by KPMLAW | Feb 20, 2019 | KPMBlog, News, Profiles, Uncategorized
Written by Gary Reinhardt, Esq. Editors Note: This article first appeared in the Winter 2019 Edition of SIU Today Rate evasion refers to when an individual materially misrepresents information on an insurance application. The applicant evades a higher premium, or obtains insurance she may not be eligible for, by submitting or omitting material information on the insurance application. Rate Evasion can lead to an insurer voiding the policy ab initio, or from inception. Many in the industry also refer to this as “rescission.” When an insurer voids/rescinds a policy, it does so on the basis of fraud in the inducement, essentially claiming that the insurer would never have contracted with the applicant had the applicant told the truth. The remedy is to put each party back to where they were prior to the contract. The insurer refunds the premium paid and treats the policy as if it never existed. Voiding/rescinding the policy differs from a claim denial. An insurer can void a policy, often resulting in non-coverage for a valid claim one that would ordinarily be covered by the terms and conditions of the policy. Voiding also allows the insurer to escape liability from any prior non-disclosed claims and from any claim that might arise subsequently. Denying coverage impacts only the particular claim at issue. The policy remains in force and subject to providing coverage for any prior claims and any that may arise. This is important because carriers may intend to cancel a policy rather than voiding a policy. This keeps the carrier exposed while it completes the statutory cancellation procedures and timeframes. Rate evasion indicators, or “Red...
by KPMLAW | Feb 19, 2019 | KPMBlog, News, Profiles, Uncategorized
Written by Matthew Liller, Esq. Edited by Bill Pfund, Esq. Nearly all insurance policies require that an insured cooperate with their carrier during the investigation of a loss. Many policies also require the insured to submit to an Examination Under Oath (E.U.O.) should the carrier so elect. But what happens if the insured is under criminal investigation for the same circumstances as the loss? Can the carrier force the insured to testify at an E.U.O. during the pendency of a criminal proceeding despite the Fifth Amendment’s Constitutional protection against self-incrimination? The Supreme Court of the United States has made clear that the Fifth Amendment not only protects an individual against being involuntarily called as a witness against himself in a criminal prosecution, but also privileges him not to answer official questions put to him in any other proceeding, civil or criminal, formal or informal, where the answers might incriminate him in future criminal proceedings. Lefkowitz v. Turkey, 414 U.S. 70, 77 (1973). Perhaps the most common circumstance under this rubric is a house fire. Soon thereafter, the insured reports a substantial loss for the structure and destroyed personal belongings. Subsequent investigation by authorities reveals suspicious circumstances, and criminal arson charges are then brought against the insured. The insurance carrier wishes to invoke its contractual right to require an E.U.O. The insured, of course, has an interest in not making any statements – particularly any under oath – about the circumstances related to ongoing criminal charges, as any and all statements could then be used against them in the criminal case. Under Virginia law, substantial compliance with a “cooperation clause”...
by KPMLAW | Feb 19, 2019 | KPMBlog, News, Profiles, Uncategorized
Written by Nick Marrone, Esq. Edited by Rachel Riordan, Esq. As an adjuster working on Virginia worker’s compensation claims, you are likely aware of the penalties that can accrue on compensation that is not timely paid. Under § 65.2-524 of the Virginia Workers’ Compensation Act (“the Act”), “[i]f any payment is not paid within two weeks after it becomes due, there shall be added to such unpaid compensation an amount equal to 20% percent thereof…” What does this mean? It is pretty straightforward: If a claimant is under an award for compensation benefits and the Insurer fails to issue payment within two weeks of those benefits being due the claimant would be entitled to 20% of the total amount of compensation not issued within two weeks of being due. However, the Insurer does have some defenses to a claim for penalties. Under that same section of the Act, the 20% penalty will not be due if “the Commission finds that any required payment has been made as promptly as practicable and… there is good cause outside the control of the employer for the delay…” What sort of situation would meet this exception? The Commission has held that compensation timely issued to the claimant’s attorney who failed to provide the payment to the claimant in a timely fashion met the exception. The Commission has also found that a payment issued to the claimant’s address of record which was never received and then promptly reissued once the Insurer had notice it was not delivered also met the exception despite the payment being reissued after the two week period. Often when a...
