The justices are scheduled to hear arguments today in Babcock & Wilcox v. American Nuclear Insurers on whether two insurers should have to indemnify a company for more than $80 million it paid to settle claims over radiation exposure. On Wednesday, the justices are expected to hear arguments in Polett v. Public Communications, which involves a woman who has twice seen her $27.6 million verdict reversed over defense claims that her treating physician, whom she agreed to delay suing, was not disclosed prior to trial as serving as an expert witness.
Over the two-day session, justices are also scheduled to hear arguments on the proper interpretation of an insurance policy's language, and whether an employer's insurer can subrogate a claim against a tortfeasor.
In Polett, Margo and Daniel Polett filed their suit after Margo Polett suffered a fractured right patella and a ruptured tendon in her right knee, both of which she claimed were the result of filming a promotional video for an artificial knee implant.
The jury apportioned 36 percent negligence to public relations company Public Communications Inc., the Chicago firm hired to make the artificial knee video, 34 percent negligence to orthopedic medical device manufacturer Zimmer, and 30 percent negligence to Polett.
To reflect Polett's liability, Philadelphia Court of Common Pleas Judge Frederica A. Massiah-Jackson molded the verdict June 10, 2011, ordering Margo Polett be paid $19.6 million in damages and Daniel Polett be paid $700,000 in damages.
After a three-judge panel of the Superior Court ruled 2-1 in March 2013 to overturn the verdict, an en banc panel, split 7-2, reached the same result in a Dec. 20 opinion.
Margo Polett's orthopedic surgeon and the plaintiffs' expert witness, Dr. Robert E. Booth, helped develop the knee implant Polett received June 27, 2006, and which Public Communications was hired to market on behalf of Zimmer, according to court documents.
Polett, who agreed to participate in the filming of the video a little less than two months after her surgery, walked on a treadmill, rode an exercise bicycle and was filmed walking in a garden with her daughter, court documents said.
On appeal, the original Superior Court panel found the defendants were entitled to a new trial because of an error in the charge on causation, because the plaintiffs did not identify the woman's treating physician as an expert, and because the tolling agreement, which extended by six months the limitations period for suing Booth and his practice, was kept out of the trial.
While the plaintiffs argued that Booth was exempt from the requirement of Pennsylvania Rule of Civil Procedure 4003.5 that all experts be disclosed ahead of time because he was Polett's treating physician, the majority of the original panel disagreed that Booth developed his opinions ahead of litigation. The majority also found both that Booth's testimony as an expert needed to be disclosed ahead of trial and that the tolling agreement should have been admitted into the case.
In the Dec. 20 en banc opinion, penned by state Superior Court Judge Jacqueline O. Shogan, the court, for the second time, found that Massiah-Jackson erred by instructing the jury on causation, denying Zimmer and Public Communications' motion in limine to preclude the causation testimony of Booth and in granting Polett's motion in limine to preclude the use of the tolling agreement to impeach Booth.
The Supreme Court granted the Poletts' appeal on whether Massiah-Jackson exercised appropriate discretion in: determining the tolling agreement would have confused the jury; instructing the jury not to speculate about other causes for Polett's injuries; and allowing Booth to give expert testimony on causation given Massiah-Jackson's finding he reached his opinion during the course of treating Polett and before litigation was anticipated.
Indemnification
In Babcock & Wilcox, the justices agreed to hear arguments on the single issue of whether a policy holder must forfeit its right to insurance coverage if it settles a claim without its insurer's consent where the insurer is defending the insured subject to a reservation of rights.In a case of first impression, the state Superior Court in July ruled that when an insurer agrees to defend an insured subject to a reservation of rights, the insured may either accept the insurer's defense and remain bound by a consent-to-settlement clause while allowing the insurer to control the litigation, or furnish its own defense and retain control of the litigation, the costs of which may or may not be covered by the insurer depending on whether those costs are deemed fair, reasonable and noncollusive.
In arriving at this holding, a three-judge panel in Babcock & Wilcox ruled unanimously to reverse an Allegheny County trial judge's ruling that two insurers—American Nuclear Insurers and Mutual Atomic Energy Liability Underwriters, referred to collectively in the court's opinion as "ANI"—must indemnify Babcock & Wilcox Co. for the $80 million plus prejudgment interest it paid to plaintiffs to settle claims over radiation exposure against ANI's protests.
The panel instead ordered a new trial, directing the lower court to determine whether B&W rejected its insurers' defense and whether the insurers' refusal to settle the case or participate in the settlement talks constituted bad faith.
The court was split 2-1, however, on which approach the trial court should apply on remand.
Noting a dearth of Pennsylvania precedent regarding an insurer's obligation to honor a consent-to-settlement clause in an insurance contract when it has agreed to defend an insured subject to a reservation of rights, the majority adopted the approach set forth in the Florida Court of Appeals' 1978 ruling in Taylor v. Safeco Insurance, which held that when an insured settles after rejecting an insurer's defense, the insurer is only obligated to cover the amount of the settlement up to the policy limits if the settlement was "'reasonable'" and not entered into "'in bad faith, fraudulently, collusively or without any effort to minimize his liability.'"
However, in a concurring and dissenting opinion, Judge Judith Ference Olson disagreed with the application of Taylor.
"In my view, established and controlling Pennsylvania law compels the conclusion that since ANI tendered a defense subject to a reservation of its rights to contest coverage, B&W remained committed to observe its obligations under the consent-to-settlement clause in the parties' insurance contract unless B&W could establish bad faith on the part of ANI pursuant to our Supreme Court's decision in Cowden v. Aetna Casualty and Surety," Olson said.
Subrogation
The justices are also expected to hear arguments in Liberty Mutual Insurance v. Domtar Paper on the sole issue of whether the state Workers' Compensation Act allows an employer's carrier to step into an employee's shoes to pursue subrogation against a tortfeasor.According to court documents, the case involves George Lawrence, an employee of Schneider National Inc. In 2009, while acting in the scope of his employment, Lawrence fell on his right knee in a parking lot at Domtar Paper Co. Schneider National was insured by Liberty Mutual, and the Domtar parking lot was owned by National Retail Properties and four other defendants in the case.
After Lawrence made a workers' compensation benefits claim, Liberty Mutual paid about $34,000 to Lawrence. Liberty Mutual then designated itself a subrogee of Lawrence and sued the parking lot owners, alleging negligence in the maintenance of the parking lot.
The property owners filed preliminary objections, contending that Liberty Mutual's cause of action was barred because the state does not allow independent causes of action by workers' compensation insurers when the injured party has not sued in his own right and is not a party in the case.
The trial court sustained the objections.
In its Sept. 27 ruling, a unanimous three-judge panel of the Superior Court held that carriers could not sue on behalf of an employee who does not first commence an action against a tortfeasor.
As reported by Max Mitchell on 7/10/2014.Max can be contacted at 215-557-2354 or mmitchell@alm.com. Follow him on Twitter @MMitchellTLI.
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