“No Double Dipping – Set It Off”

Florida’s Fourth District Court of Appeals (“4th DCA”) recently issued an opinion that significantly impacted a jury’s damages award. The court’s ruling represented a major win for the insurers, which successfully set off thousands in duplicated benefits.

In Liberty Mutual Insurance Company and Liberty Mutual Fire Insurance Company vs. Jeffrey H. Wolfson, Case Nos. 4D18-3652 and 4d19-118 (June 24, 2020), following a car accident, the insured (Jeffrey Wolfson) filed a claim under his UM policies with his insurers, which they did not pay. The insured filed suit. The sole issue presented to the jury related to the insured’s damages.  The jury awarded the insured a total of $1,579,629.00 (comprised of: $810,000 for loss of earning; $367,629 for medical damages; and $400,000 for pain and suffering). Post-verdict, the insurers filed a motion to set off from the verdict the amount of any settlements which duplicated any part of the verdict. Nationwide argued that it settled the insured’s UM claim for injuries and lost earnings for $100,000. The insured argued that no Florida Statute expressly authorized an UM carrier to obtain a set off for duplicated benefits paid by another UM carrier. Likewise, the insured settled his claim against AIG for $480,667.50. He argued that the AIG settlement did not duplicate the jury-determine benefits, as it related to his wife’s unpled loss of consortium claim and not injuries and lost earnings claims. The trial court denied the insurers’ motion for set off.

On appeal, the 4th DCA concluded that the set off of the AIG settlement was based on the settlement release’s plain language, which clearly and unambiguously stated it was only for the insured's benefit (“for the benefit of Jeffrey Wolfson”). As to the Nationwide settlement, the 4th DCA noted Section 627.727(1), Fla. Stat., (2018) (in relevant part): “The coverage described under this section shall be over and above, but shall not duplicate, the benefits available to an insured under any workers' compensation law, personal injury protection benefits, disability benefits law, or similar law…” While it does not define “similar law”, the 4th DCA found that because the section was legislatively enacted coverage, therefore personal injury protection benefits and disability benefits law are also legislatively enacted coverages. The 4th DCA concluded that the benefits provided under an UM policy cannot duplicate benefits already paid to an insured under another UM policy.  The 4th DCA affirmed the jury’s total award amount but remanded for the trial court to set off the settlement amounts, thereby enter a final judgement of $998,961.50. 

Big Win for Business Interruption Insurance Carriers

Small businesses around the nation have suffered an enormous body blow, as a result of the COVID-19 pandemic. Beginning in mid-March, New York officials shut down all non-essential businesses to mitigate the spread of the coronavirus.

As a result, many small businesses have filed claims under their business interruption insurance policy. However, for most companies, business interruption insurance derives from their property policy. The property policy, in turn, requires that the covered property suffer a "physical loss or damage" before the insurance coverage will apply.  Two recent decisions have addressed the issue of whether COVID-19 sufficiently meets the standard for "physical loss or damage".

On July 1, 2020, a Michigan State Court handed down the first, substantive COVID-19 business interruption coverage decision of its kind. In Gavrilides Management Co. et al. v. Michigan Ins. Co., Judge Joyce Draganchuk sided with an insurance carrier on a threshold motion to dismiss, dismissing the complaint as a matter of law. Judge Draganchuk reasoned, “There has to be something that physically alters the integrity of the property.” 

Up until the Michigan decision, only one other U.S. Judge had ruled on the issue of business-interruption losses caused by COVID-19. In Social Life Magazine v. Sentinel Ins. Co., U.S. District Court Judge Valerie Caproni for the Southern District of New York denied a preliminary injunction requested by a magazine publisher to force its insurers to pay for financial losses caused by a coronavirus closure order.  Judge Caproni reasoned, “It damages lungs. It doesn’t damage printing presses.”

