THE 2020 TORT TALK TOP TEN

             

Here is the 2020 Tort Talk Top Ten--an annual listing of notable cases and important trends in Pennsylvania civil litigation law over the past year as highlighted in Tort Talk blog posts.

If you wish to view the actual Tort Talk post on any of the following cases or topics, or the actual Opinion, please go to TortTalk.com and type the name of the Plaintiff in the case in the Search Box in the upper right hand corner of the blog.  There should be a Link to the actual Opinion within the blog post itself.

10.    Trial Judges Should Stay on the Bench for Voir Dire

The Pennsylvania Supreme Court was positioned to answer the question of whether it was proper for a trial court judge to leave the bench for jury selection in its decision in the case of Trigg v. Children's Hospital of Pittsburgh of UPMC, No. 3 WAP 2019 (Pa. April 22, 2019) (Op. by Todd, J.)(Donohue, J., Concurring)(Wecht, J., Concurring).  

However, in its decision, the Pennsylvania Supreme Court found that the issue had not been preserved for appeal and that the Superior Court had, therefore, improperly addressed the merits of the question presented.

While the Court found that the issue had been waived, several of the Justices wrote Concurring Opinions voicing their thoughts that a trial court judge should remain on the bench during the course of voir dire.

9.    Validity of Reservation of Rights Letters

In the case of Selective Way Ins. Co. v. MAK Services, 232 A.3d 672 (Pa. Super. April 24, 2020) (Bowes, J., Shogan, J., Strassburger, J.) (Op. by Bowes, J.)(Dissenting Op. by Strassburger, J.), the Pennsylvania Superior Court issued an important decision pertaining to the validity of reservation of rights letters issued by liability insurance carriers.

The court emphasized that, in order for a reservation of rights letter to be valid, it must be issued in a timely fashion and it must clearly state the reasons under the policy for the reservation of rights or for the challenge to coverage.  The court also noted that a best practice may be for the insurance company to send the reservation of rights on multiple occasions as the case evolves.

The court noted that, if a carrier fails to meet these recommendations with respect to a reservation of rights letter, the carrier may be estopped from denying coverage in the end.

8.    Still no Appellate Guidance for Post-Koken Cases

The original Post-Koken decision was handed down back in 2005 allowing automobile insurance companies to replace their arbitration clauses with the requirement that UM and UIM claims instead be pursued in a court of law.  Yet, since that time, essentially the only appellate court decision of note handed down was the Stepanovich v. McGraw decision by the Pennsylvania Superior Court back in 2013 in which that court suggested that it was permissible to conduct a trial of the claims against the tortfeasor and the UIM carrier before the same jury (the Pennsylvania Supreme Court inexplicably denied allocatur in the case).

To date, there remain splits of authority all across the Commonwealth of Pennsylvania on a wide variety of Post-Koken issues in terms of pleadings, discovery, and trial.  These varying county decisions can always be viewed on the Post-Koken Scorecard by scrolling down the right hand side of the Tort Talk blog and clicking on the date under "Post-Koken Scorecard."

7.    Courts Address Standards for Sealing a Settlement Agreement

In the case of A.A. v. Glicken, No. 2020 Pa. Super. 197 (Pa. Super. Aug. 14, 2020 Olson, J., Dubow, J., and McLaughlin, J.) (Op. by Olson, J.), the court upheld a Luzerne County trial judge’s decision not to seal a settlement agreement in a minor’s medical malpractice lawsuit. 

In so ruling, the appellate court rejected the Defendants’ argument that not sealing the settlement agreement would have a chilling effect on future settlements and would go against the parties’ interests in privacy. The appellate court found no abuse of discretion by the trial court in denying the Motion to Seal. 

The Superior Court also ruled that the Defendants did not overcome the common law presumption of openness in courts and the Defendant did not meet their burden of showing good cause for sealing the record. 

