Passing the Buck: How to Successfully Transfer Risk to Third Parties

By Brian Cafritz, Esq. When claims are made against your company, one of the quickest ways to clear that loss from your company’s books is to transfer the risk to a third party. A good Risk Transfer Plan can not only remove the risk of indemnity, but it can also prevent expensive litigation costs and attorney’s fees. Indeed, a well-planned and firmly executed Risk Transfer Program can change the internal perceptions of the risk management and claims management departments. By taking a few simple steps, your risk management strategies will create reduce the number of pending claims and create a flow of incoming money, rather than being seen solely as a source of outgoing payments. Key Principles of the Risk Transfer Program In order to compile a useful Risk Transfer Program, one must understand a few key principles regarding the available theories behind Risk Transfer:  Contribution: The right of one tortfeasor to get reimbursement or payment from another tortfeasor to equally or proportionally share the amount owed to a Plaintiff.  Contractual Indemnity: A promise in a contract to pay full amounts owed by another. The scope and breadth of the obligation are determined by the language of the contract, but it can often be limited by state laws depending on a state’s public policies. It is common to see a duty of defense attached to the duty to indemnify, but it must be expressly stated in the contract for it to exist.  Common Law/Equitable Indemnity: If no indemnity contract is available, Equitable Indemnity exists to shift liability from one who is only passively liable to the...

Does the Collateral Source Rule Apply in Contract Cases?

Written by Stephanie G. Cook, Esq. Edited by Bill Pfund, Esq. For the first time, the Supreme Court of Virginia has ruled on whether the collateral source rule applies in contract cases. The collateral source rule provides that compensation or indemnity received by a tort victim from a source other than the tortfeasor may not be applied as a credit against the amount of damages owed by the tortfeasor. This rule has been consistently recognized in tort cases in Virginia. It has also been applied to cases involving social security benefits, public and private pension payments, unemployment benefits, workers’ compensation benefits, and vacation and sick leave allowances. In Dominion Res., Inc. v Alstom Power, Inc., 825 S.E. 2d 757, 297 Va. 262 (2019), the court held that the collateral source rule does apply to breach of contract actions, where a plaintiff has been reimbursed by an insurer for the full amount it seeks in damages from the defendant. The court noted, however, that whether the collateral source rule applies should be determined on a case by case basis. In Dominion Resources, a company called Alstom Power, Inc. performed services at a power plant owned by Dominion Resources. These services were governed by a contract which required Alstom to obtain two separate policies, an aggregate limit policy and an excess policy. In addition to the two policies held by Alstom, Dominion Resources also had an excess policy with Associates Electric & Gas Insurance Services (“AEGIS”). As a result of a boiler accident at the plant, three workers died and two others were injured. The workers and their estates sued Dominion...

The E-scooter: Another Insurance Quandary Caused by the “Sharing Economy”

Written by Gary Reinhardt, Esq. We discussed coverage concerns associated with sharing homes and cars.  An even bigger headache may be the e-scooter.  They are everywhere, usually in your way.  E-scooters fly along sidewalks and on the roads and end up scattered about town, usually where you want to walk or park.  Often they dodge around you as you walk or drive, or you dodge them.  Accidents are inevitable.  As the latest and greatest trend for commuters and those that just do not want to walk clutters the landscape of cities and college campuses, a significant problem exists that not many people seemed to have thought about:  does the operator of the e-scooter have liability coverage in the event of an accident? In rental situations, many assume that the rental itself will provide coverage, meaning Bird, Lime or Bolt or one of the rental companies provides insurance to the operator.  This does not appear to be the case.  For example, the Bird rental agreement is titled “Bird Rental Agreement, Waiver of Liability and Release.”   In large, bold print the agreement warns that “YOUR AUTOMOTIVE INSURANCE POLICIES MAY NOT PROVIDE COVERAGE FOR ACCIDENTS INVOLVING OR DAMAGE TO THIS VEHICLE. TO DETERMINE IF COVERAGE IS PROVIDED, YOU SHOULD CONTACT YOUR AUTOMOTIVE INSURANCE COMPANY OR AGENT.”  Damage to the scooter may be the least of the worries of an operator involved in an accident. Section 15 of the Bird rental agreement, titled “Releases; Disclaimers; Assumption of Risk”, requires the operator (called the “Rider”) to indemnify and hold harmless Bird for any incident that arises out of the use of the scooter. The...

