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CLM National: March 2019

News and verdicts that affect you from across the country

March 05, 2019 Photo

A 35-year-old precedent regarding implied warranty of habitability claims against subcontractors is overturned in Illinois, New York City will pay the federal government over false Superstorm Sandy claims, and, in Washington, the Supreme Court rules employers are liable for employees’ discriminatory conduct even if the employers did not participate in the discrimination and were not negligent in training or supervising.


Employers Are Strictly Liable for Employees’ Conduct

On Jan. 31, 2019, the Washington Supreme Court held in Floeting v. Group Health Cooperative that, under the plain language of the Washington Law Against Discrimination (WLAD), employers are held strictly liable for an employee’s discriminatory conduct toward a customer in a place of public accommodation. In this case, the plaintiff alleged that a Group Health Cooperative employee repeatedly sexually harassed him while he was seeking medical treatment. The plaintiff sued Group Health, which argued that workplace sexual harassment doctrines should be imported into the public accommodations context, categorically limiting employer liability. The trial court dismissed the plaintiff’s claim on summary judgment. The Court of Appeals reversed. The Washington Supreme Court noted that, under the plain language of the WLAD, employers are directly liable for the sexual harassment of members of the public by their employees, even if they did not participate in the discrimination.—From CLM Member Cristin Cavanaugh


Supreme Court Upends Minton Precedent

The Illinois Supreme Court overturned a 35-year-old precedent in December and abolished implied warranty of habitability claims against subcontractors. In Sienna Court Condominium Association v. Champion Aluminum Corporation, et al., the court agreed with subcontractors that, where there was no contractual privity between the homebuyer and subcontractor, there could be no implied warranty of habitability. Subcontractors in Illinois had faced uncertain liability in these matters since the 1983 state appellate court ruling in Minton v. The Richards Group of Chicago first extended the implied warranty of habitability to subcontractors only “where the innocent purchaser has no recourse to the builder-vendor.” In overruling Minton, the Illinois Supreme Court in Sienna Court held that purchasers of newly constructed homes cannot pursue breach of implied warranty of habitability claims against subcontractors where there is no contractual privity. The Sienna Court decision marks a significant change in Illinois construction-defect jurisprudence.—From CLM Member Christopher Cano


Automatic Termination Provision Renders Policy Coverage Excess

In Artisan & Truckers Casualty Co. v. United Ohio Insurance Co., two insurers each issued an automobile policy to the owner of a tractor and trailer that was involved in a fatal motor vehicle accident. United and Progressive split a $1.35 million indemnity payment to settle the underlying wrongful death suit and reserved the right to seek contribution from each other. Progressive sought and obtained a declaratory judgment that its policy was in excess of United’s policy. Progressive’s coverage of the tractor ceased immediately upon the United policy’s issuance due to an automatic termination provision, but United argued that Progressive’s policy provided co-primary coverage under its “Other Insurance” provision since the trailer remained listed on the declarations page. The appellate court rejected this interpretation as “absurd” since the “Other Insurance” provision was intended to render trailer coverage in excess unless the tractor was insured solely by Progressive.—From Northeast Ohio Chapter Secretary Michael C. Brink

New York

City to Pay FEMA Over False Sandy Claims

New York City, as part of a settlement with the federal government, will pay $5.3 million for fraudulently obtaining FEMA funds after 2012’s Superstorm Sandy. According to Manhattan U.S. Attorney Geoffrey S. Berman, the New York City Department of Transportation (NYCDOT) created a list of vehicles within the agency’s fleet purportedly damaged by the storm for reimbursement pursuant to FEMA’s Public Assistance program. The city submitted a certification to FEMA attesting that all costs were incurred as a direct result of Superstorm Sandy. However, the federal government says many of the vehicles had been nonoperational or not in use prior to the storm, resulting in FEMA paying the city millions of dollars to which it was not entitled. As part of the settlement, which must be approved by the U.S. District Court for the Southern District of New York, the city will pay back $4.1 million and relinquish rights to an additional $1.2 million that FEMA had approved for disbursement.—From Managing Editor Phil Gusman

Washington, D.C.

MSP Compliance Changes on the Way

This year is set to be one of change when it comes to Medicare Secondary Payer compliance. CMS ushered in the New Year with an updated Workers’ Compensation Medicare Set-Aside (WCMSA) Reference Guide. One of the most significant changes in this guide addresses off-label drug usage and the broadened inclusion of costly drugs, such as Lyrica, in WCMSA allocations. In September 2019, CMS is set to release proposed rules addressing Section 111 civil monetary penalties and Medicare Secondary Payer obligations for liability, no-fault, and workers compensation claims. Although CMS has issued official policies and procedures addressing MSAs in the workers compensation arena, no official guidance has been provided thus far for liability and no-fault claims. Underlying all of these changes is the constant discussion surrounding “Medicare for All,” which would impact not only the Medicare system, but also health care coverage throughout the country.—From CLM Fellow Bridget Smith

New Jersey

Workers Comp Carrier Can Pursue Tortfeasor

In N.J. Transit Corp. v. Sanchez, the New Jersey Appellate Division held that a workers compensation insurer can obtain reimbursements from the tortfeasor in a subrogation action even if the insured employee is barred from recovering damages. The court permitted the workers compensation insurer to recover for the tortfeasor medical expenses and wage-loss benefits that it paid to the insured employee as a result of a work-related motor vehicle accident. Although the insured employee was barred from seeking damages against the tortfeasor based on his inability to pierce the verbal threshold—i.e., show that he sustained a statutory enumerated or permanent injury pursuant to N.J.S.A. 39:6A-8(a)—the Appellate Division found that a tortfeasor who negligently causes an accident is liable for reimbursement of the workers compensation benefits pursuant to N.J.S.A. 34:15-40(f) (Section 40) of the Workers Compensation Act, N.J.S.A. 34:15-1 to -146.—From CLM Member Julia C. Talarick


About The Authors
Phil Gusman

Phil Gusman is senior managing editor for CLM Magazine and Construction Claims magazine.  phil.gusman@theclm.org

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