This issue was also addressed by Judge Terrence R. Nealon of Lackawanna County in the case of Moses Taylor Foundation v. Coverys, No. 19-CV-7423 (C.P. Lacka. Co. May 8, 2020 Nealon, J.), the court addressed a hospital's request to seal the record in a bad faith litigation. 

In the end, the court found that the secrecy interests cited by the hospital and the trust do not supersede the presumption in favor of open access to the judicial records so as to justify a court-sanctioned closure of the record.

6.    Split of Authority on Allegations of Recklessness

In 2020, the split of authority on the propriety of allegations of recklessness continued.  

Some more liberal trial court judges allowed allegations of recklessness to be pled with reckless abandon in any case whatsoever regardless of the facts presented under a rationale that an allegation of recklessness is an averment of a state of the mind and such averments are allowed to be generally pled under Pa.R.C.P. 1019.

Another line of courts emphasized that Pennsylvania is a fact-pleading stated and limited allegations of recklessness to those cases where outrageous facts were present.

Most Plaintiffs attorneys avoid any delays in the forward movement of their cases that may be caused by Preliminary Objections by agreeing to stipulate the claims of recklessness out where they are challenged so long as the Plaintiff retains the option to motion the claims back in if discovery reveals facts sufficient to support a punitive damages claim.

5.    Pennsylvania Superior Court Adopts Test for Staying a Civil Lawsuit While Criminal Charges are Pending against Defendant

In a case of first impression, the Pennsylvania Superior Court has ruled in Keesee v. Dougherty, 230 A.3d 1128 (Pa. Super. March 16, 2020 Bowes, J., Olson, J., Stabile, J.)(Op. by Olson, J.), that a trial court judge must reconsider her refusal to stay a civil lawsuit while a companion criminal case is pending.

The lawsuit in this matter was brought by a nonunion electrical contractor against an indicted union boss and other defendants.

With its ruling the Pennsylvania Superior Court adopted the six-factor test established by the federal courts for determining whether to stay a civil case pending resolution of a related criminal matter.  The court cited to the federal case of In re Adelphia Communications, No. 02-1781, 2003 WL 22358819 (E.D. Pa. 2003).

4.    Pennsylvania Supreme Court Upholds Artful Pleading to Avoid Liability Exclusion

In Erie Insurance Exchange v. Moore, No. 20 WAP 2018 (Pa. April 22, 2020)(Op. by Dougherty, J.)(Dissenting Op. by Mundy, L), the Court allowed artful pleading of negligence by a Plaintiff in a shooting case to avoid exclusions in a liability policy and thereby implicate a carrier’s duty to defend the matter.

This case arose out of the tortfeasor's shooting of the Plaintiff.  The Plaintiff asserted in his Complaint that the shooter had negligently, carelessly and recklessly caused the weapon to be fired.  The Court read the facts to indicate that the shooter had intended to shoot another person and, when the Plaintiff had intervened, the Plaintiff was shot by mistake during the scuffle with the shooter.

3.     Regular Use Exclusion is Under Attack

Over the past two years, the Plaintiff's bar has been successful in attacking the validity of the Household Exclusion in automobile insurance policies.

Energized, the Plaintiff's bar has now set its sights on attacking the Regular Use Exclusion using essentially the same argument that was utilized in the Gallagher v. GEICO case, i.e., that the exclusion acts as an improper de facto waiver of stacked coverage when the MVFRL requires that carriers secure written waivers of stacked coverage from its insureds.

While these attacks initially have not met with success, the Plaintiff's bar scored a chink in the armor with a victory in the Northampton County Common Pleas Court case of Rush v. Erie Insurance Exchange, No. C-48-CV–2919-01979 (C.P. Northampt. Co. June 29, 2019 Baratta, J.). In Rush, Judge Stephen G. Baratta of the Northampton County Common Pleas Court granted partial summary judgment to the injured party plaintiffs after holding, as a matter of first impression by any court in Pennsylvania, that Erie’s regular use exclusion was invalid under the MVFRL.

