On June 13, 2016, the Appellate Division issued its unpublished decision in Comer v. Pacheco, affirming the trial court’s grant of the plaintiff’s cross-motion for summary judgment, requiring the insurer to provide coverage under the subject policy. In this case, an employee of Pat’s Housekeeping Service, Figueroa, died as a result of a motor vehicle accident that occurred on April 4, 2006. At that time, Pacheco, the owner of Pat’s Housekeeping Service, was driving Figueroa in Pacheco’s personal vehicle, rather than the vehicle registered to Pat’s Housekeeping Service. Proformance Insurance Company (“Proformance”), issued a commercial automobile policy to Pat’s Housekeeping Service. Proformance, upon being provided with a statement of loss, denied coverage, reasoning that the accident involved Pacheco’s personal vehicle, which was not scheduled.
In affirming the trial court’s grant of summary judgment to plaintiff, the Appellate Division reasoned that insurance policies are adhesion contracts, as the insurance company is the expert and unilaterally prepares the policy, whereas the insured is unversed in insurance provisions. As a result, courts are required to read coverage provisions broadly and to strictly construe exclusionary clauses. Where the subject claim involves the compensation of an innocent third party, the protection of the innocent third party is a primary concern. The language of the policy is to be given its plain, ordinary meaning, and if the policy terms are clear, courts interpret the policy as written. However, if the policy language fairly supports two meanings, the policy is construed to sustain coverage in order to comport with the reasonable expectations of the insured. Further, the declarations page has “signal importance” in defining the insured’s reasonable expectations of coverage.
In this case, the named insured on the declarations page of the Proformance policy was Pat’s Housekeeping t/a Patricia Pacheco. Under the policy terms, coverage was afforded to a Ford minivan, the sole scheduled vehicle, and also to “those autos you do not own…that are used in connection with your business.” The policy defined “you” as the named insured on the declarations page. Proformance’s denial of coverage was premised on the contention that Pacheco and Pat’s Housekeeping Service were one in the same, i.e., that Pacheco was also a named insured under the policy. As a result, Proformance argued that the Pacheco vehicle was owned by the named insured and not covered under the policy.
In contrast, the Appellate Division described that the declarations page provided that the named insured was Pat’s Housekeeping Service. Therefore, the Appellate Division provided that it was reasonable for Pacheco to assume that the references to “you” in the policy referred to Pat’s Housekeeping Service alone. Thus, the Appellate Division held that it was reasonable for Pacheco to believe that coverage under the Proformance policy existed for the vehicle owned by Pat’s Housekeeping Service, and vehicles not owned by Pat’s Housekeeping Service but used in connection with its business. Consequently, the Appellate Division provided that the language of the policy fairly supported two meanings; Proformance’s interpretation which would deny coverage, and Pacheco’s interpretation that would provide coverage. As a result, the Appellate Division concluded that the policy must be construed to sustain coverage in order to comport with the reasonable expectations of the insured, and that Pacheco’s personal vehicle was covered under the policy because it was not owned by Pat’s Housekeeping Service.
Testimony Re: Consistency of Testifying Expert Opinions with Non-Testifying Experts Barred in New Jersey
The New Jersey Supreme Court recently unanimously held in Bardis v. Stinson, 2016 WL 1650509 (N.J. April 27, 2016) that the collapse of an insureds’ basement wall was not covered under a homeowner’s insurance policy as the policy did not afford coverage for collapses caused by “hidden construction defects.”
In Bardis, the insureds’ basement wall, which was built as part of an addition of their single-family home twenty years earlier, collapsed in December of 2009. The insured’s general liability and commercial dwelling policy provided limited coverage for “direct physical” losses, including collapse losses, stating “the collapse of a building or any structural part of a building that ensues” due to “[h]idden decay, unless such decay is known to an insured prior to the collapse.”
As the insureds’ expert, Michael Pierce, opined that a lateral bending failure due to excessive horizontal loads caused the collapse, and that the manner of construction in building the wall “certainly would not be the proper way of constructing a basement foundation wall system.” He further opined, “this foundation wall had hidden defects that would not have been immediately obvious to somebody doing an inspection inside the basement prior to the collapse.” As such, the insureds argued that loss was a “hidden decay” unknown to the insureds prior to the collapse. Both parties filed Motions for Summary Judgment in trial court, and the trial judge granted summary judgment to the insurer, holding that the insured failed to establish that the loss was caused by a hidden decay.
