Update on Recent Insurance Law Decisions

Over the past several months, there have been several decisions and developments which are potentially significant to the practice of insurance law. These involve legal malpractice, employer liability, and claims against health care providers for premises liability. Always, each case involves different facts and law, and accordingly the following must be taken for general information purposes only, rather than for action upon any specific fact situation.

Legal Malpractice: Probate Proceedings

In Smith v. O’Donnell, Executor of the Estate of Corwin Denney, 07-0697 (Tex. 2009), the Supreme Court extended its previous holding that an executor was in privity with a decedent’s attorney (and thus could sue for estate planning malpractice) to allow suit by an executor against a decedent’s attorney for the decedent’s survivable claims for legal malpractice against the attorneys who advised decedent with respect to the decedent’s actions while serving as executor to the estate of the decedent’s previously deceased wife.

Though the facts are complex, some 29 years after the alleged malpractice, the beneficiaries of the wife’s estate sued the estate of the deceased executor of the wife. The executor of the deceased executor settled the claims of the wife’s beneficiaries, and then brought suit for legal malpractice against the attorneys who had advised the deceased executor. Although the rule ostensibly remains in Texas that intended beneficiaries under a will or other third parties who lack privity with a deceased’s attorney cannot sue for malpractice in their own right, given the right approach and the right facts, there are ways around that prohibition which can ultimately allow a recovery against a decedent’s attorneys for malpractice, whether it be for malpractice involved in estate planning or for malpractice committed during the probate process.

No Liability of Employer to Third Party for Injuries due to Fatigue of Off-Duty Employee:

In Nabors Drilling, USA, Inc. v. Escoto, 06-0890 (Tex. 2009), the Supreme Court reiterated the general rule that employers in Texas do not owe a duty to third parties for the tortious activities of off-duty employees occurring off the work site. Although limited exceptions exist, e.g., when an employer sends an obviously intoxicated employee to drive home, and/or where the employee is using the employer’s vehicle, our Supreme Court held that an employer in Texas has no duty to prevent injury due to the fatigue of its off-duty employee or to train employees about the dangers of fatigue.

Thus the employer had no liability for an accident arising out of a fatigued employee’s use of the employee’s own vehicle while driving home from work after a tiring work shift, where the employer did not affirmatively exercise control over the tired employee. Because of the many factors which can contribute to an employee’s fatigue, including factors arising from the employee’s activities before reporting to work and while at work, the court held that imposing a duty on employers to prevent their employees from driving while fatigued is not reasonably justified, and concomitantly held that there is no duty of an employer to train employees about the dangers of fatigue.

Negligently Maintained Hospital Bed is Not a Healthcare Liability Claim:

In Marks v. St. Luke’s Episcopal Hospital, 07-0783 (Tex. 2009), the Supreme Court dealt with whether a hospital patient’s fall from a negligently maintained hospital bed was a healthcare liability claim under the “Medical Liability and Insurance Improvement Act” of Texas, which act precludes claims if the plaintiff fails to timely file an expert report substantiating the claim. Noting that the Texas medical liability statute was specifically intended to apply to situations having a “material adverse effect on the delivery of medical
and healthcare services in Texas,” the Supreme Court rejected the hospital’s contention that a healthcare liability claim includes any injury to a patient negligently caused by any unsafe condition at a healthcare facility.

Rather, the Supreme Court held that the patient’s fall from a defective hospital bed involved the failure of a piece of equipment which did not involve a “departure from the accepted standards of medical care or health care,” was merely “incidental to the patient’s care,” was more in the nature of a premises liability claim, and that the claim in this case based on the defectively assembled or maintained hospital bed was not governed by the Texas healthcare liability statute.

The result of this ruling was to obviate the need for any supporting expert medical report, avoided the damage caps contained in the Texas medical liability statute, and ostensibly would invoke insurance coverage available from the hospital’s CGL carrier rather than or in addition to the hospital’s medical malpractice carrier. Indeed, in cases alleging both premises liability and healthcare liability claims, both the CGL carrier and the medical malpractice carrier of a healthcare provider in Texas could see defense and apportionment issues arise.”

By H. Norman Kinzy

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