October 2023 Case Notes & Comments

“You can live wherever you want to live. Be whoever you want to be. You have time." ~ Aftersun (2022)

MONTHLY QUIZ: Defendant operates a car Dealership, which has automatic sliding glass doors between the service area and the waiting area. Plaintiff-Customer brings her car to Dealership and sits in the waiting area while her car is serviced. When her car is ready, Customer pays at the counter and walks towards her car and the sliding glass doors, which open during her approach. As she is crossing through the doors, the doors close and Customer claims she is injured. Customer sues for negligence, alleging that Dealership improperly installed a the doors, failed to maintain / adjust the doors and "choose" to keep the defective doors. Dealership has a service agreement with a maintenance company to inspect the sliding glass doors, though there are no records pertaining to any problems or repairs. In discovery, Dealership employees testify that they are are not aware of any current or prior issues with the doors, or their sensors. None of Dealership's employees know how or if the injury occurred or how the doors or sensors functioned. There is neither surveillance footage of the incident, nor any evidence regarding the function of the doors and the sensors.Dealership moves for summary judgment contending that there is insufficient evidence to support a negligence claim against Dealership. Plaintiff asserts that her claim is entirely proved by circumstantial evidence and, for that reason, it is not necessary to present witnesses and documents regarding the workings, operation, or maintenance of the doors or evidence that the doors were actually defective. Is Customer's description of the accident sufficient circumstantial evidence? Is Dealership entitled to summary judgment? You be the judge. (Answer Below).

LEF SECURES SUMMARY JUDGMENT IN EQUITABLE CONTRIBUTION ACTION: Scott Wing and Howard Randell were granted summary judgment in the United States District Court for the Eastern District of Michigan resulting in the recovery of $1,000,000.00 in defense and indemnity payments on behalf of their insurer client. The underlying wrongful death litigation arose out of a traffic accident allegedly caused by a motor carrier who was retained to deliver cargo by the insured-broker. The insured-broker tendered its defense of the suit to its logistics liability insurer, who accepted the defense, as well as its general liability (GL) insurer, who declined to defend and took no further action. After the logistics insurer defended the case and exhausted its $2,000,000,00 policy limit to settle the insured’s liability, LEF filed a Complaint for Equitable Contribution against the GL insurer. On Motion for Summary Judgment, the Court agreed with LEF’s contention that the GL insurer owed a duty to defend under its “non-owned auto” endorsement and breached that duty when it declined the tender without further action. As such, the Court held that the GL insurer was liable for its pro rata share of the defense and indemnity payments, as well as pre-judgment interest under the relevant Michigan statute.

WORKERS' COMPENSATION - PILOT'S ATTEMPT TO ESTABLISH EMPLOYER-EMPLOYEE RELATIONSHIP IN THE ABSENCE OF A CONTRACT OR DIRECT COMPENSATION CRASHES AND BURNS: Appellant-Employer (Respondent), a skydiving company appealed the Circuit Court's determination that there was an employee-employer relationship with Appellee-Pilot (Petitioner). During a skydiving session, Petitioner crashed while attempting to land a Respondent-owned Cesna 182 and sustained blunt force trauma to her face causing lacerations and a broken nose, necessitating two reconstructive surgeries and other treatment. Petitioner testified that she agreed to fly for Respondent, without payment of money, in exchange for accumulation of flight hours necessary for commercial-jet certification. Petitioner estimated that for each hour of flight, she saved $195 in flight and certification-related fees. Although the parties did not enter into a written contract, Petitioner agreed to fly 5-8 hours on Sundays, according to the number and details of Respondent's bookings, and according to the routes and altitudes specified by Respondent. Except for her headset, Respondent supplied all equipment. Respondent testified that the flight directions were relayed by air traffic control. On this record, the Arbitrator determined that an employment relationship existed reasoning that while there was no monetary payment, the parties entered into an oral contract for an exchange of goods and that Petitioner’s opportunity to accumulate flight hours was sufficient consideration / compensation. The Commission reversed on the grounds that a true employer-employee relationship cannot exist in the absence of the payment or expected payment. The Commission cited workers’ compensation statutes throughout the country, which had been "uniformly construed" to exclude coverage for "purely gratuitous workers who neither receive, nor expect to receive pay or other remuneration for their services." The Circuit Court reversed the Commission’s decision and reinstated the Arbitrator’s decision on the grounds that Petitioner’s $195 per hour benefit of flying for Respondent was sufficient consideration to establish an employment relationship under the Act. The Appellate Court reversed the Circuit Court’s decision and reinstated the Commission’s decision. They reasoned that Petitioner and Respondent did not intend to enter into an employee-employer relationship at the time of their oral agreement. Further, Petitioner’s benefit of accumulating flight hours was purely a personal benefit and the benefit of those hours were not given to Petitioner by Respondent, and therefore could not serve as consideration for a contract for hire. Petitioner’s relationship with Respondent was analogous to any other volunteer position. Accordingly the Appellate Court found no employee-employer relationship and thus, Petitioner was not entitled to any benefits under the Act. Larson v. Illinois Workers’ Compensation Comm’n, 2023 IL App (4th) 220522WC-U.

