CM Report of Recent Decisions
2005 Volume 1
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
"Lost Punitives" Are Recoverable in Legal Malpractice Claim
As a matter of first impression in Illinois, the Illinois appellate court has joined the U.S. District Court for the District of Columbia as well as Arizona, Colorado, Kansas and South Dakota in finding that plaintiffs may recover punitive damages they allegedly lost as a result of legal malpractice in the underlying suit. Tri-G, Inc. v. Burke Bosselman and Weaver, 817 N.E.2d 1230 (Ill. App.).
Advertising Injury Coverage Boundaries Examined
Two recent decisions have addressed the limits of advertising injury coverage under a general liability policy. In both cases, the courts delved into the specific language of the policy and determined that no coverage existed due to a lack of advertising and the absence of any allegation that the content of a message caused damage.
Advertising injury is covered under a general liability policy only if it is caused by an act of advertising, not an act of stealing a product.
Building Your Product Liability Claim: A Product Supplier's Obligations Under the Consumer Product Safety Act
Aside from the obvious duty to place only those products that are safe for use into the stream of commerce, manufacturers, importers, distributors and retailers also have significant duties under the Consumer Product Safety Act (“CPSA”). Those duties provide a valuable, powerful hook in developing a product defect claim. A manufacturer's product liability exposure frequently involves breach of post-sale duties of disseminating appropriate and updated warnings, safety bulletins, and installation and operating instructions, as well as implementing corrective actions, including product recalls, where necessary to avoid foreseeable dangers, risks and hazards from a recognized product defect.
Clausen Miller Makes Favorable First-Party Property Law; Reverses $8.2 Million Judgment Against Insurer
Many property insurers are concerned about making “bad law” and will thus forego appeal of decidedly erroneous trial court rulings/judgments on coverage issues (and specific policy language) in order to “limit” the potential damage done as trial court rulings are not precedential. Although this strategy may be warranted in some cases, the converse must also be considered: might an appeal establish “good law” by reversing the erroneous position espoused below?
Clausen's Appellate Advocacy Judicially Endorsed
Appellate advocates are not fungible, anymore than are trial lawyers. The task is not to merely research and painfully recite precedent, as do many lawyers. The goal is, or at least should be, to compel the attention and respect of the court. Does the attorney have presence? Does his or her oral presentation command the court's attention and respect? Is the written presentation both easy to read and interesting? Does it sing -- sending a forceful message?
E-Mailing Company Employment Policy Was Not Enough --Even When the Employee Opened It!
Q. Does your company use its electronic intranet to announce employment policy changes?
Q. Is your company moving toward, or is it already, a “paperless” business?
If you answered “yes” to either question, please read on.
Federal District Court Rejects Insured's Claim for Costs to Correct Code Violations in Areas Not Affected by Insured Loss
The United States District Court for the Eastern District of Tennessee recently addressed the extent to which an all-risk policy provides coverage for costs incurred as a result of upgrading due to code violations. The court held that an insurer's liability is limited to costs associated with upgrading due to code violations only in the area that was directly affected by the insured loss. Chattanooga Bank Assoc. v. Fidelity and Deposit Co. of Maryland, 301 F.Supp.2d 774 (E.D. Tenn. 2004).
Fifth Circuit Predicts Texas Law: Insurer Must Be Prejudiced to Use Late Notice as a Defense to Coverage
The U.S. Court of Appeals for the Fifth Circuit has predicted that, under Texas law, an insurer raising a late notice defense to coverage must show evidence of actual prejudice suffered as a result of the late notice in order to prevail. Ridglea Estate Condominium Ass'n v. Lexington Ins. Co., 398 F.3d 332 (5th Cir. 2005).
Georgia Adopts Tort Reform
On February 17, 2005, Governor Perdue of Georgia signed S.B.3, which is effective upon signing.
Illinois Appellate Court Rules That Failure to Warn Insured of Number of Days Left to File Suit is a Waiver of the Policy's Suit Limitation Provision
A recent case of first impression in Illinois serves as a warning to insurance companies that their ability to rely on the policy's suit limitation provision could be compromised if they fail to follow the rules and regulations of the Illinois Department of Insurance. Mathis v. Lumbermen's Mutual Casualty Ins. Co., 822 N.E.2d 543 (Ill. App. 2004). Editor's Note: Mathis has been accepted for review by the Illinois Supreme Court (No. 10042).
Illinois Court Applies Both the "Total" and "Absolute" Pollution Exclusions to Bar Coverage for Toxic Smoke Permeating Neighborhood After Fire at Insured's Recycling Facility
In Connecticut Specialty Ins. Co. v. Loop Paper Recycling, Inc., 2005 Ill. App. LEXIS 137 (Ill. App.), the Illinois Appellate Court ruled that the “total” and “absolute” pollution exclusions bar coverage for a suit against a paper recycler brought by neighboring residents as a result of a fire set by vandals to cardboard scheduled to be recycled at the insured's facility.
Illinois Supreme Court Accepts Appeal in "Barragan v. Osman"
On January 26, 2005, the Illinois Supreme Court accepted the petition for leave to appeal filed by Petitioner/Defendant Osman Construction Corporation, most likely due to the strong dissent in the Appellate Court.
