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Swartz Campbell LLC

November 2007

SUPREME COURT TO ADDRESS ATTORNEY-CLIENT PRIVILEGE

In Nationwide Mutual Insurance Company v. Fleming, 2007 Pa Super. 145, 924 A.2d 1259 (2007), the Supreme Court has granted Nationwide’s Petition for Permission to Appeal to address the scope of the attorney-client privilege with respect to communications between a corporate client and in-house counsel. This case concerns a lawsuit brought by Nationwide against former insurance agents for allegedly violating an agency agreement. During discovery, Nationwide identified Document No. 529 which discussed strategies for responding to agency defections. The document was sent from Nationwide’s general counsel’s office to fifteen of its officers, managers, and attorneys. Nationwide argued that the document was protected under attorney-client privilege and redacted its entire substantive text. In response, the agents argued that this document was not protected by attorney-client privilege and that even so, Nationwide had waived privilege when it produced other documents on the same topic. The Superior Court determined that Document 529 was not protected by attorney-client privilege. The Court explained that such privilege extended only to confidential communications by a client to an attorney for purposes of obtaining legal advice and did not protect a document consisting of confidential facts previously communicated by a client. Although the Superior Court has issued several opinions regarding attorney-client privilege with respect to in-house counsel, this case will provide the Pennsylvania Supreme Court with the first opportunity to address this important issue. Click here for a copy of the Superior Court Opinion.

STATUTE OF LIMITATIONS BEGINS TO RUN WHEN DUTY BREACHED

In Wachovia Bank, N.A. v. Ferreti, 2007 Pa. Super LEXIS 3546 (October 25, 2007), the Superior Court held that the trigger for the accrual of a legal malpractice claim, for purposes of determining the appropriate statute of limitations, is not the realization of the actual loss, but the occurrence of a breach of duty. The underlying legal malpractice claim arose when the defendant failed to have a judgment marked satisfied. The lendee, against whom the judgment had been entered, sued the predecessor in interest after he had trouble getting credit due to the judgment not being marked as satisfied. The Superior Court agreed with the lower court that the statute of limitations in a legal malpractice claim begins to run when the attorney breaches his or her duty, and is tolled only when the client is unable to discover the injury or its cause. Click here for a full copy of the decision.

HOUSEHOLD EXCLUSION UPHELD

In Nationwide Mutual Insurance Company v. Roth, 2007 U.S. App. LEXIS 25390 (October 25, 2007), the Third Circuit Court of Appeals held that the household exclusion barred recovery of underinsured motorist benefits. In that case, the claimant sustained injury while riding his motorcycle which was insured by Nationwide. After recovery of UIM benefits under his motorcycle policy, the claimant sought additional UIM benefits under his personal auto policy also issued by Nationwide. The claimant challenged the validity of the household exclusion, citing the rationale of Craley v. State Farm. The claimant argued that the requirements of a knowing waiver of stacking as enunciated in Craley applied to the household exclusion. The Third Circuit, in an important decision, rejected this argument. A Petition to Convert the Opinion from Not Precedential to Precedential is pending. In finding in favor of the insurer, the Court favorably cited the Superior Court of Pennsylvania decision in Alderson v. Nationwide. Both Roth and Alderson were handled by Swartz Campbell attorneys. Click here for a copy of the Roth decision.

EXPERT NOT REQUIRED TO USE WORDS “REASONABLE DEGREE OF MEDICAL CERTAINTY”

In Vicari v. Spiegel, 2007 Pa. Super LEXIS 3534 (October 18, 2007), the Superior Court held that an expert’s opinion will not be deemed deficient merely because the witness failed to expressly use the specific words, “reasonable degree of medical certainty.” During his testimony, the plaintiff’s medical expert did not specifically state that his testimony was based upon a “reasonable degree of medical certainty.” Thereafter, the trial court struck the testimony of the expert and granted the defendant’s motion for nonsuit. The Superior Court reversed the lower court, holding that an expert need not use the specific words, “reasonable degree of medical certainty” when rendering expert medical testimony. Click here for a full copy of the decision.

FREDERICK C. FLETCHER, II TO RECEIVE AWARD FOR VISIONARY SERVICE

Fredrick C. Fletcher, II, a partner in the Philadelphia office, has been selected by the Association of Delaware Valley Independent Schools to receive the Award for Visionary Service for his accomplishments as a Trustee of the Shipley School. The Award for Visionary Service was initiated in 2001 and each year recognizes one individual’s extraordinary gifts of time, commitment, expertise or financial support to one of the member schools of the Association of Delaware Valley Independent Schools. Mr. Fletcher served on the Board of Trustees of the Shipley School from 1991 through 1997 and as Chairman from 1997 through 1999. He is currently a Trustee Emeritus.

