Insurer’s Payment of Damages in Excess of Policy Limits Does Not Prevent Bad Faith Claim. Cont'd...
Supreme Court Holds That Employee With Carpal Tunnel Syndrome Is Not “Disabled” Under The ADA. Cont'd...
New Jersey Law Against Discrimination Does Not Require Employer to Create Permanent Part-Time Position For Disabled Employee. Cont'd...
The Pennsylvania Supreme Court has recently held that an insurance company’s payment of damages far in excess of the policy limits due to its failure to participate in settlement negotiations does not prevent its insured from bringing a bad faith action under Pennsylvania law. In The Birth Center v. St. Paul Companies, Inc., decided December 31, 2001, the insured, The Birth Center, brought a bad faith action against St. Paul due to its alleged bad faith refusal to engage in settlement negotiations in an underlying action. The under-lying action alleged negligence during the birth of a baby, which caused her to suffer severe physical injury and permanent brain damage. After being served with the Complaint in the underlying action, The Birth Center turned to St. Paul for its legal defense. St. Paul hired defense counsel and investigated the claim. Subsequently, the baby’s parents proposed to settle the case within the limits of The Birth Center’s professional liability insurance policy with St. Paul, and The Birth Center notified St. Paul that it was making a demand to settle the case within its policy limits. However, St. Paul refused to settle or even to make an offer for a settlement, even after several judges recommended settlement at various pre-trial conferences. The defense attorneys prepared pre-trial reports for St. Paul’s consideration stating that potential jury verdict ranges could be from $1.25 million to $6 million, and predicting the chances of winning at trial between 35-50%. The executive director of The Birth Center put St. Paul on written notice of the potential for.compensatory damages and the possibility of a verdict in excess of The Birth Center’s policy limits. When the executive director expressed the same concerns to the St. Paul claims representative assigned to the case, the claims representative informed the executive director that St. Paul tries “all of these bad baby cases, and we’re going to trial.” Following the trial of the underlying action, the jury returned a verdict in favor of the baby’s parents for $4.5 million, with The Birth Center liable for sixty-percent of that amount. The final verdict was molded to include delay damages and interest, and The Birth Center’s ultimate liability amounted to $4,313,743.00. St Paul agreed to indemnify The Birth Center for the entire verdict, and the parties settled the case for $5,000,000.00. Following St. Paul’s payment to the parents, The Birth Center filed suit against St. Paul, alleging St. Paul breached its fiduciary duty to The Birth Center, its implied covenant of good faith, and its contract. The Birth Center also claimed that the insurance company’s failure to settle the underlying action within its policy limits constituted negligence, reckless disregard for the rights of the insured, willful and wanton behavior and bad faith pursuant to the Pennsylvania bad faith statute, 42 Pa. C.S.A. § 8371. Following the trial in the bad faith action, the jury found that St. Paul acted in bad faith and awarded The Birth Center $700,000.00 in compensatory damages. The jury did not award punitive damages. St. Paul then moved for judgment notwithstanding the verdict, which the trial court granted, holding that St. Paul’s payment of the excess verdict nullified The Birth Center’s bad faith claim. The trial court also held that compensatory damages were not available under the Pennsylvania bad faith statute. On appeal, the Pennsylvania Superior Court held that the payment of the excess verdict did not preclude the award of compensatory damages and reversed the decision of the trial court, reinstated the jury award, and remanded the case for a determination of The Birth Center’s entitlement to interest, attorney’s fees and costs pursuant to the Pennsylvania Bad Faith Statute. St. Paul then appealed the decision to the Pennsylvania Supreme Court. On appeal, St. Paul argued that an insurer’s payment of an excess verdict precluded all bad faith claims, and that allowing the insurer to recover additional compensatory damages would discourage insurance companies from satisfying excess verdicts. However, the Supreme Court found that although St. Paul’s argument did have “facial appeal”, the insurer did not pay the excess verdict out of the goodness of its heart, and had reason to believe that The Birth Center was going to sue for bad faith. The Pennsylvania Supreme Court also believed that St. Paul was worried that it would be liable for punitive damages pursuant to the Pennsylvania Bad Faith Statute and found that St. Paul paid the excess in an attempt to avoid a punitive damage award. The Pennsylvania Supreme Court also found that St. Paul’s payment of the excess verdict did not bar The Birth Center’s claim for compensatory damages, because The Birth Center was able to prove that the insurance company’s bad faith conduct was a substantial factor in its suffering damages in additional to the excess verdict.
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In a recent decision which could sharply curtail the protection afforded to employees, the Supreme Court of the United States has held that an automobile assembly line worker claiming to be disabled from performing her job by carpal tunnel syndrome was not disabled under the Americans with Disabilities Act of 1990 (ADA), 42 U.S.C. § 12111.