The recent cases on this issue can be viewed by going to www.TortTalk.com and scrolling down the right hand column until you get to the "Labels."  In alphabetical order under that, click on the label for "Regular Exclusion" to get to the Tort Talk blog posts on those cases.

Also, here is a LINK to my September 10, 2020 Pennsylvania Law Weekly article on the topic entitled "Can the Regular-Use Exclusion Withstand an Attack from the Plaintiffs Bar?"

2.   Lower Courts Continue to Debate Scope of Gallagher v. GEICO Household Exclusion Decision

In 2019, the Pennsylvania Supreme Court attempted to eradicate the Household Exclusion found in automobile insurance policies as an improper de facto waiver of stacked coverage.

In 2020, lower courts struggled with the application of the Gallagher v. GEICO decision to different factual scenarios than that presented in the case decided by the Pennsylvania Supreme Court.

While the Federal District Court judges largely followed the Gallagher v. GEICO decision as eradicating the Household Exclusion, several state court judges upheld the continuing validity of the Household Exclusion based upon the cases before them having different facts than those at issue in the Gallagher v. GEICO decision.

However, just last month, in the case of Erie Insurance Exchange v. Petrie, No. 261 EDA 2020 (Pa. Super. Nov. 18, 2020 Pellegrini, J., Nichols, J., Kunselman, J.)(Op. By Kunselman, J.), a panel of Pennsylvania Superior Court Judges held that the Gallagher v. GEICO decision was not limited to its facts and should be read as invalidating the Household Exclusion.

The recent cases on this issue can be viewed by going to www.TortTalk.com and scrolling down the right hand column until you get to the "Labels."  In alphabetical order under that, click on the label for "Household Exclusion" to get to the Tort Talk blog posts on those cases.

1.    COVID-19 Pandemic Impacts Civil Litigation in Pennsylvania (and across the world)

With the rise of the COVID-19 Pandemic in March of 2020, the courts shut down except for essential matters through September of 2020.  By then, most courts in Pennsylvania began to try to complete jury trials until the second surge compelled most courts to shut down trials again in December of 2020.  It remains to be seen when trials will get back on track in 2021.

The COVID-19 Pandemic also forced attorneys and judges to adapt and to adopt virtual meetings in order to keep cases moving forward.  The use of virtual meetings for depositions and court appointments became the norm, possibly impacting how cases will be handled in the future when the Pandemic goes away.

It is also anticipated that the impact of the Pandemic will be felt in the future in terms of a dip in claims given that there was a stay-at-home Order in effect in Pennsylvania for about two months in the Spring of 2020.

Superior Court Provides Important Lessons Regarding Reservation of Rights Letters

In the case of Selective Way Ins. Co. v. MAK Services, No. 1289 EDA 2019 (Pa. Super. April 24, 2020) (Bowes, J., Shogan, J., Strassburger, J.) (Op. by Bowes, J.)(Dissenting Op. by Strassburger, J.), the Pennsylvania Superior Court issued an important decision pertaining to the validity of reservation of rights letters issued by liability insurance carriers.

According to the Opinion, the insured in this matter was a snow and ice removal contractor. The carrier at issue had issued a policy to this insured which had an exclusion for snow and ice removal coverage. 

In an underlying matter, the insured snow removal contractor was sued for a slip and fall event that allegedly occurred in an allegedly icy parking lot. 

According to the Opinion, even though the carrier had the exclusion for snow and ice removal activities contained in its policy, the carrier did not expressly reference that exclusion in its reservation rights letter that was initially issued to its insureds after the claim arose. 

Rather, the carrier defended the case for approximately eighteen (18) months before specifically raising the exclusion, for the first time, in a Declaratory Judgment Complaint.  In that Declaratory Judgment Complaint, the carrier requested a declaration from the court that it had no duty to defend or indemnify its insured under the case presented as applied to the policy language. 

