Docstoc

Covered Events

Document Sample
Covered Events Powered By Docstoc
					March 16, 2012                                                                                               2012 Issue 2

Case Search Database Link                                Leadership Notes

http://dri.org/Services/Cases                            From the Chair
                                                         by Anthony R. Zelle
DRI Resources


                                                                        My Notes for this issue were composed on
                                                                        Presidents Day and in the spirit of that
                                                                        commemorative holiday, I present some of the
                                                                        contributions our presidents have made to the
                                                                        industry of insurance.


Join the DRI Community
                                                         As a resident of the Commonwealth of Massachusetts,
                                                         birthplace and temporary residence of many presidents, and
                                                         even more unsuccessful presidential candidates, I feel
                                                         compelled to begin with the observations of John F.
                                                         Kennedy. JFK once said: "In our system of free enterprise,
                                                         insurance holds a place of special importance. This is a
In This Issue
                                                         segment of American industry with which a high percentage
From the Chair                                           of our citizens are associated. In a very real sense insurance
                                                         sets standards of performance and responsibility for all
From the Editor
                                                         American business. Surely Americans derive their image of
CALIFORNIA                                               business most often from the relations with they establish with
FLORIDA
                                                         insurance agents. The varied services performed by
                                                         American insurance can do much to carry forward our
ILLINOIS                                                 traditions of freedom."
INDIANA
KANSAS
                                                         I could devote the rest of this piece, and much more time, to
                                                         dissecting these observations, but suffice it to say that as
MAINE                                                    member of the Insurance Law Committee, it is not only "[i]n
NEW JERSEY                                               our system of free enterprise," but is also in our professional
                                                         and personal lives that "insurance holds a place of special
NEW YORK
                                                         importance." Perhaps the Supreme Court will decide that
OKLAHOMA                                                 Patient Protection and Affordable Care Act, which requires
                                                         individuals to buy health insurance or pay a penalty, is an
PENNSYLVANIA
                                                         invasion of our constitutional rights, but the fact that Supreme
SOUTH DAKOTA                                             Court will decide the issue will serve to make the place
TEXAS
                                                         insurance holds in our society even more special.

UTAH
                                                         Franklin Delano Roosevelt may be the past president with the
WASHINGTON                                               greatest personal experience in our industry. Between 1921
WISCONSIN                                                and 1928, FDR worked as a vice president in the New York
                                                         office of the Fidelity & Deposit Co. of Maryland, which is now
The Black Box Does Not Lie in PIP and Third-Party Auto   a Zurich-owned company. He also served as member of the
Accident Cases
                                                         board of directors. FDR took this position after his
Increase Your DRI Membership Value                       unsuccessful run as the running mate of democratic
                                                         presidential nominee in 1920, James Cox. Commemorating
                                                         the one-hundredth anniversary of its operations in the United
                                                         States, Zurich recently gifted the desk at which FDR sat in his
                  Committee Chair                        New York office, along with documents related to FDR's
                  Anthony R. Zelle                       insurance career, to the FDR Presidential Library and
                  Zelle McDonough & Cohen                Museum. According to the acting director of Library and
                  (617) 742-6520                         Museum: "The desk helps tell the story of one of the most
                  tzelle@zelmcd.com                      critical periods in FDR's life, from 1920-1928, when he
                                                         struggled to recover from polio and used his position with
                                                         F&D to benefit the company as well as maintain his contacts
              Committee Vice Chair                       with important leaders in business and politics." For those of
              Michael M. Marick                          you in the Chicago area who want to see the desk before it
              Meckler Bulger Tilson Marick &             goes on display next year in New York, it is being exhibited at
              Pearson                                    Zurich's North American headquarters in Schaumburg,
              (312) 474-7888                             Illinois.
    michael.marick@mbtlaw.com
                                                         Another U.S. President to serve as a director for an insurance
           Publications Chair                company was Calvin Coolidge. After his presidency,
                                             Coolidge served as a director of New York Life Insurance
           Matthew S. Foy
                                             Company.
           Gordon & Rees
           (415) 986-5900
           mfoy@gordonrees.com               Occupying a slightly less lofty, but possibly more ambitious
                                             role in the industry, after graduating from college, Warren
                                             Harding worked as an insurance salesman.
          Co-Editor
          Tiffany M. Brown
          Meagher & Geer                     While looking at the presidential contributions to the insurance
          (612) 371-1324                     industry, a brief mention of the contributions of the insurance
          tbrown@meagher.com                 industry to our presidents is also worth noting. In the current
                                             presidential election, financial contributions to candidates and
                                             their political action committees already exceed $20 million
           Co-Editor                         and are well on the way to eclipsing the record $46 million
           Jonathan L. Schwartz              that was invested by the insurance industry in the last
           Lewis Brisbois Bisgaard & Smith   presidential election cycle. The $46 million given in the 2008
           LLP                               cycle was in addition to the $160 million invested by the
                                             insurance industry in lobbying efforts in 2008.
jschwartz@lbbslaw.com
          Co-Editor
          Bryan M. Weiss                     Shifting the focus to our to the contributions of the Insurance
          Murchison & Cumming                Law Committee to our professional lives, it is with enthusiastic
          bweiss@murchisonlaw.com            anticipation that I look forward to the Insurance Coverage and
                                             Claims Institute that will present its annual program in
                                             Chicago on March 28-30, 2012. If you can attend the
                                             conference and have not yet registered, here is the link:
             Associate Editors               http://www.dri.org/Event/20120155. I also encourage you to
                                             register for the DRI Annual Meeting that will take place in New
Suzanne Young                                Orleans from October 24-27. The ILC has laid plans (which
         Zelle McDonough & Cohen             must remain secret until the Annual Meeting brochure is
         (617) 742-6250                      finalized) to present one of the Mainstage programs and has
         syoung@zelmcd.com                   a blockbuster speaker for its business meeting as well. You
                                             can use this link to register for the Annual meeting:
                                             http://www.dri.org/Event/2012AM.
           Elaine Murphy Pohl

                                             As always, I encourage you to get involved with the Insurance
                                             Law Committee and you should not hesitate to contact me to
                                             share your interests.

Plunkett Cooney
(248) 901-4000
epohl@plunkettcooney.com
                                             From the Editor
                                             by Jonathan L. Schwartz
           Roger Williams
           Rivkin Radler
           (516) 357-3227
                                                            My February edition of Covered Events seems
           rogerwilliams@rivkin.com
                                                            to always involve a reference to Groundhog
                                                            Day, and this year is no exception. But rather
                                                            than comment on Punxasutawney Phil and
Click to view entire Leadership
                                                            how much longer we have until spring,
                                                            sunshine, and warmth, or how Phil Connors
                                                            was forced to spend thousands of years in a
                                             small town in Pennsylvania learning how to play the piano,
                 Seminars                    speak fluent French, and ice sculpt, I want to speculate briefly
                                             on how, if I were in a similar time loop, DRI and Covered
                                             Events would play a significant role in my finding the right
                                             path to success. Initially, I, as a young associate, got
                                             involved with Covered Events, submitting short summaries
                                             about recent developments in Illinois. That allowed me to
                                             showcase to others in the leadership of DRI that I was
                                             committed to this fine organization and its mission of
                                             scholarship and excellence. Following the summaries came
                                             my appointment to editor of Covered Events, where I was
                                             given the opportunity to see first-hand how a well-run
                                             newsletter operates. And not only did that give me the
                                             valuable training critical to the creation of my firm's quarterly
                                             newsletter, my activity in the Insurance Law Committee has
                                             recently led to my appointment as Chair of the Personal and
                                             Advertising Injury Law Subcommittee. Now while all of this
                                             did not happen for me in one magical day, Groundhog Day
                                             should hopefully inspire you with its message of commitment
                                             to self-improvement.

