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The U.S. Department of Justice recently filed an action seeking to recover conditional Medicare payments paid on behalf of certain individuals who also received compensation as part of a $300 million PCB settlement entered into almost six years earlier. The complaint seeks to recover damages from the plaintiffs’ attorneys, the defendant PCB manufacturers and two of their insurers for the conditional payments Medicare made on behalf of approximately 900 individuals. (Medicare will pay certain expenses on a conditional basis where the party primarily responsible has not paid, and then it can recover such conditional payments from the primary payer.) In addition to recovery of the conditional payments, the complaint also seeks double damages. Consequently, if all these claims are successful against them, the insurers could have to pay certain claims or portions of claims three times over.

In 2003 Monsanto, Pharmacia and Solutia settled several related suits in Alabama involving approximately 20,000 plaintiffs alleging injuries caused by the manufacture, release and disposal of PCBs. The $300 million Abernathy portion of the settlement involved several consolidated lawsuits filed on behalf of approximately 3,500 Anniston, Alabama residents who claimed that PCBs released in the Anniston area lowered their property values and caused them personal injury.

The Abernathy settlement involved the creation of a $300 million fund to process the settlement payments. The PCB manufacturers, along with two of the insurers of one of the PCB manufacturers, namely Travelers and AIG, paid monies into the Abernathy Settlement fund.  Medicare alleges that no provision was made for reimbursement of the conditional Medicare payments made on behalf of the approximately 900 plaintiffs that received these Medicare benefits.

The complaint is venued in United States District Court for the Northern District of Alabama. United States v. James J Stricker, et.al CV-09-PT-2423E.  Filed pursuant to the Medicare Secondary Payer Statute and the regulations promulgated under the statute, the complaint alleges that 42 CFR §411.25 obligated the defendants to notify Medicare of any settlement, award, judgment or other payment that was made when the case was settled. The complaint alleges that the defendants’ failure to notify Medicare entitles Medicare to a double recovery for any payments that are owed pursuant to 42 U.S.C. § 1395y(b) (2) (B) (ii) and 42 C.F.R. § 411.24 (c) (2).

There has been significant effort and focus recently in industry to address the Medicare Reporting requirements that became effective as of January 1, 2010. These efforts have been concentrated on avoiding the imposition of certain statutory fines for failing to properly report settlements. However, the Stricker case cautions that such fines are only one potential financial detriment that can result from failing to report liability settlements. Medicare has now made it abundantly clear that it will seek double damages for recovery of any conditional payments where Medicare was not properly notified of a liability settlement. Medicare’s potential double damages recovery for non-reported claims also predates the new Medicare Reporting requirements. Indeed, the Stricker case is not based on the newly effective Medicare Reporting requirements. Given the six year statute of limitations, there is potential for double damages liability for such settlements going back as much as six years.

A PDF of the complaint is available here: United States v. James J Stricker, et.al CV-09-PT-2423E.

In its November 12, 2009 decision in Baughman v. United States Liability Insurance, Civil No. 08-290 (JBS/KW) the New Jersey Federal District Court made a number of significant rulings in the environmental and toxic tort insurance coverage area.  The insureds had sought defense and indemnity for claims made in a number of related lawsuits arising out of mercury contamination of the insureds’ day care center. 

The Court found:

