Professional Liability Magazine - Spring 2019 by goldbergsegalla

SPRING 2019

PROFESSIONAL LIABILITY MAGAZINE Developments | Decisions | Defenses

DISASTERS AND EMERGING RISKS What It Means For Agent/Broker E&O

ALSO INSIDE: Whatever Happened to The Ramp at the Plaza Diner? • Careful How You Put That • Court Highlights the Importance of Watertight Draftsmanship in Insurance Policies • Long-Term Care Providers Should Anticipate Growth of “Granny Cam” Legislation • Voluntary Cybersecurity Practices and Guidance for Health Care Industry • Making a Getaway – For Spring Break • Court Dismisses Suit By Church Volunteer Hurt While Decorating For Easter

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CONTRIBUTORS Caroline Berdzik cberdzik@goldbergsegalla.com Jonathan L. Berkowitz jlberkowitz@goldbergsegalla.com David Y. Choi dchoi@goldbergsegalla.com JANUARY 2019

EDITORS Management and Professional Liability Practice Group Co-Chairs

Jonathan S. Ziss 267.519.6820 jziss@goldbergsegalla.com Peter J. Biging 646.292.8711 pbiging@goldbergsegalla.com

PLM SPRING 2019 TEAM LEAD Martha P. Brown mpbrown@goldbergsegalla.com

Daniel L. Gold dgold@goldbergsegalla.com Matthew S. Marrone mmarrone@goldbergsegalla.com Colleen M. Murphy cmurphy@goldbergsegalla.com Shannon T. O’Connor soconnor@goldbergsegalla.com Joseph A. Oliva joliva@goldbergsegalla.com Joanne J. Romero jromero@goldbergsegalla.com Sean T. Stadelman sstadelman@goldbergsegalla.com Colin B. Willmott cwillmott@goldbergsegalla.com

PLM | SPRING 2019

Turning the Page

Contents

Welcome to PLM 2.0. Goldberg Segalla’s publication on professional-liability matters has undergone a reboot. The final monthly edition of PLM published in January. This, the Spring 2019 edition, marks PLM’s debut as a quarterly. With stories ranging from in-depth pieces on emerging legal trends to trenchant analyses of recent litigation, this isn’t a newsletter anymore; it’s a newsmagazine. And the time has come to officially acknowledge and effectively accommodate that reality by relaunching PLM with an adjusted production and publication schedule – one better suited to the creation of quality content. You’ll see the difference in the pages ahead. They contain a richer and more robust mix of stories than ever, and all are as interesting as they are informative. Consider Joanne L. Romero’s “Whatever Happened to the Ramp at the Plaza Diner?” – a piece exemplifying the depth, texture, and detail that give PLM stories a human pulse and real-world context as well as legal insight. Though you’d never know it from the bloodless writing in some professional journals, stories about the law are just stories about people. So Joanne, who focuses her practice on representing employers in employment-discrimination cases in state and federal courts and before administrative agencies, writes of the New York City venue that serves as her story’s lens on revocable consent: “Before it closed a couple of years ago, the Plaza Diner had its admirers. “For years this was the place for the best cheesecake around. Suddenly the Diner is no more. R.I.P.,” one TripAdvisor reviewer wrote in early March 2017. “But not everybody could eat at the diner while it was still open. Todd Kreisler, who lived several blocks away, claimed he passed the little restaurant three or four times a week and often thought of going inside but never could figure out how. The step up to the front door was almost eight inches high, and Kreisler, who has cerebral palsy and gets around in a motorized wheelchair, couldn’t get over it.” Also included in this issue are a Peter J. Biging article on the potential effects on the insurance industry of rising prospects for natural or manmade disasters; a Jonathan L. Berkowitz piece examining “granny cam” legislation through the lens of an Arizona case in which a nurse impregnated a comatose woman; a Shannon T. O’Connor story on cybersecurity in the healthcare industry; and a Sean T. Stadelman piece on a Pennsylvania medical-malpractice case involving a nurse midwife. In all, more than 10 articles await you. And so, as might be said for PLM itself, it’s time to turn the page.

Jonathan S. Ziss Management and Professional Liability Practice Group Co-Chair

INSIGHT 5 | Long-Term Care Providers Should Anticipate Growth of “Granny Cam” Legislation COVER STORY 6 | Disasters and Emerging Risks: What It Means for Agent/Broker E&O CASE NOTES 10 | Pennsylvania Superior Court Rules that Doctor's Opinions Against Midwife Insufficient to Sustain Claim 11 | Careful How You Put That Court Highlights the Importance of Watertight Draftsmanship in Insurance Policies

SPOTLIGHT 12 | Whatever Happened to the Ramp at the Plaza Diner? And Other Questions Concerning Revocable Consents

INSIGHTS 14 | McKinsey RTS’ Disclosure Woes Highlight Need for Transparency in Chapter 11 Engagements 15 | Voluntary Cybersecurity Practices and Guidance for Health Care Industry TOP FIVE 16 | Making a Getaway – for Spring Break CROSSOVER 17 | Court Dismisses Suit by Church Volunteer Hurt While Decorating for Easter 17 | Successful Defense of Driver in Two-Car Accident Turns on a Stop Sign Ignored

Breaking News • Trends and Legal Developments • Regulations and Decisions • Best Practices Resources

Professional Liability Matters Your online source for the latest news and updates impacting the professional liability community. At Professional Liability Matters, our attorney-first writers discuss a wide range of industries including: • Finance • Medicine • Architecture • Law and Construction • And More • Real Estate Whether you’re an industry professional, insurer, or liability attorney, Professional Liability Matters has you covered.

