When Generally Reserving Your Rights Is Not Enough

Recently the Superior Court of Pennsylvania held that an insurer’s reservation of rights (“ROR”) letter that failed to clearly communicate the extent of the rights being reserved and the reason for same, resulted in presumptive prejudice to the insured.  The Court cautioned that any such reservation of rights “must fairly inform the insured of the insurer’s position and must be timely, although delay in giving notice will be excused where it is traceable to the insurer’s lack of action or constructive knowledge of the available defense.”  See Selective Way Ins. Co. v. MAK Servs., 2020 PA Super 103.

Defendant was in the business of snow and ice removal and in a “comedy of errors” obtained insurance coverage from Plaintiff/Insurance Company that excluded various types of coverage including “snow and ice removal.”  Thereafter an individual slipped, fell, and filed suit against Defendant.  The individual alleged that Defendant was negligent in removing snow and ice.   Plaintiff/Insurance Company appointed defense counsel to represent the Defendant in the slip/fall lawsuit and also sent a ROR letter.  The ROR letter did not acknowledge or discuss the snow and ice removal exclusion contained in the Policy. 

Thereafter defense counsel retained by Plaintiff/Insurance Company defended the matter for approximately eighteen months.  Also thereafter, Plaintiff/Insurance Company filed a declaratory judgment and averred that Defendant’s “potential negligence is based solely upon ice and snow removal activity, and the [Policy] specifically excludes a defense and indemnity for any damages arising from snow and ice removal activity . . . .”  The trial court entered judgment in favor of Plaintiff/Insurance Company and found that the Insurance Company had no duty to defend or indemnify Defendant related to the slip/fall lawsuit.  Defendant filed an appeal and the Superior Court summarized the issue on appeal: “[Defendant] is essentially challenging the sufficiency of [Plaintiff/Insurance Company’s] reservation of rights letter, and thereby its preservation of the snow and ice removal exclusion.”

First the Court examined the timeliness of the Insurance Company’s letter.  The Court noted that the general principle is that a ROR letter sent close-in-time to the institution of a potentially covered legal action is "timely" under Pennsylvania law.  In this case the Insurance Company sent the letter approximately three weeks after of the filing of the slip/fall lawsuit.

Second, the Court examined whether the ROR letter was “‘fairly inform[ed] the insured of the insurer's position’ to validly preserve defenses to coverage under the policy.”  In this case, the Court found that the ROR letter may have sufficiently apprised Defendant that future exigencies might affect coverage; however, the letter did not provide notice “of the existing coverage issue appearing on the face of the Policy, i.e., the snow and ice removal exclusion.”  

The Court concluded that the Insurance Company’s ROR letter failed to “clearly communicate” the extent of the rights being reserved, which resulted in presumptive prejudice to Defendant.  As a result of this prejudice, the Insurance Company should have been estopped from asserting a policy exclusion for the first time eighteen months later without sufficient notice.  The Court reversed the trial court’s decision and remanded the matter for further proceedings.

New Jersey Reduces Requirements of Arbitration Agreements

The New Jersey Supreme Court recently reversed the Appellate Division’s decision in Marilyn Flanzman v. Jenny Craig, Inc., et al.  In doing so the Supreme Court overturned the Appellate Division’s decision that companies and individuals entering into an employment agreement with an arbitration agreement in New Jersey must carefully draft the agreements to include a forum for the arbitration or the method and rules for the arbitration or they will run the risk that the arbitration agreement will be unenforceable and invalid.   The Appellate Division had originally held that an arbitration provision is unenforceable when the agreement fails to identify where or how the parties are to arbitrate the matter.  The Supreme Court Decision rejected the Appellate Division’s broad reading of Atalese v. U.S. Legal Services Group, L.P., which set forth that arbitration agreements must plainly and unambiguously set forth an agreement to arbitrate and to forego the right to litigate in court. 

The lawsuit in Flanzman was originally instituted following alleged discrimination against an eighty-six (86) year old worker who was terminated by Jenny Craig, Inc. after working for the company for twenty-six years (26).  Plaintiff alleged that she was terminated due to her age, and as such, filed the lawsuit in state court.  The defendant, her employer, then filed a motion to compel arbitration at the trial court level based upon an arbitration agreement in the employment agreement which the plaintiff signed in 2011.  The arbitration agreement established that the parties would arbitrate all disputes between them “in lieu of a jury or civil trial” and that the arbitration would be binding.  Notably, the arbitration agreement failed to identify where the arbitration was to occur. 

