In Lebrio v. Pier Shops at Caesar’s, 2014 N.J. Super. Unpub. LEXIS 2319 (App. Div. Sept. 25, 2014), the plaintiff Karen Lebrio injured her knee and back when she slipped and fell while walking in a common area at The Pier Shops at Caesar’s in Atlantic City. The jury awarded her $427,000 for her injuries. The issue on appeal is whether the trial judge improperly instructed the jury to apply the mode-of-operation doctrine.

The mode-of-operation doctrine is a limited exception to proving notice in a traditional premises liability negligence case. Under this doctrine, when a substantial risk of injury is inherent in a business’s method of doing business, an injured plaintiff is excused from proving that the business had actual or constructive notice of the dangerous condition that caused the injury.

In Lebrio, after the plaintiff fell, she noticed a clear liquid on the floor, as well as a cup, lid, and straw nearby. The plaintiff did not know how long the liquid had been spilled on the floor. The mall sold beverages in their food court and allowed patrons to walk around the mall and drink them in common areas.

The trial judge found that the mode-of-operation should apply because the mall did not restrict the carrying or consumption of food and drink in the common areas of the mall. Further, about 20 feet from where plaintiff fell, there was a large fountain where patrons gathered to watch a water show.

The Appellate Division pointed out that this doctrine does not apply because a defendant operates a certain kind of business. Rather, it applies based upon the business’s method of operation, which is “designed to allow patrons to directly handle merchandise or products without intervention from business employees, and entails an expectation of customer carelessness.”

Here, the plaintiff established that spills regularly occurred on busy holiday weekends at The Pier Shops in common areas as a result of patrons’ unrestricted consumption of beverages. Thus, the Appellate Division found that the jury was appropriately instructed and tasked with the duty to determine if this doctrine applied and upheld the jury verdict.

Melissa Alvarado sued the Blair House, a condominium complex, and its property manager based upon personal injuries she suffered due to the defendants’ alleged failure to provide adequate security while at Blair. One night, she was there to visit her boyfriend at 12:15 am and, while parking her car, was approached by two individuals, Eric Obugyei and Catherine Smith. They persuaded her to drive them to the bus station and, after she drove off the Blair lot, abducted her, and stole her car. In Alvardo v. Blair House, 2014 N.J. Super. Unpub. LEXIS 2106 (App. Div. Aug. 27, 2014), the plaintiff claimed that her injuries could have been prevented had the defendants had better security.

The trial court granted summary judgment as to the defendants and this appeal followed.

Alvarado voluntarily lent Obugyei her cell phone while in the Blair parking lot. She also agreed to drive them to the bus station after they promised to pay her. She unlocked her car and let them into her car. Neither individual did anything threatening to her until they were about a mile from Blair. Then Smith put a wire around plaintiff’s neck, started to choke her, pulled her into the backseat, put a bag over her head, and bound her wrists and ankles. They then drove to the river, made her walk to knee-deep water and, thereafter, drove off with her car.

When the plaintiff was in the parking lot of Blair, there was a camera pointed at the area where she encountered her two abductors. The plaintiff showed that there were 85 prior calls to the police from Blair and claimed that it was “rife” with criminal activity. However, the plaintiff was unable to show, except for a few calls, that they involved the commission of a crime.

The Appellate Division looked at not whether the defendants owed a duty of care but whether they breached that duty. The plaintiff contended that Blair should have had a security guard constantly watching the monitor and, when the individuals approached her, they should have questioned them.

The court found that, based upon the totality of the circumstances, no reasonable jury could infer that the defendants breached their duty of care due to the security guards’ failure to question these individuals. From an objective point of view, it looked like an innocuous encounter among three adults. The abductors showed no outward hostility or aggression towards the plaintiff in the parking lot. There was no suggestion that criminal activity was to occur. Thus, under these facts, the Appellate Division found that the defendants did not breach their duty of care and upheld the dismissal of the case.

Plaintiffs Alfio and Jennifer Leone filed a lawsuit against Lantana Insurance Ltd., relating to their claims for coverage under their Homeowners Insurance policy. They claimed that Lantana wrongfully denied their claim for wind damage to their home incurred during Hurricane Sandy. In Leone v. Lantana Insurance Ltd., 2014 U.S. Dist. LEXIS 121873 (D.Ct. Sept. 2, 2014), they brought suit in federal court for claims of breach of contract, breach of the duty of good faith and fair dealing, and a declaratory judgment. They sought attorneys fees for each count.

