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Mar 13

Dram Shop Liability

Dram Shop Liability Likely Dead For Another Year in Maryland

Business owners achieved a victory in the Maryland legislature this month, as both the House Bill and Senate Bill introduced to establish dram shop liability were given unfavorable reports by legislative committees. Dram shop liability is a cause of action that can be asserted by plaintiffs who allege that they were injured as a result of an establishment’s sale of alcohol. The bill introduced in the Maryland legislature would have allowed for civil actions against establishments or their employees if 1) the defendant knew or should have known that a customer was visibly under the influence of alcoholic beverages; 2) the defendant could have foreseen that the customer might attempt to drive a motor vehicle; 3) the customer negligently drove a motor vehicle; and 4) the customer’s negligent driving proximately caused the damages claimed in the action.

Maryland courts have rejected attempts to assert dram shop liability, instead using a theory of premises liability to hold establishments liable in certain circumstances. E.g. Troxel v. Iguana Cantina, LLC, 201 Md. App. 476, 29 A.3d 1038 (2011). However, premises liability applies to acts or omissions on property that is under the defendant’s control. Dram shop liability seeks to hold business owners liable when an intoxicated customer negligently injures someone after leaving the premises that the business owner controls. The bills introduced in Maryland this legislative session would have allowed for dram shop liability only when an intoxicated driver caused the alleged damages. However, it is easy to see how that liability could be extended through future legislation to include such things as off-premises assaults, liability for hosts of private parties, or even serving the “habitually intoxicated” as some states do. Dram shop liability, a favorite of the plaintiffs’ bar, is an attempt to shift blame from the responsible tortfeasor to a business with “deep pockets.” While this bill is likely to be reintroduced next year, business owners are safe from such claims for now.

Aug 26

Maryland Insurer Not Permitted to Rely on Business Pursuits Exclusion to Deny Duty to Defend Where Continuity of Business Interest and Profit Motive Were Unclear

In Springer v. Erie Insurance Exchange, the Court of Appeals set out to determine whether the allegations in a complaint for defamation triggered the Business Pursuits exclusion in a homeowner’s liability insurance policy and, consequently, would negate Erie Insurance’s duty to defend its insured.  Business Pursuits exclusions are commonly found in homeowners’ insurance policies, and this was the Court’s first opportunity to interpret the exclusion in the context of an insurer’s duty to defend.  In reaching its decision that Erie did have a duty to defend because the facts of this case were insufficient to support a denial of coverage as a matter of law, the Court established a two-part test for determining whether a business pursuits exclusion in a homeowner’s policy can be the basis for denying the insurer’s duty to defend its insured against a third party claim.  Specifically, in order to determine if an underlying complaint triggers the Business Pursuits exclusion, an insurer must consider (1) the continuity of the insured’s alleged business interests and (2) the insured’s profit motive.

The Court agreed with the insured, Springer, that the underlying tort complaint was ambiguous in that it did not clearly allege that Springer had any profit motive behind his actions, which was necessary to apply the Business Pursuits exclusion. Springer further claimed that he presented evidence from outside the complaint to Erie that suggested he was not involved in a business when the allegedly defamatory remarks were made.  Using the two-pronged analysis noted above, the Court agreed with other jurisdictions that have held that seasonal or occasional activities do not meet the continuity requirement, and that profit motive, not actual profit, makes a pursuit a “business pursuit.”

In addition to the specific application of the Business Pursuits exclusion in the context of an insurer’s duty to defend, the Springer case should serve to remind liability insurers that they cannot rely solely on the “four corners” of an underlying complaint to deny coverage if the insured provides evidence that would support coverage.  The insurer must consider this extrinsic evidence before making a decision on a duty to defend request.  Maryland courts have established that the denial of an insurer’s duty to defend based solely upon the four corners of the underlying complaint is permitted only in limited instances, and there will be a duty to defend if any evidence known to the insurer presents a potentiality of coverage.

Dalene Radcliffe is an attorney practicing in Niles, Barton, and Wilmer’s litigation group, serving clients in Maryland.  For more information on this post, or related issues, please contact her at daradcliffe@nilesbarton.com.

 

Aug 18

Court of Appeals Rejects Mandatory Treble Damages Under Wage Payment and Collection Law

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Last week, in the case of Peters v. Early Healthcare Giver, Inc., the Court of Appeals had another opportunity to reflect on the Maryland Wage Payment and Collection Law (“WPCL”) and specifically discuss the application of the treble damages and attorneys’ fees provisions of the statute.  Under the WPCL, an employee has a private right of action against her employer if the employer fails to timely pay the employee’s earned wages, which includes unpaid overtime.  The WPCL has a specific provision allowing an award of up to three times the unpaid wages (i.e., treble damages), attorneys’ fees, and costs when the withholding of the wage was not the result of a “bona fide dispute.”  

