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Tolling the statute of limitations for change-in-condition applications under Virginia Act
In Ford Motor Company v. Gordon, 281 Va. 543, 708 S.E. 2d 846 (2011), the Court considered the proper interpretation of Va. Code sec. 65.2-708(A) and 65.2-708(C), which govern the tolling of the statute of limitations for filing a change-in-condition application for workers' compensation benefits. The Court held that the Code sec. 65.2-708(A) statute of limitations runs anew under each successive award of compensation for a particular compensable injury and is triggered on the last day for which compensation was paid. The Court also held that Code sec. 65.2-708(C), by providing for wages meeting certain prescribed conditions to be treated as compensation under sec. 65.2-708(A), applies to each such award.
The effect of these statutes is best understood by their application to the facts of the Gordon case. The claimant sustained a compensable injury in Ford's plant in Norfolk, Virginia on January 9, 2000. Based on this injury, the Commission entered a series of awards of compensation to Gordon for various periods of TTD and PD. The last of these awards was entered on January 13, 2003, which was an open-ended award for TTD. Gordon received his last payment under this award on February 23, 2003. Thereafter, between periods of TTD, he worked in light duty positions for Ford. He worked light duty from October 23, 2000 to January 3, 2001; from April 1, 2002 through June 30, 2002, and from April 20, 2003 through September 11, 2006, earning wages equal to or higher than his pre-injury average weekly wage. On September 11, 2006, he was temporarily laid off from his position at Ford because the plant was shut down for production reasons, and he filed a change-in-condition application on September 25, 2006, seeking TTD benefits based on lost wages caused by this change in condition.
The Court's holding meant that because Gordon worked in a light-duty capacity for Ford from April 2003 through September 11, 2006, and was paid wages equal to or greater than his pre-injury wage, under Code sec. 65.2-708(C), the wages that Ford paid to Gordon during the first 24 months must be considered "compensation" for purposes of tolling the statute of limitations under Code sec. 65.2-708(A). Accordingly, since the application for benefits was made within 24 months after the last day for which compensation was paid, the application was timely.
Subsequent to the Gordon decision, the Virginia Court of Appeals has applied Gordon in Prince William County School Board and VML Insurance Programs v. Rahim, No. 1737-10-2 (Va. App. July 12, 2011). There, the Court held that in a case where the Commission had entered a "medical-only" award, under Code secs. 65.2-708(A) and 708(C), the claimant had 24 months from the last day compensation was paid either pursuant to an award or pursuant to the requirements of subsection C within which to file a change-in-condition application. In so ruling, the Court distinguished Mayberry v. Alcoa Bldg Prod., 18 Va. App. 18, 441 S.E.2d 349 (1994), and limited that decision to its facts, on the grounds that in Mayberry, there had been no formal award entered by the commission, and voluntary payment of medical expenses by the insurer is not the payment of compensation which tolls the running of the statute of limitations.
Posted by David B. Stratton on 01/16/2012 at 08:49 PM
Virginia •
Workers Compensation •
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Virginia Workers Compensation: Court affirms successful res judicata defense
In Brock v. Voith Siemen Hydro Power Generation et al., No. 0428-11-3 (Va. App. Nov. 1, 2011), the Court affirmed a decision by the Virginia Workers Compensation Commission that the claimant was barred by res judicata from litigating injuries he alleged in his initial claim but did not raise at his evidentiary hearing.
As a result of a work injury, Brock filed a workers' compensation claim seeking benefits for injuries to his shoulder, back, and hips. He later amended his claim to allege additional injuries to his head and leg. A deputy commissioner scheduled a hearing and advised Brock's counsel that all issues will be considered at the upcoming hearing. Brock's counsel requested a continuance, and the hearing was continued for more than three months.
At the hearing, Brock and the employer stipulated that he had injured his left shoulder. Brock, who was represented by counsel, produced no evidence of his other injuries. Significantly, Brock also did not request additional time to obtain evidence, did not ask the deputy commissioner to hold the record open to later consider the other injuries, did not seek to withdraw any part of his claim, and did not ask the deputy commissioner to defer for later determination issues which were unripe for adjudication.
The deputy commissioner entered an award for benefits for the stipulated injury to the left shoulder, and dismissed the claim. Neither party appealed the order to the full commission.
