Premises Liability, Mode of Operation

Posted on June 25, 2015 04:39 by Philip Howe

*The Massachusetts Supreme Judicial Court has on June 23, 2015  ruled that the “mode of operations” approach to premises liability applies to slip and fall incidents including slipping on a wet spot on the dance floor in a bar.

Mode of Operations

The Massachusetts Supreme Judicial Court had previously applied the “mode of operations” standard of negligence in a slip and fall at a self-service supermarket, Sheehan v. Roche Brothers. Supermarkets, Inc. 448 Mass. 780, 788 (2007). Traditionally, a plaintiff asserting premises liability has been required to show that the owner of the premises had actual or constructive notice of an unsafe condition that gave rise to an injury for which compensation is sought.

Under the mode of operations approach the plaintiff satisfies the notice requirement by showing that the injury was attributable to a reasonably foreseeable unsafe condition related to the premises owner’s chosen mode of operation. Opinion, page 2.

Under the traditional approach, the plaintiff was required to prove how long the substance creating the hazardous condition has been on the floor. This imposed an unfair burden on plaintiffs to “adduce evidence more readily available to defendants.”  Opinion,  page 14.

Slip and Fall

The plaintiff in this case had broken her leg after slipping and falling on a wet dance floor at a nightclub owned by the defendant. Patrons were permitted to consume their alcoholic beverages on the dance floor while they danced. The dim lighting was accented by strobe lights. The staff included security guards, barbacks and a manager responsible for ensuring the dance floor was free of debris. Opinion pages 3-4. The plaintiff and her friends danced for several hours. She then stepped on a wet surface, slipped and fell. Opinion page 4.

The Trial Court granted summary judgment to the defendant. 

Broadening the Mode of Operations Approach

In Sheehan, supra, the plaintiff had fallen on a grape in a grocery store. The grapes were packaged in individual bags that were easily opened by hand and were susceptible to spillage by customers. Opinion, page 6. In Sheehan, supra¬, the Court noted that the evolution of grocery stores from clerk-assisted to self-service operations created a new risk for customers. They generally may not be as careful and vigilant as a store owner because customers are not focused on the store owner’s concern of keeping items off the floor to avoid potential risks of harm. Opinion page 7.

The Court ruled that it would be unjust to saddle the plaintiff with the burden of isolating the precise failure that caused an injury, particularly where the injury results from a foreseeable risk of harm stemming from an owner’s mode of operation. Wollerman v. Grand Union Stores, Inc. 47 N.J. 426, 430 (1966). The Court wrote further that, irrespective of the particular mode of operations involved, the plaintiff “bears the burden of establishing that the defendant failed to exercise reasonable care in protecting its patrons from the unsafe conditions facilitated by its mode of operations.” Opinion page 9.

The Court wrote that in the case of a nightclub permitting patrons to dance with their drinks, such reasonable care might include sufficient staff to monitor and clean up spilled liquid at sufficient intervals. Or they might use beverage containers that are less likely to spill, instead of plastic cups. Opinion pages 9, 13. The Court ruled that it was reasonably foreseeable that permitting patrons to dance with beverages in plastic cups would result in liquid on the dance floor. The spill creates an unsafe condition that a patron such as the plaintiff “is ill-suited to discern.” The owner is in a far better position to identify and investigate the source of the condition once it has occurred. Opinion page 13.

The plaintiff must prove either that the owner caused the unsafe condition or had notice of it. “Under the mode of operations approach, foreseeability of condition satisfies the notice requirement.” Opinion page 12. “The nightclub manager testified in his deposition that, “spills on the dance floor are part of the business.” Opinion page 15.  Considering the evidence in the light most favorable to the Plaintiff, the reasonable inference is that a spilled beverage produced the wet surface on which plaintiff slipped. Opinion pages 15-16.

The Court reversed the summary judgment in favor of the defendant and remanded the case to the trial court.

SARKISIAN V. CONCEPT RESTAURANTS, INC., ___N.E. 3d ___, 2015 WL 3833877 (Mass. 2015).