The Appellate Division in Bardis, relying heavily upon the reasonable expectations doctrine, reversed the trial court’s decision, concluding that the insureds “could have reasonably expected that their homeowner’s insurance policy would cover a gradual decline in strength of their basement wall, followed by its sudden collapse, after it stood for over twenty years.” Further, the Court found that the term “decay” is ambiguous and therefore could cover gradual declines in the strength of the wall. Accordingly, the Appellate Division held that a question of fact existed as to whether the wall collapsed over time as it weakened, constituting a collapse due to a hidden decay. The Honorable Paulette Sapp-Peterson, P.J.A.D. dissented, asserting that the trial court was correct in declaring that the term “decay” is not the same as the term “defect”, holding that “a ‘defect’ connotes imperfection from the outset, while ‘decay’ connotes a decline from a condition that was originally sound. One cannot force a square into a round hole.”
The Supreme Court did not issue its own opinion in reversing the Appellate Division’s decision, instead electing to rely upon the Honorable Paulette Sapp-Peterson, P.J.A.D.’s dissent. In doing so, the Supreme Court reinforced the importance of courts applying unambiguous policy language rather than relying on the reasonable expectations doctrine as a justification for adopting their own interpretations of unambiguous policy language.
Appellate Division Affirms Ruling that Plaintiffs' Claims Are Not Time Barred in Applying "The Discovery Rule"
In Kuczynski v. Pomponi, No. A-0316-15T3, 2016 N.J. Super. Unpub. LEXIS 1225 (App. Div. May 27, 2016), the Appellate Division affirmed the lower court’s denial of defendant-appellant Town of Kearny’s motion to dismiss, holding that plaintiffs’ Notice of Claim was timely under the Tort Claims Act (TCA) and the “discovery rule.”
In 2013, there were three separate instances in which the toilet in the basement of plaintiffs’ home overflowed and expelled sewage. After each occurrence, the plaintiffs consulted with defendant Pomponi, a plumber, who advised plaintiffs that the sewer line was broken and needed to be replaced from the house to the curb, and, later, that there was a blockage in plaintiffs’ sewer pipe somewhere between the house and the point where the pipe connected to the town’s sewer system. Importantly, Pomponi told plaintiffs that they were responsible for the entirety of that pipe to the point where it connects to the Town’s system.
On March 25, 2014, after consulting with a second plumber who concluded that there was a blockage in the pipe between the sidewalk and the middle of the street, the area was excavated for repairs, at which time it was discovered that boulders used to fill a sink hole in the street had crushed and disconnected one of the plaintiffs’ pipes near the area where it connected with the Town’s sewer main. The Town’s plumbing inspector, who was overseeing the excavation, stated “this is our fault.” Having realized that the Town was at fault for their plumbing problems, plaintiffs served a Notice of Claim upon the Town on May 20, 2014 (56 days after first learning that the boulders used to fill sink holes had caused the plumbing issues).
The Town moved to dismiss arguing that plaintiffs’ cause of action accrued in December 2013, when Pomponi indicated to plaintiffs that there was a blockage in plaintiffs’ sewer pipes somewhere between their house and the Town’s sewer main. Accordingly, the Town argued that the May 20, 2014 Notice of Claim was untimely, having not been brought within 90 days of the accrual date.
The Appellate Division, however, was not persuaded by the Town’s arguments, instead holding that the first time plaintiffs knew or should have known the Town might be at fault for their plumbing issues was on March 25, 2014, when plaintiffs discovered that boulders the Town had used to fill a sink hole had crushed one of the plaintiffs’ pipes. Before that date, none of the experts (i.e. the plumbers retained by plaintiffs to fix the plumbing) had suggested that the Town was at fault, and there were no other facts that should have alerted plaintiffs that the Town was at fault.
Under New Jersey law, “the date of accrual will be the date of the incident on which the negligent act or omission took place.” Beauchamp v. Amedio, 164 N.J. 111 (2000). However, it is well-settled that the “discovery rule” applies to claims brought under TCA. See McDade v. Siazon, 208 N.J. 463 (2011). Under the “discovery rule”, a cause of action does not accrue until “the facts presented would alert a reasonable person, exercising ordinary diligence, that he or she was injured due to the fault of another.” Caravaggio v. D’Agostini, 166 N.J. 237 (2001). Significantly, because the cause of an injury or damages is not ascertainable by a lay person, a party may not know a third party is at fault for damages until informed by an expert. See Guichardo v. Rubinfeld, 177 N.J. 45 (2003).
Here, the Appellate Division emphasized the plaintiffs’ reliance on the opinions of the expert plumbers that advised plaintiffs they were responsible for the pipes up to the point where they connect to the Town’s main sewer lines. This decision serves as a key reminder of the judiciary’s recognition not all injuries are immediately discoverable, and that plaintiffs should not be barred from making claims where an expert is necessary to ascertain the cause of injury.