by KPMLAW | Feb 19, 2019 | KPMBlog, News, Profiles, Uncategorized
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by KPMLAW | Jan 26, 2019 | KPMBlog, News, Profiles, Uncategorized
By Brian A. Cafritz Removing a case to Federal Court is often one of the first important strategic moves a defendant can make in litigating a lawsuit. Knowing the inherent advantages that typically come with Federal Court, Plaintiffs will often plead the case in a way that precludes Federal Removal. Sometimes, the rush to Federal Court can backfire, and in the recent case of Scott Carmine v. Glen Poffenbarger, et al., Civil Action No. 1:18-cv-1288, Judge Anthony Trenga in Alexandria Division of the Eastern District of Virginia sanctioned the defendant for attempting to remove the lawsuit when such a move was not proper. Carmine was a medical products liability case where the Plaintiff alleged permanent and disabling injuries from a bone graft procedure. Plaintiff sued his doctor (Dr. Poffenbarger), 5 product manufacturers whose components were involved in the surgery (the Medtronic Defendants), and the Hospital and physicians group. Of the defendants, only the hospital and physicians group were Virginia citizens. On the day before the deposition of Plaintiff’s expert, the expert reconsidered, and he testified that Dr. Poffenbarger did not breach the applicable standard of care. Dr. Poffenbarger was scheduled to be deposed one week after the expert, but just days before that deposition, the Medtronic Defendants removed the case to Federal Court. The removal created extreme disruption to the state court’s scheduling and docket. Specifically, the removal caused Dr. Poffenbarger’s deposition to be canceled, the defendant’s expert designation to pass, and the trial date scheduled for the next month to be missed. The Medtronic Defendants contended that the collapse of Plaintiff’s experts would require the dismissal of Dr....
by KPMLAW | Jan 26, 2019 | KPMBlog, News, Profiles, Uncategorized
Written by Brian Clarry, Esq. Edited by Bill Pfund, Esq. “[C]ommon-sense is opposed to making one man pay for another man’s wrong.” ~Oliver Wendell Holmes, Jr., Agency, 5 Harv. L. Rev. 1, 14 (1891). Sadly, this is not the law in Virginia. If you own (or insure) a business that requires your employees to do some form of traveling, whether in a company vehicle or their own, it is important to be aware of your potential liability and take proactive measures to reduce risk. Whether you are a traditional freight carrier, a home services company, a residential or commercial cleaning company, a medical transporter, a provider of roadside assistance services, or even a food truck owner—it is necessary to prepare a plan for handling liability arising out of motor vehicle accidents involving employees. Plaintiffs will sue you, the entity-employer, under a theory of “respondeat superior,” which is a form of vicarious liability that holds an employer responsible for the wrongful acts of its employees, if the wrongful act was done in the course and scope of his or her employment. The question, then, is whether your driver was in the scope of his employment when involved in a motor vehicle accident (or other allegedly wrongful conduct). Obviously, the answer to that question depends on the driver’s itinerary. See Bryant v. Bare, 192 Va. 238, 245 (1951) (“In any case, it has been said to be clearly impossible to formulate a general rule governing all cases…”). The Virginia Supreme Court called it a “vexatious and perplexing” task to determine whether an employer should be held liable based on his employee’s...
by KPMLAW | Jan 26, 2019 | KPMBlog, News, Profiles, Uncategorized
Written by Ben Woody, Esq. Edited by Bill Pfund, Esq. The capsizing of a vessel operated by a police officer has highlighted a stark contrast between the application of sovereign immunity in state and federal courts in Virginia. The City of Norfolk contracted with Willard Marine, Inc., to perform certain repairs to the City’s SAFE Boat. When Willard Marine returned the repaired vessel to the City, a Norfolk police officer and two other City employees accepted delivery on its behalf. The officer, who was otherwise unqualified to navigate the vessel, conducted a sea trial with two Willard Marine employees, Glover and Pridemore, aboard. The officer perceived steering and handling issues with the SAFE Boat and, without warning the Willard Marine employees, pushed the vehicle to high speed and steered hard to starboard, causing the vessel to capsize and injuring Glover and Pridemore. The employees sued under a variety of theories in parallel state and federal litigation. In the state case, the plaintiffs sued under theories of common law negligence and gross negligence. In the federal case, the City moved to dismiss the claims on the basis that, among other reasons, sovereign immunity barred the plaintiffs from recovery. Glover v. Hryniewich, 2018 U.S. Dist. LEXIS 64920, at *8 (E.D. Va. Apr. 16, 2018). The Eastern District of Virginia found, however, that sovereign immunity was not available to the City for two reason: first, the sea trial was not a government function; and second, the City was not an arm of the state. Id. at *13, 15. The Court noted that sovereign immunity protected municipal shipowners in in rem proceedings (against...
