5/22/2017

Around the CLM - National May 2017

We look at construction defect standards in Colorado, key workers compensation reforms in New York, and product liability issues related to cigarettes in Kentucky.

By Phil Gusman

Colorado: New Standard for Construction Defect Claims 

Third-party claims in construction defect cases are timely so long as the first-party claims are not time-barred and the third-party claims are brought either during the first-party litigation or within 90 days of judgment or settlement, according to the Colorado Supreme Court in In Re Goodman v. Heritage Builders. Heritage has major implications for construction defect litigation in Colorado. Previously, statute of repose deadlines forced general contractors to hastily identify third-party defendants and bring actions out of fear of having such claims barred. Now, general contractors will be able to identify third-party claims and parties throughout litigation, and can use the process of discovery to bolster and validate these claims. On the other hand, a subcontractor’s ability to assert statute of limitations or statute of repose defenses in third-party actions has been significantly limited, if not eliminated altogether. —From CLM Member Christina M. Gilbertson

Florida: Court Considers if Chapter 558 Notice Is a “Suit”

The Florida Supreme Court’s answer to a question certified from the 11th Circuit will have a significant impact on construction defect lawsuits and the cost of insurance in the state. In Altman Contractors Inc. v. Crum & Forster Specialty Ins. Co., the 11th Circuit certified the following question: “Is the notice and repair process set forth in Chapter 558 of the Florida Statutes a ‘suit’ within the meaning of the CGL policies” issued by Crum & Forster to Altman? Simply put, if a 558 notice is not a “suit” triggering a defense, those in the construction industry might decline the pre-suit process, instead inviting litigation to secure a defense. However, imposing a defense would necessarily involve costly attorney’s fees, potentially driving up premiums. It is a lose-lose situation. During contested oral arguments on April 6 before Florida’s high court, both insured and insurer sparred over policy and legal definitions, along with legislative intent and insurer consent. One thing is clear: This is a highly anticipated decision that will impact the construction industry and insurers alike. From CLM Member Jason H. Klein

Kentucky: Court Finds Philip Morris Not Liable for House Fire Caused by Smoker 

A court dismissed a product liability claim against Philip Morris USA in a lawsuit stemming from a house fire caused by an adult who fell asleep while smoking, which resulted in 10 deaths including a number of young children. In Walker v. Philip Morris USA, plaintiffs claimed that the cigarette had a defective and dangerous design. The Nelson Circuit Court in Bardstown, Kentucky, though, found the cigarette design was not unreasonably dangerous. Plaintiffs also made claims against the landlord and his caretakers, alleging that there was no properly functioning smoke detector in the home. The court dismissed these claims as well, holding that there was no duty either by statute or common law for the landlord to maintain the home’s smoke detector. The court recognized the existence of a duty was primarily based in law, and this was appropriate for determination on summary judgment. The decision is not immediately appealable as there are still claims pending against one remaining defendant. —From CLM Member Thomas Glassman

New York: Key Workers Compensation Reforms Included in Budget

New York’s fiscal 2017-2018 budget, passed in April, and includes major comprehensive reforms to the workers compensation law that impacts claims administration. First, the chair of the state’s Workers Compensation Board has been mandated to produce new permanency guidelines and a drug formulary by Dec. 31, 2017, a tough deadline to meet. Second, claimants classified with permanent partial disabilities no longer have to look for work to qualify for benefits. This could lead to claimants’ attorneys filing RFA-1s to reinstate awards for previously disqualified claimants. Third, for new claims, the carrier will be able to take a credit for all benefits paid beyond 130 weeks of temporary partial indemnity benefits, provided that the carrier can show that the claimant is at maximum medical improvement. While these are the most important changes, there are others, and interested parties should see the full text for all of them. —From CLM Members Damon M. Gruber and Mark A. Hauck

Oregon: Jurisdiction Limited for Out-of-State Defendants

In cases where an act or injury giving rise to a claim occurs outside the state of Oregon, a corporate defendant can seek dismissal and require that the plaintiff refile the claim in the corporation’s home state. The recent Barrett v. Union Pacific decision by the Oregon Supreme Court follows the approach taken by the U.S. Supreme Court in Daimler AG v. Bauman, which essentially limits general jurisdiction to where a corporation is “at home,” meaning the state of incorporation and principal place of business. In Barrett, the Oregon Supreme Court held that Oregon could not exercise general jurisdiction over Union Pacific. Although Union Pacific had substantial business contacts with Oregon, they were only a small fraction of its overall national activities. Barrett read Daimler to mean that claimants cannot subject corporations to general jurisdiction in every forum where their businesses are substantial and continuous. Barrett is shaping up to be a boon for corporate defendants seeking predictability in structuring their businesses.From CLM Members Allen Eraut and Kevin Bergstrom

Washington: Insurer-Appointed Defense Counsel Authorized to Represent

In Kruger-Willis v. Hoffenburg, the Court of Appeals held that an insurer-appointed defense counsel was contractually authorized under the insurance policy to defend and represent the insured, even though defense counsel was not expressly authorized by the insured. In this case, the insured struck and damaged the plaintiff’s parked vehicle. The plaintiff sued the insured to recover for the diminished value of her vehicle. The insurance company appointed defense counsel to represent the insured in the lawsuit. Defense counsel never had contact with the insured, who was not involved in the defense against the lawsuit. After a defense verdict, defense counsel sought to recover attorney’s fees. Plaintiff’s counsel refused to pay the amount to the insurance company, contending that defense counsel had no right to represent the insured. The court rejected the plaintiff’s contention, noting an insurer has implicit authority under its duty to defend to authorize defense counsel to represent the insured. —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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