What constitutes waiver of personal jurisdiction?

May 13th, 2011

Legislative Update
By Dawn Boyce

On July 1, 2011, a bill recommended by the Boyd-Graves Conference, which delineates what affirmative conduct on the part of a party constitutes a waiver of any objection to personal jurisdiction or defective service, will go into effect. In summary, if a party files any pleading, conducts discovery or asks for or participates in any proceeding on the merits, any such objection is waived. A party may agree to extensions or scheduling orders, conduct discovery on the jurisdiction or service issue, transfer venue or remove the case to federal court, or observe and attend proceedings without waiving its objection. The full text of the bill can be viewed at http://lis.virginia.gov/cgi-bin/legp604.exe?111+ful+CHAP0710.

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Additional Legislative Changes

April 15th, 2011

By Nicholas J. Lawrence

Effective July 1, 2011, the general assembly has amended Va. Code Section 16.1-107 to eliminate the requirement for an appeal bond when the defendant has liability insurance coverage available to pay the judgment at issue. The insurer must provide a written irrevocable confirmation of coverage in the amount of the judgment in order to eliminate the requirement for a bond. The changes to the statute also clarify that the amount of the bond must be sufficient to guarantee payment of the general district court’s judgment. Under the current statute the bond is to be sufficient to satisfy any judgment that might be rendered by the circuit court on appeal.

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Legislative Changes

March 28th, 2011

By Heather K. Bardot

Less than a Year after Enactment, the General Assembly Amends Virginia Code Section 38.2-2206(L)
Less than a year after enacting Virginia Code Section 38.2-2206(L), which allows an underlying automobile insurer to make an irrevocable offer of settlement to a plaintiff in an effort to pass defense costs to the UM/UIM carrier, the General Assembly has amended the section. Effective July 1, 2011, the statute will read as follows:
L. If the liability insurer or insurers providing coverage to an underinsured motor vehicle owner or operator make an irrevocable offer in writing, which may be contingent upon waiver of subrogation, to pay the total amount of liability coverage available for payment with reference to a claim for property damage or bodily injury, 60 days following written notice of the offer to any insurer or insurers providing underinsured coverage that have been served pursuant to this section, the insurer or insurers providing liability coverage shall be relieved of the cost of defending the owner or operator incurred thereafter, including expenses as well as reasonable and necessary attorney fees, and the insurer or insurers providing the underinsured motorist coverage shall reimburse the liability insurer or insurers for the costs to defend the underinsured motor vehicle owner or operator to the date of the underinsured motorist insurer’s offer of its limit of coverage. The liability insurer or insurers shall nonetheless retain the duty to defend their insured. If underinsured motorist coverage is provided by more than one insurer, the cost to defend shall be assumed in the same order of priority as set forth in subsection B with regard to the payment of underinsured benefits upon the offer of each underinsured motorist insurer’s limit of coverage. This subsection, including the liability insurer’s irrevocable offer and the underinsured insurer’s liability for defense costs, shall not apply in the event of either a jury verdict being returned in an amount equal to or less than the total liability coverage available for payment or a dispositive ruling dismissing the plaintiff’s complaint, including but not limited to the plaintiff taking a voluntary nonsuit. This subsection shall not apply to costs incurred in connection with an appeal.
The effects of the amendments are: (1) An irrevocable offer may be contingent on waiver of subrogation by the UM/UIM carrier. This insures that the defendant is protected from excess exposure, a concern which previously made it difficult to utilize the statute given the ambiguity on whether an offer could be conditional and irrevocable at the same time. (2) If the plaintiff obtains a verdict less than or equal to the irrevocable offer, neither the offer nor the passing of defense costs are preserved. Instead, the underlying carrier would pay the verdict amount and be solely responsible for all defense costs it attempted to pass through to the UM/UIM carrier. (3) If the plaintiff nonsuits, the irrevocable offer is no longer in effect and the UM/UIM carrier is not obligated to pay any of the defense costs which the underlying carrier attempted to pass through by making the irrevocable offer.
Although the amendments clarify some issues which arose after passage of Virginia Code section 38.2-2206(L), there remain unanswered questions such as whether it applies to motor vehicle liability policies in effect before its initial enactment. Perhaps questions such as this will be clarified legislatively or through case law in the not too distant future.

