Volume 90

INSURANCE LAW UPDATE

Joy Michele-Johnson obtained a no-cause of action verdict in a jury trial in Monmouth County, in which the plaintiff alleged to have tripped over a power cord in a beauty salon at the Monmouth Mall. Plaintiff’s alleged injuries included soft tissue injuries to her neck and back, pain management injections and a recommendation for lumbar surgery. Plaintiff’s medical expert was Dr. Cary Skolnick. Plaintiff testified at trial that she observed the cord before falling, but could not avoid it. The jury deliberated for less than an hour, and returned a defense verdict.

Donald Mahoney obtained an Appellate Division decision which affirmed the trial court’s entry of summary judgment to a residential property owner with respect to a trip-and-fall on an abutting public sidewalk. That case, Peifer v. Mesday, is summarized below.

Matthew Minor obtained a grant of summary judgment in a case in which the 18-year old plaintiff alleged to have consumed alcohol at a house owned by the defendant-insureds. In granting summary judgment, the judge relied on the recent published Appellate Division case of Estate of Narleski v. Gomes, which is summarized below.

CASES OF SIGNIFICANCE TO THE INSURANCE INDUSTRY

1. Estate of Brandon Tyler Narleski v. Gomes – What is the duty owed by parents and their son to a plaintiff who consumed alcohol at the house of the parents along with their son, and where the plaintiff was killed in a car accident by an intoxicated driver who had also consumed alcohol at the parents’ house?

2. Kaur v. Garden State Fuels, Inc. – Does a Section 20 settlement in workers’ compensation court paid by an uninsured employer to an employee who was killed in the scope of employment bar a third-party civil suit by the employee’s estate against the employer?

3. Sousa v. Massachusetts Bay Ins. Co. – Is water damage to a house caused by a water main break excluded under a homeowner’s policy as damage caused by a flood or surface water?

4. Peifer v. Mesday – Is the fact that a tree is located near an upraised sidewalk slab enough for a plaintiff to overcome summary judgment, where the defendant is a residential homeowner who planted the tree years earlier?

5. Abankwa v. Greer – Can a medical expert testifying at trial give an opinion regarding the results of electromyography (EMG) testing, where the expert reviewed the data underlying the EMG but did not actually conduct the EMG himself?

6. Green v. Monmouth University - Does the Charitable Immunity Act bar suit by an attendee of a concert at a public university, even though the university contracted with a for-profit entity to host the concert?

7. Don v. Edison Car Company, Inc. – Does the admission of trial testimony to the effect that a non-testifying physician recommended that plaintiff undergo surgery, even though none of plaintiff’s testifying experts had recommended surgery, constitute an abuse of discretion to warrant the granting of a new trial?

8. Cortes v. Garrard Construction Group, Inc. – Should a minor plaintiff injured while using construction equipment while trespassing on a construction site be permitted to argue at trial that the defendants who controlled the site should have known that minors would trespass onto the site and use construction equipment?

9. Liberty Mutual Insurance Company v. Penske Truck Leasing Company – Can a defendant which self-insured a commercial vehicle be compelled to arbitrate an insurance carrier’s claim for reimbursement of PIP benefits paid to its insured in an auto accident with defendant’s vehicle?

10. Paladino v. Auletto Enterprises, Inc. – Can a valid claim of privilege be made for witness statements obtained by insurance carriers prior to litigation or assigning a case to defense counsel?

11. G.A.-H. v. K.G.G. – Under what circumstances can one employee be held liable for sexual assault of a minor by a co-employee?

12. Vizzoni v. BMD – When does a psychiatrist owe a duty to a third-party who is alleged to have been killed as a result of medication prescribed to the psychiatrist’s patient?

13. FK v. Integrity House, Inc. – Is an entity that receives 1.26% of its funding from private sources entitled to the protection of the Charitable Immunity Act?

1. Estate of Brandon Tyler Narleski v. Gomes, New Jersey

Appellate Division – Published Opinion

Brandon Narleski purchased liquor at a liquor store accompanied by a group of his friends. Everyone in the group was over 18 years old but under 21 years of age. The group included Mark Zwierzynski. The group left the liquor store and went back to a house at which Mark Zwierzynski resided. Mark’s parents, who owned the house, were not home.

