California Issues Long-Awaited Decision in Hartford v. Swift, Finding No Coverage For Claims of “Implied” Disparagement

/in

On June 12, 2014, the California Supreme Court issued its decision in Hartford Casualty Ins. Co. v. Swift Distribution, Inc., affirming the Court of Appeal’s ruling that Hartford’s CGL policy did not potentially cover claims made against its insured for “implied” disparagement, i.e., where the insured’s advertising material does not directly disparage a competitor’s products but can be implied to do so.  This is an important decision because as the Court itself concluded, “[o]ur holding clarifies and limits the scope of an insurer’s duty to defend a policyholder against a possible claim of disparagement, as that term is used in a commercial general liability policy.”

  By way of background, CGL policies, such as the one issued by Hartford to Swift, typically include coverage for “personal and advertising injury” under Coverage B.  One of the offenses that defines “personal and advertising injury” is publication of material that disparages another’s goods, products or services, or in the case of the Hartford policy, “oral, written, or electronic publication of material that slanders or libels a person or organization or disparages a person’s or organization’s goods, products or services.”  While potential coverage under that offense is apparent when the insured is sued for making express statements that disparage another’s goods, products or services, courts have wrestled with claims based on so-called “implied” disparagement – publications which do not include express disparaging statements, but rather might be interpreted that way by someone reading or viewing the material.  Is that enough to trigger a duty to defend based on the disparagement offense?

  Courts around the country have reached different result in these types of claims, with the majority holding that absent a definite and express derogatory statement, there is no potential for coverage.  However, in Travelers Property Casualty Co. v. Charlotte Russe Holding, Inc. (2012) 207 Cal.App.4th 969 (“Charlotte Russe”) a California Court of Appeal held that a CGL insurer had a duty to defend its insured against an “implied” disparagement claim based on the insured selling garments at drastically lowered prices, holding that the price reductions implicated that the garments were of inferior quality.  A different Court of Appeal, however, reached an apparently opposition conclusion in Hartford v. Swift, thereby setting the stage for the California Supreme Court to resolve the conflict.

  The facts in Swift were relatively simple:  The insured, Swift, manufactured, sold and advertised a product called the “Ulti-Cart” – a metal cart that can be folded in different configurations for transporting materials.  It was sued in federal court by a competitor, Dahl, which also manufactured, sold and advertised a folding cart called “Mult-Cart”.  The Dahl complaint contained a variety of causes of action based on the alleged similarity of the products, including unfair competition and misleading advertising.  At issue for the purposes of this decision was Swift’s advertising of its product, advertising which did not mention Dahl’s product or contain any negative references to that product – it simply promoted the positive aspects of its own product.

  Swift tendered the Dahl action to its CGL carrier, Hartford, asserting that Dahl’s claims against it could be interpreted as constituting disparagement by implication, thereby triggering a duty to defend under the Hartford policy.  Hartford denied coverage and filed a complaint for declaratory relief.  The trial court granted Hartford’s motion for summary judgment and the Court of Appeal for the Second Appellate District affirmed, holding that there was no duty to defend because “Dahl alleged no claim for injurious false statement or disparagement that was potentially within the scope of the Hartford policy coverage for advertising injury.”  The California Supreme Court granted review “to clarify the principles governing the scope of a commercial general liability’s duty to defend an insured against a claim alleging disparagement.”

  The Court affirmed the Court of Appeal’s decision, holding that a claim of disparagement requires a plaintiff to show a false or misleading statement that (1) specifically refers to the plaintiff’s product or business and (2) clearly derogates that product or business – “[e]ach requirement must be satisfied by express mention or by clear implication.”  Those elements were held not to be present in Swift’s advertising of its UIti-Cart in that the advertisements did not make a false or misleading statement that necessarily referred to and derogated Dahl’s product.  Rather, the ads simply conveyed the positive aspects of its own product.  The Court held that “[w]ere we to adopt Ultimate’s theory of disparagement, almost any advertisement extolling the superior quality of a company or its products would be fodder for litigation.”  Most importantly, the Court expressly disapproved of the decision reached in Charlotte Russe.

