Force Majuere: Is COVID-19 An ‘Act of God'?

Every business can fail at times to meet their deliverables.  It might be a simple misdelivered customer order or maybe something more serious like a fire shutting down your factory.  These things happen.  The law provides remedies to these situations, whether identified in the contract between the parties or in the common law.  This often means that the party who fails to perform (for whatever reason) will be required to place the other party in the position where they would have been if the contract had been performed as expected.

What about when it really gets weird, though?  What about when a war breaks out or other societal calamity makes fulfilling a contract impossible?  That is the province of the force majeure clause.  French for ‘Superior Force,’ the clause is very often included in contracts but, by its nature, very seldom invoked.  It typically provides both parties to the contract the ability to withhold performance during a calamity which makes performance impossible.  This is sometimes referred to as an ‘Act of God’ clause, although an ‘Act of God’ may also be just one part of a force majeure clause – a peril outside of human control which cannot be forseen or protected against.

Drawing the lines of when and how these clauses apply is the work of the courts.  One of the leading Territorial cases on the matter is First American Development Group/Carib, LLC vs. WestLB AG, a 2010 decision arising from the Superior Court of the Virgin Islands.   In that case, First American owned land in Chocolate Hole, St. John.  It sought to develop a luxury residential community and received a $60 Million Dollar loan from WestLB, a German bank.  In exchange, First American gave WestLB a mortgage on the property. 

The project slowed in 2009 as the First American saw that it would require additional financing but could not secure that financing due to a global recession.  First American defaulted on its obligation, failing to make payments.  WestLB sought assistance from the Court, asking that a receiver be appointed to oversee the property and the project so that its interests could be protected.  First American attempted to invoke the force majeure clause, arguing that the global recession made performance on their contract impossible.  In the Loan Agreement, the clause stated that First American could be excused for performance for up to 90 days upon the happening of a qualifying ‘event,’ which the clause described as:

such event consists of an act of God (such as tornado, flood, hurricane, etc.), fires and other casualties or condemnation; strikes, lockouts or other labor disturbances (not specific to the Project); riots, insurrections or civil unrest; embargoes, shortages or unavailability of materials, supplies, labor, equipment and systems that first arise after the Effective Date, but only to the extent cause by another act, event or condition covered by this clause (b); sabotage, terrorism; vandalism, or a change in Law or any new Law is enacted after the Effective Date (unless Borrower, in the exercise of due diligence and prudent judgment, should have anticipated such enactment).

It was the job of the Superior Court to determine if the recession claimed by First American met the level of ‘event’ for purposes of the force majeure clause.

The Court held that even if First American did adequately prove that a recession was the cause of its failures, “a worldwide economic crisis does not constitute a Force Majuere event under the definition First American agreed to in the Loan Agreement.”  The Court then ticked off the various perils specifically identified in the clause and ultimately held that First American could not utilize the clause as a defense in this case.  The Court ruled for WestLB and granted them the receiver that they sought to oversee the project.  (It should be noted that different proofs might have resulted in a different decision from the Court and the case should not be read to say that such an economic crisis could never invoke force majeure – just that First American could not prove that here.)

Even when there is not a clause -- or a written contract at all, there might still be relief in the doctrine of impossibility.  Impossibility is a defense to a party’s failure to perform under a contract.  The Uniform Commercial Code is codified as Title 11A of the V.I. Code.  The UCC sets a baseline standard of commercial expectations and legal standards to be utilized between merchants.  It provides that a seller is excused from performing under a contract when

performance as agreed has been made impracticable by the occurrence of a contingency the non-occurrence of which was a basic assumption on which the contract was made or by compliance in good faith with any applicable foreign or domestic governmental regulation or order whether or not it later proves to be invalid.

In the context of the current Coronavirus crisis, if the Government declares your business to be non-essential and restricts your company’s work, there are good arguments for impossibility as a successful defense – even if no force majeure clause exists.

Whether and in what cases these defenses might apply to your company is something that must be evaluated on a case-by-case basis.

In the meantime, wash your hands.

If you have questions about how Coronavirus has impacted specific contracts for your business – or this has raised any other questions, please call for Mark at 340-774-4547 or send him an email at mark@usvilaw.com.

Coronavirus Series: Does Your Insurance Cover Your Business Closure?

