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Posts Tagged ‘negligence’

Striking a Balance: Motor Carriers, Insurers, and the Innocent Motoring Public

Posted on: February 17th, 2020

By: Mallory Ball

Some courts are striking a balance where innocent third parties are injured from the negligence of motor carriers by finding coverage despite the terms and conditions of the insurance policy.  For example, some insurance policies restrict the geographical limits for which coverage is provided.  Specifically, a limitation of use endorsement would provide that insurance applies only while the respective vehicles are operated within 50 miles from the garage location shown on the policy.  Other policies provide coverage for only certain vehicles, like only those autos you lease, hire, rent, or borrow, not including from any of your employees, or autos you do not own, lease, hire, rent or borrow that are used in connection with your business, including autos owned by your employees.

In cases where the geographical limitation was the reason for disclaiming coverage, courts voided the limitation as against public policy.  In one case, the insurer issued a basic automobile policy, instead of a motor carrier policy, with a 50-mile limitation for coverage to the motor carrier insured.  The court determined that because the insured identified as a motor carrier on its application for insurance, the insurer knew of should have known the insured was a motor carrier, and thus, the insurer assumed responsibility to indemnify the motoring public for injuries sustained by the motor carrier’s negligence.  On the other hand, where an insurer issued a motor carrier policy with a 50-mile limitation to a motor carrier, the court held that where the insurer executes the necessary documents to allow a carrier to obtain a certificate to operate as a motor carrier, the insurer is not allowed to deny coverage.

Likewise, some courts look for all ways a vehicle not listed on the policy may meet the policy’s definition of a covered auto in situations where the motoring public was injured by a motor carrier.  For example, at least one court found that the independent owner-operator of a leased tractor-trailer was both an independent contractor of the motor carrier and an employee of the motor carrier in order to find alternative means of coverage for the vehicle not listed on the motor carrier’s insurance policy.  There, the court was motivated by not allowing the motor carrier to escape liability for hiring an uninsured independent trucker.  Other courts are similarly motivated by protecting the innocent motoring public by rejecting arguments that Federal Motor Carrier Safety Administration’s (FMCSA) regulations require strict compliance when determining whether a valid lease agreement exists between a motor carrier and an independent owner-operator.  Those jurisdictions reason that strict compliance would allow the motor carrier to easily escape liability.

While some courts are not willing to find coverage under an insurance policy issued to a motor carrier where the policy’s terms and conditions exclude coverage, they strike a balance by finding coverage under the MCS-90 endorsement.  Where an insurance policy is issued to an interstate motor carrier, the MCS-90 endorsement is attached to the policy in order to show the motor carrier has met its financial responsibility under the FMCSA’s regulations.  The MCS-90 endorsement provides, in pertinent part, “[t]he insurer agrees to pay, within the limits of liability described herein, any final judgment recovered against the insured for public liability resulting from negligence in the operation, maintenance or use of motor vehicles subject to the financial responsibility requirements of the Motor Carrier Act regardless of whether or not each motor vehicle is specifically described in the policy and whether or not such negligence occurs on any route or in any territory authorized to be served by the insured or elsewhere.”  The MCS-90 endorsement also allows an insurer to recoup any money paid under the endorsement from the insured.

In cases where the MCS-90 endorsement is not triggered, some courts apply a “safety net” to the MCS-90 endorsement in order to trigger coverage where (1) the underlying insurance policy to which the endorsement is attached does not otherwise provide coverage, and (2) either no other insurer of the motor carrier is available to satisfy the judgment against the motor carrier, or the motor carrier’s insurance coverage is insufficient to satisfy the federally-prescribed minimum levels of financial responsibility.

Some states have endorsements similar to the MCS-90 that attach to policies issued to intrastate motor carriers.  In at least one case, the endorsement only covered vehicles listed on the policy.  However, the court found coverage under the endorsement for a vehicle not listed on the policy in order to balance fairness to the parties by satisfying public policy, such that the motoring public was compensated for injuries, while also having the insurer pay no more than the liability coverage it agreed to provide the motor carrier under the endorsement.

