Subrogation & Recovery Law Blog : Insurance Subrogation Lawyer & Attorney : Cozen O'Connor Law Firm : Property Damage & Insurance Commentary

In the United States, there are only 6 jurisdictions that continue to bar recovery for a plaintiff if their own negligence contributed in any way to the cause of their injuries- Virginia, Maryland, South Dakota, Alabama, the District of Columbia and North Carolina. (South Dakota does allow recovery where the plaintiff’s negligence is slight in comparison to the negligence of the tortfeasor.) While it is clear that the theory of contributory negligence is a dinosaur among legal doctrines, those jurisdictions that continue to follow it have shown little signs of giving it up- until now.

North Carolina House Bill 732, known as the Tort Reform Act of 2011, is currently under consideration in the North Carolina legislature. If it is passed, House Bill 732 could impact recoveries both in and out of North Carolina in a number of ways.

First, House Bill 732 would abolish contributory negligence in favor of a modified comparative negligence scheme. A “pure” comparative negligence scheme allows a plaintiff to recover that amount of damages that are attributable to the torfeasor regardless of any proportion of the plaintiff’s own negligence in causing their injuries.  Under the modified scheme currently proposed in the bill, a plaintiff would be able to recover damages for injuries as long as the plaintiff’s own negligence was not equal to or greater than the combined responsibility of all other parties and released persons determined to have caused the injury. For subrogation purposes, this means that as long as your insured’s actions constitute less than half of the negligence leading to the injuries, you can recover the proportion of total damages caused by the tortfeasor(s).

Second, House Bill 732 would abolish sovereign immunity for governmental entities. Sovereign immunity currently bars most actions against state agencies and their employees from suit as long as the agency was performing a governmental function (police, fire, etc.). The Bill would limit the damages that are recoverable and would also make the Industrial Commission the forum of first impression for cases of negligence against the State, but this portion of the bill could potentially open up formerly unavailable avenues of recovery against governmental agencies.

Finally, as noted, these few hold-out jurisdictions have shown little inclination in the recent past to change their stance on contributory negligence. If North Carolina breaks ranks, it is possible that other jurisdictions will be spurred to follow suit. If so, large metropolitan areas like Baltimore, Richmond and Washington D.C. may soon be more fertile than ever for future recovery.
 

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The Fourth Circuit Court of Appeals has recently clarified its interpretation of the procedure for removing a case to federal court in Barbour v. International Union, No. 08-1740, 2011 WL 242131 (4th Cir. Jan. 27, 2011). Courts strictly construe the removal statutes, 28 U.S.C. §§ 1441 and 1446, to limit the jurisdiction of federal courts. Doubts about the propriety of removal are resolved in favor of remanding the case to state court. Dixon v. Coburg Dairy, Inc., 369 F.3d 811, 816 (4th Cir. 2004) (en banc). Therefore, a defendant’s failure to comply with the statutes’ requirements—and the relevant jurisdiction’s interpretation of those statutes—can defeat removal on technical grounds and keep the case in state court.

Section 1446 requires a defendant to remove a case within 30 days of being served with the complaint. When there is only one defendant this procedure is straightforward: when there is more than one, the situation is more complicated. Courts have universally applied the “rule of unanimity,” which requires all defendants in an action to formally “join in or consent to the notice of removal, otherwise the removal is defective.” See Getty Oil, Div. of Texaco, Inc. v. Ins. Co. of North Am., 841 F.2d 1254, 1262 (5th Cir. 1998). Some courts have recognized exceptions to this rule where (1) the non-joining defendant has not been served; (2) the non-joining defendant is merely a nominal or formal party; or (3) the removed claim is independent. Parker v. Johnny Tart Enterprises, Inc., 104 F. Supp. 2d 581, 584 (M.D. N.C. 1999).

The Fourth Circuit recently confirmed its long-standing position, which differs from every other Circuit that has addressed the issue, that the consent or joinder in the removal be simultaneous. In 1992, the Fourth Circuit articulated the “McKinney Intermediate Rule” in a footnote, which provided that “where B is served more than 30 days after A is served, . . . if A petitions for removal within 30 days, the case may be removed, and B can either join in the petition or move for remand, [but] . . . if A does not petition for removal within 30 days, the case may not be removed.” McKinney v. Board of Trustees of Maryland Comm. College, 955 F.2d 924, 926 n.3 (4th Cir. 1992).

The McKinney rule varies markedly from the rules applied in other Circuits. The Fifth Circuit maintains the “First-Served Defendant Rule,” whereby the removal notice must be filed within 30 days of the first defendant receiving service, and all then-served defendants must join in that filing in order for it to be effective, even if they were served with the complaint the day before the 30-day window expired. The Sixth, Eighth, Ninth (as of this January) and Eleventh Circuits follow the “Last-Served Defendant Rule,” which allows any defendant to file a notice of removal within 30 days of being served. Under this interpretation, even if the earlier-served defendants chose not to seek removal within 30 days of service, a later-served defendant can try to persuade them to join its removal petition.
 

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Property insurers are all too familiar with losses caused by defective products. Some product defects are isolated instances, affecting only one unit, but in today’s era of mass production and of use of component parts supplied by third-party vendors, defects that affect every unit of a particular product are commonplace.