                                             Please do the same for your young associates and inspire
                                             them to become a better professional. First, get them to join
                                             DRI. Since you receive this newsletter, you are already
                                             member of DRI and should be aware of its innumerable
                                             professional benefits. Foremost, the educational and
                                             networking opportunities are unparalleled.            Second,
     Insurance Coverage and                  encourage your young associates to make a name for
         Claims Institute                    themselves     by    submitting    summaries       of   recent
                                             decisionsinvolving a type of coverage or jurisdiction in which
                        you practice. This approach is certain to highlight their
 March 28-30, 2012      budding expertise. Third, bring your young associates with
  Chicago, Illinois     you to the Insurance Law Committee's top-notch seminars.
                        There, they will have the chance to meet our committee's
DRI Publications        roster of superstar young lawyers, who should continue to
                        inspire your young lawyers to be elite, thorough, and reliable,
                        persons to whom you can turn to and depend on at crunch-
                        time. So spread the word about DRI among the young
                        lawyers in your firm, and get them started right away on their
                        path to success.
        Insurance Bad
                        Speaking of seminars, please make sure you have on your
        Faith-2010      calendar DRI's Insurance Claims and Coverage Institute,
                        which is being held in Chicago on March 28-30, 2012 at The
                        Westin Michigan Avenue. The conference offers the
                        perspectives and insights from a distinguished faculty of
                        lawyers, insurance industry leaders, and policyholder counsel
                        regarding recent court rulings and national claims trends, as
                        well as practical advice for both the first- and third-party
                        practitioner and claims professionals. This program also
                        offers top-notch networking opportunities with senior claims
                        executives and experienced coverage lawyers from across
                        the     country.     Wednesday       afternoon  features    a
     Print to PDF       program focused on bad faith. The Thursday session is filled
                        with a wide range of cutting-edge topics including Trial
                        Advocacy in a CSI World, The Role of E&O Liability of Agents
                        and Brokers, and Drilling Down on the Duty to Defend. The
                        Friday program includes two outstanding break out tracks
                        focusing on Construction Defect and First-Party Personal
                        Lines and Property. For more information and to register,
                        please go to: http://dri.org/Event/20120155.

                        What's more, the Insurance Law Committee now has its own
                        DRI subgroup on LinkedIn. Posting on the subgroup site is a
                        great way for our members to share articles, update each
                        other on important case developments, seek assistance on a
                        particular coverage issue or case, or post about any other
                        matter unique to ILC members. To join the subgroup, go to
                        the DRI page on LinkedIn. Click the "More" tab at the top,
                        right of the page (it's the 6th tab among the tabs beginning
                        with "Discussions"), click on "subgroups", scroll down to the
                        "DRI Insurance Law" subgroup, and click "Join the Group."
                        And once you've joined our subgroup, feel free to post about
                        any matter related to our practice.

                        As always, thank you to those who submitted to Covered
                        Events for this edition, especially Bob Abramson for his article
                        on vehicles' Event Data Recorders. We very much
                        appreciate new submissions, so if there is a new coverage
                        development in your state, show off your expertise and please
                        send us a summary.

                        Editors:

                        Jonathan L. Schwartz
                        Lewis Brisbois Bisgaard & Smith LLP
                        Chicago, Illinois
                        jschwartz@lbbslaw.com

                        Bryan M. Weiss
                        Murchison & Cumming, LLP
                        Los Angeles, California
                        bweiss@murchisonlaw.com

                        Tiffany Brown
                        Meagher & Geer
                        Minneapolis, MN
                        tbrown@meagher.com

                        Associate Editors:

                        Elaine Pohl
                        Plunkett Cooney
                        Bloomfield Hills, MI
                        epohl@plunkettcooney.com

                        Roger Williams
                        Rivkin Radler
                        Uniondale, NY
                        roger.williams@rivkin.com
Suzanne Young
Zelle McDonough & Cohen LLP
Boston, MA
syoung@zelmcd.com




Recent Case Law Updates

CALIFORNIA
CALIFORNIA—ASBESTOS/BANKRUPTCY

The Ninth Circuit ruled that a California District Court erred in
refusing to consider various insurers' objections to a proposed
524(g) reorganization plan to resolve the insured insulating
company's asbestos liabilities. In In re Thorpe Insulation Co,
No. 10-56543 (9th Cir. Jan. 24, 2012), the court refused to
find that the insurers had failed to diligently press their rights
based on the "equitable mootness" doctrine or that it would be
inequitable to unwind the plan at this stage. Further, the court
ruled that the proposed plan was not "insurance neutral" in
light of its substantial interference with the contractual
obligations of the insurers and their rights of contribution.
Having declared that the insurers did have standing to object,
the Ninth Circuit remanded the case back to the District Court
to consider the insurers' objection that the plan was not
proposed in good faith, did not comply with 524(g), and was
developed by conflicted counsel (Morgan Lewis).

Michael Aylward
Morrison Mahoney
Boston, MA
maylward@morrisonmahoney.com

CALIFORNIA—EXCESS COVERAGE/EXHAUSTION/SIRs

A federal district court ruled that where a hotel was entitled to
insurance coverage as an additional insured under a policy
issued to a restaurant inside the hotel, funds contributed by
the restaurant's insurer towards the settlement of a wrongful
death claim against the hotel and the restaurant satisfied a
$250,000 self-insured retention in the hotel's own policy with
Federal. Notwithstanding language in the Federal policy
stating that the insured itself was responsible to pay all self-
insured retention expenses," the U.S. District Court ruled in
National Fire Insurance Co. of Hartford v. Federal Insurance
Co., 2012 U.S. Dist. LEXIS 641 (N.D. Cal. Jan. 4, 2012), that
the language in question was distinguishable from that
considered by the Court of Appeal in 2010 in Forecast Homes
that unambiguously stated that "payment by others, including
without limitation additional insureds or insurers, do not serve
to satisfy the self-insured retention."

