The Appellate Strategist

Insights on appellate issues, trial consultations, and evaluating appeals

Florida Insurance Brokers Beware: Liability Expands

By on Posted in Florida, Insurance

Insurance brokers in Florida can now be liable to insurance companies which suffer a loss as a result of the broker’s own fraud or negligence in providing information in an application material to the issuance of a policy.

An appellate court in Florida has issued an opinion applying section 552 of the Restatement (Second) of Torts to insurance brokers, thus allowing claims for negligence and fraudulent misrepresentation to proceed against a broker who did not fully disclose all material information relied upon by the insurance company in issuing a policy.

In Liberty Surplus Ins. Corp., Inc. v. First Indemnity Ins. Servs., Inc. (.pdf), Florida’s Fourth District Court of Appeal reversed the trial court’s dismissal of a complaint filed by an insurance company against a broker for, among other things, negligence and fraudulent misrepresentation. The broker had submitted an application for professional liability insurance on behalf of a law firm. The law firm provided full disclosure to the broker of numerous malpractice claims and disciplinary proceedings involving the firm and its members over the preceding 5-year period; however, the broker only forwarded some, but not all, of that information to the insurance company as part of the application. The insurance company issued and subsequently renewed the professional liability policy to the law firm.

After the law firm was sued in a class action for professional malpractice action, the insurance company discovered the information about the prior claims and proceedings that the broker had not disclosed. The insurance company settled the underlying lawsuit against its insured and filed a complaint against the broker to recover the amount it paid. The trial court dismissed the complaint with prejudice on the ground that any misrepresentations or altering of the application by the broker were imputed to the insured and no legal relationship existed between the insurer and broker.

Section 552 of the Restatement (Second) of Torts provides:

(1) One who, in the course, of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.

Although Florida had previously adopted section 552 and applied it to professionals such as accountants, title agents, and other types of professionals who supply information to business transactions, that provision had never been expressly applied to insurance brokers – until now. The court found the application of section 552 to an insurance broker to be appropriate when the broker submits an application for insurance that fails to disclose material facts about the applicant that the insurer justifiably relies upon in issuing a policy.

As such, insurance companies can now sue brokers in Florida for negligently or fraudulently misrepresenting or withholding material facts in an application for insurance.

Illinois Supreme Court Allows Petitions for Review in Eight New Civil Cases

By Kirk Jenkins on Posted in Constitutional Law, Illinois

This afternoon, the Illinois Supreme Court allowed petitions for review in eight new civil cases.  They are:

  • Williams v. Board of Review, 395 Ill.App.3d 337 (1st Dist., 2009), which involves review of a decision by the Board of Review of the Department of Employment Security to deny a terminated employee’s application for a Federally-funded trade readjustment allowance;
     
  • In re County Collector of Du Page Co., 2009 WL 3970918 (2nd Dist., 2009), a case involving the scope of the power to tax on behalf of a forest preserve district to pay for the district’s contribution to the Municipal Retirement Fund;
     
  • In re Torski C., 395 Ill.App.3d 1010 (4th Dist., 2009), which involves the question of whether the definition of "dangerous conduct" found in the involuntary commitment statute is void for vagueness;
     
  • Ries v. City of Chicago, 396 Ill.App.3d 418 (1st Dist., 2009), a personal injury suit involving the scope of a city’s immunity from liability for the conduct of a police officer during the pursuit of a stolen police vehicle;
     
  • Johnston v. Weil, 336 Ill.Dec. 285 (1st Dist., 2009), which involves the question of whether the Confidentiality Act applies to communications during an evaluation made by a court-appointed independent evaluator with respect to custody and visitation issues;
     
  • Kaufman v. Jersey Community Hospital, 396 Ill.App.3d 729 (4th Dist., 2009), which involves the construction of Section 8-101 of the Tort Immunity Act, 745 ILCS 10/8-101, providing limitations periods governing (a) claims against local entities or their employees; and (b) claims against such entities arising out of patient care;
     
  • Goodman v. Ward, 2010 WL 184081 (3rd Dist., 2010), which involves the question of whether a candidate for a judgeship in a particular subcircuit must be a resident of that subcircuit on the date of his ballot petition; and
     
  • Hossfeld v. Illinois State Board of Elections, 2010 WL 743877 (1st Dist., 2010), which involves the meaning of the requirement that a candidate for state Senate in a primary election must be a "qualified primary voter" of his or her party.

We will update Appellate Strategist’s database of civil issues pending at the Illinois Supreme Court shortly with our analysis of these new cases.

