‘Turf’ War Emerges Over the Environmental Liability … on page continued on page Summer 2008 In ThIs Issue: 1 ‘Turf’ War Emerges Over the Environmental Liability and Coverage

continued on page �continued on page �

Summer 2008

In ThIs Issue: 1 ‘Turf’ War Emerges Over the Environmental Liability and Coverage of Artificial Turf Playing Fields • Insurance Coverage Corner 3 New Jersey’s Highest Court Applies Limited Duty of Care in Hockey Spectator Injury Case 5 Scheduled Presentations 6 Metropolitan Life Insurance Co. v. Glenn: Conflict of Interest Triggers Strict Scrutiny of Denial of Claim 9 HRRV Decisions of Note 12 HRRV in the Public Eye

‘Turf’ War Emerges Over the Environmental Liability and Coverage of Artificial Turf Playing FieldsBy Sean P. Dwyer

Since the 1970s, the presence of artificial turf on sports fields across the nation has dramatically increased. For years, manufacturers and proponents of artifi-

cial turf have touted it as “the playing field of the future” promoting it as a durable, low-maintenance and cost-effective alternative to grass. The Synthetic Turf Council trade group estimates there are about 3,500 full-size artificial turf fields in the United States and that new fields are being installed at a rate of 900 to 1,000 per year. With the advancement of technology, these synthetic surfaces have been designed to be softer, safer and help prevent injuries.

But there are increasing concerns that some synthetic fields—particularly artificial surfaces that have been in place for years—are contaminated with lead and pose a health hazard to children, athletes and others who use them. Recently, in the New York and New Jersey regions alone, a half-dozen artificial fields that have been in use for more than 10 years have been closed because of a concern about high levels of lead in the turf fibers. The threat of lead contamination in old turf has given way to a growing wave of concern over newer types of artificial turf. While newer fields are made from polyethylene and polypropylene, plastics commonly used to make everything from grocery bags to food containers, they often feature longer strands of plastic “grass” and rubber from recycled car and truck tires. These bits of recycled tires, known as “crumb rubber,” provide a cushioned surface that mimics natural turf during sports play. While scientific studies have yet to confirm the extent,

New York’s No Prejudice Rule May Be Eviscerated, Again�

By Matthew D. Kraus and Joseph G. Silver

On June �3, �008, the New York State Assembly and Senate

passed a bill (A115�1 and S8610), which if signed by Governor David Pa-terson, which is likely,� will dramatically change New York’s insurance coverage laws. The chief components of the bill are: (1) that an insured’s late notice will not invalidate its claim unless the insurer has been prejudiced by the delay, and (�) that an injured person or other claimant in a wrongful death or personal injury action may, in limited circumstances, commence a simultane-ous declaratory judgment action against the insurer.3

Abolishment of the No Prejudice RuleCurrently, under New York law “[t]he right of an insurer to receive [timely]

1. Last year, Governor Eliot Spitzer vetoed similar legislation.

�. Governor Paterson proposed this legisla-tive initiative for introduction into New York’s legislature.

3. http://assembly.state.ny.us/leg/?bn=A115�1

Legal Insights / Summer �008 / www.hrrv law.com�

Personal Attention. Powerful Representation. Creative Solutions.

Turf WarFrom page 1

if any, of a health hazard, crumb rubber has been suspected to contain hazard-ous substances including polycyclic aromatic hydrocarbons and heavy met-als, such as lead.

The well-publicized concerns about artificial turf have created ripples na-tionwide, prompting multiple investi-gations on both the state and federal levels of artificial surfaces and raising anxiety among health and elected of-ficials, some of whom want to ban new installations until government agencies study the potential health risks and en-vironmental hazards. Earlier this year, both the U.S. Environmental Protection Agency and the U.S. Consumer Safety Product Commission commenced inde-pendent investigations into the environ-mental impact of artificial turf and the potential for hazardous lead exposure.

Beyond federal regulatory action, the New York State Legislature has introduced legislation, Bill #A9503-Englebright / #S6531-Alesi, to place

a six-month moratorium on building new artificial turf fields in New York and conduct a study on the possible health impacts of crumb rubber and artificial turf. While this bill has just entered its second round of reviews, it is predicted that the measure will pass in the state legislature within the next few months. New York State is not alone in this en-deavor. Many other states and local municipalities across the nation have initiated their own independent reviews of the safety of artificial turf.

With the wave of adverse media at-tention and the potential for liability exposure, schools and sports facilities owning fields with artificial turf are well advised to conduct a risk management assessment and a review of existing insurance coverage policies. Today’s standard liability policy forms typically contain exclusions that may undermine the ability of an artificial field owner to obtain coverage. One common exclu-sion, for example, bars coverage costs from damage to one’s own property or product without actual damage or injury to a third party. Still, another common exclusion includes a broad pollution exclusion barring coverage for liabilities arising from environmental exposures.

Conversely, schools and sports facili-ties intending on installing artificial turf playing fields should carefully review and evaluate the coverage and exclu-sions that may apply to the playing field before purchasing insurance. Potential environmental exposures must now be identified and addressed when cover-age is procured. Insurance policies, like any contract, can be negotiated at inception to attempt to address the risks associated with artificial turfs.