New Jersey Appellate Division Affirms No Sidewalk Liability for Religious Organization Not Engaged in Commercial Activity
In a recent decision, the New Jersey Appellate Division affirmed a Trial Court decision granting summary judgment in favor of a church that had been sued by a pedestrian-plaintiff. The Appellate Division, in Rockhill v. Grace Orthodox Presbyt. Church, 2016 N.J. Super. Unpub. LEXIS 683 (Super Ct App Div Mar. 30, 2016, No. A-1697-14T3), held that defendant Grace Orthodox Presbyterian Church (“GOPC”) was not a commercial user of its property, and, therefore, was entitled to dismissal of plaintiff’s complaint, as a matter of law.
In Rockhill, plaintiff slipped and fell on a sidewalk adjacent to GOPC’s property, sustaining personal injuries. She alleged that GOPC’s negligent maintenance of the sidewalk was a direct and proximate cause of her injuries.
In analyzing GOPC’s liability, the Appellate Division first explained that only commercial property owners are liable for injuries on the sidewalks abutting their property that are caused by their negligent failure to maintain the sidewalks in a reasonably good condition. See Stewart v. 104 Wallace St., Inc., 87 N.J. 146 (1981). By contrast, New Jersey Courts have held that residential property owners are not liable for sidewalk injuries. See Luchejko v. City of Hoboken 207 N.J. 191 (2011).
As to the issue of whether a nonprofit religious organization’s use of its property is properly deemed commercial or residential, the Court in Dupree v. City of Clifton, 351 N.J. Super. 237 (App. Div. 2002) held that “if the use is exclusively religious, e.g. if the organization uses the property solely as a parish or rectory, then the organization will not be considered a commercial landowner, and, liability will not be imposed.“ However, “[i]f the organization’s use of the property is partially or completely commercial…liability attaches despite the nonprofit status of the owners.”
In the instant case, discovery revealed that at all times prior to the date of loss, and for the approximately one-year period following the incident, GOPC used its property exclusively for the religious activities of its parish and for no commercial purposes. SeeRockhill, supra. Though GOPC did, subsequently, use its property for commercial purposes (renting the basement of the property to a youth group), the Appellate Division was not persuaded that liability should attach, and deemed that only the GOPC’s use of the premises on the date of the accident was relevant.
Importantly, the Appellate Division emphasized that the policy behind the Court’s ruling in Luchejko, supra, distinguishing residential and commercial users of property, influenced its decision in this case. In Luchejko, the Court held that the purpose of the distinction is to provide guidance and predictability for property owners. For example, it allows commercial owners to know that clearing their abutting sidewalks is a cost of doing business, and it allows residential owners to safely rely on the fact that they will not be liable unless they create of exacerbate a dangerous sidewalk condition. SeeLuchejko, supra.
Likewise, in Rockhill, the Appellate Division ruled that to hold GOPC liable would deprive the defendant of its justifiable reliance upon its status as a residential owner, and, therefore it affirmed the Trial Court's ruling granting summary judgment and dismissing plaintiff’s complaint.
United States Supreme Court Strips Subrogation Rights Of Those Who Wait To Pursue Them
On January 20, 2016, the United States Supreme Court ruled in Montanile v. Board of Trustees of the National Elevator Industry Health Benefit Plan, that an Employee Retirement Income Security Act of 1974 (ERISA) plan fiduciary is not entitled to the participant’s separate assets under Section 502(a)(3) as reimbursement of medical expense payments paid by the plan. 29 U. S. C. §1132(a)(3). The Supreme Court held that while Section 502(a)(3) of ERISA authorizes plan fiduciaries to file suit in order to “obtain…appropriate equitable relief…to enforce….terms of the plan,” fiduciaries are precluded from bringing suit to attach the participant’s separate assets, seeking to recover general funds, because doing so would not be seeking equitable relief.
In general, many ERISA benefit plans contain subrogation clauses which require a plan participant to reimburse the plan for medical expenses paid if and when the participant recovers money from a third party for his/her injuries. In Montanile, the petitioner participant, Montanile, was seriously injured by a drunk driver, and he received more than $120,000 for his medical expenses from his ERISA plan. Montanile subsequently filed suit against the drunk driver and obtained a settlement in the amount of $500,000. Upon receipt of the settlement funds, Montanile paid his attorneys $200,000 for their services, as well as an additional $60,000 that the attorneys had advanced to Montanile, leaving him with $240,000.
