Motion to Sever Post-Koken UIM/Bad Faith Claims Denied in Philadelphia County Case

In the case of Kiszlo v. Erie Insurance Exchange, No. 2355, October Term 2014 (C.P. Phila. Co. March 30, 2015 Rau, J.), the court denied the UIM carrier’s Motion to Sever the UIM and bad faith claims.

In her Order, Judge Rau provided that “[t]he same judge who presides over the UIM trial will also decide the bad faith claim immediately after the UIM jury trial.   Any evidence that is not relevant to the UIM claim but that is relevant to the bad faith claim may be presented to the judge following the UIM claim.   In all other respects, the claims will be proceed on a parallel track.”  

Anyone desiring a copy of this decision may click this LINK. 

 I send thanks to Attorney Jay Fulmer in Philadelphia for providing me with a copy of this decision.   

 

 

Trial Court Addresses Questionnaires/Pain Diagrams for IMEs

The Dauphin County Court of Common Pleas recently addressed the issue of whether a Plaintiff is required to fill out a questionnaire and/or a pain diagram relative to an IME in the case of Maguire v. Liberty Mut. Group, No. 2014-CV-1036 (C.P. Dauph. Co. June 1, 2015 Bratton, J.).

In this motor vehicle accident matter, the Plaintiff was set up for an IME and the IME vendor company sent an IME Questionnaire and a MVA and Pain Diagram form to be filled out by the Plaintiff prior to the IME.  The Plaintiff objected to these documents as impermissible discovery sent by a non-party.  The defense asserted that these documents were a normal part of a physical examination by a physician and were permitted under Pa.R.C.P. 4010.  The issue was then brought before the court for resolution.

Reviewing the wording of Rule 4010, Judge Bratton noted that the Rule provides that "oral interrogation" of the person to be examined is allowed on issues germane to the claims of damages presented.  Based on this plain wording of Rule 4010 and the absence of any rule allowing a non-party to propound discovery in a litigation, the court sustained the Plaintiff's objections to the pre-IME documentation at issue.

Anyone wishing to secure a copy of this Maguire decision by Judge Bratton may contact me at dancummins@comcast.net.

I send thanks to the prevailing Plaintiff's Attorney Robert Claraval of the Harrisburg, PA law firm of Claraval & Claraval for forwarding a copy of this decision to my attention.

Scope of Employer's Liability Exclusion in Commercial General Liability Policy Narrowed by PA Supreme Court

The Pennsylvania Supreme Court recently issued a notable decision in the case of Mutual Benefit Ins. Co. v. Politsopoulos, 60 MAP 2014 (Pa. May 26, 2015) in which the Court essentially eviscerated the scope of the employer's liability exclusion found in most commercial general liability insurance policies as applied to additional insureds.

The decision applies to the following typical fact scenario:  Company A owns a property and leases it to Company B to run a store on the premises.  The lease requires Company B--the store--to add Company A--the owner--as an additional insured under the store's commercial general policy.

An employee of Company B--the store--is hurt on the job in a slip and fall.  The employee cannot sue the store for personal injury under the store's immunity under the framework of applicable worker's compensation law.

Accordingly, the injured store employee instead sues Company A--the owner of the premises for a recovery over and above any worker's compensation benefits secured.

When the suit is served on Company A--the owner--that party will send the claim over to the commercial general liability carrier and request a defense.  Prior to the Pennsylvania Supreme Court case noted above, most commercial general liability carriers took the position that the employer's liability exclusions in the commercial general liability policy supported a denial of liability coverage not only to the store that obtained the policy but also to Company A--the owner.

Here, in the Mutual Benefit Ins. Co. v. Politsopoulos case, the Pennsylvania Supreme Court ruled that the “employer’s liability” exclusion in a restaurant’s umbrella commercial liability policy did not preclude coverage for a negligence suit brought by a restaurant employee against the policy’s “additional insureds,” who were the owners of the property on which the restaurant conducted its business.

