ENG 132Winesburg Essay Definition ArgumentSpring 2019The.docx
2013.3 Spring Litigation Mgt
1. spring 2013
LitigationManagementMagazine
Raising the Bar
Collaborative Performance Management
p. 50
OMG?!
The Impact of Social Media on
the Tripartite Relationship
p. 54
Runaway Jurors
Routing Out Rogue Jurors Before Trial
p. 56
What’s
Hot
CurrentTrendsandthe
FutureofLitigation
Managementp. 46
3. spring 2013 | LitigationManagement | 3
DEPARTMENTS
FROM THE TOP
Sharpen your networking skills at industry events 10
Developing and mentoring the new insurance defense attorney 12
Specifically Speaking
Delegating jobsite safety responsibilities 16
Preventing the spread of pollution in urban areas 18
How broad is the duty to aid business invitees 20
Rising impact of motor carrier CSA scores 22
Insured contract and additional insured tenders 24
The cedent-reinsurer relationship 28
Leading the way 30
Workers’ compensation benefits outside the workplace 32
Legal project management picks up speed 34
Using transactional insurance 36
End of the med mal cap era 38
Navigating broker exposure and AI endorsements 40
Reducing exposure to insurer liability 44
RISK MANAGEMENT
Creating and implementing a crisis communications plan 58
OUNCE OF PREVENTION
Fighting fraudulent theft claims 60
Who controls a fraud investigation? 62
Who Knew?
Frank Chang, Lead Actuary, Google 65
Adrianne Baumgartner, Managing
Partner, Porteous, Hainkel & Johnson 66
in every issue
Publisher’s Letter 5
Events 8
54 OMG?!
The Impact of Social Media on the
Tripartite Relationship
56 Runaway Jurors
Routing Out Rogue Jurors Before Trial
46 What’s Hot
Current Trends and the Future of Litigation Management
50 Raising the Bar
Collaborative Performance Management
54
56
contents | spring 2013
OMG?!
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6. 6 | LitigationManagement | spring 2013
Martin H Alpert
President and CEO, Environmental and
General Liability Consulting Group
Adrianne Baumgartner
Managing Partner, Porteous,
Hainkel & Johnson
Larry Beemer
National Claim Director, Fireman’s Fund
Insurance Company
Tricia Bellich
Attorney, Kopka, Pinkus, Dolin & Eads
Robert J. Bergson
Partner, Abrams Garfinkel Margolis
Bergson, LLP
Frank J. Brier, Esq.
Litigation Counsel, Geisinger Health
System
Jeff Brinker
Attorney, Brinker & Doyen, LLP
Guy E. “Sandy” Burnette, Jr.
Attorney, Guy E. Burnette, Jr. P.A
Lynette Caldwell
Special Investigator, Liberty Mutual
Insurance
Frank Chang
Lead Actuary, Google
Jerry Craig
Excess Claims Supervisor, Baldwin
and Lyons
Marcy Croft
Partner, Forman, Perry, Watkins,
Krutz & Tardy
Michael Cronin
Senior Claims Counsel, Westfield
Insurance
Mike Daly
Global Practice Leader, Liability Claims,
XL Insurance Company
Joseph DePaul
Senior Vice President, Management &
Professional Liability, Arthur J. Gallagher
Domenick DiCicco
Head of Legal Strategy, AIG
Laura Farjadian
Senior Intellectual Property Manager,
Navico
Elizabeth Ganiere
General Counsel, Gulf Stream Coach, Inc.
Marta Garrett
Claims Specialist, ProAssurance
Krista Glenn
Senior Vice President, ACE North
American Claims
Laura Goodson
Partner, Forman, Perry, Watkins, Krutz &
Tardy
J. Matthew Haynes, Jr.
Attorney, McCandlish Holton
Brian Heermance
Partner, Morrison Mahoney LLP
Gregory Hirtzel
Principal, Post & Schell P.C.
Kim Hollaender, Esq.
Attorney, Langsam Stevens Silver &
Hollaender LLP
Robert Jones
Global Head of Financial Lines, Specialty
Claims, AIG
Patricia Kagerer
Risk Management Executive, American
Contractors Insurance Group
Matthew P. Keris, Esq.
Attorney, Marshall, Dennehey, Warner,
Coleman & Goggin
Bob Kopka
Managing Partner, Kopka, Pinkus,
Dolin & Eads
Nicole Koppitch, Esq.
Attorney, Reminger
Brett L. Kuller
Associate, Abrams Garfinkel Margolis
Bergson, LLP
Michael Leahy
Senior Partner, Haight, Brown
& Bonesteel
Dr. Joseph J. Lifrieri
President, Warren Professional
Services, LLC
Patricia McCullagh
Attorney, McCandlish Holton
John McGann
Partner, Wilson, Elser
Preston McGowan
Vice President and Manager, Claim
Litigation Management Unit, Chubb
Rob Moschet
Attorney, McCollum, Crowley, Moschet,
Miller & Laak, Ltd.
Nicky Mukerji
CIO, Legalbill
Brenda K. Radmacher
Partner, Wood Smith Henning & Berman, LLP
Richard Randazzo
President, Invision/Brownyard Claims
Management, Inc.
Linda Pretzel Roberts
Claims Analyst, American Safety Claims
Services, Inc.
Caryn Siebert
President/CEO, Carl Warren & Company
Anthony R. Slimowicz
Counsel, O’Toole Fernandez Weiner and
Van Lieu, LLC.
Michelle Stegmann
Assistant Vice President, Resolute
Management, Inc.
Thomas Storrer, Esq.
Attorney, Langsam Stevens Silver &
Hollaender LLP
Gary Tipton
General Liability Claims Adjuster, North
American Risk Services
Gene A. Weisberg
Partner, Gladstone Michel Weisberg
Willner & Sloane, ALC
Daniel Winkler
Leader, Claims Legal, Westfield Insurance
Frank Zeigon
Commercial Property Claims Manager, CNA
Jonathan Ziss
Partner, Goldberg Segalla LLP
Lori Zobler
Director of Claims, BerkleyNet
Thank you to the many outstanding professionals who have authored and contributed
to articles in this issue of Litigation Management.
If you’d like to contribute to a future issue of Litigation Management,
email Susan Wisbey-Smith at susan.wisbey-smith@theclm.org.
|Authors and Contributors|
8. 8 | LitigationManagement | spring 2013
Claims College Enrollment Opens on April 1
The CLM Claims College — the source for claims manage-
ment continuing education — is coming this September.
Created by and for claims professionals, Claims College
participants will gain the knowledge necessary to do their
current jobs better and prepare for higher-level positions.
In this inaugural year, professionals may choose from
education in one of the following areas:
u Claims Management
u Professional Lines
u Transportation
u Workers’ Compensation
The Claims College will be held Sept. 8 to 11 in
Philadelphia. The registration fee is $499 for CLM Fellows
and $999 for CLM Members.
Visit www.theclm.org/claimscollege for complete details.
the brief
Events
May 13
Washington, DC
Supreme Court Tour
May 16
Dallas
Event
Rangers Game
May 17
Dallas
Product Liability Mini-Conference
Renaissance Dallas Hotel
June 13
Cleveland
Event
Cleveland Museum of Art
June 14
Cleveland
Transportation Mini-Conference
Renaissance Cleveland Hotel
June 20
Omaha
Event
College World Series
July 11
Chicago
Event
Annual Boat Cruise
July 12
Chicago
Workers’ Compensation
Mini-Conference
Double Tree by Hilton Hotel
July 24
Hartford
Event
Boat Cruise
July 25
Boston
Event
July 26
Boston
Professional Liability Mini-Conference
Westin Boston Waterfront
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10. 10 | LitigationManagement | spring 2013
From the Top | Advisory Board
C
LM events are a tre-
mendous opportunity
to network with other
industry professionals,
vendors and service
providers, but are you making the
most of each event? Working a crowd
comes naturally to some. For others,
it’s a challenge, one that even brings
on a level of anxiety. With a good
game plan and minimal preparation,
you can make great connections at
every event.
It might just be networking 101, but
even the most experienced profes-
sional forgets business cards once in
a while. Before attending any event,
check your business card inventory.
“Bring your cards, bring enough cards,
and make sure they are updated,” says
Elizabeth Ganiere, General Counsel
for Gulf Stream Coach, Inc. and a
member of the CLM Advisory Board.
“And in today’s world, business cards
are so inexpensive, make sure they are
completely updated with your title,
email, credentials, etc.”
Ganiere also suggests having an ice
breaking strategy. “By nature, I’m
really shy. I get over that by being pre-
pared,” says Ganiere. “I find it easy to
break the ice by focusing on some-
thing about the other person. If some-
one has a nice hairstyle or an attractive
outfit, I’ll comment. That tends to get
a conversation started.”
CLM events are structured to maximize
the networking opportunities. ““The
Annual Conference provides a unique
opportunity to network with industry
thought leaders as well as current and
future business partners,” says Dan
Winkler, Leader, Claims Legal.
Westfield Insurance and member of the
CLM Advisory Board. “The arrange-
ment of the conference events allows
for various opportunities to meet indi-
viduals who are dealing with common
issues of interest that can spark new
ideas and innovative solutions.”
“CLM events are unique in they pro-
vide the perspective from a law firm,
corporate counsel and insurance point
of view,” says Ganiere. “It’s a great
forum to share ideas and experiences.
I especially enjoy the roundtable ses-
sions at the Annual Conference. They
are set up in a way that everyone in the
room is encouraged to participate. The
facilitators guide the conversation, but
no one is there as the authority on the
topic. It’s a room of industry profes-
sionals sharing ideas, experiences and
suggestions.”
Not all events are as interactive and
dynamic. In those cases, Ganiere rec-
ommends a wingman. “I once attend-
ed an event that was really boring.
