December 2020 Case Notes & Comments

"The year end brings no greater pleasure then the opportunity to express to you season's greetings and good wishes. May your holidays and new year be filled with joy." ~ Charles Dickens

MONTHLY QUIZ: North Pole Village holds Winterfest every year in the downtown area on closed public streets. The wildly popular festival includes a bandstand, beer tents, carnival rides and food and craft vendors and is attended by Santa, Mrs. Klaus, Grinch, Hanukah Harry, Santa's Elves, Abominable Snowman and 10-15 thousand other daily attendees. To create a walkway for patrons, Village blocks off a route from the designated parking area, down Main Street, to the entrance gates. While walking back to the designated parking area from Rudolph's music concert, Jack Frost falls on a sewer grate that is allegedly sunken, broken and in disrepair. Frost sues the Village for failure to repair, inspect, barricade and warn Frost of the alleged condition. Notably, the portion of Main Street where Frost fell is closed every year for Winterfest, as well as periodically throughout the year, for recreational activities such as the annual post-holiday fun run. North Pole's Governmental Immunity Statute affords the Village immunity for injuries sustained on property "intended or permitted to be used as recreational property," as long as the injuries were not caused by willful or wanton conduct. Village files a motion for summary judgment on the grounds that immunity applies because at the time of Frost's fall and at other times throughout the year, Main Street is being used for recreational purposes. Frost argues that his injuries did not occur on recreational property as Main Street was only partially closed for Winterfest and is normally used for non-recreational purposes, such as vehicle traffic. Who is right? Should Main Street be considered recreational property? Is this case appropriate for summary judgment? You be the judge. (Answer below).

WORKERS' COMPENSATION - CIRCUIT COURT CANNOT RELY ON PRIMARY JURISDICTION DOCTRINE TO STAY COMMISSION'S 19(B) PROCEEDINGS: Employee was injured in an April 2017 forklift accident at Employer's facility and underwent surgery. Employer paid Employee's lost wages and medical expenses, but did not report the injury to its Insurer. When Employee discovered the need for follow-up surgery, Employee filed a workers' compensation claim and roughly five months later, filed a 19(b) Petition. Insurer filed a complaint for declaratory action in the circuit court asserting that no coverage was owed since Employer failed to provide proper notice. Insurer also contended that by paying Employee's surgery-related expenses, Employer voluntarily elected to forgo coverage. When Commission scheduled a hearing on Employee's 19(b) Petition, Insurer filed an emergency motion to stay the proceedings until the coverage action was resolved, which the circuit court granted. In the various motions that followed, the parties took opposing positions as to which venue (i.e. Commission v. circuit court) was proper for determining coverage issues and whether the circuit court had authority to stay the 19(b) proceedings. The circuit court determined that it had "primary jurisdiction" over coverage issues, such as late notice, and entered a stay on the Commission's proceedings. The appellate court lifted the stay and the matter was taken by the Illinois Supreme Court. The Illinois Supreme Court affirmed the judgment of the appellate court and remanded the matter. The Illinois Supreme Court determined that the "primary jurisdiction doctrine," which allows a court to stay judicial proceedings while it refers all or some portion of the matter "to an administrative agency having expertise in the area," was not applicable to these circumstances and did not serve as a basis to stay the proceedings before the Commission. The Illinois Supreme Court reasoned that entering a stay as to Employee's 19(b) petition, which sought to determine whether Employee was entitled to benefits, was contrary to the expeditious resolution of issues. The issue was remanded  and ultimately reviewed a second time by the appellate court, who entered an opinion consistent with the Illinois Supreme Court's prior decision. West Bend v. TRRS Corp. et al., 2019 IL App (2d) 180934 (Oct. 16, 2020); see also West Bend v. TRRS Corp. et al., 2020 IL 124690 (Jan. 24, 2020).

COVID-19 UPDATES - NORTH CAROLINA GRANTS PARTIAL SUMMARY JUDGMENT IN FAVOR OF INSURED RESTAURANTS: A North Carolina state trial court granted Insured-Restaurant Group partial summary judgment. Insured-Restaurant Group, which operates sixteen restaurants, procured "all risk" policies, which defined "loss" as "accidental physical loss or physical damage," and covered loss of use of and access to covered property. The court granted judgment in favor of the Insured-Restaurant Group, reasoning that the term "physical loss" could be reasonably interpreted to include "the inability to utilize or possess something in the real, material, or bodily world, resulting from a given cause without the intervention of other conditions.... [which] is precisely the loss caused by the Government [shutdown] Orders. Plaintiffs were expressly forbidden by government decree from accessing and putting their property to use for the income-generating purposes for which the property was insured." North State Deli, LLC v. The Cincinnati Ins. Co, Case No. 20-CVS-02569 (Oct. 7, 2020).

