2/18/2015

Around the Nation: February 2015

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

By Bevrlee J. Lips

CALIFORNIA: Arbitration and Prevailing Party Recovery of Attorney’s Fees

Two parties enter into an agreement that contains an arbitration clause and a prevailing party attorney’s fee provision that states, “The prevailing party in any arbitration shall be entitled to recover its attorney’s fees.” Can a prevailing party defendant recover attorney’s fees when the plaintiff initiated a lawsuit (not an arbitration proceeding) that sought damages and attorney’s fees as per the aforementioned attorney’s fee provision? A common response by many attorneys is that a prevailing defendant could recover his attorney’s fees because the defendant should not be deprived of his right to recover those fees simply because the plaintiff failed to abide by the arbitration clause in the contract.

However, the little-known case of Kalai v. Gray says otherwise. The court in this case held that an agreement that awards prevailing party attorney’s fees in arbitration does not provide for attorney’s fees in a court proceeding, even if the losing party refused to abide by the arbitration clause at issue. A defendant should look closely at the prevailing party attorney’s fee language in the contract at issue and give serious thought to promptly moving to compel arbitration to preserve his right to recover those fees upon the conclusion of the case.—From Orange County Chapter Member Robert A. von Esch, Esq.

DELAWARE: There’s No Place Like Home

Delaware courts have reached different conclusions on whether a foreign corporation consents to jurisdiction by complying with a statute requiring foreign corporations to register to do business and identify a registered agent, even if it is not “at home” under Daimler AG v. Bauman. In Astrazeneca AB v. Mylan Pharms. Inc., the court held that a foreign corporation does not consent to jurisdiction by following the mandatory registration requirement for all companies seeking to do business in Delaware and naming a registered agent. The court in Daimler held that merely doing business in the state does not confer jurisdiction and that complying with the registration statute is a part of doing business. The court also held that Sternberg v. O’Neil, which held that complying with the registration statutes was express consent to being sued in Delaware, is no longer valid post-Daimler.

In Acorda Therapeutics v. Mylan Pharms., a different judge on the same court held that complying with the foreign registration statute constitutes express consent to general jurisdiction. The judge determined that Daimler did not address consent to jurisdiction and, therefore, did not overrule it as a basis for general jurisdiction.—From CLM Member Paul A. Bradley 

MINNESOTA: Those 50 Percent or Less at Fault Not Jointly Liable

In Staab v. Diocese of St. Cloud, Alice Staab sustained injuries when her husband pushed her wheelchair through a doorway into a Catholic school building over an unmarked, five-inch step. The jury awarded damages and attributed 50 percent of the negligence to the Diocese and 50 percent to Mr. Staab, the “empty chair” defendant.

The Staab case addressed Minn. Stat. § 604.02, which governs joint and several liability. It provides that all liable defendants are severally liable unless (1) a party’s fault was greater than 50 percent; (2) two or more parties acted in a common scheme; (3) a party committed an intentional tort; or (4) a party violated certain environmental or public health laws. Subdivision two of the statute provides for reallocation of uncollectible amounts from any negligent defendant. Mrs. Staab argued that since Mr. Staab’s share of the award could not be collected from him, it should be reallocated to the Diocese. The Minnesota Supreme Court disagreed and held that if a party does not fall under one of the four categories of § 604.02, subd. one, then the party can never be subject to the reallocation provision in subdivision two. As a result, the Diocese was not responsible for paying more than 50 percent of the damages awarded to Mrs. Staab.—From CLM Member John Crawford

MISSOURI: Excess Insurer Sues Primary for Bad Faith

The Missouri Supreme Court in Scottsdale Insurance Company v. Addison Insurance Company has held that an excess insurer can sue a primary carrier for bad faith. In Scottsdale, the primary carrier declined to settle for its policy limits. The case was eventually settled for the primary carrier’s limits plus an additional payment by the excess carrier, Scottsdale, of $1 million. Scottsdale then brought a bad faith action against the primary carrier. The court also expressly held that claims for bad faith are assignable. The 8th U.S. Circuit Court of Appeals had previously opined that a Missouri court would hold they were not assignable.—From CLM Member Jeffrey J. Brinker

NEVADA: A Question of Law and Policy Limits

In Federal Insurance Co. v. Coast Converters Inc., the Nevada Supreme Court considered an appeal from a judgment on a jury verdict finding an insurance company liable for breach of contract and violation of the Nevada Unfair Claims Practices Act. Electrical problems at a plastic bag manufacturing plant led to damaged machinery and defective bags. The dispute involved whether the defective bags were covered under property damage or business interruption provisions of the policy and whether a policy limit of $2 million or $5 million applied to the loss. The district court submitted both issues to the jury. A jury awarded the manufacturer more than $4 million for breach of the insurance contract, impliedly finding that the loss was property damage and the $5 million limit applied. The court reversed and remanded the case, finding (1) the policy provision under which the defective bags were covered was a question of contract interpretation and a question of law; and (2) once the jury determined when Coast knew or should have known about the damages, the district court should have determined which policy limits applied because that, too, was a question of law.—From CLM Member Gina M. Mushmeche, Esq.

OREGON: Social Host Has Liability in Third-Party Claim

In Deckard v. Bunch, an Oregon court recently held that ORS 471.565, a statute that prevents a social guest from bringing suit against a social host for serving alcohol to visibly drunk guests, does not prevent a third party from filing suit against the host if the third party is injured by the guest in an accident. The Oregon Court of Appeals analyzed the legislative history and found it did not support an inference that the legislature intended to wholly eliminate statutory liability against a social host as to innocent third parties.—From CLM Member Jack Levy 

TENNESSEE: No Lien for Hospital When Adjusted Bill Is Paid

Can a hospital maintain its lien for the unadjusted cost of services even though it has been paid an adjusted amount by an insurer? In West v. Shelby County Healthcare Corp., the trial court in this case held in the affirmative. However, the Court of Appeals reversed, and the Tennessee Supreme Court affirmed the Court of Appeals. Except for unpaid copays and deductibles, a hospital may not maintain a lien after an insurer has paid the adjusted bill in full according to agreements.—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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