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Posts Tagged ‘Massachusetts’

Massachusetts’ Will-o’-the-WISP

Posted on: April 24th, 2019

By: Zach Moura

Massachusetts revised its data breach notification law, effective April 10, 2019, to change the minimum standards for what companies should include in a Written Information Security Plan, or WISP. Companies that experience a data breach incident must now confirm in their breach notice to the Massachusetts Attorney General whether the company maintains a WISP and identify any steps taken or planned to take relating to the incident, including updating the WISP. The requirements apply to companies that handle personal information belonging to Massachusetts’ residents no matter where the company itself is located.

The revisions also reshape the requirements for notifications to impacted individuals. In data breach incidents in which Massachusetts residents’ Social Security numbers are exposed, Massachusetts now requires companies to offer 18 months of free credit monitoring services to impacted individuals. Entities must also now certify to the state’s Attorney General and Office of Consumer Affairs and Business Regulation (“OCABR”) that the credit monitoring services comply with the statute, and provide the name of the person responsible for the breach of security, if known. The revisions also obligate the OCABR to publicly post the sample notice on its website within one business day.

The new statute calls for rolling and continuous notifications to all impacted individuals as they are identified, rather than allowing a business to first determine the total number of impacted individuals before notifying them all at the same time. And if an investigation reveals more information on the data breach that, if known, would have been provided to the impacted individuals in the original notice, additional notices must be sent. Entities must also now identify any parent or affiliated corporation in the notification letter.

For any questions about the above, or whether a WISP complies with Massachusetts law, please contact Zach Moura at [email protected].

First Circuit Affirms Ruling That Third-Party Administrator Responded Reasonably To Settlement Offers Within Policy Limits

Posted on: April 9th, 2019

By: Bill Buechner

We recently posted a blog (see here) concerning an appeal to the First Circuit Court of Appeals from a Massachusetts district court decision finding that a third-party administrator (Sedgwick) did not violate the Massachusetts Consumer Protection Statute, Chapter 93A, or the Insurance Practices Statute, Chapter 176D, even though it did not make any offer to settle a wrongful death claim before trial and did not accept settlement offers within the policy limit for a negligence claim for pain and suffering. Our previous blog noted that the “insurance coverage bar will be paying close attention when the First Circuit issues its decision.” The First Circuit very recently issued its decision affirming the district court’s judgment in favor of Sedgwick. Calandro v. Sedgwick Claims Mgmt. Servs., ___ F.3d ____, 2019 U.S. App. LEXIS 7913, 2019 WL 1236927 (1st Cir. March 18, 2019). Notably, former Supreme Court Justice Souter was on the panel.

In the underlying case, Genevieve Calandro fell from her wheelchair at a nursing home (Radius Danvers) and subsequently died in August 2008 at a hospice facility after being taken to the hospital. The estate filed suit for wrongful death and negligence against Radius and later added as a defendant Radius’s medical director, who was also Calandro’s attending physician. While the underlying case was pending, the estate made settlement offers for $500,000 on October 12, 2011 and November 12, 2013 and for $1 million in April 2014 and July 3, 2014, which was the policy limit for the nursing home’s policy. The most that Sedgwick offered before trial was $300,000, which the estate declined.  The underlying case went to trial in July 2014, and the jury awarded $1,425,000 in compensatory damages and $12,514,605 in punitive damages. The estate then sued Sedgwick to recover these amounts and more. The district court, after a bench trial, concluded that liability was never “reasonably clear” on the wrongful death claim as required by the statute, and that Sedgwick made timely and reasonable offers on the negligence claim for pain and suffering.

Rejecting the estate’s appeal, the First Circuit held that the district court did not clearly err in finding that liability on the wrongful death claim was never “reasonably clear” before trial on the wrongful death claim. The First Circuit noted that an independent adjuster hired by Sedgwick stated in its initial report in October 2011 that the cause of death seemed to be related to ongoing medical conditions and not necessarily Radius’s negligence, but that there were missing documents and witnesses he had not yet been able to locate and interview. Under these circumstances, the First Circuit concluded that it was reasonable for Sedgwick to continue to investigate (which it did) “rather than roll over and concede that Radius’s negligence was the cause of death.” Id. at *13.   The estate argued that liability on the wrongful death claim became reasonably clear in May 2013 when the estate’s expert presented his opinion as to causation. The district court credited the testimony of Radius’s defense counsel, who was retained by Sedgwick, that only an outline of the estate’s expert’s anticipated testimony was provided in May 2013, and that the estate’s expert’s full report explaining his reasoning as to the cause of death was not provided until late April 2014. The First Circuit also emphasized that Sedgwick received a report from its own expert in May 2014 that reached materially different conclusions on the causation issue than the estate’s expert did. Id. at *15. In addition, the First Circuit noted that the verdict form included a question as to causation, which indicated that Sedgwick never conceded the causation issue, and internal Sedgwick correspondence shortly before trial stating that, in light of comorbidity issues often affecting elderly and infirm people like Calandro, “we have a strong argument for causation.” Id. at *16 n.5.

