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Archive for the ‘Tort and Catastrophic Loss’ Category

Third Circuit Rules Against the City of Williamsport in Lawsuit Filed Against Insurance Companies Based on Law Enforcement Policy Coverage

Posted on: June 14th, 2019

By: Michelle Yee

In 2015, there was major news coverage that a former Williamsport police officer pled guilty to involuntary manslaughter and several other charges. This case stems from a fatal automobile accident that occurred between James David Robinson and a Williamsport police officer. The officer was traveling at 101 mph with emergency lights and sirens activated on East Third Street, which has a 35-mph limit. The officer then passed three vehicles, including Robinson’s, and crashed into Robinson’s vehicle which burst into flames when it struck against a utility pole. Robinson’s mother sued the City and the police officer for the officer’s negligence and recklessness, which caused the fatal collision and death of Robinson. After the City unsuccessfully moved to dismiss the constitutional claims, this matter settled for $1,000,000.

The City filed a lawsuit against CNA Insurance and National Fire Insurance Company of Hartford, both of which has a $1 million limit, for refusing to provide more than $500,000 in total to cover for the settlement. This case, City of Williamsport v. CNA Insurance Companies and National Fire Insurance Company of Hartford, was recently heard before the United States District Court for the Middle District of Pennsylvania. The Defendants argued that their liability under the Automobile Policy is limited to $500,000 because the policy covers the “sums [the City] legally must pay as damages” and Pennsylvania law caps the state law tort liability against local agencies at $500,000. The Court rejected this argument and ruled that Defendants cannot dismiss this matter based on the City’s Automobile Policy because the state tort law does not place a liability cap for federal claims against the officer, which must be indemnified by the City. The court agreed with the City.

The City of Williamsport then argued that the Law Enforcement Policy’s coverage for civil rights violation should apply to this settlement. On the other hand, Defendants argued that the policy’s automobile exclusion precludes coverage. The Court held for the Defendants. It reasoned that the City sought to hold the office liable for his conduct while driving and the city is responsible for its supervision and training of its officers. Further, the court interpreted the language of the Law Enforcement Policy, as excluding coverage for damages arising out of the operation of any automobiles in the course of employment. Therefore, the Court dismissed the City’s claims to seek recovery under this policy because the damages were proximately caused by an automobile.

The Court finally dismissed the City’s insurance bad faith claim holding that the City did not allege that the Defendants “knew or recklessly disregarded the lack of reasonable basis when denying the City’s claims,” as required by law. However, the Court noted that this dismissal is without prejudice and the City may amend its Complaint to cure this deficiency.

For more information, please contact Michelle Yee at [email protected].

California Court Rules That Payroll Companies Are Not Liable For Employer’s Wage And Hour Violations

Posted on: April 25th, 2019

By: Michael Shepherd

The California Supreme Court recently provided clarity to payroll companies in Goonewardene v. ADP, LLC (2019) 6 Cal.5th 817. In Goonewardene, Plaintiff alleged claims of negligence and negligent misrepresentation against a payroll company based on wages due that the plaintiff claimed were not paid. The Court refused to impose a tort duty upon payroll companies, and emphasized five reasons for its decision:

First, the Court reasoned that California law already provides employees with a full and complete remedy for any wage loss an employee sustains as a result of the payroll company’s negligent conduct; an employee is entitled to recover in a civil action against the employer the full wages and other significant remedies authorized under the labor statutes.

Second, the Court reasoned that imposing tort liability on a payroll company is not necessary to deter negligent conduct because the payroll company is already obligated under its contract with an employer to comply with labor statutes and wage orders. Consequently, a payroll company would already be subject to liability for breach of its contract with the employer and tort liability would not appreciably increase the incentive for payroll companies to refrain from negligent behavior.

Third, payroll companies have no special relationship with an employer’s employees that would warrant the imposition of a duty of care.

Fourth, the Court reasoned that imposing a duty of care on payroll companies could distort the payroll company’s performance of its contractual obligations. The Court expressed the concern that where the meaning or scope of a labor statute or wage order is ambiguous or uncertain, a tort duty of care to an employee could adversely affect the payroll company’s fulfillment of its contractual obligations to the employer. The potential of greater tort liability may induce the payroll company to place the employee’s interest above those of the employer, to whom the payroll company has a contractual obligation.

Finally, the Court reasoned that imposing a tort duty of care on payroll companies would add an unnecessary and potentially burdensome complication to California’s increasing volume of wage and hour litigation. If a tort duty were imposed, then payroll companies would likely be joined as an additional party in every wage and hour lawsuit. The Court did not find such an increased burden was justified given that an employee can obtain a full recovery for his or her economic loss in a wage and hour action against an employer alone.

Thus, while the Court made clear that payroll companies can be liable to employers if they breach their contractual obligations, they cannot be sued by employees in tort for an employer’s obligations under California’s wage and hour laws.

For any questions, please contact Michael Shepherd at mshephe[email protected].

Georgia Court of Appeals Provides Guideline for Drafting Enforceable Exculpatory Clauses in Georgia

Posted on: April 23rd, 2019

By: Bart Gary and Jake Carroll

Exculpatory clauses are terms in a contract that shift the risk of loss to the other party or a third-party, or attempt to limit one’s obligations under a contract. A typical exculpatory clause is a “limitation of liability” provision, which is commonly used in agreements for services—especially professional services, rendered by accountants, architect, engineers and consultants.

Attempts to limit one’s liability to agreed amounts are sometimes challenged in court on the ground that they violate “public policy,” but are nevertheless generally enforceable in Georgia, provided such clauses are “explicit, prominent, clear and unambiguous.”

