Davis v. State: State is not required to plead and prove an exception to the State Tort Claims Act, and an exception to the State’s immunity may be raised for the first time on appeal or sua sponte.

On October 6, 2017, in the case of Davis v. State, the Nebraska Supreme Court concluded that its prior cases holding that the State of Nebraska (the “State”) must plead and prove an exception to the State’s immunity from suit under the State Tort Claims Act (the “STCA”) were clearly erroneous. Davis v. State, 297 Neb. 955, 979 (2017).  As a result, the Court overruled its prior cases “to the extent they can be read to hold that a state attorney waives an immunity defense under [the Act] by failing to raise it in a pleading or to a trial court.”  Davis, 297 Neb. at 979.1

Instead, the Court held “that an exception to the State’s waiver of immunity under the STCA is an issue that the State may raise for the first time on appeal and that a court may consider sua sponte [(i.e., on its own motion)]”.  Id.  The Court’s rationale for its holding was that “when a plaintiff’s complaint shows on its face that a claim is barred by one of the exceptions [to the STCA], the State’s inherent immunity from suit is a jurisdictional issue that an appellate court cannot ignore.”  Id.  While not specifically stated, the Court’s holding in Davis will also apply to claims under Nebraska’s Political Subdivisions Tort Claims Act (the “PSTCA”).  See id.

The effect of the Court’s holding in Davis is that a plaintiff bringing a tort claim against the State or against a political subdivision will have to meet somewhat of a heightened pleading standard.  In addition to having to comply with the procedural requirements of the STCA or the PSTCA, plaintiff’s will also have to ensure that their complaint does not show, on its face, that the claim is barred by one of the exceptions to the State’s or political subdivision’s waiver of immunity.  If it is, the trial court, or even an appellate court, has the inherent power to determine whether the plaintiff’s allegations show that the tort claim is facially barred by an exception to the STCA or the PSTCA.  See id. at 980.

The Davis holding also relaxes the pleading standard for the State and political subdivisions.  As indicated above, because the Court considers the exceptions to the State’s and political subdivision’s waiver of immunity under the STCA and PSTCA as jurisdictional issues (i.e., whether the court has the power to hear the case), the failure to raise an exception in a responsive pleading or at trial does not operate as a waiver of the defense, and may be raised by either the State, political subdivision, or the court for the first time on appeal.

1 The cases that were overruled were Maresh v. State, 241 Neb. 496, 489 N.W.2d 298 (1992); Hall v. County of Lancaster, 287 Neb. 969, 846 N.W.2d 107 (2014); Doe v. Board of Regents, 280 Neb. 492, 788 N.W.2d 264 (2010); Reimers-Hild v. State, 274 Neb. 438, 741 N.W.2d 155 (2007); Lawry v. County of Sarpy, 254 Neb. 193, 575 N.W.2d 605 (1998); Sherrod v. State, 251 Neb. 355, 557 N.W.2d 634 (1997); and D.M. v. State, 23 Neb. App. 17, 867 N.W.2d 622 (2015).

May an Insurer Depreciate the Cost of Labor in Determining the Actual Cash Value of a Covered Loss?

Recently, the United States District Court for the District of Nebraska certified this question to the Nebraska Supreme Court: “May an insurer, in determining the ‘actual cash value’ of a covered loss, depreciate the cost of labor when the terms ‘actual cash value’ and ‘depreciation’ are not defined in the policy and the policy does not explicitly state that labor costs will be depreciated?”. Today, the Nebraska Supreme Court found in the affirmative. 

Henn v. American Family Mut. Ins. Co. involves a current dispute over the interpretation of a homeowners’ insurance policy. At the crux of the dispute was whether labor costs can be depreciated in determining the actual cash value (replacement cost minus depreciation) of a covered damage under the policy. In its analysis, the Nebraska Supreme Court noted that Nebraska law has always generally allowed for depreciation in defining “actual cash value”. Despite the plaintiff’s argument that depreciating labor is illogical because labor does not depreciate, the court noted that such an argument is in contravention of the court’s prior reasoning that actual cash value must not equal the amount required to complete the repairs. Actual cash value is meant only to start repairs. 

The court also stated that Nebraska courts may still consider material and labor when determining actual cash value. This approach ensures that the insured does “not pay for a hybrid policy of actual cash value for roofing materials and replacement costs for labor” as the property is comprised of both materials and labor. Therefore, an insurer may depreciate labor in determining the actual cash value of a covered loss when not stated otherwise in the policy. 
 

