TIPS 75th Anniversary

The Tort & Insurance Law Jounal

Fall 1999
Volume 35, Number 1

Table of Contents

The Surety’s Rights to the Contract Funds in the Principal’s Chapter 11 Bankruptcy Case

Insurance Coverage for Collapse Claims: Evolving Standards and Legal Theories

The Unresolved Conflict Between Traditional Principles of Reinsurance and Enforcement of the Terms of the Contractual Undertaking

Evolving Limitations on Coverage for AIDS: Implications for Health Insurers and Employers Under the ADA and ERISA

Credentialing Liability in the Managed Care Arena

Extending Coverage of the Americans with Disabilities Act to Individuals with Attention Deficit-Hyperactivity Disorder: A Demonstration of Inadequate Legislative Guidance

Worth A Thousand Words: The Admissibility of Day-in-the-Life Videos


The Surety’s Rights to the Contract Funds in the Principal’s Chapter 11 Bankruptcy Case, 35 TORT & INS. L.J. 1 (1999)
By: George J. Bachrach and Cynthia E. Rodgers-Waire

This article discusses the substantive legal and equitable rights of the surety when the surety is in the position of competing for contract funds on contracts bonded by the surety for a principal that has filed a Chapter 11 bankruptcy case against claims to those contract funds by trustees in bankruptcy, debtors, in-possession and other potential claimants. The article further discusses the procedures under the U.S. Bankruptcy Code that must be followed in order for the surety to assert and protect its rights to the contract funds. A surety that performs the obligations of its principal under a performance bond expects that it will receive payment from the obligee of the remaining contract price, because receipt of the contract funds from the obligee reduces the surety’s ultimate loss. The surety must educate the bankruptcy court concerning its rights and interests to the contract funds, and adapt to the practice in the bankruptcy courts to assert its substantive rights and negotiate the best deal possible. The article explains why the surety must negotiate with the debtor for whatever protections the surety deems adequate for the debtor’s use of the contract funds. If a debtor will not cooperate, or other parties in interest, such as the bank, refuse to acknowledge the surety’s rights and interests, the surety should seek to prohibit the debtor’s use of the cash collateral. The article discusses the procedures available in the bankruptcy court to compel the debtor to comply with its obligations under the contracts with respect to the contract funds.

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Extending Coverage of the Americans with Disabilities Act to Individuals with Attention Deficit-Hyperactivity Disorder: A Demonstration of Inadequate Legislative Guidance, 35 TORT & INS. L.J. 1
By: David W. Lannetti

Part I of this article provides a brief introduction to the Americans with Disabilities Act of 1990 and suggests that the expansive view adopted by the applicable administrative agencies and the courts has extended coverage well beyond that supported by the statutory language of the Act and its legislative history. The inclusion of Attention Deficit-Hyperactivity Disorder (ADHD) under the aegis of the ADA is the latest example of an overly broad interpretation of the landmark legislation for the disabled. Part II provides a brief history of the ADA. Part III contains a concise overview of ADHD and its relationship to learning disabilities. Part IV discusses the interpretation of the ADA regarding ADHD and learning disabilities, including the language of the statute and its applicable regulations, the Act’s legislative history, and recent inconsistent judicial opinions. Part V points out that coverage under the ADA has expanded well beyond the confines envisioned by Congress, as demonstrated by the inclusion of individuals afflicted with ADHD. Finally, this article concludes that more specific legislative guidance is required to rein in the courts and ensure that the ADA is interpreted as specified in the statute and as intended by Congress.

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Evolving Limitations on Coverage for AIDS: Implications for Health Insurers and Employers Under the ADA and ERISA, 35 TORT & INS. L.J. 1

By: Nancy R. Mansfield

State insurance laws prevent insurers from reducing health insurance benefits after a disease is diagnosed, but ERISA has a loophole for self-insured employers that can reduce or eliminate coverage for a particular illness after a sick employee submits a claim. However, the Americans with Disabilities Act (ADA), enacted in 1990, may provide protection for sick employees of self-insureds. The ADA prohibits employers from discriminating on the basis of disability, but permits ERISA self-insureds and insurers to continue to underwrite, classify, and administer risks, as long as the plans are carried out according to accepted principles of insurance risk classification. A surge of lawsuits reflect the fact that self-insureds have, to some degree, targeted AIDS-afflicted employees by capping their benefits after the claims are filed. No similar string of case law exists for other illnesses. Specifically, AIDS-afflicted employees of self-insureds have filed suit asking the courts to hold that their self-insured employers cannot cut off their benefits under the ADA. This article explores the ERISA loophole. Further, it explains how the ADA may prohibit self-insured employers and insurers from capping benefits after a disease is diagnosed. The article also analyzes whether the courts, in interpreting the ADA, should require employers and insurers to treat individuals with AIDS like those suffering from other long-term diseases.