  Clearly, the Supreme Court’s decision in Swift serves to clarify the standards that must be met in order for a claim of “implied disparagement” to trigger a duty to defend under a CGL policy.  The heightened scrutiny given to such claims and the disapproval of decisions such as Charlotte Russe will help guide insurers in the future that are confronted with similar claims.  That said, it must be mentioned that the Court recognized other situations in which a defense might be triggered, even absent an express reference to another’s product.  For examples, “bait and switch” tactics might suffice, as might false claims of ownership of intellectual property rights or clear implications of another product’s inferiority.  Thus, these claims must still be looked at on a case-by-case basis, but the Court’s decision in Swift provides insurers with much-needed clarity.

Nevada Federal Court Finds No Coverage for Molestation Allegations

/in

FC&S Legal

View Link

Please click here for a PDF of the article.

Judge James Mahan of the U.S. District Court in Las Vegas, Nevada, has granted Discover Property and Casualty Insurance Company’s motion for summary judgment, finding that the allegations against the defendant of sexually assaulting a 12 year old boy did not trigger the insurer’s duty to defend or indemnify under a general liability policy.

The ruling was supported on three different grounds:

(1) the injuries were not the result of an “occurrence”, meaning an accident;

(2) coverage was barred pursuant to the “intentional act” exclusion; and

(3) the “abuse and molestation” exclusion in the general liability policy applied.

In addition to the substantive ruling, the case is also significant in that the court ruled based upon language of the underlying complaint, adopting the “four corners” or “complaint” rule.

Background
The plaintiff had sued William Scudier, seeking damages because of various acts of alleged sexual mis-conduct and restraint of the plaintiff against his will when he was 12 years old. The complaint alleged several examples of offending conduct by Mr. Scudier that were, frankly, disturbing. At the time of the incidents, Mr. Scudier was a maintenance person working for a Las Vegas homeowners’ association, who allegedly had befriended the young boy and gained his confidence in order to carry out the abuse.

Discover argued in its motion for summary judgment that the complaint and other filed documents by the plaintiff demonstrated liability existed against the insured, if at all, based upon non-accidental conduct. The court followed the Nevada Supreme Court decision in Beckwith v. State Farm Fire and Casualty Company, 120 Nev. 23, 27 (2004), which found that if defendant intended the acts that caused the injury, any resulting injury was not the result of an “occurrence.”

The court also granted Discover’s motion on the ground that the “intentional act” exclusion applied, rejecting the plaintiff’s argument that there was a triable issue whether he had “consented” to the sexual contact. The court found that as a matter of law a minor could not consent to sex with an adult.

Finally, the Discover policy had an exclusion specific to abuse and molestation, which were undefined terms. Using ordinary definitions in the “plain ordinary and popular connotations” of the words used, and relying upon the Nevada Supreme Court decision in Fire Insurance Exchange v. Cornell, 120 Nev. 303, 306 (2004), Judge Mahon ruled that sex with an underage boy constituted “abuse” and “molestation” under Nevada law.

The Significance of the Ruling
This case is significant in two respects.

First it emphasizes the “four corners” or “complaint” rule to determine coverage or a duty to defend. This provides guidance to parties and lawyers pursuing insurance litigation.

Second, the case emphasizes interpretation of insurance contracts in a commonsense approach.

The case is Discover Property and Casualty Insurance Company v. William Scudier, No. 2:12-CV-836 JCM (CWH) Document No.

Lose the Evidence, Lose Your Case: Understanding and Avoiding Spoliation of Evidence

/in

By: Guy R. Gruppie

FDCC Quarterly

The following is an excerpt from, “Lose the Evidence, Lose Your Case: Understanding and Avoiding Spoliation of Evidence,” originally published in the Fall, 2012 issue of the FDCC Quarterly.

