2/15/2017

Around the CLM - National February 2017

We look at the Right to Repair Act in California, reservation of rights letters in South Carolina, and whether a business must use an AED in Tennessee.

By Bevrlee J. Lips

California: California Right to Repair Act 

In drug and medical device cases, the manufacturer generally is entitled to a defense that preempts any state law claims. In a case involving the birth control device Essure, a California trial court judge has ruled in favor of the plaintiffs, denying a preemption defense and allowing the plaintiffs’ cases to go forward. The plaintiffs argue that the drug manufacturer did not properly complete post-market studies and therefore the state law claims may proceed. The judge also has consolidated 58 cases. Additionally, HR 5403, or “Ariel Grace’s Law,” was introduced to Congress to amend the Federal Food, Drug and Cosmetics Act to restrict claims of preemption in medical device cases. However, such legislation is considered unlikely to pass.—From CLM Member Ned Babb

Ohio: Evidence from Testimony Is Sufficient to Recover Under UM/UIM Provision

In Smith v. Erie Insurance Company, the Ohio Supreme Court resolved a certified question to address an automobile policy’s requirement that the insured present “independent corroborative evidence” that an unidentified vehicle caused the accident. The plaintiff filed suit seeking a declarationof entitlement to uninsured motorist coverage for a no-contact hit-and-run accident. In opposing Erie’s summary judgment motion, Smith submitted a state highway patrol accident report and a 911 call transcript, both derived solely from his statements. The trial court granted summary judgment to Erie on the basis that the “independent corroborative evidence” provision meant that Smith had to submit something independent of his testimony. In reversing, the appellate court determined that the “additional evidence” language was ambiguous and thus construed it in Smith’s favor. In affirming, the Ohio Supreme Court held that the “additional evidence” required to satisfy the UM provision “need only be additional and supportive.”—From CLM Northeast Ohio Chapter Secretary Michael C. Brink

South Carolina: Getting Specific with Reservation of Rights Letters

The South Carolina Supreme Court recently addressed the sufficiency of a reservation of rights letter where the carrier was providing a defense in a construction claim. The court found that, in order to be valid, the reservation of rights letter needs to contain some specificity as to the basis for the reservation and include sufficient information such that the insured can understand why the policy might not provide coverage. The court noted that a generic letter or merely “cutting and pasting” from the policy will not suffice. The court also emphasized the need to alert the insured as to other matters, including potential conflicts of interest for defense counsel, a possible need for special verdict apportioning damages, and the possibility of a declaratory judgment action. While not ruling on the issue, the court also noted that delays in issuing the letter could affect the validity.—From CLM Member Douglas C. Baxter

Tennessee: Does a Business Have a Duty to Use an AED? 

Statutes have been passed in a number of states relating to the purchase and use of automated external defibrillators (AEDs). Do these statutes impose any duty upon a business to acquire, purchase, or use an AED? The answer is “no,” according to the Tennessee Supreme Court. Also, since the business does not owe such a duty, the manufacturer also does not owe a duty as to training or use either. In Wallis v. Brainerd Baptist Church, the decedent collapsed after a cycling class held at a church’s recreational facility. The church had AEDs, and instructors had been trained. However, the instructor thought the decedent was having a seizure not a cardiac event and used wet towels instead of the AED. The widow brought an action claiming that had the AED been used, her husband would have survived and that the church had a duty to properly train its people on how to use the device. The Tennessee Supreme Court affirms the grant of summary judgment in the case.—From CLM Member James C. Wright

Washington: No Presumption of Harm in Stipulated Settlement

In Mutual of Enumclaw Ins. Co. v. Myong Suk Day, the Washington Court of Appeals held that the remedy of coverage by estoppel did not apply where the tort plaintiffs had fully and unconditionally released claims against the insured. Under state law, if the insurer has engaged in bad faith while defending under a reservation of rights, then the claimant pursuing the assigned bad faith claim may be entitled to a rebuttable presumption of harm and coverage by estoppel. In this case, however, the insured retained her claims against her insurer and assigned only claims against her agent. The settlement agreement included language requiring the tort plaintiffs to sign a full satisfaction of judgment once the assigned claims were concluded. After the tort plaintiffs settled with the agent, the trial court conducted a reasonableness hearing, concluded that the settlement amount was reasonable, and imposed coverage by estoppel. The Court of Appeals reversed, holding that the insured was legally insulated from any exposure on the agreed judgments by the terms of the settlement agreement.—From CLM Member Paul Rosner 

Wisconsin: Spokeo Takes Effect in the 7th Circuit 

The 7th Circuit recently issued its first opinion addressing a so-called “no-injury” federal class action, as discussed in Spokeo Inc. v. Robins. In Meyers v. Nicolet Restaurant of De Pere LLC, the U.S. Court of Appeals, 7th Circuit, dismissed putative class-action claims alleging purely statutory violations of the Fair and Accurate Credit Transactions Act. The panel determined that the plaintiff, whose injury arose out of the defendant’s alleged failure to truncate his credit card expiration date, had not suffered the requisite “concrete harm” sufficient to trigger federal standing. The ruling that “Spokeo compels the conclusion that Meyers’ allegations are insufficient to satisfy the injury-in-fact requirement for Article III standing,” demonstrates the increased hostility of federal courts toward no-injury statutory violation claims. That hostility does not signify the end of such claims, however, as plaintiffs are still entitled to pursue them in state court.—From CLM Member Benjamin E. Reyes



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

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