Business Interrupted: But Not So Fast

NEW JERSEY’S PROPOSED BUSINESS INTERRUPTION INSURANCE BILL

Currently, COVID-19 is wreaking havoc and disrupting businesses worldwide. Businesses everywhere have begun to look towards their business interruption insurance policies in an effort to mitigate losses associated with the Pandemic.

As many of us in the industry know, it is common that business interruption insurance does not provide coverage for pandemics such as COVID-19, as these policies often have a requirement for “physical” damage, which is not present in a pandemic scenario. During past catastrophe level events, such as the SARS outbreak in 2002-2003, courts widely construed, or ignored the “physical” damage requirement. However, despite past precedent, the “physical” damage requirement in most policies has not been removed.

In the Northeast, we have begun to hear radio commercials from law firms who are actively seeking out clients whose business interruption insurers have denied claims. Moreover, some firms have begun to add COVID-19 business interruption insurance policy review advertisements on their webpages. Clearly, our adversaries are anticipating a vast amount of denials that may warrant legal representation in order to be addressed.

In an effort to combat these coverage denials, New Jersey recently joined several other states when the NJ Assembly introduced Bill A-3844.[1], to provide a mechanism by which certain business that suffer business interruption losses as a result of COVID-19 may recover from their insurer if they had business interruption insurance in force as of March 9, 2020, which is the date that Governor Murphy declared Public Health and State of Emergencies.

In short, the Proposed Bill provides coverage for business interruptions due to pandemic as follows:

1.     Every insurance policy insuring against property damage, which includes loss of use and business interruption, shall be construed to include among the covered perils, coverage for business interruption due to global virus transmission or pandemic;

2.     The coverage required by the Act shall indemnify an insured, subject to the policy limits, for losses caused by business interruption for the duration of the declared State of Emergency; and 

3.     The Act applies to businesses with less than 100 employees, who work 25 hours or more per week.

On its date of introduction, March 16, 2020, the Proposed Bill was approved to advance to a second reading, however, it was removed from the legislative calendar after insurance industry representatives raised concerns about the potential consequences (e.g., premiums were not calculated to include pandemics, etc.). The Bill, in its current form, will not likely be passed, however, it will be interesting to see the changes that are discussed between the legislators and the insurance industry moving forward. 

When “Good Faith” Reporting Goes Wrong

New York’s Highest Court Holds Public Health Law § 230 (11) (b) Does Not Have a Private Cause of Action

The State of New York Court of Appeals recently held in Dr. Robert D. Haar, M.D. v. Nationwide Mutual Fire Insurance Company (November 21, 2019, No. 81) that a doctor cannot sue an insurance carrier for reporting him to state authorities for insurance fraud.  More specifically the Court held that N.Y. Pub. Health Law 230(11)(b) does not create a private right of action for bad faith and malicious reporting to the Office of Professional Medical Conduct. (“OPMC”)

Plaintiff, an orthopedic surgeon, treated patients insured by a specific automobile insurance company.  The Defendant insurance company later filed complaints with OPMC alleging insurance fraud.  OPMC declined to impose discipline against Plaintiff.  Plaintiff then commenced an action asserting that Defendant's complaints lacked a good-faith basis in violation of Public Health Law § 230 (11) (b) and interposed a separate cause of action for defamation.  Defendant removed the matter to federal court, moved to dismiss, and the United States District Court for the Southern District of New York granted Defendant’s motion.  The District Court noted that if presented with the issue of interpretation of New York State law, it would hold that § 230 (11) (b) did not imply a private right of action.

Plaintiff appealed and the Second Circuit, recognizing an Appellate Division split, certified the above-noted question.  In Ahmed Elkoulily, M.D., P.C. v New York State Catholic Healthplan, Inc., 153 AD3d 768, 771- 772 (2d Dept 2017), the Second Department found that the law does not create a private cause of action.  Earlier in Foong v Empire Blue Cross & Blue Shield, 305 AD2d 330, 330 (1st Dept 2003), the First Department held that the law did create an implied right of action.  This Appellate Division split allowed for the same law to be interpreted differently in the state.