Months later, Brock, proceeding pro se, filed a claim seeking benefits for injuries to his back, head, shoulder, leg, and hip arising out of the same workplace accident. At a hearing for these claims, the employer argued that these claims had been abandoned and argued that they could not be properly considered. The deputy commissioner held that Brock had abandoned the claim for injuries beyond the stipulated left shoulder injury, but declined to apply res judicata, instead finding that the abandonment was in effect a non-suit.
The employer appealed to the full Commission, arguing in part that the doctrine of res judicata barred the claims for the other alleged injuries. The Commission agreed that res judicata barred Brock's allegedly new claim for injuries. Brock then appealed the Commission's decision.
The Court of Appeals affirmed the Commission, noting in pertinent part that claims precluded by res judicata include those "made or tendered by the pleadings" as well as those "incident to or essentially connected with the subject matter of the litigation, whether the same, as a matter of fact, were or were not considered." The Court noted that these res judicata principles apply to workers' compensation cases.
The Court observed that on appeal, Brock "simply asserts the right to litigate the case on an injury-by-injury basis at separate hearings with each resulting in separate award orders." The Court rejected that argument, stating, "Like the commission, we are unaware of any 'conceivable public policy which would be furthered by such piecemeal adjudication of claims.'"
This case illustrates the importance of claimant's counsel taking formal steps at a workers' compensation hearing to preserve claims which may not be ready for adjudication.
For employers, insurers, and their defense counsel, this case underscores that in any file where the employee is alleging additional injuries arising out of an accident which has already resulted in an award, it is important to fully understand what issues were raised in the prior proceeding, what issues were decided, and what issues were preserved for later adjudication.
Posted by David B. Stratton on 01/16/2012 at 03:41 PM
Virginia •
Workers Compensation •
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Presumption that death on the job was work-related held not to apply in Virginia comp appeal
In Puller v. Fairfax County School Board, No. 0886-11-4 (Va. App. 2011), the Court affirmed the Commission's denial of workers' compensation benefits to a widow whose husband died of a heart attack while performing his job as a mail delivery truck driver.
The decedent, who worked for the School Board, was found dead in the cargo area of his mail truck, with numerous burns on his body from the metal floor of the truck. Following an autopsy, the state medical examiner reported that the cause of death was hypertensive and aatheroscleratic cardiovascular disease, and that the skin changes were postmortem, due to contact with a hot surface.
The police investigation found that the floor of the mail truck's cargo area could reach the temperature of 120 degrees. The police concluded that the decedent died of a heart attack while backing his van, then fell to the floor of the van where he sustained the burns.
The widow filed a claim for workers' compensation benefits, on the theory that working in the July heat caused the heart attack which killed the decedent. She supported her claim with opinions from a cardiologist and an internist that the cardiac arrest was caused by the extraordinary heat in the vehicle.
The employer offered the opinion of a cardiologist that the ambient temperatures on that day were fairly average, and that the cardiac arrest was the product of risk factors including hypertension, diabetes, hypercholesterolemia, and cigarette smoking. The cardiologist concluded that the decedent's death was not work related, and resulted from natural causes and that the burns were as a result of post-mortem heat exposure. The employer also offered the decedent's medical records, which indicated that he had been transported to a hospital for chest pains, one month before his death.
The deputy commissioner denied the claim for benefits, and that ruling was affirmed by the Commission.
On appeal, the Court considered whether the claimant, under these circumstances, was entitled to a presumption that the decedent's death was work related. There is a presumption that a death at the workplace is work related, but it applies only to cases where the employee is found dead at his place of work or nearby, and even then, only when no plausible inference suggests that the accident might be noncompensable. That is, the only rational inference to be drawn must be that death arose out of an in the course of employment. No presumption can be said to arise where an employee suffers from pre-existing heart disease and subsequently dies of cardiac arrest while at work.
Here, since it was undisputed that the decedent had a pre-existing heart condition and that he died of cardiac arrest while at work, the Commission correctly ruled that no presumption applied. The Court also concluded that there was sufficient evidence supporting the Commission's decision as to the cause of death.
This case illustrates the importance of careful review of the decedent's medical records in any workers' compensation claim arising from a death on the job.