Two New Features on The Appellate Strategist

By on Posted in Announcements, California, Illinois, Texas

The Appellate Strategist was the first blog to offer a comprehensive, regularly-updated database of civil issues — broken down by category and subject matter — that the California Supreme Court has agreed to hear and decide.

We are proud to announce two new features.

  1. Since this "preview of coming attractions" has been one of our most popular features, we have expanded our reach to track and report on civil issues pending before the Texas Supreme Court and the Illinois Supreme Court.
     
  2. In the coming months, we will be adding Florida, New York and New Jersey to our coverage of state Supreme Courts. 

We welcome your comments.

When It Comes to an Amicus Brief, How Friendly Should You Be?

By Douglas Collodel on Posted in Civil and Appellate Procedure

Input from an amicus curiae can be invaluable to a court struggling with a difficult issue — as most matters pending before a High Court are — but can be counterproductive if not done properly or in the right situation. 

Before tendering another brief to a busy court that reads an enormous amount of material contained in the parties’ briefs and appellate record, find out what a particular appellate panel may (or may not) want.

Obviously, this is more easily accomplished when the intermediate court is divided into divisions where the judges regularly sit together, but the information can be garnered even when panels are not pre-set. Some judges at the intermediate appellate level have expressed complete disinterest in amicus briefs, noting the parties can provide whatever is needed to decide the parties’ dispute at hand. But at courts of last resort, that type of resistance is not uncommon, since the justices are called upon to decide significant legal issues applicable to the public, not just the parties before them.

Of course, any submission must comply with the rules governing amicus submissions in the court before which you want to file your amicus brief.  A comprehensive list* of all the state rules was collected by Sarah F. Corbally and Donald C. Bross in their: "A Practical Guide for Filing Amicus Curiae briefs in state appellate courts," (.pdf). But that was published in 2001 and, though useful as a starting point, must be updated.  For example, this table references Rule 14 for my home jurisdiction, California, but this rule has been amended and renumbered; California’s current amicus rules are Rule 8.200 [Courts of Appeal] and Rule 8.520 [Supreme Court]. 

Next, figure out a way to articulate and contribute something significant that the parties did not include in their briefs. 

Although there are occasions when a "me too" replication of a party’s brief is effective, that is usually productive only in garnering the court’s interest in taking the case.  Generally, after the case is accepted and being briefed on the merits, an amicus needs to bring new perspectives to the court’s attention. Statistical information or data to show the potential impact of a court’s decision is often helpful in summarizing a particular point and directing the court’s focus. 

A good amicus brief explains how a particular resolution will impact an entire industry, or why a change in the current state of the law is necessary to accommodate changing societal interests.  

The American Bar Association’s website provides guidelines (.pdf) it uses when considering whether it will endorse an amicus brief.  Although many other examples exist, the ABA’s list highlights universally applicable principles, which serve as reminders to assist you in being an effective advocates speaking on behalf of a "friend of the court."

 

*STAY TUNED: The Corbally/Bross table is referenced in several articles over the past decade, but does not appear to have been updated since its compilation.  We will be updating the table and publishing it in this blog soon.

A Divided Illinois Supreme Court Finds Limited Tort Duty in Drunk Driving Case

By Kirk Jenkins on Posted in Illinois

If a business evicts a patron on the grounds that he’s intoxicated, puts him in his car and requires him to drive away, does the business have a tort duty to persons the patron injures?  According to the Illinois Supreme Court, the answer is "yes."  Simmons v. Homatas, No. 108108(.pdf).

Defendant Homatas visited a strip club.  Because the club featured nude dancing, it was barred from holding a liquor license.  However, the club encouraged patrons to bring their own liquor into the club, and defendant did so.  When Homatas was discovered vomiting in the restroom, club employees ejected him from the club, instructed the valet service to bring his car to the front door, put him in the car and required him to drive away.  Not long after, Homatas collided with another car, killing three passengers.

Because the club didn’t sell Homatas liquor, the plaintiffs couldn’t recover under the Dram Shop Act.  But that wasn’t the end of it, according to the Court.  The Dram Shop Act only preempts claims based on the act of selling or providing alcoholic beverages; it doesn’t necessarily preclude liability for conduct independent of providing alcohol which led to a plaintiff’s injuries.  The club argued that it had no duty to determine whether Homatas was intoxicated, but the Court held it wasn’t imposing one — club employees had voluntarily concluded that the defendant was intoxicated and taken it upon themselves to force him to get in his car and drive away.

