Contents DRI CLE And The Defense Wins by wuyunyi


									Tuesday, July 27, 2010                           The Voice - October 15, 2008                           VOLUME 7 NUMBER 41

And The Defense Wins
And The Defense Wins
And The Defense Wins
DRI Cares
This Week's Double Feature
This Week's Double Feature
And The Defense Wins
Legislative Tracking
Quote of the Week
Annual Meeting
DRI News
DRI News
DRI News
And The Defense Wins
And The Defense Wins

October 14, 2008

Asbestos Medicine
November 6-7, 2008
Bellagio, Las Vegas, Nevada

Leadership, Compensation and Associate Retention (webconference)
November 11, 2008

After the Hurricanes and Floods — Insurance Coverage Issues that Rise/Float to the Top(webconference)
November 12, 2008

Complex Medicine
November 13-14, 2008
Hotel del Coronado, San Diego, California

The Advantages of Technology in Modern Litigation(webconference)
November 18, 2008

Fire and Casualty
November 20-21, 2008
Marriott Chicago Downtown, Chicago, Illinois

Insurance Coverage and Practice
December 4-5, 2008
Sheraton New York Hotel and Towers, New York, New York

Civil Rights and Governmental Tort Liability
January 28-30, 2009
The Ritz-Carlton New Orleans, New Orleans, Louisiana

For all other seminars and webconferences,click here.

October 14, 2008

And The Defense Wins

                                                             Page 1 of 10
Richard A. Hayhurst of the Hayhurst Law Offices in Parkersburg, West Virginia, represented United Bank, Inc., and one of its administrative
                                                                                                                       Givens vs. Main Street Bank,
officers in a pro se civil rights action in the United States District Court for the Northern District of West Virginia,
et al., Civil Action File No. 5:08-cv-127. Section 1983 claims, various federal statutory claims and state law causes of action were alleged by
the plaintiff who had been arrested in connection with a forgery/fraud scheme. Monetary relief of $10 million and injunctive relief were sought.
Jurisdictional challenges and merits defenses were litigated and, on September 25, 2008, the district court vindicated United Bank and its
officer on all claims.

October 14, 2008

And The Defense Wins

David M. Davis and J. Mark Holbrook, shareholders at Davis & Wilkerson, P.C. in Austin, Texas, obtained a victory in a recent medical
malpractice case against two general surgeons. On October 10, 2008, the state district court entered judgment on the jury verdict which fully
exonerated the two surgeons.

The case arose out of medical care provided to a 61-year-old man who died in a local Austin hospital. The man had entered the hospital for
care of gout to his left knee. After two weeks in the hospital, it was determined that he had developed an ischemic bowel (lack of oxygen
causing the death of a segment of the colon) and a general surgeon was called in to perform a colon resection procedure to remove the
diseased portion. Subsequent to the procedure the man failed to improve, developing fever and other signs of infection. On post-operative day
nine, the man suffered a respiratory arrest due to airway obstruction and died.

The case was complicated by an autopsy performed by the Travis County Medical Examiner who found that the surgical site at the colon had
failed and determined that the cause of death was related to an infection caused by the failure. Through the testimony of the two surgeons and
an expert witness from the Baylor College of Medicine of Houston, the defense was able to establish through the clinical records that the death
was not due to the failure of the surgical site but instead caused by choking on a pill prescribed by a non-defendant physician. The defense
was able to explain the failure of the surgical incision as being the result of the cardio pulmonary resuscitation performed at the time of the
cardiac arrest.

The jury reached its unanimous verdict in approximately 30 minutes.

October 14, 2008

And The Defense Wins

Quintairos, Prieto, Wood & Boyer, P.A. (QPWB) trial attorneys, Teresa A. Arnold-Simmons, managing partner of the Jacksonville office
and Todd M. Smayda, a partner in the Tampa office, obtained a defense verdict on behalf of the Gray Gable Nassau Village Volunteer Fire
Department (VFD)in a case in which a general surgeon sued a VFD for an injury sustained while participating as a volunteer in a charity event
of dunk-the-doctor. The event was hosted by the American Cancer Society Relay for Life and sponsored by the hospital, which had borrowed
the dunking booth from the VFD. Prior to the trial, the hospital already had settled with the plaintiff. The original claim against the hospital did
not include the VFD, and was later amended to add the VFD.

The plaintiff, Robert Hogan, was the fourth doctor in line to be dunked, and allegedly slipped while climbing into the dunking booth, lacerating
his finger, which required eight stitches at the emergency room. Three months after the injury, the plaintiff asserted he had developed Reflex
Sympathetic Dystrophy (RSD). He claimed this caused him to become disabled, thus forcing him to close his medical practice. His experts and
treating physicians stated that he was permanently disabled and that his lost wages and future care ranged between $3-4 million.

The biggest challenge at trial was dealing with the numerous allegations brought by the plaintiff against the defendant VFD, which included
lending of an allegedly dangerous dunk tank, negligent design and building of a dangerous dunk tank, failure to modify and failure to warn of a
dangerous dunk tank. In addition, the plaintiff's experts claimed that the section of the ladder extending into the dunk tank did not comply with
OSHA standards for fixed ladders, that it lacked a non-slip surface on the steps and handrails.

In spite of the numerous claims raised against the product, during the trial, the defense established that the dunk tank was safe, as shown by
its construction and by its continued use. The dunk tank, with a span of 15 years of use within the community, did not have a history of
complaints as to the ladder or any injuries associated with the tank. The defense expert, a safety and operations consultant for theme parks
and outdoor events, noted that the dunk tank was a common design and was safe.

