon the qualified expert’s review of the
available material, a reasonable interpretation of the facts supported a
finding that the acts or omissions of the defendant against whom the action was
brought constituted negligence; and 3) concluded that the claim was meritorious
and based on good cause.
In John v. Saint Francis Hospital, a plaintiff filed a medical
negligence action against a surgeon, and the surgeon moved to dismiss due to
the plaintiff’s failure to attach an affidavit of merit under 12 O.S. §
19.1. The Honorable Jefferson Sellers overruled
the defendant’s motion to dismiss finding the affidavit of merit requirement
unconstitutionally imposed substantial and impermissible impediments on the
plaintiff’s right to access the courts. The district court certified its ruling for appellate court review, and
the Oklahoma Supreme Court assumed jurisdiction to determine the
constitutionality and application of Okla. Stat. tit. 12 § 19.1. After analyzing
the law established by Wall v. Marouk,
2013 OK 36, 302 P.3d 775 and by its predecessor Zeier v. Zimmer, 2006 OK 98, 152 P.3d 861, and after re-examining the
Oklahoma Constitution, the Oklahoma Supreme Court found Section 19.1 to be an
“impermissible barrier to court access and an unconstitutional special law.” John v. Saint Francis, 2017 OK 81, ¶ 1.
The Oklahoma Supreme Court made
it very clear that access to the court system is a fundamental right, and it is
unconstitutional to condition court access on a plaintiff’s ability or
inability to pay “some liability or conditioned coercive collection
devises.” Id. at ¶ 18. This is so
whether the context is of a medical liability, professional liability or expert
liability. Id. The Oklahoma Supreme
Court was also not fooled by the language of the third “incarnation” of Section
19.1, finding the language was functionally and texturally identical to its
predecessors.
After applying the
three-prong test for determining whether a statute is an impermissible special
law established in Reynolds v. Porter,
1988 OK 88, ¶ 13, 760 P.2d 816, 822, the Oklahoma Supreme Court concluded that
the Affidavit of Merit requirement under Section 19.1 was an unconstitutional
special law. The Court recognized there had
been a perceived ambiguity due to the statute’s failure to define the relevant class
of expert actions, which led to unintended consequences and an overly broad
application of the statute by district courts throughout Oklahoma. Id. at
¶¶ 24-28. Similar to its predecessors, Section
19.1 contained no definition for qualified expert and, as such, the Oklahoma
Supreme Court held that “an expert negligence action, professional negligence
action and medical liability action are essentially the same as all three are
only statutorily defined in the medical malpractice context.” Id.
at ¶ 26. According to the Oklahoma
Supreme Court, the language of Section 19.1 had the same operative effect as
its two predecessors, and it was, therefore, “an unconstitutional special law
regulating the practice or jurisdiction of, or changing the rules of evidence
in judicial proceedings or inquiry before the courts.” Id. at
¶ 31. Ultimately, the Oklahoma Supreme
Court believed that because the Oklahoma Legislature used a phrase synonymous
to that used in the previous two enactments, the constitutional infirmities
inherent within the prior enactments were inherent in Section 19.1 and, similar
to that of the previous two enactments, Section 19.1 did not pass
constitutional muster. Id. at ¶ 32.
This ruling begs the
question of whether the Oklahoma Legislature can craft an affidavit of merit
requirement that will pass constitutional muster and not impede a plaintiff’s
right to have access to the court system. The Oklahoma Legislature has tried,
and failed, three times. Is the third time a charm, or will we see a fourth Legislative attempt at requiring an Affidavit of Merit?
Only time will tell.
The full opinion is
available at:
http://www.oscn.net/applications/oscn/DeliverDocument.asp?CiteID=481630
[Posted October 25, 2017]
What's Been Going on in 2017? A Summary of this Year's Significant Insurance Law Rulings
The year of 2017 has already resulted in multiple
insurance decisions that have attracted widespread attention within the
insurance industry. Ranging from decisions related to when a policyholder can
sue for bad faith, to interpreting a policy to determine when an insurer must defend
an insured, the year of 2017 has been rife with insurance law rulings. Here is
what you need to know:
Isidoro
Perez-Crisantos v. State Farm Fire and Casualty
On February 2, 2017, the Supreme Court of Washington
ruled for insurers and limited an insured’s ability to directly sue an insurer
for bad faith under the state Insurance Fair Conduct Act. The Washington Insurance
Fair Conduct Act (“IFCA”) gives insureds a new cause of action against insurers
who unreasonably deny coverage or benefits, and it broadly addresses unfair
practices in insurance. In Perez-Crisantos
v. State Farm, the Supreme Court of Washington was asked to interpret the
IFCA, and determine its applicability to regulatory violations.”
The insurer in Perez-Crisantos
v. State Farm denied an underinsured motorist insurance claim relying on
its own adjuster’s lay opinion that the plaintiff was seeking benefits for
excessive chiropractic treatment and an unrelated shoulder surgery. The
plaintiff sued the insurer, alleging numerous claims including a claim that
State Farm violated the IFCA, acted in bad faith and was negligent. After
resolving his UIM claim in arbitration, and getting an award in his favor, the
plaintiff amended his complaint to assert that State Farm violated the IFCA
regulations related to unfair settlement practices when it forced him to
litigate to recover payments due to him. Both parties moved for summary
judgment, and the Supreme Court of Washington was eventually tasked with
determining whether first-party insureds can sue their insurance companies
under IFCA for regulatory violations. In disagreeing with a federal court
decision handed down in the Eastern District of Washington, the Supreme Court
of Washington held that the legislative history of the IFCA “suggests that IFCA
does not create a cause of action for regulatory violations.” It concluded that
the IFCA creates no independent cause of action for regulatory violations in
the absence of an unreasonable denial of coverage or benefits.
This appears to be a win for insurers in the state of Washington.
However, it leaves open for interpretation the meaning of “unreasonable
denial,” and it has the potential to cause more litigation over what
constitutes unreasonable conduct sufficient to fall within the ambit of the
IFCA, and how an insured can prove such conduct.
The full opinion is available at: http://caselaw.findlaw.com/wa-supreme-court/1776437.html
R.T.
Vanderbilt Co. v. Hartford
On March 7, 2017, the Connecticut Appellate Court
issued a 161-page opinion in favor of policyholders seeking coverage for
asbestos-related long-tail liability claims under commercial general liability
policies. While providing policyholders support for overcoming certain coverage
defenses common to these types of claims, the opinion also summarizes existing
cases, judicial rational and coverage positions taken by both policyholders and
insurers in connection with issues common to long-tail liability claims.
Long-tail liability claims typically have long
settlement periods. In 2008, R.T. Vanderbilt brought an insurance coverage
action against his primary insurance carriers for the policy periods from 1948
through 2008, arguing that the insurance carriers breached their contractual
obligation to provide coverage for defense and indemnity costs incurred in
connection with underlying lawsuits during this time period. While the
Connecticut Appellate Court made findings on numerous issues, of significant
note is the court’s opinion on the allocation of risk for uninsured policy
periods.
For the first time, the Connecticut Appellate Court faced
the issue of whether a policyholder or insurer should bear the risk for periods
during which applicable insurance coverage was not commercially available, also
known in other jurisdictions as the “unavailability of insurance” exception to
the pro rata allocation method. The Connecticut Appellate Court performed an
extensive review and analysis of the law of other jurisdictions, and the
rational for applying the “unavailability of insurance” exception. While the
appellate court initially noted that it believed it would “not be fundamentally
unfair” to hold either the policyholder or the insurance carrier responsible
for portions of the allocation of responsibility during the time insurance is
unavailable, the appellate court concluded that it would be more efficient and
reasonable for the insurer to bear such a risk. In doing so, the Connecticut
Appellate Court noted that: 1) holding insurers collectively responsible for
the full injury has a desirable effect of maximizing the resources available to
respond to the multitude of claims those policyholders that are similarly
situated to Vanderbilt; 2) holding insurers responsible when unforeseen risks
arise creates an incentive for insurers and policyholders to continuously
identify and investigate previously unknown risks associated with various
materials and lines of business; 3) the application the exception best comports
with the reasonable expectations of the policyholder because a fundamental
component of insurance involves the transfer of risk from policyholder to
insurer; and 4) insurers have a better ability to manage this risk because they
can continue to accept, pool and spread the risk and price coverage accordingly.
This opinion is significant for policyholders,
and provides policyholders with a very well-reasoned rationale for overcoming a
common coverage defense.
The
Connecticut Appellate Court also addressed an issue of first impression
nationwide in favor of the insurer. The issue was whether secondary insurance
policies that exclude coverage for occupational diseases bar coverage for occupational
disease claims brought by claimants who are not employees of the policyholder,
but who developed an occupational disease while working for another employer. The
Connecticut Appellate Court held that the occupational disease exclusion
unambiguously barred coverage for “any underlying actions whose allegations
meet the standard definition of occupational disease.”This would include occupational disease
claims brought by employees and by individuals who contracted an occupational
disease while performing work for other employers. Being a case of first
impression nationally, this ruling is likely to lead to further litigation and
analysis by the Connecticut Supreme Court, and possibly other
jurisdictions.
The full opinion is available at: http://caselaw.findlaw.com/ct-court-of-appeals/1851005.html
USAA
Texas Lloyds Co. v. Gail Menchaca
On April 7, 2017, the Supreme Court of Texas clarified
Texas precedent on the intersection between contract claims under an insurance
policy and tort claims under the Texas Insurance Code. The Supreme Court of
Texas determined whether an insured can recover policy benefits as actual
damages caused by an insurer’s statutory violation absent a finding that the
insured had a contractual right to benefits under the insurance policy. In
doing, the Supreme Court of Texas announced five new rules that address this
relationship.
The plaintiff filed a storm damage claim with her
homeowner’s insurance company, USAA Texas Lloyds, after incurring damages to
her home from Hurricane Ike. While USAA determined that its policy covered some
of the damage, it declined to pay any benefits because the total estimated
repair costs did not exceed the policy’s deductible. The plaintiff sued USAA
for breach of the insurance policy and for unfair settlement practices in
violation of the Texas Insurance Code, seeking as damages insurance benefits
under the policy. At trial, the jury held that while USAA did not breach the
insurance policy, it violated the Texas Insurance Code and awarded the
plaintiff $11,350 as benefits owed under the insurance policy.
The Texas Supreme Court stated that, while an insured generally
cannot recover policy benefits as actual damages caused by an insurer’s
statutory violation absent a finding that the insured had a contractual right
to the benefits under the insurance policy, the issue is complicated and
involves several related questions. The court set forth five distinct but
interrelated rules that should govern the relationship between contractual and
extra-contractual claims in the insurance context: 1) an insured cannot recover
policy benefits as damages for an insurer’s statutory violation if the policy
does not provide the insured a right to receive those benefits; 2) an insured
who establishes a right to receive benefits under the insurance policy can
recover those benefits as actual damages under the Texas Insurance Code if the
insurer’s statutory violation causes the loss of the benefits; 3) even if the
insured cannot establish a present contractual right to policy benefits, the
insured can recover benefits as actual damages under the Texas Insurance Code
if the insurer’s statutory violation caused the insured to lose that
contractual right; 4) if an insurer’s statutory violation causes an injury
independent of losing policy benefits, the insured may recover damages for that
injury even if the policy does not grant the insured a right to benefits; and
5) an insured can recover no damages based on an insurer’s statutory violation
if the insured had no right to receive benefits under the policy and sustained
no injury independent of a right to the benefits. After applying these five
rules to the facts of USAA v. Menchaca,
the Supreme Court of Texas remanded the case in the interest of justice for a
new trial consistent with the rules clarified in the opinion.
By resolving a conflict in Texas jurisprudence and clarifying
that policy holders may recover for bad faith absent coverage under the policy,
this ruling appears to be in favor of insureds and will lead to a case-by-case
analysis in coverage battles in Texas.
The full opinion is available at: http://caselaw.findlaw.com/tx-supreme-court/1856129.html
General
Refractories Co. v. First State Insurance Co., et al.
On April 21, 2017, the United States Court of Appeals
for the Third Circuit interpreted the meaning of “arising out of asbestos” as
used in insurance policy exclusions. In doing so, the Third Circuit reversed the
District Court’s finding that the phrase “arising out of asbestos” contained
latent ambiguity.
The plaintiff in General
Refractories Co. v. First State was a manufacturer and supplier exposed to
thousands of lawsuits arising from asbestos related injuries after it included
asbestos in some of its products.While
the plaintiff’s primary insurers handled these claims initially, in 2002, the
plaintiff submitted claims to its excess insurance carriers, all of whom denied
coverage based on exclusions for asbestos claims. Eventually, the plaintiff
commenced a lawsuit against its excess insurers seeking a declaration of
coverage for losses related to the underlying asbestos claims. After settling
with the excess insurance defendants except for Travelers, the plaintiff
pursued its lawsuit against Travelers arguing the term “arising out of
asbestos” should be interpreted to apply only to asbestos as the raw mineral,
and not to asbestos in any form.
The Pennsylvania District Court concluded that the
Asbestos Exclusion contained a latent ambiguity “because the terms were
reasonably capable of being understood in more than one sense.” The Third
Circuit disagreed and held that the District Court’s analysis “overlooked the
phrase ‘arising out of,’ which has an established, unambiguous meaning under
Pennsylvania law.” The Third Circuit recognized that Pennsylvania courts have
consistently interpreted “arising out of” to require “but for” causation, which
does not require a showing that a product proximately caused an injury. The
Third Circuit concluded that applying the “but for” standard compelled the
conclusion that the plaintiff’s losses fell within the Asbestos Exclusion under
the policy as a matter of law. The Third Circuit empathized that its
application of a broad interpretation of the “arising out of” language was
necessary to promote consistency among insurance contracts in Pennsylvania.
Considering the substantial amount of Pennsylvania
case law interpreting the phrase “arising out of,” this ruling is not
surprising and can provide support to the broad application of exclusions,
particularly asbestos and pollution exclusions, while limiting broader
applications of those exclusions in the State of Pennsylvania.
The full opinion is available at: http://caselaw.findlaw.com/us-3rd-circuit/1857289.html
Zhaoyun
Xia, et al. v. ProBuilders Specialty Insurance Company
On April 27, 2017, the Supreme Court of Washington
handed down a significant insurance law opinion for the insured in Xia v. ProBuilders, where the Supreme
Court of Washington clarified the applicability of a broad, absolute insurance
pollution exclusion clause where negligence was the primary cause of the loss.
After the plaintiff purchased a new home, she quickly felt
ill and discovered that an exhaust vent attached to the hot water heater had
not been installed correctly and was discharging carbon monoxide directly into
the confines of the basement room. The plaintiff notified the contractor of her
injuries and explained how the hot water heater exhaust vent had been
discovered. The contractor’s general liability insurance carrier, ProBuilders,
eventually denied the claim under two exclusions: a pollution exclusion and a
townhouse exclusion, and refused to defend or indemnify the contractor. The
plaintiff sued the contractor and settled that lawsuit. As part of the
settlement, the plaintiff was assigned all first-party rights, privileges,
claims and causes of action against ProBuilders. The plaintiff thereafter sued
ProBuilders seeking declaratory judgment regarding coverage and alleging breach
of contract, bad faith and violations of the Consumer Protection Act and the
Insurance Fair Conduct Act. Both parties filed motions for summary judgment,
and after the trial court entered summary judgment for ProBuilders under the
townhouse exclusion, the appellate Court reversed that decision finding that
while the townhouse exclusion did not apply, the pollution exclusion did. The
Supreme Court of Washington accepted discretionary review to determine whether
the pollution exclusion relieved ProBuilders of its duty to defend the
contractor against the plaintiff’s claims.
