CLM National: September 2023

Citizens Property Insurance Corp.’s CEO warns of a possible hurricane tax in Florida, Washington adopts an aggressive approach to hemp-derived cannabinoid products, and, in Illinois, a bill is signed to allow punitive damages to be recoverable in wrongful death and survival actions.

Washington

State Adopts Aggressive Approach on Hemp Cannabinoid Products

Washington has grappled with how to regulate intoxicating hemp-derived cannabinoid products that are being innovated faster than state lawmakers can respond. The state has decided on an extreme solution prohibiting the sale of products containing “any amount of THC” unless the product is sold pursuant to adult-use cannabis regulations. Washington’s blunt strategy raises questions over fairness, effectiveness, and the viability of enforcement. As of July 23, all manufacturers, distributors, and retailers of hemp-derived products that contain any amount of THC are prohibited from selling those products, except by entities that hold a valid cannabis operating license. This includes all “full-spectrum” CBD products. The timing of enforcement and level of penalties remain unclear. Washington is now an outlier with its aggressively blunt strategy. Close attention should be paid to whether this portends a new trend that is copied by other state legislatures. —From CLM Member Ian Stewart, Wilson Elser

California

‘X’ Marks the Spot

A terminated Twitter employee filed a petition to compel X Corp. to arbitrate multiple employees’ claims and pay the arbitration fees. The employee alleged he signed a contract with Twitter requiring the parties to arbitrate employment claims with Judicial Arbitration and Mediation Services (JAMS). JAMS publishes its Minimum Standards, including a provision requiring the employer to pay almost all arbitration fees. However, the contract between the employee and Twitter stated unless the company is required by law to pay all the arbitration fees, the parties will apportion them. JAMS has refused to allow the arbitrations to go forward if X Corp. declines to pay the fees. It remains to be seen how the federal court will enforce the arbitration contract, which conflicts with JAMS’ own standards on shifting fees to the employer. This is a reminder that clarity is essential in employment contracts. —From CLM Member Yaron Dunkel, Tyson & Mendes

Illinois

Punitive Damages Allowed in Wrongful Death and Survival Actions

Gov. J.B. Pritzker signed HB 219, amending previous bills to allow punitive damages to be recoverable in wrongful death and survival actions. These amendments will have the immediate impact of driving up the value of tort claims. Notably, the statute makes clear that punitive damages cannot be sought against doctors and lawyers and against public entities. In addition to raising the risk attendant to wrongful death and survival claims, this also complicates coverage disputes regarding the insurability of punitive damages. Punitive damages are generally not insurable under Illinois law. However, the law is less clear in the context of vicarious liability. Finally, defendants subject to punitive damages based upon this new statute should preserve their right to challenge its constitutionality for violation of the three-readings rule of the Illinois Constitution, Art. IV, Section 8(d). —From CLM Members Kingshuk K. Roy and Donald Patrick Eckler, Freeman Mathis & Gary

Florida

Citizens CEO Warns of ‘Hurricane Tax’

The CEO of the state’s largest home insurer warned this week that policyholder surcharges, commonly known as a “hurricane tax,” may be needed to help pay claims for a significant loss event. Tim Cerio, Citizens Property Insurance Corp.’s CEO, confirmed that, while claims will be paid after a catastrophic event, it would be through a mix of reinsurance, surcharges, and assessments, The Capitolist reported. While Citizens is committed to meeting its claims obligations, there is a tangible concern about its financial robustness in the face of more costly storm losses, and restrictive regulations that do not allow the insurer to charge actuarily sound rates while risk exposure increases. If Citizens faces a shortfall from paying storm claims, it is allowed to initiate a “hurricane tax” to its customers and all other Florida consumers via a multi-year surcharge added to property (home, condo, renters) and auto insurance premium bills.—From Mark Friedlander, Insurance Information Institute

New Jersey

Ruling Allows Observer or Recording in Medical Examinations

The state Supreme Court’s decision in DiFiore v. Pezic on June 15, 2023 clarified that the defendant has the burden to justify the exclusion of third-party observers or recordings during independent medical examinations (IMEs) . This decision will likely increase the production of motions filed by defendants. The court held that a plaintiff in a personal injury action is not required to demonstrate special reasons to justify an observer or recording of an IME, and that the attendance of a third-party observer, or the recording of IMEs, should be decided on a case-by-case basis. The burden is placed on defendants to show why a neutral third-party observer, or a recording, should not be permitted. With DiFiore’s decision, the defendants in personal injury cases may now need to take extra steps and produce additional motions if they seek to bar third-party observers or recordings.—From CLM Member Cathleen Kelly Rebar, Rebar Kelly

New York

Power Companies’ Motion for Summary Judgment Denied

Long Island Lighting Company (LILCO) is a subsidiary of Long Island Power Authority (LIPA). LIPA was created “to remedy LILCO’s conduct as a private electric provider” by closing LILCO’s Shoreham Nuclear Power Station—where the plaintiff-decedent was allegedly exposed to asbestos—and saving LILCO customers money by reducing utility costs. LIPA and LILCO moved for summary judgment, stating the plaintiff failed to bring claims within the statute of limitations, and timely serve notices of claim pursuant to New York Public Authority & General Municipal Law. The plaintiff contended LILCO was a private entity at the time, and therefore public authority notice requirements did not apply. The prevailing issue was whether a private entity later acquired by a public authority should be entitled to the benefits of the statute of limitations and claim requirements. The court was unconvinced LILCO should receive the benefits of being associated with LIPA, and the motion for summary judgment was denied.—From CLM Member Quincy Conrad, Goldberg Segalla