Arthur D. Burger and Caroline Y. Lee-Ghosal are participating in a live-broadcast webinar on April 26 to discuss ethical considerations in litigation strategy. The webinar begins at 12 pm, and all attendees will earn 2 hours of CLE credit.
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Upcoming Webinar: The Litigator’s Guide to Evidentiary Objections
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Federal court in Maryland confirms “unmarketable” relates to title, not property.
The United States District Court for the District of Maryland recently dismissed a title policy holder’s claim regarding an allegedly unmarketable title and provided especially useful language to the industry. In Kiritsis v. Stewart Title Guaranty Co., the court confirmed that “unmarketable” as used in the policy was not ambiguous and that the term related solely to title and not the property itself.
Plaintiffs owned one dwelling across three adjoining parcels in Ocean City, Maryland. Plaintiffs entered into a sales contract with a developer who announced a plan to replace the existing residence and erect separate dwellings on each of the three lots. Shortly thereafter, Plaintiffs’ neighbor filed suit to bar the development claiming that Ocean City’s Zoning Code prohibited the announced plan. The developer’s intended title insurer would not issue a policy absent an exception for the neighbor’s claim, which caused closing to be disrupted. The Plaintiffs made a claim on their title policy asserting that title to their property was unmarketable.
The Kiritsis Court analyzed whether the title was unmarketable and held that the term referred solely to legal title of the property and neither to its usage nor value. The Court noted that “[i]f a storm destroyed part of a building on a piece of property, it would certainly make the property less desirable or ‘marketable,’ but it would have no impact on whether the title to the property was valid.” Concluding that the policy would not afford the relief demanded by Plaintiffs, the Court held that it “is not the purpose of title insurance to insure against any possible claim brought against owners of a property; rather, as its name suggests, its purpose is to insure against claims to the title of the property at issue.” The Court also noted the policy’s exception for losses related to police powers, zoning, and land use. While a potentially predictable win for the title industry, the decision is useful for practitioners given the strong favorable language throughout the opinion.
Jackson & Campbell, P.C. represents title insurers and insureds in Maryland, Virginia, and Washington, D.C. and we strive to keep our clients and other title professionals up to date on various developments in the law. Additionally, we present no-cost in-house updates of the nation’s most noteworthy cases and national trends following the spring and fall American Land Title Association’s Title Counsel meetings.
If you have any questions about this case or laws impacting real estate in and around the Washington, D.C. region, feel free to contact us. Our Real Estate Litigation and Transactions Practice Group is ready to assist.
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Court of Appeals of Virginia opens door to second round of easement litigation
The Court of Appeals of Virginia affirmed the denial of an implied easement absent evidence of its location but may have encouraged the parties to further litigate the issue. In Morris v. Parker, the central issue initially before the trial court was whether the Morrises had established an implied easement to use a platted but unimproved road partially upon the Parkers’ property.
The Morrises owned two lots—Lot 3 being to the west of Lot 5—with Lot 5 bordering a platted but unimproved right of way known as Flurry/Fluridy Road on its east side. Mr. Morris testified at trial that he never used Flurry/Fluridy Road but accessed Lots 3 and 5 via two other entrances to the west and south. The Parkers owned the property on the east side of Flurry/Fluridy Road. The Parkers accessed their property via a gravel road to the east of their parcel. The Morrises subdivided their property and sought to benefit a newly-created Lot 5-A by paving the platted Flurry/Fluridy Road—claiming that it was the same gravel road used by the Parkers—and using it as a driveway.
Importantly, neither side provided the trial court with any accurate description of the physical location of the claimed easement. While a title examiner testified that both properties were once owned by a common grantor as well as to the location of Flurry/Fluridy Road in the land records, no one testified as to the physical location of the platted Flurry/Fluridy Road or whether it was developed or not. For his part, Mr. Morris testified that he did not know whether the gravel road was in the same place as the platted Flurry/Fluridy Road.
The trial court found in favor of the Parkers holding that there was no evidence that the easement was in use at the time of the severance or that it was apparent, continuous, and reasonably necessary. On appeal, the Court of Appeals affirmed on a narrower basis under the “right-result-different-reason” principle. No evidence linked the platted right of way to an actual physical location. As the Morrises failed to establish the location of the claimed easement, their cause of action failed.
While the Parkers’ trial court victory was affirmed, they may only have a short reprieve from litigation. The Court of Appeals stated in a footnote that its “ruling does not preclude the Morrises from instituting an action alleging an easement over a different location that might correspond to the platted Flurry/Fluridy Road.” The parties are likely in for Round 2.
Jackson & Campbell, P.C. represents title insurers and insureds in Maryland, Virginia, and Washington, D.C. and we strive to keep our clients and other title professionals up to date on various developments in the law. Additionally, we present no-cost in-house updates of the nation’s most noteworthy cases and national trends following the spring and fall American Land Title Association’s Title Counsel meetings.
If you have any questions about this case or laws impacting real estate in and around the Washington, D.C. region, feel free to contact us. Our Real Estate Litigation and Transactions Practice Group is ready to assist.
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Arthur D. Burger to sit on American University Law Review Symposium Panel
Arthur D. Burger, Of Counsel at Jackson & Campbell P.C., will sit on a panel at the American University Law Review Symposium on artificial intelligence on February 9, 2024, from 3:15 p.m. to 4:35 p.m., addressing how the principles of legal ethics will adapt to the use of this burgeoning technology by lawyers and law firms. The program will be live streamed for those who register. Click here to sign up today.
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New York Appellate Court Concludes That Insurer Waived Coverage Defense by Failing to Timely Deny Coverage
Courts in many jurisdictions generally recognize that coverage for an otherwise uncovered claim cannot be created through the doctrine of waiver. A New York appellate court has recently taken a different approach. In Titan Indus. Servs. Corp. v. Navigators Ins. Co., 2024 NY Slip Op 00041 (App. Div. Jan. 4, 2024), the New York Appellate Division, First Department, concluded that a general liability policy provided additional insured coverage to a contractor because the insurer failed to timely disclaim coverage. The coverage action arose from injuries sustained by an employee of a subcontractor on a jobsite. The employee filed a lawsuit against the general contractor (Titan). Titan sought additional insured coverage under an insurance policy issued by Navigators to the subcontractor through a tender issued by its broker and then, several months later, sought coverage through a tender Titan submitted directly to Navigators. The Navigators Policy contained a “Designated Persons or Entities” Exclusion that specifically excluded coverage for Titan. Navigators, however, waited over three months to deny coverage for Titan direct tender. Titan initiated coverage litigation and argued that Navigators failed to timely disclaim coverage under New York law. Specifically, Insurance Law § 3420(d)(2) requires insurers to provide written notice of the disclaimer as soon as reasonably possible after receiving a tender for coverage. When the demand for coverage is obvious and does not require an investigation, some courts have found that 30 days is unreasonable. When an insurer fails to timely disclaim coverage under this law, they waive the right to deny coverage.