The Court held that plaintiffs’ complaint alleged enough facts to give the club a common law duty within the meaning of Section 876 of the Restatement of Torts, which imposes liability on those who give substantial assistance or encouragement to someone’s tortious conduct.  Justices Freeman and Burke dissented, concluding that plaintiffs’ factual allegations weren’t sufficient for liability to attach.  Their opinion is a good road map to defense counsel arguing that plaintiffs’ allegations aren’t "substantial" enough to satisfy Section 876.

The majority took pains to discourage anyone wanting to interpret its holding expansively.  The case presented "special circumstances," the Court wrote:

We do not hold today that restaurants, parking lot attendants or social hosts are required to monitor their patrons and guests to determine whether they are intoxicated.  We hold only that where . . . a defendant is alleged to have removed a patron for being intoxicated, places the patron into a vehicle and requires him to drive off, such facts are sufficient to state a common law negligence cause of action.

The Coito Decision Questions Nacht and Puts the Scope of California Work Product Protection in Question

By on Posted in California, Civil and Appellate Procedure

 

Nacht & Lewis Architects, Inc. v. Superior Court may be the most widely cited case in California.  It seems to appear in most responses to Form Interrogatory Nos. 12.2 and 12.3 to justify refusing to produce recorded interviews of witnesses, any resulting attorney notes, or a list of interviewed witnesses.  Now those numerous discovery responses may be in question.  In Coito v. Superior Court, [pdf] California’s Fifth District Court of Appeal considered and rejected Nacht, holding in a divided decision that attorney notes from witness interviews and the list of those interviewed will often be discoverable. 

These conflicting decisions leave two crucial questions unresolved. 1) Do the questions asked by counsel in an interview reveal counsel’s impressions, conclusions, opinions, or theories?  2) Does the selection of who to interview reveal the same?  Coito says not usually to both, Nacht says yes.  Given the frequency in which these issues arise, the state Supreme Court may be asked to intervene to clarify the issue and provide clear guidelines for California litigators and overworked trial courts.

California Appellate Court End-Runs Moradi-Shalal

By on Posted in California, Insurance

The California Court of Appeal has issued an opinion which, if allowed to stand, threatens to eat away at the once-settled body of law that prohibits third-party claimants who were injured by an insured from suing the insured’s insurance company for unfair claims settlement practices under California Insurance Code § 790.03.  Over 20 years ago, the State Supreme Court held that only the State’s Insurance Commissioner may pursue insurers for improper settlement practices under that statute; § 790.03 does not grant either insureds or third-party claimants the right to sue insurers for violating the statute’s prohibitions.  (Moradi-Shalal v. Fireman’s Fund Ins. Companies (1988) 46 Cal.3d 287.)

But the new opinion — from the intermediate appellate court — would create a loophole that could accommodate a whole fleet of trucks.  (Zhang v. Superior Court (2009) 178 Cal.App.4th 1081.)  According to Zhang, if plaintiff’s allegations are not limited to unfair claims handling, but also include "specific" allegations that the insurer "made fraudulent misrepresentations and promulgated misleading advertising" — i.e., it never intended to pay covered claims — the complaint will survive the insurer’s demurrer challenge.  However, to prevail, plaintiff would be required to prove the insurer made false representations to the public and that the insurer had a policy that was inconsistent with these representations.

Zhang candidly acknowledged it disagreed with a prior opinion which held squarely to the contrary.  (Textron Financial Corp. v. National Union Fire Ins. Co. (2004) 118 Cal.App.4th 1061.)  The conflict in the published opinions of the intermediate appellate courts makes Zhang a prime candidate for review by the California Supreme Court.  Indeed, the high court extended its time to rule on the insurer’s Petition for Review until March 9.  (Ptn. for Review filed 12/09/09, No. S18542.)

Zhang is a troubling opinion, and Appellate Strategist urges interested parties to support the insurer’s petition.  It is easy enough to allege a policy or practice.  Under this decision, that alone is sufficient to defeat the insurer’s demurrer against what should have been a stillborn claim.  The value of Moradi-Shalal is that it deals an immediate fatal blow, saving defendants the time and expense of discovery and trial on allegations a plaintiff cannot possibly prove.  If Zhang survives, the insurer cannot defeat the suit short of a motion for summary judgment, and perhaps not even then.

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California, As Usual, Is First To Decide: 2003 Medicare Act Preempts Enrollee’s State Law Claims Against Healthcare Service Plan

By on Posted in California, Health Care

In 2003, Congress enacted the latest version of the Medicare Act.  It contained far broader language than previous versions on what State law claims it preempted: “The standards established under this part shall supersede any State law or regulation (other than State licensing laws or State laws relating to plan solvency) with respect to MA [Medicare Advantage] plans which are offered  by MA organizations under this part.” (42 U.S.C. § 1395w-26(b)(3).) 

