Thursday, August 22, 2013

The United States Court of Appeals for the Fourth Circuit Applies Contra Proferentum in Construing Contract Ambiguity

In Johnson v. Am. United Life Ins. Co., the United States Court of Appeals for the Fourth Circuit, applying the rule of contra proferentum (interpretation against the draftsman) reversed the United States District Court for the Middle District of North Carolina, at Greensboro, in its decision to deny Accidental Death and Dismemberment (AD&D) benefits to the widow of an insured. 

This case arises out of a single vehicle crash that claimed the life of Richard Johnson (“Mr. Johnson”).  Mr. Johnson, sustained fatal injury when he drove a vehicle owned by his employer while intoxicated, and was ejected from that vehicle.

Prior to his death, Mr. Johnson had participated in an employee welfare benefit plan and received life insurance and AD&D benefits through group policies issued by the American United Life Insurance Company (“American United”).  Following Mr. Johnson’s death, his wife Angela Johnson (“Mrs. Johnson”) received insurance benefits.  However, American United refused to pay any of the AD&D benefits.  Seeking to recover these AD&D benefits, Mrs. Johnson filed this action under the Employee Retirement Income Security Act (“ERISA”).  See 29 U.S.C. § 1132(a)(1)(B).  The district court affirmed American United’s denial of benefits concluding that Mr. Johnson’s death was the result of drunk-driving, and, was therefore, “anticipated and expected,” and, thus, not accidental, such that it was not covered by the AD&D policy.

American United argued that when an ERISA plan does not define “accident” or “accidental” with sufficient clarity, circuit precedent requires the use of the analysis used in Eckelberry v. ReliaStar Life Insurance CompanySee 469 F.3d 340, 343-346 (4th Cir. 2006).  Although the Court of Appeals acknowledged some factual similarities between the case at hand and Eckelberry, it rejected American United’s argument on grounds that Eckelberry did not establish “a per se rule that drunk driving injuries or fatalities can never be accidental.”  Further, the Court of Appeals noted that unlike the policy presently before it, the policy in Eckelberry defined “accident” in terms of foreseeability.  Finally, here, unlike in Eckelberry, the review is de novo and therefore, the decision is “not limited to considering only the reasonableness of the decision and reasoning of the claims administrator.”  Thus, the Court of Appeals was not bound to follow Eckelberry in defining “accident.”  The Court of Appeals went on to consider how the lower court used state law in defining “accident.” 

The Court of Appeals, although acknowledging that drunk driving “is reckless, irresponsible conduct that produces tragic consequences,” focused its decision on contract law and considered the language of the policy itself.  The Court of Appeals began by evaluating the plain language of the disputed provision.  The provisions of American United’s AD&D policy provided that American United would pay benefits "[i]f a Person has an accident while insured under the policy which results in a [covered] loss."  Although the policy defined “accidental death” as "death due to an accident, directly and independently of all other causes," the term "accident” was not defined.  When considering the meaning of “accidental,” within the context of Mr. Johnson’s policy, the Court of Appeals determined that there was an ambiguity.  Thus, the court applied the rule of contra proferentum and construed “the terms strictly in favor of the insured."  Wegner v. Standard Ins. Co., 129 F.3d 814, 818 (5th Cir. 1997).  

Given that the insurance policy at issue expressly enumerated its limitations on the payment of AD&D benefits, and did not include drunk driving in this list, included benefits for anyone who died while wearing a seatbelt but expressly excluded drunk drivers who died while wearing a seat belt, the ambiguous nature of the term “accident” since it is reasonably subject to multiple definitions, and the lack of definition of “accident” within the policy itself, the Court of Appeals applied contra preforentum and construed the policy in favor of the insured.  Ultimately the Court of Appeals concluded that a reasonable plan participant would have expected that a death, resulting from drunk driving, would be covered as an “accident” under the AD&D benefits.  Thus, the Court of Appeals reversed the lower court and remanded the case to award benefits to Mrs. Johnson.  

Thursday, August 15, 2013

Governor O'Malley appoints four new judges

Governor Martin O'Malley has appointed four new judges to the District Court of Maryland for Baltimore City.

The new judges are Nicole Klein, a former administrative law judge with the Office of Administrative Hearings; Martin Dorsey, a former public defender in Baltimore City; Mark Scurti, who was in private practice, specializing in bankruptcy and consumer protection law and Kevin Wilson, a former Assistant State's Attorney in Baltimore City.

For more information, follow this link:

Tuesday, August 13, 2013

Maryland Court of Appeals Declines to Impose Dram Shop Liability on Bar or Tavern Owners

In a 4-3 decision, the Maryland Court of Appeals recently declined to impose dram shop liability on the part of a bar or tavern owner.  The Court held that, absent a showing of a special relationship between the injured party or tortious actor and the bar, there is no duty owed by the bar to prevent harm inflicted by an intoxicated patron while not on the premises of the bar or tavern.

In this particular case, Michael Eaton was served and consumed approximately seventeen beers and three liquor drinks at Dogfish Head Alehouse.  The bar staff eventually refused to serve any more alcohol to Eaton, and offered to call him a cab.  Eaton refused cab service, opting, to drive from the bar instead.  While driving from the bar that evening, Eaton collided with a vehicle occupied by Plaintiffs, resulting in serious injuries to two parents and a child, and the death of another child.

After the Circuit Court for Montgomery County granted summary judgment for Dogfish Head Alehouse, but prior to consideration by the Court of Special Appeals, the Court of Appeals granted Plaintiff’s petition for certiorari to consider whether to adopt dram shop liability as a matter of Maryland law.

