Defining the “Fuzzy Edges” of Rule 26(b)(4)

draft pic.1As most attorneys involved in civil litigation are aware, Rule 26(b)(4) of the Federal Rules of Civil Procedure was amended in 2010 to “address concerns about expert discovery.” ADVISORY COMMITTEE NOTES TO 2010 AMENDMENTS. Specifically, the Advisory Committee was concerned about the “undesirable effects” of “routine discovery into attorney-expert communications and draft reports.” Id. Therefore, the Committee amended Rule 26(b)(4) “to provide work-product protection against discovery regarding draft expert disclosures or reports and . . . communications between expert witnesses and counsel.” Id. [1]

Although the amendments took effect in 2010, there is very little case law addressing the practical impact of the amendments.[2] In a recent case, the Southern District of New York attempted to define the “fuzzy edges” of Rule 26(b)(4)(B). See Deangelis v. Corzine, 11 Civ. 7866 (S.D.N.Y. January 7, 2016).

In the case, the plaintiff sought an order compelling the defendants’ expert witness, Jerry Markham, and the defendant’s non-testifying consultants, Cornerstone Research, to produce documents in response to a subpoena duces tecum. The defendants refused to produce the requested documents, arguing that the materials were drafts of Mr. Markham’s report, and were therefore, protected by Rule 26(b)(4)(B). The documents at issue contained a “write-up” and a “chart” both prepared by Cornerstone to assist Mr. Markham in preparing his report.

The defendants first argued that the documents at issue were protected because they “were clearly marked as ‘drafts’”. The Court dismissed this argument. According to the Court, the fact that a document is labeled as a draft is not conclusive evidence that it is, in fact, a draft.

The defendants next argued that the documents were protected because (1) they were created for the purpose of being included in Mr. Markham’s report and (2) they were actually included in early versions of the report. After reviewing the documents in camera, the Court found that the documents at issue were protected from disclosure by Rule 26(b)(4)(B). According to the Court, the “documents were prepared not simply to aid Mr. Markham in drafting his report, but rather to form part of the report itself and were in fact included in preliminary versions of that report.” In short, the documents constituted drafts of Mr. Markham’s report, and were therefore, protected. Accordingly, the Court denied the plaintiff’s motion to compel.

The case clarifies one important issue – simply labeling a document as a “draft” does not automatically protect it from disclosure under Rule 26(b)(4)(B). Rather, the document must actually be included in earlier versions of the expert’s report to be considered a “draft.” Cozen O’Connor will continue to keep subrogation professionals advised as more case law develops regarding the practical impact of amended Rule 26(b)(4).


[1] Rule 26(b)(4)(B) provides:
Trial-Preparation Protection for Draft Reports or Disclosures. Rules 26(b)(3)(A) and (B) protect drafts of any report or disclosure required under Rule 26(a)(2), regardless of the form in which the draft is recorded.

[2] According to the Southern District of New York, only the Ninth, Tenth and Eleventh Circuits have considered the impact of Rule 26(b)(4)(B). See Deangelis v. Corzine, 11 Civ. 7866 (S.D.N.Y. January 7, 2016).

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Sales Website May Be Sufficient For Jurisdiction Over Foreign Corporation

international.1Courts may be willing to exercise jurisdiction over a foreign entity in a civil action based solely on a website that solicits sales throughout the United States without specifically targeting one state or its residents. Recently, a trial court denied a motion to dismiss by foreign entity defendant despite the fact that the foreign entity did not maintain an office in the state, specifically target the state, or ever have any employees in the state. The decision may signify a trend towards a common sense approach to the jurisdictional issue that considers today’s web based economy.

The decision is a trial court decision. Whether the foreign entity appeals the decision remains to be seen. However, the decision shows a willingness by at least one trial court to consider common sense arguments. Other courts may eventually follow the same reasoning. The decision is positive for United States consumers and their subrogating property insurance carriers. Hopefully, appellate courts, and perhaps, the United States Supreme Court will address the issue in consideration of how retail business is conducted today.