A proactive risk management strategy for a sports facility owner must now include contract negotiations during construction and installation of the field that include comprehensive indemnity provisions and the proper allocation of risk. Ensuring survival of those indem-nity obligations after completion of the project is equally critical. Moreover, a facility owner may want to confirm that its applicable general liability policy contains a pollution exclusion with a “carve out” for products pollution. If a provision of this nature cannot be nego-tiated, stakeholders in the construction process can purchase a contractor’s pollution liability insurance policy, which will provide indemnity and defense ob-ligations after the project is accepted by the owner. As a further alternative, a facility owner may wish to purchase pollution legal liability coverage, which will provide the owner with dedicated limits and contains an absolute duty to defend the owner in the event of a claim or litigation.

Even if a risk cannot be fully trans-ferred, the mere exercise of consider-ing what risks are covered facilitates planning. In all, there are a variety of commercial insurance products on the market that directly underwrite pollution liability. If a “turf war” does break out, the effective management of risk will depend on whether a school or sports facility sought proper counsel and guid-ance today to explore potential environ-mental exposures that will likely arise in the future.

Contact

Sean P. Dwyer: 516-6�0-17�0 or [email protected]

Schools and sports facilities owning fields with artificial turf are well advised to conduct a risk

management assessment and a review of existing insurance coverage policies.

http://www.hrrvlaw.com

mailto:[email protected]



New Jersey’s Highest Court Applies Limited Duty of Care in Hockey Spectator Injury Case

By Carla Varriale

In �003, Denise Sciarrotta attended a professional hockey game at the

Sovereign Bank Arena in Trenton, New Jersey. Her seat was located six or seven rows from the ice and above the Plexiglas barrier mounted on the sideboards. The area in which she was sitting was not protected by the netting, which extended above the Plexiglas. During the pregame warm-up period, when each team used as many as twenty-five pucks, an errant puck struck a goal post, flew above the Plexiglas and hit Ms. Sciarrotta, causing her to sustain injuries.

In Sciarrotta v. Global Spectrum, et al, �008 N.J. Lexis 31� (�008), the Su-preme Court of New Jersey addressed two aspects of the limited duty rule, a specialized standard of care applied to sports venues because of the unique risk posed by objects leaving the field of play. The rule mandates that an owner or operator who provides protected seating in the most dangerous section of the venue and makes it available for those spectators who desire such seating has satisfied its duty of care. A spectator who chooses not to occupy a seat in the protected area cannot maintain a negligence action against an owner, operator or, arguably, a player.

The Supreme Court previously con-sidered the limited duty of care in the context of an injured baseball spectator in the highly publicized (and criticized) case, Maisonave v. Newark Bears Professional Baseball Club, Inc., 185 N.J.70, 881 A.�d 700 (�005). In Mai-sonave, the Supreme Court created an exception to the limited duty rule for those patrons who were not “specta-tors” at the time of the accident or who were otherwise engaged in one of the sports arena’s commercial ventures. By essentially gerrymandering a baseball

field of play, calling the danger a “self-evident risk.”

In contrast, the dissent argued that the plaintiff should have been warned of the risk of injury so that she could have made an informed decision. The dissent would have required that the following warning be posted at ticket booths and within the arena, stating that it con-formed with the Court’s prior jurispru-dence regarding the duty of care owed to spectators:

During warm-ups and hockey games, pucks and other items may fly off the ice and into the stands. Under New Jersey law, a hockey rink operator must provide a protected area for spectators who choose not to be exposed to such risks. You have a right to ask for such protected seating, and the operator has a duty to provide it if available. If you do not do so and are injured, you will not be able to recover money damages from the operator.

Impact of the Decision

The Supreme Court’s decision is note-worthy for several reasons. The Court held that the limited duty rule applies

stadium into recreational or commercial areas, the Court created two distinct duties of care with regard to objects leaving the field of play—the limited duty of care or a broader duty of care traditionally owed to business invitees—depending on the location of a spectator when injured. Maisonave was, how-ever, promptly rejected su-perseded by the New Jersey Baseball Spectator Safety Act of �006, L. �005, c. 36�, N.J.S.A.@A:53A-�3-�8.

The Limited Duty Rule Applies to Pregame Activities

The Supreme Court concluded that the limited duty applies to “all activities on the field of play, including pregame warm-ups.” In finding that there are no “temporal limitations” to the application of the limited duty rule, the Supreme Court expressly rejected the argument that there are differing levels of distrac-tion, depending on whether the game is in progress. Moreover, the Court found that many spectators attend sporting events for the “entire experience” and that some hockey fans arrive early to “scramble for the pucks the players inevitably lift into the stands for the spectators’ delight.” Noting that the New Jersey Baseball Spectator Safety Act of �006 defined a professional baseball game to include pregame activities, the Court found that there was no reason to craft a different definition for the scope of the limited duty with respect to pro-fessional ice hockey.

The Limited Duty Rule Does Not Encompass a Duty to Warn

The Supreme Court also held that the limited duty rule does not include a separate duty to warn spectators of the inherent danger of objects leaving the continued on page 5




continued on page 5

From page 1

notice has been held to be so funda-mental that the insurer need show no prejudice to be able to disclaim liability on this basis.” See Allstate Ins. Co. v. Furman et al., 8� A.D.�d �9, ��5 N.Y.S.�d �36, �39 (�nd Dep’t 1981) (emphasis added). In other words, if an insured fails to timely notify its insurer of a potential claim, then the insurer may disclaim its coverage obligations, regardless of whether it has been preju-diced by its insured’s late notice. See Argo Corp. v. Greater N.Y. Mut. Ins. Co., 79� N.Y.S.�d 70� (�005).