The Supreme Court of Washington applied the “efficient
proximate cause” rule to conclude that coverage was available, and the insurer
had a duty to defend. This rule states that coverage exists if a covered risk
sets in motion a chain of events leading to an injury, even if an excluded risk
is part of that chain. The Supreme Court
of Washington held that while carbon monoxide clearly falls within the absolute
pollution exclusion in the liability policy issued by ProBuilders, coverage was
still available for the plaintiff’s claim because the predominant cause of her
injury was the builder’s negligent installation of the water heater.
Unlike the Third Circuit’s refusal to narrowly
interpret an asbestos exclusion to find coverage in General Refractories, the Supreme Court of Washington found
coverage by extending the efficient proximate cause doctrine to narrowly
interpret the pollution exclusion in the liability policy issued by
ProBuilders.
The full opinion is available at: http://www.courts.wa.gov/opinions/pdf/924368.pdf
Auto-Owners
Insurance Company v. High Country Coatings, Inc., et al.
Finally, on June 12, 2017,
the District of Colorado was faced with the issue of whether an insurer had a
duty to defend a subcontractor in an underlying lawsuit under Colorado law. The Court performed an extensive analysis of
Colorado law to determine whether an insurer must defend a subcontractor
alleged to have known there was damage to property, or defective work, prior to
obtaining a policy.
High Country Coatings
(HCC), the defendant subcontractor in Auto-Owners,
was a Colorado-based subcontractor that applied floor coatings.HCC subcontracted with a construction company
to install epoxy and urethane coatings on concrete floor slabs at an airport
hangar in Colorado. After HCC’s work was finished, it was discovered that the
coating HCC applied was bubbling. Although HCC disputed liability, because the
construction company and the owner of the hangar demanded that the coating be
replaced, HCC replaced it with a different coating. Before agreeing to do so, HCC
took out a 1-year policy with Auto-Owners Insurance Company (AOIC). That policy
became effective 2 months before HCC began work to replace the floor coating.
After HCC installed the new coating, it also bubbled and the owner of the
hangar demanded it also be replaced. HCC refused to replace the second floor
coating, and Zurich American Insurance Co., the construction company’s insurer,
sued HCC claiming HCC had damaged the hangar floor.AOIC eventually filed a declaratory judgment
action against HCC alleging it had no duty to defend or indemnity HCC in the
Zurich lawsuit.
Upon applying Colorado’s “complaint
rule,” and after analyzing recognized exceptions to the complaint rule, the
District of Colorado concluded that AOIC had a duty to defend HCC in the
lawsuit filed by Zurich. The “complaint
rule” tasks a court with reading the complaint in the underlying lawsuit and the
parties’ insurance policy to determine whether the facts alleged against the
insured would fall within the coverage of the policy.While the District of Colorado recognized
there are exceptions to this rule that allow a court to view extrinsic evidence,
it did not want to alter Colorado law. Therefore, because the allegations in
the Petition created a dispute on whether HCC knew of the loss prior to
obtaining the AOIC policy, and it would require extrinsic evidence to decide
the issue, the District Court refused to create an additional exception to the
complaint rule and upheld Colorado precedent. The District of Colorado adhered
to the complaint rule and concluded that AOIC had a duty to defend HCC in the
Zurich lawsuit.
The full opinion is
available at: https://cases.justia.com/federal/districtcourts/colorado/codce/1:2016cv03196/167835/39/0.pdf?ts=1497344979
[Posted August 29, 2017]
Oklahoma Supreme Court Reinforces an Insurer's Freedom to Contract for Liability Coverage and Finds that Insurer can Enforce Indoor Air Exclusion
On February 24, 2017, the Oklahoma Supreme Court answered a certified
question from the United States District Court for the Western District of
Oklahoma regarding the enforcement of the indoor air exclusion, and in doing
so, reinforced an insurer’s freedom to contract for liability coverage.
Century Surety Company (“Century”) issued a Commercial Lines Policy to
Siloam Springs Hotel, L.L.C. (“Siloam”). That policy included general liability
coverage of a hotel owned by Siloam in Siloam Springs, Arkansas for the policy
period from November 13, 2012 through November 13, 2013. The coverage provided
by the policy was modified by an Arkansas Special Exclusions and Limitations
Endorsement which added an Indoor Air Exclusion to the policy. That exclusion
provided that the insurance afforded by the policy does not apply to bodily
injury, property damage or personal and advertising injury “arising out of,
caused by, or alleging to be contributed to in any way by any toxic, hazardous,
noxious, irritating pathogenic or allergen qualities or characteristics of indoor
air regardless of cause.”
On January 17, 2013, several guests staying at the hotel allegedly
suffered bodily injury. i.e., poisoning caused by carbon monoxide that
allegedly escaped into the air due to leakage from the hotel’s indoor swimming
pool heater. Siloam sought coverage under its Century policy, but Century
denied based on the Indoor Air Exclusion. Siloam filed suit in state court
seeking a declaration that the policy provides coverage. The case was removed
to the United States District Court for the Western District of Oklahoma where
both parties filed summary judgment motions. The Western District granted
Century’s motion, and denied Siloam’s motion. Siloam appealed the Western
District’s ruling to the United States Court of Appeals for the Tenth Circuit.
The Tenth Circuit did not reach the merits of the underlying case because it
recognized a potential jurisdictional defect. However, in its final opinion,
the Tenth Circuit provided guidance to the Western District regarding the
coverage issue, and suggested that the Western District consider whether the
state’s interest in insurance regulation would be best served by certifying the
coverage question at issue in the case to the appropriate state supreme court.
On remand, the Western District found that Oklahoma law applied, and it
certified the following question to the Oklahoma Supreme Court:
Does the public policy of the State of Oklahoma prohibit enforcement of
the Indoor Air Exclusion, which provides that the insurance afforded by the
policy does not apply to “’Bodily Injury’, ‘property damage’, or ‘personal and
advertising injury’ arising out of, caused by, or alleging to be contributed to
in any way by any toxic, hazardous, noxious, irritating pathogenic or allergen
qualities or characteristics of indoor air regardless of the cause.
The Oklahoma Supreme Court interpreted the certified question as being
one concerning public policy in the State of Oklahoma and whether Oklahoma
prohibits the enforcement of a specific coverage exclusion in an insurance
contract.
The Court examined Oklahoma precedent discussing coverage exclusions that
are unenforceable in motor-vehicle insurance policies. The Court cited Ball v. Wilshire Insurance Co., 2009 OK
38, 221 P.3d 717 to illustrate the manner in which an insurance clause can be
void and unenforceable if it violates public policy as expressed in the
Oklahoma Statutes. In that case, the Oklahoma Supreme Court held that because
the exclusion at issue violated public policy as expressed in Oklahoma’s
Compulsory Liability Insurance statute, that exclusion was unenforceable. However,
the Court distinguished this case from the automobile insurance cases finding there
is not a similar public policy articulated by the Oklahoma statutes that is
violated by an air quality exclusion in a liability insurance policy. “Oklahoma
has no compulsory liability insurance law requiring liability insurance be
maintained for air quality issues, nor is there any law explicitly prohibiting
such an exclusion.” The Court held that there is no precedent for intruding
into a parties’ freedom to contract for liability coverage, and such an
intrusion “runs counter to the carefully circumscribed approach this Court
articulated in Ball.” Therefore, it
concluded that because there is no articulated public policy in Oklahoma that
prohibits the enforcement of an Indoor Air Exclusion, Century and Siloam were
free to negotiate and contract for coverage as they saw fit.
Further emphasizing the policy in Oklahoma favoring the right to
contract, the Oklahoma Supreme Court’s ruling in Siloam Springs reinforces an insurance company’s freedom to
contract for general liability coverage. This case stands for the proposition
that unless it is clear there is a public policy that is violated by an
exclusion in a liability insurance policy, a parties right to contract should
be favored, and exclusions shall be enforced.
The full opinion is available at: http://www.oscn.net/applications/oscn/deliverdocument.asp?citeid=479789.
[Posted March 14, 2017]
Use of Adoptive Child's Photographs on Social Media
With the prevalent use of social media, a recent
Oklahoma case, Thomas v. Cash, serves
as a reminder to adoptive parents to be aware of potential consequences of
sharing pictures and information online.
The Thomas family had adopted a child through DHS in
August 2006. Several years later, the
adoptive parents sought, and obtained a protective order against members of the
child’s biological family for alleged “stalking” on Facebook. The admitted actions included: 1) the
biological family members had sent the adoptive mother “friend requests” on
Facebook, 2) the biological family members had copied unrestricted pictures
from the adoptive mother’s Facebook page and posted them on their own pages, 3)
biological family members used the child’s photograph as their own profile
picture on Facebook, 4) biological family members posted comments that they
would see the child again, and 5) the biological family members sent at least
one message to the adoptive family either asking to see the child or asking
about the child’s welfare. After requesting
the biological family members to remove the child’s pictures, the biological
family members refused and the adoptive family sought the protective order.
On appeal, the Oklahoma Court of Civil Appeals
reversed the trial court’s order granting the protective order for
harassment. The appellate court found
that under the circumstances presented, there was no evidence that the biological
family posed a threat of harm or caused the adoptive family to suffer any
substantial emotional distress.
It is important to note that in this case, the
adoptive family had posted unrestricted photographs of the child on Facebook,
and allowed others to do so as well. It
should also be noted that the biological family members never attempted to
contact the child directly and the adoptive parents stated that they did not
feel threatened.
The appellate court did state that its holding in this
case did not indicate that a protective order would be unwarranted in all
situations. However, use of enhanced
privacy settings on social media, and being aware of the potential audience, could
be of assistance in avoiding a similar situation.
The full opinion is available at: http://www.oscn.net/applications/oscn/DeliverDocument.asp?CiteID=479796.
[Posted March 6, 2017]
South Carolina Supreme Court Finds Reservation of Rights Letter Ineffective
Although not the first of its kind, on January 11,
2017, in Harleysville Grp. Ins. v.
Heritage Communities, Inc (No. 13-1291), the South Carolina Supreme Court
joined a growing number of courts that have held that a reservation of rights
letter can be ineffective and invalid if it fails to adequately inform the
insured of the reasons the insurer may not be obligated to provide coverage. The issue came before the Court pursuant to cross-appeals
from a declaratory judgment action to determine the amount of coverage
applicable to two jury verdicts arising from two construction defect cases.
Heritage, the developer, had constructed two
condominium complexes between 1997 and 2000. Harleysville insured Heritage from
1997 through 2001; thereafter, Heritage was uninsured and went out of business
in 2003. The construction defect lawsuits were filed in 2003. Harleysville accepted the defense of Heritage
under a reservation of rights. Following
jury verdicts against Heritage, Harleysville filed the declaratory judgment
actions to determine what portion of the judgments would be covered under
Heritage’s policies. The declaratory
judgment actions were referred to a Special Referee, who held an evidentiary
hearing in 2010. The Special Referee
found that Harleysville had failed to adequately reserve its rights, and as a
result, the policies provided coverage for the majority of the verdicts. Both parties appealed.
The South Carolina Supreme Court held that
Harleysville’s reservation of rights, paired with recitation of several pages
of the policy provisions, was ineffective because it failed to adequately
inform the insured of the reasons why the insurer may not be obligated to
provide coverage. The reservation of rights included no discussion of
Harleysville’s position as to the various provisions or explanation of its
reasons for relying on those provisions.
Specifically, the court stated, “Harleysville’s
reservation letters gave no express reservation or other indication that it
disputed coverage for any specific portion or type of damages. Nor did the
letters or testimony indicate that, in the event Heritage was found liable in
the construction-defect suits, Harleysville intended to file the instant
lawsuit to contest various coverage issues. Specifically, Harleysville did not
expressly put its insureds on notice that it intended to litigate the issues of
whether any damages resulted from acts meeting the definition of occurrence,
whether any damages occurred during the applicable policy periods, what damages
were attributable to non-covered faulty workmanship, and whether certain
damages resulted from intentional acts by the insured and were thus excluded. And in no way did the letters inform the insureds that a conflict of interest
may have existed or that they should protect their interests by requesting an
appropriate verdict.”
This case serves as a reminder that in every type of
liability policy, reservation of rights letters must give fair notice to the
insured that the insurer intends to assert defenses to coverage or intends to
pursue a declaratory judgment action. Without this information, the insured has
no reason to act to protect its rights because it is unaware of the conflict of
interest that exists between itself and the insurer. The insurer must specify
in detail any and all bases upon which it might contest coverage in the future. In addition, the insurer must inform the insured of the need for an allocated verdict
as to covered versus non-covered damages, and of the insured’s interest in
obtaining a written explanation of the award that will permit the parties to
determine which part of the verdict is covered.
The full opinion is available at: https://www.sccourts.org/opinions/HTMLFiles/SC/27698.pdf.
[Posted February 1, 2017]
Oklahoma Supreme Court Weighs in on Statutory Pre-Lien Notice Requirement for Subcontractor's Mechanics and Materialmen's Lien
Recently, the Oklahoma Supreme Court issued its
unpublished opinion in Pizano v. Lacey
& Assocs., LLC, providing direction on application of Oklahoma’s
pre-lien notice requirement for certain mechanics and materialmen’s liens. Lacey & Associates, LLC (“Lacey”) had
purchased a commercial property and contracted with Everest Homes, LLC
(“Everest”) to replace the roof and HVAC units. Everest contracted with the Williams Group to complete the work, who
ultimately hired Andrea Rosa Pizano (“Pizano”) to remove the roof. Pizano filed suit and sought to foreclose on
the property pursuant to her subcontractor lien when Williams Group did not pay
her. Lacey and Pizano both filed motions
for summary judgment, with Lacey arguing that Pizano’s lien was invalid because
Lacey did not receive the requisite pre-lien notice. The trial court granted Pizano’s motion but
awarded Pizano a judgment in a reduced amount. On appeal, the Court of Civil Appeals reversed, holding that Okla. Stat.
tit. 41, §142.6 does not require subcontractors like Pizano to file a pre-lien
notice. The Oklahoma Supreme Court agreed
to review the Court of Appeals’ order.
Section 142.6 requires a subcontractor to file a
pre-lien notice if it falls within the definition of “Claimant” in subsection
(A)(1) and (A)(2). A “Claimant” is
defined as a “Person,” other than an original contractor, who is entitled to a
lien pursuant to Okla. Stat. tit. 42, §141.Section 141 provides, in pertinent part:
Any person who shall, under oral or written contract
with the owner of any tract or piece of land, perform labor…on said land for
the erection, alteration or repair of any building, improvement or structure
thereon…shall have a lien upon the whole of said tract or piece of land, the
buildings and appurtenances. If the
title to the land is not in the person with whom such contract was made, the
lien shall be allowed on the buildings and improvements on such land separately
from the real estate.
The Supreme Court held that Pizano fell within the
definition of a “Claimant,” and had Pizano filed a pre-lien notice, Section 141
would have limited the lien only against the buildings and improvements of the
property separately from the real estate.