The trial court overseeing the coverage litigation ruled that Navigators’ failure to timely disclaim coverage was irrelevant as Titan was never an insured under the policy. According to the court, “the policy language provides no coverage for Titan whatsoever, not simply as a result of a specific policy exclusion where Titan would otherwise be covered.” Titan appealed the result, arguing that the New York law on timely denials of coverage applied to the endorsement in this case.
The Appellate Division sided with Titan, reversed the trial court’s ruling, and concluded that Navigators could not deny coverage based on its untimely coverage determination. The Court held that because Navigators sought to deny coverage based on a policy exclusion, it was required under Insurance Law § 3420(d)(2) to provide written notice of the disclaimer as soon as reasonably possible after receiving Titan’s tender. The Court noted that the application of the exclusion was obvious and did not require an investigation. Accordingly, the Court held that Navigators’ unexplained delay in disclaiming coverage – seven months after the first tender and almost three months after the second – was unreasonable as a matter of law. Although the appellate court concluded that Navigators had a duty to defend Titan, it held that Titan was not entitled, at this stage of the litigation, to a declaration that Navigators had a duty to indemnify Titan.
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Upcoming DC Bar CE Course: Discussing Common Ethical Dilemmas Today’s Attorneys Face
Join Arthur D. Burger and Caroline Y. Lee-Ghosal for an upcoming CE class through the DC Bar, “Discussing Common Ethical Dilemmas Today’s Attorneys Face”. The class will take place on February 13 from 6:00 PM – 8:15 PM EST.
This interactive class uses a series of video vignettes that the Association of Professional Responsibility Lawyers (APRL) has produced that APRL designed to present fact scenarios that illustrate various ethical issues that often arise. The vignettes will show volunteer attorneys who role-play different encounters between an attorney and a client, or an attorney and other attorneys, which highlight various ethical issues in a way that will promote a frank discussion of the principles and policies that underlie the rules and the boundaries of their application, which our faculty expert will facilitate.
This class will provide practical advice in navigating the ethical dilemmas that lawyers often encounter and is a must for all practitioners regardless of their firm or organization size, and their area of practice.
Learn more and register here.
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The Appellate Court of Maryland addresses choice of law question
The Appellate Court of Maryland addresses choice of law question, holding law from the place where the injury initially developed applies.
In Blackston v. Drs. Weight Loss Centers Inc., No. 553, Sept. Term,2022, 2023 WL 4247374 (Md. Ct. Spec. App. June 29, 2023), cert. granted sub nom. Doctor’s Weight Loss Centers, Inc. v. Blackston, 486 Md. 96, 302 A.3d 542 (2023), Plaintiff developed a MRSA infection following laser-assisted liposuction. She sued for malpractice and lack of informed consent in Prince George’s County against a Virginia company. At issue was whether the injury was complete on introduction of bacteria, in Virginia, where the surgery occurred, or on development of infection, in Maryland. The trial court applied Maryland law but this was overturned. The appellate court held that a cause of action for medical negligence arises where the injury first came into existence, not where the ultimate damage was suffered. The appellate court found Ms. Blackston was “injured” during the Virginia procedure when MRSA bacteria were introduced. Accordingly, Virginia law applied to non-economic damages and recovery of medical expenses. The Drs. Weight Loss Centers Inc. appealed, and the Supreme Court of Maryland granted cert., but has not yet ruled.
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Fifth Circuit Proposes Expansive AI Disclosure Rule
After a pair of New York attorneys were aggressively sanctioned in June by a federal district court for submitting wholly fictional case citations they obtained from ChatGPT, lawyers, and legal scholars around the country, have rapidly become more aware of the dangers associated with irresponsible use of artificial intelligence and generative algorithms. Now, one federal appellate circuit court appears to be taking this issue a step further.
On November 29, 2023, the 5th U.S. Circuit Court of Appeals proposed a new submission requirement associated with the use of artificial intelligence. The new rule would require attorneys in appellate procedure to include a certification in every pleading, similar to already-existing certifications concerning compliance with formatting and other pleading standards, concerning the use of generative AI in the preparation or creation of the pleading. Rather than entirely foreclosing the use of AI, however, the proposed rule would allow attorneys to state whether AI had been used in any capacity and, if so, that a human being had reviewed the document for accuracy prior to its submission. The certification is as follows:
This document complies with the AI usage reporting requirement of 5TH CIR. R. 32.3 because:
□ no generative artificial intelligence program was used in the drafting of this document, or
□ a generative artificial intelligent program was used in the drafting of this document and all generated text, including all citations and legal analysis, has been reviewed for accuracy and approved by a human.
Proponents of the rule argue that it will act as an important reminder to help attorneys avoid relying too much on this emerging technology. In particular, requiring attorneys to choose between the two options could serve as a reminder to more closely scrutinize pleadings which may have been prepared in part by support staff. However, others can point out that the signature of an attorney on a pleading (required by Rule 32(d) of the Federal Rules of Appellate Procedure) already serves as an implicit certification that the attorney stands behind the validity of the pleading similar to the explicit certification in the Federal Rules of Civil Procedure. Rule 11 of the FRCP provides that an attorney’s signature serves as an affirmative declaration that “the claims, defenses, and other legal contentions” in the pleading “are warranted by existing law or by a nonfrivolous argument for extending, modifying, or reversing existing law or for establishing new law.” Because established rules and conventions already include safeguards to prohibit attorneys from submitting pleadings they have not reviewed, some could see this new requirement as duplicative.
The legal profession has long depended on support staff for research and drafting assistance, but such assistance ordinarily carries with it an expectation of good faith. Unlike support staff that might merely make mistakes in conducting research or checking citations, a generative artificial intelligence needs no malicious intent to invent citations or entire cases. Like the New York attorneys learned, the possibility of “AI hallucination” (where an AI attempts to answer a question by imagining what the answer could be rather than relying on actual sources) opens the legal profession up to serious sanctions when AI-generated content and research is not checked for accuracy.
This summary is not intended to contain legal advice or to be an exhaustive review. If you have any questions regarding this article, please contact Chris Ferragamo at Jackson & Campbell, P.
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Maryland Appeals Court gives Defendants Burden of Proving Apportionment of Damages
In Williams v. Dimensions Health Corp., No. 0036, 2023 WL 5523951 (Md. App. Ct. Aug. 28, 2023), defendant challenging damages as having a proximate cause other than its negligence has the burden of proving apportionment.
Plaintiff claims his physician negligently caused a right leg amputation after a car accident. The MVA – not physician negligence — necessitated a left leg amputation and other injuries. Defendant claims the court should apportion damages between future care costs necessitated by the accident versus those caused by physician negligence. The court denied the motion. Plaintiff won $6,285,549.