Remedies and penalties for the loss, alteration, or destruction of relevant evidence are rapidly developing areas of law in several states, with increasingly serious consequences. Known as spoliation, evidence loss or destruction may be punishable in a number of ways. Courts may issue monetary, evidentiary, issue or even terminating sanctions to punish and deter spoliation by a party to litigation. Criminal and disciplinary penalties have developed to punish those involved in spoliation, including attorneys. Where there is a duty to preserve evidence, spoliation may be punishable in future litigation, even if no case is pending when it occurs.

Some jurisdictions recognize spoliation as an independent tort. Where a party, or even a non-party, intentionally destroys evidence, it is subject to judicial punishment. In addition, courts have recently held that a cause of action may be stated against a party or non-party who only negligently causes the spoliation of evidence. The negligent loss or destruction of electronic evidence, in addition to physical and documentary evidence, has become widely punishable. In states where spoliation is not a separate tort, sanctions against parties who lose or destroy evidence are still potentially sought.

This Article first provides a brief survey of the history of the doctrine of spoliation. It then addresses the different ways in which courts and agencies across the country have dealt with spoliation. Finally, to assist attorneys defending cases where spoliation may be a concern, this Article provides some practical guidelines for preventing spoliation claims.

For the full article, please use the following link: Lose the Evidence, Lose Your Case: Understanding and Avoiding Spoliation of Evidence.

Finding the True Meaning of Sargon

/in

By: Scott L. Hengesbach

Daily Journal

“Finding the True Meaning of Sargon” originally appeared in the May 16, 2013 issue of the Daily Journal.

The state Supreme Court’s decision in Sargon Enterprises, Inc. v. USC, 55 Cal. 4th 747 (2012), detailing a trial court’s gatekeeping responsibility regarding expert testimony, has generated tremendous buzz over its true meaning and significance — some labeling the decision a “game changer” while others suggest it merely restates existing law. For its part, the Court of Appeal decision earlier this month (on remand) took a middle ground, holding that the Supreme Court did not announce a new rule of law, even if the court explained existing law in a way which “may be said to ‘extend’” or “give new meaning” to the law. Sargon Enterprises, Inc. v. USC, 2013 DJDAR 5677 (May 2, 2013). Which of these views is closest to the truth? If Sargon did not announce a new rule of law, it surely explained the law in a groundbreaking manner.

History of the law
Almost 10 years after the Evidence Code became effective, the state Supreme Court adopted the rule regarding expert testimony set forth in Frye v. United States, 293 F. 1013 (D.C. Cir. 1923) in the 1976 case People v. Kelly, 17 Cal.3d 24. Making only a passing reference to Evidence Code Section 801 and no mention at all of Section 802, the Kelly court held that to admit expert testimony, the proponent must demonstrate that: (1) the method employed by the expert was reliable; (2) the expert was sufficiently qualified; and (3), the correct scientific procedures were used. To prove that the method was reliable, the court held that the proponent of the evidence must show that the technique had attained general acceptance in the relevant scientific community. The so-called Kelly/Frye rule became the primary focus of efforts to exclude scientific expert witness testimony over the next several years.

In the wake of the U.S. Supreme Court’s 1993 decision in Daubert v. Merrill Dow Pharmaceuticals, 509 U.S. 579, the state Supreme Court revisited the issue in People v. Leahy, 8 Cal. 4th 587 (1994). The impetus for this was both growing criticism of Kelly/Frye and Daubert’s conclusion that the adoption of the Federal Rules of Evidence superseded the common law rule in Frye. Rejecting calls to modify the rule, and distinguishing the history of the adoption of the Evidence Code from that of the Federal Rules of Evidence, Leahy reaffirmed California’s adherence to the Kelly/Frye rule. In so doing, beyond stating that Evidence Code Section 801 did not incorporate the “general acceptance test” of Frye, the court again was silent on the significance of Sections 801 and 802. In fact, the Leahy court indicated that the reliability of scientific testimony should be governed by Section 350 (i.e., relevance).

