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Archive for May, 2019

The Third Circuit Upholds District Court Ruling That Trucking Company Employees Not Entitled to 1 Million in UIM Benefits

Posted on: May 22nd, 2019

By: Erin Lamb

In Farmland Mutual Insurance v. Sechrist, the Third Circuit upheld a district court’s decision rejecting the claims of employees involved in a serious accident while driving a vehicle for Clouse Trucking that they were entitled to $1,000,000 in underinsured (UIM) benefits instead of the $35,000 paid to them by Farmland Mutual Insurance Co.

Farmland had determined that Clouse Trucking had selected to waive UIM coverage equal to the bodily injury liability coverage ($1,000,000), and selected UIM coverage of $35,000. The employees had argued that Clouse Trucking’s waiver was invalid and unenforceable as it was contrary to what is required by the Pennsylvania Motor Vehicle Financial Responsibility Law (PMVFL).

Farmland proceeded with a declaratory judgment action in the U.S. District Court for the Middle District of Pennsylvania, seeking determination of its obligations under that law, related to the UIM coverage. The district court granted summary judgment, adopting the argument that the policy application was a valid written request by Clouse Trucking for lower UIM coverage, as allowed under the (PMVFL). The employees appealed to the Third Circuit claiming the purported selection of the lowered UIM coverage was not a valid written request under the PMVFL. They argued that the requirements had not been met because the selection form contained a box that listed the UIM limit offered as $35,000 when it should have read $1,000,000.

Notably, in the application for the Farmland policy, the owner of Clouse Trucking checked a box that stated, “I want Underinsured Motor Coverage with limits lower than my bodily injury liability limits, as indicated below…” However, a sticky note obscured several of the boxes that were options for the amounts he could select. There was a handwritten note that stated near the selection, “35,000”. The Important Policyholder Notice, signed by Clouse, indicated that he understood that Farmland provided such coverage up to at least $100,000.

The Third Circuit found that, while the PMVFL required specific written waivers with statutorily-provided forms if an insured declined uninsured or UIM benefits entirely, that was not the case for simply selecting an amount less than the bodily liability coverage. In such a case, the election could take any form, so long as the request was signed by the insured, and contained a designation of the amount of coverage selected. Those requirements were met. The court found no significance in the fact that the Underinsured Motorist Coverage Limit Offered portion of the Selection form had stated that amount as $35,000 when it should have read $1,000,000.

If you have any questions or would like more information, please contact Erin Lamb at [email protected].

Insured’s Flood Claims Deluged By Texas Federal Court

Posted on: May 22nd, 2019

By: William Gildea

The importance of clear and unambiguous language in insurance policies recently came to light in the United States District Court, Southern District of Texas. The Court recently granted Lexington Insurance Company (“Lexington”) summary judgment after an insured filed a lawsuit seeking coverage for losses to the insured’s properties caused by flooding from Hurricane Harvey in 2017. Lexington issued a Commercial Property Policy (the “Policy”) covering the insured’s commercial properties, including an apartment building, a commercial parking garage, and a retail building. The insured suffered $6,700,000.00 in flood damage from Hurricane Harvey and subsequently filed a timely claim under the Policy with Lexington.

The insurable value for the properties were $190,500,000.00 and $182,565.86 respectively.  Lexington notified the insured the Named Storm Deductible applied, and the deductible surpassed the claim for damages.

An exception to the general deductible under the Policy was for “any adjusted loss due to Flood.” The Flood Deductible contained a $1,000,000.00 per location deductible for locations within Special Flood Hazard Areas.  The Policy also contained a Windstorm Deductible ($100,00 per occurrence) that contained an exception titled “Named Storm Deductible” that provided:

5% of the total insurable values at the time of loss at each location involved in the loss or damage arising out of a Named Storm (a storm that has been declared by the National Weather Service to be a Hurricane, Typhoon, Tropical Cyclone, Tropical Storm or Tropical Depression), in Tier 1 Counties including Florida, regardless of the number of coverages, locations or perils involved (including but not limited to all Flood, wind, wind gusts, storm surges, tornados, cyclones, hail or rain) and subject to a minimum deductible of $250,000 any one occurrence.

The insured argued the Named Storm Deductible did not apply because the language was found in the Windstorm Deductible portion, and the insured did not suffer any wind damage.

The Court disagreed with the insured, analyzing that the Named Storm Deductible did not only apply to claims for wind damage. The Court looked to the clear and unambiguous language of the Named Storm Deductible, which applied “regardless of the number of coverages, locations or perils involved (including but not limited to all Flood, wind, wind gusts, storm surges, tornados, cyclones, hail or rain).”  The Court held the clear and unambiguous language of the Named Storm Deductible applied to any loss caused by a Named Storm, including a loss resulting from heavy rains “associated with a Named Storm.”  The Court concluded the insured’s damages were thus lower than the applicable deductible.

This decision shows that some courts will enforce clear and unambiguous policy provisions as they are written without regard to any perceived inequities in the resolution.  Drafters of policies should remain vigilant that terms are generally construed against the interests of insurers and in favor of coverage and the need to use precise language in coverage agreements.

If you have any questions or would like more information, please contact William Gildea at [email protected].

 

California Tax Board for the Win

Posted on: May 21st, 2019

By: Matthew Jones

The California Franchise Tax Board has been dealing with a lawsuit for approximately 28 years. However, the lawsuit has finally come to an end due to the United States Supreme Court’s recent ruling. The highest court in the United States issued a ruling that shields states from private lawsuits filed in other states, thereby implicating the “sovereign immunity” principle. In reaching its decision, the Supreme Court overturned a 40-year-old precedent to now “hold that states retain their sovereign immunity from private suits brought in the courts of other states.”