On appeal the appeals court found that plaintiff presented sufficient evidence to support the jury’s award and noted there was conflicting evidence regarding the proximate cause of the future medical care. Neither party raised divisibility or objected to the admission of plaintiff’s experts’ testimony about future care needs. Rather, the Defendant’s experts testified the future needs were caused by the car accident, not physician negligence.
The court explained that where damages are theoretically divisible, the plaintiff’s burden is to prove negligence was at least a contributing proximate result of the harm. The burden then shifts to the defendant to either deny all liability or prove the harm caused can be divided and apportion the damages. For divisibility to be an issue, the circuit court must make a finding as to the ability of the harm to be apportioned. If the circuit court does not determine that the injuries are divisible, it is the jury’s role to determine divisibility and the harm apportionable. In Williams, no party asked the court to determine as a matter of law whether the claimed injuries were divisible. Because the time to raise the divisibility issue is through a Daubert-Rochkind hearing, at the admission of expert testimony, and/or jury instructions regarding the admissibility of expert testimony, the Court in this matter need not determine whether the injuries were divisible.
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United States District Court for the District of Maryland grants summary judgment on 3(a) exclusion
Earlier this week, the United States District Court for the District of Maryland granted, in part, summary judgment against a title insurer for failing to provide a defense to an underlying fraud and conspiracy action. In Sharestates Investments, LLC v. WFG National Title Ins. Co., the Court reaffirmed that the duty to defend is significantly broader than the duty to indemnify, and a claim which potentially touches upon an insured’s title may trigger the duty to defend.
In Sharestates, Sharestates placed a deed of trust on a Baltimore parcel owned by an entity controlled by Jean Agbodjogbe. After the parcel was secured by the Sharestates deed of trust, Alia Al-Sabah obtained a judgment against Agbodjogbe holding that he had wrongfully obtained $7.8 million from Al-Sabah under the false promise that various properties, including the disputed parcel, would be titled in Al-Sabah’s name. Subsequent to obtaining the first judgment against Agbodjogbe, Al-Sabah filed a second action against Sharestates alleging conspiracy to obtain a fraudulent mortgage and aiding and abetting Agbodjogbe’s fraudulent conduct.
Sharestates tendered the second suit to its title insurer. WFG denied coverage and refused to provide a defense. After Sharestates filed suit alleging breach of the insurance contract against WFG, Sharestates moved for summary judgment. WFG defended asserting that the claims raised by Al-Sabah sounded in tort and were not against title but, even if they were, exclusion 3(a)—that the claims were created, suffered, assumed, or agreed to by WFG—precluded a claim for defense.
The Court roundly disagreed with WFG and noted that Al-Sabah’s suit alleged she held equitable title to the property stripped of Sharestates’ lien. The Court further noted that WFG’s 3(a) defense was inapplicable. Al-Sabah’s suit against Sharestates did not allege that Sharestates caused the initial change in title to the Property into Agbodjogbe’s wholly-owned entity. Instead, Al-Sabah alleged that Sharestates improperly issued its deed of trust to Agbodjogbe’s wholly-owned entity after title had passed to the entity but Al-Sabah’s adverse claim against the entity—and, thus, Sharestates’ interest in the parcel—stemmed from Agbodjogbe’s initial fraudulent conduct. WFG, the Court concluded, owed a defense obligation until such time as Sharestates was ultimately dismissed from the action.
Jackson & Campbell, P.C. represents title insurers and insureds in Maryland, Virginia, and Washington, D.C. and we strive to keep our clients and other title professionals up to date on various developments in the law. Additionally, we present no-cost in-house updates of the nation’s most noteworthy cases and national trends following the spring and fall American Land Title Association’s Title Counsel meetings.
If you have any questions about this case or laws impacting real estate in and around the Washington, D.C. region, feel free to contact us. Our Real Estate Litigation and Transactions Practice Group is ready to assist.
Chris Glaser
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Virginia Court of Appeals Rules that Statements Made by Decedent to His Heirs About the Cause of His Fall at a Hospital Were Sufficiently Collaborated by Statements Made to Disinterested Witnesses to be Admissible Under the Dead Man’s Statute
In Bon Secours-DePaul Med. Ctr., Inc. v. Rogakos-Russell, No. 1134-22-1, 2023 WL 7134822 (Va. Ct. App. Oct. 31, 2023), Father Constantine Rogakos, a Greek Orthodox priest, died after falling in an ultrasound examination room. His Estate sued and at trial, the evidence established that Father Rogakos was elderly and had difficulty standing and walking independently. There was no dispute that he had fallen after his sonographer left him unattended in the room to remove his clothing. Prior to his death, Father Rogakos told his family members, attending physician, and another priest that he had leaned on a unlocked stretcher which moved, causing him to fall. The hospital moved to set aside an adverse jury verdict based on Virginia’s Dead Man Statute, Virginia Code Section 8.01-397, which states that “[i]n an action by . . . the . . . administrator, heir, or other representative of the person . . . incapable of testifying, no judgment or decree shall be rendered in favor of an adverse or interested party founded on his uncorroborated testimony.” The Court of Appeals held that Father Rogakos’ heirs were interested parties, and their testimony about Father Rogakos’ statement required further collaboration. Such collaboration came from two disinterested witnesses–Father Rogakos’ attending physician, who also documented the statement in a medical record, and the priest. The judgment against the hospital was affirmed.
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Upcoming Class: Tort Damages in the District of Columbia 2024
Crystal S. Deese, chair of Jackson & Campbell P.C.’s Health Law Practice Group, will be teaching an upcoming virtual class on Tort Damages in the District of Columbia 2023 for the D.C. Bar Continuing Legal Education Program. The class will take place on Tuesday, December 12, 2023, from 6:00 p.m. – 9:15 p.m and will be worth 3.0 credit hours. A registration link will be coming soon, so mark your calendars!
Best Law Firms® 2023 Rankings
A number of Jackson & Campbell, P.C.’s practice groups received national and metro rankings in the Fourteenth Edition of the Best Law Firms® rankings. As a firm, we strive for excellence in our work and are very proud to be recognized as a part of this elite group. Here are the Best Law Firms® 2023 rankings for Jackson and Campbell:
- National Tier 1
- Litigation – Real Estate
- National Tier 3
- Real Estate Law
- Metropolitan Tier 1
- Washington, D.C.
- Ethics and Professional Responsibility Law
- Litigation – Real Estate
- Washington, D.C.
- Metropolitan Tier 2
- Washington, D.C.
- Real Estate Law
- Washington, D.C.
Congratulations to all our attorneys who made this possible. Learn more about Best Law Firms® here.