I was with a friend and rather than
just leaving, we set a goal to meet at
least one new person before we left. It
worked and we did meet some inter-
esting people,” she says.
Post event, both Ganiere and Winkler
recommend follow up to strengthen
those new connections. “I use network-
ingtoolssuchasLinkedInaftertheevent
to maintain a connection with a new
contact. That allows for the creation of a
strong ‘brain trust’ that is available with
a few clicks of the mouse,” says Winkler.
Ganiere also adds her new contacts
to her networking circle. “I’ve met
several people who I have called after
an event either to hire them as out-
side counsel or to pick their brain on
a topic. I recently needed counsel in
a specific area and called someone I
met at the Litigation Management
Institute. We had that shared experi-
ence, so working together was easy
and something we both benefitted
from,” she says. LM
Sharpen Your Networking Skills at Industry Events
Making Connections
Networking Tips
K Listen. When you first meet
someone, get to know them, don’t
focus on selling them anything.
K Share. Keep your business
cards updated and handy.
K Stretch. Don’t just talk to people
you know. Make an effort to
meet new people.
K Plan. If possible, review the
attendee list in advance and
know who you want to seek out
and meet.
K Follow up. Reach out to your
new contacts after the event via
email and LinkedIn.
11. Learn more at datacert.com/insurance
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12. 12 | LitigationManagement | spring 2013
From the Top | National Committee
E
very good lawyer had a
good mentor. Clarence
Darrow’s was John
Peter Altgeld. Richard
“Racehorse” Haynes’
was Percy Foreman. Robert Shapiro’s
was F. Lee Bailey. Lawyers serving
the insurance and claim management
industry constantly strive to provide
excellent legal services in an economi-
cal manner. Strong mentorship of the
current generation of young lawyers
will ensure that these lawyers have the
necessary skills to meet both goals.
Having junior attorneys handle
appropriate assignments in the liti-
gation process is one way to achieve
these goals. Today’s junior attorneys
are bright, well-educated, eager and
enthusiastic individuals. Their hour-
ly rates are significantly lower than
most senior attorneys and partners.
However, these young lawyers are still
learning how to apply their academic
skills to practicing law and need the
mentorship of seasoned senior attor-
neys to cultivate their practice and
hone their talents. Mentorship, prop-
er training, experience and opportu-
nity will make these junior attorneys
the next generation’s mentors. As
industry veterans, senior attorneys
and experienced claims professionals
can help these junior lawyers develop.
Law Firm Training
A new lawyer’s post-law school men-
toring generally starts at the law firm.
Law firms must first help junior law-
yers learn how to apply their academic
training to the concrete practice of law.
While law schools teach students that
negligence is the omission to do some-
thing that a reasonable man would do
or doing something that a prudent
and reasonable man would not do,
law firms must teach new lawyers the
practical aspects of defending against
a negligence lawsuit. They need to
learn about identifying and interview-
ing key witnesses, litigation strategy,
written discovery, depositions, vetting
and retaining litigation savvy experts,
motion practice, assessing and chal-
lenging damages claims, preparing a
case for trial and other related matters.
Further, law students may have stud-
ied contract law, but never analyzed
an insurance contract or been asked to
determine whether insurance coverage
for a specific incident or damage exists.
Transferring a new lawyer’s skill set
from the academic to the practical
takes time and commitment. New
Developing and Mentoring the New Insurance Defense Attorney
By J. Matthew Haynes, Jr., Patricia McCullagh and Caryn Siebert
Sculpting the Future
13. spring 2013 | LitigationManagement | 13
attorneys are first tasked with specific
assignments on less complicated mat-
ters — often in a lower trial court. As
they progress, they begin to review and
analyze those same files to evaluate
liability and damages issues and assist
with recommendations for case pro-
gression. Soon after, they accompany
senior lawyers to depositions and hear-
ings before handling these matters on
their own. Ultimately, they assist with
trials until they have sufficient expe-
rience to try cases on their own. New
lawyers must also learn to develop pro-
fessional skills, such as time manage-
ment, case file organization, dealing
with difficult opposing counsel, pre-
sentation style and the ability to think
on their feet. While time consuming,
a strong law firm mentorship program
can pay exponential dividends to both
the law firm and ultimately clients.
More importantly, though, law firms
must educate new lawyers about the
scope and nature of the insurance
business. Specifically, educating new
lawyers on strict compliance with
reporting and billing guidelines is a
hallmark of any civil defense practice.
New lawyers must be taught to exceed
clientexpectations,notjustmeetthem.
Knowledge of each individual client’s
legal goals and business goals, budgets
and bottom lines is critical to ensure
client satisfaction. The legal research
and motions we prepare and deposi-
tions and hearings we attend are not
just academic exercises, but instead
must accomplish a specific business
objective in a cost-efficient manner.
We also coach these lawyers on how
to respectfully and clearly communi-
cate with non-lawyer insureds, claims
managers and other litigation support
personnel in a practical, effective man-
ner without using too much legalese.
Armed with an understanding that
legal services are only one compo-
nent of achieving our clients’ business
goals, new lawyers can better assess
the business risks and benefits of the
actions they recommend.
Claims Professional’s
Involvement
Claims professionals can also assist
in developing a new attorney’s skills.
New attorneys are eager to please and
enjoy client interaction. Adjusters
should clearly discuss goals and
expectations for specific files with
junior attorneys. Although more
experienced lawyers inherently know
how much time and effort should
be spent on specific matters, clear
assignments will help new attorneys
focus on necessary tasks without
wasting time investigating tangential
or irrelevant issues. In conjunction
with the mentorship of senior attor-
neys, claims adjusters and manag-
ers should respond to inquiries or
requests for information as quickly
as possible. This will allow the new
attorney to continue focusing on the
projects assigned without digging
through files to uncover information
that is otherwise readily available.
Claims professionals should also feel
comfortable providing new attorneys
positive and negative feedback where
applicable or necessary. Having this
feedback allows a new attorney to either
address and correct concerns or contin-
ue to provide information in the helpful
manner identified. Where necessary,
a call to the junior attorney’s supervi-
sor may be necessary if concerns have
not been addressed. This will assist the
senior attorney training (or retraining)
the new lawyer to meet expectations.
Building rapport with new attorneys
will also create a collaborative work-
ing relationship. New lawyers are
often nervous and may have never
worked directly with clients before.
Sharing war stories or discussing how
you (or another attorney) addressed
prior similar situations will help edu-
cate the new lawyer about how to
act or react, and ultimately provide
better legal service. A lawyer who is
comfortable working with you is also
likely to interact or communicate
with you more frequently, providing
more information about your cases.
Because of the time and energy nec-
essary to train new attorneys, a cer-
tain degree of patience is required of
law firms and claims professionals.
Almost all new lawyers will experi-
ence growing pains as they develop
their skills, practice and business
acumen. This is especially true when
migrating away from hourly bill-
ing arrangements over to alternative
fee arrangements. We must remind
ourselves that we too were once new
attorneys and claims profession-
als requiring training and education
from others. It is now our collective
responsibility to invest in our future
attorneys and claims professionals,
and take time to groom and mentor
colleagues to continue to enhance the
value to the industry that these new
professionals provide. LM
J. Matthew Haynes, Jr. and Patricia McCullagh
are attorneys with McCandlish Holton. Caryn
Siebert is the President/CEO of Carl Warren &
Company.
14. Thank You Sponsors!
With the generous support of our sponsors, the 2013 CLM Annual Conference
promises to be the best CLM event yet! The Conference includes more than 80
collaborative sessions and several panel presentations featuring industry leaders.
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15. HigHligHts will include:
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Executive Vice
President and Chief
Claims Officer,
Commercial Insurance, Liberty
Mutual Insurance
Premier sessions — What’s
New in Litigation Management
and Pathways to Dynamic
Leadership
networking events —
CLM Rodeo and Disco Party
AwArd reciPient — Funds
raised from the Golf Outing will
be donated to the Semper Fi
Fund, which provides financial
support to injured members
of the U.S. Armed Forces and
their families.
GolD
SilvEr
WCDEnvironmental & Construction
Claims Consulting
®
Evaluate. Negotiate. Resolve with confidence.
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16. 16 | LitigationManagement | spring 2013
Specifically Speaking | Construction
C
alifornia law regard-
ing the Peculiar Risk
Doctrine has changed
over the years and
limited the liabil-
ity of general contractors and, as of
2005, landowners. Plaintiffs who are
employees of a subcontractor often
will attempt to circumvent the work-
ers’ compensation exclusivity rule by
suing the general contractor and/or
the landowner for the injuries they
sustained under theories of general
negligence, negligence as to control
of the job site and negligent hiring.
The California Court of Appeal
recently gave general contractors a
bit more solid footing for protection
from liability for injuries to a sub-
contractor’s employee. In Brannan v.
Lathrop Construction Associates, Inc.,
a masonry subcontractor’s worker
slipped on wet scaffolding, injured
his back and brought a lawsuit against
the general contractor, who failed to
call a “rainy day” to protect against
dangerous conditions from slippery
surfaces. The Court ultimately granted
the general contractor’s motion for
summary judgment.
Brian Brannan, an employee of sub-
contractor Bratton Masonry, was
hired by general contractor, Lathrop
Construction to perform the mason-
ry work under a written subcontract.
Part of Bratton’s subcontract required
it to comply with all state and federal
health and safety requirements as
well as Bratton’s and Lathrop’s safety
procedures and to maintain a safety
program on the site. Lathrop also
hired other subcontractors under the
same terms. Lathrop had an onsite
project manager who managed the
safety on site and Lathrop had the
final say on coordination of the work
at the site and could stop a subcon-
tractor’s work for safety reasons.