The group including Narleski, Mark Zwierzynski, and Nicholas Gomes consumed alcohol at Mark’s house. Brandon Narleski and Nicholas Gomes subsequently left Mark’s house in a vehicle driven by Gomes. Gomes was involved in an accident, in which Brandon Narleski was ejected from the vehicle and killed. Gomes’ blood alcohol level was significantly over the legal limit for driving.

The Estate of Brandon Narleski sued the liquor store which sold alcohol to underage individuals. The liquor store filed a third party complaint against Mark Zwierzynski and his parents. The trial court granted summary judgment to Mark and his parents.

The Appellate Division affirmed the trial court’s grant of summary judgment. The Appellate Division found that since there was no evidence that Mark’s parents had knowledge of or consented to the underage consumption of alcohol at their house, that they owed no duty to plaintiff.

The Appellate Division further held that Mark Zwierzynski owed no duty to plaintiff. However, the court set forth a new rule of law that would go into effect with respect to conduct that was to occur within 180 days of the court’s decision. The new rule of law would have imposed a duty upon someone like Mark Zwierzynski, who was over 18 years old and under 21 at the time of the incident, and who facilitated the underage consumption of alcohol at his house, even if he were not a tenant or owner at the house. The Appellate Division also invited the New Jersey Supreme Court and/or the state legislature to take up this issue. There is currently a petition for certification filed with the New Jersey Supreme Court by the attorneys for Mark Zwierzynski, asking the Supreme Court to address the Appellate Division’s prospective ruling on the duty of underage drinkers towards other underage drinkers.  

2. Kaur v. Garden State Fuels, Inc., New Jersey Appellate Division - Unpublished Opinion

An employee of Woodbury Gulf, LLC, which owned a gas station, was fatally shot during the course of a robbery. His wife filed a claim under the Workers’ Compensation Act as well as a third party claim individually and on behalf of her husband’s estate. She appealed from an order granting summary judgment and dismissing her complaint. The trial judge found that the settlement of her claims under the Workers’ Compensation Act barred her from filing a third party claim.

The Appellate Division affirmed the Trial Court’s decision. Plaintiff had filed a dependency claim under the Workers’ Compensation Act. At the time she filed the petition, Woodbury Gulf, LLC did not have workers’ compensation coverage. The petition was resolved by way of a Section 20 lump sum settlement.

Before the Appellate Division, plaintiff argued that the Workers’ Compensation Act bar to recovery did not apply because the defendant did not agree to pay her the statutory workers’ compensation benefits set forth in Section 13 of the Workers’ Compensation Act. She also contended that defendant’s payment of a lump sum settlement under Section 20 did not surrender her right to common law remedies.

The Appellate Division found that plaintiff had clearly settled her disputed claim in the Section 20 settlement. The Court found that the claims that plaintiff was making were precisely the types of claims to which the Workers’ Compensation Bar applied and which were the subject of her action before the judge of compensation. The Court further found that although the Section 20 settlement preserved dependency claims under Section 13, the preservation of those claims did not give rise to a right to avoid the Workers’ Compensation bar.

The Court further found that the failure to maintain workers’ compensation insurance did not alter the effect of the Workers’ Compensation Bar, especially pursuant to the Section 20 settlement.

3. Sosa v. Massachusetts Bay Ins. Co., New Jersey Appellate Division - Published Opinion

Plaintiff sought coverage from defendant, a homeowner’s insurance carrier, for real and personal property damage after a municipal water main broke and flooded plaintiff’s home. Defendant denied coverage after concluding that the damage had resulted from “surface and groundwater intrusion”. Defendant’s policy provided “all risk” coverage to the house and other structures. Both coverages were subject to a “water damage exclusion” which excluded coverage for damage by water that was “caused by an act of nature or was otherwise caused”. The trial court granted summary judgment to the defendant, ruling that the policy language plainly excluded plaintiff’s claim pursuant to the water damage exclusion.

The Appellate Division reversed the grant of summary judgment on appeal. The court rejected defendant’s contention that the water damage exclusion applied regardless of how the water damage was caused. The court ruled that the policy did not exclude all losses resulting from “water”. Instead, the court noted that the policy specifically identified kinds of water to which the exclusion applied. The court explained that water from a municipal water main break did not constitute a “flood” or “surface water” ruling that those terms required a naturally occurring body of water. The court noted that once breaking through the main, the water that damaged plaintiff’s home was no longer below the surface of the ground.