Differences Between Application of General Negligence and Professional Negligence Statutes of Limitation Clarified

In Churchill v. Columbus Community Hospital, Inc., the Nebraska Supreme Court attempted to provide clarification, in the context of services provided by a physical therapist, about how to determine when the two year professional negligence statute of limitation applies and when the four year general negligence statute of limitation applies.
In Churchill, a patient participating in aquatic therapy was injured after she slipped on a puddle of water while descending steps to leave a pool area located within a physical therapy clinic. The clinic’s policy was not to assist patients leaving the pool unless an initial evaluation indicated the patient had trouble walking. Churchill’s evaluation did not reveal any such trouble. On November 1, 2011, one day before the four year anniversary of her fall, Churchill filed an action in Platte County District Court against the clinic’s owner, claiming negligence in failing to clean the floor and failing to warn of the water hazard. The district court granted summary judgment in favor of the defendant, determining that the action was one for professional negligence, which Nebraska Revised Statute §25-222 states must be filed within two years after the act or omission occurred.
Churchill appealed the grant of summary judgment against her on the grounds that her claim was for premises liability, which is subject to a four year statute of limitation under Neb. Rev. Stat. §25-207. Addressing an issue it had not previously specifically determined, the Court concluded that physical therapists are considered professionals, taking into account that physical therapists are licensed by the state, are required to have a college degree, are subject to professional disciplinary authority, and are required to maintain certain educational requirements. The Court then stated that the alleged negligent act, directing Churchill to leave the pool without assistance, occurred within the scope of a professional relationship between patient and therapist. The Court reasoned that performing aquatic exercises was part of Churchill’s therapy, and her therapist evaluated her ability to walk. When the therapist directed Churchill to leave the pool without assistance, he was providing professional services. Thus, Churchill’s action was not allowed to proceed, as it was governed by the two year statute of limitation for professional negligence. 
Churchill thus clarified the analysis by which Nebraska courts evaluate whether a claim must be filed within two years as professional negligence, or within four years as required for other causes of action. The act or omission alleged must be essential and an integral part of the professional service rendered. Also, the profession addressed must exhibit factors similar to the factors set forth in Churchill.   This rule of law has been upheld in subsequent cases.
Churchill gives plaintiffs an incentive to file suit early if they have any question as to whether their claim is subject to the professional negligence statute of limitation.  Those defending against claims may argue for a broader application of the definition of “professional negligence”, as Churchill may broaden that definition in some situations.

Jury Confusion: What Happens When the Jury Makes a Mistake?

The Iowa Court of Appeals recently affirmed a district court’s denial of a motion for new trial based on juror misconduct. In Resetich v. State Farm, the Leanna Resetich was involved in a car accident in which she sustained injuries. Her and her husband eventually sued State Farm for underinsured motorist coverage and loss of consortium. The jury returned a verdict for $48,000, and assessed Ms. Resetich’s fault at 45%. Consequently, the judge reduced the plaintiff’s judgment to $26,500. 

The plaintiffs then filed a motion for a new trial alleging, among other things, juror misconduct. In support of the assertions, they produced a juror’s sworn statement attesting that the jurors had already considered Ms. Resetich’s fault in calculating the $48,000 verdict, an action prohibited by the jury instructions. The district court refused to admit the affidavit and denied the motion for new trial. Plaintiffs appealed. 

On appeal, the court noted that I.C.A. § 5.606(b) prohibits the use of juror testimony unless it refers to extraneous prejudicial information or outside influences that improperly affected jurors. In order to protect the sanctity of the juror room, any thoughts, emotions, or internal matters are not admissible. The court reasoned that jurors’ understanding or lack thereof represented the internal workings of the jury, which was barred by the evidence statute. Thus, the district court properly excluded the juror’s affidavit and denied the motion for new trial on the grounds of juror misconduct.

For any litigant, this result is upsetting. I.C.A. §5.606(b) is a statute used in different forms across the country to protect jurors. To avoid a confused jury, it is important to have an attorney that fights for clearly worded jury instructions and protects an appellate record in case unfair instructions are sent to the jury room. 

If you are considering suit or facing a complaint, attorneys at Erickson | Sederstrom may be able to assist you on a variety of legal topics. Attorney MaKenna Dopheide may be reached at (402) 397-2200.

Federal Appellate Court Rules that Obesity is Not a Disability (Most of the Time)

In a case of first impression for the United States Court of Appeals for the Eighth Circuit, the court ruled that, in most cases, the Americans with Disabilities Act (ADA) does not cover obesity alone. In Morriss v. BSNF Railway Company, Mr. Morriss sued the railroad when his offer of employment was revoked after a physical. The would-be employee failed a physical when his Body Mass Index (BMI) was found to violate company policy, even though he did not have any current health concerns or work restrictions. The company, concerned about health and safety risks to which an employee with a high BMI may be susceptible, had instituted a policy refusing to hire candidates with a high BMI for safety-sensitive positions. Mr. Morriss sued, arguing the company discriminated against him in violation of the ADA. The company was granted summary judgment, and Mr. Morriss appealed.
 