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Upcoming Webinar: The Economics of Law Firm Ownership
Arthur D. Burger will be participating on a webinar panel with George Mason University Law School on October 20 from – on the topic of ownership of law firms.
Investment in litigation by third parties — i.e., when neither the litigants nor lawyers on contingency are the primary funders for a case (often labelled “Third Party Litigation Financing” (TPLF)) — is increasing in frequency and scrutiny. Indeed, because current disclosure rules rarely work to reveal TPLF’s existence in a case, much of TPLF is occurring under the radar of the public and even without the knowledge or consideration of the judges in cases. While prior Civil Justice Academy webinars have focused on TPLF generally — see, for example here and here — this program will focus on a special subset of funding with its own special concerns: when third parties make investments in law firms in return for an ownership stake or cut from litigation attorneys fees generated in the cases the firms handle.
Should there be limits on who can own law firms? How does third party investment in law firms change law firm structure or decision-making? What effect does the ownership structure have on selection of clients, selection of cases, and management of particular pieces of litigation? What level of control should funders be allowed to exert over law firm governance? Why have ethics rules traditionally limited non-lawyer investment in law firms and how have those, or should those, rules change? What impact does funding have on case filings and the already over-burdened caseloads in the state and federal courts? What kinds of cases get prioritized when returns on investment drive firm decisions? A panel of experts with diverse perspectives on these issues will join us for what promises to be an interesting discussion on one important driver in the evolution of the market for legal services and its impact on the civil justice system.
Register here today.
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Corporate Transparency Act: What Business Owners Need to Know
The Corporate Transparency Act, which goes into effect on January 1, 2024, has sweeping ramifications for small businesses and their owners. This articles offers a primer on the Act’s reporting requirements, exceptions, and penalties for non-compliance. Read more here.
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Blue Book Rules Seminar for the DC Bar
Crystal Deese, Director of J&C’s Health Law Practice Group, is teaching a one hour seminar on the Blue Book rules today for the DC Bar at noon. The course is a refresher from your first year law school curriculum and she tries to keep the dry material entertaining.
Register for the webinar and find the course details here.
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Maryland Employers – Requirement To Establish Retirement Savings Program
In recognition of the advantages of employees establishing retirement savings accounts, with few exceptions, Maryland employers (including non-profits) are now required to establish a payroll deposit retirement program for employees and must file an annual certification of compliance every December 1. Employers could offer 401(k), SEP or Simple IRA, or similar programs, but, fortunately, the State of Maryland offers a simple, cost-free solution called “MarylandSaves” with information at https://marylandsaves.com/ that allows employees to contribute to a retirement plan.
Employers are required to offer retirement programs if they have at least one W-2 employee with Maryland income.
There are several exemptions from this requirement.
Exemptions:
- Startups that have operated for fewer than 2 years
- Businesses that do not use a payroll service
- Businesses that offer or have offered within the past 2 years a voluntary payroll-based retirement savings plan such as a 401(d)
- Government entities (federal, state, local).
If a business does not already have a retirement program, enrolling in MarylandSaves takes only about 15 minutes. Employers can register at https://www.marylandsaves.org/register-my-business/ and, thereafter, either the employer or the payroll provider will submit a list of employees.
Employers are not required to make any contributions (either matching or for administration costs) but employees would certainly benefit from participation. There are even opportunities for others to participate. Sole proprietors and 1099 employees can enroll themselves in this easy program and make contributions directly from their checking accounts. Similarly, business owners, family members, and stockholders can participate, as long as they are considered employees for tax purposes.
A signup will prompt an email to the employee, announcing that the retirement program is available, setting up their new “WorkLife” Roth-IRA, and suggesting that the employee contribute 5% of their paycheck as a contribution to their IRA. The first $1,000 contributed by the employee will go into an Emergency Savings Account. Any employee over 18 years of age with a Social Security number or a Tax Identification number may participate and there is an opportunity to opt-out. Otherwise, the Roth account will be established for the employee and the payroll service will start the 5% deductions.
Employees may move their retirement account among employers, change their contribution rate, make withdrawals and make investment decisions.
The employers need not report the contributions on the employees’ W-2s because it is a payroll deduction IRA, as opposed to a traditional retirement plan. MarylandSaves will file an IRS Form 5498 – IRA Contributions Information, and send the employee a copy by May 31 of each year.
Mark your calendar. Each December 1, the employer must certify that it has either offered a 401(k) program to employees or participates in MarylandSaves. There is a $300 fee which can be waived if you show compliance.
Employers should resist giving financial or other advice to employees on this topic, apart from explaining that an IRA is a win-win situation for employees and the earlier that an employee starts making contributions, the better. Apart from that, the law protects employers from fiduciary liability and, giving advice could erase that protection. Instead, employees should be directed to the MarylandSaves website.
For more information:
Directed to Employees (highlighting the advantages of retirement savings): https://www.marylandsaves.com/ 833-811-7437
Directed to Employers https://www.marylandsaves.org/ 833-811-7438
For more information on this new program, or other advice on employment matters for your business please do not hesitate to contact the Business & Employment Group at Jackson & Campbell at (202) 457-5457, or jmatteo@jackscamp.com.
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Simply Owning or Renting a Home in DC May Subject You to DC Income Tax
D.C. Simply Owning or Renting a Home in DC May Subject You to DC Income Tax (regardless of whether you live outside DC for the majority of the year) – Statutory Residency in the District of Columbia
As a general proposition, States tend to impose their income taxes on people who reside within the state or who may be part-time residents in that they are physically present in the state for more than 183 days in a year. The District has a statute which adds an additional ground for DC taxation – simply maintaining (regardless of whether the unit is owned or leased) a “place of abode within the District for [more than] 183 days or more during the tax year, whether or not the individual is domiciled in the District. 47 D.C. Code §1801.04(42).
The result is that the District has two bases it may assert to assess taxes: 1) whether the person is a domiciliary resident (whether the person is domiciled in the District, which takes into account the person’s physical presence, intent to be domiciled in the District that could be evidenced by a driver’s license, voting record, etc.) and 2) a statutory resident (simply owning a place of abode in the District.
It should be noted that, for statutory residency, temporary absences, like vacations, business travel, hospital and rehabilitation stays, are not subtracted from the 183-day threshold.
The District filed suit against an individual and an employer claiming that the individual was a statutory resident, wherein the D.C. Office of Tax and Revenue (“OTR”) took the position that the determination of statutory residency (and the District’s authority to tax) was a simple litmus test based upon the existence of a place of abode. D.C. Superior Court District of Columbia v. Saylor, Case No. 2021 CABSLD 001319 B.
This should start to bring into focus the inherent danger of the District imposing income or other taxes. A person who owns or rents a “place of abode” for more than 183 days in a year could be subject to DC taxation even if that person had not stepped a foot in the District. This is a vastly different scenario from most other states which couple a physical presence requirement before they will attempt to assert a tax.
