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Sixth Circuit-Good Deeds Should Go Unpunished

Common sense prevailed in Bickley v. Dish Network, LLC, when the Sixth Circuit affirmed a district court's grant of summary judgment to Dish after it was sued under the Fair Credit Reporting Act by a consumer whom it had prevented from becoming a victim of identity theft.  After a prospective Dish customer attempted to use Bickley's identity fraudulently to apply for Dish service through a Dish retailer, the company requested a credit report for the identity thief. When the credit request returned a result of "Declined No Hit," Dish declined service and notified Bickley that someone had attempted to open an account in his name, even going so far as to provide him with a copy of the recorded conversation between the identity thief and a Dish representative.  To show his gratitude for the thwarted identity theft attempt, Bickley sued Dish under the Fair Credit Reporting Act for requesting and using his credit report without a "permissible purpose."  The district court granted summary judgment in favor of Dish and the Sixth Circuit affirmed, finding that Dish used the report for a permissible purpose because it had a legitimate business need to verify the eligibility of applicants for its service.  The court additionally noted that companies should not be punished for preventing identity theft, bringing full circle Judge McKeague's stated opposition to the axiom that "no good deed should go unpunished."  - Submitted by Wesley P. Page and Michael Bonasso of Flaherty Sensabaugh Bonasso PLLC

Formation of partnership under DC law

Formation of partnership under District of Columbia law is a factual question

In 2008, Queen, an employee with NBC, approached Ed Schultz, who was a radio personality in Fargo, North Dakota, for the purpose of developing a television show that would star Schultz.  Prior to this conversation, Queen had approached NBC with the idea for a Schultz led program and was developing a strategy to market the show.  In January 2008, Schultz visited the NBC building in Washington, D.C., and Queen and Schultz discussed Queen’s proposal.   The parties contested the content of the January conversation, but Queen alleged that, when asked if Schultz was working on a television program with anyone else, Schultz responded, “No.  Now you’re it.” Id., at 1. Thereafter, Queen began to develop sales material for the program, and enlisted the assistance of Max Schindler, a former NBC employee.  The three engaged in numerous email communications in which the terms of the partnership were discussed, including the percentage salaries that would be given to each after the sale of the program.  This was reduced to a partnership agreement, but Schultz never agreed to sign it.  Schindler left the partnership soon after, believing Schultz would never honor his verbal agreements.  To assuage any concerns that Queen had after Schindler’s departure, Schultz affirmed, in writing, that any television deal that Schultz entered into would include Queen.  While Queen and Schultz, through his attorney, continued to negotiate the terms of the financial agreement, Queen arranged for a pilot episode to be filmed at NBC’s studios.  The pilot was picked up by WUSA, a CBS affiliate, with the condition that Queen and Schultz had to pay a fee for the first six (6) months and if it was successful WUSA would consider purchasing ownership in the program.  A few weeks before the WUSA show was scheduled to begin filming Schultz withdrew, having come to an agreement with MSNBC for “The Ed Show.”  Queen contacted Schultz seeking his financial compensation under his agreement with Schultz splitting the compensation for any television show.  Schultz sent Queen a check for $12,000 for expenses associated with filming the pilot, but refused to pay any additional amounts.  

Queen thereafter filed suit in the District Court for the District of Columbia for breach of contract, fraud in the inducement, tortious interference with business relationships and intentional infliction of emotional distress.   Schultz, in response, filed a counterclaim for fraud, slander per se, and libel per se.  The parties filed cross-motions for summary judgment, and the  District Court granted judgment to Schultz for Queen’s claims and to Queen on Schulz’s counterclaim, finding neither party liable to the other.  Queen appealed the ruling on the breach of contract claim and his breach of partnership duties theory.

The Court of Appeals initially reviewed Queen’s claim of ordinary breach of contract, noting that Queen had the burden of showing that there was a “valid and enforceable contract [which] requires both (1) agreement as to all material terms; and (2) intention of the parties to be bound.”  Id., at 4.  The District Court had held that the parties had never agreed to the terms with reasonable certainty, most notably about the financial terms that were material terms of the agreement.  The Court of Appeals agreed with the trial court’s finding that the materials terms were not agreed upon, but proceeded to analyze the facts under the District of Columbia’s partnership law. 