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This year’s DRI Fidelity and Surety Roundtable featured some excellent presentations.  One that really caught my attention was Ronald Freidberg’s presentation on “pay-if-paid” clauses and recent case law affecting their enforcement in Ohio.  Contingent payment clauses can be used to the surety’s advantage in defending payment bond claims.  The practical implications of such clauses ensure that the surety will rarely be relying upon these provisions without an active principal.  Practically speaking, if the owner or upstream contractor is withholding money from the principal and the principal is using that withholding of money as a defense to a downstream contractor, they are usually going to be actively involved in the litigation related to the project and the defense of the claim.   It is rare that a principal will simply walk away from money owed on the project after the work has been performed or the material has been delivered.  Still, the surety must be knowledgeable of these defenses.  There is no doubt that these clauses can be used to the surety’s advantage in defending payment bond claims. 

Several questions arise every time a surety comes across a contingent payment clause.  How are these clauses enforced and what are the practical differences between pay-if-paid clauses and pay-when-paid clauses?  While there may be headings that designate a certain contractual clause as a “contingent payment provision,” it is rare that the construction contract will be drafted with actual heading titled: “pay-if-paid” or “pay-when-paid.”  What happens when there is not an active principal?  Can the surety, as a secondary obligor, rely upon this defense just like the other defenses of the principal?

Application of a Pay-If-Paid Clause versus a Pay-When-Paid Clause

Both pay-if-paid and pay-when-paid clauses are “contingent payment clauses.”  While their labels are only separated by one word and they are both risk-shifting provisions, their applications can be wildly different.

Generally speaking, a pay-if-paid clause makes payment from the owner or the upstream contractor a condition precedent to payment from the principal to the downstream contractor.  A pay-when-paid clause, on the other hand, only deals with the timing of the obligation to pay the downstream contractor. At some point under these pay-when-paid clauses, when it becomes clear that the owner or upstream contractor is simply refusing to pay and is not simply withholding payment, the principal will become liable for the amounts owed to the downstream contractor.  This is generally a fact intensive inquiry and can be affected by such circumstances as the length of delay in payment, the reason for non-payment, and the downstream contractor’s performance on the project.

Interpreting a Contingent Payment Clause as Pay-If-Paid or Pay-When-Paid

Whether either clause will be upheld is a very jurisdictionally specific question.  Some jurisdictions favor the right to contract and will enforce these clauses as long as the parties clearly establish that they are shifting the risk of nonpayment to the downstream contractor in the construction contract. Others will practically interpret all clauses as pay-when-paid clauses.  Still others frown on these clauses altogether.    

My home state of Texas is a right to contract state.  Therefore, these provisions will be enforced as long as the parties’ intent to shift this risk to the downstream contactor is clear in the construction contract.  There is no magic language differentiating a pay-if-paid clause from a pay-when-paid clause. However, most Texas case law interpreting a contingent payment clause as a pay-if-paid clause states that the owner’s or up-stream contractor’s payment is a “condition precedent” to the principal’s liability to the downstream contractor.  If this contingency to liability is not clear, the clause very well may be interpreted as a pay-when-paid clause and will only affect the timing of the principal’s liability.  If the contingent payment provision is interpreted as a pay-if-paid, then the clause is subject to the “Texas Contingent Payment Statute,” which provides four scenarios which serve as exceptions to the application of these clauses: (1) the owner’s or upstream contractor’s refusal to pay is caused by the principal’s failure to meet its obligations; (2) the contingent payment clause is contained in a sham contract; (3) the downstream contractor provides timely notice objecting to the enforcement of the contingency payment clause; or (4) the enforcement of the clause would be unconscionable.  The application of any of these exceptions will depend heavily on the facts and circumstances of the claim. 

