Maryland Business Litigation Lawyer Blog

When an injured party has insurance coverage, it’s a tricky thing figuring out what a jury should know about that insurance during trial. It can be even trickier when the insurer is an actual party, standing there fully represented in the courtroom. At least in Maryland, however, where insurance isn’t an issue in the case, the jury doesn’t have to know why the insurer’s involved.

In the recent case of Keller v. Serio & GEICO Ins. Co., Court of Appeals of Maryland, Case No. 48, September Term 2013, the plaintiff, Ms. Keller, got into a fender-bender and then went home. After talking to her attorney, Ms. Keller decided to check herself into the hospital. Five years, and more than $27,000 in medical bills later, she sued the other driver, Mr. Serio, in the Circuit Court for Baltimore County and notified her insurer, GEICO of a claim for underinsured-motorist coverage (“UM” in common insurance parlance) under that policy. GEICO then intervened in the lawsuit on the chance that an award might trigger the UM coverage.
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Reinsurance is a great way for insurance companies to manage their risk. An insurer issues a policy with a million dollars in liability limits, and then cedes, by way of example, 75% of that risk, or $750,000 to a “reinsurer.” The reinsurer charges a small premium based on its actuarial bet that most claims will never exceed $250,000. The insurer is likewise pleased to pass of the majority of the risk for a small portion of the premium it collected. It is critical to remember, however, that the fundamental tenet of all insurance transactions, including reinsurance transactions, is risk transfer. If no risk of loss is transferred from the insurer to the reinsurer, there is no reinsurance transaction.

This precise problem was addressed recently by a federal district court in Menichino v. Citibank, N.A., 2014 WL 462622 (W.D. Pa., Feb. 4, 2014). By this opinion, a claimant was found to have successfully articulated a RESPA (“Real Estate Settlement and Procedures Act (“RESPA,” for short)) cause of action against Citibank by alleging that Citibank charged fees for reinsurance but did not accept any risk. Citibank is also facing claims for unjust enrichment. While these are merely allegations, and none of these facts have been proven, the claimant’s lawsuit survived the preliminary motions stage, and provided all reinsurers a reminder to carefully consider risk transfer in structuring its transactions.
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As governments get increasingly involved in regulating telecommunications advertising, it is more important than ever for companies to be legally savvy about their mass-marketing techniques. Insurers are well aware that violations of mass-marketing laws have the potential to result in huge class action verdicts, so carriers tend to be vigilant in defending against claims for insurance coverage for these suits. A recent case from Illinois provides insurers with additional ammunition to use in effectively disclaiming such coverage.

In Windmill Nursing Pavilion v. Cincinnati Ins. Co., 2013 IL App (1st) 122431, Unitherm, Inc., a company selling a garment-labeling system, sent nearly 75,000 unsolicited faxed advertisements that allegedly violated the federal Telephone Consumer Protection Act, 47 U.S.C. § 227 et seq. Because the TCPA provides for $500 in liquidated damages for each unsolicited faxed advertisement, Unitherm faced more than $37 million in liability for its ill-advised marketing strategy.
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Plaintiffs rarely enjoy having their case jettisoned from court and onto the arbitration table – whether right or wrong, arbitration has a decidedly pro-defense rep that makes plaintiffs’ attorneys do just about anything to avoid it. But as shown in the recent Court of Special Appeals of Maryland case of Gordon v. Lewis, No. 1505, Sept. Term 2011, arbitration isn’t always a graveyard for meritorious claims, and plaintiffs can even score punitive damages that are quite hard to overturn. Simply put, courts are loath to revise an arbitrator’s decision, even when it involves an exemplary award.

In Gordon, appellant Kathy Gordon, a financial advisor, advised the appellees, her clients, to invest a quarter of a million dollars in a Somerset County real-estate venture that, coincidentally, just happened to be owned by her son. The clients received supposedly secured promissory notes that assured repayment, but that never actually happened, even while Gordon repeatedly stated that high rates of interest were being earned. Meanwhile, unbeknownst to the investors, the development company had actually gone belly-up into bankruptcy. When the clients eventually discovered this important little detail, they weren’t too pleased that their notes were – despite what they had been told – completely unsecured. In other words, it was nice knowing you, 250 grand.
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Companies and individuals who are weighing the “pros” and “cons” of entering into arbitration agreements consider a whole host of factors in making this complex, and significant decision. Arbitration is often a good choice for parties who have a strong desire to keep their disputes confidential. An arbitration is also typically resolved faster than a civil lawsuit, usually with streamlined discovery and motions practice, resulting in the added benefit of lower litigation costs. Parties who choose arbitration typically prioritize these anticipated benefits over what is typically more exhaustive collection of information and presentation of issues in a civil lawsuit.
When a party chooses arbitration, however, it is critical that counsel express that choice with absolute clarity in a written agreement. A new decision from Maryland’s top court holds that after a civil lawsuit is filed, and a responding party is unsuccessful in moving to compel the arbitration it thought was agreed to, there is no immediate appeal of the denial of the motion to compel arbitration. Instead, the party must add the denial of the motion to compel arbitration to issues raised on appeal after trial.
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Companies often develop complimentary services that can enhance the consumer experience and build customer loyalty to their brand. Shrewd businesses recognize that these freebie benefits should come attached with exculpatory and indemnification agreements, so a courtesy for customers doesn’t end up being a colossal burden of additional liability. Even when faced with heartbreaking injuries to a small child, Maryland’s highest court recently ruled that exculpatory agreements are binding on children in Maryland, creating new law on an issue of first impression in BJ’s Wholesale Club, Inc. v. Rosen, No. 99, Sept. Term 2012.

The stage for the case was set when the Rosens permitted their 5-year-old son, Ephraim, to play at a free “Incredible Kids Club” area at a BJ’s Wholesale Club in Owings Mills, Maryland. Before Ephriam was permitted to play, Mr. Rosen had to execute an agreement releasing and indemnifying BJ’s from any related injuries that might arise. Cut to 15 months later, when Ms. Rosen returned to BJ’s to do a little shopping. Mrs. Rosen again dropped Ephraim off at BJ’s Incredible Kids Club, which featured a large toy hippopotamus to climb on.
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Many of you have seen the following disclaimer made in connection with films or books: “All characters in this book are fictitious, and any resemblance to real persons, living or dead, is coincidental.” The line between fact and fiction may not always be so clear, however, as Maryland’s Court of Special Appeals discovered in addressing the issues raised in Publish America, LLP v. Stern, No. 2965, September Term 2010.

Stern was a librarian at the Ludington Library in Ludington, Michigan. During her tenure at the Library, Stern developed a manuscript about some of the interesting people in her community. In 2008, Publish America offered to publish Stern’s manuscript. Publish America insisted that Stern either obtain waivers from the people appearing in the book or appropriately “fictionalize the work.” Publish America’s concern was that the book disparaged real-life people who were recognizable within Stern’s community. Publish America instructed Stern to “make sure that all names, places, and events have been changed” so as to truthfully comply with the disclaimer and to “take care that there are no real-life people that are in the least bit recognizable.” Stern agreed to fictionalize her characters, and she even confirmed via e-mail that she had done so.
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