In combating the plaintiff’s damages, the defense showed that the plaintiff’s hospital privileges were to expire within eight months following the
accident, as the plaintiff had failed to obtain the required board certification on four previous occasions. Moreover, the opinion of two expert
witnesses indicated that the plaintiff did not, in fact, suffer from RSD.

The two-week trial concluded when the jury deliberated for one hour and 10 minutes, returning with a defense verdict. When it came time for
the trial, Ms. Arnold-Simmons says it was a matter of putting everything together for the jury.

October 15, 2008

DRI Cares

                                                                    Page 2 of 10
This year will mark the third year that the Milwaukee law firm ofGonzalez Saggio & Harlan LLP will "adopt" a family at Christmas. In 2006,
the firm obtained the name of a family forced out of their home due to divorce, domestic violence and poverty. The family of five received
clothing, coats, boots, books, dishes, cups, silverware and gift certificates for groceries. Of course, toys were also included and one of the
special items was a renovated antique doll house. Last year members of the firm purchased an automobile for a family who had no
transportation. This gift enabled the mother to get back and forth to her job. This year the firm will seek a third family. Money is raised from
                                                                                                                                Joseph M. Fasi II,
individuals at the firm; attorneys and staff then shop for the gifts. This is followed by a gift wrapping day and a delivery day.
a former DRI board member, originated the idea for this worthwhile cause.

October 15, 2008

This Week's Double Feature


By Daniel W. Gerber and Joanna M. Roberto,Goldberg Segalla LLP

When there are non-covered claims and a demand to settle within the policy, can an insurer settle and recoup the payment from the insured?
Does the insurer need the insured’s consent to settle an order to recoup? As with most unsettled legal principles, there is the majority view, the
minority view, and then the other view.

The Majority View
"Whenever you find yourself on the side of the majority, it's time to pause and reflect."— Mark Twain

The majority view is that an insurer who settles a non-covered claim is entitled to reimbursement, despite the insured’s objection, where: (1)
the insurer has timely asserted a reservation of rights; (2) the insurer has notified the insured of its intent to seek reimbursement; and (3) the
insured has meaningfully controlled the defense and negotiation process.See Travelers Property Casualty Co. of America v. Hillerich &
Bradsby Co., Inc., 2006 WL 2524145 (W.D.Ky, Aug. 28, 2006) andCincinnati Ins. Co. v. Grand Pointe LLC 501 F.Supp.2d 1145 (D.Tenn.
2007). By way of example, under Arkansas law, an insurer is entitled to reimbursement where it timely and explicitly reserved its right to
recoup the costs and provided specific and adequate notice of the possibility of reimbursement. obel Ins. Co. v. Austin Powder Co., 256
F.Supp.2d 937 (W.D.Ark.2003). In Massachusetts, the right to reimbursement has been denied where the insurer entered into a settlement
agreement without notifying the insured of the settlement offer prior to accepting it.Medical Malpractice Joint Underwriting Ass’n of
Massachusetts v. Goldberg, 680 N.E.2d 1121 (Mass. 1997). In California, it was initially sound practice that the parties may enter into an
agreement under which the insurer reserves the right to dispute coverage, and if a determination of non-coverage is subsequently found, then
the insurer has the right to obtain reimbursement of settlement amounts it paid.Johansen v. California State Automobile Assoc.
Inter-Insurance Bureau, 538 P.2d 744 (Cal. 1975).

Then, over 20 years later, the question of whether and what if a policyholder refuses to enter into such an agreement was raised. A California
federal court responded by holding that an insurer is entitled to reimbursement upon a timely and express reservation of rights, an express
notification to the insured of the insurer’s intent to accept a proposed settlement and an express offer to the insured that they may assume
their own defense when the insurer and insured disagree whether to accept the proposed settlement.Blue Ridge Ins. Co. v. Jacobsen, 25
Cal.4th 489 (Cal. 2001).

In Travelers Property Casualty Co. of America v. Hillerich & Bradsby Co., Inc, 2006 WL 2524145 (W.D. Kentucky August 28, 2006), Travelers
funded the defense of Hillerich & Bradsby in a lawsuit alleging claims ranging from anti-trust violations to interference with business
relationships in the aluminum baseball-bat market. Travelers agreed to pay the lawyers selected by Hillerich & Bradsby and to fund a
settlement negotiated by them. However, Travelers reserved the right to seek reimbursement of settlement amounts for uncovered claims.
Hillerich & Bradsby would not agree to allow Travelers to have the right to seek reimbursement. As a result, Travelers brought a declaratory
action to clarify this issue.

Travelers sought only reimbursement of uncovered settlement amounts, as opposed to reimbursement of legal fees. The court decided
insurers have the right to seek such reimbursement when certain factors are present such as: (1) they have expressly reserved the right to do
so; (2) they have notified the insured of their intent to accept a proposed settlement offer; and (3) the insured either has control of the defense,
or the insurer makes an express offer to allow the insured to assume the defense when the insurer and insured disagree over the proposed
settlement. The court found support in the statement that if an insured chooses to accept a defense under a reservation, then the insurer
retains any defenses under its policy and may contest coverage in a subsequent proceeding.National Union Indem. Co. v. Miniard, 310
S.W.2d 793, 794 (Ky. 1958). Although the court found that Travelers had the right to seek reimbursement of settlement funds, it did not and
would not decide whether Travelers had the right to collect reimbursement under the language of its policy. The issue of whether Travelers'
policy gave it the right to seek reimbursement was left for another court, another day.

