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Archive for November, 2015

Does Insurer Have Duty to Defend Non-Covered Lawsuit When Insured Proclaims Innocence?

Posted on: November 23rd, 2015

By: Bill Buechner

An insurer’s duty to defend is generally determined by comparing the allegations in the complaint to the insurance policy.  If the allegations in the complaint arguably or potentially bring the claim within coverage, the insurer has a duty to defend the lawsuit, even if the allegations are false or unfounded.  Conversely, if the allegations in the complaint unambiguously demonstrate that the claims asserted are not covered under the policy, then the insurer does not owe a duty to defend.  Many states, including Georgia, provide for an exception to this rule when the insured informs the insurer of “true facts” that would bring a claim within the scope of coverage.  In that situation, the insurer has an obligation to conduct a reasonable investigation into the insured’s contentions and then determine whether there is a potential for coverage, in which case a duty to defend is triggered.   See, e.g., Colonial Oil Industries, Inc. v. Underwriters Subscribing to Policy Nos. T031504670 and T031504671, 268 Ga. 561, 491 S.E.2d 337 (1997).

When confronted with a lawsuit for which there is no coverage on its face, an insured sometimes will attempt to obtain a defense by informing the insurer that it denies the allegations in the complaint that are outside of coverage and then claim that the “true facts” therefore demonstrate that it is entitled to a defense.  Such an argument has some appeal on the surface, and a federal court in Georgia recently found a duty to defend in part on this basis.

Although there is relatively little case law directly addressing this issue, the logical conclusion of such an argument is that any insured could claim an entitlement to a defense in a lawsuit asserting only non-covered claims simply by denying the allegations in the lawsuit and demanding that the insurer provide a defense based on these “true facts.”   Obviously, that is not the intent of the typical insurance policy.  At least one court has rejected this “I didn’t do it” theory for a duty to defend a lawsuit asserting only non-covered claims. Nationwide Property & Cas. Ins. Co. v. O’Neill, 2013 WL 5972471, at *1 n.1 (M.D. Ga. 2013).

When confronted with such a tactic, an insurer should confer with coverage counsel before deciding whether to continue disclaiming coverage or whether to defend under a reservation of rights and then file a declaratory judgment action.

Arbitration Agreements Cannot Change the Rules for Judicial Review of a Final Award

Posted on: November 18th, 2015

By: Bart Gary

Agreements to arbitrate are now uniformly enforceable throughout the country. While some states have shown reluctance to enforce arbitration agreements because they are seen as ousting the courts of jurisdictions, an agreement that evidences commerce among the states is controlled by the federal arbitration act. Almost any contract has some effect on interstate commerce. The federal law favors arbitration agreements and trumps any state or local law that conflict with the general enforceability of the agreement. The parties may freely agree upon the details about the conduct of the arbitration, including such terms as the location of the hearing, the arbitrator or how the arbitrator will be selected, the number of arbitrators, and whether and to what extent prehearing discovery will be allowed. Most agreements incorporate a set of rules that describe the process of the arbitration, and such agreements are also enforceable.

            Arbitration awards are usually final and binding and may be enforced in the courts by a procedure called confirmation, which is intended to be a quick and inexpensive way to convert the award to a judgment. Most statutes, including the federal act, allow limited grounds to challenge or vacate an award in court, usually for some egregious misconduct by a party or an arbitrator, such as fraud. Challenging the award is the one area where the courts restrict the parties’ freedom to contract. Efforts to expand the grounds to challenge the award have been uniformly unsuccessful, because those efforts would frustrate the policy of finality to the arbitration process. Parties have also attempted to avoid any judicial review of the award, for example with language in the arbitration agreement that the parties “hereby expressly agree not to challenge the validity of the arbitration or the award.” Recently the Georgia Court of Appeals held that such a term was against public policy and not enforceable. The court reasoned that just as parties may not by agreement expand the grounds to challenge an award, they may not by agreement “waive or eliminate a party’s right to apply to a court to vacate or modify an award on the statutory grounds.”

Atlanta Flooring Design Centers, Inc. v. R.G.Williams Constr. Inc., 333 Ga. App. 528 (2015).

Houston Voters Reject Sexual Orientation and Gender Identity Antidiscrimination Law

Posted on: November 18th, 2015

By: Tim Holdsworth

In one of the most closely watched votes on Election Day 2015, citizens of Houston overwhelmingly voted to repeal the Houston Equal Rights Ordinance (“HERO”).  Passed by the city council last year, the ordinance augmented federal and state laws by prohibiting discrimination against employees on the basis of sexual orientation or transgender status.  The HERO referendum drew the attention of numerous high-profile individuals.  Those supporting the ordinance included President Obama, Hillary Clinton, and actress Sally Field.  Those opposing it included Texas Governor Greg Abbott, Lieutenant Governor Dan Patrick, and former Houston Astro Lance Berkman.  Berkman, whom you may remember as a star on Astros teams during the last decade and whose baseball cards are hopefully collecting value in my parents’ basement, even shot a divisive commercial in opposition to the ordinance.