Noteworthy Legislation Regarding Objections to Personal Jurisdiction or Defective Process Goes into Effect in Virginia on July 1, 2011
On July 1, 2011, the Virginia Code will contain a new section, 8.01-277.1 relating to personal jurisdiction. The section will state, as follows:
§ 8.01-277.1. Objections to personal jurisdiction or defective process; what constitutes waiver.
A. Except as provided in § 8.01-277, a person waives any objection to personal jurisdiction or defective process if he engages in conduct related to adjudicating the merits of the case, including, but not limited to:
1. Filing a demurrer, plea in bar, answer, counterclaim, cross-claim, or third-party claim;
2. Conducting discovery, except as provided in subsection B;
3. Seeking a ruling on the merits of the case; or
4. Actively participating in proceedings related to determining the merits of the case.
B. A person does not waive any objection to personal jurisdiction or defective process if he engages in conduct unrelated to adjudicating the merits of the case, including, but not limited to:
1. Requesting or agreeing to an extension of time;
2. Agreeing to a scheduling order;
3. Conducting discovery authorized by the court related to adjudicating the objection;
4. Observing or attending proceedings in the case;
5. Filing a motion to transfer venue pursuant to § 8.01-264 when such motion is filed contemporaneously with the objection; or
6. Removing the case to federal court.
The exception noted in paragraph (A) maintains a party’s right to challenge a defect in service or to challenge the plaintiff’s failure to serve within a year after commencement of the action by filing a timely motion. However, if a defendant goes further, i.e. by responding to the Complaint, seeking a decision on the merits, or engaging in discovery which goes to the merit of the case, any defect in process or objection to personal jurisdiction will be deemed waived.

The Jurisdiction of General District Courts in Virginia will Increase Significantly as of July 1, 2011
Effective July 1, 2011, Virginia Code section 16.1-77 will be amended to change the jurisdictional limits of courts in Virginia. With a few limited exceptions, the general district courts will have exclusive, original jurisdiction to hear claims where the amount sought is equal to or less than $4,500, exclusive of interest and any attorney’s fees contracted for by contract. General district courts will have concurrent jurisdiction with the circuit courts when the amount sought exceeds $4,500 but does not exceed $25,000, exclusive of interest and any attorney’s fees contracted for by contract.
Previously, the general district courts’ jurisdiction capped out at $15,000.00. With the increased jurisdiction, the inability to remove cases to circuit court, the almost non-existent discovery in general district court, and the inability to have cases tried by a jury in general district court, it is anticipated that the dockets in general district court will grow significantly after July 1, 2011.

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Survival of a Tort Claim which Seemingly Arises out of Breach of Contract

March 11th, 2011

By Heather Bardot, Esquire

On March 4, 2011, the Supreme Court of Virginia issued an opinion in Kaltman v. All American Pest Control, Inc., Record No. 092541, reversing the trial court’s sustaining of a demurrer. The demurrer had challenged the plaintiffs’ ability to file suit in tort against the defendant-pest control company and its employee on the basis that, since the defendants’ allegedly negligent conduct arose out of a contract to apply pesticide, the only available cause of action was breach of contract. Defendants relied upon Richmond Metropolitan Authority v. McDevitt Street Bovis, Inc., 256 Va. 553, 507 S.E.2d 344 (1988) and Dunn Construction Co. v. Cloney, 278 Va. 260, 682 S.E.2d 943 (2009). In rejecting defendants’ argument, the Supreme Court noted that the plaintiffs were seeking “redress for injuries to their persons and property as a result of alleged breaches of common law and statutory duties. . . . Just because the application of pesticides is included in [defendants’] contractual duty to control pests, it does not follow that [plaintiffs] have contracted away their common law and statutory rights. Because [plaintiffs] have alleged that [defendants] breached common law and statutory duties independent of the company’s contractual duty to control pests, we hold that the trial court erred when it sustained the demurrers to the [plaintiffs’] negligence counts.” The Kaltman opinion does not necessarily represent a change in existing law, but it certainly clarifies how a Complaint should be pled to overcome the McDevitt and Dunn holdings and suggests that it may become more difficult to obtain early dismissal of personal injury or property damage claims which seem to arise from negligent performance of a contract so long as the plaintiff can identify a statutory or common law duty which has purportedly been violated.

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Innocent Victim of Horseplay Rule Affirmed by Virginia Supreme Court

February 14th, 2011

By: Dawn Boyce

In Simms v. Ruby Tuesday, Inc., 2011 Va. LEXIS 17 (2011), the Virginia Supreme Court addressed whether an innocent victim of horseplay was eligible for compensation under the Workers’ Compensation Act. Although it had long been held that injuries suffered by innocent bystanders as a result of horseplay at the workplace were compensable, this precedent was called into doubt by the court in Hilton v. Martin, 275 Va. 176, 654 S.E.2d 572 (2008). The issue in Simms was whether the actual risk test analysis articulated in Hilton had materially changed the juris prudence related to innocent victims of horseplay at work. In Hilton, the Commission found that injuries did not arise out of the employment where a co-worker turned on the power of a manual cardiac defibrillator, adjusted its energy to 150 joules, and touched the defibrillator paddles to an innocent victim. The denial of compensation sent a ripple through the workers’ compensation community and led the Commission and Court of Appeals to start denying horseplay claims.

