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Assuredly Clear? A Crash Course on the Sudden Emergency Doctrine
The Pennsylvania Motor Vehicle Code requires that
[n]o person shall drive a vehicle at a speed greater than is reasonable and prudent under the conditions and having regard to the actual and potential hazards then existing, nor at a speed greater than will permit the driver to bring his vehicle to a stop within the assured clear distance ahead.
75 Pa.C.S.A. s. 3361 (West 2006). While the statute is titled “Driving vehicle at safe speed,” it is also referred to as the “assured clear distance ahead” rule. The well-established assured clear distance ahead rule requires the operator to keep his automobile under such control so that he can always stop within the distance the he can clearly see. Levey v. DeNardo, 725 A.2d 733 (Pa. 1999). It means only what it says, i.e., clear distance that is assured or can be reasonably depended on, not guaranteed. Turner v. Smith, 346 A.2d 806 (Pa. Super. 1975). The Supreme Court, while generally agreeing with Superior Court decisions announcing that the assured clear distance ahead rule generally applies to static or essentially static objects,1 does not believe the rule to be that inflexible. Lockhart v. List, 665 A.2d 1176, 1182 (Pa. 1995). The Court has held that the distinction between a moving or static obstacle is rendered meaningless where the evidence, at least arguably, suggest either that the driver would not have seen the obstacle in time to avoid a collision and/or would not have reasonably foreseen the occurrence of the obstacle, even if prudent.” Id. at 1182-83.
While the assured clear distance rule generally applies to static or essentially static objects, the sudden emergency doctrine generally, but not exclusively, has been applied to “moving instrumentalities unexpectedly thrust into the driver’s path.” Lockhart v. List, 665 A.2d 1176, 1182 (Pa. 1995). The “sudden emergency doctrine” is available as a defense to a motorist who suddenly and unexpectedly finds himself confronted with a perilous situation that permits little or no opportunity to apprehend the situation and act according. Id. The purpose behind this doctrine is to lessen the standard of care for an operator confronted with such a sudden and unforeseeable circumstance because of the shortness of time in which to react. Id. However, the driver seeking to avail himself of the protection of the sudden emergency doctrine cannot be himself driving carelessly or recklessly. Id.
What is a sudden emergency? A sudden emergency which will render the assured clear distance ahead rule inapplicable may be a dust cloud, a moving object, a sudden blocking of the road, the sudden swerving of other vehicles or blinding lights. Unanagst v. Whitehouse, 344 A.2d 695 (Pa. Super. 1975). A sudden fog may also qualify as a sudden emergency where the driver’s actions, including turning down the radio, dimming high beams of headlights, and letting up on the gas pedal, supported the inference that she reacted upon encountering dense fog. Dickens v. Barnhart, 711 A.2d 513 (Pa. Super. 1998) app. den. 729 A.2d 1129 (Pa. 1998). In addition, it has been held that a jury instruction on the sudden emergency doctrine was proper where a motorist struck the car in front of him when another vehicle abruptly turned into the path of the first car and caused a collision. Levey v. DeNardo, 725 A.2d 733 (Pa. 1999). In this case, the defendant, traveling behind the plaintiff, applied his brakes but his car began to skid on the wet surface of the roadway. Id. The court found that a jury instruction on the sudden emergency doctrine was appropriate, as there were no facts to suggest that collision between the first and second drivers was caused by the second driver’s own negligence. Id. at 737.
The sudden emergency doctrine should be pleaded as an affirmative defense in New Matter, and the issue is presented to the jury in the form of a jury instruction. See Pa. S.S.C.J.I. 3.18. If the evidence does not conclusively establish that an emergency situation existed, wholly independent and not created by plaintiff’s own act of negligence or recklessness, the issue must be submitted to the jury. Stacy v. Thrower Trucking, Inc., 384 A.2d 1274 (Pa. Super 1978). An instruction on the sudden emergency doctrine may also be given in a negligence action concurrently with an instruction on the assured clear distance ahead rule if the facts do not conclusively establish the existence of a sudden emergency. Cunningham v. Byers, 732 A.2d 655 (Pa. Super. 1999).
What is clear is that it is appropriate to instruct the jury on both the assured clear distance ahead rule and the sudden emergency doctrine, regardless of whether an obstacle is stationary or moving, if there is any evidence to suggest that an emergency situation existed.
Must An Insurer File A Petition Showing Good Cause
To Obtain A Medical Examination?
On January 14, 2009, in the matter of Celeste Williams vs. Allstate Insurance Company, E.D. Pa., Civil Action No. 08-3031, Senior U.S. District Judge Ronald L. Buckwalter issued an Opinion/Order opining that the contractual provision in Allstate’s policy requiring an insured to submit to a medical examination is enforceable, despite Section 1796 of the Pennsylvania Motor Vehicle Financial Responsibility Law (75 Pa.C.S.A.§1796) which gives the court the power to issue an order compelling a person to submit to a mental or physical examination by a physician only “upon motion for good cause shown."
The Williams case arose out of a motor vehicle accident on December 28, 2006. The Plaintiff was driving a vehicle insured by Allstate when she struck a deer. She claimed that her low back injuries which caused nerve damage which allegedly led to a functional bowel obstruction and to her complete disability due to the unpredictability of her bowel movements thereafter. Allstate initially paid for the neck and back treatment provided by her chiropractor and for her work loss. However, Allstate did not pay for any of the GI treatment, because an orthopedic examination concluded that her main problem was her chronic constipation, on which he was not qualified to opine.
Thereafter, Plaintiff retained counsel to represent her. Allstate then requested that Plaintiff attend a physical examination by a gastroenterologist. Plaintiff notified Allstate that she would not attend the examination. Allstate thereafter stopped payments of her work loss benefits and continued to deny payment of her outstanding GI medical bills. Before doing so, Allstate had not: (1) produced a medical report from any physician, which either refuted or even questioned the reasonableness and necessity of her GI treatment; (2) filed a petition to compel a medical examination, particularly by a gastroenterologist; or (3) contacted either Plaintiff’s counsel or her doctor to request additional documentation and/or an opinion on casual relationship between the accident and her GI treatment.
Plaintiff then proceeded to file a Complaint in the Bucks County Court of Commons Pleas. Allstate then removed the action to Federal Court, and filed an Answer and Counterclaim for Declaratory Judgment. In the Counterclaim, Allstate alleged that the Policy explicitly provided that, “[t]he [insured] shall submit to mental and physical examinations by physicians selected by [Allstate] when and as often as [Allstate] may reasonably require.” An endorsement to the policy further provided that “[n]o one may bring an action against [Allstate] in any way related to the existence or amount of coverage, or the amount of loss for which coverage is sought, under Part 2 – First Part Benefits Coverage, unless there is full compliance with all policy terms….” Thereafter, Allstate filed a Motion for Judgment on the Pleadings on the Counterclaim seeking a ruling that plaintiff’s first party medical benefits claim under the policy was barred by her non-compliance with the policy.
In ruling upon Allstate’s Motion, Judge Buckwalter found that there was a conflict in Pennsylvania law over the interplay between such policy provisions and Section 1796 of the MVFRL. Judge Buckwalter fashioned the question presented as “whether an insurance policy that permits an insurer to demand reasonable examinations of its insured as a condition precedent to coverage is valid and enforceable in light of section 1796(a) of the MVFRL.” Judge Buckwalter reasoned that, since there is no decision from the state’s highest court directly on point, he had to predict how that Court would resolve the issue and, thus, proceeded to review prior case precedent.
In 1980, in Fleming v. CNA Ins. Co., 597 A.2d 1206) the Pennsylvania Superior Court ruled that an insurer providing medical benefits to insureds following an automobile accident did not have to establish good cause, because the policy gave the insurer the right to order the examination without establishing good cause. The Fleming Court ruled such policy provisions are valid and do not conflict with the MVFRL’s requirement to obtain a court order.
By contrast, Plaintiff argued that the Fleming decision had come under scrutiny in other cases. In a pair of decisions, Judge R. Stanton Wettick, Jr. of the Allegheny County Court of Common Pleas ignored Fleming and ruled that contractual provisions requiring an insured’s submission to medical examinations as a condition precedent to benefits are unenforceable. In Erie v. Dzadony, 39 Pa. D. & C. 3d 33 (Alleg. CCP 1986), Judge Wettick reasoned that, since section 1796 specifically required a petition showing good cause, a contractual clause allowing an insurer to unilaterally demand such an examination was inconsistent with the insurer’s obligation to pay benefits whenever the insured submitted reasonable proof supporting his or her claim. Similarly, in Nationwide Ins. Co. v. Hoch, 36 Pa. D. & C. 4th 256 (Alleg. CCP 1997), Nationwide petitioned to compel an independent medical examination under both section 1796 and the insurance policy. Judge Wettick cited extensively from his decision in Dzadony and, thus, deemed the contract provision unenforceable. Judge Wettick interpreted the Fleming case as having left unanswered the question of whether such policy provisions are void as unconscionable or as against public policy.
