Dallas Bar Association
HEADNOTES Focus Tort & Insurance Practice
May 2017 Volume 42 Number 5
DBA Hosts Mock Voir Dire
Focus
Tort & Insurance Practice
Insurance Considerations in Tort Cases: Common Pitfalls BY MICHELLE HARTMANN, DAVID SILLERS, AND TIFFANIE N. LIMBRICK
Thank you to the volunteers who helped make the Law Day Committee’s Mock Voir Dire a success. Held at the George Allen Courthouse on April 7 for more than 200 Dallas ISD students, the event addressed the 14th Amendment. Special thanks to event organizers Law in the Schools & Community Co-Chairs Katie Anderson and Sean Whyte, and Judge Martin Hoffman. The opening panel consisted of (left to right): DBA President Rob Crain, Hon. Martin Hoffman, Katie Anderson, Dominique Sims, and Prof. Dale Carpenter.
Focus
Tort & Insurance Practice
Alexa, Will You Testify Against Me? BY JOHN G. BROWNING
Americans are more “connected” than ever- at least to the Internet. A 2015 study by Deloitte revealed that collectively we look at our smartphones around 8 billion times per day; when accounting for all age groups, that translates to about 46 times per day, per person. And the number of web-enabled devices is projected to almost triple in the next few years, from 13.4 billion in 2015 to 38.5 billion by 2020. Consumers are filling their homes with everything from “smart” kettles and refrigerators to interconnected lightbulbs, toothbrushes, baby monitors, and medical devices. But along with the explosive growth of the “Internet of Things” (or IoT) and the unprecedented information-gathering by such devices have come dramatic new concerns about consumer privacy, data security, and the potential uses for such data in litigation. It is already happening, as recent headlines have demonstrated. In February, police in Ohio charged 59-year-old Ross Compton with aggravated arson and insurance fraud after data from his pacemaker was inconsistent with his story about his physical activity when his house burned down. Compton claimed that he had frantically packed some belongings, broken the glass of a bedroom window to get out and scrambled to escape. But a cardiologist reviewed the heart monitor’s data (obtained through a warrant), and concluded that Compton’s account was “highly improbable.” Earlier this year, Arkansas police sought help in
solving a murder from an unusual source: the Amazon Echo, the popular web-connected wireless speaker that, upon voice command, can provide music and information on a variety of topics. As users know, “Alexa” is always listening through 7 built-in microphones, and when a voice command is made it also records under 60 seconds of sound from its surroundings (streaming this audio into the cloud)—including a fraction of a second before its “wake word.” Prosecutors sought this data to aid in their case against Andrew Bates, who was charged with first-degree murder after his friend Victor Collins was found strangled and drowned in Bates’ hot tub. They believed that Bates’ Amazon Echo may have recorded incriminating audio, such as the sounds of an argument or struggle; Amazon, however, has resisted turning over the data, citing user privacy. Wearable technology, including activity/fitness trackers like Fitbit or Apple’s “smartwatch,” has also helped usher in the IoT revolution. Devices like the Fitbit, Jawbone, or Nike Fuelband monitor and store a whole host of data about one’s physical condition, location, heart rate, exertion level, and even sleep patterns. This digital trove of insight into the health and lifestyle of the device’s wearer can have considerable value for enterprising attorneys in virtually any kind of case in which an individual’s physical condition might be relevant. In late 2014, a Canadian personal injury case demonstrated this fact when the attorney for the plaintiff continued on page 16
In tort suits, especially those involving multiple parties with indemnity and cross-indemnity obligations, it is important for counsel to understand— at the outset of the matter—the coverage that a client may have. Choices made at the beginning of a case can be critical to the eventual outcome—and who pays for it. To avoid some common pitfalls when handling your next tort suit, bear the following in mind: Know Your Client’s Insurance Tower. Although not a pitfall per se, it is important to have an understanding of your client’s insurance tower—including the levels of liability insurance and what each level covers. Knowing these facts at the beginning of a case can guide case strategy and how to approach both offers of settlement and settlement. For example, your client may be motivated to settle below a particular dollar amount so that it stays within a particular level in its insurance tower. And, particularly when the case involves a Stowers demand from the opposing side, it is important to keep insurers from all relevant tower levels involved in early offers of settlement. Multi-Defendant Suits: Right to Indemnification vs. the Duty to Defend. In the typical multi-defendant tort suit, your client may find itself with a duty to indemnify other parties involved, as well as a duty to defend those parties. Those duties are separate under Texas law. • The duty to defend is a contractual right that often includes the authority to select the attorney who will defend the claim and to make other decisions that would normally be vested in the insured as the named party in the case. • The duty to indemnify arises at the end of the suit after liability is actually established. The courts have held there is no justiciable controversy regarding the insurer’s duty to indemnify before a judgment has been rendered against an insured. • One pitfall to keep in mind is the potential for a conflict of interest between the insurer and insured if the insurer reserves the right to deny the indemnity claim. If the facts used to potentially dispute coverage are the same as in the underlying lawsuit, a conflict may exist and the insurer may have more limited rights in terms of guiding the defense or selecting counsel.
Anti-Indemnity Statutes. Whether in the role of indemnitor or indemnitee, it is important to know whether an antiindemnity statute applies that may limit whether there is a duty to indemnify. For example, the Texas Oilfield AntiIndemnity Act prohibits indemnification of a negligent indemnitee, with only very specific exceptions. When analyzing indemnification obligations in any field of the law, it is sensible to check for requirements to enforce indemnification agreements under applicable anti-indemnity laws. Also be mindful of complex conflicts of laws issues that may arise if different states’ laws are implicated. Workers’ Compensation Insurance. If there is a physical injury involved, you may have to consider multiple sources of insurance, including workers’ compensation insurance and liability insurance. Consider whether value can be created for your client by understanding that, in some situations, a workers’ compensation claimant may be willing to adjust his or her demands based on whether the settlement will also affect current or future credit for workers’ compensation benefits. Depending on who funds and/or insures the policies (particularly in the instance of an entity which is self-insured), additional coverage and/or leverage may be discovered. Settlement: Understanding the Stowers Duty. In G.A. Stowers Furniture Co. v. American Indemnity Co., when faced with a set of particularly egregious facts, the Texas Supreme held that insurers are subject to a duty to accept reasonable offers within policy limits. If an insurer violates the duty, you may be able to seek damages for the judgment separate from the contract and in excess of the insurance coverage. A settlement offer typically triggers this duty when (1) the claims are within the scope of coverage, (2) the demand is within policy limits, and (3) the terms of the demand are such that an ordinarily prudent insurer would accept it, considering the likelihood and degree of the insured’s potential exposure to an excess judgment. When presented with such a settlement offer, make sure it fully and completely releases the insured and any indemnitees, including the satisfaction of any HN outstanding liens or obligations. Michelle Hartmann is a Partner at Sidley Austin LLP and can be reached at mhartmann@sidley.com. David Sillers and Tiffanie N. Limbrick are Associates at Sidley Austin LLP and can be reached at dsillers@sidley.com and tlimbrick@sidley.com, respectively.
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