The Fourth DCA Shields Defendant Employer from Punitive Damages Exposure Under Vicarious Liability Claim

The Fourth District Court of Appeal of Florida recently decided the case of HRB Tax Group, Inc. v. Florida Investigations Bureau, Inc., No. 4D22-2981 (4th DCA May 17, 2023), wherein it reversed the trial court’s order granting the plaintiff’s motion for leave to amend the complaint to add a claim for punitive damages against the defendant based on a theory of vicarious liability.  The Fourth District found that the plaintiff failed to make sufficiently allege or proffer evidence to establish a reasonable basis for the recovery of punitive damages under Section 768.72(3), Florida Statutes against the corporate defendant, HRB Tax Group, Inc. (“HRB”).

The action arose from an alleged fraudulent investment which the corporate plaintiff made through a third party. The proffered evidence was that plaintiff was referred to the third party fraudster by one of HRB’s employees, who was an expert in investments and tax planning. HRB’s employee allegedly advised the plaintiff’s president to invest at least $250,000 with the third party.  Further, it was alleged that HRB’s employee facilitated communications between the plaintiff and the third party using a personal email address, and her personal emails contained a signature line reflecting her HRB employment.  It was alleged that, due to the employee’s influence and recommendation, the corporate plaintiff wired more than $250,000 to the third party’s bank account in Hong Kong, but never received any returns on the investment.  Moreover, when the plaintiff requested that the money be returned, the requests were ignored by HRB’s employee and the third party, who absconded with the money.

The plaintiff’s original complaint alleged claims of fraud and negligence against HRB’s employee, a claim for civil conspiracy against HRB’s employee and the third party, and claims for vicarious liability and negligent supervision against HRB.

After the complaint was filed, the plaintiff learned that HRB’s employee had recommended the investment as part of a reciprocal referral program implemented by HRB’s managers. The plaintiff also learned that the involved employee was later terminated by HRB for violating company policies, including HRB’s policy against using personal email addresses to communicate with clients.

Based on this information, the plaintiff moved for leave to amend the complaint to assert a claim for negligence against HRB based on its reciprocal referral program.  Thereafter, the plaintiff moved to amend and add a claim for punitive damages against HRB.

The trial court granted the plaintiff’s motion for leave. In doing so, the trial court partially relied on evidence relating to the direct negligence claim against HRB regarding the referral program.  HRB appealed the order to the Fourth District.

In reversing the trial court, the Fourth District noted that section 768.72(1), Florida Statutes provides that “no claim for punitive damages shall be permitted unless there is a reasonable showing by evidence in the record by the claimant which would provide a reasonable basis for recovery of such damages.”  Under section 768.72, a defendant may be liable for punitive damages if the defendant was personally guilty of intentional misconduct or gross negligence.  In order to impute an employee’s conduct to his or her employer, a plaintiff must establish that the employee’s conduct constituted “intentional misconduct” or “gross negligence,” AND establish one of the following: (a) the employer, principal, corporation, or other legal entity actively and knowingly participated in such conduct; (b) the officers, directors, or managers of the employer, principal, corporation or other legal entity knowingly condoned, ratified, or consented to such conduct; or (c) the employer, principal, corporation or other legal entity engaged in conduct that constituted gross negligence and that contributed to the loss, damages, or injury suffered by the claimant.

The Fourth District found that the plaintiff’s proffered evidence relating to HRB’s maintenance of a reciprocal referral program did not establish any of the three bases for vicarious punitive liability, as there was no evidence proffered that HRB knew that the third-party would defraud the plaintiff and abscond with its investment, nor that its failure to vet the third-party participating in its reciprocal referral program rose to the level of gross negligence.

This decision reminds us of the high bar plaintiffs face in Florida to support a claim for punitive damages against a corporate defendant based on the conduct of the defendant’s employee.

NJ Raises Minimum Amount of Liability Coverage Required for Auto Insurance Policies

The State of New Jersey enacted new legislation that raises the minimum amount of liability coverage required for automobile insurance policies effective as of January 1, 2023. The new law has generated significant discussion among insurance providers, policyholders, and legal practitioners. In this article, we will delve into the background of PIP coverage, the changes brought forth by the new legislation, and the potential consequences for insurance defense litigation.

Personal Injury Protection (PIP) coverage, commonly known as “no-fault” coverage, is a form of auto insurance that covers medical expenses, and in some instances, lost wages and other damages, regardless of who is at fault in an accident. PIP coverage is mandated in several states, including New Jersey, and is intended to expedite the claims process, reduce litigation, and ensure injured parties are promptly compensated for their losses.

Effective January 1, 2023, the new law raised the State’s minimum automobile insurance limits, for the first time since 1972, in two (2) phases: January 2023 and January 2026.