The Court identified “essential factors” to be considered in determining whether a private right of action can be fairly implied from the statutory text: “(1) whether the plaintiff is one of the class for whose particular benefit the statute was enacted; (2) whether recognition of a private right of action would promote the legislative purpose; and (3) whether creation of such a right would be consistent with the legislative scheme[.]” (citing Sheehy v Big Flats Community Day, 73 NY2d 629, 633 (1989).

The Court concluded that there was not a private right of action because Plaintiff failed to demonstrate that he fell within the class the legislature intended to benefit by enacting Public Health Law § 230 (11) (b).  The Court reviewed the law’s legislative history and found the intent of the law was to protect specific people and entities – including insurance companies form making good-faith reports to OPMC.  The Court concluded that the law, on its face, was intended to benefit persons or entitles that report suspected medical misconduct, not medical professionals accused of misconduct.

This case stands for the proposition that diligent investigation and reporting of suspected medical, insurance, and other types of fraud remains a statutory priority.  Carriers and people with good faith information should not hesitate to report same to the appropriate authorities.

New York’s “Storm in Progress” Defense Still Viable Where a Landowner Takes Steps to Remediate Snow and Ice Accumulations During the Storm

We recently obtained summary judgment in New York Supreme Court, Queens County pursuant to New York’s “storm in progress” doctrine. Generally, under New York’s “storm in progress” doctrine, a landowner is deemed to not have notice of a potentially dangerous condition, such as an accumulation of snow or ice, until a reasonable period of time passes after the cessation of a snowstorm. However, an exception to this doctrine may apply where the landowner undertakes to remove snow or ice during the course of the ongoing storm and subsequently causes, creates, or exacerbates a slippery condition.

In this case, the plaintiff alleged that he was caused to sustain a relatively serious trimalleolar fracture of his ankle after slipping and falling on an accumulation of ice and/or snow during the course of a snowstorm. He further alleged that the defendant-landowner caused or exacerbated a slippery condition by shoveling the sidewalk prior to his accident. However, we argued that the “storm in progress” doctrine applied and that the defendant-landowner did not cause or exacerbate any allegedly dangerous conditions. We highlighted that, although the landowner was in the process of shoveling the portion of the sidewalk where the plaintiff alleged that he fell, the landowner had fully shoveled and spread salt over that portion of the sidewalk.

Agreeing with the landowner’s arguments, the New York Supreme Court ruled that the “storm in progress” doctrine applied. The Court further held that, by shoveling and salting the portion of the sidewalk where plaintiff allegedly fell, the landowner did not create, cause, or exacerbate any allegedly slippery condition on the sidewalk. As such, the plaintiff’s Complaint was dismissed in its entirety.

Based on this ruling, it is important to note that, should landowners elect to begin snow or ice remediation activities during the course of an ongoing storm in New York, they should take all reasonable steps to ensure that no dangerous conditions are created as a result of their activities. If they insist on cleaning during an ongoing storm, by both shoveling and spreading salt, landowners can still avail themselves of the protections of the “storm in progress” doctrine and prevent otherwise costly cases from proceeding to trial.

Additional Insured: What Comes First, the Policy or the Lease?

A recent New Jersey Appellate Division decision highlighted the importance of the language of the policy over the terms of the lease when it comes to the entitlement of coverage as additional insureds.  On April 29, 2020, the Superior Court of New Jersey, Appellate Division, in Gateway Park, LLC v. Travelers Insurance Company and Stacie Garris, et al., reversed an order granting defendant, Travelers Insurance Company’s (Travelers) motion for reconsideration of an order granting plaintiff summary judgment and denying the defendant’s motion for summary judgment.  

This matter stemmed from a slip and fall accident in January of 2014, when plaintiff, Stacie Garris, fell in a parking lot at an office building owned by the plaintiff, Gateway Park, LLC (Gateway), in which ExamWorks, Inc. (ExamWorks), her temporary employer, was a tenant.  Garris suffered injuries as a result of her accident and filed a personal injury suit against Gateway, ExamWorks, and Gateway’s snow and ice removal contractor, Ground Effects Construction, LLC.

