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DC team wins defense jury verdict in FDCPA action
In May of 2011, John Tremain May and Padraic Keane of Jordan Coyne & Savits, L.L.P. successfully defended a law firm in the United States District Court for the District of Columbia in a lawsuit alleging violations of the Fair Debt Collection Practices Act ("FDCPA"). The plaintiff alleged that the defendant law firm, in the course of foreclosing on the plaintiff's property, had failed to provide the plaintiff with notices required under the FDCPA, and had failed to respond to alleged facsimiles and telephone calls from the plaintiff to the defendant in an effort to challenge the foreclosure. After a three-day trial before the Honorable James Gwin, specially assigned from the Northern District of Ohio, the jury found in favor of the defendant. As always, matters are decided on their own particular facts or merits, and, because each case is different and litigation is inherently unpredictable, the past record is no assurance of reaching a favorable result in any future case.

For more information, please contact John Tremain May at (202) 296-4747.

Posted by David B. Stratton on 06/30/2011 at 01:57 PM
District of ColumbiaFair Debt Collection Practices Act (FDCPA)Jordan Coyne LLP newsPermalink

Wrongful death settlement procedures reviewed in Maryland

In ACE American Insurance Company v. Williams, et al., 418 Md. 400, 15 A.3d 761 (2010), the Maryland Court of Appeals held that a court cannot approve a settlement of a wrongful death action unless the settlement complies with the requirements of Maryland Rule 15-1001, Courts and Judicial Proceedings Article sec. 3-904, and Walker v. Essex, 318 Md. 516 (1990).  The failure of a court to comply with those requirements renders invalid any judgment purporting to settle “any and all potential claims stemming from the death of the decedent,” when that judgment is challenged by children of the decedent who had never been properly made “use” plaintiffs, and who had not been notified of a proposed settlement that—if approved—would purportedly extinguish their rights. 

In 2003, Lori Williams, as the widow and personal representative of the decedent filed a lawsuit and identified two children as “use” plaintiffs that were beneficiaries of the decedent’s estate, Jeremy and Shane Williams.  In 2005, Mrs. Williams reached a settlement with the Defendant’s insurance provider, ACE, for $750,000, but her attorney refused to sign a release in which Mrs. Williams would have held harmless and indemnified ACE for any further claims.  In the interim, it was revealed that decedent had two other children, Steven and Michael Williams, from a previous relationship.  Since ACE intended to settle and resolve “all” claims, it objected to settling the case without the two additional children being added to the suit as “use” plaintiffs as required under Maryland law.  As a result, Plaintiffs amended the complaint to include and reference Michael and Steven and mailed them a copy of the amended complaint.  Once Michael and Steven were added to the suit, ACE and Mrs. Williams filed a Joint Motion for the Court to approve the settlement and the Court granted the motion even though Michael and Steven were not represented by counsel, did not respond to the Complaint, and were not allocated any of the settlement funds. 

Later in 2005, Michael and Steven Williams, through the same attorney who represented Mrs. Williams, filed an Amended Complaint and a Motion to Reopen and Consolidate the two wrongful death cases.  The crux of the motion to reopen was that the claims of Michael and Steven were not addressed in the 2003 suit or 2005 settlement.  In response, ACE filed a third party complaint against Mrs. Williams for indemnification and moved for summary judgment against Michael and Steven asserting that the case had been resolved to finality and a valid settlement agreement was in place.  The trial court granted summary judgment in ACE’s favor.

On appeal, the Court of Appeals held that Michael and Steven were never officially added as “use” plaintiffs to the lawsuit due to several procedural technicalities and therefore, their interests were not represented or considered regardless of whether they had notice of the suit.  Rule 15-1001 and Courts & Judicial Proceedings Article sec. 3-904 require that all beneficiaries be included in “one action” for wrongful death and the failure to include all beneficiaries is a defect that cannot be waived.  The Court reiterated their holding in Walker v. Essex that “the purpose of the one action rule is to protect a defendant from being vexed by several suits instituted by or on behalf of different equitable plaintiffs for the same injury, when all the parties could be joined in one proceeding.” 

Consequently, the Court of Appeals found that the trial court erred in approving the settlement since Michael and Steven were not properly added as parties, nor were their interests considered in settlement.  As a result, the trial court also erred in granting summary judgment in the second action brought by Michael and Steven.  Consequently, the settlement agreement and judgment based on the settlement agreement was vacated and the Court remanded the matter.