In response to the financial needs of many small business owners, the New York State Assembly introduced a bill (“10226-B”) and its identical companion Senate bill (“8211-A”), which would require certain commercial property insurance policies to cover business interruption during a period of a declared state emergency due to the COVID-19 pandemic. The bill would expressly void any exclusion in such a policy for losses based on a virus-caused disease. These requirements would extend to any policy meeting all of the following criteria:

1.     In force on or after March 7, 2020;

2.     Issued to an insured with fewer than 250 eligible employees (defined as employees working a “normal week of 25 or more hours”); and

3.     Covering business interruption.

The bill was returned to the Insurance Law Committee for review, which cited in its report, “While we recognize and appreciate the interest and need within the business and nonprofit sectors to address the availability of business interruption coverage for pandemics, we believe, unless amended, the bill would present numerous ambiguities in practice, raise potential questions of Constitutional interference with contract issues, and produce an unacceptable level of uncertainty and potential insolvency in insurance markets.” While small business relief is undeniably needed in New York and throughout the nation, the recent decisions in Michigan and New York create precedential case law that COVID-19 is unlikely to sufficiently meet the “physical loss or damage” requirement for coverage to apply.

Callahan & Fusco, LLC Secures Legal Malpractice Victory for Reputable South Florida Law Firm

Callahan & Fusco, LLC recently prevailed on a motion to dismiss a legal malpractice lawsuit in Palm Beach County, Florida circuit court.
 
Our client, a well-regarded South Florida law firm, secured a full defense verdict on behalf of its client. Despite this outstanding result, the law firm’s client sued, alleging negligence in the failure to secure attorney’s fees from offers of judgment which were deemed insufficient to serve as the basis of a fees claim by a circuit court.
 
The Plaintiff argued that he was unable to win a statutory fee claim because our client, despite winning a full defense verdict, was negligent in filing the fees claims. As support for this, Plaintiff attached the fees proposals and claims filed by our clients to the complaint, along with the circuit court order denying the fees claim and ruling the proposals for fees failed because they were ambiguous, contrary to the law which states any proposal seeking entitlement to fees must clearly state the scope of fees and litigation covered by the proposal. The Plaintiff’s Complaint did not allege that there was an appeal of the circuit court’s ruling and a final order; in fact, the evidence in the record showed Plaintiff had specifically instructed our client to not seek an appeal of the circuit court’s fees order.
 
After lengthy briefing and oral argument, the Palm Beach County circuit court agreed with Callahan & Fusco, LLC senior associate Neil W. Blackmon’s argument that Plaintiff had not established “redressable harm” in his pleading because he had pleaded merely the “possibility of negligence”, as opposed to actual negligence. The basis for this ruling was our argument that the Plaintiff attached court orders to his Complaint that were non-final orders that could be, and needed to be, appealed. We argued that the only way “litigational negligence” could be pled in a legal malpractice suit under Florida law is to show that an appellate court upheld the finding of the circuit court and as such, the Plaintiff’s inability to access fees was the result of attorney negligence, not judicial error. Callahan & Fusco, LLC successfully argued that in this case—it was not clear because this was an appealable order.
 
The Court granted the motion to dismiss, with the Judge’s ruling noting that he was particularly persuaded by the argument that Callahan & Fusco, LLC’s client likely would have prevailed on appeal, as the original circuit court judge found ambiguous an order that was quite clear. As such, the appeal mattered; and the Plaintiff had not established harm caused by attorney error in his pleading. This outstanding result ultimately led to the Plaintiff abandoning his pursuit of legal malpractice litigation against our client, a just reward for a law firm that secured a complete defense verdict.

New Jersey Condominium Associations Continue to Fight Palisades

There is an old saying that “bad facts make bad law”. When you practice long enough you realize that the word “bad” is relative. This is certainly true when reviewing the New Jersey Supreme Court’s decision in The Palisades At Fort Lee Condo. Ass'n, Inc. v. 100 Old Palisade, LLC. There, the Court held that the six-year statute of limitations for a condominium association’s construction defect claims against their developer accrue when the association discovers a cause of action may exist. Although this holding appears straight forward, the Court found that the six-year period may begin when the developer is still in control of the association and identifies a possible defect and does not strictly apply to the unit owners’ period of control.