In Simms, the Virginia Supreme Court has declared that an interpretation of Hilton resulting in a denial of compensation to innocent horseplay victims is erroneous. In Simms, the worker, a server at the restaurant, was injured when three of his employees/friends began throwing ice at him. He turned while being pelted with ice and lifted his shoulder to deflect ice from his face. When he did so, he felt his shoulder dislocate. The full Commission and Court of Appeals denied the compensability of the related injuries based on Hilton, which many characterized as a horseplay case.

On appeal, the Virginia Supreme Court reversed, distinguishing the Hilton case as an assault case, not a horseplay case. In determining whether victims of assault are entitled to compensation, the court must determine whether or not the assault was directed at the victim because of his employment. If there is no connection to the employment, there is no entitlement to compensation. Unlike assault cases, the court found there was a causal connection between the work and horseplay holding, “[t]he playful or joking actions of the fellow employee are found to be an actual risk of the employment because horseplay is a natural incident of work contemplated by a reasonable person familiar with the whole situation, as a result of the exposure occasioned by the nature of the employment.”

The Simms case is an important one, as it dispels many questions with regard to the breadth of the court’s holding in Hilton v. Martin. The question remains at what point horseplay becomes assault.

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NEW IMAGING STUDIES FOR BRAIN INJURIES: ARE THEY PEER REVIEWED OR SCIENTIFICALLY RELIABLE?

January 3rd, 2011

The Virginia Lawyers Weekly had a blog and article posted recently regarding plaintiff’s bar advocating new imaging tests to prove brain injuries. The article quoted  John D. McGavin, Esquire on behalf of the defense who advised that these tests should still be challenged and questioned.  He was quoted as follows:

“Defense lawyers caution the new tests don’t close the door on disputes in brain injury claims. For one thing, said John D. McGavin of Fairfax, the science is new and may still be subject to challenge in court. “I’m not sure it’s yet reached the stage of being fully peer-reviewed,” he said.

One concern, McGavin said, is false positives. He noted that earlier imaging advances, such as MRIs and CT scans, turned up evidence that many people without symptoms nonetheless had findings consistent with spinal problems. He said it’s important to develop baselines for normally functioning brains and valid means for comparison to studies of similar resolution.” 

The bottom line for the defense — such new imaging studies need to be challenged and questioned and verified as scientifically reliable and peer reviewed.

The entire blog/article can be reviewed at:

http://valawyersweekly.com/blog/2011/01/03/new-imaging-techniques-may-help-prove-or-disprove-brain-injuries/

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MEDICARE LIEN: SECTION 111 – ANOTHER DELAY IN IMPLEMENTATION?

December 21st, 2010

Another delay? Yes. There is now a third delay of Section 111 implementation. Why? Probably because Medicare agents have been flooded with information which is required by Section 111. This has resulted in significant delays. Thus, there has been yet another postponement. The Department of Health and Human Services (HHS), Center for Medicare and Medicaid Services (CMS), and Medicare Secondary Payer Recovery Contractor (MSPRC) has set forth a one year delay in implementation on Section 111 reporting requirements for claims involving liability insurance, retroactive to October 1, 2010 through October 1, 2011.
While the sanctions for failure to comply may be postponed, this does not change the obligations to inform the MSPRC of the personal injury case and payment of the medicare lien. All parties should continue to work together to minimize the delay in securing final medicare lien information from CMS/MSPRC which will assist in a more timely issuance of settlement proceeds.

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FAILURE TO PROPERLY SERVE INCARCERATED CONVICT WITHIN ONE YEAR OF WHEN THE SUIT WAS FILED RESULTS IN DISMISSAL OF LAWSUIT WITH PREJUDICE

August 23rd, 2010

By: Steven W. Bancroft, Esquire
Wesley D. Allen, Esquire

In a recent wrongful death case, the defendant was an incarcerated convict, the Arlington County Circuit Court dismissed, with prejudice, a $2 million compensatory claim, with an additional punitive damages claim, finding the plaintiff failed to properly serve the incarcerated defendant within one year of when the suit was filed.

