Vermont adopts 'time of risk' approach in environmental case.

Even as briefing has begun before the Massachusetts Supreme Judicial Court with respect to the issue of allocation, Vermont has joined the growing number of Northeastern states adopting a “time on the risk” approach in long-tail cases.  In its first comprehensive assay into the murky world of environmental jurisprudence, the Vermont Supreme Court has ruled in Towns v. Northern Security Ins. Co., 2008 VT 98 (Vt. August 1, 2008),  that (1) a continuous trigger is appropriate, not “manifestation;” (2) the own property exclusion does not apply to groundwater contamination; (3) even de minimis levels of environmental contamination constitute “property damage;” and (4) a waste hauler’s use of debris from his business to redevelop his personal home is not subject to the “business pursuits” exclusion in a homeowner’s policy.

Vermont is an unusual state within which to litigate environmental coverage issues.  Unlike states in southern New England, Vermont lacks the type of heavy industry that have historically generated significant numbers of environmental claims in the past.  On the other hand, insurers for the most part have been denied the opportunity to include pollution exclusions by reason of regulations followed by Vermont regulators since the early 1970s.  Even so, there has been a relative dearth of clear appellate case law construing the availability of insurance coverage for such claims.  It will be interesting to see how this latest ruling impacts the scope of future coverage controversies in the Green Mountain State and whether the state Supreme Court’s adoption of a “time on the risk” approach will influence the attitude of northern New England states whose Supreme Courts have yet to rule on allocation issues, such as Maine and Massachusetts.

Category: Insurance
Posted by: Michael Aylward | Posted on: 8/20/2008 | Permalink & Comments

 

Additional Insured Coverage and Blanket Endorsements

Contract language that is intended to trigger additional insured coverage under a blanket endorsement should specifically state that the party to be named as an additional insured is to be named as an additional insured.  A requirement that simply stated that insurance was to be obtained for the benefit of both contracting parties was insufficient to trigger such coverage. In Kassis v. Ohio Casualty Ins. Co., (N.Y.A.D. 4th Dept. May 2, 2008), the Court held that language in a lease agreement requiring the lessee to procure CGL coverage for "the mutual benefit of" the lessor insufficient to trigger additional insured coverage under a blanket additional insured endorsement which extended additional insured coverage to anyone the named insured was required to name as an additional insured under a contract or agreement.

Category: Insurance
Posted by: Tom Federico | Posted on: 8/18/2008 | Permalink & Comments

 

Supreme Judicial Court of Massachusetts tightens pleading standards.

The Massachusetts Supreme Judicial Court ("SJC") announced in June in Iannacchino v. Ford Motor Co. SJC-10059, 2008 WL 2375179 (Mass. June 13, 2008), that it would adopt the more "refined" pleading standard laid out by the U.S. Supreme Court in Bell Atl. Corp. v. Twombly, 127 S. Ct. 1955, 1965 (U.S. 2007). 

In Twombly, a class of plaintiffs alleged that actions by the regional local telephone carriers -- the residuals of AT&T -- violated Section 1 of the Sherman Act .  Such a claim demanded, at a threshold level, an agreement (conspiratorial in nature, perhaps, but minimally an agreement of some kind) between local providers.  Finding that the Plaintiffs provided no such foundation for the claim, the Supreme Court ordered Plaintiffs' complaint dismissed, "[b]ecause the plaintiffs . . . have not nudged their claims across the line from conceivable to plausible."  More broadly, the Court "retired" consistently misconstrued language from Conley v. Gibson, 355 U.S. 41 (1957), that "a complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief."  The Court held that "[w]hat is required at the pleading stage are factual 'allegations plausibly suggesting (not merely consistent with)' a valid cause of action.  " 