1. Claims for medical monitoring of children exposed to mercury contamination at the center that was formerly a thermometer manufacturing building are “damages” under the CGL policy issued to the wife of the couple who owned the center. Relying on the New Jersey Supreme Court case in Ayers v. Twp. of Jackson, 106 N.J. 557 (1987), Judge Simandle found that medical monitoring, when court ordered, is no different than the clean up costs at waste sites recognized as “damages” in Morton Int’l., Inc. v. Gen. Accident Ins. Co., 134 N.J. 1 (1993).  The Court stated at p. 15 that New Jersey courts have not directly addressed this issue, but then goes on to cite cases from other jurisdictions in support of its decisions.  See p. 15 of Baughman decision.
2. The underlying suits constitute claims for Bodily Injuries even when there are no allegations that physical symptoms have yet manifested.  Instead at p. 18, Judge Simandle states: “Regardless, all underlying plaintiffs allege that they were exposed to mercury and that this exposure has increased the risk of illness for those plaintiffs.  {citations omitted}  This constitutes ‘bodily injury’ under the CGL policy.”  The Court cites the New Jersey continuous trigger cases as the basis for this ruling, which appears inappropriate since the science behind those cases was that there was injury at the time of exposure to, for example, asbestos, and the claimant now had manifested physical symptoms tied to the exposure.  See Owens-Illinois, Inc. v. United Ins. Co., 138 N.J. 437 (1994).
3. The absolute pollution exclusion does not bar coverage because the mercury exposure claims do not involve traditional environmental pollution.  In this case, “Indoor Pollution” was distinguished by the Court from the pollution covered by the exclusion.  What that means is something the Court concedes is not defined in the cases.  Instead it is defined more by what it does not include.  On p. 22 of Baughman, Judge Simandle relies on the New Jersey Supreme Court case in Nav-Its, Inc. v. Selective Ins. Co., 183 N.J. 110 (1999) to conclude that mercury exposure confined within a building is not a traditional pollution claim.  Nav-Its involved fumes in an office building caused by a floor sealant.  Judge Simandle, from that case and a review of the facts from cases cited in Nav-Its from other jurisdictions, then makes the broad pronouncement that the exclusion does not apply to indoor pollution.  There is nothing in the language of the exclusion that suggests the limitation found by the Court.  The fact that the previous thermometer manufacturer failed to clean up the premises when it left appears to be no different from the everyday traditional actions to clean up or remediate when a company leaves a site or closes operations.  It is noted on p. 5 of the decision that in June 1996 the NJDEP added the site to its known contaminated sites where it remained until 2004 (why it was removed from the list is not known from the decision).  The history and facts of the site and contamination fall more within the traditional pollution case.

Whether an appeal will be taken is not known.  But this case again weakens the absolute pollution exclusion in New Jersey.

A PDF of the Opinion is available.

The Special Masters of the United States Court of Federal Claims issued its highly anticipated decisions today on the first three test cases in the Autism Omnibus Proceeding.  In all three cases, the court found insufficient evidence of a causal link between the vaccines and autism. 

The Omnibus Autism Proceeding consists of over 5,000 cases alleging that certain childhood vaccinations caused or contributed to the child’s diagnosis of autism or autism spectrum disorder.  As part of the proceeding, three test cases were selected and tried under two general causation theories:  (1) that the MMR vaccine and vaccines that contained thimerosal (a compound consisting of 49.6% mercury used as a preservative in certain vaccines) combined to cause autism; and (2) that thimerosal-containing vaccines alone caused the childrens’ autism.  The decisions on these two general causation theories will then be applied to the over 5,000 individual cases.

The three test cases decided today pertained to the first general causation theory.   The Special Masters issued separate decisions on each of the three test cases.  The lengthy decisions may be found on the United States Court of Federal Claims website.

Hearings on the three test cases on the second general causation theory, that thimerosal-containing vaccines alone can cause autism, were completed in July of 2008.  Decisions on the second general causation theory are not expected for a few months.

At the gym yesterday, I read an article in Forbes by Peter Huber which discusses how the system employed to record real property title, security interests, etc. is and should change due to technology.  I would also note that for reasons having nothing to do with digital data and electronic communications, title insurance isn’t used in many civilized countries outside the USA.

Mr. Huber’s article brought to mind a company Andrew Craig and I have been working with.  That company has a business that scrapes electronic and paper records to create alerts of threats to institutional and engineering environmental controls for historically-contaminated real property.

It works like this:  if you were to remedy historical contamination by placing a physical cap and recording a deed restriction, but then not be in a position to observe whatever may go on at the property thereafter (most likely you sell or close the factory and move away), as a subscriber to the tracking service you would receive an alert, by way of example, if reporting on the control goes out of compliance or someone applies for a permit that could interfere with it.   I think that one of Andrew’s clients or a responsible party predecessor at a remediated site is considering subscribing to the service for its site(s).  Mike and I are involved in a discussion with a similar company about how the information technology they have developed may have application to insurance claims.