There are a number of situations in which a foreign entity may be the only third-party potentially liable for damages. However, a foreign entity can’t be held liable for damages if a court refuses to exercise jurisdiction over the foreign entity. It sometimes seems, frustratingly so, that courts look for reasons not to exercise jurisdiction over foreign entities instead of looking for reasons to exercise jurisdiction. Courts have been reluctant to exercise jurisdiction over foreign entities based solely on websites generally available to anyone with an internet connection. (See, generally, Boppy Co. v. Luvee Products Corp. 2004 WL 2608265 (D. Colo. 1997)).  Courts have been reluctant to exercise jurisdiction over foreign entities based solely on the grounds that the stream of commerce might cause a product to land in the state where the damage occurred. (See, generally, Asahi Metal Industry Co. Ltd. V. Superior Court of Calif. 480 US 102 (1978)).

State courts may typically exercise jurisdiction over non-resident defendants to the extent permitted by the Due Process clause of the United States Constitution. In International Shoe v. Washington, 326 US 310 (1945), the U.S. Supreme Court held that a state court may exercise personal jurisdiction over a nonresident defendant only if the defendant has sufficient contacts with the state such that the lawsuit does not offend “traditional notions of fair play and substantial justice.” The International Shoe jurisdictional test is often referred to as the minimum contacts test and is obviously vague.

In cases where the foreign entity really has no presence in a state, the challenge is to convince the court to exercise specific jurisdiction over the foreign entity. Specific jurisdiction may be exercised, in a particular matter, if the foreign entity has sufficient contacts with the state to make the exercise of jurisdiction reasonable and just with respect to the claim in issue. Specific jurisdiction must be distinguished from general jurisdiction which can be exercised over a foreign entity that has systematic and continuous contacts with a state. Examples of systematic and continuous contacts may include ownership of property and maintaining offices.

Two tests have been applied to determine whether the exercise of personal jurisdiction is reasonable in a matter; the purposeful availment test and the purposeful direction test. The purposeful availment tests considers whether the foreign entity purposefully availed itself of the privilege of doing business in the state and is typically the more appropriate analysis in a contract claim. The purposeful direction test considers whether the foreign entity purposefully directed activity at the state and its residents and is typically the more appropriate test to apply in a tort claim. The purposeful direction test is typically the most appropriate test to apply in a property damage subrogation claim.

States have begun to adopt what is described as the holistic approach to resolving the jurisdictional issue. The holistic approach considers whether the foreign entity engaged in purposeful conduct for which it could reasonably be expected to be subject to the jurisdiction of the state. The holistic approach considers the totality of the specific facts and circumstances of the case.

Arguably, a foreign entity that maintains its own sales website is purposefully directing advertising and marketing material to consumers 24 hours a day 365 days a year for the specific purpose of completing transactions and establishing relationships with the targeted consumers. If the foreign entity collectively refers to a group of targets as the United States or the USA, each individual member of the group should be considered a target unless specifically excluded. Arguably, the foreign entity need not list each and every state individually for each and every state to be a target. The fact that the foreign entity refers to the group of targets collectively should not mean that each and every member of the group is not a specific target. A foreign entity that maintains a website that sells products to state residents, invites residents to develop sponsorship opportunities, and recruits prospective employees may be purposefully directing activities to the state sufficient for the exercise of specific jurisdiction in litigation alleging damages caused by the foreign entity.

At least one court has found that a website maintained by a foreign entity that is generally directed to the entire United States is sufficient for an exercise of personal jurisdiction if there exists a connection between the purpose of the website and the circumstances of the claim. Hopefully, other courts will follow as the reasoning makes sense in today’s world. Foreign entities are now able to use the internet to sell to anywhere in the United States at any time. These foreign entities should not escape accountability for damages caused by their negligence or defective products merely because they don’t target a state individually. A website open 24 hours a day 365 days a year should not be any less of a presence in, or an intent to sell to residents of, a state than a brick-and-mortar store.

Courts should be expected, however, to remain reluctant to exercise personal jurisdiction over foreign entity corporations that sell products on third-party websites over which the foreign corporation has no control or that ship products to third-party distributors without retaining any control over where the products eventually land.

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Amalgamation Explained

Amalgamation Pic.1It is often lamented that the amount of liability that can be assessed to a defendant in a subrogation matter is inversely proportional to their ability to satisfy a judgment. The easier it is to prove a defendant is responsible, the higher the chances the defendant doesn’t have the coverage or assets to pay for the sustained damages. In modern times, finding a “pocket” to reach into to pay a claim is further complicated by the existence of the protections granted to the owners of companies. In most states, getting a recovery from the rich owner of a company with no assets (known as “piercing the corporate veil”) is not possible unless the company was set up for some nefarious purpose, such as fraud, or if the company was set up for the sole purpose of being a shell to limit the liability of its owners/shareholders and serves no other purpose.

