4/14/2017

Around the CLM - National April 2017

News and verdicts from around the nation.

By Bevrlee J. Lips

California: Los Angeles Reacts to Passage of Cannabis Proposition

In November 2016, California voters passed Proposition 64, a statewide initiative that establishes an extensive system to legalize, control, and regulate nonmedical commercial cannabis activities. Prop. 64 also will implement a taxation scheme for the cultivation and retail sale of recreational cannabis once its licensing program becomes effective in January 2018. 

In 2013, Los Angeles enacted Proposition D to regulate medical marijuana dispensaries within the city. After California adopted Prop. 64 to regulate recreational cannabis, the city sought to expand its existing regulatory scheme to encompass nonmedical commercial activity and licensing. In March, Los Angeles voters passed Proposition M, which allows for the replacement of Prop. D with an updated framework for regulating local commercial cannabis activity. Priority for nonmedical commercial licensing under Prop. M will be given to those medical marijuana businesses currently operating in compliance with Prop. D.—From CLM Member Ian Stewart 

Maryland: Contractor’s Claim Barred Against Design Professional

After winning a bid to upgrade Baltimore’s wastewater treatment plant, a contractor encountered significant delays and cost overruns due to faulty engineering plans drafted by an engineer hired by the city. Arguing that the city’s engineer had a duty to render accurate plans, the contractor filed a negligence case against the design professional to recover the economic losses sustained. In response, the engineer moved to dismiss on the grounds that it contracted only with the city and the aggrieved construction firm. Upholding the dismissal of this case, the Court of Appeals of Maryland in Balfour Beatty Infrastructure Inc. v. Rummel Klepper & Kahl LLP held that, without a direct contractual relationship, physical injury, or risk of physical injury, the economic loss doctrine bars parties from bringing negligence claims for purely economic losses. Since there would be no claim for a breach of contract in this case and no one suffered bodily injury, the design professional is not liable for malpractice.—From CLM Member Irwin R. Kramer

New York: What Took Lawyers 360,000 Hours Takes JPMorgan’s New Software Seconds 

JPMorgan is touting the use of a computer program to take the place of hundreds of thousands of hours of time it takes a typical legal team to review financial deals. The “learning machine,” called COIN, short for Contract Intelligence, goes through and interprets loan documents in seconds that JPMorgan estimates would have taken 360,000 hours for lawyers and loan officers to review previously. According to the company, the software commits fewer errors, reviews documents in seconds, and “never asks for vacation.”—From CLM Member Ned Babb

Ohio: Court Rejects “Continuous Trigger” Theory 

In Lightning Rod Mutual Insurance Co. v. Southworth, an Ohio appeals court was asked to decide if a “continuous trigger” theory could be applied to permit coverage for property damage occurring prior to issuance of a policy that provides coverage only for damage that occurs during the policy period. The insured, an installer of manufactured homes, was sued by a mobile home manufacturer for negligent installation that allegedly caused structural defects. In response, Lightning Rod filed a separate declaratory judgment action and moved for a summary judgment that coverage was excluded since the property damage occurred prior to the policy’s issuance. In seeking reversal of summary judgment in Lightning Rod’s favor, the installer argued that, in cases involving property damage of a continuing nature, all policies in effect from when damage first appears until it terminates are triggered for coverage. Based on the construction of the policy’s plain language, however, the appeals court rejected the continuous trigger approach.—From Northeast Ohio Chapter Secretary Michael C. Brink

South Carolina: When a Reservation of Rights Letter Is Not 

In Harleysville Group Ins. v. Heritage Group Communities Inc., the Supreme Court of South Carolina issued a decision that could force insurers to give more attention to reservation of rights letters. The insurer’s letter included much of the stock language used by insurers in issuing such letters. It identified the insured and the lawsuit at issue, summarized the allegations in the complaint, identified the policy numbers and policy periods for policies that potentially provided coverage, and, “through a cut-and-paste approach,” incorporated excerpts of various policy terms and provisions relating to the insuring agreement and Harleysville’s duty to defend as well as policy exclusions and definitions. The court held that the insurer failed to properly reserve its right to contest coverage of an underlying construction defect case because its letters “included no discussion of [its] position as to the various provisions or explanation of its reasons for relying thereon,” and “failed to specify the particular grounds upon which [it] did, or might thereafter, dispute coverage.”—From CLM Member J. Stephen Berry

Tennessee: Former Felony Record Does Not Support Negligent Hiring

In Fletcher v. CFRA LLC, the Tennessee Court of Appeals held as a matter of public policy that the hiring of a convicted felon, standing alone, is not enough to support a claim for negligent hiring in a case where the employee, after going off-duty, ends up in an off premises fight with the customer. The court noted, “Such a holding would effectively deter employers from hiring anyone with a felony record. The result would be that convicted felons would have a nearly impossible time finding gainful employment that would allow them to turn their lives around and become productive citizens. This would be contrary to public policy.” The appellate court affirmed the summary judgment granted to the employer.—From CLM Member James C. Wright 



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

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