What I think we are seeing is that these companies have cool products in search of drivers to make a market that is emerging.

Obviously, information technology is a game-changer for an information business like law.  Today’s consumer of legal services is increasingly unwilling to pay lawyers’ fees for service the consumer perceives to be at best “paperwork” and, at worst, clerical repackaging of data and analysis that already exists.  (Cisco’s general counsel, Mark Chandler, made a well-publicized speech addressing these themes.)   As Mr. Huber discusses, today’s technologies provide cost-effective means of performing that work and the law will adopt them.

So, you have decided you have better things to do with your money than to pay your lawyer the fees he has incurred in representing you.  The lawyer sues you for his fees.  You make the further decision to file a counterclaim for legal malpractice even though you know there is no basis for the malpractice claim.  Your strategy is that the malpractice claim will induce the lawyer to drop his suit for fees or to settle the claim cheaply.  At the very worse, the countersuit will delay the day you actually have to pay your former lawyer. 

What could go wrong? 

(more…)

The New Jersey Appellate Division recently affirmed a grant of summary judgment to High Point Insurance Company in High Point Insurance Company v. J.M., et al., ___ N.J.Super. ___, (App.Div. 2008), Docket No. A-0829-06T50829-06T5 (March 12, 2008) declaring that it was not obligated to defend or indemnify a pair of insureds under a homeowner’s policy in a personal injury lawsuit stemming out of sexual abuse.

As a result of events that occurred between August 1999 and April 2000 involving two minors, Sheryl Van Dyke (“Sheryl”) pled guilty to one count of second degree sexual assault and one count of endangering the welfare of minors. In a subsequent personal injury action brought by guardians of the involved minors, Sheryl faced allegations of sexual molestation and emotional injury. In addition, the complaint alleged that George Van Dyke (“George”), Sheryl’s husband, knew or should have known of Sheryl’s behavior and did nothing to prevent it. The Van Dykes were insured pursuant to a homeowner’s policy issued by High Point. High Point defended George subject to a reservation of rights, but declined to defend Sheryl. The case eventually settled.

Subsequently, a coverage action was commenced to determine whether the settlement was covered. The trial Court found Sheryl’s actions to be intentional based on an objective approach thus precluding coverage pursuant to an expected/intended exclusion within the policy. The trial court also denied coverage to George on public policy grounds, asserting that liability coverage should not be provided to spouses of sexual molesters, especially if he knew or should have know about his wife’s sexual proclivities.

George argued on appeal that the trial court should have applied a subjective test to determine an insured’s intent to injure. He further argued that if such a test was applied, summary judgment would have been denied because High Point could not demonstrate that he had any intent to injure. Quoting the New Jersey Supreme Court in Voorhees v. Preferred Mutual Ins. Co., 128 N.J. 165, 184 (1992), the Court stated “[w]hen the actions are particularly reprehensible, the intent to injure can be presumed from the act without an inquiry into the actor’s subjective intent to injure.” Furthermore, the Court reasserted its public policy stance stated in J.C. v. N.B., 335 N.J.Super. 503, 509-10 (App.Div. 2000) that allowing coverage for a spouse in a sexual molestation case would provide that spouse “with an undue incentive to value the stability and privacy of the marriage over the well-being of the child-victim.” Therefore, the Court found that public policy warranted application of an objective approach and as such George’s behavior cannot be labeled an ‘accident’ consistent with the policy’s definition of ‘occurrence’. The award of summary judgment relative to George was thus affirmed.

Also on appeal, Sheryl argued that High Point had a duty to defend and indemnify her based on her lack of subjective intent to cause any harm. Sheryl cited her assertion of a duress defense as support for her argument. The Court found this reasoning unpersuasive, stating that the elements of the crimes for which Sheryl pled guilty to reflect culpability for injury to the minors involved. As a result, the Court found that it did not matter which test (subjective or objective) the Court used to evaluate coverage and affirmed the award of summary judgment relative to Sheryl.

