6/23/2015

Around the Nation: June 2015

State news and updates from CLM chapters, reps, and committees.

By Bevrlee J. Lips

CALIFORNIA: Employers Now Liable for Staffing-Agency Errors

California businesses increasingly have relied upon the use of contract employees provided by employment or staffing agencies. Traditionally, these agencies were responsible for obtaining workers’ compensation coverage, paying wages, and handling payroll tax contributions, which induced businesses to utilize them for their labor needs. Unfortunately, this convenience is coming to an end. California Labor Code Section 2810.3 recently was amended to hold a business responsible for its staffing or employment agency’s failure to properly pay wages, provide adequate workers’ compensation insurance, and make payroll tax contributions. Now, a business must ensure that its agency is complying with the aforementioned legal requirements or it will be responsible for the resultant penalties and liabilities. The effect of this law on the viability of the contract labor marketplace has yet to be seen. Undoubtedly, its impact will be significant and the subject of much litigation in the years to follow.—From Orange County Chapter Member Robert A. von Esch

CONNECTICUT: Data Breach Loss Not Covered Under CGL Policy

In a nationally monitored case, the Connecticut Supreme Court upheld the insurer’s position that a data loss was not covered under a commercial general liability (CGL) policy. In Recall Total Information Management v. Federal Insurance Co., the plaintiff contracted with International Business Machines (IBM) to transport and store computer tapes that contained personal employee information. A subcontractor, Ex Log, was hired to transport the tapes. Subsequently, Ex Log lost the computer tapes when they fell off of a truck onto the roadside and were retrieved by an unknown individual. There was no evidence that the individual or anyone else gained access to the information or that the loss of the tapes caused injury to any employee. Due to these facts, the Connecticut Supreme Court found that neither defense nor indemnity was required; there was no coverage under the insured’s CGL policy for costs incurred in connection with the loss of the tapes.—From Connecticut Chapter Member Bruce Raymond

GEORGIA: Failure in Discovery Does Not Justify Exclusion of Evidence

In Hand v. South Georgia Urology Center PC, the Georgia Court of Appeals recently reversed a defense verdict in favor of a doctor in a case alleging medical malpractice. The allegations centered on the doctor’s use of a medical device for treatment of patients with enlarged prostates. The plaintiff complained of pain during the procedure, and it later was found that the device burned a hole between his rectal and urethral tissues. The doctor believed that the device malfunctioned and claimed to have used it only once or twice after the plaintiff. Upon learning of the injury, he claimed to stop using it completely. The device was demonstrated at trial. After the plaintiff rested, reports were discovered indicating that the doctor had used the device to treat six other patients after the plaintiff. Plaintiff’s counsel requested that the reports be admitted into evidence for purposes of impeachment. The trial court denied this request. The appellate court held that the trial court abused its discretion by excluding the reports for use as impeachment evidence because (1) whether the device was functioning properly and (2) whether the doctor believed it was functioning properly were material to the case. The court reasoned that the doctor knew about the information even though it was not requested during discovery and admitting the evidence would not result in “trial by ambush.” Therefore, the court overturned the verdict and remanded the case for a new trial.—From Greater Atlanta Chapter Vice President Tamika White

MISSOURI: Noneconomic Damage Caps Set

In Missouri, SB 239, a statutory cause of action for medical malpractice lawsuits, is set to go into effect on Aug. 28, 2015. The legislation was designed to create noneconomic damage caps that will be able to withstand constitutional scrutiny. It establishes tiered caps depending on the severity of the injury involved. There is a general cap of $400,000 and a cap of $700,000 for claims involving “a catastrophic personal injury,” (quadriplegia and several other categories) and wrongful-death claims (twice the current wrongful-death cap of $350,000). The caps apply regardless of the number of defendants and will increase annually by 1.7 percent.—From CLM Member Jeff Brinker

OREGON: Estoppel Did Not Negate Application of Policy Exclusion

In Deardorff v. Farnsworth, the insureds directed their insurance agent to obtain coverage for their horse stables. The quote excluded coverage for personal property in the insured’s care, custody, or control (CCC). The agent contacted the underwriter to inquire whether the insurer offered CCC coverage. The underwriter purportedly responded that “[l]iability exposure for property of others in the insured’s CCC, that is covered in liab form.” When the policy was issued, it included CCC property coverage but not CCC liability coverage. The liability policy included an exclusion for “property damage to…[p]ersonal property in the care, custody, or control of the insured.” During the policy period, the insureds were transporting horses that were owned by others when the trailer carrying the horses caught on fire, killing the horses. The insureds were sued for the loss. When the insurer denied the insured’s tender, the insureds filed suit against the insurer and the agent. The trial court held that the insurer was estopped from asserting the CCC exclusion. The Oregon Court of Appeals reversed. In its analysis, the court of appeals first determined that the provision at issue was an express exclusion rather than a condition of forfeiture. It then concluded that estoppel may only negate an exclusion where a representative of the insurer provides an interpretation of an ambiguous policy provision and the insured relies on that interpretation. In this case, there was no such interpretation, and as such, estoppel was inapplicable.—From CLM Member Geoffrey Bedell

TENNESSEE: Ninety-Day Extension of Statute of Limitations to Add Third Party

Tennessee has a one-year statute of limitations on personal injury claims. But under TCA Section 20-1-119, this period can be extended if a defendant avers the fault of a third party. In that event, the plaintiff has 90 days after the defendant’s pleading to add third parties. In Swearengen v. DMC, the Tennessee Court of Appeals recently held that the defendant does not have to tell the plaintiff the name of the party—only that there is a third party that may be at fault. It generally has been thought in Tennessee that the defendant must give information identifying the third party sufficient for service of process. Under Swearengen, the plaintiff would need to conduct discovery in the 90-day period and then add any party discovered based upon the answer.—From CLM Member Jimmy Wright



Bevrlee J. Lips was managing editor of Claims Management magazine (now CLM Magazine) from January 2012 until March 2017.

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