This case arose out of an automobile/motorcycle accident with alcohol involved that resulted in the death of the decedent. As a result, the defendant was convicted of a felony and sentenced to a 20-year term, 5 years suspended. The Administrator of the Estate of the decedent filed an initial wrongful death suit against the defendant which it later non-suited. In the initial suit, the defendant was represented by Steven W. Bancroft, who had entered an appearance on his behalf.

Approximately a month after the Court entered a nonsuit order in the matter, the plaintiff re-filed its wrongful death lawsuit. Plaintiff attempted to serve the incarcerated convict via private process server, but failed to fully comply with Virginia Code § 8.01-297, which sets forth the two-prong test on how to properly serve an incarcerated convict. Pursuant to the Virginia Code, in order to properly serve an incarcerated convict: (1) service shall be served on the convict by delivering it to the officer in charge of such jail or institution whose duty it shall be to deliver it to incarcerated convict; and (2) “subject to [Virginia Code] § 8.01-9, a guardian ad litem shall be appointed for him.” Va. Code Ann. § 8.01-297 (2010) (emphasis added).

In the instant case, the plaintiff’s counsel filed an Affidavit with the Court that the incarcerated convict had been personally served with the Complaint and Summons by a private process server within a month after filing its lawsuit. However, the plaintiff failed to have a guardian ad litem or committee appointed, pursuant to Virginia law. When defendant’s former counsel discovered the defective attempt at service upon his former client, he wrote to the plaintiff’s counsel and advised of the defect and provided the Virginia Code sections setting forth the statutorily-mandated provisions regarding service upon an incarcerated convict. Having heard nothing further from the plaintiff’s counsel, the defendant’s former counsel sent a second letter to the plaintiff’s counsel 3 weeks later.

Thirteen months passed and the plaintiff’s counsel took no action to correct the defective attempt at service. In fact, the plaintiff’s counsel failed to ever contact the
defendant’s former counsel concerning this matter. Pursuant to Virginia Code § 8.01-277(B), the defendant’s former counsel entered a “special appearance” on behalf of his former client to move that the lawsuit be dismissed with prejudice on the grounds that the plaintiff failed to serve process upon the incarcerated defendant within one year of the commencement of the action, pursuant to the statutorily-mandated method.

At the hearing on the defendant’s Motion to Dismiss, the plaintiff’s counsel argued that he did not have to have a guardian ad litem or committee for the incarcerated convict, relying upon Virginia Code § 8.01-9(B). This Code section sets forth that when a party under a disability is represented by an attorney duly licensed to practice in Virginia, who has entered a record of appearance for the defendant, no guardian at litem or committee needs to be appointed. The Court held that the plaintiff’s counsel erroneously assumed that the defendant’s former counsel had entered an appearance on behalf of the incarcerated defendant, and that defendant’s former counsel did not take any action to mislead the plaintiff’s counsel to the conclusion that he was acting as the defendant’s current counsel.

Judge Kendrick of the Arlington County Circuit Court recognized the harsh remedy set forth by Virginia Code § 8.01-277(B) for failure to properly serve a defendant with service of process within one year of filing the plaintiff’s lawsuit; however, the Court reasoned that it was constrained by Virginia law. After considering the facts of this case, the Court concluded the defendant’s motion was well-taken in that the Plaintiff failed to properly serve the incarcerated defendant within one-year of re-filing its wrongful death action, and accordingly dismissed the matter with prejudice. No request was made for a second nonsuit.

For more information on the above case, please contact Steven Bancroft, (703) 385-1000.

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CONSTRUCTION LAW AND THE STATUTE OF LIMITATIONS

June 8th, 2010

Contract documents do not always create a written contract for purposes of the statute of limitations:

By: Steven W. Bancroft, Esq.
Nicholas J. Lawrence, Esq.

In a recent case for breach of contract and negligent destruction of property arising from a fire during a construction project, the Circuit Court for Fairfax County dismissed a $3 million claim because of the statute of limitations. Plaintiffs filed suit almost five years after the cause of action accrued, relying on about fifty pages of letters, written proposals, change orders, and invoices to establish the existence of a “written contract” and avoid the three year statute of limitations for an oral contract. Defendant argued that none of the proposals constituted a final agreement and, while not denying the existence of a contract, argued that the contract had been an oral agreement loosely based on the last written proposal.

