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Posts Tagged ‘Georgia’

In the Land of Insurance Coverage, Specificity is King

Posted on: December 13th, 2018

GA Court of Appeals Finds Insurer Must Cover Millions in Damages Because of Policy Ambiguities

By: Brandon Howard

Whenever a court suspects an insurance policy is “ambiguous,” anxiety strikes the minds of both coverage counsel and insurers alike. For coverage counsel, combating an alleged ambiguous provision of a policy typically occurs on the back-end, after an incident has occurred and the claimant or plaintiff has already made underlying allegations of liability. As a result, coverage counsel can only advise clients or litigate matters within the framework of any given insurance policy’s established language. Yet, as policy issuers, insurers are uniquely positioned to monitor trends in litigation, on the front-end, in an effort to anticipate and revise policy language which may appear ambiguous in light of unique or uncommon facts. By proactively taking on vague policy provisions, a prudent insurer may avoid unanticipated exposure and a public battle over any alleged ambiguities during litigation.

Recently, in Nat’l Union Fire Ins. Co. v. Scapa Dryer Fabrics, Inc., 2018 Ga. App. LEXIS 634 (Ga. Ct. App. Oct. 26, 2018), the Georgia Court of Appeals demonstrated how a pair of ambiguous policy provisions can expose an insurer to millions of dollars in unanticipated liability. In that case, over a period of five years, the primary insurer, National Union, issued commercial general liability policies to an entity selling asbestos-containing dryer felts (Scapa). Three of the policies had $1 million occurrence/aggregate limits, while the last two policies purported to cap the insured’s liability limits for any one occurrence at $7.2 million. Citing the policies’ non-cumulation and limit erosion provisions, National Union argued that its duty to indemnify Scapa was discharged when the Scapa’s liability reached $7.2 million. Scapa, however, argued that both the non-cumulation and limit erosion provisions were ambiguous, thus allowing it to “stack” the limits of each of the primary policies, for a total coverage limit of $17.4 million.

On appeal, the Georgia Court of Appeals held that Scapa was allowed to stack the coverage limits of the five National Union policies because the policies’ non-cumulation clauses were ambiguous. The policies provided that if “[Scapa] has been provided with more than one policy by [National Union] covering the same loss/losses, the limit of liability stated in the schedule of this endorsement is the total limit of [National Union’s] liability for all damages which are payable under such policies. Any loss incurred under this policy shall serve to reduce and shall therefore be deducted from the total limit of [National Union’s] liability.” Confronted with this language, the Court concluded that the non-cumulation provision is ambiguous because “[it] does not indicate whether the limit applies to [each discriminate] policy period only or to the aggregate period under the original and renewed policies.” Construing the policy in favor of the insured, the Court held that the non-cumulation provision did not apply in the aggregate and, therefore, Scapa could stack its policy limits to gain an additional $10.2 million in coverage beyond what National Union contended was due.

On the issue of policy limit erosion, the Court also sided with Scapa. National Union had argued that, under its policies, the liability limits were eroded by the costs expended to defend Scapa against liability. For support, Scapa pointed to the policy, which provides that the limits of liability are reduced by “all expenses incurred by [National Union], . . . in any claim, suit[,] or other action defended by [National Union].” The Court noted, however, that National Union’s limits “[are] eroded only by the total sums that National Union ‘become[s] obligated to pay due to’ any bodily injury or . . . property damage.” The erosion provision, according to the Court, “is ambiguous as to whether such expenses include defense costs National Union is obligated to pay solely as part of its contractual duty to defend (as opposed to those sums it is legally obligated to pay by reason of the liability imposed upon Scapa by law for damages).” Again, construing the policy in favor of the insured, the Court held that National Union’s limits were not eroded by the costs incurred defending Scapa.

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

Dealing with Nonparty Document Requests

Posted on: December 4th, 2018

By: Ze’eva Kushner

As an executive or business owner, at some point you may receive a request to produce documents relating to your business from a party to a lawsuit that does not involve your company.  There are a variety of potential issues that you should consider once this lands on your desk.

The Georgia Civil Practice Act allows parties to a lawsuit to serve requests for production of documents on nonparties as part of the process of gathering information relevant to the subject matter of the case.  (O.C.G.A. § 9-11-34 (c)).  Ordinarily, your deadline to respond to such a request falls 33 days after the request was put in the mail or emailed to you.  But what happens if the request is mailed to your company’s registered agent, and he or she does not get it to you in time for you to gather the documents and respond by the deadline?