The Court explained that because Section 141 applied to Pizano, then
Section 142.6’s pre-lien notice requirement applied as well: “Prior to the
filing of a lien statement pursuant to Section 143.1 of this title, the
claimant shall send to the last known address of the original contractor and an
owner of the property a pre-lien notice pursuant to the provisions of this
section.”
In granting Pizano’s motion for summary judgment and
reducing the judgment, the trial court had utilized the exception to pre-lien
notice found in Section 142.6(D), which allows a lien claim to be enforced
without pre-lien notice when the aggregate amount of the claim is less than
$10,000. The Supreme Court, in upholding
the trial court’s reduction in that regard, quoted subsection D, “[f]ailure by
the claimant to comply with the pre-lien notice requirements of this section
shall render that portion of the lien claim for which no notice was send
invalid and unenforceable.” Based on
this language, the Supreme Court upheld the trial court’s determination that
Pizano’s lien was not completely barred but simply enforceable only up to
$9,999.00.
The full opinion is available at: http://www.oscn.net/applications/oscn/DeliverDocument.asp?CiteID=478193.
[Posted July 19, 2016]
Colorado's High Court Rules in Favor of Liability Insurers and, Again, Rejects Expansion of the Notice-Prejudice Rule
For the second time in as
many years, the Colorado Supreme Court has ruled in favor of liability
insurers, and it has rejected the expansion of the notice-prejudice rule. On April
25, 2016, the Colorado Supreme Court in Stresscon
Corp. v. Travelers Property Casualty Co. of America ruled that policy
holders that settle claims prior to litigation without an insurance carrier’s
permission cannot receive coverage, effectively rejecting an expansion of
Colorado’s notice-prejudice rule. At
issue in Stresscon Corp. was whether a
policyholder could receive coverage after settling a lawsuit prior to
litigation, but before notifying the insurer. The Colorado Supreme Court did not so find, and limited the application
of the notice-prejudice rule.
A majority of jurisdictions
recognize and apply the notice-prejudice rule when faced with the issue of
liability coverage when the insurer receives late notice of a claim. The
“notice-prejudice rule” provides that an insurer may not deny a claim on the grounds
of late notice without demonstrating prejudice. The application of this rule has,
however, been limited to claims made under an occurrence policy, as opposed to
a claims-made policy. An occurrence policy covers claims that arise out of
occurrences that take place during the policy period, regardless of when the
claim is made. A “claims-made” policy covers losses that arise out of claims
that are made during the policy period, even if the claim arises out of an
occurrence that took place when the policy was not in effect.
The State of Oklahoma
implemented this limitation in State ex
rel. Crawford v. Fanie Int’l, 1997 OK CIV APP 39, 943 P.2d 1099. The
Oklahoma Court of Civil Appeals recognized that coverage is only triggered
under a claims-made policy when an insured becomes aware of and notifies the
insurer of a claim. It is that notice that triggers coverage under the policy. Crawford, 1997 OK CIV APP 39, ¶ 4, 943
P.2d at 1100. Clear notice of a claim or occurrence during the policy period is
crucial, because allowing actual notice beyond the policy period would
“constitute an unbargained for expansion of coverage.” Id. (quoting LaForge v. The American
Casualty Company of Reading, Pennsylvania, 37 F.3d 580, 583 (10th Cir.
1994). Therefore, it was concluded that the notice-prejudice rule was
inapplicable to claims-made policies.
One of the more recent
jurisdictions to implement this same limitation was the State of Colorado. In April of 2015, the Colorado Supreme Court
issued an opinion in Craft v.
Philadelphia Indemnity Insurance Co., 2015 CO 11, 343 P.2d 951, and held
that Colorado’s notice-prejudice rule doesn’t apply to time-specific notice requirements
in claims-made policies. In so ruling,
the Colorado Supreme Court cited the traditional rationale for this majority
rule, a rationale similar to that relied upon by the Oklahoma Supreme Court.
More specifically, the Colorado Supreme Court found that because the
date-certain notice requirement defines the scope of coverage in a claims-made
insurance policy, “to excuse late notice in violation of such a requirement
would rewrite a fundamental term of the insurance contract.” Craft, 2015 CO 11, ¶ 7, 343P.2d 951.
Just this week, the
Colorado Supreme Court limited the application of the notice-prejudice rule
even further. In Stresscon Corp v.
Travelers Property Casualty Co. of America, Stresscon, a concrete company,
found itself in an insurance coverage battle with its liability insurance
carrier stemming from a construction accident. Prior to filing a lawsuit,
Stresscon settled its claim with a general contractor, a settlement that was
struck without Stresscon’s liability insurance carrier on board. In September
of 2013, a Colorado intermediate appellate court found that Colorado’s
notice-prejudice rule should be extended to cases where policyholders violate a
clause in liability policies barring them from voluntarily settling claims or
making payments without the insurer on board. The Colorado Supreme Court,
however, disagreed with this ruling.
On April 25, 2016, the
Colorado Supreme Court, in a 4-3 opinion, overturned the September 2013 appellate
court decision, and rejected an expansion of Colorado’s notice-prejudice rule.
The state high court majority rejected the application of the notice-prejudice
rule to the “no-voluntary-payments” policy provision at issue in Stresscon Corp., and held that Stresscon
was not entitled to coverage for its deal with the general contractor. Justice
Nathan B. Coats, writing for the majority, stated that “[t]his so-called ‘no
voluntary payments’ clause clearly excluded from coverage any payments
voluntarily made or obligations voluntarily assumed by the insured without
consent, for anything other than first aid.” Accordingly, “[t]he insurance
policy emphatically stated that any such obligations or payments would be made
or assumed at the insured’s own cost rather than by the insurer.” The majority
of the Colorado Supreme Court did not require the liability insurance carrier
to show that it had suffered prejudice, and it put Stresscon on the hook for
the settlement it entered into with the general contractor.
The Colorado Supreme
Court’s April 25, 2016 ruling highlights the risks of policyholders settling
claims prior to litigation without giving the insurer notice and an opportunity
to participate. Ultimately, the ruling helps shield insurance carriers from the
risk of having to pay covered claims when policyholders and third-party
claimants negotiate settlements that can be passed along to insurers, without
the insurer’s knowledge. The Colorado Supreme Court ruling
was a big win for insurers, and in light of this decision, and the similarities
between Oklahoma’s view and Colorado’s view of the notice-prejudice rule, it is
important to understand the potential implications on insurers and
policyholders in the State of Oklahoma. A
policyholder that believes a third-party’s claim may be legitimate is not
always free to negotiate and settle with that third-party prior to notifying
their liability insurance carrier. An insured that holds a liability policy
with a no-voluntary-payment provision should comply with that provision, and,
when faced with a third-party claim, make efforts to involve their carriers in
settlement negotiations. Absent a waiver of that provision, or a
consent-to-settle provision in the policy, if an insured settles a claim
without its insurance carrier on board, an insurer may be able to escape from providing
coverage in circumstances where coverage is otherwise available.
[Posted April 29, 2016]
Miranda Calhoun Collaborates on "Understanding the Roles of Supervised Visitation and Therapy in Family and Juvenile Legal Proceedings" and Publishes in Tulsa Lawyer Magazine
In
collaboration with other members of the Tulsa County Bar Association’s Children
and the Law Committee, McDaniel Acord & Lytle, PLLC Associate Attorney Miranda R.
Calhoun publishes “Understanding the Roles of Supervised Visitation and Therapy
in Family and Juvenile Legal Proceedings.” The article serves as a resource for practitioners by explaining the
parameters of supervised visitation and various therapies in the arenas of
domestic and juvenile law. The full
article, published in the April 2016 edition of Tulsa Lawyer Magazine, is
available here: http://issuu.com/tulsacountybarassoication/docs/tulsa_lawyer_magazine_april_2016/8?e=16570281/34595935.
[Posted April 26, 2016]
Tenth Circuit Affirms CAFA Jurisdiction and Dismissal of Putative Environmental Class Action in Favor of Client
The Tenth Circuit Court of Appeals ruled in favor of
our client, a Fortune 100 member of the energy industry, and affirmed denial of
motions to remand and dismissal entered against a putative landowner class
action entered by the federal district court. The plaintiffs were landowners attempting to bring a class action for
alleged air, water and soil contamination arising from the disposal of fly ash
and oil and gas produced fluids against numerous defendants.
The Order and Judgment provides needed clarification
in the circuit on the citizenship element of the “local controversy” exception
to the Class Action Fairness Act (“CAFA”) jurisdiction by a federal district
court. After the defendants removed the case
to the federal district court, the plaintiffs filed two motions to remand,
asserting the exception applied and mandated remand. However, the district court and Tenth Circuit
agreed that plaintiffs failed to meet their burden of proof on the exception’s
element of citizenship, which requires plaintiffs seeking remand to show that
“greater than two-thirds of the members of all proposed plaintiff classes in
the aggregate are citizens of the State in which the action was originally
filed.” See 28 U.S.C. §1332(d)(4)(A)(i)(I). Noting that the plaintiffs’ class was not restricted to citizens of
Oklahoma, but, rather, included “citizens and/or residents and/or property
owners,” the Tenth Circuit held that the class definition encompassed groups of
people who may not necessarily be Oklahoma citizens.“ Because Plaintiffs did not include in their
amended petition an unambiguous limitation confining the class definition to
Oklahoma citizens, they were obliged to do more; they, perforce, had to marshal
and present some persuasive substantive evidence (extrinsic to the amended
petition) to establish the Oklahoma citizenship of the class members.”
The Tenth Circuit also upheld the district court’s
dismissal of the plaintiffs’ amended complaint, concluding that it failed to
state a plausible claim for strict liability, negligence and negligence per se due to failure to include adequate
factual allegations of injury resulting from the defendants’ alleged
wrongdoing. The Order and Judgment
explains that, under Oklahoma law, the claims asserted by the plaintiffs
require specific allegations that the defendants caused an injury. Furthermore, “a plaintiff in a toxic tort
case must prove that he or she was exposed to and injured by a harmful substance manufactured by the
defendant.” The Tenth Circuit held
plaintiffs’ expressions of “reasonabl[e] concern[]” and allegations that they
“suffer physical ailments consistent with disclosures and warnings set forth on
MSDS [i.e., Material Safety Data Sheets]” were not sufficient to allege an
actual injury in fact.
The full text of the Order and Judgment is available
here: https://www.ca10.uscourts.gov/opinions/14/14-7010.pdf.
[Posted March 7, 2016]
The 2016 Adoption Tax Credit
With
tax season upon us, this is a good time to remind adoptive parents to make
their tax professional aware of adoption-related expenses and to request the
adoption tax credit. Because it is a tax
credit as opposed to a deduction or exemption, the credit applies
dollar-for-dollar to reduce your tax liability up to the maximum amount of the
credit. The maximum amount for 2015 is
$13,400 per child, but begins to phase out if your modified adjusted gross
income is $201,010 or more.
The
credit applies up to the amount of your qualified adoption expenses, including
reasonable and necessary adoption fees, court costs and attorney fees, travel
expenses (including meals and lodging while away from home) and other expenses
directly related to the adoption. These
amounts can include expenses even before a child is identified for adoption,
such as home study expenses incurred prior to finding a child for adoption.
Keep
in mind that you may only claim the tax credit one time for the same adoption
effort. For example, if you claimed a
credit of $4,000 for 2014, any credit you claim for 2015 for the same adoption
cannot exceed $9,400 ($13,400 minus $4,000).
If
your employer provided adoption assistance, you may also claim an exemption
from income for the amounts paid by the employer, as long as neither the credit
nor the exemption claimed exceed the $13,400 limit. For example, if you incurred $18,400 in
qualified adoption expenses in 2015 and your employer reimbursed for you $5,000,
you can claim a $13,400 tax credit and exclude $5,000 from your income
for tax purposes (assuming your income is below the phase-out amount and all
other requirements are met).
For
more information on the adoption tax credit, see IRS
topic 607.
[Posted February 16, 2016]
Eighth Circuit Rejects Claim for Stacking of Cincinnati CGL and BOP Policies
In an opinion issued on January 6, 2016 in the case of
John Gohagan, et al. v The Cincinnati
Insurance Company, Appeal No. 14-3454, the Eighth Circuit Court of Appeals
upheld summary judgment entered by the United States District Court for the
Western District of Missouri in favor of Cincinnati that held the plaintiff
could not recover the each-occurrence single limit under both the CGL and BOP policies issued to the alleged tortfeasor.
The case arose from an accident when Thomas Campbell
was attempting to remove a tree in a land clearing operation for a residential
development. The tree fell on the
plaintiff causing serious bodily injuries. Cincinnati had issued both CGL and BOP policies to Thomas. Each policy had an “Each Occurrence Limit” of
$1,000,000 and a “General Aggregate Limit” of $2,000,000. Cincinnati paid plaintiff the each-occurrence
limit of $1,000,000 under the CGL policy, and the parties agreed to submit a declaratory
judgment complaint jointly to the District Court to determine whether the BOP
and CGL policies’ anti-stacking provisions prohibited coverage stacking,
thereby limiting the combined total of the applicable each-occurrence limit of
liability to $1,000,000. The District
Court held that the anti-stacking provisions of the policies limited
plaintiff’s coverage to the $1,000,000 each-occurrence limit.
On appeal, plaintiff first argued that the
anti-stacking provisions of the BOP and CGL policies were ambiguous with regard
to the meaning of “aggregate maximum limit of insurance.” The Eighth Circuit began its de novo review of the District Court’s
interpretation of the insurance policies by considering the policy terms. The BOP policy’s anti-stacking provisions,
labeled “Two or More Policies Issued by Us,” provided:
If this policy and any other policy issued to you by
us or any company affiliated with us apply to the same “occurrence” or
“personal and advertising injury” offense, the aggregate maximum limit of
insurance under all the policies shall not exceed the highest applicable limit
of insurance under any one policy.
The anti-stacking provision in the CGL policy, labeled
“Two or More Coverage Forms or Policies Issued by Us,” provided:
If this Coverage Part and any other Coverage Form,
Coverage Part or policy issued to you by us or any company affiliated with us
apply to the same “occurrence” or “personal and advertising injury” offense,
the aggregate maximum limit of insurance under all the Coverage Forms, Coverage
Parts or policies shall not exceed the highest applicable limit of insurance
under any one Coverage Form, Coverage Part or policy.
Plaintiff argued that because neither policy defined “aggregate
maximum limit of insurance,” the ordinary purchaser would understand the term
to refer to the $2,000,000 general aggregate limit in each policy. Cincinnati responded that the term referred
to the “highest applicable limit of insurance under any one Cincinnati-issued
policy.” The Eighth Circuit held that
the anti-stacking provisions were not ambiguous. The policies provided that the “aggregate
maximum limit ‘shall not exceed the highest applicable
limit of insurance under any one policy.’” The falling tree was the “occurrence, and each policy had an
each-occurrence limit of $1,000,000.” Thus, the Court held, the “highest applicable
limit of insurance” under either policy is the each-occurrence limit. The result is “the aggregate maximum limit of
insurance under both policies
combined may not exceed the each-occurrence limit under either policy – in this case, $1,000,000.
