Articles Posted in Unfair Business Practices

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A summary judgment is rendered when a trial court decides that there are no genuine issues of material fact that need to be determined. “Manifestly erroneous” is the high standard under which summary judgments are reversed on appeal. Summary judgments are cheaper and less time consuming than full blown trials; they are a means toward the end of judicial expediency, a goal that becomes increasingly important to our judicial system over time. Despite the importance of this procedural device, many cases do not call for summary judgment. Sometimes trial courts grant full or partial summary judgments in error and are reversed. That is what occurred in the case of Jagneux v. Frohn, which you can read here.

The defendants in this case convinced the trial court that no issues of fact existed that required litigating. Their legal journey was not over though due to the plaintiff’s appeal. The court of appeals applied the standard promulgated by the Louisiana Supreme Court. This Louisiana Supreme Court’s standard initially places the burden of proof on the party that is moving for a summary judgment. The moving party must prove that one or more elements of the adverse party’s claim or defense lacks any factual support on the record so far. The opposing party is then granted an opportunity to prove that there have been facts alleged that support that party’s position. At the time of summary judgment the record is sparse so a granting of summary judgment represents a finding by the court that no facts supporting a particular party’s, in this case the plaintiff’s, position.

The appellate court reversed the trial court’s decision in this case because it found that the issue of whether Mrs. Kling, a defendant in this case, was the driver of the white SUV at the time that it, at least partially, caused the accident at issue in this case. Because there was conflicting evidence about where Mrs. Kling was and whether or not she was actually in control of the car at the time of the accident, summary judgment was not the right choice in this case. The trial court is not to weigh the merits of the case when addressing summary judgment. Summary judgment is only appropriate in cases where no potentially meritorious case is presented by one of the parties.

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The following very interesting and compelling question by plaintiffs, and the contingent commentary by the court, is articulated in this appeal to the Second Circuit Court of Appeals in Louisiana: “Does a diagnosis by a doctor rendering a second and correct opinion, equate to a per se reasonable belief that the previous treating physicians committed medical malpractice?”

This question arises in the context of the Second Circuit’s consideration of the plaintiff’s appeal of the trial courts “judgment of defendants, sustaining an exception of prescription as to the malpractice claim filed by Joseph Lee Amos prior to his death and granting summary judgment which dismissed their wrongful death claim.” The purpose of this paper is to discuss the question posed by the plaintiff and the Second Circuit’s response to that question.

On April 12, 1999, Joseph Lee Amos had his first appointment with Dr. Rebecca Crouch: he was experiencing “occasional rectal bleeding.” Mr. Amos “repeatedly complained of similar symptoms in his subsequent visits to Dr. Crouch.” Mr. Amos claims that “when he was under Dr. Crouch’s care, he was continually ‘hurting a lot’ and that the blood was ‘bright red’…The physicians report states that Mr. Amos said that Rebecca Crouch checked down there ‘and (Mr. Amos) was told everything was okay.” His final appointment with Dr. Crouch was on January 3, 2000.

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On behalf of the Berniard Law Firm, we hope that all of our friends and followers have had a relaxing and restful holiday. Posting will resume on Tuesday