While Queen’s complaint failed to allege a breach of partnership duties, the District Court had addressed the issue based on Queen’s reference to partnership throughout his arguments.  “A partnership arises under District of Columbia law when ‘two or more persons … intend to associate together to carry on as co-owners for profit.’”  Id., at 6.  There are customary attributes of a partnership, i.e., profit and loss sharing, joint control, that aid in determining the existence of a partnership, but the existence of a partnership is a factual question.  While Schultz claimed that Queen was a mere employee, Queen argued that he was more than an employee, and that Schulz had agreed to the co-ownership and co-development of the television program. 

The Court of Appeals found the District Court erred in finding no partnership existed as a matter of law, as there were factual disputes.  The Court further noted that, if Queen were able to prove a partnership existed, and that “The Ed Show” was an opportunity for the partnership, Queen may be entitled to a portion of Schulz’s compensation.  Despite not being able to show the existence of the contract that would have given him (25) percent of the compensation, under the District of Columbia partnership law there was a presumption that Queen would be entitled to (50) percent of the partnership income.  The Court of Appeals then affirmed the trial court’s granting of summary judgment as to all issues, except the determination of whether a partnership was formed, which was reversed.  The matter was remanded for proceedings consistent with the ruling.

Submitted by Marisa Trasatti, Semmes, Bowen & Semmes at 410-576-4795

Managing Ethical Risks Part 9

Familiarity and complacency cause lawyers to take on matters they are not competent to handle. Rule 1.1 describes the ethical considerations associated with deciding what matters to undertake, or not.

Lawyers do not like to give their competitors the opportunity to get their foot in the door, and possibly "steal" a client.  This is especially true with respect to valued, long-standing clients. So, when a good client calls with a matter that is out of the lawyer's and his firm's typical areas of practice, some lawyers agree to handle the matter when they are really not competent to do so, rather than refer the client to another lawyer.

For their part, clients have a role in this process as well. Clients with long-standing relationships with their lawyers become comfortable with them, their level of service, their billing practices, and their staff. All things being equal, they may (understandably) prefer to have their usual counsel handle an unusual matter, rather than take a chance on an unknown quantity in the form of new counsel. So, they may encourage their long-standing counsel to represent them in a matter that is outside the lawyer's typical areas of practice, and even agree to pay the cost of the lawyer "getting up to speed" in this new area.

Whether the lawyer should agree to handle the unusual matter under these circumstances is a judgment call that depends on a number of factors, discussed below. Ultimately, however, the risk to the attorney is that he or she will make a mistake that an attorney experienced in that area of practice would not: missing an important case, statute, regulation, issue, defense, approach, or strategy.

In the immortal words of a lawyer with whom I once practiced, "The law is some tricky s__t.” In my own, practicing law is hard even when it’s easy.  It is hard enough to play error-free ball when you know the rules of the game you are playing. It's much harder in a new and unfamiliar game that you are trying to learn as you go. When considering the following ethical guidelines for deciding whether to take on a matter in an unfamiliar area of practice, a lawyer would be well advised to err on the side of referring the client to a lawyer that is unquestionably competent to handle it.

Next: Being Chatty

Beastie Boys, et al. v. Monster Energy Company

Company uses band’s trademark without permission, Court keeps band’s expert from testifying regarding prior settlement in a similar case.

Monster Energy Company created a video using the names and trademarks of the band “Beastie Boys”. Beastie Boys sued, and prior to trial, Monster Energy moved to preclude Beastie Boys’ expert from testifying concerning the fair market value of the copyright license at issue because, among other reasons, the expert’s evaluation improperly relied on a prior settlement between the Beastie Boys and another entity who had previously created a video set to the tune of a Beastie Boys song. The SDNY granted Monster Energy’s motion to exclude testimony by the expert regarding this prior settlement, as such testimony would be unreliable and would be properly excluded under Rule 403, but did not grant Monster Energy’s motion to prevent expert from testifying at all, holding that the expert’s testimony about the fair market value of the copyright license was sufficiently reliable to be presented to the jury.

http://www.nysd.uscourts.gov/cases/show.php?db=special&id=400

Submitted by: Megan Fulcher Bosak and Michael Bonasso of Flaherty Sensabaugh Bonasso PLLC

Arbitration for Condo Assoc

 Arbitration Proper for Defendant Condo Association, But Not For Defendant Unit Owner