The Minority View
“It is emphatically the province and duty of the judicial department to say what the law is.” — Chief Justice John Marshall

                                                                    Page 3 of 10
Other courts, applying what appears to be the minority approach, hold that unless there is an express agreement in the policy language
authorizing reimbursement, a unilateral reservation of rights letter cannot create rights not contained within the insurance policy – namely
reimbursement of costs and expenses prior to a declaratory judgment that determines there is no duty to defend or indemnify.See, e.g.,
Westchester Fire Ins. Co. v. Wallerich, 527 F.Supp.2d 896 (D. Minn. 2007);Shoshone First Bank v. Pacific Employers Ins. Co., 2 P.3d 510
(Wy. 2000); Texas Association of Counties Government Risk Management Pool v. Matagorda County 52 S.W.3d 128 (2000). For instance, in
Alabama, the supreme court has ruled that where one insurer, with full knowledge of the facts voluntarily pays money to satisfy the colorable
legal demand of another insured, no action will lie to recover such a voluntary payment, in the absence of fraud, duress, or extortion. t. Airy
Ins. Co. v. Doe Law Firm, 668 So.2d 534 (Ala. 1995).

In Steadfast Ins. Co. v. Sheridan Children's Healthcare Servs. Inc 34 F.Supp.2d 1364, 1366-67 (S.D. Fla.1998), the Southern District for
Florida held that an insurer could not recover settlement monies paid on behalf of its insured before the issue of coverage was resolved. The
court explained, “[T]he ruling is equitable in the sense than an insurer, who asserts a lack of interest in a claim by denial as to coverage,
should have no standing to obligate the insured. Other courts have reached the same conclusion by treating an insurer as a volunteer when it
simultaneously denies coverage and settles a claim without the insured's consent.”

The Conditional View: The Exception to All Rules
“There are those whose sole claim to profundity is the discovery of exceptions to the rules.” – Paul Eldridge

In some jurisdictions, courts apply the other view, which holds the insurer accountable for the full amount of any reasonable (and
non-collusive) settlement reached by the parties, so long as the covered claims asserted stem from a set of facts ranging within the scope of
coverage. See, e.g., U.S. Fire Ins. Co. v. Green Bay Packaging, Inc 66 F.Supp.2d 987 (E.D. Wis. 1999);Alderman v. Hanover Ins. Group,
169 Conn. 603, 612, 363 A.2d 1102 (1975).See, e.g., Reliance Ins. Co. v. Armstrong World Indus., Inc., 259 N.J. Super. 538, 614 A.2d 642,
657-58 (N.J. Super. L. Div.1992), rev'd on other grounds, 292 N.J. Super. 365, 678 A.2d 1152 (N.J. App.1996) (insurer had a duty to
indemnify policyholder for entire settlement amount in lawsuit seeking the same damages based on covered and uncovered theories); nited
States Steel Corp. v. Hartford Acc. and Indem. Co., 511 F.2d 96, 99 (7th Cir. 1975) (underlying judgment was covered in its entirety where
facts showed that the policy holder was liable for the same damages under both covered and uncovered claims);Alexander v. CNA Ins., Co     .,
441 Pa. Super. 507, 657 A.2d 1282, 1285 (Pa. App. 1995) (policyholder was entitled to indemnity for the entire amount paid to settle a claim
seeking the same damages under alternative covered tort and non-covered breach of contract counts);Hawthorne v. South Bronx Community
Corp., 582 N.E.2d 586, 588 (N.Y.1991) (insurer was obligated to pay for the entire settlement of an underlying claim where the policyholder
was liable under two alternative theories, only one of which fell within the policy's coverage).

Frank’s Casing Decision: 2005 versus 2008

In a recent decision, the Texas Supreme Court issued its long awaited decision, which has generated significant interest and unsettled
discussions. The interest sparks from the fact that the court reversed a previous unanimous 2005 ruling that, in certain circumstances, an
insurance company has a right to seek reimbursement for settlement of uncovered claims. The majority opinion inExcess Underwriters at
Lloyd’s, London et al v. Frank’s Casing Crew & Rental Tools, Inc, announced that unless a policy provides the insurer with the right to
reimbursement of settlement proceeds following a coverage dispute, then the insurer cannot unilaterally create such a right.

Frank’s Casing fabricated a drilling platform for ARCO. When the platform collapsed, ARCO sued Frank’s Casing and several others. Frank’s
Casing had a $1 million primary liability policy and excess coverage up to $10 million with Excess Underwriters at Lloyd’s. The excess policy
did not require the underwriters to assume control of the defense or the settlement of any claims, but did give them the right to associate with
defense counsel retained by Frank’s Casing or the primary insurer — if it was reasonably likely that the excess coverage layer would be

After notice was provided to the excess of ARCO’s claims, reservation of rights letters were issued. The letters stated that coverage for
ARCO’s claims was “limited or negated” under the policy’s terms. Shortly before trial, Frank’s Casing’s in-house counsel contacted ARCO
which demanded $7,500,000. The demand was communicated to the excess underwriters by Frank’s Casing, suggesting it was a reasonable
one that should be accepted. As part of that same communication, Frank’s Casing reiterated its disagreement with the disputed coverage
position. In sum, the excess underwriters agreed to pay $7.5 million in settlement, less $500,000 from the primary and then reserve the right to
seek reimbursement from Frank’s Casing.

