CM Report of Recent Decisions (2003v3)
2003 Volume 3
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
Business Lost Because Employer Did Not Renew Employment Contract
Have you been busy and not had a chance to have employees renew their employment contracts? Was there a covenant not to compete in the contract? If so, it could be bad news under Marwaha v. Woodridge Clinic, 2003 Ill. App. LEXIS 679 (2d Dist. 2003). And this Second District decision would also apply to other kinds of employment contract provisions.
California Supreme Court Narrows Scope of Absolute Pollution Exclusion
On August 14, 2003, the California Supreme Court reversed an appellate decision on the absolute pollution exclusion to limit its application to environmental pollution events in the important case of MacKinnon v. Truck Ins. Exchange, 3 Cal. Rptr. 3d 228 (Cal. 2003), modified, 2003 Cal. LEXIS 6933. In MacKinnon, it was contended that the absolute pollution exclusion applied to the negligent spraying of pesticides resulting in bodily injury.
Connecticut Supreme Court Adopts Pro Rata Method of Allocating Defense Costs in Long Latency Loss Claims Involving Multiple Insurance Policies
In Security Ins. Co. of Hartford v. Lumbermens Mut. Casualty Co., et al., 826 A.2d 107 (Conn. 2003), the Connecticut Supreme Court adopted the pro rata method of allocating defense costs in long latency loss claims involving multiple insurance policies. The court further held that when pro rata allocation occurs, insurers have causes of action for equitable contribution and reimbursement of defense costs against their insureds during periods of self-insurance.
Edgerton Overruled in Wisconsin
The Wisconsin Supreme Court recently issued a landmark opinion in Johnson Controls v. Employers Ins. Co. of Wausau, 665 N.W.2d 257 (Wis. 2003), re-opening a window to insurance coverage that it had shut nine years ago. In Johnson Controls, the court overruled its 1994 decision in City of Edgerton v. General Casualty Co. of Wisconsin. Edgerton held that comprehensive general liability (CGL) policies do not cover Superfund cleanup costs, and that an insured’s receipt of a potentially responsible party (PRP) letter from the government does not trigger the insurer’s duty to defend. Johnson Controls is the culmination of insureds’ nearly decade long efforts to limit or reverse Edgerton’s holdings on environmental insurance issues.
Eleventh Circuit Holds That A Non-Dependent Parent Of A Non-Seaman May Not Recover Non-Pecuniary Damages In A Suit Brought Under The General Maritime Law
In Tucker v. Fearn, 2003 AMC 1705 (11th Cir. 2003), the Eleventh Circuit followed a long line of maritime cases and held that a non-dependent parent of a non-seaman may not recover non-pecuniary damages in a wrongful death action brought under general maritime law.
Employer Loses Credibility with the Court in Litigation Discovery Battle
The proverbial “smoking gun” is the hope of every employee and the fear of every employer. In Zubulake v. UBS Warburg, 2003 WL 21087884 (S.D.N.Y.), plaintiff did come up with something close to a smoking gun and the employer’s “circle the wagons” tactics did not help the employer with the judge either.
Northern District of Illinois Rules that Raising Limitation of Liability as an Affirmative Defense in State Court is Insufficient to Confer Jurisdiction on a Federal Court
The Northern District of Illinois has held in Holly Marine Towing, Inc., Limitation Proceedings, 2003 AMC 1672 (N.D. Ill. 2003), that asserting the Limitation of Liability Act (the “Act”), 46 U.S.C. App. §183, as an affirmative defense in a state court action is insufficient to give a federal court jurisdiction over the matter.
Not All Statements Arising Out Of A Business Are An Employment-Related Act Excluded By The Employment-Related Practices Exclusion
Coverage was found under a commercial liability policy for defamatory statements made against an employee despite the existence of an employment-related practices (“ERP”) exclusion where the statements were not made in the context of employment and were not sufficiently related to the employment relationship. American Alliance Ins. Co. v. 1212 Restaurant Group, LLC, 794 N.E.2d 892 (Ill. App. 1st Dist. 2003).
Southern District of Texas Considers Whether Failure to Provide Prompt Notice of an Initial Water Event Should Preclude Coverage for Mold Growth in Flores v. Allstate Texas Lloyd's Co.
The U.S. District Court for the Southern District of Texas holds that “while the answer will typically be based on the facts of each case, a homeowner’s failure to provide initial notice of a water event within the home should not, as a general rule, prevent the homeowner from subsequently providing prompt notice of, and receiving coverage for, ensuing mold damage that becomes manifest well after the initial water event, where such initial failure to provide notice is reasonable under the circumstances.” Flores v. Allstate Texas Lloyd’s Co., 2003 WL 22006302 (S.D. Tex).
Watch Out: The FDCPA May Apply to Your Contract-Based Recovery Efforts
The Fair Debt Collection Practices Act, 15 U.S.C. § 1692 (2002) (“FDCPA”), applies to any debt incurred by a consumer for personal, family or household use. Although the FDCPA does not apply to a consumer debt being collected by the creditor, it does apply to any third party attempting to collect on the debt, including attorneys. The debt must be incurred as the result of a consumer transaction, resulting in typical tort-based subrogation claims being excluded from the FDCPA’s reach. However, a recent decision of the U.S. Court of Appeals for the Fifth Circuit applied the FDCPA to a contract-based subrogation action. Hamilton v. United Healthcare of Louisiana, 310 F.3d 385, 392 (5th Cir. 2002).