 Plaintiff Kamal Jahanbein, a unit owner and member of the Ndidi Condominium Unit Owners Association, Inc. (the Condo Association), sued the Condo Association for breach of fiduciary duty and sued Jamal Sahri, a fellow unit owner, for negligence, after the water pipes in Mr. Sahri’s unit burst and allegedly damaged Mr. Jahanbein’s unit.  Both Defendants moved to compel arbitration pursuant to D.C. Code § 16-4407(a), alleging that the trial court did not have subject matter jurisdiction because the Condo Association’s Bylaws, adopted under D.C. Code § 42-1901.01, et seq., constituted an enforceable agreement that required alternative dispute resolution of Plaintiff’s claims.  Plaintiff opposed the motions to compel, arguing (1) that his claims against Defendants were tort claims, not contract claims, and so the Bylaws were inapplicable; and (2) that with respect to the claim against the Defendant unit owner, the Bylaws did not create a contract between unit owners and the unit owner Defendant had no right to compel arbitration of the claim against him.  The trial court granted the motions to compel arbitration, and Plaintiff appealed.  The appellate court affirmed in part, and reversed in part, and remanded the case for further proceedings.  The claim against the Condo Association was subject to arbitration, but the claim against the unit owner Defendant was not.

The appellate court agreed that the Bylaws constituted an enforceable agreement to arbitrate as between Plaintiff and the Condo Association.  The Plaintiff’s particular claims against the Condo Association were also subject to arbitration under the terms and conditions of the Bylaws.  Therefore, the trial court property granted the Condo Association’s motion to compel arbitration.  Whether the Bylaws created an enforceable agreement to arbitrate as between the unit owners was less clear, however, according to the District of Columbia Court of Appeals. 

The Bylaws were intended for the benefit of the Condo Association, and not a third-party unit owner, and so the unit owner Defendant could not enforce the arbitration provisions against the unit owner Plaintiff as a third party beneficiary to the Bylaws.  The unit owners were also not direct parties to each other’s agreements with the Condo Association.  While there was a presumption in favor of arbitration, in light of the ambiguities, that presumption only attached after a trial court determined that a valid agreement to arbitrate existed.  No such valid agreement existed in this case as between the unit owner parties, according to the appellate court.

While upholding the trial court’s determination that Plaintiff’s claim against the Condo Association was properly dismissed because it was subject to arbitration, the appellate court held that the Condo Association Bylaws did not constitute an enforceable agreement to arbitrate the inter-unit owner dispute.  As such, the appellate court reversed and remanded that aspect of the case for further proceedings. 

Law Day-The Great Equalizers

Recently, Pope Francis tweeted: “Inequality is the root of social evil.” I would like to go a little further and suggest that in the United States, lawyers are the great equalizers. Our Constitution was drafted, in part, by lawyers seeking to avoid the dangers of a monarchy and an overzealous government. Our Bill of Rights makes us unique and gives us not only rights, but responsibilities. In his speech at the Sorbonne on April 23, 1910, then former President Teddy Roosevelt, speaking most eloquently about the duties of citizens in a democracy, said, “To you and your kind much has been given, and from you much should be expected . . . no self-respecting individual, no self-respecting nation, can or ought to submit to wrong.”

Today, in this time of 24 hour news and 24/7 Internet bombardment of opinion and disinformation, there must be guardians of truth. Our Constitution sets forth the framework for finding the truth with rights, including but not limited to, free speech, due process of law, equal protection, counsel in criminal matters, and protection from illegal search and seizure. But this precious framework is worthless unless we have champions willing to stand in the breach and cry foul when these rights are abridged, either individually or against society as a whole. The list of legal championships is long, and in the history of the world unique to the United States of America: Marbury v. Madison, Brown v. Board of Education, and Gideon v. Wainwright are just a few examples. Each case was championed by a lawyer, who was not afraid to seek truth, justice and equality.

Just this week, the owner of the L.A. Clippers was banned from the NBA and fined $2,500,000.00 because of racist statements he made in a private conversation. The NBA may now try to take away his ownership of the team. Notwithstanding the despicable nature of his comments, the issue may come down to whether a citizen may be deprived of property as a result of a surreptitious private recording of his speech. He has the means to hire an army of lawyers to protect his property rights. But what about the aggrieved single mom who can’t support her family because of a deadbeat dad, the falsely accused indigent, or the individual who is the subject of racial, gender, age or religious discrimination? Who will take their cases? Most likely, it will not be an army of lawyers hired by a multimillionaire. No, it will be a solitary lawyer who takes seriously his or her oath “to preserve, protect and defend the Constitution of this State and of the United States . . . and to assist the defenseless or oppressed by ensuring that justice is available to all citizens. . . .” President Abraham Lincoln knew the trials and tribulations of a lawyer seeking justice, truth and equality. These lessons he learned so well were the foundation for his quest for equality for all Americans. Speaking on the issue of equality and the framers of the Constitution, he stated, “They meant to set up a standard maxim for free society which should be familiar to all – constantly looked to, constantly labored for, and, even though never perfectly attained, constantly approximated, and thereby constantly spreading and deepening its influence, and augmenting the happiness and value of life to all people, everywhere.”