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INSIGHT

Long-Term Care Providers Should Anticipate Growth of “Granny Cam” Legislation JONATHAN L. BERKOWITZ On December 29, 2018, a 29-year-old woman who had been comatose for more than a decade gave birth to a baby boy at Hacienda Healthcare, a facility located in Phoenix, Arizona, that provided care to disabled residents. Following the birth, a 36-year-old former employee who worked at the facility as a nurse was charged with sexual assault and abuse relating to the alleged rape and impregnation of the incapacitated resident. Since the disturbing incident occurred and gained national attention, Arizona state legislators have proposed several legislative and regulatory solutions to protect the state’s long-term care, elderly, and infirmed populations. One proposed solution involves the enactment of legislation to permit the use of video cameras in nursing homes, commonly known as “granny cams.” “The question is, does the family who has a loved one in a nursing home or a care facility have a right to keep an eye on them,” Representative Jeff Weninger said. The use of surveillance and electronic monitoring equipment is a growing trend in the long-term care industry designed to hold facilities accountable for the care they provide and to prevent future incidents of abuse and neglect. As of mid-2018, Illinois, Louisiana, New Mexico, Oklahoma, Texas, Washington, Utah, and Florida had enacted legislation permitting the use of surveillance cameras at long-term and/or assisted living facilities. In February 2019, the Minnesota state legislature was considering legislation to permit the use of electronic monitoring equipment in nursing homes, assisted living facilities, and other long-term care settings.

New Jersey has undertaken a different approach to address the same resident-safety concerns under its “Safe Care Cam” program, which loans micro-surveillance equipment to the families of assisted-living and nursing home residents. Under the program, the families of elder-care residents may borrow cameras and memory cards without charge to monitor the care provided to their loved ones. Once a camera is in place, it is up to the participant to review the recorded footage and report any issues to the Office of the Attorney General or other appropriate authorities at their discretion. “Our Safe Care Cam program sends a clear message that we are committed to safeguarding our most vulnerable residents from abuse and neglect,” said Paul R. Rodriguez, acting director of the New Jersey Division of Consumer Affairs. “An undisclosed number of cameras are at work right now across the state, watching over loved ones to ensure they are treated with dignity and care. Caregivers who think they can get away with abusing or neglecting those they are entrusted to look after while no one is looking need to think twice because a Safe Care Cam may be watching.” Despite the inherent benefits of electronic surveillance legislation to monitor and prevent abuse and neglect, the implementation of these laws poses new challenges to long-term care providers, particularly those that operate in multiple states. In jurisdictions where laws conflict, providers must ensure that their policies and procedures comply with the laws of individual states. Also, providers must ensure their policies and procedures address HIPAA privacy protections, such as in cases where roommates or fellow residents may be recorded on monitoring equipment. Despite these challenges, long-term care providers should anticipate the expansion of electronic surveillance laws in the future.

“The information gleaned by this video monitoring equipment can be used at a trial, if you wish to charge someone with a bad act,” said Senator Jim Abeler. “And it should also have the effect of putting everybody on notice that they should do a little better job.” www.goldbergsegalla.com

Spring 2019 | 5

COVER STORY

DISASTERS AND EMERGING RISKS: What It Means for Agent/Broker E&O PETER BIGING

There seems no denying that the threat of disaster striking is at an apex. The fallout from global warming has seen unprecedented fires in areas not getting enough rain, like California late last year; unprecedented rains causing their own havoc, as in Maui in the winter of 2018; and massive flooding following storms seemingly inconceivable in their breadth and scope (think Hurricane Katrina and Superstorm Sandy). Worse, in addition to natural disasters, we face the continued threat of manmade disasters from the failure to maintain our aging infrastructure, and truly mind-boggling threats from cyber crime. And then there are emerging risks no one saw coming, like the D&O risks presented by the growth of the #MeToo movement, with tens of millions of dollars of stock value being lost within hours of revelations of sexual harassment and gender discrimination rocking publicly traded companies.

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The emergence of these enormous risks has had a tangential effect: increased risks to insurance agents and brokers. In a challenging and competitive environment in which agents/brokers are compelled to promise to “tailor the right solutions to protect your company” and help their clients “navigate smoothly through a myriad of complex issues,” they are going to be the ones their customers look to when disasters bring about unexpectedly large losses, extensive damage to multiple structures on their properties, and business income losses stretching years in length. They will also find themselves at risk when multiple coverages leave gaps. The emerging disaster risk Starting with a look at natural disasters, insurance claims from the wildfires that hit northern California in the latter part of 2017 have thus far topped $11.4 billion. More than $8 billion of this is from the fires that destroyed the town of Paradise. This is below the $12.4 billion in insurance claims from the 2017 California wildfires, but the total may continue to rise. In fact, Munich Re has estimated the total losses will reach $16.5 billion, of which only $12.5 billion will be insured. Worldwide, Munich Re estimates an overall economic impact from natural disasters in 2018 totaling $160 billion, of which only $80 billion is insured. In economic terms, the losses from the California wildfires were staggering in and of themselves, but they have led to criminal exposures as well, the bankruptcy of one of the largest utility companies in the world in Pacific Gas & Electric, and the potential for shareholder derivative suits arising from the failure to be properly prepared to face the fire risk, given the experience with the 2017 wildfires. While it is uncertain if there will be lawsuits against

any insurance brokers or consultants, one has to wonder how such lawsuits can possibly be avoided with such a substantial uninsured loss presented. Moving past natural disasters to look at cyber risks, in 2017 nearly 700 million people in 21 countries experienced some form of cyber crime, per Symantec. Per ThreatMatrix, the threat is growing, with mobile fraud rising 24 percent year-overyear in the beginning of 2018 and over 150 million global attacks in the first half of the year alone. A McAfee report estimates that worldwide cybercrime costs an estimated $600 billion per year, and Juniper Research expects the total cost of all data breaches will reach $2.1 trillion this year. Accenture puts the figure at $5.2 trillion over five years. The consequences are enormous: as a result of the Yahoo data breach, which involved over 3 billion user accounts being compromised, it has been estimated that the value of the Verizon purchase of the company was reduced by $350 million. According to Lloyd’s of London’s Cyber Risk Management Report issued in January, a hypothetical coordinated global cyber-attack spread through malicious email could cause economic damages from $85 billion to $193 billion and affect more than 600,000 businesses worldwide. Insurance claims under this scenario would range from business interruption and cyber extortion to incident response costs. But, total claims paid by the insurance sector in this scenario were estimated to be between $10 billion and $27 billion, meaning 86 percent of the losses would be uninsured. And even if this nightmare scenario could be put to the side, an IBM study has estimated the average cost of a data breach to a company right now at $3.86 million. Yet, despite widespread efforts to warn employees of the dangers of clicking