The day of the accident, Bratton’s
employees worked around scaffolding
that was left by the plastering subcon-
tractor, but were not working on the
scaffolding. Bratton had a foreman
on site the day of the accident who
was responsible for safety; he also
had authority from Lathrop to call
off work if he believed it was unsafe.
Lathrop did not direct Bratton, its
employees or foremen on how the
masonry was to be laid. The question
raised was whether Lathrop’s sched-
uling of the masonry work before the
framers had finished, and allowing
the scaffolding to remain on the job-
site contributed to the accident.
In most cases, the independent con-
tractor is responsible for the safety
of the workplace as it relates to per-
forming their job. In this case, the
court acknowledged that there are
exceptions to this rule when a gen-
eral contractor retains control of the
conditions at the worksite. However,
the retained control must contribute
to the employee’s injuries. A general
contractor contributes to an unsafe
procedure or practice by its affir-
mative conduct where the general
contractor is actively involved in, or
asserts control over, the manner of
performance of the contracted work.
Such control occurs, for example,
when the principal employer directs
Can Delegating Jobsite Safety Responsibilities Preclude Liability?
By Brenda K. Radmacher and Linda Pretzel Roberts
No More Rainy Days?
17. spring 2013 | LitigationManagement | 17
that the work be done in a certain
way or otherwise interferes with how
the work is accomplished. Omission
or failing to act may constitute such
an affirmative contribution, but it
depends on the circumstances. If
the practices of the employee were
not affected by the retained control
over safety conditions at the work-
site, there cannot be a finding that the
general contractor affirmatively con-
tributed to the injuries.
The court found that Lathrop’s act of
scheduling the work cannot subject
it to liability. Since the general con-
tractor never affirmatively directed
the subcontractor’s employee’s work
nor interfered with how the work
was done, it could not be liable for
Brannan’s injuries. In making this
decision, the court extended protec-
tion provided to general contractors.
Since both Bratton’s foreman and
Lathrop had authority to stop the
work, and Bratton’s foreman did not
require any approval from Lathrop
to do so, no liability for failing to stop
the work could be found. In fact, since
Bratton’s subcontract expressly delegat-
ed Lathrop’s worksite safety responsi-
bilities to Bratton without reservation,
there was no negligence by Lathrop.
Non-Delegable Duties
General contractors must be careful
in getting too giddy over Brannan as
non-delegable duties still attach to
a general contractor for which they
may be held liable. Duties imposed
on a contractor by regulations are
non-delegable. For example, in Evard
v. Southern California Edison, the
court was asked to determine wheth-
er billboard owners violated a general
industry safety order that required
them to provide specific safety equip-
ment. The court found that they
might be liable if they breach regula-
tory duties, regardless of whether or
not it voluntarily retained control or
actively participated in the project,
as long as the breach contributed to
plaintiff’s injuries. However, the fact
that there is a regulation does not
automatically mean a non-delegable
duty is created.
To determine whether the nature of
regulation creates a non-delegable
duty, courts look to the language of
the regulation. Specifically, whether
the regulation states who must com-
ply with it, that is, is compliance
something that has to be achieved by
the property owner, or can another
individual be obligated to comply
with the regulation? The main dis-
tinction turns on whether compliance
with the regulation is one that can
only be achieved by the landowner, or
if compliance is something that could
be achieved by the general contractor.
For example, in Evard, the safety pre-
cautions for the billboard were some-
thing that could only be achieved
by the landowner because they were
constant, not something that was
connected to construction or work
that would normally be done by an
independent contractor. Instead they
were constantly needed for the bill-
board. Conversely, in another case,
court found that an OSHA regulation
regarding certain activities around
water lines on demolition sites did not
create a non-delegable duty. This was
in part because the regulation only
pertained to preparation of the work
site and work being performed when
the subcontractors were present, as
opposed to regulation of something
on the site with a more permanent
nature. Thus, the language and nature
of the regulation determines whether
it imposes a non-delegable duty on
general contractors.
Contractors should keep a keen eye
on what potential regulations, stat-
utes and ordinances, or other safety
rules that may apply to the jobsite and
ensure that the duties that are delegat-
ed are clearly understood and acted
upon appropriately by its employees.
Changing Claims Handling
For the claims handler and risk manag-
er, the Brannon decision requires some
in-depth investigation and analysis of
the relevant regulations affecting the
incident. Additionally, the scope and
extent of retained control should be
analyzed closely. Did the general con-
tractor direct work by the subcontrac-
tors? Was any work directed or con-
trolled by the general contractor such
that it caused or allowed for the injury?
These questions must be investigated
to determine the potential arguments
to raise as well as to review coverage
obligations. When the subject policy is
a wrap-up, OCIP or CCIP, the claims
professionalwillalsoneedtodetermine
whether there is any potential conflict
of interest requiring appointment of
separate counsel for the subcontractor
and general contractor. Additionally,
issues of whether the claim may be sub-
ject to a builder’s risk policy should be
investigated.
Overall, the lesson learned from
the Brannon decision is that a non-
delegable duty may not be so clear.
The language of the contract is criti-
cal as is the role and involvement by
the general contractor in controlling
the work by the subcontractor. These
highly factual issues may pose poten-
tial hurdles for extricating parties on
summary judgment but with careful
analysis and investigation, summary
judgment may still be obtained in
many instances. LM
Brenda K. Radmacher is a Partner with
Wood Smith Henning & Berman, LLP. Linda
Pretzel Roberts is a Claims Analyst with
American Safety Claims Services, Inc.
Who’s Liable?
When determining liability on the
part of the general contractor, ask
these questions:
K Are there regulations that have
been violated that contributed to
the incident?
K Did the general contractor direct
work by subcontractors?
K Did any work controlled or
directed by the general contrac-
tor contribute to the incident?
18. 18 | LitigationManagement | spring 2013
Specifically Speaking | Environmental
F
ormer manufactured
gas plants (MGP) pres-
ent continuing problems
in the field of remedia-
tion for most inner cit-
ies. Many insurance companies are
feeling the historical effects of their
insureds being sued by consortiums
of adjacent and nearby residential
property owners who contend that
they had been affected by the con-
tamination migrating from the for-
mer MGP site.
Since most properties affected were
constructed prior to the advent of
Comprehensive Environmental Res-
ponse,Compensation,andLiabilityAct
(CERCLA) and did not contribute to
the contamination found at the source
site or on their property, the owner of
the offending site was required to con-
duct a remedial effort to prevent fur-
ther pollution from emanating from
their site and protect the adjacent and
contiguous property owners.
Urban Protection
Contaminated soil and groundwater
below these former MGP sites is typi-
cally affected to great depths, requires
significant remediation and threat-
ens adjacent property owner sites.
Due to the urban setting of most sites
and site spatial and adjacent property
owner constraints, contaminated soil
removal from beneath the gas holder
pads, where the source of the pollu-
tion typically resides, is generally not
a viable option. Therefore, engineering
controls, such as deep cut-off walls, are
required to protect human health and
the environment and prevent further
impacts from occurring. Geologic
constraints may limit the efficacy of
these types of remedial efforts.
Pollution from former MGP sites is
derived from coal tar and purifier
waste, which consists of a mixture of
organic chemicals that include vola-
tile organics and semi-volatile organic
compounds that are typically denser
than water and tend to travel down-
ward by gravity. These types of wastes
present various types of environmen-
tal problems, which can persist in
the environment for many years after
discharge. Exposure to the kinds of
pollutants that constitute MGP waste
byproducts are also known to be
harmful to human health.
Geologic Conditions
At many sites in northeastern urban
areas, varying geologic conditions
exist that may present particular prob-
lems to successful remedial actions
since many of the coal tar pollutants
have traveled deep into the ground
making it more difficult to reach and
treat. In certain northeastern states
many sites are underlain by strati-
graphic units that consist of man-
made fill, alluvial deposits, glacial
deposits, and weathered bedrock at
various depths below ground surface.
Some former MGP sites located in
northeastern areas can be underlain
by multiple aquifer systems, some
of which may be semi-confined and
exhibit artesian conditions. To address
these issues and prevent the further
spread of pollution, deep cutoff walls
can be installed that can extended to
great depths and effectively contain
pollution from migrating laterally.
At one specific site in the New York
City area, geologic constraints spe-
cifically related to the man-made fill
and the glacial till deposits (which
contained a heterogeneous mixture
of boulder size debris, boulders, grav-
els, sand, silt and clay) required that
a composite vertical barrier contain-
ment wall consisting of shallow, rela-
tively impervious, proprietary steel
sheeting and an overlapping deep jet
grouted soil cement barrier wall be
designed and installed. The impervi-
ous sheet pile barrier wall extended
to an intermediate depth sufficient
to penetrate the fill and glacial till.
Overlapping relatively impervious
soil cement columns, constructed
using modified triple fluid jet grout-
ing techniques, were installed extend-
ing from five feet above the bottom of
the sheet piles to depths greater than
100 feet below ground surface into
the embedment stratum.
This type of containment barrier wall
was designed to isolate the source
material from contact with ground-
water outside the wall and prevent
lateral migration of contaminants.
This remedial action was successfully
installed and subsequently approved
by governing regulatory agencies.
This containment system served as an
approved method of preventing the
spread of pollution from the source to
adjacent and nearby potential recep-
tors such as residential structures.
Preventing the Spread of Pollution to Residential Properties in Urban Areas
By Joseph J. Lifrieri and Anthony R. Slimowicz
Containment Quandry
19. spring 2013 | LitigationManagement | 19
Mitigating Claims
This situation is of interest to insur-
ance claim professionals and attorneys
because it describes one approach to
mitigate the impact of potential claims
or adverse litigation. Adjacent and
contiguous property owners who were
unaware of the potential impact from
the source site, would have been able
to ask for relief from the impacts of the
pollution, potentially be reimbursed
for loss of property value, poten-
tially have their homes and property
acquired by the offending entity, and/
or insist upon the implementation of a
remedy to correct the pollution.