One way to hold other entities responsible for the financial obligations of another that works around the high bar set for piercing a corporate veil is called amalgamation. Under the theory of amalgamation, the rules for piercing a corporate veil of a “parent” company, even if it is a wholly owned subsidiary, are still valid. However, if the target company has sibling companies that are owned and/or substantially controlled by the same parent company, courts have allowed judgments to be satisfied by any or all of the sibling companies for the liability of one of the sibling companies.
In a subrogation context, this could be the solution to a common problem. For instance, for corporate liability purposes, a parent company may set up a holding company, a construction company and a sales company to develop commercial or residential land. If the construction company completes the development, and thereafter goes out of business, and whatever builder’s risk or GCL policy it had is no longer active afterward, there may not be any assets or coverage to satisfy a claim for damages caused by the contracting company’s negligent construction. Under a piercing the corporate veil scenario, the parent company will not be liable for the claims. However, if the sales company or the holding company is still in business, and either has assets, the theory of amalgamation could allow a plaintiff to use those assets to satisfy a judgment against the construction company.
Admittedly, amalgamation is not likely to come into play in a normal setting, but it is something that could turn a dud case into a stud case for the carrier whose counsel is thinking creatively.

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Ode to the Burning Christmas Tree

xmas tree.1Both real and artificial trees can and do burn causing fire damage; unfortunately, ‘tis the season. As expected, Christmas tree claims arise through the seasonal months of November, December, and January.

The National Fire Protection Association (NFPA) estimates of reported home structure fires, derived from the U.S. Fire Administration’s National Fire Incident Reporting System (NFIRS) and NFPA’s annual fire department experience survey show that in 2009-2013, Christmas trees were the item first ignited in an estimated average of 210 reported home structure fires per year, resulting in an annual average of $17.5 million in direct property damage. Just this week, a fire destroyed a 96 foot white fir Christmas tree at a mall in Costa Mesa, California on December 14, 2015. The tree with twenty-thousand lights had been displayed and lit since November 23, 2015. The property damages will be significant.

A dry Christmas tree can become fully engulfed in flames seconds after first being ignited. The U.S. Consumer Product Safety Commission released a video demonstrating the fast rate at which a tree can burn and cause property damage. In the video, a Christmas tree is in flames within 10 seconds, the fire spreads to the ceiling and furniture within 30 seconds, and the location of the tree is entirely engulfed in the flames within 40 seconds. The rate at which the trees burn will depend on the use of fire retardant, use of other chemical materials on the tree, dryness of the real cut tree, location and environment of the tree, species of the real tree, manufacturer of the artificial tree, etc.

Fire authorities issue advisories on Christmas tree safety, as well as general holiday decoration safety. For example, the Mississippi State Fire Marshal provided the following safety tips:
• Use holiday decorations made with flame-retardant or non-combustible materials.
• Carefully inspect light strings and replace damaged items before plugging lights in.
• Do not overload extension cords.
• Turn off all light strings and decorations before leaving home or going to bed.
• Never use lit candles to decorate a tree, and make sure any lit candles in the room are placed away from tree branches.
• Water daily live trees. A live tree can absorb as much as a quart of water a day. A moist tree is less of a fire hazard than a dry tree shedding needles. Use 1 quart of water for every inch of tree stem diameter.
• Make sure the tree is at least three feet away from any heat source like fireplaces, radiators, heaters, candles, heat vents or lights.

However, despite safety warnings, these incidents occur. Therefore, we should prepare for these losses this season. The following is a non-exhaustive list of claim investigation questions for losses involving real trees:

How long has the tree been in the house or building? What was the watering schedule? Where did the insured obtain the tree? Can we determine how long ago the tree was cut? Did the Christmas tree seller provide a fresh cut and well watered tree? What type of lights and other decorations were used on or near the tree? What was the cause of the fire? Was the tree protected with fire retardant?

For artificial trees, the following additional claim investigation questions will arise: When did the insured purchase the tree? What is the make, model, age, seller of the tree? How was the tree kept, stored, displayed, etc.?

Potential subrogation targets would include the manufacturer of the electrical device that caused the fire, a person who negligently left a candle burning nearby, a person who negligently discarded a cigarette nearby, etc. An additional potential subrogation target in an artificial tree case would be the manufacturer of the artificial tree itself.

