March, 2005

I.Insurance Issues

Delay by Insurer Processing Claim Bars Statute of Limitations Defense

Is it reasonable for an insurer to delay the processing of a claim, and then deny the claim because the insured failed to file the complaint prior to the running of the six-year statute of limitations? This question was recently answered in the negative by the Supreme Court of New Jersey.

In Price v. NJ Manufacturers Insurance Co., 2005 WL 548623 (3-10-05), the plaintiff, a pedestrian, was struck and injured by a motor vehicle in 1995. The plaintiff maintained insurance coverage with New Jersey Manufacturers that included uninsured motorist coverage. At some point after the accident, the plaintiff learned that the driver's insurance company had denied coverage, and in February 1998, the plaintiff's attorney wrote to New Jersey Manufacturers, alerting the insurer that plaintiff would be presenting an uninsured motorist claim, and requested that the company "[p]lease establish an uninsured motorist claim file." A New Jersey Manufacturers' claims representative acknowledged receipt of the plaintiff's letter and requested information as to the plaintiff's injuries and the amount of any workers' compensation lien, because the plaintiff was injured in the course of his employment. Approximately six months later, a different New Jersey Manufacturers' claims representative requested copies of all of the plaintiff's medical bills and his insurance Declaration Page to verify his tort threshold. The following Spring, New Jersey Manufacturers scheduled a medical examination of the plaintiff, which took place in the Fall. During the course of the next year, plaintiff's attorney sent New Jersey Manufacturers various documents, including medical reports, employment records, and a medical authorization form. Finally, plaintiff's counsel demanded that New Jersey Manufacturers evaluate the file for settlement purposes; however, New Jersey Manufacturers did not reply to the plaintiff's letter.

In November 2002, seven years after the accident, the plaintiff filed a complaint seeking to compel New Jersey Manufacturers to participate in arbitration. New Jersey Manufacturers then argued that the plaintiff failed to formally request coverage or demand arbitration prior to the expiration of the Statute of Limitations in August 2001. The trial court found that the insurer's course of conduct "had lulled plaintiff's attorney into a false sense of having timely made a UM (Uninsured Motorist) claim."

The New Jersey Supreme Court agreed, finding that the facts of this case supported an equitable tolling of the six-year statute of limitations. The New Jersey Supreme Court found that the plaintiff's attorney had notified the insurer in February 1998, that plaintiff "would be presenting an uninsured motorist claim", and in June 1998, he informed the insurer that plaintiff "would like to proceed with [his] uninsured motorist claim(s)." The Court held that in dealing with the plaintiff, the insurer "was required to act in a fair manner and inform plaintiff if there were any deficiencies in his claim or if he needed to file a request for arbitration by a certain date. It was not reasonable for NJM to sit back, request and receive various documents over a three and one-half year period, and then deny plaintiff's claim because he failed to file a complaint in Superior Court or request arbitration prior to the running of the six-year statute of limitations. We agree with the (lower court) majority that NJM had a duty of good faith to notify the plaintiff if it disagreed with its understanding, that NJM was duly acting upon his filed claim… We conclude that NJM violated the duty of good faith and fair dealing."


II.Employment Issues

New Jersey Court Eases Burden for Plaintiffs in Employment Cases

The Supreme Court of New Jersey has recently issued an opinion that represents a major victory for plaintiffs in the State of New Jersey that bring employment actions. In Zive v. Stanley Roberts, Inc., 2005 WL 425162 (2-24-05), the Court held that if a plaintiff brings an employment claim pursuant to the New Jersey Law Against Discrimination (LAD), the quality of the employee's work performance "does not come into play on the plaintiff's prima facie case."

In this case, the defendant hired the plaintiff as a sales executive, but then informed him several years later that his services would no longer be required after sales for the company declined substantially. The plaintiff then filed an action under the New Jersey LAD, and at trial, the employer moved for a directed verdict, claiming that the plaintiff had not presented a prima facie case that he had met the "legitimate expectations of his employer". The New Jersey LAD prevents only unlawful discrimination and does not prevent the termination or change of employment of any person who "is unable to perform adequately the duties of employment, nor [does it] preclude discrimination among individuals on the basis of competence, performance, conduct or any other reasonable standards." In order to address the difficulty of proving discriminatory intent on the part of the employer, New Jersey has adopted the procedural burden-shifting methodology set forth by the U.S. Supreme Court in McDonnell Douglas Corp. v. Green. Under this test, a plaintiff must show that he was (1) a member of a protected class; (2) performing his job at a level that met his employer's legitimate expectations; (3) he nevertheless was fired; and (4) the employer sought someone to perform the same work after the employee left.

