Honesty is the Best Policy

The United States Court of Appeals recently addressed an appeal from a grant of Summary Judgment in favor of an insurance carrier on the issue of the homeowners association’s nondisclosure of potential claims resulting in concealment under Cal. Ins. Code § 331. See Atain Specialty Ins. Co. v. Lake Lindero HOA, No. 21-55319, 2022 U.S. App. LEXIS 3313, at *1 (9th Cir. Feb. 7, 2022). The Court determined that the insurance carrier was entitled to rescind the policy and had no duty to defend or indemnify the homeowners association in litigation.

In Atain, the California homeowners association, Lake Lindero Homeowners Association obtained liability insurance from Atain Specialty Insurance Company.  During the application process, the Association was required to complete an application that asked the Association to disclosure any fact, circumstance, or situation that may result in an action or claim against the corporation, or any of its directors or officers. The application specifically asked (1) “within the last five (5) years, has any inquiry, complaint, notice of hearing, claim or suit been made…against the organization, or any person proposed for Insurance in the capacity of etither Director, Officer, Trustee, Employee or Volunteer organization?” and (2) “Is any person proposed for this insurance aware of any fact, circumstance or situation, which may result in a claim against the organization, or any of its Directors…?”. The Association answered “No.” to both questions. The Association was later sued and sought to file a claim with Atain to defend the Association in suit.

The Insurance Carrier filed Motion for Summary Judgment and argued that, as a matter of law, it is entitled to rescind the policy due to material misrepresentations and concealments made by the Association in the application. The Trial Court determined that a material misrepresentation or concealment in an insurance application, whether it be intentional or unintentional, entitles the insurer to rescind the insurance policy. However, the Trial Court also asserts that if an application had no present knowledge of the facts sought, or failed to appreciate the significance of information related to him, the incorrect or incomplete responses would not be grounds for rescission. Ultimately, the Trial Court concluded that the Association concealed or misrepresented a material fact, that a claim would likely be brought against them, and consequently, the Insurance Carrier was entitled to rescind their policy and granted Summary Judgment in favor of Atain.

On Appeal, the Appeals Court upheld the Trial Court’s grant of Summary Judgment in favor of Atain. The Appeals Court determined that the Association had knowledge of potential claims against it, despite the fact that they had yet to develop into a pending claim, and that such information clearly presented a risk that Atain needed to assess in its underwriting process in the application process.

From a defense perspective, Atain teaches us that even mere knowledge of circumstances that may lead to litigation could lead to an insurer’s right to rescind their policy and end their duty to defend and indemnify. Atain shows the importance of an honesty during the application process for an insurance policy because a dishonest or incorrect answer may have lead the insurance company to deny coverage or later disclaim coverage.  Further, even an unintentional failure to disclose could lead to the insurer’s right to rescind coverage. Thus, it is best practice to disclose all material information and provide an honest and accurate representation.

NO IME, No Problem: How to Fight Claimant’s Permanency Opinions When You Do Not Have Your Own in New York Workers’ Compensation Matters

A New York State Supreme Court, Appellate Division, Third Department decision recently came out reversing a Workers’ Compensation Board (“WCB”) Decision based on the fact that Dr. David Capiola did not review all of the claimant’s medical records, his medical opinion did not comply with the Workers’ Compensation Guidelines, and his medical findings were inconsistent with Plaintiff’s complaints of pain and physical abilities.  See Matter of Ippolito v. NYC Transit Auth., 2022 NY Slip Op 01493 (App. Div.)

In this case, the self-insured employer was precluded from producing an independent medical examination (“IME”), so the only permanency opinion was from the claimant’s treating physician, Dr. Capiola. Id. at 2. Following Dr. Capiola’s deposition, the employer filed a written summation challenging Dr. Capiola’s permanency report, arguing that the finding of permanency was premature as the claimant did not exhaust conservative treatment, the doctor did not review all of the claimant's medical records, the schedule loss of use (“SLU”) opinion did not comply with the 2018 Workers' Compensation Guidelines (“Guidelines”) and the medical findings were inconsistent with the claimant's complaints of pain and physical abilities. Id. The Workers' Compensation Law Judge (“WCLJ”) found that the claimant had reached maximum medical improvement and was entitled to lump-sum awards based upon Dr. Capiola’s SLU opinions, with the exception of each hand, which the WCLJ reduced to 10% based on the special considerations set forth in the Guidelines as well as the mild limitations in claimant's range of motion. Id. Upon administrative review, the WCB affirmed, which led to this Third Department appeal in which the employer contended that the WCB “erred in not addressing the issues raised in its application for administrative review,” which the Third Department agreed with. Id.