Posted by Robert D. Anderson on 06/27/2011 at 01:29 PM

Intentional infliction claim dismissed by Maryland federal court

In Respess v. Travelers Cas. & Sur. Co. of Am., 2011 U.S. Dist. Lexis 28531 (D. Md. 2011), the United States District Court for the District of Maryland analyzed the factual circumstances necessary to support a cognizable claim for intentional infliction of emotional distress and gross negligence against an insurer for failure to authorize care for a patient, leading to the patient’s suicide.

Patricia Respess (“Respess”) was physically and sexually assaulted at work in 1987.  She suffered from various psychiatric conditions as a result of the incident and required medical treatment.  Travelers Casualty & Surety Company of America and the Travelers Indemnity Company of America (“the Insurers”) paid for her medical treatment pursuant to a worker’s compensation claim.  From January of 2008- April of 2008, Respess received 24 hour care from a mental health care facility (“facility”).  Near the end of April, her treating physicians determined that 24 hour care was no longer required and that she could return home. 

Shortly after her discharge from the facility, Respess began experiencing suicidal thoughts and practicing unsafe medication management.  Her home health care nurse contacted the Insurers and informed them that Respess needed urgent 24 hour care.  The Insurers would not authorize the treatment.  The nurse then consulted a medical doctor who had formerly treated Respess; he too contacted the Insurers to request that they authorize immediate 24 hour care.  Though acknowledging that Respess’s health had deteriorated since her release from the facility, the Insurers again refused to authorize the requested treatment.  Ms. Respess overdosed and died shortly thereafter, leaving behind a suicide note that stated she did “not have any fight in her to challenge the [Insurers] anymore.”

Ms. Respess’s family (“Plaintiffs”) filed suit against the Insurers, asserting claims of intentional infliction of emotional distress and gross negligence.  They alleged that the Insurers’ refusal to authorize the requested 24 hour treatment was intended to cause Respess emotional distress and/or made in reckless and deliberate disregard of the high degree of probability that emotional distress or death would ensue.

The court dismissed the Plaintiffs’ complaint on the basis that it failed to state a claim upon which relief could be granted.  Specifically, the court held that the allegation that the Insurers failed to authorize 24 hour treatment for Respess, despite knowledge of her frail mental health, fell woefully short of meeting the exacting standards required to state a viable claim for intentional infliction of emotional distress or gross negligence under Maryland law.  The court noted that insurers are not health care providers and that Respess’s treating physician never contacted the Insurers to request authorization for 24 hour care.  It thus concluded that the Complaint did not contain factual allegations sufficient to establish that the Insurers’ conduct was shocking to the conscious, egregious, or deliberately intended to cause Respess harm.

This decision illustrates how difficult it is for a plaintiff to prevail on an intentional infliction of emotional distress claim.

Posted by Mandy Wolfe on 06/27/2011 at 01:13 PM

Reminder Notice Can Extend Grace Period for Life Insurance Premium Payment in Maryland

In a decision of interest to estate attorneys and insurance advisors, the Maryland Court of Special Appeals considered whether a life insurance policy issued to Dr. John Griffith (“Dr. Griffith”) was in force at the time of his death.  See United States Life Ins. Co. v. Wilson, 198 Md. App. 452, 18 A.3d 110 (2011).

On July 28, 2007, Dr. Griffith was struck and fatally injured by a passing motor vehicle.  Prior to his death, Dr. Griffith purchased a 10 year level term life insurance policy (“Policy”) from United States Life Insurance Company in the City of New York (“US Life”). He was the named insured under the Policy and his wife, Elizabeth Wilson (“Wilson”), the primary beneficiary. The Policy was administered by AMAIA, a subsidiary of the American Medical Association. 

Premiums were due on the Policy bi-annually, on November 15 and May 15. The Policy had a “Grace Period” provision, however, that provided:

Each premium, after the first, may be paid up to 31 days after its due date. . . .The insurance provided by the group policy will stay in effect during this period. If the premium is not paid by the end of this period, such insurance will end at that time. United States Life may extend the grace period by written notice. Such notice will state the date the insurance will end if the premium remains unpaid.

The Policy also contained a “Reinstatement” provision that provided the Policy could be reinstated without the written approval of US Life so long as any overdue premium was paid within 31 days from the end of the Grace Period. 

