Overcoming Defenses

At the Law Office of Steven L. Smith, P.C., we have developed unique and sophisticated approaches to some of the most formidable defenses raised in subrogation cases. We blunt our opponent’s defenses with precision and expertise.

We have successfully overcome defenses including:

° Waivers of Subrogation
° Limitations of Liability
° Economic Loss Doctrine
° Spoliation
° Statutes of Repose
° Daubert

Waivers of Subrogation

Waivers of subrogation appear in leases and contracts. They can be a thorn in the side of the subrogating carrier. We poke and prod at these waivers to find the loophole that blunts the defense. We look at all possible angles, including:

° Who entered into the "waiver"?
We take pains to limit the application of a waiver as much as possible.

° What did the "waiver" accomplish?
Just because a contract uses the word "waiver" does not mean that subrogation has been waived. We broke new legal ground in 1991 by recognizing the difference between an actual waiver and a promise to obtain a waiver.* Sometimes a promise to obtain a waiver is ignored, and no waiver has taken place.

*See Zurich-American Ins. Co. v. Eckert, 770 F.Supp. 269 (E.D.Pa. 1991)

Limitations of Liability

Limitations of liability appear in many contracts. Some of the most daunting limitations of liability appear in alarm system contracts. We challenge limitations of liability with the same penetrating legal analysis we apply to other defenses. We have successfully defeated limitations of liability by:

° Exploiting wrong or no signatures
Many contracts with limitations specify who must sign in order for the contract to be valid. We have successfully defeated limitations of liability due to improper signatures.

° Limiting the limitations
Contractual limitations are no broader than the contract in which they appear. We look for theories of recovery where the contract and its limitations do not apply. For example, certain alarm contracts are limited to central station monitoring, so the limitations would not affect theories based on defective design or installation of the system.

We have successfully beaten limitations in alarm system contracts by confining them to their scope.

° Making an end run around the limitations
We research the law to develop legal theories that are not affected by limitations of liability. Examples include theories involving fraud, misrepresentation, violations of consumer protection statutes, and violations of safety regulations or codes.

Economic Loss Doctrine

In cases where a defective product causes a loss, out best legal theory is often strict liability, where the manufacturer is responsible even if it wasn't careless. Manufacturers try to take this weapon away from us by using the economic loss doctrine. The defense, when successful, means that we cannot pursue tort claims such as strict liability and instead are limited to contract claims, which can be vulnerable to language that limits warranties, shortens the time to sue or caps the amount of recoverable damages.

The economic loss defense holds that when a defective product fails in a way that damages only the product, it is not a tort but a breach of contract. If the product fails and damages not only itself but other property as well, it is a tort.

But, manufacturers are constantly trying to expand the reach of the doctrine. For example, manufacturers of metal buildings or prefabricated homes argue that the entire building is a product, so no collapse of the structure or fire within the building is a tort.

We have developed creative ways to defeat or limit this defense by questioning all facets of the situation, including:

° Who were the parties the contract?

° What product or products were sold pursuant to the contract?

° What product or products were defective?

° Can the Contract be voided by fraud or other theories?

Spoliation

Spoliation has emerged as a popular and potent defense in subrogation actions. Defendants claim that the carrier and its representatives altered or destroyed the fire scene and, as a result, they cannot fully defend themselves. Penalties for spoliation range from limiting evidence or testimony to dismissing the entire case.

We take a two-step approach to this defense. First, we aim for prevention rather than cure. We offer training to clients on how to identify and preserve potentially relevant evidence. And in cases where clients retain us promptly after a new loss, we take an active role in preventing spoliation.

Second, we have been successful in countering spoliation charges by:

° Distinguishing between spoiling evidence and throwing out meaningless debris

° Forcing defendants to prove that the loss of evidence has caused them real prejudice

° Drawing distinctions between product cases involving design defects and those involving manufacturing defects. In design defect cases, the loss of the product is less prejudicial because all products share the same design and any exemplar can be used by the defendant.

° Determining who spoiled the scene. We cannot be held responsible if the fire department altered the scene.

Statutes of Repose

Many states have enacted statutes that extinguish claims after a certain number of years following a certain event, such as the completion of a building or the sale of a product. So if a building collapses or a product fails after the time period in the statute, the statute bars subrogation.

We challenge these defenses on all fronts:

° In building cases, we "deconstruct" buildings into defective and nondefective components, and recast the claim as a product liability claim.

° We challenge the applicability or the constitutionality of the statute.

° We look for activity subsequent to the event that triggers the statute, such as repairs to the building or product.

Daubert

Working with experts is essential to successful subrogation. But working with experts is also a potential minefield, with defendants taking aim at our experts. The law provides fuel for the fire. The U.S. Supreme Court opinion in Daubert v. Merrill-Dow allows experts to be challenged and precluded from testifying.

We approach Daubert issues with a degree of difference. We not only defend our experts from Daubert challenges, we actually turn the tables and use Daubert to preclude or neutralize our opponents' experts.

° We draw on our technical background in working with our experts to insure that their work and their reports are based on sound methodology that will survive a Daubert challenge.

° We scrutinize the work of our opposing experts to identify shortcomings in their methodology and conclusions.

° We view depositions of opposing experts as an opportunity to lay the groundwork for our own Daubert challenge. In several cases, our penetrating examinations have produced very notable results. In several cases, the defendants have abandoned their experts. In other cases, we filed our own Daubert motions and won preclusion of defendants' experts.