As a contributing factor, the Christmas tree seller may be liable for selling an aged and/or dehydrated tree without proper warning; however, the evidence needed to proof this claim may be difficult to obtain due to the nature of the Christmas tree industry (brevity of the season, large volume of trees, lack of documentation and tracking of individual trees, etc.). Also, the insured may have been required to have the common knowledge that a dry Christmas tree will need additional watering or assume the risk of purchasing a dry tree. Another potential target or contributing factor may be the watering service company for failing to properly and routinely keep the tree watered. Depending on what a fire investigator can determine, another potential target may be the fire retardant company for product defect. The fire retardant may have worked as properly as expected (i.e., delay a fire from consuming the entire tree or resist a small flame), or may have caused the fire to burn larger or faster due to a defect. The expert investigation would be key for this type of claim.

In this ode we do not praise such fire losses, but hope to inspire holiday safety, fire safety preparedness, claim preparation, and thorough investigation.


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Re-Reading the Riot Act: An Update

police.1Changes to the Riot Act that will hit insurers look set to go ahead following Parliament’s recent second reading of the Riot Compensation Bill.

The draft Bill, which will replace the Riot (Damages) Act 1886, was the subject of debate at the House of Commons on Friday, 4 December 2015, when it was welcomed as a vast improvement on the “outdated” 1886 Act, and passed unopposed.

If it is given Royal Assent, the Bill, as drafted, will continue to hold the Police accountable for damage caused by riots, however it will, amongst other things, introduce a cap on compensation payable in a single claim, and will exclude damages for consequential losses. These changes, which go directly against the recent Court of Appeal finding in the Mitsui litigation, could leave insurers and businesses out of pocket.

The Mitsui Litigation

Until the Court of Appeal decision was made in the case of Mitsui Sumitomo Insurance Co (Europe) Ltd, Royal and Sun Alliance Insurance plc and others v The Mayor’s Office for Policing and Crime (MOPAC) [2014] EWCA Civ 682, it was widely understood that compensation payable by the Police under the Riot (Damages) Act 1886 was limited to physical damage only, and indeed, this was the first instance finding of the Commercial Court. However, the Court of Appeal’s finding in May 2014 turned this position on its head.

By way of background, the claim by Mitsui and others arose after a Sony distribution warehouse in Enfield, north London, was set alight during the 2011 London riots. The incident, which has been described as Europe’s largest arson attack, caused millions of pounds’ worth of property damage and business interruption losses, which insurers sought to recover, in full, from the Police in a subrogated claim under the 1886 Act.

The Mayor’s Office, which oversees the Metropolitan Police, declined to compensate the claimants, prompting recovery proceedings by Mitsui and other interested insurers for damages in excess of £60 million, as well as claims for an additional £4 million of uninsured losses.

While the Commercial Court found that the claimants were entitled to compensation by the Police Authority under the 1886 Act for physical losses caused by the riots, it found they were not entitled to consequential damages to the interruption of business.

Both insurers and the Mayor’s Office independently appealed the respective decisions against them, with the Mayor’s Office coming out somewhat worse: in the judgment handed down by the Court of Appeal on 20 May 2014, not only was the Mayor’s appeal on the issue of liability dismissed, but the Court allowed insurers’ cross appeal on the issue of damages. It found that there was nothing in the 1886 Act to suggest that Parliament had intended to deprive claimants of the right to compensation for losses consequential to physical damage, such as loss of profit and loss of rent.

The finding was welcome news to insurers (as well as uninsured claimants), who can now recover business interruption losses suffered as a result of the rioting. On the contrary, it was a clear blow for the Mayor’s Office, which was left with a £75 million bill to pay from an already stretched public purse. The Court of Appeal commented that whilst the broad application of the 1886 Act may seem unfair against the Police Authorities, it is for

Parliament, not the courts, to amend the Act or remove it altogether.

And it would seem the decision indeed prompted the beginning of the end for the Riot Act as we know it, with the Government wasting little time in announcing a public consultation to reform the 1886 Act on 5 June 2014.

History of the Bill

The public consultation, which followed an independent review of the Act in 2013, was undertaken during the Summer of 2014. In March 2015, the Home Office published its Summary of Consultation, in which it stated that the Government “agrees with the independent reviewer that covering consequential loss would be a step too far for a state administered scheme and does not intend a reformed Act to cover consequential losses”, together with a draft Riot Compensation Bill.