The Court ruled that the exclusion, which provided that the policy barred coverage for injuries to employees of “the insured,” was ambiguous.  Accordingly, under general principles of contract construction applicable in Pennsylvania, the ambiguity was construed against the commercial general liability carrier and the exclusion was more narrowly construed as applying only to claims asserted by employees of “the insured” against whom the claim was directed.  The court held that because the property owners in this case were not the underlying plaintiff’s employers, the exclusion did not apply.

The Majority Opinion written by Chief Justice Saylor can be read online HERE. 

The Concurring Opinion by Justice Eakin can be viewed HERE.

Notably, commentators have indicated that this decision would be applicable to any type of contractual arrangement where one party agrees to list another as an additional insured in a commercial liability policy, which are typical in construction and vendor contracts as well.

I send thanks to Attorney Richard Fine of the Scranton, PA law firm of Fine & Wyatt for bringing this case to my attention.

Current Status of Law on Negligent Infliction of Emotional Distress Reviewed by Western District Federal Court

In the case of Rapchak v. Freightliner Custom Chassis Corp., 2:13-cv-1307 W.D. Pa. June 10, 2015 McVerry, J.), the court addressed the current status of the Pennsylvania law relative to negligent infliction of emotional distress claims.

In this matter, the decedent was working under his motorhome in his driveway by lying on his back while the vehicle was lifted up.  While the decedent was in this position, his mother came out of the home and said goodbye as she was leaving to visit a car show with a friend.  While the decedent's mother was away from the home, the motorhome came down on the decedent's chest and suffocated him to death. 

When the mother came home later that day she eventually found the decedent under the motorhome with his legs sticking out.

The Plaintiff-mother later filed suit and included a claim for negligent infliction of emotional distress.

The Rapchak court granted partial summary judgment, finding that a plaintiff cannot recover for negligent infliction of emotional distress where she did not contemporaneously observe the accident that resulted in the decedent's death.  

The court's decision, which provides a nice recitation of the current status of the bystander theory of recovery under the claim of negligent infliction of emotional distress can be viewed online HERE.

 

I send thanks to Attorney Jim Beck of the Philadelphia office of Reed Smith.  Attorney Beck is the creator of the excellent Drug and Device Law Blog which can be viewed HERE.

Notable Ruling on Discoverability of Sentinel Event Reports Reconsidered

Tort Talkers may recall the recent Tort Talk blog post on Lackawanna County Judge Terrence R. Nealon’s decision in the case of Brink v. Marian Community Hospital, No. 13 - CV - 1314 (C.P. Lacka. Co. June 5, 2015 Nealon, J.), in which the court held that a Sentinel Event Report sent by the hospital to the Joint Commission was discoverable and not protected by the Peer Review Protection Act.  That Tort Talk Blog post may be viewed HERE. 

As an update, it is noted that the court has reconsidered its prior ruling in light of additional information having been provided by the defense such that ruling has been changed to note that the Sentinel Event Report was not discoverable under the circumstances presented.

More specifically, according to the latest ruling, defense counsel did not provide the court with the hospital's sentinel event reporting policies before.  Also, the original record submitted to the court did not prove that the Sentinel Event Report to the Joint Commission was part of a peer review process, as opposed to a voluntary report of an incident to an accreditation organization. 

The motion for reconsideration submitted by the defense provided to the court new information in the form of the hospital policies showing that the report at issue was a root cause analysis of system deficiencies, as well as an action plan recommending remedial measures, and was part of a peer review process, as opposed to a mere voluntary report of an incident. 

Accordingly, the Sentinel Event Report at issue was found to be protected from discovery under this more developed record presented to the court.

Anyone wishing to review this decision, may click this LINK.