Insurance companies that hold poli-
cies for affected property owners and
the affected property owners who were
unaware of the potential pollution
source at the time of purchase or pur-
chased their property prior to the com-
mencement of practices that caused the
pollution by the responsible party, may
have been entitled to relief available to
them under CERCLA. CERCLA gives
the federal government broad responsi-
bility and control to identify and compel
responsible parties to clean up releases
or threatened releases of hazardous sub-
stances that may endanger public health
or the environment. Any entity that
purchased a property and was unaware
of and had no knowledge of the con-
tamination at the time the property was
purchased may be able to rely upon the
“Innocent Land Owner” (ILO) defense
provision of CERCLA liability provid-
ing they exercised “All Appropriate
Inquiries” (AAI) prior to purchasing the
property and providing they complied
with other provisions prior to or follow-
ing the purchase of the property.
Brownfields Law
In2002,theBrownfieldsLawamended
CERCLA and clarified the AAI provi-
sions. To satisfy the AAI provisions of
CERCLA, the purchaser of the prop-
erty post January 11, 2002, is required
to perform “all appropriate inquiries”
prior to purchasing the property. The
purchaser may then buy the property
and still comply with CERCLA’s limi-
tation on liability provided by the new
definition. For contiguous or adja-
cent property owners to comply with
CERCLA’s limitation on liability, they
must not be the source of the con-
tamination found on their property,
must have performed an AAI prior to
purchasing the property and then pur-
chase the property still not knowing
or suspecting contamination on their
property. The innocent landowner
defense is similar to the defense for
contiguous or adjacent property own-
ers in that they must perform an AAI
prior to purchase of a property and
must purchase the site without know-
ing, or suspecting, of contamination
on their property.
A provision of the Brownfields
Law directed the EPA to establish a
regulation outlining standards and
practices for conducting an AAI.
The EPA prepared and promulgat-
ed the “All Appropriate Inquiries
Fact Sheet”, dated April 2003 that
lists 10 steps necessary to satisfy
AAI compliance.
It is important to understand the pro-
visions of CERCLA and comply with
the Act’s provisions so that the prop-
erty owner, insured or insurer enjoy
CERCLA’s limitations on liability. A
properly conducted EPA sanctioned
AAI (due diligence) should be con-
ducted on all property transactions.
This is especially important in urban
areas where multiple generations of
property uses are typical and mask
former site uses making reliance on
visual inspections problematic. LM
Dr. Joseph J. Lifrieri is President of Warren
Professional Services, LLC. Anthony R.
Slimowicz is Counsel for O’Toole Fernandez
Weiner and Van Lieu, LLC.
Conducting An All Appropriate Inquiry
As outlined by the EPA, the 10 criteria for exercising All Appropriate Inquiries (AAI)
prior to the purchase of a property are:
K The results of an inquiry by an environmental professional;
K Interviews with past and present owners, operators, and occupants of the facility
for the purpose of gathering information regarding the potential for contamina-
tion at the facility;
K Reviews of historical sources, such as chain of title documents, aerial photo-
graphs, building department records, and land- use records, to determine
previous uses and occupancies of the real property since the property was first
developed;
K Searches for recorded environmental cleanup liens against the facility that are
filed under federal, state, or local law;
K Reviews of federal, state, and local government records, waste disposal records,
underground storage tank records, and hazardous waste handling, generation,
treatment, disposal, and spill records concerning contamination at or near the
facility;
K Visual inspections of the facility and adjoining properties;
K Specialized knowledge or experience on the part of the defendant;
K The relationship of the purchase price to the value of the property if the property
was not contaminated;
K Commonly known or reasonably ascertainable information about the property;
and
K The degree of obviousness of the presence or likely presence of contamination at
the property and the ability to detect the contamination by appropriate investi-
gation.
Source: All Appropriate Inquiries Fact Sheet, April 2003, www.epa.gov/brownfields/aai/index.htm.
20. 20 | LitigationManagement | spring 2013
Specifically Speaking | Retail, Restaurant and Hospitality
W
hile there is no
legal duty to ren-
der aid or assis-
tance to another
in peril, there
may be a strong moral and humanitar-
ian obligation to furnish such aid and
assistance. A number of exceptions to
this rule exist, each of them premised on
a special relationship between the par-
ties. Parents, for example, have a legal
duty to aid and assist their children. By
virtue of their profession, police officers,
EMTs and medical personnel have a
legal duty to aid and assist those they are
charged with overseeing.
In the world of retail and hospitality,
business owners have a legal duty to
render reasonable aid and assistance
to their invitees. In the case of an ill or
injured customer, the business owner
has historically been required to do no
more than give such first aid as he/she
reasonably can, and take reasonable
steps to turn the customer over to med-
ical personnel. Giving the customer a
bandage or ice pack and calling 911 are
the types of things that often suffice in
discharging this obligation.
Increasingly, however, suits have
alleged that business owners have a
legal duty to do more. In some cases,
plaintiffs have argued that the business
owner was required to perform CPR,
administer oxygen or use an auto-
mated external defibrillator (AED) to
aid a sick customer. Fortunately, most
of these cases are dismissed, but there
has been a trend in recent years to pass
legislation that some plaintiff lawyers
argue require precisely these kind of
potentially life-saving activities.
The American Heart Association esti-
mates that about 350,000 people die
each year as a result of sudden cardiac
arrest. In an effort to drive that num-
ber down, many states have enacted
legislation requiring AEDs in certain
settings (e.g., schools, airports, health
clubs). Most of these statutes require
not just the device, but someone
trained to use it. Typically, the statute
will contain good Samaritan protec-
tion for anyone who uses the device
in attempting to save a life. The liabil-
ity conundrum arises not when the
device is used, but when it is not.
If, for example, a health club has the
required AED and a trained employee
on staff but the employee does not
use the device because the customer
appears to be breathing (AED con-
traindicated), has the club violated a
legal duty to use the device? Plaintiff’s
counsel argue yes, that the require-
ment of an AED and trained employee
carries with it the implied obligation
to use the device. The club, however,
argues no because the statute referenc-
es good Samaritan protection for any-
one who voluntarily uses the device.
Simply put, volunteers volunteer, they
do not discharge a legal obligation.
Commercial establishments are
encouraged to check with counsel to
determine whether there exists any
emergency response legislation of this
type. If not, then you will likely be able
to defeat such claims. Even if you have
such legislation, you may still be able
to get the case dismissed. Does it say
that CPR must be administered or
that the AED must be used? If not,
you have the argument that no such
duty exists because statutes that are in
derogation of the common law must
be strictly construed. Does your stat-
ute contain good Samaritan protec-
tion, using the words “volunteer” and/
or “voluntarily” when providing such
protection? If so, that is rather strong
evidence that there is no duty to use
the device (AED) or engage in the pro-
scribed activity (CPR).
Legislation will continue to grow
throughout the country, not just in the
industries noted, but others as well.
Commercial establishments are likely
to see more creative arguments made
that a “reasonable” response to an
emergency can and should no longer
be limited to just the rendering of first
aid and calling of 911. Legislation that
is passed, however well-intentioned
to encourage good Samaritans to act
in more sophisticated ways, should
not open the door to increased liabil-
ity for business owners. It is enough
that they be required to provide the
tools and training to render a volun-
tary rescue. Anything more than that
would improperly burden business
owners with the kind of legal duties
historically reserved for police and
medical personnel. LM
Brian Heermance is a Partner with the
New York office of Morrison Mahoney LLP.
Richard Randazzo is the President of Invision/
Brownyard Claims Management, Inc.
How Broad Is the Duty To Aid Business Invitees?
By Brian Heermance and Richard Randazzo
Emergency Response
22. 22 | LitigationManagement | spring 2013
O
n December 13,
2010, the Federal
Motor Carrier Safety
Ad m i n i st r at i on
(FMCSA) launched
its Compliance Safety Accountability
(CSA) program. The centerpiece
of CSA is the Safety Measurement
System (SMS), which analyzes safety-
based violations from inspections and
crash data to determine a commercial
motor carrier’s on-road performance.
The SMS uses seven safety improve-
ment categories called BASICs to
examine a carrier’s on-road perfor-
mance and potential crash risk and
then assign a score to the carrier.
The carrier is assigned a score from
one to 10 in each category with ine
representing the lowest crash risk
and 10 representing the highest.
By reviewing violations within each of
the seven categories, the intention of the
FMCSA is to identify high-risk behav-
iorswithaspecificcarrierandapplyearly
intervention to minimize those behav-
iors. However, the implications in doing
so are heavy for carriers because CSA
scores in all but two categories, Cargo-
Related and Crash Indicator, are public.
Youcanbesurethatwheneveracarrieris
involved in a collision, a savvy plaintiff’s
attorneywillgethisorherhandsonacar-
rier’sCSAscoreasearlyaspossible.
Wading Through
Though not made public, a carrier’s
Cargo-Related and Crash Indicator
scores are not necessarily off limits
to a potential plaintiff or counsel. By
virtue of simple written discovery, the
opposing side may be able to obtain
this information. This may include
requests for the Carrier’s Profile or any
documentation related to any interven-
tion assigned to that carrier. In some
cases, a carrier may pose viable discov-
ery objections to disclosing some or all
information related to a specific acci-
dent where certain scores may not be
relevant or the request is overly broad.
Once the score is made available, the
question then becomes what can the
other side do with it? Alternatively,
when a compliant carrier has a low
The Rising Impact of Motor Carrier CSA Scores
By Nicole Koppitch and Jerry Craig
What’s the Score?
Specifically Speaking | Transportation
23. spring 2013 | LitigationManagement | 23
score, the better question is, should
the carrier offer its CSA score as a
shield to liability?
