Sep 25, 2010

Dual Residency: Keeping Insurance Coverage In Play

Getting insurance coverage in play is crucial in personal injury cases.  While insurance contracts are never easy to read, it is very important that you spend as much time as you need to understand all the complexities within the insurance contracts at issue.  If you look closely enough, you may uncover strategies to keep coverage in play and your case going forward.

Some insurance policies extend coverage to “residents” of the insured household in addition to the named insureds.  Even if the tortfeasor doesn’t live full-time in the insured house, he or she may still be considered a “resident” of the household for coverage purposes.  This is possible based on the law of “dual residency.”

In Wood v. McQueen, 1995 Ohio App. LEXIS 4071, *17 (Ohio Ct. App., Cuyahoga County, Sept. 21, 1995), the court stated that “courts in this state have examined several factors when there is a question concerning a person's status as a 'resident' in the insured's household, including the amount of time the person spends at the household, the person's age, the person's intent, and whether the insured is ‘legally obligated' to the person’.”

In Malone v. Nationwide Mut. Ins. Co., 1986 Ohio App. LEXIS 5436 (Ohio Ct. App., Erie County, Jan. 31, 1986), the tortfeasor was the insured’s son who was enlisted in the military and came home regularly on furloughs.  In determining whether the son had dual residency at his parents’ home as well as his military base home, the court looked at several factors.  One, the son regularly returned to the home on furloughs.  Two, the son’s Army personnel files listed his parents address as his permanent address.  Three, the son's personal possessions were kept at his parent's home and, fourth, the son maintained his savings account with the bank in his hometown.

For more on “dual residency,” read the following cases:

Ziegler v. Workman, 1994 Ohio App. LEXIS 1668 (Ohio Ct. App., Muskingum County, Mar. 30, 1994)
Prudential Property and Casualty Ins. Co. v. Koby (1997), 124 Ohio App.3d 174, 181 (Ohio Ct. App. Trumbull County).
Snedegar v. Midwestern Indemnity Co. (1988), 44 Ohio App.3d 64.
Wood v. McQueen, 1995 Ohio App. LEXIS 4071 (Ohio Ct. App., Cuyahoga County, Sept. 21, 1995)
Malone v. Nationwide Mut. Ins. Co., 1986 Ohio App. LEXIS 5436 (Ohio Ct. App., Erie County, Jan. 31, 1986).
Hager v. Hager (1992), 79 Ohio App.3d 239.
Spires v. Spires (1966), 7 Ohio Misc. 197.
Farmers Ins. of Columbus, Inc. v. Taylor (1987), 39 Ohio App.3d 68.

Contact me for further questions!
Simon W. Johnson

Sep 24, 2010

More On Social Networking Evidence – Five Elements for Admissibility

In Lorraine v. Markel Am. Insurance Co., 241 F.R.D. 534 (D. Md. 2007), the court identified five evidentiary issues that must be overcome in order to introduce electronically stored information as evidence at trial.

First, the information must be relevant.  This should be easy to establish since social networking information provides a litany of photos, status updates and commentaries discussing your client’s or other parties’ personal conduct and behaviors.  Photos of parents who appear intoxicated with their children around, for example, should be relevant to the issue of fitness for custody.  In states that permit a showing of fault, pictures or messages that relate to extramarital affairs are clearly relevant.  Photos that show a spouse and his or her newly acquired expensive goods can be relevant to defeat a claim of lack of resources available for support.

Second, the attorney offering the evidence must also show that the probative value of the message or images substantially outweighs any dangers of unfair prejudice.

Third, the proponent must authenticate the evidence.  It appears that many judges routinely permit the introduction of Facebook-acquired information because the author of this information, if a party to the action, is available to testify to its authenticity.  Alternatively, you can authenticate a photo by showing that it is an accurate depiction or description of the individual.  The person who obtained the information can also testify as to how and when it was obtained.

Overcoming hearsay objections is the fourth issue.  If you are trying to admit the statement to prove the matter asserted, then you must establish a hearsay exception.  Images and photos on websites are not hearsay unless they depict the matter asserted.  Messages and images on social networking sites are more often used for non-hearsay purposes such as for impeachment or to establish a state of mind, motive, or purpose.

The fifth issue to deal with is the “original writing” evidentiary rule which requires that the original record be produced if it is available.  Some technology-friendly courts consider a copy of the original message or image as having the same evidentiary value as the original.  The copy must accurately reproduce the original and simply printing from the website should accomplish this. 