Posted by David B. Stratton on 01/13/2012 at 11:29 PM
Virginia •
Workers Compensation •
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Virginia Workers Compensation award reversed because employer had insufficient number of employees
In Ragland v. Muguruza, No. 0524-11-4 (Va. App. 2011), the Court reversed the Virginia Workers Compensation Commission's award of benefits, on the grounds that there was insufficient evidence that Ragland, the employer, had three or more employees "regularly in service" at the time of the accident, and thus, the claimant was not entitled to benefits under Code sec. 65.2-101.
If an employer has fewer than three employees "regularly in service", it is not subject to the Act and has no obligation to provide its employees with workers' compensation benefits.
Ragland was the superintendent at an apartment building in Alexandria, Virginia. The owner paid him to clean and manage the property. On behalf of the owner, Ragland got bids from contractors to replace the building's windows, but then replaced about half the windows himself, with unpaid help from the owner and his sons. At that point, Ragland brought in a contractor to work on the window replacement project. The contractor brought two of his brothers, one of which was the claimant. On their second day of work, the claimant was injured while operating a table saw, and never returned. A few days later, the contractor stopped working for Ragland. Ragland did not replace the three brothers, however, the third brother later returned to help complete the window project.
The deputy commissioner awarded benefits to the claimant for his injury, finding that Ragland had three or more regular employees. The full commission affirmed, finding that Ragland was an employer who had three employees, as well as himself, performing work at the time of claimant's accident.
The Court of Appeals stated that the test is not whether Ragland was an employer who had three employees performing work "at the time of the accident", rather, the proper test was whether Ragland had three employees "regularly in service."
To determine whether an employee is "regularly in service", the Court examines the employer's "established mode of performing the work." The term "regularly" implies a practice, or a constant or periodic custom. Therefore, the Court looks for regularly recurring periods of employting the requisite number of persons over some reasonable period of time. In order for the employer to be subject to the Act, the recurring periods of employing the requisite number of employees should be the rule and not the exception.
In this case, for a window replacement project that took months to complete, Ragland had three workers for, at most, one and a half days. That did not constitute regularly-recurring periods. Ragland had never had three employees before the brothers worked for him for a day and a half, and did nto have three employees afterwards.
Thus, the Court held that Ragland did not have "three or more employees regularly in service" at the time the claimant was injured, and Ragland was not subject to the Virginia Act. The Court therefore reversed the Commission.
[Ed. Note: Inquiries about Virginia workers compensation defense issues or claims may be directed to John H. Carstens, Esq., in our Fairfax, Virginia office.]
Posted by David B. Stratton on 01/09/2012 at 06:26 PM
Virginia •
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Insurer’s Late Notice Defense in Virginia: Dabney v. Augusta Mutual Ins. Co.
In Dabney v. Augusta Mutual Insurance Co., 282 Va. 78, 710 S.E.2d 726 (2011), the Virginia Supreme Court held that the question whether the insured gave the insurer notice of the claim "as soon as is practicable" was a question for the jury, notwithstanding the insured's 254-day delay in providing notice. The Court reversed the trial court's award of summary judgment to the insurer, because the trial court only focused on the length of the delay, and failed to consider the facts and circumstances surrounding the delay.
The Virginia Supreme Court reasoned that the timeliness of the notice of the claim must be considered in light of all the facts and circumstances presented in the case. There were extenuating circumstances here: The insured was unaware of the claim before her death; and the address for notice in the insurance policy had been changed, unbeknownst to the executor of the insured's estate, resulting in the initial written of notice letter being sent to the wrong address, and yet the letter was never returned to sender or acknowledged.
Given the extenuating circumstances, whether the notice was timely under the policy was a question of fact upon which reasonable minds could disagree, and the trial court erred in ruling that the notice was untimely as a matter of law.
Elsewhere in the decision, the Virginia Supreme Court held that the trial court correctly held that the plaintiff was limited to the alleged date of notice plead in the amended complaint. The Court emphasized that the law in Virginia is well established that a court cannot enter judgment based on facts that are not alleged in the parties' pleadings. The issues in a case are made by the pleadings, and not by the testimony of witnesses or other evidence.
However, the Court noted that the plaintiff's counsel did not argue to the circuit court that, pursuant to Code sec. 8.01-377, its pleading could have been amended to conform to the evidence presented at trial. Because the Virginia Supreme Court remanded the case for trial, this raised the possibility that plaintiff's counsel still could amend the pleading to allege alternative dates of notice.