In rejecting the Plaintiff’s reliance on Hoch, however, Judge Buckwalter found that Fleming “has never been overruled, rejected, criticized, or meaningfully distinguished by any Pennsylvania court.” He further noted that no Pennsylvania appellate court, or any court for that matter, had either affirmatively cited the holding in Hoch or rejected it as erroneous. Recognizing that his task his task was not to resolve the apparent inconsistency in the law, “but to predict how the Pennsylvania Supreme Court would decide the issue”, Judge Buckwalter opined that “based on the current state of the law in Pennsylvania, this Court predicts that the Pennsylvania Supreme Court would find that a contractual provision, which requires an insured to submit to reasonable medical examinations as a condition precedent to insurance coverage, is enforceable, notwithstanding section 1796 of the MVFRL.” 1
Can an Insurer Be Held Responsible for an Insured’s Criminal Restitution?
An Analysis of Brethren Mutual Insurance Company v. McKernan
In Brethren Mutual Insurance Company v. McKernan, 961 A.2d 205 (Pa. Super 2008), the Superior Court addressed the issue of whether Pennsylvania public policy prohibits the use of insurance coverage to pay for criminal restitution. In affirming the lower court’s decision, the Court held that a convict, in the context of a criminal litigation, cannot utilize a policy of insurance to cover a restitution order.
By way of background, on February 1, 1999, Cynthia McKernan was involved in an argument with her boyfriend, Joseph Gardner. During that argument, McKernan grabbed a knife, and in an effort to scare Gardner away from her, swung it. Unfortunately, the knife struck Gardner, resulting in his death. Following a jury trial, McKernan was convicted of reckless endangerment and simple assault. The trial court imposed a sentence that included, among other things, a restitution order in the amount of $5,190.00 (equal to the cost of the decedent’s funeral expenses).
Following the conviction, the decedent’s estate and minor children filed a wrongful death and survival action against McKernan. The suit alleged that McKernan negligently and recklessly caused decedent’s death. Subsequently, McKernan’s insurer, Brethren Mutual Insurance Company, filed a declaratory judgment action seeking a declaration that it had no obligation to defend or indemnify McKernan due to her intentional conduct. The trial court denied Brethren’s motion for summary judgment on this issue, stating that McKernan’s convictions were based upon negligent and reckless conduct. By way of denying Brethren’s motion for summary judgment, the trial court held that Brethren had a duty to defend and provide coverage to McKernan in the civil action.
Eventually, the wrongful death and survival action resolved without exhausting the Brethren policy limits. A dispute arose, however, when McKernan filed a counterclaim to Brethren’s declaratory judgment action seeking reimbursement for the $5,190.00 she paid to the estate pursuant to the restitution order. Brethren responded to the counterclaim with a motion for summary judgment which was granted by the trial court. McKernan appealed to the Superior Court.
On appeal, the Superior Court characterized the issue to be resolved as follows: “whether an insured may seek reimbursement against his insurer for a criminal restitution award resulting from a criminal prosecution?”
In reviewing the issue, the court noted that an order of criminal restitution is imposed for its effect on the defendant. “It is meant to help rehabilitate a convict by impressing upon him, in some degree, the scope of the damage inflicted by his criminal conduct.” The proposition that a third party insures against the ordered criminal restitution would defeat this purpose entirely. Furthermore, a finding of coverage under these circumstances would place the insurer in a position where it could not “vindicate its own rights under the insurance policy,” as it would be unable to exercise its rights to defend, choose counsel or settle the action as provided in the policy.
In light of the above, the Superior Court affirmed the trial court and held that a convict, in the context of criminal litigation, cannot utilize a policy of insurance to cover a restitution order.
Section 1722 Held To Preclude Double Recovery Of Third Party And Uim Benefits
After a seemingly long line of decisions beginning with Panichelli v. Liberty Mutual in 1996, Carroll v. Kephart in 1998, Ricks v. Nationwide in 2005, and Tannenbaum v. Nationwide in 2007 where the Collateral Source Rule seemed to win at every turn, on September 23, 2009 the Superior Court limited that trend and reaffirmed the legislative intent underlying Section 1722 of the MVFRL by enforcing the preclusion against double recoveries with a common sense approach.
In Pusl v. Means and G & J Welding and Machine Company, ___A.2d ___, 2009 PA Super 192 (Pa. Super. 2009), the Superior Court affirmed the trial court’s decision to reduce a plaintiff’s $100,000 jury verdict against the tortfeasor by the $75,000 in UIM benefits the plaintiff recovered before trial. In doing so, the Court rejeced the procedural and collateral source arguments advanced by plaintiff, and affirmed the entry of judgment for plaintiff in the sum of only $25,000.
The Pusl case arose from a 2002 car accident. Plaintiff recovered $75,000 from her underinsured motorist carrier prior to the jury trial in the third party action. In the subsequent jury trial, the jury awarded Plaintiff $100,000 against the tortfeasor. The prior UIM settlement was not admitted as evidence at the trial and, therefore, the jury was unaware of the prior payment and could not have taken it into consideration when arriving at a damage award. In post trial motions, defendant successfully sought to mold the verdict with a credit or set-off of the UIM benefits previously received.
Plaintiff appealed based upon the trial court’s decision to allow defendant to amend his New Matter after the verdict, thereby enabling defendant to assert the prior UIM recovery and request the set-off. Plaintiff argued that allowing the set-off of the UIM recovery violated the collateral source rule. The Pennsylvania Association of Justice (formerly PaTLA) and the Pennsylvania Defense Institute filed amicus curiae briefs for their respective positions, which demonstrates the importance of the issue by both plaintiff and defense practitioners and carriers.
After analysis of the civil procedural rules regarding waiver of defenses and post trial relief, the Court ruled that defendant’s failure to assert the UIM settlement and seek a set-off prior to trial did not amount to a waiver, because the “requested relief, i.e., modification of the verdict to preclude double recovery, were simply not available to be raised in pre-trial proceedings.” The Court reasoned that obviously, defendant could not have predicted the amount of the jury award, nor could defendant have “foreseen that Appellant [plaintiff] would be in a position to procure a double recovery...” or otherwise possess a set-off defense before the trial.
The Court’s ruling was premised upon two intertwined public policy considerations: the policy against a person recovering twice for the same injury, and the policy that a tortfeasor should be fully liable for the damages he caused notwithstanding an injured party’s receipt of benefits from a collateral source - the so called Collateral Source Rule. The Court reasoned that Section 1722 of the MVFRL was enacted precisely to serve the former policy and was designed to prevent double recovery of first party benefits, including UIM benefits, in third party tort actions. Recovery of both the $100,000 jury verdict and the $75,000 UIM settlement would result in the prohibited double recovery of first party benefits.
Regarding the latter public policy that a tortfeasor should be fully liable for the damages he caused, the Court, citing Johnson v. Beane, 664 A.2d 96 (1995), recognized prior case precedent holding that “when an injured party is fully compensated for a particular loss by her underinsurance carrier, her right to sue the tortfeasor is extinguished.” Similarly, here, plaintiff’s right to sue the tortfeasor was limited to that amount over the $75,000 amount she already recovered from the UIM carrier, which then possessed the right of subrogation to recover said amount via suit against the tortfeasor. In a footnote, the Court supported its reasoning by noting that the public policy that a tortfeasor pay for the damages caused is unaffected by whether the UIM carrier ultimately pursues subrogation or not.
Products Liability Update: Will the Pennsylvania Supreme Court adopt the Restatement (Third) of Torts?
Currently, the Pennsylvania law of strict product liability is based on §402A of the Restatement (2d) of Torts. Under Pennsylvania law, a manufacture/supplier of a product is the guarantor of its safety. The manufacturer/supplier is liable for any harm that a defect in its product was a substantial factor in bringing about the harm. A defect may be found where the product left the manufacturer and supplier’s control lacking any element necessary to make it safe for its intended use or possessing any feature that rendered it unsafe for the intended use. Intended use includes any reasonably foreseeable use or misuse of the product. Up until now, Pennsylvania law has only extended to “intended” users of the product.
