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The Pivotal Law Blog

Case Law Update: Injuries from assault not an “accident” and not covered by insurance

Posted Wednesday, August 16, 2017 by Christopher L. Thayer

Case Law Update: Injuries from assault not an “accident” and not covered by insuranceIn a recent unpublished decision, the Washington Court of Appeals (Division 1) addressed whether injuries caused by an intentional assault would be covered under an insurance policy that provided coverage for “accidents”. State Farm Fire and Casualty v. Peters, et al (No. 75705-9-I, August 14, 2017).

Belt and Peters got into an argument. Belt struck Peters several times in the face with a closed fist, breaking Peters’ jaw in three places. Belt pled guilty to fourth degree assault. Peters subsequently sued Belt for damages in Snohomish County. Belt was insured by State Farm, with a policy that covered bodily injury claims arising out of an “accident”. The term “accident” was not defined in the policy. State Farm sought a court order confirming it had no duty of defense or indemnity – and the trial court agreed.

Insurance policies are contracts and are construed as such. Insurance policies are to be interpreted “as an average insurance purchaser would understand them.” Kish v. Ins. Co. of North America, 125 Wn. 2d 164 (1994). If an insurance policy defines its terms, those definitions apply, but undefined terms “must be given their plain, ordinary, and popular meaning.” Kitsap County v. Allstate, 136 Wn.2d 567 (1998).

In the present case, the policy does not expressly define “accident” and the policy’s exclusionary provisions do not mention the term. The court then looked to the common law definition of “accident”:

Thus, where the insured acts intentionally but claims that the result was unintended, the incident is not an accident if the Insured knew or should have known facts from which a prudent person would have concluded that the harm was reasonably foreseeable. State Farm v. Ham & Rye, 142 Wn. App. 6 (2007).

Belt argued he lacked specific knowledge that his conduct would cause injuries to Peters and that he did not “expect or intend” to cause injuries. The Court noted Belt’s unintended result and purported subjective intent were of no consequence and that “a prudent person would have concluded that a broken jaw was a reasonably foreseeable result of punching someone in the jaw.” The Court concluded “There is no support for the proposition that a mere subjective belief that there would be no injury, or subjective lack of knowledge or appreciation of consequences, results in coverage of intentional conduct as an “accident.”

The Court of Appeals affirmed the trial court’s summary judgment order – confirming State Farm had no duty to provide coverage or indemnify against any damage award.

For the average person, Belt’s arguments probably seem pretty esoteric, but the reality is this case was all about insurance coverage. With certain exceptions, the typical home or auto policy will provide coverage for “accidents” and not intentional conduct. Without insurance, Belt may not have been able to afford a lawyer, and Peters may not recover any damages for his injuries.

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Proposed Seattle Legislation update to Limit use of prospective tenant's criminal history

Posted Tuesday, August 8, 2017 by Christopher L. Thayer

Seattle Legislation Update:

The Seattle City Council is considering passing an ordinance which would prohibit landlords from screening prospective tenants based on criminal histories (except for registered sex offenders). The proposed ordinance will be presented to the full Council for a vote in the near future. This legislation is based on a proposal Mayor Ed Murray sent to the Council in June 2017.

More information about the proposed provision can be found here: http://seattle.legistar.com/LegislationDetail.aspx?ID=3089232&GUID=49272C76-0464-4C6E-A1FF-140591D00410&FullText=1

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Welcome to Our New Associate Attorney: McKean J. Evans

Posted Tuesday, August 8, 2017 by Christopher L. Thayer

Alternative TextWe are very pleased to announce that McKean J. Evans has joined Pivotal Law Group as an associate attorney. McKean has recently moved to Seattle from Pittsburgh, Pennsylvania with his fiancé, a native of the Pacific Northwest. He is excited about moving to Seattle and, as an avid backpacker, is eager to explore the Washington wilderness.

McKean brings five years’ experience litigating complex cases before state and federal judges nationwide, in diverse matters ranging from insurance to employee benefits to real estate appraisal fraud.

Some of McKean’s recent cases include: Recovering a six-figure settlement for an insurance policyholder whose insurer refused to pay benefits due under the policy; Representing women sales agents who claimed they were underpaid because of their gender; and obtaining cash payments for retired workers whose former employer terminated their retirement benefits.