on suspicious links, in a 2018 Data Breach Investigations Report, Verizon reported 30 % of phishing emails in the U.S. are opened, with 12 percent of those targeted by these emails clicking on the infected links or attachments. And there are still substantial portions of the business community with little to no cyber coverage or coverage with a variety of limitations and exclusions. Looking at manmade disasters, the collapse of the Florida International University pedestrian bridge has led to millions of dollars in liability and wrongful death claims, and the builder’s filing for bankruptcy protection. According to data reported in the Insurance Information Institute, there were 118 man-made disasters in 2017, causing $6.2 billion in losses. And, this is without a disaster of the magnitude of the September 11, 2001 terrorist attacks in the U.S., which caused $26 billion in insured losses that year alone. While all of this is scary enough, the fact is that emerging risks are developing all the time - like the D&O risk presented by what had previously been seen as only an employment practices liability risk in sexual harassment and gender discrimination. Just hours after Sports Illustrated swimsuit model Kate Upton accused Guess co-founder Paul Marciano of using his power to “sexually and emotionally harass women,” the company’s shares dropped almost 18 percent, resulting in a loss of $250 million in market value in a single day. Following a Wall Street Journal report that Steve Wynn, the casino mogul and founder and CEO of Wynn Resorts, had been accused of sexual harassment and assault by a number of employees, shares of the company fell by 10 percent on the day the story was published, and another 9 percent three days later, resulting in a loss in shareholder value of about

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Spring 2019 | 7

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$3.5 billion. At least the company survived. In the case of the Weinstein Company, the report of horrific conduct by Harvey Weinstein over decades involving sexual harassment and sexual assaults literally destroyed the company. The impact on insurance agents and brokers In a presentation at Fordham Law School on February 5, 2019, Kiera O’Connell Goral of QBE and Lisa Doherty of Business Risk Partners noted that, typically, after disasters strike there is a time lag in terms of an uptick of insurance agent/broker E&O claims. These claims tend to spike after insureds find out either that they have no coverage or insufficient coverage for their losses. An agent’s/broker’s duty of care in terms of placement of coverage is typically very limited, requiring only that the agent/broker: •• Exercise good faith and reasonable skill, care and diligence in procuring insurance requested in accordance with the client’s instructions •• Obtain coverage which is not void •• Obtain coverage which is not materially deficient •• Obtain the coverage undertaken to be supplied at the requested limits •• Obtain requested coverage for client within reasonable time or inform client of its inability to do so There is generally no duty to advise or offer guidance on the types or amounts of coverage to purchase absent a showing of “special circumstances” or a “special relationship.” This is because insureds are believed to be much better positioned to understand their businesses and the risks presented, the value of their properties, their financial ability to pay for insurance, and the uninsured risk they are willing to bear. Moreover, the concern is that if agents/brokers were found to owe a duty to advise at all times, it would result in creating a perverse incentive on the part of businesses to purchase only the most minimal coverages offered, and then use the agent’s/broker’s E&O coverage as their excess coverage when losses exceed the coverage available, blaming the agent/ broker for not offering or insisting on the insured purchasing more coverage. As a result, courts typically hold that “it is the insured’s responsibility to request the type of insurance coverage, and the amount of 8 | PLM

coverage needed. It is not the agent’s obligation to spontaneously or affirmatively identify the scope or the amount of insurance coverage the client needs.” This is pursuant to Avenue Musicians & Artists, LLC v. Hudson Spec. Ins. Co., et al., 2016 U.S. Dist. LEXIS 74042, at * 3 (June 6, 2016, E.D.La.) (citing Isidore Newman Sch. V. J. Everett Eaves, Inc., 42 So.3d 352, 359 (La. 2010)) (emphasis added). However, where there are special circumstances or a special relationship between the company and the agent/broker, courts have generally found that the agent/broker owes a duty to advise. There are a number of factors that go into the determination as to whether a duty to advise may exist, but among the principal factors courts look at are: •• Receipt of compensation in addition to commissions, such as for a “service fee.” •• Counseling of the insured with respect to specialized coverage or a specific coverage issue, or other “interaction with regard to a question of coverage.” •• Agent’s/broker’s expressed expertise. •• Agent’s/broker’s exercise of broad discretion in servicing the insured’s account. •• A course of dealing over an extended period sufficient to have put an objectively reasonable agent/broker on notice that his advice is being specially relied upon. •• An ambiguous request for coverage that requires clarification. While this may seem to provide some significant protection to agents/brokers, the fact is that the courts are increasingly viewing agents/brokers as “experts,” to whom the average insured turns for help in navigating complex coverages. And agents/ brokers do themselves no favors in this regard by regularly posting things on their websites touting the special value they bring to their customers, such as in this sampling of broker website promises to: •• Provide a “range of experience in specific industries to offer you exactly the coverage you need” •• Provide “tailor-made risk management solutions based on expert advice” •• Provide “strategic decisions analysis” •• “Review insurer insolvency” •• “Design comprehensive and complete

programs for both insurance and risk management” •• Provide “performance beyond the required . . . in all we do” •• “Create the best products and services for your needs” •• Negotiate with insurers to “secure the most favorable terms for you” An example can be found in an Arizona federal court decision issued earlier this year in National Fire & Marine Ins. Co. v. Infini PLC, 2019 WL 95894 (D. Ariz., Jan. 3, 2019). In that case, the court cited to the broker’s website promises to “tailor[] the right solutions to help protect your company” and “help businesses navigate smoothly through a myriad of complex issues” as support for a breach of contract claim against a broker for failing to procure coverage for a claim arising from a liposuction procedure, even though the insured was given a quote evidencing that there was no coverage for such procedures which the insured accepted. In reaching its determination, the court stated “[p]art of the reason that insured persons hire insurance brokers is to have them navigate complex insurance agreements.” The result is that as insureds face increasing risk of catastrophic loss, agents/brokers face ever greater exposure to claims for failing to meet their duty to advise. And, as the risks insureds are facing are becoming larger, more complex and unprecedented in size and scope, agents/brokers are placed in evermore peril. The fact is that individuals and businesses with uninsured losses are going to look wherever they can to find a way to recoup some or all of those losses. As a result, agents/ brokers need to make sure that they document what coverages are offered to their customers, document what coverages the customer chooses not to purchase, and undertake a careful, organized and systematic approach to how each customer’s insurance coverage needs are reviewed and insurance coverages are marketed and bound. Claims practitioners and defense counsel need to fully understand the applicable laws governing the duty of care in the particular case presented, and fully build out the available defenses to the application of a duty to advise in the particular instance presented.

