10/14/2016

Around the Nation: October 2016

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

By Bevrlee J. Lips

CALIFORNIA: Immigration Status Now Inadmissible

In August 2016, Gov. Jerry Brown approved the immediate addition of Section 351.2 to the Evidence Code, which provides, in part: “In a civil action for personal injury or wrongful death, evidence of a person’s immigration status shall not be admitted into evidence, nor shall discovery into a person’s immigration status be permitted.” While California courts generally limit evidence of immigration status, one exception has been when future lost earnings are asserted. In such instances, the defendant is regularly allowed to raise immigration status to support the position that future losses should be calculated not by the “going rate” in California but rather by the rate expected in their country of origin, which is presumably significantly less. Otherwise, the plaintiff is being overcompensated. The addition of Evidence Code Section 351.2 will now serve as a complete bar to this defense theory, disallowing arguments of alternative economic loss evaluation.—From Orange County Chapter Director of Education Yvette Dumas Kohan

KENTUCKY: Extracontractual Claims: Bad Faith or Reasonable Conduct 

In Kentucky, the court permits an extracontractual claim based on the Kentucky Unfair Claims Settlement Practices Act in both first- and third-party cases. Since 2000, there has been considerable confusion as to whether the standard remains actual bad faith or simply is a question of the reasonableness of the conduct. The Supreme Court has two recent cases that address this issue. In Hollaway v. Direct General Ins. Co. of Mississippi, the court reaffirmed that, in order to prove a bad faith claim, the plaintiff not only must show that the insurer unreasonably failed to respond to a legitimate claim, but also must prove the insurer acted with reckless indifference to the plaintiff’s right to recover. The court recognized that an insurer has the right to change its position as the investigation proceeds, even where the initial position was more favorable to the plaintiff. The court also appeared to clarify that, where the statute requires that “liability be reasonably clear,” that liability includes damages. The court suggests that, where there is no absolute duty to pay a claim, there can be no bad faith, recognizing that the claimant and insurer can disagree about the value of a claim. The insurer is required only to negotiate reasonably and is not required to accept a third-party demand. The industry position was supported by an amicus curiae brief by the Insurance Institute of Kentucky. This holding is a refreshing reprieve for insurers attempting to do business in Kentucky, and we hope to see additional clarification when the court considers the remaining case.—From Kentucky Chapter President Ronald Green

NATIONAL: Ruling Holds No Shield for the New General Motors

In the matter of In RE: Motors Liquidation Company, the U.S. Court of Appeals, 2nd Circuit, has ruled that the General Motors (GM) bankruptcy sale of the assets of old to new GM does not shield the new GM from liability for ignition switch products cases. The court found that old GM knew about the defect and its contingent liability to the plaintiffs at the time of the bankruptcy and found that due process, therefore, required the plaintiffs to be given proper notice and an opportunity to participate in the sale process. In its ruling, the court stated, “Due process applies even in a company’s moment of crisis.” The 2nd Circuit ruling reverses a bankruptcy court ruling in favor of GM. This ruling will allow product liability cases to go forward against GM.—From CLM Member James C. Wright

NORTH DAKOTA: Proper Calculation of Offset Provision in UIM

In Hiltner v. Owners Insurance Company, a case certified to the North Dakota Supreme Court by the U.S. District Court, District of North Dakota, Southeastern Division, the North Dakota Supreme Court, with one dissenting opinion, held that in an underinsured motorist (UIM) action arising under state law and under the specific question presented to the North Dakota Supreme Court, construing N.D.C.C. §§ 26.1-40-15.3(1) and 26.1-40-15.4(1)(b) together, and in conjunction with comparative fault state law, a court must first reduce a past economic damage award to the plaintiff by the percentage of fault attributable to the plaintiff—the underinsured motorist insured and other persons or parties other than the operator or owner of the underinsured motor vehicle—and then deduct the no-fault benefits paid.—From CLM Member Mike Morley

OREGON: Duty to Protect Patrons from Foreseeable Harm

Oregon businesses generally have a duty to protect their patrons from foreseeable harm. Typically, harm caused by criminal activity is not foreseeable unless there is a history of criminal conduct in the area and the business is or should be on notice of the same general type of harm. In Piazza v. Kellim, the Oregon Supreme Court held that a claim arising from a shooting should not have been dismissed where the plaintiff pleaded facts regarding a history of violent crime in the area and the nightclub where the shooting occurred knew about the history, despite the fact that the shooting was randomly carried out by a mentally ill individual. The case is an important reminder that a plaintiff’s claims likely will not be dismissed on the issue of foreseeability of criminal violence if the plaintiff also alleges the defendant is or should be on notice of past criminal violence.—From CLM Member Jack Levy

WASHINGTON: Greater Liability for Design Professionals

Design professionals face greater liability in Washington as the courts continue to eat away at what is left of the economic loss rule—now referred to in Washington as the independent duty doctrine—and the protections previously afforded to design professionals against liability for purely economic damages. In Pointe at Westport Harbor Homeowners’ Association v. Engineers Northwest Inc. P.S., a condominium homeowners association sued the structural engineer for negligent design, which allegedly rendered the building unsafe for its occupants, and sought the cost of repair. The Washington State Court of Appeals expanded the design professional’s duty to owners, holding that an engineer has the duty to prevent potential damage or injury. The court stated, “Even where such safety risks do not cause consequential damage to persons or property, the risk itself constitutes an injury within the class of harm contemplated by a design professional’s duty of care.”—From CLM Member Timothy J. Repass



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

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