eNotes: Liability – December 2021
December 01, 2021
SIGNIFICANT CASE SUMMARIES
FEDERAL CASE SUMMARY
Round Guys Brewing Co. v. Cincinnati Ins. Co.
United States District Court for the Eastern District of Pennsylvania
No. CV-20-6252, 2021 U.S. Dist. LEXIS 180621
Decided: September 22, 2021
Insured was not entitled to business interruption coverage under their policy for losses incurred during the COVID-19 pandemic.
Plaintiff is a craft brewery and restaurant which was forced to close by the series of executive orders of Governor Wolf during the COVID-19 pandemic relating to non-life-sustaining businesses. The brewery incurred financial losses due to its closure, and sought to recover these losses under its insurance policy with Cincinnati Insurance Company. Round Guys’ policy was identified as an “all risk” policy, “meaning all losses are recoverable unless they explicitly fall into a categorical exclusion.” One requirement of the policy was that a covered loss must include “physical loss” or “physical damage.” Plaintiff brought counts of declaratory judgment, breach of contract, and bad faith. Defendant removed the case to federal court, and subsequently moved to dismiss the Complaint.
The Court held that the brewery could not plausibly establish that it was affected by a covered loss under the policy and dismissed the Complaint. When considering the Motion to dismiss, the Court held that the insurance policy was unambiguous and a “covered loss” required a “physical” damage or loss. The Court further identified that other courts which have addressed identical policy provisions in the context of the COVID-19 pandemic have reached a consensus that loss of business due to governmental orders is not enough without physical damage or loss. As Plaintiff alleged no physical damage or loss, the Court accordingly held that they had no plausible claims. The Complaint was dismissed with prejudice.
Questions about this case can be directed to Logan Nagle at (717) 255-7234 or firstname.lastname@example.org.
Brown v. LM Gen. Ins. Co.
United States District Court for the Eastern District of Pennsylvania
Decided: August 24, 2021
Court grants Motion to dismiss bad faith claim with prejudice as Plaintiff failed to plead specific facts regarding how insurer acted in bad faith.
Plaintiff was involved in a motor vehicle accident and made a demand against her insurer for uninsured motorist benefits. After being denied these benefits, Plaintiff filed a complaint against the insurer for breach of contract and bad faith in violation of 42 Pa.C.S. § 8371.
The Court dismissed the original bad faith claim contained in the first Complaint, with the Court granting leave for Plaintiff to re-plead the claim. In Plaintiff’s subsequent filing, she alleged her insurer failed to conduct a medical evaluation, review her medical records, or otherwise investigate her claim prior to offering a settlement. Plaintiff also claimed her insurer was dilatory in handling her claims and that it allegedly misrepresented that it would resolve the claim.
The Court held that Plaintiff failed to adequately plead bad faith and dismissed the claim with prejudice. The Court found the alleged 38 ways in which the insurer purportedly acted in bad faith were not facts, but conclusions, and there were no details describing what was unfair about the process, other than Plaintiff’s disputes over the value of the settlement offer. Plaintiff admitted that her insurer requested medical records and reviewed them, and Plaintiff failed to plead specific facts as to how the insurer was dilatory. Finally, the Court found, that the bad faith claim only represented a disagreement over the amount of the settlement. To properly state a bad faith claim a plaintiff must do more than call an insurer’s offer “low ball.” Thus, Plaintiff’s bad faith claim was dismissed.
Questions about this case can be directed to Michael Weinert at (610) 332-7025 or email@example.com.
PA CASE SUMMARIES
Brooks v. Ewing Cole, Inc.
Pennsylvania Supreme Court
No. 4 EAP 2021
Decided: September 22, 2021
An Order denying a Motion for summary judgment, based on sovereign immunity, was immediately appealable under the collateral order doctrine.
Plaintiff Brooks alleged personal injuries when she walked into an unmarked glass wall, while she was attempting to exit the Family Court building in Philadelphia. Defendants included, Ewing Cole, the architectural firm that designed and constructed the building; the City of Philadelphia, as a lessor of the building; and the Family Court, as a leasee of the building. Within the Complaint, Plaintiff alleged that the Family Court, as a Commonwealth entity, was subject to liability under the real estate exception to sovereign immunity, set forth by 42 Pa.C.S. § 8522(b). The Family Court filed a Motion for summary judgment, arguing that Section 8522 was inapplicable because it was not a “Commonwealth party” within the meaning of the Sovereign Immunity Act.
