On February 11, 2016, the New Jersey Supreme Court handed down its decision in Templo Fuente De Vida Corp., et al. v. National Union Fire Ins. Co., enforcing the insurer’s coverage denial under a “claims made” policy for the insured’s breach of the notice provision. In this case, plaintiff Templo Fuente De Vida Corp. (Templo) relied on Merl Financial Group, Inc. (Merl) as a source of funding for its purchase of property. However, upon the closing date, Merl was unable to fund the loan, and the seller terminated the purchase agreement. As a result, Templo filed a complaint against Merl, which was subsequently restructured and renamed First Independent Financial Group (First Independent). The matter was eventually settled, wherein First Independent assigned its rights and interests under an insurance policy to Templo.
First Independent purchased the policy from National Union Fire Ins. Co. (National Union), which was a $1 million “claims made” policy containing a notice provision section. That section, as a condition precedent, required First Independent to provide notice to National Union of any claim “as soon as practicable.” Although First Independent was served with Templo’s Complaint on February 21, 2006, it did not provide notice of the claim to National Union until August 28, 2006. As a result, National Union disclaimed coverage, asserting that notice of the claim was not provided “as soon as practicable” under the terms of the policy.
Templo then initiated a declaratory judgment action against National Union, seeking a coverage determination. The Court, in affirming summary judgment to National Union, upheld National Union’s disclaimer as First Independent did not provide notice as soon as practicable, and also held that National Union did not have to show prejudice. In reaching that conclusion, the Court reasoned that, if the policy language is unambiguous, the Court will not engage in a strained construction to support coverage, nor write a better policy than the one purchased. The Court then found that the policy’s notice provision unambiguously required the insured to provide notice as soon as practicable, and that First Independent's delay in providing notice of Templo’s claim was unjustified under the circumstances.
In determining that National Union was not required to prove prejudice prior to disclaiming coverage, it reasoned that the policy at issue covered “claims made,” and that First Independent was a knowledgeable entity which purchased its insurance through sophisticated brokers. As a result, the Court reasoned that National Union did not need to show prejudice prior to disclaiming coverage, and instead, the Court need only enforce the plain and unambiguous terms of the negotiated policy. The Court found that the nature of the “claims made” policy contained mutual rights and obligations, and by failing to adhere to the notice requirement, the insured foreclosed the insurer’s ability to protect its own rights and to influence how litigation proceeded. When First Independent defended Templo’s claims without notifying National Union, First Independent breached the timely notice provision contained in the policy, and National Union was within its rights to decline coverage without demonstrating appreciable prejudice.
Comparative Analysis Is Critical When Plaintiff Alleges Aggravation Of A Pre-Existing Injury
In a recent decision, the New Jersey Appellate Division held that plaintiff, who allegedly sustained an aggravation of a pre-existing injury in a motor vehicle accident, was required to present a comparative analysis of her injuries at trial, and her failure to do so should have resulted in a directed verdict for the defendant. Accordingly, the Appellate Division, in Lopez v. Larsen, 2016 N.J. Super. Unpub. LEXIS 199 (Super Ct App Div Feb. 2, 2016, No. A-0660-14T2), reversed the decision of the trial court and remanded the case for an entry of judgment in favor of the defendant.
Plaintiff alleged that she was injured in a motor vehicle accident on October 1, 2009. Her claims were subject to the New Jersey verbal threshold statute. Plaintiff stated that she sustained permanent injuries to her neck, resulting in disc herniations at C4-C5, C5-C6, a disc bulge at C5-C6, and cervical radiculopathy. During the course of discovery, however, plaintiff disclosed that she was involved in prior motor vehicle accidents in 2004 and 2006, in which she sustained injuries to her neck, back and right shoulder.