The strict limitation of the application of the Kelly/Frye rule to new scientific techniques proved incredibly dissatisfying for those eager to attack scientific testimony. For example, in Roberti v. Andy’s Termite & Pest Control, Inc., 113 Cal. App. 4th 893 (2003) — a toxic tort decision focusing on medical causation testimony — the court, citing Leahy, rejected the notion that a Daubert threshold test applied in California, and maintained strict adherence to the narrow application of the Kelly/Frye rule to scientific techniques. Roberti flatly rejected the notion that trial courts had a duty to ensure that expert testimony rests on a reliable foundation. The court further held that the opinions were admissible because they were based on the type of matter which experts ordinarily rely upon to form opinions on medical causation. Apparently, because the Supreme Court itself had done no more than mechanically apply Section 801(b) in this same fashion since 1967, such as in Luque v. McLean, 8 Cal.3d 136 (1972), and People v. Stoll, 49 Cal.3d 1136 (1989), and had not provided any guidance on Section 802, the Roberti court perceived that this was the appropriate end to the analysis.

No doubt recognizing the total absence of Section 801 analyses, in 2005 the state Supreme Court granted review in Lockheed Litigation Cases, 126 Cal. App. 4th 271 (2005) (Lockheed II), another toxic tort case involving expert medical causation opinion testimony. The issue presented in Lockheed II was whether Section 801(b) permitted a trial court to review the evidence an expert relied on to determine whether it provided a reasonable basis for the expert opinion. Regrettably, owing to conflicts of interest, four of the justices recused themselves after the case was fully briefed. In a controversial decision, the court then declined to appoint lower court justices to fill the void and dismissed the appeal. A golden opportunity to expound on Section 801, and perhaps Section 802, was lost.

After dismissing the appeal in Lockheed II, and before granting review in Sargon, the Supreme Court remained mostly silent on the issue. The most notable remark came in a footnote, later cited by Justice Ming W. Chin in Sargon, referencing the gate-keeping duty of trial courts — although not in relation to Section 801 or 802). People v. Prince, 40 Cal. 4th 1179, 1225, n.8 (2007). Given the foregoing history, Justice Chin was writing on a nearly completely blank slate in Sargon. He surely was not in a position to merely “restate the law” based on historical precedent, for there was none.

The only remaining question left then is whether the Sargon adds anything to our understanding of Sections 801 and 802. The answer is a resounding “yes!”

The message of Sargon
For starters, Sargon’s proclamation that trial courts have a “substantial ‘gatekeeping’ responsibility” must be viewed as groundbreaking. Save the Prince footnote, prior to Sargon the court never spoke of a trial court’s duties in relation to Sections 801 and 802 in these terms.

Second, Sargon rejects the notion that Section 801(b) can be satisfied by mere proof that an expert has relied upon matter that is of a “type” that experts in the relevant field ordinarily rely upon (and is not speculative). This limited application of Section 801(b), which Leahy and other decisions followed, was not followed in Lockheed Litigation Cases, 115 Cal. App. 4th 558 (2004) (Lockheed I). Sargon adopted the Lockheed I view, declaring that “the matter relied upon must provide a reasonable basis for the particular opinion offered” (emphasis added). Thus, even if an opinion is supported by the type of data ordinarily relied upon by an expert in a particular field, and cannot be said to be based on speculation, Sargon dictates that under Section 801(b) trial courts are now obligated to go further, and determine if the basis for an expert opinion is reasonable. Using toxic tort cases as an example, it is not enough to say that toxicologists commonly rely on epidemiological studies to prove medical causation. Instead, the proponent must show the studies relied on by the expert provide a reasonable basis for the expert’s opinion.

Third, Sargon interpreted Section 802 to mean “that a court may inquire into not only the type of material on which an expert relies, but also whether that material actually supports the expert’s reasoning.” This is not saying that jurors should scrutinize the facts underlying an expert’s opinion, or that jurors are at liberty to reject expert opinions with unsound bases. Quite to the contrary, Sargon declares it the responsibility of the trial court to make a threshold determination whether the reasoning of the expert is reasonable. No prior decision ever explained Section 802 this way, as illustrated by the fact that Sargon did not cite a single previous opinion of the court on this point, instead citing a recently published law review article.