I know of no greater honor in civilian society than the privilege of representing a client in pursuit of truth, equality and justice. We lawyers must always be willing to stand in the breach between lies and truth, injustice and justice, and inequality and equality. So, on this Law Day 2014, take stock in the words of Pope Francis, President Lincoln, and President Teddy Roosevelt. In our society, we lawyers are the great equalizers and we must fight social evil by “constantly” laboring for equality. If he were alive on this Law Day 2014, I think that President Roosevelt would be telling us: The credit belongs to the lawyer who is actually in the courtroom… who strives valiantly; who errs… who comes short again and again… who does actually strive to do the deeds…. who knows great enthusiasm… who spends himself or herself in a worthy cause… who at best knows in the end the triumph of high achievement, and who at worst, if he/she fails, at least fails while daring greatly, so that his/her place shall never be with those cold and timid souls who neither know victory nor defeat.

- See more at: http://abnormaluse.com/2014/05/law-day-the-great-equalizers.html#sthash.8f7mOvu0.dpuf

Managing Ethical Risks Part 8

Familiarity and complacency cause lawyers to withhold bad news and remain in cases from which they should withdraw.

It is difficult to get a new client in the door, and it is difficult to keep a good client for a long time. Frequently, a lawyer’s desire to preserve a long-standing attorney-client relationship will cause him not to share with the client information the lawyer believes may jeopardize that relationship. Such information may relate to a mistake, an adverse development, a bad result, the development of a conflict, or any number of other things.

 

Lawyers rationalize withholding such information from clients through the belief that they can fix the problem, that the problem will go away, or that the case could proceed to a successful conclusion without the client ever learning about the problem. A close, long-standing relationship with a client makes it especially difficult for a lawyer to pull the trigger on the ultimate, necessary resolution to some of these problems: withdrawal from the representation.

 

Although it is not possible to know how often lawyers withhold such information from clients, stay in cases from which they should withdraw, obtain successful outcomes, and the clients never learns about it, there are plenty of cases in which this plan did not work and actually made matters worse. This approach is also inconsistent with a number of ethical obligations lawyers owe their clients.

 

Withholding information is inconsistent with a lawyer's fiduciary duty of candor to the client. It deprives the client of the opportunity to make informed decisions about how to proceed in the case, including whether to continue to use the same lawyer or bring in a new one. It creates a conflict, in which the lawyer has placed his or her own interests ahead of the client's. The list goes on.

 

From a risk management perspective, it's a terrible approach. If the problem was the commission of malpractice, the lawyer will be in a far worse position having to defend a malpractice action in which she concealed the mistake then she would be if she had disclosed to the client and allowed the chips to fall where they may. Also, lawyers that try to fix their own mistakes in secret from the client, and stay in cases from which they should withdraw, frequently create evidence that is then used against them in ensuing malpractice cases.

 

Example: a plaintiff's attorney filed suit after missing the statute of limitations, did not tell the client, and attempted to "fix" the situation by claiming that an exception to the statute of limitations applied. While still in the case, he retained an expert who authored a report that supported a huge damages figure. The lawyer later lost on the statute of limitations issue, was sued for malpractice, and then had to attack the very damages calculations he procured.

 

A lawyer should not allow the duration and comfort of a close client relationship prevent the lawyer from withdrawing from a given representation when circumstances warrant.

Fourth Circuit Court of Appeals

 

Fourth Circuit Court of Appeals held that Homebuyers could not Recover Damages for Emotional Distress from Security Company for Racially-Targeted Arsons perpetrated by an Employee

In Antonio v. SSA Security, Inc., the United States Court of Appeals for the Fourth Circuit held that homebuyers who had not yet closed on their houses could not recover damages for emotional distress from a security company hired to protect their homes, even though the homebuyers’ houses were burned down by an employee of the security company because the homebuyers were racial minorities.  Writing for the Court, Circuit Judge Henry Franklin Floyd found dispositive the fact that the homebuyers only sought damages for emotional distress caused by learning that their homes had been burned down.  The Court held that, under Maryland law, Plaintiffs could not recover for emotional distress, absent certain exceptions that the Court held not to apply in this case.  The Court did, however, certify to the Maryland Court of Appeals a question of state law as to whether the Maryland Security Guards Act, MD. Code Ann., Bus. Occ. & Prof. § 19-501 rendered a security company strictly liable for the criminal acts of its employees, where the employee planned any part of his or her criminal actions while off duty.