The alternative dates of notice were a key underlying issue at trial, because of the operation of Virginia Code sec. 38.2-2226, which states in pertinent part that:
Whenever any insurer on a policy of liability insurance discovers a breach of the terms or conditions of the insurance contract by the insured, the insurer shall notify the claimant or the claimant's counsel of the breach. Notification shall be given within forty-five days after discovery by the insurer of the breach or of the claim, whichever is later. . . . Failure to give the notice within forty-five days will result in a waiver of the defense based on such breach to the extent of the claim by operation of law.
Id.
Thus, if the plaintiff could show that the insurer had received notice of the claim earlier than 45 days from the time that the insurer gave the claimant notice of the late notice defense, the defense would be waived as a matter of law under this statute. Virginia courts have been strict in applying such waiver. See, e.g., Aetna Casualty & Surety Co. v. Compass & Anchor Club, Inc., 33 Va. Cir. 235 (Feb. 24, 1994). See also Morrell v. Nationwide Mut. Fire Inc. Co., 188 F.3d 218 (4th Cir. 1999).
For those reasons, whether or not the trial court would, on remand, allow an amendment of the pleadings to conform to the evidence presented at trial, could mean the difference between victory or defeat for the parties.
All insurers doing business in Virginia and their counsel should keep the notification requirements of Va. Code sec. 38.2-2226 in mind in any claim involving a late notice defense or any other claim involving alleged breach of the conditions of the insurance policy as a defense.
Posted by David B. Stratton on 11/30/2011 at 10:32 PM
Defenses •
Insurance •
Virginia •
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Innocent Insureds provision held not to save coverage for accounting firm for employee theft
In Bryan Brothers Inc. v. Continental Casualty Co., No. 10-1439 (4th Cir. March 24, 2011)(published per order filed Sept. 6, 2011), the Court held that the prior knowledge provision in an accounting firm’s professional liability policy was a clear and unambiguous condition precedent to recovery under the policy for thefts from client accounts by a former employee of the accounting firm. Because the former employee had prior knowledge of her thefts, a condition precedent was unfulfilled, and the coverage agreement was not triggered. In addition, the 4th Circuit held that exclusions and exceptions in the policy cannot provide coverage that is precluded by the prior knowledge exception. Thus, the Court affirmed Bryan Brothers v Continental in favor of the insurer.
Significantly, the accounting firm’s professional liability policy with Continental included the following Innocent Insureds provision under the Policy conditions:
If coverage under this Policy would be excluded as a result of any criminal, dishonest, illegal, fraudulent, or malicious acts of any of you, we agree that the insurance coverage that would otherwise be afforded under this Policy will continue to apply to any of you who did not personally commit, have knowledge of, or participate in such criminal, dishonest, illegal, fraudulent or malicious acts or in the concealment thereof from us.
The accounting firm argued that since the former employee who committed the thefts was the only person with prior knowledge of her thefts, the innocent insureds provision saved coverage for any insured other than her. Continental Casualty argued, on the other hand, that the prior knowledge provision in the main insuring clause was a condition precedent that precluded coverage if unfulfilled.
Applying Virginia law, the 4th Circuit agreed with the insurer. The Court agreed that based on the plain language and structure of the policy, the prior knowledge provision in the main insuring clause was a condition precedent to coverage. Thus, the accounting firm’s lack of prior knowledge was a condition of the insurer’s agreement to cover the accounting firm’s liability from acts predating the policy. The knowledge of the former employee breached that condition. The Court found that the Innocent Insureds provision was inapplicable, because the insurer did not deny coverage under the bad acts exclusion. The Court stated that the Innocent Insureds provision “appears to be an exception to the bad acts exclusion”, which was not implicated.
In any event, the Court found that it is elemental that exclusions and exceptions in an insurance policy cannot expand the scope of agreed coverage.
Accounting and law firms should be aware of this decision when negotiating the renewals of their professional liability policies. The Innocent Insureds provision does not trump the provisions of the main insuring clause.