In the case of Phillips v. Cricket Lighters, 841 A.2d 1000 (Pa. 2003), a child was injured by a cigarette lighter that was not equipped with known safety features. The Pennsylvania Supreme Court stated that in order for a plaintiff to bring a claim for strict liability based on defective design under 402A, he/she must establish that the product was unsafe for its “intended user”. Accordingly, the Court held a child is not an intended user of a cigarette lighter.
However, that may change. In a significant product liability opinion published recently, a three judge panel of the United States Court of Appeals for the Third Circuit predicted that Pennsylvania would adopt the Restatement (Third) of Torts, opening a new door for plaintiffs and strict liability cases. In the case of Berrier v. Simplicity Mfg., No. 05-3621 (3rd Cir. April 21, 2009), the Federal Appellate Court ruled that a “bystander” plaintiff can pursue a strict liability claim against a manufacturer to recover for injuries that occur while a third party actually operated the product.
Berrier involved negligence and strict liability claims arising from a lawn mower accident. Ashley Berrier, a minor, was injured when a riding mower that was being operated by her grandfather backed up over her left foot resulting in a traumatic amputation. The trial court reasoned that the mower was intended to be operated only by an adult and was designed accordingly. The blades could be disengaged by use of a lever on the side of the control panel. Adequate instructions were provided to clearly warn against operating the mower while anyone was within the area of operation. However, the mower, manufactured by Simplicity, was not equipped with a known safety device that prevented the blades from operating when the mower was placed in reverse. The utility of a “no mow in reverse” feature and a roller barrier at the rear of the blade deck, was not added to Simplicity mowers until sometime later. At the conclusion of discovery, Simplicity filed a Motion for Summary Judgment premised on current Pennsylvania strict products liability law which does not permit recovery for injuries for anyone other than the “intended user” of the product. See Phillips.
On appeal, the Third Circuit first tried to certify the question of whether a mere bystander was entitled to recover under a strict liability theory to the Pennsylvania Supreme Court. However, the Pennsylvania Supreme Court declined the invitation in 2008. So, the Third Circuit pronounced that in the absence of controlling authority, it was going to predict how Pennsylvania’s highest court would decide the case at hand.
The Third Circuit held that Pennsylvania would adopt §1 and §2 of the Restatement (Third) of Torts for strict liability matters, therefore affording bystanders a cause of action which until now was limited to only “intended users” of a product. The Court reasoned that the Pennsylvania Supreme Court was ready to adopt the Restatement (Third) of Torts, “which does not limit a strict liability cause of action to the “user or consumer”, and broadly permits any person harmed by a defective product to recover in strict liability.”
However, we may soon see if Berrier will remain the “law of the land” for strict liability cases defended under Pennsylvania law. At this time, the Pennsylvania Supreme Court has before it the certified question of whether to apply the Restatement (Third) of Torts in the case of Bogosh v. I.U. North America, 941 A.2d 897 (Pa.2008).
The Third Circuit has opened the door to a new class of plaintiffs in Federal Court. It is quite possible that a significant shift in the law applicable to products liability cases under Pennsylvania law could be coming soon as well, depending on how the Pennsylvania Supreme Court decides Bogosh.
Forry Ullman Obtains Defense Verdit In Post-Koken Uim Jury Trial In Philadelphia County
By Karl L. Stefan, Esquire
On Tuesday, March 22, 2010, a Philadelphia Common Pleas jury entered a defense verdict in the first Post-Koken decision in Philadelphia County involving Progressive Insurance in the case of Horwitz v. Progressive Halcyon Insurance Company. Karl Stefan, Esquire and Leonard Sabato, Esquire acted as counsel for Progressive.
This case involved an underinsured motorists claim against Progressive Halcyon Insurance Company only, since plaintiffs had previously settled their action against the tortfeasor for his liability limits of $15,000.00.
The case was tried to a jury pursuant to a Binding Agreement between the parties wherein it was agreed that all medical evidence would be submitted by way of records and reports, in lieu of live testimony. The Binding Agreement also provided for a cap on damages and the waiver by both parties of any right of appeal from the jury’s decision.
At trial, the jury was advised that the lawsuit involved an underinsured motorists action commenced by the plaintiffs against Progressive. However, the jury was not provided with any information regarding premiums paid, the amount of liability coverage available to or recovered by the plaintiffs, or the limits of underinsured motorists coverage under the Progressive policy.
Progressive stipulated to liability on the part of the tortfeasor, and the case was therefore litigated only on the issues of causation and damages. Following a two-day trial, the jury entered a verdict in favor of the defendant, finding that the accident was not a factual cause for the injuries/damages claimed by the plaintiffs. Progressive chose not to obtain an IME of the husband-plaintiff. Notwithstanding plaintiffs’ arguments that the injury was uncontroverted, the jury still found that the accident was not the cause of any injuries to plaintiff. For any questions or further details regarding this important decision, please contact Karl L. Stefan, Esquire.
Impact of the Severability Clause On Excusionary Language
Under Pennsylvania Law
Lurking within most insurance policies issued in the Commonwealth of Pennsylvania is a dreaded “severability clause”; the clause which provides that: “[t]his insurance applies separately to each insured.” What does it mean? What effect does it have on my policy’s coverage(s)? Why is it even in my policy? The purpose of this Article is to provide an answer to each of these questions.
It appears the severability clause originated to offset coverage in commercial automobile insurance policies which denied coverage for claims made by employers for the injuries of an employee, on the grounds that workman’s compensation insurance provided such reimbursement. See Windt, Allan D., 2 Insurance Claims and Disputes 5th §11:8 (2009). Since this origin, however, the severability clause has now worked its way into most insurance contracts, but the question remains, why? This question, along with other related questions, has been answered by the Courts in one of two ways: the majority view and the minority view.
At this time, a minority of jurisdictions hold that the severability clause acts exclusively to require that each insured on a policy be treated as having separate coverage under the policy. See, e.g., Worcester Mut. Ins. Co. v. Marnell, 398 Mass. 240 (1986).1 Thus, should one insured commit an act excluded by the policy, coverage will not be denied to the other insureds under that same policy due to the severability clause. Id.
The minority view so holds even when the policy at issue contains exclusionary language otherwise evincing an intent to provide “joint” coverage to the insureds; such as exclusions precluding all coverage for the act of “any insured”, “an insured” or the like.2 Thus, under the minority view, the severability clause acts to convert exclusionary language otherwise evincing “joint” coverage, (i.e. “any insured” or “an insured”), into exclusionary language evincing “several” coverage, (i.e. “the insured”).3
Fortunately, the majority of jurisdictions which have considered these issues reject the flawed logic underlying the minority view.
As one might expect in light of the above, the majority view holds that the severability clause does not act to mandate that each insured on a policy be treated as having separate coverage there under. See, e.g., BP America, Inc. v. State Auto Prop. & Cas. Ins. Co., 148 P.3d 832 (Okla. 2005). Instead, the majority recognizes the rightful purpose of the severability clause, which is to afford each insured under the policy a full measure of coverage up to the policy limits.4 Id.
This majority view also holds that the severability clause has absolutely no effect on exclusionary language otherwise evincing “joint” coverage to the insureds. Id. The majority view is premised upon the following rationale, so eloquently stated by the courts of Oklahoma:
[T]o hold . . . [that the presence of a severability clause renders the language “any insured” or “an insured” ambiguous] would effectively nullify . . . [otherwise clear and unambiguous exclusionary language in the policy]. [Our courts] realize that . . . [affording] coverage [to one insured despite another insured having committed an excluded act] requires a tortured reading of the insurance agreement, [and requires] expanding liability beyond that bargained for by a reasonable person under the plain policy language. [Therefore, we hold that] . . . in the presence of an exclusionary clause utilizing the term[s] “any insured” [or “an insured”] , a claim made against any insured for conduct arising out of the specific conduct within the exclusionary clause, is barred. Failure to so hold results in the specific terms of the exclusionary language being overridden by a more general severability provision. Furthermore, it requires the court to ignore and treat as superfluous the term “any” [or “an”] in the policy language.[5]
BP America, 148 P.3d at 840-41 (citations omitted).
