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Insurer’s Late Notice Defense in Virginia: Dabney v. Augusta Mutual Ins. Co.
In Dabney v. Augusta Mutual Insurance Co., 282 Va. 78, 710 S.E.2d 726 (2011), the Virginia Supreme Court held that the question whether the insured gave the insurer notice of the claim "as soon as is practicable" was a question for the jury, notwithstanding the insured's 254-day delay in providing notice. The Court reversed the trial court's award of summary judgment to the insurer, because the trial court only focused on the length of the delay, and failed to consider the facts and circumstances surrounding the delay.

The Virginia Supreme Court reasoned that the timeliness of the notice of the claim must be considered in light of all the facts and circumstances presented in the case. There were extenuating circumstances here: The insured was unaware of the claim before her death; and the address for notice in the insurance policy had been changed, unbeknownst to the executor of the insured's estate, resulting in the initial written of notice letter being sent to the wrong address, and yet the letter was never returned to sender or acknowledged.

Given the extenuating circumstances, whether the notice was timely under the policy was a question of fact upon which reasonable minds could disagree, and the trial court erred in ruling that the notice was untimely as a matter of law.

Elsewhere in the decision, the Virginia Supreme Court held that the trial court correctly held that the plaintiff was limited to the alleged date of notice plead in the amended complaint. The Court emphasized that the law in Virginia is well established that a court cannot enter judgment based on facts that are not alleged in the parties' pleadings. The issues in a case are made by the pleadings, and not by the testimony of witnesses or other evidence.

However, the Court noted that the plaintiff's counsel did not argue to the circuit court that, pursuant to Code sec. 8.01-377, its pleading could have been amended to conform to the evidence presented at trial. Because the Virginia Supreme Court remanded the case for trial, this raised the possibility that plaintiff's counsel still could amend the pleading to allege alternative dates of notice.

The alternative dates of notice were a key underlying issue at trial, because of the operation of Virginia Code sec. 38.2-2226, which states in pertinent part that:
Whenever any insurer on a policy of liability insurance discovers a breach of the terms or conditions of the insurance contract by the insured, the insurer shall notify the claimant or the claimant's counsel of the breach. Notification shall be given within forty-five days after discovery by the insurer of the breach or of the claim, whichever is later. . . . Failure to give the notice within forty-five days will result in a waiver of the defense based on such breach to the extent of the claim by operation of law.


Thus, if the plaintiff could show that the insurer had received notice of the claim earlier than 45 days from the time that the insurer gave the claimant notice of the late notice defense, the defense would be waived as a matter of law under this statute. Virginia courts have been strict in applying such waiver. See, e.g., Aetna Casualty & Surety Co. v. Compass & Anchor Club, Inc., 33 Va. Cir. 235 (Feb. 24, 1994). See also Morrell v. Nationwide Mut. Fire Inc. Co., 188 F.3d 218 (4th Cir. 1999).

For those reasons, whether or not the trial court would, on remand, allow an amendment of the pleadings to conform to the evidence presented at trial, could mean the difference between victory or defeat for the parties.

All insurers doing business in Virginia and their counsel should keep the notification requirements of Va. Code sec. 38.2-2226 in mind in any claim involving a late notice defense or any other claim involving alleged breach of the conditions of the insurance policy as a defense.

Posted by David B. Stratton on 11/30/2011 at 10:32 PM

Subrogation suit dismissed based on contractual limitations period in arbitration clause
In Vigilant Insurance Company v. American Mechanical Services of Maryland, LLC, the U.S. District Court for the District of Columbia dismissed a subrogation action by an insurance company against a contractor on the grounds that the claim was barred by a contractual limitations period.

Vigilant sued American Mechanical Services to recover amounts paid by Vigilant to Venable, LLP following a fire at Venable's offices which Vigilant claimed was caused by American Mechanical Services. As Vigilant was subrogated to the rights of its insured, it was bound by the contract between American Mechanical Services and Venable, LLP, which included a mandatory arbitration clause. That clause included a requirement that a written demand for arbitration needed to be served within one year after the date the dispute arose.

