Liability

Plaintiff Charles Romeo (“Romeo”) slipped and fell at Defendant Harrah’s Atlantic City casino on March 19, 2011. Video surveillance showed that a patron spilled a liquid beverage on a common walkway at 7:03 pm. Four minutes later, the video showed Romeo slipping on the liquid and falling. In Romeo v. Harrah’s Atlantic City Propco, LLC, 2016 U.S. Dist. LEXIS 31457 (D.N.J. March 10, 2016), Romeo sued for his injuries. Harrah’s claimed that it should not be liable because it had no actual or constructive notice of the dangerous condition alleged to have caused the fall.

Harrah’s has an in house cleaning service called EVS. EVS is responsible for cleaning the public areas of the casino and has employees throughout the casino. The area where plaintiff fell is inspected every 30 to 40 minutes. Given the time in between inspections by EVS and the short window of time in between the spill and Romeo’s fall, Harrah’s argued that it did not have constructive notice of the dangerous condition.

Plaintiff argued that the mode of operation doctrine should apply, relieving the plaintiff of having to prove either actual or constructive notice. Plaintiff contended that Harrah’s drink service is an integral part of its mode of operation. It has several vending machines near the common walkway and patrons are provided with free drinks and bottles of water.

Harrah’s did not dispute that it supplies beverages in self-service style to casino patrons, including bottled water. However, there was no proof in the record that the spilt liquid came from Harrah’s beverage service. The video did not establish the identity of the person who spilled the beverage and, thus, it cannot be determined whether or not he got the beverage from Harrah’s.

Applying the New Jersey Supreme Court’s case of Prioleau v. Kentucky Fried Chicken, 223 N.J. 245 (2015), the District Court found that the mode of operation doctrine did not apply. Pursuant to Prioleau, for this doctrine to apply, the plaintiff must establish a nexus between the defendant’s self-service operation and the spill. Here, the court found that the plaintiff was unable to establish such a nexus and, hence, this doctrine did not apply.

That was the good news for Harrah’s. The bad news is that the Court nevertheless found that a jury question existed as to whether Harrah’s had constructive notice of the spill. Thus, it denied summary judgment to Harrah’s.

The court stated that constructive notice exists when “a particular condition existed for such a length of time as reasonably to have resulted in knowledge of the condition, had the owner… been reasonably diligent.” An owner breaches his duty to maintain his premises in a safe condition if he has either actual notice of the condition or “if the condition existed for such a length of time that the owner should have known of the condition and fails to remediate the problem.”

The court pointed out that whether a breach occurred is generally a jury question. There was no evidence that Harrah’s had actual notice of the spill. However, here, the video showed a casino supervisor walking in the general area of the existing spill, lingering for a moment, and then leaving the area. The defendant’s corporate designee testified that every casino employee is tasked with identifying hazards. Thus, even though the spill only existed for four minutes, the court found that this situation created a jury question as to whether Harrah’s had constructive notice of the spill.

This case is somewhat distressing to defendant business owners, in that a court could find that a spill that only existed for four minutes could be sufficient to establish constructive notice, if an employee is in the area of the spill while it is on the floor. However, it demonstrates the importance for business owners to be vigilant in maintaining their premises and the need to train employees to observe and clean up promptly any spills or debris discovered in the public areas of their premises.

Notice provisions are common clauses in insurance policies, whereby the insured is required to provide timely notice of the claim as a condition to obtaining coverage under the policy. The courts in New Jersey, however, interpret this notice clause differently, depending upon whether the policy is an occurrence or a claims made policy. In Templo Fuente De Vida Corp. v. National Union Fire Insurance Co., 2016 N.J. LEXIS 144 (2016), the New Jersey Supreme Court dealt with the interpretation of this clause in the context of a claims made policy.

The issue in this case was whether, to disclaim coverage for a claims made policy, an insurance company must show that it was prejudiced by the insured’s failure to provide timely notice. The policy in question was a Directors and Officers policy.

The underlying claim involved a failure of the defendant insured to provide funding to the plaintiff to purchase property. The plaintiff Templo Fuente De Vida Corp. (“Templo”) had engaged the Morris Mortgage Inc. (“MMI”) to find funding sources for the purchase of the property. MMI identified Merl Financial Group, Inc. (“Merl) as a possible funding source. Despite several commitments from Merl, when the final closing date arrived, Merl was unable to fund the purchase and the sellers of the property terminated the sales agreement with the plaintiff. Templo then sued Merl for its losses due to the terminated agreement. Claims were made for breach of contract, unjust enrichment, negligence, professional malpractice, as well as other claims.