If this legislation is enacted, New York’s longstanding No Prejudice Rule will be abolished. Section � of the bill, which adds a new subsection, N.Y. Insurance Law § 3��0(a)(5), provides that an in-sured’s failure to abide by an insurance policy’s notice requirements within the “time prescribed therein shall not invali-date any claim made by the insured, injured person or any other claimant, unless the failure to provide timely no-tice has prejudiced the insurer.”� The bill affords an arguably myopic definition of prejudice. New § 3��0(c)(�)(C) provides that “[t]he insurer’s rights shall not be deemed prejudiced unless the failure to timely provide notice materially impairs the ability of the insurer to investigate or defend the claim.” In other words, if an insurer cannot prove that its ability to investigate or defend a claim has been materially impaired by its insured’s late notice, then it cannot disclaim insurance coverage for late notice with impunity.

The bill, in new § 3��0(c)(�)(A), creates a shifting burden of proof concerning the issue of prejudice. In any action in which an insurer alleges that it was prejudiced as a result of its insured’s untimely notice, the burden of proof

�. Section � of the bill makes exceptions for claims-made policies.

shall be on the insurer to establish prej-udice “if the notice was provided within two years of the time required under the policy.” However, the burden of proof shifts to the insured to establish that the insurer has not been prejudiced, “if the notice was provided more than two years after the time required under the policy.” Furthermore, the bill creates an irrebuttable presumption of prejudice “if, prior to notice, the insured’s liabil-ity has been determined by a court of competent jurisdiction or by binding ar-bitration; or if the insured has resolved the claim or suit by settlement or other compromise.”

The bill’s summary states that the impetus for abolishing New York’s No Prejudice Rule was the inequitable relationship between insurers and in-sureds. More specifically, the summary stated that the current law is inequitable because “insurers collect billions of dollars in premiums annually, and dis-claim coverage over . . . inconsequential technicalit[ies].”5 According to its terms, the bill, which was ostensibly proposed to level the playing field, would take ef-fect 180 days after it is enacted into law, and shall then apply prospectively only, to policies issued or delivered in this state6 on or after the effective date and to any action maintained under such a policy. The bill also changes New York’s direct action rules.

Direct Actions Against the InsurerThe Court of Appeals has held that an injured party may, in very limited cir-cumstances, maintain a direct action against a tortfeasor’s insurer. See Lang v. Hanover Ins. Co., 3 N.Y.3d 350, 787 N.Y.S.�d �11 (�00�). Before filing a di-rect action against the insurer, the in-jured party must: (1) obtain a judgment against the tortfeasor, (�) serve the insurance company with a copy of the judgment, and (3) await payment for 30

5. http://assembly.state.ny.us/leg/?bn=A115�1

6. This could prove to be a significant unintend-ed loop hole in the legislation.

days. See N.Y. Insurance Law § 3��0 (McKinney �008). The bill, if enacted, will alter this rule.

Section 3��0(a)(6), an addition to the current statute, affords an injured party or other claimant the right to bring a declaratory judgment action directly against an insurer in limited circum-stances, even if his or her underlying claim has not been reduced to a judg-ment. In particular, Section 3��0(a)(6) allows plaintiffs to initiate a declaratory judgment action against the tortfeasor’s insurer in which the sole question is the validity of the insurer’s late notice dis-claimer or denial if: (1) the underlying action is a wrongful death or personal injury action, (�) the insurer disclaims liability or denies coverage based upon late notice, and (3) neither the insurer nor the insured has commenced a declaratory judgment action within 60 days of the disclaimer.

The Bill’s ImpactThe exact impact of each addition to N.Y. Insurance Law § 3��0 will remain unknown, and subject to wide specula-tion, until the judicial branch interprets the new provisions. However, certain impacts of § 3��0(a)(5) are clear. Sec-tion 3��0(a)(5) will indelibly (unless the statute is amended or repealed) alter the insurance coverage landscape because New York will no longer be a No Prejudice Rule state. Insurers will be unable to ignore the effect of an insured’s late notice before disclaiming insurance coverage. If an insurer can-not prove that its ability to investigate or defend a claim has been materially im-paired by its insured’s late notice, then it cannot properly disclaim insurance coverage for late notice.

The legislature has left a critical ques-tion unanswered: when is an insurer’s ability to investigate or defend a claim materially impaired by its insured’s late notice? In the most extreme instances (for example, receiving notice on the eve of a verdict or judgment), we



Legal Insights / Summer �008 / www.hrrv law.com5

From page � Academy for Venue Safety and SecurityCarla VarrialeAugust 16–�1, �008

New CMS Policy on Preventable Injuries: Limiting Liability Exposure and Protecting Hospital Medicare ReimbursementLive 90-Minute Teleconference

Program with Interactive Q&ASean DwyerSeptember �, �008

Trial Techniques: Opening StatementsNational Business InstituteLive 90-Minute Teleconference

Program with Interactive Q&ASean DwyerSeptember �, �008

Mitigating Green Building Project RisksNational Business InstituteSean DwyerSeptember 16, �008—Cleveland,

OhioSeptember 17, �008—Columbus,

OhioSeptember �6, �008—Syracuse,

New YorkOctober 17, �008—Long Island,

New York

Introduction to Green Building Technology and MethodsU.S. Green Building CouncilSean DwyerSeptember �5, �008

Risk and Insurance in Green ConstructionInternational Risk Management

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New Jersey Hockey Spectator Injury CaseFrom page 3

to “all activities on the field of play, in-cluding pregame warm-ups,” arguably opening the door for an application of the limited duty rule to promotional and marketing activities that take place on the field of play, such as a T-shirt launch. Moreover, the Court held that the limited duty rule applies without regard to whether a spectator is dis-tracted, torpedoing the so-called “dis-traction” theory that has been advanced in an attempt to circumvent the effect of the limited duty rule.

