I. Insurance Issues

Physician has no Right to Exercise Control Over Settlement Between Insurer and Claimant if no Express Contractual Right Exists

In Webb v. Witt, 2005 WL 1587789 (7-08-05), the Superior Court of New Jersey, Appellate Division, was presented with the issue of whether a physician or health care practitioner has the right to exercise control over the settlement between a medical malpractice insurer and a claimant, where the physician is afforded coverage by the insurer, but has no express contractual right to approve the settlement. The court was also asked whether the physician could demand an apportionment of his or her responsibility before the settlement is reported to either the National Practitioner Databank or the New Jersey Department of Consumer Affairs.

In this matter, the plaintiffs brought a medical malpractice case alleging that their infant daughter sustained a permanent loss of the use of her right arm. The plaintiff sued the hospital and three physicians, including the attending obstetrician, the attending intern, and the chief resident, who were all employed by the hospital. The hospital was the sole named insured in an insurance policy that also afforded coverage to the other physicians as “other insureds”. The policy also provided that the insurer must obtain consent from the hospital before settling any litigation, but need only make “a reasonable attempt to consult with the [other] Insureds”.

In its holding that the physicians did not have to consent to the settlement, the court rejected the physicians’ argument that it was against public policy for an insurance contract to provide one insured the right to veto settlement, while withholding that right from the other insureds. The physicians also attempted to argue that the insureds who did not have the right to veto the settlement had no involvement in the negotiation of the insurance contract. The court held that the terms of the insurance policy were clear, and that it was not the court’s function to write for the insureds a better policy of insurance than the one purchased. Further, the court held that the physicians had not shown that the absence of a consent to settle clause was against public policy.

The court also disagreed with the physicians’ contention that there must be a determination of the liability apportioned to each physician. The court could not find any federal or state law requiring such an apportionment.

II. Employment Issues.

Arbitration Requirement Unenforceable if Employee Does Not Actually Receive Handbook, Despite Acknowledgement of Receipt.

A recent decision of the Superior Court of Pennsylvania has held that an agreement to arbitrate disputes contained in an employee handbook is not enforceable if the employee never actually receives a copy of the handbook, even if the employee signs a form acknowledging that she has read the handbook and accepts the arbitration provisions.

In Quiles v. Financial Exchange Co., 2005 WL 1562355 (Pa. Super. 7-06-05), the plaintiff was hired as a part time teller by the defendant. Approximately one month after the date of her hiring, the plaintiff signed an Employee Acknowledgement Form given to her by her store manager. The form stated that the plaintiff had received and read the company handbook, and that she understood and agreed to be bound by its terms. The form also stated that prior to signing it, the employee had carefully read the handbook which “include[d] the Dispute Resolution Program and provision relating to arbitration.” This form did not contain any further language explaining the arbitration policy or practice adapted by the defendant. The plaintiff admitted that she signed the form, but argued that she never actually received the handbook, despite her request made to a district manager for a copy of the handbook.

The handbook contained a section entitled “Dispute Resolution Program”, that provided for the use of a telephone hotline or a conference between the employee and the management team to resolve any type of dispute. If the internal procedures outlined did not prove successful in resolving the employee’s claims, the employee had the option to request a private arbitration with the American Arbitration Association. The handbook also stated that all employees who accepted employment or continued their current employment after a certain date agreed to be bound by the terms of the Dispute Resolution Program.

After being terminated by the defendant, the plaintiff brought a defamation action against the company, claiming that the defendant falsely accused her of stealing money from the company, and that she was terminated for this reason. The trial court denied the company’s request to compel arbitration, concluding that there was no meeting of the minds on any of the handbook terms, including the arbitration procedure.