As to the negligence claim for pain and suffering, the First Circuit held that that the evidence supported the district court’s conclusion that Sedgwick conducted a good faith investigation, and noted that Sedgwick retained a qualified investigator almost immediately after it learned of the claim. Id. at *18-19. Furthermore, the First Circuit upheld the district court’s findings that the settlement offers were reasonable and prompt after liability on this claim became reasonably clear in February 2014. On February 6, 2014, in response to the estate’s $500,000 offer made on November 12, 2013, the defendants made a joint settlement offer of $275,000 and indicated that they had “some room to move.” Id. at *5, 20. A day later, defense counsel wrote a report to Sedgwick in which he predicted a verdict against the defendants in the range of $300,000 to $500,000.  Id. at *5. The First Circuit explained that, “especially given the difficulties inherent in placing a dollar value on intangibles such as pain and suffering,” the district court did not clearly err in finding this settlement offer reasonable.  Id. at *20. The First Circuit also noted that the defendants made an offer of $300,000 in May 2014 after the estate increased its settlement demand to $1 million in April 2014, and that Sedgwick made an offer of $250,000 on behalf of Radius a few days before trial.  Id. at *20-21.

Calandro construed a state statute that differs from the common law bad faith failure to settle claim recognized in most jurisdictions,  and it applied a very deferential clear-error review to the factual findings of the district court after a bench trial. Nevertheless, Calandro provides some helpful reminders to claims professionals and attorneys responding to settlement demands within policy limits and defending bad faith failure to settle claims. First, while the facts themselves of course are critical, the procedural steps taken by a claims professional may often be significant as well.  In this case, the First Circuit emphasized the fact that Sedgwick retained a qualified and independent investigator almost immediately after receiving notice of the claim, that the investigator provided his initial report within two weeks raising the causation issue, and that Sedgwick continued to investigate the claim throughout the case. Second, courts will not expect insurers and claims professionals to “roll over” if there is a reasonable defense to liability at the time a settlement offer within policy limits is made or if the evidence available at that time is not sufficiently developed to make a reasonable assessment as to liability. Third, sensitive information such as internal correspondence or emails and reports from defense counsel may become critical evidence in defending a bad faith failure to settle claim. In finding that liability for the wrongful death claim was not reasonably clear, the First Circuit in Calandro cited internal Sedgwick correspondence within a week of trial expressing confidence in the causation defense. The conclusion that Sedgwick’s settlement offers on the pain and suffering claim were reasonable was supported by the fact that its settlement offers were close to or within the verdict range predicted by defense counsel in his report to Sedgwick.

Nevertheless, insurers and claims professionals should recognize that the actions of the third-party administrator in Calandro likely received much more thorough and sympathetic consideration from the district judge who served as the fact-finder than most juries may have provided.

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

Bold New Changes to Massachusetts’ Data Breach Notification Law

Posted on: March 15th, 2019

By: Michael Kouskoutis

Effective April 11, 2019, Massachusetts’ data breach notification law will compel notifying entities to follow several additional and unprecedented requirements when responding to a data breach.

First, the notifying entity must report to the state’s Attorney General whether it has implemented a written information security program (WISP). In the event the entity has no WISP in place, follow up inquiries and perhaps even penalties may result.

If applicable, notifying entities will also have to inform affected individuals of the name of their parent corporation or affiliated companies, which could generate negative publicity for companies whose subsidiaries suffer a data breach. Notably, the statute provides no threshold level of ownership before triggering this provision.

Further, the entity will not be permitted to delay notifications on the ground that the total number of residents has not yet been determined. In effect, the entity may have to issue breach notifications on a rolling basis instead of waiting for the investigation to conclude.

Lastly, Massachusetts’ Office of Consumer Affairs and Business Regulation will publish on its website the entity’s individual notification letter in addition to other details about the breach. It will also assist Massachusetts residents in filing public records requests to the Attorney General to obtain state agency notification letters.