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On June 27, 2008, Betty Jean Russell went to see her eye doctor at Eye Associates of Northeast Louisiana. Russell, 78, who required a wheelchair to get around, was driven to the apppointment by her granddaughter, Ashley Dixon. While Dixon remained in the waiting room, an Eye Associates employee wheeled Russell back to an examination room. There, Russell was required to move to one of the facility’s wheelchairs in order to access one of the examination machines. Then, in order for her to look into a different machine, Russell was required to return to her own wheelchair. In the process of moving back to her own wheelchair unassisted, Russell fell, injuring her shoulder and breaking her thighbone. The Eye Associates employees did not call an ambulance, but rather helped Russell off the floor and back into her wheelchair. Dixon immediately drove her grandmother to the ER where Russell underwent surgery to set her broken leg. Although Russell was able to walk from time to time prior to her injuries, she was no longer able to walk at all. Russell filed suit against Eye Associates and Hanover Insurance Co., its general liability insurer. She also filed a petition for a medical review panel under the Louisiana Medical Malpractice Act. The Louisiana Medical Mutual Insurance Company (LAMMICO), the professional liability insurer for Eye Associates, intervened in the action. Hanover filed a motion for summary judgment arguing that Russell was injured while Eye Associates employees were delivering professional services, and therefore Russell’s claim was one of medical malpractice. LAMMICO, on the other hand, argued in its own motion for summary judgment that Russell’s fall was “not treatment-related” or “caused by a dereliction of professional skill,” which meant that LAMMICO was not liable for coverage for her injuries.

The trial court held a hearing on the motions for summary judgment, during which it determined that this was not a medical malpractice case. The court granted summary judgment in favor of LAMMICO and denied Hanover’s motion. Hanover appealed on the basis that “the undisputed facts
and evidence establish that the plaintiff’s injuries occurred as a result of a ‘medical incident,’ as defined by the LAMMICO policy.” On appeal, the Second Circuit reviewed that “[w]hen determining whether a policy affords coverage for an incident, the insured bears the burden of proving that the incident falls within the policy’s terms.” Furthermore, “summary judgment declaring a lack of coverage under an insurance policy may not be rendered unless there is no reasonable interpretation of the policy, when applied to the undisputed material facts shown by the evidence supporting the motion, under which coverage could be afforded.” The court noted that the definition of malpractice under Louisiana law includes “unintentional torts by healthcare providers and their employees based on health care or professional services rendered.” The LAMMICO policy maintained by Eye Associates provided professional liability coverage for “incidents arising out of the rendering or failure to render professional services.” The policy defined professional services to include treatment, diagnosis, rendering medical opinions or advice, or performing management or administrative duties by Eye Associates employees. LAMMICO argued that no doctor (or other health care provider) was involved in the accident, as “no assessment of [Russell’s] condition had taken place” at the time of her fall. However, the court noted that Russell testified that the Eye Associates employee involved in her accident had already used one type of machine to examine her eyes and was attempting to
position her in order to use another machine; this move from one wheelchari to another was necessary in order to continue Russell’s eye examination. This point, in the court’s view, created “a genuine issue of material fact as to whether the accident constitutes a medical incident which occurred in connection with the rendering of professional services, satisfying the statutory definition of malpractice and meeting the terms of the LAMMICO policy for coverage.” Accordingly, the court found that the trial judge erred in granting summary judgment in favor of LAMMICO. It reversed the trial court’s judgment an remanded the case for further proceedings.

This case shows how seemingly simple claims can turn complex in litigation. Much of the Second Circuit’s decision rested on a review of the insurance policies themselves, as contracts, to determine the potential for coverage for Russell’s claims. As with any personal injury case, it was essential for the plaintiff to retain experienced counsel to ensure that all potential defendants were brought into the litigation.

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When individuals apply for life insurance, several application forms must be submitted. Amongst these forms is a history of the applicant’s medical history. Based on this history, and a variety of other factors, insurance companies will either accept the application and set a premium that must be paid to obtain the insurance, or deny the application for pre-existing conditions. However, errors, omissions, and accidents occur during this application process and can cause several legal issues to arise when a life insurance policy needs to be paid out.

This situation arose in Foster v. United of Omaha. In that case, an individual sought to change her life insurer, but when the paperwork was arranged and sent to her, the medical history page was absent. The individual signed all of the paperwork and sent it back to the insurance company. Without any red flags regarding the individual’s medical history, United extended $1 million worth of life insurance to her. No physical health examination of the individual took place and the policy was extended based on the blank medical history paperwork.

