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Update on Insurance Law - September 2015

Author: H. Norman Kinzy

There have been a number of recent court decisions which are of significance to the practice of insurance law. These include cases dealing with expert testimony, sovereign immunity, motor carriers, products liability, premises liability, liability of attorneys, and workers’ compensation issues, including new rules of liability for non-subscribing employers.

As always, each case involves different facts and law, and accordingly the following must be taken for general information purposes only, rather than for action upon any specific fact situation.

Expert Testimony – Reliability: In Gharda USA, Inc., vs. Control Solutions, Inc., No. 12-0987 (Tex. 2015), the Supreme Court dealt with complex litigation where parties supported their respective positions with expert testimony.  This case involved the question of whether interdependent opinion testimony from a series of 4 experts was reliable.  The Supreme Court noted that expert testimony must be both relevant and based upon a reliable foundation. After a review of the evidence, the court the court held that “the testimony of all 4 experts is unreliable because the individual opinion testimony of at least 2 experts was unreliable and the remaining 2 experts based their opinions on the first 2 experts’ unreliable opinions.”  The Supreme Court held that “whether an expert’s testimony is reliable is based on more than whether the experts’ methodology satisfies the Robinson factors. …. Reliable expert testimony must be based on a probability standard, rather than on mere possibility.”  In other words, “could” have testimony by an expert does not establish that it did so result, and this type of expert testimony is mere speculation, and is therefore unreliable.

Texas Tort Claims Act – Election of Remedies: In Molina vs. Alvarado, No. 14-0536 (Tex. 2015), the Supreme Court dealt with the situation where a plaintiff filed suit against a city for negligence of a city employee alleged to have been driving a city vehicle under the influence of alcohol.  Since the plaintiff filed suit initially against only the governmental unit, and did not name the employee as a defendant, the filing of suit by the plaintiff constituted an irrevocable election which immediately and forever barred any suit or recovery by plaintiff against the individual employee of the governmental unit regarding this same subject matter.

Motor Carriers – Independent Contractors – Respondeat Superior:  In Gonzalez vs. Ramirez, No. 14-0107, the Supreme Court discussed whether a harvester of silage who engaged an independent contractor to supply trucks and drivers for hauling the silage, had primary liability as a “motor carrier” under either federal or Texas regulations, and secondly, whether the harvester retained “sufficient control over the transportation” to owe a common law duty to the deceased driver of the truck.  After reviewing applicable regulations, the Supreme Court held that the harvester was acting “as a shipper, not a motor carrier,” and thus found the motor carrier regulations inapplicable.  The Supreme Court also reiterated the Texas rule that generally an owner or general contractor does not owe a duty to its independent contractor’s employees to ensure that they safely perform their work, and held that there was inadequate evidence to find liability on the part of the harvester for the injuries suffered by the independent contractor’s driver. 

Products Liability – Design Defect – Balancing Risks Against Product Utility: In Genie Industries, Inc. vs. Matak, No. 13-0042 (Tex. 2015), the court dealt with a jury verdict which found that an aerial lift was unreasonably dangerous.  Although the balancing of the evidence as to whether a defective design renders a product unreasonably dangerous normally resides with the jury, the court held that the jury verdict was unsupported by the facts because in the Supreme Court’s view, the evidence allowed but one reasonable conclusion, and that was that the aerial lift could not “be said in any sense to be unreasonably dangerous,” as a matter of law.  The case is instructive in situations where the danger of misuse is obvious even to someone not trained in handling sophisticated equipment. 

Insurance – Coverage For EPA Super-Fund Cleanup “Proceeding”: In McGinness Industrial Maintenance Corp. vs. The Phoenix Insurance Co., No. 14-0465 (Tex. 2015), the Supreme Court held that the standard-form commercial general liability (“CGL”) insurance policies at issue which were issued in the late 1960’s and early 1970’s provide coverage for, and must respond to, super-fund cleanup proceedings conducted by the Environmental Protection Agency (“EPA”) under  the federal Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“cercla”).  In reaching that result, the Supreme Court held that the CGL insurance policies’ requirement that an insurer respond to a “suit” includes responding to proceedings initiated under CERCLA when the EPA issues a notice letter informing the recipient that it is a potentially responsible party.”

