Newark N.J. (May 22, 2024) - “It always pays to have a good captain” and “details matter” are phrases that carry extraordinary meaning.
Recently, we were presented with what appeared to be a routine slip and fall on snow and ice in a parking lot. However, the plaintiff, an employee, sued every potential defendant based on a title search for the property, as well as her employer and the snow removal contractor. When the carrier first assigned the case, there was no coverage for the employer – only for the property owner and financing entities based on an additional insured provision in the policy. The carrier was concerned about a conflict of interest if we represented all parties. However, we assured them that controlling more pieces of the litigation would allow us to focus the plaintiff's attention on the snow removal contractor. The carrier and even the client were confused as to the respective roles of each of the insured finance-related defendants. Accordingly, we secured conflict waivers and opened two matters: one with the carrier for the finance-related entities and property owner, and another for the uninsured employer. This enabled us to develop a more comprehensive and cost-effective litigation plan.
Document Inspection and Strategy Development
First, we requested all snow removal contracts, the lease between the employer and the property owner, and the plaintiff's employment file. Corporate counsel for the client left the position before the case started. So, while there was a very able paralegal from another department on the legal team, no one could explain why the decision to exclude employees' claims from coverage was made and what the plan was in the event there was a claim by an employee for injuries on the premises. Our review of the lease revealed that it was a triple net or ground lease placing all responsibility for maintenance of the property squarely with the employer lessee of the property. At this point, we formulated a global strategy to secure dismissal with the least cost and resistance possible. We started with a friendly call to opposing counsel requesting dismissal of the finance entities without prejudice. In doing so, we advised that the property owner, the tenant of the property, and the snow removal contractor were all defendants in the case. Based on these representations, the plaintiff voluntarily dismissed the finance entities without prejudice.
Dismissal of Employer/Tenant
Next, we went about securing a dismissal of the employer/tenant of the property. From our perspective, the plaintiff clearly could not sue her employer based on application of the workers' compensation bar. However, when we requested the workers' compensation claim file, which the plaintiff's counsel had handled, the employer was listed as what appeared to be an unrelated staffing agency. This did not match the employment file. After much digging, we learned that there was one workers' compensation policy with a number of additional insureds, including the plaintiff's employer/lessee of the property. Apparently, without guidance – due to the absence of corporate counsel – the workers' compensation claim listed the first named insured as the employer not the actual additional insured employer/lessee related to the plaintiff employee's claim. This mistake effectively deprived the employer/lessee of the workers' compensation bar defense.
To correct this mistake, we combined payroll records, employment file records, tax records, and a certification from the employer to demonstrate the error and to prove that the plaintiff was an employee of the employer/lessee. We then used these materials to support our motion for summary judgment and dismissal of the uninsured employer/lessee. The motion pointed out that the dismissal requested was legally appropriate and that the snow removal and property owners remained in the case. As such, the plaintiff still had a possible avenue of recovery. Likely due to how the motion was presented, it met with minimal resistance and was granted.
Dismissal of Property Owner
The final piece in our strategy was dismissal of the property owner based on the application of the triple net/ground lease. Factually, this motion appeared straightforward because the lease placed all responsibility for property maintenance with the employer/lessee. The employer tenant could acknowledge this in a certification to support the motion because they were now out of the case with no exposure. Moreover, the issue was legal in nature because it involved solely lease interpretation. However, in opposition to the motion, the plaintiff argued that the snow removal invoices and contract were between an entity with a slightly different name than the employer/lessee and that there was, at least, a question of fact that prevented the court from granting the motion. Unfortunately, the snow removal contractor did use a slightly different name on the signed invoices and contract for snow removal, lending credence to opposing counsel's arguments.
If corporate counsel had been involved when the contracts were prepared, or if the significance of these details was appreciated at the time the contract was executed, this error could have been corrected. Instead, we were forced to scramble to secure a certification from the employer/lessee acknowledging responsibility for maintenance of the premises and explaining the naming error with supporting proof of payment by the correctly-named employer/lessee. When we argued the motion, the court was hesitant to grant it based on this “question of fact” that was created solely by an outside vendor's naming errors. As a compromise, the court granted the motion without prejudice, allowing the plaintiff to renew the claim against the property owner if information came to light indicating that it did maintain the property contrary to the recitals in the triple net lease. The court agreed that legally, the lease was a triple net lease and that the property owner should be dismissed based on an absence of any duty. It had reservations, however, as to whether there was a question of fact regarding what occurred. Accordingly, it entered an order of dismissal without prejudice.
Takeaways: The Importance of Corporate Counsel and Significance of Contract Details
While we were able to tier our defense approach to secure dismissals in the most cost effective and timely matter, it is clear that the absence of corporate counsel and errors in small documentary details almost derailed what was obviously a carefully developed risk mitigation and cost reduction strategy by the client. The client minimized risk to the real estate by using a separate company to own the real estate and then leased it to the tenant, which operated the business. A triple net/ground lease was selected to eliminate the most possible claims against the lessor. The lessee assumed all maintenance obligations. Furthermore, in an effort to minimize costs, personal injury claims against the lessor were excluded from coverage because the client realized that such claims would be barred by the workers' compensation bar. The property owner was an additional insured and would not be subject to this exclusion because it was not an employer of staff at the business. This plan was thoughtfully considered and tiered.
However, without corporate counsel to direct outside counsel as to this litigation strategy, it was necessary for litigation counsel to secure conflict waivers, evaluate the lease issues and learn the relationship between the different pieces of the larger organization. These efforts were then hampered by outside vendors who did not pay attention to small details and by petitioners who failed to correct workers' compensation filings. Details matter and they almost set the carefully crafted litigation strategy off course. This is why the importance of good corporate counsel cannot be overstated. They have a global view with a clear litigation strategy that involves pieces at play that neither litigation counsel nor the insurance carrier may see. A good captain is always needed to steer the ship. A good captain is essential to ensure that small details, which could knock the ship off course, are not overlooked.
At the conclusion of this case the client did hire new corporate counsel who was made aware of our efforts and the strategy that his predecessor put in place. Counsel was very appreciative of our efforts and our constructive critique of which details almost hindered his predecessor's efforts. We look forward to continuing to develop this relationship and feel that the diversity of perspective and experience that exists amongst the attorneys at Lewis Brisbois enabled us to obtain this result.
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