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CASE NOTE Rhoads v. Hoops, CNM, et al, 2019 WL 291171 (Pa. Super. Ct., Jan. 23, 2019)

Pennsylvania Court Rules that Doctor’s Opinions Against Midwife Insufficient to Sustain Claim SEAN T. STADELMAN In Rhoads v. Hoops, CNM, et al, the Pennsylvania Superior Court held that testimony from an obstetrics and gynecological expert was insufficient to sustain a medical malpractice claim against a nurse midwife. The case arose from a sad set of facts involving the delivery of a child. At birth, the baby exhibited problems with his right arm, including swelling, bruising, decreased range of motion and sensory deficits. The baby was diagnosed with compartment syndrome. The mother, on behalf of herself and her child, filed a medical malpractice lawsuit against the healthcare team involved in the delivery, including a nurse midwife, alleging that her child’s injuries were caused by the failure to order a Caesarean section sooner than was done. The case was tried to a jury and resulted in a verdict in favor of the defendants. During the course of the trial, the nurse midwife was dismissed by the trial court judge. On appeal, one of the issues the appellate court addressed was whether the trial court erred in dismissing the midwife. The plaintiff contended that she presented testimony from an expert witness in obstetrics and gynecology, who “spent significant time explaining how midwife Hoops and the other defendants fell below the standard of care by misreading EFM strips and other signs and in failing to request and order a C-section delivery in a timely fashion.” The plaintiff argued that this was sufficient evidence of the nurse midwife’s negligence to preclude dismissal of her during the trial. The appellate court disagreed and found that because the plaintiff’s 10 | PLM

witness was accepted as an expert in the field of obstetrics and gynecology, but not in the field of midwifery, the expert witness was not competent to testify as to the standard of care for midwives. Furthermore, the court found that the plaintiff’s case centered on whether a Caesarean section was timely ordered and there was no evidence that a midwife could even order such a procedure or had a duty to notify the doctor about the need for such a procedure. The appellate court affirmed the dismissal of the nurse midwife at trial. IMPACT: This case provides an important reminder that medical malpractice claims need to be supported by testimony from experts in the same field regarding the appropriate standard of care. Testimony from experts in related fields is insufficient, by itself, to support claims of failing to comply with the applicable standard. Furthermore, the findings here present an opportunity for attorneys representing non-physician healthcare providers to utilize the argument that claims based on whether such providers should notify physicians to act in a certain way are likely unsupportable.

CASE NOTE Attorneys Insurance Mutual Risk Retention Group, Inc. v. Liberty Surplus Insurance Corporation, No. 17-55597, 2019 WL 643442 (9th Cir. Feb. 15, 2019)

Careful How You Put That Court Highlights the Importance of Watertight Draftsmanship in Insurance Policies COLIN WILLMOTT In reviewing an insurance-policy provision in a claims made and reported policy, the Ninth Circuit Court of Appeals determined, contrary to the insurer’s insistence, that all claims, regardless of when they were first made, were deemed to be made during the policy period. This case involves coverage for a claim made in one policy period but reported in a subsequent policy period. A family instituted a probate petition against an attorney in February 1, 2010. Then, on September 24, 2010, the same family filed a civil action in state court again naming the attorney as a defendant. These two actions were based on the same set of facts. Liberty Surplus Insurance Corporation issued two successive professional liability policies to the attorney’s law firm for the policy periods of July 31, 2009, to July 31, 2010 (09-10 policy), and July 31, 2010, to July 31, 2011 (10-11 policy). Both policies were issued on a claims made and reported basis. No notice was provided to Liberty of either claim until after the civil action was filed. Liberty disclaimed coverage for both cases. Specifically, Liberty indicated that the probate action was not covered under the 09-10 policy even though the claim was made during this policy period because it was not reported to Liberty during that same policy period. Furthermore, because the probate and civil action were interrelated, there was no coverage under the 10-11 policy for the civil action because the claim was first made, but not reported, in the preceding policy. Another insurance carrier, Attorneys Insurance Mutual Risk Retention Group, or AIMRRG, provided a defense to the attorney and brought a lawsuit against Liberty for contribution. In ruling www.goldbergsegalla.com

on the issues, the court recognized that under claims made and reported policies, timely reporting of the claim within the policy period is a condition precedent to coverage. Accordingly, the court focused on whether the probate and civil actions were a single claim and, if so, when the single claim was deemed first made. Relying on the language contained in the 10-11 policy, the court found that both claims were made and reported in the 1011 policy. The 10-11 policy contained a “Limits of Liability” section for multiple related claims, which stated: “Claims alleging, based upon, arising out of or attributable to the same or related acts, errors or omissions shall be treated as a single Claim regardless of whether made against one or more than one Insured. All such Claims, whenever made, shall be considered first made during the Policy Period or any Extended Reporting Period in which the earliest Claim arising out of such acts, error or omissions was first made …” The term “policy period,” was specifically defined by the 10-11 policy as the policy period identified in the declarations. Using that definition of policy period, as the court was bound to do under the rules of insurance policy construction, the court interpreted the limits of liability provision to mean that any related claims will be considered first made during the 10-11 policy period. Even if using the policy definition of “Policy Period” made that provision ambiguous, the court noted that any ambiguity in the Liberty policy would be construed in favor of coverage.