At Pivotal Law Group, McKean will focus his practice on litigation protecting the rights of small businesses and their owners, individuals injured in accidents, owners of insurance policies, and employees.

McKean can be reached at MEvans@PivotalLawGroup.com, or through his direct line at (206) 805-1493.

McKean is admitted to practice law in the State of Pennsylvania; his admission to practice law in Washington is pending.
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The Case of the Incredible Shrinking Airline Seat

Posted Wednesday, August 2, 2017 by Christopher L. Thayer

Federal Appeals Court Criticizes Disappearing Airline Legroom in “the Case of the Incredible Shrinking Airline Seat”

The U.S. Court of Appeals in Washington, D.C. recently ruled on a case involving one of air travelers’ traditional complaints: the gradual shrinking of aircraft seating space. In Flyers Rights Education Fund, Inc. v. Federal Aviation Administration, which the court dubbed “the Case of the Incredible Shrinking Airline Seat,” the court addressed claims that shrinking aircraft seats and reduced legroom threatened passengers’ safety.

The plaintiff, Flyers Rights Education Fund, Inc., (“Flyers Rights”) became concerned that gradual reductions in aircraft seating space threatened passenger safety. Flyers Rights asked the Federal Aviation Administration (“FAA”) to create rules governing the size of aircraft seats to protect passenger safety by, for instance, ensuring passengers can quickly escape their seats in an emergency.

The FAA declined to adopt rules governing passenger space on aircraft seats, claiming that the issue did not affect passenger safety. Flyers Rights filed a lawsuit in federal court claiming that federal law – the Administrative Procedure Act – required the FAA to have adequate evidence for its refusal to pass rules governing aircraft seat space. Flyers Rights asked a federal court to order the FAA to reconsider its decision.

The U.S. Court of Appeals sided with Flyers Rights. The court observed that the FAA’s mission includes providing minimum safety standards for aircraft consistent with “the duty of an air carrier to provide service with the highest possible degree of safety in the public interest.” Flyers Rights’ petition to the FAA included evidence that airline seat space had shrunk considerably over the last several decades while the average American passenger grew larger. The FAA denied Flyers’ Rights’ petition because the FAA found the aircraft seat space issue “d[id] not raise an immediate safety or security concern.” But the FAA cited no studies or other evidence supporting its conclusion.

The court agreed with Flyers’ Rights that the FAA “failed to provide a plausible evidentiary basis for concluding that decreased seat sizes combined with increased passenger sizes have no effect on emergency egress.” The Court decided that Flyers Rights identified a reasonable safety concern backed up by evidence, and that the evidence the FAA relied on in denying Flyers Rights’ petition did not adequately address the issue. Among other things, the FAA relied on studies that never tested whether seat size was a safety issue, then reasoned that seat size could not be a safety issue because its studies never tested for it. The court found the FAA’s reasoning “blinks reality.”

Accordingly, the court sent the case back to the FAA to give a “properly reasoned” response to Flyers Rights’ concern about shrinking aircraft seats.

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Case Law Update: Successor Liability for a Law Firm

Posted Wednesday, July 26, 2017 by Christopher L. Thayer

The Washington State Court of Appeals (Division I) recently found the owner of a law firm operating as a sole proprietorship liable for debts incurred by his predecessor Limited Liability Company in Columbia Bank v. Invicta Law Group and Mark Jordan, (No. 73915-8-I)(2017).

In 1999, Jordan formed Invicta Law Group, PLLC (“PLLC”) and was the sole member and manager. In February 2012, the PLLC borrowed $165,000 from Columbia Bank. The PLLC executed several loan documents including a commercial promissory note (note), loan agreement, and security agreement. Jordan signed all three loan documents as manager of the PLLC. Jordan also signed the loan agreement individually as guarantor.

On September 30, 2013, Jordan (personally) filed for voluntary Chapter 7 bankruptcy. On January 2, 2014, the bankruptcy court discharged Jordan’s personal guaranty on the loan agreement. On the same day he filed for bankruptcy, Jordan also ceased operating as the PLLC. The PLLC did not file for bankruptcy. When Jordan filed for personal bankruptcy, the PLLC also stopped making payments on the loan to Columbia Bank.