The Court viewed the attempt to im-pose a duty to warn of a self-evident risk with “skepticism.” This aspect of the Sciarrotta decision could arguably call into question the need for announce-ments warning of the risk of injury cre-ated by objects leaving the field of play.

Finally, the Sciarrotta decision is note-worthy to another kind of spectator,

should be able to foretell the outcome. However, in less extreme instances (for example, receiving notice during pretrial discovery), we will have to rely on the courts’ guidance. Inevitably, this question will work its way through New York’s trial courts, and ultimately be determined by the Court of Appeals. At this juncture, claim professionals should be cognizant of the fact that they must continue to disclaim coverage promptly because the bill: (1) does not take ef-fect until 180 days after it is enacted, (�) only applies prospectively to poli-cies that are issued after the effective date, and 3) does not alter the rule that an insurer seeking to disclaim cover-age based on late notice must do so promptly.

Moreover, the bill could potentially change the landscape of how declara-tory judgment actions are litigated in New York state. Section 3��0(a)(6) af-fords claimants the right to challenge the validity of an insurer’s late notice disclaimer, even before the underlying claim has been reduced to a judgment. This may enable plaintiffs to compel an insurer to participate in the defense and indemnity of its insured, and may also lead to more favorable settlements for plaintiffs. Whereas, under the present law, plaintiffs, at times, may be inclined to accept smaller settlements from tortfeasors who have questionable in-surance coverage. Consequently, more coverage litigation will likely ensue.

Contact

Joseph G. Silver: 6�6-7�7-51�� or [email protected]

Matthew D. Kraus: 6�6-7�7-51�7 or [email protected]

as the limited duty rule has inspired strong opinions and a vigorous debate, even within the New Jersey Supreme Court. “Court watchers” may recall that Justice Rivera-Soto, who delivered the Supreme Court’s majority opinion in Sciarrotta, was the author of a withering dissenting opinion in Maisonave. Traces of Justice Rivera-Soto’s forceful critique of the hybrid rule set forth in Maisonave can be found in the Sciarrotta decision. Moreover, the dissenting opinion in Sci-arrotta was authored by Justice Long and joined by Justices Albin and Wal-lace, all of whom signed on to the ma-jority decision in Maisonave. As such, the limited duty rule has inspired strong opinions and a vigorous debate, even within the New Jersey Supreme Court.

Contact

Carla Varriale: 6�6-7�7-5115 or [email protected]




continued on page 7

As the Met Life decision makes clear, there are steps that insurers and their agents should take to enhance the likelihood

that their decisions will be upheld—and

challenged less frequently.

1. 1�8 S.Ct. �3�3 (�008).

�. Indeed, the Supreme Court itself recognized that support for its decision was based on unrelated areas of law involving trustee rela-tionships and judicial review of administrative decisions plainly demonstrating that rules de-veloped for one set of issues can easily spread to others.

Metropolitan Life Insurance Co. v. Glenn:� Conflict of Interest Triggers Strict Scrutiny of Denial of Claim

By Abbie Havkins

The U.S. Supreme Court recently is-sued a decision that should serve

as a clear and present warning of how closely courts will scrutinize certain decisions by insurers and their adminis-trators denying benefits. While the case itself involved a fairly narrow set of cir-cumstances, the rigorous scrutiny that both the Supreme Court and the Sixth Circuit applied to the decision-making process strongly suggests that anyone involved in making a “close” claim deci-sion in the insurance industry should do so carefully, giving fair consideration to the claimant’s position and ensuring that objective documentary proof exists supporting the determination. A failure to do so may well result in judicial rever-sal of the decision.

Once again proving the maxim that “bad facts made bad law,” the insurance industry can thank this new heightened scrutiny on bad facts. Before delving into the intricacies of this decision, it is important to recognize that by its terms, the decision is limited to the standard to be applied for judicial review of deni-als of ERISA claims either by insurance companies themselves or by claim ad-ministrators they have hired. However, as we all know, pronouncements by the U.S. Supreme Court can be used to justify similar approaches in widely disparate areas, including subject areas having nothing to do with the original narrow issue.� It is in this respect that the Supreme Court’s decision may have its greatest impact.

While recognizing that virtually every

decision maker faces a conflict of in-terest in deciding how to proceed, by holding that such a conflict of interest is a “factor” to consider in reviewing deci-sions, the decision has broad implica-tions far beyond its narrow facts. Since the Supreme Court carefully sets forth some factors a reviewing court should consider in assessing the propriety of a decision to deny a claim, it is important that insurance agents, brokers, claims administrators and insurers themselves be aware of those factors, and follow them as well: forewarned is forearmed.

The DecisionMetropolitan Life Insurance Company (Met Life) was the insurer and admin-istrator of Sears’ long-term disability ERISA plan. Met Life determines the validity of claims and, if valid, pays them. Glenn was a Sears employee who was granted �� months of benefits due to a serious heart disorder. Met Life encouraged Glenn to apply for, and she received, Social Security benefits based on a determination that she could not work. When the initial ��-month period of benefits ran out, Met Life denied further benefits due to its determina-tion that she could perform sedentary work. The District Court denied Glenn’s appeal, however, in a decision affirmed by the Supreme Court, the Sixth Circuit reversed.