Now, for our regional readers, all of the above may beg the question: has Pennsylvania considered this issue and does it follow the majority view? That answer, while proving much more difficult to discern than this author anticipated, appears to be a yes.6
In two unreported Eastern District Federal Court cases, the Courts held that, under Pennsylvania law, a severability clause cannot act to modify the meaning of an otherwise clearly and unambiguously worded exclusionary provision. See North Wales Water Auth. v. Aetna Life and Cas., 1996 W.L. 627587 (citing Pennsylvania Mfr.’s Ass’n Ins. Co. v. Aetna Cas. & Sur. Ins. Co., 426 Pa. 453 (1967)(noting the somewhat convoluted rationale of this opinion); Strouss v. Fireman’s Fund Ins. Co., 2005 W.L. 2989309. Thus, in accordance with these opinions, it is submitted that insurers in the Commonwealth of Pennsylvania should take the position that “a severability provision will not alter the otherwise clear and unambiguous language utilized in an exclusionary provision; such as “an insured”, “any insured” and/or the like.7 See Pennsylvania Mfr.’s Ass’n Ins. Co., 426 Pa. 453 (1967).
However, given the less than clear opinions explaining Pennsylvania law on these questions, it is likely the effect of the severability clause on otherwise clear and unambiguous exclusionary language will be revisited again by our Appellate courts. The outcome of such a case, while open to possible educated speculation (likely favoring an outcome in line with the majority view), remains to be seen.
The Household Vehicle Exclusion Survives One Attack, Faces Another
By the slimmest of margins, the Pennsylvania Supreme Court has again upheld the “household vehicle exclusion” in a case which was vigorously contested not only by the parties, but also by the leading professional associations of the plaintiff and insurance defense bars. However, the exclusion is currently under attack in another case, in which the Supreme Court has not yet ruled on a Petition for Allowance of Appeal on a similar issue.
On June 22, 2009, a 4-3 majority of the Court in Erie Insurance Exchange v. Baker (No. 26 WAP 2008) affirmed the trial court’s grant of declaratory judgment in favor of Erie in a claim for underinsured motorist (UIM) benefits. Baker was injured while operating his motorcycle, which was insured by Universal Underwriters. He collected the tortfeasor’s liability limit and the full $15,000 UIM benefit from Universal. Baker also owned 3 vehicles which were insured by Erie with stacked underinsured motorist benefits of $100,000/person and $300,000/occurrence. When he sought to recover UIM benefits from his Erie policy, coverage was denied due to the “household vehicle exclusion” in the Erie policy, which made UIM coverage inapplicable where the accident occurred while the insured was “…occupying or being struck by a motor vehicle owned by [the insured] or a relative, but not insured for Uninsured or Underinsured Motorists Coverage under this policy.” Erie then successfully filed for declaratory judgment in Allegheny County, and this judgment was affirmed by the Superior Court in an unpublished memorandum opinion. The Supreme Court then granted a Petition for Allowance of Appeal in order to determine whether the household vehicle exclusion constituted an invalid denial of stacking in violation of §1738(a) of the Motor Vehicle Financial Responsibility Law.
Baker’s argument was that §1738(a) provides that “[t]he limits of coverages available under this subchapter for an insured shall be the sum of the limits for each motor vehicle as to which the injured person is an insured” unless the insured has executed a valid waiver of stacking. Since he had not executed a waiver, the household vehicle exclusion actually operated to deny him the right to stack the UIM coverage on his automobile policy over the UIM coverage on his motorcycle policy. Erie countered that language similar or identical to the household vehicle exclusion in its policy has been upheld by the Supreme Court each and every time it has been challenged. Erie relied on the long-accepted argument that it should not be responsible to extend UIM benefits for an accident that did not involve any vehicle it insured. Erie had not collected a premium with regard to the motorcycle, and had not taken such risks into account in calculating the premium it charged Baker.
Justice Greenspan, joined by Chief Justice Castille and Justice Eakin in an opinion with which Justice Saylor concurred, rejected Baker’s argument and held that “…the household exclusion … does not involve “stacking” at all” and instead described Erie’s exclusion as “…a valid and unambiguous preclusion of coverage of unknown risks.” The Court affirmed the Superior Court, which had affirmed the trial court’s entry of judgment in favor of Erie.
One might suppose that the Supreme Court’s holding in Baker, which is just the latest in a long, uninterrupted line of unsuccessful attacks on the household vehicle exclusion, would lay the matter permanently to rest. However, the Court has not yet determined whether it will consider a policyholder’s appeal in the case of GEICO v. Ayers (442 WAL 2008). In Ayers, the Appellant was injured when the motorcycle he was operating was struck by a truck, which then rolled over Mr. Ayers as he was lying in the street, causing additional injuries. Thus, the case involved two distinct accidents: the collision between the pickup and the motorcycle, followed by Ayers’ being run over by the pickup as he lay in the street. Ayers collected the liability limits applicable to the truck for each of the two accidents, and then made claims for underinsured motorist benefits under two policies he had purchased from GEICO. One policy covered two motorcycles owned by Ayers (including the one involved in the first accident), and the second insured his two pickup trucks. Ayers had never executed a waiver, so both policies were subject to stacking.
GEICO agreed that Ayers was entitled to stacked UIM benefits under both policies with respect to the second accident, which occurred while he was lying in the street, and therefore not occupying a vehicle. However, with regard to the initial collision between his motorcycle and the tortfeasor’s truck, GEICO invoked the household vehicle exclusion contained in the policy covering the trucks and denied UIM coverage under that policy, because the first accident occurred while Ayers was operating a vehicle (his motorcycle) which was owned by Ayers but not insured under the policy covering the trucks. GEICO then filed a declaratory judgment action in Allegheny County. The parties filed cross-motions for summary judgment, and the trial court granted Ayers’ motion and denied GEICO’s motion. On appeal, the Superior Court reversed the trial court and remanded with instructions that the trial court enter judgment in favor of GEICO. In an opinion penned by retired Senior Judge Colville and joined by co-panelist Judge Orie Melvin, the Court cited the 2006 Pennsylvania Supreme Court case of Craley v. State Farm, in which Justice Eakin opined in a concurring opinion that that the clause in the policy at issue in that case was “…similar to household vehicle exclusion clauses this Court previously has held enforceable. There is no reason, public policy or otherwise, to not enforce this exclusion.”
The Ayers Court went on to hold as follows: “the clear and unambiguous language of the household vehicle exclusion at issue in this case precluded Ayers from stacking the UIM coverage contained in his trucks’ policy on top of the UIM coverage contained in his motorcycles’ policy. The exclusion is not contrary to the MVFRL or any other discernable public policy.”
In a dissenting statement, Judge Musmanno wrote that because insurers routinely require motorcycles to be covered under separate policies from other vehicles, the household vehicle exclusion acts as an impermissible bar to inter-policy stacking in cases where the policyholder, like Ayers, had paid an additional premium for stacking and arguably expected to be able to stack his UIM benefits for all vehicles under both policies.
On September 12, 2008, Ayers filed a Petition for Allowance of Appeal which was opposed by GEICO. On February 18, 2009, the Supreme Court ordered that Ayers’ Petition be held pending the outcome of the Baker case. At the time of this writing (mid-December, 2009), there has been no further activity on the Supreme Court’s docket in Ayers.
What arguably differentiates cases like Ayers from cases like Baker is the fact that both of Mr. Ayers’ policies were underwritten by the same carrier. It may be anticipated that Mr. Ayers (and the plaintiff personal injury bar, which is monitoring the case and is expected to participate as an amicus curiae if Ayers’ Petition is granted) will argue that because GEICO underwrote both of the policies in the Ayers household, it cannot argue that it was unaware of the risks associated with Ayers’ operation of his motorcycle. Moreover, GEICO had collected premiums for stacked UIM coverage with respect to both policies.
It remains to be seen whether the Pennsylvania Supreme Court will entertain yet another challenge to the household vehicle exclusion in Ayers. If it does, the Court will presumably offer definitive guidance as to the enforceability of the household vehicle exclusion where one carrier has underwritten all of the policies in a single household.
Slip Sliding Away: Erosion of the Hills and Ridges Doctrine?
By David T. Bush, Esquire
In Harvey v. Rouse Chamberlin, LTD., et al, 901 A.2d 523 (Pa. Super. 2006), the Pennsylvania Superior Court issued a decision which appears erode the long-standing “hills and ridges” doctrine under Pennsylvania law, at least in the context of conditions created as a result of human intervention.