Using CSA Scores
The Federal Motor Carrier Safety Act
Part 385 does not address the admis-
sibility (or non-admissibility) of CSA
scores. In fact, to date, there are no
specific regulations, rules or statutes
addressing the use and admissibility of
CSA scores in litigation. Limited case
law is split as to whether the scores
are admissible under evidence rules.
Likely, the admissibility of these scores
will continue to be a case-by-case
determination based upon the nature
of the accident, the nature of the
claims and the nature of the request.
Certainly when a carrier has a low CSA
score, that score can play to the carrier’s
advantage. Though a good score will
not insulate a company from liability,
compliance can be used to mitigate, or
insomecases,absolve,negligenthiring,
negligent entrustment, negligent reten-
tion, negligent training and negligent
maintenance claims against the carrier.
Further, a strong CSA score can assist
a complaint motor carrier in defend-
ing a claim for punitive damages,
which requires a plaintiff to prove the
carrier was reckless and/or wanton.
Certainly a pattern of compliance
within the BASIC categories supports
the position that a carrier did not
proceed with reckless disregard when
it comes to hiring, retaining, super-
vising and training drivers.
The Pitfalls
Of course, for every good score, there
are those carriers with undesirable
scores and plaintiffs looking to use
those scores as a sword. In those cas-
es, the best approach for a carrier is
to dispute the reliability of the scores.
Carriers should cite the FMCSA web-
site, which includes a disclaimer in
which it advises that a reader should
not draw conclusions from the data
displayed on the system. In fact, the
FMCSA is clear that unless a car-
rier has been issued an unsatisfactory
safety rating, it is authorized to law-
fully operate motor vehicles.
The methodology for determining
CSA scores is routinely evolving and,
in fact, as late as December 2012, the
FMCSA had yet again posted new
updates to its methodology in deter-
mining scores. These revisions are
based partly upon ongoing public
comment and research. Probably the
most problematic issue for carriers is
that the CSA score does not consid-
er fault when calculating the BASIC
score for Crash Indicator. This means
a carrier’s score for Crash Indicator
will increase as the result of a colli-
sion regardless of whether the colli-
sion was avoidable or unavoidable.
All of these factors support the position
that CSA scores are simply unreliable.
Under Federal Rule of Evidence 403,
carriersshouldarguethatanyprobative
value of a CSA score is far outweighed
by the prejudicial value. Further, to
the extent a plaintiff is attempting to
offer CSA scores through expert tes-
timony, Federal Rule of Evidence 702,
expert opinions must be the product
of reliable principles. As reflect in the
FMCSA disclaimer, CSA scores are
not the product of reliable methods
and principles. Rather, these scores are
simply intended to assist the FMCSA
in the early identification and interven-
tion of potential problematic behavior.
Both Ways?
The landscape right now is unclear.
As the popularity of CSA scores
continues to rise, ongoing litiga-
tion as to the discoverability and
admissibility should be expected.
However, in the absence of any
strong case law, carriers are in the
best position to pick and choose
when they might utilize CSA scores.
Of course, carriers should do so
with caution, as decisions being
made on these issues will undoubt-
edly play a significant role in the
future of trucking litigation. LM
Nicole Koppitch, Esq., is an attorney with the
Reminger law firm. Jerry Craig is an Excess
Claims Supervisor with Baldwin and Lyons.
Back to Basics
The Safety Measurement System seven
safety improvement categories, the
BASICs, are:
K Unsafe Driving
K Fatigued Driving (Hours-of-Service)
K Driver Fitness
K Controlled Substances/Alcohol
K Vehicle Maintenance
K Cargo-Related
K Crash Indicator
24. 24 | LitigationManagement | spring 2013
Specifically Speaking | Insurance Coverage
T
he use of indemnity
and other risk-shifting
clauses has become
more prevalent in
commercial contracts.
Typical indemnity clauses require
one party (the indemnitor) to defend
and indemnify another party (the
indemnitee) from and against certain
claims and liabilities. Other provi-
sions may require the indemnitor to
procure coverage for the indemnitee
as an “additional insured” under the
indemnitor’s liability policy.
Additional insured and indemnity
clauses are frequently seen together
in the same contract (for example, in
construction contracts and vendor
contracts), and one might be tempted
to conclude that both clauses mean
the same thing. However, contractual
indemnity obligations and additional
insured obligations are distinctly dif-
ferent. Having the status of indemni-
tee is not the same as being an addi-
tional insured. There are important
practical differences between these
risk-shifting concepts that may affect
how they are processed under a typi-
cal Commercial General Liability
(CGL) policy.
Contractual Indemnity Claims
The insuring agreement in the typical
ISO form CGL policy broadly covers
claims for “bodily injury” or “prop-
erty damage” caused by an “occur-
rence” as those terms are defined
in the applicable policy. This broad
scope of coverage is reduced by vari-
ous policy definitions, exclusions and
conditions. One such exclusion is
Insured Contract and Additional Insured Tenders
By Gary Tipton and Rob Moschet
Separate and Not Always Equal
25. spring 2013 | LitigationManagement | 25
the Contractual Liability exclusion,
which excludes coverage for damages
that the insured becomes obligated
to pay because it has assumed liabil-
ity for such damages in a contract.
Standing alone, this exclusion would
prevent coverage for liability that
the insured may have assumed as an
indemnitor in a contract.
However, an exception to the
Contractual Liability exclusion may,
in a sense, reinstate coverage for cer-
tain indemnity obligations that the
insured has assumed by contract.
If the indemnity obligation of the
insured is contained in an agree-
ment that meets the definition of an
“insured contract” under the poli-
cy, then the insured’s liability as an
indemnitor may in fact be covered
under the insured’s policy.
One important point to keep in mind
when analyzing claims under the
“insured contract” provisions of the
policy is that the coverage for such
claims is extended to the Named
Insured under the policy, and extends
to the liabilities that the Named
Insured has agreed to assume in the
insured contract. It is the Named
Insured who tenders the indemnity
claim to the carrier for coverage
under the insured contract provi-
sions of the applicable policy, and it is
the Named Insured who is entitled to
coverage under the policy.
Additional Insured Coverage
A contract may require one party
to a contract to procure and main-
tain liability coverage for the ben-
efit of another party as an Additional
Insured, and this obligation may exist
whether or not the party obliged to
obtain and pay for such coverage has
separately agreed to also indemnify
the other party. The obligation to
obtain Additional Insured coverage
typically requires the Named Insured
to take some sort of action to notify
the insurer to add the Additional
Insured to the policy of the Named
Insured, may require the payment of
a separate or additional premium for
the coverage, and is often evidenced
by the issuance of an endorsement to
the policy that adds the Additional
Insured to the policy and which may
further define or limit the scope of the
coverage as stated in the endorsement.
If the Named Insured’s policy has
been endorsed to add a party as an
Additional Insured, the Additional
Insured is entitled to the same rights
and is subject to the same duties as an
Insured under the policy as endorsed.
Among other things, the Additional
Insured has the right and obligation
to tender the claim directly to the
carrier, and the carrier owes direct
duties to the Additional Insured. Like
the Named Insured, the Additional
Insured may sue the carrier directly
to enforce obligations owed to it
under the policy.
Thescopeofadditionalinsuredcover-
age is controlled by the specific word-
ing of the endorsement. The endorse-
ment may provide the same coverage
as that afforded the Named Insured,
but not necessarily. For example, (and
as often happens with construction
projects) the Named Insured may
be covered for completed operations
but the Additional Insured may not
be covered. Some AI endorsements
limit coverage to the specific coverage
additional insured coverage specified
in a written contract with the Named
Insured. And some endorsements
specifically limit such coverage as
excess over other coverage. In that
case, the other insurance clauses of all
policies potentially providing cover-
age need to be reviewed to make sure
any payments are apportioned to the
appropriate policy.
Contractual Indemnity
The scope of the contractual liability
coverage depends upon the specific
obligations assumed by the Named
Insured in the insured contract and
applicable law in the controlling
jurisdiction. For example, some juris-
dictions prohibit or otherwise restrict
the ability of an indemnitee to be
indemnified for its own negligence or
other fault. And in some jurisdictions
case law holds that a duty to indem-
nify the indemnitee does not neces-
sarily include a duty to also defend
the indemnitee against claims, so the
The scope of
additional insured
coverage is
controlled by the
specific wording of
the endorsement.
26. 26 | LitigationManagement | spring 2013
contract must be reviewed carefully
to determine whether the indemnity
obligation also includes an obligation
to defend. Further, contractual liabil-
ity coverage under the typical CGL
policy extends only to tort liability
assumed in the insured contract, not
to damages for breach of contract (for
example, failure to perform the con-
tract). Thus, both the specific indem-
nity provisions in the underlying con-
tract and the statutory and case law
in the controlling jurisdiction must
be considered along with the specific
provisions of the Named Insured’s
policy when analyzing the carrier’s
obligations to respond to claims ten-
dered under the contractual liability
coverage of the policy.
Contractual liability coverage is still
subject to other exclusions, condi-
tions and limitations contained in
the Named Insured’s CGL policy.
Liability assumed in an underlying
contract is not automatically covered
simply because it has been prospec-
tively assumed by the Named Insured.
Defense Costs and
Policy Limits
Contractual liability coverage only
covers defense costs of the indem-
nitee if specifically required by the
indemnity agreement or applicable
law. And, because indemnity and
costs of defense (if any) owed by the
Named Insured to the indemnitee
are liabilities owed by the Named
Insured, those obligations as well as
direct liabilities of the Named Insured
to other claimants may count against
the Named Insured’s policy limits.
For an Additional Insured, defense
costs are included in the coverage and
do not count against the policy lim-
its, unless the policy specifically states
that defense costs are included within
the policy limits. Policy limits may be
the same as the policy limits for the
Named Insured, or as otherwise lim-
ited in the applicable AI endorsement.