Vigilant conceded that no written demand for arbitration was made, but argued that a demand letter sent to American Mechanical Services (which did not mention arbitration) was sufficient to discharge American Mechanical Services' obligation to initiate arbitration. The Court disagreed, finding that the term was unambiguous, and that no reasonable jury could find that American Mechanical Services had lulled Vigilant into disregarding the contractual period of limitations.

Posted by Padraic K. Keane on 11/22/2011 at 07:13 PM
ArbitrationDistrict of ColumbiaInsurancePermalink

Legal malpractice in D.C.: the common knowledge exception to the requirement of expert opinion
In Carranza v. Fraas, No. 05-0117 (D.D.C. Oct. 31, 2011), Judge Urbina granted summary judgment on legal malpractice and breach of fiduciary duty claims, due to the plaintiffs' lack of expert testimony supporting some of their claims, and the plaintiffs' lack of admissible evidence to support their last remaining claim. The plaintiffs, who were two female farmers from Montana, brought suit against the defendant attorney for legal malpractice and breach of fiduciary duty arising out of their underlying civil rights action against the USDA.

The plaintiffs had three claims. First, they alleged that the attorney failed to meet USDA-imposed deadlines in pursuing a settlement in the civil rights action. Second, they alleged that the attorney failed to disclose a conflict of interest arising from his work as a registered lobbyist before the USDA. Third, they alleged that the attorney failed to inform them of a settlement offer by the USDA.

Judge Urbina granted summary judgment on the first two claims in an earlier opinion, Carranza v. Fraas, 763 F.Supp.2d 113 (D.D.C. Feb. 7, 2011). The Court noted that to establish legal malpractice under D.C. law, the plaintiffs must demonstrate the applicable standard of care, that the attorney violated that standard and that the violation caused a legally cognizable injury. They must establish the standard of care by presenting expert testimony, unless the attorney's lack of care and skill is so obvious that the trier of fact can find negligence as a matter of common knowledge.

Here, the plaintiffs had failed to designate an expert witness, and argued that their allegations fell within the common knowledge exception. Concerning the allegation that the attorney failed to meet USDA deadlines, Judge Urbina acknowledged that failing to adhere to court filing deadlines is a type of negligence that may fall within the common knowledge exception. However, not every failure to meet a deadline falls within the common knowledge exception. The alleged deadline here was an unspecified time during which the USDA expected the defendant to file paperwork in accordance with the purported settlement offer. The Court found that "it is far from clear that a lay jury could determine the significance of the defendant's alleged failure to comply with such deadlines without the aid of expert testimony", and that the common knowledge exception did not apply to these deadlines.

The plaintiffs' second claim was based on an alleged conflict of interest. While other jurisdictions have held that no expert testimony is necessary in cases involving obvious conflicts of interest, in D.C. the Court observed that it has been held that "assessing an alleged conflict of interest is a task that falls beyond the ken of a lay juror relying on common knowledge and requires expert testimony." Thus, the Court found that the common knowledge exception did not apply to the conflict of interest claim.

The plaintiffs' third claim was that the attorney failed to inform them of the USDA's January 2001 settlement offer. The Court did find that the common knowledge exception applied to this claim:

Without question, an attorney has a duty to inform his client of meaningful settlement offers made in the course of civil litigation. See, e.g., D.C. RULES OF PROF'L CONDUCT R. 1.4(a) cmt. 1 (providing that "[a] lawyer who receives from opposing counsel an offer of settlement in a civil controversy . . . is required to inform the client promptly of its substance") . . . .

The Court reasoned that a lay juror could recognize that an attorney's failure to report a settlement offer is a breach of duty, and is a withholding of information necessary to make decisions that are at the core of the attorney-client relationship. However, the Court denied summary judgment on this claim without prejudice, to allow for further discovery as to whether the USDA had in fact ever made the alleged settlement offer.

The Court also refused plaintiffs' motion to appoint an expert under Fed. Rule of Evidence 706(A), which was a ruling that drew some scholarly attention.

In the subsequent opinion, the Court granted the renewed summary judgment motion by the defense. After discovery, it simply turned out that there was no evidence that the USDA had actually made the alleged settlement offer in January, 2001. The plaintiffs' opposition to the renewed motion for summary judgment rested only upon their own unsupported affidavit, which itself merely presented hearsay. The contemporaneous documentation of the settlement negotiations indicated that the USDA had never made the alleged settlement offer after all.

