Tuesday, October 17, 2017

How Much Underinsured Coverage Is An Insurance Company Required To Pay When There Are Multiple Tortfeasors?

Insurance coverage for underinsured and uninsured motorist coverage lawsare often times confusing. One source of such confusion is the determination of coverage owed when there are multiple tortfeasors. The recent case of Illinois Emcasco Ins. Co. v. Tufano, 2016 IL App (1st) 151196 provides guidance in this circumstance.
A passenger in a car that collided with another car resulting in injuries claimed to be in the millions of dollars. Id. at ¶ 1. The passenger sued both drivers. Id. One driver had a $100,000 insurance policy that was tendered in full. Id. The other driver had a $300,000 policy that was also tendered, resulting in a payment of $295,000 under that policy. Id. The injured passenger had an underinsured motorist policy in the amount of $500,000 with Illinois Emcasco Insurance Company. Id.
The issue in this case was whether Emcasco was required to cover the difference between what was received from the two drivers collectively and the $500,000 underinsured policy, for a total of $105,000. Or, whether the $500,000 underinsured coverage could be applied to each driver separately, for a total of $605,000. Id at ¶2.
The underinsured motorist coverage in the Emcasco Policy provided:
“Underinsured Motorists Coverage”
The limit of liability shown in the Schedule or in the Declarations for Underinsured Motorist Coverage is our maximum limit of liability for damages because of ‘bodily injury’ resulting from any one accident. This is the most we will pay regardless of the number of:
  • ‘Insureds’;
  • Claims made;
  • Vehicles or premiums shown in the Declarations; or Vehicles involved in the accident.” Id at ¶10.
The Emcasco policy also contained a “set off” provision, that provided “Except in the event of a ‘settlement agreement,’ the limit of liability for this coverage shall be reduced by all sums paid because of the ‘bodily injury’ by or on behalf of persons or organizations who may be legally responsible. Id at ¶11.
Where multiple tortfeasors are involved and the insurer wants to offset the collective payments made by all tortfeasors against the underinsured coverage, the plain language of the policy is not the end of the inquiry. Id at ¶22. The court also considers whether application of the policy language violates the public policy behind the underinsured motorist statute. Id at ¶22.

Outcome of the Illinois Case Illinois Emcasco Ins. Co. v. Tufano

Three principles emerge from the Illinois case law:
  1. Underinsured motorist coverage should place the insured in the same position he or she would have occupied if the tortfeasor had carried insurance in the same amount as the insured;
  2. Underinsured motorist coverage exists to fill the gap between the amount received from the tortfeasor’s insurance and the amount of the insured’s underinsured-motorist policy limit; and
  3. Underinsured-motorist coverage is not intended to allow the insured to recover amounts from the insurer over and above the insured’s underinsured-motorist policy limit. Id at ¶25.
In situations such as Tufano, where there is one claimant and multiple tortfeasors, application of underinsured coverage can be complex when these three principles are taken into account. Id at ¶27. For example, in order to satisfy the second principle, Emcasco would only owe $105,000. Id. However, this would not satisfy the first principle, to put the injured passenger in the same position as if both at fault drivers had $500,000 in insurance coverage, which would entitle the injured passenger to $1,000,000 overall. Id. If the first principle was ranked above the second principle, then the third principle would be violated because Emcasco would be required to pay more than the policy limit. Id.
Ultimately, the Court determined that, where multiple tortfeasors are involved in an accident in which an underinsured motorist policyholder is injured, the policyholder must be placed in the same position as if each tortfeasor carried the same amount of insurance as the policyholder. Id. at ¶41. One tortfeasor’s payment cannot be used to offset the underinsurance gap of another tortfeasor; each instance of underinsurance must be viewed distinctly. Id. However, the amount of coverage the policyholder can receive from the underinsured motorist carrier is capped by the overall limit of the underinsured motorist policy, because the insurer should not be required to pay a policyholder more than was promised or more than the amount for which the policyholder paid in premiums. Id.
While the determination of underinsured insurance coverage involving multiple tortfeasors may be a difficult determination to make, insurers can rest assured that Illinois insurance law will not require a payment over and above the underinsured policy limit.
For information about this topic or any other insurance coverage concerns, contact Kelly Purkey at McKenna Storer.

