CLOSE X
RSS Feed LinkedIn Instagram Twitter Facebook
Search:
FMG Law Blog Line

Posts Tagged ‘First Circuit’

First Circuit Court of Appeals to Decide Dispute Involving Handling of Settlement Demands within Policy Limits

Posted on: March 15th, 2019

By: Ben N. Dunlap

A claimant’s demand to settle a case within the limits of a defendant’s liability insurance policy can lead to a variety of outcomes driven by the particular allegations, evidence, liability and damages evaluations, procedural posture, and law of the jurisdiction.

In one case addressing these issues, the First Circuit Court of Appeals is considering arguments that a third-party claims administrator failed to make a reasonable settlement offer when liability became “reasonably clear” in an underlying suit alleging wrongful death and negligence against a nursing home.  In Calandro v. Sedgwick Claims Management Services, the First Circuit recently heard arguments by the estate of Genevieve Calandro, seeking to revive claims under the Massachusetts Consumer Protection Statute, Chapter 93A, and Insurance Practices Statute, Chapter 176D, arising from the settlement of the underlying lawsuit. Sedgwick was the third-party claims administrator handling the estate’s claim against the nursing home. With policy limits of $1 million, in the course of the litigation the estate had made demands of $500,000 (twice) and $1 million (again twice). Sedgwick’s best pre-trial offer was $300,000, which the estate declined.

In 2014, a jury awarded the estate $1.4 million in compensatory damages and $12.5 million in punitive damages. After the trial in the underlying suit, the estate served a demand letter on Sedgwick seeking $40 million under Chapters 93A and 176D, alleging the claims administrator had failed to make a reasonable offer of settlement once liability of the nursing home became “reasonably clear.” Sedgwick offered $2 million in response. The estate then filed suit against Sedgwick in Massachusetts federal court alleging unfair settlement practices in violation of Chapters 93A and 176D.

After a bench trial, the Court concluded Sedgwick did not violate Chapters 93A or 176D because it made two “reasonable” offers to settle the estate’s pain and suffering claims prior to trial, and Sedgwick had no obligation to make an offer to settle the wrongful death claim, because causation was fairly disputed and therefore liability on that claim was not “reasonably clear” at any point in the litigation.

The estate argues on appeal that the trial Court misconstrued the significance and timing of the evidence available to Sedgwick as it was evaluating the underlying case, focusing on a particular expert report disclosed by the estate in 2013. Based on the report, the estate argues liability should have been “reasonably clear” long before Sedgwick made an initial pre-trial offer. Sedgwick argues the Court correctly concluded liability was not “reasonably clear,” in part because the estate’s expert report was not disclosed in full until the spring of 2014.

The insurance coverage bar will be paying close attention when the First Circuit issues its decision.

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

A Series of Particular Events: Foreseeability and the First Circuit

Posted on: February 6th, 2019

By: Thomas Hay

A three-judge panel on the First Circuit denied Omni Hotel’s petition for review of their decision to overturn a lower court ruling that awarded summary judgment to Omni and reinstated a negligence charge filed by a man who was beaten, and his arm broken by a group of individuals in Omni Hotel’s Providence, Rhode Island hotel lobby. The First Circuit held that the development of a particular sequence of events can, without more, render future harm foreseeable.

The First Circuit’s opinion effectively broadened the duty of care imposed on hotels to protect guests and members of the public against spontaneous criminal conduct by a third party.

The plaintiff lived in a condominium complex adjoining the hotel. He had access to and regularly used the hotel’s services and amenities. On the night in question, hotel security had evicted from the premises a group of youths whose partying had caused a disturbance. Some of the evicted group returned outside the hotel with a case of beer and attempted to pick a fight with a passer-by which was seen by the hotel’s valet. A number of the group would later reenter the hotel’s lobby and proceed to beat the plaintiff resulting in the breaking of his arm.

While the lower court found that Omni had a special relationship to the plaintiff, as the “possessor of land that holds the land open to the public/member of the public,” on the issue of foreseeability, the lower court found that the hotel did not have a legal duty to protect the plaintiff from an attack spontaneously committed by third parties. Additionally, the lower court found it unforeseeable that the specific rowdy and later evicted group would spontaneously attack the plaintiff.

In the First Circuit’s review of the case, Omni cited Rhode Island cases that pertained to a “past occurrences” theory of foreseeability, whereas the plaintiff cited cases that illustrated a “sequence of events” theory of foreseeability. The First Circuit ultimately agreed with the plaintiff, saying that while it may not have been foreseeable that the group would assault the plaintiff at the time of their eviction, the attack was foreseeable by the time the group had returned and tried to pick a fight with the passer-by.