Over the course of their relationship, the defendant submitted four separate written proposals to the plaintiffs (who were lawyers), all of which contained a signature line for plaintiffs to indicate their acceptance of the proposal, and none of which were ever signed by either plaintiff. The plaintiffs argued that the final proposal, submitted shortly before the defendant actually began work, constituted the “written contract,” and that their acceptance had been given orally. They pointed to the invoices and change orders as evidence that the agreement reached was the one proposed in the final written proposal. The defendant established that the attorney plaintiffs had refused to sign any of the many documents presented to them, and argued that their refusal demonstrated that whatever the agreement was, it was not what was proposed in writing. At best, the parties simply had a series of oral agreements for the construction project.

Relying on an 1899 Virginia Supreme Court decision cited by the defense, the court held that the various written proposals, letters, change orders, and invoices were insufficient to establish a written contract for purposes of the statute of limitations. The court also held that the negligence claims were barred, reasoning that the defendant had no common law duty to perform the work at issue, and so the plaintiffs’ remedy, if any, was for breach of contract. Rebuilding the home after the fire cost $2.5 million. Erie Insurance Exchange was the defendant’s liability carrier.

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THE 2010 AMENDMENT TO THE VIRGINIA UM/UIM STATUTE

May 18th, 2010

The Virginia General Assembly added a new section to the Virginia UM/UIM statute, Va. Code Section 38.2-2206 during its most recent session which was designed to create a mechanism to allow liability carriers to shift the costs of the defense to the UIM carrier if certain criteria is met. First, the liability insurer must make an “irrevocable” offer in writing to pay its bodily injury or property damage limits; second, written notice must be given to the UIM carrier; third, to be effective, the UIM carrier who gets the notice must have been served in accordance with the statute; fourth, 60 days after the written notice is provided to the UIM carrier, the liability insurer is relieved of defense costs incurred thereafter, which includes expenses and “reasonable and necessary” attorney’s fees; fifth, the UIM carrier must reimburse the liability insurer for costs to defend to the date the UIM carrier offers its limits, or presumably settles. The amended statute requires that the liability carrier retains the duty to defend. It also states that in the event of either a jury verdict returned in an amount equal to or less than the total liability coverage available for payment or a dispositive ruling dismissing plaintiff’s complaint the new subsection of the statute does not apply. So, how will this new statute impact the insurance industry? 

It remains to be seen.   The statute passed through the General Assembly very quickly and already is open to varied interpretation.  This is evidenced by our recent attendance at the Virginia Association of Defense Attorneys Spring Series Seminar in May where even insurance industry representatives and defense attorneys could not agree on the meaning and interpretation of the newly added section.  What does “irrevocable” offer mean?   When are the liability insurer’s defense costs paid?  How does this impact subrogation rights?  

The newly amended section is completely silent on the issue of subrogation. The liability carrier still has the primary duty to defend and it may be very troublesome to the liability carrier and its defense attorney to make an “irrevocable” offer of liability limits when there is no agreement from the UIM carrier to waive subrogation. To make such offer without it being contingent on a waiver of subrogation exposes the insured/defendant to potential excess exposure.   Certainly, “irrevocable” offer can’t mean offering the policy limits without conditioning such offer on a complete waiver of subrogation.   But if that is what it means,  what incentive does the UIM carrier have to waive subrogation? To do so, encourages the liability insurer’s invocation of this statute,  and the  headache of how to deal with the possibility of an uncooperative defendant. The UIM carrier is not in privity with the defendant and doesn’t have breach of contract defenses to raise if cooperation issues occur.    This statute raises more questions than it answers.  While it is expected that certain conflicts in interpretation will arise, since the statute requires that the UIM carrier reimburse the liability carrier for defense costs, the most logical way to proceed is business as usual. Thus, the liability insurer should continue to pay its counsel and then pursue reimbursement of those fees and expenses if the case settles or the exception isn’t triggered. The liability insurer and UIM insurer can then determine what reimbursement is appropriate based on the language of the statute.   The recoverable attorneys fees are only thoses “reasonable and necessary.”  Open lines of communication regarding case assessment and policy limits should also occur early on between insurers, especially since most insurers will experience being on either side of this coin.   

If the liability insurer wants to exercise its rights under this new section of the statute, the liability insurer should send a letter in accordance with the statute to the UIM carrier and state that it is offering its policy limits conditioned upon a full release and waiver of subrogation as to its insured.  This starts the 60 day clock and the UIM carrier will need to make some quick decisions about whether to (1) resolve the case;  (2) continue litigation with waiver of subrogation and coordinate defense with liability carrier to mitigate defense costs; or (3) continue litigation with no waiver of subrogation and if defense costs cannot be coordinated face potential exposure for payment of liability insurer’s defense costs. Please contact Steve Bancroft or Melissa Katz for further discussion.  This statute goes into effect on July 1, 2010.

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