The individual, after discovering that she was at high risk for cardiovascular disease, sought an addendum to the insurance policy to raise the payout to $2 million. To complete the policy change, the individual had to sign additional paperwork stating that her health condition had not changed since the issuance of the original policy. Because the individual never signed anything for the original policy claiming poor health, she signed the addendum stating that her health had not changed.

After some time, the individual passed away of lung cancer. United conducted an investigation and discovered that, prior to the issuance of the original coverage, the individual had been treated for heart disease, chest pain, and lung ailments. Based on these findings, coupled with the fact that the addendum stated that the individual’s health hadn’t changed, United refused to pay the policy out. The individual’s trustee brought suit against United, seeking payment of the policy.

Several insurance forms, including the one in Foster’s case, contain language that states “incorrect or misleading information may void this policy from its effective date.” Thus, courts have established that an insurance company, in order to rescind a policy on these grounds, must establish that statements made in the form were false, that those misrepresentations were made with an actual intent to deceive, and that the false statements materially affected the insurance company’s acceptance of risk. The most difficult of these elements to establish is the insured’s intent when making false statements. In these types of cases, courts often look to the attending circumstances to determine whether or not the insured had knowledge of the falsity.

In the Foster case, United failed to carry its burden of proof in establishing that the insured intended to deceive United. Though the individual did not claim her medical ailments in the policy application, the paperwork for the original policy was never made available to her. Thus, the insured could not be held responsible for claiming no change in her health when, in fact, it had not changed since the issuance of the original policy. The insured thought she was telling the truth, and therefore could not be held to have intended to deceive the insurer. This finding places responsibility on the insurer to ensure that all paperwork is provided and explained in a clear, reasonable manner. This avoids consumer confusion and creates an efficient market.

Many insurance companies claim that truthfulness is a condition precedent to policy coverage. This means that the policy will only extend its coverage upon the fulfillment of truthful statements required by the applicant. However, whether or not something is a condition precedent is a matter of contract interpretation. In the Foster case, for example, the court held that the language in the addendum that stated “incorrect or misleading information provided herein may void this policy from its effective date” was permissive. The use of “may” in this type of contract suggests that misleading information provided by the applicant might void the policy, but on the other hand, it might not. Such permissive language will never be held to be a condition precedent in insurance disputes.

With these rules at hand, the court in the Foster case found that United was not entitled to withhold the policy payment. Such a finding solidifies courts’ standing in placing responsibility on insurance companies to provide accurate assessment of insurance coverage and risk. Placing this burden on insurance applicants would carry market chilling potential. In addition, search costs could rise and those who were inexperienced with insurance applications would be prone to making mistakes that would stifle courts with insurance interpretation disputes.

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Whether someone is working at the time of an accident can be difficult to tell, and it affects which insurance coverage applies. Harry T. Kemp was an independent contractor driving a Peterbilt tractor pulling a 50-foot flatbed trailer when the truck collided with an automobile driven by Lewis Jurey in East Baton Rouge Parish. Kemp had picked up his trailer from Baker Metal Works, which had completed repairs on the trailer. The Louisiana Court of Appeal decided 2-1 in Jurey v. Kemp (La. Ct. App. 1 Cir. 9/20/11) that Kemp was not working when the accident occurred. That affected which insurance policy covered the injuries received by Jurey and his two passengers.

Independent contractors with trucking companies may be covered by the company’s insurance when the driver is performing transportation services. When the independent contractor is not, non-trucking liability, or “bobtail,” insurance is needed to fill a gap in coverage. Liberty Mutual Fire Insurance Co. insured Dallas & Mavis Specialized Carrier Co., LLC (D&M), which had hired Kemp as an independent contractor. The Nineteenth Judicial District Court agreed with Liberty Mutual that the policy did not cover Kemp because he was “on his own time.” Instead, Kemp’s bobtail coverage from Great American Insurance Co. should cover the accident.