The seminal case in hills and ridges is Rinaldi v. Levine, 176 A.2d 623 (Pa. 1962), which held generally that there is no premises liability created by mere general slippery conditions on sidewalks. In Rinaldi, the Court found that in order to recover for a fall on ice or snow covered public sidewalk, the Plaintiff must prove: 1) that snow and ice had accumulated on the sidewalk in a ridges or elevations of such size and character as to unreasonably obstruct travel and constitute a danger to pedestrians traveling thereon; 2) that the property owner had notice either actual or constructive of the existence of such conditions; and 3) that it was the dangerous accumulation of snow and ice which caused the Plaintiff to fall. Absent proof of such facts, a plaintiff has no basis for recovery. Subsequent cases expanded the defense to other circumstances. The underlying rational for the rule which holds that the owner or occupier of land is not liable for mere general slippery conditions is that to “require that one’s walks be always free of ice and snow would be to impose an impossible burden in view of the climatic conditions in this hemisphere.”
However, the Harvey decision appears to depart from the rationale of the Courts in prior cases on this issue. Plaintiff Nancy Harvey was a resident of a development which was under construction. The roads of the development had not yet been dedicated and as such were privately owned by the developer, Rouse Chamberlin. Chamberlin had also contracted with the Co-Defendant, J. L. Watts Excavating, to provide plowing services in the development.
It had begun snowing the day before the accident in the early morning hours of January 21, 2001. After it had stopped snowing and roads had been plowed by Watts, the plaintiff decided to take a walk in the development. During her walk she had walked on the sidewalk but at times had to walk in the street as portions of the sidewalks had not been cleared. As the plaintiff approached the sidewalk in front of a particular home, she observed that there was snow on the sidewalk and decided to walk in the road which appeared to be clear and dry. While walking in the road, plaintiff slipped and fell on “black ice” and sustained injuries.
At the close of Plaintiff’s case, the defendants moved for a compulsory non-suit based on the hills and ridges doctrine, which was granted by the trial court because the plaintiff stated that she slipped on mere “black ice”. The trial court concluded that there was no evidence that the black ice was the result of human interference, but rather was a natural condition.
However, the Plaintiff appealed to the Superior Court. In reversing the trial court, the Superior Court placed heavy reliance on Bacsick v. Barnes, 341 A.2d 157 (Pa. Super. 1975), which held that the hills and ridges doctrine may only be applied “in cases where the snow and ice complained of were the result of an entirely natural accumulation following a recent snowfall. In contrast to the trial court’s findings, the Superior Court ruled that the evidence did show that the black ice condition was influenced by human intervention, (i.e., plowing and salting by the contractors) and, thus, was not the result of an entirely natural accumulation. For this reason, the Superior Court ruled that the trial court’s entry of a non-suit was error.
The impact of the Harvey decision on the hills and ridges doctrine is that a property owner who exercises reasonable care by attempting to treat a black ice condition may lose the benefit of the hills and ridges doctrine defense and will be forced to defend his/her actions by showing that reasonable care was exercised. By contrast, a property owner who does nothing to attempt to treat a black ice condition may still be able to successfully assert the hill and ridges doctrine as a defense. One could argue that the Superior Court’s decision can euphemistically be characterized as codifying the principal that “no good deed goes unpunished”. Thus, depending on the facts in a particular case, the Harvey decision could have a significant impact on defense strategy and the burden of proof.
Indemnification 101: The Basics of 'Holding Harmless'
In its simplest and most frequently-seen form, “indemnification” in the context of insurance describes the right of one party (the “indemnitee”) to be protected by a second party (the “indemnitor”) from liability to a third party. The right of indemnification may arise as a matter of common law or as the result of a formal, contractual agreement; a liability insurance policy, for example, is itself a common form of indemnification agreement.
Contractual indemnification is a means by which two parties to a common enterprise, such as a construction project, will allocate some of the risks that may naturally accompany the project. Often, what is actually being shifted is not the risk itself but the burden and expense of obtaining insurance to cover the risk.
There is no particular language specified by law to create a valid contractual indemnification agreement. However, the interpretation of an indemnity agreement is a question of law, Hutchinson v. Sunbeam Coal Corp., 519 A.2d 385, 390 (Pa. 1986), and a Pennsylvania court called upon to determine the validity of an exculpatory agreement will apply principles of strict construction. Any ambiguities will be construed against the party seeking indemnification. Brown v. Moore, 247 F.2d 711, 722 (3d Cir. 1957).
Ultimately, the goal is to determine as closely as possible the intentions of the parties. An issue often arises as to how broad the court’s inquiry should be in determining the parties’ intentions. If the indemnity clause itself is clear and unambiguous, then the intentions of the parties should be ascertained primarily by looking to the language used in the clause. Fallon Elec. Co., Inc. v. The Cincinnati Ins. Co., 121 F.3d 125, 127 (3d Cir. 1997). However, if the court determines that the indemnity clause is ambiguous, it may consider the circumstances under which the contract was signed. East Crossroads Ctr., Inc. v. Mellon Stuart Co., 205 A.2d 865, 866 (Pa. 1965). It should also be kept in mind that an indemnity clause is not ambiguous simply because the parties disagree about its interpretation. Metzger v. Clifford Realty Corp., 476 A.2d 1, 4 (Pa. Super 1984).
An indemnity agreement that seeks to protect the indemnitee from a loss due to his own negligence must be clear and unequivocal. The Pennsylvania Supreme Court first set forth this principle in the well-known case of Perry v. Payne, 66 A. 553 (Pa. 1907) when it stated as follows: “… a contract of indemnity against personal injuries, should not be construed to indemnify against the negligence of the indemnitees, unless it is so expressed in unequivocal terms. The liability on such indemnity is so hazardous, and the character of the indemnity so unusual and extraordinary, that there can be no presumption that the indemnitor intended to assume the responsibility unless the contract puts it beyond doubt…” Perry, 217 Pa. at 262, 66 A. at 557.
The Perry rule was revisited and updated in the case of Ruzzi v. Butler Petroleum Co., 527 Pa. 1, 588 A.2d 1 (1991). In Ruzzi, a property owner agreed to indemnify a renovation contractor "from any and all liability for claims for loss, damage, injury or other casualty to persons or property caused" by the project. The court held that this language was not specific enough to require the homeowner to indemnify the contractor against a claim arising from the contractor's own negligence. The court’s holding on this issue, which has come to be known as the Perry-Ruzzi Rule, was enunciated as follows: “We conclude that the only intent that can be gleaned from this document is that the parties did not intend to indemnify for acts of the indemnitee's negligence, since words of general import are used. We can discern no reason to abandon the Perry rule of contract interpretation which is still a valuable rule of construction, rooted in reason and authority…” Ruzzi, 527 Pa. at 9, 588 A.2d at 5.
What about the liability of an indemnitor for losses contractually assumed by the indemnitee? In Jacobs Constructors, Inc. v. NPS Energy Services, Inc., 264 F.3d 365 (3rd Cir. 2001), the United States Court of Appeals for the Third Circuit concluded that the Pennsylvania Supreme Court would apply the Perry-Ruzzi Rule, requiring that “…such an obligation must be stated plainly, in clear and unequivocal language.”
Conclusion
The state and federal appellate courts of Pennsylvania have made it clear that an indemnification clause or “hold harmless agreement,” to be enforceable, should clearly and unequivocally state the intentions of the parties at the time they entered into the agreement. Where the contract language is ambiguous, particularly as to the obligation to hold the indemnitee harmless from claims arising from his own negligence, the court is likely to find that the parties did not intend a right of indemnification at all, and that the indemnification provision is nothing more than an invalid exculpatory clause.
Discovery of Surveillance Evidence in Pennsylvania
In many personal injury cases, a decision is made to retain an investigator to conduct surveillance to ascertain whether the plaintiff is truly as injured as claimed. In order to weigh the risks and benefits of this decision, the defense lawyer and carrier should know the discovery impact under Pennsylvania law.
Under the case law, there is no question that the surveillance is highly relevant information on the claim of damages in a personal injury case as it relates to the physical condition, disability and credibility of the plaintiff. The courts have had to weigh the competing issues of avoiding unfair surprise with protecting the defendant’s impeachment material.
Discovery in the Pennsylvania federal courts is governed by Fed. R. Civ. P. 26 (b)(3) which allows discovery of trial preparation material where a party can show that there is a “substantial need” for the material and the party is unable, without undue hardship, to obtain the “substantial equivalent of the material” by other means. While surveillance video is regarded as work-product since it was obtained in anticipation of litigation, federal courts have generally found that the privilege is waived on account of the plaintiff’s substantial need for the evidence combined with the inability to obtain a substantial equivalent since the surveillance was taken at a particular time and place that can never be replicated. Snead v. American Export – Isbrandtsen Lines, Inc., 59 F.R.D. 148 (E.D. Pa. 1973).