This case illustrates the need for a practitioner to document settlement negotiations carefully, in order to avoid any misunderstandings and resolve any claims expeditiously.

Posted by David B. Stratton on 11/17/2011 at 06:52 PM
District of ColumbiaExpert Witness IssuesLegal MalpracticePermalink

Maryland Premises Liability:  Nightclub subject to suit for injuries to patron beaten on dance floor
In Troxel v. Iquana Cantina, LLC, No. 820, September Term, 2010 (Md. App. October 3, 2011), plaintiff was a patron at a nightclub, where on a "college night" he was attacked and beaten on the dance floor by several unknown individuals. The Circuit Court granted summary judgment to the defendants, holding that the plaintiff's cause of action was an attempt to impose "dram shop" liability contrary to Maryland law; and that there was insufficient evidence to sustain a negligence claim. The Court of Special Appeals reversed, concluding that while Maryland does not recognize "dram shop" liability, here the plaintiff's cause of action was supported by sufficient evidence of negligence under a premises liability theory to survive the motion for summary judgment.

Dram ship liability is not recognized as a valid cause of action in Maryland. The Court explained at length the difference between dram shop liability and premises liability. A statutory dram shop cause of action requires the following elements: (1) a server of intoxicating beverages; (2) a recipient of alcohol who is either an intoxicated person or a minor; and (3) an injury which is proximately caused by the intoxication. In contrast, a premises liability claim against a tavern keeper has the following elements: (1) the owner controlled a dangerous or defective condition; (2) the owner had knowledge or should have had knowledge of the dangerous condition; and (3) the harm suffered was a foreseeable result of that condition.

The Court found that the gravamen of the amended complaint was that the injury resulted from the defendants' failure to protect patrons from a dangerous condition, and not from the furnishing of alcohol, and that the Circuit Court was incorrect to analyze this as a dram shop action.

Within the State of Maryland, the seminal case addressing duty in a premises liability context is Scott v. Watson, 278 Md. 160 (1976). Expanding on the teachings of Scott, the Court of Special Appeals, in Corinaldi v. Columbia Courtyard, Inc., 162 Md. App. 207 (2005), discussed three scenarios where a landowner would be liable for the criminal acts of a third party on their property. Id. at 25. A landlord would be liable if it has knowledge of: (1) prior similar criminal incidents on his property; (2) prior conduct of the criminals; or (3) events occurring on the premises immediately prior to and leading up to the criminal act, that made imminent harm foreseeable. Id.

In the present case, plaintiff focused solely on the first scenario, prior similar incidents. The Court of Special Appeals found overwhelming evidence that fights routinely occurred on the premises prior to the events that gave rise to this lawsuit. Specifically, the Court of Special Appeals found several acts of violence within the year leading up to the incident giving rise to this case. Id. at 6. Additionally, several security guards swore under oath that fights occurred most nights, and with greater frequency on ?college night,? which was the night plainitff was injured. Id. at 7.

The Court concluded that,

On the question of legal causation, when viewing all facts, and all reasonable inferences drawn from the facts, in a light most favorable to Troxel, the evidence suggests that his injuries were the foreseeable result of a typical night at Iguana Cantina. It was foreseeable from the previous incidents of violence that a large, rowdy crowd might accumulate in Iguana Cantina; that a physical altercation might occur on the dance floor; that it might be difficult to detect a physical altercation without certain security measures in place; and that a person like Troxel might suffer a physical injury as a result of violence inflicted by third persons at the nightclub. A jury could reasonably conclude that these college nights facilitated such an environment of disorder and violence that the injuries sustained by Troxel were foreseeable.

For further information on the law of premises liability in Maryland, the District of Columbia, Virginia, and West Virginia, with regard to the criminal acts of third parties, see Liability of Landowner for Criminal Acts of Third Parties

Posted by Mark H. Kopelman on 11/16/2011 at 05:47 PM

Confidential Settlements are Discoverable to Determine Joint Tortfeasor Status and Contribution
In Richard Tempel, et al. v. Elena L. Murphy, et al., No. 1199 Sept. Term 2010 (Oct. 28, 2011), the Court of Special Appeals addressed two questions: (1) whether a non-settling defendant has a right to inspect the settling defendants settlement agreements prior to judgment; and (2) whether Plaintiffs' evidence of the decedent's future economic loss is speculative if his retirement age cannot be proven with certainty.