The new law increases the minimum amount of liability and uninsured/underinsured motorist coverage for bodily injury or death as to one person from $15,000.00 to $25,000.00 on insurance policies purchased or renewed as of January 1, 2023. N.J.S.A. § 17:28-1.1. For plans purchased or renewed on or after January 1, 2026, the law will further increase minimum liability coverage to $35,000.00. Id.

Also, effective January 1, 2023, insurance plans must raise minimum coverage from $30,000.00 to $50,000.00 for accidents involving more than one person resulting in either bodily injury or death. N.J.S.A. § 17:28-1.1. Thereafter, the law provides that plans issued or renewed on or after January 1, 2026, require minimum coverage in the amount of $70,000.00. Id.

The recently enacted legislation raises the minimum coverage levels and premiums for PIP policies. This change impacts both insurance providers and policyholders.

Advocates of the new law argue that increasing the minimum coverage levels and premiums will bolster financial stability within the insurance industry and ultimately benefit consumers by ensuring that insurers can continue to provide adequate coverage. However, opponents argue that the higher premiums may lead to financial strain for policyholders due to a likely rise in insurance premiums, particularly those with limited incomes or driving records that already result in elevated premium rates.

The new law’s effects on insurance defense litigation can be varied. Some potential implications include:

1. Increased Coverage Disputes: With higher PIP coverage levels and premiums, policyholders may be more inclined to dispute coverage decisions or seek to reduce their out-of-pocket expenses. This will likely yield an increase in coverage disputes.

2. Shift in Claimant Strategies: The rise in PIP coverage levels and premiums could lead claimants to explore alternative compensation routes, such as filing claims against other drivers or their insurers. This shift may result in an increase in third-party liability claims.

3. Greater Potential for Bad Faith Claims: Insurers that fail to adequately inform policyholders of the changes to their coverage levels or premium rates may face allegations of bad faith.

4. Monitoring Legislative and Regulatory Developments: As the new law is implemented, insurance defense practitioners must remain informed of any legal challenges, regulatory guidance, or additional legislative developments that could impact PIP coverage and litigation. This knowledge will be crucial in advising clients on best practices and developing effective defense strategies. 

The recent legislation increasing minimum PIP coverage levels and premiums presents both challenges and opportunities for insurance defense. By understanding the potential implications of the new law on litigation and staying current on developments in the legal landscape, insurance defense attorneys can effectively represent their clients and navigate the evolving dynamics of PIP coverage disputes. Our firm is dedicated to assisting clients in navigating these changes and providing expert advice on insurance matters. If you have any questions about how this new law may affect you or your business, please do not hesitate to contact us.

Declared Value Matters When Defending a Courier Service

The United States District Court for the Southern District of New York recently granted a Motion for Summary Judgment in part by ordering that the plaintiff’s damages for lost items were capped at the items’ listed declared value, pursuant to the Federal Carmack Amendment, 49 U.S.C. §14706(d).  In Ikegwuoha v. Art Village Gallery a/k/a Urevbu Contemporary, et al., the District Court found that despite a demand price of $9,500,000, the plaintiff’s damages for his lost artwork from a national courier services provider were limited to the declared value of $1,000.00 for the shipment of four pieces of art, which was consistent with the federal law.

The plaintiff in Ikegwuoha, a Nigeria-based artist, was involved in a commemorative art exhibition between March and April of 2018 wherein he shipped five pieces from Nigeria to a local art gallery in Tennessee through a courier services provider with a declared value of $277.00 for use during the 2018 exhibition. Following the exhibition, after one of the plaintiff’s pieces sold, the remaining four were, at the request of the plaintiff, returned via a different national courier services provider chosen by the plaintiff. When shipping the plaintiff’s artwork to his virtual office in New York, at his request, the art gallery set a declared value of $1,000.00 for the returned pieces.  When the shipped artwork arrived at the plaintiff’s virtual office, however, the office’s policy prohibited large scale packages and therefore, the package was refused.  Thereafter, the plaintiff’s artwork allegedly did not complete its return transit to the art gallery.

The plaintiff initiated litigation in New York State Supreme Court for alleged negligence of the courier in allegedly misplacing the plaintiff’s artwork during shipment, which lawsuit was ultimately removed to the Southern District of New York, as the Carmack Amendment “governs lost or damaged goods transported by motor carriers in interstate commerce.”  Following the conclusion of discovery, defense counsel moved for summary judgment on behalf of the defendant courier, seeking in part to cap any potential damages at the declared value price of $1,000.00.