The court held that Frank’s Casing never impliedly consented to reimburse the excess underwriters. Further, the excess insurer had no right to
reimbursement under the equitable theories of quantum meruit and assumpsit.

The court in Frank’s Casing offered suggestions to avoid a quandary such as the one at issue. A similarly situated insurer could refuse to
participate in settlement and rely on its coverage action, leaving the insured to negotiate on its own. Alternatively, an insurer could seek
prompt resolution of its coverage dispute. Or, an insurer could leverage the coverage dispute during settlement negotiations to lower a
plaintiff’s demand. Lastly, an insurer could include a reimbursement provision in its policy, yielding an inevitable lower premium but retaining
the right to act on this contractual right.

The dissent, namely Judge Hecht, in stating that a policyholder should be liable to the insurer for reimbursement of uncovered claims despite
a reservation of rights letter, found its support in the “same law of unjust enrichment that applies to everyone else.” The remedy, inherent in the
UCC and contract law, is restitution. Although restitution may sound equitable and fair, what happens if the policyholder has limited or no
financial resources? As Judge Hecht stated, “you can’t squeeze blood from a turnip.” It would be less of an incentive to seek reimbursement if
investigative efforts reveal that the policyholder would not be able to satisfy a realistic judgment. Yet, adopting this logic means that the theory
of seeking reimbursement for uncovered settlements would only function if the insurer is fortunate enough to have a financially fit policyholder.

In essence, the 2008 decision reiterated, with an extended provision, a previous ruling explaining that, in Texas, an insurer that settles a claim
against its insured when coverage is disputed may seek reimbursement from the insured should coverage later be determined not to exist, if
the insurer obtains the clear and unequivocal consent to the settlement and the insurer reserves its right to seek reimbursement. ee, Tex.

                                                                   Page 4 of 10
Ass’n of Counties County Gov’t Risk Mgmt. Pool v. Matagorda County 52 S.W.3d 128, 135 (Tex. 2000).Matagorda County refused to allow
the insurer a right to reimbursement, namely because the policy did not reserve that specific right. TheMatagorda County court refused to
impose a right of reimbursement using the theories of quantum merit or unjust enrichment as substantive support. As an alternative to relying
on a policy provision for the right to reimbursement, theMatagorda County court also stated that the same result could be achieved by
obtaining an insured’s consent to (1) the settlement and (2) the insurer’s right to seek reimbursement later. Arguably,Frank’s Casing can be
distinguished because it involves excess coverage wherein the insured consented to the settlement, but not to the excess insurer’s asserted
reimbursement right. Having said that, one can argue that theFrank’s Casing court refused to recognize an exception that would have implied
a reimbursement obligation when the policy involves excess coverage.

Four months after Frank’s Casing, in June 2008, the Court of Appeals for the Fifth Circuit (applying Texas law), affirmed the Southern District
of Texas’ allocation, conducted by trial, to apportion the settlement between covered and uncovered claims.American Intern. Specialty Lines
Ins. Co. v. Res-Care, Inc., 529 F.3d 649 (5th Cir. 2008). Judgment was entered against the policyholder, Res-Care, for $5 million,
representing, more likely than not, punitive damages. American International Specialty Lines Insurance Company (“American”) insured
Res-Care, a group home for mentally disabled individuals. The primary policy had a coverage limit of $10 million and the umbrella was $15

In Res-Care, Trenia Wright, a 37-year-old resident with cerebral palsy and mental disabilities, fell into a bleach mixture used to clean the floors
and was left in the liquid for several hours before the employee who was cleaning returned from eating pizza outside. Wright did not receive
medical assessment by staff personnel until 17 hours after her exposure to the bleach. As the staff nurse made no recommendations, Wright
received no follow-up assessment or medical care for 34 hours until she was sent to the emergency room. Eventually, Wright died from
severe burns covering over 40 percent of her body. After American settled the suit for $9 million, it sought reimbursement from Res-Care
pursuant to their non-waiver agreement.

The Res-Care court provided instructive discussion concerning the role of a trial court that is deciding apportionment of settlement between
damages that the insurer owes and damages for which the insured has a duty to pay. TheRes-Care court stated:

In the allocation trial, the trier of fact can consider any facts that could have been considered in the [underlying] lawsuit itself. The trial court, of
course, will have considerable leeway in deciding what facts are truly relevant to the apportionment decision, and can thereby (we hope)
prevent a full-clown retrial of the [underlying] lawsuit.

Res-Care, 529 F.3d 649, 656.

To determine a reasonable allocation…all information influencing the settlement decision is potentially relevant. This information might include
internal memoranda, correspondence between insurer and insured, communications with the insured party, investigative reports and
statements, and even assessments of how sympathetic the plaintiffs would be at trial.

Res-Care, 529 F.3d 649, 657.

In U.S. Fire Ins. Co. v. Green Bay Packaging, Inc 66 F.Supp.2d 987, 988 (E.D.Wis. 1999), the court found that the duty to indemnify included
an entire damage award, holding that “where a claim consists of a variety of acts, some of which are covered and others that are not, it is well
settled that resulting liability falls within the terms of the insurance policy unless the uncovered risk is the sole cause of damages….” Notably,
this decision was particular to addressing indemnity for a damage award, yet it seems clear that adopting the court’s logic means that the
same rule would be applied in a settlement situation.