Justice Breyer, writing for the Court, initially observed that “often the entity that administers the [insurance] plan such as an employer or an insurance company, both determines whether an employee is eligible for benefits and pays benefits out of its own pocket.” Finding that this “dual role creates a conflict of interest,” the Court held that a “reviewing court should consider that conflict as a factor in determin-ing whether the plan administrator has




Conflict of Interest From page 6

continued on page 8

abused its discretion in denying ben-efits.” See 1�8 S.Ct. at �3�6. Tellingly, while the Court’s holding itself gave little guidance on how significant a factor such a conflict would be, finding that its significance “will depend upon the circumstances of the particular case,” the decision itself provided illustrations of how insurers and their representa-tives can lessen the significance of this omnipresent factor. As such, a detailed review of the decision may be a useful guide to how those involved in claims-making decisions can best insulate the claims-making decision process from “second-guessing” by the courts (and avoid substantial legal charges in the process).

Analysis

The Court first reviewed the Sixth Cir-cuit’s decision, which had set aside Met Life’s rejection of benefits based on five factors: 1) the conflict of interest, �) Met Life’s failure to reconcile its conclusion that Glenn could work with the Social Security administrator’s conclusion that she could not, 3) Met Life’s reliance on one doctor’s report concluding that Glenn could work to the exclusion of other more persuasive reports that she could not, �) Met Life’s withholding of medical reports from its experts, and 5) Met Life’s failure to consider evidence that “stress” could aggravate Glenn’s condition.

Met Life sought certiorari on the issue of whether there was in fact a conflict. The United States asked the Supreme Court to consider “how” such a conflict should be taken into account on judi-cial review of a discretionary benefit determination.

Addressing the first question, the Supreme Court found that when the employer “both funds the plan and eval-uates the claims,” the answer “is clear” that a conflict of interest exists. The an-

swer as to whether a conflict exists was “less clear” when the plan administrator is “not the employer itself but rather a professional insurance company.”

The Supreme Court recognized that strong arguments existed as to the ab-sence of a conflict of interest:

Such a company, Met Life would argue, likely has a much greater incentive than a self-insuring em-ployer to provide accurate claims processing.

* * * Why, Met Life might ask, should one consider an insurance com-pany inherently more conflicted than any other market participant, say, a manufacturer who might earn more money in the short run by producing a product with poor quality steel or a lawyer with an incentive to work more slowly than necessary, thereby accumu-lating more billable hours?

Id. at �3�9.

Justice Breyer conceded the validity of these differences but nonetheless found that “for ERISA purposes a conflict ex-ists.” The Court based this determina-tion on three factors: 1) the employer’s conflict may influence its selection of an insurance company, �) ERISA im-poses “higher than marketplace quality standards on insurers,” and 3) including conflict of interest as a factor still allows particular “circumstances” to diminish the “significance or severity of the con-flict in individual cases.” Id at �350 (ital-ics in original).

Turning to the question posed by the United States of “how” the conflict iden-tified by the Court should be taken into account, the Court found that benefit decisions arise in so many varied con-texts that it rejected a “one-size-fits-all procedural system.”

Rather, in reviewing benefit denials, “conflict of interest” would be one fac-tor of several different considerations that courts are required to consider. In such cases, “any one factor will act as a tiebreaker when the other factors are closely balanced.” In providing a practical guide to how claims evaluators should conduct themselves, the Court laid out a road map as to how important each factor will be:

The conflict of interest at issue here, for example, should prove more important (perhaps of great importance) where circumstances suggest a higher likelihood that it affected the benefits decision, including, but not limited to, cases where an insurance company ad-ministrator has a history of biased claims administration. It should prove less important (perhaps to the vanishing point) where the administrator has taken active steps to reduce potential bias and to promote accuracy, for example, by walling off claims administra-tors from those interested in firm finances, or by imposing manage-ment checks that penalize inaccu-rate decision making irrespective of whom the inaccuracy benefits.

Id. at �351 (citations omitted).

The Supreme Court then turned to the Court of Appeals decision to evalu-ate whether that court’s review of the circumstances justified reversal of the District Court and Met Life’s benefits decision. It found that the Sixth Circuit’s evaluation justified reversal of the denial of benefits decision and in doing so explained how various factors, including conflict of interest would be weighed based on the circumstances of each case:




Conflict of Interest From page �

The Court of Appeals’ opinion in the present case illustrates the combination-of-factors method of review. The record says little about Met Life’s efforts to assure accurate claims assessment. The Court of Appeals gave the conflict weight to some degree; its opinion suggests that, in context, the Court would not have found the conflict alone determinative. The Court instead focused more heavily on other fac-tors. In particular, the Court found questionable the fact that Met Life had encouraged Glenn to argue to the Social Security Administra-tion that she could do no work, received the bulk of the benefits of her success in doing so (the remainder going to the lawyers it recommended) and then ignored the agency’s finding in concluding that Glenn could in fact do seden-tary work. This course of events was not only an important factor in its own right (because it suggested procedural unreasonableness), but also would have justified the Court in giving more weight to the con-flict (because Met Life’s seemingly inconsistent positions were both financially advantageous). And the Court furthermore observed that Met Life had emphasized a certain medical report that favored a denial of benefits, had deemphasized cer-tain other reports that suggested a contrary conclusion, and had failed to provide its independent vocation-al and medical experts with all of the relevant evidence. All these se-rious concerns, taken together with some degree of conflicting interests on Met Life’s part, led the Court to set aside Met Life’s discretionary decision. We can find nothing im-proper in the way in which the court conducted its review.

Id. at �351 (citations omitted).