If you enjoyed this topic you may like to read these other Insurance Coverage articles by our attorneys.
This post was originally published at https://www.mckenna-law.com/blog/Underinsured-Coverage-Payments-Multiple-Tortfeasors

Tuesday, October 10, 2017

When to Report a Legal Malpractice Claim to the ARDC

There may be a double "whammy" in being a legal malpractice defendant. In addition to being a defendant, the plaintiff may be obligated to report you to the Attorney Registration & Disciplinary Commission (ARDC) if the alleged malpractice misconduct violates Rules 8.3(a), 8.4(b) or (c) of the Illinois Rules of Professional Conduct ("Rules"). This mandatory reporting heightens the stakes of any malpractice claim and may complicate the defense of the case.

What the legal malpractice rules require

Rule 8.4 (b) and (c) describe particular types of lawyer misconduct:
8.4. It is professional misconduct for a lawyer to
  • (b) commit a criminal act that reflects adversely on the lawyer's honesty, trustworthiness or fitness as a lawyer in other respects;
  • (c) engage in conduct involving dishonesty, fraud, deceit or misrepresentation.
If any violation of 8.4(b) or (c) is part of a legal malpractice complaint, a report by plaintiff's counsel is mandatory. The 2010 revisions to the Illinois Rules of Professional Conduct state:
Rule 8.3 Reporting Professional Misconduct provides:
  • A lawyer who knows that another lawyer has committed a violation of Rule 8.4(b) or Rule 8.4(c) shall inform the appropriate professional authority.

What triggers a reporting requirement?

The elements giving rise to reporting requires:
  1. Knowledge;
  2. Non-privileged information;
  3. A violation of 8(b) or (c) of the Illinois Rules of Professional Conduct; and
  4. The report must be to the proper authority
Under the rules, "knowledge" is defined in Rule 1.0(f) as knowledge which "may be inferred from the circumstances". As the court in Skolnick noted, knowledge must be more than a "mere suspicion," but it does not require "absolute certainty". Skolnick, supra at 228. Second, the information must not be privileged, or consent to waive the privilege must be given by the client. Rule 8.3(c). Third, only violations of 8.4(b) or (c) must be reported, other violations are not within the scope of the reporting requirement. Garden variety negligence legal malpractice claims will not fall within the disclosure requirements.

Effect of an attorney’s failure to report misconduct of another

In In re Himmel, 125 Ill. 2d 531 (1988), the Supreme Court made clear that the failure of an attorney to report another attorney's misconduct, was, in and of itself, an ethical violation. In 2000, the court added clarity to the requirement. Filing a legal malpractice complaint and thereby advising the trial court of the misconduct does not discharge the ethical duty of the lawyer to report misconduct under Rule 8.3(a). Skolnick v. Altheimer & Gray, 191 Ill. 2d 214, 229 (2000).
Rather, the report must be made to a tribunal "empowered to act" on the reported misconduct. Id. The court in Skolnick made clear that a trial court is not the proper authority to enforce the ethical rules, that is not the trial court's role. So merely filing the complaint does not constitute a "report". Id. In Illinois, that authority is exclusively delegated by the Supreme Court to the Attorney Registration & Disciplinary Commission ("ARDC"). Skolnick, supra at 229. In the Rule amended in 2010, the report must be made to the "appropriate professional authority", which almost always is the ARDC.

