In recent years, assignments have become less common. More often, the insured brings an action against the insurer seeking punitive damages, attorney’s fees and costs and any other compensatory damages that arise for the failure to pay the demand including damages to credit, mental anguish as well as for the amount of the judgment and interest. Plaintiff’s attorneys have the advantage of representing wronged insureds in front of juries who typically do not love insurance companies. In short, claims were transformed into potentially huge recoveries for both underlying plaintiffs and insureds where policy limits were as low as $25,000.

In this writer’s experience, Holt set up letters from lawyers seeking jackpot justice have exploded. Deadlines as low as 5 to 10 days craftily timed to include weekends and holidays and purposeful confusion over the exact date the deadline expires have become common. In addition, recent rulings by the Georgia Appellate Courts requiring strict compliance with the terms of the demand have led to Holt time demands specifying numerous and sometimes ambiguous conditions regarding the form and language of releases, lien satisfaction and delivery of payment. Often, these conditions are hidden in lengthy time demands in order to get the insurer to make an offer for policy limits that question liens or other matters that is deemed to be a counter offer and a rejection of the time demand. Last, seasoned trial lawyers have skillfully marketed themselves as insurance bad faith experts, encouraging attorneys to set up insurers with Holt demands so they can pursue lucrative bad faith actions when excess verdicts result.

HB 366 seeks to establish procedures for pre suit time demand in only motor vehicle accident cases. The new codes section only applies to “causes of action for personal injury, bodily injury or death arising from the use of a motor vehicle after 7-1-2103.” The demand must be in writing, sent either by certified mail or statutory overnight mail return receipt requested and contain the following material terms:

1. A 30 day time period from receipt of the offer in which the demand must be accepted;
2. The amount of the payment;
3. The party or parties to be released;
4. The type of release to be accepted in exchange for payment;
5. The claims to be released.

The code section also states that the insurer “shall have the right to seek clarification regarding terms, liens, subrogation claims, standing to release claims, medical bills, medical records and other relevant facts without this attempt to seek “reasonable clarification” being deemed to be a counter offer and an rejection of the demand. Last, the code section specifies forms of payment that are acceptable.

The passage of this bill is a welcome first step in providing structure to pre suit time demands and hopefully will curb the use of tricky and excessive tactics to remove policy limits in claims. However, it must be noted that the new code section does not apply to cases that do not involve car accidents and after suit is filed, anything goes. In addition, the code section has been characterized as flawed and a mere “Band-Aid on a sucking chest wound” since it does not provide any caps on penalties or attorney’s fees as in the case of most other forms of insurance bad faith in Georgia. Expect more lobbying from the insurance and business industries to expand the scope of the statute as well as strong and organized opposition from trial lawyers who view this as a “perceived problem.”

In the meantime, expect a wave of pre suit time demands for claims that arising for car accidents that occur before 7-1-13. This writer recommends that claims handlers as well as attorneys continue to carefully read time demands and seek early verbal clarification form plaintiffs’ attorneys as to the terms of their demands and what releases they will accept. If more information is needed to respond to the demand, request the information and an extension of time to obtain and review demands well in advance of any deadlines. Most importantly, ALWAYS inform the insured of the time demand, send then a copy and request their input.

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Defense attorneys Matthew Moffett and W. Winston Briggs were surprised the case settled because their offer had been pending for two years, and there was a large gap between the sides’ valuations of the case.

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CLM Congratulates Graduates of the Litigation Management Institute

New York, NY — The Claims and Litigation Management (CLM) Alliance is proud to announce the graduates of the 2012 Litigation Management Institute (LMI). The LMI was hosted by Columbia Law School in New York from Oct. 5 to 7.

Graduates of the LMI received the Certified Litigation Management Professional (CLMP) certification. Students completed approximately 30 hours of pre-course reading, 18 hours of in-class instruction and 12 hours of group project work. Given the rigorous nature of the program, the CLM was pleased to have 91 percent of participants successfully complete the program and receive the CLMP.

The graduates to receive the CLMP certification are:

The LMI is the first certification program specifically designed to provide a comprehensive understanding of the business of litigation management. The program consists of nine courses taught by executives with extensive industry experience. The next LMI will be held in the fall of 2013 with registration opening in the spring.

About the CLM 
The Claims and Litigation Management Alliance (CLM) promotes and furthers the highest standards of claims and litigation management and brings together the thought leaders in both industries. CLM’s Members and Fellows include risk and litigation managers, insurance and claims professionals, corporate counsel, outside counsel and third party vendors. The CLM sponsors educational programs, provides resources and fosters communication among all in the industry. To learn more about the CLM, please visit www.theclm.org.