The Surety’s Ability to rely upon a Contingent Payment Clause

Logically, the surety is entitled to rely upon this defense when it is available to its principal.  It is black letter law that the surety, as a secondary obligor, may rely upon all defenses of its principal to any claim under the bond.  However, I have had claimants argue that it is void as to the surety based upon public policy.  Most statutes requiring a statutory payment bond include language that prohibits the parties from contractually waiving claims under the bond as a matter of public policy.  While most sureties will argue that (1) this is not the intent of such prohibitions and (2) a contingent payment clause is only a defense and it is not a waiver of a claim, the wary surety practitioner should know that such arguments are out there.  The language in the Texas Contingent Payment Statute also suggests that the surety may rely upon these contingent payment provisions.  In discussing the above referenced exceptions, the statute states that “a contingent payor or its surety may not enforce a contingent payment clause to the extent . . . .”   The inclusion of the surety in this language, at the very least, suggests that the surety has the right to enforce these clauses whenever these exceptions do not apply.

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Categories: Fidelity & Surety | Seminar

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*The Massachusetts Court of Appeals has on June 17, 2015 ruled that the burden is on the insurer to prove the applicability of an exclusion. Because the facts alleged in the Complaint in the underlying action do not establish that the business pursuits exclusion in a homeowner’s policy applies to all potential liability as a matter of law, the insurer had a duty to defend.

The insured was licensed electrician. The Complaint alleged that the insured acted as a general contractor, contracted with others and oversaw the work of renovations to a house owned by his parents.  In the underlying action for personal injuries by the plumber suffered on the project, the plumber recovered a judgment t for $226,218.49.

Two Policies

There were two homeowners policies in force issued by two different insurers. Vermont Mutual assumed the defense of the parents but refused to defend their son, the electrician. Preferred Mutual defended the son but under a reservation of rights.

Preferred filed its separate declaratory relief action against Vermont and the insureds. It sought a judgment declaring that its policy did not provide coverage and that Vermont was obligated to defend and indemnify the son. Preferred also asserted a claim for half of Preferred’s defense costs incurred on behalf of the son.

Exclusion and Coverage

The Vermont policy excluded coverage for bodily injury “arising out of or in connection with a business engaged in by an insured.” The Vermont policy also provided that it was “excess over other valid and collectible insurance…”

The Preferred policy covered the son “only with respect to the conduct of a business of which you are the sole owner.”  The Preferred policy also provided that it is the primary policy and that the insurer’s share is “based on the ratio of its applicable limit of insurance to the total applicable limits of insurance of all insurers.”

Duty to Defend

The Court ruled that the duty to defend arises when the allegations in the Complaint in the underlying action are reasonably susceptible of an interpretation that states or roughly sketches a claim that would be covered by the policy terms. The duty to defend is based on the facts alleged in the complaint and on the facts known or readily knowable by the insurer that may aid in its interpretation of the allegations in the complaint. Billings v. Commerce Ins. Co., 458 Mass. 194, 200-201 (2010).

The Court rejected Vermont Mutual’s position that the above business pursuits exclusion applied arguing that the Complaint referred to the son’s occupation and his role in supervising the project. The Court rejected this position and found that the son’s parents owned the building and the project was the renovation of their “mutual home.”

Two Prong Test

The Court went on to rule that, while the Massachusetts Courts had not yet faced this issue, there was in most jurisdictions a two prong test for determining when the business exclusion applied, that is, when an activity arises out of or in connection with the insured’s business. Massachusetts adopted that test. Opinion, page 8. 

The first prong is “continuity”, the activity in question must be one in which “the insured regularly engages as a means of livelihood”. The second prong is the “profit motive”, the purpose of the activity must be “to obtain monetary gain.” Opinion, page 8. 5 New Appleman on Insurance Law Library Edition, Section 53.06[2] [d] [i] (2014); 9A Couch on Insurance Section 128.13 (3d ed. 2006); 3 Windt, Insurance Claims & Disputes, Section 11:15 (6th ed. 2013); Springer v.Erie Ins. Exchange, 439 Md. 142, 162 – 164 (2014).

The Court found that there was no indication in the Complaint that the son’s alleged supervisory or disposal activity on the project were ones “in which he regularly engaged in connection with his means of livelihood.” The Court further found that the Complaint did not indicate whether the son’s participation in the renovation project “was motivated by profit.” The Complaint left it entirely possible that the son contributed his labor out of a desire to help his parents and improve the residence in which they all lived. Opinion, page 9.