Although you, as a nonparty, have an obligation to respond or object to the request for documents by the deadline, the party who sent you the request cannot just run to court if you miss the deadline to obtain an order compelling you to produce the documents.  Instead, they have to make a good faith effort to work with you regarding any issue or dispute stemming from the document requests.  This means that you should expect a phone call from the attorney to find out the reason for the delay.

When you receive the call from the attorney who requested the documents, it is a good opportunity to discuss the types of documents that are being sought, potentially narrowing the topics and thus reducing your burden.  Additionally, you may request reimbursement of reasonable copying costs and additional time to produce the documents.

If you have any questions or would like more information, please contact Ze’eva Kushner at [email protected].

Protecting In-House Correspondence from Disclosure: The Troublesome “CC”

Posted on: November 28th, 2018

By: Jake Carroll

Commercial disputes present complex issues of causation—what caused the accident, who is responsible, what is impacting company revenue. But before the dispute even arises, in-house attorneys are frequently copied on correspondence with team members and employees evaluating and offering opinions on causation, performance, and potential costs. Then, when the dispute or accident ends up in litigation, the materials prepared by the employees are sought in discovery.

For example, what if an engineering firm learns that one of its employees improperly installed a part of the anti-corrosion system for a pipeline. The employee’s supervisor prepares an email detailing all instances of improperly installed systems in the last four (4) years by the employee and decides to cc in-house counsel. Is this email protected from disclosure if a lawsuit arises from the improperly installed pipe system?

Claims of privilege and work product are often asserted when an in-house attorney is included as a secondary recipient—or CC—on an email, raising the question of what exactly is covered by the attorney-client privilege and work-product doctrine. Resolving these issues can be costly in their own right, and have the potential to derail an otherwise straightforward dispute.

While there are some exceptions, the general rule is that the communications where in-house attorneys are only CC’d are not protected from disclosure under either the attorney-client privilege or the work-product doctrine.[1]

The attorney-client privilege protects confidential communications that are sent for the purpose of securing legal advice.[2] However, when an email is neither addressed to the in-house attorney, nor sent directly to the attorney, it is unlikely that the privilege applies.[3] Similarly, the work-product doctrine protects correspondence or reports prepared in anticipation of litigation.[4] When an in-house attorney is only CC’d on correspondence, the emails are neither work performed by the in-house attorney, nor work prepared at the direction of the in-house attorney.[5] Additionally, many of these emails are typically sent prior to litigation and are not protected.

Businesses would do well to remember that simply copying your in-house attorney on an email will not shield its disclosure during discovery. The impact of this fact is far-reaching. In the example above, not only would the other side have an admission regarding the mislaid pipe from the supervisor, the email has also identified other projects where the business may be vulnerable to suit to a plaintiffs’ attorney.

If a company wishes for correspondence to be protected from disclosure, the following tips, though not exhaustive, are helpful:

  1. The sender of the email should direct correspondence to in-house counsel in a separate email—not by CC—and for the express purpose of seeking legal advice on a potential issue. For example, starting the email with “legal advice needed” or “request for legal advice” will go a long way to preserving the privilege and are more effective than “I have a question” or “see below.” Such requests should also be addressed specifically to the in-house attorney or an attorney on the legal team, rather than being directed to other employees with just a cc to the lawyer.
  2. To protect the privilege when using emails, avoid communications with both business and legal purposes as much as possible.
  3. Limit long email chains. Besides being good business practice, in-house counsel should not let privileged discussions continue in a long email chain. Inevitably, as the discussion continues, the topic may stray away from the original question and new people may be added to the email string—risking the privilege protection.

Protecting the attorney–client privilege and work-product privilege requires sound policies and procedures, a properly trained workforce and constant vigilance from the in-house attorney. But business that put procedures in place on the front end will find it well worth their time if and when a dispute arises.

If you need help with this issue, or any other commercial law questions, Jake Carroll practices construction and commercial law, is licensed to practice in Georgia and Florida, and is a member of Freeman Mathis & Gary’s Construction Law and Tort & Catastrophic Loss practice groups. He represents corporations and manufacturers in a wide range of litigation and corporate matters involving breach of contract, business torts, and products liability claims. He can be reached at [email protected].