Michael Aylward
Morrison Mahoney
Boston, MA
maylward@morrisonmahoney.com




FLORIDA
FLORIDA—CHINESE DRYWALL/POLLUTION
EXCLUSION

Granite State Insurance Company (Granite) and New
Hampshire Insurance Company (NHIC) brought suit against
their insured, American Building Materials, Inc. (ABM), to
determine if the insurers had a duty to defend or indemnify
ABM in lawsuits and pre-suit claims alleging that ABM
supplied defective Chinese drywall. As a threshold matter, the
district court found that the doctrine of lex loci contractus must
be applied under Florida choice of law principles, which
dictate that "the governing law is 'the law of the state … where
the last act necessary to complete the contract is done.'"
Applying this analysis, the district court concluded that
Massachusetts law applied.
Both insurance carriers' policies contained the total pollution
exclusion. The court noted that Massachusetts courts have
found the total pollution exclusion to be "clear, unambiguous,
and enforceable." The district court further found that,
pursuant to United States Liability Ins. Co. v. Bourbeau, 49
F.3d 786 (1st Cir. 1995), "the pollution exclusion was … 'an
absolute bar to coverage for any form of pollution,' and
'applied to all releases of pollutants.'" The court determined
that, under Massachusetts law, the damage caused by
defective Chinese drywall was not covered under the insurers'
policies. The district court reasoned that "[t]he basis of the
underlying claims is that the Chinese drywall is defective
because it is emitting harmful gases …. The total pollution
exclusion unambiguously precludes coverage for the release
or discharge of pollutants. Pollutants include any gaseous
contaminant." In line with a distinction made by the
Massachusetts Supreme Court, the district court further
determined that the pollution alleged with respect to the
Chinese drywall should be categorized as industrial pollution
"involv[ing] the discharge of a harmful substance" as opposed
to "cases that 'involve injuries resulting from everyday
activities gone slightly … awry[.]'". Because it was industrial
pollution, the total pollution exclusion applied and the insurers
had no duty to defend or indemnify ABM. Granite State
Insurance Co. v. American Building Materials, Inc. (M.D. Fla.
Dec. 5, 2011).

Charles W. Browning
Kenneth C. Newa
Plunkett Cooney P.C.
Bloomfield Hills, MI
cbrowning@plunkettcooney.com
knewa@plunkettcooney.com




ILLINOIS
ILLINOIS—AUTO COVERAGE/ARBITRATION

The Appellate Court ruled in United Automobile Insurance Co.
v. Buckley, 2011 IL App. (1st), 103666 (Ill. App. Dec. 5, 2011),
that a judgment based upon an arbitration award was
recoverable against an automobile insurer, notwithstanding
the insured's failure to appear at or participate in the
arbitration hearing. Notably, the insurer was found to have
failed to present credible evidence that the insured's non-
cooperation was deliberate or that it had been substantially
prejudiced as the result of the insured's failure to appear.

Michael Aylward
Morrison Mahoney
Boston, MA
maylward@morrisonmahoney.com

ILLINOIS—HOMEOWNERS INSURANCE/MOTOR
VEHICLE EXCLUSION

Allegations that the insured negligently installed the brake
pedal on the plaintiff's motorcycle, causing it to crash, did not
trigger a duty to defend under a homeowner's policy in light of
a motor vehicle exclusion. In Allstate Property & Casualty
Insurance Co. v. Mahoney, 2011 ILL App (2d) 101279 (Ill.
App. Nov. 1, 2011), the Second District ruled that motorcycles
are "motor vehicles", not "motorized land conveyances." The
Appellate Court also ruled that the motorcycle was not in
"dead storage" so as to be subject to an exception to this
exclusion, holding that vehicles that in the process of being
repaired are not in "dead storage."

Michael Aylward
Morrison Mahoney
Boston, MA
maylward@morrisonmahoney.com




INDIANA
INDIANA—AUTO

The Indiana Supreme Court ruled in Haag v. Castro, No.
29S04-1102-CT-118 (Jan. 10, 2012), that injuries suffered by
members of a youth soccer team when their rented van went
off the road en route to a white water rafting event did not
trigger coverage under a hired vehicle endorsement to the
soccer league's auto policy because the usage of the vehicle
at the time was not in the "business of the insured." The
Court emphasized that because the policy was issued to the
tournament sponsor, the business of the insured was athletic
competitions, not "team building" and other events specific to
the individual teams.

Michael Aylward
Morrison Mahoney
Boston, MA
maylward@morrisonmahoney.com




KANSAS
KANSAS—GARNISHMENT/CONSENT JUDGMENTS

Nearly 20 years after a massive warehouse fire prompted a
huge inter-carrier coverage dispute that has already been to
the Kansas Supreme Court twice, the Supreme Court ruled in
Associated Wholesale Grocers, Inc. v. Americold Corp., No.
99,506 (Dec. 23, 2011), that the garnishment action by which
the plaintiff sought to recover against excess carriers must be
dismissed, as the underlying legal liability of the
garnishee/insured to the plaintiff was itself extinguished due
to the dormancy of the proceedings under KSA 60-2403(a)
and the plaintiff's failure to file a motion for reviver within two
years of dormancy under KSA 60-2404. Writing in dissent,
Chief Justice Greene contended that the dormancy period
was tolled by KSA 60-2403(c), as the plaintiff could not have
executed on these consent judgments due to the ongoing
legal proceedings and issues of collusion raised by the
insurers in challenging the consent judgments.

Michael Aylward
Morrison Mahoney
Boston, MA
maylward@morrisonmahoney.com




MAINE
MAINE—DUTY TO DEFEND/INTENTIONAL ACTS

Allegations that a lobsterman conspired to destroy a
competitor's traps triggered a duty to defend under a
homeowner's policy, notwithstanding the allegations of
intentional acts and conspiracy to injure. The Maine Supreme
Judicial ruled in Mitchell v. Allstate Insurance Co., 2011 ME
133 (Me. Dec. 22, 2011), that although the insured's dominion
over the plaintiff's property by exercising possession over it
would not have triggered coverage, since that would not have
resulted in third-party property damage, it could conceive of a
scenario in which other individuals cut the plaintiff's lobster
traps that the insured subsequently located and took without
knowing that they belonged to the plaintiff, damaging them in
the process. Under these circumstances, the court found that
the insured could have exercised dominion over the plaintiff's
goods, damaging them in the process, so as to create a claim
for conversion without any intent to cause injury to the
plaintiff's property.

Michael Aylward
Morrison Mahoney
Boston, MA
maylward@morrisonmahoney.com
NEW JERSEY
NEW JERSEY—AUTO COVERAGE/PERMISSIVE USE

The Appellate Division ruled in Repossession Specialists v.
Geico Insurance Co., A-23712-10T1 (App. Div. Jan. 12,
2012), that a lawsuit brought against a repo company by a car
owner who was injured while trying to retrieve personal items
from a vehicle that was being towed did not trigger coverage
under the omnibus provisions of the owner's personal auto
policy. The Appellate Division ruled that repossession was
not a permitted use and that the repo company was therefore
not entitled to seek coverage as an additional insured under
the owner's auto policy. Although the right of repossession
was set forth in a contract that the named insured had
entered into, the court emphasized the inability of the owner
to revoke this right, declaring that "use as of right pursuant to
irrevocable authority is inconsistent with the concept of
permissions."

Michael Aylward
Morrison Mahoney
Boston, MA
maylward@morrisonmahoney.com

NEW JERSEY—E&O/RELATED ACTS EXCLUSIONS

A federal district court ruled in Gladstone v. Westport
Insurance Corp., 2011 U.S. Dist. LEXIS 132100 (D. N.J. Nov.
16, 2011), that a "related acts" exclusion which provides that
multiple claims arising out of a single wrongful act or a series
of related or continuing wrongful acts shall be deemed to
have been asserted when a claim is first made precluded
coverage for a lawsuit brought during the policy period that
was related to a lawyer's representation of numerous parties
in a zoning ordinance matter that had prompted litigation by
other clients prior to the policy period.