The global spread of the Novel Coronavirus has shuttered businesses around the World, whether through illness, lack of business, or government mandate.  The economic impact is already severe and it is fair to say that the road ahead is uncharted.

Here in the U.S. Virgin Islands, the local Government has already mandated the closure of non-essential businesses.  That includes, by the way, law firms like this one.  While lawyers can work from home, the same may not be true for your business.  One lifeline for your business just might be right there in your insurance policy.

Business Interruption Coverage (BIC) is an insurance product that may be paired with Commercial Property policies.  Insurance industry numbers suggest that about one-third of small businesses do have some type of BIC.  As an example of how BIC works, one local client suffered a major fire at their store during off-hours.  The damage was so severe that the store was closed for about three months afterwards while the premises was gutted and rehabilitated.  That was three months of employee payroll and loss of sales for the store.

In that instance, the business had BIC as part of their Commercial Property Policy.  The BIC kicked-in to cover the lost business income -- typically defined as something like, “the net income (net profit or loss before income taxes) that would have been earned or incurred by the insured and the continuing normal operating expenses incurred, including payroll.”  In the instance of my fire-damaged client, they were able to establish through business records what payroll they paid during the closure, as well as historical documents showing what the business had made in prior months.  As a result, they were able to recover a large percentage of what they would have otherwise earned.

Can your business do the same if closed because of the Coronavirus pandemic?  Like so many legal questions, the answer is a firm maybe.  The language of your particular insurance policy controls.  Following the 2002-04 SARS outbreak, many insurance companies around the world began to adopt language which excludes BIC for any “loss due to virus or bacteria.”  Some jurisdictions have specifically introduced legislation which would relax those exclusions but insurers, as you may imagine, are fighting hard for those clauses to remain in place. 

The fact that these virus exclusions do exist should not keep you from examining your policy to see if BIC or some other avenue for coverage exists under the current exigent circumstances.  Not all insurance policies are the same – and jurisdictional laws do vary.  These are difficult times for businesses and having a great business lawyer on your side is a valuable tool to battle the uncertainty.

If you need help deciphering your insurance policy or have any questions on business interruption insurance or how your business might have a claim, please call for Mark at 340-774-4547 or send him an email at mark@usvilaw.com.

OPINION: Virgin Islands Law Should Clearly Insulate Those Wanting to Do Good

As the people and the businesses of the Virgin Islands seek to rebuild after the twin devastations of Hurricanes Irma and Maria, ambiguities in Virgin Islands law are hampering their ability to do so.  The Home Depot on Saint Thomas – the island’s largest hardware store – reopened recently to long lines of customers who would wait for hours to find that tool or part that they’ve been needing since the storms devastated their homes and businesses. 

The store, badly damaged itself, has now announced – to the shock of struggling residents -- that they have decided to take most of their pre-storm inventory to the island’s landfill.  The large fenced-in back lot of the store is now packed with toilets, stoves, plywood, tile, and all manner of other products which are headed to the already-overcrowded Bovoni landfill.  The Company made the decision to throw these useable products away instead of donating them or selling them at a reduced cost.  According to a company spokesman, products that were exposed to water must be thrown away because mold could appear over time.  In addition to these possible liability concerns, the spokesman cited insurance concerns, seemingly that the store could not take the reduced value on their insurance claim – and in order to receive compensation, they needed to throw away these products instead.

While some have suggested that this is a corporate failing, the real failure here is on the entities which write and enforce our laws.  The Virgin Islands does have a Good Samaritan law, codified at Title 27, Section 42 of the VI Code, which provides immunity to anyone who “voluntarily and gratuitously renders emergency assistance to a person in need.”  Courts must interpret these statutes by looking to the plain language and then to the intent of the Legislature.  The Legislature could act to make the language plainer or their intent clearer.  Any fear of criminal prosecution could be eliminated by a formal opinion letter from the Territory’s Attorney General.  As for the insurance concerns, it is difficult to evaluate what is included in the ‘four corners’ of someone else’s insurance policy but it would be a simple and direct matter for the VI Legislature to include a provision in the local Insurance Code (Title 22 of the VI Code) that explicitly allowed for recoupment claims of such ‘damaged goods.’ Home Depot’s spokesman was quoted in the local newspaper as stating, “There really aren’t many options.” 