The respondent plan administrator, the Board of Trustees of the National Elevator Industry Health Benefit Plan (the Board), sought reimbursement from the settlement amount from Montanile’s attorneys, who refused the request, despite having sufficient funds to satisfy the ERISA lien of approximately $120,000. Montanile’s attorneys informed the Board that unless it objected, the settlement funds would be transferred from the client trust account to Montanile. The Board failed to object, and the settlement funds were issued to Montanile. Of note, Montanile alleges that he then spent the remainder of the money within the next six months on non-traceable assets, such as food and travel, and did not spend the money on traceable assets, such as cars or homes.
After six months, the Board brought suit against Montanile in Federal District Court under Section 502(a)(3) of ERISA, which authorizes plan fiduciaries to file suit in order to obtain appropriate equitable relief and to enforce the terms of the plan. Thus, the Board sought an equitable lien on Montanile’s settlement funds or property in Montanile’s possession, as well as an order enjoining Montanile from dissipating his settlement funds. Montanile argued that since he had spent nearly all of his settlement funds, that there was no longer an identifiable fund in existence upon which the Board could enforce the lien.
The District Court rejected Montanile’s argument that no identifiable fund existed due to his prior spending of the settlement fund, and the Eleventh Circuit affirmed the District Court’s decision, holding that the Board of Trustees was entitled to reimbursement of Montanile’s general asserts if he had previously spent his settlement money.
The United States Supreme Court disagreed, holding that when an ERISA-plan participant wholly dissipates a third-party settlement on nontraceable items, as was the case here, that the plan fiduciary, respondentmay not file suit under§502(a)(3) to attach the participant’s separate assets. The Court’s reasoned that had the Board enforced its lien immediately upon receipt of the settlement by Montanile, or even filed a lien once Montanile received the funds from his attorneys, both actions would have been equitable, and thus, the Board would have been entitled to reimbursement under §502(a)(3).
Here, however, due to the Board’s failure to object to the disbursement of the settlement money to Montanile, and failure to immediately file suit enforcing the lien upon receipt by Montanile’s attorneys, or subsequently, Montanile, once he dissipated the settlement funds, the relief sought by the Board, seeking recover out of his general assets, was no longer equitable. Therefore, due to the Board’s failure to pursue their subrogation rights in accordance with §502(a)(3) of ERISA, they were precluded from bringing suit to attach Montanile’s separate assets.
“Relationship” Discovery Directed To Plaintiff Law Firms And Doctors In Florida
“Mr. Jones, how did you come to learn of this physician?” “Objection, seeks to invade the attorney-client privilege.” Not in Florida, for now. In Worley v. Central Florida Young Men’s Christian Ass’n, Inc., 163 So.3d 1240 (Fla. 5th DCA 2015) (review pending), the Florida Fifth District Court of Appeals has held that defendants, and ultimately the jury, have the right to know whether or not a Plaintiff has been referred to a particular physician by their attorney.
Worley is now pending before the Florida Supreme Court. The Supreme Court accepted conflict jurisdiction as this holding is in direct conflict with the holding in Burt v. Government Employees Insurance Co., 603 So.2d 125 (Fla. 2d DCA 1992), where the 2d DCA held that the referral of a Plaintiff to a particular medical provider by his or her attorney is a communication protected by the attorney-client privilege.
However, Worley is another example of the trend of Florida Courts allowing exploration of the relationship between Plaintiff law firms and the physicians treating their clients. In Worley, the most expansive case on this issue to date, the Fifth DCA held, for the first time in Florida, that “after exhaust[ing] all other avenues without success, we find, contrary to the trial court’s preliminary ruling … that it was appropriate for YMCA to ask Worley if she was referred to the relevant treating physicians by her counsel or her counsel’s firm.”
Whether or not a Plaintiff has been referred to a medical provider by his or her attorney is the threshold requirement in allowing discovery into the relationship between Plaintiff attorneys and the physicians that treat their clients. This discovery includes, but is not limited to, information pertaining to past dealings between doctors and law firms and agreements regarding billing and collections for litigation patients. The rationale for allowing this kind of discovery is that “the more extensive the financial relationship between a party (or its attorney) and a witness, the more likely it is that the witness has a vested interest in that financially beneficial relationship continuing.”
Over the past few years, the Florida District Courts of Appeal have made it clear, a jury has the right to know how involved Plaintiff’s attorneys are with the doctors that treat their patients. This type of discovery has been in a state of expansion in Florida. Should the Florida Supreme Court affirm Worley, the trend will certainly continue. Defense counsel and insurance companies are routinely required to disclose the names of cases in which they referred a plaintiff to a specific doctor for a compulsory medical examination. The Courts of Florida have finally agreed that there is no meaningful difference between requiring defense counsel or insurers to disclose this information and requiring Plaintiff’s counsel to disclose the extent of the relationship between themselves and the treating physicians involved in the care of their clients.