Spring 2019 | 11

SPOTLIGHT

Whatever Happened to the Ramp at the Plaza Diner? And Other Questions Concerning Revocable Consents JOANNE J. ROMERO In New York City, a question that often comes up when someone files a lawsuit alleging a storefront needs a permanent ramp to be wheelchair-accessible under Title III of the Americans with Disabilities Act is whether the landlord or store owner even could get approval from the city to build a permanent ramp. Many businesses employ temporary ramps to avoid paying the professional fees and other costs involved in the design- and permitapproval process necessary for building a permanent ramp because they fear it’s an expense that might prove to be all for naught. Whether a permit will be approved is a particularly burning question for businesses located on a corner – those such as the Plaza Diner. French fries and frustration Before it closed its doors a couple of years ago, the Plaza Diner had its admirers. “For years this was the place for the best cheesecake around. Suddenly the Diner is no more. R.I.P.,” one TripAdvisor reviewer wrote in early March 2017. ” But not everybody could eat at the diner while it was still open. Todd Kreisler, who lived several blocks away, claimed he passed the little restaurant three or four times a week and often thought of going inside but never could figure out how. The step up to the front door was almost eight inches high, and Kreisler, who has cerebral palsy and gets around in a motorized wheelchair, couldn’t get over it. Nor did Kreisler know that a small, portable, wooden ramp was available; though the diner had one, it wasn’t always outside, and there was no sign stating that it could be brought out. Some patrons knew about it (three or four people in wheelchairs ate there each week, some after being pulled up the ramp), but others did not. On October 10, 2010, Kreisler filed suit against the diner and its landlord, J.J.N.K. Corp., citing the restaurant’s wheelchair-inaccessible entrance, small vestibule, and other interior barriers and seeking injunctive relief to remove the alleged barriers. He also sought compensatory damages and attorneys’ fees. 12 | PLM

After Kreisler filed the suit, J.J.N.K. bought the diner an aluminum ramp worth between $300–$500 that contained anti-skid materials but no handrails and installed a buzzer and sign at the diner’s entrance: “Please Ring Bell for Assistance.” But the sign was removed twice a week for cleaning and sometimes remained down for longer periods of time. Corner quadrant restrictions A quick overview of the city rules at issue in the case provide some background on the issues with which the Plaza Diner and its landlord had to contend. Generally, permanent structures on sidewalks, including wheelchair ramps, are subject to approval by the New York City Department of Buildings and Department of Transportation. The New York City Building Code generally permits ramps in buildings built before December 6, 1969, to extend up to 44 inches from the street line. However, ramps often must extend beyond 44 inches from the street line in order to avoid making the slope of the ramp too steep. In those situations, the transportation department usually will grant revocable consents for wider ramps at an additional annual cost, but there are various restrictions on the department’s ability to grant revocable consents. One such restriction is that permanent structures are not permitted within 10 feet of what’s called the corner quadrant – an area created by extending the corner of each building to the sidewalk. The corner quadrant restriction is based on the Sidewalk Corner Clearance Policy as stated in the NYC Mayor’s Executive Order 22 of April 13, 1995, as amended. Executive Order 22 states that the policy reasons behind the corner quadrant restrictions are that: “Corners that are congested with structures and objects create pedestrian gridlock which may ultimately bottle up a whole block of sidewalk. Congested corners also raise serious traffic and safety concerns: when structures and objects block the corner, pedestrians spill out onto the street and are in danger of being hit by passing vehicles.”

"Before it closed its doors, the Plaza Diner had its admirers. But not everybody could eat there."

However, where strict compliance with rules restricting the issuance of revocable consents create undue hardship, applicants may make a written request for a waiver, which should be granted “if in [the Commissioner’s] opinion, the public health, safety and general welfare will not be endangered thereby. Such a waiver must first undergo review by the Department of City Planning.

the Plaza Diner ever applied for a permit to build a permanent ramp, and whether that application was granted or denied. A cursory review of DOB records showed that the landlord actually filed an application to build a permanent ramp on November 18, 2013, after its unsuccessful appeal of the decision, but this application was denied on November 20, 2013.

‘Not subject to reasonable dispute’

The city’s rejection of the ramp application may be very telling, and may be good news for businesses contending with corner quadrant restrictions, as it may support the argument that NYC would not approve a permit for permanent ramps falling in the corner quadrant. This fact perhaps may be the proper subject of judicial notice one day. An in-depth review of the diner’s permit application process, and the reasons for denial of the application may be useful to confirm the foregoing. However, such a review may ultimately prove to be unnecessary in light of the decision in De la Rosa v. 597 Broadway Development Corp., which provides a judicially accepted example of circumstances under which a party is excused from applying for a waiver of a revocable consent restriction.

In Kreisler v. Second Ave. Diner Corp., the Plaza Diner and its landlord argued, among other things, that the foregoing corner quadrant restrictions made building a permanent wheelchair ramp for their restaurant impossible because the city would never grant the necessary permit or waiver to build a ramp. However, the Plaza Diner and its landlord conceded that they never attempted to obtain approval for a permanent ramp. The court took issue with the fact that the Plaza Diner and its landlord failed to provide any explanation as to why they should be excused from trying to apply for a permit. Surprisingly, the court also stated that “a casual visual inspection of New York City’s sidewalks suggests that exceptions to the city’s sidewalk structure rules are granted with some frequency.” Arguably, this was improper judicial notice given that generally “a court may take judicial notice only of facts that are ‘not subject to reasonable dispute’ because they are generally known in the jurisdiction or ‘can be accurately and readily determined from sources whose accuracy cannot reasonably be questioned.’” In fact, the court failed to note whether it was referring to corner quadrant ramps, and, if so, whether the corner quadrant ramps it was “casually” observing had been built before or after the 1995 corner quadrant restrictions were implemented, or whether the required permits had been properly obtained. A review of the historical record of existing ramps on corner quadrants was clearly beyond the scope of the Kreisler judicial opinion, but may prove a useful endeavor for other business litigating similar ADA issues. In any event, it appears that following their defeat in court on this issue, neither the Plaza Diner, which recently dissolved and is no longer located at that address, nor the landlord ever installed a permanent ramp. The burning question then became whether www.goldbergsegalla.com

De la Rosa v. 597 Broadway Development Corp. did not specifically involve a corner quadrant, but did involve other restrictions on the DOT’s ability to provide a revocable consent. In De la Rosa, the Southern District of New York accepted arguments that an application for waiver of a restriction on a revocable consent from the DOT was not required as the DOT has limited discretion under the rules to waive such restrictions. The Court noted that while normally the DOT can waive restrictions on the provision of revocable consents if the restrictions would cause undue hardship, there is no undue hardship where a temporary wheel chair ramp is in place. Apparently, this may have been a reasonable basis to argue it is excused from applying for a revocable consent or waiver of a restriction thereon that the Plaza Diner and its landlord were missing at the time of the Kreisler decision. The good news is that it may be a very simple, and inexpensive, argument to make for some businesses that already employ a temporary ramp.