Plaintiff also argued that the “Other Insurance”
provisions in Cincinnati’s BOP and CGL policies were ambiguous because they
establish coverage that the anti-stacking provisions preclude. The relevant provisions stated:
This insurance is primary except [in circumstances not
relevant here]. If this insurance is
primary, our obligations are not affected unless any of the other insurance is
also primary. Then, we will share with
all that other insurance by the method described in c. below.
The sharing provision stated:
If all of the other insurance permits contribution by
equal shares, we will follow this method also.
Under this approach each insurer contributes equal amounts until it has
paid its applicable limit of insurance or none of the loss remains, whichever
comes first.
Plaintiff contended that the BOP and CGL policies
individually provide primary coverage that the anti-stacking provisions
impermissibly limit. The Eighth Circuit rejected
this argument and agreed with the District Court, which found that the “‘Other
Insurance’ provisions apply when the policies covering the same injury are
issued by Cincinnati and another insurance company, not when two policies are issued
by Cincinnati.” Accordingly, these
clauses do not conflict or create an ambiguity with the anti-stacking
provisions that apply only in the case of two Cincinnati policies. Thus, the coverage limit for the plaintiff’s
injury was $1,000,000.
The full opinion is available at http://media.ca8.uscourts.gov/opndir/16/01/143454P.pdf.
[Posted January 25, 2016]
A Post-Divorce Checklist
You
have finally reached the end of the dissolution process and have the final
decree. Now what? There are a few items you still will need to
take care of to ensure that you are protected financially.
- Make
a list. Go through your divorce decree
and make a list of everything you and your ex have been ordered
to do, i.e., put the house on the market, deed property, turn over the
silverware to your former spouse, etc. Many of the requirements will be time sensitive and you will want to
ensure you are in full compliance with the order.
- Change
your beneficiaries. Even if your decree
says you retain the full benefit of your retirement plan, the plan
administrator will be bound by your beneficiary designation for the account,
NOT the decree. As soon as the decree is
entered, you should contact the administrators for all retirement accounts,
life insurance policies, etc. to have the beneficiary changed from your former
spouse to another trusted individual, if the change complies with the
decree. The same is true for any
“transfer on death” assets that you retained in the divorce. Your homeowner’s insurance policy may need to
be changed as well.
- Update
your will. Chances are, you no longer
want your estate to go to your former spouse upon death. Work with an attorney to update your
will. You should also change any health
care proxies and durable powers of attorney, unless you want your ex to make
life-altering decisions once you become incapacitated.
- Close
joint accounts. If any joint banking and
credit card accounts remain upon entry of the decree, you should close those
immediately. If your ex will still be
using a credit card account, have your name removed from it. Cut up the card and send a certified letter
to the credit card company advising them that you will no longer be responsible
for any future charges.
- Update
your name. If you choose to change your
name upon divorce, you driver’s license, social security card, passport and
other documents will need to be changed. You will also need to update bank accounts, your children’s school
records, retirement accounts and anything else that is listed under your
married name.
This
list is not exhaustive but applies in most cases. Although these tasks are burdensome, they are
an important step in ensuring your protection from future problems.
[Posted January 8, 2016]
Sixth Circuit Reverses Southern District of Ohio in Finding Professional Errors and Omissions Policy Exclusion Required Insured's Subjective Knowledge of the Potential for Suit
On November 18, 2015, the United States Court of
Appeals for the Sixth Circuit issued its opinion in Maxum Indemnity Co. v. Drive West Insurance Services, Inc., reversing
the Southern District of Ohio’s grant of summary judgment in favor of Maxum
Indemnity Co. (“Maxum”). At issue was
whether the subject professional errors and omissions policy excluded claims
that the insured should have known, prior to coverage, would turn into claims. The Sixth Circuit did not so find; instead
applying a subjective knowledge standard.
Drive West Insurance Services, Inc. d/b/a Mulberry
Insurance Services, Inc. (“Mulberry”) is a wholesale insurance broker that
provided quotes and binders for insurance coverage to National Condo &
Apartment Insurance Group, Inc. (“NCAIG”), a retail insurance broker. NCAIG, in turn, issued the insurance coverage
to its property owner clients. The
coverage issued named AIX Specialty Insurance Company and North American
Specialty Insurance Company as the insurance carriers, but those companies
never issued or approved the policies.Accordingly, Mulberry received multiple cease-and-desists letters from these
purported carriers, alerting Mulberry that they had no business relationship
and had never issued or approved any of the policies in question. However, none of the cease-and-desist letters
actually threatened legal action against Mulberry.
After receiving the letters, Mulberry applied for
professional errors and omissions liability coverage through Maxum, checking
“No” in response to whether Mulberry had “any knowledge of any potential errors
or omissions claim(s).” Maxum issued the
Policy to Mulberry on March 1, 2012.
The Exclusions
section of the Policy provided, in pertinent part:
This insurance does not apply to:
J. Any
“claim” arising out of or resulting from any “wrongful act” or
“personal/advertising
injury,”
(1) Disclosed in your application of insurance or any accompanying
documents provided to us; or
(2) You had knowledge of or information related to, prior to the first inception date
of this continuous claims-made coverage with us, and which may result in a “claim.”
The term “wrongful act” was defined as “any actual or
alleged negligent act, error or omission in the rendering or failure to render
‘professional services.’” “Claim” was defined as “a written or verbal demand
received by any ‘insured’ for money or services, including notice of service”
of a civil proceeding for monetary damages or “institution of any
administrative, judicial, arbitration or alternative dispute proceedings
against any ‘insured.’”
In the spring of 2012, property owners, aware of the lack
of valid insurance for their properties, filed suit against NCAIG. In June 2012, NCAIG notified Mulberry of the
lawsuits and its intention to hold Mulberry responsible for NCAIG’s loss. By the end of August 2012, Maxum was aware of
three claims filed by NCAIG against Mulberry and began its investigation.Invoking Exclusion J.2, Maxum denied coverage,
claiming that Mulberry had “knowledge and information relating to” the forged
insurance before Mulberry’s professional liability coverage began on March 1,
2012.
In March 2013, Maxum filed suit against Mulberry,
NCAIG and others seeking rescission of the Policy, or in the alternative, a
declaration that Maxum had no duty to defend or indemnify Mulberry in any of
the several underlying suits because Exclusion J.2 excluded those claims from
coverage. The district court entered
summary judgment in favor of Maxum, finding Exclusion J.2 unambiguously covered
all wrongful acts of which Mulberry had knowledge prior to coverage.
The Sixth Circuit, applying California law, reversed
the district court. The Sixth Circuit
interpreted the Policy language to require Mulberry’s knowledge of the claims
to be subjective, i.e. that Exclusion
J.2 applied only to the wrongful acts Mulberry believed, prior to coverage,
would turn into claims. The court noted
that Maxum could still evade coverage if it showed Mulberry was subjectively
aware of the potential for suit arising from the unauthorized insurance prior
to coverage, but Maxum had not done so.
The full opinion is available at: http://www.ca6.uscourts.gov/opinions.pdf/15a0760n-06.pdf.
[Posted November 30, 2015]
Sixth Circuit Holds Clean Air Act Does Not Preempt State Common Law Tort Claims
On November 2, 2015, the Sixth Circuit Court of
Appeals affirmed the United States District Court for the Western District of
Kentucky’s refusal to dismiss the plaintiffs’ air pollution claims for nuisance
and trespass against a permitted facility by concluding that the federal Clean
Air Act does not preempt Kentucky’s common law. See Merrick, et al. v. Diageo
Americas Supply, Inc., Appeal No. 146198. For the full Opinion, see http://www.ca6.uscourts.gov/opinions.pdf/15a0261p-06.pdf.
Diageo distills and ages whiskey at its facilities in
Louisville, Kentucky. The plaintiffs
brought the lawsuit on behalf of a putative class of owners, lessors and
renters of properties near Diageo’s facilities claiming that ethanol emissions
from the facilities reach their properties, and when combined with condensation,
form “whiskey fungus” that is unsightly, deteriorates surfaces, and
unreasonably interferes with the use and enjoyment of their properties. Plaintiffs seek compensatory and punitive
damages, and an injunction requiring Diageo to install control technologies to
abate the emissions.
Ethanol emissions are regulated under the federal Clean
Air Act, 42 U.S.C. § 7401, et seq. (“CAA”). Under the structure of the CAA, the US-EPA
develops national ambient air quality standards, and then it is up to the
individual states to determine how to meet those standards. The states then enforce those standards
through their regulatory programs, including mandatory permit systems for stationary
sources. Diageo’s facility operates
under air quality permit overseen by the Louisville Metro Air Pollution Control
District that includes emission limits for various pollutants. While Diageo’s permit caps its non-fugitive
emissions of volatile organic compounds (including ethanol) at 100 tons per
year, it does not cap fugitive ethanol emissions from its storage warehouses.
Diageo moved to dismiss the plaintiffs’ common law
tort claims asserting that the CAA preempts the application of Kentucky common
law standards imposed by court action.
Diageo argued that such common law standards would conflict with the
CAA’s methods for regulating emissions and disrupt the balance of power between
federal and state law, and therefore applying such standards to its operation
would frustrate Congress’ purposes and objectives in the Act. The District Court rejected this argument,
and the Sixth Circuit took up the issue on an interlocutory appeal.
In
concluding that the CAA does not preempt the plaintiffs’ common law claims, the
Court relied on the “states’ rights savings clause” in the CAA that provides:
Except as otherwise provided…nothing in this chapter shall
preclude or deny the right of any State or political subdivision thereof to
adopt or enforce (any standard of limitation respecting emissions of air
pollutants or (2) any requirement respective control or abatement of air
pollution…
The
Court held that “[s]tate courts are arms of the ‘State,’ and the common law
standards they adopt are ‘requirement[s] respecting control or abatement of air
pollution.” Thus, the savings clause
preserves common law remedies under state law.
While the United States Supreme Court has declined thus
far to review a CAA preemption case, the Sixth Circuit concluded that the
Supreme Court’s preemption analysis under the federal Clean Water Act (“CWA”)
was persuasive because numerous provisions in the CWA, including the savings
clauses, were modeled on the CAA. In the
landmark decision in International Paper
Co. v. Ouellette, 479 U.S. 481 (1987), the Supreme Court held that the CWA
“savings clause preserves other state actions, and therefore, nothing in the
[CWA] bars aggrieved individuals from bringing a nuisance claim pursuant to the
law of the source state.” The Diageo
Court held that this leads “to the conclusion that the analogous states’ rights
savings clause in the Clean Air Act similarly preserves claims based on the law
of the source state.”
In an Opinion also issued on November 2, the Court
applied its reasoning in the Diageo case
to reject CAA preemption of state law remedies in Little, et al. v. Louisville Gas & Electric Co., Appeal No.
14-6499.
There is a potential Circuit Court split regarding the
interpretation of the CAA’s savings clause; however, the Supreme Court has
denied review to multiple CAA-state law preemption cases, thus the matter of
CAA preemption of state common law will not be finally resolved for some time
to come.
[Posted November 11, 2015]
Planning for an Aging Parent
Our
office frequently receives calls from adult children worried about how to care
for an aging parent who is showing signs of dementia or who is otherwise no
longer able to make informed decisions or properly care for himself. A few options are available under the law to
ensure one has the ability to make important decisions for an elderly parent.
Often,
clients are interested in seeking guardianship of their elderly parent. Guardianships are available in Oklahoma if a
person is incapacitated. An
“incapacitated person” is someone, age 18 or older, who is impaired by reason
of mental illness, mental retardation or developmental disability, physical
illness or disability, drug or alcohol dependency or other similar causes. 30 O.S. § 1-111. In addition, the person seeking guardianship
must show the court that the proposed ward’s ability to evaluate information
effectively or to make responsible decisions is impaired to such an extent that
the ward either lacks the capacity to meet essential requirements for his
physical health or safety or is unable to manage his financial resources. Id.
Based
on the degree and type of incapacity, the court may grant a guardianship over
the person, over the property, or both.
The court-appointed guardian will then be required to submit annual
reports to the court regarding the status of the ward’s health, financial
condition or both, depending on the type of guardianship entered. 30 O.S. § 4-305 (person) and 30 O.S. § 4-306 (property). Note that a non-incapacitated person may
execute a document to nominate a guardian in the event he later becomes
incapacitated.
In
some cases, a person may not qualify for a guardianship, but still needs some
help with daily activities or financial matters. A durable power of attorney (“DPOA”) is a
popular option, if a person is not incapacitated at the time of execution and
wants to avoid a guardianship later. 58 O.S. § 1071 et.seq. The DPOA can be made
effective immediately or upon the happening of a certain event, such as a
medical opinion (or two) that the subject of the DPOA has become
incapacitated. One potential downside of
a DPOA is that the subject does not forfeit control over his finances and can
still enter into contracts and make other life-changing decisions. He may also withdraw the DPOA at any time,
without notice. An upside is that the
caretaker will not have to go to court to utilize the DPOA.
A
person who is not yet incapacitated may also choose to execute a health care
proxy. A health care proxy allows the
person named as the proxy to make health care decisions for the subject of the
health care proxy. However, in the event
of a conflict between the wishes of the subject and the proxy, the subject’s
wishes likely will be honored. A HIPPA
medical records release is another possibility, and allows another specified
person access to one’s medical records and other information from medical
providers.It does not allow anyone
other than the patient the ability to make health care decisions and the
release must be executed voluntarily by the subject of the records.
Finally,
in the event of a physical disability that renders one unable to manage
his property, a conservatorship may be appropriate. The subject must consent to a conservatorship
to manage his estate, and the conservatorship must be entered by the court. 30 O.S. § 3-211. Like a guardian, a conservator must submit
annual reports to the court. Upon
appointment of a conservator, the ward will no longer have the power to enter
into contracts, except for necessities.
If
you would like to discuss options for caring for your
loved one, contact our office for an appointment.
[Posted September 16, 2015]
U.S. Supreme Court Refuses to Review Clean Water Act Permit Shield Ruling
Recently, the United States Supreme Court declined
review of the Ninth Circuit opinion in Alaska
Community Action on Toxics v. Aurora Energy Services, LLC. The Court’s decision allows the Ninth
Circuit’s decision to stand and exposes otherwise permitted companies to
liability under the Clean Water Act.In its
decision, the Ninth Circuit held that Aurora Energy Services, LLC and Alaska
Railroad Corp. (“the Companies”) were not shielded from liability for non-stormwater
coal discharges by their Multi-Sector General Permit for Stormwater Discharges
with Industrial Activity issued under the U.S. Environmental Protection
Agency’s National Pollutant Discharge Elimination System.
The Companies urged in their Petition to the Supreme
Court that compliance with such a permit bars liability under the Clean Water
act for any and all types of discharges, whether specifically discussed in the
permit or not, unless the discharge was not known to the permitting agency at the
time the permit was issued. The
Companies’ arguments were unsuccessful in obtaining the high court’s review,
despite their having argued to the Court that the Ninth Circuit’s ruling
conflicts with opinions from the Second, Fourth and Sixth circuits, all of
which applied the shield to protect permitted companies from liability for
discharges within the authority’s reasonable contemplation.
On the other side, environmentalists including the
Sierra Club, argued that the Ninth Circuit’s decision did not address the
permit shield issue but instead determined that the Companies’ non-stormwater
coal discharges were prohibited by the terms of the general permit, and thus,
even under the permit shield analysis, the discharges were unlawful.