The trial court in Flanzman originally granted the defendant employer’s motion to compel the arbitration, but on appeal the Appellate Division reversed the trial court’s holding because the arbitration agreement did not select an “arbitral institution.”  The Appellate Division held failing “to identify in the arbitration agreement the general process for selecting an arbitration mechanism or setting… deprived the parties from knowing what rights replaced their right to judicial adjudication,” and therefore, there could not have been a “meeting of the minds” between the parties when entering into the agreement.  According to the Appellate Division, the decision in Flanzman does not violate the language of the FAA because the Court made it clear that it did not impose additional requirements that would not be applied to other types of contracts. 

The New Jersey Supreme Court has now rejected the Appellate Division’s findings and has reversed the Appellate Division’s decision.  In doing so, the Appellate Division noted that policies favor arbitration agreements, as set forth and codified in the FAA and NJAA.  Both the FAA and NJAA establish “default” provisions which allow courts, upon a party’s application, to rule over the selection and appointment of an arbitrator, should the issue be left open.  As such, this has eased the requirements set forth by the Appellate Division’s decision previously imposed upon parties entering into an arbitration agreement that they must ensure that the agreement establishes the arbitration forum or the method and rules by which the matter is to be arbitrated.   

Liability Waivers in the Age of COVID-19

It is after Labor Day, which means football is back and slowly, schools are back in session. The return of school- and football- across much of the country this month has sparked a lengthy debate those of us in litigation defense and insurance fields are all too familiar with: what value is there in the protection of a liability waiver? The COVID-19 pandemic raises other questions about the legal impact, enforceability and practicability of such waivers.

Liability waivers are nothing new in the entertainment, sports, nursing home and insurance industries and their use was common in pre-pandemic life. Most parents who have enrolled a child in little league or gymnastics or almost any person who has bought a ticket to a sporting event have signed a liability waiver. In the COVID-19 age, the concept of having liability waivers signed is simple: anyone who wants to participate in a certain activity signs what is intended to be a legal document stating that (1) he or she assumes the risk of contracting COVID-19 through their participation and (2) agrees that the business, employer, school, college or even venue, is not liable for any COVID-19 related harms.

One document that releases and holds harmless entities from all COVID-19 related liability sounds great on paper. That said, while there are different types of waivers (hold harmless agreements, pre-injury waivers, assumption of risk waivers), the one thing that is certain is the uncertainty of the waiver’s enforceability. Different states take different approaches the enforceability question.

In Florida, for example, the law on liability waivers is that the waiver must be in clear, unequivocal language to be enforceable. UCF Athletics Ass’n v. Plancher, 121 So.3d 1097, 1101 (Fla. 5th DCA 2011). To be effective, the wording of such clauses must be so clear and understandable that an ordinary and knowledgeable person will know what he or she is contracting away. Raveson v. Walt Disney World Co., 793 So.2d 1171, 1173 (Fla. 5th DCA 2001)Waivers are strictly construed against the party seeking to relieve itself from liability. Gillette v. All Pro Sports, LLC, 135 So.3d 369, 370 (Fla. 5th DCA 2014). Further, liability waivers in Florida are unenforceable to disclaim against intentional, criminal or reckless conduct. Fresnedo v. Porky’s Gym III, 271 So.3d 1185 (Fla. 3d DCA 2019). 

Some attorneys might tell you that means in Florida, all you have to do is put the COVID-19 waiver in clear, unequivocal language and avoid reckless behavior. But the definition of what constitutes “reckless conduct” varies, and smart plaintiff’s lawyers are already filing complaints noting that engaging in certain activities in the midst of a global health pandemic is per-se reckless. That hypothetical and these early cases alone should raise red flags as to how thorny the law around liability waivers can be.

Other states have different rules.

Many states do not recognize parental waivers; in other words, waivers signed by parents for their children are not enforceable. This complicates the use of waivers in the school re-opening context.

Louisiana is one state that bars the use of waivers completely. Meanwhile, Georgia tends to follow Florida, but a fascinating and potentially COVID-19 related applicable exception emerges from a Supreme Court case that holds waivers can, at times, violate public policy, especially when “the consideration for the waiver contract is contrary to good morals and the law.” Carrion v. Smokey, Inc., 298 S.E. 2d 584, 585 (Ga. Ct. App. 1982) Tennessee had long favored expansive liability waivers, but a recent decision from their state Supreme Court changed that, noting that “bargaining power and leverage” will now be key considerations in determining what is enforceable. Copeland v. HealthSouth/Methodist Rehabilitation Hospital, LP, 565 S.W.3d 260 (Tenn. 2018). The Tennessee decision reflects a judicial trend in the waiver context, as courts increasingly look to bargaining power, a concept that is particularly interesting in the context of college sports and potential NCAA member institutional use of waivers.