Recent local news reports address actions being taken in response to lead contamination associated with artificial turf fields at New Jersey recreational facilities, including school playing fields. News items like these, and similar ones, like the less-recent Kiddie Kollege fiasco, which led to intensive NJDEP action regarding day-care centers, reemphasize the need to think about environmental risk before a problem arises.

The reports in the papers indicate that the measured lead levels may result from lead compounds used to color the nylon utilized in turf products distributed several years ago. At least for now, the turf itself would appear to be a source of the lead contamination, in whole or part. But it also seems reasonable to consider that one or more of these playing surfaces may sit on a field in an urban, highly-industrialized area of our state, essentially a brownfield, where increased lead levels may be historical in the soils and nearby structures. Obviously, step one is to investigate the situation and understand it so that all reasonable and necessary measures are taken.

But regardless of what the science ultimately shows, as in any situation like this, the recent findings will generate heat, and will have financial costs, at a minimum in the form of investigative work, and field surface replacement, since some fields are already being ripped out. At least three hot-button issues are in play here — protection of childrens’ health, environmental risk and urban – center quality of life. Where there are unexpected costs and issues like these, litigation is a distinct probability.

Typically, one of the first places we look when unexpected costs, especially cost associated with possible bodily injury arise, is liability insurance. To be sure, those who find themselves in the path of this issue have been calling their risk managers, brokers and lawyers, and policies are being pulled out and read. What they find there may or may not be reassuring. Today’s standard liability policy forms would contain exclusions, for example, barring coverage costs from damage to one’s own property or product without actual damage or injury to a third party, as well as a broad so-called absolute pollution exclusion barring coverage for liabilities arising from pollution. Of course, standard insurance policies, like any contract, can be negotiated at its inception to attempt to address the risk of the insured, and even if a risk cannot be transferred, the mere exercise of considering what risk is covered, and what is not, earlier rather than later, facilitates planning. There are commercial insurance products on the market for many years that directly underwrite so-called “pollution liability”. If a turf-war does break out, the degree of insurance protection available may depend on whether those with exposure today sought proper advisors, including lawyers and insurance brokerage personnel, to think about potential environmental exposures of their client and tried to identify and manage such risks when the coverage was procured.

Often times, the issue of whether pre-marital, gifted or inherited assets are separate property will arise in divorce actions. While the spouse claiming that it is separate property will argue that there is no issue since the asset is only in his/her name, the analysis simply does not end there.

The most common example that may arise in a divorce action is where a non-owner spouse argues that the marital home that was either acquired before the marriage or inherited or gifted to the other spouse during the marriage, is now subject to equitable distribution.

Generally, assets which are acquired prior to the marriage, or assets which were gifted to one spouse or inherited by one spouse during the marriage, are considered separate property. However, there are exceptions to this general rule.

Typically, issues arise where the value of the separate asset has increased over time. In order to evaluate whether the asset has maintained its separate character, a determination of whether the asset’s appreciation was “active” or “passive” must be made.

Passive assets are generally those assets whose appreciation is based solely on market conditions. On the other hand, active assets are those which appreciate due to the contributions or efforts of one party.

Passive assets which were acquired prior to the marriage or by gift or inheritance during the marriage are not subject to equitable distribution in a divorce action.

The analysis of pre-marital active assets or active assets that were acquired by gift or inheritance is not that simple. If the asset’s appreciation was brought about solely by the efforts of the owner spouse, it is not subject to distribution. On the other hand, where the asset appreciates, in whole or in part, due to the efforts of the non-owner spouse, the appreciation is subject to distribution. Common examples of the active asset whose appreciation is subject to distribution are where the non-owner spouse pays down the mortgage or the non-owner spouse contributes in some way to renovations to the house which increase its value.

Further, separate property can be “transmuted” into marital property, which will be subject to equitable distribution in the event of a divorce. If the spouse owning the asset represents to the non-owing spouse that the separate asset will be shared or takes some action to share the asset, such as depositing separate funds into a jointly owned account, the separate asset may then become marital property.

Therefore, it is important for parties intending to keep separate property separate, to be aware of the various factors which can affect the asset’s ownership in the event of a divorce.