4. Peifer v. Mesday, New Jersey Appellate Division – Unpublished Opinion

This matter was defended by the firm of Sweet Pasquarelli. The trial court granted summary judgment to a residential homeowner, with respect to a trip-and fall accident that occurred on the sidewalk in front of the residence. Plaintiff alleged that an uneven sidewalk had caused her to trip and fall.

A tree that was previously located in the front yard in the general vicinity of the sidewalk had been cut down several years prior to the accident. Defendant argued that it was entitled to residential sidewalk immunity, and although defendant conceded that the tree had been planted by the homeowner years earlier, argued that there had been no expert testimony or other evidence that the presence of the tree in the front yard had caused the upraised portion of the sidewalk on which plaintiff tripped and fell.

The trial court granted summary judgment to the defendant finding that there was no evidence that the tree roots had caused the upraised sidewalk. The Appellate Division affirmed for essentially the same reason given by the trial court.

5. Abankwa v. Greer, New Jersey Appellate Division – Unpublished Opinion

Plaintiff appealed from a jury verdict in favor of defendant. Plaintiff had been in a car accident with defendant, but plaintiff declined medical treatment at the scene. Almost two years later, plaintiff filed a complaint alleging that she had suffered serious and permanent injuries as a result of the defendant’s negligence. At trial, the jury found that the defendant was at fault but also found that plaintiff failed to prove that she had sustained a permanent injury that was proximately caused by the defendant’s negligence. Therefore, a judgment was entered in favor of the defendant.

On appeal, plaintiff argued that the trial judge erred in permitting defendant’s expert witness, Steven Robbins, M.D., to testify about an EMG that he did not conduct and upon which he did not rely upon because it was hearsay and outside the scope of his expertise. The plaintiff argued that the defendant had impermissibly “bootstrapped” the complex opinion of a non-testifying expert into evidence.

The Appellate Division concluded that Dr. Robbins had reviewed EMG results as well as the raw data underlying the EMG, not just the report. The court noted that even if the trial court did abuse its discretion, plaintiff did not show how the EMG results could have affected the outcome of the trial.

6. Green v. Monmouth University, New Jersey Supreme Court Opinion

Plaintiff appealed from a decision of the Appellate Division, which affirmed the trial court’s order granting summary judgment to defendant, Monmouth University. Plaintiff alleged to have suffered injuries after falling down a set of stairs while attending a concert open to the public, being held at defendant’s activity center. Defendant had contracted with Thoroughbred Management, Inc. (TMI), a for-profit company, to allow TMI to use defendant’s facilities to host a concert. TMI paid defendant a $10,000 fee, while TMI and defendant equally split a facility fee added to concert ticket purchases.

The trial court granted summary judgment to defendant, ruling that the defendant was immune to suit pursuant to the Charitable Immunity Act. The trial court found that defendant’s governing resolution stated that defendant’s purposes included hosting concerts to the public to advance defendant’s mission of education and recreation. The court ruled that the concert where plaintiff was injured therefore fell within the defendant’s purposes. The court also held that even though plaintiff was not a student of the university, she was still a beneficiary of defendant’s educational mission by attending the concert.

On a split decision, the Appellate Division affirmed summary judgment. The dissenting opinion argued that immunity was inappropriate because defendant derived income from the concert. The court further questioned whether the concert furthered defendant’s educational mission.

The Supreme Court affirmed the Appellate Division on appeal. The Court ruled that presenting the concert to the public did further defendant’s stated mission of advancing the cause of education. The court held that it was not the role of the court to determine what music should constitute educational music. The court further ruled that hiring a third party such as TMI to present a concert did not invalidate defendant’s immunity, noting that non-profits regularly relied on for-profit entities to help present charitable, educational, or religious programming. Additionally, invalidating charitable immunity for working with for-profit companies to advance charitable causes would have a chilling effect on charitable organizations. The court held that it was irrelevant whether defendant could have made a profit or loss from holding the concert. Finally, the court concluded that the plaintiff was a beneficiary under the Charitable Immunity Act.

7. Don v. Edison Car Company, Inc., New Jersey Appellate Division - Unpublished Opinion

Defendant’s vehicle rear-ended a vehicle that then struck plaintiff’s vehicle from the rear. Plaintiff sustained injuries in the accident. Defendant stipulated to liability leaving only the issue of proximate causation and damages for trial.