Accordingly, the draft Bill, in direct contrast to the Mitsui finding, makes no provision for consequential losses. In addition, it makes a number of further key changes, to include a cap of £1 million on damages in any single claim.

At the reading on Friday, Mike Wood MP, who sponsors the Bill, argued that a cap would have allowed 99% of claims after the 2011 riots to be paid in full, and would have saved “tens of millions of pounds” on the most expensive claims, thereby reducing the burden on the tax payer. He commented “We need to act now to build a new system of compensation that works and that is fair to the people and businesses who are affected by riots and also fair to taxpayers who will ultimately foot the bill.”

In addition, the Bill will increase time limits for lodging a claim from the 14 days prescribed by the current Act, allow claims to be submitted electronically, and also update compensation from an “old for old” replacement system to a “new for old” system.

Insurance Industry Reactions

While welcoming a number of the proposed changes, insurers have previously expressed their concerns over a number of aspects. In particular, the Association of British Insurers (ABI) raised concerns about the draft Bill’s exclusion of consequential losses, which it believes could seriously impact on businesses that have had to cease trading, landlords that have lost rent or residents that have had to move out of their homes.

Furthermore, the Bill, as drafted, will allow the Police and Crime Commissioners to decide whether or not a disturbance constitutes a riot. Given the Commissioners are essentially liable for the compensation, this would appear to create a conflict of interest. The ABI have also warned that business premiums will go up.

The draft Bill will now pass to Committee Stage, followed by a Report Stage and Third Reading, before passing to the House of Lords. If passed, the Bill will replace the current Act with the Riot Compensation Act 2015. As such, the effect of the Court of Appeal decision on the recovery of consequential losses could well be short lived. Furthermore, in December 2014, the Supreme Court granted permission (in part) to the Mayor’s Office to appeal the Court of Appeal’s finding. Further news on any appeal is still awaited.



Summary of Consultation:
Draft Riot Compensation Bill:

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Recent Idaho Decision Excludes Expert’s Rebuttal Opinion Based on New Testing

dust.1A recent federal court ruling offers a reminder that subrogating carriers need to be careful when disclosing expert opinions. The case, Columbia Grain v. Hinrichs Trading et al. (D. Idaho 2015), involved a fire in a garbanzo bean elevator. The plaintiff’s expert opined that a failed bearing ignited garbanzo bean dust, which smoldered for two days prior to bursting into flames during a wind storm. When the expert was later deposed, he admitted that he had not performed any testing to support this smoldering theory.

After the defendant’s expert disclosed opinions attacking the theory, the plaintiff’s expert proceeded to perform additional testing. A timely rebuttal opinion was then filed, which described testing that confirmed that this type of garbanzo bean dust could smolder for several days before fully igniting. The documentation and data supporting this testing was produced to the defendant well before trial.

Nevertheless, the defendant successfully convinced the court that the opinions relating to the smoldering theory should be excluded. The court stated that rebuttal testimony can only be used to counter unforeseen arguments in an opposing expert’s disclosure, rather than being “used to advance new arguments or new evidence.” Here, since the smoldering theory was offered in the plaintiff’s expert’s original disclosure, the court barred him from introducing new testing in a rebuttal report to support that theory.

While every case is different when it comes to the admissibility of expert opinions, this case serves as a strong reminder that, especially when in federal court, a subrogating carrier’s expert needs to fully-support his or her opinions prior to a disclosure deadline.

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Four Helpful Tips for a Successful Subro Recovery

All too often, claims that would otherwise have strong potential for recovery via subrogation cannot be pursued due to issues that arise shortly following a loss. Too many times, hope for recovery is lost because of evidentiary issues or expired limitation periods. As we near year’s end and begin to reflect on the year, here are four tips to help improve the likelihood of a successful subrogation recovery.

Tip 1: Send out notice letters as soon as possible
There may be contractual or statutory requirements to put parties on notice. Failing to adhere to these notice requirements can jeopardize the right to proceed with a claim. Special care must be taken when dealing with certain types of contracts. For example, Canadian Construction Documents Committee (CCDC) Contracts often have very particular notice requirements. When dealing with these types of agreements it is highly advisable to assign counsel to the matter as soon the loss arises, as there may be a short window of opportunity before the potential for recovery is lost.

