Ability to Obtain Insurance Can Mitigate Damages Award, NY Court Rules

A significant question of first impression was addressed on August 21st, 2024, by the Appellate Division, Second Department in Liciaga v. New York City Transit Authority: Whether a Defendant has the right to seek a hearing pursuant to CPLR 4545, to establish the extent to which a Plaintiff's potential future medical costs would be reduced by insurance available to such Plaintiff, including the Affordable Care Act. This ruling was particularly important given the changing face of healthcare and access thereto.

The Patient Protection and Affordable Care Act, or “PPACA”, dramatically changed the healthcare landscape throughout the United States by providing basic health insurance to millions of previously uninsured people. With insurance options increasingly becoming available, especially to the uninsured at the time of an injury, Courts have now started to recognize that potential offsets are now available, and ought to be factored in the determination of damages. As stated by the New York State Supreme Court, Kings County, in Liciaga, when Plaintiffs have access to insurance, these avenues must be explored during collateral source hearings in order to appropriately adjust awards for damages.

The facts in Liciaga are particularly interesting. The Plaintiff was 23 years-old and uninsured, when he fell in a non-barricaded drop zone. Thereafter, he was struck from behind by a railroad tie, resulting in severe injuries such as multiple fractures in his thoracic spine and a severed spinal cord. The incident ultimately resulted in Plaintiff claiming permanent paralysis. At trial, the jury concluded that Defendant's negligence was a substantial factor in causing Plaintiff's injuries and awarded the Plaintiff a verdict in excess of $100,000,000 ($9 million for past pain and suffering, $60 million for future pain and suffering, $1,174,972.38 for past medical expenses, and an astounding $40 million for future medical expenses).

Following the jury verdict, Defendant moved, pursuant to CPLR 4404(a), for a new trial limited to the issue of damages. Alternatively, if such request was to be denied, Defendant requested a collateral source hearing pursuant to CPLR 4545 in order to scrutinize the future medical expenses issue more closely. The underlying premise of that motion was that Plaintiff, although uninsured on the date of this accident, was entitled to insurance through the PPACA, which would greatly reduce the economic burden of Plaintiff's future medical expenses. However, the trial court denied Defendant's request for a collateral source hearing, and Defendant appealed.

On appeal, the Appellate Division, held that a hearing can be granted to the Defendant when there is competent evidence showing that the Plaintiff's economic losses may be recoverable from collateral sources either in the past or in the future. Further, the Court explained that an application for a collateral source hearing may be made at any time prior to the entry of judgment, unless otherwise directed by the court. The rule insulates Defendants in this way from having to bear the entire cost of damages as insurance would likely cover part of such expenses. It serves further to underscore that courts must acknowledge the realities of an evolving healthcare system wherein options of insurance coverage are becoming plentiful and will influence personal injury cases.

In short, Liciaga v. New York City Transit Authority sets forth a new mitigation device available in future cases involving uninsured Plaintiffs.

De Minimis Compliance With Post Loss Obligations Creates Issue of Fact

In the case of Hally Finnell v. Florida Insurance Guaranty Association Inc., 383 So.3d 836 (Fla. 4th Dist. Ct. App. 2024). the main issue at hand was whether the insured breached the homeowner's insurance policy by failing to submit to an Examination Under Oath (EUO). The insurer denied the insured's claim for property loss due to water damage based on this alleged breach.

The insured, Hally Finnell, had a homeowner's insurance policy with the insurer, Florida Insurance Guaranty Association Inc. The homeowner's insurance policy specified that in the event of a property loss, the insured was required to submit to an EUO, which would be conducted separately and not in the presence of any other persons except legal counsel. However, prior to the scheduled EUO, Finnell’s counsel informed the insurer's counsel that Finell intended to bring her own videographer and court reporter. The insurer objected to this, resulting in the EUO not proceeding as planned and the subsequent denial of the claim.