The insured filed a counterclaim asking for a defense and coverage and also asserted claims for bad faith and fraud. Notably, the insured also included a request that the court declare that the carrier was "estopped" from ceasing its representation and indemnification of the insured in the underlying slip and fall lawsuit. 

At the trial court level, a ruling was issued that the language in the reservation of rights letter that was issued by the carrier was sufficient to preserve the carrier’s right to assert the snow and ice exclusion eighteen (18) months later even though that exclusion was not specifically referenced or quoted in the letter. The trial court had granted summary judgment in favor of the carrier on all counts in the declaratory judgment action. On appeal, the Superior Court reversed.

In so ruling, the Pennsylvania Superior Court reviewed certain general principles of law relative to the validity of reservation of rights letters. 

For example, the Pennsylvania Superior Court confirmed that “Pennsylvania law does not require an insurance company to list every potential defense to coverage in its reservation of rights letter.”  However, the Court did note that there was some recent case law that suggested that some level of specificity is necessary in this regard. 

The Superior Court also confirmed that an insurance company may “choose to send multiple reservation of rights letters during the evolution of case as a best practice.” 

The appellate court also confirmed that, even where a carrier “assumed the duty to defend, the [carrier] can simultaneously challenge whether the claim is covered under the insurance policy, even if the underlying case settles.”

The Superior Court also confirmed that “[a]n insurer’s defense of the insured, therefore, does not waive the insurer’s claims that a policy exclusion applies.” 

Yet, the appellate court also confirmed that a carrier is “required to provide timely and sufficient notice of any such reservation of rights to the insured....” 

Overall, the Court noted that a reservation of rights letter must “(1) be submitted in a timely fashion, and (2) ‘fairly inform the insured of the insured’s position’ in order to preserve an insured’s assertion of policy exclusions once a defense of the insured has been mounted.” 

The appellate court otherwise noted that a carrier “preserves defenses via a reservation of rights ‘[i]f its investigation is conducted with reasonable dispatch and its disclaimer is made with promptness upon the discovery of the facts....’” 

Stated otherwise, the Pennsylvania Superior Court noted that a carrier “cannot delay its decision and refrain from giving notice to the insured until such time has elapsed that [the insured’s] rights in relation to the accident are prejudiced or may become so…..” 

Notably, the Court additionally held that, where a carrier “fails to clearly communicate a reservation of rights to an insured, prejudice may fairly be presumed.” 

The Pennsylvania Superior Court went on to rule that a carrier will not be estopped from setting up the defense that the insured’s loss was not covered by the insurance policy, even if the carrier participates in the defense of the action against the insured, “if the [carrier] gives timely notice to the insured that it has not waived the benefit of its defense under the policy.” 

The Pennsylvania Superior Court cautioned, however, that, “to be effective, [a reservation of rights] must be communicated to the insured.” 

That reservation of rights must also “fairly inform the insured’s position and must be timely, although delay in given notice must be excused where it is traceable to the [carrier’s] lack of actual or constructive knowledge of the available defense.” 

The Superior Court also cited to Supreme Court precedent for the proposition that “[w]hen an insurance company or its representatives is notified of loss occurring under an indemnity policy, it becomes its duty immediately to investigate all of the facts in connection with the supposed loss as well as any possible defense on the policy. It cannot play fast and loose, taking a chance in the hope of winning, and, if the results are adverse, take advantage of a defect in the policy. The insured loses substantial rights when he surrenders, as he must, to the insurance carrier the conduct of the case.” 

The Pennsylvania Superior Court also confirmed that “insurance carriers may be estopped from asserting a policy exclusion where it has ‘lulled the insured into a sense of security to his detriment.’”  

In this case, it was noted that the carrier has issued the reservation of rights letter within three (3) weeks of the lawsuit filed against the insured, and before any defense was assigned. As such, the Superior Court found that the reservation of rights letter was timely in this case. 

