May It Please The Court: Weblog of legal news and observations, including a quote of the day and daily updates
 Bookstore:        |
Quote of the Day - The lion and the calf will lay down together, but the calf won't get much sleep.
Insurance Company That Slept On Its Rights Denied RemedyOnce an insurance company rejects a claim, it can't later try to jump into the lawsuit and salvage what may have been a mistake. Zurich insured CalTrans for any negligence arising out of its highway designs. One of those designs apparently led to several deaths and injuries. CalTrans tendered the claim to Zurich, who promptly denied coverage. During the course of the inevitable wrongful death litigation that arose from that accident, the parties (several years later) realized that there probably was coverage under the policy and elected to settle. For $29 million. CalTrans paid part of that claim and then assigned the remainder of the judgment to the Plaintiffs who were set to sue Zurich and recover just over $27 million. Zurich, sensing a problem, sought to intervene in the original lawsuit in an attempt to have some effect on the settlement and ultimate judgment it would eventually have to pay. In the case entitled Noya v. A.W. Coulter Trucking, the trial court and appellate court denied Zurich's motion to intervene, saying it was too late. If Zurich had cared that much, the court reasoned, then it should have defended CalTrans in the beginning or tried to become involved much earlier. Just goes to show you. When money matters, insurance companies pay attention. It will be an expensive lesson to learn. Bodily Injury Excluded From Residential Real Estate Arbitration RequirementSo you bought a house. Everything is great until you've been there awhile, and you start finding that you're sick, and you think it's due to the house. You want to sue, but you read the purchase agreement and see that it contains a mediation/arbitration clause. Those provisions are in the standard California Association of Realtor contract, typically used to buy a house here in California. Do you have to mediate? Not according to this recent opinion, Gravillis v. Coldwell Banker, which limits those provisions to contractual claims arising out of the purchase, and excludes claims for bodily injury. You can go straight to court and don't have to arbitrate. Court Rules Insurance Reserves Discoverable In Bad Faith CasesWhen an insurance carrier initially receives a claim from its insured, it typically sets a "reserve" of money that it anticipates it may have to pay to satisfy the claim. These reserves are required by many insurance commissioners, and particularly here in California. That way, the state can be assured that the insurance company is adequately capitalized to handle the amount of insurance that it issues to its policyholders. There are other reasons, too. Claims adjusters try to pay less than the amount "reserved" for the claim in order to demonstrate their value to the insurance company. The greater the differential between the reserve and the amount paid to satisfy the claim, the more valuable the claims adjuster. That value sometimes translates directly into raises, bonuses and other perks to the claims adjuster. There's a dark side to the whole concept, however. Given the financial pressure on claims adjusters, they sometimes get stubborn and either don't pay or try to underpay legitimate claims. The interests of the insurance company and claims adjuster in saving money are not in line with the interest of the policyholder to be fully compensated for the loss. That conflict between the insurance company and the policyholder frequently leads to charges that the insurance company's underpayment or failure to pay amounts to bad faith, exposing the insurance company to a lawsuit coupled with a demand for hefty punitive damages. Such is the case in the battle between Bernstein v. Travelers Insurance Companies, Case No. No. C 05-01528 SBA (WDB), a case recently decided in the United States District Court for the Northern District of California. Unfortunately, the case isn't available on the Northern District's website, but here's a short summary from the case itself: "the plaintiffs [policyholders] assert that the defendants [Travelers Insurance] made unjustifiable demands for proof of claims during the claims processing period. The defendants also allegedly delayed payments." So Plaintiff/Policyholder Ronald Bernstein sued The Travelers for bad faith, and then sought to find out how much Travelers had set aside as a "reserve." Travelers resisted the discovery request, forcing Bernstein to bring a motion to compel. In a wonderfully written opinion comparing federal civil procedure with California substantive insurance law and procedure, the Court found that the policyholder had the right to know how much Travelers "reserved" when the claim was filed. Bernstein will then most likely be able to argue that the alleged delays and underpayments by Travelers were unjustified and Travelers may very well end up with a bad faith judgment, depending on how reasonable the final payment of the claim was compared to the initial amount reserved. Round One In Trademark Battle Goes To Google; Roadmap For Challenge SetRescuecom, a company that's giving the Geek Squad a run for its money, sued Google last year because the 800-pound gorilla search engine allowed others to buy the name "Rescuecom" for its AdWords program, despite the real Rescuecom's trademark on the name. Filed in federal court, the lawsuit was dismissed by the court because Rescuecom apparently didn't actually use the trademark. According to the Court, "there is no allegation that defendant places plaintiff's trademark on any goods, containers, displays, or advertisements or that its internal use is visible to the public." That omission makes it difficult to win a trademark case. It's one thing to have one; it's quite another to use it in the stream of commerce according to the Court. Defendant Google argued that it could use the Rescuecom name to trigger delivery of AdWords that feature companies who compete directly with Rescuecom. Google claimed "fair use" of Rescuecom's name because it was only using Rescuecom's name internally in order to generate its AdWords when it also featured a link to Rescuecom's site. The Court argued it was no different than a grocery store grouping competing products together on a shelf, which we all should know is not a trademark violation. There's just one difference; when I go to the grocery store, I don't tell the store manager that I want to see a particular product and then expect to have the manager show me the entire range of products. I expect to get what I asked for. Google's argument is that it gives you that and more - if you don't like it, I presume, the company would tell you to use another search engine. Easy for Google to say. These cases in the Second Circuit are all over the map, and you can look for this case to be appealed. Certainly the next such case won't be filed in the Second Circuit. Eventually, the matter will make it to the Supreme Court and we'll get some definitive law. In the meantime, if you want visibility on the Internet, start a blog. Coast to Coast Internet Radio Goes To Online CLE SchoolThe days of sitting in a stuffy classroom are over. With the popularity of the internet, online classes have been accessible to many lawyers. Online CLE is continuing legal education and many attorneys want to take classes and do not have time to attend, so now many companies are offering online credit. Join me and my fellow Law.com blogger and co-host Bob Ambrogi as we call on our experts to walk us through online CLE and to see what the future holds. Coast to Coast welcomes Brian Emerson, head of Online CLE for Law.com and Pete Glowacki, Director of the ABA Center for Continuing Legal Education, to discuss the ins and outs of Online CLE. Don't miss it!