Because there is no definition of “place of abode” in DC laws or regulations, the courts are saddled with how to define the term. Two considerations have had particular importance.
“Base of Operations”. Administrative Law Judges have reviewed the facts of each case to determine whether the residence is more or less permanent “base of operations” (a legally defined term), a principal abode, keeping it furnished, having utilities, to which an individual returns between vacations and work travel. Other factors which might be considered are similar to those associated with determining domiciliary residency, including where a driver’s license was issued, whether the individual has another property in a different state with factors indicating that he treats that property as his principal domicile as opposed to the D.C. unit.
“Unfettered Access”. A dwelling is more likely to be a “place of abode” if the owner has “unfettered access” to the unit. If an owned dwelling is leased out, it is far less likely to be a “place of abode” to which the person can easily return as a base of operations. Conversely, if individual rents an apartment on a longer term basis from another person or the employer provides a company-owned/leased unit to the person, that unit could constitute a “place of abode” and may be a trigger of taxation.
The administrative law judges are also mindful of a conflict between OTR’s rigid interpretation of statutory residency and the provisions under the Constitution’s Commerce Clause and, on at least one occasion, it was held that the interpretation had to be “rejected because it would inhibit interstate commerce and render the statute unconstitutional”. Bechtel v. Office of Tax and Revenue, Case No. 2016-OTR-0017. The judge further held that OTR’s position was untenable in that the result would be that “an individual who maintained a dwelling for their use in more than one state could be deemed to be a statutory resident of multiple states … [which would] deter individuals from buying or renting in more than one state, thereby impeding interstate economic activity”. See Bechtel MSJ at 22, n.95.
In an excellent article entitled “Pass/Fail: Evaluating the Test for D.C. Statutory Residency” appearing in “A Pinch of Salt” issued by Tax Analysis, t/a “Tax Notes”, Charles C. Kearns and Charles C. Capouet explore this matter in further depth.
Professionals guiding individuals who purchase dwellings or enter into long-term leases in the District should be mindful of the possibility of the District assessing income and other taxes, based solely upon the ownership of and access to the dwelling. No longer can one simply take solace in the fact that the individual is not actually present in the District for any period of time. Instead, there must be careful consideration of the factors and how to mitigate against an aggressive interpretation by the District taxing authority.
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Court of Appeals of Virginia holds private easement not a public dedication.
The Court of Appeals of Virginia affirmed a summary judgment grant finding that language included in a subdivision plat did not create a public easement. In Salunkhe v. Christopher Customs, LLC, the Court held that language stating, “24’ Ingress-Egress Esm’t” and “35’ Rad. Turnaround Esm’t” failed to satisfy the Virginia Code requirements to create public rights.
Lots 28 and 29 each owned separate adjacent strips of land which, together, formed a partially paved access to a public road. Salunkhe contended that the subdivision plat created a public easement allowing her to make improvements and to pave the entire 24-foot pipestem and 35-foot turnaround area. After Salunkhe filed suit seeking a declaratory judgment, the parties cross-moved for summary judgment. The trial court held that the subdivision plat language failed to create a public easement.
The Court of Appeals of Virginia affirmed the trial court and held that Salunkhe’s interpretation of the public easement statute was unsupported. Creating a public easement in Virginia requires both a dedication and an acceptance. Here, there was nothing for the public authority to accept as the subdivision plat merely referenced an easement and not a public easement. Recognizing the fallacy in Salunkhe’s argument, the Court stated, “if simply noting the existence of an ingress/egress easement on an approved subdivision plat created a public easement, all easements so reflected would immediately become public easements and be transferred to the locality upon recordation.” Creation of a public easement in Virginia, as in other jurisdictions, requires an explicit notation of a dedication to the public which was not present here.
Jackson & Campbell, P.C. represents title insurers and insureds in Maryland, Virginia, and Washington, D.C. and we strive to keep our clients and other title professionals up to date on various developments in the law. Additionally, we present no-cost in-house updates of the nation’s most noteworthy cases and national trends following the spring and fall American Land Title Association’s Title Counsel meetings.
If you have any questions about this case or laws impacting real estate in and around the Washington, D.C. region, feel free to contact us. Our Real Estate Litigation and Transactions Practice Group is ready to assist.
Chris Glaser
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The Best Lawyers in America 2024
Jackson & Campbell, P.C. is pleased to announce a number of our Directors have been named to The Best Lawyers in America© 2024 Edition.
Congratulations to:
- Arthur D. Burger (2015) – Ethics and Professional Responsibility Law
- Christopher Ferragamo (2024) – Insurance Law
- David H. Cox (2010) – Litigation – Real Estate, Real Estate Law
- Crystal S. Deese (2024) – Medical Malpractice Law – Defendants
- Christopher Glaser (2024) – Real Estate Law
- Roy L. Kaufmann (2018) – Real Estate Law
Additional congratulations to David H. Cox, who was named Lawyer of the Year for Litigation-Real Estate in Washington, D.C.
Since it was first published in 1983, The Best Lawyers in America© has become widely regarded as the definitive guide to legal excellence. The Best Lawyers in America lists are based on exhaustive peer review surveys in which over 50,000 top attorneys cast more than 5.5 million votes on the legal abilities of other lawyers in their practice areas. Corporate Counsel magazine has called The Best Lawyers in America “the most respected referral list of attorneys in practice.” Congratulations to our attorneys for such prestigious recognition by their peers in their specific areas of law.
Jackson & Campbell’s attorneys are among the most respected in Washington, D.C. routinely winning national awards and high rankings from organizations like The Best Lawyers in America, Super Lawyers, Who’s Who in America, and many others. Dependability is the cornerstone of a successful attorney-client relationship. We take particular pride that our clients depend on our advice to address what is often among their most important decisions – wills, family trusts, generation wealth transfers, real estate transactions, business transactions, professional negligence, and all types of dispute resolutions ranging from arbitrations to jury trials. Jackson & Campbell traces its roots to 1887, making it one of the oldest law firms in Washington. We pride ourselves on more than a century of service to our clients and our community.
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Supreme Court of Maryland has clarified how public roads are established
In Board of County Commissioners v. Aiken, the Supreme Court of Maryland has clarified how public roads are established, recognizing that its prior case law “has caused confusion.” The Court agreed with the Appellate Court of Maryland’s “well-reasoned analysis and affirm[ed] its judgment in all respects.” The Appellate Court’s decision was discussed here in August, 2022.
At issue in the trial court was ownership of unimproved land bordering the Chesapeake Bay. The disputed property was part of a 1945 conveyance from the Wilkinson Family Living Trust’s predecessor to the State and, subsequently, from the State to the County, to construct a public road. The road was partially constructed but never completed and the County erected a sign at the end of the paved portion stating, “End of County Maintenance,” with the disputed parcel being located beyond the sign. In 2017, the County adopted an ordinance that closed the uncompleted portion of the road.