Finally, Sargon adopted the “analytical gap” test set forth in General Electric Co. v. Joiner, 522 U.S. 136 (1997), which the court cited with approval interpreting Section 802. In Joiner, the court excluded expert witness testimony on medical causation due to partially faulty assumptions by the experts, and because the studies relied on involved short-term, high level exposure in contrast to plaintiff’s long-term, low level exposures. In short, the court felt the evidence was not sound enough to support the expert’s opinion.

Interestingly, the evidence at issue in Joiner mirrors the type of evidence that the defendant in Roberti fought in vain to exclude under the Kelly/Frye rule. The Roberti court perceived that there was “no authority or rationale” to apply a “Daubert threshold reliability analysis” to scientific evidence that was not within the ambit of the Kelly/Frye rule, such as expert medical testimony. However, that is exactly what we have now — the Kelly/Frye rule, which applies to new scientific techniques; and, a threshold reliability test, pursuant to Sections 801 and 802 (as opposed to Daubert), for all expert testimony, regardless of whether the testimony falls within the ambit of Kelly/Frye.

More than anything else, this is the true meaning of Sargon.

You’re Never “Fully Covered”: Obligations and Liabilities of Insurance Brokers in Procuring Insurance for Their Clients

/in

By: Nancy N. Potter

USLAW Magazine

The following is an excerpt from, “You’re Never ‘Fully Covered’: Obligations and Liabilities of Insurance Brokers in Procuring Insurance for Their Clients,” originally published in the Spring/Summer 2013 issue of USLAW Magazine.

A few years ago, I arranged to purchase a homeowners insurance policy from a major national insurance company. When I received the policy, I thought that the stated replacement value for the structure seemed low, particularly since I have an old house with unique architectural features. I consulted the agent, suggesting that the replacement cost limit needed to be higher. He sent me a letter stating in part, “You have all the coverage you need to completely rebuild your house.” My first thought was, “Now I do.”

The insurance industry is in the business of providing peace of mind, and insurance brokers, whether independent or affiliated with an insurer, as the people with the direct relationship with the policyholder, often try to give that peace of mind. However, when a loss occurs, which for some reason is not covered, the broker can be liable if the coverage available did not meet the insured’s expectations. This article will discuss insurance brokers’ duties, and some of the ways in which brokers can find themselves liable to insureds when the coverage turns out to be less than the insured expected.

Many times, of course, there is nothing a broker can do about the disappointed coverage expectations: the loss is not insurable as a matter of law, or the claim set forth simply cannot be brought within the policy’s insuring agreement. This does not prevent the broker from being sued for negligence or misrepresentation, especially if they have been overly sanguine in their assurances of full protection. Brokers who advise their clients that they are “fully covered” or can “rest easy” in an age of increasingly complex insurance policies are inviting the disappointment of their clients and lawsuits when it turns out that there is seldom, if ever, “full coverage” for any loss or claim.

For the full article, please use the following link: You’re Never “Fully Covered”: Obligations and Liabilities of Insurance Brokers in Procuring Insurance for Their Clients.

Walking Back Miranda Rights?

/in

Daily Journal

“Walking Back Miranda Rights?” originally appeared in the April 1, 2013 issue of the Daily Journal.

The Supreme Court’s 1966 Miranda decision sought to provide a means to ensure that those whose freedom of action was in some way deprived had a means of protection from coerced, self-incriminating statements (a.k.a. the third degree). The court stated, “when an individual is taken into custody or otherwise deprived of his freedom by the authorities in any significant way, and is subjected to questioning, the privilege against self-incrimination is jeopardized.” I couldn’t agree more. So why did the court back away from this reasoning in its most recent Miranda-warranting decision, Howes v. Fields, 132 S. Ct. 1181, 1186 (2012)?