The Trial Court denied the Family Court’s Motion for summary judgment, concluding that the Family Court did constitute a Commonwealth Party. The Family Court filed a Motion for reconsideration, requesting that the Trial Court amend its Order denying the Motion for summary judgment, including a statement which would allow the Family Court to file an interlocutory appeal. The Trial Court denied the request, in response to which the Family Court appealed to the Commonwealth Court. The Commonwealth Court issued an order staying the Trial Court proceedings, pending appeal. Eventually, the Commonwealth Court quashed the Family Court’s appeal, concluding that the Trial Court’s Order denying summary judgment was not a collateral order subject to interlocutory appeal.
The Supreme Court of Pennsylvania noted that three criteria must be satisfied, such that an order of a trial court constitutes a “collateral order,” those criteria being separability, importance and irreparable loss. The Commonwealth Court had determined that the first two criteria were met in the context of this case. The Court agreed with the Commonwealth Court with regard to its findings on the first and second prongs, noting that the appeal was separable from Plaintiff’s cause of action because it could be resolved without an analysis of the merits of the underlying dispute; and that the issue presented within the appeal (i.e. the applicability of sovereign immunity) was too important to evade review before final judgment. The Court disagreed with the Commonwealth Court with regard to the third prong (i.e. irreparable loss), finding that an appeal following final judgment with respect to the underlying claim would not adequately protect the Family Court’s claim of sovereign immunity, as “subjecting the government to unnecessary litigation has potentially deleterious effects on its policymaking decisions” and is certain to result in the depletion of government money and resources.
Questions about this case can be directed to Sam Dunlop at (412) 926-1432 or firstname.lastname@example.org.
Leadbitter v. Keystone Anesthesia Consultants
No. 19 WAP 2020 (Pa. 8/17/2021)
Pennsylvania Supreme Court
Decided: August 17, 2021
Returning to long-standing precedent, the Supreme Court of Pennsylvania holds that peer review documents do not need to be generated by a “peer review committee” to be afforded protection under the Pennsylvania Peer Review Protection Act (“PRPA”) so long as the committee itself is performing a peer-review function.
In a medical case arising out of post-spinal surgery complications, Plaintiffs alleged that the hospital was negligent in credentialing and privileging the Defendant surgeon. During the course of discovery, Plaintiffs formally requested the surgeon’s full and complete credentialing and privileging file maintained by the Defendant hospital. Defendant hospital produced a portion of the requested documents; however it withheld and/or redacted sections of the files containing professional opinions relating to the surgeon’s competence as well as documents generated by the National Practitioner Data Bank (NPDB).
The Trial Court held that the documents were not subject to peer review protection and ordered them to be produced. Defendant hospital appealed the Trial Court ruling, arguing that professional opinions and performance evaluations are protected under the PRPA and that the NPDB documents are protected under the HCQIA and 45 C.F.R. § 60.20(a) (information reported to the NPDB is confidential and shall not be disclosed absent certain narrowed exceptions). The Superior Court upheld the Trial Court’s ruling.
Agreeing with the hospital’s core position, the Supreme Court vacated both of the Lower Court rulings finding that any hospital committee that engages in a form of peer review, regardless of their designation, can be considered a “review committee” for the purpose of the PRPA. It would follow, therefore, that a hospital’s credentials committee, including the documents which they generate, should enjoy the protections of the PRPA. Although the Court’s ruling may prevent plaintiffs from obtaining some documents, “the legislative body is presumed to have balanced that consideration against others. . . and to have intentionally used language applying to a variety of committees whose proceedings and records involve peer review.”
Questions about this case can be directed to John Lucy at (717) 441-7067 or email@example.com.
Avent v. A. Bob’s Towing
Pennsylvania Superior Court
1467 EDA 2020
Decided: October 21, 2021
Missing witness instruction properly given where party with superior access to identified witness failed to produce the witness at trial.
Plaintiff fell while delivering mail on Defendant’s property. An eyewitness saw the accident and approached Plaintiff. The two men recognized each other as classmates from high school. The witness provided Plaintiff with his contact information and later cooperated with Plaintiff’s investigator by providing a signed statement. When Defendant subpoenaed the witness for deposition, the witness failed to attend. Both parties included the witness on their witness lists and proposed voir dire. Plaintiff did not contact the witness until three days before trial and did not serve him with a trial subpoena. During opening statements, Defendant’s counsel commented on the discrepancies between the witness’ statement and Plaintiff’s version of the event. The witness did not appear for trial. Upon request by Defendant, the Trial Court instructed the jury that they were permitted to infer based upon Plaintiff’s failure to call the witness to the stand, that his testimony would have been unfavorable to Plaintiff. The jury returned a verdict for Defendant.