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INSIGHT

McKinsey RTS’s Disclosure Woes Highlight Need for Transparency in Chapter 11 Engagements DANIEL L. GOLD The recent $15 million settlement between the Office of the United States Trustee and McKinsey Recovery & Transformation Services U.S., LLC highlights how large consulting and financial advisory firms must disclose fully their connections to all creditors and constituencies in Chapter 11 bankruptcy cases or risk disqualification and disgorgement of fees for failing to disclose potential conflicts of interest. While the settlement did not result in clearer guidance for disclosures that would fully satisfy Rule 2014 of the Federal Rules of Bankruptcy Procedure, professionals can no longer argue that the need to preserve client confidentiality prevents full disclosure. Similarly, performing incomplete conflict checks will not protect sophisticated consulting firms from disqualification or more serious penalties. A full explanation of the extent to which McKinsey RTS failed to comply with bankruptcy disclosure rules is beyond the scope of this article, but McKinsey RTS’ lackluster efforts in providing full disclosure of its connections with creditors and interested parties across multiple cases resulted in a massive penalty and the need to update its disclosures related to its pending application for retention in the other bankruptcy cases. Before reaching the settlement, the United States Trustee had filed complaints claiming that McKinsey RTS had failed to disclose the identity of clients of the firm with ties to creditors, debtors, and other parties in interest in the Chapter 11 cases of Westmoreland Coal, SunEdison Inc., and Alpha Natural Resources, Inc., or ANR. In fact, ANR’s case had been reopened based on a motion by an entity owned by J. Alix, a longtime competitor of McKinsey RTS in the insolvency advisory space, which charged McKinsey RTS with a pattern of incomplete disclosures across dozens of cases dating back decades. The settlement term sheet, which was filed in all three cases, revealed that McKinsey RTS’ alleged inadequate disclosures and possible conflicts of interest included bankruptcy cases filed as far back as 2002. For example, in Westmoreland Coal, the bankruptcy case of a Colorado-based mining company, the United States Trustee alleged that McKinsey RTS’ retention application lacked “transparent disclosure,” noting that it listed six unnamed clients who are “parties of interest” in the case, one of which generated a “stag14 | PLM

gering” 17.5 percent of the firm’s gross revenue for 2018. In addition, the application to retain McKinsey RTS stated that the firm held a claim against the Westmoreland Coal estate for pre-petition fees, a conflict that it had not agreed to waive as of the date of the application; that the firm limited its search for connections with its consulting affiliates to those with a “direct commercial relationship” with parties in interest, when there is no such limit in the U.S. Bankruptcy Code; and that the firm admitted it had not completed its conflicts search with interested parties in the bankruptcy case. Against these patently insufficient disclosures and incomplete conflict search results, the United States Trustee had objected to McKinsey RTS’ retention on the basis that it was not “disinterested” as that term is defined by 11 U.S.C. §§ 327(a) and 101(14) of the Bankruptcy Code and Rule 2014. In other words, McKinsey RTS’ retention of a sizable claim against the debtor and its failure to disclose the identity of a major firm client with an interest in the case created the potential for conflicts of interest with the estate. Specifically, McKinsey RTS could favor its own interest in seeking to have its claim and that of its major “unidentified” client paid over the general interests of the debtor and its duties to the entire creditor body. The settlement term sheet required that McKinsey RTS pay $5 million to the debtors in each of the ANR, SunEdison, and Westmoreland cases, and waive any distribution under the confirmed reorganization plans in those cases. The penalty exacted against McKinsey RTS is steep and impactful. There are, however, lingering questions from the McKinsey episode. Namely, what disclosures are mandatory for consultants and other professionals in Chapter 11 cases. While the bankruptcy courts in the ANR, Westmoreland, and SunEdison cases did not render decisions on the adequacy or inadequacy of the scope of McKinsey’s disclosures, it is clear that the United States Trustee and vigilant parties in interest will be looking to enforce the full disclosure requirements of Bankruptcy Rule 2014. The burden of adequate disclosure, however, rests with the professional seeking to be retained. Professional insolvency consultants, attorneys, and financial advisors are well instructed to conduct full and broad searches of their connections with creditors and other parties in interest in bankruptcy cases and promptly to disclose those connections or else risk disqualification or disgorgement of fees.

INSIGHT

Voluntary Cybersecurity Practices and Guidance for Health Care Industry SHANNON T. O’CONNOR Cybersecurity continues to be an ever-important issue in all industries. With vast amounts of protected personal information, the healthcare industry, whether public or private, needs to understand not just threats to obtaining this information, but, more importantly, the “best practices” to prevent cybersecurity attacks. This is a constant and ever-changing arena. However, knowledge is key, and making attempts to stay informed is the best approach. The United States Department of Health and Human Services (“HHS”) issued new guidance documents related to cybersecurity for all healthcare organizations. The Cybersecurity Act, or CSA, of 2015 sought to establish better public-private partnerships between the federal government and private sector in the area of cybersecurity. The need for better public-private partnerships stems from the acknowledgement and recognition that our economic solvency, personal safety, and infrastructure are interrelated with digital technologies. The CSA specifically required “Aligning Health Care Industry Security Approaches.” In response, a task force was created, which included experts from the healthcare industry and cybersecurity field. Notably, the taskforce comprised over 150 cybersecurity and healthcare industry representatives from both the private and public sectors. The taskforce sought to focus on “the most impactful threats, with the goal of significantly moving the cybersecurity needle for a broad range of organizations” within the healthcare world. Over a two-year period of work resulted in a publication titled, “Health Industry Cybersecurity Practices: Managing Threats and Protecting Patients,” or HICP. This publication, although not perfect, is a starting point to understanding the current consensus approach. Rather than re-invent the wheel, the taskforce used the National Institute of Standards and Technology, or NIST, Cybersecurity Framework as a beginning point to educate healthcare professionals on how to answer the question, Where do we start? HICP focused on five persistent cybersecurity threats: e-mail phishing attacks; ransomware; loss or theft of equipment or data; insider, accidental, or intentional data loss; and attacks against connected medical devices that may affect patient safety. Each threat is addressed, and practical suggestions on how to mitigate them are provided. www.goldbergsegalla.com