Plaintiff, Gateway, originally sought a declaratory judgment that under its lease with ExamWorks, it was entitled to additional insured coverage under Travelers’ commercial general liability policy issued to ExamWorks.  Gateway and defendant, Travelers, filed cross-motions for summary judgment, with the plaintiff arguing that as an additional insured landlord it was entitled to coverage under the tenant’s insurance policy issued by Travelers.  The court granted the plaintiff’s motion, finding that the plaintiff was an additional insured under Travelers’ policy, and as such, denied defendant’s motion.  

At issue was the difference in the definitions and language set forth in the additional insureds sections of the lease agreement and policy.  The lease agreement defined the “Premises” as the office space that defendant, ExamWorks, leased within Gateway’s building.  The policy, on the other hand, set forth that an additional insured is entitled to coverage for accidents that arise “out of the ownership, maintenance, or use of that part of any premises leased to you [ExamWorks].”

The court found that Garris was employed by ExamWorks, drove to the building leased by Examworks, and fell in the parking lot near the front door as she was walking into work for ExamWorks.  The Court found that despite the defendant’s contentions, the accident arose out of the “use of” the premises, and that the policy’s plain language outweighed the lease’s language.

Following the court’s decision to grant the plaintiff’s motion for summary judgment, Travelers filed a motion to reconsider, which was granted by the court, thus granting summary judgment for the defendant.  The court relied on the lease’s language to define the coverage under the policy.

Plaintiff appealed the court’s decision.  The Appellate Division held that the court erred in granting Traveler’s motion to reconsider and reversed the court’s order.  The Appellate Division, in reaching this decision, found that the language of the insurance policy was clear, and therefore, that the lease agreement should not have been considered.  As such, the Appellate Division reversed the court’s order granting defendant’s motion for reconsideration of the order granting the plaintiff summary judgment and denying the defendant’s motion for summary judgment.

No "Ongoing Storm Defense" in the State of New Jersey

A recent decision from the Appellate Court rejected a defendant’s plea to recognize the ongoing storm defense accepted by many of New Jersey’s neighboring states.  The ongoing storm rule relieves a commercial landowner from any obligation to render its property safe while sleet/snow is falling because it would be both inexpedient and impractical to the commercial landowner.

In this case, a commercial landowner contracted a landscaping company to perform snow and ice removal at the property. Pareja v. Princeton Int'l Props., 2020 N.J. Super. LEXIS 41.  Defendant’s property consisted of a two-floor mixed residential and commercial building as well as a paved parking lot and a concrete driveway apron.  Weather conditions had caused black ice to form on the sloped apron, which caused plaintiff to slip and fall as he walked into the building for work.

Defendants presented a meteorological expert who stated that three winter storms had occurred within a six-day period prior to the plaintiff’s accident in support of a motion for summary judgment.  Each storm was a mix of freezing rain and sleet.  Defendant’s expert explained that any pre-icing treatment would not have been practicable because both salt and sand would not have been effective to treat the areas during these storms.  Further on the day of plaintiff’s fall, the temperature was thirty-two degrees, the sky was overcast, and the wind was blowing five to ten miles per hour.  The court accepted the evidence proposed by defendants, but remained unconvinced.

The court then analyzed other jurisdictions that have both accepted and rejected the ongoing storm defense and their justifications for doing so.  The Court especially was convinced by the opinion of the Supreme Judicial Court of Maine in Budzko v. One City Center Associates Ltd. Partnership, 2001 ME 37, 767 A.2d 310, 314-15 (Me. 2001).  The Court in Budzco held that “[b]usiness owners have a duty to reasonably respond to foreseeable dangers and keep the premises reasonably safe when invitees may be anticipated to enter or leave the premises during a winter storm.” Id.  Slippery conditions resulting from snow and/or ice storm are foreseeable and thus steps should be taken to prevent injuries occurring to persons even while the weather event is occurring.

