CM Report of Recent Decisions (2004v4)
2004 Volume 4
A summary of significant recent developments in the law focusing on substantive issues of litigation and featuring analysis and commentary on special points of interest.
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Articles in this report
Alert: Corporate Counsel and Human Resource Professional
Q. What can happen, when despite company instructions, employees delete e-mails related to another employee’s discrimination claim?
A. The court can enter penalties (sanctions) including payment for re-deposing witnesses, restoring deleted information, attorneys’ fees and a negative inference instruction to the jury.
An Insurer Waives Its Right To Compel Arbitration Where It Invokes The Judicial Process To The Prejudice Of Its Opponent, Despite A “No Waiver” Of Arbitration Clause
The Fifth Circuit recently held that where an insurer relied upon the judicial process to resolve a variety of issues and only on the eve of trial sought to invoke arbitration, it waived any right to compel the opposing party to engage in arbitration. Republic Ins. Co. v. PAICO Receivables, LLC, 383 F.3d 341 (5th Cir. 2004). The court refused to enforce a “no waiver” of arbitration clause.
An Issue of First Impression: Illinois Appellate Court Holds That the Amendment to Illinois Code of Civil Procedure § 2-1117 Cannot Be Retroactively Applied
The inclusion of plaintiff’s employer on the verdict form can mean the difference between a defendant being jointly and severally responsible for an entire judgment on non-economic damages and only severally responsible for its proportionate share of non-economic damages. Therefore, in all cases where the cause of action accrued (usually a tort cause of action accrues when plaintiff suffers injury) prior to the effective date of the amendment to 2-1117 (June 4, 2003) defense counsel should tender a verdict form including plaintiff’s employer in the allocation of total fault for purposes of 2-1117.
CGL Coverage Denied For Defective Concrete as a "Business Risk"
In Bonded Concrete, Inc. v. Transcontinental Ins. Co., 784 N.Y.S.2d 212, the New York Appellate Division reviewed an issue that should be well settled but continues to be the subject of persistent litigation – whether the damages resulting from the poor quality work of the insured are covered under a commercial liability policy. It has long been established as a general rule that poor quality work, faulty workmanship or the poor craftsmanship of an insured are “business risks” and not risks contemplated in the insurer - insured relationship.
CILCO Decision - Expenditures In Response To Strict Liability Regulations Constitute “Damages” Under Excess Liability Policies
In Central Ill. Light Co. v. The Home Ins. Co., 2004 Ill. LEXIS 2033 (Dec. 2, 2004) ("CILCO"), the Illinois Supreme Court found that the term “damages” as used in excess liability policies included expenditures by a manufacturing gas plant facility in response to an Illinois EPA (“IEPA”) claim for the purpose of remedying damage to property. Moreover, the court found that the policyholder was legally obligated to make these expenditures because statutes impose strict liability for the claimed harm and because it would have been futile for the policyholder to deny its liability.
How “What We Learned In Little League” Paves The Way For Winning Litigation!
At the beginning of each little league season, my Dad taught the young players of baseball that winning the game required the three “Cs” - - Confidence, Concentration and Coordination. Those simple lessons, from many years ago, are the same winning ingredients of successful litigation.
Illinois Resists Judicial Activism on Gun Control
In City of Chicago v. Beretta USA, 2004 Ill. LEXIS 1665, the plaintiff City asserted a claim of public nuisance seeking to hold manufacturers, distributors and dealers of handguns responsible for the costs of emergency medical services, law enforcement, prosecution of violators of gun control ordinances and related expenses. The Illinois Supreme Court summarized the basis for ordering dismissal of the claim as follows:
Illinois Supreme Court Hears Arguments as to Plaintiff's Damages: Can an Injured Plaintiff Claim the Full Amount of Medical Bills or Only the Reduced Amount Paid by Her Health Insurance Carrier?
The Illinois Supreme Court recently heard arguments in Arthur v. Catour, 803 N.E.2d 647 (3d Dist. 2004), a case involving the issue of whether a plaintiff in a personal injury case is allowed to claim as damages the total amount of her medical bills or only the discounted amount paid to her medical providers by her health insurance carrier pursuant to its contractual agreements with the providers.
Iowa Supreme Court Holds That Physical Injuries Are Unnecessary to Maintain Claims for Negligent Hiring, Supervision, or Retention
In Kiesau v. Bantz, 686 N.W.2d 164 (Iowa 2004), the Supreme Court of Iowa held that an injured party does not need to suffer a physical injury in order to bring a claim against its employer for negligent hiring, supervision, or retention. The Court also held that a county sheriff was not immune from punitive damage awards in claims for negligent hiring, supervision, or retention.
Judicial Hostility Toward Non-Competition Agreements Leaves Form Users Vulnerable to Competition
Non-competition agreements are essential to protect a company’s customer base from unfair competition. To save time and money, many companies have turned to commercial forms and pre-existing agreements in drafting non-competition agreements. However, the law governing non-competition agreements varies dramatically by state, and there is a general judicial hostility toward agreements that restrain trade. As a result, courts may void an overbroad form non-competition agreement entirely if the agreement does not comply strictly with state law. Companies that unwittingly use overbroad commercial forms or pre-existing agreements thus leave themselves vulnerable to competition from former employees, particularly when form agreements are used in foreign states.
New York Casualty Update: Appellate Division Allows "Second Hand Asbestos" Case to Proceed
The New York Appellate Division – Second Department has allowed a personal injury action to proceed on a theory of “second hand” asbestos exposure. In Holdampf v. A.C.&S., Inc., et al., 2004 WL 2749487, the court held that an employer has a duty to protect non-employees from “second hand” asbestos exposure where the employer knows or should know that such exposure is likely to occur.
Settling Defendants Do Not (or Do They?) Belong on Federal Verdict Forms
The U.S. Court of Appeals for the Seventh Circuit Court recently decided a case that will negatively impact on defendants who seek to limit their exposure to damages based upon the protections afforded in statutes on joint and several liability and contribution. The decision also increases the chances for an economically viable defendant to be found jointly liable for all damages when plaintiff settles with a defendant who has insufficient insurance coverage and then proceeds to trial against the less culpable defendant. In Schadel v. Iowa Interstate R.R., Ltd., 381 F.3d 671 (7th Cir.), the court ruled that the settling defendant did not belong on the federal jury verdict form and therefore the jury was not permitted to allocate a percentage of fault to the settling defendant.
Texas Supreme Court Rules On Meaning Of “Like Kind And Quality” And On The Application Of The Statutory Penalty Provided By The Texas Insurance Code, Article 21.55
In Republic Underwriters Ins. Co. v. Mex-Tex, Inc., the Supreme Court of Texas considered “whether the commercial property insurer … breached its policy obligation to replace a damaged roof with one of ‘like kind and quality’, and if so, whether the insurer’s tender of partial payment of the claim avoided, on that amount, the 18% per annum delay penalty imposed by Article 21.55 of the Texas Insurance Code.” 2004 WL 2625017, 48 Tex.Sup.Ct.J. 134 (Tex. Nov. 19, 2004). In a split decision, the majority held that the trial court was justified in finding that Republic breached the policy, but that the penalty prescribed by Article 21.55 was not properly assessed.
“Assault And Battery” Exclusion Not Applicable To Negligent Hiring And Supervision Allegations
The New Jersey appellate court holds that an “assault and battery” exclusion does not relieve an insurer of its duty to defend and indemnify in connection with a negligent hiring and supervision count, even though the complaint also alleges excluded counts. L.C.S., Inc. v. Lexington Ins. Co., 853 A.D.2d 974 (N.J. Super. Ct. App. Div. 2004).