While not all courts are willing to find coverage under policies that otherwise exclude coverage for injuries arising out of the negligence of motor carriers, for the courts that do find coverage despite the terms and conditions of the policies, there are ways to address the courts’ construction.  It is also important for insurers to know their insureds so that they can anticipate such coverage and otherwise bargain for it.

If you have questions or would like more information, please contact Mallory Ball at [email protected]

Don’t Shoot the Messenger: Tips for Avoiding Claims of Negligent Contract Negotiation

Posted on: September 4th, 2019

By: Catherine Bednar

When negotiating on behalf of a client, an attorney focuses on obtaining the best possible deal, balancing the client’s needs and objectives against the other side’s demands as well as the limitations of the law. An attorney must also be mindful, however, of the possibility the client might someday bring a malpractice claim in if the deal goes sour later.

In Jenkins v. Bakst, 95 Mass. App. Ct. 654 (July 23, 2019), the Massachusetts Court of Appeals recently affirmed an award of summary judgment in favor of an attorney, Bakst, who had negotiated an employment contract on behalf of the Plaintiff, Jenkins. In 2003, Jenkins entered into negotiations with a security services company, Apollo, to join the company as its president and chief operating officer.  Ten years later, when Jenkins left Apollo he was disappointed by the valuation of his stock buyout under the employment agreement.  After challenging the stock valuation, Jenkins settled his claims with Apollo. He then pursued a malpractice claim against his attorney, who had proposed the methodology used in the contract.

Before Bakst entered into any negotiations with Apollo, Jenkins informed Bakst of his wishes regarding the stock buy-back clause. The draft employment agreement prepared by Apollo’s counsel provided for buy-back of Jenkins’s stock at book value. Jenkins told Bakst he wished to receive fair market value for his shares, which he believed should be measured at between twenty-five to thirty-five percent of annual revenue, equivalent to 3 to 4 months of the company’s average revenue. Notably, an existing agreement between Apollo and two other shareholders provided for buy-back of two months of the average annual revenues. Bakst told Apollo’s counsel that Jenkins would not accept book value and believed Apollo’s fair market value should be equal to four months of revenues, not two months. Bakst also suggested an alternative method for establishing Apollo’s fair market value, which Bakst had used in agreements for other clients. Apollo’s counsel accepted Bakst’s proposed alternative methodology.

Jenkins argued Bakst was negligent by failing to follow his instructions for a buy-back provision based on three or four months of revenues. The superior court ruled a fact finder could not find either that Bakst had breached the standard of care or caused Jenkins any injury.

In reaching its decision, the court noted Bakst’s testimony that he had described the alternative valuation method to Jenkins before proposing it to Apollo’s counsel. Jenkins, on the other hand, testified he could not remember his conversations with Bakst prior to signing the employment agreement. The court found there was no evidence Apollo would have accepted Jenkins’ formula based on three to four months of revenues.  The court further noted Jenkins was an

experienced businessperson. It was undisputed he read the employment agreement, initialed the relevant pages, and then signed it.  Because Jenkins could not contradict Bakst’s testimony that he had explained the valuation before Jenkins signed, there was no material fact dispute to survive summary judgment.

The Jenkins case highlights potential pitfalls for attorneys when negotiating contracts. While an attorney may not be able to entirely avoid a lawsuit by an unhappy former client, there are some measures one can take to minimize the risk.

  1. Know the Client: Be sure to ask which terms are most important to the client. What concessions is the client willing to make? What terms are considered deal-breakers?
  2. Communicate Often and In Writing: In Jenkins, the client did not rebut the attorney’s testimony he had counseled his client about the buy-back provision. But what if the client had testified differently? In order to minimize risk, an attorney should take care to communicate with the client during the course of a contract negotiation, ideally in writing. Correspondence to the client detailing what terms have been accepted, rejected or modified, discussing the pros and cons, and advising the client of their options may avoid any misunderstandings down the road as to how the final agreement was reached. Tracking changes in a document is another useful too for showing the client exactly how the contract has changed.
  3. Confirm Understanding of Terms: Make sure the client understands the terms of the contract/agreement. Ask the client in writing if the final version is agreeable and obtain their written confirmation before proceeding.
  4. Read, Initial and Sign: In Jenkins, the court cited the fact that the Plaintiff had initialed the relevant pages and signed the contract. While one might think it goes without saying, say it anyway: have the client read and sign the entire agreement, initialing each page of the contract.