Companies must be cognizant of the Ninth Circuit’s
ruling, as it could provide a basis for citizen suits for
discharges not specified in a permit. The Ninth Circuit’s decision undermines any conclusive permit shield
from liability.
The full Ninth Circuit decision is available here: http://cdn.ca9.uscourts.gov/datastore/opinions/2014/09/03/13-35709.pdf
[Posted July 27, 2015]
Texas Supreme Court Holds that EPA Superfund Cleanup Proceedings Qualify as a "Suit" and Trigger Insurers' Duty to Defend
On June 26, 2015 in McGinnes Industrial Maintenance Corp. v. The Phoenix Ins. Co. (No.
14-0465), the Texas Supreme Court in a 5-4 decision held that when the EPA
commences cleanup proceedings against a party under the federal Comprehensive
Environmental Response, Compensation, and Liability Act (“CERCLA” or
“Superfund”), the proceedings qualify as a “suit” under the duty to defend
provision of the standard form commercial general liability policies at issue. The issue came before the Court pursuant to a
certified question from the Fifth Circuit Court of Appeals.
The controversy arose from the alleged disposal of
pulp and paper mill waste sludge into pits near the San Jacinto River in
Pasadena, Texas by a subsidiary of McGinnes.
In 2005, the EPA started investigating the site, and in November 2007,
it sent McGinnes notice that it was a Potentially Responsible Party (“PRP”)
with an invitation to enter negotiations with the EPA for cleaning up the site
and reimbursing EPA’s costs. A year
later, EPA served McGinnes with a detailed request for information advising
McGinnes that its failure to respond could result in penalties of up to $32,500
per day.In July 2008, EPA sent
McGinnes a special notice stating that McGinnes was responsible for cleaning
up the site and demanding $379,000 to reimburse EPA’s costs. The notice required McGinnes to make a good
faith offer to settle with the EPA within 60 days. McGinnes did not respond, and the EPA issued
a unilateral administrative order directing McGinnes to conduct a remedial
investigation and feasibility study, and warned that its failure to comply
would subject it to penalties of up to $37,500 per day and punitive damages up
to three times the costs to EPA.
During the period between EPA’s two notice letters,
McGinnes notified the insurers who had issued standard form CGL insurance
policies during the period of the alleged waste disposal. McGinnes demanded the insurers defend against
EPA’s proceedings, and the insurers declined based on the policy that required
them to defend only in the event of a “suit” against the insured demanding
damages. McGinnes commenced a
declaratory judgment action in Texas federal court. The District Court granted the insurers’
partial motion for summary judgment and McGinnes appealed.
In its analysis, the Texas Supreme Court noted that in
the 1960s when the policies were issued, the primary means for addressing
pollution was a lawsuit asserting common law or statutory claims. When Congress enacted CERCLA in 1980, the
landscape changed dramatically. CERCLA
gave the EPA the power to conduct what amounts to pretrial proceedings without
having to commence a court action until the end of the process. The Court concluded that (1) EPA’s notice
letters to PRPs serve as pleadings; (2) EPA’s requests for information to PRPs
serve as discovery; (3) EPA’s invitations to settle serve as mediation; (4) its
unilateral administrative orders resemble summary judgment; (5) the fines and
penalties assessed by the EPA against PRPs for non-cooperation are like
sanctions issued by a court; and (6) by limiting a PRP’s opportunity for court
review until the end of the process, and then limiting the review to whether
EPA abused its discretion based on EPA’s own record, CERCLA ceded a judicial
function to EPA. Thus, the Court held
that EPA’s cleanup proceedings are the functional equivalent of a “suit.” The Court stated that McGinnes would have
been afforded a defense under its CGL policies if it had been sued for the
pollution before the enactment of CERCLA. Accordingly, the Court held that its "rights under its policies should
not be emasculated by the enactment of a statute intended not to affect
insurance, but to streamline the EPA’s ability to clean up pollution."
In conclusion, the Texas Supreme Court noted that it
is well settled in the Fifth Circuit and other courts that cleanup costs
incurred under CERCLA qualify as “damages” under the form of the CGL policies at
issue in this case. Thus, it observed
that to hold that the insurers had no duty to defend the EPA proceedings while
their policies covered the damages would create "perverse incentives and
consequences for insurers and insureds alike."
[Posted July 20, 2015]
COCA Holds that Best Interest Standard Applies Despite New BIA Guidelines on ICWA
The
best interest of a child is still an important factor in Oklahoma when
determining child custody, despite a push by the Bureau of Indian Affairs and
Native American tribes to remove that factor from consideration. Earlier this month, the Oklahoma Court of
Civil Appeals issued its opinion in In
the Matter of M.K.T., et al. v. Pigg, et al., disagreeing with the BIA’s
new guidelines and proposed regulations.
In M.K.T., the court examined a trial
court’s decision to transfer a child from a traditional foster home into a
Cherokee foster home. The State placed
the child in emergency protective custody in May 2013. The child’s mother was not Native American,
but the incarcerated father was a member of the Cherokee Nation. The child was placed in a traditional
(non-ICWA-compliant) foster home.(Indian
children are subject to the state and federal Indian
Child Welfare Acts.) The State attempted
to locate an ICWA-compliant placement for the child for the next nine
months. No extended family member was
willing or able to take the child and the Cherokee Nation had no placement
option available.
In
February 2014, the Nation found a Cherokee family willing to take the child and
filed a motion in May, one year after initial placement, to transfer the child
to the Cherokee home. The State, the
Natural Mother, the Natural Father, the Foster Mother and the child filed a
joint objection, but the trial court agreed with the tribe and ordered the
child transferred to the Cherokee home.
Upon
appeal, the Court of Civil Appeals noted that ICWA provides priority for
placement of Indian children, with “i) a member of the Indian child’s extended
family; ii) a foster home licensed, approved, or specified by the Indian
child’s tribe; iii) an Indian foster home licensed or approved by an authorized
non-Indian licensing authority; or iv) an institution for children approved by
an Indian tribe or operated by an Indian organization which has a program
suitable to meet the Indian child’s needs.”
25 U.S.C.A. §1915(b). That statute allows for deviation from the
preferences when good cause exists, with the burden of proof resting on the
party seeking to avoid the preference.
Following
the much-publicized Baby Veronica case in 2014, many tribes lobbied the BIA to
change its Guidelines on ICWA to strengthen their position on placement of
Indian children. In February of this
year, the BIA updated its Guidelines. The new Guidelines now provide that, when determining
whether to deviate from the Guidelines, “the good cause determination does not
include an independent consideration of the best interest of the Indian child
because the preferences reflect the best interest of an Indian child in light
of the purposes of the Act.” See Guidelines at §F(4)(c). The Guidelines also direct that Courts may
not consider the “ordinary bonding or attachment that may have occurred as a
result of a placement” or the length of time a child has been in the non-ICWA
placement. Id. (The BIA is in the
process of making these Guidelines into regulations with the force of law, over
significant, well-founded objections.)
The
Court in M.K.T. disagreed with the
Guidelines and the directive to ignore the best interest of the child as an
independent consideration, and the bonding a child has experienced. The Court noted that the Guidelines’
“intentional disregard of these factors results in a one-size-fits-all approach
to the placement of children with any tribal affiliation. That result may bear little resemblance to
what is really in the child’s best interests, despite the self-serving
pronouncements in the BIA Guidelines.” The Court pointed out that ICWA is being applied in a manner far
exceeding its original purpose, and children “who do not have any tribal
connection other than biology, oftentimes through distant ancestry, are
transferred from stable homes in order to create a tribal connection where none existed before.”
The
Court noted that the child at issue was never part of an Indian community, had
only a 1/128th blood quantum, and was not even an enrolled member until the Nation
visited the father in jail to enroll her after the State initiated the deprived
case. “She was removed from the only
stable home she had ever known solely because of her distant biological link to
the Nation.” The Court held that, as the
Guidelines are only instructive at this point, Oklahoma will continue to
consider the child’s best interests. Given the facts of the case, the child’s best interests are served by
remaining in the original foster home and good cause was found to deviate from
the placement preferences. The court
ordered the child returned to the care of her foster mother.
[Posted May 28, 2015]
Ninth Circuit Disagrees With the Third Circuit's Interpretation of the Local Event Exception and Upholds Federal Jurisdiction Under the Class Action Fairness Act for an Intrastate Mass Environmental Tort Alleged to Span 40 Years
On April 27, 2015, the Ninth Circuit Court of Appeals issued its Opinion in Allen, et. al. v. The Boeing Company holding that the District Court for the Western District of Washington erred when it remanded the environmental mass tort claims of the plaintiffs to state court under the local event exception to federal jurisdiction under the Class Action Fairness Act (“CAFA”).
This case originated in Washington State Court when 110 named plaintiffs brought their state claims for negligence, nuisance and trespass against The Boeing Company (“Boeing”) and for negligence against Landau Associates (“Landau”) alleging that “for over forty years Boeing released toxins into the groundwater around its facility in Auburn, Washington, and that for over a decade Landau had been negligent in its investigation and remediation of the pollution.” The defendants removed the case asserting federal jurisdiction based on diversity of citizenship and CAFA. Boeing contended that the plaintiffs’ action was a “mass action” under CAFA, § 1332(d)(11)(B) that states:
[T]he term “mass action” means any civil action (except a civil action within the scope of section 1711(2)) in which monetary relief claims of 100 or more persons are proposed to be tried jointly on the ground that the plaintiffs’ claims involve common questions of law or fact, except that jurisdiction shall exist only over those plaintiffs whose claims in a mass action satisfy the jurisdictional amount requirements under section (a).
Congress enacted CAFA to curb potential abuses of class and mass action procedures in state courts. Regarding mass action, the Senate Committee Report states:
The Committee finds that mass actions are simply class actions in disguise. They involve a lot of people who want their claims adjudicated together and they often result in the same abuses as class actions. In fact, sometimes the abuses are even worse because the lawyers seek to join claims that have little to do with each other and confuse a jury into awarding millions of dollars to individuals who have suffered no real injury.
S. Rep. No. 109-14, at 7 (2005), reprinted in 2005 U.S.C.C.A.N. 3, 44.
The Western District of Washington remanded the case to state court holding that plaintiffs’ claims fall within the local event exception to CAFA federal jurisdiction in CAFA, § 1332(d)(11)(B)(ii)(I), to wit:
As used in subparagraph (A), the term “mass action” shall not include any civil action in which – all of the claims arise from an event or occurrence in the State in which the action was filed, and that allegedly resulted in injuries in that State or in States contiguous to that State.
There was no controversy that the defendants’ removal was proper under CAFA’s mass action provision, or that the alleged pollution occurred in Washington and its alleged effects were limited to that state. The sole CAFA issue in contention was whether Boeing’s alleged 40 years of pollution and Landau’s alleged ten years of negligent response to the alleged pollution met the local event exception’s definition of “an event or occurrence.” As the Ninth Circuit recited, the Supreme Court clarified in Dart Cherokee Basin Operating Co. v. Owens, 135 S. Ct. 547, 554 (2014), that under CAFA, there is no presumption against finding federal jurisdiction, and the proponent of a CAFA exception to jurisdiction carries the burden of proof.
In its analysis, the Ninth Circuit noted its prior analysis of the local event exception in its 2012 decision in Nevada v. Bank of America Corp., 672 F.3d 661, where it held:
The “event or occurrence” exclusion applies only where all claims arise from a single event or occurrence. “[C]ourts have consistently construed the ‘event or occurrence’ language to apply only in cases involving a single event or occurrence, such as an environmental accident, that gives rise to the claims of all plaintiffs.”
Id. at 688 (original emphasis) (citations omitted). The Ninth Circuit analyzed the Third Circuit’s construction of the exception in Abraham v St. Croix Renaissance Group, L.L.L.P., 719 F.3d 270 (3rd Cir. 2013), cited by the plaintiffs to support removal. That case involved claims of nuisance from the wind dispersion of bauxite and mud, and the Third Circuit held that “treating a continuing set of circumstances collectively as an ‘event or occurrence’ for purposes of the mass-action exclusion is consistent with the ordinary usage of the words, which do not necessarily have a temporal limitation.” The Ninth Circuit disagreed with the Third Circuit’s construction, and stated “such a broad definition renders portions of CAFA redundant and is not supported by legislative history.” Regarding the single local event exception, the Senate Report states:
The purpose of this exception was to allow cases involving environmental torts such as a chemical spill to remain in state court if both the event and the injuries were truly local, even though there are some out-of-state defendants.
The Ninth Circuit took note that the Senate referred to a chemical “spill,” not “spills.” Holding to its 2012 precedent, the Ninth Circuit read the exception as referring to a single happening stating that its definition: “(1) reflects the most common understanding of the terms; (2) is consistent with, and furthers the purposes of CAFA; [and] (3) conforms to the judicially endorsed admonition in CAFA that exceptions to federal jurisdiction under CAFA are to be strictly construed….”
The Opinion may be accessed at:
https://ecf.ca9.uscourts.gov/n/beam/servlet/TransportRoom?servlet=ShowDocMulti&incPdfHeader=Y&pacer=t&incPdfHeaderDisp=Y&d=9509223&
dktType=dktPublic&caseId=265894&incPdfFooter=y&outputType=doc&outputForm=view
[Posted Apr. 28, 2015]
EEOC Publishes Proposed Regulations on Corporate Wellness Programs
In recent years, corporate wellness programs have become increasingly popular, and so the EEOC received some criticism last year when it sued several companies claiming they violated the ADA with such programs. According to Law360, at a Senate Health Education Labor and Pensions Committee hearing in November, GOP lawmakers expressed their opinion that “the agency’s litigation arm should have held off on suing until issuing guidance to help employers devise wellness programs that steer clear of potential disability discrimination.” The EEOC is now coming through with the requested guidance, publishing today its Notice of Proposed Rulemaking (“NPRM”) in the Federal Register. The publication initiates a 60-day comment period.
According to the EEOC, “[t]he [] proposed rule would provide much needed guidance to both employers and employees about how wellness programs offered as part of an employer’s group health plan can comply with the ADA consistent with provisions governing wellness programs in the Health Insurance Portability and Accountability Act (HIPAA), as amended by the Affordable Care Act.” The proposal amends ADA regulations to delineate when businesses may use incentives to encourage employees to take part in wellness programs that include disability-related inquiries or medical examinations. The agency says that the ADA allows companies to offer incentives “of up to 30 percent of the total cost of employee-only coverage in connection with wellness programs.”
The NPRM also emphasizes that employee health programs that include disability-related inquiries or medical examinations must be genuinely voluntary. For an employee’s participation in such a program to be deemed voluntary, employers must provide a notice describing what information will be collected, what will be done with the information and how confidentiality will be maintained. Finally, wellness programs and any disability-related inquiries or medical exams associated with them must be reasonably designed to promote health or stave off disease.
The EEOC also published this Fact Sheet for Small Businesses and a Question and Answer document for the general public. The entire NPRM may be viewed here: https://www.federalregister.gov/public-inspection.
[Posted Apr. 20, 2015]
What Right Do Grandparents Have to Visitation?
In this age of the ever-changing family dynamic, clients frequently ask what rights grandparents have to visitation with their grandchildren. The answer is that Oklahoma law recognizes the positive impact grandparents can have on a child, but the paramount concern is the parents’ constitutional right to raise the child as they see fit. Grandparents have a heavy burden to overcome that constitutional right to be awarded legal visitation with the child.