Contractual Indemnity
and AI tenders
Duties owed by a CGL carrier to
its Named Insured for contractual
indemnity obligations owed by the
Named Insured to an indemnitee, and
duties owed by a CGL carrier to an
Additional Insured under the Named
Insured are separate and distinct, even
though certain obligations (like a duty
to defend the indemnitee and a duty
to defend the Additional Insured)
may overlap. Where both contractual
indemnity and AI tenders are made
arising out of the same occurrence,
separate responses to each tender are
required, and the obligations arising
under the policy must be analyzed
separately. In all cases, copies of the
underlying contract containing the
indemnity and AI obligations must
be procured and carefully reviewed,
along with the applicable CGL policy
and all endorsements.
If the interests of the indemnitee or
Additional Insured conflict with the
interests of the indemnitor/Named
Insured, decisions must be made about
how best to handle the defense of the
indemnitee or Additional Insured, if a
defense obligation is owed. If the carri-
er is satisfied with the defense afforded
by counsel separately retained by the
indemnitee or Additional Insured, a
defense obligation owed pursuant to
the indemnity clause or the AI clause
in the underlying contract may be dis-
charged by contributing to the costs
of that defense. If the carrier desires
to assign defense counsel, it may do
so under the AI coverage (because in
that case the AI is subject to the insur-
ance contract which may provide for
assigned counsel). But whether a car-
rier may force a contractual indemni-
tee to accept assigned counsel depends
upon the wording of the indemnity
clause. If the clause does not address
the issue, it is questionable whether
the carrier has the right to unilaterally
assign defense counsel.
Because there are numerous issues and
factors that arise in these situations,
it is important to analyze each situa-
tion carefully. Denial of tenders may
expose the Named Insured to unin-
sured breach of contract claims that, if
the denial was wrongful, may in turn
subject the carrier to bad faith claims. It
is wise to consult with coverage counsel
for specific advice in such matters. LM
Gary Tipton, AIC, AIM, AIS, CLU, CPCU,
LUTCF, is a General Liability Claims
Adjuster for North American Risk Services.
Rob Moschet is an attorney with McCollum,
Crowley, Moschet, Miller & Laak, Ltd. in
Minneapolis.
Whether a carrier may force a contractual
indemnitee to accept assigned counsel depends
upon the wording of the indemnity clause.
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28. 28 | LitigationManagement | spring 2013
Specifically Speaking | Product Liability
F
or 600 years or more, the
cedent-reinsurer relation-
ship was based on mutual
trust and a reciprocal duty
of utmost good faith. The
reinsurer trusted that the cedent pro-
vided accurate information on the risk
and that the cedent would bill appro-
priately for any given loss. In turn, the
cedent trusted that a reinsurer would
honor the agreement when presented
with a claim. Each had a duty of full
disclosure and veracity and the mutual
perception was that there was little or
no need to verify the other’s informa-
tion. Due to financial pressures begin-
ning in the 1970s, cedents and rein-
surers started to protect their recipro-
cal legal rights under the reinsurance
agreement, just like parties to any
other contract.
Duty of Utmost Good Faith
The duty of utmost good faith is a
reciprocal, heightened duty of good
faith implied in reinsurance contracts
since the earliest form of reinsurance.
The duty requires that the insurer fully
disclose every known material cir-
cumstance of the risk that may influ-
ence the reinsurer’s decision to accept
the risk and set the premium because
the insurer may readily ascertain the
risk’s material facts and circumstances.
The reinsurer is obligated to pay rein-
surance claims that arise within the
scope of the underlying policy as well
as the reinsurance contract, absent a
bona fide defense.
The duty arose from the high degree
of mutual trust required to make a
reinsurance agreement profitable
for both parties. Mutual profitabil-
ity occurs only when the reinsurance
premium is less than the insurance
premium and the reinsurer can rely
upon the cedent’s risk evaluation and
proper handling of any claim, thereby
eliminating the reinsurer’s costs of
doing so.
The Modern Relationship
For decades, commentators and
courts alike have characterized a
reinsurance contract as a gentleman’s
agreement consummated with a
handshake. The inherent mutual trust
existed in the traditional relation-
ships because the potential, profitable
long-term relationship and harm to
reputation for contesting bills out-
weighed any single loss incurred by a
cedent or reinsurer. Thus, historically,
The Ever-Evolving Cedent-Reinsurer Relationship
By Martin H Alpert, Kim Hollaender and Thomas Storrer
Trust and Investigation
29. spring 2013 | LitigationManagement | 29
reinsurers honored the agreements,
typically without challenging a bill.
When disputes arose, the parties
often resolved their own disputes —
sometimes over a two-cocktail lunch
— rather than litigating.
The modern relationship is based on
trust coupled with verification and is
not necessarily bound by the customs
that governed the traditional relation-
ship. Unlike the traditional relation-
ship, a reinsurer may verify claims or
contest claims without jeopardizing
its reputation or contradicting cus-
tom. Protecting reciprocal legal rights
instead of taking a loss for the sake of
the relationship is acceptable and not
contrary to custom. While the duty of
utmost good faith remains, a reinsurer
does not risk breaching that duty by
verifying a claim and asserting non-
frivolous, legal defenses.
Various factors caused a change in
the relationship. Cedents and rein-
surers focused on profitability, if
not solvency, in the 1970s and 1980s
due to unforeseen large and long-tail
toxic tort and environmental claims.
Additionally, reinsurers started
accepting more risks to increase cash
flow, but without satisfactorily evalu-
ating their capitalization. The result-
ing undercapitalization reduced a
reinsurer’s ability to absorb large or
long-tail losses. Concurrently, insurers
started to shop for bargain premiums,
rather than remain with a reinsurer
who required a higher premium. Like
reinsurers, unforeseen losses and capi-
talization problems prevented cedents
from taking a loss for the relationship’s
sake. Instead, cedents fought for full
indemnification. Additionally, the use
of managing general agents and inter-
mediaries (i.e., brokers) for reinsur-
ance agreements further undermined
the traditional relationship. Cedents
and reinsurers blamed real or per-
ceived wrongs on managing general
agents and intermediaries.
Game Changer
Transport Ins. Co. v. TIG Ins. Co. (TIG)
portrays the modern cedent-reinsurer
relationship and its effect on rein-
surance customs and duties. In TIG,
Transport argued, in part, that the rein-
surers’ violated custom by asserting
a statute of limitations defense when
they denied indemnity of their share of
a $26.6 million settlement. The appel-
late court disagreed and asserted, “all
issues are fair game” under the modern
reinsurer relationship. The court dis-
pelled any notion that the traditional
cedent-reinsurer relationship exists or
that the reinsurer is bound to customs
that prohibit it from asserting valid
legal defenses to indemnification.
Another lesson from TIG is that an
obvious, basic element of a claim, such
as the statute of limitations, may still be
dispositive due to the evolving case law
in reinsurance. At the time of TIG trial,
Continental Casualty Co. v. Stronghold
Ins. Co., Ltd. was the controlling rein-
surance case law regarding the statute
of limitations, which held the statute of
limitations does not start to accrue until
the reinsurance claim is denied or, in the
absence of denial, a reasonable time fol-
lowing submission of the final proofs of
loss if the reinsurer did not act upon the
final proofs. Stronghold was decided in
1996, in the midst of the underlying cov-
erageaction,butbeforeTransportsaction
against it reinsurers. Therefore, non-
issuesmaybecomeissues,andvice-versa,
overthecourseofalong-tailclaim.
A reinsurer’s investigation of large and
long-tail claims conducted in a coop-
erative and ethical manner may not be
necessarily detrimental to a relationship.
A reinsurer’s investigation may promote
the exchange of information and ideas,
a key to successful claims programs.
Moreover, a reinsurer’s investigation
prior to claim payment or settlement
may reduce the chance of litigation later.
A reinsurer’s investigation should not be
conducted in a way that could be con-
struedasparticipationinthehandlingof
the claim or as creating the appearance
of an agent-principal relationship with
all its accoutrements. LM
Martin H Alpert JD, CPCU, ARM, ASLI, ARe,
CPD,isthePresidentandCEO,Environmental
and General Liability Consulting Group. Kim
Hollaender, Esq. and Thomas Storrer, Esq.
are attorneys with the firm Langsam Stevens
Silver & Hollaender LLP.
The court dispelled any
notion that the
traditional cedent-
reinsurer relationship
exists or that the
reinsurer is bound to
customs that prohibit it
from asserting valid
legal defenses to
indemnification.
30. 30 | LitigationManagement | spring 2013
Specifically Speaking | DIVERSITY
A
t the CLM Leadership
Forum held in
December, Steven
Plate,DeputyChiefof
Capital Planning and
Director of the WTC Construction,
The Port Authority of New York and
New Jersey, addressed an audience
of professionals from corporations,
businesses, and the legal and insur-
ance industries. Deputy Chief Plate
shared his thoughts on the unique
and special nature of the rebuilding
efforts at the World Trade Center
Site Redevelopment project,
some of the challenges faced
by the project team and
the guiding princi-
ples of leadership
as he strives to
complete a mas-
sive construction
project in one of the
most urban areas in
the country, if not the
world. Highlights of the
Deputy Chief’s follow.
Huge Scope
Thousands of men and women
are working in Lower Manhattan
each and every day to realize this
“miracle in the making,” the redevel-
opment of the World Trade Center
site. There are 3,500 workers at the
site each day and 26,000 employ-
ees directly working on portions
of the project. There are also more
than 62,000 people affected daily by
the project. This is one of the best
and diverse teams ever assembled.
The extended WTC team shows
the dedication and resilience of the
American people and epitomizes the
American spirit.