However, the prevailing view in the federal courts is that there is no duty to turn over the actual surveillance to the plaintiff unless it will be introduced into evidence at trial. Gibson v. National R.R. Passenger Corp., 170 F.R.D. 408, 410 (E.D. Pa. 1997). In order to preserve the impeachment value of surveillance, the disclosure is permitted to be made after the plaintiff’s deposition. Snead, supra. If the surveillance will be used at trial, the plaintiff’s counsel must be given sufficient time to prepare a cross-examination, if desired, of the investigator with regard to the accuracy and completeness of the evidence.
In the majority of times, the surveillance evidence will be inconclusive, or worse, will corroborate the plaintiff’s claims. Where this occurs, the issue becomes whether the material must still be disclosed and/or produced to opposing counsel. In either case, the federal work-product doctrine bars discovery. Gibson , 170 F.R.D. at 410. As stated by the Court in Snead, “The only time there will be substantial need to know about surveillance pictures will be in those instances where there would be a major discrepancy between the testimony the plaintiff will give and that which the films would seem to portray.” Snead, 59 F.R.D. at 151. The information contained in the surveillance – facts about the extent of plaintiff’s medical condition and abilities – is readily attainable from the plaintiff’s own testimony. Accordingly, where the surveillance will not be played at trial, the intrusion into work product is not upheld by the federal courts.
In contrast to these well-developed federal court standards, the Pennsylvania state court decisions on the discoverability of surveillance evidence remains unsettled. Pa.R.C.P. 4003.3 is a more relaxed standard than the federal rule, and generally provides that work product is discoverable, with some exceptions not applicable to surveillance video. Therefore, while the federal court decisions focused on the “substantial need” of the plaintiff to obtain the surveillance, the question in Pennsylvania state court is merely whether the surveillance is discoverable. Under the broad standard of Pa.R.C.P. 4003.1, surveillance in a personal injury case is discoverable. Morganti v. Ace Tire & Parts, Inc., 2004 W.L. 3304656 (Pa. C.P. Allegheny Dec. 28, 2004).
In Pennsylvania courts, before surveillance evidence is admitted into evidence at trial, the existence of the surveillance must be disclosed in response to interrogatories on the subject, and the production is required only after the plaintiff’s deposition. Id.; Bindschultz v. Phillips, 771 A.2d 803 (Pa. Super. 2004). The failure to turn over the surveillance in a timely matter after the plaintiff’s deposition will result in preclusion of the evidence at trial. However, there have been no cases ruling on whether the surveillance must be produced, even if there is no intent to use the material at trial.
In sum, there is consensus in the state and federal precedent that if the surveillance will be used at trial, a copy must be timely supplied to opposing counsel, but it does not need to be disclosed in discovery until after the plaintiff’s deposition. Defense counsel is permitted to fully depose the plaintiff regarding his or her limitations and injuries prior to the disclosure and/or production of any surveillance materials. The discovery obligations are not yet clear at the state court level where there is no intent to use the surveillance at trial. For that reason, especially at the state court level, defense counsel and their carriers, should ensure that the case is appropriate for surveillance and should carefully monitor and supervise the investigator’s activities to ensure that a record is not created which will have to be produced in discovery.
Fibromyalgia: The Invisible Syndrome That Only Some Plaintiffs’ Experts Can See!
In the realm of personal injury litigation, over the years, individuals involved in traumatic events have been diagnosed with numerous injuries and disorders that often cause one to wonder just how such an injury could be caused by an accident. TMJ syndrome was the rage of the 1980’s, followed by injuries such as thoracic outlet syndrome and brachial plexus syndrome. While causation may be at issue, the diagnoses of such conditions are based on specific findings on clinical examination and diagnostic testing, thus rendering the opinions of those medical experts who diagnose their patients with these injuries or conditions as admissible at trial.
In recent years, defense counsel have come up against a growing number of personal injury claimants who allege to have constant, debilitating pain throughout various parts of their bodies, yet there is no objective evidence to support their complaints. These cases involve Plaintiff’s who are diagnosed with the syndrome of fibromyalgia.
In such cases, generally, a Plaintiff will complain of widespread pain throughout the body but often, there will be complaints of a number of other symptoms that may include stiffness, a decreased pain threshold, headaches, fatigue, and non-restorative sleep. Fibromyalgia appears to be a “rule out” form of medical diagnosis, usually made by physiatrists, which is based entirely on the subjective complaints of the patient. If diagnostic testing fails to indicate objective evidence that would assist a physician in arriving at a diagnosis, a diagnosis of fibromyalgia will be offered by the physician if a patient demonstrates tenderness on palpation of at least 12 of 18 recognized sites. The challenge to defense counsel in cases involving a Plaintiff with a diagnosis of fibromyalgia is not just trying to disprove that Plaintiff actually suffers from fibromyalgia, but also in attempting to convince a trial judge not to admit the treating physician’s opinion relating the diagnosis to a traumatic event into evidence.
When reviewing articles discussing fibromyalgia, one finds comments such as, “The causes of fibromyalgia are unknown, but there are probably a number of factors involved”, “While the underlying cause or causes of fibromyalgia still remain a mystery, ….” and “Fibromyalgia remains an elusive syndrome. Even experts on the illness do not know why fibromyalgia occurs or what causes it.” In short, there is presently no general consensus in the medical community as to what causes fibromyalgia. Thus, if there is no consensus as to what causes the syndrome known as fibromyalgia, there is an issue as to whether a treating physician’s opinion, that a Plaintiff suffers from traumatically induced fibromyalgia, should be admissible at trial.
Just over one year ago, in the Lackawanna County case of Crossman v. Delisi, Plaintiff’s expert physiatrist opined that Plaintiff’s fibromyalgia was caused by the traumatic event in which Plaintiff was involved. The Trial Judge noted that Plaintiff’s expert testified that “a majority of the medical literature” recognizes that fibromyalgia may be traumatically induced. Furthermore, the Trial Judge referred to the Court’s “own research” into the issue and, in denying the defense Motion in Limine, stated that the expert’s opinion that trauma may cause fibromyalgia “has gained the requisite level of acceptance in the medical community.”
The same issue arose more recently in July 2009, in the Adams County case of George vs. Frederick. In that case, the plaintiff sustained injuries as a passenger in a vehicle involved in a serious accident. Eventually, she was diagnosed as having sustained “traumatically induced fibromyalgia” by a physician who was to testify on her behalf at trial. Defense counsel filed a Motion in Limine in an attempt to preclude the testimony of Plaintiff’s expert, relying on the test enunciated in Frye v. United States and followed by the Courts of this Commonwealth. Defense counsel did not contest the expert’s diagnosis of fibromyalgia, instead arguing that there is no general acceptance in the medical community that fibromyalgia is caused by trauma. The Court in George relied on the numerous prior decisions that cited Frye and stated that the proponent of expert evidence must prove that an expert’s principles and methodology in arriving at a diagnosis are generally accepted by scientists in the relevant field. The Court found that the methodology utilized by the Plaintiff’s expert was generally accepted in the medical community as pertained to arriving at a diagnosis of fibromyalgia. Importantly, however, the Court also stated that the precise principle relied upon, i.e. that trauma may cause fibromyalgia, has no support in the scientific community. Despite noting that both plaintiff’s and defense counsel had presented him with a number of articles on the issue, the trial judge would not render a decision and ordered counsel to supplement the record with additional information and documentation as to whether fibromyalgia may be caused by trauma.
As a Trial Judge will be guided by the standard set forth in Frye when ruling upon whether an expert’s testimony is admissible, if there is growing acceptance in the medical community that fibromyalgia may be “caused” by trauma, it is likely that an expert’s opinion stating same will be admissible at trial. Thus, in cases involving fibromyalgia, the challenge will remain for defense counsel first to attempt to preclude the expert’s opinion from being admissible at trial, but then, to be armed with the evidence needed to persuade a trier of fact not to accept it.
Has Medicaid Lost Its Right To Assert A Statutory Lien?
It Has For The Time Being!