Burden on the Insurer

The Court ruled, “It is the insurer who bears the burden of proving the applicability of an exclusion.” In order for an exclusion to negate an insurer’s duty to defend ab initio, the facts alleged in the Complaint must establish that the exclusion applies to all potential liability as a matter of law. Opinion, Page 9. Because the facts alleged in the Complaint do not establish that the business pursuits exclusion applies to all potential liability as a matter of law, Vermont Mutual had a duty to defend and should not have disclaimed coverage outright. Opinion, page 10.

Preferred also had a duty to defend. The claims asserted in the Complaint are also potentially within the scope of Preferred’s  coverage.  The Complaint alleged that the son was an electrician who had been in charge of the renovations project. These allegations do not negate the possibility that he was engaged to work on the renovations as an electrician and that his supervisory activities and/or his removal and disposal work were ancillary to his electrical work and performed in the conduct of his business. Herbert A. Sullivan, Inc. v. Utica Mutual Ins. Co., 439 Mass. 387, 394-395 (2003).

But, the Court further ruled that Vermont could not demonstrate that the Preferred policy afforded coverage to the son. The Preferred policy covered the son only with respect to the “conduct of a business of which [he was] the sole owner.” Opinion, page 15. That business was identified as the son being an electrician. The record revealed no facts from which it might reasonably be inferred that the son was conducting his business as an electrician at any time relevant to the occurrence of the accident at issue. Opinion, page 16.

The Court concluded that both Vermont and Preferred had duties to defend the son. But, while Vermont had a duty to indemnify the son, Preferred did not. Furthermore, Preferred was entitled to equitable contribution and Vermont shall reimburse Preferred 50% of its costs in defending the son. Opinion, pages 16-17.

Preferred Mutual Insurance Company v. Vermont Mutual Insurance Company, ___N.E. 3d ____, 2014 WL 99009470 (MA Ct. App. June 17, 2015).

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In a negligent misrepresentation claim, the Vermont Supreme Court strictly construed plaintiffs’ need to prove direct reliance on the alleged misrepresentation. Lacking such proof, the claim failed. To assert a viable consumer protection claim, plaintiffs must prove not merely that defendant made a statement, but that defendant was directly involved in the transaction at issue.  Because it was not, the claim failed.

The case is Glassford v. Dufresne & Associates, P.C., 2015 VT 77 (June 12, 2015).  Plaintiffs-homeowners alleged negligent misrepresentation and violation of the Vermont Consumer Protection Act. Superior Judge Toor granted summary judgment for defendant, and the Vermont Supreme Court affirmed.  

The case involved defendant’s certification to the Agency of Natural Resources that the septic system in plaintiffs’ new home had been installed, and that it operated, as permitted.  Vermont law (10 V.S.A. § 1973) requires such a certification.  The builder of the home hired defendant to make the certification.  Defendant filed the certification with the Agency shortly before plaintiffs purchased the home from the builder.  Within a few weeks of their closing on the house, plaintiffs’ septic system failed.  Plaintiffs contended that the soil placed over the system was improperly graded.  Defendant contended that the house was too large; that plaintiffs operated a daycare center that added to the wastewater entering the system; and that plaintiffs’ horses were allowed to walk over the system.  Plaintiffs alleged that defendant:  1) failed to properly inspect the system, and 2) misrepresented the proper construction of the system in the certification to the Agency.

The superior court granted judgment for defendant on the negligent misrepresentation claim because plaintiffs never saw the certification until the lawsuit commenced, and so couldn’t have relied on it in making their decision to purchase the home.  The court granted judgment for defendant on the consumer protection claim because the parties did not contract with each other for a sale of goods or services.

On appeal, with respect to the negligent representation claim plaintiffs argued that they effectively relied on the certification because, even though they did not see it before they closed on the home, defendant had a “duty” to furnish it to them.  Furthermore, they argued, because their closing attorney received a copy of the certification just before the closing, they relied on it through their agent.