The ADA prohibits a covered employer from discriminating against any “qualified individual on the basis of disability”. Of the several definitions of “disability”, the Eighth Circuit focused on whether Mr. Morriss had an actual or perceived physical impairment. A physical impairment, as defined by the EEOC, means a physiological disorder affecting one or more body systems. As a result, the court concluded that an individual’s weight is considered covered when it falls outside the normal range and occurs as a result of a physiological disorder. Because Mr. Morriss had no evidence that his weight was the result of a physiological disorder, the court affirmed the district court’s decision. While this decision does not mean that ADA coverage is out of reach for claimants with obesity, it certainly excludes a substantial amount of claims. When conducting physicals, Iowa and Nebraska employers with similar policies should take care that the candidate does not have any underlying disorder causing obesity or a covered disability arising from obesity to avoid liability under the ADA.

Iowa Court of Appeals Issues New Decision on the Coming and Going Rule

The Iowa Court of Appeals recently reviewed several exceptions to the going and coming rule. In Seaman vs. Burgess Health Center, Mrs. Seaman died tragically on her way to work. The agency determined that she was not injured while in the course of her duties. Therefore, it barred her widower’s action for death benefits and funeral expenses. 

On appeal, the widower argued that there was a causal injury between her death and her work with Burgess Health Center. According to the going and coming rule, injuries occurring off the employer’s premises while the employee is on the way to or from work are not compensable. However, the court does make several exceptions. Of those, the widower argued that the special errand exception, dual purpose exception, and second business situs exception applied. 

The special errand exception applies when an employee is injured away from the employer’s premises during a special errand or mission for their employer. The dual purpose exception applies when an employee is injured off the premises while making a trip that serves both personal and business purposes. To apply this exception, the employee would have had to make the trip even if it did not coincide with the business purpose. The widower argued that both exceptions applied because his wife was on her way to work to deliver completed patient reports. He argued that the reports were time sensitive and she would be reprimanded if she did not deliver them. However, the court found no facts that would make the agency’s finding that she did not have to provide the reports that day illogical or unjustified. Therefore, neither the special errand exception nor the dual purpose exception applied. 

Finally, the widower argued that the business situs exception applied. The business situs exception applies when the employee’s home serves as a secondary office. While the Iowa Supreme Court has not officially adopted this exception, other courts state that it applies when it finds a large amount of work performed at home, continuing presence of work equipment at home, or special circumstances of the particular employment that make it necessary and not personally convenient to work from home. A great example of this occurs when a woman must work from home due to pregnancy. Although Mrs. Seaman did some work at home in the evenings to complete reports, she never saw clients at home, Burgess Heath Center never required her to work from home or paid for mileage to and from work. Mrs. Seaman did not have equipment at home. Based on these facts, the court could not find the agency’s finding that the exception did not apply wholly irrational. Therefore, the Iowa Court of Appeals affirmed the decision that Mrs. Seaman’s estate was barred from workers’ compensation benefits.

This case serves as a great review for employers in determining which tasks will invoke the exceptions to the going and coming rule. More importantly, while the court did analyze the case under the business situs exception, it still did not adopt it. As such, Iowa remains one of the twenty-eight states that still have not adopted that specific exception. 

The Search for “Bigfoot” Continues—The Iowa Court of Appeals Yet Again Finds Insufficient Evidence to Meet the Seemingly Unattainable Standard for Reversing for Workers’ Compensation Decisions

The search for the “Bigfoot” of the legal community continues, specifically the search for a case reversing final agency action on the ground that the agency’s action is unsupported by substantial evidence or is irrational, illogical, or wholly unjustifiable. In McComas-Lacina Construction v. Drake, McComas-Lacina, Mr. Drake’s employer, appealed the district court’s decision to affirm a workers’ compensation award in favor of Mr. Drake.  The employer argued that the determinations regarding Mr. Drake’s permanent total disability and date of last injury was “an abuse of discretion, irrational, illogical, unreasonable, unjustifiable, arbitrary and capricious, and error of law, and not supported by substantial evidence.”
 
