Appellate Cases of Interest

On 30 May 2008, plaintiff sustained a work-related to his right shoulder while employed as an estimator. On 21 November 2008, plaintiff was laid off as part of a company-wide reduction in staffing due to lack of work. Plaintiff later underwent surgery on the right shoulder and defendants initiated disability benefits. When plaintiff was released with permanent restrictions, defendants attempted to terminate plaintiff's benefits via Form 24 on the grounds that plaintiff was unable to prove ongoing disability as a result of his injury. The Form 24 was denied, but defendants were able to terminate plaintiff's benefits following successful appeals before the Deputy Commissioner and Full Commission, which found that plaintiff was capable of returning to work as an estimator but for the current economic downturn affecting the construction industry as a whole. As a result, plaintiff's current wage loss was deemed unrelated to his compensable injury. 

Claude Medlin v. Weaver Cooke Construction, COA 13-159 (Sept. 3, 2013)

In a split decision filed on 3 September 2013, a majority of the Court of Appeals affirmed the Full Commission Opinion and Award. Citing Hilliard, the Court held that an injured worker's incapacity to earn wages must be caused by the compensable injury. According to the majority, plaintiff was unable to establish disability resulting from his work injury. The Court focused on defendants' uncontroverted evidence that plaintiff was capable of returning to work in his regular duty pre-injury position as an estimator but for the current economic downturn. The majority also referenced Segovia, a case in which the plaintiff was laid off due to a decline in business with his benefits ultimately terminated when he could not establish that his loss of earnings was due to any disability arising from the injury. 

The dissent argued plaintiff proved he was disabled under the second Russell prong because he had been unable to obtain employment after a reasonable job search. As a result, the burden shifted to defendants to establish that there were suitable jobs available that plaintiff was capable of obtaining taking into account his physical and vocational limitations. The majority disagreed with the dissent's interpretation that the second prong of the Russell test was sufficient to establish disability by itself without producing evidence of any causal connection between the inability to locate work and the work injury. A Notice of Appeal to the Supreme Court has been filed in light of the dissent. 

Submitted by Joy Brewer, Brewer Defense Group. 

In the McDowell County case of Lunsford v. Mills, the plaintiff volunteer firefighter was injured when he arrived at the scene of a tractor-trailer accident to render assistance to the driver/tortfeasor, who had injured himself by flipping his rig. As the plaintiff attempted to carry defendant Mills to safety, he was struck by a second motorist and suffered injury. The plaintiff later filed suit against both drivers, whose carriers each had counsel file answers to the complaint - as did the plaintiff's UIM carrier. The relevant coverage limits were: $1mil for the truck driver, $50,000 for the second driver, and a combined $400,000 in UIM coverage through the plaintiff's carrier.

The second driver's carrier decided to tender its $50,000 coverage to the plaintiff, which the UIM carrier decided not to match to protect its subrogation rights against that second driver's personal assets. When the plaintiff then alleged that the UIM carrier needed to pay up its limits, before adjudication of the remaining claim against the truck driver and his carrier, the UIM carrier declined under the theory that it did not have to pay anything if the truck driver was found partially negligent for the injury - because the combined liability limits on both vehicles would exceed the available UIM coverage. Later, the plaintiff settled with the truck driver and his carrier for an additional $850,000. So, the plaintiff had recovered an aggregate total of $900,000 in liability coverage.

The plaintiff was about to recover more. The trial judge ruled that the UIM carrier should have paid its limits at the time of the $50,000 tender from the liability carrier, and entered judgment against the UIM carrier for its available coverage (after the credit for the liability coverage on the second vehicle) of $350,000. The UIM carrier cried foul, claiming that now the plaintiff had recovered twice for the same loss, as the UIM carrier should have received credit for the coverage on the other vehicle.

Nope, said the Court of Appeals. The comparison is not between the available UIM coverage and the total of all liability coverage on all cars - instead an "underinsured vehicle" is established for UIM purposes as soon as the coverage ON THAT VEHICLE ALONE has been exhausted without full compensation for the plaintiff's injury. Citing dicta from an earlier case, the Court has now established a new bright-line rule.   A UIM carrier can still get its money back in a case such as this, from the other at-fault driver, but only if it first pays the UIM claim to the plaintiff and then proceeds against the other driver's liability coverage in subrogation. Since the UIM carrier failed to do this in this case, the plaintiff gets to keep all the liability money AND get all the UIM money.