Tip 2: Determine if the potential defendant is insured
Notice letters to potential defendants should always request that the potential defendant put their insurer on notice. Strategically, it is helpful to learn at an early stage that a potential defendant is insured. By doing this, you know that if liability is clear, recovery is likely. This not only allows the potential defendant’s insurer to better understand the loss, but allows you to avoid spoliation of evidence arguments that can arise at a later date.

Tip 3: Take special care when bringing an action against a municipality
In Canada, shorter limitation periods often apply to municipalities. As municipalities are often the target of subrogated claims, whenever there is any indication that a municipality may be liable, take extra caution.

Tip 4: Keep the evidence.
Evidence retention is a major issue in subrogated claims. All too often, evidence will remain with the insured who may unwittingly fail to properly retain the evidence. As well, it is not uncommon for evidence to be thrown away by emergency restoration service providers. Whenever possible, ensure that the evidence is properly retained by your expert.


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New Hurdles for Defect Claims by Condo Associations in Texas

DEFECT.1There are two new sections in the Texas Property Code which will provide protection for developers and their design professionals from actions brought by condominium associations for construction defect or design claims. The impetus for this change grew out of concerns by developers and design professionals that as constituted, the Texas Residential Construction Act (“RCLA”) did not provide sufficient protection from questionable lawsuits brought by condominium associations that had not obtained approval and consent of the individual unit owners to prosecute the lawsuit.

The new provisions are codified in Sections 82.119 and 82.120 of the Texas Property Code. These sections generally require a condominium association to present an independent third-party report from a licensed professional engineer which identifies defective elements in the common areas before it can file a lawsuit against developers or design professionals. Upon presentation of the report, the developer and design professionals will be afforded an opportunity to inspect and cure any deficiencies that are raised in the report. In addition, the provision provides a mechanism by which the unit owners must meet and approve the filing of any legal action related to construction or design defect claims. The approval before filing any legal action must be obtained from those owners holding more than 50 percent of the total votes allocated under the condominium declarations. At least 30 days prior to such a meeting, the unit owners must be provided with basic information regarding the potential legal action including a general description of the claim, what damages are being requested, how long prosecution of the lawsuit may take, and the chances of success. This notice to the unit owners must include a number of items including (a) a copy of the engineer’s report; (b) any attorney fee contract for counsel representing the association; (c) a description of all efforts to resolve the claim; (d) a disclosure that filing the lawsuit or initiating arbitration may affect the market value, marketability, or financing of the units while the claim is pending; and (e) how the association will fund the litigation. Curiously, this disclosure notice cannot be prepared by the law firm proposed to represent the association. To account for these new procedural hurdles, the limitations period for filing suit or arbitration is now tolled until one year after the date that these procedures are initiated by the association (provided that the procedures are initiated during the final year of the applicable statute of limitations).

Section 82.120 now authorizes condominium associations to mandate binding arbitration in its declarations for construction defect and design claims. This provision further limits the ability of unit owners to amend the declarations to modify any mandatory arbitration requirement if the applicable claims is based on acts or omissions that occurred prior to the amendment.

Both of these provisions merit close review by claims professionals handling construction defect or design claims for condominium associations and/or its subrogated insurers in Texas.

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Looking to the Constitution for Recovery Options Due to Seasonal Flooding

Flood.1Earlier this year, Houstonians awoke to find most of their city underwater. This month, South Carolina experienced torrential rains that were so severe that—in some areas—the total rainfall exceeded the expected rain totals for a 1 in 1,000 year storm. The World Resources Institute, in collaboration with four Dutch research organizations, estimated that total U.S. property damage from flooding could increase to over $400 billion by 2030. Flood damage will consistently be a serious issue for the insurance industry and one that needs to be constantly evaluated for recovery opportunities.

It is difficult to recover from the government for damages due to seasonal flooding. Both the Flood Control Act of 1928 (33 U.S.C. 702a et seq.) and common-law discretionary-function doctrine affords the government blanket immunity for flood-control plans. Generally, only a Fifth Amendment Takings-Claim is a viable theory against the federal government for damages caused by flooding. However, tradition dictated that a Fifth Amendment Takings-Claim required a permanent intrusion on private property rights. Thus, property owners had no remedy for the type of temporary flooding that occurs during seasonal flooding.