Whatever your view on HERO or the vote’s outcome, employers should be aware that Houston voters’ rejection of HERO runs against the current trend in employment law.  A number of states prohibit discrimination on the basis of sexual orientation and gender identity.  So, too, do many cities, including several major cities in Texas.  In fact, while Georgia does not prohibit discrimination on these bases, the relevant city of Atlanta ordinance on private employment enumerates both sexual orientation and gender identity as protected classes.

Additionally, the EEOC takes the position, and held in a recent ruling more thoroughly discussed here, that Title VII’s sex discrimination provision prohibits discrimination against employees on the basis of sexual orientation and gender identity.  Some federal courts have followed the EEOC’s position and allowed sex discrimination suits to be brought on these bases.  Furthermore, despite opponents of HERO arguing that the ordinance would potentially endanger women and children to sexual predators because it allowed men dressed as women to enter women’s bathrooms, we have already discussed the EEOC’s ruling that denying a transgender employee the right to use a bathroom that is consistent with their gender identity constitutes sex discrimination under federal law.

Employers should be modifying their employment policies as necessary to comply with any local, state, or federal legislation in this trending area of the law.  In fact, the EEOC declared that “coverage of lesbian, gay, bisexual and transgender individuals under Title VII’s sex discrimination provisions ” is an “enforcement priority for FY2013-2016.”

Please contact us with any questions you may have about these issues or their effect on your employment policies.

 

 

U.S. Supreme Court Reverses Fifth Circuit on Whether Officer is Entitled to Qualified Immunity

Posted on: November 16th, 2015

By: Coleen Hosack

         On November 9, 2015, the Supreme Court reversed the Fifth Circuit’s decision to uphold a district court ruling denying summary judgment to Texas Department of Public Safety Trooper Chadrin Mullenix, the sole issue being whether Mullenix was entitled to qualified immunity under circumstances where he used his rifle to disable a vehicle driven by a fleeing felon. Mullinex v. Luna, 577 U.S. (2015). The Court held that central to the qualified immunity analysis is how the court frames the “clearly established rule.”  The relevant inquiry “is whether existing precedent placed the conclusion that Mullenix acted unreasonably in these circumstances ‘beyond debate.’”  Mullinex, p. 7 slip opinion.  Framing the rule too generally like the Fifth Circuit did (i.e. that deadly force requires a sufficient threat) is inadequate because answering the general question fails to settle the matter of immunity, particularly in light of Brosseau v. Haugen, 125 S. Ct. 596, 599 (2004), a case also involving the shooting of a suspect fleeing in a car.  In Brosseau, the Court rejected the general test and explained that the correct inquiry was whether it was clearly established that the Fourth Amendment prohibited the officer’s conduct in the situation that the Brosseau officer confronted, which was whether to shoot a disturbed felon, set on avoiding capture through vehicular flight, when persons in the immediate area are at risk from that flight.

         As for Mullinex, the context in which the “clearly established rule” should have been analyzed was within the framework that he confronted a reported intoxicated fugitive, set on avoiding capture through high-speed vehicular flight, who twice during his flight had threatened to shoot police officers, and who was moments away from encountering an officer at Cemetery Road. Mullinex, p. 7 slip opinion. The circumstances that Mullinex faced were more unpredictable and more dangerous than those circumstances faced by the Brosseau officer, who was entitled to qualified immunity.  Unlike Mullinex, who knew officers were on foot in the immediate area, the Brosseau officer only believed officers on foot were in the immediate area and that others persons might be in the area.  Mullinex’s actual knowledge of officers on the ground coupled with the actual threats Leija made and the possibility that Leija was intoxicated made the case for qualified immunity even stronger for Mullinex as compared to the Brosseau officer.

         The Court argued that if the use of deadly force in connection with dangerous car chases like those circumstances found in Scott v. Harris, 127 S. Ct. 1769 (2007) and Plumhoff v. Rickard, 134 S. Ct. 2012 (2014) does not violate the Fourth Amendment; then it surely cannot be the basis for denying qualified immunity. The Court rejected the dissent’s criticism of Mullinex’ not waiting to see if the spike strips worked first before attempting to disable the vehicle by other means. There is no clearly established law that says an officer must select one dangerous alternative over another in high speed chases. Further, relying on an Amici Curiae brief written by the National Association of Police Organizations, spike strips suffer from their own set of problems, including that they are not always reliable and they too are inherently dangerous to use. Finally, the Court was satisfied with the governmental interest that justified the shooting because of Mullinex’s testimony that he feared Leija may run over the officers manning the spike strips.  Aside from Mullinex being immune from suit, the take away from this case against the back-drop of Brosseau, Scott, and Plumhoff, is that the Supreme Court has sent another strong message that the use of deadly force to end a dangerous high speed pursuit is permissible under the Fourth Amendment.