When a systemic defect is discovered, such as the defect affecting Ford cruise control systems or Norcold RV refrigerators, a prudent manufacturer will proactively issue a notice of product recall to consumers. Some such notices are published through the manufacturer’s website or through government channels, and are not directly sent to consumers. Others, such as the recalls issued by Ford and Norcold, are sent by mail directly to affected consumers. In many cases, the consumer ignores the recall notice, which can present problems for a subrogated property carrier attempting to recover against the manufacturer of the defective product.

In litigation, the problem arises when the product manufacturer can prove that it sent one or more recall notices to the insured. Manufacturers rely on the notices as evidence of the insured’s contributory negligence. However, the confirmed receipt of a recall notice by the insured does not automatically devalue your subrogation case. Further analysis should be done as there are several factors which can work in favor of a subrogated insurer. First, the insured may deny receiving the recall notice. Recall notices are almost always sent by standard US Mail, with no means of confirming the consumer’s receipt of the notice. In those instances, the assertion by the insured that he or she never received any notice of recall is often sufficient to drive up the value of the case. Because many recall documents are sent in plain envelopes which give no clue that they contain vital safety information, it is reasonable to assume it could be discarded as “junk mail”.

Even if there is no real dispute that a recall notice was received, the manufacturer must show that the recall was effective in curing the defect which it seeks to address. For example, some Ford owners have suffered fire losses relating to the cruise control systems of their vehicles after they had the recall work performed. Likewise, Norcold has issued repeated recalls of some of its RV refrigerators, and maintains a website advising certain consumers that “[e]ven if your refrigerator was repaired as part of a previous recall, it is necessary to have it repaired again to minimize the risk of injury or death due to fire.” If the recall work is not actually effective in correcting the product defect, it is arguable that the recall notices have no real effect. That is, if the product defect still exists after the recall work is performed, a consumer who ignores the notice has not failed to decrease his or her risk of a loss.
 

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On April 21, 2011, the U.S. Consumer Product Safety Commission (“CPSC”) announced a recall of about 1.2 million Marineland “Stealth” and “Stealth Pro” aquarium heaters. The subject aquarium heaters are Marineland “Stealth” brand heaters of various model numbers and wattages, sold through their parent company, United Pet Group. The heaters were sold at pet stores and on websites from January 2004 through February 2011.

The “hazard” identified in the recall notice is a wiring problem that can cause the heaters to overheat during normal use, which in turn can lead to a fire hazard. The overheating can also cause the heater to shatter or the glass of the aquarium to break, resulting in a laceration hazard. The recall states that United Pet Group has received reports of 38 fires resulting in property damage and 45 reports of broken aquarium glass.

If you have a case where a Marineland Stealth or Stealth Pro aquarium heater is associated with a fire, you should consult the CPSC’s recall notice to determine if your model is one listed on the recall. The heaters associated with this recall are black plastic tubes and have a temperature adjustment knob at the top. They have also been sold as part of aquarium starter kits.
 

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How far does California's grant of immunity for the tortious acts of firefighters extend, and specifically, when can a fire department be liable for the negligent operation of its fire engine? The California Court of Appeal in Varshock v. Cal. Dept. of Forestry and Fire Protection (2011) D057709 attempted to answer these questions in a case arising out of the 2007 San Diego County wildfires. Thomas Varshock lived with his wife, Dianne, and their son, Richard, within an area consumed by one of the 2007 wildfires. As the fire approached and burned the Varshock's property, the family evacuated and found a group of firefighters in the nearby area to whom they pled with to save their home. The firefighters agreed, drove to the Varshock's property with Thomas and Richard aboard, and attempted without success to put out the blaze, which at this point consumed the Varshock's residence. Realizing that the fire was uncontrollable, the fire captain told his crew, along with Thomas and Richard, to retreat into the fire engine. Tragically, when attempting to drive the fire engine away from the blaze, winds blew flames across the fire engine causing its engine to die and subjecting the vehicle to intense heat and smoke. Thomas died as a result, and Richard along with the other firefighters suffered severe burns.

The Varshock family sued the California Department of Forestry and Fire Protection ("CAL-FIRE") based primarily upon the alleged negligence of the fire captain in his decisions to (1) drive the fire engine to the Varshock's property with Thomas and Richard aboard without first verifying if there was an adequate escape route; (2) drive the fire engine into a location that had poor access and inadequate space to turn around; and (3) park the fire engine too close to the fire itself. CAL-FIRE moved for summary judgment on the ground that it was entitled to immunity under Government Code section 850.4, which the Varshocks argued did not apply to the case due to a particular exception established under Vehicle Code section 17001.

Government Code § 850.4 provides the following grant of immunity: "Neither a public entity, nor a public employee acting in the scope of his employment, is liable for any injury resulting from the condition of fire protection or firefighting equipment or facilities or, except as provided in Article I (commencing with Section 17000) of Chapter 1 of Division 9 of the Vehicle Code, for any injury caused in fighting fires." Among the statutory exceptions referred to in section 850.4 is Vehicle Code section 17001: "A public entity is liable for death or injury to person or property proximately caused by a negligent or wrongful act or omission in the operation of any motor vehicle by an employee of the public entity acting within the scope of his employment."
 

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