Around the Nation: March 2014

State news and updates from CLM state chairs, reps, and committees.

By Bevrlee J. Lips


Cost-Sharing Allocation for Construction Defect

In D.R. Horton Inc. v. Travelers Indemnity, the U.S. District Court for the District of Colorado decided how D.R. Horton’s defense costs should be equitably allocated between insurers and subcontractors who owed a joint duty to defend in a construction defect case. The allocation methods considered included “equal shares” and “policy limits.” The policy limits allocation was rejected because its results were arbitrary and unreliable. The court joined a minority of jurisdictions and assessed each represented party an equal share of the defense costs. Given that subcontractors owed a duty to defend only once, it was inconsequential if the subcontractor had multiple policies. The allocation formula further excluded unrepresented and nonparty subcontractors.—From Colorado State Chapter Member Mark A. Neider


Batson Challenge Extended to Sexual Identity

Almost 30 years ago, the U.S. Supreme Court issued an opinion in Batson v. Kentucky, which stated that peremptory challenges could not be used to exclude a juror based on race, as doing so would violate the Equal Protection Clause of the 14th Amendment. Over the years, the court extended this protection to include women. Last month, the 9th U.S. Circuit Court of Appeals ruled in SmithKline Beecham v. Abbott Laboratories that counsel could not exclude jurors based solely on sexual orientation. This is the first federal court opinion to specifically address the Equal Protection Clause for gays and lesbians in the jury box.—From California State Chapter Member Kathleen Walker


Transgender and Places of Public Accommodation

In Doe v. Regional School Unit 26, the Maine Supreme Judicial Court ruled that the rights of a transgender student were violated when school administrators arranged for the student to use the elementary school’s staff bathroom instead of the girls’ restroom. The ruling is the first in which a state supreme court has affirmed a transgender person’s right to equal access to restrooms in places of public accommodation. The decision could lay the foundation for other state courts that are facing questions about the rights of people who identify themselves as the opposite of their birth gender.—From Maine State Chapter Lead Chair David P. Very


Government-Sponsored Arbitrations

In Delaware Coalition for Open Government Inc. v. Strine, the 3rd U.S. Circuit Court of Appeals affirmed the District Court for the Delaware Court of Chancery, holding there is a First Amendment right of access to Delaware’s state-sponsored arbitration program on the basis that experience and logic favor opening the proceedings to the public. Under the “experience and logic” test, the court considered the tradition of accessibility to civil trials and arbitrations, finding in favor of granting public access (experience) and that the benefits of access outweighed the drawbacks (logic). A significant benefit to allowing access is the ability of stockholders and the public to understand how Delaware resolves major business disputes.—From Delaware State Chapter Lead Chair Paul A. Bradley


Going and Coming Rule Challenge

The Maryland Court of Appeals reversed on a workers’ compensation matter involving the “going and coming” rule. In Thaddeus Roberts v. Montgomery County, Md., a firefighter was working in a “light duty” position and sustained personal injuries in a motor vehicle accident that occurred while he was traveling from physical training at a local high school to a fire station. The employer encouraged firefighters, including those on light duty, to engage in such training. The purpose of his trip to the fire station was to pick up “work mail,” a practice known by the employer. The employer contested the workers’ compensation claim on the basis that the injury did not arise out of or in the course of employment. The Workers’ Compensation Commission agreed and disallowed the claim. The Circuit Court for Montgomery County and Court of Special Appeals agreed with the commission, concluding that the injury occurred while Roberts was coming and going to work. On certiorari, the court of appeals concluded that Roberts’ participation in training at the high school and his visit to the fire station to retrieve his mail were both work-related activities. Therefore, his travel between the two sites was incidental to his employment, and the injuries sustained in the accident were compensable.—From Maryland State Chapter Susan E. Smith


Costly “Ambiguity” in Loss of Business Income

In Artist Building Partners v. Auto-Owners Mutual Insurance Company, the Tennessee Court of Appeals found that a loss of business income endorsement is not limited to a 12-month period but, rather, the amount is owed for the “period of restoration.” The court affirmed the finding of the trial court that the policy language was ambiguous. As a result, the insurer was ordered to pay more than $600,000 in additional lost business income as well as prejudgment interest. The language found to be ambiguous, and therefore to be construed in favor of the insured, is as follows: “[W]e will pay for the actual loss of business income you sustain due to the necessary suspension of your ‘operations’ during the ‘period of restoration’ and necessary extra expenses you incur during the ‘period of restoration’ that occurs within 12 consecutive months after the date of the direct physical loss of or damage….” The court stated that language in an insurance policy “is ambiguous if it is susceptible of more than one reasonable interpretation.”—From Tennessee State Chapter Lead Chair Jim Wright    


Restoring Balance to Claims Litigation

The Missouri House and Senate introduced HB 1344 and SB 617—described as “Restoring Balance to Claims Litigation”—to address unfavorable bad-faith law in the state. The legislation seeks to abrogate Missouri case law that allows an insured to reject a reservation of rights requiring the carrier either to withdraw the reservation or have its selected attorney be discharged. It also would nullify Missouri case law that exposes a carrier in a garnishment action to liability for an underlying judgment in excess of the policy limits. Additionally, the legislation addresses recent Missouri case law that limits the extent to which a carrier in a garnishment action can collaterally attack findings made in the underlying judgment.—From Missouri State Chapter Lead Chair Jeff Brinker

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

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