In Iannacchino, a class of plaintiffs sued Ford Motor Company in the Superior Court of Massachusetts, on claims of breach of warranty and violations of the Commonwealth's consumer protection act, M.G.L. ch. 93A.  Ford moved for judgment on the pleadings pursuant to Mass. R. Civ. P. 12(c) which was granted as to all counts save a breach of implied warranty count that the lower court held was sufficient to show that the vehicle line at issue was unmerchantable.  The Supreme Judicial Court found that the complaint insufficiently pled facts sufficient to support each and every allegation of M.G.L. c. 93A and breach of warranty  – allegations which were factually dependent upon alleged violations of federal motor vehicle safety standards.  The SJC, finding that plaintiff's allegations were conclusory and factually deficient, largely echoed the pronouncements in Twombly, and in doing so has, in practice, set the pleading bar higher for Plaintiffs seeking to proceed with any civil action in the Commonwealth.   The "plain statement" of the complaint, must "possess enough heft to 'sho(w) that the pleader is entitled to relief.'" 

Category: Consumer Protection
Posted by: Anthony E. Abeln | Posted on: 6/30/2008 | Permalink & Comments

 

Connecticut Supreme Court win for MM on relation back doctrine in med-mal case.

MM Connecticut Partner, Thomas Anderson, and Associate, Cristin Sheehan, recently won a favorable decision from the Connecticut Supreme Court on behalf of an Orthopedic Surgeon and his professional group. In Dimmock v. Lawrence and Memorial Hospital, Inc. et al., 286 Conn. 789 (2008) the Connecticut Supreme Court refused to broaden Connecticut's relation back doctrine, which would have made it easier for plaintiffs to amend their theory of liability long after suit is filed.  In Dimmock, the plaintiff's original complaint alleged that a post operative infection following a diskectomy and fusion of her lower spine led to a permanent disability.  After her expert failed to establish a causal connection between the post operative infection and her claims, the plaintiff proposed to amend her complaint to add the facts that her expert did relate to her claims, namely that the defendant was negligent for failing to perform her spinal surgery with hardware.  The trial court granted summary judgment in favor of the defendant because, among other things, (1) the proposed amendment stated a new cause of action barred by the statute of limitations and (2) the plaintiff could not succeed on her claim because she did not have an expert to establish a causal connection between any actions and/or omissions of the defendant and her alleged injuries.  Noting that the "the overwhelming thrust of the operative complaint related to the plaintiff's infection" and that the plaintiff's amendment impermissibly attempted to "substitute an entirely new theory of negligence," the Supreme Court affirmed the trial court's decision.

Category: Connecticut Practice
Posted by: MMBlog Administrator | Posted on: 6/23/2008 | Permalink & Comments

 

Spolation Issues -- by MM Partner Michael Aylward

Spoliation issues have been a perennial concern to insurers.  Not only do they present problems in cases that insurers are defending, whether due to the fact that the insured itself has lot a key bit of the plaintiff’s evidence or such evidence has gone missing after being forwarded to the insurer or its consultants for examination, such claims have recently become the subject of direct claims for coverage by policyholders.  A recent opinion of the Illinois Appellate Court has clearly explained, however, why general liability insurers should not afford coverage for such claims.

The dispute in United Fire & Casualty Co. v. Keeley & Sons, Inc., No. 5-06-0307 (Ill. App. May 2, 2005) arose out of a construction defect accident involving three of Keeley’s employees who fell from an I-beam and were injured.  In addition to the claims for personal injury that the plaintiffs brought against Keeley, they claimed that he had subsequently destroyed or disposed of the I-beam, thwarting their ability to investigate and confirm its allegedly defective nature.  Keeley’s insurer (United) denied coverage and brought a declaratory judgment action.

Earlier this month, the Illinois Appellate Court affirmed the absence of coverage for the spoliation claims.  Keeley had argued that as the claims against him were because of lost property, they should fall within the policy’s definition of “property damage.”  The Appellate Court disagreed. 

The Appellate Court conceded that a spoliation claim may be considered to constitute two different claims for damage to property.  The first would involve the damage to and loss of use of the I-beam itself.  In this case, however, the court observed that the I-beam was at all times within the care, custody and control of the insured and was therefore subject to Exclusion J(4) in the CGL policy.