Third Circuit Turns CERCLA On Its Head; Companies Take Note: Don't Voluntarily Clean UpE.I. du Pont de Nemours & Co. faced the Third Circuit, appealing a decision that precluded the company from recovering CERCLA contribution from the United States Government under section 107 of CERCLA. You see, du Pont had admitted that it contaminated real estate, and as a good corporate citizen, voluntarily cleaned up the contamination it caused. It also cleaned up the contamination caused by the United States Government. Like any good corporate citizen, however, it was not happy with paying more than its fair share, so it asked the Government to help pay. The U.S. told du Pont it would not contribute, so du Pont, a small country in itself, sued to recover its costs. The Third Circuit took the matter up in light of the Supreme Court's decision in Cooper Industries v. Aviall, which made sense because the Supreme Court prevented a party from recovering contribution costs under CERCLA section 113, but left open the option of recovery under sections 106 or 107. Trouble is, there are two older cases (New Castle County v. Halliburton NUS Corp. and Matter of Reading Co., 115 F.3d. 1111) in the Third Circuit that prevent contribution recovery for voluntary cleanup under section 107, the section du Pont used to sue the Government. While du Pont prides itself on a management scheme (called the DuPont Legal Model) to control its attorneys and their costs, it doesn't appear to have worked too well in this case. What's the moral of this story? If your company has liability for contamination of real estate and there are others who are also liable and able to pay, then don't voluntarily clean it up. Wait until the government issues an order. You'll be able to obtain contribution from others to clean up the property, and assuming you have the right kind of insurance coverage, you'll be able to trigger it, bringing more money to the party. Does it make sense? Is this result Congress wanted when it enacted CERCLA? Why would the Court punish a good corporate citizen? du Pont must have forgotten this maxim: No good deed goes unpunished. Bad E-discovery Questions Result in $30,000 Cost-shift To Plaintiff's TabYou sue your employer for gender discrimination, alleging that your male counterparts were given better jobs and more raises than you. You think you can prove it, too, so your lawyer fires off a set of standard demands for production of documents asking for evidence of the supposed scheme utilized by your employer. And you're hep, too. You remember to ask the company to produce emails between the managers. You even suggest certain search terms to utilize to find these documents from backup tapes the company has in storage. In fact, you're so hep that you fashion searches broader than endorsed on one of the series of seminal e-discovery cases, Zubulake v. UBS Warburg LLC. But there's just one problem. There's little if any resulting evidence, and the company spent over a quarter million dollars to find out relatively nothing was there. Well, with the money spent, I guess there's two problems. That's where the cost-shifting comes in. In our case, the company applied to the Court to reallocate the costs from it to the Plaintiff in the case Claudia Quinby v. WestLB AG, No. 04 Civ. 7406, S.D. N.Y. She couldn't seem to fashion a good question to get the discovery results she wanted. The Court weighed the seven-factor Zubulake test to determine who should bear the burden of the cost of electronic discovery, and got stuck on the marginal utility factor. The Court reasoned that since the results were something very much less than spectacular, the Plaintiff should bear some of the cost, and shifted some $30,000.00 to her. A small consolation compared to such a big bill, but a consolation prize nonetheless. Be careful what you wish for. Ninth Circuit Schools Employers How To Handle Disgruntled EmployeesEmployers take note: when you're faced with a disgruntled employee who you place on administrative leave, but still allow the employee to maintain possession of one of your computers or laptops, the Ninth Circuit just gave you a road map on how to handle it. First, send a letter to the employee instructing the employee to maintain the integrity of the hard drive and not to erase anything. Then (if you anticipate a big blowup), before you fire the employee, file a declaratory relief action with the Court and explain your reasons for wanting to fire the employee. That way, you can fire the employee with the court's endorsement and you won't have to worry about a backlash. In the actual case, Leon v. IDX Systems, the employee (a medical doctor) deleted some 2,200 files from the company's laptop and then filed a wage and hour claim with the Department of Labor and another one against the company. The employee had threatened to take whistle-blower actions against the company, including actions for violation of the False Claims Act, Sarbanes-Oxley and the Americans with Disabilities Act. As you can guess, these claims were a time bomb for the company, which is likely why it decided to take a preemptive strike and file suit against the employee. The company won, and won big. The Ninth Circuit upheld the trial court's two decisions to slap the employee with a $65,000 monetary sanction for evidence spoliation and dismiss the employee's wage and hour claim against the company. The appeals court also reversed the trial court's refusal to likewise dismiss the employee's claim with the US Department of Labor. The strategy worked: the company can now terminate the employee, the employee is barred from his claims against the company (including wages) and the employee now owes the company money. A triple play.
|
|||||||||||||||||||||
| Text-Only Site | ||||||||||||||||||||||