Oklahoma’s statute on grandparent visitation is found at 43 O.S. § 109.4. Section 109.4 provides that a grandparent may be allowed court-ordered visitation with a minor, unmarried grandchild if: 1) Visitation is in the child’s best interest; 2) The child’s parents are unfit or “the grandparent has introduced clear and convincing evidence to (i) rebut the presumption that a fit parent acts in a child’s best interest and (ii) demonstrate that without grandparental visitation the child would suffer harm or potential harm;” and 3) There has been a disruption to the child’s nuclear family due to one of fourteen factors listed in the statute. Some of those factors include divorce of the parents when the grandparents have an existing relationship with the child, death of the parent of the child who is the child of the grandparents, or when custody of the child is granted to someone other than the child’s parent and the grandparents have a preexisting relationship with the child. Under no circumstances may a grandparent be granted visitation with the child when the child’s nuclear family is intact and both parents object.
Furthermore, even though the legislature lists the child’s best interest as the first factor in the statute, the Oklahoma Supreme Court has continuously held that the courts can only consider the child’s best interest AFTER the grandparents prove parental unfitness or harm to the child and a disruption to the nuclear family. The focus is, therefore, on preserving the parent’s constitutional rights rather than the best interest of the child. See, i.e., Craig v. Craig, 2011 OK 27, 253 P.3d 57; and see Murrell v. Cox, 2009 OK 93, 226 P.3d 692.
[Posted Apr. 13, 2015]
Tenth Circuit COA Denies Indemnity Under Texas Fair Notice Rule Based on Indemnitor's Implicit Duty to Indemnify Against Indemnitee's Fault
On February 3, 2015, the Tenth Circuit Court of Appeals held that the Fair Notice Rule under Texas law barred an alleged indemnitee’s demand to recover the costs of successfully defending claims of fraud, nuisance, restitution, and violations of CERCLA and the Texas Solid Waste Disposal Act in Martin K. Eby Constr. Co., Inc. v OneBeacon Insurance Co. and Kellogg Brown & Root, LLC, No. 13-306 (10th Cir. 2015).
In the underlying case, the plaintiff brought claims against Eby and Kellogg alleging that when the companies were constructing a water pipeline, workers struck a methanol pipeline, causing environmental damages. The plaintiff alleged that Eby accidentally struck the methanol pipeline, and that Kellogg’s inaction after Eby caused the leak resulted in the damage. Both defendants prevailed, and the case at bar arose from Kellogg’s demand to recover its cost of defense from Eby under the indemnity provision of the parties’ contract, including over $2 million in attorney’s fees. Eby promised to indemnify Kellogg “for all claims, including attorneys’ fees and expenses, ‘directly or indirectly arising from or caused by or in connection with the performance or failure to perform any work’ by Eby.”
The Court construed the indemnity clause broadly to conclude that while the clause did not specifically state that Eby agreed to indemnify Kellogg for Kellogg’s malfeasance, it covered claims “involving Kellogg’s failure to comply with a duty created by something Eby had done.” Since Eby hit the methanol pipeline causing the leak, and the plaintiff in the underlying action alleged Kellogg should have taken corrective action, the indemnity clause was broad enough to cover the plaintiff’s claims against Kellogg for Kellogg’s fault. Eby and its insurer argued that the indemnity clause was unenforceable under the Fair Notice Rule. Kellogg argued unsuccessfully in the trial court that the Fair Notice Rule did not apply because it is seeking indemnity for Eby’s conduct, not its own.
The Texas Fair Notice Rule is similar to the conspicuity rules enforced in many other jurisdictions. The Rule requires that “promises to indemnify a party for its own fault must be expressly stated and conspicuous.” Relying on Texas cases applying the express negligence rule, the Court held that the Fair Notice Rule might apply when the indemnity clause covers an indemnitee’s fault implicitly despite no express mention of such claims. Finding that the facts presented gave rise to an implicit duty for Eby to indemnify Kellogg for its own fault, the Court held that the Fair Notice Rule applied to each of the claims asserted against Kellogg in the underlying action, including fraud, nuisance, restitution, and violations of CERCLA and the Texas Solid Waste Disposal Act.
The Court reviewed the parties’ contract, and finding that the indemnity clause was not conspicuous as it was in single-spaced, small black and white print on page 86 of a 197-page document, it held the clause unenforceable thereby affirming the summary judgments entered by the lower court in favor Eby and its insurer.
The full opinion is available: http://www.ca10.uscourts.gov/opinions/13/13-3076.pdf.
[Posted Mar. 12, 2015]
Adoptive Parents Should Utilize the Adoption Tax Credit
With tax time bearing down upon us, adoptive families should remember to utilize the adoption tax credit for qualified adoption expenses and the exclusion for employer-provided adoption assistance. The nonrefundable tax credit for 2014 is $13,190.00 per child. Qualifying expenses include adoption fees, court and attorney fees, travel expenses and other expenses directly related to the adoption.
The income limit for both the credit and the exclusion is based on modified adjusted gross income (MAGI). The credit and exclusion begin to phase out when the adoptive family’s 2014 income reaches $197,880.00. Once income reaches $237,880.00, the adoptive parents no longer qualify for the credit or exclusion. However, if income is below $197,880.00, the credit or exclusion will not be affected.
In most cases, the credit or exclusion is limited to amounts the adoptive parents actually pay for the adoption. However, if the adopted child is a U.S. child with special needs, the adopting family is eligible for the full credit or exclusion, even if the family did not pay qualified adoption expenses. To be considered a special needs child for purposes of the adoption tax credit, the child must have been a citizen or resident of the U.S. when the adoption began, the state must determine that the child cannot or should not be returned to the parent’s home, and the state must determine the child probably would not be adoptable without assistance to the adoptive family.
For more information, visit the IRS website. In particular, Topic 607 - Adoption Credit and Adoption Assistance Programs, provides a helpful explanation and the particular forms necessary to claim the credit or exclusion.
[Posted Feb. 24, 2015]
U.S. Supreme Court Rules that in the Absence of a Statement in the Complaint as to the Amount in Controversy, a Defendant's Notice of Removal Need Only Include a Plausible Allegation that the Amount in Controversy Exceeds the Jurisdictional Threshold
On December 15, 2014, the United States Supreme Court considered this question in Dart v. Cherokee Basin Operating Co., LLC v. Owens, 574 U.S. ___ (2014): “To assert the amount in controversy adequately in the removal notice, does it suffice to allege the requisite amount plausibly, or must the defendant incorporate into the notice of removal evidence supporting the allegation?” The Respondent, Owens, had filed a putative class action in Kansas state court against Dart Cherokee Basin Operating Company, LLC and Cherokee Basin Pipeline, LLC (collectively “Dart”) for underpaid royalties under certain oil and gas leases. In the Complaint, Owens sought only “a fair and reasonable amount” to compensate the putative class members.
Dart removed the case to the U.S. District Court for the District of Kansas pursuant to the Class Action Fairness Act of 2005 (“CAFA”), alleging with respect to the amount in controversy that the purported underpayments totaled in excess of $8.2 million. Owens moved to remand, arguing that the notice of removal was “deficient as a matter of law” for failing to include evidence proving that the amount in controversy exceeded $5 million as required by CAFA. Dart responded with a declaration from one of its executive officers detailing the damages calculation. Owens did not challenge Dart’s calculation but argued the “evidence” came too late. Ultimately, the district court granted Owens’ remand motion. The Tenth Circuit denied Dart’s petitions for review, but the U.S. Supreme Court granted certiorari to resolve a division among the circuits on the question presented.
In the opinion written by Justice Ginsburg and joined by Justices Roberts, Breyer and Sotomayor, the Supreme Court explained that under §1446(a) “a defendant seeking to remove a case to a federal court must file in the federal forum a notice of removal ‘containing a short and plain statement of the grounds for removal.’” And, §1446(a) follows the general pleading requirement provided in Rule 8(a) of the Federal Rules of Civil Procedure. The Court further explained that when a plaintiff invokes federal jurisdiction, the plaintiff’s allegation with regard to the amount in controversy is accepted if made in good faith. “Similarly, when a defendant seeks federal-court adjudication, the defendant’s amount-in-controversy allegation should be accepted when not contested by the plaintiff or questioned by the court.” The Court instructed that it is only when the plaintiff contests the defendant’s allegation that the district court must determine whether, by the preponderance of the evidence, the amount in controversy exceeds the jurisdictional threshold. The opinion, on this issue, concludes with the Court’s holding that “a defendant’s notice of removal need include only a plausible allegation that the amount in controversy exceeds the jurisdictional threshold. Evidence is required by §1446(c)(2)(B) only when the plaintiff contests, or the court questions, the defendant’s allegation.”
The full opinion is available at: http://www.supremecourt.gov/opinions/14pdf/13-719_8mjp.pdf.
[Posted Feb. 16, 2015]
Oklahoma County District Judge Holds that 2013 Version of Section 19.1 of Title 12 of the Oklahoma Statutes is Unconstitutional
Okla. Stat. tit. 12, sec. 19.1 passed in 2011 required plaintiffs in professional negligence actions to file an “affidavit of merit” in support of their claims. That statute was declared unconstitutional by the Oklahoma Supreme Court in Wall v. Marouk, 2013 OK 36, on the bases that the provision was a special law and created a financial burden on access to the courts. Following that opinion, in 2013, the Oklahoma Legislature passed the most recent version of section 19.1, which requires an “affidavit of merit” to be filed “[i]n any civil action for negligence where in the plaintiff shall be required to present the testimony of an expert witness to establish breach of the relevant standard of care and that such breach of duty resulted in harm to the plaintiff.” On January 16, 2015, Oklahoma County District Judge Bryan C. Dixon ruled that the 2013 version of section 29.1 is also unconstitutional, as it continues to create “a subclass of tort victims and tortfeasors for cases requiring an expert witness to establish the standard of care and violation of that standard.” Judge Dixon explained, “Merely changing the wording from professional negligence to the new language involving experts does not resolve this constitutional problem.”
See the full opinion here: http://www.oscn.net/dockets/GetCaseInformation.aspx?db=oklahoma&number=CJ-2014-4764.
[Posted Feb. 10, 2015]
No Pay, No Play Law Declared Unconstitutional by Oklahoma Supreme Court
Plaintiffs filing automobile negligence claims no longer are excluded from claiming pain and suffering damages due to their own lack of insurance as a result of a decision of the Oklahoma Supreme Court. On December 16, 2014, the Court struck down 47 O.S. § 7-116, known as the “No Pay, No Play” law, in Montgomery v. Potter, 2014 OK 118. The law excluded uninsured plaintiffs from recovering pain and suffering in automobile accident cases, except in certain circumstances. Specifically, the law provided that:.
[I]n any civil action to recover damages arising out of an accident involving the operation of a motor vehicle or for any claim against the motor vehicle liability insurance coverage of another party, the maximum amount that a plaintiff or claimant may receive, if the plaintiff or claimant is not in compliance with the Compulsory Insurance Law, shall be limited to the amount of medical costs, property damage, and lost income and shall not include any award for pain and suffering…”
The Montgomery Plaintiff brought claims for injuries to herself and her minor child after being rear-ended by the defendant. At the time of the accident she was uninsured, her insurance having lapsed 60 days prior to the accident. The defendant alleged that the “No Pay, No Play” law prevented the plaintiff from recovering pain and suffering damages. The plaintiff responded that the law is unconstitutional as a “special law” precluded by the Oklahoma Constitution. The trial court agreed with plaintiff and the defendant appealed to the Oklahoma Supreme Court.
The Supreme Court agreed with the plaintiff that the law impermissibly creates a special class of victims of auto accidents who are uninsured out of a larger, more general class of all victims of auto accidents. The Oklahoma Constitution prevents the application of special laws where a part of a class of similarly-affected people are treated differently than the class as a whole. The Court pointed out that the “No Pay, No Play” law held uninsured drivers to a much stricter standard than other plaintiffs in auto accidents, despite whether those drivers are at fault. The Court struck down the law as unconstitutional.
[Posted Jan. 26, 2015]
Oklahoma Supreme Court Reverses $7 Million Fee Award to Class Counsel Where Nationwide Class Recovered Less Than $50 Thousand
On December 16, 2014, the Oklahoma Supreme Court issued its opinion in the case of Hess v. Volkswagen of America, 2014 OK 111, reversing the District Court’s award of $7 million in attorney’s fees to the class counsel. Hess had filed a class action in 2005 against Volkswagen for breach of express and implied warranties arising from an allegedly improperly designed front spoiler on the Jetta model. The class was certified and upheld on appeal to the Oklahoma Court of Civil Appeals. Ohio plaintiffs filed a similar action in 2004, and Volkswagen successfully decertified a similar action in Florida in 2005.
In December 2011, the parties settled, and the Ohio plaintiffs intervened in July 2012. The settlement required Volkswagen to notify over 2 million owners and lessees of the subject model nationwide, who could file claims for the cost to repair the front spoilers. No Oklahomans received a payout, and only 310 claims were paid nationwide, for a total distribution by Volkswagen of $45,780, or $140.00 per claimant.
The settlement required Volkswagen to pay the claimants’ reasonable attorney’s fees. Class counsel submitted a fee and expense application for $15 million. The District Court applied Oklahoma’s Lodestar method to determine the fee award of $3.6 million, which included a 5% deduction for the attorney fees applicable to the failed Florida litigation. Hess moved for reconsideration citing to the recently decided case Berry v. Volkswagen, 397 S.W.3d 425 (Mo. 2013), in which the Missouri Supreme Court approved a 2.0 enhancement multiplier to the Lodestar to determine class counsel’s fees. The District Court considered Berry, and amended its award by applying a 1.9 enhancement multiplier for a total fee award of $7.3 million. This prompted the instant appeal.
The Supreme Court reviewed the fee award under an abuse of discretion standard applying the Lodestar method that requires the District Court to review counsel’s time records, then arrive at the fee by multiplying counsel’s hourly rate by the time expended. The Court noted that in class actions, the fee may be enhanced upon consideration of multiple factors, including: (1) time and labor required; (2) novelty and difficulty of the questions; (3) skill required; (4) preclusion of other employment; (5) customary fee; (6) whether the fee was fixed or contingent; (7) time limitations; (8) amount involved and results obtained; (9) experience, reputation, and abilities of the attorneys involved; (10) undesirability of the case; (11) awards in similar cases; (12) risk of recovery; and (13) whether any benefits of the recovery take a non-cash form. The Court’s opinion focused on the amount involved and the results obtained by class counsel holding that “in all cases, the attorney fees must bear some reasonable relationship to the amount in controversy.”
First, the Oklahoma Supreme Court concluded that the District Court abused its discretion by including any of the fees from the failed Florida litigation in the fee award. In doing so, the Supreme Court rejected Hess’ arguments in support of the award that his counsel’s experience gained in the Florida litigation enhanced the successful settlement of the Oklahoma action, and Florida residents were included in the settlement class.