Alternatively, the court recognized that the lost use of the I-beam had damaged the value of the plaintiff’s lawsuit against Keeley.  The court observed, however, that characterizing the claim in this manner took it out of the insuring agreement of the policy itself since coverage only applies to injury to tangible property whereas damage to a cause of action is not damage to “tangible property.”  Accordingly, the court affirmed the lower court’s declaration that Keeley’s claims were not covered by his CGL carrier.

This Illinois ruling is in general accord with such limited case law as exists on this issue.  Several years ago, the Florida Supreme Court ruled in Humana Worker’s Compensation Services v. Home Emergency Services, 842 So.2d 778 (Fla. 2003) that spoliation claims did not give rise to coverage under an employer’s liability policy whose coverage was limited to “bodily injury by accident.”  The court ruled that even though the spoliation claim would not have risen but for the fact that a bodily injury occurred giving rise to a lawsuit against the employer, the employer’s destruction of evidence did not itself result in bodily injury.  Thus, the court ruled that, “The accident did not result in bodily injury but rather in the latter not being available as evidence in the bodily injury claim.”

Oddly, the Appellate Court did not reference an earlier opinion in Fremont Cas. Ins. Co. v. Ace-Chicago Great Dane Corp., (Ill. App. 2000) in which it held that a CGL carrier had no obligation to defend a product manufacturer for having lost a ladder that injured the plaintiff.  The First District of the Appellate Court ruled that, “The inability to prove the cause of action against a third party does not fall within the plain and ordinary meaning of the term ‘bodily injury.’”

 

Category: Insurance
Posted by: Michael Aylward | Posted on: 6/10/2008 | Permalink & Comments

 

Indiana Court Blocks Manufacturer's Reliance on Batch Clause For Drug Claims -- by MM Partner Michael Aylward

A recent Indiana opinion has shed light on efforts by product manufacturers to avoid the impact of large "per occurrence" self-insured retentions through the manipulation of batch clauses. 

Allianz Ins. Co. v. Guidant Corp., 2008 Ind. App. LEXIS 730 (Ind. App. April 17, 2008) concerned claims brought against the manufacturer of the Ancure device, a synthetic vascular graft used to repair abdominal aortic aneurysms.  The manufacturer had pleaded guilty to a felony charge of making false statements to the FDA concerning the device's performance and had announced a voluntary recall of all unused Ancure devices.  After the inevitable mass tort litigation commenced, Guidant sought coverage from its umbrella carrier, arguing that it could trigger this "claims made" coverage by paying a $5 million self-insured retention.  Allianz disagreed and this coverage litigation ensued.

At the heart of this dispute was the interpretation of a batch clause in the policy that permitted the insured to treat all losses arising from a single batch of the product as a single occurrence and allowed all subsequent claims arising out of the same batch to relate back to the date that the initial claims were presented.  Guidant argued that even though the two suits that it had received during this policy were for far less than $5 million, it was entitled to allocate all of its Ancure-related losses, including hundreds of later claims, to this policy based on the wording of the batch clause.

This argument was rejected by the Indiana Court of Appeals based on the specific wording of the clause in question,  In particular, the court focused on language in the clause requiring that that there have been an advisory memorandum informing health professionals of a risk of bodily injury or property damage from the product in question.  The Indiana court declined to find that two letters that the insured had issued to physicians around the country concerning problems with the graft product satisfied this requirement as the letters in question had actually assured the physicians that, notwithstanding regulatory and communication deficiencies by the manufacturer, the Ancure product was safe and effective. 

Issues involving whether mass tort litigation triggers multiple or single "occurrence" limits have spawned an enormous number of suits in recent years.  As is evident, however, while multiple "occurrences" may vastly increase an insured's potential limits of coverage, it can also have a devastating impact on whether the insurer pays in the first instance under policies that, as is increasingly common, contain large deductibles or self-insured retentions.