Plaintiffs claimed over $2,000,000.00 in damages including lost profits and lost business (claiming the dealership went bankrupt over this incident because the Plaintiff’s primary property insurer disclaimed coverage due to a policy exclusion). During discovery, Plaintiff produced a valuation and appraisal report from their expert who actually had inspected the vehicles prior to Plaintiff selling them for salvage in which he opined that the RVs were un-repairable and that the lost value was over $650,000.00.

We retained a valuation expert who provided an affidavit for us that stated that although a valuation and damage appraisal could be performed on the RVs, he was unable to do this because a personal inspection of the RVs was necessary and that opportunity was forever lost. He further testified that the pictures of the RVs that did exist could not substitute for a personal inspection.

Following the close of discovery, we moved the Court to sanction Plaintiff for the spoliation of evidence and went for the “home run swing” of dismissal of the Complaint. Recognizing that dismissal is typically reserved for cases where actual malice is demonstrated, we knew that dismissal was a long shot.

The oral argument at this motion hearing lasted well over two hours with the Plaintiff’s main argument being that because the manufacturer refused to warranty any repairs that might have been done, there was no prejudice suffered by the defense and the entire argument was a red herring. The thrust of our counter-argument was that the manufacturer’s decision was largely based on the opinions of Plaintiff’s expert who had gotten the chance to inspect the vehicles and that the entire case hinged on our ability to discredit that expert and the manufacturer – the ability to do so having been lost when the vehicles were sold by Plaintiff before allowing the defense the personal inspection needed.

The trial court agreed with our position. Applying the Bridgestone factors as required in Georgia, the trial court found: 1) the defense had been prejudiced; 2) the prejudice was incurable; 3) the evidence spoliated by Plaintiff was of extreme importance; 4) that Plaintiff had acted in bad faith by ignoring the repeated requests by the defense to inspect the vehicle; and 5) that the potential for abuse by expert witness testimony was extremely high as demonstrated by our arguments. Also of note is the fact that that Court indicated that even if the defense had not made repeated requests to inspect the RVs, Plaintiff should have known the importance of this evidence to the case and preserved it. Although the Court considered other less-severe sanctions, it ultimately concluded that any remedy it attempted to fashion would still deny the Defendant its constitutionally-required full and complete defense. “This Court prefers cases to be tried on its merits. Sometimes, that is just not possible.”

We are only aware of two other cases in Georgia where a Plaintiff was sanctioned with the dismissal of his Complaint. Why not more? The RV Motors case is a significant victory for the defense and just goes to prove that what is sauce for the goose can be sauce for the gander.

If you would like a copy of the Order dismissing the RV Motors case, or would like to discuss defensive spoliation strategy, please feel free to contact us.

–Matt Moffett and Wayne Melnick – for the defense

This summer, in the case of Hoover v. Maxum (S11G1681, S11G16883, 2012) the Georgia Supreme Court ruled 4-3 against the insurer. First, the Court reaffirmed that an insurer cannot both deny coverage and reserve coverage at the same time. Then, the Court held that boilerplate reservations (e.g. “the right to disclaim coverage on any other basis that may become apparent”) fail to preserve coverage defenses. And finally, the Court even seemed to hold that an insurer can not later raise a defense it did not set forth in its initial coverage position.

This case involved an employee suing his employer for an on-the-job injury. The exclusive remedy (workers’ compensation bar) did not prohibit the lawsuit as the employer failed to carry workers’ compensation insurance. The employer’s liability insurer denied coverage pursuant to the Employer’s Liability Exclusion of the policy. In addition, the insurer attempted to reserve its rights with respect to the policy notice provision and further “on any other basis that may become apparent as this matter progresses . . . .” The insurer later filed a DJ action based only on the Employer’s Liability Exclusion; that DJ action was dismissed as improper.

Plaintiff obtained a $16 million dollar judgment; the policy limits were $1 million. Plaintiff then took an assignment from his insured employer and sued the liability insurer. Cross-motions for summary judgment were filed. Ultimately, the Supreme Court ruled against the insurer. What is left to litigate is how much of the $16 million judgment the liability insurer may have to pay.

While we agree with the dissenting justices that this decision is unreasonable, at least in part, in light of this decision we do recommend the following for consideration by liability insurers:

• A full and complete investigation of any and all possible coverage issues and defenses should be undertaken prior to issuing any coverage communication to an insured. In that regard, an insurer should consider EUOs, requests for additional documentation and material, and outside legal advice/opinion.
• Any coverage communication to an insured must not deny coverage on one ground and also attempt to reserve on another.
• Any denial of coverage should be clear, complete and candid in that all bases for denial should be stated, in light of known (or which reasonably could be known) evidence and policy language.
• All reservations of rights as to potential coverage defenses should be clear, complete and candid based on evidence known (or which reasonably could be known) evidence and policy language.

