Recent NY Decision Discusses the Scope of Limitations of Liability Contained in an Electric Utility’s Tariff and Other Affirmative Defenses

 

gavel.1On February 27, 2015, District Judge Joanna Seybert of the Eastern District of New York issued a significant and informative Decision on the issue of striking a defendant’s affirmative defenses in Allstate Ins. Co. v. Long Island Power Authority, 14-CV-0444, NYLJ 1202719533249 (E.D.N.Y., Decided February 27, 2015). The decision discusses the legal standard for moving to strike affirmative defenses, as well as explains in detail the Court’s rationale in either granting or denying the motion as to several common defenses asserted in tort actions. As discussed below, the Decision is particularly informative with respect to the scope of the limitations of liability contained in a New York power company’s Tariff. The decision also clarifies that spoliation of evidence is a discovery issue rather than an affirmative defense.

When a plaintiff commences litigation by filing a Complaint, the responsive pleading served by counsel for the defendant almost always contains “affirmative defenses” to the plaintiff’s causes of action. When suit is commenced against a New York utility, the utility’s Answer often includes an affirmative defense asserting that the plaintiff’s causes of action are barred by limitations of liability contained in the utility’s tariff. A tariff is document which sets forth and explains the terms and conditions of a utility company’s relationship with its customers. Tariffs are made available to the public and filed with the New York Public Service Commission (“PSC”), the entity which, among other things, is responsible for regulating and overseeing the water, gas, electric and telecommunications industries in New York.

In Allstate Ins. Co. v. Long Island Power Authority, the plaintiff, Allstate Insurance Company as subrogee of Lawrence F. Dooling and Barbara A. Dooling (“Allstate”), moved to strike seven affirmative defenses asserted in the Answer served by the defendants, Long Island Power Authority (“LIPA”) and National Grid (collectively, “defendants”). In this lawsuit, Allstate is seeking to recoup its payments to its subrogors (“the Doolings”) related to property damages sustained as a result of an electrical fire at their property in Hampton Bays, New York. Allstate’s Complaint alleges that the defendants negligently caused the electrical fire by failing to properly supply electricity to the property.

In deciding Allstate’s motion seeking to dismiss the defendants’ seven affirmative defenses, the Court acknowledged that a motion to strike is generally “determinable only after discovery and a hearing on the merits,” and that “[a] court may therefore strike only those defenses so legally insufficient that it is beyond cavil that defendants could not prevail upon them.” Id. at 5. However, in a Memorandum and Order likely to be referenced many times in the future, the Court partially granted and partially denied Allstate’s motion, which resulted in dismissal of four of the defendant’s affirmative defenses.

The Court’s decision and rationale is particularly insightful with respect to the dismissal of two of these affirmative defenses that arise often in tort litigation against utilities in New York. In their Sixth Affirmative Defense, the defendants relied on language contained in Leaf No. 27 of LIPA’s Tariff, which states, in pertinent part: “[LIPA] will not be liable … [f]or interrupted, irregular, defective or failed service if the causes are beyond [LIPA’s] control or are due to ordinary negligence of its employees or agents.” Id. at 8 (citation omitted). However, the Court determined that this Tariff was inapplicable in the present case which seeks to hold defendants liable for their negligent supplying of electricity rather than for an “interrupted, irregular, defective, or failed service.” Id. at 8. For this reason, the Court struck this affirmative defense as being inapplicable in this case. Significantly, the Court also noted that “even if the language of Leaf No. 27 covered liability arising out of the supply of electricity, Section 281.1 of the PSC’s regulations prohibits any such limitation of liability.” Id.

The defendants’ Fifth Affirmative Defense pertains to spoliation of evidence. In granting Allstate’s motion to strike this affirmative defense, the Court clarified that spoliation of evidence is not an affirmative defense, but rather a discovery issue. Specifically, the Court cited to New York case law holding that the rule dealing with spoliation of evidence “does not prevent recovery by the plaintiff; it merely leads to the exclusion of evidence or to the admission of negative evidence.” Id. at 8 (citation omitted).

In addition to being a resource of information regarding these commonly asserted affirmative defenses, the Court’s decision is important in that a motion to strike is rarely a device that is used by subrogating plaintiffs and is one that should be reviewed and analyzed when an answer to a complaint is interposed. If a motion to strike is appropriate, it can be a useful way to streamline the discovery process and narrow the issues pertinent to obtaining a successful recovery.

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