The Third Department found that the decisions of the WCB and WCLJ did not address the substantive issues raised by the employer. Id. at 3. The Third Department reasoned that, “[a]lthough there was no opposing medical opinion and the Board ‘may not reject an uncontradicted opinion that is properly rendered,’ the issues raised by the employer in its application for review challenged the propriety and reliability of Capiola's permanency findings.” Id. (quoting Matter of Taylor v Buffalo Psychiatric Ctr., 199 AD3d 1110, 1112 [2021]). The Third Department further explained that the WCB’s failure to address the claims raised by the employer deprived the employer of the opportunity to have the WCB consider the merits of issues that were properly preserved. As such, the matter was remitted to the WCB for resolution of those issues. 

This decision stresses the importance of continuing to fight medical opinions when you have lost the ability to obtain your own. However, confronting claimant’s doctors’ range of motion findings, reported physical abilities, and exhausted treatment courses opinions with the Guidelines is a tool that carriers and self-insured employers should utilize in defending workers’ compensation claims whether or not they have an IME. Furthermore, this decision solidifies the importance in raising and maintaining these issues at hearings and preserving your right to appeal WCLJ and WCB decisions.

Callahan & Fusco Obtains a Dismissal for Sub-Contractor in Pennsylvania

The Court of Common Pleas of York County, Pennsylvania recently granted the Motion for Summary Judgment brought by Callahan & Fusco on behalf of their client, one of the defendant contractors, dismissing the plaintiffs’ action against the client. See Tully, Declan, et al. v. Durazo Construction Specialties, LLC, et al.

The underlying suit arises from an accident that took place on April 6, 2019, when a minor fell into a below ground pool still under construction, outside his parents’ property. As a result of the accident, the minor struck his head, face, and other body parts sustaining injuries therein. On July 25, 2019, the minor’s parents filed suit against the general contractor and the various sub-contractors involved in their pool’s construction alleging claims of negligence resulting from the defendants’ failure to fence off the in-ground pool under construction at the plaintiffs’ home, a claim for negligent infliction of emotional distress alleging that the parents witnessed their child fall into the unfinished pool, and a claim for breach of contract against all defendants for their respective failure to perform the work they were contracted to do on the plaintiffs’ pool adequately and completely and for reasons unrelated to the April 6 incident.

After the conclusion of the plaintiffs’ depositions and the concrete subcontractor co-defendant’s deposition, the moving party, a pool liner sub-contractor co-defendant, filed their Motion for Summary Judgment, requesting the court to dismiss them from the underlying matter. In support of their motion, the moving party argued that even if plaintiffs’ alleged facts are accepted as true, at no point did they breach a duty owed to the plaintiffs in the course of their work on the premises nor did they materially breach any contract between them and the plaintiffs. Specifically, the co-defendant argued they never undertook a duty to maintain, erect, or inspect the safety fence installed at the construction site. The moving co-defendants addressed plaintiffs’ contention of contractual breach, by pointing out that they never entered a contract with the plaintiffs, instead the only contract they entered into was with the general contractor, as such there was no prima facie case to support plaintiffs’ allegations of a material breach of contract.  Regarding plaintiffs’ negligent infliction of emotional distress, co-defendants argued at no point did plaintiffs witness nor observe their child’s accident.

The record supported the moving party’s argument as it contained testimony of the concrete subcontractor co-defendant, affirming that the subcontractor removed the plastic safety fence installed during the construction of the plaintiffs’ pools upon receiving permission by the plaintiffs. The testimony also provided that not only did plaintiffs approve the removal of the safety fence, but plaintiffs were also going to put the safety fence back up. The record contained testimony of the plaintiff, revealing that she did not see her child fall into the pool and only witnessed her child after the accident. These admissions proved to be key in granting the co-defendants’ Motion for Summary Judgment.

From a defense perspective, Tully teaches us the importance of discovery and how every stage provides a new opportunity to continually improve existing strategies. Therefore, prior to engaging in litigation, it is crucial to select an experienced defense counsel with a keen eye to details who can adapt to revelations brought forth through discovery in the best interest of the client.