There is still an unanswered question about all this, however: why did the UIM carrier not get a hearing on the value of the plaintiff's claim? Perhaps in this case it was obvious (or even stipulated) that the plaintiff should recover at least $400,000 from the underinsured second driver - but in future cases that might not be obvious at all. So, practice point here is - evaluate the timing and availability of UIM coverage not on the parties as a whole, but instead as to each potentially underinsured vehicle involved in the case.

Just because you disagree with a ruling of a trial judge does not mean you get to appeal right away. This is true even if both sides to the appeal think the time is now. In the recent decision of Paradigm Consultants v. Builders Mutual, the North Carolina Court of Appeals decided that an order denying summary judgment to both parties, on claims regarding the carrier's duty to defend another suit, did not affect a substantial right and thus the appeal was not timely. 

Paradigm sued their customers the Raymonds to recover amounts it claimed was due for construction work. The Raymonds counterclaimed, alleging construction defects under both contract and tort theories. Paradigm tendered defense of the counterclaim to its insurer Builders Mutual, which refused to defend Paradigm because it claimed not such a defense was not owed under the policy. After that, Paradigm settled up with the Raymonds on various terms, including an amount of damages that would be owed from Paradigm to the Raymonds for the defects. The agreement required Paradigm to pursue coverage litigation against Builders Mutual, to be funded by the Raymonds. Paradigm then filed this action against its insurer.

At the summary judgment stage, the trial court ruled that neither party was entitled to summary judgment on the coverage issues, though it did grant summary judgment on another issue. Both parties appealed, alleging that prior case law stood for the proposition that the duty to defend another action affects a substantial right and thus denial of summary judgment on that issue justifies an immediate appeal. In ruling otherwise, the Court of Appeals emphasized that the trial judge had not certified his ruling for immediate appeal pursuant to Rule 54. In addition, the Court of Appeals decided that there was no immediacy to the appeal since, unlike in previous cases, the underlying case about which the duty to defend was being litigated was no longer pending - it had been settled prior to the filing of the coverage litigation, and thus there was no good reason to expedite an appeal before final judgment.

Practice point - if the parties to a dispute want to pursue coverage litigation as a resolution to that dispute, particularly as a team, the parties had best not officially end the underlying litigation prior to filing the coverage complaint, so that the legal issue on coverage can be submitted to the appellate courts more quickly.

It seems so simple. If you don't file an answer, you lose. Default is entered, so you are deemed to have admitted all the allegations in the complaint. But what happens if there is to be a hearing on damages (what we used to call "default and inquiry)? What evidence and arguments are allowed by the defense in such a hearing, and which are verboten because default has been entered? In the recent decision Webb v. McJas, Inc., the Court of Appeals allowed a judgment to stand where the Superior Court Judge awarded $992.88 in damages and $506.78 in attorney fees after a hearing on default damages involving a complaint that sought $139,259.86 in compensatory damages. Did we already say that the defendant was in default? 

The case arose out of a lease for a McAlister's Deli in Pitt County. After filing an amended complaint seeking the $139,259.86 in unpaid rent against an individual guarantor, judgment was eventually entered by the clerk for the full amount sought since the guarantor in question had failed to file an answer. In response to a later motion to set aside the judgment, filed by the guarantor, the trial judge set the default judgment aside but not the entry of default itself. As such, the case was scheduled for a damages hearing. After evidence was presented, another trial judge entered the much lower damages award after determining that the guarantor only guaranteed a portion of the amounts sought by the plaintiff, and that credits should apply given payments made by or on behalf of other defendants.

The plaintiff cried foul on appeal. Pointing out that the entry of default should have foreclosed any liability defenses, the plaintiff characterized the trial court's action as allowing a defaulting litigant to escape the consequences of his default status. The Court of Appeals disagreed, holding that in determining the correct amount of damages, the trial court was allowed to critically examine the evidence presented and come to the conclusion that not all the damages sought were recoverable from the guarantor as opposed to some other party. Since the documents that showed the guarantor did not guarantee the entire amount sought were attached to the complaint by the plaintiff himself, the judge could hardly ignore such evidence staring him in the face just because the defendant defaulted.

Practice point for the plaintiff: there is no need to attach all supporting documents to a collection complaint. Bare bones allegations, when admitted in default, create a cleaner record for entry of default judgment. For the defense: just because your client is in default does not mean you throw up your hands in defeat. Creative and persuasive lawyering can still be of great value to a defaulted client.