The Court, turning to a “different con-text,” observed that there are no “de-tailed set of instructions” or “formulas” that reviewing courts should employ in assessing decisions. This lack of “certainty” reflects the “intractability of any formula to furnish definiteness of content for all the impalpable factors involved in judicial review” Id. at �35� quoting Firestone Tire & Rubber Co. v. Bruch, �89 U.S. 101, 109 S.Ct. 9�8 (1989). Put simply, a court reviewing the decision of an insurance company or its representatives is free to consider all relevant factors.

As the Met Life decision makes clear, there are steps that insurers and their agents should take to enhance the likelihood that their decisions will be upheld—and challenged less frequently. Steps should be taken to reduce the inherent conflicts that exist and improve the accuracy of the decisions. For ex-ample, the claim evaluation process should be screened off from other parts of the company, especially those relat-ing to the company’s profitability and finances. Claim reviewers should avoid taking inconsistent positions, as it is clear that the Supreme Court and the Sixth Circuit were distressed that Met Life argued that Glenn was disabled to the Social Security Administration but then rejected that argument itself. Insurers, agents and claims evaluators must employ objective standards and consider all the evidence. A decision that ignores expert reports and doctors’ evaluations will not be sustainable. A believable non-pretextual basis must be articulated for accepting one opinion (favorable to the insurer) and rejecting an opinion favorable to the claimant. Further, claim evaluators must maintain careful records of past decisions and the decision-making process itself to show that personal factors or more like-ly self-interested factors did not play a role in the decision and to demonstrate that there is a history of fair and impar-tial decision making.

Given the Supreme Court’s recognition that there is an inherent “conflict of in-

terest,” administrators should consider using independent, objective review panels or decision makers whose ap-pointment and compensation can be shown (conclusively) to be unrelated to their decisions. Objective, appellate systems should be in place to ensure that the first level review system is fair. Rubber stamping denials will not be useful; instead reliable, up-to-date and accurate records showing that the “ap-pellate review” system is objective and fair will prove invaluable.

ConclusionThe Supreme Court in Met Life made clear that all relevant factors must be weighed by reviewing courts in assess-ing a company’s denial of claim benefits rather than application of a specific formula. While this “want of certainty” may not be desirable, it is now the law of the land and insurers and their representative must take heed of the Supreme Court’s guidance if they want their decisions upheld. A steady stream of affirmed benefit denials will soon discourage such appeals. That steady stream will only result if the insurer and its representatives can prove that the denial of benefits was fair. As noted earlier, forewarned is forearmed.

Contact

Abbie Havkins: 6�6-7�7-5100 or [email protected]




HRRV DECISIONS OF NOTE

New York Appellate Court Affirms Dismissal of Suit by New York Marathon Participant Based on Enforceability of Release

New York’s Appellate Division, Second Department has affirmed the dismissal of all claims against the defen-

dants based on a release signed by the plaintiff, who claimed that he was injured while running in the �00� New York City Marathon. In Brookner v. New York Road Runners Club, Inc., Index Nos. �007-0�310 and �007-0�71� (�d Dep’t, May �0, �008), the court rejected the plaintiff’s attempt to rely upon General Obligations Law § 5-3�6, noting that it was inap-plicable because the entry fee paid by the plaintiff was for his participation in the marathon and was not an admission fee allowing him to use a city-owned public roadway. The court also held that the public roadway where plaintiff alleges he was injured is not a place of amusement or recreation.

The plaintiff had also argued that he should at least be permitted to conduct discovery as to his gross neg-ligence claim (since the release would not have applied to gross negligence). Plaintiff contended that the increase of runners by 1800 (5 percent over the previous year) with no contingency plan in place to allow for the disbursement of the runners amounted to gross negligence. Although the court did not address this argument specifically, it ended the opinion by stating that the plaintiff’s remaining contentions (presumably this one) were without merit.

Contact

Steven H. Rosenfeld, Carmen A. Nicolaou and Deborah Peters repre-sented the defendants.

Steven H. Rosenfeld: 6�6-7�7-5105 or [email protected]@hrrvlaw.com

Carmen A. Nicolaou: 6�6-7�7-5106 or [email protected]

Deborah Peters: 6�6-7�7-51�� or [email protected]

No Duty Owed to Baseball Game Patron Struck by Ball When Sitting Outside of Screened-in Area; Complaint Dismissed

In Flynn v. Hudson Valley Stadium Corp., Westchester County, Index No. 135�3/06 (April 3, �008), Judge Denis

Donovan granted a motion to reargue his denial of a motion to dismiss a case brought on behalf of a seven-year-old struck by a baseball at a minor league baseball game and, upon re-argument, granted the motion to dismiss.

The plaintiffs alleged that while attending a Hudson Valley Renegades baseball game, the plaintiff (then an infant) was injured when she was struck in the right eye by a foul ball. At the time of the incident, the infant plaintiff and her family were seated in the Rookies’ Retreat picnic area, which is located to the left of left field.

In denying defendants’ motion to dismiss, Judge Donovan confused New York’s limited duty rule with the assumption of risk doctrine and held that the infant plaintiff, because of her age, could not be chargeable with having assumed the risk of being injured by a baseball.

On the motion to reargue, Judge Donovan acknowledged New York’s limited duty rule as set forth in Akins v. Glens Falls City School District, 53 N.Y.�d 3�5 (1981), and the cases decided thereunder; and recognized that whether the infant plaintiff was primarily attending a baseball game or a picnic (which is the argument advanced by the plaintiffs) and whether the configuration of the picnic area constituted a danger, were both irrelevant. The question to be answered was whether a baseball park owner owes a duty to a patron struck by a base-ball when that patron is sitting outside of the screened-in area behind home plate.