The WTC is a Rubik’s cube of not
just finance, but also emotions, and is
one of the most complex engineering
projects on the face of the earth. Each
month $200 to $250 million is paid
out to vendors and contractors, total-
ing $2.4 billion in 2011 and about
$2.5 billion in 2012.
Finding Success
To be successful in this project, we
needed focus around a common goal.
Something people could embrace in
their heart. Focusing on a common
goal is critical. Ask your staff, what
do you need? Whatever it takes,
make sure you support your staff.
Momentum starts to happen and
success breeds success.
The challenge is to take away
obstacles and get everyone
pulling in the same direction.
Give people the proper envi-
ronment and encourage
them to talk to each other.
It boils down to commu-
nication. Empowerment
is also key. Learn to be
empowered. Lead, fol-
low or get out of the way
and move, move, move.
If you stop, inertia sets
in.
Then there’s the emo-
tional part. This was
our home, where we
worked every day that
we lost. We’re rebuilding
a city, a nation, really the
world. We have a fiduciary
responsibility, a moral compass
that points due north, watching
to make sure what we do is perfect
for those people.
What is most amazing when these
events happen is people come togeth-
er to make it better because of the
resilience and commitment deep in
their souls. What we are doing will
leave a legacy that good will prevail
over evil. LM
Director of World Trade Center Construction Addresses Issues of Leadership
The Rubik’s Cube of Projects
31. simple knot
(easy to unravel)
Gordian knot
(hard to unravel)
Some problems are easy to solve. Others, like the Gordian knot, are more complex
and require rare skill. That’s where we come in.
At RGL Forensics, our financial experts are specially trained to unravel the most
complicated accounting challenges to help our clients in commercial disputes. From
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32. 32 | LitigationManagement | spring 2013
Specifically Speaking | Workers’ Compensation
I
t was so easier back in the day:
Dad went to work from 9 a.m.
to 5 p.m., sat at his desk all day,
clocked out for his lunch hour,
clocked in and finished his work
day. He was usually home by six for din-
ner with the family. No after hour calls,
no virtual office, no emails, no flying to
ameetingandnoweekendwork.Inturn,
the compensability of an alleged work
injury was usually clear-cut. With certain
exceptions, injuries occurring off work
premises,ornotduringworkhours,orto
and from an employee’s place of employ-
mentwerenotcompensable.
Jump forward into the tech world of
2013! The above scenario describes a
rapidly declining number of employ-
ees in the workforce. The work envi-
ronment is now vastly different than
what it was 30 years ago, which rais-
es several workers’ compensation-
related issues.
The Facts
Nearly half of U.S. companies have
employees working from home or on
the road. And while accurate statis-
tics are hard to wrangle since the term
telecommuting covers a broad spec-
trum of workers, it is estimated that 40
percent of employers now offer some
form of telecommuting. A 2012 U.S.
Census Bureau study entitled Home-
based Workers in the United States:
2010 highlighted that the percentage
of all workers who worked at least one
day at home increased from 7 percent
in 1997 to 9.5 percent in 2010. In the
1960s, the vast majority of home-based
workers were primarily self-employed
family farmers and professionals such
as doctors and lawyers. As of 2010, pro-
fessional and scientific industries, and
education and health services made up
the bulk of work-at-home individuals.
State workers’ compensation statutes,
however, have not changed to reflect
today’s working world. This leaves a
gray area as to what is and isn’t com-
pensable. By its nature case law in each
state varies and companies are left to
Do Workers’ Compensation Benefits Go with Them?
By Trish Bellich, Bob Kopka and Lori Zobler
Workers on theGo
33. spring 2013 | LitigationManagement | 33
follow trends to guide them as to what
meets the criteria for a covered work-
ers’ compensation injury.
Categories of Telecommuters
A uniform categorization of employ-
ees who work outside a traditional
office environment does not exist.
Technology and policies are moving at
arapidpacewithuncleardividinglines.
What appears most logical is separat-
ing workers into three different groups.
The first group are the work-at-home
employees who work in a home office
the majority of the time. The second
group is a mixed category of employ-
ees who sometimes report to an office,
sometimes work from home and may
travel as part of their work duties. The
third is road warriors, who do not have
a stationary office. This group works in
a multitude of locations.
At-Home Workers
At its basic level, compensability asks
whether an injury arises out of or dur-
ing the course of employment. To test
this, the causal connection between
a workers’ compensation injury and
a risk connected with the employ-
ment is examined. To determine if the
injury occurred during employment,
a variety of factors are considered,
including the location of the injury
and whether the worker was reason-
ably fulfilling employment duties.
Although some of the scenarios in
the case law seem farfetched and fact
specific, a consistent theme is a sur-
vey of reasonable expectation and an
examination of the risk involved.
One of the most cited cases on this top-
ic involves a claimant who is a custom
decorator who works at home one day
a week and kept her samples in a van
to regularly take on her customer calls.
While the decorator was walking out
her back door to her garage to change
fabrics to the new line, she tripped over
her dog and fractured her wrist. In
that case, Sanberg v. JC Penney Co., the
Oregon Court of Appeals looked at a
work connection test and weighed facts
such as the claimant regularly worked
out of her home and was required to
store the samples as a condition of her
employment. The Court found that the
home environment was the work envi-
ronment meaning the risks of the home
became the risks of the claimant’s work.
The Road Warrior
For road warriors, compensable inju-
ries follow wherever the job takes them.
Many states apply the continuous cov-
erage doctrine. Under this doctrine, an
employee is in the course of employ-
ment when the injury has its origin in
a risk created by the necessity of being
away from home, except when a dis-
tinct departure on a personal errand is
shown. Cases involving road warriors
have provided death benefits for the
next of kin when a worker drowned
during a layover and covered injuries
sustained by a long-haul truck driver in
a bar fight during a layover.
With the expanding global economy,
employers are sending their workers
abroad. These “special missions” may
or may not be covered by the standard
workers’ compensation/employers lia-
bility policy. This standard policy was
meant to cover only the U.S., its terri-
tories and Puerto Rico. A special policy
can be bound if an employer has a large
percentage of employees traveling out-
side the U.S. Borders.
Minimizing Risks
The best advice for minimizing risks is
to keep lines of communication open.
Knowing where, when and how your
workforce is tackling the world is a
company’s best bet for minimizing
risks. Comprehensive employee poli-
cies that include no texting and driving
rules,oroutlineforbiddenactivitiescan
guide a mobile workforce while mini-
mizing an employer’s workplace risk.
Workplace accidents will happen, but
they can be minimized. Work with
purely home-based workers to estab-
lish a designated area, specific work
hours and resources necessary to fur-
ther their job so the employee does
not create solutions that create risks for
the employer. For hybrid employees,
employment contracts that specifically
outline job duties may reign in the zone
of risk. For road warriors, consider
pairing them up to keep them more
engaged in the company and choose
employees who are keen on travel,
safety and possess common sense. Set
a uniform standard of conduct to dis-
suade employees from unnecessary
activities. Don’t forget to conduct tra-
ditional in-person meetings or telecon-
ferencing with telecommuters to create
face-to-face interaction, which can be
invaluable in minimizing risk.
While new technology brings with it
new challenges, companies should be
proactive with policies and procedures
to manage their mobile work forces.
Trends show the mobile work force is
on the rise and precaution is necessary
to avoid increased workers’ compensa-
tion costs. LM
Bob Kopka is the Managing Partner of
Kopka, Pinkus, Dolin & Eads. Tricia Bellich
is an attorney with Kopka, Pinkus, Dolin &
Eads. Lori Zobler is the Director of Claims
for BerkleyNet.
34. 34 | LitigationManagement | spring 2013
Specifically Speaking | Project Management
T
hree years ago, a 50-year-
old management disci-
pline — project man-
agement — assumed a
new identity within the
legal community — legal project man-
agement (LPM). Within a few months,
it made headlines on a regular basis as
large law firms started creating Project
Management Offices (PMOs). The fal-
teringeconomyandtheincreasingtrend
of alternative fee arrangements acted as
catalysts for this business approach.
Many legal professionals began to refer
to LPM as the paradigm shift or tipping
point within the practice of law.
Today, early adopter law firms still con-
tinue to use their PMO to manage mat-
ters using LPM concepts. However, the
vast majority of law firms are unsure
whether LPM is right for them. Most of
these point to lack of resources, imple-
mentation costs and process complex-
ity as their main deterrents.
At the Core
The reality is that all law firms practice
LPM within their organizations in one
way or another. The role of LPM is to
formalize processes and develop a sys-
tematic matter management approach.
The power of LPM lies within the
fact that it builds a system that can be
used to compare performance across
the firm and over time. LPM is not
an all-or-none approach. The imple-
mentation of any project management
environment is a multi-stage, iterative
process. To that end, every step taken
towards an LPM environment will
bring associated benefits and standards
to the law firm. Law firms could begin
using LPM processes within a division,
or for a particular type of matter as a
pilot. Usually, the firm will learn from
the pilot and develop a stronger LPM
model, which can be implemented
across the entire firm.
Efficiency Not Overload
The purpose of LPM is to develop a for-
mal set of systems and processes. All too
often, there is a tendency to develop a
multitude of associated processes with
little or no incremental value. Budget
updates, work breakdown structures,
status reports and Gantt charts can
quickly become a burden, rather than
a management tool. A good LPM
implementation should always balance
resource availability, process develop-
mentandmanagementbenefittoensure
long-term sustainability of the solution.
Frequently, law firms are faced with
situations in which some attorneys
are over-utilized over many months,
resulting in diminished work quality.
An LPM system will make it easy for
a law firm to choose, train and utilize
appropriateresources.Areviewofstaff-
ing profiles versus outcomes for past
matters can help determine synergies.
It can also determine training needs
amongst team members. An updated
resource utilization plan can easily
determine team member availability.
