May 2010 Case Notes & Comments

“ Spring is nature’s way of saying, ‘Let’s party!’ " ~ Robin Williams

MONTHLY QUIZ: WHICH POLICY IS PRIMARY? Moving Company rented truck from Rental Company that was involved in a collision resulting in injuries. Moving company procured policy with a $750k limit. Rental Company obtained policy listing company’s vehicles that contained a $1 mil. per occurrence limit, as well as an endorsement seeking to limit liability “for rentees to $50,000” per accident. Both policies contained “other insurance” clauses. Query A: Which policy provides primary coverage? Query B: Which limit applies on Rental Company’s policy? You be the judge. (Answer below).


U.S. SUPREME COURT: COURT ADOPTS “NERVE CENTER” TEST IN ALL FEDERAL CASES WHERE JURISDICTION IS BASED UPON DIVERSITY-OF-CITIZENSHIP PURSUANT TO 28 U.S.C. §1332: Plaintiffs, California citizens, sued Hertz claiming violations of state wage and hour laws. Hertz filed a motion, seeking removal to federal court with declaration claiming that Hertz was a citizen of New Jersey, the state where its “corporate headquarters” and “major administrative operations” were located and where “core executive and administrative functions… [were] carried out.” In finding Hertz a citizen of CA, the trial and appellate courts applied the local test, which considered such factors as the volume of business conducted in CA versus other states. In reversing the lower courts and finding Hertz a citizen of New Jersey, the US Supreme Court rejected the different tests applied by the different Circuits over several decades, which were “too complex and impractical to apply.” In an effort to find an easier and unified approach, the court adopted the “nerve center” test, which determines diversity jurisdiction based upon the place “where a corporation’s officers direct, control, and coordinate the corporation’s activities….[which is] normally … the corporation[‘s] headquarters – provided that the headquarters is the actual center of direction, control, and coordination, … and not simply an office where the corporation holds its board meetings.” Hertz Corporation v. Friend, et al., 130 S.Ct. 1181 (S. Ct. Feb. 23, 2010)


ILLINOIS SUPREME COURT: HIGH COURT MODIFIES PRIOR OPINION - CLARIFIES WHICH SETOFFS ARE FOREFEITED IF NOT PLEAD AS COUNTERCLAIM: In original opinion, IL Supreme Court held that doctor forfeited his claim for setoff by not pleading it as a counterclaim pursuant to § 2-608 of the IL Code of Civil Procedure. On rehearing, the court modified its prior opinion, clarifying that § 2-608 applies to defendants who have “a distinct cause of action against the plaintiff who filed suit against him.” Therefore, defendant was not required to plead set-off as a counterclaim. However, in affirming prior result, the court found that defendant was not entitled to any setoff since he waived the argument that plaintiff made a double recovery and failed to prove that any portion of the settlement was allocated, or attributable, to the negligent infliction of emotional distress claim against him. Thornton v. Garcini, ---N.E.2d---, 2010 WL 1714000 (IL S. Ct. April 22, 2010)


LEF WINS APPEAL – RELEASE AND INDEMNITY AGREEMENT BARS CLAIMS AGAINST TOUR OPERATOR: Congratulations to Edward J. Leahy and James J. Sanders, who prevailed as appellee in First Appellate District. On a motion for summary judgment, Mr. Leahy and Mr. Sanders successfully argued that the claims against a Segway tour operator were barred by Plaintiff’s execution of a “Release and Indemnity Agreement”, which included an exculpatory clause, prior to the tour on which she was injured. Plaintiff appealed, arguing that the release was unenforceable. The Appellate Court affirmed, holding that the release was valid, enforceable, and applicable to the underlying occurrence. Hamer v. City Segway Tours of Chicago, Case No. 1-08-3371 (1st District, April 22, 2010).


LEF CONGRATULATES JOHN MCINERNEY: Leahy, Eisenberg & Fraenkel, Ltd. thanks John J. McInerney for his over 30 continuous years of service to the firm. John specializes in large loss litigation.


ANSWER TO QUIZ: Both policies are primary. The “other insurance” clauses cancelled each other out. Court also found Rental Company’s policy was ambiguous since two endorsements, each with different limits, purported to apply. Therefore, Rental Company’s policy also provided $1 mil. in coverage. American Service Insurance Company v. Jones, --- N.E.2d---, 2010 WL 1254856 (1st District, Mar. 31, 2010)