The unadorned fact remains that if an insured could prevent an insurer from seeking reimbursement for settling a non-covered claim, an
insurer would have no practical avenue of recourse other than to settle and forgo reimbursement.Blue Ridge, 25 Cal.4th at 502. Effectively,
this would force insurance companies defending under a reservation of rights to settle covered and non-covered claims alike whenever there
is a colorable argument that coverage exists. Public policy considerations support reimbursement of settlements for even uncovered costs
because reimbursement encourages defense and settlement in cases for which coverage is uncertain. As stated by theBlue Ridge court, an
insolvable concern is that reimbursement transfers “from the injured party to the insurer the risk that the insured may not be financially able to
pay the injured party’s damages.” Blue Ridge, 106 Cal. Rptr. 2d at 545. An insurer may indeed reserve its right to seek reimbursement from its
policyholder, however, there is no guarantee that there will be assets available to contribute or compensate.

Recoupment of Defense Fees for Uncovered Claims

An additional question exists as to when an insurer is entitled to reimbursement of defense costs from its insured. It is axiomatic that the duty
to defend is broad, and it is universally held that in actions asserting both covered and uncovered claims, the insurer has a duty to defend all
claims. Once paid, however, jurisdictions vary on whether the insurer was required to pay for the defense of non-covered causes of action and,
therefore, whether it may be entitled reimbursement for amounts paid. In the majority of states, an insurer is entitled to a return of defense
costs for non-covered claims if the amounts allocable to the non-covered claims can be readily discerned. Windt,nsurance Claims and
Disputes, §4:13 (5th ed. 2007). In other states, in the absence of policy language allowing recoupment, the insurer must fund defense claims
without hope of reimbursement. See, e.g., Westchester Fire Insurance Co. v. Wallerich, 527 F.Supp.2d 896 (D. Minn. 2007).

The issue of when an insurer is entitled to recoup defense costs has broken states down into two distinct camps since the seminal California
case of Buss v. Superior Court was decided in 1997. 16 Cal.4th 35 (1997).

The Buss court held that an insurer’s duty to defend runs to claims that are only potentially covered, and that the duty to defend was
contractual. Buss at 47. The contractual duty to defend extends to claims that are potentially covered, but not to claims that are not. The
insurer did not contract to pay defense costs for uncovered claims; to require it to do so would impermissibly extend the insurer’s contractual
duties without a basis in fact or contract. Nonetheless, theBuss court held that an insurer must defend an entire “mixed” action, even though
there is no policy obligation to do so. Instead, an insurer has a duty to defend the entire action “prophylactically, as an obligation imposed by
law in support of the policy.”Buss at 65.

                                                                      Page 5 of 10
If the covered and non-covered causes of action ever arise from the same operative set of facts or a single accident, the insurer is not likely to
be able to substantiate its claims for reimbursement. If the defense costs would have been incurred in the absence of a non-covered cause of
action, there is no possibly of reimbursement. Turner, Insurance Coverage of Construction Disputes §7:20 (2007), citing Buss, supra.; see
also Horace Mann Insurance Co. v. Barbara B. 4 Cal.4th 1076 (1996). Beyond that, however, Buss and other decisions do little to guide a
court as to what “solely” attributable means. InHorace Mann, supra, the court applied a temporal and spatial rule. It determined allocation is
only permissible if the uncovered claims were far enough away in space and time to form a separate act.

Notably, the majority of courts hold that the right to defense costs reimbursement need not be expressly set forth in the policy for an insurer to
be entitled to recoupment; rather it is an “implied-in-law” right.Buss, supra. At the same time, the Buss court cautioned that it would be wise for
the insurer to reserve its rights to recoupment, lest a waiver argument be raised.Buss, supra at fn. 13 (“To the extent this right is implied in fact
in the policy as contractual, it should be reserved. Through reservation, the insurer avoids waiver.”). The insurer’s reservation, however, is not
contingent upon the insured’s acceptance of the same. Courts will allow an insurer to seek reimbursement if it has issued a unilateral
reservation of rights letter. The theory is that the insured’s acceptance of the defense is the tacit consent to the conditions placed upon the
defense in the reservation of rights – i.e., the potential to recoup non-covered defense costs. Id.


An insured's refusal to authorize the settlement unless the insurer agrees to forgo reimbursement places the insurer in a catch-22 and forces it
to indemnify uncovered claims, contrary to its contractual obligations. TheFrank’s Casing court expressed a concern that recognizing an
extra-contractual reimbursement right allowing an insurer to settle claims and then sue its policyholder may foster conflict and distrust in the
relationship. Despite the possibility of a deteriorated relationship, an insurer needs to consider whether it is cost-effective to assert the
reimbursement right.

Frank’s Casing leaves a small window of opportunity for insurers to seek reimbursement of settlement for claims later determined to be
uncovered. Insurers should learn to benefit from predictability. Revising a policy by endorsement to include a right of reimbursement appears
to be the most advisable means of achieving success if prosecuting an action for reimbursement of settlement payments for uncovered claims.
Because courts are fundamentally ready to place the risk of coverage uncertainties with the insurer, insurers may be better guided and
protected if they prosecute the declaratory judgment action before or even simultaneously with the liability suit to obtain a coverage
determination expeditiously in advance of settlement discussions. As theMatagorda County court reasoned, since an insurer is in the
business of analyzing and allocating risk, it should either draft more specific policies to capture the right of reimbursement or account for the
possible and occasional uncovered claim when calculating its rate structure.Matagorda County, 52 S.W.3d at 134.