Dr. Griffith failed to make the premium payment that was due May 15, 2007. After he missed the payment, US Life sent him a Reminder Notice that stated: “To assure active coverage, full payment must be received no later than 60 days [from May 15, 2007].”  On July 23, 2007, Dr. Griffith entered an online directive for his bank to make the payment.  The bank complied and on July 25, 2007, issued a check for the payment and sent the check to AMAIA.  AMAIA received the check on July 30, 2007.  Without knowledge of Dr. Griffith’s death, AMAIA returned the check, contending that the Policy had lapsed and could not be reinstated unless a new application was submitted.

Wilson subsequently filed a claim under the Policy for death benefits. AMAIA denied the claim, indicating that the Policy was not in force at the time of Dr. Griffith’s death. Litigation ensued and ultimately, the trial court granted summary judgment to Wilson on her breach of contract claim against US Life and AMAIA (“the Insurers”).

The Insurers appealed, arguing that the trial court’s judgment was erroneous. Specifically, they argued that the Reminder Notice did not extend the Grace Period from 31 to 60 days and as such, the Policy lapsed because payment was not received within the required time frame. Alternatively, they argued that even if the Reminder Notice had extended the Grace Period from 31 to 60 days, there was no obligation to reinstate the Policy because Dr. Griffith died before the Insurers received and negotiated the premium payment.

The Court of Special Appeals rejected the Insurers’ arguments concluding that the trial court had correctly entered summary judgment in favor of Wilson.  In so concluding, the Court held that the Reminder Notice served to extend the Grace Period to July 14, 2007, as expressly permitted under the Policy, because the notice was in writing and contained a substitute date that the insurance would end?60 days from May 15, 2007. 
The Court then held that because the premium payment was dispatched to the Insurers within 31 days of July 14, 2007, the conclusion of the extended Grace Period, the Insurers were required to reinstate the Policy pursuant to the contract terms. The Court explained that the premium payment was deemed received by the Insurers not when they took actual physical possession of the payment, but rather when Dr. Griffith’s bank dispatched the payment, or set it into motion. Thus, Dr. Griffith’s acceptance of US Life’s offer to reinstate his Policy was effective and his Policy revived on July 25, 2007, when his bank sent the premium payment to the Insurers. Accordingly, the Court held that the Policy was in force at the time of Dr. Griffith’s death on July 27, 2007.



Posted by Mandy Wolfe on 06/27/2011 at 12:54 PM
InsuranceLiability of Agents and BrokersMarylandPermalink

Coverage Issues in Review:  E.D. of Virginia Tackles Pollution Exclusion in Chinese Drywall case
Most liability insurance policies include what is commonly referred to as a "pollution exclusion" provision, which essentially excludes insurance coverage for bodily injury or property damage arising out of the discharge of "pollutants." The inception of the pollution exclusion provision in liability insurance policies dates back to the 1970s, at which time the insurance industry was becoming increasingly concerned about pollution claims resulting from environmental catastrophes that occurred during the 1960s, including specifically the Torrey Canyon disaster and the Santa Barbara off-shore drilling oil spills in 1969. Many insurance companies used the adoption of the pollution exclusion provision as an opportunity to address public concerns regarding environmental pollution and to clarify and publicize the position that commercial general liability insurance policies did not indemnify companies that were knowingly polluting the environment.

Initially, most policies were drafted to include a "sudden and accidental" pollution exclusion provision, which denied coverage for bodily injury arising out of the discharge, dispersal, release, or escape of irritants, contaminants or pollutants into or upon land, the atmosphere or any watercourse or body of water; unless the discharge, dispersal, release, or escape was "sudden and accidental." In light of controversy over the interpretation of the "sudden and accidental" pollution exclusion provision by the courts with respect to whether the language of the provision was clear and unambiguous, and in an effort to limit coverage for pollution related claims, an "absolute pollution exclusion" was adopted in 1985. Pursuant to the absolute pollution exclusion, "bodily injury or property damage arising out of the actual, alleged or threatened discharge, release, or escape of pollutants" was excluded from coverage; the term "pollutant" being defined as "any solid, liquid, gaseous or thermal irritant or contaminant including smoke, vapor, soot, fumes, acids, alkalies, chemicals and waste." The revision of the pollution exclusion did little to resolve issues of the scope and application of the provision, which was one of the most heavily litigated insurance coverage questions in the late 1980s and early 1990s.