The District Court noted that this lawsuit was subject to the American Rule in which “the prevailing litigant is ordinarily not entitled to collect a reasonable attorneys fee from the loser.” There are 3 exceptions to the rule: (1) where counsel fees are permitted by court rule or statute; (2) pursuant to a contract; and (3) where counsel fees are a traditional element of damages in a particular cause of action.

There is a New Jersey court rule, R. 4:42-9(1)(6), which does permit the award of attorneys fees in an action upon a liability or indemnity policy of insurance in favor of a successful claimant. However, the District Court found that New Jersey case law is clear in that this rule does not extend to permit counsel fees to an insured on a direct suit against the insurer to enforce a casualty or other first-party direct coverage.

Here, this lawsuit was based upon a first party property damage claim under their policy. Thus, the rule does not permit the award of attorneys fees. Because the plaintiffs provided no other grounds of statutory authorization, agreement, or other established exception for which they could receive counsel fees, the court dismissed all claims for attorneys fees.

In Marciante v. Huezo, 2014 N.J. Super. Unpub. LEXIS 2281 (App. Div. Sept. 19, 2014), ARI Mutual Insurance Co. (“ARI”) tried to vacate a default entered against its insured more than one year after a default judgment was entered against its insured and three years after the insured was served with the lawsuit. The plaintiff Shannon Marciante was seriously injured in a motor vehicle accident when she was struck by a truck driven by defendant Amado Huezo and owned by Rudery Marcia. Huezo was never served but Marcia was served on June 11, 2010 but never filed an answer to the complaint. Default was entered against him in July 2010 due to his failure to answer.

ARI insured UHU, a company that was supposed to have been leasing the vehicle at the time of the accident from Marcia and learned of the existence of the lawsuit in August 2010 when Great American Insurance Co. (“Great American”), which insured the cab, informed it of the suit. At that time, ARI hired an investigator to try to track down Marcia but was unsuccessful in locating him.

Both insurers initially denied coverage and declined to defend or indemnify Marcia. ARI denied because it was advised that UHU had not been leasing the vehicle at the time of the accident. Great American denied coverage based upon a business use exclusion.

In April 2012, a proof hearing was held and the trial court entered a judgment in the amount of $1.2 million for the plaintiff’s pain and suffering and $7800 for her lost wages. Thereafter, a default judgment was entered solely against Marcia for $1,207,800. While the plaintiff was not able to establish that it served the judgment upon Marcia, it did serve the judgment upon ARI and Great American.

Eight months later, Great American sent to ARI a copy of the lease between UHU and Marcia. That agreement showed that the vehicle had indeed been leased to UHU at the time of the accident. After receiving the lease agreement, ARI changed its position and decided to provide representation to Marcia under a reservation of rights. Although it was not successful in contacting Marcia, ARI hired defense counsel to try to vacate the default judgment.

While the motion was accompanied with a certification from ARI’s claim manager, it was not supported by a certification by Marcia. The trial judge chastised the two insurance companies for not acting sooner and denied the motion to vacate the judgment. This appeal followed.

A motion to vacate a default judgment based upon “mistake, inadvertence, surprise, or excusable neglect” under R. 4:50-1 had to be filed within one year of entry of the final judgment. Because the plaintiff could not prove that Marcia had been served with the judgment, the one year time period had not been violated. Nevertheless, the motion had to be filed “within a reasonable time.” The Appellate Division upheld the trial court’s determination that waiting to set aside a final judgment for more than one year did not qualify as a “reasonable time.”

However, the court did leave it open that, if Marcia himself provided an explanation by certification as to why he never answered or presented such other facts that could equitably justify relief from this judgment, that he could file such a motion and the trial court would have to consider the circumstances.

The bottom line is that if there is potential coverage, an insurance carrier must investigate promptly and make a determination as to whether it should afford a defense. Otherwise, if it decides not to defend or timely challenge a default judgment entered against its insured, and it turns out that there is coverage, it may be faced with rather dire adverse consequences. The carrier may be foreclosed from vacating that judgment and, potentially, be required to satisfy that judgment.

Juan and Nora Valdez filed a lawsuit in federal court against defendants Macy’s and Thyssenkrupp Elevator America, Inc. due to the personal injuries suffered by their 10 year daughter whose right foot and leg got trapped in an escalator while visiting a Macy’s store. J.V. by her GAL Juan Valdez v. Macy’s, Inc., 2014 U.S. Dist. LEXIS 138952 (D.N.J. September 30, 2014). The minor underwent 13 surgeries to save her foot and leg, but she did have her pinky and second toes amputated.  They sued in their own names, as well as on behalf of their daughter, claiming negligence against the defendants. Their lawsuit also included a claim for parental loss of consortium. Both defendants filed a motion to dismiss the loss of consortium claim.