Addressing the District Court’s error in relying on the Berry decision from Missouri and applying a 1.9 enhancement factor, the Supreme Court held that Missouri law differs from Oklahoma law in the enhancement factors the trial court must consider, and that two factors relied upon by the Berry court were absent in this case. The Supreme Court also approved the First Circuit Court of Appeals’ holding in In re Volkswagen & Audi Warranty Extension Litigation, 692 F.3d 4 (1st Cir. 2012) that “the actual claims data collected by the settlement administrator is relevant to the enhancement question and in determining the appropriate fee.” In remanding the case back to the District Court for a proper determination of fees, the Supreme Court summarized:
This Court has long recognized the importance of the relationship between the amount sued for in a case seeking only money damages and the results obtained. As defined by Hess, the “class” included in excess of two million Jetta owners. Although in excess of 300 members have received full recovery for damage repairs and the warranty period has been expanded by twelve months through the settlement, if the pay-out is spread across the entirely of the defined class, recovery is miniscule. When we consider the award to the class, as did the federal court in Audi, we have little difficulty in concluding that application of a 1.9 enhancement figure to the lodestar amount constituted an abuse of discretion.
[Posted Jan. 12, 2015]
Supreme Court Rules Employees Not Entitled to Overtime Pay for Security Screenings
Employees required to undergo post-shift security screenings are not entitled to overtime pay for time spent waiting for and undergoing the screenings, according to an opinion issued last week by the U.S. Supreme Court. In Integrity Staffing Solutions, Inc. v. Busk, et al., hourly warehouse employees of Integrity Staffing sued to be compensated for the time involved in the screenings. The employees’ jobs consisted of retrieving products from shelves and packaging them for delivery to Amazon customers. At the end of each shift, Integrity required all warehouse employees to remove items on their persons, such as wallets, keys and belts, and pass through metal detectors. The employees claimed the screenings took around 25 minutes each day.
The District Court dismissed the claim for failure to state a claim under the Fair Labor Standards Act (“FLSA”), holding that the screening activities were not integral and indispensable to the job, and thus, not compensable under the FLSA. The Ninth Circuit Court of Appeals reversed in part, holding that the post-shift activities were compensable because the activities were “necessary” to the employees’ primary work and done for Integrity’s benefit.
The Supreme Court reversed the appeals court, relying on the Portal to Portal Act, 29 U.S.C. §251(a), which exempts employers from liability for claims for overtime related to traveling to and from work and claims preliminary to or postliminary to the principal activities of employment. The Court said the Court of Appeals was wrong in focusing on whether the employer required the post-shift activity. The Supreme Court held that an activity is compensable under the FLSA if it is “integral and indispensable to the principal activities that an employee is employed to perform.” Because the Court determined that time spent waiting and undergoing security screenings is not integral and indispensable to the job of pulling and packaging product, an employer is not required to compensate that time under the FLSA.
[Posted Dec. 18, 2014]
New York Appellate Court Holds that Pending or Anticipated Litigation Unnecessary to Invoke "Common-Interest Privilege"
On December 4, 2014, the New York Supreme Court, Appellate Division held that parties sharing identical legal interests may invoke the common-interest privilege to protect communications with common counsel when there is no pending or reasonably anticipated litigation. Ambac Assurance Corp. v. Countrywide Home Loans and Bank of Am. Corp., Case No. 651612/10. By adopting the interpretation of the privilege applied by most federal courts and the Restatement, the Court departed from prior New York cases that required actual or anticipated litigation to support a claim of common-interest privilege.
Ambac is a financial guaranty insurer that guaranteed payments on certain residential mortgage backed securities issued by Countrywide. Ambac brought the action alleging that Countrywide fraudulently induced Ambac to enter in the insurance agreements and breached those agreements. Ambac sued Bank of America as the successor in interest to Countrywide. Those secondary claims arose from a merger between a Bank of America subsidiary and a Countrywide entity.
The instant issue arose from Ambac’s quest for the production of several hundred documents reflecting communications between Bank of America, Countrywide and their common counsel during the pre-merger period. The defendants asserted protection against discovery under the common-interest privilege; however, the lower court rejected the claim and ordered production based on extant New York case law that required actual or anticipated litigation to support the privilege.
The common-interest privilege is a limited exception to the waiver of the attorney-client privilege that arises when a third party is involved in the communication between an attorney and client provided that “(1) the communication qualify for protection under the attorney-client privilege, and (2) the communication be made for the purpose of furthering a legal interest or strategy common to the parties.” A line of New York cases require the party claiming the privilege to establish additionally that the communication occurred while litigation was pending or reasonably anticipated.
The defendants asserted that because they are two heavily regulated public financial institutions, they required shared legal advice from counsel together to ensure their compliance with the law and to advance their common interest in successfully completing the merger. In reviewing the prior New York cases, the Court held:
These cases provide that when two parties with a common legal interest seek advice from counsel together, the communication is not privileged unless litigation is within the parties’ contemplation; on the other hand, when a single party seeks advice from counsel, the communication is privileged regardless of whether litigation is within anyone’s contemplation. We cannot reconcile this contradiction, as it undermines the policy underlying that attorney-client privilege.
The Court observed that case law from federal and Delaware courts, as well as the Restatement (Third) of the Law Governing Lawyers, § 76 (2000), hold that the common-interest privilege is not tied to the contemplation of litigation. In adopting this view and reversing the lower court, the Court held the application of the common-interest privilege is particularly suited to the case at bar where the two defendants, “having entered a merger agreement without anticipating litigation, and having signed a confidentiality agreement, required the shared advice of counsel in order to accurately navigate the complex legal and regulatory process involving completing the transaction.”
The full opinion is available at https://iapps.courts.state.ny.us/fbem/DocumentDisplayServlet?documentId=uz8JzzlYSZbAG5h9OkPhGA==&system=prod
[Posted Dec. 8, 2014]
Amici Curiae Urge Resolution of Whether the Clean Air Act Preempts State Tort Claims in Case to Watch Before the United States Supreme Court
Last month, the National Association of Manufacturers, National Mining Association, Nuclear Energy Institute, Corn Refiners Association, Council of Industrial Boiler Owners, Metals Service Center Institute and National Shooting Sports Foundation filed a brief as amici curiae in support of the Petitioners before the United States Supreme Court in Grain Processing Corp. v. Freeman, on Petition for a Writ of Certiorari to the Supreme Court of Iowa. The Petitioners have asked the U.S. Supreme Court to negate a class action alleging that it negligently releases harmful chemicals onto residents’ homes and properties, arguing that the state law claims are preempted by the Clean Air Act. The amici curiae’s brief states the issue for review by the high Court is “whether state tort claims involving air pollution, especially public nuisance, are preempted by the federal Clean Air Act.” The brief maintains that without resolution of the issue, a “destructive ‘dual track’ system where federal agencies and courts use conflicting standards to redress the same concerns” will result. The Respondents, at least according to the amicus curiae, argue that the Clean Air Act exists concurrently with state common law remedies, including public nuisance, and that such remedies are available even when a source complies fully with the Clean Air Act.
The amici curiae provide the Court with three reasons why it should grant certiorari to review the underlying Iowa Supreme Court decision, set for Conference before the Supreme Court on November 25, 2014: (1) the case presents the “ideal opportunity” to resolve the question remaining after the American Electric Power v. Connecticut, 131 S.Ct. 2527 (2011) decision that public nuisance claims were “displaced” by the Clean Air Act, i.e. whether state claims were also preempted; (2) the case presents an opportunity to resolve a split of authority existing within the federal and state judiciaries; and (3) unless the Court grants review and decides in favor of preemption, “the predictability and certainty of the [Clean Air Act’s] carefully designed permitting system will be replaced by the mutability and malleability of state common law – and the efficacy of the [Clean Air Act’s] pollution control system will surely be compromised.” The brief concludes with this summary of the amici curiae’s argument:
The current “Circuit by Circuit” and “state by state” approach to the question of preemption precludes any uniform standards for environmental compliance and enforcement, and also vitiates any reliable basis for capital investment, expanded operations and work-force stability. Since the [Clean Air Act] was enacted to promote all of those goals – as well as to promote jobs and a healthy economy – delaying review prolongs uncertainty and intensifies the dilemma facing not only the courts, but also the regulated community. Under these circumstances, granting certiorari now presents the best opportunity to resolve this difficult question.
It will be interesting to see whether the Supreme Court takes the opportunity to “clarify the respective roles of the federal and state regulatory authorities and courts in air pollution control,” as framed by the amici curiae’s brief. You can follow the Petition for Certiorari and the case docket here: http://www.supremecourt.gov/search.aspx?filename=/docketfiles/14-307.htm.
[Posted Dec. 1, 2014]
Parents May Be Liable for Their Child's Social Media Posts
Add one more reason why you may want to monitor your kids on social media. A Georgia appellate court held last month that parents potentially can be liable for what their kids post on Facebook. The decision rested on the fact that the parents made no attempt to determine the content of posts or whether the posts could be deleted after learning of the false and offensive information posted by their son.
The problems started when a 13-year-old boy, Dustin, and a female friend created a fake Facebook page posing as a classmate, Alex, using a computer and Internet account provided by Dustin’s parents. Dustin used a “Fat Face” app to create a profile picture of the classmate using a photo he took of her at school. Dustin and his friend posted racist and homosexual information to the profile and friended over 70 classmates in the first two days. The two posted updates and comments that were graphically sexual, racial and otherwise offensive and which stated Alex had mental health disorders and took illegal drugs.
Alex suspected Dustin and went to the school principal. Dustin and his friend admitted their actions and Dustin’s parents grounded him for one week from seeing friends after school. Nevertheless, the Facebook account remained active for another eleven months, continuing to accept and extend friend requests and posts, until Facebook deactivated it shortly after Alex’s parents filed the lawsuit.
Alex and her parents sued Dustin, his parents and others for libel. The trial court granted summary judgment in favor of Dustin’s parents on the claims against them but the Georgia appellate court disagreed. The appellate court pointed out that “[p]arents may be held directly liable … for their own negligence in failing to supervise or control their child with regard to conduct which poses an unreasonable risk of harming others.” The key question is “whether the parents had knowledge of facts from which they should have reasonably anticipated that harm to another would result unless they controlled their child’s conduct.”
The Court’s decision turned not necessarily on the original posting by Dustin, but on the parents’ failure to act after learning he created the fake profile. Given the nature of libel, the injurious conduct may continue to cause injury if published to additional readers or if it continues to exist in a public forum. Therefore, the appellate court held that a jury could reasonably find that Dustin’s parents’ negligence in not attempting to remove or correct the offensive profile caused some part of Alex’s injury resulting from Dustin’s actions. Based on that finding, Alex and her parents’ were allowed to maintain their claims against Dustin’s parents at the trial court.
[Posted Nov. 10, 2014]
Fifth Circuit Court of Appeals Finds CGL Coverage for Defective Home Construction
On October 29, 2014, the Fifth Circuit Court of Appeals issued its Opinion in Crownover v Mid-Continent Casualty Company, No. 11-10166, which held Mid-Continent liable for the cost of repairing residential construction defects under Texas law under its CGL policy issued to the home builder.
In 2001, the Crownovers contracted with Arrow Development for the construction of a new home. Within a year of completion, the home developed foundation and wall cracks, and the HVAC units failed due to defects in the duct system. The construction contract included a clause in Para. 23.1 that obligated Arrow to “promptly correct work…failing to conform to the requirements of the Construction Documents.” When Arrow refused the Crownovers’ repeated demands to correct the problems, they made the repairs at a cost of several hundred thousand dollars.
Pursuant to the contract, the Crownovers commenced an arbitration proceeding against Arrow. The Arbitrator found that Arrow had breached the express warranty in Para. 23.1 for failing to repair the foundation and HVAC defects, and awarded the Crownovers the cost of repairs. Arrow filed bankruptcy, and the court lifted the stay to allow the Crownovers to pursue Arrow’s insurer. After Mid-Continent denied the Crownovers’ demand, they commenced the instant action. On appeal, the Fifth Circuit evaluated the district court’s grant of summary judgment to Mid-Continent.
The Fifth Circuit framed the primary question on appeal as follows:
[W]hether a contractual provision in the construction contract between the Crownovers and Arrow, which obligated Arrow to repair its work where that work failed to conform to the requirements of the construction contract, was an “assumption of liability” that exceeded Arrow’s liability under general Texas law, thereby triggering a “contractual liability exclusion” in Arrow’s insurance contract with Mid-Continent.
The Policy stated that Mid-Continent “will pay those sums that [Arrow] becomes legally obligated to pay as damages because of…’property damage’ to which this insurance applies.” The contractual liability exclusion stated that “[t]his insurance does not apply to [] ‘property damage’ for which the insured is obligated to pay damages by reason of the assumption of liability in a contract or agreement,” subject to the exception for “liability…[t]hat the insured would have in the absence of the contract or agreement.” The Crownovers argued that since there was no express disclaimer of the implied warranty of good workmanship in the contract, Arrow was liable for the defects under Texas law notwithstanding the express warranty, and thus, the exception to the exclusion applied and the claim was covered.
The Fifth Circuit conducted its analysis pursuant to the burden-shifting paradigm for determining the applicability of policy exclusions, to wit:
[1] Initially, the insured has the burden of establishing coverage under the terms of the policy. [2] If the insured proves coverage, then to avoid liability the insurer must prove the loss is within an exclusion. [3] If the insurer proves than an exclusion applied, the burden shifts back to the insured to show that an exception to the exclusion brings the claim back within coverage.
Quoting Gilbert Texas Constr., L.P. v. Underwriters at Lloyd’s London, 327 S.W.3d 118, 124 (Tex. 2010).
In the first step of the analysis, the Court concluded, “Arrow’s defective work was an ‘occurrence’ that caused the HVAC system and the foundation to require repairs, both of which amounted to ‘property damage.’ Thus having found coverage, the Court moved on to analyze the contractual-liability exclusion. The Court held that for the exclusion to apply, Mid-Continent had the burden to show that Arrow was obligated to the Crownovers for the costs of the repairs, and that such liability exceeded Arrow’s liability under general law. Thus, Mid-Continent had to establish that Arrow’s express warranty set out in Para. 23.1 of the contract with the Crownovers imposed a greater duty on Arrow than those imposed by extant Texas law. The Texas Supreme Court had held previously that the contractual-liability exclusion does not apply merely because the obligation is expressed as a contractual duty. The determination for the court is whether the contractual duty expands the insured’s liability beyond that established by general law.
The Fifth Circuit noted that Texas law requires a party to perform its duties under a contract with reasonable care and skill, which includes the duty to repair (correct) deficient performance. The remedy for failing to fulfill the duty to repair is the cost to repair the defective work. Comparing these general duties to Arrow’s express warranty, the Court held that because Para. 23.1 of the contract required Arrow to correct its work that failed to conform to the Contract Documents, the contract did not expand Arrow’s existing obligations under Texas law. On this conclusion, the Court held that the contractual-liability exclusion in Mid-Continent’s policy did not apply.
Mid-Continent also argued that there was no coverage under the policy pursuant to the “your work” exclusion. The exception to the exclusion in the policy at the time Arrow constructed the home stated that it did not apply “if the damaged work or the work out of which the damage arises was performed on your behalf by a subcontractor.” Mid-Continent argued that it had removed the exception from the renewed policy issued to Arrow after the home was completed and before the alleged property damage manifested. Mid-Continent had tendered the opinions of an expert in the district court asserting that the deflection in the foundation of the Crownovers’ home did not exceed the limits established by the American Society of Civil Engineers until a date falling after the Mid-Continent policy changes were in effect. The Court rejected this argument holding that the appearance of cracks was sufficient to constitute “property damage,” regardless of whether they exceeded some deflection threshold. The Court held that since the evidence was undisputed that the damage to the foundation and HVAC systems appeared during the policy period that included the subcontractor exception, and because the subject work was performed by Arrow’s subcontractors, the “your work” exclusion did not apply.