Right to Inspect Settlement Agreements

After learning that co-defendants had settled with plaintiffs, co-defendants Dr. Richard Tempel and his employer, Osler Drive Emergency Physicians Association, requested a copy of the settlement agreements and releases on the basis that they "would significantly impact upon plaintiffs' defense strategy." Plaintiffs also suggested that they were entitled to determine if the release was a joint tortfeasor type release and the amounts paid by the other defendants on the basis that it would "dramatically impact upon defense strategies." The co-defendants refused to provide the releases but stated that they were "standard non-Swigert Joint Tortfeasor Releases" and that the amounts of settlement were not relevant until after a verdict had been rendered against the non-settling defendants to determine the appropriate amount owed by them. Unsatisfied with this response, the non-settling defendants filed a motion to compel production of the settlement agreements. The trial court ruled that the non-settling defendants were absolutely entitled to know what type of release was negotiated so that they could know how to proceed at trial, but denied the plaintiffs from discovering the settlement amounts contained therein.

The Court of Special Appeals cited Rule 2-402(a) for the proposition that:

a party may obtain discovery regarding any matter that is not privileged, including the existence, description, nature, custody, condition, and location of any documents . . . and tangible . . . if the matter sought is relevant to the subject matter involved in the action, whether it relates to the claim or defense of the party seeking discovery or to the claim or defense of any other party. It is not ground for objection that the information sought is already known to or otherwise obtainable by the party seeking discovery or that the information will be inadmissible at the trial if the information sought appears reasonably calculated to lead to the discovery of admissible evidence.

"Absent some fact in a given case that would change the result, the settlement amount contained in a joint tortfeasor release is not relevant at the pre-verdict stage." "Here, the settlement amounts did not, in any way, concern the facts relevant to a determination of [the non-settling defendants] liability or the amount of any damages; thus, they were not relevant at the pre-verdict stage." Even after final judgment, "the settlement would not be evidence relevant to any issue in the case other than the ministerial apportionment of damages." Bullinger. Here, the releases were relevant pre-trial because the nature of the releases would determine whether the non-settling defendants, if liable, would receive an automatic pro rata reduction or whether the joint tortfeasor status of the settling parties would have to be adjudicated. Accordingly, the Court of Special Appeals in affirming the trial court's ruling found that the non-settling defendants were properly provided with the pertinent information at the stage in the proceedings in which the information was relevant.

Sufficiency of Evidence to Determine Economic Loss

As to the second issue, the Appellants argued that the trial court erred by not granting their motion for judgment notwithstanding the verdict "as to the speculative nature of the jury's award for loss of Mr. Murphy's financial support" because plaintiffs' failed to prove this element of their claim." Defendants asserted that the award of $600,000 was "overly speculative" because there was no evidence upon which the jury could have concluded that Mr. Murphy, who died at the age of 59, would have retired at age 66 or 67, rather than 61, 62, or 70.

The evidence at trial was from plaintiffs' economic expert, Dr. Thomas Borzilleri, who testified that his calculations were based upon the decedent's W-2 forms and the Social Security Administration's "growth rates" and the assumption that Mr. Murphy would work until age 66 or 67 using the "Work Life Expectancy" calculation and the U.S. Pension Benefit Guarantee Corporation's "Life Expectancy Table." There was additional testimony from the decedent's family members regarding his work habits, outlook, savings habits and intentions of saving enough money to send his children to college.

The Court of Special Appeals held that the plaintiffs did not have to prove a specific age at which decedent would have retired. The Court also held that the jury could consider the totality of the evidence as to the decedent's age, health, employment, financial situation, and general population statistics (i.e. life expectancy and work life expectancy) provided by Dr. Borzilleri and the testimony from decedent's family members describing the decedent prior to the events which gave rise to the lawsuit, to determine the amount of lost support.

Posted by Robert D. Anderson, Esq. on 11/15/2011 at 05:27 PM