The parents claimed the loss of consortium and services premised on the assertion that as parents, they were entitled to the services and consortium that parents would typically expect from a child living in the same household and that they have lost that based upon the defendants’ conduct. In deciding this motion, the court looked to New Jersey law.

The District Court found that a parental loss of services of a minor child resulting from a negligence claim was a viable claim under New Jersey law. However, the Court noted that New Jersey law does not provide for the right of recovery by parents to sue for the loss of consortium of a minor child.

Parents can sue for damages for loss of the child’s past or future services. The rationale for such a claim is rooted in the common law when children would work on the family farm or at a factory as early as age 10. While other states have moved beyond the pecuniary loss calculation of  a parent’s loss, New Jersey remains “off-trend” in prohibiting a loss of consortium claim. Thus, the District Court granted the defendants’ motion in dismissing this claim.

Plaintiff Carylee Johnson slipped and fell on the public sidewalk in front of the home owned by defendants Eric and Leigh Ann Morse. She suffered injuries to her knee, arm, and shoulder and sued the defendant homeowners on the basis that the predecessor owner negligently built a defective sidewalk. In Johnson v. Morse, 2014 N.J. Super. Unpub. LEXIS 1788 (App. Div. July 21, 2014), the Appellate Divisions was asked to decide whether the plaintiff’s expert report was sufficient to establish that the defendants were responsible for the sunken sidewalk slab in front of their home.

The alleged dangerous condition was a 1 ½ inch sinking of a sidewalk slab and a resulting protruding edge of the adjacent slab. The plaintiffs’ expert claimed that the sunken slab was caused by a failure to compact the base material of the sidewalk properly when it was built back in 1991.

Under New Jersey law, a residential property owner can be liable for an injury caused by the condition of an adjoining public sidewalk, if the plaintiff can prove that the residential property owner, or a specifically designated prior owner of the property, actively caused the dangerous condition, such as by negligent construction or repair of the sidewalk.

Here, for the plaintiffs to be able to pursue their claim they would need to show that the defendants’ predecessor in title negligently constructed the sidewalk panel in question, when the construction took place, and what the standards were at the time the work was done.

The plaintiffs’ expert opined in his report that the unsafe sinking of the sidewalk slab was due to the base material not being properly compacted at the time of construction. However, the expert failed to test the base material or conduct any other investigation by which he attributed the sinking to defective construction.

While the expert in his report attached excerpts of construction industry documents pertaining to sidewalk safety, his report did not indicate the source or date of the document or how he used it in his evaluation that this particular sidewalk had been negligently constructed. He was permitted to supplement his report but, again, failed to identify the date of the industry standard document upon which he relied.

The Appellate Division found this report inadequate to establish a basis against the homeowners because the expert never tied his conclusion that the sidewalk was defectively constructed to the construction industry documents upon which he relied. Thus, his mere conclusion without factual support or sufficient identification of the applicable industry standard was found to be an inadmissible net opinion.

Accordingly, the appeals court found his report failed to establish a case against the defendants that they or their predecessor in title affirmatively created the defective condition of the sidewalk. Due to the plaintiff’s inability to present an adequate expert report establishing the defendants’ potential liability for the sunken sidewalk in front of the home, the Appellate Division upheld the trial court’s dismissal of the lawsuit.

In Masaitis v. Allstate, 2014 N.J. Super. Unpub. LEXIS 2100 (App. Div. Aug. 26, 2014), the plaintiffs Marilyn and William Masaitis appealed from a jury verdict that they were not entitled to compensation from their homeowner’s insurance carrier, Allstate New Jersey Insurance co., for loss of property due to a fire. Allstate disclaimed coverage on grounds of fraud and concealment but never returned the plaintiff’s insurance premiums. The plaintiffs claimed that Allstate should have been estopped from denying the claim because it never refunded their premiums.

The plaintiffs’ home was damaged by a fire. The municipal fire marshall was unable to determine the cause of the fire, nor did the county prosecutor’s office attribute the cause of the fire to arson. Nevertheless, based upon circumstantial evidence, at the trial, Allstate argued that the plaintiffs had committed arson.

Allstate also contended that the plaintiffs made false claims to Allstate for the loss of personal property. Allstate was able to prove that items of loss were fraudulent. As an example, plaintiffs claimed the loss of 2 Rolex watches valued at a total of $70,000 but they were not able to prove they ever owned such watches.