On appeal, Plaintiff claimed that the Trial Court erred in not striking defense counsel’s comments during opening statements and issuing the missing witness instruction claiming that both parties had equal access to the witness. The Court first ruled that defense counsel’s comments during the opening caused no prejudice because the Trial Court instructed the jury that such statements were not evidence and the jury was the sole factfinder. The Court next noted that the equal availability of a witness is a fact-based matter. The witness cooperated with Plaintiff’s investigator because the Plaintiff had a social history with the witness, but the witness then refused to comply with Defendant’s subpoena for a deposition. Under the circumstances, the Court concluded that Plaintiff had superior access to the witness.
The Superior Court affirmed the judgment in favor of the Defendant holding that the Trial Court did not err in issuing the missing witness instruction where the Plaintiff had superior access to the witness and failed to call the witness at trial despite identifying the witness as a trial witness.
Questions about this case can be directed to James F. Swartz, III at (610) 332-7028 or firstname.lastname@example.org.
Franczyk v. Home Depot, Inc.
Pennsylvania Superior Court
No. 1090 WDA 2020, 2021 Pa. Super. Unpub. LEXIS 2594
Decided: September 24, 2021
WC Act did not bar claim by employee against employer where claim involved employer’s interference with employee’s right to bring negligence claim against a tortfeasor.
Plaintiff was employed with Home Depot when a customer’s dog bit her on the arm, which resulted in Plaintiff being diagnosed with cubital tunnel syndrome. Despite a posted store policy prohibiting customers from bringing their pets into the store, Plaintiff alleged that her supervisors regularly permitted customers to do so. Following the bite, Plaintiff reported the incident to her direct supervisor and two store managers. The store managers spoke with a witness to the dog bite, as well as the dog owner, while Plaintiff was instructed to remain at the service desk. The store managers thereafter allowed both the witness and the owner to leave the store without obtaining any identifying information from either individual. Plaintiff filed for and received Workers’ Compensation indemnity and medical benefits. Plaintiff also filed a negligence lawsuit against Home Depot and the store managers.
The negligence lawsuit against Home Depot and the store managers sought damages based upon allegations of negligent investigation. After the filing of several Preliminary Objections and several Amended Complaints, Defendants filed an Answer and New Matter, which averred that Plaintiff’s negligence claims were barred by the exclusivity provision of the Workers’ Compensation Act. Defendants filed a Motion for summary judgment arguing that Plaintiff was in the course and scope of her employment when she sustained the dog bite. The Motion was denied by the Trial Court and Defendants filed a Petition for review, which was granted by the Superior Court.
On appeal, Defendants argued that no material issue of fact existed as to the applicability of the exclusivity provision of the WCA to bar Plaintiff’s negligence claims against Defendants. Plaintiff argued that Defendants had a common law duty to protect her right to seek redress against the third party tortfeasor, and Defendants’ failure and/or refusal to identify the dog owner deprived Plaintiff of the ability to pursue any claims against the dog owner. The Superior Court noted that the exclusivity provision of the WCA is not absolute. The Court held that a genuine question existed as to whether Defendants’ failure to obtain the tortfeasor’s information rises to the level of negligence. Thus, the ruling of the Trial Court was affirmed.
Questions about this case can be directed to Doug Keil at (412) 926-1428 or email@example.com.
MD CASE SUMMARY
W.F. Gebhardt & Co. v. Am. European Ins. Co.
Maryland Court of Special Appeals
2021 Md. App. LEXIS 441
Decided: May 26, 2021
Maryland Court of Special Appeals relies on dictionary definition and the context of an insurance policy to resolve coverage issue.
Gebhardt owned a four-unit apartment building located in Baltimore City (the Premises). A fire escape was physically attached to both the Premises and a neighboring property. The fire escape ran from the roof of the Premises to a shared landing and then down a ladder into the backyard of the neighboring property. In 2017, Gebhardt noticed that the ladder was missing and later discovered that it had been destroyed. Gebhardt held a commercial property insurance policy with American European Insurance Company (AEI) and filed a claim seeking coverage for the loss of the fire escape. AEI denied coverage. Gebhardt subsequently filed suit in the Circuit Court for Baltimore City for breach of contract.
The Policy obligated AEI to provide Gebhardt with coverage “for direct physical loss of or damage to Covered Property at the premises.” The Circuit Court ruled in favor of AEI, finding that the ladder was not “at” the premises. The Circuit Court determined that the meaning of “at” was ambiguous and that the phrase “at the premises” did not cover the ladder which descended into neighboring property. The Circuit Court essentially interpreted the term “at” as synonymous with “on.” Gebhardt appealed to the Court of Special Appeals of Maryland, arguing that the Circuit Court erred in determining that the ladder was not “at the premises.”