Daniel W. Gerber (
Joanna M. Roberto (
Goldberg Segalla LLP
Buffalo, New York

October 15, 2008

This Week's Double Feature

Georgia High Court Finds the National Childhood Vaccination Injury Compensation Act of 1986, 42 U.S.C. § 300aa-1 seq. Does Not
Preempt State Products Liability Actions

By Geremy W. Gregory, Balch & Bingham LLP

On October 6, 2008, the Georgia Supreme Court issued an opinion finding that The National Childhood Vaccination Injury Compensation Act
of 1986, 42 U.S.C. §§ 300aa-1 et seq. (the “Vaccination Act”) does not preempt state design defect claims.   Ferrari v. American Home Products
Corp., 2008 Ga. LEXIS 833, *18 (2008) (Ferrari II). The Vaccine Act provides in pertinent part: "No vaccine manufacturer shall be liable in a
civil action for damages arising from vaccine-related injury or death associated with the administration of a vaccine after October 1, 1988, if the
injury or death resulted from side effects that were unavoidable even though the vaccine was properly prepared and was accompanied by
proper directions and warnings." 42 U.S.C. § 300aa-22(b)(1).

The plaintiffs’ asserted strict liability and negligence claims, alleging their son suffered neurological damage caused by multi-dose vials of
vaccines containing the preservative thimerosal that were manufactured by defendants.Ferrari v. American Homes Products Corp., 286 Ga.
App. 305, 305, 650 S.E.2d 584, 586-587 (2007) (Ferrari I). The trial court granted partial summary judgment in favor of the defendants, finding
the plaintiffs’ design defect claims were preempted by the Vaccine Act.Id.

The plaintiffs appealed, arguing 1) design defect cases are barred by the Vaccine Act only if side effects are determined to be unavoidable on
a case-by-case basis, and 2) in this case, their son’s injuries could have been prevented if Defendants used mercury-free preservatives, or
manufactured single dose vials. Ferrari I, 286 Ga. App. at 208. Defendants argued that any vaccine-related injury should be deemed
unavoidable under the Vaccine Act, so long as the vaccine was properly prepared and accompanied by proper warnings.Id. The Georgia
Court of Appeals agreed with the plaintiffs and found thatBates v. Dow Agrosciences, 544 U.S. 431, 125 S. Ct. 1788, 161 L. Ed. 2d 687 (2005),
required it to “accept a reading [of the Vaccine Act] that disfavors preemption.”Ferrari I, 286 Ga. App. at 312.

The Supreme Court of Georgia granted certiorari and affirmed, albeit on different grounds. The Georgia Supreme Court found based on the
text of the statute and an analysis of congressional intent, that the Vaccine Act “clearly does not preempt all design defect claims against

                                                                    Page 6 of 10
vaccine manufacturers, but rather provides that such a manufacturer cannot be held liable for defective design if it is determined, n a
case-by-case basis, that a particular vaccine was unavoidably unsafe.”Ferrari II, 2008 Ga. LEXIS 833, *18 (emphasis added).

Before Ferrari II, every court addressing the issue of vaccine design defect preemption found the Vaccine Act provides blanket preemption of
any state-law defective design claims. See Bruesewitz v. Wyeth, Inc., 508 F. Supp. 2d 430 (E.D. PA 2007);Sykes v. Glaxo-SmithKline, 484 F.
Supp. 2d 289 (E.D. PA 2007);Blackmon v. American Home Products Corp., 328 F. Supp. 2d 659 (S.D. TX 2004);Miltrano v. Lederle
Laboratories, 769 N.Y.S.2d 839 (2003).Bruesewitz, Sykes, Blackmon, and Miltrano expressly considered, and rejected, the case-by-case
analysis now adopted by Georgia. Bruesewitz, 508 F. Supp. 2d (“allowing case-by-case inquiries into whether a particular vaccine is
unavoidably unsafe would do nothing to protect vaccine manufacturers from suit from design defects, since such an inquiry would require a
finder of fact to consider the manufacturer's design against a purported safer alternative”);Sykes, 484 F. Supp. 2d at 301 (“the purposes of
the Vaccine Act would not be served if defective design claims could be tried before juries”); lackmon, 328 F. Supp. 2d at 665. (“to permit
juries in each state to pass judgment on the design of childhood vaccines could interfere with the federal government’s efforts to establish a
uniform national standard for childhood vaccines”);Miltrano, 769 N.Y.S.2d at 845 (“Congress did not intend that the national vaccine policy be
determined by the vagaries of a jury’s determination on a case-by-case basis”).

The immediate implications of the Ferrari II decision are significant. Manufacturers of vaccines can be subject to strict liability and negligence
claims despite the Vaccine Act. Ferrari II, 2008 Ga. LEXIS 833, *21. The Georgia Supreme Court appears to intend that whether an “injury or
death resulted from side effects that are unavoidable” will be determined on a case-by-case basis as a question of fact. at *10. This holding
may practically eliminate preemption of vaccine-related claims.

Other states may follow Georgia’s example, but at this early stage it is impossible to determine whether this decision is an anomaly or an
emerging trend. Until the United States Supreme Court provides a definitive answer, the cost of defending a vaccine-related design defect in
Georgia has increased significantly.

Geremy W. Gregory
Balch & Bingham LLP
Atlanta, Georgia

October 15, 2008

And The Defense Wins

The San Juan, Puerto Rico, father and son team of Francisco J. Colon-Pagan and Francisco E. Colon-Ramirez of Colon & Colon, PSC
successfully defended The Hotel Conquistador Resort & Spa in a federal jury trial held in San Juan, involving the death of a physician who
apparently died of a sudden cardiac arrest. The plaintiffs alleged that the hotel's safety and security measures were inadequate and that the
hotel failed to timely comply with the assumed duty of timely providing oxygen and an automatic external defibrillator (AED) to the doctors
attending the guest.