In 2001, Randall Lee Fields was in the custody of the Lenawee County Sheriff’s Department. On Dec. 23, a corrections officer escorted him from his cell to a conference room in the main area of the department. The escort did not advise him of where he was being taken or for what purpose. Fields was in his county-issued jumpsuit, but remained unchained. Once in the conference room, he was questioned by two deputies regarding his sexual relationship with a minor. At the beginning of the interview, Fields was told he was free to leave whenever he wanted. The door to the room was sometimes closed, but never locked. At some point Fields became agitated, yelling several times that he no longer wished to speak to the deputies. The deputies did not conclude the interview at that time. During the five to seven hours Fields was questioned, he admitted to engaging in sexual activities with the minor. At no time was he advised of his right to remain silent. At no time was he advised of his right to an attorney. At no time was he asked whether he understood his rights. The statements were admitted at trial, and Fields was convicted and sentenced.

The court held that Fields was not in custody within the meaning of Miranda. It stated that while it was sensitive to the realities of imprisonment, it believed that questioning an inmate does not involve the shock of initial arrest; that an inmate is unlikely to be lured into speaking by a longing for a prompt release; and that an inmate knows and understands law enforcement lacks the authority to affect the duration of his sentence. It reasoned that Fields was told he could leave and go back to his cell, the conference room was well lit and “not uncomfortable,” he was offered food and water, the conference room door was sometimes left open, and that those objective facts were consistent with an interrogation environment in which a reasonable person would have felt free to terminate the interview and leave.

The court’s decision leaves a long-unanswered question: What then [is] custody for purposes of Miranda? The court has specifically stated that it has “repeatedly declined” to address this issue. This question cannot remain unanswered. If answered, the correct conclusion would be Miranda applies in Howes.

First, while it is understood that there can be a break in custodial interrogation, it goes without saying that when a person is incarcerated they are, and remain, in custody. The very nature of being incarcerated is a restraint of freedom, paired with deprivation of movement. Prisoners are escorted to and fro, directed when to be where, and do not enjoy the freedom of movement of persons not in custody.

Second, the court itself points out custodial questioning is “an inherently compelling pressure.” It does not then follow that a prisoner does not experience the same shock and pressures of coercion when undergoing questioning by law enforcement. To the contrary, Fields was restricted by the very nature of his incarceration. He was further restricted when the deputy escorted him to the conference room outside of his cell, away from the general population, and interrogated for the sole purpose of the investigation of a crime to determine whether he would “fess up.” He was with these officers for five to seven hours. It has no bearing that Fields was told he could leave when he wanted because, when he began to yell he no longer wished to speak with them, the deputies showed no intention of releasing him, did not advise him that he could have an attorney present, and did not advise him that he did not have to speak with them – presenting a fairly “exit free” and coercive environment.

Finally, whether the deputies had the authority to affect the duration of Fields’ sentence is not quite accurate. Although law enforcement had no means to lengthen Fields’ sentence on the matter he was incarcerated for, they absolutely had a means to affect his sentence by (1) questioning him regarding a crime he was alleged to have committed, (2) receiving incriminating statements identifying Fields as the perpetrator, (3) prosecuting him based on those statements and, (4) having the information received be material to his conviction. Here, we have all of the above. Appearing that all grounds are satisfied, it follows that Fields was in Miranda-warranting custody, and should have been advised of his rights.

The court seems to remain conflicted or, perhaps, unwilling to recognize the fact that this question must be answered. A bright-line rule must be issued for law enforcement to follow and arrestees, inmates, defendants and the like to be protected by. The danger in the former? A continuous flow of case-by-case studies where the court dances around the issue, leaving the privilege discretionary – which is not a privilege at all.

Los Angeles Superior Court ADR Department to Close

/in

In response to state-imposed budget cuts, the Los Angeles Superior Court will be closing its Alternative Dispute Resolution (ADR) Department.

The department stopped providing certain services on March 11, 2013. The first office closures will begin in April and, by May 31, all of the Court’s ADR offices will be closed and all services stopped.

Murchison & Cumming’s team of attorneys is available to handle your ADR needs. We provide the creative solutions and expertise to take complex cases to resolution in a cost-effective manner. Our team addresses each client’s individual needs, tailoring solutions to fit those needs. Our attorneys have negotiated hundreds of cases in a mediation environment with a successful outcome. The ADR team includes a recipient of an LLM in Litigation and Alternative Dispute Resolution and a designated “neutral” on the Los Angeles Superior Court ADR panel. With a trial attorney’s background, specialized legal knowledge and well-honed negotiating skills, our lawyers are available to provide a variety of ADR services.