The Court of Special Appeals reversed and remanded, determining that the term “at” was unambiguous and that the fire escape ladder was “at the premises” for coverage purposes. In this case, the Court determined that the phrase “at the premises” unambiguously applied to the Premises’ fire escape, including the ladder, which “descended within a foot or two” of the premises. The Court relied on the Merriam Webster Definition of “at” as well as the context of the policy in arriving at its conclusion. The Court noted that the Merriam Webster Definition of “at” indicated presence “in, on, or near.”
Questions about this case can be directed to Andrew White at (443) 641-0572 or firstname.lastname@example.org.
NJ CASE SUMMARY
Landis v. Heraz
New Jersey Superior Court, Appellate Division
Decided: November 2, 2021
Unreported New Jersey Appellate Division decision holds that incongruent co-primary coverage sharing provisions can result in the policy with lower limits being fully exhausted, while saving the larger limit policy more of its available proceeds than pro-rata sharing would.
Plaintiff was injured in an automobile accident while a passenger in her mother’s car. Defendant High Point Safety & Insurance Co. insured the Plaintiff’s mother’s car, with $100,000 in UIM limits. Plaintiff and her mother resided with Plaintiff’s grandmother, who had an automobile insurance policy with United Farm Family Insurance that listed Plaintiff under “Operator Information” and provided a $250,000 UIM limit. Plaintiff sought UIM coverage under both her mother’s and grandmother’s policies. The insurers argued over which company was responsible, and Plaintiff sued alleging negligence and bad faith. Farm Family and High Point asserted cross-claims against each other, and High Point sought a declaratory judgment that Farm Family’s coverage was primary. Farm Family filed for summary judgment arguing the policies provided coverage on a co-primary basis and UIM coverage should be equally apportioned. The Trial Court found both policies provided primary coverage, both had mutually repugnant excess coverage provisions and both should share liability equally. The insurers settled with Plaintiff and appealed.
The Appellate Division found that the language of both policies provided that each policy was excess to any other policy providing similar coverage. It also found that those clauses were mutually repugnant and that both policies, therefore, had to be considered primary. The Appellate Division then observed that when two policies are considered primary, the risk is allocated based on the terms of the policies. Furthermore, “unless all the policies contain congruent pro-rata provisions, the sharing is equal.” Under equal sharing, “the insurers share equally up to the lowest policy limits, and the remaining insurers share equally above that sum up to the next lowest limits and so on.” In this case, the policies did not have congruent sharing provisions. Whereas Farm Family’s other insurance clause contained a pro-rata sharing clause, High Point’s did not. Therefore, this Court concluded that the companies must share the liability equally.
The Appellate Division then provided the required calculation of the carriers’ respective responsibility. The overall UIM recovery was limited to $250,000, the Farm Family policy’s limit. After applying a $15,000 credit representing the underinsured’s policy limit, the total recovery limit was set at $235,000. Next, High Point’s and Farm Family’s responsibility was equally apportioned at $100,000, thereby exhausting the High Point policy. Thereafter, Farm Family was found to be responsible for the remaining $35,000, thereby reaching Plaintiff’s total recovery amount. Ultimately, High Point was responsible for $100,000, exhausting its limits, while Farm Family was responsible for only $135,000 of its $250,000 UIM limit.
Questions about this case can be directed to Mark Sander at (856) 334-0415 ext. 8915 or email@example.com.
DC CASE SUMMARY
Schwab v. MissionSide, LLC
United States District Court for the District of Columbia
2021 U.S. Dist. LEXIS 213122
Decided: November 4, 2021
An arbitration provision exists if the language of the contract indicates that the parties clearly intended to submit disputes to an independent instrument for definitive settlement.
MissionSide purchased Blue Water Media from Curtis Schwab. In the purchase agreement, a section provided for adjustments to the purchase price at and after closing to account for differences between the target and actual working capital, outstanding debts, and unpaid transaction expenses at the time of exchange. In the event of a dispute over the amount owed, the agreement provided for a final determination by an independent accountant. In the midst of this post-closing adjustment process, Schwab objected to the closing price adjustment, alleging that he was owed nearly $100,000. MissionSide also learned that Schwab allegedly owed over $500,000 to the landlord of a property leased by Blue Water, which they contended should have been disclosed during negotiations. Schwab refused to submit this rent liability to the independent accountant pursuant to the purchase agreement.