For unit owners that just assumed control of its board of directors from its developer, this decision is troubling. Not only must they learn their new roles in leading the association, they must decide whether they should file suit against the developer so that their claims are not time-barred. For a developer, this ruling incentivizes maintaining a good relationship with its unit owners, addressing concerns and establishing trust that the association has been turned over in a good place so as to avoid immediate litigation. For the developer’s subcontractors that often completed their work several years before the unit owners assumed control of the association, this provides additional finality to their potential exposure to liability and allows their insurance carriers to properly underwrite their policies.

Recently, an unpublished appellate decision came down in a condominium association construction defect case that reaffirmed the Palisades holding, leaving little doubt as to New Jersey’s jurisprudence regarding these types of claims. Riva Pointe at Lincoln Harbor Condominium Association, Inc. v. Tishman Construction Corp, et al dealt with an Association that had an engineering report in 2008 that addressed certain deficiencies in the building. Despite the fact that unit owners were not in control of the building  until 2011 and thus could not bring suit until that time, the Court ultimately held that the association was time-barred from bringing suit in 2015 as their six-year statute of limitations expired in 2014.

The Palisades ruling has been and will understandably continue to be challenged by the community association industry until either the courts reverse the decision, create limited exceptions or legislation is passed that specifically addresses the holding. Until that time it is imperative for the developer and community association to continue to work amicably to resolve their issues to ensure there is a smooth transition.

Florida’s Statutory Scheme is Clear: No Duplicate Benefits in Underinsured Motorist Cases

The question of what protections insurers have in cases involving underinsured or uninsured (UM) motorists has long been a thorny one. An entire body of law has developed around the question, one constantly being reshaped by legislative revision and judicial interpretation. A key question within that area of law: what is the impact to the insurer of other settlement agreements with the underinsured motorist’s liability carrier?

This June, Florida’s Fourth District Court of Appeal visited this question in Liberty Mutual Insurance Co. v. Wolfson, 45 Fla. L. Weekly, June 26, 2020. In Wolfson, an underinsured motorist collided with an insured’s car, causing permanent injuries. The insured filed a claim under his UM policies and the insurers (Liberty Mutual) declined to pay. The insured sued, and in a trial solely on damages, a jury awarded $1.6 million to the insured. The insurers filed a motion to set off settlements which they argued duplicated part of the jury verdict. At an evidentiary hearing on that motion, the insurer was able to demonstrate that one insurer, Nationwide, had paid $100,000 on the claim and another insurer, AIG, had entered a release wherein it waived subrogation rights in exchange for a $480,667.50 payment. The trial court, in the Seventeenth Judicial Circuit in Broward County, denied the insurers’ motion, finding most vitally that no Florida Statute specifically authorizes one UM carrier to obtain a set-off for duplicate benefits paid by another UM carrier.

Liberty Mutual appealed, and the Fourth District Court of Appeal unanimously reversed. The Court held that the Florida Statute §627.727, controlled. That statue reads, in pertinent part:

“The coverage described in this section shall be over and above, but shall not duplicate, the benefits available to an insured under any workers’ compensation law, personal injury protection benefits, disability benefits law, or similar law; under any automobile medical expense coverage; under any motor vehicle liability insurance coverage; or from the owner or operator of the uninsured motor vehicle or any other person or organization jointly or severally liable together with such owner or operator for the accident; and such coverage shall cover the difference, if any, between the sum, of such benefits and the damages sustained, up to the maximum amount of such coverage provided under this section.” (Emphasis in opinion) Florida Statute §627.727(1) (2018).

