Around the Nation: September 2013

State news and updates from CLM state chairs, reps, and committees.

September 26, 2013 Photo


Bar Scuffle and Duty of Care

In Harrington v. The Crystal Bar, the plaintiff entered a bar in Bozeman and began arguing with the bouncer and a second person. The plaintiff left the bar upon management’s request and was assaulted by the second person in front of the bar, rendering him unconscious and requiring hospitalization. The plaintiff sued the bar for negligent screening and training of employees, promoting the “risk of conflict” between the plaintiff and his assailant, and failing to protect the plaintiff or contact the police. The plaintiff also sued for liquor liability under Montana’s dram shop law.

Due to disagreeing accounts of the events before the assault, the court held that a material fact issue remained as to whether the bar breached its duty of reasonable care owed to the plaintiff, stating that the bar’s duty could conceivably extend to the bar’s exterior area. There also was a factual dispute as to the bar’s knowledge about the conflict. However, merely closing the door to a potentially violent situation did not foreclose the bar’s duty of care. The court rejected the dram shop claim, finding no evidence that the bar served the assailant before the altercation.—From Montana State Lead Chair James C. Cumming


Assault Cases Separate

In Roman Catholic Diocese of Brooklyn v. National Union Fire Ins. Co., the New York Court of Appeals issued two important holdings regarding insurance coverage claims. First, a notice of disclaimer under insurance law § 3420(d)(2) is not required in the event there is no insurance and, therefore, no obligation to disclaim or deny.     

The second key issue involves how the court determines whether or not to aggregate events in terms of triggering coverage. Absent policy language indicating intent to aggregate separate incidents into a single occurrence, the unfortunate event test should be applied to determine how occurrences are categorized for insurance coverage purposes. The unfortunate event test requires consideration of “whether there is a close temporal and spatial relationship between the incidents giving rise to injury or loss, and whether the incidents can be viewed as part of the same causal continuum, without intervening agents or factors.” In this case, there was a self-insured retention (SIR) of $250,000 per occurrence. Because the policy did not aggregate the sexual assaults, the diocese had to pay its SIR for each assault instead of being able to aggregate the claims.—From New York State Chapter Member David A. Glazer


Contract Terminations and Subcontractors

In Shelter Products v. Steelwood Construction, the Oregon Court of Appeals held that, when a contract is terminated “for convenience” and not “for cause,” a general contractor cannot deduct its damages to repair work completed by a subcontractor. Contractors and their insurers should carefully scrutinize construction contracts that permit a contractor to be terminated without cause. If a general contractor uses such language and attempts to terminate an agreement with a subcontractor, it may not be able to seek damages or an offset for improper work performed by the subcontractor.—From Oregon State Chapter Co-Chair Jack Levy


$1 Billion Workers’ Comp Rebate for Employers

In May 2013, the Ohio Bureau of Workers’ Compensation’s (BWC) board of directors unanimously approved a $1 billion premium rebate for public and private employers that purchased coverage from the state. The rebate for approximately 210,000 employers equals about 56 percent of employers’ 2011 rate year premium. The action was set forward by Governor Kasich and was made possible by larger-than-expected fund balances at BWC generated by strong investment management.

Employers participating in Group Retrospective Rating and Individual Retrospective Rating will have their rebates calculated separately based on their 2011 net premiums relating to their retrospective rating programs.—From Ohio State Chapter Member Leo McCann


Proof of Fair and Reasonable Value of Medical Expenses

In Brethren Mutual Ins. Co. v. Kenneth Suchoza, Maryland’s Court of Special Appeals held that an adjuster’s testimony concerning the amount of payments made by an insurer to a plaintiff’s health care providers was inadmissible to prove the fair and reasonable value of medical expenses incurred. The amount paid to the health care providers, which was accepted as full payment, was less than the amount stated on the bills. The insurer sought to introduce the adjuster’s testimony as proof of the fair and reasonable value of the expenses, but the trial court excluded the evidence. The Court of Special Appeals affirmed, holding that testimony establishing the amount paid to satisfy a bill is insufficient to establish its reasonableness.—From Maryland State Chapter Co-Chair Susan Smith


Double the Underlying Judgment

In the case Rhodes v. AIG Domestic Claims Inc., after receiving an $11.3 million verdict against a defendant driver for catastrophic injuries resulting in paraplegia, the plaintiffs brought a c. 93A § 9 action against the primary and excess insurers for failure to effectuate prompt, fair, and equitable settlement of tort claims. The plaintiffs were awarded $448,000, the interest on the underlying settlement, against the excess insurer for violation of c. 93A § 9.

On appeal, the Supreme Judicial Court held that the measure of damages the plaintiffs were entitled to recover under the law must be based on the underlying judgment in the plaintiffs’ tort action, not the underlying settlement. Therefore, an award of double the underlying judgment, or $22 million, was not a violation of the defendant’s due process rights.—From Massachusetts State Co-Chair James Campbell


No Review of Liability Medicare Set Asides

In DuHamell v. Renal Care Group East Inc., the New Jersey Superior Court was to decide whether to enforce settlement agreements and declare Medicare’s interests adequately protected notwithstanding Medicare’s response to plaintiffs regarding their claims. The court ruled to approve the liability Medicare set aside (LMSA). The ruling stemmed from the plaintiffs’ motion to enforce a settlement, which was reached at mediation, and the LMSA was submitted to CMS for review. The response was a “no review” letter indicating that it was due to resource constraints and advising that it provided no release from the obligations in Medicare Secondary Payer, 42 U.S.C. §1395(y)(b)(2). The plaintiffs moved to enforce the settlement, and the defendant did not oppose. The court granted the motion and opined that the settlement protected Medicare’s interests and was reasonable and reliable.—From New Jersey State Co-Chair Todd DeStefano


About The Authors
Bevrlee J. Lips

Bevrlee J. Lips was managing editor of Claims Management magazine (now CLM Magazine) from January 2012 until March 2017.

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