As had the superior court, the Vermont Supreme Court analyzed the negligent misrepresentation issue under the Restatement (Second) of Torts § 552.  The Court determined that plaintiffs – homebuyers purchasing a newly-constructed septic system – were among the class of people for whom the certification requirement in 10 V.S.A. § 1972 was intended.  Thus, defendants could be liable to plaintiffs.  However, plaintiffs’ claim failed because they demonstrated no direct reliance on the certification (i.e., the alleged misrepresentation), as § 552 requires.  The Court surveyed case law from around the country and determined that in negligent misrepresentation claims plaintiffs must demonstrate that they directly relied on the alleged misrepresentation.  Because plaintiffs here did not ever see the certification before they closed, they could not have relied, and did not rely, on what it said.  The fact that their closing attorney saw the certification did not satisfy their burden to show direct reliance on it. The attorney’s knowledge of the certification could not substitute for actual reliance by plaintiffs on its contents. Accordingly, the Court affirmed the superior court’s judgment for defendant on the negligent misrepresentation claim.

On the consumer protection claim, the superior court ruled for defendant because the parties were not in privity. On appeal, the Supreme Court held that privity is not required on a consumer protection claim, but that the defendant must still be directly involved in the transaction that gives rise to the alleged liability.  Here, defendant’s filing of the septic certification with the Agency was an act unrelated to the sale of the home to plaintiffs.  The filing was unrelated to the issue of who bought or owned the home.  There was no interaction between plaintiffs and defendant.  Accordingly, defendant could not be liable under the consumer protection act and the Court affirmed judgment for the defendant on this claim.

It should be noted that one justice vigorously dissented.  

A copy of the decision is attached hereto and is available at

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DRI: It’s Personal!

Posted on June 12, 2015 02:45 by Tanya Lawson

I saw a post recently on the DRI Diversity blog that impacted me at my core.  It is the sort of post that some organizations would have shied away from because it raised serious issues on a diversity topic that is still very controversial for some.  Instead, in subsequent days I saw other posts from DRI members lauding the author of the article for his courage to raise these important issues.  This is one of the primary reasons that I gravitated toward and have been a longstanding member of DRI over any other legal organization.  DRI’s commitment to diversity is real!  DRI and its members have been at the forefront of these issues and I have found DRI to be an oasis in what can sometimes seem like a legal desert.

As an African American woman who has been practicing over 20 years, there are some circles in which I have not always felt welcome or appreciated.  I have had to work hard to try to fit in and get ahead in a profession that I love but which can sometimes be very challenging for African Americans, especially in a large firm environment.  I can remember it like it was yesterday -- the first time I attended a DRI Diversity for Success Conference in Chicago almost a decade ago.  It was at a reception which was filled with people of all ages and backgrounds but who all seemed to be excited about making diversity a priority for the organization.  People were warm and welcoming and I began an odyssey with DRI that would take me to the highest levels within the organization and ultimately the profession.

Ever since that first day, I looked forward to attending the Diversity for Success Conference each year.  I would re-connect and solidify relationships with old friends and would get the sustenance I needed to go back to Florida to continue my drive to achieve success in the profession.  Indeed, the diversity conferences became a fixture in our African American Forum budget at my prior firm and attorneys would vie for a spot on the team selected to attend.  Each time I have attended the conference since that first day, I have experienced an intense feeling of belonging and have felt revived and rejuvenated.  Not only have my experiences with DRI had a curative quality, I gained deep insights as well as good friendships as a result of my participation in DRI sponsored events.

I was for some time the only African American female partner in my former AmLaw 200 firm, and then later only 1 or 2 African American female partners.  DRI’s diversity committee offered sometimes the only opportunity I had to interact with and bounce ideas and experiences off a variety of other African American male and female partners in large law firms.  As co-chair of diversity at my prior firm, I also leaned heavily on DRI’s leadership for ideas to assist me to bring new insights to the diversity and inclusion dialog.  Douglas Burrell, DRI’s current Membership Chair, has been a source of constant encouragement and inspiration.  Pam Carter, who heads up the DRI’s Diversity Committee, was also a tremendously positive influence.