The trial court held that the uncompleted portion of the road was not a public road as a matter of law as the County “established, built, paved and maintained” a road over only a portion of the grant but that the disputed parcel laid beyond and was not maintained. The Appellate Court reversed as the trial court had “blurred” methods establishing public roads and clarified the requirements of a dedication to create a public road.
In supplementing the Appellate Court’s analysis, the Supreme Court began its discussion using familiar principles of deed interpretation. The deed to the State provided that the conveyance was for the purpose of creating a public road, with the deed recitals indicating that the conveyance was in order to construct or improve a highway “as a part of the Maryland State Roads System.” The Wilkinson Family Living Trust contended that such language reflected a limited grant and that the State’s failure to construct a road caused the unimproved parcel to revert back. The Supreme Court noted that the deed did not contain any reversionary language. Absent such reversionary language, the grant to the State—later, to the County—was in fee simple absolute.
Turning to the dedication, the Supreme Court held that a public dedication required an offer and acceptance. Here, the offer was plain and the deed to the State was a clear manifestation of the intent to make an offer. The four forms of acceptance were then enumerated as: “(1) by deed or other record; (2) by acts in pais, such as opening, grading or keeping the road in repair at the public expense; (3) by the general public’s long continued use of the land; and (4) by express statutory provision or other similar official action.” The State accepted the offer set forth in the deed by both accepting the conveyance and recording the instrument. The 2017 closure ordinance further evidenced that there had been a prior acceptance as, indeed, the public road could not be closed by ordinance if it had not been initially accepted.
Jackson & Campbell, P.C. represents title insurers and insureds in Maryland, Virginia, and Washington, D.C. and we strive to keep our clients and other title professionals up to date on various developments in the law. Additionally, we present no-cost in-house updates of the nation’s most noteworthy cases and national trends following the spring and fall American Land Title Association’s Title Counsel meetings.
If you have any questions about this case or laws impacting real estate in and around the Washington, D.C. region, feel free to contact us. Our Real Estate Litigation and Transactions Practice Group is ready to assist.
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Real Estate Loan Drafting Guidance: District of Columbia
We’re sharing a Q&A guide to real estate finance law and practice for borrowers and lenders in the District of Columbia. This guide can be used in conjunction with the Real Estate Finance State Q&A. It addresses state customs and laws relating to loan document drafting to ensure enforceability and priority of the lien of mortgage instruments. It also generally discusses mortgage recording taxes, foreclosure, and lien priority in a commercial context. Federal, local, or municipal law may impose additional or different requirements. Answers to questions can be compared across a number of jurisdictions (see Real Estate Loan Drafting Guidance: State Q&A Tool). Read the whole guide here.
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Appellate Court of Maryland confirms an “easement to nowhere” is terminated.
The Appellate Court of Maryland has confirmed that an “easement to nowhere,” if it existed,
may be terminated by estoppel and adverse possession. In Holder v. Uncle Eddie’s Brokedown
Palace, LLC, the Court examined an express easement which included purported rights to
traverse lands not owned by the servient estate and how the conveyed rights, if any, may be terminated.
In Holder, Justin Young was the owner of the subject Parcel 3 and Uncle Eddie owned Parcel
414. Parcel 3 did not abut Parcel 414 but was separated by land owned by third-party Stonecrest
Development, LLC. In 1872, Aaron Cost, Stonecrest’s predecessor, granted Uncle Eddie’s
predecessor an easement crossing both Cost’s parcel as well as Parcel 3, which was not owned
by Cost. The trial court held—and the Appellate Court of Maryland affirmed—that Cost’s grant
was defective ab initio and remained defective as one cannot grant an easement to cross lands
owned by another. The resulting grant was an “easement to nowhere” and wholly unenforceable.
Recognizing the defective grant, Uncle Eddie argued in the alternative that it held an easement
by prescription. Even if such a prescriptive easement existed, however, it had been terminated by
estoppel and by adverse possession. To establish termination by estoppel, Young had the burden
to establish that Uncle Eddie failed to use the easement and acquiesced to Young’s actions. To
establish adverse possession of an easement, Young had the burden to not only satisfy the
traditional adverse possession elements but also that Young’s use of the land was “incompatible
or irreconcilable with the authorized right of use.” Uncle Eddie’s failure to use the easement
since, at least, 1988 together with Young allowing Parcel 3 “to return to nature” with the growth
of mature trees satisfied both termination by estoppel as well as adverse possession. Even if the
“easement to nowhere” could have been granted, any such grant had now been lost.
Jackson & Campbell, P.C. represents title insurers and insureds in Maryland, Virginia, and
Washington, D.C. and we strive to keep our clients and other title professionals up to date on
various developments in the law. Additionally, we present no-cost in-house updates of the
nation’s most noteworthy cases and national trends following the spring and fall American Land
Title Association’s Title Counsel meetings.
If you have any questions about this case or laws impacting real estate in and around the
Washington, D.C. region, feel free to contact us. Our Real Estate Litigation and Transactions
Practice Group is ready to assist.
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Navigating High Interest Rates: The Power of Qualified Personal Residence Trusts in Estate Planning
On May 3, 2023, the Federal Reserve raised interest rates, this time to a range between 5% and 5.25%. It marked the tenth increase since March 2022. As rates continue to rise, estate planning strategies must shift to take advantage of these new economic conditions. One such tactic is the Qualified Personal Residence Trust (QPRT). A QPRT is an irrevocable trust designed to hold a primary or secondary residence, which can provide significant tax savings and asset protection for high-net-worth individuals. In this article, we will explore how QPRTs function and why they are particularly beneficial in a high interest rate environment.
A QPRT allows the grantor (the person creating the trust) to transfer ownership of their residence to the trust while retaining the right to live in the property for a predetermined number of years. At the end of this term, the residence is passed on to the trust beneficiaries, usually the grantor’s children or other family members. The primary advantage of a QPRT is the reduction of the grantor’s taxable estate, as the value of the residence is removed from their taxable estate upon the trust’s creation.
The effectiveness of a QPRT is enhanced in a high interest rate environment because the value of the taxable gift made upon the creation of the trust is lower. This value is calculated using the applicable federal rate (AFR) in conjunction with the term of the trust and the value of the residence. A higher AFR results in a lower taxable gift, providing a greater tax advantage for the grantor. Additionally, as the property’s value is locked in at the time the QPRT is established, any appreciation on the residence’s value during the trust term will not be subject to estate or gift tax.