SUPREME COURT TO HEAR “DOUBLE DIP” CASE

In Tannenbaum v. Nationwide Mutual Insurance Company, 292 MAL 2007 (October 17, 2007), the Pennsylvania Supreme Court agreed to hear a case involving the right to plead, prove and recover items of income loss under the Pennsylvania Motor Vehicle Financial Responsibility Law, 75 Pa.C.S.A. §1701 et seq. In that case, the plaintiff sought to recover work loss as damages in his underinsured motorist claim even though his disability insurer had paid the plaintiff for the loss. The insurer argued that §1722 of the Motor Vehicle Financial Responsibility Law precluded such a “double dip.” The Supreme Court agreed to hear the appeal, certifying the following questions:

Did the Superior Court ignore the mandates of the Legislature judicially repealing §1722 of the MVFRL thereby reinstituting double recovery and the collateral source rule in the system of automobile accident litigation in Pennsylvania?
Did the Superior Court depart from judicial precedent and ignore prior decisions by this Supreme Court by allowing a claimant to recover the same damages twice under the MVFRL?

Swartz Campbell attorneys are co-counsel for the insurer. Click here for a copy of the Supreme Court order.

PHYSICAL CONDITION NOT COVERED BY TITLE INSURANCE

In Rood v. Commonwealth Land Title Insurance Company, 2007 Pa. Super. LEXIS 3533 (October 18, 2007), the Superior Court held that the insured was not entitled to coverage because an abandoned septic tank on his property did not constitute a “defect, lien or encumbrance” affecting title to the property. The insured purchased the property on August 6, 1970 and received a title insurance policy from the insurer. In April 2005, a sink hole occurred on the front portion of the insured’s neighbor. The sink hole was caused by an abandoned septic tank on the neighbor’s property. Upon inquiring, the insured learned that there was also an abandoned septic tank on his property. The Superior Court agreed with the lower court that title insurance is designed to protect the insured from any loss arising through defects, liens or encumbrances that may be in existence, affecting the title when the policy is issued and that the septic tank was a physical condition of the property and not related to the title. Click here for a full copy of the decision.

FEDERAL COURT DECLINES TO HEAR UIM COVERAGE DISPUTE

In Kuckla v. Farmers Insurance Group of Companies, No. 3:07cv1968 (M.D. Pa. October 31, 2007), the United States District Court for the Middle District of Pennsylvania declined to exercise jurisdiction over a declaratory judgment action, noting that jurisdiction over such a matter was discretionary. This case involved an underinsured motorist (UIM) coverage issue. The plaintiff was involved in an accident with an underinsured motorist. At that time, the defendant insurer provided coverage for four vehicles owned by the plaintiff’s father, in addition to insuring the plaintiff’s car that was involved in the accident. The plaintiff sought stacked UIM benefits under her father’s policy. The defendant declined payment of such benefits, stating that they were precluded under the policy’s family car exclusion. As a result, the plaintiff filed an action for declaratory judgment in state court which the defendant removed to the Middle District based on diversity jurisdiction. Although the Court acknowledged that they had jurisdiction over this matter, they declined to hear the case stating that the matter is one of contract interpretation under Pennsylvania law. The Court explained that “No unique questions of federal law exist and this court’s expertise is not necessary for a just outcome in the case.” Click here for a copy of the Opinion.

CURTIS P. CHEYNEY, III TEACHES SEMINAR IN RUSSIA

Curtis P. Cheyney, III, a partner in the Philadelphia office, was selected by the Center for International Legal Studies, after a rigorous application and interview process, to be a visiting Professor of Law at Herzen State University in St. Petersburg, Russia. Mr. Cheyney taught a two week seminar covering an impressive range of legal topics including U.S. business history, the Constitution, business entrepreneurship and the lawyer’s role in business matters. His seminar included discussion and analysis of bankruptcy law, debtor’s law, and corporate law, which was especially poignant given that the majority of the students enrolled in his course were studying for their Masters in Business. Outside of teaching his seminars, Mr. Cheyney and his wife, Barbara, had the opportunity to visit many culturally significant sights around St. Petersburg, accompanied by students from the seminar.

ALTERNATIVE PLEADING UPHELD

In Schwartz v. Rockey, 35 WAP 2006, 932 A.2d 885(October 17, 2007), the Supreme Court of Pennsylvania held that the plaintiffs were not foreclosed from amending their Complaint, which sought contract based damages, to include an inconsistent equitable remedy. The plaintiffs purchased a home from the defendants who did not disclose that the property often experienced substantial water infiltration. Upon discovery, the plaintiffs instituted an action alleging common law fraud and violations of the Unfair Trade Practices and Consumer Protection Law (UTCPCL) and requested monetary damages. Sometime thereafter, the plaintiffs sought to amend their complaint to include the equitable remedy of contract rescission. The Supreme Court determined that a prayer for relief seeking contract based damages did not foreclose amendment for equitable relief when (1) it was alleged that the plaintiffs lacked knowledge of material facts upon which the contract was based; and (2) the opposing party did not demonstrate detrimental reliance on the initial requested relief. Click here for a copy of the Opinion; Click here for a concurring/dissenting Opinion.