Michael Aylward
Morrison Mahoney
Boston, MA
maylward@morrisonmahoney.com




NEW YORK
NEW YORK—REINSURANCE/FOLLOW THE FORTUNES

The First Department ruled that various reinsurers must
"follow the fortunes" of their cedent and reimburse Travelers
for $420 million out of a total of $975 million that USF&G paid
to settle Western McCarthur's asbestos claims. In USF&G v.
American Re-Insurance Co., 2012 NY slip op 00421 (App.
Div.,1st Dept. Jan. 24, 2012), the Appellate Division of the
New York Supreme Court ruled that the Supreme Court had
not erred in agreeing with USF&G that the treaty year under
which these claims had been ceded had only a $100,000
retention, not the $3 million retention that applied to later
years. Further, the court refused to find that USF&G had
settled to avoid a likely bad faith award against it. In light of
the "follow the fortunes" doctrine, the First Department
declared that the reinsurers had no right to second-guess
USF&G's decision to settle, much less its decision to assign
the entire loss to a single policy instead of spreading it among
its thirteen years of coverage. As to the latter point, the court
noted that applying thirteen retentions would have deprived
USF&G of any reinsurance for this settlement and that the
decision to select the 1959 policy, whether or not beneficial to
the cedent's reinsurance rights, was not only permitted under
California's "all sums" law and benefitted the underlying
claimants, since the 1959 policy was the only one that was
triggered by all their claims and had a higher policy limit that
some of the other years. Writing in dissent, Judge Abdus-
Salaam argued that there were disputed issues of fact with
respect to whether the settlement was for bad faith, noting
that Western McCarthur had not only made such claims in the
original coverage litigation (USF&G had first denied that it
ever insured Western McCarthur and then asserted that any
policies would necessarily have contained aggregates when,
in fact, copies that unserenditipously turned up in an archive
that USF&G had donated to a Baltimore museum proved the
opposite) but that the Bankruptcy Court, in approving the
settlement, had assigned value to these claims.

Michael Aylward
Morrison Mahoney
Boston, MA
maylward@morrisonmahoney.com

NEW YORK—WAIVER/ESTOPPEL

The Appellate Division reversed prior precedent that allowed
insurers a reasonable time to conduct an investigation without
fear of statutory waiver, declaring in George Campbell
Painting v. National Union Fire Insurance Co. of Pittsburgh,
PA, 2012 NY slip op 00254 (App. Div., 1st Dept. Jan. 17,
2012), that Section 3420(d)'s requirement that any declination
of coverage be issued as soon as is reasonably possible,
"cannot be reconciled with allowing the insurer to delay
disclaiming on a ground fully known to it until it has completed
its investigation (however diligently conducted) into different,
independent grounds for rejecting the claim. If the insurer
knows of one ground for disclaiming liability, the issuance of a
disclaimer on that ground without further delay is not placed
beyond the scope of the 'reasonably possible' by the insurer's
ongoing investigation of the possibility that the insured may
have breached other policy provisions, that the claim may fall
within a policy exclusion, or (as here) that the person making
the claim is not covered at all."

Michael Aylward
Morrison Mahoney
Boston, MA
maylward@morrisonmahoney.com

NEW YORK—ARBITRATION

Generally, an application to stay an uninsured or
underinsured motorist arbitration must be made within 20
days of the time arbitration has been demanded. However, a
motion to stay arbitration may be entertained outside the 20-
day period when "its basis is that the parties never agreed to
arbitrate, as distinct from situations in which there is an
arbitration agreement which is nevertheless claimed to be
invalid or unenforceable because its conditions have not been
complied with."

Here, the accident occurred while a rental car was being
driven in Mexico. The policy provided coverage only for
accidents that occurred within New York State, the United
States, its territories, possessions, or Canada. Since the
policy did not provide for coverage in the geographic area
where the accident occurred, it cannot be said that the parties
ever agreed to arbitrate this claim. In re Allstate Insurance
Co. v. LeGrand (App. Div., 1st Dept., Jan. 17, 2012).

Dan Kohane
Hurwitz & Fine, P.C.
Buffalo, NY
ddk@hurwitzfine.com

NEW YORK—NOTICE TO INSURER/DUTY TO INDEMNIFY

Ocean Gardens d/b/a Horizon sought a declaration that
Travelers was obligated to indemnify it in an underlying
personal injury action alleging that Horizon's employee
caused damages in an automobile accident. This was not a
suit seeking defense costs.

The duty to pay is determined by the actual basis for the
insured's liability to a third person, not the allegations in the
complaint. Since Horizon's liability to the plaintiff in the
underlying action had yet to be determined, it was premature
for the Supreme Court to decide the question of whether such
loss would be covered by the policy.

Additionally, Travelers contended that Horizon failed to give
notice of the accident "as soon as reasonably possible," as
required by the policy. This was a pre-prejudice (§ 3420(d))
case. Here, in opposition to Travelers' prima facie showing
that notice, given approximately 15 months after the accident,
was not "as soon as reasonably possible," Horizon raised an
issue of fact as to whether its good faith belief in nonliability
constituted a reasonable excuse for the delay. The
supporting evidence was as follows: according to deposition
testimony, at the time of the accident, Horizon's employee
was driving in his own personal vehicle and was not engaged
in any matters which were related to his employment with
Horizon. Moreover, Horizon was not named as a defendant in
the underlying action and was not contacted regarding the
case until more than a year after the accident occurred, when
it was subpoenaed to produce records for inspection by the
underlying plaintiff. Notice was given shortly thereafter.
Accordingly, the court found a question of fact on the
reasonableness of the delay. Ocean Gardens Nursing
Facility, Inc. v. Travelers Cos., Inc. (App. Div., 2d Dept., Jan.
17, 2012).

Dan Kohane
Hurwitz & Fine, P.C.
Buffalo, NY
ddk@hurwitzfine.com

NEW YORK—PROFESSIONAL LIABILITY

Plaintiffs are limited liability companies that made multiple
loans to Goldan totaling approximately $3 million. Daniels, an
attorney, was a member of Goldan. Goldan was an American
insured. Daniels was sued for legal malpractice. It was
claimed that as K2's attorney, he failed to record mortgages
and obtain title insurance and thus, committed malpractice.

The plaintiffs demanded $450,000 from Daniels in full
settlement of their claims under the E&O policy. The carrier
denied coverage on two exclusions in the policy: one based
on an exclusion for an insured's capacity or status as an
officer, director, etc., of a business enterprise, and the other
exclusion based on a claim arising out of the alleged acts or
omissions of the insured for any business enterprise in which
he had a controlling interest. Daniels defaulted in the
malpractice action after the disclaimer and judgments totaling
over $3,000,000 were entered against him. Daniels then
assigned to plaintiffs all his claims against defendant,
including bad faith claims.

The court found that the exclusions did not apply with respect
to either the duty to defend, which was demonstrated based
upon the allegations of legal malpractice, or the duty to
indemnify for a judgment based in legal malpractice. The
allegations of professional malpractice had nothing to do with
Daniels' status as an officer or his controlling interest in the
entity. These were malpractice claims arising out of the
attorney-client relationship. The bad faith case was
dismissed, however, plaintiffs having failed to establish a
prima facie case of bad faith based upon defendant's "gross
disregard" of the insured's interests under the policy.