Several homebuyers (“Plaintiffs”) contracted to purchase homes from U.S. Home Corporation and Patriot Homes, Inc. (“Developers”) in the Hunter’s Brooke neighborhood in the town of Indian Head, Maryland.  SSA Security, Inc. (“SSA”), a private security company, provided Hunter’s Brooke with security services from November 12, 2004, to December 6, 2004, during which time arsons destroyed many homes.  At the time, Defendant employed Aaron Speed (“Speed”) and William Fitzpatrick (“Fitzpatrick”) as security guards for the Hunter’s Brooke neighborhood.  Speed conspired with four (4) other men to burn down the houses owned by the Plaintiffs.  Speed targeted particular homes, including those that Plaintiffs had contracted to buy, because their purchasers were all racial minorities.  On the day of the arson, Fitzpatrick left his post before his shift ended, allowing Speed and his co-conspirators to set fire to Plaintiffs’ houses.  Of those affected by the arsons, only two (2) buyers had taken possession of their homes; the remaining homebuyers — Plaintiffs in this case — had yet to close on or take possession of their homes.  Therefore, Plaintiffs’ homes were still owned by Developers when the arsons occurred.

Plaintiffs sued multiple defendants, including SSA, asserting negligence claims and one (1) claim premised on a provision of the Maryland Security Guards Act, MD. Code Ann., Bus. Occ. & Prof. § 19-501.  In particular, Plaintiffs alleged that Section 19-501, which provides that “[a] licensed security guard agency is responsible for the acts of each of its employees while the employee is conducting the business of the agency,” id., rendered Defendant strictly liable for any actions of its security guards, including intentional torts.  The District Court for the District of Maryland entered summary judgment in favor of Defendant as to Plaintiffs’ negligence counts, and declined to certify Plaintiffs’ state law question of whether Section 19-501 imposed liability beyond the common law principles of respondeat superior.  Plaintiffs appealed.

The Fourth Circuit Court of Appeals affirmed the district court’s entry of summary judgment as to Plaintiffs’ negligence-based claims, but certified Plaintiffs’ question regarding the scope of the Maryland Security Guard Act to the Maryland Court of Appeals.  With respect to Plaintiffs’ negligence claims, the Court found dispositive the fact that Plaintiffs alleged only emotional injury, given that they did not actually own their homes at the time of the arson.  The Court recognized that, under Maryland law, a plaintiff cannot generally recover for emotional injury caused by witnessing or learning of negligently inflicted injury to his or her property, absent two (2) exceptions.  The first exception to this rule is where the plaintiff’s personal safety was in jeopardy; the Court noted, however, that Plaintiffs did not contend this exception applied.  The second exception is where the acts were inspired by fraud, malice, or like motives.  The Court ultimately held this second exception did not apply to Plaintiffs because Maryland law required a plaintiff seeking emotional damages under this exception to allege either notice of the mental distress on the part of the tortfeasor, or that the acts were calculated to cause mental distress.  Plaintiffs did not contend that Defendant’s actions were calculated to cause mental distress, and Plaintiffs failed to show that Defendant had any prior notice of Plaintiffs’ emotional injuries.  Furthermore, the Court found that Plaintiffs could not hold Defendant responsible for emotional injuries based on Speed’s malice because Plaintiffs’ injuries were not a foreseeable result of Defendant’s actions.

The Court also held that Plaintiffs’ question regarding the scope of the Maryland Security Guard Act should be certified to the Court of Appeals of Maryland.  The parties argued two (2) different interpretations of Section 19-501’s language, both of which would be determinative of whether Defendant could be liable for Speed’s intentional acts.  Plaintiffs argued that Section 19-501 rendered Defendant strictly liable, even for off-duty criminal acts of an employee, when the employee planned any part of the off-duty criminal acts while he or she was on duty.  Conversely, Defendant argued that the scope of Section 19-501 was only as broad as common law respondeat superior, under which Defendant could not be held liable for the criminal acts of its employee.  The Court acknowledged that Maryland law offered support to both positions.  Accordingly, the Court declined to interpret the statute, seeking the guidance of the Court of Appeals of Maryland. 