Posted by David B. Stratton on 09/12/2011 at 01:57 PM
Insurance •
Virginia •
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Virginia Court of Appeals nixes 6 person spa pool as treatment under workers compensation
In Portsmouth School Board v Harris, No. 0026-11-1 (Va. App. July 19, 2011), the Court reversed a decision by the Virginia Workers Compensation Commission, which held that the employer was responsible for paying for a six-person spa pool purchased by the claimant, as physician-ordered treatment which was reasonable, necessary, and related to his work-related injury.
Following a compensable injury to his shoulder, the claimant consulted with Dr. Felix Kirven, an orthopedic surgeon, about ongoing swelling, stiffness, and soreness in his back. Claimant saw a spa pool with massage jets, and mentioned it to Dr. Kirven. Dr. Kirven thereafter wrote a letter indicating that the claimant would benefit from a spa pool. The record did not indicate that the letter was sent to the employer, and there were neither medical reports or progress notes that mentioned the spa pool. However, Dr. Kirven did write the claimant a prescription for a spa pool. The claimant then asked the claims adjuster whether a spa pool would be reimbursed. The adjuster requested documentation from Dr. Kirven, and in response to a fax containing the prescription, inquired whether the claimant could attend therapy at a center that offered whirlpool or aquatic therapy. There was no response to that inquiry.
Five days later, the claimant purchased a six-person spa pool for $5,200. Dr. Kirven had not recommended this particular spa pool.
The Virginia Workers Compensation Commission held that the employer was responsible for payment for the spa pool, noting that Va. Code sec. 65.2-603(A)(1) requires an employer to provide necessary medical treatment for a compensable injury, including any appliances prescribed by the claimant's treating physician. Dr. Kirven had prescribed a spa pool, and there was no medical evidence to the contrary, and no medical evidence that other forms of water therapy would have been equally helpful or available to claimant. The employer then appealed.
The employer appealed, raising the issue whether the commissioner erred in finding that claimant met his burden of proof to show that his purchase of a spa pool was reasonable and necessary, and related to his work injury. The appellate court identified a threshold issue, which was what limits, if any, apply to a non-specific, generalized and generic physician's prescription for treatment.
The Court reversed, finding that the claimant failed to demonstrate that the six-person home spa pool was medically necessary. Nothing in the record indicated that the claimant could not receive similar treatment (water/heat therapy) elsewhere. Dr. Kirven never indicated that claimant was unable to obtain the same treatment at a fitness/health center. Dr. Kirven's prescription did not call for a "home" spa pool, nor did it call for a spa pool capable of seating six. Dr. Kirven did not prescribe this specific appliance.
The appellate court concluded that:
[W]hen a treating physician prescribes an unspecific, generalized, and generic treatment, the claimant must present evidence that such treatment is medically necessary such as evidence that alternative treatment is not adequate, or available medical testimony elaborating on the non-specific prescription, or documentation of the need for the specific treatment obtained by claimant. This list is not exhaustive. Claimant cannot, with unbridled discretion, choose any treatment that falls within the non-specific prescription.
[Ed. Note: Inquiries about Virginia workers compensation issues or claims may be directed to John H. Carstens, Esq., in our Fairfax, Virginia office.]
Posted by David B. Stratton on 09/04/2011 at 01:37 PM
Virginia •
Workers Compensation •
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Legal malpractice insurer breached duty to defend, affirms 4th Circuit
In Minnesota Lawyers Mutual Insurance Co. v. Batzli, Nos. 10-1684, 10-1839, 10-1910 (4th Cir. Aug. 4, 2011)(unpublished), the 4th Circuit affirmed the trial court's denial of a post-trial motion for judgment as a matter of law, made by the insurer, that challenged the jury's verdict that the insurer breached its duty to defend under a legal malpractice policy. Although the decision was unpublished, the opinion is lengthy and also has a dissent by Circuit Judge Shedd.
The 4th Circuit found that there was sufficient evidence in the record for a reasonable jury to conclude that the insurer breached its policy.
The underlying legal malpractice claim arose from a drafting error in a property settlement agreement prepared in the client's divorce proceeding. Essentially, the client instructed the insured lawyer to seek the wife's interest in a family business during the settlement negotiations. After some negotiations, the insured believed he had negotiated a deal under which the wife would transfer her interest in the family business to the husband, however, the property settlement agreement he prepared had indicated that the husband would retain "his" interest in the family business, rather than "their" interest. This mistake came to light when the insured sent a follow-up document to the wife's lawyer to effect the transfer of the family business, to which the wife's lawyer responded that his client had not agreed to such a transfer. The wife's interest in the family business was worth over $400,000.