Obligation of legal malpractice plaintiffs

For the legal malpractice plaintiff, it is important to be attuned to this requirement and make sure you have solid "knowledge" supporting your pleading that at a minimum meets the pleading requirements of Illinois Supreme Court Rule 137. Rule 137 provides in pertinent part:
  • "The signature of an attorney or party constitutes a certificate by him that he has read the pleading, motion or other document, that to the best of his knowledge, information and belief, formed after reasonable inquiry it is well grounded in fact and warranted by existing law or a good faith argument for the extension, modification or reversal of existing law…"
Compliance with Rule 137 intersects with the concept of "knowledge" under Rule 8.3(a).
If your complaint allegations are sufficient under rule 137 and the allegations fall within the parameters of 8.4(b) or (c), you must report. It is important that any legal malpractice complaint be solidly supported by facts, but it is even more important if the complaint filing will trigger this ARDC reporting requirement.

Skills required of legal malpractice defense counsel

For the legal malpractice defendant, it is possible you will be conducting a dual defense: in court and before the ARDC. For the defendant who is in this situation, it might be advisable to ensure your legal malpractice attorney has practiced before the ARDC or that defense counsel is willing to partner with someone who is experienced in appearing before the ARDC. Obtaining this expertise should not come after the ARDC decides to file charges. It is needed when the defendant is initially responding to an ARDC inquiry. In other words, earlier is better.
For all parties a complaint alleging misconduct that falls under Rules 8.4(b) and (c) raises serious ethical issues. At every stage, counsel for each side must be cognizant of the implications of the allegations from both a liability and ethical perspective.
For more information about this topic, contact Sara E. Cook at McKenna Storer.
If you enjoyed this article, you may enjoy other malpractice law articles by our attorneys.
This post was originally published at https://www.mckenna-law.com/blog/legal-malpractice-claim-ardc/

Wednesday, October 4, 2017

Ninth Circuit Revisits Spokeo and Holds that Violations of the FCRA Can Establish Standing to Sue Under Title III

The United States Supreme Court opinion in Spokeo (“Spokeo II) was viewed as a major decision in cybersecurity litigation. We at Mckenna Storer addressed the importance of that decision in this space in “No Harm, No Foul: Why Spokeo v. Robins is a Win for Data Privacy Defendants”. The results following that decision have been mixed for plaintiffs and defendants. In Spokeo II, the Court remanded the case to the U.S. Court of Appeals for the 9th Circuit, which recently issued its opinion on remand. The 9th Circuit held that Plaintiff has standing to sue Spokeo for violations of the Fair Credit Reporting Act (FCRA).
The 9th Circuit addressed whether Plaintiff Robins sufficiently pled a concrete injury such that he had standing to sue Defendant Spokeo under Article III of the United States Constitution. Robins argued that Spokeo’s alleged violation of the FCRA was sufficient to establish concrete injury. Guided by the Spokeo II opinion, the 9th Circuit considered the extent to which a violation of a statutory right can itself establish an injury sufficiently concrete for the purposes of Article III standing. Spokeo II made clear that a plaintiff must demonstrate an injury that is real and not abstract or merely procedural.
Ten data privacy issues every business must address
Additionally, the Court stated that intangible harm may rise to this level as with restrictions on free speech or harm to one’s reputation. Despite this earlier statement, Spokeo II recognized that some statutory violations alone can manifest concrete injury. As the 2nd Circuit summarized in Strubel v. Comenity Bank, Spokeo II “instruct[s] that an alleged procedural violation [of a statute] can by itself manifest concrete injury where Congress conferred the procedural right to protect a plaintiff’s concrete interests and where the procedural violation presents ‘a risk of real harm’ to that concrete interest.”
Based on its interpretation of Spokeo II, the 9th Circuit addressed two questions on remand: (1) whether the statutory provisions of the FCRA were established to protect concrete interests, and (2) whether the specific procedural violations alleged in this case actually harm, or present a material risk of harm, to such interests.
The court answered the first question in the affirmative. Specifically, the court determined that consumers have a concrete interest in accurate credit reporting about themselves. This determination is based on both the importance of credit reports in daily life and Congress’ judgment identifying this harm.
The court also affirmatively answered the second question. In doing so, the court focused on the information that was inaccurately reported; specifically, the plaintiff’s age, marital status, educational background, and employment history. The court determined that inaccurately reported information in this case was sufficient to present actual harm, or material risk of harm. The court also noted that not every inaccuracy will give rise to a concrete harm.
This most recent Spokeo opinion has confirmed what has been evident in cybersecurity litigation since the Supreme Court’s ruling in this case. The question of whether a plaintiff has standing to sue will be specific to the facts of each case. There is no bright line rule taking this issue off the table, so challenges to standing will continue to be raised by defendants in cybersecurity litigation.
If you have any questions concerning cybersecurity litigation defense, or any data privacy and security matter, please contact Tim Hayes at McKenna Storer.

