6/19/2017

Around the CLM - National June 2017

Alabama’s Workers Compensation Act is declared unconstitutional, New Jersey disallows symptom magnification testimony, and Pennsylvania parses the enforceability of an asbestos exclusion.

By Phil Gusman

Alabama: Trial Court Declares State Workers Compensation Act Unconstitutional 

In May 2017, the trial judge in the matter of Clower v. CVS Caremark Corp. ruled that two sections of the Alabama Workers Compensation Act are unconstitutional. Because the statute is non-severable under Alabama law, the result is that the entire Alabama Workers Compensation Act is declared unconstitutional. The two specific sections addressed by the trial court are the statutory cap of $220 per week allotted to individuals who have a permanent partial disability rating under Alabama Code § 25-5-68; and the cap on attorneys’ fees at 15 percent of the compensation awarded or paid in workers compensation proceedings, per Alabama Code § 25-5-90(a). The trial court stayed the order for 120 days to allow the legislature time to amend the Act, meaning the workers compensation law will remain in effect over that time. However, if the trial court’s order is allowed to stand, then it will dispose of the entire framework of workers compensation law in Alabama.—From Alabama Chapter Secretary Jeremy W. Richter

Colorado: Court of Appeals Expands the Definition of “Residential Construction”

In Broomfield Senior Living Owner LLC v. R.G. Brinkmann Company, a court of appeals determined that a senior living facility was “residential property” as opposed to “commercial property,” and so it was afforded the protections of the Homeowner Protection Act of 2007 within Colorado’s Construction Defect Action Reform Act. While the crux of the court’s ruling focused on the applicable statute of limitations to bring construction defect claims based on the contractually defined “accrual date,” the Broomfield ruling has major implications for construction defect litigation in Colorado generally. The ruling appears to broaden the types of properties considered “residential property,” which could open developers to more claims. At a time when affordable housing is sparse, the possibility that apartments and other buildings may now be deemed “residential” is likely to have a further chilling effect on new construction.—From CLM Member Christina M. Gilbertson

Pennsylvania: Enforceability of Asbestos Exclusion Reaffirmed 

The 3rd Circuit Court of Appeals reversed a district court’s judgment in General Refractories Co. v. First State Insurance Co. that had barred Travelers from enforcing a policy exclusion for thousands of claims “arising out of asbestos” on the basis that the language was ambiguous. General Refractories argued that the term “asbestos” merely connotes the physical substance in its raw form, and does not include its existence within finished products. In support, it introduced a different Travelers exclusion—contained in policies sold to other insureds—that barred coverage “whether or not the asbestos is airborne as a fiber or particle, contained in a product, carried on clothing or transmitted in any fashion whatsoever.” Travelers contended that the common asbestos exclusion covers injury claims related to asbestos in any form. In overturning the $36 million judgment, the court determined that the exclusion was unambiguous because the “losses relating to the underlying asbestos suits would not have occurred but for asbestos, raw or within finished products.”—From NE Ohio Chapter Secretary Michael C. Brink

New Jersey: Medical Testimony Deemed Inadmissible in Jury Trials

The New Jersey Appellate Division ruled in Rodriquez v. Wal-Mart Stores Inc. that medical testimony regarding symptom magnification is inadmissible in jury trials because it could unfairly affect the jury’s evaluation of the plaintiff’s credibility. The decision permits such testimony in non-jury trials. In Rodriguez, plaintiff’s expert testified that plaintiff’s accident caused her complex regional pain syndrome. Defendant’s neurologist testified that plaintiff engaged in symptom magnification because her complaints were inconsistent with objective medical testing, indicating that her perception of pain had a psychological component. The court ruled that such testimony impermissibly invaded the jury’s exclusive province to decide witnesses’ credibility. An expert may testify in a jury trial that test results contradict plaintiff’s claims, and may testify that plaintiff’s testimony is inconsistent with objective medical findings, without using terms deemed pejorative, such as “malingering” or “symptom magnification.”—From CLM Member Timothy P. Smith

New York: Arbitration Award Vacated

In Certain Underwriting Members at Lloyd’s London v. Insurance Company of the Americas, the U.S. District Court for the Southern District of New York vacated an arbitration award using, for the first time in recent years, the standard established by the 2nd Circuit Court of Appeals. The decision vacates an arbitration award rendered against reinsurers in the amount of $5 million, including current and future payments. The district court found that the arbitrator’s undisclosed relationships with principals of the ceding company warranted vacatur. The court noted that the arbitrator failed to disclose business relationships that would lead a “reasonable person to conclude that an arbitrator was partial to one party to the arbitration.” The ruling also found that under the “evident impartiality” standard established by the 2nd Circuit, the arbitrator’s failure to disclose his relationships with the principal of the ceding company was sufficient to vacate the arbitration award.—From CLM Members Timothy W. Stalker and Ryan A. Nolan

Washington: Supreme Court Expands “Efficient Proximate Cause” Analysis 

In Xia v. ProBuilders Specialty Insurance Company, the underlying plaintiff was injured by the inhalation of carbon monoxide. The insurer denied the insured’s tender based on the policy’s absolute pollution exclusion. In its decision, the Washington Supreme Court first found that the pollution exclusion would preliminarily apply to a bodily injury claim caused by carbon monoxide poisoning based on prior Washington cases addressing injury from fumes. However, the court then added a step to the analysis and found that the insurer must next determine whether the excluded occurrence is the “efficient proximate cause of the claimed loss.” Prior to this decision, the efficient proximate cause rule had only been applied to first-party coverage (e.g., property coverage), which is generally based on “covered perils.” Finally, the court found that the insurer committed bad faith by not defending the insured because the insurer “should have noted that a potential issue of efficient proximate cause existed.”—From CLM Member Geoffrey Bedell



Phil Gusman is managing editor of CLM magazine, a publication of the CLM. He can be reached at phil.gusman@theclm.org.

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