Homeland Security Alert for Georgia Local Governments: Don’t Miss End of Year Deadlines

Posted on: November 12th, 2015

By: Coleen Hosack

I. Public Benefits Report pursuant to O.C.G.A. § 50-36-4 and Immigration Compliance Reports pursuant to O.C.G.A. §§ 36-60-6(e) & 13-10-91(7)(A)

An annual immigration compliance report to the Department of Audits and Accounts (http://www.audits.ga.gov/) is due by December 31.  Even if your local government is exempt from the reporting requirements, the local government must still submit the annual report and indicate in the report which requirements from which it is exempt. The report must include the following information:

(a) The agency or political subdivision’s federal work authorization program verification user number and date of authorization;

(b) The legal name, address, and federal work authorization program user number of every contractor that has entered into a contract for the physical performance of services with a public employer as required under Code Section 13-10-91 during the annual reporting period;

(c) The date of the contract for the physical performance of services between the contractor and public employer as required under Code Section 13-10-91;

(d) A listing of each license or certificate issued by a county or municipal corporation to private employers that are required to utilize the federal work authorization program under the provisions of Code Section 36-60-6 during the annual reporting period, including the name of the person and business issued a license and his or her federally assigned employment eligibility verification system user number as provided in the private employer affidavit submitted at the time of application; and

(e)(A) A listing of each public benefit administered by the agency or political subdivision and a listing of each public benefit for which SAVE program authorization for verification has not been received.

II. SPLOST Annual Publication Report pursuant to O.C.G.A. 48-8-122    

If the local government received proceeds from SPLOST, it must publish annually (in newspaper and on web page) no later than December 31 a simple nontechnical report which shows the following for each project:

(a) the original estimated cost,

(b) the current estimated cost if it is not the original estimated cost,

(c) amounts expended in prior years,

(d) amounts expended in the current year,

(e) any excess proceeds which have not been expended for a project or purpose,

(f) estimated completion date, and

(g) the actual completion cost of a project completed during the current year. (h) In the case of road, street, and bridge purposes, such information shall be in the form of a consolidated schedule of the total original estimated cost, the total current estimated cost if it is not the original estimated cost, and the total amounts expended in prior years and the current year for all such projects and not a separate enumeration of such information with respect to each such individual road, street, or bridge project.

(i)The report shall also include a statement of what corrective action the local government intends to implement with respect to each project which is underfunded or behind schedule.

III. Registration of Local Government Authorities pursuant to O.C.G.A. § 36-80-16

Local government authorities are those instrumentalities created to fulfil a specialized public purpose or any other legally created organization that has authority to issue debt for a public purpose independent of a county or city, not to include state authorities. Local government authorities include joint authorities, regional authorities, hospital authorities, housing authorities, residential care facilities for the elderly authorities, resource recovery development authorities, solid waste management authorities, downtown development authorities, airport authorities, industrial, payroll and other development authorities, transit authorities, water and sewer authorities, parking authorities, recreation authorities, stadium and coliseum authorities, building authorities, public service authorities, or any other local government authority regardless of name. Such local government authorities may have been created by local constitutional amendment, general statute, or local law.

By December 31, all local government authorities must register with the Department of Community Affairs (http://www.dca.state.ga.us/) for the current calendar year. Failure to register will prohibit the authority from incurring any debt or credit obligation until the registration is updated.

IV. Publish your new annual budgets to comply with O.C.G.A. 36-80-21(c)

For those counties and cities adopting an annual budget in excess of $1 million, a copy of the final budget for the upcoming fiscal year, must be electronically transmitted in Portable Document Format file to the Vincent Institute (http://www.cviog.uga.edu/) within 30 days of the adoption of the budget.  Since many ordinances require the adoption of the new budget at the end of the year, don’t miss the 30 day window to transmit your budget to the Vincent Institute.

V. Disposition of Forfeited Property report pursuant to O.C.G.A. § 9-16-19(g) and O.C.G.A. § 36-80-21(e)

Any law enforcement agency, multijurisdictional task force, district attorney, or state agency receiving property and proceeds forfeited and income resulting from the sale of forfeited property, including property distributed in kind, shall submit an annual report specifying the property and proceeds forfeited and any income resulting from the sale of forfeited property received during its reporting year and shall clearly identify the use of such property, proceeds, and income, including the specifics of all monetary expenditures and funds on deposit with a financial institution. Such report shall not include any information that is likely to disclose the identity of a confidential source, disclose confidential investigative or prosecution material which could endanger the life or physical safety of any person, disclose the existence of a confidential surveillance or investigation, or disclose techniques and procedures for law enforcement investigations or prosecutions. Such annual report shall be appropriately completed and legible. Such report shall be:

(a) With respect to law enforcement agencies, multijurisdictional task forces, and state agencies:

(i) Submitted on a form promulgated by the Prosecuting Attorneys’ Council, as provided in subparagraph (A) of paragraph (3) of this subsection;

(ii) Submitted by each local law enforcement agency to the political subdivision governing its jurisdiction;

(iii) Submitted by multijurisdictional task forces to each political subdivision governing the jurisdictions involved;

(iv) Submitted by state agencies to the state auditor;

(v) Submitted by January 31 each year for the previous calendar year; and

(vi) Copied and submitted to the Carl Vinson Institute of Government of the University of Georgia as provided in Code Section 36-80-21.

For questions or for additional information on these or any other deadlines, please contact Coleen Hosack at [email protected].