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02/24/04          METLIFE AUTO AND HOME v JOE BASIL CHEVROLET

New York Court of Appeals

Without Special Relationship, No Cause of Action Exists in New York For Negligent Spoliation of Evidence

A fire started in a vehicle owned by Joe Basil Chevrolet, and used by Michael Basil. At the time of the fire, the vehicle was parked in Michael Basil’s garage home, and caused $330,000 in property damage to the home. Basil’s homeowner’s carrier, MetLife, paid the property damage claim. Fire and sheriff investigators determined that the fire originated in the vehicle’s dashboard. After indemnifying Chevrolet, Chevrolet’s insurance carrier took possession of the vehicle, and a representative of Royal agreed in a telephone conversation to preserve it. Representatives of MetLife, General Motors, the Speaker Shop, Inc. (which installed a remote starting device in the dashboard) and Royal arranged for a joint inspection and testing of the vehicle. Before an inspection took place, however, Royal notified the parties that the vehicle had been disassembled and disposed of, and that scientific analysis and examination were no longer possible. As Basil’s subrogee, MetLife then commenced this action for money damages. MetLife brought the first three causes of action for negligence, breach of warranty and strict liability against Chevrolet, GMC and the Speaker Shop. The fourth cause of action, the sole cause at issue on this appeal, brought solely against Royal, alleged that “as a result of the negligence, carelessness and recklessness of Royal, invaluable, necessary and important evidence has been destroyed and lost, thereby irrevocably impairing MetLife’s right to pursue successfully the defendants, Joe Basil Chevrolet, Inc., General Motors Corporation and Speaker Shop, Inc.” New York’s high court considered whether New York State should recognize a cause of action for third-party negligent spoliation of evidence and impairment of a claim or defense as an independent tort. The court declined to recognize it on these facts. Royal had no duty to preserve the vehicle. There was no dispute that Royal owned the vehicle. Moreover, no relationship existed between MetLife and Royal that would give rise to such a duty. Additionally, MetLife made no effort to preserve the evidence by court order or written agreement. Although MetLife verbally requested the preservation of the vehicle, it never placed that request in writing or volunteered to cover the costs associated with preservation. Court held that the burden of forcing a party to preserve when it has no notice of an impending lawsuit, and the difficulty of assessing damages, militate against establishing a cause of action for spoliation in this case, where there was no duty, court order, contract or special relationship.

 

02/19/04          ALLSTATE v STEIN

New York Court of Appeals

APIP Subrogation Claim Must be Sued within Three Years of Date of Accident

New York’s high court determines that No-Fault carrier’s subrogation claim must be sued within three years of date of accident, not three years from date of payment. No-Fault carrier “faulted” for failing to object to plaintiff’s settlement of personal injury claim without resolution of subrogated claim for Additional Personal Injury Protection.

 

Across Borders

 

Visit the HOT CASES section of the Federation of Defense and Corporate Counsel website, recently ranked among the top five legal research websites in an article published in the January 2004 issue of Litigation News, a publication of the Litigation Section of the American Bar Association. Dan Kohane serves as the FDCC’s Website Editor.

 

02/24/04          E.M.M.I. v ZURICH AMERICAN INS.

California Court of Appeal

Jewel’s block Provision Regarding Being “On or Upon” a Vehicle to be Ambiguous

A jewelry salesman got out of his car, leaving the engine running and the door open, and bent over to look under the car to identify a noise. A thief jumped in and drove away. The policy excluded any losses from a vehicle unless an employee is “actually in or upon such vehicle at the time of the theft.” The overwhelming majority of courts that have addressed this or similar policy provisions have found it clear and unambiguous. The California court did not. It concluded that the “vehicle theft exclusion, as a whole, is ambiguous and fails to plainly and clearly alert insureds that there is no coverage if a theft occurs when the insured has stepped out of the vehicle but remains in close proximity and is attending to it.” The court applied a reasonable expectation analysis. Dissents pointed out that the majority's opinion was contrary to the policy language. “Actually” was used deliberately by Zurich to mean on the vehicle and not in close proximity to the vehicle, as the majority concluded.

Daina Kojelis, Zurich Insurance

 

02/23/04          REGENCY MOTORS OF METAIRIE, LLC v HIBERNIA-                                            ROSENTHAL INS. AGENCY

Appeals Court of Louisiana

Expulsion of Partners from Partnership Not “Wrongful Eviction”

Insureds were sued in an underlying suit for dissolution of a partnership that owned a car dealership. The insured’s sought defense from the insurer on the grounds that the plaintiffs’ claims in the underlying suit that the defendants withheld the partnerships books from them and expelled them from the partnership was “wrongful eviction” which was covered under the policy. However, the court held that the plaintiffs did not allege they were evicted from any premises they had a right to occupy. Rather, they alleged they were threatened with legal action if they continued to participate in, attend to, or appear on the property of the dealership. There was no actual impingement on any possessory rights they may have had and, thus, there was no coverage for wrongful eviction.