The Court of Appeals addressed four issues with respect to the WPCL, all of which revolved around the existence of a bona fide dispute and the award of treble damages, that are important for employers to understand.  First, the Court noted that a trial court must determine in all WPCL cases whether a failure to pay wages was the result of a bona fide dispute.  Although the employee bears the overall burden to prove her claim under the WPCL, once a violation has been proven, the burden of proof as to whether the employer’s violation was the result of a bona fide dispute shifts to the employer.  The basis for this burden shifting approach is rational – the employer is in a better position to establish and demonstrate its rationale for denying the wage payment.  Because the burden to prove a bona fide dispute falls to the employer, it is important for employers to understand exactly what is meant by the phrase “bona fide dispute.”   A bona fide dispute exists when there is “a legitimate dispute over the validity of the claim or the amount that is owing where the employer has a good faith basis for refusing an employee’s claim for unpaid wages [and] the inquiry into whether an employer’s withholding of wages was the result of a bona fide dispute is one concerned with the employer’s actual, subjective belief that the party’s position is objectively and reasonably justified.”  Explanations by an employer that it thought it had already paid the wage, that it was an oversight, or that the employer was ignorant of the law will not satisfy the requirements of establishing a bona fide dispute.  It is also important for employers to understand that a bona fide dispute cannot be developed after the fact.  The test is what the employer’s basis was at the time of the violation, not after a claim is brought and an attorney is retained to develop arguments on the client’s behalf. 

As to the payment of treble damages and attorneys’ fees, the Court rejected the argument that they were mandated in all cases where it was determined that no bona fide dispute existed. It ruled that requiring an award of treble damages would nullify the statute’s plain language, which specifically states that a court “may” award the enhanced damages.  The Court did, however, offer guidance that a trial court should consider the remedial nature of the WPCL when considering an award of treble damages and that the statute should be liberally construed to favor an attorneys’ fees award to encourage attorneys to take valid WPCL claims.  Finally, the Court rejected the employee’s argument that the WPCL permits an award of unpaid wages in addition to treble damages, and it declined to overturn an earlier Maryland case holding that under the plain language of the statute, the maximum recovery is a total of three times the unpaid wages.

Although the Court’s decision did not greatly change the preexisting general interpretations of the WPCL, it formally clarified some guiding principles that employers should understand.  Specifically, an employer should have a working knowledge of state and federal wage payment laws, because a bona fide dispute will only exist if the employer can state a credible factual and/or legal position.  This is one of the many reasons that employers should discuss their wage payment policies and other employment practices with an attorney prior to a problem developing, not after.  An attorney can assist the employer in developing policies that comply with current laws and, even if the policy is ultimately determined to be in violation, the reasoning behind it may be sufficient to permit a finding that the violation was in good faith and save the employer from having to pay treble damages and attorneys’ fees.  An employer should expect that if it cannot identify a bona fide dispute that a trial court will likely award the Plaintiff attorneys’ fees, at minimum, and depending upon the severity of the violation, potential enhanced damages.

Apr 9

Legislature acts on dog bite liability – Landlords happy. Dog owners? Not so much.

After several failed attempts in prior legislative sessions to take action against the Court of Appeals holding in the 2012 “pit bull” case of Tracey v. Solesky (for a closer look at the Solesky case, click here), the legislature finally succeeded in passing a new dog bite liability bill law (the governor is expected to sign it) for incidents where a dog causes personal injury or death to a person.  The new law has five key features:

(1) it applies with respect to all dogs, negating the Solesky Court’s determination that pit bulls were inherently more dangerous than other dogs;

Read more

Jul 23

Contributory Negligence Fights Off Extinction Yet Again

Being one of only five States (including the District of Columbia) that still recognizes the affirmative defense of contributory negligence as a complete bar to a tort plaintiff’s recovery in a negligence action, Maryland has seen several attempts to abolish the doctrine come and go, but like Rocky Balboa, every time someone tries to knock it out, contributory negligence keeps getting back to its feet. Read more

Apr 29

Court Affirms that Emotional Distress Claims Cannot Arise from Post-Accident Conduct