If  the message or image has been removed from the social networking website, an exception to the “original writing” rule can permit secondary evidence when the original is no longer available due to unintended or intended conduct.  Additionally, you can request the original message or image from the social network website provider but these providers tend to resist such requests.  They claim that divulging this information violates the federal Stored Communication Act which prohibits any electronic communication service “from knowingly divulging the contents of any communication while in electronic storage by that service to any person other than the addressee or intended recipient.”

Please contact to discuss!
Simon W. Johnson

Sep 22, 2010

Using Social Networking Websites In Family Law

Attorneys are increasingly using social networking sites to discover relevant information for use in trial preparation, i.e. depositions, as well as for use at trial as admissible evidence. Sites such as Facebook, MySpace, LinkedIn and Twitter provide a wealth of personal information on the defendant or other witnesses in the cases.  However, just as the skilled attorney can use these sites to build a case against the other side, this skilled attorney should also caution his own client as to the risks of using social networking sites.

Clients should be advised to modify all passwords so that a spouse or family member is unable to create a false profile.  At the beginning of representation, attorneys should advise clients to stop using or adding information to any social networking sites that they had been using.  Clients could potentially change their privacy options so that only people they know can view their information.  The attorney must be careful, though, and not advise the client to remove any information from these sites that could be deemed relevant to the case. Removing such arguably relevant information could run afoul of spoliation.

Additionally, many clients use these sites for legitimate social connection, especially during highly emotional times when the client may not be as outwardly social as before.  But, this is clearly the worst time for a client to be venting his or her emotions on any social networking site.  Clients with children create extra problems as children may simply not care about a court order saying they cannot use these sites.  Violations of such orders will not work wonders for your client’s case.  And this is especially true if the child surfs the social networking sites and reads emotionally-charged posts that the child’s parent - your client - has posted.

Just as attorneys request other confidential information from their clients, such as social security numbers, attorneys should also request access to the client’s social networking sites.  This allows an attorney to review the available information to be able to determine if anything could be problematic.  Due to the modern acceptance of open, online sharing of social information, clients sometimes have a difficult time understanding that the information posted on these sites can be used as evidence in a divorce case.  By explaining the ramifications to them, hopefully they will gladly give you access to their social networking sites.

Please contact me to discuss this or any other legal matter!

Take care,
Simon W. Johnson

Sep 21, 2010

"Fraud Created The Market" Theory Not Accepted In Securities Fraud Litigation

In Malack v. BDO Seidman, LLP, No. 09-4475, 2010 WL 3211088 (3d Cir. Aug. 16, 2010), the Third Circuit refused to endorse the “fraud created the market” theory.

Fraud requires the plaintiff to prove a (1) misrepresentation or omission by the defendant, (2) of a material fact, (3) scienter of defendant, (4) defendant’s intent to induce reliance, (5) reasonable reliance by the plaintiff, (6) causation, and (7) plaintiff’s damages.

Plaintiff attorneys argued that reasonable reliance is presumed when the defendants are selling a security that shouldn’t be sold because it’s totally worthless or unmarketability.  To be unmarketable, the securities must be “so lacking in basic requirements that [they] would never have been approved by the [issuing entity] nor presented by the underwriters had any one of the participants in the scheme not acted with intent to defraud or in reckless disregard of whether the other defendants were perpetrating a fraud.” Id. at 468.  The theory is that the security market should only present marketable securities that have investment value.  While I think most everyone likes the tone of this theory, the court didn’t and reasoned that investors still have to do their due diligence when determining what to invest in.  Ultimately, the court is saying that the reality of the securities markets is such that scammers exist and they are not going away.  Caveat emptor!

Reliance is an essential element to proving fraud and getting a presumption for one of your elements can save much prep time.  The plaintiff’s reliance must be reasonable which means that the plaintiff has some burden to act responsibly in making his investment decisions.  Ultimately, the Third Circuit's decision only hurts plaintiff attorneys slightly because they still have two more accepted theories that give a presumption of reasonable reliance.

The first was set forth in Affiliated Ute Citizens of Utah v. United States, 406 U.S. 128 (1972), where the Supreme Court held that proof that a material fact was omitted created a presumption of reliance.  These cases would involve failing to disclose material facts, i.e. someone knows something, and he should tell you so that you can make the most informed decision, but he doesn’t tell you, and this affects your decision.