In Volume 4 of the 2004 CM Report, we advised of a recent CM Appellate Department victory in Carollo v. Al Warren Oil Co., Inc., in which the Illinois Appellate Court, First District held in a case of first impression that the June 4, 2003 amendment to Illinois' joint and several liability statute (735 ILCS 5/2-1117), which provides that a plaintiff's employer should not be considered in the allocation of total fault, cannot be retroactively applied. On January 26, 2005 the Illinois Supreme Court denied plaintiff's petition for leave to appeal. Thus, Carollo will not be considered by the Illinois Supreme Court and the First District opinion remains the law on this point. The First District opinion can now be found in the Northeastern Reporter at 820 N.E.2d 994.
Illinois Supreme Court Vacates "Thompson"
In Volume 2 of the 2004 CM Report, we discussed the Illinois Appellate Court, Second District's decision in Thompson v. Gordon, 813 N.E.2d 241(2004), allowing out of state licensed engineers to provide expert opinion testimony without licensure in the State of Illinois. Specifically, Thompson held that licensure in the State of Illinois pursuant to the Professional Engineering Act is not required to render an expert opinion; rather, the witness must be deemed to be an “expert,” or to have both the experience and qualifications to assist the trier of fact in understanding the evidence.” Accordingly, the lack of an Illinois licensure only goes to the weight of the expert opinions, not the competency.
Maine's Highest Court Rejects Argument That Gross Negligence is an Exception to a Waiver of Subrogation Provision
Various types of contracts (i.e., construction, leases, etc.) commonly contain a provision wherein the parties agree to waive claims for damages against each other to the extent the damages are covered by an injured party's insurance. Several courts have held that this contract provision effectively waives the subrogation rights of the injured party's insurer.
NASD Rule 2130 and the Expungement of Customer Dispute Information from the CRD System
The NASD was faced with and guided by conflicting interests in drafting Rule 2130. The interests were those of the regulators who require accurate and relevant information, the interests of the brokerage community in protecting their reputation, and the interests of the investing public in having access to meaningful information. Rule 2130 sets forth limited circumstances under which expungement relief will be permitted and as such recognizes expungement as an extraordinary remedy.
No Civil Authority Coverage Arising Out of the FAA's September 11, 2001 Ground Stop Orders
Another court holds that there is no civil authority coverage arising out of the Federal Aviation Administration's September 11, 2001 ground stop orders halting air traffic in the United States. The Paradise Shops, Inc. v. Hartford Fire Ins. Co., Civil Action No. 1:03-CV-3154 (N.D. Ga. 12/15/04).
Ohio Court Appeals Allows a Successor Corporation to Receive Insurance Benefits from its Predecessor's Insurer for Pre-Acquisition Liability
The Ohio Court of Appeals has held that a successor corporation is automatically entitled to insurance benefits under policies issued to its predecessor by “operation of law” for pre-acquisition liability, including the right to a defense and indemnification. Glidden Co. v. Lumbermens Mut. Cas. Co., 2004 Ohio App. LEXIS 6468.
Siblings' Emotional Distress Claims are Subject to the Same Limit of Liability As Decedent
In Allstate Ins. Co. v. Tozer, 392 F. 3d 950 (7th Cir. 2004), the United States Court of Appeals for the Seventh Circuit held that emotional distress claims brought by automobile passengers in an accident are subject to the same “each person” limit of liability applicable to the wrongful death claim.
Six Critical Steps for Achieving a Successful Mediation
Successful mediation does not happen fortuitously – it takes hard work, a realistic case evaluation, and an appreciation of the value of a negotiated resolution versus the costs and uncertainties of trial.
Strict Liability Governs Cruise Ship Crew Member's Assault of Passenger
The United States Court of Appeals for the Eleventh Circuit recently held that a cruise ship line was strictly liable for its crew member's sexual assault on a passenger. Doe v. Celebrity Cruises, Inc., 394 F.3d 891 (11th Cir. 2004).
Supreme Court Adopts Expansive Definition of "Vessel" for Purposes of Jones Act
On February 22, 2005, the Supreme Court handed down its much anticipated decision in Stewart v. Dutra Construction Co., 125 S.Ct. 1118, 2005 WL 405475 (2005). In Stewart, a unanimous Supreme Court held that the expansive definition of “vessel” in 1 U.S.C. § 3 must be used to determine seaman status under the Jones Act: “The word ‘vessel' includes every description of watercraft or other artificial contrivance used, or capable of being used, as a means of transportation on water.”
Underwriters Laboratories- The Forgotten Island in the Litigation Seas- "Full of Fruit" -For Bolstering or Undercutting Product Integrity
Underwriters Laboratories (“UL”) is a nonprofit organization that conducts product safety testing and certification. In 2004, UL's marks were seen on 19 billion products (www.ul.com). UL publishes hundreds of standards for safety and acts as a conduit for safety messages for consumers throughout the world.
What to Do When the Insured Files Bankruptcy: A Checklist for the Claims Representative
1) STOP any contact with insured and any claimant. Once an insured has filed bankruptcy, no claim or litigation can be pursued against the insured. All claims, including the commencement or continuation of litigation (including service of process), enforcement of a judgment, attempt to take possession of property or perfect a lien, collect a claim or set off a debt are stayed pursuant to 11 U.S.C. § 362(a).