By Alan S. Battisti, Esquire
I. INTRODUCTION
On March 25, 2009, United States District Judge, Joy Flowers Conti, authored a 97 page
Memorandum Opinion addressing the validity of liens placed by the Pennsylvania Department of Public Welfare on settlement proceeds obtained from third parties by recipients of Medicaid benefits. Tristani v. Richman, C.A. No.2:06-cv-00694-JFC, 2009 WL 799747 (W.D. Pa. Mar. 25, 2009). In her Opinion, Judge Conti ultimately opined that State Medicaid agencies may not assert liens on personal injury awards. Judge Conti further opined that Congress intended for the States themselves to actively pursue reimbursement of medical expenses paid by Medicaid. The Defendants, Estelle B. Richman, Secretary of Public Welfare for the Commonwealth of Pennsylvania, and Feather Houston, Richman’s predecessor in that position, have filed a Motion for Leave to Appeal by Permission to the United States Third Circuit Court of Appeals, which Motion is presently pending.PROCEDURAL AND FACTUAL HISTORY
A. TRISTANI
On September 14, 2001, Plaintiff, Rita L. Tristani (“Tristani”) instituted a medical malpractice action in the Court of Common of Pleas for Washington County, Pennsylvania, against a local hospital, family practice center and several doctors, all of whom allegedly provided negligent medical care to Tristani, thereby causing her to suffer serious and permanent injuries. Tristani underwent a bunionectomy in September 1999. Eighteen days after this surgery, on September 28, 1999 Tristani was seen in follow up by her surgeon. Her surgeon then learned that Tristani’s leg had recently become painful and warm, with red, black and blue discoloration. Suspecting that Tristani was suffering from deep vein thrombosis, her surgeon, who was not a defendant to Tristani’s lawsuit, immediately referred her to the defendant family practice center.
On the same day as her surgeon’s referral, Tristani was examined by a defendant resident physician. Neither this resident physician, nor his defendant preceptor physician, performed any lab studies, imaging studies or diagnostic tests upon Tristani. Rather, they chose to rely solely upon the resident physician’s physical examination findings. They allegedly ruled out deep vein thrombosis as the cause of Tristani’s medical problem. They allegedly further diagnosed her as having superficial thrombophlebitis. Despite the resident physician’s relative inexperience, his preceptor physician did not examine Tristani himself. Both doctors indicated that Tristani should be reevaluated if her symptoms did not resolve within 2-3 days. Tristani’s symptoms did not resolve within this timeframe.
Thereafter on October 1, 1999, Tristani telephoned the defendant family practice center to inquire as to whether or not she should be reevaluated. A medical assistant initially responded to Tristani’s first call by e-mailing the defendant resident physician. This doctor allegedly failed to respond to this e-mail message. Five hours later, another defendant resident physician responded with an e-mail instructing the medical assistant to “follow up as needed”. Tristani allegedly received no further communication in response to her first call. Later that same day, Tristani called the defendant family practice again. This time her call was taken by different medical assistant, who responded by sending an e-mail message to a defendant registered nurse. This registered nurse allegedly returned Tristani’s telephone call, instructing Tristani to continue to take the medication prescribed by the resident physician and his preceptor. This registered nurse allegedly further advised Tristani that she did not need to be reevaluated. Four days later, on October 5, 1999, Tristani suffered a massive pulmonary embolism and stroke, concurrent with brain damage, partial paralysis and disfigurement. Due to her impairments, Tristani now resides in a full-time medical care facility. Tristani is paralyzed on her right side, needs a wheelchair to get around, needs assistance in washing, getting dressed, using the bathroom, and in preparing her food.
On November 7, 2001, while Tristani’s State action was pending in the Court of Common Pleas of Washington County, a third-party liability program investigator for the Pennsylvania Department of Public Welfare (“DPW”) sent Tristani’s counsel a letter indicating that Tristani was the recipient of medical assistance under the Medicaid program and that Pennsylvania law provided that the rights of such medical assistance recipients to recover the cost of medical care from liable third parties were assigned to DPW by operation of law. Thereafter, Tristani’s counsel continued to correspond with the DPW over the next three years. In this regard, the DPW third-party liability program investigator sent Tristani’s counsel a letter dated December 14, 2004, wherein it stated:
The Department of Public Welfare maintains a lien in the amount of $247,514.98 for the above referenced incident.
The Department has agreed to reduce its lien by 33.33% and accept the net payment of $165,018.24 to satisfy the total lien amount.
Thereafter, a different third-party liability program investigator took over the handling of this matter for DPW and in a letter of April 12, 2005, was advised by Tristani’s counsel that counsel’s firm had been retained by Tristani on a 40% contingent fee agreement, not on a 33.33% contingent fee agreement. Accordingly, the new third-party liability program investigator for DPW sent Tristani’s counsel a letter on April 29, 2005, similar in fashion to the letter cited above, but which now changed DPW’s agreement to reduce its lien by 40%, not 33.33%, and to accept a payment of $148,508.99 to satisfy the DPW lien.
On or about May 31, 2005, a settlement was reached in Tristani’s medical malpractice action. In a Court Order dated June 2, 2005, the Court of Common Pleas of Washington County acknowledged the settlement of Tristani’s action for $5,200,000.00, and further acknowledged the payment of $148,508.99 to DPW “in full and final satisfaction of its subrogation lien”. While addressing various other distributions from Tristani’s settlement, the Court Order did not specifically identify what portion of the settlement was attributed to Tristani’s medical expenses. On July 5, 2005, Tristani’s counsel sent DPW a check in the amount of the aforementioned lien. In the letter sent with the check, Tristani’s counsel specifically referenced the most recent letter from DPW of April 19, 2005. Thereafter, in a letter of July 18, 2005, another third-party liability program investigator with DPW acknowledged receipt of Trisani’s payment.
B. VALENTA
On January 29, 2005, the Plaintiff, Joshua C. Valenta (“Valenta”) was injured in a multi-vehicle accident. As a result of this accident, Valenta was hospitalized for a period of six days and suffered orthopedic injuries in the nature of multiple fractures to his right femur. However, because the accident in question also resulted in two fatalities, multiple claimants were seeking recovery from the tortfeasor’s third party liability policy limits of $300,000.00 per occurrence. Following the accident, Valenta was enrolled in a medical assistance program.
By letter dated April 26, 2005, a DPW claims investigative agent sent a letter to Valenta’s counsel stating that the rights of medical assistance recipients to recover the costs of medical care from liable third parties were assigned to DPW by operation of law. Another claims investigative agent advised Valenta’s counsel, by letter dated August 2, 2005, that DPW had a lien in the amount of $15,581.56 against Valenta’s “personal injury award”. Ultimately, DPW reduced this lien to $10,000.00 to account for attorney’s fees and costs. By letter dated August 18, 2005, Valenta’s counsel provided DPW with a check in the amount of $10,000.00, indicating in said letter that this check and amount:
… represents full and complete payment and final satisfaction of any and all liens pertaining to Department of Public Welfare payments made due to injuries of Joshua C. Valenta sustained in the above-dated accident. The Department of Public Welfare agreed, on August 10, 2005, to accept this amount as full and complete satisfaction.
In a letter dated August 24, 2005, the DPW claims investigative agent acknowledged DPW’s receipt of this $10,000.00 payment.
Thereafter, on November 1, 2005, Valenta commenced his action in the Court of Common Pleas of Allegany County against the tortfeasors whose negligence had allegedly caused Valenta’s injuries. On October 30, 2006, the tortfeasors and their insurance carrier settled with Valenta. Valenta also pursued and recovered underinsured motorist benefits, which ultimately lead to a total gross recovery of $130,000.00.
C. THE TRISTANI/VALENTA FEDERAL COURT CLASS ACTION
On May 22, 2006, Tristani and Valenta commenced their federal action against Defendants, Estelle B. Richman, Pennsylvania’s Secretary to Public Welfare, Feather Houston, Richman’s predecessor in said position, and the Department of Public Welfare. In commencing their action, these Plaintiffs alleged that the DPW’s liens against their personal injury recoveries were in violation of Title XIX of the Social Security Act, the Takings Clause of the 5th Amendment to the United States Constitution, the Due Process Clause of the 14th Amendment to the United States Constitution, and the Takings Clause of Article I, Section 10 of the Pennsylvania Constitution. The Plaintiffs’ action was filed as a proposed class action under Federal Rule of Civil Procedure 23.
On June 9, 2006, the Plaintiffs filed an Amended Class Action Complaint naming only Richman and Houston as Defendants. On September 29, 2006, Defendants Richman and Houston filed a Motion to Dismiss. While this Motion to Dismiss was still pending, the Plaintiffs sought leave to amend their Complaint for a second time. The Court granted this request for leave to amend on October 27, 2006. The Plaintiffs then filed their Second Amended Class Action Complaint on November 10, 2006. On January 3, 2007, the Defendants filed a new Motion to Dismiss. The Federal Court heard oral argument with respect to this Motion to Dismiss on April 17, 2007. This Motion to Dismiss was denied without prejudice so that the relevant factual and legal issues could be evaluated, on a more developed record, at the summary judgment stage. Accordingly, Defendants filed a Motion for Summary Judgment on April 9, 2008. Plaintiffs filed a Motion for Partial Summary Judgment on April 10, 2008. These Motions were the subject of Judge Conti’s Memorandum Opinion of March 25, 2009.