To schedule a mediation or to discuss the firm’s ADR services, please contact Jean M. Lawler.

For details and a timeline of court closures and service stoppages, please see the linked Los Angeles Superior Court Notice to Attorneys.

California Courts and the Duty to Initiate Settlement Negotiations

/in

IADC Insurance and Reinsurance Committee Newsletter

The following is an excerpt from, “California Courts and the Duty to Initiate Settlement Negotiations: Ramifications of the DU Decision(s),” originally published in the February 2013 issue of the International Association of Defense Counsel’s Insurance and Reinsurance Committee Newsletter.

On June 11, 2012, the 9th Circuit Court of Appeals announced its decision in Du v. Allstate Insurance Co., 681 F.3d 1118 (9th Cir. 2012),sending ripples of concern throughout the insurance industry in California. In that decision, the Court held that an insurer may be held liable for bad faith on a failure to settle theory if it fails to initiate settlement negotiations, even in the absence of a within-policy limits demand. Perhaps in response to those rumblings, the Court amended its decision on October 5, 2012 (found at 697 F.3d 753), backing off its earlier pronouncement. In its amended decision, the Court instead held that it need not address the “duty to initiate” issue because under the specific facts of this case, no such duty ever arose – at the time the plaintiff in that case suggested that the insurer should have initiated settlement discussions, it did not have enough information about the claim to do so.

With that amended decision, it could be said that the insurance industry “dodged a bullet” and that the California courts are not prepared to impose an affirmative duty to initiate settlement negotiations. Or are they? What if, under the facts of Du (or a case in the future) the insurer did have sufficient information to initiate settlement discussions prior to any settlement demand from the claimant? This Article will examine the ramifications of the Du decision and the status of the “duty to initiate” issue in California.

For the full article, please use the following link: California Courts and the Duty to Initiate Settlement Negotiations: Ramifications of the DU Decision(s).

Upcoming Los Angeles Superior Court Changes

/in

Murchison & Cumming, LLP would like to update you on upcoming plans for the Los Angeles Superior Court. Despite the passage of Proposition 30, the court continues to operate under substantial fiscal constraints. As a result, the following substantial changes are planned. These changes are expected to be implemented over six months beginning in January of 2013, and completed by June of 2013.

Ten courthouses are scheduled to be closed:

  • Huntington Park
  • Whittier
  • Pomona North
  • Malibu
  • West Los Angeles
  • Beverly Hills
  • San Pedro
  • Beacon Street
  • Catalina
  • and Kenyon Juvenile Justice Center.

There will be no court-provided court reporters for civil matters. Parties will have to arrange for court reporters for all civil law and motion and all civil trials. See http://www.lasuperiorcourt.org/courtreporter/ui/. The court will likely retain court reporters for some types of matters such as family law.

All personal injury (PI) cases (including wrongful death and medical malpractice) will be filed downtown in the Mosk courthouse and will be assigned to one of two Master Calendar (MC) courtrooms.

Each MC judge is expected to have as many as 8,000 cases at any one time.

There will be no MC courtrooms in the districts. A PI case will be in the district only if the MC court determines (at the request of a party) it should be transferred to an Individual Calendaring (IC)court in the district because the case will be too “appearance-heavy” for MC, but does not qualify for complex designation. It is expected that about 10% of PI cases will be transferred to IC courts.

Parties will receive trial and final status conference dates at the filing window when the Complaint is first filed.

The court will no longer monitor service of Summons & Complaint.

The court will be seeking a Court Rule change to eliminate case management conferences in PI cases. And there will be no more Orders to Show Cause regarding: Dismissal, Default, or Service, nor will there be any Post-Mediation Status Conferences.

Trials (if the Complaint is timely and properly served and if Notice of the Trial and Final Status Conference was timely and properly given) will be assigned to one of the dedicated trial courtrooms (10 downtown in the Mosk courthouse, plus others spread around the county). Parties may or may not get trial downtown in the Mosk courthouse and will not know until the day of trial where the case will be sent for trial.