The District Court found that the purpose of the Carmack Amendment was to provide a “uniform regime for recovery by shippers directly from the interstate common carrier in whose care their items are damaged…”  The District Court further found that the national courier services provider can limit its liability “to a value established by written or electronic declaration of the shipper… if the value would be reasonable under the circumstances surrounding the transportation.”  Therefore, the District Court concluded that any liability of the national courier services provider was capped at the agreed-upon declared value of $1,000.00, which was the only sum required to be reimbursed to the plaintiff for the allegedly lost artwork.

From a defense perspective, Ikegwuoha is a lesson for all involved to consider all available remedies in matters involving interstate commerce and transportation, including the Carmack Amendment, designed to protect courier services in defense of suits for allegedly damaged or lost goods.  The Carmack Amendment also allows the matter to be heard in Federal Court, a traditionally more favorable venue for defendants, while limiting the exposure on liability to a specific declared sum for any items lost or damaged during shipment.  Upon commencement of any potential Carmack Amendment litigation, it is crucial to determine whether a declared value for the items allegedly lost or damaged has been stated before making an appropriate application to the District Court to limit liability and cap the damages sought.

Employee Spotlight: Women's History Month with Chelsea Novelli

Chelsea S. Novelli is an Associate in the New Jersey and Massachusetts offices of Callahan & Fusco. Ms. Novelli is licensed to practice in Massachusetts, New Jersey, and New York, specializing in premises liability, transportation, construction, and other general liability matters. Throughout her career, she has successfully and effectively represented large trucking companies, independent contractors, small businesses, and community associations in New Jersey, Massachusetts, and New York. 

What are your favorite aspects of C&F?

My favorite aspects of C&F are my colleagues and the diversity of matters we litigate. The partners, associates, and support staff are friendly, inviting, and always willing to help one another. C&F provides a supportive learning environment and the ability to develop, individually, within this ever-changing field.

How has C&F helped develop you professionally?

Through hands-on training, continuing education, and client development opportunities. 

What would you like to accomplish in your future at the firm?

In the future, I would like to become a partner and lead a litigation team in a new practice group. 

What was your motivation for going into the law industry?

I chose a career in legal industry because I enjoy the art of an argument. As cliché as it may seem, litigation is like a puzzle, you find and put the pieces together for the full picture, ultimately allowing your client to show their side of the case. 

What advice would you give for women starting their careers in law?

The biggest piece of advice is to get involved and not be afraid of any legal area that is “male dominated”. In the same vein, understanding the legal community is small and the relationships you build can ultimately set the trajectory of your career.

Florida’s Civil Remedies Bill: Major Tort Reform Legislation Signed Into Law Today

Florida Governor Ron DeSantis, signed into law a major legislative tort reform package this afternoon.  While DeSantis had from today, March 24, 2023, when he was presented House Bill 837 (companion to Senate Bill 236), until March 31st, to sign it, he immediately signed into law.

Civil Remedies, as the bill has been referred to: changes the pure comparative negligence framework to a contributory fault system; standardizes the evidentiary threshold necessary to prove damages for medical expenses in certain civil actions; imposes requirements for certain disclosures with respect to claims for medical expenses for treatment rendered under letters of protection; reduces the statute of limitations for negligence actions; levels the playing field for insurers in bad faith actions; and grants property owners a presumption against liability in certain negligent security matters.  

Tens of thousands of new negligence lawsuits were filed throughout Florida’s courts over the past week ahead of the signing of the law, since it was drafted to take effect immediately.

Some of the more significant changes under the new law are discussed below.   

Florida will now move from a pure comparative negligence system to a modified comparative negligence system. Under the current pure comparative negligence framework, a claimant’s recovery is reduced in proportion to the percentage of fault, if any, that his or her actions or inactions contributed to the damages or injuries sustained.  Additionally, a defendant can further diminish its liability to the claimant based on the comparative fault of others.  Under the new contributory fault system, a plaintiff found to be greater than 50 percent at fault for his or her own harm may not recover any damages (except in an action for damages for personal injury or wrongful death arising out of medical negligence).  

The statute of limitations in negligence actions has now been shortened from four (4) years to two (2) years.

The new law also broadens what evidence is admissible at trial to prove the reasonableness of medical treatment and expenses. Evidence offered to prove the amount necessary to satisfy unpaid charges will be limited to the amount the health care provider is obligated to pay should the claimant have health care coverage other than Medicare or Medicaid.  

• If a claimant has health care coverage and receives treatment under a letter of protection, the claimant will only be able to board the amount the claimant’s health care coverage would pay the medical provider to satisfy the past unpaid charges under the insurance contract or applicable regulation.