The Court ultimately held that “a landowner has a duty to take reasonable steps to render a public walkway abutting its property—covered by snow or ice—reasonably safe, even when precipitation is falling.” Id.  Further, the Court stated that the commercial landowner’s liability may arise “only if, after actual or constructive notice, it fails to act in a reasonably prudent manner to remove or reduce the foreseeable hazard.” Id.  This ruling does not impose absolute liability upon the commercial landowner, but instead adds evidence of an ongoing storm as a factor to be considered by the jury at trial 

This serves as a warning to commercial landowners to take steps as to ensure that their premises are free of hazardous conditions.  Further, it will demand snow removal contractors to patrol their assigned properties more closely even during an ongoing storm.  Many external maintenance contracts have conditions for the contractor to act as to snow height or freezing conditions.  It may prove effective to include monitoring conditions to prevent the formation of black ice.  The key factor is what the jury’s impression at trial, and adding more preventative measures may tip the scales to a more favorable verdict.

Georgia Tort Reform

An uptick in nuclear jury verdicts and the expansion of tort liability has earned Georgia a place on the American Tort Reform Association’s Top 10 “Judicial Hellholes” (https://www.judicialhellholes.org/2019-2020/georgia/) for the first time.  Georgia ranks sixth on the organizations 2019-2020 list. 

Earlier this year, and in response to the increase in nuclear verdicts and liability-expanding court decisions, tort reform gained traction in the Georgia Legislature for the first time since 2005 through several Republican-backed bills, including the comprehensive S.B. 415 sponsored by Senate Majority Whip Steve Gooch (R-Dahlonega) and H.B. 1089, sponsored by Rep. Tom McCall (R-Elberton).  The tort reform package was posed to dramatically alter personal injury, medical malpractice, and premises liability litigation in Georgia.  Key measures included in the proposed legislation included: (i) prohibition of “phantom damages,” which are compensatory damages in excess of the medical expenses actually paid; (ii) expansion of legal immunity for premises owners in certain liability actions; (iii) availability of the “seat belt” defense in motor vehicle actions; (iv) required disclosure of payment agreements between insurers and third parties that pay medical bills; (v) bifurcation of liability and damages at trial; and (vi) precluding juries from hearing certain details on the division of monetary damages.

Ultimately, S.B. 415 – the most comprehensive of the tort reform proposals – was tabled on March 12, 2020 after lengthy debate.  S.B. 226, one of the bills to address the seatbelt defense, was tabled as well. On March 13, 2020, the 29th day of the 40 day session, the Georgia General Assembly suspended its 2020 legislative session indefinitely by joint resolution.  Eleven days remain in the legislative session, with the following bills relating to civil litigation still alive:

·       S.B. 374 (www.legis.ga.gov/legislation/en-US/Display/20192020/SB/374)

·       S.B. 390 (www.legis.ga.gov/legislation/en-US/Display/20192020/SB/390)  

·       H.B. 1089 (www.legis.ga.gov/legislation/en-US/Display/20192020/HB/1089)

Of these remaining bills, H.B. 1089 includes the most sweeping tort reform measures.  These proposed changes include prohibiting attorneys from arguing a specific monetary value for pain and suffering or the value of life; requiring separate trials for liability and damages where a plaintiff seeks more than $150,000; prohibiting counsel or a judge from informing the jury that a plaintiff would not be able to recover any damages if they are more than 50% at fault; allowing the use of the “seat belt defense” in motor vehicle actions; eliminating or mitigating the liability of landowners in certain premises liability actions; and capping punitive damage awards in product liability actions.

S.B. 374 proposes certain changes to O.C.G.A. 9-11-67.1, which governs pre-suit settlement offers and agreements for personal injury, bodily injury, and death.  This bill proposes expanding this provision to apply to any offer to settle any tort claim, not just pre-suit demands in motor vehicle actions.  Additionally, the bill proposes additional requirements for the offeror, including the requirement that the offeror provide medical records that relate to the subject of the tort action, including records of any prior injuries or treatment reasonably related to the claimed injury.

While it remains to be seen whether or not these current bills will make it through the legislature, it is evident that the tort reform conversation in Georgia is here to stay.  More frequent nuclear jury verdicts, rising insurance premiums, and recent court decisions expanding liability are quickly creating an unsustainable landscape for civil defendants in Georgia.  Corporate defendants and insurers should keep a close eye on this legislative activity over the coming year.