In response, Finnell brought a lawsuit against the insurer, claiming breach of contract and seeking declaratory judgment for the insurer's failure to pay the covered claim. The insurer, in its answer and affirmative defenses, alleged that the insured breached the policy by failing to submit to the EUO and moved for summary judgment on this defense. Finnell, in her response to the motion for summary judgment, argued that she had complied to some extent with the EUO requirement but cited the hostile relationship between the attorneys as a barrier to the EUO being conducted and, specifically, pointed to instances of unprofessional conduct by the insurer's trial counsel as evidence of this hostility.

The trial court granted the insurer's motion for summary judgment, finding that Finnell breached the homeowner's insurance policy by failing to submit to the EUO. However, on appeal, the appellate court ruled differently. The appellate court determined that when an insured complies to some extent with post-loss obligations, an issue of fact arises.

In this case, Finnell appeared for the EUO and provided an explanation for why it did not proceed. The appellate court concluded that since the insured cooperated to some degree with the policy's post-loss obligations, the motion for summary judgment should not have been granted. The court found that an issue of fact remained in dispute and therefore reversed the trial court's decision and remanded the case for further proceedings.  

In essence, this ruling shifts the balance of power, allowing insured individuals to navigate the complexities of policy compliance with greater ease. By merely demonstrating a reasonable effort to meet post-loss obligations, they can now effectively challenge an insurer's summary judgment, transforming the landscape of insurance disputes and ensuring that a genuine commitment to fulfilling their responsibilities is enough to keep their claims alive.

Clicking to Agree: Supreme Judicial Court of Massachusetts Declares Online Agreements Aren’t So Different

In a recent ruling from the Supreme Judicial Court of Massachusetts (“SJC”), the Court held that the Superior Court erred by denying Defendant’s motion to compel arbitration because the contract formation requirements were met, and Plaintiff reasonably manifested his assent to Defendant's
Terms of Use.

In Good v. Uber Technologies, Inc., 494 Mass. 116 (2024), Plaintiff was a chef at a Boston restaurant, and first registered an account with Defendant Uber in August 2013.  On April 25, 2021, when Plaintiff opened Uber's app to secure a ride, he was presented with a screen that stated Uber had updated its Terms of Use.  Plaintiff clicked a checkbox next to text indicating that he had reviewed and agreed to the terms.  Only after performing these actions could Plaintiff proceed to order a ride via Defendant’s rideshare application.  Days later, Plaintiff again used Defendant’s app to secure a ride, during which the Plaintiff’s uber driver collided with another vehicle, causing Plaintiff to be thrust forward, strike his head on the front passenger's seat headrest, and break his neck. Plaintiff was instantly paralyzed and was later diagnosed with a severe spinal injury and quadriplegia.

Defendant Uber’s updated Terms of Use, inter alia, required that users of Defendant’s application agree to resolve all disputes—including personal injury claims—through “final and binding arbitration,” and further waived the right to a trial by jury.

The main issue before the SJC was the enforceability of this arbitration provision or, more generally, whether an enforceable contract had been formed based upon the surrounding facts and circumstances.  For an online contract to be enforceable, the Court stated, “there must be both reasonable notice of the terms and a reasonable manifestation of assent to those terms.”

As to the issue of notice, the Court highlighted the conspicuous nature of Defendant’s Terms of Use—for example, that they were hyperlinked in blue font, and a user could not proceed to use Defendant’s application without checking a box saying the user reviewed and agreed to the terms. 

Significantly, the Court explained that even in the absence of Plaintiff’s actual review of all of Defendant’s Terms of Use, that a reasonable opportunity to review the terms would be sufficient to satisfy the notice requirement.

As to a reasonable manifestation of assent, the Court found that Plaintiff affirmatively manifested his assent twice—first when he was required to check a box immediately adjacent to text stating, “By checking the box, I have reviewed and agree to the Terms of Use,” and second when he was required to click a button stating “Confirm.” The Court found that the connection between checking the box and indicating assent to the terms was express and unambiguous—especially where Plaintiff could not proceed past the screen without indicating his assent.

Based on its analysis, the Court ultimately held that there was an enforceable online contract, and accordingly, that the Superior Court erred in denying Defendant’s Motion to Compel Arbitration.