However, the Superior Court found that the content of the reservation of rights letter, which did not reference the particular exclusion at issue, did not fairly inform the insured of the carrier’s position. The Superior Court faulted the carrier for using “boilerplate language” in its reservation of rights letter without reference to the particular exclusion the carrier wished to rely upon. 

The Superior Court reiterated that, while carriers do not have the list every potential defense in a reservation of rights letter, the trend of recent case law suggested that some level of specificity is necessary and, therefore, required. 

The Pennsylvania Superior Court was careful to note that “[t]he lack of specificity in [the carrier’s] reserve of rights letter is not determinative, in and of itself.   The Court emphasized that it was "not announcing some new paradigm by which Pennsylvania insurance companies must prophylactically raise all potential coverage defenses in order to preserve them."

Here, the carrier had the policy language in hand along with actual knowledge of the nature of the claim, but still waited eighteen (18) months before specifically raising the exclusion. This, the Pennsylvania Superior Court found, was insufficient. Because the insured was allegedly presumably prejudiced as a result, the court found that the carrier was estopped from asserting the exclusion.  As stated, the trial court's decision in favor of the carrier was reversed and the case was remanded for further proceedings.

Anyone wishing to review a copy of this decision may click this LINK.

The Dissenting Opinion by Judge Strassburger can be viewed HERE.  Judge Strassburger was of the opinion that the prejudice in this context should not be presumed, but that the insured should be required to prove prejudice relative to the reservation of rights letter.

I send thanks to Attorney Lee Applebaum of the Pennsylvania law firm of Fineman, Krekstein & Harris for bringing this case to my attention and for his analysis of the same. Please be sure to check out Attorney Applebaum’s excellent Pennsylvania and New Jersey Insurance Bad Faith Case Law blog. 

Supreme Court Addresses Ability of Insured To Settle Claim Itself When Being Defended Under Reservation of Rights By Liability Carrier

In the case of Babcock & Wilcox Co. v. American Nuclear Insurers & Mutual Atomic Energy Liability Underwriters, 2 WAP 2014 (Pa. July 21, 2015)(Maj. Op. by Baer, J.)(Concurring and Dissenting Op. by Eakin, J.), the Pennsylvania Supreme Court addressed the issue of first impression of whether an insured forfeits insurance coverage by settling a tort claim without the consent of its insurer, when the insurer defends the insured subject to a reservation of rights, and asserts that the claims may not be covered by the policy.

The underlying facts involved an insurance carrier that refused to settle a class action claim against its insureds.  The carrier believed in a strong chance for a defense verdict. 

The insured was not of the same opinion and went ahead and negotiated a settlement of the underlying matter with the class action plaintiffs.

The insureds then pursued a reimbursement of the settlement amount paid from the its liability carrier who refused to settle the matter.

After a jury trial on the matter, the jury found that the settlement brokered by the insured was fair and reasonable.

The Superior Court had ruled that an insured could only settle a claim that was being defended under a reservation of rights by the insurer if the insured could demonstrate the insurance company was acting in bad faith.

The Supreme Court reversed and held that an insured does not have to demonstrate bad faith in reservation of rights cases order to settle certain claims without its insurance company’s consent. 

In so ruling the Pennsylvania Supreme Court reinstated an $80 million settlement in personal injury actions against a nuclear facility owner.

The Babcock Supreme Court adopted the standard that was employed by the Allegheny County trial court in the case, which found that the insured’s settlement of the case was “‘fair and reasonable from the perspective of a reasonably prudent person in the same position of [insureds] and in light of the totality of the circumstances.’”

The Supreme Court stated that this was the “standard which we adopt herein as the proper standard to apply in a reservation of rights case where an insured settles following the insurers’ refusal to consent to settlement.”  

Anyone wishing to review this Babcock Majority Opinion may click this LINK.

The Concurring and Dissenting Opinion may be viewed HERE.    


Sources:  I send thanks to Don Eodice of Eodice Consulting for bringing this decision to my attention. 