The Legislature should make their intent clear that Home Depot would be immune from civil liability.  The Attorney General should make it clear that such an act would not bring criminal liability.  The Insurance Code in a hurricane zone should explicitly state that the loss in value in damaged goods may still be part of a claim even if someone else can make some use of them.  There are always options.  The legal community should push these options. 

If you have questions about how the law might impact your business, contact our Office.

Machado vs. Yacht Haven USVI, LLC: There's Erosion in the Virgin Islands -- and Not Just On the Beaches!

The Supreme Court of the Virgin Islands continues to take bold steps in reshaping the law of the Territory – and once again it is in a fashion that may spell difficulty for property and business owners, as well as their insurers.  Yesterday, the Supreme Court handed down their decision in Machado v. Yacht Haven USVI, LLC.  The decision erases a longtime distinction in the law on what duties the owners and occupiers of land owe to those on their property.

Being a younger jurisdiction with a less developed body of judicial decisions, the Virgin Islands did, for many years, heavily rely upon the Restatements of the Law to guide judicial decision-making.  The Restatements are published works by experts, academics, and practitioners in all areas of the law which set forth the common principles in those areas.  Since 2011, however, the VI Supreme Court has been moving away from the Restatement.

In Banks v. Int’l Rental & Leasing Corp. (2011), the VI Supreme Court stated that VI law did not require local courts to ‘mechanically apply’ the Restatement and set out a framework for determining whether the Restatement should still be followed.  Then in Gov’t of the V.I. vs. Connor (2014), the Court took another step in holding that the Restatements held no sway and that it would be the ultimate authority on what is or what is not the law of the Territory.

For business owners and insurers, the changes have meant uncertainty and risk.  Last year, in Perez v. Ritz-Carlton, the Court softened the requirements concerning a property owner’s constructive notice of a dangerous condition on the land.  The Plaintiff no longer has to show that the property owner actually knew or had reason to know of the particular dangerous condition causing injury.  Rather, the Court held, if the particular dangerous condition was one that habitually re-appeared, it was sufficient that the property owner previously knew about it.  In that case, it was leaves and plant debris on a walkway.  Although the Plaintiff could not show that the hotel knew about this particular accumulation – or even had reason to know of it – it’s awareness of previous accumulations was sufficient to hold it liable for resulting injury.

The current decision takes the uncertainty even farther.  In the Machado decision, the Supreme Court was reviewing a grant of summary judgment from the Superior Court for a local landowner.  The case involved Yacht Haven Grande, a local marina and retail complex.  Ms. Machado, who was employed at a business at the facility, chose to take a shortcut through the parking lot after work.  Rather than use the sidewalk, Ms. Machado walked through a curbed median with decorative plants and shrubbery.  While crossing the median, she tripped and fell on a sprinkler head and was injured.  She sued the marina, alleging that the sprinkler was a dangerous condition because of the lack of lighting and any warning signs. 

The trial court granted summary judgment to the landowner, holding that while Machado was on the property as a licensee, her status changed to trespasser when she entered the median – as it was not an area to be utilized by pedestrians.  The trial court’s decision was based upon the distinctions of invitee, licensee, and trespasser.  When determining if a property owner owes a duty to warn of or correct a dangerous condition, the Restatement provides for these three types of visitors:

• Invitees are those invited to enter upon the property for business or personal reasons.  While a property owner is not deemed to be the insurer of their safety, they are owed the highest duty of care under the Restatement and the property owner has a duty to make the premises safe for them, requiring an inspection of the premises and a warning or remediation of any discovered hazards.
• Licensees are those entering the property with the landowner’s permission but for their own benefit.  For these entrants, the Restatement does not have the same duty to inspect but only the requirement for the property owner to make safe those dangerous conditions of which the owner is already aware.
• Trespassers are those who enter or remain upon the land without permission.  It is the general rule that they are owed no duty of care under the Restatement – albeit with a good number of specific exceptions to that general rule.

In Machado, the VI Supreme Court overturned the grant of summary judgment in the trial court and erased the common law distinction between invitee, licensee, and trespasser that has long governed VI law.  Instead, the Court held that, “the foreseeability of harm is the touchstone of the existence of a land possessor’s duty of reasonable or ordinary care to all premises liability actions.”  The “foreseeability of harm” standard requires a more detailed analysis.  One of the cases cited by the Court detailed the factors to be assessed:

 (1) the foreseeability or possibility of harm; (2) the purpose for which the entrant entered the premises; (3) the time, manner, and circumstances under which the entrant entered the premises; (4) the use to which the premises are put or are expected to be put; (5) the reasonableness of the inspection, repair, or warning; (6) the opportunity and ease of repair or correction or giving of the warning; and (7) the burden on the land occupier and/or community in terms of inconvenience or cost in providing adequate protection.