A two judge dissent believed an issue of material fact
remained as to whether plaintiffs' legal malpractice claims, at
least in part, are based upon or arose out of Daniels's
capacity or status as an officer, director, shareholder or
employee of Goldan, or out of his alleged acts or omissions
on behalf of Goldan, a business enterprise in which he had a
controlling interest. K2 Investment Group, LLC v. American
Guarantee & Liability Insurance Co. (App. Div., 1st Dept., Jan.
3, 2012).

Dan Kohane
Hurwitz & Fine, P.C.
Buffalo, NY
ddk@hurwitzfine.com

NEW YORK—FIRST PARTY PROPERTY

The Second Circuit rejected class claimants' contention that a
requirement in Allstate's fire insurance policy requiring that
repairs be completed within 180 days in order to be
compensable violated Section 3404(3) requirement that
insureds be given "a reasonable time" after a loss to repair or
replace their property. In Woodhams v. Allstate Fire and
Casualty Co., No. 10-4389 (2d Cir. Jan. 3, 2012), the court
declared that the claimants' argument ignored the fact that
New York requires only that an insurer pay the "lesser
amount" of the actual cash value of the property, the cost of
repair or replacement, or an otherwise fixed limitation-of-
liability amount. Because Allstate paid plaintiffs the actual
cash value of their property at the time of loss, which was
allegedly less than the full value of repairs, the court ruled that
had Allstate satisfied its statutory obligation to provide "no
less favorable" coverage than that set forth in § 3404(e).

Michael Aylward
Morrison Mahoney
Boston, MA
maylward@morrisonmahoney.com

NEW YORK—NO FAULT INSURANCE

An issue of fact precluded summary judgment in the insurer's
favor on the issue that the plaintiff violated the 45-day rule, as
the plaintiff submitted an affidavit form the billing manager
who averred that he personally mailed the claim form.
Further, the insurer was not entitled to summary judgment
with regard to certain claims based upon an adjuster's
affidavit attesting that a fee schedule review revealed the
amount charged exceeded the workers' compensation fee
schedule. However, the insurer's summary judgment motion
with regard to certain additional claims denied upon an IME
report should have been granted. The plaintiff failed to rebut
the conclusions set forth in the IME report. MIA Acupuncture,
PC a/a/o Fidel Williams v. Praetorian Insurance Co. (N.Y.
App. Term, 2d Dept. Dec. 29, 2011).

Audrey Seeley
Hurwitz & Fine, P.C.
Buffalo, NY
aas@hurwitzfine.com

NEW YORK—ADDITIONAL INSURED REQUIREMENTS

LMIII brought this action, asserting that Gemini Insurance
Company is obligated to defend LMIII as an additional insured
in an underlying personal injury action. In the underlying
action, a roofer employed by Shaffer Building Services, Inc.
(Shaffer) sought damages for injuries he sustained during the
course of his employment. LMIII had hired Shaffer to replace
a roof on its property, and Shaffer was insured under a
commercial general liability policy issued by Gemini. The
policy's additional insured endorsement provided that a third-
party may constitute an additional insured "when you and
such person or organization have agreed in writing in a
contract or agreement that such person or organization be
added as an additional insured on your policy."

The court held that the term "in writing" refers to the entire
phrase "in a contract or agreement." Here, there was an
enforceable purchase order that required Shaffer to add LMIII
to its policy. Although unsigned, it was in writing, and the
parties agreed that they were bound by it. It was therefore a
writing that warrantedadditional insured status. LMIII Realty,
LLC v. Gemini Insurance Co. (App. Div., 4th Dept., Dec. 23,
2011).

Dan Kohane
Hurwitz & Fine, P.C.
Buffalo, NY
ddk@hurwitzfine.com




OKLAHOMA
OKLAHOMA—"INSURED CONTRACT"

Robbie Griffin was injured in an explosion while working as an
independent contractor for S&W Transports, Inc. A settlement
was reached by S&W, but it did not resolve which of its
insurers would provide coverage for the settlement payment.
Mid-Continent issued a CGL policy to S&W, while
Union issued an umbrella policy. The Mid-Continent policy
contained a contractual liability exclusion to which there was
an insured contract exception, providing that the exclusion did
"not apply to liability for damages … [a]ssumed in … an
'insured contract'…." The policy defined "insured contract" in
part as a contract "under which [the insured] assume[s] the
tort liability of another party to pay for 'bodily injury' … to a third
person … provided the 'bodily injury' is caused, in whole or in
part, … by those acting on [the insured's] behalf." The issue
was whether Griffin had caused his own injuries, at least in
part.

The Tenth Circuit Court of Appeals concluded that, because
Mid-Continent's definition of "insured contract" specifically
stated that the bodily injury need only be caused in part by
the person acting on the insured's behalf, the "expert reports
suffice to establish there is no genuine dispute that Griffin's
actions were at least a partial cause of his injuries." The
Tenth Circuit, therefore, concluded that the insured contract
exception to the contractual liability exclusion applied, and, in
turn, Mid-Continent owed coverage to S&W for the settlement
payment. Mid-Continent Casualty Co. v. Union Insurance Co.
(10th Cir. Nov. 2, 2011).

Charles W. Browning
Kenneth C. Newa
Plunkett Cooney P.C.
Bloomfield Hills, MI
cbrowning@plunkettcooney.com
knewa@plunkettcooney.com




PENNSYLVANIA
PENNSYLVANIA—UM/UIM

On January 26, 2012, the Third Circuit Court of Appeals
issued an interesting uninsured (UM) motorists benefits
coverage decision in the debris-in-the-road case of Allstate
Property and Casualty Insurance Co. v. Squires, No. 11-1664
(3d Cir. Jan. 26, 2011). There, the injured party insured was
driving his pickup truck when he allegedly swerved to avoid a
cardboard box lying in the middle of his lane.

Significantly, Allstate stipulated in this matter that an
unidentified vehicle dropped the box. Allstate rejected the
injured party's claim for uninsured motorist benefits and
sought a declaratory judgment. The insured responded with
counterclaims for breach of contract and insurance bad faith
under 42 Pa. Cons. Stat. § 8371.

At the trial court level, the District Court entered judgment for
Allstate, finding that the injuries did not "arise out of
ownership, maintenance or use of an uninsured auto." The
Third Circuit reversed, rejecting the main argument by Allstate
that the harm was caused by the box in the road and not by
any vehicle, as required to support a UM claim under the
insurance policy language and Pennsylvania law. The Third
Circuit relied, in part, on the notion that physical contact with
an uninsured vehicle is not required for an accident to "arise
out of" the use of an uninsured vehicle. The Court ultimately
held that, accepting for purposes of appeal the stipulated
facts that the debris was placed on the road by an
unidentified vehicle, the Court found that the accident arose
out of the maintenance and use of a motor vehicle such that
there was a sufficient causal connection to support a finding
of potential coverage for the claims presented. The Third
Circuit stated its belief that the Pennsylvania Supreme Court
would rule in the same fashion if presented with the same
case.

Perhaps a significant difference between the Third Circuit's
decision in Squires and other Pennsylvania state trial court
decisions on debris-in-the-road cases is that it does not
appear that there was any stipulation in any of the trial court
decisions that the debris on the road had indeed come from a
vehicle. Rather, in those cases, the injured party was without
any evidence to establish how the debris came to be on the
road. A number of the state court decisions resulted in
findings of no coverage on the basis that the accident was not
vehicle-caused, but rather caused by foreign objects on the
roadway.