If you found this content helpful, you may also value other Privacy and Data Security articles.
This post was originally published at https://www.mckenna-law.com/blog/Ninth-Circuit-Revisits-Spokeo+

Sunday, August 13, 2017

New FASB Accounting Standards Could Change How Your Company Does Business – Are You Ready?

New accounting standards proposed by the Financial Accounting Standards Board scheduled to go into effect for the 2019 fiscal could affect how commercial leases are structured. As an executive or house counsel, if you are not aware of the changes or thought there was plenty of time to make your company compliant, time is running out. The new FASB standards cause dramatic changesto generally accepted accounting principles(GAAP) applicable to leases.

Current GAAP for finance and operating leases

There are two types of leases: Finance leases and operating leases. Each of them is currently being treated differently under GAAP. An asset acquired under a finance lease is deemed owned by the lessee. The payments made under the lease are shown as liabilities in much the same way as payments on a loan for accounting purposes. Accounting principles treat finance leases as the financing vehicle by which your organization acquires assets.

In sharp contrast to finance leases, operating leases are the means by which a lessee acquires the ability to use an asset without claiming any ownership rights to it. Accountants applying current GAAP rules report operating lease payments on a company’s income statement, but they do not include the payments or the value of the asset on its balance sheet.

Identifying a lease as either a finance lease or operating lease is accomplished by looking for the following four characteristics of a finance lease:

  • End of term transfer of ownership to lessee
  • Purchase option
  • Economic life and lease term are the same or close to being the same
  • Lease payments and residual value of the asset as reflected in the lease equal or exceed the value of the leased asset

How FASB changes affect GAAP beginning in 2019

Known officially as “FASB Accounting Standards Update No. 2016-02, Leases (Topic 842),” the new rules require recognition of operating leases on balance sheets and income statements.

Both operating leases and finance leases must be reflected on a company’s balance sheet under the new FASB rules.

The value of the asset and the payments made under the lease must be reported on a company’s balance sheet under the new standards. This is an oversimplification because the new FASB rules require special treatment by accountants for common lease provisions, including:

  • The additional payments generated by options to extend the lease must now be accounted for in advance by anticipating whether it is likely to be exercised
  • Leases with cost of living or other adjustment clauses are subject to new accounting principles
  • Leases with options to purchase granted to the lessee are subject to addition rules and accounting principles

The complexity of the process of gathering the information needed to comply with the new GAAP under the changes approved by FASB requires immediate action by companies and their accountants and legal counsel. Publicly traded corporations must meet the new standards for all filings made after December 15, 2018 and for other companies beginning a year later.

Role of outside counsel helping companies comply with FASB standards

Companies with leased assets will need guidance and legal advice from attorneys knowledgeable in commercial real estate law to review leases to determine how they are structured in order to assist in mining the data required to properly report the assets and liabilities associated with them. The business law and commercial real estate law attorneys at McKenna Storer provide superior advice and representation in lease negotiations and reviews. For additional information about this topic, please contact them to schedule an appointment.