Where Corporate Franchisor is Named Defendant, Service of Process on Local Franchisee is Insufficient

In the case of  Trexler vs McDonald’s Corporation, 2015 Pa. Super. 131, 903 MDA 2014 (Pa. Super. June 3, 2015 Ford Elliott, P.J.E.,  Shogan, J., Stabile, J.)(Op. by Stabile, J.), the Pennsylvania Superior Court recently clarified that, where the named Defendant in a lawsuit is the Corporate Franchisor, in order for service of a Complaint as original process to be proper, the Complaint must be served upon that Corporate Franchisor Defendant, and not he individual franchisee who may own the local establishment.  

In this case, the Plaintiff sued the McDonald's Corporation after an alleged slip and fall at a local McDonald's located in Pottsville, Pennsylvania.

The Plaintiff served the Complaint upon the manager of the local Pottsville franchisee McDonald’s where the Plaintiff was allegedly injured as a result of an alleged slip and fall.  The Plaintiff did not properly serve the Complaint upon an agent of McDonald’s Corporation, who was the actual Defendant named in the lawsuit.   

The Corporation argued in Preliminary Objections that it did not own or manage the local Pottsville McDonald’s and that, as such, service was improper or incomplete.  The McDonald’s Corporation also asserted that no one at the local McDonald’s in Pottsville was authorized to accept service of any lawsuit on behalf of the Corporate Franchisor.

The Court agreed that proper service of the Complaint had not been effectuated over the Corporate Franchisor Defendant named in the suit under the circumstances presented.

The Plaintiff countered with an argument that the Preliminary Objections filed by McDonald’s Corporations, which were filed eleven months after the local franchisee’s manager was served, were untimely, as the Preliminary Objections were well beyond the 20 days within which Rule 1026 permits the filing of pleadings subsequent to a Complaint.  

The Superior Court rejected this argument and emphasized that the deadline noted in Pa.R.C.P. 1026(a) to file Preliminary Objections within 20 days was a deadline the time for which did not begin until after proper service of the previous pleading.  Since there was no proper service of the Complaint, the 20 day rule to file the subsequent pleading never began to run.

As such, the trial court’s granting of the Corporate Defendant’s Preliminary Objections was affirmed by the Superior Court.

This Superior Court Opinion in the Trexler v. McDonald's case can be viewed online HERE.

I send thanks to Attorney Patricia Burns Horn of the Exton, PA law firm of Connors O'Dell, LLP for bringing this decision to my attention.

Major Bad Faith Decision from Third Circuit: It is NOT Bad Faith for a Liability Carrier To Not Include Potential Punitives in Settlement Evaluation

In the case of Wolfe v. Allstate Prop. & Cas. Ins. Co., No. 12-4450 (3d Cir. 2015 Rendell, J., Jordan, J., Lipez, J.)(Op. by Rendell, J.), the Third Circuit Court of Appeals remanded an excess verdict bad faith case back for a new trial after ruling that punitive damages could not be awarded by a jury against the third party liability carrier.

According to the Opinion, this case arose out of a rear end accident caused by an allegedly intoxicated third party tortfeasor who was insured by Allstate.

The case proceeded to trial at which the jury awarded the Plaintiff $15,000 in compensatory damages along with a $50,000 award in punitive damages based upon the allegations of intoxication/driving under the influence.  Allstate, the tortfeasor's liability carrier paid the compensatory damages but not the punitive damages as the punitive damages were not covered under the liability policy.

The tortfeasor assigned his rights to assert an alleged bad faith claim against Allstate to the Plaintiff who filed a bad faith suit.

Tort Talkers may recall that this Wolfe v. Allstate case was previously certified by the Third Circuit to the Pennsylvania Supreme Court for a ruling on whether or not a tortfeasor could assign a right to bring a bad faith suit against a liability carrier to a Plaintiff--the Pennsylvania Supreme Court ruled that such rights could indeed be assigned. [Click HERE to view that Tort Talk post, which also contains a Link to the Pennsylvania Supreme Court's decision].