While the publication lays out “voluntary” guidance, the recommendations are helpful to organizations of all sizes. The main document in the HICP recommends 10 cybersecurity practices to help alleviate threats: •• Email protection systems •• Endpoint protection systems •• Asset management •• Vulnerability management •• Network management •• Access management •• Data protection and loss-prevention •• Incident response •• Medical device security •• Cybersecurity policies Analysis of these recommendations is done through real-life events and statistics, which demonstrate the financial and patient care impact of cyber threats and how such cybersecurity practices may be beneficial. In addition to the main document, the HICP provides two volumes that are specifically intended for IT and Security professionals. Technical Volume I provides for cybersecurity guidance for small health care organizations, while Technical Volume II proves cybersecurity practices for medium and large health care organizations. Such specific tailoring acknowledges HHS’s recognition that the health care industry is truly varied when it comes to digital practices and capabilities. It is important to note that the practices contained in the HICP are not requirements or mandates and conformity with the act does not guarantee compliance with the Health Insurance Portability and Accountability Act, or HIPAA. However, given how vital technology is and continues to be to the healthcare industry, recommendations and best practices for managing and mitigating the myriad of cyberattacks and exploitations that occur was needed. As such, it is vital for all those in the industry to review the HICP publication and discuss with their IT and security professionals what is being done and what can be improved upon. In the coming months, the healthcare industry can expect additional awareness and recommendations from HHS on cybersecurity practices. Spring 2019 | 15

TOP FIVE

MAKING A GETAWAY—FOR SPRING BREAK JOSEPH A. OLIVA It is that time of year again when, no matter what our age, we fondly recall days of carefree youth. Some will recall Spring Break with friends in Daytona Beach or the sands of Cancun, the craziness of New Orleans or the Texan island of South Padre. Attorneys and staff at Goldberg Segalla are no different . . . except we do not need to seek a travel agent or consult with the leaders of fraternities or sororities. We just need to analyze our own website to find go-to destinations for Spring Break from our very own footprint! We offer not only top-of-the-line legal service but also a high level of legal acumen at these “must be seen in” spring break destinations. But you don’t have to be in trouble with the law to make a getaway to any of the following hot spots:

1 2 3 4

Miami and West Palm Beach

South Beach – ‘nuff said. If you like the beach, sun, and temps in the 80s, along with great restaurants, bars, and nightlife, southeastern Florida must be one of your spring travel destinations!

Greensboro and Raleigh

For the golfers who need to take that spring golf trip – some of the best golf in the United States is in North Carolina, and Raleigh, and Greensboro. And you’ll find Southern charm at its finest!

Los Angeles

La La Land offers it all – sun, the beach, Rodeo Drive, Hollywood, and Santa Monica Pier. You may even get to catch King James at a Lakers game!

New York City

I know some may say that NYC is not a spring break destination, but -- the best times to visit are spring and fall. If you like great restaurants, Broadway, bars, and a City that Never Sleeps, get to the Big Apple – a city so nice they named it twice!

Orlando

Children of all ages will enjoy Disney and all it has to offer. While your kids will be mesmerized by Mickey Mouse and friends, adults can explore Epcot and sample fine wines and beers from all over the world!

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CROSSOVER

Success stories about Goldberg Segalla attorneys in other areas of practice

Court Dismisses Suit by Church Volunteer Hurt While Decorating for Easter Up until the day Goldberg Segalla partners Stewart G. Milch and Matthew G. Miller convinced an appeals court to dismiss a woman’s personal-injury suit against a Greek Orthodox Church in New York City, the plaintiff—a church volunteer who fell from a stepladder and fractured her heel while helping decorate the Epitaphios for Greek Easter—was demanding $750,000, non-negotiable. She fell because the ladder shook, she alleged. It was defective, her expert said.

At Goldberg Segalla, our appellate attorneys showcase what makes the firm different. Much more than a last line of defense, our appellate attorneys are key partners from the initial stages of litigation. The leaders of our Appellate Practice Group have a combined 90 years of legal experience and together have handled over 800 appeals and participated in drafting over 300 appellate decisions. The group includes former state Appellate Division staff attorneys.

Though the ultimately successful defense we mounted was fairly simple – we argued that the church didn’t supervise or control the decorating or have any way of knowing the ladder might be a problem because its purported defects weren’t noticeable -- the case followed an oddly circuitous path fraught with difficult opposing counsel and an indecisive judge.

It also includes Stu, who has handled complex litigation at the state and federal levels for more than two decades, and Matthew, a highly experienced trial attorney who focuses his practice on general liability, construction litigation, and product liability.

In late 2017 – after we persuaded the judge to dismiss the case in trial court and the plaintiff successfully moved to re-argue that decision and the judge said in open court that she intended to stand by her original decision dismissing the case, we got a surprise: One week later came a written decision from the judge in which she said she had changed her mind; now there was an order denying our motion, one that effectively breathed new life into the case. So we had to appeal. But we were ready.

When Stu and Matthew appealed the trial-court judge’s decision in the church case, the plaintiff’s counsel tried to delay the process, hoping that the case would be sent for trial before the appeal was decided and that the church would be forced to settle. But the Appellate Division’s First Department dismissed the case, and our client, once again, was in the clear.