Bad Faith for a Bad Investigation

Written by Gary Reinhardt, Esq. The US District Court in Alexandria recently found a carrier acted in bad faith in the case of  South Boston Energy, LLC v. Hartford Steam Boiler Specialty Insurance.  In this case, the insured, a power plant, suffered a loss to a large turbine.  A piece of metal got inside the turbine and forced the insured to disassemble the turbine.  The insured reported the loss to its insurer. Initially, the insured reported an estimate of repair of $450,000.  The insurer’s adjuster responded that the loss did not exceed the power plant’s deductible.  The power plant responded quickly, listing costs far in excess of the deductible associated with the disassembly, removal, repair and re-assembly.  This response gave an estimate total cost of over $1 million. The carrier hired an engineer to go onsite and inspect the turbine. This engineer found that the damage reported came from covered losses.  He also felt that the insured’s cost estimates could be audited and lowered some. Unsatisfied, the carrier hired two other engineers.  Each found different causes of loss for the majority of turbine damage.  However, neither engineer actually physically inspected the turbine nor had either engineer repaired turbines.  Both of these engineers determined that the loss to the turbines did not meet the $500,000 policy deductible.  Without further research into the insured’s estimates or obtaining other information on the damage or the cost to repair, the carrier denied coverage. After a jury held for the insured and awarded more than $770,000 in damages, the Court turned to the bad faith allegations.  The Court applied the venerable test of bad...

Assaulted Without a Motive

Written by Joseph Smith, Esq. Edited by Rachel Riordan, Esq. When an employee is assaulted at work, there are several factors to consider in assessing whether the assault “arises out of” the employment. Assault cases are tricky to defend due to the subjective nature of why a person is attacked. Further, the issue is compounded when the assailant is not available to testify regarding the motive. Recently, KPM’s own Bob McAdam successfully argued to the Full Commission that “why” an assailant attacks a claimant is the most important factor to consider regardless of whether motive is known. In King v. DTH Contract Services, Inc., JCN VA00001225281 (Aug. 8, 2019), the claimant was injured after being assaulted by a former co-worker. The claimant worked as an attendant at a rest station on I-66 near Manassas, Virginia during a night shift. His duties included cleaning trashcans, bathrooms, and the parking lot. When not attending to his duties, he was required to remain in a locked office and make calls to VDOT every hour to confirm his well-being. On the date of the assault, the claimant was returning to the office when he was stabbed multiple times with a screwdriver. The assailant was identified as a former co-worker who had resigned in 2015. The co-worker ultimately committed suicide without ever explaining his motive for the attack. The only disputed issue in the case was whether the assault “arose out” of the claimant’s employment. It is well-settled in Virginia that a physical assault can ‘arise out of” the employment when it is the result of an actual risk arising out of the employment....
How the Changing Mindset by Millennials Affects Your Jury

How the Changing Mindset by Millennials Affects Your Jury

Written by Jessica Relyea, Esq. Edited by Brian A. Cafritz, Esq. If you are from the millennial generation, the chances are you have been derided by a family member or neighbor as being “entitled.”  If you are from an older generation, you may have even used that phrase to describe a younger employee at your office.  Older generations being annoyed or skeptical of younger generations is nothing new.  X-ers should recall being called “slackers” and Baby Boomers were defined as “hippies.”  The challenge for lawyers, adjusters and risk managers is that millennials are now the most populous generation in the United States.  Press Release, U.S. Census Bureau, and Millennials Outnumber Baby Boomers and are Far More Diverse, Census Bureau Reports (June 25, 2015). This means that millennials make up a larger percentage of your customers, employees, and yes, even jury pools, than any other generation.  Knowing that, it is important to see millennials beyond the stereotypes and determine how they are going to affect the outcome of your case. There is a certain amount of disagreement in defining the generation, but a 2019 Pew Research Center report defines millennials as those born between 1981 and 1996.  Domock, Michael, Defining generations: Where Millennials end and Generation Z begins, Pew Research Center, https://pewrsr.ch/2szqtJz, (January 17, 2019).  This means that in 2019, millennials will turn between the ages of 23 to 38.  The Pew Research Center decided on these parameters in part because the generation has to be old enough to comprehend the 9/11 terrorist attacks, which is the most significant historical event that defines them, and because they entered the workforce...