D&M’s policy would insure the accident only if the semi-tractor, leased to D&M, was being used for business purposes when the accident occurred. The reason for Kemp’s trip was decisive to determine coverage. Kemp’s lease with D&M required Kemp to “maintain the Equipment in proper operating condition and in full compliance with applicable government regulations.” On January 17, 2008, Kemp was picking up the trailer to make room at the Baker Metal Works. Kemp had requested the metal works replace some of the trailer’s decking boards and weld a door to make it easier to reach the wiring for lights and air lines for brakes. D&M did not request this work and did not know about it. Kemp did not ask for reimbursement, and D&M did not pay him for the trip. Nor was Kemp performing any transportation services for D&M or on standby.

Previous cases have established the outlines for when an independent truck driver is working. Driving home after a delivery is personal because it is after work has ended. When the company asks its independent contractor to remain in an area to pick up a load, the driver is working. Similarly, driving to a distant motel at night for rest to be ready to haul a load is work related.

Whether Kemp was on business depended on whether the lease with D&M required these repairs. Neither D&M nor Department of Transportation regulations required the repairs on the decking boards or creation of a door accessing the trailer’s wiring and air hoses. It would be different if regulations explicitly required these repairs. Instead, the repairs were for Kemp’s convenience. Because D&M did not require the repairs, it was not work related and D&M’s insurance policy did not cover him. Kemp’s bobtail policy was the appropriate insurer for the accident.

Judge Jewel E. “Duke” Welch disagreed. By his reasoning, the lease gave D&M “exclusive possession, control, and use of the leased motor vehicle for the duration of the lease agreement.” He interpreted “use ‘for’ D&M whenever that use furthered D&M’s business interests and was not a purely personal use of the covered vehicle by Kemp.” This may be a broader standard than previous cases allowed. The repairs may have made work easier for Kemp, but they also may have served D&M’s business interests. Kemp was maintaining the leased equipment for trucking-related purposes. Under the lease, he was obligated to maintain the trailer and make sure it passed periodic safety inspections. Kemp did not get reimbursed by D&M for any maintenance work because maintenance was his responsibility. Judge Welch would have reversed the district court.

Independent contractors are common in today’s flexible business world. In these business relationships, the line between work and free time is hazier than with traditional employment. More factors need to be taken into account. A lawyer skilled in determining potential liability will be able to distinguish the boundary between the individual’s and the company’s liability and which insurance policy should pay.

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The Berniard Law Firm would like to wish everyone a Happy Holiday.

Regular posting will resume in 2012! Have a happy, and SAFE, holiday season!

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Uninsured/Underinsured Motorist (UM) coverage is designed to protect a policyholder against injury or loss inflicted by another driver who has inadequate insurance or no insurance coverage at all. Louisiana statute provides that “an insurer owes to his insured a duty of good faith and fair dealing,” which includes fairly and promptly settling claims with the insured. La. R.S. 22:1220. An insurer who breaches this duty is liable for damages that result from the breach. In order to establish a cause of action for penalties and or attorney fees, a plaintiff must show that (1) the insurer received sufficient proof the of loss; (2) the insurer failed to tender payment within 30 days; and (3) the insurer’s failure to pay is “arbitrary, capricious, or without probable cause.” La. R.S. 22:658. Louisiana courts have held that “arbitrary, capricious, or without probable cause” is “synonymous with ‘vexatious,’” and that a “vexatious refusal to pay” means it is “unjustified, without reasonable or probable cause or excuse.” The courts impose penalties on an insurer when the facts of the situation “negate probable cause for nonpayment,” but tend to avoid them when an insurer can point to “a reasonable basis to defend the claim and acts in good-faith reliance on that defense.” Pointedly, it is well settled that “bad faith should not be inferred from an insurer’s failure to pay within the statutory time limits when … reasonable doubt exists.” Instead, penalties are appropriate when the insurer refuses to tender a reasonable payment in an amount over which “reasonable minds could not differ.”

