November, 2005

I.Happy Thanksgiving.

Thomas Paschos & Associates, P.C. wishes to extend a “HAPPY THANKSGIVING” to all our friends and colleagues.

II.Firm News.

Kelly A. Lavelle, Esquire, has joined our law firm. Kelly is a graduate of Villanova University School of Law (2000), and the University of Scranton (1997), and was previously employed with Harvey, Pennington, Ltd.

III.Insurance Coverage Issues.

MCARE RESPONSIBLE FOR PAYING ONLY CLAIMS THAT EXCEED THE HEALTH CARE PROVIDER’S PRIMARY COVERAGE AND IS NOT REQUIRED TO “DROP DOWN” TO PAY A BASIC COVERAGE OBLIGATION OF AN INSOLVENT PRIMARY CARRIER.

In Gabroy v. Commonwealth of Pennsylvania Medical Professional Liability Catastrophe Loss Fund and Pennsylvania Property & Casualty Insurance Guarantee Association, 2005 WL 3041024 (Pa. Cmwlth. November 15, 2005), the court held that the Medical Professional Liability Catastrophe Loss Fund or MCARE is not responsible for “drop down” coverage when the primary insurer becomes insolvent. In this case, a medical malpractice action was brought against Alan S. Gabroy, M.D., William J. Manella, M.D., and Suburban Surgical Associates. Gabroy, Manella, and Suburban Surgical each had separate basic coverage insurance with Physicians’ Insurance Co. (PIC) in the amount of $200,000 per occurrence. PIC became insolvent in 1998, three years before a jury found Dr. Gabroy jointly and severally liable, along with his co-defendants, in the amount of $665,000 plus delay damages for a total judgment amount of $807,467. The jury found Dr. Gabroy 70% negligent, Dr. Manella 20% and Suburban Surgical 10% negligent. The plaintiffs chose to collect the entire judgment against Dr. Gabroy.

The Pennsylvania Property & Casualty Insurance Guarantee Association (PPCIGA) paid $200,000 to plaintiffs on behalf of Dr. Gabroy, and $100,000 on behalf of Dr. Manella, for a total payment of $300,000. MCARE paid plaintiffs $334,868 on behalf of Dr. Gabroy, an amount equal to his percentage of casual negligence, plus 70% of delay damages and post judgment interest less the amount paid by PPCIGA for Dr. Gabroy.

Dr. Gabroy filed a motion for summary judgment averring that he is entitled to have MCARE pay, out of the remaining unexhausted fund statutory excess coverage, the balance of plaintiffs’ verdict, along with paying the delay damages and post judgment interest, above the amount paid by PPCIGA. MCARE argued that it was required to pay only for claims that exceed the healthcare provider’s primary coverage, and was not required to “drop down” to pay a basic coverage obligation of the primary carrier. The court held that both MCARE and PPCIGA were compliant with statutory requirements and that MCARE is not required to “drop down” to pay a basic coverage obligation of an insolvent primary carrier.



STATUTE OF LIMITATIONS FOR BAD FAITH CLAIM AGAINST INSURER AND PROFESSIONAL NEGLIGENCE CLAIMS AGAINST AGENT BEGIN TO TOLL AT TIME OF DENIAL OF COVERAGE.

In the case of Bear v. Harford Mutual Insurance Co., 2005 WL 3054354 (E.D. Pa. November 10, 2005), the plaintiff brought insurance coverage and professional negligence actions against defendants, Harford Mutual Insurance Co. and David M. Frees Insurance Company, alleging breach of contract, bad faith, and violation of the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL) against Harford and alleging that Frees, Bear’s insurance agent, was negligent in failing to alert Bear to the flaw in coverage and/or to make sure Bear had the requisite insurance coverage.

The factual background of this case is of significance. On April 9, 1999, Harford received a notice of occurrence/claim from its insureds (Bears), reporting that the Bear’s had received a letter from an attorney informing them that the child of a family residing in an apartment building owned by the Bears, had been diagnosed with lead poisoning. On May 4, 1999, Harford sent Bear a denial of coverage letter advising that, based upon a review of the Bear’s insurance policy, there was “no coverage available for a lead poisoning claim under these policies.” Subsequently, two additional coverage denial letters were issued on October 7, 1999, and again on April 9, 2002.

