Around the Nation: August 2014

WASHINGTON: Duty to Defend and Discovery

In Expedia Inc. v. Steadfast Ins. Co., the Washington Supreme Court accepted review of a trial court order denying an insured’s summary judgment motion allowing the insurer to complete potentially prejudicial discovery. In this matter of first impression, the Supreme Court was persuaded by California authority, which held that “if a showing of potential coverage was made and the insurers did not produce undisputed evidence that conclusively eliminated any possibility of coverage, the motion was to be granted.” As a result, the court vacated the trial court’s order and remanded with instruction to determine the insurer’s defense obligation.—From Washington Chapter Director of Education Brent Williams-Ruth

CALIFORNIA: Design Professional’s Duty of Care to Homeowner

In Beacon Residential Community Association v. Skidmore, Owings, and Merrill LLP, the Supreme Court of California held that principal architects owe a duty of care to future homeowners relating to the design of residential properties. The court found that such a duty extends to homeowners even when the architects do not actually build the project or exercise ultimate control over construction and when there is no privity or contractual relationship between the architects and homeowners. This case expands the scope of design professionals’ liability under California common law. The court held that, where a design professional plays a primary role in the design and construction of a project, he may be held liable to the ultimate purchasers even if the professional lacks privity with those third parties. A homebuyer or third party may now bring claims against such a professional for negligence under common law tort theories and potentially for violations of the construction standards set forth in SB 800. On a larger scale, businesses should take note that the court’s action in this matter is representative of the growing trend in California to sideline privity as a requirement in negligence-based actions. —From Los Angeles Chapter Vice President Stephen Henning

LOUISIANA: No CGL Coverage B for FACTA Claims

In Ticknor et al. v. Rouse’s Enterprises LLC, a Louisiana federal court held that a claim under the Fair and Accurate Credit Transactions Act (FACTA), which imposes civil liability on merchants for failure to truncate credit card information on receipts, does not constitute “publication” for purposes of “personal and advertising injury” under a commercial general liability (CGL) policy. The court held that there was no publication because the transactions were initiated by the plaintiffs, the receipts were provided only to them, and they contained information they already possessed. The significance of this case is that it is only the third case nationwide to rule on this issue.—From Greater Dallas Chapter Secretary Harrison H. Yoss and CLM Member Chris Gabriel

NEW JERSEY: Get Promises in Writing

In Budd Larner P.C. v. Frank Gabriel, the plaintiff law firm alleged that it was retained to represent the defendant’s son in a matrimonial dispute. The defendant orally promised to pay “all fees and disbursements for the services” rendered on behalf of his son and had a personal interest in the outcome of the matrimonial dispute. The defendant paid $17,500 to the plaintiff law firm pursuant to an unexecuted retainer agreement between the firm and defendant’s son, but the law firm alleged that the defendant still owed the firm an unpaid balance of $280,290.37. On appeal, the Appellate Division affirmed the trial court’s granting of summary judgment for the defendant, rejecting the law firm’s claim that the defendant’s main purpose of assuring payment was to protect his own interest in a family business, which would have triggered an exception to the requirement that promises to pay another’s debt must be in writing. —From Northern New Jersey Chapter President Karen P. Randall

CONNECTICUT: Uncommon Award of Attorney’s Fees

In Cooke v. Mercedes-Benz USA LLC, the head safety restraint in a 2005 Mercedes Benz deployed, and the plaintiff was injured. A federal trial court awarded attorney’s fees to the defendant because the plaintiff failed to file timely, complete responses to discovery and requests for production. The court relied on Fed. Rule Civ. P. 37, which deals with the failure to make disclosures or to cooperate in discovery and the appropriate sanctions, as a basis for the award. State courts have parallel powers, but such orders are not common.—From Connecticut Chapter President Bruce Raymond

TENNESSEE: New Law Regulates Lawsuit Lending Businesses

A new law, SB 1360, that will regulate consumer legal funding services went into effect in Tennessee on July 1, 2014. Loan companies that provided funds to plaintiffs pending the outcome of litigation largely had gone unregulated in Tennessee. With the new regulations, one of the country’s largest legal funding services, Oasis Legal Financial, is leaving the Tennessee market. Oasis CEO Ralph Shayne said that the law represents a victory for the insurance industry over consumers seeking fair settlements. According to the National Conference of State Legislators, 14 states had legislation pending regarding lawsuit financing transactions in 2014, and two states—Tennessee and Oklahoma—passed legislation this year.—From CLM Member James C. Wright

WASHINGTON, D.C.: No Coverage for Legal Malpractice Judgment

In Chicago Insurance Co. v. Paulson & Nace PLLC, an insurance carrier filed an action against an insured law firm and two of its attorneys seeking a declaratory judgment that it was not bound to cover the costs of a legal malpractice action against the defendants. Following cross-motions for summary judgment, a District of Columbia federal judge ruled that Chicago Insurance had no duty to defend or indemnify the defendants as a result of their failure to timely notify the insurer of a potential legal malpractice claim, and that doctrines of waiver and estoppel did not bar the plaintiff from asserting such a defense to coverage.—From CLM Member Kelly M. Lippincott