Judge Donovan held that no such duty was owed. Moreover, he recognized that the infancy of a plaintiff cannot create a duty where no duty otherwise exists.

Contact

Steven H. Rosenfeld and Carmen A. Nicolaou represented the defendants.

Steven H. Rosenfeld: 6�6-7�7-5105 or [email protected]@hrrvlaw.com





continued on page 11


Negligent Security and Dram Shop Case Commenced by Nightclub Shooting Victims Dismissed

Justice Allan Weiss, sitting in Su-preme Court, Queens County,

granted defendants’ motion in Bryan and Dunkley v. Crobar, Supreme Court, Queens County, Index No. 16373/�006 (May �7, �008) for summary judgment in a negligent security and Dram Shop claim commenced by two patrons who had been shot while in the nightclub. Recognizing that the defendants were obligated to provide minimal security measures designed to protect those who were lawfully on their premises from reasonably foreseeable acts of third parties, the court accepted and agreed with the plaintiffs’ argument that their shooting was foreseeable, based upon several violent incidents that had occurred at the nightclub in the past. Nevertheless, the court found that the defendants had provided the level of security required by the law and dis-missed the negligent security claim. The court also dismissed the Dram Shop claim, noting the plaintiffs’ failure to pro-vide any evidence to support this claim, which would ordinarily include the il-legal sale of alcohol and a connection between such a sale and the plaintiffs’ injuries.

Contact

Steven H. Rosenfeld and Carmen A. Nico-laou represented the defendants.

Steven H. Rosenfeld: 6�6-7�7-5105 or [email protected]


Dismissal of Labor Law Action Against Employer Resulting from Fall through Ceiling

In Medina v. Costco Wholesale Corporation, Supreme Court, Suffolk County, Index No. 0�-807� (May �9, �008), Justice Arthur G. Pitts granted the motion for sum-

mary judgment by third-party defendants K&G Electric Motor & Pump Corporation and K&G Power Systems seeking dismissal of the third-party plaintiff’s complaint against them.

This case arose from a work accident occurring on the premises of Costco Whole-sale Corporation on February �5, �003. Plaintiff, an employee of K&G, had been dispatched to repair a compressor used in Costco’s bakery department. While work-ing on a platform on the mezzanine level, the ceiling collapsed, and he fell to the floor below. Plaintiff received worker’s compensation benefits relative to his accident.

K&G was impleaded into the action by Costco on the basis of a written servicing agreement in place between K&G and the manufacturer of the compressor, Ingersoll-Rand Co. Costco pointed to the following language in the agreement:

d. [K&G] shall at his own expense repair equipment which has been improperly repaired or serviced by his personnel and shall indemnify and hold [Ingersoll-Rand] harmless from third-party liability as a result of improper repairs or services performed.

In support of its motion for summary judg-ment, K&G first argued that it was the plain-tiff’s employer at the time of the incident, that the plaintiff applied for and received worker’s compensation benefits and that the plaintiff’s claimed injuries did not constitute a “grave injury” as defined by the Worker’s’ Compensation Law. Thus, K&G argued, the claims of common law contribution, indemnification, joint and several liability and breach of express and implied warranty against K&G must be dismissed.

These issues were indisputable. As a result, the third-party claims rested on whether K&G had contractually agreed to indemnify Ingersoll-Rand and whether Costco was a third-party beneficiary of that agreement. K&G argued not only that the servicing agreement did not clearly provide for contractual indemnification but also that there was no language to support Costco’s claimed status as a third-party beneficiary. K&G pointed out that the servicing agreement did not contain any hold harmless clause, insurance procurement clause, indemnification clause or similar legal device that would serve as a basis for an indemnification and/or contribution claim by either Costco or Ingersoll-Rand.

K&G further argued that neither Costco nor any other specific owner of Ingersoll-Rand-manufactured equipment is mentioned in the servicing contract. The contract

“When a party is under no legal duty

to indemnify, a contract assuming that

obligation must be strictly construed to

avoid reading into it a duty which the parties did not intend to be

assumed.”




From page 10


Dismissal of Plaintiff’s Interpleader Complaint: Potential Exhaustion of an Insurance Policy’s Limits Is Not Tantamount to Actual Exhaustion

In Scottsdale Insurance Company v. Excalibur, LLC, Su-preme Court, New York County, Index No. 603�03/�007

(May �0, �008), Justice Marylin G. Diamond granted a motion to dismiss the plaintiff’s interpleader complaint, brought pursuant to N.Y. C.P.L.R. § 1006. The plaintiff, an insurance company, brought this action against its named insured and a myriad of nightclubs, which were additional insureds under the insurance policy. The plaintiff sought, among other things: (1) an order permitting it to deposit the insurance policy’s aggregate limits with the court, and (�) a declaration from the court that upon depositing the aggre-gate limit, it had no further defense or indemnity obligations to any of the defendants.

During the insurance policy’s effective period, the plaintiff’s named insured, a security services provider, was retained by numerous nightclubs in New York City. The plaintiff al-leged in its interpleader complaint that several of its addi-tional insureds (nightclubs), along with its named insured, had been named as defendants in numerous underlying personal injury actions. In addition, the plaintiff alleged that it expected the claims in the underlying personal injury actions to exceed the insurance policy’s aggregate limits, and therefore, its duty to indemnify should be extinguished upon depositing the insurance limits with the court.