The Court held that the phrase “similar law” within the text of §627.727(1) clearly contemplated and intended to encompass uninsured and underinsured motorists within the umbrella of §627.727 itself, which is a legislatively-enacted type of insurance coverage. Nehme v. Smithkline Beecham Clinical Labs, Inc., 863 So.2d 201, 205 (Fla. 2003) (“Under the doctrine of noscitur a sociis (a word is known by the company it keeps) one examines the other words used within a string of concepts to derive the legislature’s overall intent.”) Applying that rule in this case, the Court held that §627.727 plainly means that benefits provided under one UM policy cannot duplicate benefits already paid to an insured under another UM policy. The insurer, as a result, was entitled to set off those amounts already paid to the insured from the jury’s verdict. The Court’s message in Wolfson was clear: the Florida Legislature adopted §627.727 as a statutory scheme intended to protect insurers from paying out duplicate benefits in a variety of ways, including underinsured and uninsured motorist cases, and it is not, ultimately, the province of the Court to change or rewrite laws enacted by the legislature.

Drawing a Line in the Snow Regarding A Landlord's Potential Liability for a Commercial Property

Recently, the New Jersey Supreme Court addressed the question of whether the owner of a commercial property owes a duty to clear snow and ice from a demised property to prevent harm to a tenant’s invitees in Shields v. Ramslee Motors, 240 N.J. 479 (2020). Landlords of commercial properties routinely include clauses delegating the responsibility for maintenance and repairs of the demised property to the tenant as part of a lease. The Court made a distinction with a landlord’s non-delegable duty to maintain the adjacent sidewalk to the property with a duty to maintain the demised property itself.

In Shields, the landlord leased the property to a used car dealership where the lease stated the tenant “shall maintain the leased premises” and that the tenant “shall be solely responsible for the maintenance and repair of the land” during the tenancy. The plaintiff in the underlying action delivered a package to the tenant and slipped on accumulated ice and snow in the tenant’s driveway. The tenant settled with plaintiff and was dismissed from the action; the landlord filed for summary judgment. Ultimately, the Court held that the lease created a clear responsibility for the maintenance of the private driveway of the property upon the tenant as the landlord did not retain control and vested ownership, making the tenant the de facto owner, of the property based upon the unambiguous language of the executed lease.

The Court agreed with the landlord’s argument finding that the executed lease specifically provides that “TENANT shall maintain the leased premises” which delegated the duty of snow and ice removal for the driveway to the tenant. The Court defined “maintain” which is “[t]o care for (property) for purposes of operation productivity or appearance; to engage in general repair and upkeep.” Additionally, the Court found that the landlord’s right of re-entry did not create a duty for the landlord to remove any snow and/or ice. While the Court previously found that a landlord possesses a non-delegable duty to maintain the sidewalk, that duty does not extend to the demised property’s the driveway. Moreover, the landlord granted the tenant with exclusive possession thereby making it “‘unfair’… to hold the landlord responsible for ‘a condition of disrepair over which it had relinquished access.’” 

The Court addressed the idea of “control” to see if a different outcome would be reached when deciding the permissibility of delegating the removal of snow: The Court found no change in its analysis. The Court evaluated several factors and found that no relationship between the plaintiff and landlord existed; that it would be unfair to have an out-of-possession landlord responsible for the removal of transient weather build-up; and that no public policy interest is met by requiring the landlord to remove the snow and/or ice from a tenant controlled property. 

From a defense prospective, Shields teaches us the following: first, that it is important for the leases for commercial properties to specifically address the responsibilities of the tenants regarding the maintenance and the upkeep to the demised property; and second, that the landlord is aware that issues with a demised property can be attributed to a landlord if the landlord maintains control, albeit the Court neglects to advise on the amount of control, over the demised property.  Additionally, while Shields addresses only the distinction of liability between a landlord and tenant for the removal of snow and/or ice on the demised property, a court could easily apply the same analysis for any debris or defect on a demised property controlled and maintained by the tenant for tenant’s purposes.