The Court of Appeals addressed the merits of Plaintiff’s appeal, focusing primarily on whether Dogfish Head had a duty to protect the Warrs from injury by an inebriated patron.  When determining liability for torts caused by third persons, the court stated that liability only exists when the entity sued had some control over the third party by virtue of some special relationship.  Similarly, without the existence of a special relationship between, or control over the third party, there can be no duty to a tortiously-injured person.  Because Warr did not assert the existence of a special relationship between Dogfish Head and themselves, the court concluded that they were owed no duty.

Plaintiff also argued that Dogfish Head owed a duty to refuse intoxicated persons due to the existence of a criminal statute containing similar language and intent.  For support, Warr cited numerous extra jurisdictional cases where state courts applied civil liability on the basis of an existing, similar criminal statute.  The court conceded that civil liability may be assigned on the basis of a criminal statute, but that this requires that the plaintiff show that the specific statute or ordinance be designed to protect a class of persons, which includes the plaintiff.  As the court pointed out, the criminal statute relied upon by Warr was designed for the “protection, health, welfare, and safety of the people” of Maryland.  Because this statute applied to the public in general, no special relationship or class was formed.  As such, no statutory civil duty existed.

In conclusion, the majority noted that the decision to impose civil liability to bar owners due to injuries caused by their intoxicated patrons involves significant public policy considerations that are better suited for the legislature.

In the future, the Maryland legislature may impose dramshop liability on bars and taverns in Maryland. For now, however, the highest court in Maryland has, again, said that bars and taverns are (typically) not liable for injuries caused off-premises by intoxicated customers.

Article Contributed by Derrick Dye 

Monday, August 5, 2013

Jury Returns Defense Verdict in Rear-end Collision Case

After one hour of deliberation, a Baltimore City jury returned a defense verdict in a case in which the Plaintiff alleged the Defendant rear-ended his vehicle.

The case, tried by RSRM partner, Andy Nichols, involved allegations that the Defendant negligently struck the rear of the Plaintiff's vehicle, allegedly causing injuries to the Plaintiff.  During the course of cross-examination, the defense was able to highlight several inconsistencies in the Plaintiff's trial testimony, contrasted with his deposition testimony and various documents.  Furthermore, the defense was able to impeach the Plaintiff's contention that he had not been involved in any subsequent accidents or suffered any subsequent injuries, by introducing a copy of a Complaint stemming from a motor vehicle accident that occurred approximately seven months after the rear-end collision.  By attacking the Plaintiff's credibility, the defense was successful in persuading the jury that the Plaintiff's testimony and evidence were insufficient to meet Plaintiff's burden of proof.

Friday, August 2, 2013

Clarification of the term "Unoccupied" in Insurance Disputes

In Khoshmukhamedov, et. al. v. State Farm Fire and Casualty Company, Izatullo Khoshmukhamedov and Zoulfia Issaeva (“Plaintiffs”) filed an action against State Farm Fire and Casualty Company (“State Farm”) because State Farm refused to pay Plaintiffs under their homeowner’s insurance policy for losses sustained when water pipes burst and flooded the Plaintiffs’ home while Plaintiffs were out of the country.  This action presents the issue of whether or not Plaintiffs’ home was “unoccupied” when the water damage occurred, such that, State Farm was not obligated under the homeowner’s insurance policy to cover the loss. 

In 2006 Plaintiffs moved into a home in Potomac, Maryland.  Plaintiffs insured their home with State Farm.  In October 2008 Plaintiffs left their Potomac home intending to return in February 2009.  Because Plaintiffs intended to return they left many personal items including a furnished home and car in the garage.  Prior to leaving, Plaintiffs made arrangements with their friend and translator, Mikhail Immerman (“Immerman”), and their neighbor, Khushi Kalotra, to monitor and care for their Potomac home.  In addition, before leaving Plaintiffs had their cable, television and telephone services turned off and Plaintiff Khosmukhamedov instructed Immerman to have the electricity disconnected by the power company.  Immerman informed Plaintiff Khosmukhamedov that the electricity had successfully been disconnected.  Plaintiff Khosmukhamedov believed that because the pump that supplied water to the Potomac home ran on electricity, once the electricity had been turned off water would not flow through the pipes in the home.  However, the water pump continued to receive electricity throughout the winter, and, at some point prior to February 6, 2009, the water pipes in the home froze and burst. 

Immerman acting as the Plaintiffs’ representative contacted State Farm.  State Farm denied Plaintiffs’ claim on grounds that the home was “vacant/unoccupied” at the time of damage, and, as such, the damage was not a covered loss. 

Plaintiffs challenged State Farm’s denial of coverage on grounds that the word “unoccupied” is ambiguous, and, therefore, should be construed against State Farm.  However, the United States District Court for the District of Maryland rejected this argument.   In support the District Court cited two Court of Appeals of Maryland cases, Agricultural Insurance Co. of Watertown, N.Y. v. Hamilton, 33 A. 429 (1895) and Norris v. Connecticut Fire Insurance Co. of Hartford, 80 A. 960, 961 (1911).  These cases, both containing “vacant or unoccupied” language, ruled that the meaning of the word “unoccupied” in an insurance contract is not ambiguous.  Thus, according to the District Court, “under Maryland law there can only be one interpretation of the word ‘unoccupied’ as written into an insurance contract.”  The District Court went on to do a factual comparison of the facts in the case before it to the facts in Hamilton and Norris.  This comparison included a discussion of how an individual’s “intent to return” is not relevant in determining whether or not a home is unoccupied and further how leaving behind a substantial amount of personal property does not render a home occupied.

            Ultimately the Court concluded that in light of Plaintiffs’ extended absence from the home, the utilities being shut off, the infrequent visits to the home and lack of overnight stays, there was no genuine dispute of material fact with respect to whether or not the home was occupied when the home sustained water damage as a result of burst pipes, and, as such, the Court granted Summary Judgment in favor of State Farm.