Assume, for example, that a 60-year-old grantor owns a residence worth $1,000,000 and wishes to establish a QPRT with a 10-year term. For simplicity, also assume the AFR for the month of the trust’s creation is 5%. To determine the taxable gift upon the creation of the QPRT, we must first calculate the present value of the grantor’s retained interest in the property (i.e., the right to live in the property for 10 years). This is calculated using the AFR and the term of the trust.
Using an IRS-approved calculation, we find that the present value of the retained interest is $610,970. The taxable gift is then calculated by subtracting the value of the retained interest from the value of the residence:
$1,000,000 (residence value) – $610,970 (retained interest) = $389,030 (taxable gift)
With the QPRT in place, the grantor would only be liable for gift tax on $389,030, as opposed to the full $1,000,000 value of the residence. Furthermore, any appreciation in the property’s value over the 10-year term will not be subject to gift or estate tax (currently assessed at a rate of 40%).
If, for example, the property appreciates to $1,500,000 at the end of the 10-year term and the grantor has survived, the $500,000 appreciation will pass to the beneficiaries free of gift or estate tax. Additionally, the property will receive a “step-up” in basis, reducing the capital gains tax implications for the beneficiaries upon the sale of the property.
This above example demonstrates how a QPRT can provide substantial tax savings, particularly in a high interest rate environment. The higher the AFR, the lower the taxable gift and the greater the potential tax advantage for the grantor.
If you are interested in exploring the benefits of a QPRT or other estate planning strategies tailored to your unique circumstances, please do not hesitate to contact our firm. Our experienced attorneys are here to help you navigate the complexities of estate planning in a dynamic economic landscape.
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Vermont Extends Assisted Suicide Law to Nonresidents
In a precedent-setting move, Vermont has become the first state in the U.S. to amend its assisted suicide law, extending its provisions to terminally ill nonresidents. Signed into law by Republican Governor Phil Scott on May 2, 2023, the legislation removes the decades-old residency requirement, demonstrating a significant shift in the nation’s approach to end-of-life care.
This development comes on the heels of a landmark court settlement in Oregon last year, where the state agreed to halt enforcement of its own residency requirement for terminally ill people seeking lethal medication. Additionally, Oregon agreed to propose legislative changes to permanently remove this requirement from its law, though the proposed bill remains pending at this time.
Earlier this year, Vermont reached a similar settlement with a terminally ill Connecticut woman who had sued the state over its residency requirement. She was granted the right to use Vermont’s law to end her life, provided she met the other requirements set by the legislation.
Vermont’s actions mark a significant shift in the landscape of end-of-life care in the United States, prompting discussions about the role of state borders in determining access to medical aid in dying. With this change, Vermont joins a small but growing number of states that have reconsidered the limitations on their assisted suicide laws. The development may encourage other jurisdictions to reevaluate their own laws and their stance on medical aid in dying.
In contrast to Vermont, many states, including Maryland and Virginia, do not currently have laws permitting physician-assisted suicide. Both states do, however, have laws that allow patients to refuse or discontinue life-sustaining treatment under certain circumstances through the execution of an advance medical directive. In Washington D.C., the Death with Dignity Act of 2016 permits physicians to prescribe lethal doses of medication to terminally ill patients who meet specific criteria. Critics argue that the law has not been properly implemented and remains largely unavailable to patients who would otherwise qualify.
Understanding the legal intricacies of end-of-life decisions can be complicated and emotionally challenging. The experienced attorneys in our Trusts and Estates practice are committed to providing compassionate and comprehensive legal assistance to help you ensure your wishes are clearly outlined and respected.
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Security Deposit Requirements for DC Residential Leases
The District of Columbia, with its rich history of protecting the rights of tenants, has strict rules governing security deposits on residential leases. Landlords who manage their own properties and professional managers should be familiar with these rules.
Limitations on the amount of the security deposit. The deposit shall not exceed one month’s rent, and only charged once. See DC Municipal Regulation 14 DCMR 308.2.
Where Security Deposits should be held. The landlord should have an interest-bearing, separate bank account, in the District of Columbia, with FDIC or similar insurance. That account could be used for multiple security deposits, but should be segregated from the landlord’s other accounts. 14 DCMR 308.3.
Interest on Security Deposit. The tenant is entitled to interest from the date the tenant paid the deposit, if the lease is for more than 12 months. 14 DCMR 311.2. The best solution is to make sure that the bank account is interest-bearing. The tenant is entitled to the “statement savings rate” that the bank offers. The rules state that that rate must be tracked in 6-month intervals. At the end of each year, the landlord should create a notice:
Bank where Security Deposit(s) are held: __________________
Interest rate for Jan 1 – June 30: __________________
Interest rate for July 1 – December 31: __________________
This notice should be posted in the “rental office” and in the “lobby”. 14 DCMR 308.7
The landlord should keep a copy of all these notices, because, at the end of the lease, the tenant is entitled to a list of the interest rates for each 6-month period of the lease. 14 DCMR 308.7
If the Security Deposit is not held in an interest-bearing account. If the landlord does not use an interest-bearing account, the interest due to tenant is at a higher rate – the “judgment rate of interest”. That is the interest rate that plaintiffs would be entitled to, in the District, if they win their suit. The historical judgment interest rate is available at: https://www.dccourts.gov/sites/default/files/matters-docs/Historical-Judgment-Interest-Rate.pdf
What can be deducted from the Security Deposit. The landlord may deduct unpaid rent and for damages to the unit, as long as the lease spelled out the specific responsibilities of the tenant. 14 DCMR 308.6, 14 DCMR 309.1 and 42 DC Code 3502.17. Thus, the lease should spell out what costs may be deducted from the security deposit. There may be no deductions for “ordinary wear and tear” defined as:
“[D]eterioration that results from the intended use of a dwelling unit, including breakage or malfunction due to age or deteriorated condition. The term “ordinary wear and tear” does not include deterioration that results from negligence, carelessness, accident, or abuse of the unit, fixtures, equipment, or other tangible personal property by the tenant, immediate family member, or a guest.” 42 DC Code 3502.17.
Accounting and Payment for Security Deposit at end of lease: The landlord has 45 days from the termination of the lease to either pay the tenant the security deposit plus accrued interest (along with the chart of interest rates applied) or deliver a Notice that the landlord intends to make deductions, along with a check for the difference, if any, and the chart of interest rates. 14 DCMR 309.1 The Notice has to be:
- Sent within 45 days after termination of lease
- Delivered personally to tenant or by certified mail to tenant’s last known address (landlord to use good faith effort to find it).
- State that landlord intends to withhold and apply the monies defraying the cost of expenses properly incurred under the terms and conditions of the security deposit provisions of the lease.
- A copy of the interest rate chart.
Within 30 days after the initial Notice, the landlord has to deliver to tenant:
- a refund of the balance of the deposit, plus interest
- an itemized statement of the repairs or deductions including the dollar amount of each.
