Another Step in Stopping Court Secrecy

According to the American Association for Justice Senior Vice President of Public Affairs Linda Lipsen  "From tires that are defective to cribs that collapse on sleeping babies, secrecy agreements have been used to keep safety information away from people. Stopping secrecy in our civil justice system is necessary to ensure that defective products do not injure or kill more people."

New Case Law Defining "Midwifery"

The Commonwealth Court in Goslin v. State Board of Medicine has ruled that practicing midwifery is not practicing surgery or medicine and that certified midwives and licensed nurse-midwives are not one and the same. As a result of the ruling, lay midwives are not subject to regulation by the State Board of Medicine.

Read the entire decision by the Court here.

Why are confidentiality clauses in personal injury settlements dangerous?

Settlement agreements and releases in personal injury cases are increasingly containing confidentiality provisions that may potentially result in adverse tax consequences to the unwary.

The little known tax court decision of Amos v. Commissioner, T.C. Memo 2003-329 (December 1, 2003), is a cautionary tale for Plaintiff's counsel. The relevant facts of the Amos case are condensed as follows:

-    Professional athlete, Dennis Rodman, kicked a photographer in the groin upon  falling out of bounds during an NBA game.

-    The photographer commenced a lawsuit, which eventually settled for the sum of $200,000.00.

-    A settlement agreement was executed between the parties which contained a confidentiality clause.

-    The photographer treated the entire amount of the settlement as compensation for a personal physical injury under IRC Sec. 104(a)(2) and excluded same as income.

-    Possibly as a result of the publicity of the incident, the photographer's income tax return was audited.  The IRS sought to treat the entire sum of $200,000.00 as taxable compensation, reasoning that the settlement amount was motivated by a desire for confidentiality, as opposed to compensation for a personal physical injury.

The Tax Court analyzed the facts as follows:

-    A taxpayer has the burden of proving that damages are on account of personal physical injuries or sickness, under IRC Sec. 104(a)(2), citing Commissioner v Schleir, 515 U.S. 323, 328 (1995), and United States v. Burke, 504 U.S. 229, 248 (1992).

-    "The nature of the claim forming the basis for the settlement controls whether such damages are excludable under IRC Sec. 104 (a)(2)." Burke, supra, 504 U.S. at 237 [emphasis added].

-    "The intent of the payor is critical" and "the character of the settlement payment hinges ultimately on the dominant reason of the payor in making the payment." Knuckles v. Commissioner, 349 F.2d 610, 613 (10^th Cir. 1995).

The Court's decision was to treat 60% of the damages as compensation for the photographer's physical injuries and 40% as payment for confidentiality.  Thus, 40% of the damages were taxable. The impact of the ruling was an acknowledgment that despite the dominant reason Mr. Rodman paid the photographer was to compensate him for his physical injuries, the court still held that a portion of the award represented taxable damages. The holding in Amos provides justification for the IRS to treat all personal injury damage awards as part taxable and part non-taxable if the settlement agreement contains a confidentiality provision.

Therefore, counsel must be cautious during settlement negotiations and insist on striking such confidentiality provisions from personal injury settlements that fall within the purview of IRC Sec. 104(a)(2). If confidentiality is non-negotiable, any such clause should be drafted so as to contain express language that confidentiality is mutually beneficial to both parties and that no consideration is being paid or intended for that purpose.

Also be sure to strike the phase "in settlement of a doubtful and dubious claim" which is frequently inserted into settlement agreements. In the worst case scenario, the settlement agreement and/or release needs to be clear as to the percentage of the total settlement that is being allocated to confidentiality and the percentage allocated as compensation for personal physical injury. It could thus be argued that additional consideration must be paid to offset any such potential tax implications for such apportionment.

Here is a .pdf of the Amos case if you want to review the specific language of the tax court.

County liable for woman killed after making several 911 calls

Athens Township: Delayed emergency response leaves resident questioning readdressing

From The Evening Times:

     "Lockhart Street resident Patricia Simmons is making sure everybody knows where her home is following a March 12 emergency in which responders couldn’t find her house.  Near midnight on that night Simmons, who lives at 552 W. Lockhart St. in Athens Township, had begun to choke, and co-resident Bill Creedon called 911. After a while of waiting for Greater Valley EMS, Simmons, who could barely speak at that point, called 911 again herself.  “I could hardly stand it,” said Simmons. “I picked up the phone and said, ‘Where are you? I can’t breathe.’ It could have ended up in tragedy. I’m so close to the hospital, it should take only three minutes. It took 20 minutes to get to the hospital.”  She added that when she arrived at the hospital she had a significant amount of water in her lungs.  Simmons’s residence is the first house beyond the border of Athens Township on the south side of West Lockhart Street, while homes across the street are counted as a part of Sayre Borough up to Pennsylvania Avenue. "

Teen injured in near-fatal crash gets $14.8M

New Case Law on stacking of underinsurance by employees in company owned vehicles

In State Auto Property & Casualty insurance Co. v. Pro Design, P.C. today the District Court for the Middle District of Pennsylvania (Munley, J.) held that a corporation can avail itself of stacked underinsured motorist benefits even if it waived stacking on a single vehicle policy where it subsequently added two vehicles to the policy and never signed a new waiver of stacking for those additional vehicles. 