by KPMLAW | Jan 22, 2019 | KPMBlog, News, Profiles, Uncategorized
Written by Porter Peery, Esq. Edited by Bill Pfund, Esq. The improvement in artificial intelligence (AI) over the last few years has impacted several industries including insurance. In a survey by Accenture “a full 75% of 550 insurance executives said they believe that AI will either significantly alter or completely transform the overall insurance industry in the next three years.” Machine learning algorithms are already playing a key role in product design, sales, services, fraud detection, risk evaluation and claims resolution. In another Accenture survey, the two keys to a satisfactory customer claims experience were speed of settlement and transparency of process. AI can improve and streamline the claims process through automated data entry, compliance tracking, fraud screening and even analysis and predictive modeling. By removing what used to be manual steps, an adjuster will be freed up to utilize their experience where it can count the most. Increasing the efficiency of claims processing and reducing loss adjustment expenses will reduce overall costs and help make the carrier’s premiums stay more competitive. (1) Despite these benefits, the use of AI presents hidden dangers for insurance companies, particularly in such areas as regulatory compliance, law and privacy. There is little apparent on the surface as to just how AI makes conclusions or solves problems while performing tasks. The concerns are especially relevant for the insurance industry which needs to comply with a number of industry and government regulations. Algorithms do malfunction and although these mistakes may be different from those typically made by humans, there will likely be legal ramifications. Who will be held responsible if a machine makes an...
by KPMLAW | Jan 22, 2019 | KPMBlog, News, Profiles, Uncategorized, Updates
Written by Andrew Willis, Esq. Edited by Rachel Riordan, Esq. Back in September, KPM’s Joe Smith updated you about the Commission’s recent decision of Norris v. ETEC Mechanical Corporation, JCN:VA00001317384 (June 25, 2018). Norris involved a claimant who sustained serious injuries in a car accident after he fell asleep at the wheel. By Norris’s own admission, he “dozed off.” He said he’d done it before and added that “I guess this time I didn’t wake up.” The Commission denied benefits, holding that the accident did not “arise out of” his employment. Specifically, the Commission found that Norris had failed to prove a “causal connection between [his] employment and his untimely slumber…” Since Joe’s update, the Court of Appeals reviewed the Commission’s decision in Norris. In the published decision of Norris v. ETEC Mechanical Corporation, Record No. 1054-18-2 (Dec. 28, 2018), the Court agreed with the Commission that Norris could not recover under the Workers’ Compensation Act. The Court’s Norris opinion begins by explaining the difference between an injury occurring “in the course of” employment and “arising out of” employment. Norris, who was driving a company vehicle at the time of his crash, was clearly “in the course of” his employment. However, Norris still needed to prove a “’critical link’ or causal connection between the conditions of his work and falling asleep behind the wheel.” The Court held he failed to do this. The reason Norris lost was because he “denied knowing what caused him to fall asleep.” Although he “testified that he dozed off because he was tired,” he “never related his drowsiness to his employment.” He also admitted...
by KPMLAW | Nov 19, 2018 | KPMBlog, News, Profiles, Uncategorized
Written by Helen Jhun, Esq. Edited by Bill Pfund, Esq. As more individuals look to alternatives to traditional hotels when planning vacations and short term trips, the Virginia Supreme Court recently set forth what standard of care the owner of a short term rental property owner owed to its renter. In the recent Virginia Supreme Court case of Haynes-Garrett v. Dunn, the Court addressed the issue of whether the owner of a short term vacation rental owed the duties of a landlord or the duties of an innkeeper. 2018 Va. LEXIS 131, 818 S.E.2d 798, 2018 WL 4783257 (October 4, 2018). Under Virginia common law, a landlord has “no duty to maintain in a safe condition any part of the leased premises that [is] under [a tenant’s] exclusive control.” Isbell v. Commercial Inv. Assocs., 273 Va. 605, 611, 644 S.E.2d 72 (2007). Absent fraud or concealment, the tenant takes the premises in whatever condition they may be in, and assumes all risk of personal injury from defects therein. There is an elevated duty of care imposed an innkeeper. An “innkeeper” is defined as “[a] person who, for compensation, keeps open a public house for the lodging and entertainment of travelers.” Black’s Law Dictionary at 792 (7th ed. 1999). These are generally accepted to mean owners who run hotels, motels, and resorts. Unlike a landlord, an innkeeper owes a duty “to take every reasonable precaution to protect the person and property of their guests and boarders.” Crosswhite v. Shelby Operating Corp., 182 Va. 713, 716, 30 S.E.2d 673 (1944). The duties owed by an innkeeper are significantly greater than those...