At trial, plaintiff presented her pain management physician as the only medical expert to testify as to her injuries. Plaintiff’s medical expert critically testified that there were “significant changes” between the 2004 MRI and 2009 MRI of her cervical spine. Accordingly, he opined that plaintiff’s injuries were causally related to the 2009 accident. Her physician further testified that plaintiff told him she was not involved in any prior accidents, and he formed his opinion, that she sustained a permanent injury causally related to the 2009 accident, based on this fact. The witness also admitted that the prior medical records pertaining to her 2004 and 2006 accidents could have caused him to change his opinion.
After presentation of plaintiff’s case-in-chief, defendant moved for a directed verdict arguing that plaintiff’s expert failed to provide a comparative analysis of her pre- and post-accident injuries, which was denied by the trial judge. The jury returned a verdict in favor of plaintiff and awarded $90,000.
On appeal, defendant argued that her motion for a directed verdict should have been granted because plaintiff failed to present a comparative analysis of her injuries as required under Davidson v. Slater, 189 N.J. 166 (2007). In Davidson, the Court held that a plaintiff who pleads an aggravation of a pre-existing injury must present comparative medical evidence in order to satisfy the causation element. Plaintiff argued that she satisfied this burden because her medical expert testified that there were “significant” changes in the 2004 and 2009 MRIs and that these changes are objective evidence sufficient to permit the issue of causation to be decided by a jury.
The Appellate Division found that because plaintiff’s medical expert had not been given all of the applicable medical information pertaining to the prior injuries and treatment (and had merely been presented with two sets of films and asked to opine as to the differences), plaintiff evaded her burden and her expert could not provide an opinion as to the causation of her injuries following the 2009 accident. Therefore, the Court remanded the case to the trial court to enter a judgment for the defendant. This decision is significant because of the Court’s emphasis that a comparative analysis, through expert testimony is of paramount importance in cases involving aggravation of a pre-existing injury. While causation may typically be an issue for the trier of fact, the Appellate Division’s holding makes clear that causation issues may not reach the jury until plaintiff satisfies the initial burden of providing a comparative analysis.
Dangerous Instrumentality As Applied To Incidents Involving Golf Carts In Florida
The dangerous instrumentality doctrine imposes strict and vicarious liability upon the owner of a motor vehicle who voluntarily entrusts that motor vehicle to an individual whose negligent operation causes damage to another, and operation of a vehicle falls within the strict liability doctrine because a vehicle is dangerous to others when used for its designed purpose. The dangerous instrumentality doctrine is historically a creation of the courts, not the legislature, and may be invoked or extended where an instrumentality of known quantities is so peculiarly dangerous in its operation to justify the doctrine. Florida is unique in that it is the only state to have adopted this rule by judicial decree.
In Meister v. Fisher, 462 So.2d 1071 (Fla. 1984), the Florida Supreme Court held that a golf cart was a dangerous instrumentality. In reaching that decision, the Court pointed to three different justifications for the decision: golf carts fit the statutory definition of a “motor vehicle,” golf carts were extensively regulated by statute, and record evidence regarding the causes and consequences of golf cart accidents. The Court justified expansion of the dangerous instrumentality doctrine based upon the record before them:
“As the district court itself noted, Florida’s tremendous tourist and retirement communities make golf carts and golf courses extremely prevalent in this state. And there is evidence in this record from an expert who stated that he has investigated numerous accidents involving golf carts that “the types of accidents caused by the operation of the carts are due to the particular design features of the carts and are identical to those involving other motor vehicle accidents”
Meister at 1073.
While the owner of a golf cart’s vicarious liability is virtually unlimited under the doctrine, these cases are defensible. Firstly, it is, or should be, the practice of golf facilities to have guests or members sign an agreement containing an exculpatory clause prior to using the facilities. Florida Courts are clear that exculpatory clauses are enforceable where and to the extent that the intention to be relieved of liability was made clear and unequivocal in the contract. The wording must be so clear and understandable that an ordinary and knowledgeable party will know what he is contracting away. This particular issue has not been considered by the appellate courts of Florida with respect to golf carts, however, the Massachusetts Court of Appeals has held:
“A golf club member who died in an accident while driving his golf cart along a temporary path on the golf course was bound by the release and indemnity clause in his membership handbook, even though the clause was contained in a handbook among many other rules, regulations, and provisions, and there was no evidence that the member had ever read the provision or knew of its existence, either before he became a member of the club, or during the 10 years of his membership.”