While these requirements have been addressed in prior appellate decisions, in Warren Averett, LLC v. Landcastle Acquisition Corp.[1] the Georgia Court of Appeals discussed in detail the “prominence” requirement for limitation of liability clauses in a contract for accounting services. The Court observed that a number of factors are considered when evaluating the enforceability of an exculpatory clause or limitation of liability clause:

  • Font. The clause should not be in the same font size used throughout the contract. It should be “capitalized, italicized, or set in bold type for emphasis.”
  • Setoff. The clause should be set off in a separate section that specifically addressed liability or recoverable damages, with a bold, underlined, capitalized or italicized specific heading, such as “Limitation of Liability” or “DAMAGES.”
  • Location. The clause should be in a prominent place within the contract to emphasize the importance of the clause’s limitation on recoverable damages, such as being adjacent to another similarly significant provision or being next to the parties’ signature lines.[2]

These factors should be used as a guide for parties when drafting and negotiating contracts with exculpatory clauses. For example, in construction contracts, the parties should pay close attention to the font and location of indemnity and no-damage-for-delay clauses. In commercial and professional services contracts, common exculpatory clauses that merit close scrutiny address indemnity, limitation of lability, waivers of certain types of damages, and insurance terms.

Finally, while the opinion is helpful as concerns what is not prominent, it does not offer a clear statement of what is prominent. For example, does the font need to be bold, capitalized, and italicized, or will one choice work? In light of the Warrant Averett decision, it would seem that the more factors met, the less risk the clause is found unenforceable.

If you have questions regarding this decision, or any other contract drafting questions, please contact Bart Gary at [email protected] and Jake Carroll at [email protected]. Mr. Gary and Mr. Carroll practice construction and commercial law as members of Freeman Mathis & Gary’s Construction LawCommercial Litigation, and Tort and Catastrophic Loss practice groups as well as representing business and commercial entities in a wide range of disputes and corporate matters involving breach of contract, business torts, and products liability claims.

[1] Warren Averett, LLC v. Landcastle Acquisition Corp., 2019 Ga. App. LEXIS 178, Case no. A18A2117, March 13, 2019. (physical precedent only). Because one judge of the three-judge panel concurred in the judgment, the opinion is limited, physical precedent.
[2] 2019 Ga. App. LEXIS 178 at 9-10 (emphasis by the Court) (internal citations omitted).

The Power Of Animations Outside The Movie Theater

Posted on: March 15th, 2019

By: Matthew Jones

The use of animations in the courtroom is becoming more and more popular given the ruling in the case People v. Duenas (2012) 55 Cal.4th 1. The Duenas court equated animations to demonstrative evidence, specifically stating “a computer animation is demonstrative evidence offered to help a jury understand expert testimony or other substantive evidence…” The basis for this ruling is that animations do not draw conclusions and are not exact simulations of the subject accident being portrayed. To the contrary, animations are an attempt to recreate a scene or process based on the evidence presented.

Animations can be a powerful tool during trial to provide a visual aid to the jury of an expert’s opinion on an issue or just to offer a visual observation of how the subject accident occurred. For proper use of the animation, the Duenas court identified instructions that should be presented to the jury. The scope of these instructions are that the animation is not a film of what actually occurred or an exact re-creation of the subject accident, and that the animation is simply a guide as to the party’s version of events based upon interpretation of the evidence.

FMG’s in-house litigation team has utilized numerous animations over the years with great success, including a recent wrongful death action in Los Angeles County. Liability was hotly contested and Plaintiffs demanded over $15 million at trial. The jury came back with a defense verdict in only forty-five minutes.

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

Serving That Whiskey Might Be Risky – Liability Of Social Hosts In DUI Accidents

Posted on: February 15th, 2019

By: Stacey Bavafa

Under California Civil Code Section 1714, social hosts and other third parties may be held to be partially liable in the event of a drunk driving accident depending on the circumstances that led up to the accident. Under Sec. 1714, everyone is responsible for the result of his or her willful acts, but also for injuries sustained by another by a want of ordinary care or skill in the management of his or her property or person.

California courts have held that the furnishing of alcoholic beverages is not the proximate cause of injuries resulting from intoxication, but rather that the consumption of alcoholic beverages is the proximate cause of injuries inflicted upon another by an intoxicated person. Vesley v. Sager (1971) 6 Cal.3d 153; Bernhard v. Harrah’s Club (1976) 16 Cal.3d 313; and Coulter v. Superior Court (1978) 21 Cal.3d 144.

Therefore, social hosts who provide alcoholic beverages to a person may not be held legally accountable for damages suffered by the intoxicated person, or for damages the intoxicated person inflicts on another person resulting from the consumption of alcoholic beverages. In other words, if John Doe had 5 glasses of whiskey at a bar and ends up swerving in and out of his lane due to his inebriated state, and hits another vehicle causing injury to a third person, the bar who provided John Doe the 5 glasses of whiskey will not be required to pay for damages sustained by the third party.

There are however, two exceptions to the rule outlined above:

If an adult, including a parent or guardian, who knowingly serves alcoholic beverages at his or her residence to a person whom he or she knows, or should have known, to be under 21 years of age, the adult may be held liable for actions the minor takes as a result of the consumption of alcohol.

Further, if a business sells alcohol to an obviously intoxicated minor, in such that a reasonable person would be able to tell the minor was intoxicated, the business may face liability for harm arising out of the minor’s actions.

In the case of the underaged drinker, both the underaged drinker and the person who was harmed by the actions of the underaged drinker can file a civil claim against the social host or business to obtain recovery of his or her medical bills, property damage, pain and suffering, loss of income, and legal fees.

If you have any questions or would like more information, please contact Stacey Bavafa at (213) 615-7026 or [email protected].