PROPER NOTICE REQUIRED TO ENTER JUDGMENT OF NON PROS

In Mumma v. Boswell, Tintner, Piccola & Wickersham, 2007 Pa. Super. LEXIS 3589 (October 30, 2007), the Superior Court held that the Prothonotary must provide notice of the entry of a judgment of non pros for failure to file a certificate of merit otherwise the judgment will not be considered officially recorded on the docket and therefore defective. The defendants praeciped for entry of a judgment of non pros pursuant to Pa.R.C.P. 1042.6 because the plaintiff failed to file a certificate of merit within 60 days of the filing of his professional negligence complaint. The Prothonotary subsequently entered judgment in favor of the defendants. The record did not indicate that the Prothonotary sent the plaintiff notice of the actual entry of the judgment in favor of the defendants. The Superior Court reversed the trial court, finding that because the Prothonotary failed to provide such notice as required by Rule 236, the judgment against the plaintiff was not officially recorded and thus defective. Click here for a full copy of the decision.

PROVIDER NOT REQURED TO INDEMNIFY MANUFACTURER

In Ocean Spray Cranberries, Inc. v. Refrigerated Food Distributors, Inc., 2007 Pa. Super LEXIS 3501 (October 15, 2007), the Superior Court held that the Factor Agreement between the provider and the manufacturer did not require the provider to indemnify the manufacturer for its own negligence. The provider installed the manufacturer’s equipment in a warehouse and the equipment later broke free of its restraints and caused damage to the facility and the spoiling of certain food products. Following a jury trial, the jury assigned 75% of the responsibility to the manufacturer and 24.995% to the provider. The Superior Court agreed with the lower court that the provider was not obligated to indemnify the manufacturer for its own negligence under circumstances where the provider was found to have negligently installed the manufacturer’s system. Click here for a full copy of the decision.

DPW ISSUES NEW REGULATIONS FOR REIMBURSEMENT

In 37 Pa.B. 4881, the Department of Public Welfare (DPW) issued new regulations effective November 8, 2007 for how the agency will seek reimbursement of medical assistance (MA) payments from moneys owed to MA recipients from third party tort recoveries. These regulations were issued as a result of the recent United States Supreme Court decision in Arkansas Department of Health and Human Services v. Ahlborn, 547 U.S. 268, 126 S. Ct. 1752 (2006). In Ahlborn, the United States Supreme Court invalidated the federal Medicaid policy that permitted states to recover the entire amount of a tort recovery, concluding that states could only assert claims for the portion of the award that represented the assigned rights to payment for medical care. Although Pennsylvania DPW asserts that its previous policy was consistent with Ahlborn, the new regulations clarify DPW’s procedures from collecting reimbursement for medical payments as well as the recipient’s responsibilities to notify DPW of their third party claim and facilitate reimbursement. Click here for a copy of the regulations. Click here for a copy of the Ahlborn decision.

INSURED ENTITLED TO BENEFITS FOR CRIMINAL RESTITUTION

In Brethern Mutual Insurance Company v. McKernan, 2007 Pa. Super. LEXIS 3591 (November 1, 2007), the Superior Court held that insurance coverage applied to court ordered criminal restitution. In the underlying tort action, the insured swung a knife at her boyfriend intending to frighten him but instead struck and killed him. The insured then sought to recover for the boyfriend’s funeral expenses under her homeowner’s policy which she was required to pay as part of the court’s restitution order. The Superior Court held that the statute governing restitution did not apply to the present facts and the language of the insurance policy applied. Click here for a full copy of the decision.

PUBLIC UTILITIES NOT INCLUDED IN EXCEPTION TO ECONOMIC LOSS RULE

In Excavation Technologies, Inc. v. Columbia Gas Company of Pennsylvania, 2007 Pa. Super. LEXIS 3845 (November 7, 2007), the Superior Court held that public utilities do not fall within the exception to the economic loss rule set forth in Section 552 of the Restatement (Second) of Torts, as adopted by the Pennsylvania Supreme Court in Bilt-Rite Contractors, inc. v. Architectural Studio, 581 Pa 454, 866 A.2d 270 (2005). Excavation Technologies was performing excavation work and pursuant to the One Call Act requested Columbia mark any gas lines in the vicinity of various excavation sites. Columbia allegedly marked the lines improperly. As a result, Excavation Technologies struck gas lines on eleven occasions resulting in purely economic damages. Excavation Technologies sought recovery for the economic damages under a negligent misrepresentation theory based upon Columbia’s failure to comply with its obligations under the One Call Act. The Superior Court found that Columbia, a public utility, is not akin to the professional information provider contemplated in Bilt-Rite. Click here for a copy of the decision.