Please feel free to call us to discuss this matter further.

Matt Moffett & Jennifer M. Guerra – for the defense.

The plaintiff in Couch suffered a violent attack by an unknown criminal assailant while staying in a hotel and subsequently brought suit against the owner of the hotel for failing to keep the premises safe. The case is pending in federal Court and had been sent to the Georgia Supreme Court to answer questions regarding the interpretation of Georgia’s apportionment statute.

Writing for a majority of the Court, Justice Melton found that the rules of statutory construction, including reliance on ordinary word meanings, dictate that an assailant who evades hotel security to intentionally abduct, rob, and assault a hotel guest is, at the very least, partially at “fault” for the brutal injuries inflicted by the assailant on that guest. As a party at fault, such an assailant must be included with others who may be at fault such as the property owner in a premises liability action for purposes of apportioning damages among all wrongdoing parties. That is the clear directive of the Georgia apportionment statute, OCGA § 51-12-33.

The arguments against application of the apportionment statute to intentional criminal conduct centered on the interpretation of the word “fault.” The plaintiff contended that “fault” as used in the statute did not include intentional conduct. According to the Supreme Court, however, the ordinary meaning of “fault” includes intentional conduct and if the legislature had intended to exclude intentional conduct from that definition it could have and would have done so. “Fault” is not a term of art but is a word of general use to be given its ordinary and every day meaning. Fault is not meant to be synonymous with negligence, according to the Court, but includes other types of wronging such as intentional acts.

It is clear now that in any premises liability case involving a criminal assault, a jury will be allowed to apportion damages to the criminal assailant, whether known or unknown. In my opinion, our GA Supreme Court again has done the right thing in allowing juries to impose liability in a fair and reasonable way, and against the criminal who caused the injury, even if the plaintiff’s lawyer chooses not to sue that criminal in the case.

I have tried and continue to defend many of these criminal attack cases and am happy to talk with you about the discovery and trial strategy we employ for the defense. I also am happy to send you a copy of the Couch decision.

Matt Moffett – for the defense

If you are interested in how we made that happen in a recent case, click on the below link.

The Case

Our case involved a violent assault upon an office worker by a janitor in a metro Atlanta office building. We defended the property manager who had contracted with the janitor’s company to clean the building. The cleaning company was also a defendant in the case, along with the property owner and security company.

The Contract

Of course, the first request we made to our client was to show us the contract with that cleaning company. And, we found in that contract what we hoped to find – both an indemnity and insurance procurement provision. The cleaning company was to defend and protect our management company from injury to others “arising out” of their work and to insure our client for claims against it arising out of that work.

The Legal Tender

We next tendered the defense of the case, via letters, to the cleaning company and its insurer. And, for reasons we later proved to be wrong, both denied our tender!

The Cross Claim

We then filed a cross claim against the cleaning company for breach of contract, indemnity and legal fees/costs. Under GA law, a cross claim like this is authorized to resolve a dispute between defendants since the dispute relates to the main claim involved in the case.

The Third Party Claim

We also filed a third party claim against the insurer of the cleaning company because our client was in fact listed as an additional insured under that liability policy. Under GA law, an insurer can be added to a pending lawsuit by a defendant claiming a right to insurance from that insurer and when that insurer denies coverage.

The Resolution

After two years of litigation, we were able to convince the cleaning company and its insurer that the plaintiff’s injury was something “arising out of” the contract at issue. In GA, the phrase “arising out of” in an indemnification provision does not mean proximate cause in the strict legal sense nor does it require a finding that the injury was directly caused by the indemnitor’s actions. Rather, and as our GA courts have held, almost any causal connection or relationship will do.

But for the cleaning contract, but for the cleaning company hiring that janitor and but for that janitor having access to the building that night for cleaning, this event would not have occurred and our client would not have been sued. At the least, the event and injury arose out of the contract at issue.

After fighting about it (for too long in our opinion), the cleaning company and its insurer finally agreed to: a) reimburse our client management company and its insurer for our legal fees/costs, and b) pay the plaintiff to settle the claims advanced against our client in the lawsuit. The end result was that our client was made whole and dismissed from the case.

The Epilogue

The case later tried against the cleaning company and resulted in a multi-million dollar plaintiff’s verdict. The other defendants settled out before trial.

The Moral of the Story

If another is obligated to pay your tab, first ask them to do it and if necessary use the law to convince them.

If you would like to talk further about the strategy involved in this case or about any other legal matter, please feel free to call me.

Matt Moffett – for the defense