This decision highlights two significant takeaways:

1. Users of applications and/or digital technologies, need to carefully read through and understand terms of use or service carefully before affirmatively indicating assent to such terms; and

2. Creators of online services, products, or applications, need to ensure that any terms of use or service are conspicuously displayed and that a reasonable opportunity for review of these terms is provided to users in order to have an enforceable, online/digital contract.

Florida Supreme Court Overrules $28.6 Million Jury Verdict in Favor of Bar Owner

On March 7, 2024, the Florida Supreme Court issued a significant ruling in the case of Guardianship of Jacquelyn Anne Faircloth, Petitioner v. Main Street Entertainment, Inc., Respondent, effectively overruling a $28.6 million verdict against Potbelly’s, a bar that served alcohol to an underage patron involved in a serious traffic accident. This case highlights the complexities of Florida’s “Dram Shop” Statute and the intricate relationship between alcohol service, negligence, and liability.

The subject incident occurred in November 2014, when 20-year-old Devon Dwyer collided with 18-year-old Jacquelyn Faircloth as she crossed the street. Both individuals were intoxicated at the time, resulting in catastrophic injuries to Faircloth. In response, Faircloth's guardians filed a lawsuit against Potbelly’s and Cantina 101, alleging violations of Florida’s Dram Shop Statute, Section 768.125, which holds vendors accountable for unlawfully serving alcohol to underage patrons when such service leads to injury.

The Complaint asserted that both Dwyer and Faircloth were intoxicated, with Dwyer’s impaired driving causing the accident and Faircloth’s intoxication leading her to step into the street in front of Dwyer’s vehicle. During the trial, Potbelly’s admitted to knowingly serving alcohol to Dwyer (Cantina 101 defaulted). Critically, Potbelly’s sought to invoke a comparative fault defense, claiming that Faircloth's actions contributed to the accident. The trial court, however, rejected this defense, characterizing the action as an intentional tort due to the willful misconduct required under Section 768.125. The jury found Potbelly’s liable.

Following the trial court's decision, Potbelly’s appealed to the First District Court of Appeals. The appellate court sided with Potbelly’s, asserting that the trial court should have allowed the bar to present a comparative fault defense under Section 768.81. The appellate court clarified that, while the Dram Shop Statute necessitates willful conduct for liability, such conduct does not equate to an intentional tort; rather, it falls under the realm of negligence.  The matter was then appealed to the Florida Supreme Court.

The Florida Supreme Court upheld the appellate court’s conclusions, emphasizing that the willfulness requirement of Section 768.125 does not alter the essential link between the seller’s actions and the resulting injury. The Court elaborated that the statute limits liability to certain actors but does not eliminate the negligence framework established under common law. In its evaluation, the Supreme Court noted that Potbelly’s acknowledgment of serving alcohol to a minor constituted willfulness and created an unreasonable risk of harm. This knowledge, coupled with the circumstances of the case, framed Potbelly’s actions as negligent rather than intentionally tortious. 

The Florida Supreme Court’s ruling in this case serves as a pivotal clarification of the application of Florida’s Dram Shop Statute. By affirming the distinction between negligence and intentional torts, the Court has reinforced the necessity for bars and alcohol vendors to exercise caution in their service practices, particularly regarding underage patrons. This decision underscores the importance of understanding the nuances of negligence law in the context of alcohol service and related injuries.

An Update on New York State Litigation Financing Agreements

In April 2024 the Office of Court Administration (“OCA”) sought public comment on proposed amendments to Sections 202.67 and 207.38 of the Uniform Civil Rules for the Supreme Court and County Court (22 NYCRR §§ 202.67 & 207.38), to require disclosure of information relating to litigation financing agreements. The comment period closed in May 2024 and OCA is scheduled to discuss the proposal in September 2024.

Litigation funding is the practice of a third-party funding litigation for a plaintiff with the promise of repayment after a successful litigation. Generally, this is an unregulated industry in New York. While the proposed rule modifications have been introduced to restrict the use and/or scope of litigation funding agreements, the New York Court’s Advisory Committee on Civil Practice Law and Rules proposes to require disclosure of the agreements in certain cases. Advocates for litigation funding say that the agreements allow plaintiffs who would not otherwise be able to bring claims to court. Opponents of litigation funding argue that the agreements are predatory and reduce the recovery of the injured parties. New York does not currently have any regulations on litigation funding agreements, and the only way to receive information on the agreement is through discovery as part of litigation.