In Toyota Motor Manufacturing, Kentucky, Inc., v. Williams, 543 U.S. __, January 8, 2002, Ella Williams sued Toyota, her former employer, for failing to provide her with a reasonable accommo-dation as required by the ADA. Ms. Williams worked at Toyota’s automobile manufacturing plant on an assembly line, where her duties included working with pneumatic tools. She eventually was diagnosed with bilateral carpal tunnel syndrome and bilateral tendonitis. Ms. Williams eventually was placed under a no-work-of-any-kind restriction by her treating physician, and was terminated by Toyota because of her poor attendance record. Ms. Williams then sued Toyota and claimed that she was “disabled” under the ADA because her physical impairment substantially limited her from manual tasks, housework, gardening, playing with her children, lifting and working, which she alleged constituted major life activities under the ADA. The ADA requires employers to provide “reasonable accommodations to the known physical or mental limitations of an otherwise qualified individual with a disability who is an applicant or employee, unless such covered entity can demonstrate that the accommodation would impose an undue hardship.” 42 U.S.C. § 12112(b)(5) (A). The ADA defines a qualified individual with a disability as “an individual with a disability who, with or without reasonable accommodation, can perform the essential functions of the employment position that such individual holds or desires.” 42 U.S.C. § 12111(8). The ADA also defines a “disability” as “a physical or mental impairment that substantially limits one or more of the major life activities of such individual.” 42 U.S.C. § 12102(2). The Supreme Court held that Ms. Williams’ carpal tunnel syndrome was not a disability within the meaning of the ADA. In reaching this holding, the Court stated that “the central inquiry must be whether the claimant is unable to perform the variety of tasks central to most people’s daily lives.” The Court stated that the claimant’s repetitive work with hands and arms extended at or above shoulder levels for extended periods is not an important part of most people’s daily lives.
The Court held that when addressing the major life activity of performing the manual tasks, such as Ms. Williams’ work on the assembly line, “the central inquiry must be whether the claimant is unable to perform the variety of tasks central to most people’s daily lives, not whether the claimant is unable to perform the tasks associated with her specific job.” The Supreme Court held that the manual tasks unique to any particular job “are not necessarily important parts of most people’s lives.” The Court stated that household chores, bathing and brushing one’s teeth are among the types of manual tasks of central importance to people’s daily lives, and Ms. Williams had testified that she could still brush her teeth, wash her face, garden, do laundry and perform light housework. Although the claimant could not perform heavy cleaning and occasionally needed assistance getting dressed, the Court stated “these changes in her life did not amount to such severe restrictions in the activities that are of central importance to most people’s daily lives that they establish a manual task disability as a matter of law.” This ruling could make it more difficult for employees to prove that they are disabled under the ADA because the Supreme Court has narrowly defined the word “disability”.
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The Appellate Division of the New Jersey Superior Court has recently held that the New Jersey Law Against Discrimination (LAD), N.J.S.A. 10:5-1 et seq. does not require an employer to create a permanent part-time position for a disabled employee if no suitable full-time position exists. The court further held that the LAD does not require an employer to create a permanent light-duty position to replace a medium-duty one.
In Muller v. Exxon Research and Engineering Co., December 17, 2001, the plaintiff, who is now 56 years old, was employed by Exxon from 1978 through 1997 as a construction mechanic. Exxon required construction mechanics to “have the physical capability and manual dexterity to perform advanced mechanical work,” and the plaintiff admitted that lifting and carrying objects weighing 25 to 50 lbs, as well as working at heights, were at times physical requirements of his job.
The plaintiff suffered a severe injury to his left elbow, and was placed on light duty because he could no longer lift objects over 25 lbs. or work at heights. Following surgery, the plaintiff worked a reduced schedule of four days per week, during which Exxon permitted the plaintiff to leave early if he was in pain or became tired. The plaintiff continued to work this abbreviated schedule for several years, until Exxon placed the plaintiff on Disability Absence Certification, which required plaintiff to work five days a week in order to receive full pay.
The plaintiff then filed suit against Exxon alleging a violation of the LAD. In order to present a case of discriminatory discharge for failure to accommodate an employee’s handicap status under the LAD, the employee must present proof that (1) the employee was handicapped; (2) the employee was otherwise qualified to perform the essential functions of the job, with or without the accommodation by the employer, and was performing at a level that met the employer’s expectations; (3) the employee was fired; and (4) the employer then sought someone to perform the same work.
The New Jersey court held that the plaintiff did not present a case of discriminatory discharge, because the LAD did not require that Exxon continue to accommodate the plaintiff with light-duty assignments and an indefinite part-time work schedule. The Court stated that an employer that “bends over backwards to accommodate a disabled worker… must not be punished for its generosity by being deemed to have conceded the reasonableness of so far reaching an accommodation.” The Court held that an employer must simply make all reasonable accommodations to an employee returning from disability leave and allow the employee a reasonable time to recover from his injuries.
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