The defense counsel contended that the hotel had no legal duty to have oxygen or AEDs on its premises, and further alleged that the fact it
had this equipment did not impose any additional duty, other than providing first aid until the guest was attended by medical personnel or by
others who could summon medical help. It was also argued that the hotel personnel reacted properly and in compliance with the hotel's
standard operating procedures (SOPs) for medical emergencies, and that the applicable SOPs were proper and adequate.

After a two-week trial, a nine person jury returned a verdict of no liability for the hotel.

October 15, 2008

Legislative Tracking
CA HB 2874: Damages.
• An Act to amend Section 12970 of the Government Code, relating to civil rights; this bill would delete the $150,000 limitation on actual
damages that may be assessed by the California Fair Employment and Housing Commission against a respondent who violates the California
Civil Rights Act of 2005, as an unlawful practice.
• 09/28/2008 – Vetoed by Governor.

CO LD 149: Motor vehicle insurance.
• An Act concerning creation of the Colorado No-Fault Motor Vehicle Insurance Act; outlining basic coverage requirements; and for related
• 09/18/2008 – Draft text released.


                                                                      Page 7 of 10
PA HB 2294: Debt management licensure.
• An Act providing for the licensure of persons providing debt management services and for the powers and duties of the Department of
Banking; requiring surety bonds; prohibiting certain fees and costs; providing for debt management plans; and for related purposes.
• 10/09/2008 – Adopted.

CA HB 2379: Court records; appeals.
• This bill would specify the manner of review for an order granting or denying a motion to seal or unseal a court record. The bill would
authorize a party, intervenor, or member of the public, in order to obtain review of any order to seal or unseal a court record, to either file a
petition for an extraordinary writ or a notice of appeal, as specified.
• 09/30/2008 – Vetoed by Governor.

October 15, 2008

Quote of the Week
We should not let our fears hold us back from pursuing our hopes.

— John F. Kennedy

October 15, 2008

Annual Meeting

DRI Annual Meeting
October 22-26, 2008
Sheraton New Orleans
New Orleans, Louisiana

On-site Registration Is Always an Option!
Do you want to attend the 2008 Annual Meeting in New Orleans, but think it’s too late? Well, it’s never too late to register on-site! Learn
about emerging trends and discuss hot topics with colleagues. Enjoy the cuisine and ambience that is found only in the French Quarter. Don’t
                                                               Click here or call 312.795.1101 for more information!
miss this opportunity to spice up your practice in the Big Easy!

For housing information, click here.

October 15, 2008

DRI News
New Inductee
Congratulations to long-time DRI member Brian C. Fetzer of Johnson & Bell, Ltd. in Chicago who was recently inducted into the
International Academy of Trial Lawyers(IATL). Membership is limited to 500 Fellows from the United States. Mr. Fetzer’s practice focuses
on healthcare law, product liability and alternative dispute resolution. In addition to DRI, he is a member of the Federal Trial Bar for the
Northern District of Illinois, the Chicago and Illinois State Bar Associations, the Trial Lawyers Club of Chicago (Past President), the Society of
Trial Lawyers, the American Society for Healthcare Risk Management, the International Association of Defense Counsel, and the Illinois
Defense Trial Counsel. Mr. Fetzer is also a Fellow of the American College of Trial Lawyers.

October 15, 2008

DRI News
New Mexico Defense Lawyers Association (NMDLA) Award Winners
During last week’s NMDLA Annual Meeting, Alfred L. Green, Jr., President and Director of Litigation forButt Thornton & Baehr P.C. in
Albuquerque, was honored as the 2008 Outstanding Civil Defense Lawyer of the Year Jessica M. Hernandez, an associate in the
Litigation Department of the Albuquerque office ofRodey, Dickason, Sloan, Akin & Robb, P.A., was named the 2008 Young Lawyer of the
Year. Both of these recipients are also DRI members.

October 15, 2008

                                                                    Page 8 of 10
DRI News
Asbestos Medicine Seminar
November 6-7, 2008
Las Vegas, Nevada
DRI’s 2008 Asbestos Medicine Seminar continues a long tradition of providing timely insights into the continuing developments of asbestos
practice. The seminar attracts the finest lawyers, doctors and scholars in the field. These leaders present practical, up-to-date information on
how to remain ahead of the curve in the defense of asbestos and mesothelioma claims. This year’s topics reflect the most recent revelations
that have captivated lawyers, courts and clients. The seminar looks at basic changes that have occurred over the years and suggests methods
for success. You will learn trial techniques that will help you settle and/or defend your cases. You will also hear the latest views on chrysotile
and cancer. To register, click here or call 312.795.1101 for more information       .

October 14, 2008

And The Defense Wins

After deliberating for one day, a federal court jury in Atlanta, Georgia, returned a unanimous verdict for Ford Motor Company in the wrongful
death case brought by Zachary Woodard, individually and as personal representative of his deceased wife, Cheryl Woodard. The case was
tried by Kevin C. Schiferl and Todd A. Croftchik of Locke Reynolds LLP in Indianapolis, Indiana, and Mike Boorman of McKenna Long &
Aldridge LLP in Atlanta, Georgia. The plaintiff was represented by the Mount Pleasant, South Carolina firm of Richardson Patrick Westbrook
& Brickman and the Atlanta firm of Conley Griggs LLP.