Finally, the decision barred Assumption of Risk as a complete affirmative defense to a Plaintiff’s claims.  Holding that the common law doctrine was in conflict with the VI’s system of comparative negligence, the Court held that while a Plaintiff’s risk-taking may be argued to the jury to increase their share of responsibility, it cannot be a bar to recovery sufficient for summary judgment.

For VI businesses, their insurers, and their attorneys this means more uncertainty.  Injured persons have a greater leeway in their arguments and their cases are more likely to avoid summary judgment and earn access to the jury.

If you have any questions about the impact of Machado, please contact Mark Wilczynski at 340-774-4547 or mark@usvilaw.com.

Government of the VI vs. Connor: Ending the Reign of the Restatement

In an important decision which will have a wide-ranging impact on Virgin Islands lawyers and their clients, the Supreme Court of the Virgin Islands has definitively ruled that the Restatements of the Law no longer provide the Rules of Decision for Virgin Islands courts.

The Restatements of the Law are a series of legal treatises published by the American Law Institute, an organization of legal academics, judges, and practitioners.  As Harvard Law School describes the Restatements, “the ALI’s aim is to distill the ‘black letter law’ from cases, to indicate a trend in common law, and, occasionally, to recommend what a rule of law should be.  In essence, they restate existing common law into a series of principles or rules.”  The United States has a ‘common law’ legal system, which it carried over from its English forbearers.  A common law system relies upon courts to fill in the gaps between legislatively-enacted statutes to determine what the law is and what it means.  By the principle of stare decisis, subsequent courts are typically bound to the precedent established in earlier decisions.  Most U.S. attorneys and judges see the Restatements as a useful and persuasive guide but in two jurisdictions, the Restatements have been much more than that.

Both the U.S. Virgin Islands and the Commonwealth of the Northern Mariana Islands (CNMI) enacted similar provisions in 1984 which adopted the Restatements as law where there was no local law to the contrary.    What the USVI and CNMI did in adopting the Restatement, basically, was to provide for themselves a common law.

In the Virgin Islands, this provision was codified as 1 V.I.C. § 4 and said:

The rules of the common law, as expressed in the restatements of the law approved by the American Law Institute, and to the extent not so expressed, as generally understood and applied in the United States, shall be the rules of decision in the courts of the Virgin Islands in cases to which they apply, in the absence of local laws to the contrary.     

For the last thirty years, it has been standard procedure for the attorneys and judges of the Virgin Islands to look immediately to the Restatements and they were regularly cited with approval in legal briefs and court opinions. 

Then something began happening in the fall of 2011.  The Virgin Islands Supreme Court, which came into being in 2006, made a decision to move away from the Restatement.  In Banks v. Int’l Rental & Leasing Corp., the Supreme Court concluded that Legislature -- which crafted both the Restatement provision and the provision which created the Supreme Court as the highest authority on local law – did not intend for the Court to ‘mechanically apply’ the Restatement and that the Supreme Court had “the ability to shape the common law.”  In Banks, they noted that CNMI’s Supreme Court had similarly begun to move away from rote application of the Restatements.  While these provisions have been restated in subsequent decisions, what started with Banks has now come to fruition with Connor. 

In the February 2014 decision of Gov’t of the V.I. vs. Connor, the Supreme Court has closed the door on the Restatement, reasoning that when the Legislature created the Supreme Court it “implicitly repealed 1 V.I.C. § 4.”  The Supreme Court held that the “Restatements no longer hold an automatic preferred status is VI law” and that Superior Court erred when automatically applying the Restatement without conducting what it called “a Banks analysis.” Before applying a rule to a case, VI attorneys and judges will now be required to determine (i) whether any VI courts have previously adopted an applicable rule; (ii) the position taken by a majority of courts from other jurisdictions; and (iii) the “best rule” for the VI “based upon the unique characteristics and needs” of these Islands.