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Credentialing Liability in the Managed Care Arena, 35 TORT & INS. L.J. 1
By: Carol P. Michel

This article provides an overview of the credentialing liability issues currently being addressed in the evolving environment of managed care litigation. At least twenty-two states have adopted some form of the hospital corporate liability theory and provide some legal relief for the tort of negligent credentialing. With the advent of managed care and the emergence of new types of health care delivery systems, the theory of corporate liability has expanded to include these new health care delivery systems. Health maintenance organizations, independent practice associations, physician-hospital organizations, and managed care organizations, coupled with the combination of health care financing and delivery into one corporate entity, have created a complex and interwoven network for defendants. To lawyers representing patients, decisions regarding payment for care are inseparable from decisions regarding provision of care, and when one corporation has a role in both, there is an inevitable potential for conflict and litigation. The author suggests that the best defense against these claims is a good accredited credentialing process with complete documentation of the procedure and investigation into the practitioner’s background.

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The Unresolved Conflict Between Traditional Principles of Reinsurance and Enforcement of the Terms of the Contractual Undertaking, 35 TORT & INS. L.J. 1
Edward J. Ozog, Stephen J. Schlegel, Kimbley A. Kearney, and Jennifer M. Ellin

This article explores the potential impact of the follow the fortunes and uberrima fides doctrines on a reinsurer’s ability to control its losses. It further provides recommendations that may help the reinsurer to enforce its bargain to indemnify the cedant only for losses that it has actually reinsured. The nature of the reinsurance industry has changed dramatically in the past two decades. The goals of limiting exposure for insured losses and realizing profits are now paramount. As a consequence, there is a new temptation to seize upon the traditional principles of follow the fortunes and uberrima fides as means by which those goals can be achieved. To date, the courts have not devised wholly satisfactory means of resolving the conflict between the traditional principles of reinsurance and the enforcement of the specific terms of a contract of reinsurance. Recent case law reflects a pattern of interpretation of the doctrines of follow the fortunes and uberrima fides that has significantly eroded the ability of the reinsurer to limit its exposure on risks that it may never have intended to be covered under its reinsurance policies. Until the courts become willing to reconsider their present interpretation of those doctrines in light of the expansion of the reinsurer’s liability beyond the intended scope of its contract, the reinsurer’s only recourse is to be mindful of the present status of the law and to draft clear and unambiguous reinsurance policies.

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Insurance Coverage for Collapse Claims: Evolving Standards and Legal Theories, 35 TORT & INS. L.J. 1 (1999)
By: Paula B. Tarr, William S. Daskam, IV, and Herbert J. Baumann, Jr.

This article addresses many of the issues that arise during the investigation of a collapse claim and reviews a large number of the reported cases. Many crucial problems remain unresolved or the subject of a split of authority. Furthermore, the number of collapse claims has increased significantly over the last several years. Many carriers are changing their policies to define “collapse” as an abrupt falling down to rubble or caving in. Some carriers have responded by adding an endorsement to their policies that defines “collapse” as a abrupt falling down or caving in to rubble. Even with such an endorsement, questions still exist, however, as to whether a collapse “occurred” prior to the endorsement’s effective date. Collapse claims present and will continue to present a challenge for the claims professional. Many issues raised by such claims do not have definite answers. At present and for the foreseeable future, collapse claims will continue to be a hot issue in the property insurance arena.

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Worth A Thousand Words: The Admissibility of Day-in-the-Life Videos, 35 TORT & INS. L.J. 1
By: Chilton Davis Varner and James Matheson McGee

Part I of this article presents a brief overview of the use of motion pictures or videos in personal injury trials to dramatize the plaintiff’s damages and, not coincidentally, to maximize the plaintiff’s recovery. Plaintiffs argue that day-in-the-life films communicate to the jury the real-life extent of a plaintiff’s disabilities and demonstrate the special needs that resulted from the injury caused by the doctor or the manufacturer. Defendants, in turn, argue that day-in-the-life films are unnecessary, cumulative, and, most importantly, unfairly prejudicial. Although courts have been unwilling to exclude movies or videos as a matter of law, a number have been willing to construct a variety of safeguards to protect against abuse. Part II examines the standards for admissibility, including authentication, relevance, and probativeness. Part III discusses grounds for objection, e.g., cumulative evidence, continuity, and excessive depictions of pain. Part IV analyzes various attempts to limit the effectiveness of day-in-the-life videos, and Part V concludes that many courts can be expected to continue admitting such evidence as long as the depiction is not blatantly staged.

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The Tort and Insurance Law Journal

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