If you have any questions or would like more information, please contact Catherine Bednar 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)

Federal Securities Laws: Has the 9th Circuit Gone Rogue Again?

Posted on: February 4th, 2019

By: John Goselin

On January 4, 2019, the United States Supreme Court decided to hear an appeal from the Ninth Circuit’s April 20, 2018 decision in Varjabedian v. Emulex Corporation, 888 F.3d 399 (9th Cir. 2018). The Supreme Court is hearing this case to resolve a circuit split regarding whether a claim under Section 14(e) of the Securities Exchange Act of 1934 requires the plaintiff to plead a strong inference that the defendants acted with scienter (i.e. intent to defraud) or whether Section 14(e) merely requires an allegation that the defendants were negligent. Section 14(e) is a provision of the Securities Exchange Act of 1934 that prohibits a company involved in a tender offer from making a material misstatement or omit to state any material fact necessary in order to make the statements made, in the light of the circumstances under which they are made, not misleading or to engage in any fraudulent, deceptive or manipulative acts or practices in connection with a tender offer.

Prior to the 9th Circuit’s April 20, 2018 opinion, no Circuit split had existed. Over the course of the forty-five preceding years, the Second, Third, Fifth, Sixth and Eleventh Circuits had uniformly held that Section 14(e) required a plaintiff to plead scienter when stating a claim pursuant to Section 14(e). Despite four and half decades of consensus, the 9th Circuit concluded that every Circuit Court to address this particular issue previously had simply gotten it wrong and that if the Supreme Court considered the issue, the Supreme Court would conclude that Section 14(e) only required the plaintiff to plead negligence.

Until recently, plaintiffs had historically chosen to challenge tender offers in state court, most often Delaware state court, pursuant to state law disclosure obligations. Challenging tender offers is big business as almost every tender offer conducted results in multiple state court class action lawsuits seeking injunctions to halt the tender offers until so-called disclosure deficiencies are rectified. The cases are high profile, high risk and involve significant legal defense costs that D&O carriers often end up paying pursuant to the provisions of D&O insurance policies.  The plaintiff’s lawyers have historically been successful in playing the role of the troll under the bridge collecting hefty tolls (a.k.a legal fees) for “improving” disclosures in tender offers as the tender offer participants seek to avoid the risk of a potential injunction that could halt the tender offer.

Recently, however, the Delaware state courts where the majority of these cases have been pursued have been clamping down on these “disclosure claims” making the state court forum less lucrative for the plaintiff’s bar. Hence, the plaintiff’s bar has been turning increasingly to Section 14(e) of the Securities Exchange Act of 1934 as an alternative cause of action in a federal forum in an effort to continue collecting their attorney fee tolls. The problem, however, is that if Section 14(e) requires the plaintiff to plead “scienter” and the plaintiff wants to bring a class action to put maximum pressure on the company, the plaintiff would have to comply with the heightened pleading requirements of the Private Securities Litigation Reform Act of 1995 and plead facts, not conclusory statements, sufficient to support a “strong inference” of scienter. The plaintiff’s bar would very much like to avoid this particular pleading, and burden of proof, hurdle.

So, the 9th Circuit’s decision adopting a mere negligence standard is a very big deal creating a window through which the plaintiff’s bar hopes to continue their troll under the bridge strategy at least out West and provides the plaintiff’s bar a new opportunity to challenge the prior holdings in the other Circuit Courts. The Supreme Court, however, has taken the opportunity to decide the issue and will either shut this particular door quickly or swing it wide open by deciding the issue of negligence or scienter for Section 14(e) claims.  Every securities lawyer in America will be watching closely.