Statutory Limitations On Property Owner’s Liability For Injury, Death Or Property Damage To An Independent Contractor: In Abutahoun vs. The Dow Chemical Company, No. 13-0175 (Tex. 2015), our Supreme Court interpreted how a statutory limitation on a property owner’s liability for injuries to an independent contractor applies to an independent contractor’s negligence claims against the property owner, when the claims were based on injuries arising out of the property owner’s negligent activities and not the independent contractor’s own work.  The court held that the statute applies to all independent contractor claims for damages caused by a property owner’s negligence when the requirements of the statute are satisfied, but noted that statute does not apply to all negligence claims that an injured independent contractor may assert. Specifically, the court held that where a claim does NOT “arise from a condition or use of an improvement to real property where the contractor or sub-contractor ….. modifies the improvement,”  the contractor can recover for common law negligence.

Liability of Lawyers to Non-clients: In Cantey Hanger, LLP, vs. Byrd, No. 13-0861 (Tex. 2015), our Supreme Court reviewed the rules pertaining to the lack of liability of an attorney to a non-client who sued the lawyer for fraud, aiding and abetting, and conspiracy.  The Supreme Court noted that claims against an attorney for conspiracy to defraud are not actionable where “the complained-of actions involve the filing of lawsuits and pleadings, the providing of legal advice upon which the client acted, and awareness of settlement negotiations–in sum, acts taken and communications made to facilitate the rendition of legal services to the [client].”  While noting that attorneys are not shielded from liability to non-clients for an attorney’s participation in “independently fraudulent activities,” the Supreme Court reiterated that even conduct by an attorney that is “wrongful in the context of the underlying suit” is not actionable if it is “part of the discharge of the lawyer’s duties in representing his/her client.”

Arbitration – Enforceability – Attorney/Client Employment Contracts: In Royston, Rayzor, Vickery, & Williams, LLP, vs. Lopez, No. 13-1026 (Tex. 2015), the court held that principles applicable to arbitration agreements generally, including claims that arbitration agreements may be either substantively or procedurally unconscionable, or both, apply equally to arbitration agreements between attorneys and clients.  The Court further held that the principle that one who signs a contract is presumed to have read and understood its provisions likewise applies to attorney/client arbitration agreements and that there is no legal requirement that attorneys explain to prospective clients, either orally or in writing, arbitration provisions in attorney/client employment agreements.  Moreover, the fact that the scope of an arbitration provision binds the parties to arbitrate only certain disagreements, does not make it per se unconscionable, nor does it make it illusory and thereby unenforceable. 

!  Non-Subscribing Employers – Duties To Employees – Exceptions: In Austin vs. Kroger Texas, L.P., No. 14-0216 (Tex. 2015), the Texas Supreme court dealt with duties owed by non-subscribing employers to its employees.  The Supreme Court held that under Texas law, an employee generally cannot “recover against a non-subscribing employer for an injury caused by a premises defect of which he was fully aware but that his job duties required him to remedy.” As is the case with landowners and invitees generally, employers have a duty to maintain their premises in a reasonably safe condition for their employees, but they will ordinarily satisfy their duty as a matter of law by providing an adequate warning of concealed dangers of which they are or should be aware but which are not known to the employee.  The employee’s awareness of the defect does not “eliminate the employer’s duty to maintain a safe workplace,” but with respect to premises conditions, that duty is ordinarily satisfied by warning the employee of concealed, unknown dangers; the duty to maintain a reasonably safe workplace generally does not obligate an employer to eliminate or warn of dangerous conditions that are open and obvious or otherwise known to the employee.  Exceptions to this general rule may apply in premises liability cases involving third-party criminal activity or a necessary use of the premises.  If an exception applies, the employer may owe a duty to protect the employee from the unreasonably dangerous condition despite the employee’s awareness of the danger, and the Texas Workers’ Compensation Act will prohibit a non-subscribing employer from raising defenses based on the employee’s awareness.

Workers Compensation – Course And Scope Of Employment – Travel To Job Site: In Seabright Insurance Company vs. Lopez, No. 14-0272 (Tex. 2015), the Supreme Court dealt with whether an employee who was injured while driving to a job site was acting so within the course and scope of his employment as to be entitled to compensation under the workers compensation statute.  The court noted that ordinarily an employee is not entitled to compensation for injuries incurred while traveling to and from work since those are risks to which employees are exposed generally and do not arise as a result of the work of the employer. However, the court held that if “the relationship between the travel and the employment is so close that it can fairly be said that the injury had to do with and originated in the work, business, trade or profession of the employer,” an employee’s injury under certain circumstances may be compensable.  The court noted that to be within the “course and scope of employment,” such transportation includes that furnished or paid for by the employer as a part of the employment contract, or where the means of transportation are under the control of the employer, or where the employee is directed in the employee’s employment to proceed from one place to another, or under certain other limited circumstances.