The day after filing bankruptcy, Jordan began operating a law practice as a sole proprietorship under the name Mark V. Jordan. Jordan owned, operated and controlled the sole proprietorship.

Jordan continued his individual law practice, using the same name, website, signage, telephone number, offices, insurance, employees, equipment, and representing the same clients. Jordan continued to use the full name Invicta Law Group, PLLC in new client engagement letters for nearly 6 months. Jordan also continued under the same contracts as the PLLC including office lease agreement, subtenant agreements, existing client agreements (did not have clients sign new agreements), and malpractice insurance. Jordan continued representing the same clients the PLLC had represented at the time the PLLC ceased operation. No clients left the PLLC due to its change in legal structure. Indeed, Jordan did not tell the clients until months later.

Columbia Bank sued Jordan on a claim of successor liability. The trial court awarded judgment against Jordan in favor of Columbia Bank, which, including attorney’s fees and costs, exceeded $400,000. Jordan appealed. The Court of Appeals noted:

Washington follows the general rule that “a corporation purchasing the assets of another corporation does not become liable for the debts and liabilities of the selling corporation.” Cambridge Townhomes. LLC v. Pacific Star Roofing, Inc., 166 Wn.2d 475, 481-82, 209 P.3d 863 (2009). The rationale for this rule is a “bona fide purchaser who gives adequate consideration and who lacks notice of prior claims against the property acquires no liability for those claims.” Hall v. Armstrong Cork. Inc., 103 Wn.2d 258, 262, 692 P.2d 787 (1984)). There are, however, exceptions to this general rule. A successor may be held liable for the debts of a predecessor, where:

(1) there is an express or implied agreement for the purchaser to assume liability; “(2) the purchase is a de facto merger or consolidation; (3) the purchaser is a mere continuation of the seller; or (4) the transfer of assets is for the fraudulent purpose of escaping liability.

Cambridge, 166 Wn.2d at 482 (quoting Hall, 103 Wn.2d at 262).

The trial court found Jordan liable under the “mere continuation” exception to the general rule. Washington courts rely on several factors to determine whether a successor business is a mere continuation of a seller. These include: (1) a common identity between the officers, directors, and stockholders of the selling and purchasing companies, and (2) the sufficiency of the consideration running to the seller corporation in light of the assets being sold.

The objective of the court when considering these factors is to determine whether the “purchaser represents merely a new hat for the seller.” Cambridge, 166 Wn.2d at 482. The particular form of the business entity is not determinative. Therefore, for the first factor, where a sole proprietorship is involved, while there can be no continuation of officers, directors, or shareholders, the court will consider “the continuity of individuals in control of the business as satisfying this factor.” Cambridge, 166 Wn.2d at 482-83.

The Court further reasoned:

[T]he evidence of the “mere continuation” between the PLLC and Jordan’s sole proprietorship goes beyond that identified as sufficient in Cambridge. Here, the sole proprietorship: (1) operated at the same location as the PLLC, it had the same offices, space, signage, telephone number, and address, (2) operated under the same lease as the PLLC, and between September 30, 2013, and February 2015 continued to hold itself out to the landlord as the PLLC, (3) used the same office equipment, furniture, and inventory, (4) used the same contact information as the PLLC including the same phone number, e-mail address, fax number, letterhead, and website, (5) used the same employees, (6) held itself out to its current and new subtenants as the PLLC including entering a new sublease agreement on October 31, 2013, under the name of the PLLC, and … held itself out to its malpractice insurance carrier as the PLLC for over a year….

The Court likely felt compelled to find Jordan personally liable under a theory of successor liability based upon the unique facts of this case. Most significantly, Jordan’s sole proprietorship did not pay anything for the “assets” it acquired from the PLLC. If Jordan had paid any reasonable sum for the assets acquired (known as “consideration” in this context), we believe it is likely a court would have had a hard time finding him liable under a theory of successor liability – even under these fairly egregious facts. If you have questions about successor liability (and how to avoid it or prove it), please feel free to contact Chris Thayer at 206-805-1494 or at CThayer@PivotalLawGroup.com.

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