Several of the additional insureds (nightclubs), which were represented by HRRV, argued in their motion to dismiss that (1) an insurer’s expectation of exhaustion of an insur-ance policy’s limits is not tantamount to actual exhaus-

tion through the payments of settlements or judgments, and (�) allowing an insurer to avoid its obligation to defend simply by depositing an insurance policy’s limits into court would undermine the very purpose of insurance contracts. The court, agreeing with the additional insureds’ binary argument and granting their motion to dismiss, held that the plaintiff’s duty to defend ends only when its coverage limits have actu-ally been paid out through a judgment or settlement. The court further held that if an insurer were allowed to walk away from its duty to defend simply by depositing the insur-ance policy limits with the court, it would render its duty to provide litigation insurance meaningless.

Contact

Abraham E. Havkins and Joseph G. Silver represented JMED Holdings, LLC d/b/a Pacha; Club BR d/b/a Club Bed; RM Holdings Company, Inc.; 10th Avenue Venue Hospitality Group d/b/a Mar-quee, Cain, LLC d/b/a Cain; and Aer Lounge, LLC.

Abbie Havkins: 6�6-7�7-5100 or [email protected]

Joseph G. Silver: 6�6-7�7-51�� or [email protected]

did not contain any language that could conceivably be con-strued to obligate K&G to defend or indemnify Costco. Indeed, Costco’s flawed theory of liability, if taken to its logical end, would have obligated K&G to indemnify the owner of every piece of Ingersoll-Rand equipment for whatever liability could be conceived. K&G certainly did not “expressly agree to con-tribution or indemnification” as required by courts in New York. See Majewski v. Broadalbin-Perth Central School District, 91 N.Y.�d 577, 673 N.Y.S.�d 966 (1998). “When a party is under no legal duty to indemnify, a contract assuming that obligation must be strictly construed to avoid reading into it a duty which the parties did not intend to be assumed.” See Tonking v. Port Auth., 3 N.Y.3d �86, 787 N.Y.S.�d 708 (�00�) quoting Hooper

Associates, Ltd. v. AGS Computers, Inc., 7� N.Y.�d �87, 5�9 N.Y.S.�d 365 (1989).

The Supreme Court agreed with K&G’s argument. Find-ing that the servicing agreement did not include an express agreement to indemnify against plaintiff’s claims, the Court found that K&G established its entitlement to summary judg-ment dismissing the third-party complaint.

Contact

Sean P. Dwyer and Mark J. Volpi represented K&G Electric Motor & Pump Corporation and K&G Power Systems.

Sean P. Dwyer: 516-6�0-17�0 or [email protected]

Mark J. Volpi: 516-6�0-170� or [email protected]


mailto:[email protected]

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n HRRV IN THE PuBLIC EYECarla Varriale Returns to Moderate the Ticketing Panel at the Billboard Touring Conference and AwardsCarla Varriale will make a return visit to moderate the ticketing panel for the second time at the 5th annual Billboard Touring Conference and Awards on November 19–�0. Carla frequently writes and lectures on issues of interest to sports, recreation and entertainment venues and will serve as an expert offering legal insight into the touring and live entertainment industry.

The ticketing panel is named “ Two Tickets to Paradise.” Billboard says, “There is no hotter or more controversial topic in the touring industry today than ticketing, and the wild west of the secondary market is the flashpoint issue in this space. We’ll break down trends in this market, as well as examine other topics of interest in the world of ticketing, including auctions, presales, data control and box office trends.”

When approached to moderate the ticketing panel for the second year, Carla seized the opportunity. “The ticketing panel was so much fun last time that I jumped at the chance to moderate it in the fall.”

Ray Waddell, the executive director of content and programming of the Touring and Live Entertainment Billboard Information Group, says Carla “added some class to the proceedings. [She was] so good last time, I’d love to have [her] back.”

Rosenfeld Article Will Be Published in Nightclub & Bar MagazineSteve Rosenfeld’s article, “Two Guys Walk Into a Bar . . . and an Altercation En-sues—Not the Old Joke, But a Liability Reality,” which appeared in HRRV’s spring �008 newsletter, will be published in Nightclub & Bar Magazine in August. Steve is an authoritative voice on nightclub, recreational facility and live entertainment venue liability in the New York area as well as around the United States.

Scharaga Article Will Be Published in CampBusiness MagazineGregg Scharaga’s article, “Legal Issues Take Center Stage at Tri-State Camp Con-ference,” will appear in the July/August issue of CampBusiness Magazine. Gregg wrote the article after he, along with Steve Rosenfeld and Carla Varriale, presented “Legal Issues in Camping: Protecting Your Camp, Protecting Your Campers” to an audience comprised mostly of camp owners, directors and executive staff at the �6th annual Tri-State Camp Conference in Atlantic City, New Jersey. The article dis-cusses ways camp professionals can protect their camps and employees.

Warner Article Published in Sports Litigation AlertJarett Warner’s article, “Family Sues Little League, Retailer and Metal Bat Manufac-turer Over Personal Injuries Suffered by Child,” was published in the Sports Litiga-tion Alert (volume 5, issue 11), the sports law industry’s only bi-weekly newsletter reporting on current legal opinions and news developments. Jarett specializes in the defense of professional and minor league sports teams in personal injury actions and litigations arising out of stadium construction and is regarded as an expert on this topic by Holt Hackney, publisher of Sports Litigation Alert.



Documents

‘Turf’ War Emerges Over the Environmental Liability … on page continued on page Summer 2008 In ThIs Issue: 1 ‘Turf’ War Emerges Over the Environmental Liability and Coverage