EQUITABLE SUBROGATION V. CONTRACTUAL SUBROGATION - INSURER MAINTAINS RIGHT TO SUE WHERE CLAIM PAYMENT WAS MADE TO AN INSURED OTHER THAN THE ULTIMATE SUBROGOR: Property Owner, a city owned college, entered into contracts with general contractor (GC) and Architect, respectively, for the construction and design of a new academic center (Building). In turn, Architect contracted with Engineer to design a stormwater detention system (i.e. asystem for collecting and slowly releasing rainwater)for the Building. Per its contract, GC procured a builder's risk policy from Plaintiff-Insurer, which provided property coverage for the Building during construction, identified GC as the Named Insured and Owner as an "additional named insured." A rainstorm occurred while the building was still under construction and the basement of the building flooded, causing damage. Insurer paid $2.9M to the GC per the policy and Insurer sued Engineer and others for the defective stormwater detention system. The prerequisites of an equitable subrogation claim are: (1) a third party must be primarily liable to the insured for the loss; (2) the insurer must be secondarily liable to the insured for the loss under an insurance policy; and (3) the insurer must have paid the insured under that policy, thereby extinguishing the debt of the third party. Engineer moved for summary judgment, arguing that Insurer had no right to sue Engineer because there was no contractual relationship between GC and Engineer and because Insurer was not entitled to subrogate in the name of the Owner as the claim payments were not made to Owner. Insurer argued that the principles of equitable subrogation were not controlling because its claim was for contractual subrogation. Insurer argued that per the terms of the Policy, Insurer could pursue contractual subrogation "to the extent of its payments" under the policy and seek Owner’s rights of recovery because Owner was an insured under the Policy. The trial court found the principles of equitable subrogation controlling and determined that Insurer could not satisfy those elements, as the City sustained no loss. The appellate court reversed, finding that the where the right of subrogation is created by the terms of an enforceable contract, the contract terms control, rather than common law or equitable principles. Accordingly, the trial court erred when it required Insurer to show compliance with principles outside the contract in order to be able to enforce its right to subrogation. Further, Insurer was entitled to subrogate in the name of the Owner even though the undisputed evidence showed that Owner did not sustain a loss, claim a loss, or receive payment for a loss. According to the court, the builder's risk policy was directed to the protection of the property and because both GC and Owner had a tangible, insurable interest in the insured property during construction, both suffered a “loss” due to the flooding damage. As the policy's subrogation provision applied to both the Named Insured (GC) and Additional Named Insureds and allowed Insurer to subrogate to the extent of its claim payments, Insurer could maintain is suit in the name of the Owner. Zurich Am.Ins.Co. v. infrastructure Engineering, 2023 IL App (1*) 230147-U (Sept. 19, 2023).

ANSWER TO QUIZ: Dealership wins, Plaintiff-Customer loses. Circumstantial evidence is the proof of certain facts and circumstances from which a fact finder may infer other connected facts, which usually and reasonably follow according to common and ordinary experience. Circumstantial evidence may be used as long as the circumstances are so related to each other that it is the only probable, and not merely possible, conclusion that may be drawn. In this case, the trial and appellate courts agreed that even if an inference could be drawn that the doors must have in some way been defective based solely on Customer’s injury, . that inference does nothing to prove that Dealership was negligent or that its conduct was the proximate cause of Customer's injury. Summary judgment granted and affirmed. Ocampo v. Grossinger City Autocorp, Inc., 2023 IL App (1st) 221381-U.

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