On July 22, 2002, at 5:50 p.m., the decedent, Cheryl Woodard, 35, was driving her 1993 Ford Explorer north on State Road 31 near Dublin,
Georgia. The decedent's infant son, Reece, was a rear seat passenger. Both Cheryl and Reece were properly restrained (Reece in a child
seat.) Mrs. Woodard had just picked up Reece from child care and was on her way home when a 1988 Oldsmobile Delta 88, driven by LaPaula
Williams, ran a stop sign and collided with the left rear of the Explorer. The force of the impact caused the Explorer to rotate counterclockwise
and resulted in the Explorer leaving the paved surface of the roadway. The Explorer continued to rotate and slide in the soft sandy soil until it
was perpendicular to the roadway. At that point the Explorer could no longer withstand the increasing lateral forces and rolled over 3 1/2 times.
Cheryl Woodard sustained a fatal subluxation of her cervical vertebrae and died at the scene. Her infant son, Reece, was uninjured.

The plaintiff alleged that the roof of the Explorer was negligently designed and that Ford failed to warn the Woodards that the roof would
deform in a rollover and cause injury. Specifically, plaintiff's theory was that the roof structure was not strong enough to withstand the forces in
a foreseeable rollover and that the Explorer failed to provide adequate "survival space" for the occupant. As a result, in this accident, Mrs.
Woodard moved up and forward during the rollover and the roof "caved in" on her head, killing her.

Ford proved that the Explorer's roof was properly designed and that it passed the federal safety standard for roof strength, even though the
Explorer's class of vehicles was not required to do so. Ford also demonstrated that the plaintiff's injury causation theory defies the laws of
physics. Lastly, Ford showed that the Explorer was the safest vehicle in its class and that Mrs. Woodard's tragic injury was caused when she
essentially dove into the ground with a velocity of 20 miles per hour.

The plaintiff's claims rested on the shoulders of automotive engineer Larry Bihlmeyer and biomechanical engineer Dr. Sri Kumar. Mr.
Bihlmeyer is a former Ford engineer who testified that he could easily ($10-$20 per vehicle) design a roof structure that would deform less
than 3 inches in this rollover accident. This could allegedly be done by utilizing thicker steel and eliminating or covering up the holes in the
various roof components. Dr. Kumar then took the baton and testified that the Larry Bihlmeyer "stronger roof" would have prevented Mrs.
Woodard's fatal injury. Dr. Kumar came to that conclusion based on his theory that the occupant moves toward the roof at 2-3 miles per hour in
a rollover and the roof moves in on the occupant at 7-8 miles per hour. Only through the cumulative effect of those two velocities can one
sustain a fatal spine injury. According to Dr. Kumar, if you reduce or eliminate the roof moving in at 7-8 miles per hour, you eliminate the risk of
serious injury. Dr. Kumar testified that a "stronger roof" would reduce or eliminate the velocity associated with the roof moving in on the
occupant, and would prevent injuries like Mrs. Woodard's.

Ford vigorously defended both the design and causation issues. On design, Ford called Garry Bahling, a career safety engineer at General
Motors and a pioneer in the field of researching how occupants interact with the vehicle's structure in rollover accidents. Mr. Bahling testified
that the Explorer's roof was strong—strong enough to withstand the application of almost four tons of force on the corner of the roof before it
would deform five inches. Furthermore, the design of the roof has been proven by the fact that over 98% of belted-restrained occupants suffer
minor or no injuries in rollover accidents. Ford also called Dr. Debora Marth, a former Ford engineer, to explain the work she did at Ford
regarding rollovers and injury causation. Dr. Marth testified in detail about Ford's research related to roof deformation and injury causation and
how that information is integrated into Ford's design process.

Ford called Dr. Murray Mackay to explain how Mrs. Woodard suffered her fatal injury. Dr. Mackay testified that Mrs. Woodard was the
unfortunate recipient of a very rare and very severe upper-spine injury. Her injury was caused when her head essentially impacted the ground
at 20 miles per hour. Dr. Mackay explained that as the vehicle rolls over, the occupant moves in response to the centrifugal forces. Those
forces take the occupant up toward the roof, similar to how clothes move in a spinning washing machine. As a result, Mrs. Woodard's head
would have been in contact with the roof during this rollover. During the second roll, the roof of the vehicle impacted the ground while Mrs.
Woodard's head was in contact with the roof. Mrs. Woodard's torso obeyed the laws of physics and continued toward the ground. The weight
of Mrs. Woodard's body was moving at the same speed as the vehicle (20 miles per hour), and the only anatomy trying to stop that moving
mass was Mrs. Woodard's neck. Her neck could not withstand that force and one of her vertebrae was dislocated. That dislocation interrupted
the nerves in her spinal cord and resulted in her death. That entire process happens in approximately 20 milliseconds and her fatal injury
occurred before any significant roof deformation. In other words, the forces of the accident deformed the roof structure and the forces of the
accident deformed the spine, but the roof deformation did not deform the spine.

                                                                    Page 9 of 10
The jury was comprised of 12 jurors. The case was presided over by the Honorable Thomas W. Thrash, Jr. in Atlanta.

October 15, 2008

And The Defense Wins
Keep those defense wins coming! Send a short summary and recent photo of yourself to Barb Lowery by e-mail or fax

May 20, 2003

About DRI

Annual Meeting/P>


Membership Directory

News and Events

CLE Seminars and Events


The Alliance

DRI Europe


Published by DRI

                                                              Page 10 of 10

To top