Post v. Belmont Country Club, Inc., 60 Mass.App.Ct. 645 (2004).
Further, it has been held in Florida that where two people are jointly entrusted with the possession of a dangerous instrumentality, they are co-bailees or joint adventurers and cannot impute the negligent operation of the instrumentality by either of them, or recover damages for injuries to either of them, arising therefrom. The claim of one golf cart driver against the owner of a golf cart for injuries caused by his playing partner has been specifically evaluated by courts in this state. In Ferrer v. FGC Enterprises, Inc., 805 So.2d 967 (Fla. 3d DCA 2001), the Third District Court of Appeals held that members of a golf league using a golf cart owned by the Fontainebleau Golf Club were co-bailees or joint adventurers. Therefore, the court held that the owner of the golf course was not liable under the dangerous instrumentality doctrine for injuries sustained when one member was struck by the golf cart operated by the other member.
In summary, the current state of the law in Florida is such that owners of golf carts face virtually unlimited vicarious liability for injuries caused by permissive users of golf carts. However, these cases are defensible depending on the prudence of the owner of the cart and/or facility, and the particular factual scenario in which an injured party claims the facility is liable.
New Jersey Supreme Court Takes Big Step In Protecting Insurers From Fraudulent Applications
On December 1, 2015 the New Jersey Supreme Court issued its opinion in DeMarco v. Stoddard, reversing the Appellate Division and ruling that an insurer has no duty to provide coverage to a doctor who made a material misrepresentation on his application for insurance. Defendant Dr. Sean Robert Stoddard practiced podiatry in New Jersey. In 2007, Dr. Stoddard applied to RIJUA for medical malpractice liability insurance and subsequently submitted renewal applications to RIJUA from 2008 through 2011. On each application, Dr. Stoddard represented that at least 51% of his practice was generated in Rhode Island. That was untrue.
In October 2011, Plaintiff Thomas DeMarco filed a medical malpractice complaint in New Jersey alleging that Dr. Stoddard negligently performed a surgical procedure. Dr. Stoddard subsequently forwarded the complaint to RIJUA, which responded with a reservation of rights letter, indicating that it only provides coverage for physicians who maintain 51% percent of their professional time and efforts in Rhode Island, and that it was investigating whether Dr. Stoddard met that requirement. As a result of its investigation, RIJUA instituted a declaratory judgment action in Rhode Island, and in May 2012, RIJUA rescinded Dr. Stoddard’s policy, ab initio. However, in the New Jersey action, the Superior Court and Appellate Division ordered RIJUA to provide Dr. Stoddard with a defense and indemnification up to $1 million.
In declaring that RIJUA owed no duty to provide coverage to Dr. Stoddard for the alleged malpractice committed upon DeMarco, the New Jersey Supreme Court recognized New Jersey’s policy that a legal malpractice insurance policy may be declared void from its inception due to a material misrepresentation by the insured on its application for insurance. The Court discerned no basis to treat physicians in a different manner. The Court reasoned that a policy of medical malpractice liability insurance is issued following an analysis of the risk to be assumed. However, the risk analysis is undermined when a prospective insured lies on the application. As a result, the Court stated that it refused to condone fraudulent conduct.
Furthermore, the Supreme Court differentiated New Jersey’s mandated medical malpractice liability insurance from New Jersey’s comprehensive no-fault automobile insurance system. As it pertains to medical malpractice liability insurance, unlike automobile insurance, the Court reasoned that the Legislature has not created an expectation that insurance coverage will be available to redress an injury even in the face of a fraudulently obtained policy. The Court held that the Appellate Division’s reference to and reliance on the compulsory automobile liability insurance model was therefore misplaced. The Court stated that an insured professional cannot expect insurance coverage when the professional liability insurance was obtained due to material misrepresentations in the application for insurance.