In 2012, the issue of whether damages caused by temporary flooding could be actionable under the Fifth Amendment was addressed by the United States Supreme Court. See Arkansas Game and Fish Commission v. United States, 133 S.Ct. 511 (2012). In a unanimous decision, the Court held that government-induced flooding of a temporary duration was compensable under the Fifth Amendment. The Court further stated that there was no bright-line rule to determining whether temporary-flooding rose to the level of a compensable taking. However, the Court provided the following guidelines for the lower courts to examine: (1) the duration of flooding; (2) the character of the land and owner’s anticipated use; (3) severity of the interference. Further, the Court held that taking must be an intended consequence of a government action or the recurrence of the flooding be so numerous as to be the reasonably foreseeable result of an authorized government action. (emphasis added)

Recently, the U.S. Court of Federal Claims, applying the rule from Arkansas Game and Fish Commission, found in favor for the plaintiffs in their claims against the government for flood damage after Hurricane Katrina. See St. Bernard Parish Government, et al v. United States, No. 05-1119, (May 1, 2015). The plaintiffs owned property in the Lower Ninth Ward and St. Bernard Parish (districts outside New Orleans) that were damaged by flood water originating from levee failures along the MR-GO waterway. MR-GO was a 71 mile waterway that was built as a short-cut for vessels traveling from the Gulf of Mexico to New Orleans. The Court adopted the plaintiffs’ experts’ opinions that the government’s failure to maintain MR-GO and the unintended destruction of the surrounding wet-lands caused an increased storm surge from Hurricane Katrina. The Court further agreed with the plaintiffs’ experts that MR-GO funneled the storm-surge into the Greater New Orleans-area, which led to the levee failures.

The St. Bernard Parish Government case is important because it indicates an expansion of the “reasonably foreseeable,” standard. The plaintiffs in St. Bernard relied on the government’s negligence in maintaining MR-GO and in the destruction of the protective wetlands to prove causation. Unlike the facts in Arkansas Game and Fish Commission, the government undertook no plan or action that caused flooding in the Lower Ninth Ward and St. Bernard Parish. Further, the trial court limited the importance that the temporary flooding needed to occur on a regular basis or seasonal basis. Plaintiff’s damages were a result of Hurricane Katrina’s flooding, however, the trial court accepted the testimony of lay witnesses that flooding occurred on other occasions in order to satisfy the numerous recurrence factor.

The government advised the trial court that it intended to appeal its decision on liability. Due to the possible government liability – not only for intentionally flooding property, but also if its negligence in maintaining the numerous waterways under its jurisdiction leads to a temporary flooding – this is an important case to track as it moves through the Court of Appeals.

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Consider Using Social Media to Enhance Your Subro Investigation

ICYMI: Social Media has Revolutionized the Gathering, Sharing and Publication of Information both Newsworthy and Non-Newsworthy. The use of social media posts authored by members of the public and casual observers to describe news-as-it-happens is prominent even among traditional media outlets. Social media posts, as we know (I do not want to belabor this), have several uses that range from keeping up with friends and family to keeping up with injuries to players on your favorite sports team. Craig Ferguson (and his robot sidekick Geoff) turned Twitter posts into comedy for the sleep deprived in Ferguson’s regular “Check ze Tweets” segments. While hilarity is most often not involved in any subrogation investigation, you should consider researching social media posts to supplement or kick-start your next investigation.

For example, I was checking ze tweets while waiting for my turn in court the other day and learned within minutes that a fire was ongoing at an in-town institution. Tweets were flying in first from casual observers and second from news outlets that described the location where smoke was first observed at the scene and where people thought the fire started. Many tweets included photographs that would make great trial exhibits and possibly aid the origin and cause investigation team with their efforts.

The uses to which social media posts can be used in your next subrogation investigation include the identification of witnesses, the possible finding of admissions of at-fault parties, the gathering of photographs taken from unique perspectives and vantage points at crucial points in time, the describing of unfolding events and the describing of events that may have occurred right up until the time of a particular occurrence. For example, this person’s tweet suggests that she may have been present at or near the time a fire started:

Social Media Tweet1.1



While this tweet suggests its author was observing the firefighting efforts:

Social Media Tweet2.2



Photographs taken by passersby are a-plenty:

Social Media Tweet3.3







Not to say that incorporating social media research into your next subrogation investigation will unearth that smoking gun, but you’ll never know unless you look for it.  Also, you can tell your significant other that you’re working the next time you’re busted for spending too much time with Facebook, your Twitter feed, your Instagram feed, Snapchat . . .

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