On appeal, the Pennsylvania Superior Court affirmed the trial court’s decision. Although the court found that Pennsylvania courts have consistently expressed “the sentiment that agreements to arbitrate are generally favored”, the court stated that such agreements will be upheld only when the agreement is specific enough and where the employee has expressly agreed to abide by the terms of the agreement. Although the defendant attempted to argue that the plaintiff was bound by the arbitration provision, because she signed the acknowledgement form, the court found that the plaintiff had signed the acknowledgment form under pressure from her supervisor, and was not represented by counsel nor given the opportunity to consult with an attorney before she signed the form. Accordingly, the court determined that the parties had not agreed to arbitrate in a clear and unmistakable manner. Further, the court examined the fact that the plaintiff had a “lack of command of the English language and unfamiliarity with the term ‘arbitration’”.

This case contains important guidelines for companies whose employee handbooks contain arbitration agreements. Employees should be required to sign forms both acknowledging receipt of the employee handbook, as well as the employee review of the arbitration provision and consent to arbitrate. Further, if an employee does not have a command of the English language, additional steps should be taken to ensure that the employee understands the arbitration provisions, and the steps should be outlined in the employee’s personnel file.

Employer May be Liable for the Tort of Negligent Misrepresentation of Employment References

The Superior of New Jersey, Appellate Division, has recently held that a former employer may be liable for negligent misrepresentations in its provision of employment references for a former employee.

In Singer v. Beach Trading Co., 2005 WL 1669391, (7-19-05), the plaintiff was employed at Beach Trading in an “unspecified management position.” Three weeks later, the vice president of the company sent a company-wide email introducing plaintiff as the Vice President of Daily Operations for Beach Trading. Approximately one year later, the plaintiff began looking for a new position outside of Beach Trading, and responded to an employment position as a customer service representative at HRK Industries, Inc. The plaintiff was offered the position of customer service manager, because, based on the professional experience listed on her resume, the manager of HRK believed she might be over-qualified for the position of customer service representative. The plaintiff accepted this position.

After the management of the plaintiff’s new employer became dissatisfied with the plaintiff’s performance as a manager, the management began to question the validly of the representations that plaintiff had made in her resume, and decided to contact the customer service department of Beach Trading, plaintiff’s former employer, to verify the accuracy of plaintiff’s professional experiences. However, instead of forthrightly requesting that Beach Trading confirm or deny the plaintiff’s employment history listed in her resume, the manager of HRK decided to engage in “a needless subterfuge”, misrepresenting both his identity and the true nature of the call. The manager of HRK called the customer service department of the former employer, and spoke with several of the representatives. While calling, he asked to speak to the plaintiff, and the representatives each replied that she was no longer with the firm. They also told him that she was a customer service representative. However, the manager at HRK admitted that he never asked to speak to a corporate officer at Beach Trading about the plaintiff.

HRK then terminated the plaintiff’s employment “because she had been hired under fraudulent terms and she misrepresented her previous position on her resume”.

In its holding that the former employer could be liable for the tort of negligent misrepresentation, the court held that New Jersey, like many States, has not determined whether an employer has an affirmative duty to respond to a reference inquiry; however, employers who chose to respond to a reference inquiry “may be held liable for negligent misrepresentation based on misleading or incomplete statements made in the employment references.” In this case, the court held that the plaintiff had alleged sufficient facts with respect to the negligent misrepresentation cause of action to survive the motion for summary judgment filed on behalf of the defendants. In order to state a cause of action for negligent misrepresentation, the plaintiff must show that the (1) inquiring party clearly identified the nature of the inquiry; (2) the employer voluntarily decided to respond to the inquiry, and thereafter, unreasonably provided false or inaccurate information; (3) the person providing the inaccurate information acted within the scope of her/her employment; (4) the recipient of the incorrect information relied on its accuracy to support an adverse employment action against the plaintiff; and (5) the plaintiff suffered quantifiable damages proximately caused by the negligent misrepresentation.

The court found that there were genuine issues of material fact as to whether plaintiff’s second employer properly notified the defendant of the nature and purpose of his inquiry, which could subject the defendant to a duty of reasonable care in any voluntarily response, and whether communicating the factually incorrect statement about the plaintiff’s position breached that duty.