KEY WORDS: Antonio v. SSA Security, Inc., Maryland Security Guard Act, Damages for Emotional Distress

DESCRIPTION:  Fourth Circuit Court of Appeals held that homebuyers could not recover damages for emotional distress from security company.

SUMMARY:  In Antonio v. SSA Security, Inc., the Fourth Circuit Court of Appeals held that homebuyers could not recover damages for emotional distress from security company where an employee perpetrated racially-targeted arsons.

Submitted by:  Marisa A. Trasatti, Semmes, Bowen & Semmes at 410-576-4795.

Lead Liability Case Heads to a Jury in Mississippi

Simply poking holes in a defense expert’s analysis may be all you need to do to get your product liability case to a jury, at least in one state. Let’s hope this ruling is not a contagious trend.

In a recent product liability lawsuit stemming from the alleged ingestion of lead paint, the Mississippi Supreme Court has overturned a lower court’s decision to enter summary judgment for Sherwin-Williams, the defendant in the case. The case, Banks ex rel. Banks et al. v. Sherwin-Williams Co., No. 2012-CA-00880-SCT, 2014 WL 172121 (Miss. Jan. 16, 2014), was based on the allegation that five children ingested lead paint during their time at a Boliver County Head Start facility in the 1990’s. The plaintiffs claimed that playground equipment at the facility contained lead paint sold by Sherwin-Williams, which caused increased levels of lead in their bloodstream, resulting in injuries such as developmental deficiencies.

To prove their claim, the plaintiffs relied on evidence that between 1986 and 1991, Sherwin-Williams sold six gallons of red, yellow and orange lead paint to Boliver County Head Start. A later analysis of the paint on the playground showed red, green and yellow lead paint was present on the playground equipment at issue. Additionally, a former business manager for the facility testified that 99% of the paint used was purchased from Sherwin-Williams, and a former janitor testified to personally applying the lead paint to the equipment.

To counter the plaintiff’s allegations, Sherwin-Williams raised significant questions as to the credibility of the witnesses’ testimony, and produced an expert witness whose testimony showed that the chemical composition of the lead paint found at the facility did not match the paint formulas used by Sherwin-Williams.

The plaintiffs countered with their own expert witness, who did not perform any tests of his own, however did assail the credibility of the Defendant’s expert witness, claiming that his technique lacked any estimate of error, his work was not subject to peer review, and the results could not be tested.

Despite the lower court’s ruling of summary judgment in favor of Sherwin-Williams on the grounds that the plaintiffs failed to identify Sherwin-Williams’ paint as the product that caused their injuries, the Mississippi Supreme Court held that in light of all the evidence, a jury could reasonably infer that the paint at the facility came from Sherwin-Williams.

Relying on the rule that it is the duty of the jury, not the court, to weigh the credibility of witnesses, the Mississippi Supreme Court found that issues of material fact still existed, even despite the expert witness testimony claiming that the paint at the facility did not match the formula used by Sherwin-Williams.

In light of this ruling, litigators should be aware that having an expert witness simply refute an opposing party’s expert witnesses’ techniques and opinions, instead of performing any tests of his or her own, may be enough to defeat summary judgment in certain courts. While all cases hinge on their individual facts, the Mississippi Supreme Court has outlined the standard of evidence necessary for a case to go to the jury, and the standard does not appear to be overly stringent. The ruling in this case could also signal a move toward using expert witnesses simply to refute the findings of the opposing expert, without actually completing any scientific analysis. This is a dangerous trend as it is relatively simple to criticize an expert witness’ techniques or findings without completing comprehensive, independent tests. It will be important to assess if this is a trend that continues, or is simply a case-specific aberration.

SD SUPREME COURT ENFORCES EXCLUSION FOR PRE-EXISTING DAMAGE

The S.D. Supreme Court just handed down an insurer-friendly decision, Amco Ins. Co. v. Employers Mutual Casualty Co., 2014 SD 20 (April 16, 2014).  Policyholder argued that it was against public policy to exclude a preexisting loss that is unknown to the insured when the policy incepted. The court rejected the policyholder’s public policy argument and enforced the exclusion:

“EMC crafted a specific contract exclusion for ‘property damage’ that ‘commenced or which is alleged to have occurred, prior to the inception or effective date of this policy,’ whether the damage is ‘known, unknown, or should have been known’ by the insured.  Because EMC's policy provision is neither ‘prohibited by statute, condemned by judicial decision, nor contrary to any identifiable public morals,’ we see no indication that its exclusion violates public policy.”

This decision would be very helpful in the event that a policyholder sought coverage under a new policy for an old S.D. operation.

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