Louisiana’s Third Circuit Court of Appeal recently applied this jurisprudence in the case of Mitte v. Progressive Security Insurance Co.. On April 20, 2004, Dyna Mitte was severely injured when her vehicle was hit by an underinsured driver in Lafayette Parish. Mitte had UM coverage through Progressive and filed a claim after receiving only $32,000 from the other driver’s insurance company. Progressive made pre-trial tenders to Mitte that amounted to $393,624. Mitte then filed suit seeking penalties and attorney fees on the basis of those tenders that she alleged were “inadequate and untimely.” A jury found that the tenders made by Progressive were not adequate and awarded Mitte $1.6 million. However, the jury declined to award her penalties and attorney fees. Mitte appealed, arguing that the jury erred in failing to find that Progressive was arbitrary or capricious.

Mitte’s assignment of error was based in part on her argument that because the jury awarded a large sum compared to the tenders made by Progressive, Progressive was necessarily arbitrary or capricious. The court rejected this argument, stating that Progressive was not required to “meet some percentage of the total claim awarded [Mitte] to avoid penalties and attorney fees.” Rather, Progressive “needed to tender only a figure over which reasonable minds could not differ.” Further, the record included several factual disputes described by Progressive’s adjuster at trial. For instance, there was uncertainty over whether Mitte made a claim for lost earning capacity and also as to whether a gastric bypass surgery was related to the auto accident. Thus, although the jury ultimately concluded that Progressive undervalued Mitte’s general damages “by a fairly large extent,” there was a reasonable factual basis for the jury’s finding that Progressive was neither arbitrary nor capricious. Because the court could not find that the jury’s determination was manifestly erroneous, it affirmed the trial court’s judgment.

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Governments traditionally were immune from lawsuit. That has changed. In certain circumstances, governments may be held liable for the damage they cause. A coulee flooded homes in Lake Charles after Hurricane Rita, although the area is protected by a drainage district that operates pumps and pipes to ensure drainage. The Louisiana Court of Appeal affirmed a jury award against the drainage district in Bordelon v. Gravity Drainage District No. 4 of Ward 3 of Calcasieu Parish, No. 10-1318 (La. Ct. App. 3 Cir. 10/5/11).

Drainage district employees typically stayed in pump houses during hurricanes, but in July 2005, Louisiana state officials determined that no evacuation site in Calcasieu Parish could withstand a category 4 or 5 hurricane. The drainage district has automated pumps run by electricity, but if the power went out, the diesel-fueled backup pumps required human operation. Hurricane Rita was expected to hit land as a category 4 or 5 hurricane. The district decided to allow its employees to evacuate with their families to Opelousas, Ville Platte, and Lafayette. The whole area south of Interstate 10 in Lake Charles was a part of the evacuation.

Rita unexpectedly weakened to category 3 when it made landfall on Friday, September 24, 2005. Electrical power was wiped out across a wide area. The drainage district’s electric pumps at Pithon Coulee stopped at 9 p.m. No one was in the pump house to start the diesel pumps. When residents returned the next morning, their homes were fine, but the coulee waters were rising. Drainage district employees had yet to be recalled. The houses began flooding from the rising coulee waters after 3 p.m. Saturday. Early on Sunday, the district workers returned. They turned on the pumps at 8:30 a.m. By noon, the coulee was below flood stage.

Twenty-four homeowners sought damages from the district because it failed to plan a way to automate the diesel pumps and because its decisions during Hurricane Rita resulted in flooding. The district argued it was protected by governmental immunity under Louisiana Revised Statutes. A jury awarded the homeowners $1,570,219.60, although it recognized that the liability of the district’s insurer, American Alternative Insurance Corporation, was limited to $1 million. The drainage district and its insurer appealed.