One of the final legislative acts of 2006-2007 session was the passage of a Wrongful Death bill (S-176) that expanded the damages recoverable under the Wrongful Death statute from pecuniary losses only to damages arising out of mental anguish, emotional pain and suffering, loss of society and loss of consortium.

Because only pecuniary losses were available, the Wrongful Death statute was criticized for measuring an individual’s worth by his or her financial contributions to a family and, in practice, failing to assign a value to the lives of children, the elderly and those who worked within the home.  On the other hand, the Act eased the financial strain that an unexpected death could cause a family, and judicial interpretations of the statute allowed an estate to recover the monetary value of services provided, for example, by those who worked inside the home (such as accounting expenses if the deceased handled the bills or the prospective cost of maid and landscaping services if the deceased took care of the home) and those who provided valuable counseling services (such as psychiatric expenses if the deceased provided comparable services or expenses for a business advisor if the deceased had previously been relied upon to provide such advice).

Despite passing the Senate and Assembly, Governor Corzine vetoed the bill, expressing concern that unlimited damages based on emotional anguish or pain and suffering could have a significant impact on state and local budgets.  Indeed, it was reported that 544 wrongful death claims were asserted against departments and agencies of the State between 1996 and June 2007.

Governor Corzine further expressed concern that the bill might chill business development in the state, deterring businesses from coming to or staying in New Jersey.  In this regard, many opposed to the bill were especially concerned with the already exorbitant costs of liability insurance for obstetricians, who thus far had been practically insulated from wrongful death liability for deaths arising out of complications during pregnancies or childbirth. The Governor suggested the Legislature continue its efforts to reform the Wrongful Death statute to avoid using a strict monetary valuation of a person’s life while also addressing the adverse effect of allowing unlimited and unpredictable damages.

The Governor suggested the Legislature provide for governmental immunity, more flexibility of the judiciary to reduce excessive non-pecuniary damages award, and defining “non-pecuniary damages” less expansively.

Before the Governor’s veto, the same bill was pre-introduced in the Legislature for the current 2008-2009 legislative session (which introduction would have been moot if the Governor signed the 2007-2008 bill into law).  Therefore, the 2008-2009 bill is currently in the same form as it was during the 2006-2007 session, and largely as it was since it was first introduced in September 27, 2004 by Senator Joseph V. Doria, Jr. of Hudson County.  No action has been taken yet to refine the bill, but such measures may occur from time to time during the upcoming session.

This blog will be updated as new activity on this topic occurs within the Legislature.

“Significant changes are brewing for New Jersey’s environmental site remediation program.“   

That’s the headline in advance of a joint hearing of the Senate Environment Committee and the Assembly Environment and Solid Waste Committee on April 15 to take testimony on proposed changes to NJ’s site remediation program and brownfields regulations.  Topics for discussion include:

• The use of licensed site professionals to review some remediations;
• Remedy selection/encouragement of permanent remedies;
• Engineering and institutional controls;
• Standards for the remediation/replacement of underground tanks;
• Site remediation enforcement issues;
• Issues concerning remediation funding, and,
• Change in use of contaminated sites.

Almost simultaneously, in an Adminstrative Order issued by NJDEP Commissioner Lisa P. Jackson, the DEP Permit Efficiency Review Task Force has been established.  The Task Force is charged with providing recommendations for restructuring and re-engineering NJDEP permitting and other programs.   The Task Force has a number of prominent private and public sector representatives, including its chairperson former NJDEP Commissioner Chris Daggett.  

Here’s a copy of Administrative Order 2008-06, which established the task force.

Does this mean that we will see significant changes in the environmental and brownfields regulatory process?  We shall see.  The mere fact, however, that both legislative committees are meeting together, and that the Commissioner has formed a Task Force consisting including private interest stakeholders, may be an indication that serious changes are in the works.

The meeting will be held at 10 a.m. in Committee Room 4 on the St Floor of the State House Annex.

http://www.njleg.state.nj.us/BillsForAgendaView.asp  

(For those that are interested, that’s the building to the right when you are facing the State House in Trenton.)
 
Stay tuned here for more developments…..