Sometime prior to the filing of the complaint, Merl was restructured and renamed First Independent Financial Group (“First Independent”). First Independent Group purchased a $1 million Directors, Officers, and Private Company Liability Insurance policy from National Union Fire Insurance Company (“National Union).  This policy was a claims made policy which required that, as a condition precedent to coverage, the insured must give written notice to the insurer of any claim against an insured “as soon as practicable” during the policy period.

However, the insured did not notify National Union for 6 months after suit was filed. Instead, it retained counsel, filed an answer and later provided notice. The carrier disclaimed due to the failure to comply with the notice provision in the policy.

Thereafter, the insured settled the claim for $3 million, agreed to pay a portion of the settlement, and assigned its rights under its policy to the plaintiff to pursue the carrier for the balance of the settlement. The plaintiff then commenced this declaratory judgment action against National Union.

It was undisputed that the insured failed to give notice of the claim until 6 months after it was sued, which violated the notice provision. The insured was unable to provide any explanation as to the cause of the delay.  Case law is clear that a 6 month delay violated the “as soon as practicable” notice requirement. Thus, the issue was whether the carrier also had to show it was prejudiced by the delay.

In making its determination, the Court distinguished between occurrence versus claims made policies. For an “occurrence” policy, it is the “occurrence” of the peril that is insured. As long as that peril occurred during the life of the policy, coverage attaches. However, for a “claims made” policy, it is the making of the claim which is the event and peril being insured, regardless of when the occurrence took place.

Automobile and homeowners policies are examples of typical occurrence policies. Claims made policies are typically issued for professional negligence claims. While both types of policies have notice provisions, the rationale for these provisions differ between these types of policies. For an occurrence policy, notice is required to permit the carrier to be able to promptly investigate, settle, and defend the claims. However, for a claims made policy, notice during the policy period is required to provide a fixed date after which the insurance company no longer has any liability. Thus, the purpose of the notice provision in the claims made policy is to fix the risk for the carrier.

In addition to the difference in the reason for the notice provisions in these types of policies, the Supreme Court also pointed out that occurrence policies are usually a contract of adhesion entered into by parties with unequal bargaining powers. In the vast majority of occurrence policies, the insureds are unsophisticated consumers who are unaware of the policy’s requirements. As a result, they are strictly construed against the carrier. Hence, the courts have held that for a carrier to disclaim based upon a violation of the notice provision in an occurrence policy, they must show “appreciable prejudice” due to the delay in providing notice.

On the other hand, claims made policies are usually with knowledgeable insureds, purchasing insurance through sophisticated brokers. They deal with insurers on a more equal footing. Prior case law has not imposed an obligation upon insurers to show prejudice when the notice provision has been violated.

The Court found that the notice provision in the National Union policy was clear and unambiguous, requiring that the insured report a claim to the insurer “as soon as practicable.” By failing to provide prompt notice, First Independent violated a condition precedent of timely notice to National Union. The Court found no public policy reason to expand this provision to include a requirement that the carrier had to show that it was prejudiced by this delay as well. Hence, National Union’s disclaimer of coverage was upheld by the Court.

​Plaintiff Ranjani Vaidyanathan was injured in an automobile accident on April 29, 2012 when the driver Joaquin Martinez (“Joaquin”) rear ended her vehicle. At the time, he was driving a vehicle owned by Venessa Martinez. He was very intoxicated, with his blood alcohol level tested at .31%, well past the legal limit. In the Law Division case, Vaidyanathan v. Martinez, 2016 N.J. Super. Unpub. LEXIS 128 (Law Div. Jan. 22, 2016), the issue was whether Joaquin was acting as Venessa’s agent at the time and, hence, making her liable for his actions.

Venessa had lent Joaquin her vehicle to go pick up her daughter at Venessa’s father’s house in Hillside and bring her back to Venessa’s house in Newark. At the time she lent her vehicle to Joaquin, she was unaware that he had consumed a 16 ounce pina colada. On the way to Venessa’s father’s house, Joaquin stopped off at a liquor store and consumed enough scotch to make him so intoxicated that Venessa’s father would not permit Joaquin to drive with her daughter in her car.

​Joaquin left Hillside without Venessa’s daughter and en route to Newark, he rear ended plaintiff’s vehicle.