The scope and meaning of this new preemption language is being litigated around the country, but as yet precious few cases have made their way through the appellate courts.  One that has comes out of California.  In Yarick v. PacifiCare of California (2009) 179 Cal. App. 4th 1158, the State’s intermediate Court of Appeal held the 2003 Act expressly preempted the enrollee’s statutorily-based state causes of action, and impliedly preempted state common law claims.  Yarick also rejected plaintiffs’ argument that the licensing exception within the Medicare Act’s preemption clause could save the claims. Months before, the Ninth Circuit Court of Appeals had reached a similar conclusion, but then granted rehearing.  (Uhm v. Humana, Inc. (9th Cir. Docket No. 06-35672).  Since a grant of rehearing vacates a published opinion, the score rolled back to zero. 

Now the score is back to Plans: 1; enrollees: 0.  As of this writing, Yarick is the only published appellate case anywhere in the country to address the preemption defense on the merits. (Previously, the Eleventh Circuit Court of Appeals rejected an argument that the Medicare Act completely preempted state law claims to afford federal court’s subject matter jurisdiction. (Dial v. Healthspring of Alabama, Inc. (11th Cir. 2008) 541 F.3d 1044).)    This is an important and recurring issue, and we haven’t heard the last of it.  Expect to see all manner of decisions on this hot-button question from courts around the country.  As those opinions come down, Appellate Strategist will report on them, and provide a running total  box score.

Money for Nothing: Can You Collect for Expenses Nobody Will Ever Pay?

By Kirk Jenkins on Posted in California, Insurance

Can a California trial court reduce a personal injury plaintiff’s recovery for medical expenses to reflect the amount actually paid by his health insurer?  That question matters a lot to attorneys, parties and insurers, trying to value claims and where appropriate, seek settlements in thousands of cases every day.

For twenty years, the answer under California law was "yes," as held in Hanif v. Housing Authority (1988) 200 Cal.App.3d 635 and Nishihama v. City and County of San Francisco (2001) 93 Cal.App.4th 298.  In November, California’s Fourth District Court of Appeal held that the answer was "no."  Howell v. Hamilton Meats & Provisions, Inc. [pdf] (2009) 179 Cal.App.4th 686.

On March 10, 2010, the California Supreme Court agreed to review Howell and resolve the conflict.  By virtue of the Court’s order, Howell is automatically depublished and non-citable, making Hanif and Nishihama the only precedent on this important question until the Supreme Court speaks in Howell.

Can’t Get An Opinion?: Sue the Court!

By on Posted in Texas

A party in case before the Texas Supreme Court grew so frustrated by waiting for an opinion almost three years after oral argument that it sued the justices in federal court, alleging due process violations. Coincidentally (or not) the Supreme Court issued an opinion eight days later.

The court heard oral arguments in Southwestern Bell Tel. Co. v. Marketing on Hold, Inc. in March, 2007. The case was an interlocutory appeal of a class certification order entered in litigation challenging Southwestern Bell’s right to charge certain municipal fees. The issues on appeal centered on whether Marketing on Hold, a phone bill auditing firm that had an taken assignment of rights as part of its fee to its business customers had standing in the case and whether it constituted an "adequate" class representative.

The parties had heard nothing further from the case by February, 2010. Marketing on Hold took the unusual step of of suing the justices of the Texas Supreme Court in a federal district court in Austin. It argued that the lengthy delay in rendering a decision would cause documentary evidence to be lost and the memory of witnesses to fade, thereby violating its federal due process rights. The case sought only declaratory relief.

Only eight days after the suit was filed the Supreme Court issued its opinion in the case, No. 05-0748, February 19, 2010. The court held that the assignment of rights was valid and conferred standing on Marketing On Hold. Nevertheless, because Marketing On Hold had only a fractional interest in the claim by virtue of its assignment, it had an incentive to settle for less consideration and to minimize its own expenses. It was not, therefore, an adequate class representative. The certification order was reversed. The case divided the court, 5-3.

The frustration of litigants involved in seemingly interminable proceedings is understandable. The tactic of suing an appellate court to force an opinion is both extreme and likely to be ineffective. Not only is a federal district court extremely unlikely to intervene in the internal procedures of a state appellate court, the suit is apt to make a bad impression on the appellate court justices. As Marketing On Hold learned, "be careful what you wish for…"

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