Relative to the current issue before the Third Circuit, the federal district trial court had previously denied Allstate's motion for summary judgment which asserted that, since Allstate had no duty to indemnify for punitive damages under the terms of the liability insurance policy, (1) it was not required to consider potential punitive damages when deciding whether to settle the underlying matter and (2) that indemnification for punitive damages under the liability policy was impermissible under Pennsylvania law in any event.

In the trial of the bad faith matter, the federal court jury in this matter found a violation of the bad faith statute as well as a breach of contract.  The jury awarded no compensatory damages, but included $50,000 in punitive damages in its verdict.

On appeal, the Third Circuit Court of Appeals noted that it was required to predict how the Pennsylvania Supreme Court would rule on the wider issue of whether insurers could insure against punitive damages which decision would guide the Third Circuit on how to rule on the more specific question presented of whether the existence of punitive damages should have been admitted into evidence in the trial of this bad-faith case.

In her Opinion, Judge Marjorie O. Rendell wrote, "We predict that the Pennsylvania Supreme Court would conclude that, in an action by an insured against his insurer for bad faith, the insured may not collect as compensatory damages the punitive damages awarded against it in the underlying lawsuit. Therefore, the punitive damages award was not relevant in the later [bad faith] suit and should not have been admitted." [bracket inserted here].

The Third Circuit's decision in this regard was based, in part, on the long-standing principle of Pennsylvania law that liability insurers are not responsible for covering punitive damages arising out of an insured's conduct as well as the public policy of cost containment when it comes to automobile insurance (i.e., the court noted that if it ruled otherwise, the public at large would have to bear the brunt of increased premiums to account for drivers who act egregiously).

Notably, the plaintiff in this bad faith case had also asserted that Allstate breached its duty of good faith by failing to negotiate and that as a result, Allstate should be deemed to be accountable for all damages arising out of that breach, including the punitive damages that were awarded in the underlying matter.

The Third Circuit disagreed, finding that the public policy against allowing insurance coverage for punitive damages defeated the plaintiff's argument in this regard.  Judge Rendell wrote, "In light of Pennsylvania's public policy against insuring punitive damages, which emphasizes personal responsibility and deterrence, we conclude that the insured cannot shift the punitive damages to its insurer.  Because the $50,000 punitive damages award [entered in the underlying matter] is not a compensable item of damages in this [later bad faith] case, the district court erred in allowing evidence of that award to be presented to the jury."

The Third Circuit Court also disagreed with the plaintiff's contention that the $50,000 award for punitive damages in the bad faith jury's verdict arose out of the findings by the jury of bad faith conduct on the part of the carrier, as opposed to simply being an award based on the presentation of the evidence that the underlying jury had awarded $50,000 in punitive damages against the tortfeasor defendant relative to his DUI driving.  The Court could not agree that this was simply a coincidence that the amount was the same.

The Third Circuit remanded the matter back to the trial for court for a retrial at which no evidence of the punitive damages would be allowed.

Anyone wishing to review the Third Circuit's Opinion in Wolfe v. Allstate online may click this LINK.  

Source:  Article by P.J. D'Annunzio entitled "Third Circuit Rejects Punitive Damages in Bad Faith Cases." The Legal Intelligencer (June 15, 2015).


Commentary:  This case could have a major impact on the common tactic of Plaintiffs including a punitive damages claim against a tortfeasor defendant as a "hammer" in the underlying personal injury lawsuit to assist in securing an amicable resolution of that third party liability case by arguing to the liability carrier that the failure to settle the matter and thereby expose its insured defendant tortfeasor to a potential punitive damages verdict amounts to bad faith and/or may expose the liability carrier to having to later pay for any punitive damages award in a subsequent bad faith claim.

In this regard, the Third Circuit in Wolfe stated that "[i]t follows from our reasoning that an insurer has no duty to consider the potential for a jury to return a verdict for punitive damages when it is negotiating a settlement of a case.  To impose that duty would be tantamount to making the insurer responsible for those damages, which, as we have discussed, is against public policy."  Op. at p. 17-18.