Bruce D. Celebrezze and Hank Brier, Sedgwick, Detert, Moran & Arnold

 

02/20/04          INDIANA INS. CO. v AUTO-OWNERS INS. CO.

Michigan Court of Appeals

Auto-Insurer who covered “use” of school bus must indemnify school district who “used” school buses for the safe delivery of children

Auto insurer claimed there was no coverage under its policy issued to school system for claims arising out of kidnapping of students from a school bus because there was no accident. The policy provided coverage to the school district for to claims for bodily injury arising out of the ownership, maintenance or use, including the loading and unloading, of its school buses. The court found that the dispositive issue in this appeal is whether a no-fault insurer or a general liability carrier is responsible for insuring injuries resulting from a criminal act that happens to involve a school bus. The court held that a school bus is “used” to ensure the safe delivery of children and, thus, the school bus driver’s failure to deliver the children to the appropriate stop and her allowing the kidnappers to physically remove the protesting girls from the bus arose out of the use of the bus and was covered by the policy.

Bruce D. Celebrezze and Hank Brier, Sedgwick, Detert, Moran & Arnold

 

02/19/04          HYDRO-MILL CO. v HAYWARD, TILTON

California Court of Appeal

California Applies Two Year Statute of Limitations to Claims against Insurance Broker

Company purchased earthquake insurance from broker which obtained less coverage than company sought. After Northridge earthquake, company submitted claim under policy and was only paid benefits in accordance with policy as written. Company then sued broker to recover additional benefits as would have been paid under coverage originally requested. Case was tried to court on theories of negligence, breach of oral contract, negligent misrepresentation and breach of fiduciary duty. Court found in company’s favor on all causes of action and awarded compensatory damages, attorneys’ fees, prejudgment interest and costs. On review, court of appeal held that regardless of how causes of action labeled, claim still one for professional negligence and therefore barred by applicable two year statute of limitations.

Robert N. Schiff, Haight, Brown and Bonesteel

 

02/19/04          BEALE v RISK RETENTION GROUP

Maryland Court of Appeals

Per Claim Policy Limit Not Necessarily Applicable to Malpractice Action Just Because Attorney Represented Multiple Clients in Same Suit

Where attorney represents multiple clients in tort action, malpractice insurance provision which defines per claim limit as “all damages arising out of the same, related or continuing professional services without regard to the number of claims made, demands, suits, proceedings, claimants, or persons insured involved,” does not preclude finding that aggregate limit is appropriate against attorney, even where same skill set and process may have been applicable to handling of all cases. Court must look at individual differences in clients and distinct and separate duty attorney owes to each.

Robert N. Schiff, Haight, Brown and Bonesteel

 

02/17/04          EMPLOYERS REINSURANCE v MID-CONTINENT CAS. CO.

Tenth Circuit

Tenth Circuit Rules in Reinsurance Dispute Involving Declaratory Judgment Costs

This is another decision in a small but growing body of reinsurance law addressing responsibility for costs of declaratory judgment litigation. Amounts in dispute arose out of DJ actions between cedent and original insureds. In several actions, cedent was determined to owe defense to original insureds regarding underlying tort cases. Cedent sought recovery from reinsurer of (1) original insureds’ fees and costs incurred in the DJ actions for which cedent was liable; (2) cedent’s own fees and costs from those actions; and (3) fees and costs of defense of underlying tort cases. Dispute primarily turned on interpretation under Oklahoma law of “losses” and “claim expenses” as terms were used in reinsurance contract, and rulings were generally favorable to cedent.

Robert N. Schiff, Haight, Brown and Bonesteel

 

And In Defense

 

02/20/04          IEROPOLI v AC&S CORP.

Pennsylvania Supreme Court

Pennsylvania Statute Limiting Asbestos-Related Successor Liabilities Declared Unconstitutional

Pennsylvania statute 15 Pa.C.S. § 1929.1 limits asbestos-related liabilities that arise out of mergers or consolidations of corporations incorporated in Pennsylvania before May 1, 2001. Statute expressly states that it shall apply to mergers or consolidations which occurred prior to May 1, 2001, and to all asbestos claims, including existing asbestos claims, and to all litigation, including existing litigation. Supreme Court held state constitution’s Remedies Clause provides that accrued cause of action is vested right and cannot be eliminated by subsequent legislation. Therefore, statute is unconstitutional.

Robert N. Schiff, Haight, Brown and Bonesteel

 

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