The proposed regulations would require the disclosure of funding agreements in civil cases involving wrongful death and personal injury where the Court must approve the settlement of the case. The disclosures would not just affect litigation funding agreements but also certain other ways of funding litigation. The amended rules affect contingency agreements, deferred payment agreements, and any money borrowed against the anticipated settlement.

The Advisory Committee on Civil Practice Law and Rules requested public comment and the majority of comments wanted to expand the rules to all litigation funding agreements. For example, the City of New York Law Department wrote in support of the proposal that the unregulated litigation funding industry is full of concerns regarding the behavior of the funding companies and the abuses that could and do occur. As an example, the case of Guss v. City of New York is given, where the litigation funding loans were $4,250 at the start of litigation and when litigation was finished and the loans came due, with interest, the amount was $2,838,487.65, an interest rate of over 60%.  The New York State Trial Lawyers Association (“NYSTLA”) opposed parts of the proposal.

If adopted, the proposal would bring the NYCRR in line with other jurisdictional rules, such as Rule 7.1.1 in the United States District Court of the District of New Jersey, requiring: (1) the identity of the funder(s); (2) whether the funder’s approval is necessary for litigation decisions; and (3) a brief description of the nature of the financial interest in the litigation.

Supreme Court of New Jersey Holds Scooters are Ineligible for PIP Benefits

A low-speed electric scooter (LSES) is a common sight in some areas, but how are the riders classified for insurance purposes? In Goyco v. Progressive Insurance Co. the Supreme Court of New Jersey held that a LSES is not considered a pedestrian or an automobile and thus a rider of a LSES is not eligible for PIP benefits.

On November 22, 2021, David Goyco was riding a LSES in Elizabeth, New Jersey, when an automobile struck and injured him. Goyco subsequently made a claim for PIP benefits from his insurer, Progressive. Progressive denied the claim, saying that the LSES was not an automobile, and Goyco was not a pedestrian at the time of the accident as he was operating the LSES. The definitions used in the policy conformed to the definitions used in the New Jersey Automobile Reparation Reform Act, N.J.S.A. 39:6A-1 to -35 also known as the No-Fault Act.

The No-Fault Act defines a pedestrian as “any person who is not occupying, entering into, or alighting from a vehicle propelled by other than muscular power and designed primarily for use on highways, rails and tracks.” N.J.S.A.39:6A-2(h). The No-Fault Act requires PIP benefits for individuals if the insured individual is a pedestrian or “occupying, entering into, alighting from or using an automobile.” Goyco claims that the class of pedestrian should include LSES operators as LSES operators are grouped with bicycles in N.J.S.A. 39:1-1. However, the definitions in N.J.S.A. 39:1-1 only apply to Subtitle 1, and the No-Fault Act is in Subtitle 2, so unless the No-Fault Act brings in the definition explicitly N.J.S.A. 39:1-1 does not apply.

The Court in its analysis of whether Goyco was a pedestrian for purposes of the No-Fault Act, looked to the ordinary meaning of words not explicitly defined in the act. The first was the term “vehicle”, with the Court finding that a LSES falls within the various ordinary definitions of a “vehicle”. Next was whether the LSES was powered by muscular power, Goyco’s LSES was powered by a rechargeable electric battery and was not designed to be operated by other means. In prior case law a moped that could be pedaled manually was declared to be “propelled by other that muscular power” because the plaintiff was using the motor at the time of the accident and had intended to continue in the same manner. Nunag v. Pa. Nat. Mut. Cas. Ins. Co., 541 A.2d 306 (N.J. App. Div. 1988). Using the precedent and the facts present in this matter the court found that LSES are not propelled by muscular power. Finally, the Court used the ordinary meaning of highway to mean a public road and found that the LSES was designed to be used on public roads. All three elements mean that the LSES did not fulfill the requirements to be a pedestrian as defined by the No-Fault Act.