Although these issues are not as hotly contested today, there continues to be a split of opinions by state and federal courts nationwide. Specifically, "[n]umerous courts have held that a pollution exclusion bars coverage for all injuries caused by the release of pollutants, even where the pollutant is dispersed into a confined or indoor area." However, "other courts have held that the exclusion does not apply if the facts show that the discharge, dispersal, release or escape was a localized toxic accident occurring within the vicinity of the pollutant's intended use." Firemen's Ins. Co. v. Kline & Son Cement Repair, Inc., 474 F. Supp. 2d 779, 792-793 (2007)(collecting cases) (citation omitted). For example, case law from Maryland and the District of Columbia suggests that the pollution exclusion applies only to environmental pollution. See Clendenin Bros. v. U.S. Fire Ins. Co., 390 Md. 449, 458, 889 A.2d 387, 393 (2006)(Pollution exclusions were intended to apply only to environmental pollution and insurer had a duty to defend and/or indemnify insured against claims for bodily injury caused by harmful localized, non-environmental fumes containing manganese produced from an insured's proper use of welding equipment); Richardson v. Nationwide Mut. Ins. Co., 826 A.2d 310 (D.C. 2003)(vacated as moot)(Pollution exclusions refer to the types of pollutants that were ordinarily understood in the context of federal environmental legislation; its purpose was to protect insurers from liability in the billions of dollars for environmental cleanups of hazardous waste sites and industrial facilities. Accordingly, the pollution exclusion did not apply to claim for bodily injury from exposure to carbon monoxide fumes that leaked from a defective furnace in an apartment building.)

Most recently, the United States District Court for the Eastern District of Virginia, applying Virginia law, addressed this issue in a declaratory judgment action in the context of the applicability of a pollution exclusion to claims for bodily injury and property damage related to the installation of defective drywall imported from China, which allegedly "emits various sulfide gases and/or other toxic chemicals through 'off-gassing' that created noxious odors, and caused damage . . . [and] dangerous health consequences . . . " Nationwide Mut. Ins. Co. v. Overlook, LLC, 2011 U.S. Dist. LEXIS 55282 (2011). The Court analyzed the policy at issue and concluded that, because the policy did not reference the word "environment," "environmental," "industrial," or any other limiting language to suggest that the pollution exclusion was not equally applicable to both traditional and indoor pollution scenarios; accordingly, construing the policy to apply only to environmental pollution would require the Court to interject words into the policy, contrary to the elemental rule that the function of the Court is to construe the contract made by the parties, and not to reformulate a contract for them. The Court further explained that it was unnecessary to evaluate the manner in which other jurisdictions analyzed or resolved similar contract disputes, because the Supreme Court of Virginia has explained that the law of the Commonwealth of Virginia and the plain language of the insurance policy provided the answer to this coverage question.

Finally, pursuant to what is often referred to as the "Eight Corners Rule," the Court compared the four corners of the complaint to the terms contained within the four corners of the insurance policy and determined that the insurer owed no duty to defend. Specifically, the Court explained that, because the bodily injury and property damage claimed were caused by a harmful gas that was released in a manner contemplated by the pollution exclusion provision, and the harmful gas, which allegedly necessitated a repair or replacement of various parts of the house as well as medical care, was a "pollutant" (i.e., an irritant or contaminant), and every claim in the underlying complaint referred to the defective drywall as either the basis for each claim or the cause of the resulting damage, the pollution exclusion was implicated and there as therefore no duty to defend.

Ultimately, in analyzing coverage issues that may implicate the pollution exclusion of a liability insurance policy, the applicable state law may be as important as the particular facts of the case in determining how the exclusion will be interpreted and whether it will be applied by the court. This often means that the choice of law analysis for a particular claim may be dispositive of the question. For further assistance on Virginia insurance coverage matters, call Jordan Coyne & Savits partners John H. Carstens, Esq. or Carol T. Stone, Esq., at 703-246-0900.