Happy Client (Happy Firm)
In most instances, implementing an
LPM system will result in satisfied cli-
ents and profitable law firms. Imagine
this situation. A client assigns an LPM-
equipped law firm to a new matter. The
firm pulls up its risk register database
for this type of matter. It reviews the
risks and alternate scenarios associated
with this type of matter, as well as out-
comes for similar matters in the past.
Based on the matter specifics, the firm
can now build the workflow analysis,
possible outcomes, most-likely sce-
nario and a project plan to manage the
matter. Indemnity and expense detail
for past matters can also be used to
determine the probable budget for this
new matter, as well as the associated
profitability for the law firm. Resource
detail can be reviewed to determine the
best-suited team for the matter.
The firm can share and discuss this
plan and the associated budget with
the client. After approval, this project
plan can be used to keep the matter
on schedule and within the budget.
The transparency will help build trust
between the law firm and the client. At
the same time, the focus on plan and
schedule will ensure minimum non-
billable time and greater profitability
for the law firm.
LPM is a very simple concept.
However, the systematic imple-
mentation of its concepts results in
an efficient and profitable law firm,
providing much-needed competitive
advantage in this competitive envi-
ronment. LM
Nicky Mukerji is the CIO of Legalbill, a
Nashville-based Legal Spend Management
company. Laura Farjadian is the Senior
Intellectual Property Manager for Navico.
LPM (Legal Project Management) Picks Up Speed
By Nicky Mukerji and Laura Farjadian
Revving Up
36. 36 | LitigationManagement | spring 2013
Specifically Speaking | Professional Liability
I
t has been reliably reported
that mergers and acquisitions
(M&A) related litigation is a
significant problem for corpo-
rate America. In fact, despite
fewer acquisitions in the contemporary
economy, the percentage of deals that
have spawned lawsuits has increased
dramatically. Shareholder dissatisfaction
with a perceived post-closing diminu-
tionofvalueisonebattlefield.Anotheris
thebuyer’sdissatisfactionwithinevitable
post-closing contingencies.
Transactional Insurance
The insurance industry has in recent
years developed and honed a suite of
transactional insurance (TI) products.
These can provide an ideal risk man-
agement solution to the deal-making
community. The use of TI — even its
consideration alone — can be the pro-
verbial ounce of prevention. In a real
sense, TI advances litigation manage-
ment to the front-end by anticipating
litigation’s inevitable cost and collat-
eral damage, and by transferring that
risk to the insurance markets so that
litigation, ideally, never takes hold.
TI can also mitigate professional
liability risk, demonstrating execu-
tive due diligence by management,
and advisory prudence by the out-
side legal, accounting, insurance and
financial team.
TI is a category of risk transfer agree-
mentsdesignedspecificallytofacilitate
mergers and acquisitions, divestitures,
and other organic business transac-
tions. Among the most common types
of TI available are:
u Representations and Warranties
Insurance
u Contingent Liability Insurance
u Litigation Buyout Insurance
u Tax Indemnity Liability Insurance
u Liquidating Trust and Trust
Liability Insurance
How Better to Manage Litigation Than to Prevent It?
By Joseph DePaul and Jonathan Ziss
Transactional Insurance
37. spring 2013 | LitigationManagement | 37
u Liquidation Insurance
u Specialty Management Liability
Insurance
Representations and Warranties
Insurance (RWI) RWI provides cover-
ageforthecontractualindemnification
obligations resulting from the breach
of representations or warranties of the
Seller. RWI can be purchased by the
buyer or the seller. A seller-side policy
can act to backstop the seller’s indem-
nification exposure, shifting the risk to
the insurer for a fixed cost. This risk
transfer can enhance both the quality
and scope of the indemnity cover, thus
enhancing protection on both sides of
the deal and facilitating its closure.
A buyer can also purchase RWI
(or have it purchased by the seller).
Examples of buyer-side covers include
coverage beyond the survival period
and/or cap under the purchase agree-
ment; coverage where there would
otherwise be no indemnification, as
in a purchase of assets out of bank-
ruptcy or a purchase of assets from a
distressed seller; and, a cover intended
to distinguish a bid in a competitive
sale arena by reducing or even reliev-
ing the need for seller indemnity.
Of course, RWI is not exactly a pan-
acea. Purchase price adjustments,
known issues, intentional conceal-
ment and breaches of covenants will
typically not be covered. Likewise,
RWI will not extend to injunctive,
equitable or non-monetary relief.
Contingent Liability Insurance (CLI)
Unlike RWI, CLI covers known expo-
sures or identified contingent liabili-
ties. Examples include environmental
clean-up costs, workers’ compensation
tail exposure, and other risks more or
less certain in fact, but uncertain as to
both timing and value.
Litigation Buyout Insurance (LBI) This
form of TI can be an ideal solution
when the seller is either unwilling or
unable to retain the potential liabil-
ity inherent in litigation involving the
assets being sold. Where the buyer
is likewise unwilling to assume such
liabilities, LBI can be crafted to insure
the exposure and thus clear the way
for the transaction.
Tax Indemnity Insurance Potential
tax contingencies arising from pend-
ing or threatened audits, availability
of net operating losses in a change of
control, debt cancellation issues, and
reserves for uncertain tax positions
under GAAP (FIN 48) are among
the more common tax contingencies
that can dog or even derail an M&A
transaction. These common exposures
are well-suited to being underwritten
through TI, which can go considerably
farther than a comfort letter toward
keeping the peace.
Liquidating Trust and Trust Liability
InsuranceThissolutionhasbeendevel-
oped to address the unique exposures
facing liquidating trusts and their
trustees. In addition, the tax qualifica-
tion insurance section of these policies
can protect trusts (and indirectly their
beneficiaries) from the financial expo-
sures resulting from a disqualification
as a liquidating trust.
Liquidation Insurance This solution can
facilitate an accelerated termination or
liquidationofaprivateinvestmentfund
by providing insurance for either iden-
tified or unidentified contingent obli-
gations that the fund managers believe
must prudently be provided for by way
of reserves or holdbacks.
Specialty Management Liability
Insurance M&A activity often gives
rise to D&O claims, especially if the
deal were to fail outright, or if there
was an alleged failure to disclose mate-
rial facts, or other fiduciary breaches.
In this context, TI helps to demon-
strate the directors’ and officers’ due
diligence and transparency, both on
the part of the buyer and on the part of
the seller, which may be seen to have
a duty to undertake reverse due dili-
gence. Specialty management liability
insurance provides for specific liability
exposures faced by boards of direc-
tors, management teams, fiduciaries,
liquidators, trustees and transaction-
related professionals in connection
with a specific transaction or event.
Manuscript Policies It should come as
no surprise that TI policies are careful-
ly underwritten to meet the risk. This
process takes time and considerable
effort and energy, involving under-
writers and other industry analysts,
along with input from the would-be
insured, well beyond a mere policy
application form. Close coordination
between the broker and client is essen-
tial. The underwriting process may
involve an up-front due diligence fee.
TI Can Prevent Litigation As should be
readily apparent, TI can function like a
minesweeper in a harbor, locating and
removing potentially explosive con-
tingencies. With TI in place, parties
can proceed with greater confidence,
so that more deals close. And, when
they do close, the investors, owners,
and those who advise them are well-
positioned to demonstrate their pru-
dence and due care attendant to risk
management within the deal. Overall,
the ever-present threat of litigation
surrounding M&A activity is, by vir-
tue of TI, dialed way back.
Put another way, TI not only lessens
the likelihood of M&A related litiga-
tion. It actually can prevent the seeds
of discord from ever germinating. LM
Joseph DePaul is the Senior Vice President,
Management & Professional Liability for
Arthur J. Gallagher. Jonathan Ziss is a
Partner with Goldberg Segalla LLP.
TI not only lessens the
likelihood of M&A
related litigation. It
actually can prevent the
seeds of discord from
ever germinating.
38. Specifically Speaking | Professional Liability
38 | LitigationManagement | spring 2013
O
n July 31, 2012, the
Missouri Supreme
Court held that
Missouri’s medical
malpractice non-eco-
nomic damage cap wasunconstitutional
forviolatingtheMissouriConstitutional
right to a jury trial in Watts v. Lester E.
Cox Medical Centers. The Watts opinion
represents an about face for the Court,
which had rejected the same constitu-
tional argument in 1992.
In 1986, the Missouri legislature passed
Chapter 538 governing tort actions for
improper healthcare. The chapter limited
non-economicdamagesto$350,000“per
occurrence…from any one defendant”
withanannualadjustmentforinflation.
Setting the Cap
Inthe1992case,AdamsByandThrough
Adams v. Children’s Mercy Hospital, an
8-year-old girl went into cardiopulmo-
nary arrest and suffered permanent,
severe brain damage caused by a series
of errors during a skin grafting surgery.
The verdict against five different pro-
viders included non-economic damag-
esinexcessofthecapandthetrialcourt
accordingly reduced the non-economic
damage award. Plaintiffs appealed and
challenged the constitutionality of the
cap on the basis of equal protection
and the right to a jury trial. The Court
rejected both arguments.
However, a series of Missouri Court
of Appeals opinions eroded the cap
beginning in 2002 when the Court
construed that there were two caps
against a hospital defendant where
the patient was injured by two
“occurrences” of malpractice by two
different physicians. This opinion
introduced the concept of apparent
agency to the medical malpractice
arena in Missouri and held that the
hospital was liable for a second cap
for the conduct of an independent
contractor radiologist where the
patient believed the radiologist was
affiliated with the hospital. This opin-
ion led Missouri claimants to contend
that each encounter with a defendant
physician potentially constituted an
“occurrence” allowing a separate cap
for every such encounter.
The End of the Med Mal Cap Era or the Start of the Next Chapter?
By Jeff Brinker and Marta Garrett
What’s Next?
