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Archive for January, 2013

Georgia’s Failed Bank Litigation Addresses “Insured vs. Insured” Coverage Exclusion

Posted on: January 10th, 2013

By: Kelly Morrison

Georgia is no stranger to failed banks, and thus continues to host to a number of FDIC lawsuits against former directors and officers.  Not surprisingly, these lawsuits are testing the legal waters regarding several coverage exclusions, as D&O insurers batten down the hatches in anticipation of further lawsuits.

On January 4, 2013, Northern District of Georgia Judge Robert L. Vining, Jr., issued an opinion regarding the common “insured vs. insured” coverage exclusion.  This recurring issue addresses whether the FDIC’s claims as receiver for a failed bank against the bank’s former officers and directors triggers the standard D&O policy’s “insured vs. insured exclusion.”

The case arose from the failure of Omni National Bank of Atlanta.  After suit was instituted in March 2012, the bank’s D&O insurer filed a separate declaratory judgment action, seeking a holding that no coverage existed due to the FDIC’s role as receiver for Omni.  Essentially, the D&O insurer argued that the FDIC had “stepped into the shoes” of Omni Bank, and their subsequent claims against former officers and directors were thus barred under the insured vs. insured exclusion.

Judge Vining rejected this argument, finding the policy language ambiguous due to the FDIC’s “multiple roles” as governmental regulator and receiver, noting that receivership gave the agency power to act on behalf of the bank’s depositors, creditors, and shareholders.  This reasoning is consistent with an earlier holding from the District of Puerto Rico in October 2012.

Although the insurer can develop and renew this argument in the FDIC’s lawsuit, this is undoubtedly a negative development for D&O insurers, who can now expect to defend FDIC actions through the summary judgment stage, a much more expensive proposition than the quick exit offered by a declaratory judgment.

Georgia’s Emergency Care Statute May Be Implicated by Delay in Transfer of Emergency Room Patient

Posted on: January 9th, 2013

By: Scott Rees

>In Dailey v. Abdul-Samed, the applicability of Georgia’s emergency medical care statute, O.C.G.A. 51-1-29.5.  The statute provides that in an action involving a health care liability claim arising out of the provision of emergency medical care in a hospital emergency department or obstetrical unit or in a surgical suite immediately following the evaluation or treatment of a patient in a hospital emergency department, no physician or health care provider shall be held liable unless it is proven by clear and convincing evidence that the physician or health care provider’s actions showed gross negligence.

Factually, the patient inadvertently shot paint thinner into one of his fingers and went to the ER.  In the ER, the medical providers concluded the patient needed an immediate referral to a hand surgeon.  One of the defendant physicians had a nurse begin contacting hospitals to see if they could accept the transfer.  There was a conflict in the evidence whether the hospital followed proper transfer protocols, i.e., whether it failed to contact a certain hospital.  The hospital eventually found another hospital that would accept the patient, but that acceptance did not take place until over six hours after the defendant medical providers knew an immediate transfer was necessary, and the actual transfer did not take place until over eight hours after they knew a transfer was necessary.

Plaintiffs alleged that the medical providers delayed transferring the patient out of an emergency room to a hand surgeon, leaving the hand injury untreated, which ultimately resulted in a partial amputation of the patient’s finger.  The trial court granted Defendants’ motion for summary judgment on the basis that such allegations were governed by the emergency medical care statute since the patient was presented to the ER, and that Plaintiffs failed to present clear and convincing evidence that Defendants’ actions were grossly negligent.

The Court of Appeals reversed.  Taking the evidence in the light most favorable to the Plaintiffs, the Court found there was an unnecessary delay in transferring the patient.  The Court held that the “mere fact that the [patient] remained in the emergency department while Defendants allegedly delayed in providing the [patient] the requisite care does not automatically invoke application of O.C.G.A. 51-1-29.5.”  However, it does create a question of fact whether such delay in the emergency room constituted emergency medical care under 51-1-29.5(c), and therefore the trial court’s grant of summary judgment was reversed.

Notably, there was a concurring opinion that agreed with the reversal of the trial court’s decision, but felt reversal was warranted because there was a fact question as to whether there was evidence of gross negligence.  The concurring opinion believed that the emergency medical care statute applied because the patient’s injury was an emergency, and the Defendants’ efforts to locate a transfer constituted emergency medical care.

Finally, the Court of Appeals did not address Plaintiffs’ argument that the statute is unconstitutionally vague because the trial court never addressed it.

Temporary Flooding May Give Rise to a Takings Claim

Posted on: January 2nd, 2013

By: Ali Sabzevari

A fundamental part of our Takings Clause jurisprudence holds that when the Government physically takes possession of an interest in property for some public purpose, it has a duty to compensate the former owner.  There is a multitude of ways in which government actions or regulations may give rise to Takings Clause liability.  Recently, however, the United States Supreme Court directly addressed the issue of whether government-caused temporary flooding might amount to a compensable taking.

On December 4, 2012, the United States Supreme Court issued a decision, Arkansas Game & Fish Comm’n v. United States, which instructed lower courts not to be deterred from finding that government-caused temporary flooding may result in a taking under the Fifth Amendment of the U.S. Constitution.

The Supreme Court held that “government-induced flooding temporary in duration gains no automatic exemption from Takings Clause inspection.”  By doing so, the Court reversed a Federal Circuit decision which had found that flood conditions needed to be “permanent or inevitably recurring” before the resulting damage would constitute a taking under the Fifth Amendment.

Although Supreme Court precedent had already established that government-induced flooding could constitute a taking, and that a taking need not be permanent to be compensable, under the guise of Arkansas Game & Fish Comm’n, government-caused recurrent floodings, even if of limited duration, may give rise to Takings Clause liability.

Despite ultimately remanding the case to determine whether a taking had occurred, the Supreme Court, in emphasizing the case-by-case approach required to complete this task, highlighted several relevant factors to consider:

1)      Time or duration;

2)      Severity of the government interference;

3)      The degree to which the intrusion is intended or is the foreseeable result of authorized  governmental action;

4)      The character of the land at issue; and

5)      The owner’s reasonable investment-backed expectations regarding the land’s use.

Looking ahead, local governments should be cognizant that a temporary government-caused flooding may give rise to Takings Clause liability.

Engagement Letters for Professional Services – A Valuable Tool That May Come with a Price

Posted on: January 1st, 2013

By Seth Kirby

In 2009, the Georgia Court of Appeals confirmed with resounding clarity that all professional malpractice claims sounding in contract were governed by a four-year statute of limitations.  All was right with the world.  Professionals and their insurers could rest easy that their exposure to liability for professional negligence would cease four years after a transaction was completed, absent the existence of a continuing duty, given that the time period runs from the date of the alleged error.  (more…)

Temporary Flooding May Give Rise to a Takings Claim

Posted on: January 1st, 2013

By Dana Maine and Ali Sabzevari

A fundamental part of our Takings Clause jurisprudence holds that when the Government physically takes possession of an interest in property for some public purpose, it has a duty to compensate the former owner.  There is a multitude of ways in which government actions or regulations may give rise to Takings Clause liability.  Recently, however, the United States Supreme Court directly addressed the issue of whether government-caused temporary flooding might amount to a compensable taking. (more…)