CALIFORNIA REJECTS CLAIM CHARACTERIZING RESPIRATORY DROPLETS AS CAUSE OF LOSS RATHER THAN COVID-19 -  Insured filed a claim for loss of business income due to California's shelter-in-place orders. When facing Insurer's motion to dismiss, based upon a virus exclusion, the Insured characterized its loss as resulting from respiratory droplets on surfaces at its building, claiming that "the droplets (not the virus itself) are the real focus of ordinances seeking to limit human to fomite to human transmission and should have been the real focus of damage or loss investigation by "damage or loss investigation by" Insurer. Founder Institute Inc. v. Hartford Fire Ins. Co., 3:20-cv-04466 (N.D.Cal. Oct. 22, 2020).

POLICY CONDITIONS - 7 AND 11-MONTH DELAYS IN REPORTING TWO ALLEGED HAIL CLAIMS VIOLATED POLICY'S PROMPT NOTICE CONDITION: Insurer issued condominium policies that insured Insured-Association's 31 buildings against risks of direct physical loss or damage during the policy periods. Around the time of the first hailstorm, Association's management allegedly looked into and "tried to file"  a claim for roof damage, but was allegedly told by an unidentified agent of Insurer that "it would be a waste of time." Five months later, however, Association's Property Manager inspected the roofs and convinced Association to file a claim. Repairs were made and 2 months later, the Association filed a claim. Though Association submitted a proof of loss for more than $1M, Insurer determined that Association was entitled to $14,066.94 and advised Association that it could not verify that the claimed damages occurred during the coverage period. Association sustained a second hailstorm, but waited 11 months to file a claim with Insurer. Insurer agreed that a storm occurred, but determined that Association did not sustain any damage in the second storm and denied the claim. Association sued for breach of contract and bad faith. Association argued that Insurer waived its right to the prompt notice condition because Insurer's agent discouraged Association from filing a claim. The court, however, found the alleged conversation with Insurer's agent "irrelevant" to whether the Association complied with the condition. During discovery, Association only offered the testimony of the Property Manager, who could not independently verify the details of the supposed conversation between Association and Insurer's unidentified agent. Accordingly, the court determined that no reasonable juror could conclude that Insurer had been put on notice as to the alleged hail claims, and granted summary judgment. Mapleton at Countryside Condo. Ass'n, Inc. v. Travelers Indem. Co., 2020 WL 4448458 (S.D. Ind. Aug. 3, 2020).

BATHROOM SLIP CLAIM FAILS DUE TO LACK OF PROOF OF TIME-FRAME; INTERNAL INSPECTION POLICY INSUFFICIENT TO CREATE HEIGHTENED LEGAL DUTY: Plaintiff slipped and fell on a liquid substance in a restroom at a craft brewery. Because plaintiff could not describe the type or extent of the liquid, how it ended up on the floor, or how long it had been there prior to his fall, the trial court granted summary judgment for the defendant. On appeal, the First District affirmed. Because there was no evidence to suggest that defendant created the liquid or had actual notice thereof, the sole issue was whether defendant had constructive notice of the condition - the liquid on the floor - for a sufficient length of time that the defendant should have known of its presence and taken measures to prevent the dangerous condition. The Court noted that establishing a time period is critical to showing constructive notice. In this case, one employee inspected the bathroom two hours before the fall, with a second inspecting it again at an unknown time thereafter. It would therefore be pure speculation or conjecture as to whether the liquid was present for two hours or two minutes; speculation and conjecture are insufficient to create a question of fact to defeat summary judgment. Plaintiff further attempted to argue that the defendant owed a duty to inspect the restroom every 30 minutes, based upon the bar manager's testimony that it was his personal policy to inspect the restrooms every 30 minutes when the bar was crowded. The Court rejected this, noting that a defendant's internal policy (official or otherwise) by itself does not create a legally binding duty, or establish a heightened legal duty beyond that required by common law. In addition, the Court held that because the bar manager's personal 30 minute inspection policy was never communicated to or relied upon by its customers, Plaintiff could not claim a duty based upon a voluntary undertaking. Tafoya-Cruz v. Temperance Beer Company, LLC, 2020 IL App (1st) 190606 (July 29, 2020).

ANSWER TO QUIZ: Frost wins, Village loses. The purpose of the Illinois Local Governmental and Governmental Employees Tort Immunity Act ("Act"),745 ILCS 10/1-101, et seq., is to protect public entities from liability arising from the operation of government. Section 3-106 of the Act seeks to extend that immunity to public entities who use public lands for recreational purposes, such as parks and playgrounds. In such cases, Illinois courts must focus on the character of the property as a whole, not the activity at any given time. Here, given the conflicting positions as to the use of "Main Street," the court found that questions of material fact existed as to whether a festival and fun-run on a public street were sufficient to alter the character of a public street and make it "recreational" in nature. Donath v. City of Plainfield, 2020 IL App (3d) 190762 (Oct. 6, 2020). COMPARE: Bubb v. Springfield School District, 186, 167 Ill. 2d 372, 378 (1995)(four-square lines painted on a sidewalk evinced an intent to use that part of the public sidewalk for recreational purposes).

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