DeMarco v. Stoddard marks a favorable outcome for professional liability insurers. The Court’s holding reaffirms that New Jersey courts will not condone fraudulent activity and material misrepresentations. Given this decision, it appears that physicians are now also presented with a choice; be forthcoming on an application for medical malpractice liability insurance, or face potential malpractice lawsuits and a possible disclaimer.
A Rose by Any Other Name: When Dangerous Conditions Are Only Dangerous if They Have Been Before
The New Jersey Appellate Division again recently upheld the immunities in favor of municipalities and public entities, and displayed the high burden a plaintiff faces when alleging a dangerous condition on public lands. The case of Bunero v. City of Jersey City, 2015 N.J. Super. Unpub. LEXIS 2784 (App.Div. Dec. 3, 2015), LEXIS 430, is instructive in that it displays the great strength of the immunities granted in favor of public defendants, even in factual circumstances that may seem adverse, under the New Jersey Tort Claims Act (N.J.S.A. 59:1-1, et al.)
In granting summary judgment, the trial court determined that the plaintiff had not sustained his burden in proving that the City’s actions were palpably unreasonable. The plaintiff was struck from behind while riding his motorcycle on Communipaw Avenue in Jersey City, New Jersey, on July 4, 2010. Upon impact, plaintiff’s motorcycle was caused to ride up a nearby curb, and the plaintiff’s right leg struck the “nozzle cap” of a fire hydrant which was on the sidewalk. As a result, the plaintiff sustained an open compound fracture of the right leg.
Plaintiff generally alleged that the City had allowed a dangerous condition to exist on its property, in that the fire hydrant was placed too close to the curb, and thus too close to the roadway. The edge of the hydrant’s nozzle cap was measured to be just one and one-half inches from the curb line of Communipaw Avenue. This condition allegedly posed a danger to motorists in Jersey City. Surprisingly, this allegation found a multitude of support, even from the City itself.
Based upon property records and testimony from a professional engineer employed by the City, it was determined that the subject hydrant had been at that location and position on the sidewalk since sometime before 1939. Plaintiff’s expert presented extensive testimony regarding applicable standards. Apparently, in 1938, the American Water Works Association recommended that “no portion” of a hydrant should be placed “less than six inches or more than twelve inches” from the gutter face. Even if the subject hydrant was measured from its outlets, and not the nozzle cap, it was still just four and one-half inches from the curb. In 1970, this standard was updated, and recommended that a set-back of two feet from the curb line to the hydrant was appropriate. This is apparently the current standard, as well. The City, when installing new hydrants, mandated that they be at least eighteen inches from the curb, and more specifically, there be two feet of space between the curb face and the center-line of any newly relocated fire hydrant.
The hydrant had remained in its position for over seventy years by the time of plaintiff’s accident, and it apparently was not in compliance with applicable codes and standards for the duration of that time. Nonetheless, when discussing the City’s summary judgment motion, the trial court concluded that the hydrant did not constitute a dangerous condition, and that the hydrant did not represent a reasonably foreseeable risk of the injury sustained by plaintiff. Summary judgment was awarded in the City’s favor.
On appeal, the Appellate Division of New Jersey upheld the trial court’s conclusion, and affirmed the summary judgment award. However, it disagreed with the trial court on some key aspects. The Appellate Division held that the evidence presented by plaintiff was sufficient to raise an issue of fact as to whether the hydrant constituted a dangerous condition, and that a jury could also conclude that the injury sustained by plaintiff was foreseeable.