So what does this mean for VI businesses, their insurers, and their attorneys?  In the short term, it will likely bring more uncertainty as the guiding hand of the Restatements has been removed.  While attorneys will have more latitude in crafting their arguments, they will similarly have to respond to more creative arguments.  In the long run, as the law develops, the Virgin Islands will have its own organic jurisprudence.  It will be up to our legal system, between now and then, to steer the law toward a sounder shore.

If you have any questions about the impact of Connor, please contact Mark Wilczynski at 340-774-4547 or mark@usvilaw.com.

Parsing the Double Negative: The V.I. Collateral Source Rule

Civil lawsuits are often, at their core, a question of compensation.  A is wronged by B and suffers $100,000 in damages as a result.  A sues seeking $100,000 recompense from B to make himself whole again.  But what happens when C steps into the picture and makes A whole again?  Does B still have to pay?  Is it fair to let B off the hook?  Is it fair that A recover twice?  These questions are the basis of the Collateral Source Rule.

The Collateral Source Rule states that:

[I]f an injured party receives compensation for injuries from a source independent of the tortfeasor, the payment should not be deducted from the damages that the tortfeasor must pay.

Black’s Law Dictionary, 9th 3d, p. 299 (emphasis added).

The rule is traced to the U.S. Supreme Court’s decision in The Propeller Monticello v. Mollison.  The admiralty case concerned the collision of a schooner and steamship on Lake Huron, resulting in the loss of the schooner’s cargo.  The defense in that case pointed out that the schooner’s insurers had already covered the losses and asked the Court to dismiss the case on that basis.  The Court held that the defendant was not entitled to avail himself of the benefit of the plaintiff’s insurance, stating that, “[t]he contract with the insurer is in the nature of a wager between third parties, with which the trespasser has no concern.”  The Propeller Monticello, 58 U.S. 152, 155 (1855).

The rule was widely accepted and adopted across the country and eventually worked its way into the common law.  The rule is typically seen as rule of evidence – prohibiting the introduction of evidence showing that the plaintiff has received payment from a third party.  Courts and scholars have offered several justifications for the Rule, including that a wrongdoer should not benefit from the plaintiff’s foresight in obtaining insurance and that unless the defendant is made to pay for damages, the deterrent purposes of tort liability will be undermined.  See Christian Saine, Note, Preserving the Collateral Source Rule, 47 Case W. Res. 1075, 1077-78 (1997).

The Restatement of Torts embraces the rule as well, stating that while a tortfeasor may receive credit for payments he makes toward his own liability, he cannot receive credit for payments from other sources.  “Payments made to or benefits conferred on the injured party from other sources are not credited against the tortfeasor’s liability, although they cover all or a part of the harm for which the tortfeasor is liable.”  Restatement (Second) of Torts § 920A(2).

Perceived to allow ‘double recoveries’, the rule came under attack in the tort reform movement of the late 1980’s.  Like many other jurisdictions, the Virgin Islands enacted a statute which limited the application of the collateral source rule.  The law, enacted by the legislature in 1986, states that:

In any cause of action alleging damages for medical expenses or lost income sustained by or on behalf of a party, including, without limitation, actions alleging damages for bodily injury, death or property damage, or any combination thereof, the collateral source rule shall not be applied. Any party may introduce evidence that the other party who is claiming damages for medical expenses or lost income has received, or is entitled to receive, other compensation for such damages, including, but not limited to benefits from workmen's compensation, medical and hospital insurance, prepaid health care, social security, retirement or pension, and any employer paid program, such as wage continuation and disability benefits programs. Nothing in this section shall be construed to reduce any award where there is a statutory lien against the judgment as a result of a third party payment.

5 V.I.C. § 427 (emphasis added).

Limits on the application of the rule, such as Section 427, are based upon the “basic principle of tort law that damages are to be compensatory to the full extent of the injury sustained, but the award should be limited to compensation and compensation alone."  Incollingo v. Ewing, 282 A.2d 206, 228 (Pa. 1971).  It seeks to remove the possibility of a plaintiff windfall.

The sole object of compensatory damages is to make the injured party whole for losses actually suffered; the plaintiff cannot be made more than whole, make a profit, or receive more than one recovery for the same harm.  Thus, a plaintiff in a civil action for damages cannot, in the absence of punitive or statutory treble damages, recover more than the loss actually suffered.  The plaintiff is not entitled to a windfall, and the law will not put him in a better position than he would be in had the wrong not been done.