The plaintiffs argued that Allstate should have been estopped from denying their claim because it did not refund their insurance premiums although it claimed that the policy was void because of their alleged fraud. However, the Appellate Division held that the law that the insurer could elect to either rescind the insurance policy and return the premium or to affirm the policy and abide by its terms, only applied to circumstances where the insurance policy was obtained by fraud at its inception.

Here Allstate did not claim fraud at its inception. Rather, it claimed that the plaintiffs made a fraudulent claim on their policy. Thus, such a defense did not require Allstate to rescind the policy. Hence, the Appellate Division found that Allstate was not estopped from pursuing its defenses and counterclaim.

Veronica Maciag, a minor, was attacked by a pit bull owned by the decedent defendant, Kenneth Kantor. There had been prior incidents involving this dog, in which the dog had escaped and bitten people. The minor filed suit against Kantor to recover for her injuries. After the lawsuit was filed, Kantor passed away and his estate was substituted in as a defendant. In Maciag v. Kantor, docket no. BER-5878-11 (June 25, 2014 Law Div.), the trial court judge was asked to rule on a motion filed by the defendant Estate to dismiss the punitive damages claim asserted against the defendant.

The defendant argued that the purpose of punitive damages is to punish and deter the wrongdoer only. Given that the defendant is now deceased, the defendant Estate contended that the punitive damages claim must be dismissed, because the defendant can no longer be punished or deterred from his alleged egregious acts.

Plaintiff opposed the motion, arguing that the defendant was clearly aware of the dog’s propensity to escape and bite others. Also, the case had previously been listed for trial and plaintiff argued that, had the case been tried previously, the defendant would have still been alive. Further, the plaintiff contended that an estate assumes the liabilities of its decedent in numerous scenarios. Thus, plaintiff’s position was that, just because the defendant was now deceased, that should not change the defendant’s liability for punitive damages.

The trial judge was faced with deciding whether a claim for punitive damages survives the death of the defendant. The court pointed out that the New Jersey Punitive Damages Act allows punitive damages to be awarded for the purpose of punishing and thereby deterring only the wrongdoer.

While this was a novel claim in New Jersey, 32 other jurisdictions confronting this same issue have held that punitive damages may not be awarded against a decedent’ estate. Hence, consistent with the purposes of the Act, the trial court found that punitive damages may not be pursued against a deceased defendant and granted the Estates’ motion to dismiss the punitive damages claim.

Plaintiff James Epstein sued the defendant Sondra Lippi for injuries arising out of collision between him, as he was riding his bicycle, and the automobile she was operating. In Epstein v. Lippi, 2014 N.J. Super. LEXIS 1703 (July 14, 2014 App. Div.), Epstein, who was pro se, appealed an order awarding Lippi $1000 in counsel fees and costs as a sanction for pursuing frivolous litigation. In this case, the Appellate Division was faced with deciding whether sanctions could be imposed where a party has pursued some claims which are frivolous.

Epstein was subject to the verbal threshold and, thus, to recover for his non-economic injuries, he had to sustain a permanent injury as defined by the Automobile Insurance Cost Recovery Act. In his answers to interrogatories, the plaintiff certified that his claims were not permanent. Thereafter, defendant’s counsel sent the plaintiff a frivolous lawsuit letter, demanding that he dismiss his complaint because he admitted that he did not have a permanent injury, his insurer compensated him for the loss of his bicycle, and he was not seeking recovery for lost wages or other economic claims.

The plaintiff refused to dismiss his complaint, stating that he sought to recover his out of pocket expenses incurred in seeking medical treatment and he sought full restitution for his bicycle, claiming that his insurance company only partially reimbursed him. Further, he sought punitive damages because the defendant’s conduct “displayed a conscious and deliberate disregard for the safety of others.”

The defendant moved for summary judgment on the basis that the plaintiff did not meet the verbal threshold. The trial court judge granted the motion and also dismissed the property damage claim as to his bicycle on the basis that it too was barred by the plaintiff’s failure to meet the verbal threshold.

Subsequently, the defendant moved for sanctions. The trial court awarded the defendant $1000 in counsel fees as a result of plaintiff’s continued pursuit of his claims. Defendant had sought over $5000 but the court determined that a reasonable fee to act as a deterrence in the future was $1000.

On appeal, the plaintiff contended that the trial court wrongfully dismissed his property damage claim. Further, he argued that the court should not have granted an award of fees because his property damage claim was not frivolous.