These changes are not the type we have seen other states make in recent years; Massachusetts is taking a very bold step towards a more involved notification procedure. We will be monitoring changes to other data breach notification laws to see whether other states follow Massachusetts’ lead. If you have any questions or would like more information, please contact Michael Kouskoutis at [email protected].

Philadelphia’s “Salary History Ban Law” Gets Banned!

Posted on: May 7th, 2018

By: John McAvoy

More than a half-century after President JFK signed the Equal Pay Act, the gender pay gap is still with us. Women earn 79 cents for every dollar men earn, according to the Census Bureau.  What will it take to bridge that stubborn pay gap? Well, some believe we can and will reduce the impact of previous discrimination by not asking new hires for their salary history. Several cities and states agree with this approach and have passed legislation that prohibits employers from asking questions about an applicant’s salary history. In the cities and states where such laws have been passed, they are not without controversy.

Philadelphia passed a similar law last year. In response, Philadelphia’s Chamber of Commerce, backed by some of Philadelphia’s biggest employers, including Comcast and Children’s Hospital of Philadelphia (CHOP), filed suit against the City of Philadelphia challenging the constitutionality of the salary history ban law, arguing the portion of the law that prevents companies from inquiring about an applicant’s wage history violated an employer’s free speech rights.

On Monday, April 30, 2018, the Eastern District of Pennsylvania made two rulings with respect to Philadelphia’s salary history ban law in the matter of Chamber of Commerce for Greater Philadelphia v. City of Philadelphia, docket no. 2:17-cv-01548-MSG (E.D. Pa. Apr. 30, 2018) (Goldberg, J.).

First, the court found that the law as written violated the First Amendment free speech rights of Philadelphia employers. In sum, the court’s ruling is that employers can ask salary history questions.

Second, the court upheld the ‘reliance provision’ of the salary history ban law, which makes it illegal to rely upon that wage history to set the employee’s compensation.  This means that Philadelphia employers can ask salary history but cannot use it as a basis to set salary.  The purpose of this is to encourage employers to offer potential candidates what the job is worth rather than based on prior salary which could have been set based on discriminatory factors.

There is a prevailing trend nationwide for salary history ban laws. To date, California, Delaware, Massachusetts, Oregon, Puerto Rico, New York’s Albany County, New York City, and San Francisco have enacted salary history ban laws, and at least 14 other states are considering following suit.  Although we anticipate future and continued legal challenges, it seems likely that laws banning salary history inquiries will continue to gain ground, particularly in more progressive states or areas where the pay disparity directly impacts a large segment of eligible voters. As such, prudent employers should prepare themselves to address this new workforce right through smart planning and proper training of employees, including managers, supervisors and HR personnel responsible for ensuring a lawful hiring process.

Want to learn more about what Philadelphia’s salary history ban law means for your business? Let us help you by analyzing your hiring practices. Please call or email the employment experts and John McAvoy (215.789.4919 [email protected]).

FINRA to Pick Up the Check on Unpaid Arbitration Awards?

Posted on: March 8th, 2018

By: Theodore C. Peters

As recently reported, unpaid FINRA arbitration awards is a growing problem.  As FINRA has acknowledged, roughly one quarter of FINRA arbitration awards issued in 2016 went unpaid.  If lawmakers have their way, FINRA itself may ultimately be stuck with the check, and be required to pay such awards.

On March 6, Sen. Elizabeth Warren, D-Mass, introduced legislation that would require FINRA to compensate investors for unpaid arbitration awards.  The Compensation for Cheated Investors Act would direct FINRA to establish a “relief fund” pool that could be used to provide investors with the full value of unpaid arbitration awards against brokerage firms or brokers regulated by FINRA.  The fund would derive “first from penalties paid by brokers and then from sources determined by FINRA.”  In the event FINRA fails to take steps to establish such a fund, the bill proposed by Sen. Warren would nevertheless require FINRA to compensate investors from its general budget.  The bill also provides that FINRA may require investors to subrogate their claims against brokers, and that FINRA may pursue additional remedies against the brokers.

Also of note, FINRA would not be permitted to limit the amount that an investor may receive from the relief fund, nor would FINRA be allowed to prohibit any investor from submitting a claim to the fund.  FINRA would also be required to annually disclose, among other things, the total number of arbitration awards issued in favor of investors against brokerage firms or brokers under its watch, the number and amount of unpaid awards, and the names of the brokerage firms/brokers at issue.

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