Tuesday, July 11, 2017

Reasons You Might Need Professional Liability Insurance

Professional Liability Insurance - Are you covered

Accountants, attorneys and doctors are the professions that usually come to mind when people talk about professional liability insurance. Other professions, such as real estate brokers and agents, insurance brokers, and consultants should also consider obtaining coverage to protect them in the event of negligence, good faith violations and other claims by the people to whom they provide services.

Coverage provided by professional liability insurance

Businesses and professions holding themselves out to the public as experts in a particular field, such as law and medicine, are held to a standard for their particular profession. The standard could be set by law, by the industry or profession, or by the contracts under which a professional’s services are offered to a particular client. If the professional’s performance is below the standard, he or she could be sued for damages.

Professional liability insurance generally covers a business or professional for mistakes, omissions and negligence that result in financial harm to the client. For example, the failure of a professional to complete services for a client or completing them in a negligent manner could result in a claim for which an insurance policy would provide the following coverage:
  • Costs associated with investigation of the claim
  • Litigation defense costs, including attorney fees and court costs
  • Payment of the claim through settlement or after verdict
Policies usually exclude criminal acts committed by the professional. For example, a claim against a financial advisor for stealing money from a client could be excluded from coverage as an intentional and criminal act.

Professions benefiting from liability coverage

Liability insurance for professionals goes by several names including, malpractice insurance and errors and omissions insurance. Included among the professions for which coverage is recommended are the following:
  • Financial advisors
  • Graphic designers
  • Software developers
  • Engineers
  • Architects
  • Doctors
  • Lawyers
  • Accountants
  • Real estate agents and brokers
  • Insurance agents and brokers
  • Consultants
Other professions might also qualify for coverage if they offer services relying primarily on expertise gained through education, training and experience. An attorney practicing in the area of professional liability defense would be an excellent source of information and guidance.

Types of insurance liability policies

Coverage is offered as either a claims-made or occurrence policy. Claims-made policies are the most common, but coverage is limited to claims arising and filed during the period in which the policy is in effect. Occurrence policies cover events taking place during the effective dates of a policy even if the lawsuit or claim is not filed until after coverage lapsed.

Occurrence policies might benefit individuals leaving a particular profession through a career change or retirement because claimants might have time under a state’s statute of limitations laws to file a claim exceeding the effective dates of the policy. For instance, Illinois gives people at least two years to sue for malpractice, so a claim could be filed after a policy has lapsed. If the professional had a claims-made policy, he or she could be without coverage.

Our attorneys can help

The attorneys at McKenna Storer provide professional liability defense and insurance law representation to for doctors, lawyers and other professionals. For additional information about this topic, please contact them to schedule an appointment.

Friday, June 2, 2017

3 Services Your Medical Malpractice Attorneys Should Be Offering

Medical Malpractice Attorneys
Whether you're a physician, nurse, hospital or other health care service provider, a medical malpractice claim can be an unsettling and financially devastating experience. While most medical professionals readily call on a malpractice lawyer when defending claims that reach the litigation stage, it's important to know there three important services medical malpractice attorneys can provide for you before a malpractice claim arises.

1. Advise you about the types of medical malpractice policies and coverage parameters

A medical malpractice claim against any health care professional or healthcare facility for could require an interpretation and explanation of the policy coverages. It's not unusual for a health care provider lack complete understanding of the coverage types and limitations of their malpractice policy or professional liability policy, especially when that policy is purchased by their practice,
Claims-made and occurrence are the two types of policies offered by malpractice insurance carriers. A claims-made policy insures against claims made from incidents occurring while the policy was in effect. Both the reporting of the claim and the incident must occur while the policy is active. Once the policy lapses or is cancelled, the coverage ceases to exist.
Unlike a claims-made policy, occurrence policies insure against claims arising from incidents that occurring during the effective term of the policy. A claim filed after a policy lapses or is cancelled would still be covered provided the incident arose while the policy was in effect. The date a claim is actually reported is irrelevant because coverage is determined by the date of the incident.