Traditionally, personal injury claims have generally consisted of a plaintiff seeking damages for expenses and “pain and suffering” relating to physical injuries sustained as a result of an accident. Emotional distress is an element of a plaintiff’s pain and suffering, but is not, in and of itself, a separate and distinct claim. There seems to be a recent rise in the number of claims that are alleging specific emotional or psychological damages in personal injury claims, which if backed up by expert testimony could add substantial value to a plaintiff’s claim. Diagnoses of Post-Traumatic Stress Disorder or generalized anxiety resulting from an accident can be difficult to definitively contest from a defense perspective and, at the very least, will require a defendant and insurer to retain a competing expert to assess the validity of such a diagnosis. Therefore, it is essential that insurers and defense attorneys be aware of the limitations that a plaintiff faces in trying to introduce such claims, the evidence that can be used to support them, and the potentially difficult trial strategy decisions that a defendant may fact in light of such claims. Historically, such emotional injury claims could be made only if caused by the physical impact of the accident, but that has not stopped plaintiffs from pursuing such damages that may resulted from actions unrelated to the accidents themselves, particularly the conduct and behavior of the defendant. Evidence of potentially heinous conduct by a defendant that has no bearing on the cause of an accident could still have a very negative effect on a jury’s decision. The potential prejudice to a defendant has not gone unnoticed by the Maryland courts, and recent a recent Court of Special Appeals decision has confirmed that Maryland does not allow emotional distress claims that arise apart from the underlying accident itself.

In Alban v. Fiels, 61 A.3d 867 (Md. App. 2013), Michael Fiels caused an auto accident when he veered across the center line of traffic and collided with a pickup truck being occupied by Mr. and Mrs. Alban. At trial, witnesses were prepared to testify that Mr. Fiels left the scene of the accident and proceeded down the road. However, he encountered a dead end and, therefore, had to turn around and drive past the Albans’ vehicle in order to continue fleeing the scene. The witnesses would have further testified that Mr. Fiels laughed at the Albans as he drove past them the second time. The court opinion indicated that the Albans were taken to University of Maryland Shock Trauma and released. Their physical injuries were apparently minor. Notwithstanding the lack of significant physical injury, the Albans filed a lawsuit against Fiels alleging psychological injuries and emotional distress, including crying, anxiety, and sleeplessness. Their Complaint contained a count labeled “Intentional Acts of Outrage,” which asserted that Fiels fleeing and apparent laughter caused them to sustain severe emotional trauma, and sought $1,000,000 in damages resulting from his intentional conduct. Read more

Feb 18

Court of Appeals Rules that Title Companies Owe Duty of Care in Tort when Conducting Title Searches

In the case of 100 Investment Limited Partnership v. Columbia Town Center Title Co., the Maryland Court of Appeals was asked to determine whether a title company owed a tort duty of reasonable care to its customer, the purchaser of real property, when conducting a title search, notwithstanding any contractual obligation that may also exist. The Court ruled that, despite the fact that the title company – customer relationship derives from contract, an “intimate nexus” exists between the parties because of the foreseeability that the customer’s purpose for retaining the title company is to rely on its professional judgment. This intimate nexus justifies the imposition of a tort duty to exercise reasonable care in carrying out one’s professional services. In this regard, the Court of Appeals has decided that title companies should be treated similarly to lawyers, accountants, architects, and other professionals that have been found to owe their customers tort duties, in addition to those assumed by contract.
Read more

Oct 19

Ethics Opinions Underscore Problems That Medicare Liens Create when Negotiating Settlements

In serious personal injury cases, a common issue arises in settlement talks that affect the course of negotiations – Liens; Specifically, health insurer liens and liens asserted by Medicare.  The problem is simple: a plaintiff with medical expenses often has those expenses paid for by his or her health insurer or through Medicare/Medicaid.  Medicare is entitled under the Medicare Secondary Payor Act to be reimbursed for any payments it has made for causally related medical care, and the health insurer has a subrogation interest in the proceeds it has paid.  The existence of these liens creates difficulty negotiating settlements.  Settlements are often much less than what could be a reasonably expected verdict if the plaintiff prevails, but going to trial involves risk, whereas a settlement eliminates risk.  In addition to the risk of a low plaintiff’s verdict or defense verdict, there are other factors involved in determining a reasonable settlement value, including limitations on the amount of insurance coverage available and the prospects of otherwise recovering a judgment from a defendant.  Because of these factors, the plaintiffs often have to engage in negotiations with the lien holders in order to settle the case because having to pay the full lien amount could negate any potential benefit of accepting a settlement or even continuing with the litigation.  For example, if the reasonable settlement value of a case is $100,000.00, but the plaintiff has liens in the amount of $80,000.00, the plaintiff is in a position where he or she cannot accept the settlement unless the lien holder takes less because the full settlement would otherwise go to the lien holder and the plaintiff’s attorney, leaving plaintiff with no recovery at all.  Given this reality, the plaintiff must often participate in a second negotiation with the lien holder to negotiate the lien down to a level where the lien holder will receive something, but the plaintiff will as well.  In effect, there are two separate negotiations: one between the plaintiff and defendant, and another between the plaintiff and the lien holder. Read more