The lawsuit, Franchise Tax Board v. Hyatt, was filed by a resident of California who earned millions of dollars in royalties from a computer patent. He then sold his California home and moved to Nevada, where he claimed his primary residence. This is significant because Nevada had no state income tax. However, the California Franchise Tax Board claimed the plaintiff who sued owed more than $10 million in taxes to the state of California despite his residency in Nevada. After the audit was upheld, the individual filed the lawsuit in Nevada.

If you have any questions or would like more information, please contact Matthew Jones at [email protected].

Did You Really Terminate That H-1B Employee?

Posted on: May 21st, 2019

By: Layli Eskandari Deal

U.S. Department of Labor Awards $43,366 Back Pay to Engineer.

In January, a Microfabrication Engineer, employed under the H-1B visa program by Minnesota-based TLC Precision Wafer Technology, Inc., was awarded $43,366.67 in back wages and interest after an investigation by the Department of Labor’s Wage and hour Division.

The employment began in October 2008 under the H-1B visa program. After a downturn in business, the company began experiencing financial difficulties. In a letter dated November 16, 2008, TLC notified the Engineer that he would be laid off effective immediately. However, TLC continued to employ the Engineer until January 2009, at which point he was advised by email that his hours would be reduced to part-time. The Engineer resigned his position in February 2010 and in the same month filed a complaint with the Department of Labor’s Wage and Hour Division alleging that the company had failed to pay him the required wage.

Department of Labor Regulations set the wage requirement employers must meet in employing H-1B workers. Employers must pay the H-1B employee the greater of the prevailing wage for the occupational classification or the amount they pay other employees with similar experience or qualification. The H-1B employee must be paid beginning on the date that they “enter into employment” with the employer. This condition occurs when the employee becomes “available for work or otherwise comes under the control of the employer, such as reporting for orientation or training.” H-1B employees must be paid the required wage even if they are not performing work and are in nonproductive or idle status.

In the instance case, the Administrative Law Judge found that TLC was obligated to pay the Engineer $43,000 per year starting in October 2008 until his departure in February 2010.

How can employers limit exposure?

U.S. Citizenship & Immigration Services (USCIS) regulations address the employer’s obligations with regard to material changes to H-1B employment.

  1. Employer must notify USCIS immediately of any changes in the terms and conditions of employment which may affect eligibility under the H-1B regulations. This includes changes in position or duties, changes in job location, changes in any condition of employment such as going from full-time to part-time status.
  2. If the employer no longer employs the H-1B worker, the employer must send a letter to USCIS indicating the termination of employment. DOL considers such communication to USCIS to effectively terminate the employer’s wage obligation.

It is clear that DOL will look at the actions of the employer and communication with USCIS to determine whether the employer has abided by rules governing the employment of H-1B workers.  It is vitally important for employers to be familiar with the rules and timely communicate with USCIS when dealing with changes in employment status of foreign national employees.

For additional information related to this topic and for advice regarding how to navigate U.S. immigration laws, you may contact Layli Eskandari Deal of the law firm of Freeman Mathis & Gary, LLP at (770-551-2700) or [email protected].

 

Could There Be Any Insurance Coverage For The Notre-Dame Cathedral Fire?

Posted on: May 20th, 2019

By: Jessica C. Samford

A month ago, the world was shocked with the news and images of the Notre-Dame catching fire, resulting in the destruction of some of its awe-inspiring features. It had been reported that the cathedral in its entirety was at risk, but thankfully the people of Paris were able to subdue it after many hours of hard work and careful firefighting to protect and preserve the delicate architecture. Concerns ranged from the artwork of the stained-glass windows, double arches, flying buttresses, as well as the relics and other art that the cathedral contained inside. One of its prominent exterior works, the spire, which had been undergoing renovation, ended up collapsing in flames, as did most of the roof comprised of lead to provide structural support.  Many of the statues and relics were safe from harm as they were being stored elsewhere due to the restoration work. The 8,000-pipe organ within survived the fire, but reportedly suffered some damage from water and smoke. Astonishingly, all the stained glass remains intact. While arson was speculated based on another Paris church fire the month before, officials took the position that the Notre-Dame fire was likely a construction-related accident.

As a coverage attorney, my mind naturally turned to the coverage implications of this catastrophic event. Some of the individual items could be separately insured, but typical property owner policies, at least in the United States, limit coverage for antiques, art, and other collectibles unless they are specifically set forth in the policy so that their appraised value can be considered in charging the appropriate amount of premium. Stained-glass, for example, is often limited, similarly due to the high expense in repairing or replacing things often claimed to be irreplaceable. Property owner policies also typically exclude collapse as a covered cause of loss, but those provisions may not apply if the collapse was caused by another cause of loss that was covered, such as fire. Such policies often contain lead exclusions as well, so liability for bodily injury arising from lead would not be covered. The cause of the fire, too, can affect coverage since arson triggers exclusions for intentional acts if it can be linked to the property owner in some way; whereas, construction accidents may or may not qualify as an “accident” under an insurance policy depending on the applicable definitions and case law. It’s probable that the company(ies) performing the renovation work had liability insurance specific to the job in order to cover the distinctive risks arising from the uniqueness of those professional services provided.

If you have any questions or would like more information, please contact Jessica Samford at [email protected].