Second, in Basic Inc. v. Levinson, 485 U.S. 224 (1988), the Supreme Court also recognized the “fraud on the market” theory.  This legal argument can be raised when a fraudulent misrepresentation affects the price of the security being traded on the market.   The theory is that, absent the fraud, the market operates efficiently.  Introduce the fraud and the market then reacts negatively and the investor is harmed.

While it isn’t highly likely that this “fraud created the market” theory will gain much greater acceptance in other federal court districts (only the Fifth accepts it and the Seventh agrees with the Third Circuit, discussed currently), there are still two accepted arguments that can create a presumption of reasonable reliance.

Currently, the Fifth Circuit has accepted the “fraud created the market” theory and the Third and Seventh Circuits take the opposite stance. Because there is a split of opinion among the circuits, this issue is now ripe for the U.S. Supreme Court.

Simon W. Johnson

Sep 18, 2010

Life Insurance Estate Planning

In devising a proper estate plan, it can be important for the surviving spouse to have enough cash flow or other liquid assets to cover the estate administration and estate tax bills when they come due after the death of your spouse.

If the surviving spouse's assets are tied up in illiquid assets, then there might not be enough cash to pay these bills.  This could put added pressure on the surviving spouse to sell the illiquid assets as soon as possible and probably for less than market value if the buyer is reasonably savvy.

An Irrevocable Life Insurance Trust funded with a single-life insurance policy on the deceased spouse may be the answer to this dilemma.  The trust owns the life insurance policy and the surviving spouse can be the beneficiary.  The value of the life insurance is excluded from the deceased spouse's estate (for estate tax purposes) because the deceased spouse does not technically own it.  Rather, the Irrevocable Life Insurance Trust owns the policy.  Upon the death of the spouse, the surviving spouse receives the insurance proceeds and is in a position to pay off the estate administration and estate tax bills.

An alternative life insurance product is a second-to-die policy that doesn't pay out until the surviving spouse passes away.  Such a policy could be used when there is enough assets available to cover estate administration expenses and the proper party elects to postpone paying estate tax until the surviving spouse passes away.

Please contact me for further questions!
Simon W. Johnson

Corporations Not Subject to Suit Under the Alien Tort Statute (ATS)

In Kiobel v. Royal Dutch Petroleum Co., the Second Circuit held on September 17, 2010

that in ATS suits alleging violations of customary international law, the scope of liability—who is liable for what—is determined by customary international law itself. Because customary international law consists of only those norms that are specific, universal, and obligatory in the relations of States inter se, and because no corporation has ever been subject to any form of liability (whether civil or criminal) under the customary international law of human rights, we hold that corporate liability is not a discernable—much less universally recognized—norm of customary international law that we may apply pursuant to the ATS.

In Kiobel, Nigerian residents sued Royal Dutch Petroleum alleging that the company assisted the Nigerian government by providing transportation, shelter and food resources to the Nigerian government as it attempted to put down the Ongoni peoples resistance movement.

So you may ask -- how does the Alien Tort Statute give Nigerian residents an ability to sue in U.S. courts?

The U.S. government enacted the Alien Tort Statute in the last decade of the 18th Century.  Its arguable purpose then was to protect the rights of aliens who were living in the U.S. (such as European diplomats) to be able to sue in U.S. Courts for wrongs done to them under international law.  The international law at this point in history was far less developed than it is today (although arguably just as unenforceable) and applied mainly to remedy acts of piracy.  The modern idea is that it is available to remedy those who have been tortured or - even more henious - actually killed by their own governments.

The viability of the Alien Tort Statute in today's political climate is very tenuous.  U.S. federal courts have regularly been holding that foreign individuals have no rights to sue the U.S. government for alleged detention Mohammed v. Jeppesen Dataplan.  The Kiobel holding may increase the likelihood that this protection will now cover corporations that allegedly assisted the U.S. government in detaining, relocating and torturing the detainees.

If a corporation voluntarily accepts a profitable government contract, should it remain immune from suit for violations of customary international law committed during the execution of that contract?

Because corporations are given status as individuals in other aspects of the law, i.e. free speech and the right to advertise as much as it wants for political candidates, why then should they be viewed purely as a business entity in the context of the question whether or not they are liable under the Alien Tort Statute?

Simon W. Johnson