Tree Falls in the Car, Court Hears It: New Jersey Appellate Division Affirms Tort Immunity for Public Entities

The Superior Court of New Jersey, Appellate Division, affirmed an order from the Law Division in Essex County which granted summary judgment in favor of the City of Newark and the County of Passaic. See Russi v. City of Newark, No. A-1064-20, 2022 N.J. Super. LEXIS 20, at *9 (Super. Ct. App. Div. Feb. 17, 2022). The lower court had granted the public entities’ motions for summary judgment on the basis that both parties were entitled to immunity under the Landowner’s Liability Act, from which Plaintiff sought to appeal.

On December 3, 2016, Plaintiff was driving down a road owned by the County of Passaic, when suddenly a fallen tree branch pierced his windshield. Plaintiff filed suit against the County of Passaic and the City of Newark. Discovery revealed that the branch was from a tree located in the Pequannock Watershed, which is a wooded watershed owned by the City of Newark, but preserved through a deed of conservation by the New Jersey Department of Environmental Protection. The County owned the road and was responsible the road and a twenty-five foot right-of-way, which extended from its centerline to each side of the roadway. Unfortunately for Plaintiff, the tree’s base stood several yards away from the County’s right of way.

Following discovery, the City and County were both granted summary judgment at the trial level. The lower court found that the City was entitled to immunity under the Landowner’s Liability Act (LLA); the unimproved property immunity under N.J.S.A. 59:4-8; and common law immunity. The judge concluded that the road in question was a public pathway or easement under the LLA, and the Plaintiff was not engaged in any recreational activity at the time of the accident.

Plaintiff, on appeal, contended that the lower court improperly granted summary judgment against the County, and they were liable under N.J.S.A. 59:4-2 of Tort Claims Act, an immunity where a public entity may be liable for a reasonably foreseeable risk of injury, from a dangerous condition on their property. Here, the Appellate Court was aware that both sides agreed that the tree in question was not located on County property, however Plaintiff argued that the County controlled the property where the tree fell by occasionally picking up fallen limbs that fell into the right of way, and the County established “possessory control” by treating the tree as its own. The Court rejected this argument and cited to their holding in Farias v. Twp. of Westfield, 297 N.J. Super. 395, 403, 688 A.2d 151 (App. Div. 1997), maintaining that such occasional actions, on their own, are insufficient as a matter of law to establish control.

Plaintiff’s subsequent argument was that the City was not entitled to the benefits of the LLA’s immunity and asserted that the City’s conduct fell under the one of exceptions for either (1) willful failure to warn against the condition of the tree; (2) negligent conduct to Plaintiff while he was engaged in sport or recreational activity on the premises for consideration; or (3) grossly negligent conduct in maintaining the easement. The Appellate Court disagreed, pointing to the trial court’s record that Plaintiff clearly was not using the road for recreational activities, nor did he pay to use the road. Further, the Appellate Court had no proof that the City knew that the tree was dangerous, as there were no complaints made to them regarding the specific tree. The Appellate Division affirmed the summary judgment rulings in favor of the County and City.

New York Amends Comprehensive Insurance Disclosure Act

New York Governor, Kathy Hochul, signed into law amendments to the Comprehensive Insurance Disclosure Act (“the Act”) originally effective on January 1, 2022. The amendments reduce the burden that the initial bill placed on insurers and defendants by lessening the disclosure requirements.

Under the new requirements, disclosure of insurance policies must be produced within 90 days of filing an Answer, and if plaintiff provides written consent, a defendant need only provide a copy of the Declaration page, rather than proof of the existence and contents of any insurance agreement. Plaintiffs are permitted to withdraw consent at any time and then defendant must disclose the entire contents of the insurance agreements that relate to the matter being litigated. Defendant must also disclose the name and email address of the individual assigned to adjusting the claim, and Third-Party administrators no longer need to disclose the person at the insurance company that they report to. Moreover, while defendants must disclose their policy limits after taking into account erosion and other offsets, defendants are no longer required to disclose information on other lawsuits that have eroded the policy or attorneys who have been provided payments. Defendants must make reasonable efforts to provide updated information to the parties to whom this information has been provided. Updated information must be provided at the filing of the note of issue, when entering into formal settlement negotiations, at mediations, when the case is called for trial, and for sixty days after any settlement or entry of final judgment. Additionally, disclosure of policy limits will not constitute an admission that an alleged injury or damage is covered by the policy.