Daniel E. Cummins
Foley, Cognetti, Comerford, Cimini & Cummins
Scranton, PA
dancummins@comcast.net

PENNSYLVANIA—RETURN OF DEDUCTIBLES

The Pennsylvania Supreme Court in Jones v. Nationwide
Property & Casualty Insurance Co., No. 61 EAP 2010 (Pa.
Dec. 21, 2011) (Majority Opinion by Baer, J.) (Eakin, J.,
concurring), affirmed the practice of property damage
carriers returning deductibles to insureds on a "pro rata" basis
after a subrogation recovery against a third party tortfeasor.
The court rejected the plaintiff insured's contention that this
practice violates the "made whole" doctrine, which according
to the plaintiff required that she receive her whole deductible
back. The Pennsylvania Supreme Court ruled that the "made
whole" doctrine did not apply to the collision coverage at
issue in this case. Accordingly, the court dismissed the
insured's class action.

Daniel E. Cummins
Foley, Cognetti, Comerford, Cimini & Cummins
Scranton, PA
dancummins@comcast.net

PENNSYLVANIA—DISCOVERY

A federal district court ruled in Craker v. State Farm Mutual
Auto Insurance Co., 2011 U.S. Dist. LEXIS 141811 (W.D. Pa.
Dec. 9, 2011), that an insured was entitled to obtain
production of an insurer's reserve with respect to disputed
UIM claims. However, Judge Lancaster rejected the insured's
additional efforts to obtain reports from counsel
notwithstanding the insured's contention that the lawyers
were acting as an adjuster at the time.

Michael Aylward
Morrison Mahoney
Boston, MA
maylward@morrisonmahoney.com




SOUTH DAKOTA
SOUTH DAKOTA—SHIFTING OF ATTORNEY FEES

Andrea Bjornestad was injured in an automobile accident
caused by another driver, who had an auto policy with the
minimum liability limit. Bjornestad had a policy with
Progressive that provided $100,000 in Underinsured Motorists
(UIM) coverage. Bjornestad's injuries were serious, and she
demanded that Progressive pay her the full UIM limits.
Instead, Progressive offered Bjornestad $25,000 in exchange
for a full and final release of all claims. Bjornestad brought
suit against Progressive for breach of contract and bad faith
and sought punitive damages and attorneys' fees. The jury
found in Bjornestad's favor on the breach of contract claim but
rejected her bad faith claim. Bjornestad subsequently moved
for attorneys' fees pursuant to South Dakota statute, which
the district court awarded. Progressive appealed, arguing that
the rejection of Bjornestad's bad faith claim precluded an
award of attorneys' fees.

Quoting its recent decision in Tripp v. W. Nat'l Mut. Ins. Co.,
__ F.3d __, 2011 WL 6822258 (8th Cir. Dec. 29, 2011), the
Court of Appeals stated that "a jury's adverse finding on a bad
faith claim does not, as a matter of law, preclude a trial court
from awarding attorney's fees …. Rather, … a trial court should
undertake a separate analysis to determine whether the
insurer's refusal to pay was vexatious or without reasonable
cause in those cases where a jury finds an insurer did not act
in bad faith." The appellate court determined that the district
court did not clearly err in finding Progressive's conduct
unreasonable based on several facts, including Progressive's
settlement offer, which was less than its own estimate of the
value of the case. As a result, the Eighth Circuit Court of
Appeals affirmed the district court's award of attorneys' fees in
the absence of a finding of bad faith. Bjornestad v.
Progressive Northern Insurance Co. (8th Cir. Dec. 29, 2011).

Charles W. Browning
Kenneth C. Newa
Plunkett Cooney P.C.
Bloomfield Hills, MI
cbrowning@plunkettcooney.com
knewa@plunkettcooney.com




TEXAS
TEXAS—DUTY TO DEFEND

A Texas court of appeal held that an insurer had a duty to
defend a complaint in which the underlying plaintiff failed to
plead a specific date of injury. In GEICO General Insurance
Co. v. Austin Power Inc.(Tex. App.-Houston Jan. 5, 2012),
Weldon Bradley and his wife Ruth sued several defendants,
including Austin Power, Inc., alleging that Weldon was injured
by his exposure to the defendants' asbestos-containing
products and machinery. In their factual allegations, plaintiffs
did not identify the date Weldon's injury occurred. The trial
court granted summary judgment in favor of Austin Power and
dismissed it from the case.

Austin Power held a CGL policy issued by GEICO's
predecessor, covering the period from December 31, 1969, to
December 31, 1970. On appeal, GEICO argued that because
there was no specific date of injury alleged in the petition, it
failed to make any allegation that suggested Bradley was
injured during the policy period. The appellate court
disagreed, finding several allegations that indicated a date of
injury which triggered a duty to defend. The court observed
that the Bradleys alleged that Austin Power "created
hazardous and deadly conditions to which Mr. Bradley was
exposed and which caused him to be exposed to a large
amount of asbestos fibers." By re-incorporation, the plaintiffs
alleged that Weldon was exposed to asbestos "on numerous
occasions," and that "each exposure" caused or contributed
to his injuries. In the conspiracy count against all defendants,
the court found allegation that "for many decades, Defendants
[acted] ... individually, jointly and in conspiracy with each
other and other entities...." The court further observed that the
Bradleys used the past tense in alleging that Weldon Bradley
"has suffered injuries" from asbestos exposure (emphasis by
the court). The court concluded that, in effect, the Bradleys
alleged that Weldon was injured sometime before the petition
was filed, and there was nothing in the pleadings that negated
the possibility that the injury occurred between December 31,
1969 and December 31, 1970.

Mark D. LoGalbo
Liability Insurance Research Bureau
Downers Grove, IL
mlogalbo@lirb.org

TEXAS—CONSTRUCTION DEFECT/TRIGGER OF
COVERAGE

The Texas Court of Appeals ruled that a liability insurer had
an obligation to defend in a construction defect case even
where the underlying suit did not specifically allege that
property damage occurred during its policy period. In Vines-
Herrin Custom Homes, LLC v. Great American Lloyd's
Insurance Co., 2011 WL 6396473 (Tex. App. Dec. 21, 2011),
the Dallas division held that a potential for coverage existed
as the policy in question was in effect while the home was
under construction, even though the underlying complaint was
silent with respect to when property damage commenced.

Michael Aylward
Morrison Mahoney
Boston, MA
maylward@morrisonmahoney.com
UTAH
UTAH—RESTITUTION

The Utah Supreme Court ruled in U.S. Fidelity & Guarantee
Co. v. U.S. Sports Specialty Association, 2012 UT 3 (Jan. 24,
2012), that a liability insurer has no right to seek restitution
from its policyholder in the absence of clear policy language
granting such rights. Notwithstanding the fact that USF&G
had posted a $4 million bond to protect its insured's rights,
even though its policy limits were only $2 million, the court
declined to find that the insured had been unjustly enriched or
that USF&G had a right of equitable restitution to get back the
$2 million it had paid over and above its policy limit. The
court held that the doctrine of unjust enrichment was intended
to provide equitable remedies where none existed at law,
whereas here the parties' relationship was already governed
by contract. The court also took note of the requirement
under Utah Code Section 31A-21-106(1)(a) that all
substantive terms in an insurance policy must be set forth in
writing.