At present, courts are only beginning to field legal challenges posed by COVID-19 liability waivers, even as state legislatures begin to act, further muddying the waters.

According to the American Tort Reform Association, 13 states and the District of Columbia have passed COVID-19 laws to limit the liability of health care providers and businesses. Governors of other states have issued executive orders limiting the liability of health care providers and some businesses. These new laws create constitutional questions, as well as enforceability ones.

All told, the debate over the use of liability waivers in the COVID-19 age is just beginning, but one thing seems certain: at a time of great uncertainty, the use or considered use of a liability waiver as a potential way to insulate from liability seems more widespread than ever.

Subrogation Provision of the Workers’ Compensation Act and AICRA Mutually Exclusive?

Recently, in New Jersey Transit Corp. v. Sanchez, 237 N.J. 423 (2020) the New Jersey Supreme Court considered whether a workers’ compensation subrogation action is barred by the Auto Insurance Cost Recovery Act (AICRA). 

David Mercogliano, a New Jersey Transit (NJT) employee, was involved in a car accident with the defendant, Sandra Sanchez, while operating a New Jersey transit vehicle. Plaintiff sustained a cervical strain and strain of the right trapezius. At the time of the accident, Mercogliano was insured under a standard automobile policy, with a verbal threshold limitation, under N.J.S.A. 39:6A-8(a). NJT paid Mercogliano workers’ compensation benefits, and Mercogliano never sought nor received PIP benefits under his personal automobile insurance. NJT sought to recoup workers’ compensation benefits paid to Mercogliano pursuant to a provision of the Workers’ Compensation Act, NJSA 34:15-40(f). The defendant, Sanchez, relied upon the affirmative defense verbal threshold limitation under PIP, arguing AICRA barred the subrogation claim. The trial court granted the defendant’s motion relying on AICRA and held that because NJT paid for all Mercogliano’s medical expenses and lost income, Mercogliano had no uncompensated benefits, therefore sustained no economic loss for purposes of AICRA. NJT appealed and the Appellate Court reversed. 

The Appellate Court found that N.J.S.A. 34:15-40(f) provides an employer the right of reimbursement for benefits paid to employees injured during a work-related accident by a third-party tortfeasor. In this case, NJT paid the workers’ compensation benefits for Mercogliano’s economic loss, therefore the subrogation claim was not barred by the PIP verbal threshold limitation, N.J.S.A. 39:6A-8(a). 

The New Jersey Supreme Court affirmed the Appellate Court decision and found that the Legislature, when it enacted AICRA, did not intend to bar employers and insurers reimbursement from third parties for workers’ compensation benefits paid as an economic loss. The Court relied upon the plain language, statutory intent, and history of both, Workers’ Compensation Act and AICRA. The Workers’ Compensation Act was created to make available benefits to employees if injured during the course of their employment. The Act, in turn, provides the benefit of the employer or the employers’ carrier to seek reimbursement from third-party tortfeasors. AICRA, was enacted to ensure compensation of economic losses while limiting the right to sue for pain and suffering. The Court held the trial court erred in viewing the subrogation claim under AICRA and not Workers’ Compensation Act because Mercogliano was injured in a work-related motor vehicle accident. Moreover, the Court stated that when AICRA was enacted, the subrogation provision of the Workers' Compensation Act was not eliminated or even limited to bar such claims, therefore it was not the Legislature’s intent to bar such claims. 

Until the Legislature amends the AICRA to close the loophole of subrogation claims, there is potential to circumvent the common law bar to recover workers’ compensation benefits and file suit against a third-party tortfeasor.

Snow White and the On-Going Storm Rule

Recently, the New Jersey Appellate Court addressed the question of whether commercial landowners have a duty under the “on-going storm rule” to act and make safe their property when sleet or snow is falling. In Pareja v. Princeton Int’l Props., 2020 N.J. Super LEXIS 41, the Court found that the on-going storm rule has not been adopted in New Jersey and would arbitrarily relieve a landowner’s duty to reasonably remove or reduce foreseeable and known snow or ice hazards. 

In Pareja, the plaintiff, who wore non-slip shoes, walked onto the driveway of the defendant’s property, where he slipped and fell on black ice. Deposition testimony revealed that over the course of six days leading up to the accident, there had been three storms, leaving less than one inch of snow that was undisturbed. The Vice President of Princeton Property admitted he was aware of an advisory regarding untreated surfaces that might result in slippery surfaces but was unsure if steps had been taken to reduce or eliminate ice on the property on the date of the accident. The plaintiff testified that it was not snowing at the time of the accident, but “sleet was drizzling.” The trial court granted the defendant’s motion for summary judgment finding that defendants had no duty to remove or reduce the hazardous conditions until after precipitation ended due to the on-going storm rule. Additionally, the trial court determined that no jury could find de-icing steps would have been successful until after the storm ended. 