Despite this, the Appellate Division ultimately agreed with the trial court in ruling that the City’s actions could not be found to be “palpably unreasonable.” In support of this ruling, the evidence relied upon included testimony from the City’s engineer that as a result of the location of the water pipes, the nearest property line, and other impediments, the City “probably could not have” installed the hydrant further from the roadway. It further noted that the plaintiff failed to produce any evidence that the subject hydrant was the cause of any prior incident or injury.
But perhaps the most interesting portion of this case is where the Appellate Division expounded upon its ruling. In citing Polzo v. Cty of Essex, 209 N.J. 51 (2012), the Appellate Division noted that where a public entity fails to repair a dangerous condition, even in instances where there was not even an inspection program in place, this conduct was protected under the Tort Claims Act. In Polzo, a bicyclist fell over a depression in a county road. The Supreme Court found that where there was no inspection program in place, it could not be held that the County had actual or constructive notice of the subject condition. The Court also commented on the responsibilities with which public entities are tasked, noting that they are often charged with “considerable responsibility for road maintenance in a world of limited public resources.”
The Bunero Court applied these principles to its facts, noting that Jersey City has thousands of fire hydrants on its properties, and that it is unclear exactly how many of those hydrants may be in violation of the applicable standards. Therefore, even though the City has “considerable responsibility” for maintenance of its properties, the “limited public resources” it is generally granted certainly hinder those efforts.
This matter is instructive in that it should serve as yet another reminder of state legislatures’ protection of public entities, and the often broad immunities granted in their favor. Further, if a dangerous condition is alleged, it could easily be argued in response that notice of the specific dangerous condition is required, as well as knowledge that the alleged dangerous condition was the cause of an incident or injury in the past. Should this notion be widely applied and create a new standard, the defense of public entities would benefit substantially.
New Technology Companies and the Resulting Labor Force Identity Crisis
The rise of the virtual marketplace has seen the advent of a new employment space, colloquially referred to as the “gig economy.” However, emerging technology, freelance driven companies, such as Shyp, Lyft, Instacart, Handy, Postmates, and many more, are still operating under an old employment status regime. Independent contractors and dependent employees stand on opposite sides of the employment continuum, and between the two is the future of the labor force.
Generally, an employer will be held liable for the wrongful acts of his employee and Courts have repeatedly held that an independent contractor is not an employee. Specifically, Courts have adopted a multi-factor test to determine employment status as a dependent employee or independent contractor – essentially, an analysis of the control exerted by the employer.
For example, despite Uber positioning itself as a logistics software company/middleman between transportation providers and users, the California Labor Commission recently determined that at least one Uber driver is a dependent employee rather than an independent contractor. That being said, it should be noted that Uber had success in other states, which determined that Uber's drivers are independent contractors.
Still, lawsuits are expensive and potentially fatal, as can be seen through the closing of Homejoy. Indeed, companies, including Lyft and Shyp, are starting to re-classify their workforce as dependent employees ahead of Court rulings, though, they each state that this is an attempt to achieve better customer service and is an investment in their workforce rather than a hedge to litigation costs. Reallocating funds from fighting its employees in court to paying more money in benefits etc. is a cost benefit analysis that these companies will be forced to make, and may threaten their unique business model. Clearly, the new “sharing” or “gig” economy is creating rifts in the established classifications for employees.
The classification of “dependent contractors” has been utilized by European countries and could possibly offer clarity where ambiguity presently lies. Again on the employment status continuum, a dependent contractor would stand between the independent contractor and the dependent employee. A designation of dependent contractor would allow such laborers the flexibility of an independent contractor and the protections of a dependent employee.
Whether those protections include insurance coverage has yet to be seen; however, if an employer provides insurance, the covered laborer would likely be considered a dependent employee. Nonetheless, the legitimization of the dependent contractor status could provide a windfall for workers’ rights. More, the establishment of the dependent contractor may lead to new insuring practices and platforms etc.; thereby, advancing and evolving the insurance industry, inter alia, to keep up with today’s transformative economy.