• If the claimant does not have health care coverage or maintains health care through Medicare or Medicaid, evidence offered at trial will be limited to one-hundred and twenty percent (120%) of the Medicare reimbursement rate in effect on the date of the incurred treatment or one-hundred and seventy percent (170%) of the applicate state Medicaid rate.

• Further, in personal injury actions and wrongful death actions, as a condition precedent to asserting any claim for medical expenses rendered under a letter of protection, the claimant must disclose the letter of protection and an itemized billing ledger for the claimant’s medical expenses.

Florida’s bad faith law has also undergone significant changes.  HB 837 mandates that mere negligence alone is insufficient to constitute bad faith in both statutory and common-law actions. Moreover, it imposes a duty on the claimant and the claimant’s attorney to act in good faith when furnishing information regarding the claim, issuing demands, setting deadlines, and attempting to settle with an insurer.  HB 837 also creates an immunity defense in bad faith actions where the insurance carrier tenders either the lesser of the policy limits or the amount demanded by the claimant within ninety (90) days after receiving actual notice of a claim that is accompanied by evidence to support the amount at issue.  Finally, HB 837 creates a mechanism for the distribution of insurance proceeds when two (2) or more claimants make competing claims stemming from a single occurrence and the amount sought exceeds the available limits. In the aforementioned situation, the carrier can file an interpleader action or enter binding arbitration.

Lastly, HB 837 provides apartment and other multi-family housing property owners a presumption against liability when a plainitff is injured in connection with certain criminal acts that occur on the premises, if the property owner takes certain precautions, such as having video monitoring, lighting, entry FOBs, and other security measures.

We anticipate many challenges to this new law in the Courts over the coming months, and will continue to provide updates as to how this legislative change impacts claims and litigation in Florida.

Callahan & Fusco’s attorney team is prepared to answer any questions you may have about the changes brought on by this new law and Florida matters in general. 

Emotional Distress Claims no Longer Require Extreme and Outrageous Conduct

New York’s Appellate Division, First Department recently issued an opinion holding that “extreme and outrageous conduct is no longer an essential element of a cause of action to recover damages for negligent infliction of emotional distress.” See Mabel Johanna Brown et al., Plaintiffs-Respondents-Appellants v. New York Design Center, Inc., Defendant-Appellant-Respondent, Newark Knight Frank Global Management Services, LLC et al., New York State Law Reporting Bureau, (App. Div. March 9, 2023). This decision now follows the recent decisions of the Second, Third and Fourth Departments.

This case arises out of an incident that occurred to Plaintiffs employed in a building owned by the Defendant, New York Design Center (NYDC). In April 2014, an electrician using the men’s restroom noticed a recording camera pointed through the wall and into a stall of the women’s restroom. Graphic videos of women using the bathroom were discovered on the device. Plaintiffs initiated a lawsuit arguing claims of negligence, intentional infliction of emotional distress, negligent infliction of emotional distress and negligent hiring. Several of them testified that they had previously seen the hole prior to the camera’s discovery. A few of them testified that they had complained about the state of the bathroom, including the hole behind the toilet.

The Defendant moved for summary judgment to dismiss the complaint, arguing that the Plaintiffs did not show that the Defendant was on notice of the camera, and they did not suffer any legally compensable injuries. Defendant also argued that its conduct was not outrageous, and Plaintiffs did not fear for their safety.  The Plaintiffs opposed, arguing that NYDC had actual and constructive notice of the hole, and that they testified to “paranoia and/or hypervigilance, many engaging in behavior such as habitually checking vents or looking for other spaces where cameras could be hidden, especially in public restrooms, dressing rooms and hotel rooms.”

On March 22, 2022, the Supreme Court in New York County granted Defendant NYDC’s motion for summary judgment dismissing the negligent infliction of emotional distress claim and denied the motion as to the negligence claim.

On Appeal, the Court revisited prior decisions regarding the showing necessary to sustain a cause of action for negligent infliction of emotional distress. The Court held that contrary to the Defendant’s argument, the Plaintiffs sustained emotional injuries which are a direct result of the breach of duty owed. The direct result of injury here was that the Plaintiffs were humiliated, embarrassed, felt violated, and paranoid which the Court saw as “reasonable fears given that it is not know whether additional videos exist and may be posted on the internet.” The Court reviewed Sheila v. Povich, (11 AD3d 120, 130-131 [1st Dept 2004]) and found that it and other authorities “all rely either directly or indirectly on cases that deal exclusively with intentional infliction of emotional distress or where there are allegations of both.” The Court now holds that “extreme and outrageous conduct is not an essential element of a cause of action to recover damages for negligent infliction of emotional distress.” Moreover, the Court holds that a breach of duty of care resulting directly in emotional harm is compensable when there is a direct emotional injury as a result of the breach, even when there is no physical injury.