Courts strictly interpret immunity statutes to limit their reach. Two statutes may protect the district. The Louisiana Homeland Security and Emergency Assistance and Disaster Act provides immunity when a government is “engaged in any homeland security and emergency preparedness activities” as a part of complying with the Act. An unpublished court of appeal decision persuasively limits immunity to actions taken during an emergency, but not before. Based on that decision, the jury decided against the drainage district because it failed to have a plan in place before the hurricane’s forecasted arrival. The court of appeal agreed. “A failure to plan for an emergency is not an emergency preparedness activity under the statutes conferring immunity for such activities.” The district was not immune for not having a plan to keep pumps running when the pump houses were not staffed and power was out.

Louisiana state and local governments also are not liable “based upon the exercise or performance or the failure to exercise or perform their policymaking or discretionary acts when such acts are within the course and scope of their lawful powers and duties.” Immunity exists for policymaking or acts for which a choice is acceptable within the government’s delegated powers. If the act is “not reasonably related to the legitimate governmental objective for which the policymaking or discretionary power exists,” or was done criminally or in some way intentionally, immunity does not apply.

The Louisiana statute is patterned after the Federal Tort Claims Act. A two-part test determines if immunity applies. Did the government employee have discretion, a choice, or did law require the employee to follow a certain course of conduct? If a specific action is mandatory, no immunity applies. If the employee has a choice, was that discretion “grounded in social, economic or political policy”? If not, the government may be liable. Louisiana has adopted the federal test for the state governmental immunity statute.

The court of appeal recognized that planning is an act of discretion, and ensuring employee safety above concerns to protect property “is clearly within the discretion of the district.” But, automating the diesel pumps had never been considered, although it would cost only $40,000 and the money was available. By statute, “the drainage district shall make adequate provision for the drainage of all lands and property affected thereby.” The district was required to provide adequate drainage of all property. The failure to consider a feasible alternative to ensure compliance with a statutory mandate prevented immunity for the effects of not automating the pumps. The court of appeal affirmed the district court jury verdict.

If you believe you have been harmed by a government, it is hard to know what to do. Government duties come from statutes and regulations, and governments may be protected from lawsuits. But not always. A lawyer will be able to review your claim and determine the government’s authority and potential liability.

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When one is successful on a claim against an insurance company the payment of the claim is expected to be prompt. Any delay in payment could result in the court imposing a penalty against the insurance company. In most, if not all, cases this penalty takes the form of court costs and attorney’s fees. But if an insurance company challenges a policy claim in court, and then loses, does that time when payment was refused constitute delay? The answer to this question is ‘it depends.’

In Louisiana Bag Co. v. Audubon Indemnity Co., the court held that if an insurer errs in interpreting its own insurance contract, then the insurance company will be held liable for the delay in payment resulting from the trial. This delay justifies the incurrence of penalties for attorney’s fees. If, however, the policy dispute revolves around facts rather than contract interpretation, then the “timely payment” provision is stayed during the trial. This was the situation of Maxley v. Universal Casualty Co. where Maxley’s car insurance policy through Casualty covered loss from both theft and fire. When Maxley’s car was stolen and set on fire, he filed for his claim. However, Maxley had left his car unlocked with the key in it. The policy through Casualty had an exception that nullified any claim if there was no evidence of forcible entry. The issue went to court with Casualty claiming it owed nothing under the policy because the theft was not through a forcible entry, and Maxley contesting payment was due under the fire provision of the policy rather than the theft. Maxley, in essence, argued that the exclusion provision for no evidence of forced entry was irrelevant because his car would have been recovered if it had not been for the fire.

The court found for Maxley, who then sought attorney’s fees for Casualty’s failure to make timely payment. The Third Court of Appeal upheld the denial of Maxley’s claim, stating that Maxley’s reliance on Louisiana Bag was misplaced. While Louisiana Bag relied on policy interpretation, Maxley’s case relied on a true disputation of the facts. It would be senseless to require the insurance company to pay the claim only to the have the claim payment rescinded if the facts were found in favor of the insurance company. This finding upholds efficiency in the industry as it is easier to withhold payment until truly due than it is to always make payment, then try to recoup it if made erroneously.

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