The court finds that Sackett II does not apply to a single car policy which is what the Supreme Court says in footnote 5 of Sackett II.  The Court also notes that under Sackett II "the degree that coverage under an after-acquired vehicle provision continues in effect throughout the existing period.  Once that policy period comes to an end, the insurer must obtain a new waiver if an additional vehicle was added during that period."  The fact is that when the single vehicle policy became a multiple vehicle policy the insured was not supposed to be given a chance to "purchase" intra-policy stacking and it did not get a chance to do so.  Thus, the 3 car policy provides stacking.

Florida Regulator Lifts Allstate Suspension

“Florida Insurance Commissioner Kevin McCarty ordered a stay of the suspension of the Allstate Companies' licenses to sell new business in the state. McCarty's decision comes as the result of Allstate's submission of an affidavit certifying that it has complied with Florida law by freely providing all documents (McKinsey Documents) requested by the Office of Insurance Regulation as part of its investigation of Allstate's business practices in Florida.

The commissioner's announcement follows the May 15 First District Court of Appeal's opinion denying Allstate's motion for a rehearing and affirming the OIR's action in issuing the January immediate final order. ‘I have stayed the suspension of Allstate, and I have accepted its affidavit as evidence that they have completely and unconditionally complied with Florida law and with our requests for documents,’ McCarty said. ‘I also, though, have made it perfectly clear that failure to cooperate with necessary, ongoing requests from the Office (OIR) will result in an immediate resumption of the suspension.’

Allstate produced hundreds of thousands of pages of documents that OIR staff members have been thoroughly reviewing. Of the more than 825,000 pages mentioned in its affidavit, Allstate produced only 36,000 pages between the Oct. 16 issuance of the subpoenas and the Jan. 17 issuance of the IFO.

Three injured in vehicle rollover, two 'badly', in Ridgebury

The Towanda Daily Review:

RIDGEBURY — An accident in Ridgebury Thursday evening left three men injured, according to Ridgebury Fire Chief Glen Leonard, with two “severely critical.”

Leonard said one man was airlifted to Robert Packer Hospital while the other two were taken there by Greater Valley EMS. He thought the accident occurred around 6:30 p.m.
The accident occurred where Wolcott Hollow Road and Chapel Road meet. Ridgebury Assistant Chief Kevin Chapman, who was first on the scene, said that by judging from the skid marks the vehicle was heading south on Wolcott Hollow Road. Wolcott Hollow Road makes a sharp turn near a hill, which is where the vehicle skidded off the road on the northbound side and clipped two trees, then turned onto Chapel Road. The vehicle came to a rest on Chapel Road, where Chapman found the vehicle. The vehicle was facing north towards Wolcott Hollow Road, he mentioned.

Two of the men, Chapman said, had been ejected and were injured from “head to toe.” The third, he added, had gotten out of the vehicle. Chapman told him to sit by the side of the road.

He said all three men had head injuries as they all had blood on their heads. Chapman, who lives nearby, immediately reported that they were serious injuries.

Debris was scattered all over the yard where the two trees stood and included the car’s front bumper, a hat and two shoes."

Teen recovers after she's struck by car while crossing road

A teen recovered $390,991 after she was struck by a car while crossing the road one winter evening. Zoe Malinoski was 13 years old when she was crossing the road and was struck by Sarah Fairbanks. Zoe sustained a fractured pelvis, a fractured hip, a fractured tooth, multiple skull fractures and bleeding on her brain. She spent two weeks in intensive care. She was left with cognitive defects and she continues to display memory problems in school. Defense counsel argued that Zoe darted out in front of the car, leaving Fairbanks no time to react. Zoe was also wearing dark clothing that winter evening. Zoe was found 25 percent liable, which reduced her $521,322 award. Of her award, $400,000 was for future pain and suffering.

The case was Malinoski v. Fairbanks.

Contact Verdict Search here for a full report on the case.

Bush Administration Uses Bureaucracy to Limit Lawsuits

From Law.com:

"Faced with an unfriendly Congress, the Bush administration has found another, quieter way to make it more difficult for consumers to sue businesses over faulty products. It's rewriting the bureaucratic rulebook.  Lawsuit limits have been included in 51 rules proposed or adopted since 2005 by agency bureaucrats governing just about everything Americans use: drugs, cars, railroads, medical devices and food.  Decried by consumer advocates and embraced by industry, the agencies' use of the government's rule-making authority represents the administration's final act in a long-standing drive to shield companies from lawsuits."