From my perspective, DRI should be a staple in any lawyer’s portfolio of membership organizations.  For me it has been intensely personal and I have thoroughly enjoyed my association with DRI!

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Categories: Diversity | DRI Brand

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Vermont was the first state in the country to sue an alleged “patent troll” for consumer protection violations.

Vermont’s case against MPHJ Technology Investments, LLC (MPHJ) is now over two years old and virtually nothing has been decided.  No discovery has been done; no documents have been produced; and no depositions have been taken.  But much time has been spent; much ink has been spilled; many, many briefs have been filed; and much money has been spent.  In the two years, only a jurisdictional battle has been fought:  whether the case involves MPHJ’s patent rights, and therefore is governed by federal law, and therefore belongs in federal court – as MPHJ contends.  Or – as the Attorney General contends – whether it is merely about state law, i.e., whether MPHJ’s sending of patent infringement “cease and desist”-type letters to many Vermont companies, which letters the Vermont Attorney General contends contained false statements, violates Vermont consumer protection law, regardless of whether MPHJ’s patents are valid and enforceable, such that the case belongs in state court.  This is stuff only a legal wonk could love.

While all this jurisdictional back-and-forth has played out over the last two years, involving two appeals to higher federal courts, MPHJ has recently “upped the ante,” so to speak, by filing a separate lawsuit against Attorney General Sorrell, claiming that Vermont’s efforts to stop or restrict MPHJ’s activities in Vermont infringe MPHJ’s federal civil rights.

Thus, there are now two legal cases involving the alleged "patent troll" MPHJ and the Vermont Attorney General pending in Vermont.  In the second case, federal Judge William Sessions just issued an important decision.

But before turning to that decision, some background.  In the original case, State of Vermont v. MPHJ, the Vermont Attorney General sued MPHJ in Vermont state court, claiming that MPHJ's activities in sending threatening "cease and desist"-type letters to Vermont companies violates Vermont's consumer protection law.  As noted above, all of the activity in that case so far has involved whether the case belongs in state or federal court.  MPHJ has twice tried to "remove" the case to federal court on the grounds that no matter how Attorney General Sorrell frames his Complaint, it is fundamentally about MPHJ’s federal patent rights.  Federal Judge Sessions has twice ruled against MPHJ and "remanded" the case back to state court, finding that the case is not about the validity of MPHJ’s patents per se, but only about its allegedly fraudulent activity in sending threatening letters to Vermont companies, which is a matter of state consumer protection law, not patent law, and, hence, there is no federal jurisdiction.  The first time Judge Sessions remanded the case, MPHJ appealed the remand order but it was affirmed by the federal appeals court, confirming that there was no issue of federal law and that the case belongs in state court where the Attorney General had filed it.  In its second attempt at removal, MPHJ argued that an amendment to the Attorney General’s Complaint invoked Vermont’s brand new anti-troll act, 9 V.S.A. § 4195 (effective July 1, 2013), which gave MPHJ a new basis for seeking federal jurisdiction.   The Attorney General responded that the Amended Complaint does not in fact invoke the anti-troll act and that the suit against MPHJ in no way relies on the anti-troll act but rather only upon pre-existing consumer protection law.  Judge Sessions agreed with the Attorney General, again sending the case back to state court.  MPHJ is now appealing that second remand order.

In the second case, MPHJ v. Sorrell, filed in federal court and also before Judge Sessions, MPHJ is the plaintiff.  MPHJ alleges that the State of Vermont is violating MPHJ’s federal civil rights by interfering (supposedly) with MPHJ’s rights to enforce its patents by sending its "cease and desist" letters into Vermont.  In the latest activity in that case, Judge Sessions has just thrown out most of the MPHJ’s Complaint.  See Opinion and Order dated June 3, 2015.  The only claim that Judge Sessions has allowed to proceed, for the time being at least, is MPHJ’s challenge to the constitutionality of the new anti-troll act.  Although MPHJ is not currently being sued under that act, Judge Sessions found that MPHJ’s fear of future prosecution under that act is justified because MPHJ: a) says that it does plan to continue its practice of sending “cease and desist” letters to suspected Vermont infringers, and b) can reasonably fear that that activity will be prosecuted under the anti-troll act.  Thus, MPHJ will be allowed to challenge the constitutionality of that act.