See also, Article: "High Court Allows Insureds to Settle Without Insurer Consent," by Gina Passarella of The Legal Intelligencer (July 22, 2015).  

Quoted in Pennsylvania Law Weekly Article on Reservation of Rights Issue

Here is a LINK to a Pennsylvania Law Weekly article by Lizzy McLellan entitled "Defendant Must Receive Reservation of Rights Notice" summarizing the recent Pennsylvania Superior Court decision in the case of Erie Ins. v. Lobenthal.

If you cannot access the article, please let me know at dancummins@Comcast.com and I will email you a copy.

Here is a LINK to the Tort Talk post on the case (which also contains a Link to the Opinion online).

Pennsylvania Superior Court Addresses Requirements for Valid Reservation of Rights Letter

In an April 15, 2015 decision in the case of Erie Ins Exch. v. Lobenthal, 2015 Pa.Super. 78 (Pa. Super. 2015 Ford Elliott, P.J.E., Shogun, Musmanno, J.J.)(Op. by Ford Elliott, P.J.E.), the Pennsylvania Superior Court addressed the validity of a reservation of rights letter issued by the carrier to its insured defendant in a motor vehicle accident matter. According to the opinion, the carrier insured the defendant driver's parents but the defendant driver was also an insured by virtue of the fact that the defendant driver resided with her parents.

The defendant driver was involved in a motor vehicle accident while she was allegedly driving under the influence. At some point after the accident, a reservation of rights letter, raising certain coverage issues was sent to the parents only.

After the underlying personal injury suit was filed by the allegedly injured plaintiff against the parents, as owners of the vehicle, and the defendant driver-daughter, the parents filed preliminary objections and were dismissed from the matter.

Thereafter, about three and a half months after that dismissal of the parent defendants, and about seven months after the filing of the Complaint, the liability carrier issued a reservation of rights letter to the lawyer of the defendant driver daughter.

In this separate declaratory judgment action, the parties were seeking a judicial declaration on whether the liability carrier was required to defend or indemnify the defendant daughter driver in the underlying action based upon the application of certain exclusions in the liability policy. The main issue before the trial court was whether, after tendering a defense for the insured defendant driver, the liability carrier ever properly preserved its right to challenge coverage and deny a defense to its insured in the reservation of rights letters the carrier sent out.

The trial court granted the carrier's disclaimer of coverage with respect to the defendant driver on the basis of a "controlled substances" exclusion contained in the policy.  The insured defendant driver and the underlying plaintiff appealed that decision to the Superior Court.

The Superior Court reversed the trial court and held that liability coverage should be afforded by the carrier to the defendant driver because carrier did not reserves its rights properly and waited too long to reserve its rights and disclaim coverage for the driver. 

The Court noted that the reservation of right letter to the defendant driver was only addressed to the parent named insureds and not the daughter driver.  Accordingly, the Court found that that letter did not properly notify the daughter of the reservation of the rights to the claim against her. 

The Superior Court also ruled that the fact that the reservation of rights letter was sent to the defendant driver's counsel did not serve to impute notice to the insured.  The court also found that the reservation of rights letter which was not sent to the defendant driver until seven months after the filing of the Complaint was not timely.

The appellate court rejected the liability carrier's argument that there was no prejudice to the defendant driver with respect to the timeliness of the reservation of rights letter given the fact that the defendant driver was defended by assigned counsel all the while.  The court noted that Pennsylvania law allows for prejudice to the insured defendant may be presumed in these circumstances where a liability carrier allegedly fails to issue a timely reservation of rights letter.  

For these primary reasons, the Superior Court reversed the trial court's ruling in favor of the liability carrier's disclaimer of coverage for the defendant driver.

Anyone wishing to review this decision may click this LINK.


I send thanks to Attorney Scott Cooper of the Harrisburg, PA law firm of Schmidt Kramer for bringing this case to my attention.


Source of image: www.firstcallclaims.com