In reviewing the case, the Iowa Court of Appeals recognized that the legislature granted the workers’ compensation commissioner the discretion to make factual determinations. Thus, district and appellate courts must affirm these factual determinations if they are supported by “substantial evidence in the record before the court when the record is viewed as a whole.” Substantial evidence is evidence of the quantity and quality that would be deemed sufficient by a neutral, detached, reasonable person to establish the fact at issue when the consequences of establishing that fact are of great importance. Iowa Code §17A.19(10)(f)(1). The court of appeals clarified that it would affirm a decision as having met the substantial evidence burden, even if the court would have come to a different conclusion as to the factual determinations. Because establishing the date injuries and deciding whether an employee is permanently and totally disabled are factual determinations, the Iowa Court of Appeals affirmed the lower court’s decision, concluding that there was little it could add the workers’ compensation court’s reasoning that supported these factual determinations.
 
As noted by the appellate court and evidenced through McComas, nearly all cases are won or lost in the workers’ compensation court. The Iowa Court of Appeals reinforced the widespread belief that a case reversing a final agency action on the ground that the determination was unsupportable by substantial evidence “is the Bigfoot of the legal community—an urban legend, rumored to exist but never confirmed.” Therefore, the search for "Bigfoot” continues.

Nebraska Strikes Employer’s Strategy to Keep Workers’ Compensation Plaintiffs from Dismissing Cases

Nebraska’s highest court recently ruled that employers in workers’ compensation cases cannot hold a counterclaim to keep a plaintiff from dismissing their case voluntarily. In Interiano-Lopez v. Tyson Fresh Meats, the plaintiff filed a case in Nebraska’s workers compensation court asking the court to determine his employer’s liability as to an alleged injury in October 2013. Tyson, the plaintiff’s employer, answered with a counterclaim asking that the court also determine its liability. Eventually, the plaintiff requested that the court dismiss the case without prejudice so that he could file the same case in the Iowa workers’ compensation system. (At the time, the plaintiff lived in Iowa, while the Tyson plant was located in Nebraska) The judge dismissed the plaintiff’s case, but Tyson’s counterclaim continued. Before Iowa could adjudicate the plaintiff’s claim, the Nebraska court ruled in favor of Tyson with regard to the October 2013 injury.

On appeal to the Nebraska Supreme Court, the court noted the alleged conflict in workers’ compensation statutes. Neb. Rev. Stat. § 48-177 allows a plaintiff to dismiss a case with the ability to refile if the case has not been submitted to the judge or if both parties agree. Meanwhile, Neb. Rev. Stat. § 48-173 allows both parties in interest to petition the Nebraska workers’ compensation court to resolve a dispute about an employee’s workers’ compensation benefits. While the court did not consider Tyson’s counterclaim to be a “petition” under Neb. Rev. Stat. § 48-173, it also noted that to allow counterclaims would interfere with plaintiffs’ right to dismiss a case under Neb. Rev. Stat. § 48-177. It stated, “[w]e will not construe an employer’s right to file a petition under § 48-173 in a manner which negates a plaintiff’s right to dismiss a case under § 48-177”.

This case represents a blow to a defense strategy to keep plaintiffs from increasing employer costs. In this case, the court noted that the plaintiff sought to refile in Iowa because the benefits and law were more favorable to him. The employer’s strategy sought to protect itself from last minute dismissals to save money and costs. After this opinion, plaintiffs will be allowed to dismiss a case voluntarily without regard to an employer’s right to file a petition. 

Is Your Small Business Ready for Nebraska’s Updated Data Breach Notification Law?

On July 21, 2016, new changes to Nebraska’s Financial Data Protection and Consumer Notification of Data Security Breach Act become effective. In the event of a breach, any individual or commercial entity that conducts business in the state of Nebraska and owns or licenses computerized data that includes personalized data is required to 1) conduct an investigation to determine the likelihood that the personalized information has been or will be used for an unlawful purpose, and 2) notice any affected Nebraska residents. If notice is necessary, the individual or commercial entity must also notify the Attorney General. Moreover, if the personal information is maintained by an individual or commercial entity, but not owned or licensed by the individual or entity, they must notify the owner or licensee of the breach. Failure to comply may result in suit against the individual or commercial entity for damages a resident incurred because of the breach.

New updates to the law include defining personal information to include “a user name or email address, in combination with a password or security question and answer, that would permit access to an online account”. Additionally, the law is now triggered when encrypted data is stolen in addition to the confidential process or key used to decrypt the data.

Any individual or commercial entity that maintains and follows its own notice procedures regarding data breaches is deemed to be in compliance with the law. However, many other laws or regulations also cover data breaches, such as HIPAA, HITECH, GLBA, and other states where a resident affected by the breach resides. Businesses large and small should contact their attorney to ensure that they have a policy that complies with all applicable laws and regulations and reduces the risk of liability after a breach.