Thus, both of the Vermont lawsuits involving MPHJ and its alleged “patent trolling” activities will continue to grind away. 

There will surely be more to come.

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Categories: Patent Law

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What follows is a blog post by me on June 25, 2009.  I can't resist reposting it because the 2015 Insurance Bad Faith and Extra-Contractual Liability Seminar is nine days away.  The Program Chair this year is the below-mentioned Chris Martin.  And the below-mentioned Bill Kobokovich will hold forth on "Handling Multi-Claimant and Multi-Insured Bad Faith Exposures."  (And, of course, Tony Zelle succeded me as Chair of the Insurance Law Committee.)  What is old is new again.  And I predict another synergistic and dynamic experience.  I'll see you there.  Meanwhile, here's that blog post, vintage 2009:   

"Were you at the bad faith seminar in Boston last week? Wasn’t it great? Historically, the Insurance Law Committee has done this program every other year. People who do bad faith litigation, or handle that kind of claim, really look forward to it. In my opinion, there was no disappointment this year. Congratulations to the program chair and vice chair, Tony Zelle and Bill Kobokovich.

There were many high points of the seminar. One of the best was a panel discussion on litigating “institutional bad faith.” The panel consisted of the aforementioned Bill Kobokovich (Travelers), Chris Martin (Martin Disiere, et al) and Richard Fabian (RiverStone). A lot of people told me how much they learned from the panel. The really cool part was that Chris had just gotten a defense verdict, in an institutional bad faith case against Bill’s company, the week before. And, get this; the senior partner of the plaintiff law firm that lost the case was in the audience there in Boston. I don’t believe he submitted any questions to the panel. : )

In any event, I felt the whole program had an outstanding “vibe.” The education, networking and collegiality were synergistic, creating a dynamic atmosphere. Did you feel the same way? To me, the atmosphere in a seminar can make all the difference in the world.

I don’t see how anyone who handles bad faith matters can miss the Insurance Law Committee’s semi-annual seminar." Click here to register for the DRI Insurance Bad Faith and Extra-Contractual Liability Seminar in Chicago, June 17–19. 


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Insurance for Lawyers

Posted on June 2, 2015 03:57 by Steve Crislip

We advise, defend, and prosecute insurance-related claims regularly. Lawyers sometimes do not pay close enough attention to their own coverages, however.  You should have a basic system to review and check all your coverages on a regular basis.  We were trained as lawyers, not business owners.

Recently an Illinois Supreme Court case (Ill. State Bar Ass’n Mutual Ins. Co. v. Law Office of Tyzzolino & Terpinas, 2015 BL 44614, Ill. 117096, 2/20/15, released 3/31/15) invalidated the firm’s professional liability policy for all the lawyers when one of the lawyers falsely denied knowing of any circumstances that might led to a malpractice claim. The court took away the coverage of the other lawyers and denied them the “innocent insured” doctrine.  Frequently claims against a firm arise out of the acts of a “lone wolf” doing things unknown to the others.  Here, the application process was flawed by just one lawyer not being truthful.  I have often said in law practice, you really do become your brother’s and sister’s keeper.

To maintain a modern practice, you should protect yourself with coverage. Often without regard to facts or legal basis, claims get made.  Of course, mistakes often happen.  You do not want to risk your likelihood and your assets by not having adequate coverage, whether it is general liability, employment practices, errors and omissions, or cyber insurance.

With regard to the legal malpractice coverage part, speakers at the National Legal Malpractice Conference in Washington, D.C. recently emphasized that timing is everything.  With claims made and reported coverage, the covered act needs to have occurred during the policy period and the claim reported within the period.  So, you need to know if a “claim” has been made to one of your lawyers and need to know how and when to report it.  You need to see your policy and make sure you have timely reported, with the required specificity.  In my view, that requires some looking and asking in a firm and the establishment of a culture where concealment is not tolerated.