Michael Aylward
Morrison Mahoney
Boston, MA
maylward@morrisonmahoney.com

UTAH—OTHER INSURANCE/ALLOCATION

Ohio Casualty issued one CGL policy to Cloud Nine, LLC,
and Unigard issued a successive CGL policy; however, there
was a gap in coverage between the policies. Cloud Nine was
sued and tendered the defense of the suit to Ohio Casualty
and Unigard. Unigard agreed to defend, and Ohio Casualty
denied and filed a declaratory judgment action. The district
court ruled that Ohio Casualty had a duty to defend and that,
pursuant to the "other insurance" clauses in both carriers'
policies, defense costs should be split equally between them.
Ohio Casualty appealed that ruling to the Tenth Circuit Court
of Appeals, which certified to the Utah Supreme Court the
question of whether defense costs should be allocated
between Ohio Casualty and Unigard based on the "other
insurance" clauses in their policies or based on the time-on-
the-risk method set forth in the Utah Supreme Court's
decision in Sharon Steel Corp. v. Aetna Cas. & Sur. Co., 931
P.2d 127, 140 (Utah 1997). The Utah Supreme Court
concluded that "other insurance" clauses do not apply to
successive insurance policies, because the purpose of such
clauses is to "'prevent multiple recoveries' when 'two or more
policies provide coverage during the same period.'" Instead,
the court applied a modified version of the time-on-the-risk
method, dividing defense costs for those periods that the
insured had no coverage between the carriers based on their
time on the risk. The Utah Supreme Court reasoned that the
carriers' policies gave them the right to control the defense
and that, as a result, "it would be inequitable to apportion any
defense costs to an insured who has no power to select
counsel or negotiate rates and no voice in deciding whether
to settle the suit." Ohio Casualty Insurance Co. v. Unigard
Insurance Co. (Utah Jan. 6, 2012).

Charles W. Browning
Kenneth C. Newa
Plunkett Cooney P.C.
Bloomfield Hills, MI
cbrowning@plunkettcooney.com
knewa@plunkettcooney.com




WASHINGTON
WASHINGTON—BAD FAITH

Ledcor was the general contractor on a project to construct
condominiums and townhomes. Upon completion of the
project, the homeowners associations of both the
condominiums and the townhomes notified Ledcor of various
building defects, and Ledcor, in turn, provided notice of the
potential claims to Virginia Surety. Virginia Surety requested
that Ledcor provide certain information and documents, which
Ledcor did. Virginia Surety subsequently denied coverage on
several bases, including the Fungus Exclusion contained in
the Virginia Surety policy. Ledcor brought suit against Virginia
Surety and moved for partial summary judgment, claiming
that Virginia Surety's investigation and denial of coverage
constituted bad faith. The district court agreed that Virginia
Surety's reliance on the Fungus Exclusion constituted bad
faith because the construction defects listed by the
homeowners associations "merely referenced water stains
and other 'water damage'—they did not include any reference
to mold or fungus." The district court determined that
"reasonable minds could not differ that Virginia [Surety] had
no basis for invoking the Fungus Exclusion, as the
H[omeowners Association]s never complained about the
presence of mold or fungus." The court further rejected
Virginia Surety's argument that the Fungus Exclusion was not
the primary basis for its denial of coverage. Relying upon
Washington law, the district court noted that "an insured may
maintain an action against its insurer for bad faith
investigation of the insured's claim …regardless of whether
the insurer was ultimately correct in determining coverage did
not exist." Ledcor Industries (USA) Inc. v. Virginia Surety Co.,
Inc. (W.D. Wash. Dec. 9, 2011).

Charles W. Browning
Kenneth C. Newa
Plunkett Cooney P.C.
Bloomfield Hills, MI
cbrowning@plunkettcooney.com
knewa@plunkettcooney.com




WISCONSIN
WISCONSIN—AUTO COVERAGE/EXHAUSTION/TENDER

The Wisconsin Court of Appeals ruled in Rural Mutual
Insurance Co. v. Denzine, 2011 AP 183 (Wis. App. Jan. 4,
2012), that an automobile liability insurer had no continuing
obligation to provide a defense to its insureds after tendering
its limits for settlement. In light of language in the policy
stating that "we will not defend any suit after our limit of
liability has been offered or paid," District III held that this
"tendered for settlement" language was effective, rejecting the
insured's argument that the insureds had not received the
policy or been made aware of this provision.

Michael Aylward
Morrison Mahoney
Boston, MA
maylward@morrisonmahoney.com

WISCONSIN—FIRST PARTY PROPERTY/"OCCUPANCY"

The Court of Appeals ruled in Johnson v. Mt. Morris Mutual
Insurance Co., 2010AP2468 (Wis. App. Dec. 1, 2011), that a
homeowner was entitled under WIS. STAT. § 632.05(2)
(2009-10) to recover the full policy limit when a house they
owned was destroyed by an explosion and subsequent fire.
Despite the property insurer's contention that the house was
not "occupied" or a "dwelling" within the meaning of the
statute because the Johnsons were not living in the house at
the time it was destroyed, District Four ruled that the house
was clearly purchased with the intention of making it a
"dwelling" and did not lose this status merely because the
property was being fixed up prior to actual occupancy.
Further, the court interpreted "occupy" as including uses of a
property beyond present physical occupancy that are related
to future occupancy of the property.

Michael Aylward
Morrison Mahoney
Boston, MA
maylward@morrisonmahoney.com
Feature Article

The Black Box Does Not Lie in PIP and
Third-Party Auto Accident Cases
by Robert S. Abramson




                Recently, a plaintiff in Michigan testified that
                just prior to an auto accident occurring, she
                was stopped at a stop sign, had her foot on the
                brake, and her seatbelt on. However, the
                “black box” in her vehicle revealed the true
                story.


According to the data downloaded from her Event Data
Recorder (EDR), the plaintiff was traveling at a speed of 61
miles per hour five seconds before impact, and 42 miles per
hour in a 25 mile per hour zone at the time of impact; she
never applied her brakes; never stopped at the stop sign; and
was not wearing a seatbelt.

Needless to say, EDR data can serve as powerful evidence
not only in third-party auto cases, where liability is in question,
but also in personal injury protection (PIP) cases where
plaintiffs attempt to embellish the speed and force of the
impact.

Indeed, EDRs are cutting-edge technology that are going to
play a prominent role in auto litigation for years to come, as
they will be required to be installed in all North American
vehicles effective 2013. An EDR has been defined by the
National Highway Traffic Safety Administration (NHTSA) as "a
device installed in a motor vehicle to record technical vehicle
and occupant information for a brief period of time (seconds,
not minutes) before, during and after a crash." While they
have been around since 1994, the NHTSA required
automakers for the first time in 2011 to disclose the existence
of the technology in owners’ manuals.

Typically, EDRs are located under the passenger front seat,
driver’s seat, or the center console of a vehicle. Currently,
Bosch is the only company that provides the crash data
retrieval (CDR) software. This allows for downloading data
from a microchip onto a laptop computer with the relative
ease of connecting a wire to a plug under the car’s
dashboard, which will then generate reports for use in
accident reconstruction.