THE UNITED STATES DISTRICT COURT’S RULING IN TRISTANI
After an 80 page, detailed constitutional law analysis, Judge Conti’s Memorandum Opinion concluded and ruled as follows:The plain language of §§1396.p(a)(1) and 1396.p(b)(1) precludes the “liens” and “recoveries” challenged in this case. The application of section 1409(b)(7)(i), which authorized the DPW to impose such liens and obtain such recoveries, was unconstitutional under the Supremacy Clause. Richman and Houston are entitled to qualified immunity due to the law concerning these issues being not clearly established at the time of the discretionary actions in question. Tristani and Valenta cannot establish violations of §1396k(b), the Takings Clause of the Fifth Amendment, or the Due Process Clause of the Fourteenth Amendment, nor can they establish actual violations of Pennsylvania law. Accordingly, the motion for summary judgment filed by Richman and Houston will be granted except insofar as it seeks a determination that Tristani and Valenta lack standing to seek declaratory or injunctive relief either on their own behalf or on behalf of a proposed class. The motion will be denied as to those issues without prejudice, since those issues will be dealt with at a later stage. The motion for partial summary judgment filed by Tristani and Valenta will be denied. (Italics added).
Simply stated, Judge Conti found that an application of 62 Pa. Stat. Ann. §§1409(b)(7)(i) and 1409.1(b)(1), which provides DPW with the authority to impose liens, and to enforce such liens or obtain recoveries of such liens out of the proceeds of Medicaid’s recipients’ judgments, awards or settlements, in third-party personal injury actions, was unconstitutional under the Supremacy Clause of the United States Constitution. Judge Conti concluded that these relevant sections of Pennsylvania statutory law were preempted by Title XIX’s anti-lien and anti-recovery provisions found at 42 U.S.C. §§1396p(a)(1) and 1396(p)(b)(1).
Furthermore, Judge Conti found that the Plaintiffs could not establish violations of Section 1396k(b), the Takings Clause of the Firth Amendment, the Due Process Clause of the Fourteenth Amendment, or of relevant Pennsylvania law. As stated above, Judge Conti found that the relevant Pennsylvania law set forth in Sections 1409(b)(7)(i) and 1409.1(b)(1) were preempted by the relevant federal law as set forth at Sections 1396p(a)(1) and 1396p(b)(1). Thus, the DPW’s application of Section 1409(b)(7)(i) to the settlement proceeds secured by the Plaintiffs was unconstitutional under the Supremacy Clause.
Citing Pennsylvania statutory law, Judge Conti went further stating that the DPW was not without means to protect its interest in recouping its expenses from liable third party tortfeasors. Pennsylvania Law puts a burden upon Medicaid beneficiary/recipients to “provide a reasonable notice” to the DPW when an action or claim seeking recovery of medical expenses incurred by the Medicaid program is commenced. Pennsylvania law permits the DPW to become party to an action brought by such a Medicaid beneficiary/recipient against the third-party tortfeasor or insurer. See 62 Pa Stat. Ann. §1409(b)(5)(v). Of course, the DPW is still also free to assert its own interests as well.
IMPLICATIONS ARISING FROM THE TRISTANI DECISION
If Judge Conti’s Memorandum Opinion and Decision is upheld on appeal, it effectively eliminates Medicaid lien law in Pennsylvania as we now know it. As such, the DPW would need to intervene in potentially thousands of pending court cases to stem the potential loss of revenues as lawyers escrow funds pending the outcome of litigation which could reach tens of millions of dollars. Presently, Pennsylvania has a Medicaid third-party liability case load in excessive of 10,000 cases.
While our Commonwealth’s “Plaintiffs Bar” and “Defense Bar” might have slightly different perspectives on this current legal situation, the perspective and opinion that cannot or should not be ignored at this time is that of the Pennsylvania Department of Public Welfare. Specifically, the Commonwealth of Pennsylvania, Department of Public Welfare, Bureau of Financial Operations, Division of Third Party Liability, Casualty Unit, has apparently been issuing its own “opinion” letters when contacted by counsel questioning the DPW’s right of reimbursement from a plaintiff’s personal injury claim, in light to the Tristani holding. The DPW has its own perspective on the background of this case and, in a letter shared by the Pennsylvania Defense Institute, points out as follows:
On March 25, 2009 United States District Court in Pittsburgh issued an interlocutory opinion in Tristani v. Richman finding that, inter alia, DPW cannot assert statutory liens on personal injury proceeds but, rather, is required to actively intervene in recipient personal injury actions in order to assert its reimbursement claims.
No injunction or declaratory judgment was issued by the Tristani court. In fact, for technical reasons, partial summary judgment was entered in favor of DPW and against the plaintiffs. While DPW has filed for permission to take an interlocutory appeal, ultimate resolution of the Tristani case may take several years. At this point in time there is no Court Order declaring Pennsylvania’s Medicaid lien statute to be invalid, only an interlocutory opinion to that effect. Thus, DPW does not consider that opinion to be binding in any respect.
Moreover, as the Tristani court recognized in its opinion, its interpretation that State Medicaid agencies may not assert liens on personal injury awards conflicts with other court decisions. Indeed, the Connecticut Supreme Court squarely rejected the argument adopted by the Tristani court. Connecticut v. Peters, 946 A.2d 1231 (Conn. 2008). We believe that, ultimately, the Third Circuit will reject the District Court’s reasoning, adopt that of the Connecticut Supreme Court and uphold the statutory lien provision at issue in this case.
With this in mind, the DPW gives advise to counsel based upon one of two scenarios, those scenarios being whether a Plaintiff’s case had already settled or not.
When a Plaintiff’s case has not already settled, DPW recommends as follows:
1. Your client can voluntarily agree to protect the Department’s claim notwithstanding Tristani. Please let us know, as soon as possible, if you decide to take this option.
2. You can refuse to protect the Department’s claim. In that case, you should strictly comply with the notice requirements of 62 P.S. §1409(b) and 55 Pa. Code Chapter 259. DPW will evaluate your client’s case and determine whether it will intervene in the case. If DPW does not intervene in the case, you should consider the Department’s claim disputed and, upon resolution of the case, deposit an amount equal to the gross amount of the Department’s claim into an interest bearing escrow account pending resolution of the Tristani case. See Rule of Professional Conduct 1.15(f).
The DPW opinion letter goes on to recommend that if a Plaintiff’s case has not already settled:
1. You can negotiate a voluntary resolution of the Department’s claim notwithstanding Tristani.
2. You can assert whatever rights you believe your client may have in light of the district court’s interlocutory opinion in Tristani. In that case you should strictly comply with the notice requirements of 62 P.S. 1409(b) and 55 Pa. Code Chapter 259 as they relate to settlements. DPW will evaluate your client’s case and determine whether it will file a post-settlement intervention motion as authorized by Jordan v. Western Pennsylvania Hospital, 961 A.2d 220 (Pa. Cmwlth 2008). You should consider the Department’s claim disputed and deposit an amount sufficient to cover the gross amount of the Department’s claim into an interest bearing escrow account pending resolution of the Tristani case. See Rule of Professional Conduct 1.15(f).
The DPW’s “opinion letter” goes on to further advise “that the Tristani court recognized that the Department could protect itself by intervening into cases and the Department has retained outside counsel for this purpose.” Finally, as if anyone familiar with these matters and dealing with the DPW would ever forget the same, the DPW’s opinion letter goes on to state that one should “also note that the Department has authority to impose significant civil money penalties for violations of the notice requirements of 62 P.S. §1409.”
CONCLUSION
The Tristani Memorandum Opinion has the potential to throw a major wrench into the world of personal injury litigation. However, the reality of this situation is such that there will be no easy answers in the immediate future. Rather, protection of one’s insured or client mandates working with the assumption that DPW’s liens are not just going to magically go away. As such, in resolving any case where such liens are known to defense counsel, counsel would be wise to accept nothing less than a final authorization letter from DPW, or to make a settlement contingent upon receipt of such a final letter from the DPW. Furthermore, going forward Defendants and insurance carriers should always obtain Releases with indemnification language indicating that once such a Release has been executed, the Plaintiff has assumed the liability to pay any such DPW lien.
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