Posted by Jamie Keenan on 06/26/2011 at 11:04 PM

Joint Tortfeasor Liability in Asbestos Cases Addressed by Maryland Court
In a recent decision, Scapa Dryer Fabrics, Inc. v. Saville, 16 A.3d 159 (Md. 2011), the Maryland Court of Appeals addressed an issue of first impression relating to joint tortfeasor liability in asbestos cases. In that case, Mr. Saville was a "broke hustler" for a paper mill: his job was to keep the machines clean and gather the nonsaleable paper for recycling. The defendant, Scapa Dryer Fabrics, manufactured a dryer felt containing asbestos that was used in the paper machine. Mr. Saville, who was responsible for scraping and cleaning the felt with a metal blade on a daily basis, alleged that he contracted asbestosis, lung cancer, and mesothelioma as a result of exposure to asbestos dust from the dryer felt. He brought an action against Scapa and approximately thirty other defendants.

A number of Scapa's co-defendants formed trusts pursuant to sec. 524(g) of the federal Bankruptcy Code. Under sec. 524(g), a bankrupt entity which has been named as a defendant in an asbestos case can create a trust for the purpose of compensating victims of asbestos-related injuries. Section 524(g) trusts cannot be sued for damages, but must use their assets to pay compensation to claimants in a fair and consistent manner. In this case, a number of sec. 524(g) trusts made compensation payments to Mr. Saville.

At trial, the jury found for the plaintiff, awarding damages of $1.7 million. Scapa argued that it should be entitled to an offset for all settlement payments made by co-defendants' sec. 524(g) trusts. Scapa asserted that the settlement payments should offset the plaintiff's recovery because, under sec. 524(g), Scapa could not bring a suit for contribution against these trusts.

The court held that under the Maryland Uniform Contribution Among Joint Tortfeasors Act, a defendant cannot offset its liability unless its co-defendants are found to be jointly and severally liable for the plaintiff's injury. Therefore, payments made by the sec. 524 (g) trusts would not necessarily offset the plaintiff's recovery from Scapa because these payments did not necessarily constitute an admission of liability. Rather, if the settlement agreement expressly stated that the sec. 524 (g) trust was liable, or should be treated as though a judgment had been rendered against it, then Scapa would be entitled to an offset. If, however, the settlement agreement did not acknowledge liability, the settlement payments would be treated as "volunteer payments" and would not offset the judgment against Scapa. In order to permit Scapa to properly makes its case on this score, the court held that Scapa was entitled to discovery of all sec. 524 (g) settlement agreements and payment amounts.

Posted by Raphael Cohen on 06/02/2011 at 02:43 AM

Real estate agents’ broad duty of care discussed by Maryland federal court

In Lawley v. Northam, a case recently decided by the U.S. District Court for the District of Maryland, the court explored the scope of a real estate agent's liability for making material misstatements or omissions concerning a property for sale. Lawley v. Northam, 2011 U.S. Dist. LEXIS 37690 (D. Md. Apr. 5, 2011). In that case, the defendant was a real estate agent who represented the seller of a single family home in Worcester, Maryland. The plaintiffs, Mr. and Mrs. Lawley, were the daughter and son-in-law of the buyer, and were renting the house.

The Lawleys filed a complaint alleging that the real estate agent had failed to disclose material defects in the property relating to mold, asbestos, and water intrusion. The agent moved for summary judgment, asserting that she had no obligations to the buyer or to the Lawleys because she was not their agent -- she represented the seller. Therefore, she claimed she could not be held liable for economic loss suffered by the plaintiffs.

The court denied the motion, pointing to Maryland statutes and regulations which require real estate agents to disclose all material facts to any person with whom they conduct business. For example, one Maryland regulation imposes an affirmative obligation on real estate agents to avoid "error, exaggeration, misrepresentation, or concealment of material facts." COMAR 09.11.01.D. On the basis of these statutes and regulations, the court held that a seller's real estate agent does, in fact, owe a duty of care to the buyer and can be held liable for failing to disclose material facts. The court acknowledged that in this case the Lawleys were not the buyers of the property, but only rented the property from the buyer. However, the court found that the Lawleys were sufficiently involved in the real estate transaction to maintain a suit against the seller's agent.

On the other hand, the court was careful to point out that a real estate agent will only be liable for failing to disclose material information that she knew or should have known. If a real estate agent is unaware, through no fault of her own, of a material defect in property that she is trying to sell, she cannot be held liable for non-disclosure.

For advice on potential matters involving the liability of real estate agents in Maryland, contact Deborah M. Whelihan, Esq. at 703-246-0900.

Posted by Raphael Cohen on 06/02/2011 at 02:04 AM
Liability of Agents and BrokersMarylandPermalink