​Plaintiff sued Venessa, claiming that Joaquin was acting as her agent to the extent he was performing a task for her. Vanessa argued that she should not be liable for Joaquin’s injuries because he exceeded the scope of his authority when he obtained a bottle of scotch and became too intoxicated to bring her daughter back to Newark. Thus, the issue to be decided by the court was the scope of the authority Venessa granted Joaquin and whether he exceeded the scope of that authority.

​The court noted that, in New Jersey, when a vehicle is operated on a highway by someone other than the vehicle’s owner, there is a rebuttable presumption that the driver is acting as the owner’s agent. However, if the owner can produce evidence that the driver was acting outside the scope of their authority, the claim against the owner should be dismissed. An agency relationship may be terminated when the agent takes on an errand of their own and goes beyond the instructions of the vehicle’s owner.

​Here, Venessa’s grant of authority to Joaquin was limited to driving to Hillside, retrieving her daughter, and returning her to Newark. When Joaquin, instead drove to a liquor store to purchase scotch and become too intoxicated to return her daughter to Newark, he exceeded the scope of that authority and he failed to accomplish her errand. Thus, his actions in buying and consuming the scotch terminated the agency relationship.

​Accordingly, Venessa produced sufficient evidence to rebut the presumption of agency created by Joaquin in operating her vehicle. Thus, he was found not to be acting as Venessa’s agent. The trial court held that Venessa was entitled to a judgment in her favor, dismissing the complaint as to her.

Plaintiff Jerome White was shot during third party defendant Walter Gleaton’s attempt to kill a passenger in plaintiff’s vehicle while on the premises of defendant Shan’s gas station in Trenton. As a result of the shooting, Plaintiff suffered a fracture to his thoracic vertebrae and became a paraplegic. In White v. Getty Petroleum Marketing, Inc., 2016 N.J. Super. Unpub. LEXIS 136 (App. Div. Jan. 25, 2016), plaintiff sued Shan, claiming he was negligent for not providing adequate security to prevent and deter criminal acts.

The incident occurred at 2:19 am at defendant Shan’s Getty gas station. Plaintiff drove his vehicle to the gas station, in which the passenger Parker (Gleaton’s intended victim) was seated in the front passenger seat of White’s vehicle. Seconds after their arrival, Gleaton approached the passenger side of the vehicle and, after Parker told Gleaton to get away in no uncertain terms, Gleaton shot plaintiff in the chest and Parker in the neck and ear. Apparently, this shooting was gang related.

Shan argued that he owed no duty of care to the plaintiff and that the intentional shooting was an intervening superseding cause of plaintiff’s injuries. He further argued that the shooting was not foreseeable because the evidence did not demonstrate any pattern of violent criminal activity that occurred at the gas station.

The plaintiff retained an expert who opined that the defendant breached a duty to the plaintiff by failing to provide adequate security for customers. The expert relied on the gas station’s location in Trenton, a known high crime area containing gangs.

The defendant filed a motion for summary judgement, requesting a dismissal. The judge noted the lack of evidence showing any violent crimes at the gas station for at least three years before the shooting. Also, due to the history of hostility between Gleaton and Parker, as well as the shooting having occurred within seconds of their contact, the trial court judge found that the events constituted a superseding cause. Further, even though the gas station was in a high crime area, because plaintiff failed to present any evidence that this criminal conduct should have been anticipated by a property owner, the judge found that no duty existed to protect the plaintiff. As a result, the judge granted summary judgment, dismissing the case.

On appeal, the court pointed out that whether a duty of care is owed by a landowner to an injured plaintiff depends upon the foreseeability of a defendant’s conduct under a totality of the circumstances. Business owners are not generally responsible for the criminal acts of others. A duty will not be imposed, even in a high crime area, unless there is evidence of prior, similar incidents or, if there were no prior criminal acts on the premises, but the owner was aware of prior criminal activity in the neighborhood.

In circumstances involving gang violence and shootings, the courts have looked to the business or property owner’s experience and knowledge dealing with violent crimes. Here, the evidence failed to establish a pattern of criminal activity transpiring on the gas station’s premises or any incidents of violent crime that would have lead the defendant to foresee an attempted execution taking place at his gas station. The plaintiff could not dispute that the type of crimes occurring in the immediate area were not similar. Non-violent incidents that occurred with the three years before the shooting did not establish a pattern of the type of violent criminal conduct occurring at the gas station.

Hence, the Appellate Division refused to impose a duty upon the defendant gas station owner to prevent this specific attack. Accordingly, it upheld the order granting summary judgment in favor of the defendant Shan.