22 Am.Jur.2d. Damages § 28. 

The most significant discussion of Section 427 in caselaw comes in Pedro v. Huggins, 53 V.I. 98 (V.I. Super. 2010).  In this opinion by Judge Carroll, Section 427 is found to not apply to the case – because the damages sought were not medical or income related.  Judge Carroll discusses Section 427 and, importantly, rules that the statute must be strictly construed as it is in derogation of the common law.

It is a well-established and longstanding principle that statutes which invade the common law ... are to be read with a presumption favoring the retention of long-established and familiar principles, except when a statutory purpose to the contrary is evident. Section 427, which limits the collateral source rule as established by the common law, must be strictly construed.

Id.,  at 102 (internal quotations and citations omitted).

Even construed strictly, the provisions of the statute are clear.  Based upon Section 427, the collateral source rule does not apply in actions seeking recoupment of medical expenses or lost income.  Given that the rule does not apply, and as the Code explicitly allows, a defendant may introduce evidence that the Plaintiff has received payment for medical expenses (or other collateral sources).  Above and beyond that, as the rule actually discusses deduction from damages awards, there is a sound basis for taking the position that every dollar already paid – whether by insurer or other donor - is a dollar less to be awarded.

 If you have any questions about the impact of the Collateral Source Rule, please contact Mark Wilczynski at 340-774-4547 or mark@usvilaw.com.

Defining "Motor Vehicle" for Purposes of the VI's Accident Damages Cap

In a jurisdiction considered to be very ‘plaintiff-friendly,’ there are still provisions of the law in which defendants can find some comfort.  One such provision is the damages cap in auto accident cases.  The provision, enacted by the Legislature in 1999 limits the amount of non-economic damages that a plaintiff can receive when bringing suit over a motor vehicle accident.  It states:

(a) The total amount recoverable for non-economic damages for any injury to a person in an action arising out of a motor vehicle accident may not exceed $100,000; provided, however, that this limitation shall not apply upon a finding of gross negligence or willful conduct.

(b) For the purposes of this section, non-economic damages include:

   (1) pain and suffering;

   (2) physical impairment;

   (3) disfigurement; and

   (4) other not-pecuniary damages recoverable under the tort laws of this Territory.

20 V.I.C. § 555.

Obviously, a rear-ender on Main Street is going to fall under the cap.  However, the statute does not explicitly limit itself to automobiles or public roadways.  With creative application of the provision, the damages available to plaintiffs in a wide range of cases can be significantly limited.  This office has been successful in asserting the application of Section 555 in cases which might, at first glance, be seen as something other than a “motor vehicle accident.”  One of the things that makes this possible is a wide-ranging definition of “motor vehicle,” which the V.I. Code defines as:

all vehicles propelled by power other than muscular, except those running upon rails or tracks, road rollers, tractors, and self-propelled plows and golf carts used solely for recreational purposes on golf courses and not on public roads or highways

20 V.I.C. § 101. 

In Allen v. Crown Bay Marina, the plaintiff filed suit seeking damages for injuries sustained when he was struck by a golf cart used by maintenance employees on the property of a local marina.  This office filed a motion with the Court seeking to limit evidence of non-economic damages on the basis of Section 555.  The plaintiff opposed the imposition of the damages cap, arguing that the motor vehicle code, of which the cap is a part, only applied to “public roads or highways,” and that the golf cart, which was utilized only on marina property, was not a motor vehicle that fell within the definition of the Code.  The defense prevailed on the question, with the Superior Court ruling that the cap applied.

Reading § 101 in the most straightforward and natural manner, the Court finds that Defendants’ motorized cart does not fall under the exception created in the statute.  Accordingly, the Court agrees with the Defendants’ contention that the motorized cart in question falls within the definition of a motor vehicle under § 101.  Therefore, § 555 is applicable in this action, and non-economic damages shall be limited to Seventy-Five Thousand Dollars ($75,000.00) in accordance with the terms of the statute.

Another unique application of the damages cap occurred in Lewis v. CULUSVI, Inc.  The minor plaintiff collided with a forklift that was operating inside a St. Croix store.  The plaintiff sued for damages and on behalf of the defendant, we sought to apply the damages cap to the case, arguing that the collision with the forklift was a ‘motor vehicle accident.’  The forklift, the motion argued, was within Section 101’s definition of ‘motor vehicle’ in that it was not powered by muscle, did not run or rails or tracks, and was not a road roller, tractor, plow, or recreational golf cart.  The Plaintiff opposed application of the statute – again insisting that the statute only applied to vehicles designed to transport people on public roadways.