The insured disclosed his drafting omission to the husband, and the husband decided to go through with the property settlement and to move for correction of the agreement on the grounds of a scrivener's error.
In August, 2006, the insured filed a motion in the Circuit Court seeking correction of the scrivener's error, which was denied by the Court. The Virginia Court of Appeals affirmed this denial in May, 2008.
Around October, 2008, the insured's law firm renewed its legal malpractice policy with MLMIC. The policy included prior acts coverage but only if the insured had no knowledge of facts which could reasonably support a claim at the effective date of the policy. Also, coverage under the policy is conditioned on compliance with a notice requirement that requires the insured to give immediate written notice to the insurer in the event a claim; and that a claim is made whenever an act, error, or omission by any insured occurs which has not resulted in a demand for damages but which an insured knows or reasonably should know, would support such a demand.
In January, 2009, the husband filed a malpractice suit against the insured lawyer and his firm. The insured gave prompt notice of the suit to MLMIC, which denied coverage because the insured failed to comply with the notice requirement. The scrivener's error had been the subject of litigation since 2006.
In the district court, cross motions for summary judgment were denied because the there were genuine factual disputes between the parties as to whether it was reasonable for the insured to anticipate a claim by the husband.
At trial, the jury found for the insured and awarded damages of $8400, representing attorney's fees to date to defend the legal malpractice claim.
In response to MLMIC's post-trial motion, the district court reduced the damages award to nominal damages ($1), because the insured lawyer failed to provide evidence of the reasonableness of the fees, such as the nature of the services performed, the length of such services, and the applicable rates for such representation, and thus there was insufficient evidence to support the jury's award of damages.
However, the district court denied MLMIC's argument that the insured's notice of a claim by the husband was untimely as a matter of law, in large part because it was uncontested that the former wife would not have agreed to transfer her interest in the family business to the husband.
The parties thereafter filed cross appeals.
On appeal, the 4th Circuit acknowledged, as did the district court, that the test for whether the circumstances would give rise to a claim, for purposes of the notice requirement, was an objective one:
Failure to give timely notice will not be excused when the insured only subjectively concludes that coverage under the policy will not be implicated. Such a policy provision requires the insurer to be notified whenever, from an objective standpoint, it should reasonably appear to the insured that the policy may be involved.
The appellate court stated that the district court's decision was not that the insured did not need to notify MLMIC because any foreseeable claim would lack merit; instead, the district court determined that there was no reasonably foreseeable potential claim. The appellate explained that:
The distinction is perhaps confusing because both conclusions could potentially result from the determination that [the insured's] error caused no damage to his client. See Campbell v. Bettius, 244 Va. 347, 352, 421 S.E.2d 433, 436 (1992) ("In a legal malpractice action, the fact of negligence alone is insufficient to support a recovery of damages. The client must prove that the attorney's negligence proximately caused the damages claimed.").
Here, the wife had testified at trial that she would not have signed an agreement to transfer her interest in the family business to her husband. Thus, a reasonable jury could have determined that the insured lawyer could not have anticipated a demand for damages for "failing to procure that which was unprocurable." A reasonable belief that an insured's error caused no harm to the insured's client is relevant to whether an objectively reasonable person in the insured's position would expect his error to give rise to a claim for damages.
Accordingly, the 4th Circuit affirmed the ruling of the district court, finding that the jury had sufficient evidentiary basis to conclude that the insured reasonable thought his drafting error would not result in a claim until he learned from the husband that a legal malpractice suit would be filed.
Circuit Court Judge Shedd dissented, on the grounds that the insured admitted his error to his client in a letter, offered to bear the costs of the action in state court to try to correct the error, and in addition, the insured said that upon realizing the error, he felt sick about it and lost sleep over it. The insured knew that the wife's 20% interest in the family business was worth $440,000. Because the wife's interest in the family business was a non-marital asset, the divorce court did not have jurisdiction over it and the only way the husband could have received the wife's 20% interest was through the property settlement agreement, which the insured failed to properly draft. Thus, Judge Shedd would have reversed and entered judgment in favor of MLMIC.
