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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? 

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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…..

The National Vaccine Injury Compensation Program, or Vaccine Court as it is commonly called, was established as part of the National Childhood Vaccine Injury Act of 1986. The National Childhood Vaccine Injury Act was enacted to provide a prompt, efficient and fair system for compensation of those who suffer vaccine-related injuries and to reduce private tort litigation in state and federal court against vaccine manufacturers.

The Vaccine Court is a Federal “no-fault” system designed to compensate individuals thought to be injured by childhood vaccines.  A claimant must first pursue a claim in the Vaccine Court before suing a vaccine manufacturer for a vaccine-related injury or death.

There are a number of claims pending in the Vaccine Court asserting that one or more vaccinations caused the claimant to develop autism.  In July 2002, when there were over 400 such claims, the Vaccine Court established a procedure to handle the large number of autism claims filed and the large number expected to be filed in the future.

The Vaccine Court adopted a two phase procedure.  First, the Vaccine Court would inquire into the general causation issues involved in all of the autism cases - i.e., whether the vaccinations in question can cause autism and/or similar disorders, and if so, in what circumstances.  Second, the Vaccine Court would then apply the conclusions reached in the general causation phase, referred to as the “Omnibus Autism Proceeding,” to the individual autism cases.  Individual claimants were given the choice to either opt into the Omnibus Autism Proceeding, which would also then stay a case specific finding on their individual claim until after the Vaccine Court decides the general causation issue, or proceed with their individual claim.

The Omnibus Autism Proceeding is still in progress to determine the fate of the now 4,900 autism claims pending before the Vaccine Court and those that continue to be filed.

There are three separate theories being presented in the Omnibus Autism Proceeding:  (1) that the MMR (Measles, Mumps, Rebella) vaccine and vaccines containing an ethyl-mercury containing preservative, thimerosal, can combine to cause autism; (2) that thimerosal-containing vaccines alone can cause autism; and (3) that the MMR Vaccine alone can cause autism.   Three tests cases for each of these three theories have been selected to be tried before the Vaccine Court.

Between June and November 2007, the Vaccine Court heard the three test cases as to the first general causation theory.  The parties have filed post-hearing briefs as to these three test cases analyzing the evidence presented in those cases.  Additional briefing is due to be filed, after which the Vaccine Court is expected to issue written decisions.

Hearings on the three test cases selected for the second general causation theory, that thimerosal-containing vaccines alone can cause autism, are scheduled to be heard by the Vaccine Court in May 2008.

As a woman and a business owner, I noticed my business was missing out on opportunities it should be enjoying because we lacked the necessary certifications to be awarded work we were fully capable of providing.

However, applying for a State Certification as a Women’s Business Enterprise can be daunting. One mistake can mean waiting an entire year to try again and reapply.

So, when we decided to apply for NJ state certification, I made sure my colleagues and I were experts in the field and we learned the nuances of the certification process before we got started.

I am proud to say that our hard work paid off and we are now a Women’s Business Enterprise (WBE) firm certified by both the State of New Jersey and the Women’s Enterprise Network Council (WBENC). We are also certified as a Small Business Enterprise by the State of New Jersey.

Having gone through the regulatory juggernaut required to get certified, we first-hand experience with the substantive requirements, the processes and the procedures needed to emerge as a Certified Women-Owned Business.

We want to use our success in becoming a WBE for others’ gain.

Recently, we were able to do just that. A client had come to us with a problem. The State had denied their WBE Certification application on various basis, including their belief that the company was not truly managed by the minority shareholder and President.

In doing an analysis of their company and their application, we noticed shortcoming in the structuring of their organization. We were able to revise the company’s By Laws and Shareholder Agreement to make sure that they correctly reflected the management structure.

We worked with the company and their accountant to correctly value the company shares. We made other necessary changes to the corporate structure and the documentation to support it.

We make sure that your corporate structure and management meets the substantive requirements for the certification, and that your corporate documents correctly reflect your corporate structure. We’ve learned that spending a little more time on your paperwork before the certification process starts can work wonders towards achieving certification.

Before you run the risk of being denied, take steps to have your structure and documentation reviewed by someone who knows.

Supreme Court Re-Shifts Burdens of American Home Products, Then Refuses to Defer to First-Filed Action in a State Whose Insurance Law is Less Favorable In Awarding Coverage to Polluters

The Supreme Court delivered a one-two punch in last week’s decision in Sensient Colors, Inc. v. Allstate Ins. Co., et al., __ N.J. __ (2008), Docket No. A-99/100/101-06 (Jan. 29, 2008). First, it revamped the rules for determining the comity stay. Then, applying those rules, it held that a second-filed action should proceed in New Jersey, in part because the polluting policyholder might be less able to obtain insurance reimbursement for the cost of cleanup of its contaminated property in South Jersey if the action were adjudicated in New York under New York law.

Revising The American Home Products Test

In the battle of the forums (or fora if you remember your Latin), the long-standing general rule has been that courts defer to the first-filed action, unless a party can overcome the first-filed presumption and demonstrate the action should be adjudicated in the second-filed forum based on the particular circumstances of the case. For more than 10 years, American Home Products Corp. v. Adriatic Ins. Co., 286 N.J. Super. 24 (App. Div. 1995), has provided the guiding framework on the first-filed doctrine. In its first opportunity to review the American Home Products analysis, the New Jersey Supreme Court modified the Appellate Division’s paradigm.

American Home Products established a three-prong test to determine whether a court should defer to a first-filed action or retain jurisdiction over a subsequently filed suit. Under this test, a party moving for a comity stay or dismissal of a second-filed action in New Jersey has to establish that: (1) there is a first-filed action in other state; (2) both cases involve substantially the same parties, claims and legal issues; and (3) the plaintiff in the second-filed action will have the opportunity for adequate relief in the first-filed jurisdiction. American Home Products, 286 N.J. Super. at 37. Once these are established, the burden shifts to the other party who must demonstrate special equities for allowing the second-filed action to proceed. Id.

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