The on-going storm rule delays a landowner's duty to act after precipitation ends. Many jurisdictions reason that removal during a storm inexpedient and impractical, while others have rejected the stringent rule finding that landowners have a duty to reasonably respond to foreseeable dangers, particularly because tort law is founded upon deterrence of tortious actions and preventing injury. 

Ultimately, in Pareja, the Court rejected the on-going storm rule and found that commercial landowners have a duty to take reasonable steps to render a public walkway, covered by snow or ice, reasonably safe, which cannot be fulfilled by waiting for the storm to pass. The Court held that a landowner’s liability will arise if, upon actual or constructive notice, it fails to act as a reasonably prudent person would under the circumstances to remove or reduce any foreseeable harm. The Court reasoned that such a bright-line rule would suspend a landowner’s general duty to act with reasonable care as to snow and ice hazards while precipitation is falling. However, the Court explained that it was not imposing a strict liability to landowners for every slip and fall that occurred on a commercial property. Instead, the Court listed factors to be considered in determining if a landowner has fulfilled his/her duty. In assessing whether a landowner acted reasonably, a jury could consider: (1) whether the action by a landowner would be inexpedient or impractical; (2) the extent of precipitation; (3) whether precipitation occurred during the day or night; (4) steps taken by the landowner to remove, reduce, or prevent the accumulation of snow or ice, (5) whether the commercial property was “open” or “closed”; (6) the number of people anticipated on the property; or (7) past, current, and anticipated weather conditions.

From a defense perspective, Pareja teaches us that there is no affirmative defense of an on-going storm to justify the landowner’s failure to act. A landowner is not liable merely because a slip and fall has occurred on the landowner’s property during a storm, rather the court will look to steps the landowner took to prevent hazardous conditions, both prior to and during a storm.

The New Classic: Remote Depositions

In response to the COVID-19 pandemic, the Chief Justice of the Supreme Court of Georgia, issued an Order Declaring Statewide Judicial Emergency pursuant to OCGA § 38-3-61. That Order has been extended four times, with modifications.  The Statewide Judicial Emergency Order clarifies that while remote proceedings are encouraged litigants may expressly consent in the record to remote proceedings not otherwise authorized and affirmatively waive otherwise applicable legal requirements.

O.C.G.A. § 9-11-30(b)(4) states:  Notwithstanding the foregoing provisions of O.C.G.A. § 9-11-30(b), a deposition may be taken by telephone or other remote electronics means only upon the stipulation of the parties or by order of the court. For purposes of the requirement of the Civil Practice Act, a deposition taken by telephone or other remote electronic means is taken in the state and at the place where the deponent is to answer questions.

While opposing counsel may attempt to schedule a remote deposition during this pandemic, under Georgia law, one has a right to push back against taking a remote deposition. O.C.G.A. § 9-11-30 (b)(4), expressly states to proceed with a remote deposition all parties must agree. Furthermore, the agreement must be placed on the record. The attorney who is attempting to hold the remote deposition must show an exceptional good cause on how he/she will be prejudice if the deposition is rescheduled.

An option one can use, to place on the record your objection to participating in a remote deposition is to file a motion for Protective Order. A motion for a protective order should be filed as soon as a party learns it cannot comply with the discovery request and knows it needs a protective order. Millholland v. Oglesby, 115 Ga. App 715 (Ga. App.1967). A motion for protective order must be filed before the due date for the discovery or the date that the deposition is to be taken, and not afterwards. Id.

If you have an upcoming remote deposition (stipulated by all parties) scheduled, below are some practical tips to take prior to the scheduled deposition.

1. Virtual Deposition Vendor: use a vendor who has the capability to conduct the entire deposition remotely.

2. Equipment: all participants will need internet access on a computer/tablet with audiovisual capabilities.

3. Exhibits: while most vendors have exhibit sharing capabilities, counsel should prepare hard copies and send the exhibits to the witness and opposing counsel.

4. Recording: Counsel will need to hire a separate videographer to film the deposition if a recorded video deposition is needed.

5. Court Reporter: Counsel will need to notify the vendor which geographical location the court reporter will be located.

As more courts move towards remote depositions in light of the COVID-19 pandemic, know the rules for remote depositions in your jurisdiction.