Looking to the plain language of the statute, the trial court sided with the defendant and agreed that the forklift fell within the plain meaning of the statute.  Further, the opinion concluded, the Code addressed many types of vehicles which were illegal to operate on public roadways and found this to be an indication that motor vehicle accidents which occurred outside of public roads also fell under the provisions of the Statute.

These types of applications are possible only when a thorough knowledge of local law is combined with a willingness to examine a case ‘outside-the-box.’  The result, in both instances, was a shift in the complexion of the case, allowing the defendant and their insurer to put a more certain dollar amount on the damages available to the plaintiff.  With the uncertainty over pain and suffering resolved, the focus can turn to more easily quantifiable aspects of damages, such as medical costs and wage loss.

If you have any questions about the application of Section 555, please contact Mark Wilczynski at 340-774-4547 or mark@usvilaw.com.

Diesel Exhause Classified as a Carcinogen: Plaintiff's Lawyers Say it is "Going to Be a Big Deal"

The fumes generated by the combustion of diesel fuel have long been suspected as having harmful effects.  Since 1988, diesel exhaust has been classified as “probably carcinogenic” – meaning that while researchers had their suspicions, evidence of the connection was limited.  Supported by several recent studies, the World Health Organization – the public health arm of the United Nations – removed the “probably” and announced that diesel fumes are to be considered a carcinogen.

Diesel exhaust now shares the WHO’s Group 1 carcinogen status – the level which includes smoking, asbestos, ultraviolet radiation, and alcohol.  Every person has been exposed to diesel fumes at some point – but the principal focus of the research has been occupational exposures.  “I don’t think it’s bad to have a diesel car,” said Dr. Otis W. Brawley, Medical Director for the American Cancer Society. “I don’t think it’s good to breathe its exhaust. I’m not concerned about people who walk past a diesel vehicle, I’m a little concerned about people like toll collectors, and I’m very concerned about people like miners, who work where exhaust is concentrated.”  One of the most important recent studies focused on coal miners – and found marked increases in bladder and lung cancer from these nonsmoking miners.

While US-based operations are more likely to benefit from newer, cleaner diesel systems than emerging markets, lawyers in the US have taken notice of the WHO’s decision.  The reclassification of diesel exhaust is “going to be a big deal,” said Andrew Buchannan, a St. Louis based Plaintiff’s attorney.  He believes that as more people learn about the impact of diesel fumes, lawsuits will begin to appear among workers such as truck drivers.  Other groups of people that are expected to see higher-than-normal workplace exposures include toll booth workers, forklift and heavy machinery operators, railroad and dock workers, garage workers, and mechanics.

Businesses which utilize diesel fuel in their operations need to assess the conditions under which that fuel is utilized.  It will be argued that the WHO announcement puts your operation on notice that the fumes are harmful and you needed to protect your employees and others from the dangers caused by these fumes.  With a deep background in litigating toxic exposure claims, including asbestos claims and other workplace toxic exposures, this office can help your business assess its possible exposure.

If you have any questions about the WHO reclassification, please contact Mark Wilczynski at 340-774-4547 or mark@usvilaw.com.

Defoe vs. Phillip: The 'Employee' is not an 'Employer'

On January 5, 2012, the Supreme Court of the Virgin Islands issued their decision in Defoe vs. Phillip.  The decision concerns the Virgin Islands’ Worker’s Compensation Act (WCA) and the WCA’s definition of ‘Employer.’  By the terms of the decision, the Virgin Islands now stands amongst a small minority of U.S. jurisdictions that allows worker injured on-the-job to bring injury suits against their negligent coworkers.