In its final argument, Mid-Continent asserted that coverage was barred by the exclusions for “property damage” to:
(5) That particular part on which you or any contractors or subcontractors working directly or indirectly on your behalf are performing operations, if the “property damage” arises out of those operations; or
(6) That particular part of any property that must be restored, repaired or replaced because “your work” was incorrectly performed on it.
Paragraph (6) of this exclusion does not apply to “property damage” included in the “products-completed operations hazard.”
Acknowledging that these exclusions applied to property damage that occurred while the work was ongoing, Mid-Continent argued that that the damage to the foundation and HVAC occurred at the time they were installed, and thus, before the home was completed. The Court rejected this argument holding that it does not matter when the faulty work is installed, only when the physical damage arises. Since the foundation and walls did not exhibit cracks and the HVAC system was functioning when the home was completed, the Court found the coverage exclusions inapplicable.
In sum, the Fifth Circuit ordered that summary judgment be entered in favor of the Crownovers and held that Mid-Continent was bound by the Arbitrator’s finding that Arrow had performed defective work that it failed to repair, and thus, there being no applicable exclusions to coverage, Mid-Continent was liable to the Crownovers for the costs of the repairs.
For the full opinion, see: http://www.ca5.uscourts.gov/opinions%5Cpub%5C11/11-10166-CV1.pdf.
[Posted Nov. 3, 2014]
Woman's 1938 Battle Against Anti-Slackism
Kindergarten teacher Helen Hulick made Los Angeles court history in 1938 when she appeared as a witness wearing slacks, according to the Los Angeles Times. The judge rescheduled her testimony on this occasion and one other, ordering her to return in a dress. Ms. Hulick was quoted by the Los Angeles Times as saying, “You tell the judge I will stand on my rights. If he orders me to change into a dress I won’t do it. I like slacks. They’re comfortable.” Ms. Hulick stood her ground, and on her third court appearance in slacks, the judge sentenced her to five days in jail for contempt. Follow this link to the full story on the conclusion of Ms. Hulick’s battle against “anti-slackism:” http://www.latimes.com/local/california/la-me-california-retrospective-20141023-story.html
[Posted Oct. 28, 2014]
Oklahoma Attorney General Opinion Invalidates Electronically Signed Voter Registrations
On September 25, 2014, Oklahoma Attorney General Scott Pruitt issued an Opinion in response to a question submitted by Paul Ziriax, Secretary of Oklahoma’s State Election Board. See, Question Submitted by: Paul Ziriax, Secretary, State Election Board, 2014 OK AG 10.
In the Opinion, the Attorney General considered whether voter registrations that were signed electronically using the “Allpoint Pen technology” satisfied Oklahoma’s voter registration requirements as detailed in 26 O.S. §4-112(A) and OAC 230:15-5-84. The Allpoint Pen technology is an electronic pen that transmits an electronic signature to a machine that uses an actual pen to create a simulated signature on real paper using wet ink. The Voter Participation Center used this technology as part of a voter registration project to submit “numerous voter registration applications.” Id. at ¶1.
The Attorney General opined that because §4-112(A) requires that all voter registration applications be personally signed and that the all signatures must be “original,” the Allpoint Pen technology fails to meet the statutory requirements. The Attorney General explained that because a machine creates the actual signature submitted, the “resulting signatures could not have been said to have been made ‘personally…’” Id. at ¶2. Moreover, as the statute and administrative code both require original signatures and neither allow for substitution of an original signature with a facsimile or reproduction, none of the applications submitted using the Allpoint Pen technology would be valid under Oklahoma law.
Although the Opinion did not state the precise number of voter applications that are potentially invalid because of this ruling, it is likely to impact a significant number of voters. Further, as the Election Board does not issue voter identification cards if there are 24 days or less remaining before an election, it is possible that many of the individuals who submitted invalid registrations will be unable to submit a new application in time for the November 4, 2014 elections.
The Attorney General’s Opinion is available here: http://www.oscn.net/applications/oscn/deliverdocument.asp?citeid=474770
[Posted Oct. 21, 2014]
Powers of Attorney for Illness or Aging
A Power of Attorney is a legal document giving another person the power to act in your place without involving a court. A POA can give the person granting it (called the “principal”), and his family, peace of mind when they know an illness or the effects of aging might leave the principal unable to make appropriate decisions about his healthcare, finances and other matters. The principal can choose a trusted individual to pay bills, collect debts, manage investments or direct medical care in the event the principal cannot do so.
Individuals with serious illnesses or who are aging should consider a POA before one is actually necessary. Once the principal has become incompetent, i.e. he is no longer able to make responsible decisions, he no longer has the ability under the law to grant a POA. At that point, his family will likely have to go to court to seek guardianship of the individual, a more costly and time-consuming endeavor at a time when decision may need to be made quickly. Many also prefer POA’s over guardianship because the principal has more control over the extent of power granted to the chosen attorney-in-fact. For example, the principal may choose to allow a trusted relative to pay bills and manage medical care, but prefers to appoint another person or entity to manage investments.
Many considering this option are concerned that they are handing over decision-making power while they are still capable of handling their own affairs. However, this concern can be alleviated by drafting the power of attorney to become effective only upon the disability or incapacity of the principal. The principal may direct, for example, that two medical doctors must determine that the principal is incapacitated before the attorney-in-fact is granted any power. Additionally, the principal can revoke the power of attorney at any time or change his appointed attorney in fact, as long as he is still capable of making informed decisions.
Powers of attorney are one tool that can allow individuals to maintain some control over their persons and property while also providing some peace of mind. Many principals are relieved to know they have granted their loved ones the ability to sell property or withdraw retirement funds to help with the principals’ medical expenses if costs necessitate. The time involved in preparing a power of attorney is well worth the effort.
[Posted Oct. 13, 2014]
Drivers Should Review Insurance Limits as New Uninsured Motorist Law Goes Into Effect
A new Oklahoma statute set to go into effect on November 1, 2014 will have a significant effect on uninsured/underinsured motorist (“UM”) policies issued, renewed or reinstated after that date. UM coverage is applicable when an at-fault driver is uninsured or his insurance limits are less than the claim of the injured party. The injured party is then able to recover under his own UM policy. Oklahoma law requires UM coverage under each auto policy unless the policy holder rejects the coverage in writing.
Currently, Oklahoma law allows “stacking” of UM policies. This means that if you have UM coverage on more than one household vehicle, and UM coverage is applicable to a situation, you can seek to recover from your insurer under each UM policy if your damages warrant the recovery. For example, if each of three vehicles used by household members has UM coverage with a bodily injury limit of $25,000 and a household member is injured through the actions of an uninsured/underinsured motorist with damages totaling $75,000, the injured person can recover under all three UM policies for a total of $75,000.
The new law, 36 O.S. § 3636, will change Oklahoma law so that stacking is no longer required by insurance companies. (An insurer is still allowed to expressly allow stacking in the policy terms, but is no longer required to do so.) In other words, an insured person seeking to recover under his UM coverage will only be allowed to recover under one of his UM policies. Therefore, the injured driver mentioned above will have a maximum recovery under UM of $25,000. His additional UM policies will not be available for any damages above that limit.
All drivers should reexamine their policies to determine whether their UM polices will provide sufficient coverage in the event they are injured, or their vehicles are damaged, due to the fault of an uninsured motorist.
[Posted Sept. 30, 2014]
U.S. Supreme Court Urged to Take Up Question of Whether September 11 Attacks Satisfy "Act of War" Defense Under CERCLA
On August 27, 2014, the Plaintiff/Petitioner and Real Estate Developer, Cedar & Washington, LLC, filed its Petition for a Writ of Certiorari with the U.S. Supreme Court requesting the Court to reconsider what constitutes an “act of war” in the context of the Comprehensive Environmental Response, Compensation, and Liability Act (“CERCLA”), 42 U.S.C. §§ 9601-9675.
CERCLA provides an affirmative defense to claims for cleanup where the defendant establishes by a preponderance of the evidence that the environmental hazard resulted solely from an act of war. Id. at § 9607(b).
In May 2014, the Second Circuit Court of Appeals affirmed the U.S. District Court for the Southern District of New York’s decision that CERCLA cannot be used to force defendants to pay for cleanup costs resulting solely from an act of war, even if the act of war was not caused by a formal state actor. Cedar & Washington Assocs., LLC v. Port Auth. of N.Y. & N.J. ( In re September 11 Litig.), 751 F.3d 86 (2d Cir. N.Y.2014). In Cedar, the Second Circuit considered whether the terrorist attacks of September 11, 2001 constituted an “act of war” for purposes of applying the CERCLA exception. Although CERCLA does not define what an “act of war” encompasses, the Second Circuit held that actions of both state and non-state actors can constitute an act of war within the meaning of CERCLA’s liability exception.
Although in a typical international law context, courts have held that only actions of state actors can constitute an act of war, the Second Circuit held that the facts surrounding the September 11 terrorist attacks were “indistinguishable from military attack in purpose, scale, mean, and effect.” Id. at 89. Thus, even if narrowly applied, the CERCLA “act of war” affirmative defense was applicable and served as a complete defense.
The Second Circuit’s Opinion is available here:
http://www.ca2.uscourts.gov/decisions/isysquery/3a6e8f3b-6e44-4fa1-b042-d77897468bd5/1/doc/10-4197_opn.pdf#xml=http://www.ca2.uscourts.gov/decisions/isysquery/3a6e8f3b-6e44-4fa1-b042-d77897468bd5/1/hilite/
[Posted Sept. 22, 2014]
The Tenth Circuit Finds a Party's Election Not to Procure a Witness' Attendance Does Not Preclude its Use of the Witness' Deposition Testimony at Trial under Rule 32
The Tenth Circuit Court of Appeals recently affirmed a Colorado district court’s decision to allow the videotaped deposition testimony of an expert witness at trial pursuant to Fed. R. Civ. P. 32 in A.H. v. Evenflo Company, Inc., No. 13-1403 (10th Cir. Sept. 10, 2014). Rule 32 creates an exception to the general rule that deposition testimony is inadmissible hearsay, providing:
(4) Unavailable Witness. A party may use for any purpose the deposition of a witness, whether or not a party, if the court finds:
...
(B) that the witness is more than 100 miles from the place of hearing or trial or is outside the United States, unless it appears that the witness’s absence was procured by the party offering the deposition.
Fed. R. Civ. P. 32(4)(B).
It was undisputed that the expert witness at issue was more than 100 miles from the Colorado courthouse, living and working in Georgia. However, the plaintiffs argued to the appeals court that the district court should have excluded the deposition testimony because it “appeared” that the defendant had procured the expert’s unavailability. The Tenth Circuit rejected the plaintiffs’ arguments, stating that the record showed only that the district court suspected the defendant could have procured the expert’s live testimony if it had wanted to. The Tenth Circuit held that there is a difference between affirmatively procuring a witness’ absence and electing not to procure a witness’ attendance at the proceeding.
The full Order and Judgment is available here: http://www.ca10.uscourts.gov/opinions/13/13-1403.pdf. Note that the Tenth Circuit expressly states that the Order and Judgment may be cited for its persuasive value but it is not binding precedent except under the doctrines of law of the case, claim preclusion, and issue preclusion.
[Posted Sept. 15, 2014]
Federal District Court in Montana Sides with Third Circuit in Holding that CERCLA § 113(f)(3)(B) Contribution Claim Accrued from Settlement that did not Expressly Resolve CERCLA Liability
Faced with a lack of precedent in the Ninth Circuit, the District Court of Montana, Helena Division, wrestled with a split between the Circuit Courts of Appeal on the question of whether a Consent Decree that does not expressly resolve a potentially responsible party’s (“PRP’s”) CERCLA liability can trigger a contribution claim under CERCLA § 113(f)(3)(B). In its August 26, 2014 Order granting summary judgment to the defendant in the case of Asarco LLC v Atlantic Richfield Company (CV 12-53-H-DLC), the court considered the opposing conclusions reached by the Second and Third Circuit Courts of Appeal and held that the Third Circuit’s interpretation was “truer to the express language of [the statute].”
ASARCO operated a lead smelter at the site from 1888 to 2001. A predecessor to Atlantic Richfield operated a zinc fuming plant on land leased from ASARCO at the site from 1927 to 1972 at which time it sold the plant to ASARCO. The EPA added the site to the NPL due to the release of numerous hazardous substances. In 1998, ASARCO and EPA entered a Consent Decree that resolved EPA’s claims for multiple violations of RCRA and CWA. The Decree transferred the jurisdiction for the site cleanup from the CERCLA program to the RCRA program. The Decree required ASARCO to perform a wide range of activities to address the contamination.
The subject lawsuit was commenced by ASARCO seeking contribution from Atlantic Richfield under 42 U.S.C. § 9613(f)(3)(B). The central issue for the court was whether ASARCO’s claim was barred by the 3-year statute of limitations provided in 42 U.S.C. § 9613(g)(3)(B). To resolve this issue, the court had to determine whether the 1998 Consent Decree caused ASARCO’s contribution claims to accrue given that it did not expressly eliminate ASARCO’s CERCLA liability. Lacking any Ninth Circuit precedent, the court analyzed the opposing views previously expressed by the Second and Third Circuits.
In its prior decisions, the Second Circuit had interpreted § 113(f)(3)(B)’s reference to a “response action” as being a “CERCLA-specific term describing an action to clean up a site or minimize the release of contaminates in the future.” Thus, the Circuit held that § 113(f)(3)(B) contribution claims can be predicated solely upon the resolution of a PRP’s liability arising under CRECLA.
In Trinity Ind. v. Chicago Bridge & Iron Co., 735 F.3d 131 (3rd Cir. 2013), the Third Circuit expressly rejected the Second Circuit’s analysis. The Third Circuit held that “§ 113(f)(3)(B) does not require resolution of CERCLA liability in particular.” In reaching this conclusion, the Circuit considered that § 113(f)(3)(B) references resolving liability “for some or all of a response action,” however, Congress did not require that the response action be initiated under CERCLA. The analysis drew additional support from Third Circuit case law for cost recovery actions under § 107 that allowed the government to recover its costs if the government action qualified as a “removal action” under CERCLA’s definition. Thus, the Third Circuit rejected the Second Circuit’s holding that to qualify, a response action must be CERCLA-specific, and held that the response action must simply qualify as such under CERCLA’s definitions.
The Montana Federal District Court adopted the Third Circuit’s reasoning and held that “the plain language of § 113(f)(3)(B) [gives] rise to a claim for contribution after a party resolves some or all of its liability to the United States or a State for any ‘response action,’ or the costs of such action, that falls under the wide umbrella created by §§ 101(23)-(25).” Determining that ASARCO’s 1998 Consent Decree qualified as a CERCLA response action, the court held that ASARCO’s contribution claims accrued at that time, and thus, its 2012 action against Atlantic Richfield was time-barred.
[Posted Sept. 5, 2014]
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