Sep 17

October 1 Brings New Wrongful Death Limitations Accrual for Acts of Criminal Homicide

          In a closed society where everybody’s guilty, the only crime is getting caught. In a world of thieves, the only final sin is stupidity.
                                              – Hunter S. Thompson
 

October 1 is around the corner, which in Maryland means that several new laws from the spring legislative session will take effect.  One such law will change (or perhaps clarify) when the 3-year statute of limitations period begins to accrue in wrongful death and survival actions where the underlying tort is the result of an act of criminal homicide.   In effect, the statute attempts to remove the shield of limitations from not just the murderers who get caught quickly, but also from those who those who avoid detection for many years.

Under the previous laws, the limitations period began to accrue at the time that the cause of action arose, i.e. the death.  The only defined exception was under MD Code, Courts & Judicial Proceedings 5-203,  which states that if knowledge of the accrual of a cause of action is kept from a party due to the fraud of an adverse party, the cause of action would not begin to accrue until the moment that the party discovered, or by the exercise of ordinary diligence should have discovered the fraud.  In rare instances when a wrongful death action was premised upon a criminal act, such as murder, section 5-203, by its terms, did little to help the victim’s estate or surviving relatives.  For example, if a person was murdered, but the identity of the killer was not known, it would generally not be the result of fraud by the perpetrator that prevented the injured party from discovering the cause of action.  After all, not admitting to committing a crime is different from committing a fraud to prevent one from discovering the crime’s existence.  Many jurisdictions have similar laws to Maryland regarding limitations accrual, either by statute or common law, and have had occasion to face the same problem, such as when the police arrest a suspect 10 years after a murder.  There has generally been no firm legal position to protect the injured estate or dependent from the limitations period expiring in these situations before they could ever discover the perpetrator of the crime.  Having dealt with this issue before the trial courts and research appellate cases from across the country that have dealt with this issue, I can tell you that the solutions found by courts has largely been to completely ignore the laws as written and create whatever new rule was required under the circumstances to allow the plaintiff to defeat a defendant’s limitations argument.  Often, these rulings have been flatly inconsistent with clear and established laws of the jurisdiction.  The Maryland legislature has now passed a law that will directly deal with the accrual problem in the cases of criminal homicides, which should prevent the courts from having to choose between butchering the law or allowing an alleged murderer to avoid the prospect of civil liability simply because he/she was good at covering their tracks. Read more

Aug 22

Court of Appeals Takes Another Bite at Tracey v. Solesky

     “It’s a mystery! It’s a mystery wrapped in a riddle inside an enigma! The *@*%#&^ shooters don’t even know! Don’t you get it?”     – David Ferrie (Joe Pesci) to Jim Garrison (Kevin Costner) in the movie “JFK”

On the heels of the legislature’s failure to address the quagmire created by the Court of Appeals’ April ruling in Tracey v. Solesky, where the Court decreed that all pit bulls and cross-breed pit bulls were inherently dangerous and imposed a strict liability standard against owners and anyone harboring such dogs, the Court issued a revised ruling yesterday after a motion to reconsider was filed by Tracey’s attorneys.   In the initial decision, the Court of Appeals ruled that if a person is attacked by a dog that is a pit bull or a pit bull mix (a cross-breed pit bull), then the owner, or any other person (which in this case included a landlord) who has the right to control the pit bull’s presence on the subject premises who knows or should know that the dog is a pit bull or cross-breed pit bull, is strictly liable for the plaintiff’s damages.  This ruling, with respect to pit bulls and cross-breed pit bulls, abrogated the former common law negligence standard applicable to dog owners that required evidence that the owner knew or should have known that the specific dog had dangerous propensities.  This decision received harsh public criticism for its breed-specific stance, its harsh application of strict liability to landlords and other potential third persons who do not own the dog, and the overwhelming confusion that would be caused by determining what constituted a “pit bull or cross-breed pit bull” or what standard should be applied for determining whether a person should know that the dog is a “pit bull or cross-breed pit bull.”

In its revised ruling, Read more

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