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

Ordinarily, Is It Professional Negligence? Georgia Supreme Court Thinks So In $22 Million Reversal

Posted on: April 17th, 2018

By: Shaun Daugherty

The Georgia appellate courts have addressed the issues between claims of ordinary and professional negligence in medical malpractice cases for a number of years.  The standards for liability are distinctly different, but in certain factual scenarios there may be a fine line drawn between the two.  The Georgia Supreme Court made a clear distinction on the issue last month in reversing a $22 million dollar compensatory verdict awarded in Southeastern Pain Specialists v. Brown.  This was after the same verdict had been affirmed by the Court of Appeals that found no error in the trial court charging the jury on both ordinary and professional negligence.

The Georgia Supreme Court had some clear leanings regarding the quality of care that was provided in the underlying lawsuit according to the evidence presented at trial.  The case involved an epidural steroid injection procedure where a pulse oximeter and blood pressure cuff were placed on the patient for monitoring while she was administered anesthesia face down.  During the procedure, the evidence was that the pulse oximeter read 0% and the blood pressure cuff registered no reading for a significant amount of time.  The evidence was that the defendant doctor, with knowledge of the readings, continued the procedure insisting that everything was fine.  After the 18-minute procedure, the patient was repositioned on her back and did not recover as expected.  She was taken to the local ER for further care and the defendant doctor indicated to the medical personnel that the patient was having complications from the anesthesia.  He failed to provide any information regarding the intra-procedure pulse oximeter or blood pressure readings. The patient was found to have suffered brain damage and ultimately died from the same.

At trial, the court charged the jury on both ordinary negligence, over objection by the defense, and professional negligence.  The plaintiff argued that the ordinary negligence charge was warranted due to the obvious obligation to save someone if they are not breathing and the misrepresentations made by the defendant doctor to the other healthcare providers.  The court provided no guidance as to which facts and circumstances in the case may apply to which theory of negligence. Further, the plaintiff appears to have argued in closing that the ordinary negligence standard was to be applicable generally to the defendants.

The Georgia Supreme Court made it clear that even “a very strong case of medical malpractice does not become a case of ordinary negligence simply due to the egregiousness of the medical malpractice.”  It was recognized that medical providers could be held to the ordinary negligence standard under the right circumstances, but primarily only in those cases where there was no need to exercise medical judgment.  Multiple times in the Court’s reversing opinion, it was highlighted that the facts of the case involved medical data provided by medical equipment during a medical procedure and the proper response to the same.  It was found that this required the exercise of medical judgment.

In cases involving claims of medical malpractice, the defendant is provided a presumption of due care which must be overcome by expert testimony by the plaintiff.  In cases involving ordinary negligence, no such presumption is given.  The Court found that the Court of Appeals erred in finding that a lay person would not need expert testimony to understand the meaning of the data provided from the medical machines and the proper method of response during the medical procedure.  The “trust” of the plaintiff’s argument was that the defendant doctor failed to properly respond to the data that was being provided by the machines.  This was information that required expert judgment and decision making which was outside the scope of ordinary negligence.

The Court determined that providing the jury with an ordinary negligence instruction, without clarification as to which facts and claims it may apply, invited them to decide the medical liability outside the boundaries for claims of professional negligence.  Primarily the need for expert testimony to overcome the presumption of due care.  This was compounded by the plaintiff’s counsel’s arguments in closing which made no distinction and appeared to encourage the ordinary negligence standard to all claims.  The jury verdict in favor of the plaintiff was a general form and did not allow the Court to determine whether the verdict was based on the application of the appropriate standard.  Because it was error to provide the ordinary negligence charge without further clarification or instruction, the Court reversed and remanded the matter to the Court of Appeals with a direction to send it back to the trial court for a full retrial as to the appealing parties, including the issue of punitive damages to which the plaintiff had previously been awarded $0.

So what does this opinion tell us?  It tells us that ordinary and professional negligence claims can live in the same case, but it is essential that they be clearly defined for the jury.  The trial court’s vague instruction, coupled with the plaintiff’s counsel’s closing argument, invited the reversal in this instance.  As the Court indicated many times, medical data from medical machines during a medical procedure require the exercise of expert medical judgment in determining the proper response.  The failure of the trial court and attorney to set this apart from any ordinary duty of care in defendant’s communications to other medical providers was harmful error which required the retrial.

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