Factual Background: The Path to the Courthouse

Lenroy Phillip, an employee of St. Croix’s HOVENSA oil refinery, was driving on the refinery grounds when the vehicle he was driving struck and injured Timothy Defoe, a fellow HOVENSA employee.  HOVENSA was insured under the VI’s Worker’s Compensation scheme and Worker’s Compensation approved Defoe’s claims.  As Defoe’s employer, HOVENSA was immune from further suit under Section 284 of the WCA.  Defoe did not bring suit against HOVENSA but he did bring suit against his co-worker, Phillip, alleging that Phillip’s negligence was the cause of the accident.  The Superior Court granted summary judgment to Phillip on the grounds that Phillip, as a co-employee of Defoe, was provided with the same protections as the employer under the ‘exclusivity provision’ set out in Section 284 of the WCA.  The decision by the Superior Court to grant Mr. Phillip summary judgment on the claim relied upon a 2004 decision by the Third Circuit Court of Appeals, Tavarez vs. Klingensmith.

Legal Background: Tavarez and the ‘Employee’ as ‘Employer’

Before the Supreme Court of the Virgin Islands was created in 2006, decisions of the Superior Court were reviewed by the Appellate Division of the District Court of the Virgin Islands.  Those decisions, in turn, were reviewed by the Third Circuit Court of Appeals in Philadelphia.  In the Tavarez case, an employee was injured at work due to the negligent act of his supervisor.  The employee sued the supervisor in the Superior Court.  At the close of evidence, the supervisor moved for judgment on the basis that he was immune from suit under Section 284 of the WCA.  The Court agreed and issued judgment for the supervisor.  The Appellate division affirmed the decision, as did the Third Circuit.  The Third Circuit reasoned that the acts of any corporation are necessarily through its agents and the “acts of corporate … employees on behalf of the corporation are the acts of the corporation.”  While there is an argument that Tavarez applied only to supervisory co-workers, the decision placed the Virgin Islands alongside the majority of U.S. jurisdictions that allow for co-worker immunity.  It is the ‘general rule’ in the US that a worker cannot sue his coworker for on-the-job injuries.

The Supreme Court’s Reasoning: Shifting the Burden to the Legislature

The Supreme Court, in Defoe, holds that Third Circuit decisions interpreting VI law are ‘entitled to great respect’ but are not technically binding upon the Territory’s highest court.  Once the Defoe Court decides that Tavarez is not binding upon them, they analyze the WCA by looking very particularly at the language of the statute as enacted by the Legislature.  The exclusivity provision only provides protection to the ‘employer.’  While “employer” is defined throughout VI Code, the particular section in question does not provide a definition.  The Supreme Court employs the common definition in deciding that a fellow employee is not the ‘employer’ entitled to immunity, but rather a ‘third person’ who may be amenable to suit.  The Supreme Court determines that while the lack of co-worker immunity puts the Virgin Islands in the minority of jurisdictions on the issue, the burden falls upon the Legislature to re-craft the statute.  The decision of Defoe means that until the Legislature does agree upon a change, employees can be sued by their coworkers for negligent acts which result in on-the-job injuries.

So what does this mean for the VI Employer and their Insurers? 

First, the decision in Defoe arguably creates a duty for employers to inform their employees that employees may be personally liable for injuries visited upon fellow employees -- insulated by neither Worker’s Compensation nor by the Company’s General Liability policy, which excludes workplace injuries to employees.  The failure to provide such a warning could expose the employer to the claim that they breached their duty of good faith and fair dealing.

Secondly, third party insureds will be stuck at the defense table with a co-tortfeasor who is maximally culpable but will be largely unable to satisfy a judgment for which both parties are jointly and severally liable.  For instance, Adam is injured on the job when he is struck by a forklift being driven by Bob, his intoxicated co-worker.  Adam sues Bob but also sues CraneCo, the forklift manufacturer.  Adam alleges that Bob drove negligently but also alleges that CraneCo’s forklift lacked safety equipment that might have prevented the accident.  Instead of being alone at the defense table, CraneCo now sits next to Bob.  Even if Bob is deemed 99% at fault and CraneCo only 1% at fault, CraneCo is jointly and severally liable for the verdict – a verdict that it is unlikely that an uninsured Bob will be able to contribute to.

Finally, this may offer businesses and insurers a good opportunity to lobby amendments to the WCA.  The Supreme Court has invited the Legislature to amend the statute.  In the meantime, this is an opportunity for insurers to educate their clients as to this change in the law and to provide those clients with additional protection in the form of policies which cover the now-existing gap regarding workplace injuries caused by coworkers.

If you have any questions about the impact of Defoe vs. Phillip, please contact Mark Wilczynski at 340-998-0937 or mark@usvilaw.com.