[For practitioners, this opinion teaches the importance of providing timely notice of a potential claim to one's professional liability insurer. In addition, it teaches that a fee claim must be supported by an affidavit of fees and costs.]
Posted by David B. Stratton on 09/01/2011 at 01:54 PM
Insurance •
Legal Malpractice •
Virginia •
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Virginia Court of Appeals denies workers compensation award during work furlough
In Utility Trailer Manufacturing Company and Liberty Insurance Corporation v. Testerman, No. 1484-10-3 (Va. App. July 12, 2011), the Court considered the issue whether a furlough from work of pre-defined and limited duration, applicable to all manufacturing employees, both those with and without restricted work capacity, justifies an award for lost wages to a worker with restricted capacity, in the absence of evidence demonstrating a causal relationship between that restriction and the wage loss. The Court concluded, with a dissent, that such an award under these circumstances is not authorized by the Act.
Due to a work related injury, the claimant was awarded benefits including permanent partial disability. Subsequently, the claimant resumed his work as an hourly employee on the manufacturing line with the same employer, commensurate with his restricted work capacity.
The employer shut down the manufacturing line for one week and furloughed all employees on that line, including the claimant, during an annual inventory count. The claimant then filed an application for workers compensation benefits for the furlough period. The claimant returned to work following the furlough at his same salary.
The Virginia Workers Compensation Commission awarded the claimant benefits during the furlough, awarding lost wage benefits because claimant's ability to compete economically with co-workers attempting to find work during a lay-off is permanently impaired.
In its analysis of the appeal, the Court of Appeals quoted with approval the statement of the rule by Larson, i.e., "Loss of employment should not be deemed due to disability if a worker without the disability would lose employment or suffer a reduction in earnings under the same economic conditions . . . ." The Court identified five factors to determine whether the same economic conditions applied to all workers:
We find they include: (1) the length of any furlough from work; (2) whether that furlough included all employees, restricted or not, of the same class; (3) the reason for the furlough; (4) whether the term of the furlough was pre-determined by the employer; and (5) whether employees were offered employment at the termination of the furlough. These factors address the fundamental issue in these cases: is any wage loss causally related to the injury?
The appellate court essentially agreed that a furlough of one week is simply of insufficient duration to reasonably conclude that the claimant's ability to obtain other light duty work was the result of his disability. The Court held only that during a furlough a condition precedent for an award to a partially incapacitated employee for lost wages (or diminution in earning power) is a causal relationship between that incapacity and that loss. Claimant did not demonstrate that his lost wages were causally related to his injury.
Posted by David B. Stratton on 07/15/2011 at 02:45 PM
Virginia •
Workers Compensation •
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Coverage Issues in Review: E.D. of Virginia Tackles Pollution Exclusion in Chinese Drywall case
Most liability insurance policies include what is commonly referred to as a "pollution exclusion" provision, which essentially excludes insurance coverage for bodily injury or property damage arising out of the discharge of "pollutants." The inception of the pollution exclusion provision in liability insurance policies dates back to the 1970s, at which time the insurance industry was becoming increasingly concerned about pollution claims resulting from environmental catastrophes that occurred during the 1960s, including specifically the Torrey Canyon disaster and the Santa Barbara off-shore drilling oil spills in 1969. Many insurance companies used the adoption of the pollution exclusion provision as an opportunity to address public concerns regarding environmental pollution and to clarify and publicize the position that commercial general liability insurance policies did not indemnify companies that were knowingly polluting the environment.
Initially, most policies were drafted to include a "sudden and accidental" pollution exclusion provision, which denied coverage for bodily injury arising out of the discharge, dispersal, release, or escape of irritants, contaminants or pollutants into or upon land, the atmosphere or any watercourse or body of water; unless the discharge, dispersal, release, or escape was "sudden and accidental." In light of controversy over the interpretation of the "sudden and accidental" pollution exclusion provision by the courts with respect to whether the language of the provision was clear and unambiguous, and in an effort to limit coverage for pollution related claims, an "absolute pollution exclusion" was adopted in 1985. Pursuant to the absolute pollution exclusion, "bodily injury or property damage arising out of the actual, alleged or threatened discharge, release, or escape of pollutants" was excluded from coverage; the term "pollutant" being defined as "any solid, liquid, gaseous or thermal irritant or contaminant including smoke, vapor, soot, fumes, acids, alkalies, chemicals and waste." The revision of the pollution exclusion did little to resolve issues of the scope and application of the provision, which was one of the most heavily litigated insurance coverage questions in the late 1980s and early 1990s.
