Around the Nation: June 2013
State news and updates from CLM state chairs, reps, and committees.
No Right to Recover Pre-Tender Defense Costs
The Washington Supreme Court recently held that an insurer has no right to recover defense costs from an insured when, after accepting a late-tendered defense under a reservation of rights, the insurer obtains a declaration that the claims against the insured are not covered. In National Surety v. Immunex Corp., the insured tendered their defense years after claims against the carrier were made. The carrier was obligated to pay pre-tender defense costs, absent proof of actual prejudice, and post-tender defense costs until a court declared it had no duty to defend with no right of recoupment. A motion for reconsideration has been filed in this 5-4 decision to adopt a bright-line rule against recovery.—From Washington State Chapter Co-Chair Jacquelyn A. Beatty
Curtailing Double-Dipping in Asbestos Claims
Last year, Governor John Kasich signed into law House Bill 380, which makes a significant change to asbestos litigation in Ohio and possibly signifying the beginning of a larger shift. Ohio Rev. Code § 2307.953 is designed to prevent “double-dipping” by asbestos claimants who file lawsuits after already filing claims against one of the several asbestos bankruptcy trusts. Other states are following Ohio’s lead, and H.B. 982—the Furthering Asbestos Claim Transparency (FACT) Act of 2013—was introduced in the U.S. House of Representatives this year. That bill would require the asbestos trusts to disclose the individuals who have filed claims against trusts, their exposure histories, and any payments made on the claims.—From Ohio State Chapter Member John B. Stalzer
Social Media and Spoliation
In Gatto v. United Airlines, U.S. Magistrate Judge Steven Mannion ruled that a personal-injury plaintiff who deleted his Facebook account while the defendants were trying to gain access to it should be sanctioned for spoliation. The court held that the plaintiff “had a duty to preserve his Facebook account at the time it was deactivated and deleted,” and the defense would be prejudiced by the loss of the evidence. While the plaintiff was sanctioned for spoliation, the judge declined a request for legal fees, finding the order for adverse-inference jury instruction to be a sufficient penalty.—From New Jersey State Co-Chair Karen P. Randall
New Life Breathed into Joint and Several Liability
In Zurich American Insurance Company v. Heard, the Court of Appeals reversed a trial court’s ruling and found that a tortfeasor who settled a claim for more than another tortfeasor could sue for contribution so that each tortfeasor pays an equal share of the total amount paid. The court found that O.C.G.A. § 51-12-33 requires apportionment only if the tortfeasors are sued jointly. If that occurs and the jury actually apportions damages, then, and then only, would contribution be precluded. If that does not occur, however, then the “old” contribution rules of O.C.G.A. § 51-12-32 remain in effect.
Depending on the circumstances of the case, indemnity by the plaintiff could provide some protection to a settling party, especially if the indemnity includes the cost of defending a contribution claim. There is a chance the Supreme Court of Georgia will review the appellate court’s construction of these statutes, with contribution claims among joint tortfeasors being relegated once again to the annals of Georgia jurisprudence. Unless and until that occurs, litigants and their insurers are encouraged to consider the ramifications of settling claims that may not extinguish all of the exposures presented.—From Georgia State Chapter Member Phil Savrin
Fifth Circuit Finds Damage Caps Constitutional
After the Mississippi Supreme Court declined to address the constitutionality of damage caps, the Fifth Circuit made an Erie guess. The resulting Learmonth v. Sears, Roebuck & Co. opinion holds that the noneconomic cap does not violate Mississippi’s constitutional right of trial by jury or the separation of powers. But the decision leaves an open door: “[W]e believe that Learmonth has overlooked the possibility that, at least under some circumstances, the Mississippi Constitution’s due process clause or remedy clause might impose substantive constraints on the legislature’s authority to cap compensatory damages.” There are several pending state court appeals, and a case in federal district court, Clemons v. U.S., is poised for a potentially unfavorable decision on the constitutionality of the statute’s medical malpractice cases.
Learmonth is a reminder that enforcement of the cap requires a way to determine what portion of the verdict is for noneconomic damages. The Supreme Court denied Learmonth’s certified question because the amount of noneconomic damages was decided by a post-trial stipulation between the parties as opposed to the jury’s verdict.—From Mississippi State Chapter Co-Chair Robert Addison
PIP Payment Sufficient Notice
In Scott Hughes v. City of Portland, the plaintiff brought a personal injury action alleging that he was injured in a four-vehicle accident caused, in part, by a city employee. The trial court granted summary judgment for the defendant after ruling that the plaintiff had failed to give timely notice.
To bring an action against a public body for personal injury, ORS 30.275 requires that a notice of claim be made to the public body within six months of the date of the accident or loss. This can be satisfied if payment of all or part of the claim is made by or on behalf of the public body at any time. Payment by a public body of a PIP insurer’s request for reimbursement of PIP benefits provided to an injured party can be considered payment of part of the injured party’s claim.
The Court of Appeals agreed, at least in part, with the plaintiff because the summary judgment record included evidence that the defendant paid part of the claim. The court reversed the trial court ruling, stating that it follows that there is a genuine issue of material fact that precludes summary judgment.—From Oregon State Chapter Co-Chair Jack Levy
Jury Awards $28 Million in False Claims Act Suit
In one of the first cases under the False Claims Act and the Illinois Whistleblower Reward and Protection Act based on nursing home care, a federal court jury awarded $28 million in civil penalties against nursing home operators. In United States ex rel. Absher v. Momence Meadows Nursing Center Inc., the plaintiffs alleged that Medicare and Medicaid were fraudulently billed for “worthless services.” The government lost more than $3 million resulting from the worthless services provided by the nursing home, and damages were trebled to $9 million in penalties. The nursing home also falsely certified compliance with federal and state patient care regulations and retaliated against employees for complaining about substandard care and manipulation of records. The jury found 1,729 false or fraudulent claims and awarded a maximum statutory penalty of $11,000 per occurrence, or $19 million. The plaintiffs, two former employees, were awarded more than $400,000 for their retaliation claim. A notice of appeal was filed in April.—From Illinois State Lead Chair James A. Foster