The Appellate Division reluctantly reinstated the plaintiff’s property damage claim. The court agreed with the plaintiff that this economic claim was not barred due to the plaintiff’s failure to meet the verbal threshold.

However, the Appellate Division found that the survival of one claim “does not negate the imposition of sanctions where a party has otherwise pursued other claims which are frivolous.”  The appeals court agreed with the trial court that the plaintiff presented absolutely no evidence to support a punitive damages claim and, thus, he should have dismissed that claim. As a result, the Appellate Division upheld the $1000 attorneys fee sanction assessed against the plaintiff.

Plaintiff Cecilia Taransky appealed to the Third Circuit Court of Appeals, claiming that she was not required to reimburse Medicare for conditional medical expenses advanced on her behalf as a result of a trip and fall accident. In Taransky v. Sec’y of the United States HHS, 2014 U.S. App. LEXIS 14408 (3rd Cir. 2014), the Third Circuit rejected that argument.

Taransky fell at the Larchmont Shopping Center in Mt. Laurel, NJ and sued the owners and operators of the shopping center (“Larchmont”) for the bodily injury she suffered. Taransky was a Medicare recipient and Medicare paid her medical bills. She settled her suit for $90,000 and Medicare demanded reimbursement for its payments.

After Taransky settled her lawsuit, she signed a release of “all past, present and future claims,” including medical treatment and for medical expense benefits in connection with the accident. The release also provided that any liens or subrogation claims would be satisfied and discharged from the settlement proceeds and specifically included Medicare liens and claims.

After the settlement, Taransky filed a motion in the New Jersey Superior Court, requesting an order apportioning the proceeds of the settlement between various elements of damages relevant to the anticipated administrative proceedings with the federal Centers for Medicare and Medicaid Services. She acknowledged her lawsuit sought damages for certain medical expenses for medical treatment, some of which were paid for through Medicare. However, she claimed that the New Jersey Collateral Source Statute N.J.S.A. 2A:15-97 (“Collateral Source statute”), precluded tort plaintiffs like herself from recovering losses such as medical expenses that were already paid by another source. Based upon that premise, she claimed that her Medicare expenses were not considered in the settlement negotiations and were not included in the settlement amount.

The Superior Court granted Taransky’s motion and entered an order that the settlement did not include any Medicare expenses. The order specified that the settlement amount was allocated solely to the plaintiff’s bodily injury and pain and suffering claim.

Thereafter, the Medicare contractor demanded reimbursement of the $10,121 that the Medicare program paid on her behalf. Taransky refused to pay, citing to the Collateral Source statute and the allocation order she received from the Superior Court.

Taransky then proceeded through the Medicare appeals process up to a hearing before an Administrative Law Judge, all of whom rejected her claims. Next, Taransky filed suit in the United States District of New Jersey, reiterating her claim that she was not responsible to reimburse Medicare from the proceeds of her settlement. The Government was granted summary judgment, dismissing her claim, and this appeal followed.

Taransky argued that the Government failed to demonstrate that Larchmont had a responsibility to make payment for her Medicare expenses and, thus, the obligation to reimburse was not triggered. However, the Third Circuit held that if the settlement releases the tortfeasor from claims for medical expenses, that is sufficient to demonstrate the beneficiary’s obligation to reimburse Medicare. Here, Taransky’s release specifically anticipated Medicare’s lien and provided that it would be satisfied and discharged out of the settlement proceeds. Thus, the court found that Taransky was reimbursed for her medical costs and she cannot hide behind the lump sum settlement to deprive the Government of the reimbursement it is owed.

Next, she argued that her settlement amount could not have included her medical costs as a matter of law because Medicare payments are a “collateral source” of benefits that may not be obtained form a tortfeasor under the Collateral Source statute. Although the New Jersey Supreme Court has not ruled on this issue, the Third Circuit predicted that the Court would hold that the Medicare payments, because of their conditional nature, do not constitute a collateral source under the Collateral Source statute. Thus, Taransky could not rely on that statute to avoid reimbursement to the Government.

Taransky also argued that the Government must defer to the Superior Court’s apportionment order, which provided that no portion of the settlement recovery is attributable to medical expenses. The Third Circuit rejected this argument as well, finding that it was not an adjudication on the merits and Taransky never made the Medicare contractor or the Government a party to her suit.

Thus, after rejecting the plaintiff’s numerous arguments, the Third Circuit found that the plaintiff must reimburse Medicare for the conditional payments it made for her medical expenses incurred in her trip and fall accident.