ADDITION OF PA.R.C.P. 4003.8 EFFECTIVE

On November 1, 2007, the Supreme Court made effective Pa.R.C.P. 4003.8, a new rule regarding pre-complaint discovery. Under this Rule, a plaintiff may obtain pre-complaint discovery if they can show that: (1) the information is necessary and material to the filing of a complaint; and (2) “the discovery will not cause unreasonable annoyance, embarrassment, oppression, burden or expense to any person or party.” In response, the defendant may file a motion for a protective order forcing the plaintiffs to explain to the Court with particularity their reasons for requiring such materials prior to instituting their action. In the explanatory comment, the Pennsylvania Civil Procedural Rules Committee stated that such a Rule is necessary as the current case law regarding pre-complaint discovery has not developed a general rule of application resulting in inconsistencies. Click here for a copy of Pa.R.C.P. 4003.8.

ADDITIONS TO RULES REGARDING CERTIFICATE OF MERIT PROPOSED

In Proposed Recommendation No. 227, the Pennsylvania Civil Procedural Rules Committee has proposed an amendment to Pa.R.C.P. 1042.1 et seq which governs the filing of a certificate of merit in professional liability actions. Recommendation No. 227 proposes several changes which will make it more difficult for the defendants to receive a judgment of non pros when the plaintiff has failed to file the requisite certificate. Under new Rule 1042.6, a defendant must first file a notice of intention to file for non pros based on the lack of a certificate of merit. Then, the plaintiff must motion for the court to determine if such a certificate is necessary. A judgment of non pros can not be entered until this motion is determined. The proposed changes also expands the types of claims which require a certificate of merit. A certificate must now be filed in actions against the entity which is responsible for the licensed professional who has allegedly deviated from an acceptable professional standard and in actions based on lack of informed consent. All comments concerning the proposed recommendation were due to the Committee by November 8, 2007. The proposed change will then be sent to the Supreme Court for approval. Click here for a copy of the Proposed Recommendation.

CHANGE TO PA.R.C.P. 1311.11 PROPOSED

In Proposed Recommendation No. 229, the Pennsylvania Civil Procedural Rules Committee has proposed an amendment to Pa.R.C.P. 1311.11 which governs the admission of documentary evidence in an appeal from compulsory arbitration. In Pa.R.C.P. 1311.11, the plaintiff may stipulate to $25,000.00 as the maximum amount of damages recoverable at trial following an appeal from compulsory arbitration. This recommendation clarifies that such a stipulation must be filed within thirty days after the plaintiff has filed their appeal. In the explanatory comment, the Pennsylvania Civil Procedural Rules Committee explained that this change will help avoid confusion as to how the time period for filing such a stipulation should be calculated. All comments concerning the proposed recommendation were due to the Committee by November 8, 2007. The proposed change will then be sent to the Supreme Court for approval. Click here for a copy of the Proposed Recommendation.

STUDY ON DISC INJURIES REVEALS WAITING TO HAVE SURGERY NOT DETRIMENTAL

In a study published by the Journal of American Medical Association, researchers have concluded that people with lower back disc herniation will recover regardless of whether they have surgery. Prior to this study, patients were often told that if they waited to have surgery they may risk permanent nerve damage. This study contradicts this theory. The study entitled “Spine Patient Outcomes Research Trial” tracked patients at thirteen spine clinics in eleven states. The participants were placed into two groups, surgical and nonoperative care (physical therapy, anti-inflammatory drugs, and counseling). The researchers determined that although surgery may alleviate a patient’s pain more quickly, the patient would not be harmed if they chose to continue with nonoperative care in efforts to avoid surgery. After two years, seventy percent of the patients in both groups had experienced “major improvement” in their symptoms and none of the participants who declined surgery had serious consequences. However, at least one researcher, Dr. Flum, has criticized the study’s methodology. He explained that although patients were placed into two groups, patients could switch groups at their discretion, thereby muddying the study’s results. Thus a more controlled study is necessary to determine whether surgery or nonoperative care is the clear winner for treatment of lumbar disk disorders. Click here for a copy of the study and associated articles.

e-Update and Sidebar have been designed by Swartz Campbell LLC to review developments in defense-related legislation, relevant and significant cases and court decisions, and any other information that may be of interest to clients and friends of Swartz Campbell. The information contained herein should not be construed as legal advice or opinion, and is not a substitute for the advice of counsel.

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