Of significance, insurance applications are no longer required to be disclosed, thereby avoiding issues regarding disclosure of proprietary and financial information that may not be relevant to the lawsuit. Further, the requirements under this Act do not apply to No-Fault and PIP actions.

The disclosure requirements under the Act will only apply to lawsuits filed after December 31, 2021. Carriers and defendants do not need to look back to active cases to provide this information but only going forward with the earliest disclosure due April 1, 2022, for any Answers filed on January 1, 2022.

The amendments to the Act significantly change many of the onerous provisions that defendants and insurers were required to disclose, and while not perfect, are a welcome change to from the initial disclosure requirement.

New Jersey Supreme Court Finds Worker's Compensation Compensability in Parking Lot Accident

The New Jersey Supreme Court recently awarded workers compensation benefits to an employee injured in an accident arising in the course of employment, overturning an earlier ruling by an Appellate Court. See Lapsley v. Township of Sparta, 2022 N.J. LEXIS 61 (Jan. 18, 2022). In this case, Plaintiff alleged that she was struck by a snowplow owned by the Township while walking in the parking lot also owned and maintained by the Township, Plaintiff’s employer.

Defendants filed a motion to dismiss arguing that Plaintiff’s claim was barred by the exclusive remedy provision of the Workers’ Compensation Act which was denied by the Law Division. Plaintiff then filed a summary judgment motion arguing that her injuries were not compensable under the Act. Defendants then filed a cross-motion for a stay and transfer of the matter to the Workers’ Compensation Division for a finding as to the compensability under the Act. Plaintiff then filed a claim for workers’ compensation benefits against the Township in the Workers’ Compensation Division. The Division found that the injuries “arose out of and in the course” of Plaintiff’s employment and were compensable under the Workers’ Compensation Act, N.J.S.A. § 34:15-36 and awarded benefits to Plaintiff. Id. at 9.

Plaintiff appealed and the Appellate Division found that Plaintiff’s injuries did not arise “out of and in the course of” employment because the Township exercised no control over Plaintiff’s use of the parking lot. Id. at 6. The Appellate Division relied in part on the Supreme Court’s decision in Novis v. Rosenbluth Travel, 138 N.J. 92 (1994) in considering the degree of control the employer exercised over the employee’s use of the lot. Id. at 9. The Appellate Court found that the Township did not exercise control over the parking lot because Township employees were never instructed on where to park or where to enter/exit the municipal complex. The Appellate Court concluded that a finding of compensability “would be an unwarranted and overbroad expansion” of liability for public employees. Id. at 10.

At the Supreme Court, Defendants challenged the denial of workers’ compensation benefits to Plaintiff and argued that the premises rule looks to the site of the accident and employer’s right to control the parking lot, not the degree of control it actually exercises for purposes of determining compensability. As such, Defendants argued that the Appellate Division’s decision would improperly expand public employers’ exposure to tort liability and employees’ eligibility for workers’ compensation benefits. Id. at 11. Of course, Plaintiff argued that the Township exercised no control of the parking lot and no control over her route to or from the municipal complex. Id.

In determining whether an accident arises “out of and in the course of employment,” the Supreme Court relied on Kriastiansen v. Morgan, 153 N.J. 298, 316 (citing N.J.S.A. 34:15-36) which states, that an injury that occurs “going to or coming from work arises out of and in the course of employment if injury takes place on the employer’s premises.” Id. at 4. Therefore, the fact that an employee finished work and is no longer on the clock does not preclude compensability.

The Supreme Court found that Plaintiff is, entitled to compensation under the Act. The site of the accident was the parking lot adjacent to the library where Plaintiff was employed as Plaintiff stepped off the curb directly into the parking lot. The Township controlled the parking lot through ownership and maintenance and the parties do not dispute the Township’s ownership and maintenance. Furthermore, the Township’s plowing of the lot further demonstrates the Township’s exercise of control over the lot. Id. at 5. The court affirmed the Division of Workers Compensation judgment awarding Plaintiff benefits. 

Clearly, Plaintiff’s goal was to avoid the more limited benefits under the workers’ compensation statute and to pursue a third-party claim against the co-employee operating the snowplow. However, the employer’s ownership and maintenance of the premises resulted in the unavoidable conclusion that this was indeed a work-related event.