National News: June 2018

News and verdicts that affect you from across the country

June 08, 2018 Photo

Landmark U.S. Supreme Court decision comes down on the side of employers, the New York Court of Appeals finds the insured, not the insurer, is responsible for cleanup costs within periods when insurance was unavailable, and, in Washington, a governmental department is not subject to liability for environmental contamination as an owner or operator.


DNR Not Subject to Liability for Environmental Contamination

In Pope Res., LP v. Dep’t of Nat. Res., the Washington Department of Natural Resources (DNR) had leased submerged tidelands to a mill operator at a site at Port Gamble, Washington. The plaintiffs sued DNR for contribution to environmental cleanup costs under Washington’s Model Toxics Control Act (MTCA). The issue was whether DNR was a potentially liable party for the purpose of liability under MTCA. The Washington Supreme Court concluded that DNR was neither an “owner” nor an “operator” as those terms are defined under MTCA, and, as a result, was not a potentially liable party. In reaching this result, the court recognized MTCA’s affinity with the federal Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA) statute, under which the control retained by DNR was insufficient to support its liability for environmental contamination at the site.—From CLM Member Geoff Bedell


Decision Opens the Door to Inflated Medical Damages Claims

In California, personal injury plaintiffs may recover the lesser of the (1) amount incurred for medical services, or (2) reasonable market value of those services. Insured plaintiffs may not offer into evidence the full billed amount since it represents a misleadingly inflated number compared to the amount ultimately paid, especially when insurance is involved. Uninsured plaintiffs, though, may offer the amount billed as one indication of what the reasonable market value might be. In Pebley v. Santa Clara, a question arose regarding whether the plaintiff, who had insurance, should be considered uninsured since he chose to be treated by providers outside his insurance plan. The Court of Appeal found, “Because Pebley elected to treat outside his insurance plan, the trial court did not err by allowing him to introduce evidence of the $269,498.65 in billed charges for his past medical services.” The Pebley decision creates uncertainty on evidentiary issues concerning medical bills and insurance-negotiated rates.—From CLM Member Steve Disharoon


Coverage Denied in Boy Scout Campground Accident

In Selective Ins. Co. of America v. Boy Scouts of America et al., a district court determined that Selective did not owe coverage to the Boy Scouts of America or the group’s local council for an injury suffered by a student during an orientation held at Keystone College. After the injured student filed a state court action seeking damages from both the Boy Scouts and the college, Selective filed a declaratory judgment based on the defendants’ failure to adhere to the policy’s additional insured provision. The clause extends coverage to any person or organization that signs a formal agreement with the college. Although Keystone College did receive a confirmation letter from the local council requesting that it be named as an additional insured, the school failed to ask Selective to do so. In response, the Boy Scouts argued that its agreement with the college was ratified by the parties’ conduct. The federal judge, however, rejected this argument and concluded that “[b]ecause the [confirmation] was not executed as defined by the policy, the blanket additional insured clause was not triggered.”—From Northeast Ohio Chapter Vice President Michael C. Brink


Evidence of Collateral Source Payments May Be Admissible

The Eleventh Circuit held in ML Healthcare Services LLC v. Publix Super Markets Inc. that evidence of collateral source payments may be admissible to show a doctor’s bias regarding his causation testimony about medical treatment. Georgia’s collateral source rule allows that receiving benefits or mitigating losses from sources other than a defendant will not operate to diminish plaintiff’s recovery of damages. However, evidence of collateral source payments is admissible if it serves a valid evidentiary purpose other than revealing the benefits. The Eleventh Circuit upheld the district court ruling that when a medical provider’s business model includes fronting medical expenses for plaintiffs to treating physicians, it is relevant and probative as to the bias of the treating doctors—as was the reasonableness of the medical expenses—and serves the valid evidentiary purpose of impeaching the witnesses.—From Alabama Chapter Secretary Jeremy Richter

Washington D.c.

Supreme Court: Employers Can Uphold Arbitration Agreements

In a landmark 5-4 decision in Epic Systems Corp. v. Lewis, the U.S. Supreme Court affirmed that corporations have the right to force employees to sign arbitration agreements barring them from settling workplace disputes in court, both individually and in groups. The majority opinion, authored by Justice Neil Gorsuch, held employers: (1) may rely upon clauses in their employment contracts requiring employees to arbitrate their disputes individually; and (2) may require employees to waive the right to resolve those disputes through joint legal proceedings. The majority opinion drew praise from employers—as it will undoubtedly cut down on employee lawsuits—and strong rebukes from labor leaders who say it rolls back workers’ rights—significantly limiting workers’ recourse in workplace disputes—and fortifies the power of corporations over their employees.—From CLM Member Stephen Henning

New York

Insurer Not Obligated to Indemnify for Contamination

In Keyspan Gas East Corp. v. Munich Reinsurance Am. Inc., the Court of Appeals, involving an issue of first impression, held that an insurer was not obligated to indemnify an insured for cleanup costs the insured incurred from contamination that occurred before and after the periods of the insurer’s policies when insurance was otherwise unavailable to the insured. In rendering its decision, the court noted that New York has adopted a pro rata allocation method governed by the particular language of the relevant insurance policy. The court held that a pro rata allocation theory should apply to policies containing language limiting indemnification to losses and occurrences during the policy period and that the insured, not the insurer, should be responsible for costs incurred within periods when insurance is unavailable to the insured.—From CLM Member Kevin E. Wolff

About The Authors
Phil Gusman

Phil Gusman is CLM's director of content.

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