The First Circuit stated that the development of a particular sequence of events can, without more, render future harm foreseeable. According to Omni, this decision imposes an undue burden on businesses, “which will now unnecessarily face the prospect of a jury trial every time anyone is injured on their premises.”

While the implications of this case as it pertains to the liability of business owners and injuries that occur on their premises goes to be seen, hotels in the First Circuit should be wary of omitting to assist any guest or even member of the public from the actions of aggressive third parties.

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

 

Mu v. Omni Hotels Management Corp., 885 F.3d 52 (1st Cir. 2018)
Mu v. Omni Hotels Management Corp., 882 F.3d 1 (1st Cir. 2018)

The Supreme Court Weighs in on Arbitrability, But Questions Remain

Posted on: January 31st, 2019

By: Ted Peters

As reflected in a prior article, the United States Supreme Court recently agreed to take another look at the issue of arbitrability. In the case of Henry Schein, Inc. v. Archer & White Sales, Inc., the Fifth Circuit concluded that the court, and not an arbitrator, had the power to decide the threshold issue of arbitrability. In its ruling, the circuit court embraced the “wholly groundless” argument, concluding that submission of the dispute to the arbitrator was unnecessary because the assertion of arbitrability was “wholly groundless.” This decision underscored the ongoing split of authority among the lower courts wherein some courts, but not all, recognize the “wholly groundless” exception. On appeal, the appellants sought to have the Supreme Court reject the exception as inconsistent with the Federal Arbitration Act (“FAA”), the purpose of which is “to ensure that private agreements to arbitrate are enforced according to their terms.”

On January 8, 2019, newly appointed Justice Kavanaugh delivered the opinion of the court vacating and remanding the Firth Circuit’s decision. Writing for a unanimous court, Kavanaugh determined that the “wholly groundless” exception to the general rule that courts must enforce contracts that delegate arbitrability questions to an arbitrator is inconsistent with the FAA and Supreme Court precedent. Not surprisingly, the opinion revisited a number of prior cases in which the Court repeatedly held that the “agreement to arbitrate a gateway issue is simply an additional… agreement the party seeking arbitration asks the federal court to enforce, and the [FAA] operates on this additional arbitration agreement just as it does on any other.” (Opinion at p. 4, quoting Rent-A-Center, 561 U.S. 63, 70 (2010)). Kavanaugh noted that the Court had frequently rejected the argument that a claim of frivolity can derail the parties’ agreement to vest questions of arbitrability with an arbitrator and not a court. Citing Steelworkers v. American Mfg. Co., 363 U.S. 564, 568 (1960), Kavanaugh stated: “A court has ‘no business weighing the merits of the grievance’ because the ‘agreement is to submit all grievances to arbitration, not merely those which the court will deem meritorious.’”

On January 15, 2019, the Court issued a ruling in yet another case involving arbitration, New Prime Inc. v. Oliveira. Justice Gorsuch delivered the opinion of the court. In an 8-0 decision (Kavanaugh took no part in the consideration or decision of the case), the high court affirmed the First Circuit’s determination that a court should determine whether the Federal Arbitration Act’s Section 1 exclusion for disputes involving the “contracts of employment” of certain transportation workers applies before ordering arbitration. Unlike Henry Schein, which addressed the delegation of “gateway” questions of arbitrability, New Prime Inc. involved the judicial assessment of a statutorily based objection to arbitration.

But wait… there’s (one) more: Lamps Plus Inc. v. Varela, Dkt. No. 17-988. That case, argued on October 29, 2018, addresses whether the FAA forecloses a state-law interpretation of an arbitration agreement that would authorize class arbitration based solely on general language commonly used in arbitration agreements. An opinion is expected at any time.

Coming full circle, it is fairly clear that the high court seems to remain firm in its embrace of arbitration agreements without permitting judicial meddling, provided there is “clear and unmistakable evidence” that the parties affirmatively agree to delegate the decision of arbitrability to the arbitrator. (Henry Schein at p. 6, citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 944). Yet, at the same time, the Justices appear receptive to judicial involvement as long as there is a reasonable statutory basis for it.

The takeaway? Parties to arbitration agreements should rest confident in their ability to affirmatively delegate disputes to arbitration provided that the statutory framework upon which arbitration is based leaves no basis for judicial tinkering. This may provide solace for some, but for many it leaves unanswered questions along with the risks and costs associated with uncertainty.

If you have questions or would like more information, please contact Ted Peters at [email protected].