The New Jersey Supreme Court held that the plaintiff must only produce evidence showing that the employee was actually performing the job prior to the termination. The Court held that this evidence can come from the records documenting the plaintiff's longevity in the position at issue or from testimony from the plaintiff or others that the plaintiff had been working within the title from which the plaintiff was terminated.

Once the plaintiff presents evidence to show a prima facie case, the burden then shifts to the employer to articulate a legitimate, non-discriminatory reason for the employer's action. The burden of production then shifts back to the employee to prove by a preponderance of the evidence that the reason articulated by the employer was merely a pretext for discrimination, and not the true reason for the employment decision. The New Jersey Supreme Court held that "performance markers like poor evaluations are more properly debated in the second and third stages of the burden-shifting test… Thus, even if a plaintiff candidly acknowledges, on his own case, that some performance issues have arisen, so long as he adduces evidence that he has, in fact, performed in the position up to the time of termination, the slight burden of the second prong is satisfied."

III.Professional Liability Issues

PA MCARE Act's Requirements Strictly Applied by PA Superior Court

In Bethea v. Philadelphia AFL-CIO Hospital Association, 2005 WL 590066 (Pa. Super. 3-15-05), the Pennsylvania Superior Court was presented with the issue of whether the qualifications for a medical expert under the Medical Care Availability and Reduction of Error Act (MCARE) must be met when the medical malpractice claim was filed prior to the enactment of MCARE, but the expert's testimony was heard following the enactment of MCARE.

MCARE was enacted by the Pennsylvania General Assembly on March 20, 2002. MCARE was enacted as a partial response to the medical malpractice crisis in Pennsylvania, and was designed to maintain a "comprehensive and high-quality health care system", and to ensure that medical professional liability insurance is attainable at an affordable and reasonable cost in every geographic region of the Commonwealth.

Section 512 of MCARE, which was made effective sixty days after March 20, 2002, states that an expert testifying in a medical malpractice matter must meet the following qualifications: (1) possess an unrestricted physician's license to practice medicine in any state or the District of Columbia; and (2) be engaged in or retired within the previous five years from active clinical practice or teaching.

In the Bethea case, the plaintiff brought a medical malpractice action against the hospital, two physicians and a podiatrist, and filed the complaint in May of 2000. The plaintiff retained a retired general surgeon whose medical license expired in 1999, as her medical expert. This physician drafted a report in August 2002, setting forth his opinion that the defendants' care had deviated in numerous instances from the appropriate standard of care. The defendants then filed a motion to preclude the testimony of the physician because he did not qualify as an expert under MCARE, and the trial court granted this motion and then entered a non-suit.

On appeal, the Superior Court affirmed the lower court's decision, and held that because the plaintiff's expert did not possess a valid medial license at the time of trial, he was not qualified under MCARE to testify. In reaching its decision, the court noted that some provisions of MCARE apply only to causes of action which arise on or after its effective date, but no such limitation is found in Section 512, which expressly provides that it became effective sixty days after March 20, 2002, the date of its enactment. "Thus, the court must apply the directives of Section 512 to medical experts who testify after May 19, 2002, the effective date of the Act." The court did not find the plaintiff's argument that the application of Section 512 to her case conflicted with the longstanding presumption against retroactive application of the statute persuasive. The Superior Court stated that the presumption against retroactivity does not preclude the application of a purely procedural statute to litigation in existence at the time of enactment. The court found that Section 512 of MCARE is a procedural law, which does not deal with any substantive rights of a party, "but rather affects a procedural avenue by which a party may attempt to enforce these rights.… Keeping these precepts in mind, we find that application of Section 512 of the MCARE Act to the present litigation did not constitute a retroactive application."



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