Although these issues are not as hotly contested today, there continues to be a split of opinions by state and federal courts nationwide. Specifically, "[n]umerous courts have held that a pollution exclusion bars coverage for all injuries caused by the release of pollutants, even where the pollutant is dispersed into a confined or indoor area." However, "other courts have held that the exclusion does not apply if the facts show that the discharge, dispersal, release or escape was a localized toxic accident occurring within the vicinity of the pollutant's intended use." Firemen's Ins. Co. v. Kline & Son Cement Repair, Inc., 474 F. Supp. 2d 779, 792-793 (2007)(collecting cases) (citation omitted). For example, case law from Maryland and the District of Columbia suggests that the pollution exclusion applies only to environmental pollution. See Clendenin Bros. v. U.S. Fire Ins. Co., 390 Md. 449, 458, 889 A.2d 387, 393 (2006)(Pollution exclusions were intended to apply only to environmental pollution and insurer had a duty to defend and/or indemnify insured against claims for bodily injury caused by harmful localized, non-environmental fumes containing manganese produced from an insured's proper use of welding equipment); Richardson v. Nationwide Mut. Ins. Co., 826 A.2d 310 (D.C. 2003)(vacated as moot)(Pollution exclusions refer to the types of pollutants that were ordinarily understood in the context of federal environmental legislation; its purpose was to protect insurers from liability in the billions of dollars for environmental cleanups of hazardous waste sites and industrial facilities. Accordingly, the pollution exclusion did not apply to claim for bodily injury from exposure to carbon monoxide fumes that leaked from a defective furnace in an apartment building.)
Most recently, the United States District Court for the Eastern District of Virginia, applying Virginia law, addressed this issue in a declaratory judgment action in the context of the applicability of a pollution exclusion to claims for bodily injury and property damage related to the installation of defective drywall imported from China, which allegedly "emits various sulfide gases and/or other toxic chemicals through 'off-gassing' that created noxious odors, and caused damage . . . [and] dangerous health consequences . . . " Nationwide Mut. Ins. Co. v. Overlook, LLC, 2011 U.S. Dist. LEXIS 55282 (2011). The Court analyzed the policy at issue and concluded that, because the policy did not reference the word "environment," "environmental," "industrial," or any other limiting language to suggest that the pollution exclusion was not equally applicable to both traditional and indoor pollution scenarios; accordingly, construing the policy to apply only to environmental pollution would require the Court to interject words into the policy, contrary to the elemental rule that the function of the Court is to construe the contract made by the parties, and not to reformulate a contract for them. The Court further explained that it was unnecessary to evaluate the manner in which other jurisdictions analyzed or resolved similar contract disputes, because the Supreme Court of Virginia has explained that the law of the Commonwealth of Virginia and the plain language of the insurance policy provided the answer to this coverage question.
Finally, pursuant to what is often referred to as the "Eight Corners Rule," the Court compared the four corners of the complaint to the terms contained within the four corners of the insurance policy and determined that the insurer owed no duty to defend. Specifically, the Court explained that, because the bodily injury and property damage claimed were caused by a harmful gas that was released in a manner contemplated by the pollution exclusion provision, and the harmful gas, which allegedly necessitated a repair or replacement of various parts of the house as well as medical care, was a "pollutant" (i.e., an irritant or contaminant), and every claim in the underlying complaint referred to the defective drywall as either the basis for each claim or the cause of the resulting damage, the pollution exclusion was implicated and there as therefore no duty to defend.
Ultimately, in analyzing coverage issues that may implicate the pollution exclusion of a liability insurance policy, the applicable state law may be as important as the particular facts of the case in determining how the exclusion will be interpreted and whether it will be applied by the court. This often means that the choice of law analysis for a particular claim may be dispositive of the question. For further assistance on Virginia insurance coverage matters, call Jordan Coyne & Savits partners John H. Carstens, Esq. or Carol T. Stone, Esq., at 703-246-0900.
Posted by Jamie Keenan on 06/26/2011 at 11:04 PM
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