Schwab filed suit regarding the $100,000 signing bonus he alleged he was owed under the employment agreement with MissionSide. MissionSide counterclaimed in response for breach of contract and indemnification regarding the undisclosed debt to the landlord. Schwab moved to dismiss all five counts, alleging that the Court lacks jurisdiction as the independent account provision in the purchase agreement was an arbitration provision.
The U. S. District Court for the District of Columbia found that the provision was an arbitration provision. The Court ruled that the failure of a contract to describe the relevant dispute resolution process as “arbitration” is of no legal significance, but what matters instead is whether the language of the contract indicates that the parties clearly intended to submit some disputes to their chosen instrument for the definitive settlement of certain grievances under the Agreement. The Court determined that the breach of contract claim fell within the scope of the arbitration agreement, as relevant language defines the scope of matters referred to the independent accountant as “any amounts remaining in dispute.” However, for the same reason, the Court found that the indemnification provision was not covered by the arbitration clause.
Questions about this case can be directed to Nicholas Schaufelberger at (202) 945-9502 or firstname.lastname@example.org.
VA CASE SUMMARY
Givago Growth, LLC v. iTech AG, LLC
Virginia Supreme Court
No. 201267, 2021 Va. LEXIS 110, 2021 WL 4780658
Decided: October 14, 2021
In a case involving allegations of abuse of process, slander of title, tortious interference with contractual relations, and civil conspiracy arising from the filing of a notice of lis pendens for property subject to a contract for sale, the Circuit Court erred in sustaining demurrers based on the defense of absolute privilege.
Contanza Valdez and Givago Growth (Petitioners) entered into a partnership agreement with Artifact and two other individuals, where each party would contribute a specific amount to the development of land located at 1409 Cola Drive in McLean, Virginia which the parties intended to sell in the future. Petitioners were to retain title to the property until the sale of the property. Artifact, a residential construction company owned by Felipe Valdes, borrowed $400,000.00 from iTech AG in order to fund its contribution to the partnership agreement. Artifact and iTech then entered into a joint venture agreement regarding the McLean property, which stated that Artifact would provide a collateral deed of trust on the McLean property to secure iTech’s contribution. Artifact and Mr. Valdes subsequently defaulted on the iTech loan. Following the default, Mr. Valdes informed the attorney for iTech that he could not provide iTech with the collateral deed of trust, that he had promised in the joint venture agreement, because Petitioners owned the McLean property.
As a result, iTech filed a complaint against Petitioners demanding that the Petitioners provide a secured interest in the McLean property by way of a deed of trust to iTech. iTech’s attorney also filed a lis pendens in the land records of Fairfax County with respect to the McLean property on behalf of iTech. When the lis pendens was filed, the McLean property was already under contract for sale. The purchasers refused to close on the property due to the lis pendens. Petitioners requested that iTech withdraw the lis pendens to facilitate the closing of the pending sales contract, but iTech refused and asked Petitioners to settle Mr. Valdes’ debt. In January 2019, the sales contract on the McLean property closed. However, $812,668.90 of the proceeds of the sale were held in escrow due to the pending litigation. In August 2019, iTech nonsuited its complaint and withdrew the lis pendens. Petitioners then filed a complaint against iTech and iTech’s attorney, alleging malicious abuse of process, slander of title, tortious interference with contractual relations, and civil conspiracy, all arising out of the filing of the lis pendens. iTech and its attorney filed demurrers to the complaint, arguing that the filing of the lis pendens was entitled to absolute privilege. The Circuit Court sustained the demurrers on the basis that the information contained in a memorandum of lis pendens is subject to absolute privilege.
The Court held that the Circuit Court erred in sustaining the demurrers based on the defense of absolute privilege. The Court first explained that “words spoken or written in a judicial proceeding that are relevant and pertinent to the matter under inquiry are absolutely privileged” and that such privilege “is broad and comprehensive, including within its scope all proceedings of a judicial nature whether pending in some court of justice, or before a tribunal or officer clothed with judicial or quasi-judicial powers.” As to the claims of abuse of process, tortious interference with contractual relations, and civil conspiracy, the Court noted that the defense of absolute privilege has never been extended to non-defamation torts, and thus it was improper for the circuit court to apply the defense as to those claims. As to the claim of slander of title, the Court noted that such privilege can be extended to the filing of a lis pendens. However, the Court ruled that whether the information contained in the lis pendens was sufficiently relevant and pertinent to the matter under inquiry for absolute privilege to apply was a fact-intensive analysis that could not be decided based on the pleadings filed with the Court. The Court reversed the judgment and remanded the case for further proceedings.
Questions about this case can be directed to John Dunnigan at (804) 566-3571 or email@example.com.