I can see staff, or your outside agents or brokers, handling some of your insurance requirements.  With the important professional liability coverage, I suggest you need knowledgeable lawyers and a required overview of the other lawyers.  I find lawyers to be an independent lot who often chaff at oversight of them.  The issues are too important to leave to a laissez faire approach. You really need a strong loss prevention culture in your firm, regardless of its size.  Part of that is the oversight on coverage and the individual accountability of reporting a claim to others in the firm.  The individual lawyers who gloss over a claim feeling there was no merit to it, or hope it will go away can bring down the house of others. As they said at the end of the annual conference, “Communicate with your carrier and report everything.”  Expensive coverage is better than no insurance.”

This blog was originally posted on Lawyering for Lawyers blog on June 1. Click here to read the original entry. 


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On Wednesday, the Seventh Circuit held that officers who detained a police sergeant without a warrant were entitled to qualified immunity. In Mucha v. Jackson, No. 14-3619, 2015 WL 3397026 (7th Cir. May 27, 2015), at the request of a public retirement system, a psychiatrist examined a police sergeant who had not reported to duty for seven months. In a report three weeks later, the psychiatrist stated that the sergeant was threatening to shoot police commanders and could not be sent back to work. The police department received the report a couple weeks after that. Two officers then went to the sergeant’s home, handcuffed him without an arrest warrant, drove him to a mental health facility, and signed an emergency detention form. The facility held the sergeant for three days. 

The sergeant sued, alleging in part that two officers who detained him did so without warrant or other justification in violation of the Fourth Amendment. The district court denied these officers’ motion for judgment on the pleadings with respect to their claim for qualified immunity but the Seventh Circuit reversed. It dismissed the two officers, finding they were not violating clearly established law. 

The Seventh Circuit held that a state law cannot preempt the Fourth Amendment, but it can establish a standard of conduct consistent with the amendment but particularized to a specific situation. The sergeant’s statements to the psychiatrist, the psychiatrist’s report, and the sergeant’s access to guns gave the arresting officers probable cause to believe he was mentally ill and posed a danger to himself and other officers, consistent with their state’s emergency detention statute. And though the sergeant had made these statements to the psychiatrist a month before the police acted, they were recent enough for the statute’s requirement of showing recent threats or attempts. The Seventh Circuit did not decide whether the police would have been deemed reasonable without the state detention statute, but, it wrote, “we imagine that they would have been.”

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Categories: Governmental Liability

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I recently read an announcement by a top U.S. law firm congratulating itself on its accomplishments based on a recent Law 360 survey regarding law firm diversity. The firm reported great pride in its placement, issued appropriate kudos and congratulated the firm’s ongoing commitment to supporting minorities in the firm. The problem, however, is that when you speak with African American attorneys who work at major law firms there is often a disconnect between what firms are reporting and what these attorneys are experiencing. 

Some surveys that look at the best firms for minorities in general may overlook important issues affecting African Americans specifically and, as a result, firms may be lulled into the complacent view that things are going well for all minorities when in fact the statistics may be skewed in favor of a particular group (or groups), especially in certain parts of the country where certain minority groups are more heavily represented. A recent article looking at African Americans in law firms reported that African Americans are among the most poorly represented minority groups consisting on average of 3.5 percent of non- partners and a mere 1.6 percent of partners.   

In addition, some of the numbers being reported simply do not convey the full experience of African Americans who are trying to make a long term go at “Big Firm." Over the years I have watched some of most pedigreed and qualified African American attorneys leave big firms. With the number of African Americans going to law school dwindling, this does not bode well for the future of African Americans at Big Firm.  This is an issue that is of some importance to African Americans today and it is one at which firms should take a closer look rather than touting positions on the latest diversity chart.  If the numbers and underlying experience at firms nationwide are issues, comparing one underperforming firm to its underperforming peers does little to move the ball forward.  Perhaps those doing the surveys of Big Firm should place greater emphasis on the overall experiences and longevity of attorneys within these firms.  This may help firms to understand what is needed to ensure the long term success of African Americans in the law firm environment. If not, African American lawyers will continue their exodus to more fertile and inclusive ground. 

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Categories: Diversity

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