2. Review insurance applications for malpractice coverage

The information you furnish on an application for insurance should be reviewed by insurance counsel to ensure it is accurate and complete. If you fail to include information on your insurance application about any known incident that could lead to a claim or regulatory action, such as enforcement actions by the Illinois Department of Financial and Professional Regulation, they could later become the basis for a denial of coverage by the insurance company. Application review by experienced insurance counsel and identify potential problem areas, including omissions, before submission to the carrier and prevent coverage issues from arising in the future.

3. Helping to identify medical malpractice risks

A law firm well-versed in the nuances of medical malpractice and insurance law can help you identify and control areas of potential liability through risk management reviews, including:
  • Proper documentation of patient care
  • Obtaining informed consent for all treatment and procedures
  • IDFPR licensing and regulatory compliance
  • Meeting the standard of care required of the specialty when rendering services
Upon completion of a risk management review, recommendations can be made and implemented addressing problem areas posing liability or claims issues. Acting proactively can help healthcare professionals to reduce the occurrence of claims or to minimize the extent of the damages resulting when claims occur.

Our medical malpractice attorneys can help

The attorneys at McKenna Storer provide medical malpractice defense and insurance law representation to physicians, nurses, hospitals and other health care providers When you’re looking for attorneys with that understand the defense and prevention of medical malpractice and negligence claims, or would like additional information about this topic, please contact Mckenna Storer or check out Medical Malpractice services on our website.

Thursday, May 4, 2017

Learn What Construction Lawyers Can Do For Your Company

Construction Lawyers

If you are a general contractor or the owner of a business associated with the construction industry, you might believe you only need to hire an attorney whose area of practice is construction law once a lawsuit is underway. In truth, litigation representation is only one of the many services a construction attorney provides. Knowledgeable and skilled legal representation can anticipate potential conflicts and help in avoiding construction litigation by offering practical strategies and solutions.

Construction projects require more than a handshake

The days when developers began projects based only on trusting in the reputation of the other parties are long gone. Public and private construction projects are complex undertakings requiring detailed contracts and other documents containing the terms and conditions under which the parties will operate, including the following:

  • Detailed descriptions of the responsibilities and obligations of each party to the agreement
  • Terms under which payments are to be made
  • Completion schedule and provisions in the event of delays
  • Insurance requirements
  • Risk assumption and provisions for the shifting of risk between the parties
  • Indemnity clauses
  • Process and procedures for dispute resolution
  • Penalty provisions for failure to meet completion deadlines and other contractual duties

An attorney knowledgeable about the construction industry understands that negotiations undertaken before the commencement of a project must take into account all aspects of the parties’ relationship. Incorporating the results of those negotiations into a written agreement gives the participants a clear set of guidelines under which to operate and, in the event disagreements arise, a method of resolving them without resorting to litigation.

Contracts are not the only documents attorneys draft and review for their construction industry clients. Documents related to transactions for the purchase, sale and financing of commercial and industrial real estate should be reviewed and, when necessary to protect the client, negotiated and redrafted.

Representation when avoiding construction litigation is impossible

Despite your best efforts, your company could find itself in court. The construction industry in Illinois must navigate through countless state, local and federal regulations, including OSHA, environmental restrictions and non-discrimination rules. Engaging the services of an attorney to interpret the regulations and to help develop a plan for compliance also ensures that you have legal representation ready in the event of accusations of a violation.

Other litigation that might arise for which legal counsel could benefit your construction company includes:
  • Surety claims
  • Mechanics liens
  • Insurance claims and issues
  • Warranty and damage claims
  •  Contract enforcement
  • Construction defects

Engaging the services of a law firm capable of providing your company with a variety of construction law services ensures you of litigation counsel who is thoroughly familiar with your company.

Getting help when you need it

The construction lawyers at McKenna Storer offer all of the services general contractors, insurance carriers and others operating in the construction industry may need. Contact them today for more information and to find out what they can do for you.