The court has not determined whether any changes will be made as to those PI cases that are currently pending before IC Judges.

Insurance bad faith and wrongful termination/discrimination/harassment are not considered PI cases, and thus will remain in IC courts or in complex.

All LASC collections cases will now be handled out of two Master Calendar departments, one in Norwalk and one in Chatsworth. Collections trials will be spread around the County. All non-collection limited jurisdiction cases, including limited jurisdiction PI cases, will be handled by two Master Calendar courts downtown in the Mosk courthouse (limited jurisdiction cases in the North District – Antelope Valley – are expected to stay there, although all PI cases will be sent downtown to the Mosk Courthouse). These will be different MC courts from the general jurisdiction PI MC courts. Trials of limited jurisdiction PI cases will be spread across the county. All civil harassment cases will go to family courts. All probate cases will be downtown in the Mosk courthouse (shuttering 7 to 9 branch probate courts); however, a bench officer may travel to conduct some guardianship or conservatorship hearings in some branches. All small claims will be heard only in six courthouses (Lancaster; downtown, Mosk courthouse; Alhambra, for the entire eastern part of the county; Van Nuys, north; Norwalk and Inglewood). Unlawful detainers will be heard only in four courthouses (downtown, Mosk courthouse; Santa Monica; Long Beach and Pasadena).

The Temporary Judge (Judge Pro Tem) and all court-run Alternative Dispute Resolution programs will be discontinued.

Judges, commissioners will focus on one, or possibly two types of cases only. There will be geographic hubs for some types of cases (as with Probate, above). Further reductions in courtrooms will occur, as will further reductions in courtroom staff. One court liaison will serve two to three courtrooms–so the courtroom will have only a judge or commissioner and a clerk most of the time.

Central Civil West (CCW)will still operate as it now does; all complex cases, asbestos exposure cases, and class actions will be handled there as they are now. However, the court is considering certain operational changes to endeavor to eliminate the volume of paper that must be processed in the complex cases.

Settlement courts will be maintained in the current numbers in the districts, including seven downtown. Specific locations have not yet been determined.

These changes are currently anticipated. The situation remains in a state of flux and further adjustments and tweaks may occur.

Murchison & Cumming will provide more information in the upcoming weeks.

A Primer on the Taxes Embedded in the Healthcare Reform Act

/in

By: Dan L. Longo

IADC Professional Liability Committee Newsletter

The following is an excerpt from, “A Primer on the Taxes Embedded in the Healthcare Reform Act,” originally published in the November 2012 issue of the International Association of Defense Counsel’s Professional Liability Committee Newsletter.

We are now all aware that the United States Supreme Court has upheld most of the provisions contained in the Healthcare Reform Act, aka the Patient Protection and Affordable Care Act (“The Act”). Many of us, however, are not aware of several of the new taxes contained in The Act, which may have a significant impact on our clients in the Healthcare Industry for many years to come.

One such tax is a 2.3% excise tax on the sale of “medical devices.” Importantly, this is a tax on sales, not on profits. The tax is paid by the manufacturer or importer, not the ultimate consumer. Of course, it is anticipated that the cost will be passed along to hospitals, patients, and health insurers in the form of higher costs for the taxable items. Included are “big ticket” items such as MRI and X-ray machines and other hospital equipment. The tax also applies to smaller items for individual patients such as hip and knee joint replacements, other prosthetics, dental implants, pacemakers, etc. Excluded from the tax are items generally purchased by the public at retail for individual use. This would include such items as eyeglasses and other items commonly purchased at a local drug store.

Budget committees estimate that this tax will generate approximately $2 billion in 2013, increasing to more than $3 billion by 2022, with a total ten year impact in excess of $20 billion. Although the long term impact on the medical device industry is uncertain, one concern is that manufacturing jobs in the U.S. may be sent overseas to supply markets where this excise tax does not exist.

For the full article, please use the following link: A Primer on the Taxes Embedded in the Healthcare Reform Act.