The family allegedly did not sue Bear until May 8, 2003. On January 5, 2005, Bear filed a Writ of Summons in the Court of Common Pleas in Montgomery County, to initiate suit against Harford and Frees. The complaint was filed against both defendants on February 22, 2005.

In response to this insurance coverage claim which was removed to the Eastern District of Pennsylvania, defendant, Harford filed a motion to dismiss the claims for bad faith and the claim for unfair trade practices and consumer protection law. David M. Frees Insurance Co. also filed a motion to dismiss the professional negligence claim.

Harford’s motion to dismiss Bear’s claim for bad faith rested on the argument that the statute of limitations began to run when Harford first notified Mr. Bear in 1999, that it would not provide coverage for lead claims, notwithstanding that the family did not finally sue Bear until 2003. The court held that the statute of limitations for Mr. Bear’s bad faith action began to run on May 4, 1999, the date on which Harford unequivocally denied coverage. Applying the two-year statute of limitations under 42 Pa. C.S.A. §8371, which governs bad faith actions, Mr. Bear would have had to file an action on or before May 4, 2001 to have successfully filed suit within the applicable statute of limitations. Instead, Mr. Bear filed a writ of summons on January 1, 2005, some five years, and 8 months after Harford denied coverage.

The court also dismissed Bear’s claim for professional negligence against Frees’ insurance for failure to file the claim within the applicable two year statute of limitations. The claim against Frees was filed five years after being placed on notice in writing in that the claim for coverage is being denied by Harford. The court held that the two-year statute of limitations for any negligence action against Frees expired long ago, and the claim of negligence was not colorable as a matter of law.

The court dismissed plaintiff’s claims under the Pennsylvania Uniform Trade Practices and Consumer Protection Law (UTPCPL) for failure to allege acts which constitute misfeasance as required to state a claim under the UTPCPL.

IV.Employment Issues.

ADA AWARD TO CANCER VICTIM SUFFERING FROM CHEMOTHERAPY-RELATED MEMORY IMPAIRMENT UPHELD.

In Eshelman v. Agere Systems, Inc., 2005 WL 3054354 (E.D. Pa. November 10, 2005), a federal magistrate judge refused to overturn a jury’s $200,000 verdict in a suit under the Americans with Disabilities Act, brought by a woman who claimed that she was chosen for lay-off because her employer perceived her to be disabled due to a chemotherapy-related memory impairment. The plaintiff in this case began her career in 1981 with defendant’s predecessor company. Over 20 years, she advanced through the company eventually holding the position of supervisor of the chief information office of defendant’s Pennsylvania facility. In 1998, the plaintiff was diagnosed with breast cancer and took a six month leave of absence. When she returned to work in March 1999, plaintiff told her supervisors that she was having problems with her short-term memory. This condition she attributed to her cancer treatment and referred to “chemo-brain”.

At trial the plaintiff testified that she was able to compensate for her memory deficit by carrying a notebook and making sure she took more notes than she had previously. Four months after plaintiff returned to work, defendant suffered a business down turn and laid-off 18,000 employees worldwide. The plaintiff was selected for layoff effective 12/01. The defendant’s handling in that process was the primary focus at trial.

Judge Rice found there was no dispute that plaintiff excelled at her job despite a memory impairment. In addition, Judge Rice held that there was sufficient evidence to support the jury’s conclusion that defendant had perceived plaintiff as “substantially limited” in the major life activities at working and thinking. Finally, Judge Rice found that the evidence showed that when plaintiff reminded defendant in 2001 of possible memory lapses that might temporarily impact her ability to travel to new job sites, defendant had, without explanation, “removed plaintiff from the list of employees who would be offered jobs as part of the company-wide restructuring.” As a result, Judge Rice held that the jury “could reasonably conclude this established a record of an impairment substantially limiting plaintiff’s ability to think and work.”


Copies of the full text of any of the cases discussed in this Newsletter may be obtained by calling our office.  The articles contained in this Newsletter are

for informational purposes only and do not constitute legal advice.



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