There are two types of recorded crash events. First, a non-
deployment event records data, but does not deploy the air
bags—it contains pre-crash and crash data; however, after
250 ignition cycles, the data is wiped out. Second, in a
deployment event, the air bags are deployed. The recorded
data includes pre-crash and crash data, which is saved and
may never be overridden.

How to decide whether or not to obtain data from the
EDR

First, figure out whether the vehicle is still around. It may be
totaled and no longer available. Second, find out the make
and model of the vehicle. Older cars may not have EDRs.

Importantly, analyze what sort of information may be
downloaded from that particular car, and whether or not it
could be useful for your defense. What types of information
can be extracted from an EDR?Again, it depends on the car,
but in general, the following data may be accessible:

        Air bag deployment;
        Whether the driver was wearing a seat belt;
        Whether brakes were applied;
        Vehicle speed five seconds and one second before
        impact;
        Throttle position;
        Severity of the crash, known as the delta force or the
        change of speed;
        Duration of the crash;
        Whether any warning lamps or fault codes were on.

Another consideration is cost. If the EDR needs to be cut out
from the underbody of the vehicle, that could add to the
expense.

Privacy laws, chain of custody, and spoliation of
evidence

Before you even think about accessing an EDR from a
vehicle, check your state laws. Currently, thirteen states have
enacted privacy statutes regarding obtaining data from
EDRs: Arkansas, California, Colorado, Connecticut, Maine,
New Hampshire, New York, Nevada, North Dakota, Oregon,
Texas, Virginia, and Washington.

In California, the data may not be downloaded unless the
registered owner of the motor vehicle consents to the retrieval
of the information. Colorado requires that the owner’s
consent be obtained within the preceding 30 days. New
Hampshire describes EDR data as “private property,” and
ownership of the EDR module and data survives salvage
transfer of ownership of the vehicle so long as the EDR is not
separated from the vehicle.

Once consent is provided, send out a notice of inspection of
the vehicle and invite the plaintiff and his accident
reconstructionist to attend. Also, prepare a letter demanding
preservation of evidence.

After the data is downloaded, provide a chain of custody for
the information, including an affidavit from the accident
reconstructionist. This is a critical step, because if the data is
lost, the plaintiff may be allowed to use a spoliation of
evidence jury instruction. For example, Michigan Civil Jury
Instruction 6.01(d) provides that a trier of fact may infer that
evidence not offered in a case would be adverse to the
offending party if it was under the party’s control, it could
have been produced, and no reasonable excuse was shown
for failure to produce the evidence. This is a powerful and
potentially damaging instruction.

EDR evidence is generally admissible

Courts across the country have consistently held that the
crash data and its collection is not new or novel and have
admitted such data into evidence. Further, the data has been
found to be generally accepted in the scientific community,
and therefore, it was proper for an expert to testify regarding
the results of the data.

Potential challenges to admission of EDR evidence by
plaintiffs include:

        EDR not in proper working condition and accurately
        recording information at the time of the accident;
        Expert testimony concerning the calibration and/or
        maintenance of the vehicle;
        That the EDR data is inconsistent with the damage
        photos, measurements at the accident scene, and
        testimony of witnesses.

The leading case regarding the admissibility of these
black boxes is Bachman v. GM, 332 Ill.App.3d 760, 776
N.E.2d 262 (4th Dist. 2002). There, the plaintiff
appealed from a defense verdict, claiming that the trial
court erred by allowing evidence downloaded from the
plaintiff’s vehicle that the airbag and restraint system
functioned properly. The court held that the crash data
and its respective collection was not new or novel and
admitted it into evidence. Further, the data was found to
be generally accepted in the scientific community, and it
was therefore proper for the expert to testify regarding
the results of the data under Daubert v. Merrell Dow
Pharmaceuticals, Inc. 509 US 579 (1993). Thus, the
dismissal was upheld.

In Cansler v. GM, 765 N.E.2d 698 (Ind. App. 2d Dist. 2002),
an Indiana appellate court also determined that an EDR
download confirming non-deployment of an airbag was proper
and therefore admissible. However, the court stressed that
since the defendants failed to present evidence that the EDR
was functioning properly at the time of the accident, the data
itself was not irrefutable evidence that the airbag performed
properly.

In People of the State of Michigan v Frank Druzynski
(unpublished opinion per curiam of the Michigan Court of
Appeals, decided July 20, 2010 [Docket No. 289521]), the
defendant alleged that the victim’s vehicle caused the
accident through the victim’s excessive speed. The
defendant challenged the admissibility of the expert’s
testimony, including the speed of the victims’ automobile at
the time of the accident as recorded by module in the vehicle.
After conducting a two-day Daubert hearing, the court
determined that the data from the EDRs was reliable. The
defendant then contended that the expert’s testimony should
not have been admitted because the validity of the data was
not in accord with the physical evidence. The court held that
the reliability of the expert’s testimony regarding speed was
not undermined by the physical evidence.

Based on the case law outlined above, defendants must be
vigilant about laying the proper foundation and chain of
custody for the data and using an expert who is trained in
examining this data (accident reconstructionist or engineer).
Defendants should also be aware that they may have to
proceed through an evidentiary hearing for the admission of
the data and the proposed expert testimony. Nevertheless, if
these steps are closely followed, the evidence should be
deemed admissible, and should play a significant role
inundermining the plaintiff’s subjective recall and providing a
true snapshot of what actually occurred in the vehicle.

Robert S. Abramson
Kopka, Pinkus, Dolin & Eads
Farmington Hills, MI 48331
rsabramson@kopkalaw.com




MyDRI

Increase Your DRI Membership Value
 Did you know every DRI member has a listing on the
Membership Directory? DRI has populated the member
profiles on the DRI website for each member with their name,
firm name, firm address, firm phone number, and member e-
mail address, as well as a list of committees in which the
member belongs.

Once you log onto the DRI website using your username and
password, you can find your member profile by clicking the
'Dashboard' link at the top of the screen. Complete your
profile (known as MyDRI profile) by including your member
photo, practice areas, member bio, and firm location.

Furthering the completion of your MyDRI profile, members are
encouraged to add more to his or her own profile by including
more personal information – areas of professional interest,
educational information, professional organizational activities
and positions, starting with DRI, authorships and outside
interests. Why? This information is beneficial to other
members who find your profile by using the "Find a Lawyer"
search engine, which will provide a better understanding of
you and your practice.

The MyDRI profile will allow members to view a dashboard of
activity (including Defense Wins, event rosters, course
materials, leadership roles, renewing dues, authored articles,
etc). The Dashboard on the MyDRI profile demonstrates your
DRI membership value.

Log onto the DRI website and update your MyDRI profile
today.




Special Offer
Have you visited DRI's new online portal, DRI Today
 yet? DRI Today is your one-stop resource to news,
market updates, legal commentary and more all
designed specifically with the defense attorney in mind.
Browse the DRI Blog for interesting discussions or catch
up on past articles from For The Defense. DRI Today
 provides a convenient resource to find information on
any practice area topics with just the click of your
mouse. Be sure to make DRI Today your homepage to
keep up with the fast changing world of legal news.
Don't forget to like DRI on Facebook and follow DRI on
Twitter!

				
DOCUMENT INFO
Categories:
Tags:
Stats:
views:8
posted:5/20/2012
language:
pages:19