Successful Defense of Driver in Two-Car Accident Turns on a Stop Sign Ignored Two car lengths. That’s all the distance our client had to react when another motorist entered the intersection in front of him, and it wasn’t enough; unable to stop in time, he struck the driver’s side of the other car, pushing it into a guardrail. The other driver then filed suit, alleging our client was negligent for failing to see her vehicle and yield the right of way though she already was in the intersection. Tapped to represent the defendant and his insurer was James F. Faucher II, a member of our General Liability Practice Group. Much rode on the case, and Faucher knew it. Our client wanted to clear his name and was worried he might be found liable for the accident. The financial stakes were high; the plaintiff’s last

demand was for the full value of the defendant’s insurance policy. But Faucher also knew there was a problem with the plaintiff’s case: that stop sign on her side of the intersection. Because of that sign, she didn’t have the right of way; our client did. There had been no stop sign on his side of the intersection. The plaintiff made a premature motion for summary judgment that the court denied. Then we made a cross-motion for summary judgment. The plaintiff was solely responsible for the accident for not stopping and yielding the right-of-way to our client, we argued. The court agreed, ruling that the plaintiff had entered the intersection when doing so was unsafe and dismissing the claim against our client. The stories on this page were published originally on goldbergsegalla.com

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Spring 2019 | 17

GLOBAL INSURANCE SERVICES |

WEBINAR SERIES

PRACTICAL TIPS TO MANAGE RISK

Click the links below to view any of the following samples from our archive: Goldberg Segalla’s complimentary Global Insurance Services Webinar Series explores what insurers, reinsurers, and all types Cooperation Clauses April 16, 2019 | Jeremy G. Dongilli and Steven P. Nassi

 of insurance industry professionals need to know to reduce risk, craft the strongest policies, and avoid costly litigation.

From E&O and D&O matters to issues facing U.S. reinsurers in foreign markets, this series offers an accessible way to learn the ins and outs of important and current legal issues in the insurance industry. We explore the potential impact of Insurance Clause Issues developments in state and federal law, the latest international agreements, emerging technologies, environmental disasters  March 19, 2019 | Jonathan Schapp and Ashlyn M. Capote and other catastrophes, recent judicial decisions, and other topics relevant to the insurance industry. Each webinar — a 20-30 minute presentation followed by an interactive Q&A session — is conducted by an attorney Opioid-Related CoverageGlobal IssuesInsurance Services Practice Group, a team of more than 75 highly accomplished member of Goldberg Segalla’s  February 12, 2019 | Michael A. Hamilton and Bradley R. Ryba lawyers, which Law360 has recognized as among the largest in the United States. Our attorneys share their extensive experience representing insurers, reinsurers, and all others operating in the global insurance arena. 

You Break It You Buy It - Avoiding Self-Made Errors in Claims Handling in Florida January 22, 2019 | Dustin C. Blumenthal

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Review: Specialty Lines Year in December 18, 2018 | Todd D. Kremin

UPCOMING WEBINARS

 

Mobile Equipment vs. Auto Coverage Issues

Tuesday, May 14, 2019 | 12 p.m. ET | 9 a.m. PT | Patrick J. Mulqueen and Christian A. Cavallo

Year in Review: Bad Faith December 11, 2018 | Michael E. Longo and Hillary N. Ladov 

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ALI Restatement of Liability Insurance - Gaining Speed or Losing Traction? Tuesday, June 11, 2019 | 12 p.m. ET | 9 a.m. PT | Albert K. Alikin

Trigger of Excess and Umbrella Insurance Coverage November 20, 2018 | Larry D. Mason

Stay on top of the latest regulations, trends, and court cases impacting the insurance industry by reading and subscribing to our blog: www.insurerereport.com DON’T MISS OUT! Contact us at gsclientrelationsteam@goldbergsegalla.com to learn more and to: REGISTER for upcoming sessions, REQUEST a customized webinar or in-house training for your company, Reading thealldigital version and of Professional Liability Magazine? Click each webinar to register! and ACCESS past recordings valuable handouts summarizing key webinar points.

LIKE WHAT YOU HEAR, AND WANT TO TAKE IT TO THE NEXT LEVEL? We can expand our webinars into free, in-depth programs that qualify for CE/CLE credit, or explore other topics ranging from basic legal concepts to the most sophisticated issues in this practice area. We are ready to custom-design in-house Attorney Advertising. For informational purposes only. ©2019 Goldberg Segalla. www.goldbergsegalla.com CE/CLE presentations and workshops that suit your company’s educational interests.

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Asbestos Case Tracker asbestoscasetracker.com

Goldberg Segalla offers free, interactive webinars that explore practical implications of legal trends and developments across a range of practice areas. Learn more and register at:

Data Privacy and Security dataprivacyblog.com Environmental Law Monitor environmentallawmonitor.com The Insurance and Reinsurance Report insurerereport.com Life Science Matters druganddeviceblog.com OSHA: Legal Developments and Defense Strategies osharegulationsblog.com Professional Liability Matters professionalliabilitymatters.com Sports and Entertainment Law Insider sportslawinsider.com

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PODCAST Timely Notice Your on-the-go source for sharp takes and expert analysis of the latest trends, breaking news, and sea-changes in global insurance law and the insurance marketplace.

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Spring 2019 | 19

Different. Because it makes a difference.

Our firm began with seven attorneys, one vision, and enough spare wood and sawhorses to build the makeshift desks where the firm was born. Today, Goldberg Segalla is an AmLaw 200 firm — and one of the fastest organically growing law firms headquartered in the U.S., with over 400 accomplished attorneys practicing at the forefront of a wide range of fields, from commercial litigation and transactions to employment and labor, construction, cybersecurity, professional liability, retail, sports and entertainment, and more. Most importantly, we’ve never wavered in our commitment to our founding principles of collaboration, professionalism, diversity, and creative client-driven service.

www.goldbergsegalla.com © 2019 Goldberg Segalla. Attorney advertising. The contents of this document are for general informational purposes only. Nothing in this document constitutes legal advice or gives rise to an attorney-client relationship. Readers should not act upon this information without seeking professional counsel.