 

 

[1] Minebea Co. v. Papst, 228 F.R.D. 13, 21 (D.D.C. 2005) (“A corporation cannot be permitted to insulate its files from discovery simply by sending a ‘cc’ to in-house counsel.”) (quoting USPS v. Phelps Dodge Refining Corp., 852 F.Supp. 156, 163-64 (E.D.N.Y.1994)).
[2] See e.g. Upjohn Co. v. U. S., 449 U.S. 383, 394-95 (1981).
[3] Id. at 394; In re Seroquel Prods. Liability Litig., 2008 U.S. Dist. LEXIS 39467, 2008 WL 1995058, at *4 (May 7, 2008) (explaining that “[t]here is general agreement that the protection of the privilege applies only if the primary or predominate purpose of the attorney-client consultation is to seek legal advice or assistance”) (quoting Paul R. Rice, Attorney-Client Privilege in the United States § 7:5).
[4] The work-product privilege is derived from the United States Supreme Court’s ruling in Hickman v. Taylor, 29 U.S. 495, 510-11, 67 S. Ct. 385, 393 (1947), and is codified in Fed. R. Civ. P. 26(b)(3).
[5] See Cox v. Adm’r U.S. Steel & Carnegie, 17 F.3d 1386, 1421-22 (11th Cir. 1994), opinion modified on reh’g, 30 F.3d 1347 (11th Cir. 1994) (recognizing that the work-product privilege protects from discovery “materials that reflect an attorney’s mental impressions, conclusions, opinions, or legal theories” that were prepared in anticipation of litigation and intended to remain confidential); cf. Hickman, 329 U.S. at 511, 67 S.Ct. at 393; Upjohn, 449 U.S. at 399, 101 S.Ct. at 687.

Closings Gone Bad

Posted on: October 25th, 2018

By: Dana Maine

Nathan Hardwick IV was convicted by a Northern District of Georgia federal jury on October 12, 2018 of embezzling $26 million from the accounts of his former firm, Morris Hardwick Schneider.  $20 million of this amount was from the firm’s escrow accounts.  The good news for clients of the firm is that firm’s insurer, Fidelity National Finance, stepped in to cover most of the escrow shortfall.  All parties to real estate closings were watching this trial and trying to understand how this scheme could have gone on for as long as it did and involve this amount of money. There are lots of lessons to be learned, and policies to be implemented.  Doubtless, attorneys for escrow agents and their insurers are scurrying to draft these new policies and put them in place.  Hardwick’s sentencing is set for December 19.  He will remain in custody until sentencing.

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

Who’s Liable for Letting the Dogs Out?

Posted on: October 23rd, 2018

By: Wes Jackson

“Cry ‘Havoc!,’ and let slip the dogs of war.”

William Shakespeare, Julius Caesar act 3, sc. 1.

 

Havoc indeed—in a case argued before the Georgia Supreme Court on October 10, two pit bulls slipped out of a tenant’s backyard gate with a broken latch and then mauled a woman walking her smaller dogs nearly two blocks away from the home. Police had to fatally shoot both dogs to end the attack, and the woman was life-flighted to a hospital where she stayed for seven days and was left disfigured after multiple surgeries.

The question before the Court was whether the landlord could be liable for the attack. The trial court entered summary judgment in the landlord’s favor because the plaintiff could not show the landlord had any prior knowledge of the dogs’ propensity for violence. The Georgia Court of Appeals reversed, holding that the question of the landlord’s liability should have been submitted to a jury.

The case exemplifies how thorny questions of proximate causation can jeopardize a defendant’s hopes at summary judgment. For example, the Court of Appeals found the trial court erred by failing to properly consider the fact that the landlord had known the gate latch was broken but failed to repair it. Additionally, the parties argued before the Court whether a landowner’s failure to keep the premises in repair could, as a matter of law, proximately cause an injury that happens more than two blocks away from the property. Given these arguments, the Supreme Court’s decision will likely either extend or limit the scope of landlords’ liability for injuries caused by their tenants or those that occur off the property.

The case is Tyner v. Matta-Troncoso et al., S18G0364. If you have any questions about this case or its impact on landlord liability, premises liability, or dog attack cases in Georgia, feel free to contact Wes Jackson at [email protected].