If the landlord ignores these deadlines, the tenant is generally entitled to a full refund of the security deposit and interest. 14 DCMR 309.3 Landlords should not make frivolous refusals to return money or be motivated by fraudulent, deceptive, dishonest, or unreasonably self-serving purpose, or the tenant could be entitled to triple the security deposit. 14 DCMR 309.5
Being a landlord in the District has its challenges, not the least of which is making sure your lease spells out what damages the tenant is responsible for, keeping track of interest rates, and marking your calendar for timely refund of security deposits.
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Arthur D. Burger will participate in a CLE Class called “Attorney Fees and Ethics” on May 25, 2023
Arthur D. Burger, Chair of Jackson & Campbell’s Professional Responsibility Group, will be participating in a CLE presentation of the National Association of Legal Fee Analysis (“NALFA”) on the topic of “Attorney Fees and Ethics” on May 25, 2023 in Chicago. For more information on the conference, visit: NALFA – Specializing in Attorney Fees and Legal Billing.
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Massachusetts Appeals Court Rules That Insured Is Entitled to Recover Costs In Bringing Coverage Suit Against Insurer
In John Moriarty & Assocs., Inc. v. Zurich Am. Ins. Co., No. 22-P-275, 2023 WL 2719362 (Mass. App. Ct. Mar. 31, 2023), the Massachusetts Appeals Court for Middlesex County vacated a lower court’s dismissal of Zurich American Insurance Co (“Zurich”) from a declaratory judgment action brought by John Moriarty & Associates, Inc. (“JMA”), a general contractor, and an additional insured on a commercial general liability insurance policy issued by Zurich. The court determined that JMA had adequately pled its breach of contract claim against Zurich and was entitled to recover its costs of bringing the coverage suit. Learn more about this case here.
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Massachusetts High Court: Abuse Exclusion Requires Imbalance or Misuse of Power Attendant to Physically Harmful Conduct
In a March 16, 2023 decision, the Supreme Judicial Court of Massachusetts concluded that an abuse exclusion in a homeowners’ policy was inapplicable to an unprovoked attack by an insured .
The Massachusetts Supreme Judicial Court again considered whether, under the terms of a homeowners’ insurance policy, conduct by an insured constituted “physical abuse” within the terms of a policy exclusion that precluded coverage for “bodily injury…arising out of sexual molestation, corporate punishment or physical or mental abuse in Dorchester Mut. Ins. Co. v. Miville, et. al., SJC-13308, slip. op. at 2 (Mass. March 16, 2023). The Court concluded that the term “physical abuse” in the context of the abuse and molestation exclusion, “requires an imbalance or misuse of power attendant to the physically harmful conduct.” Id. at 3.
In the underlying incident, sixty-one year old Leonard Miville (the “Victim”) went to his girlfriend’s home early in the morning to pick her up and drive her to work. Id. A thirty-year old neighbor, William Brengle (the “Assailant”), confronted the Victim from his front porch and initiated an unprovoked attack on the Victim by punching him in the head and repeatedly kicking him after he had fallen, causing him to sustain serious injuries. Id. at 3–4. The Victim brought suit, asserting claims of negligence, assault and battery, and negligent supervision against Brengle and his parents, who owned the home near where the attack took place. Id. at 5–6. Brengle’s parents maintained a homeowner’s policy (the “Policy”) with Dorchester Mutual (the “Insurer”) that provided personal liability coverage for claims “brought against an ‘insured’ (which included Brengle) for damages because of ‘bodily injury’ or ‘property damage’ caused by an ‘occurrence.’” Id. at 5. The Policy contained an abuse and molestation exclusion (the “Abuse Exclusion”) that precluded coverage for “‘[b]odily injury’ . . . arising out of sexual molestation, corporal punishment or physical or mental abuse,” but did not define “physical abuse.” Id. at 5. The Insurer sought a declaratory judgment that it had no duty to defend or indemnify the Assailant because the Abuse Exclusion applied to the Victim’s claims.
The Court considered the language of the exclusion, its history, and cases, statutes and regulations. The Court found that the canon of noscitur a sociis limited “physical abuse” in the Abuse Exclusion to the terms it accompanied, which included “corporal punishment” and “sexual molestation.” Id. at 12–13. The Court noted that that although those terms were undefined by the Policy, both “generally involved an imbalance or exploitation of power between the perpetrator and the victim” and found that “physical abuse” referred to the same dynamic. Id. The Court also observed that the exclusion evolved partly in response to sexual abuse allegations by the Catholic Church and was intended to be used with organizations “that have care or custody of others – schools, nursing homes, daycare centers, etc.” Id. at 15 (citation omitted). The Court also referenced its earlier decision, Dorchester Mut. Ins. Co. v. Krusell, in which it concluded that the term “physical abuse” as used in an identical policy exclusion was ambiguous. 485 Mass. 431, 439–40. Interpreting the exclusion through the lens of an “objectively reasonable insured,” the Krusell Court determined that “physical abuse” applied to a “limited subset of physically harmful treatment, where the treatment is characterized by an ‘abusivee’ quality such as a misuse of power” or “conduct so extreme as to indicate an abuser’s disposition towards inflicting pain and suffering” Id. 485 Mass. 431, 439–40, 46 (2020). In Krusell, a twenty-three year old insured pushed a sixty-two year old man, causing the latter to fall and sustain serious, permanent injuries, which the Court concluded did not warrant application of the Abuse Exclusion because it did not contain an “abusive” quality. Id. Applying Krussell to the Victim’s claims, the Court rejected the Insurer’s argument that the age difference between the Assailant and Victim created a “physical power imbalance between the two” and that the unviolent and provoked nature of the attack was evidence of Assailant’s disposition to inflict pain and suffering. Miville, et. al., SJC-13308, slip. op. at 10–11. Noting that Krussell involved a greater age gap, the Court concluded that there was no “exploitation or misuse of power” in the Assailant’s attack on the Victim. The Court therefore held that the Abuse Exclusion did not apply to bar the Victim’s claims against the Assailant and his parents.
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Louisiana Federal Court Holds No Coverage for Oil Spill Based on Insured’s Late Notice and Applicability of the Policy’s Pollution Exclusion
In Jaxon Energy, LLC v. Admiral Insurance Company, No. CV 22-940, 2023 WL 2499135 (E.D. La. Mar. 14, 2023), the United District Court for the Eastern District of Louisiana, applying New York law, granted summary judgment to Admiral Insurance Company (“Admiral”) upon finding that the insured, Jaxon Energy LLC (“Jaxon”), failed to provide notice within the timeframe required by its policy. The court further held that the pollution exclusion contained in the policy’s Commercial General Liability (“CGL”) removed the claim from coverage.
Read the rest of the article here.