 

Category: Insurance
Posted by: Michael Aylward | Posted on: 5/7/2008 | Permalink & Comments

 

Proportional Indemnity Change Proposed to Massachusetts Indemnity-Limiting Statute -- by MM Partner Tom Federico

Massachusetts Senate Bill 1855 proposes the following changes to G.L. c. 149, sec. 29C: (1) expand the protected scope to include general contractors; (2) expand the protection afforded by imposing a proportional limitation to any indemnity obligation; (3) expand the scope to include additional insured protection; and (4) heighten the standard of proof to trigger an indemnity obligation from a causal connection.  

As it presently stands, Section 29C only voids contractual indemnity provisions that require indemnification for injuries not caused, in whole or in part, by the subcontractor. Section 29C does not proscribe full indemnification where the wording of the indemnity clause requires it so long as the conduct of the subcontractor is a partial cause of the injury.  Thus, a contractual indemnity arrangement where the subcontractor assumes the indemnity obligation for the entire liability when both the subcontractor and the general contractor and/or owner are also causally at fault is enforceable.  Herson v. New Boston Garden Corp., 40 Mass. App. Ct. 779, 788 (1996), citing Harnois v. Quannapowitt Dev., Inc., 35 Mass. App. Ct. 286, 288 (1993); Callahan v. A.J. Welch Equip. Corp., 36 Mass. App. Ct. 608, 611-613 (1994).  Moreover, 29C does not prohibit comparative or proportional indemnity.  North Am. Site Developers, Inc. v. MRP Site Dev., Inc., 63 Mass. App. Ct. 529 (2005).  Indeed, any indemnity provision that requires proportional indemnity, will always withstand scrutiny under 29C because the subcontractor under that type of indemnity provision is only required to indemnify to the extent that it caused the injury.   If the subcontractor was not a cause of the injury there would be no indemnity under the clause and no violation of 29C.  Furthermore, Section 29C does not require a finding of negligence.  The statute requires only a causal connection between the injury or damage and the loss. However, the parties can always require a higher standard of causation ("negligence") to trigger the indemnity obligation.  Section 29C only set the minimum threshold (a causal connection between the subcontractor's work and the injury or damage).

The proposed changes will expand the scope and reach of the protection previously afforded.  General contractors would now be within the umbrella of protection.  In addition, the statute would dictate proportional or comparative indemnity clauses regardless of type of indemnity the parties had bargained for.  Proportional indemnity is clearly a fairer allocation of risk among the parties.  The indemnitor is obligated to indemnify only to the extent that its negligence caused the injury or damage.  However, if the purpose of an indemnity provision is to shift to a subcontractor responsibility, and the insurance burdens, for claims connected with the subcontractor's work, a proportional indemnity obligation in practice delays or even frustrates this purpose.  The fact that the ultimate allocation of responsibility, in practice, must await a determination by a factfinder (judge, jury, or arbitrator) prevents a shift of responsibility only until after the parties have incurred significant costs assessing fault.  In the end, this process benefits the injured or damaged party bringing the claim.

Moreover, the new language would limit the contractual obligation to provide additional insured coverage only to the proportional extent of the negligence of the indemnitor.  The use by insurance companies of blanket and automatic endorsements that are triggered by the contractual obligation to add another party as an additional insured could frustrate the underlying purpose of the statute.  If the additional insured endorsement is triggered by the obligation to add another party as an additional insured and the coverage afforded is broad (e.g., "injuries or damage arising out the ongoing operations of the named insured for the additional insured") then the proposed change will not affect the scope of coverage.  It only impacts the contractual obligation to provide additional insured coverage.  If the contract requires broad additional insured coverage and the additional insured coverage provided was limited, then the proposed statute would protect the contractor from a breach of contract claim that the contractor did not provide the full extent of the coverage required. 

 

Category: Construction Law
Posted by: Tom Federico | Posted on: 5/7/2008 | Permalink & Comments