During plaintiff’s opening statement at trial, defendant objected to references to surgery, arguing that none of plaintiff’s testifying medical experts had recommended or mentioned surgery. The trial court sustained the objection and reserved ruling as to whether plaintiff could testify about treatment options he was offered.

During plaintiff’s direct testimony, counsel proffered a recommendation for surgery to show the effect on plaintiff – whether he chose to have the surgery and the reason for his choice. The court overruled defendant’s hearsay objection and permitted the testimony.

During cross-examination of defendant’s medical expert, plaintiff’s counsel began to pose a question about a recommendation in a doctor’s note for spinal fusion surgery. The trial court permitted counsel to ask the question in a generic, hypothetical form. However, without any prompting, the defense expert referred to the recommendation for surgery in the medical record.

The jury concluded that the plaintiff suffered a permanent injury and awarded damages. The trial court denied defendant’s motion for a new trial, reiterating that testimony about plaintiff’s surgical recommendations was merely offered to show the effect on plaintiff.

On appeal, defendant argued that the jury had been unduly influenced by the erroneous admission of hearsay testimony from a non-testifying medical expert regarding surgical recommendations. The Appellate Division rejected defendant’s argument and affirmed the trial court’s order, ruling that it was not an abuse of discretion to admit the testimony under a hearsay exception, nor did it violate the rule against admission of hearsay opinions.

8. Cortes v. Garrard Construction Group, Inc.,

New Jersey Appellate Division - Unpublished Opinion

Plaintiffs appealed the denial of their motion for reconsideration following an entry of summary judgment to the defendants. Plaintiff and his friend, both 16 years old, trespassed onto a construction site operated by the defendant. It was located inside a shopping center with existing businesses. Both minors took turns operating the forklift inside a building under construction. While plaintiff’s friend was driving the forklift, plaintiff attempted to jump off the forklift, but his right leg was crushed in between the forklift and a pillar.

Plaintiff and his parents filed suit against the defendants, alleging that they failed to exercise care in controlling the construction site by not sufficiently securing the site against unauthorized entry. The trial court ultimately granted summary judgment to the defendants, ruling that plaintiffs had failed to establish that defendants knew or should have known that minors were likely to trespass onto the site.

Plaintiffs moved for reconsideration, arguing that the trial court had overlooked evidence regarding how plaintiff and his friend entered the construction site and erroneously required defendants to have knowledge, when the restatement of torts only required “reason to know”. The trial court denied plaintiffs’ motion.

On appeal, the Appellate Division reversed and remanded, agreeing with plaintiffs that the correct standard for assessing liability for minor trespassers only required proof that defendants had reason to know that minors were likely to trespass on the construction site. The court found there was enough evidence to present an issue of material fact as to whether defendants did have reason to know that minors were likely to trespass.

9. Liberty Mutual Insurance Company v. Penske Truck Leasing Company,

New Jersey Appellate Division - Published Opinion

Plaintiff appealed from the denial of its motion to compel the defendant to arbitrate plaintiff’s demand for reimbursement of PIP benefits. A tractor trailer owned by defendant and a pick-up truck driven by plaintiff’s insured were involved in a collision. The police accident report concluded that the tractor trailer driver had failed to yield right of way to traffic.

Defendant self-insured the truck and was therefore not required to maintain PIP coverage since it was a commercial vehicle. Plaintiff’s insured therefore applied to plaintiff for PIP benefits. Plaintiff paid out both PIP benefits and property damage benefits to its insured.

Plaintiff then requested reimbursement from defendant for the PIP benefits it had paid out. When defendant denied the request, plaintiff demanded arbitration of its right to reimbursement. Defendant refused to arbitrate, arguing that the tractor trailer driver was not at fault for the accident.

Plaintiff filed a lawsuit demanding reimbursement of PIP benefits and arbitration of its claim for reimbursement. The trial court denied plaintiff’s motion to compel arbitration, ruling that before plaintiff could compel arbitration, defendant had to be found to have been a tortfeasor at trial.

On appeal, the Appellate Division remanded for the entry of an order compelling arbitration of plaintiff’s right to reimbursement. The court noted that the No-Fault Act created a direct right of reimbursement rather than a subrogation right, such that PIP carriers could recover reimbursement from non-PIP carriers and uninsureds via agreement or arbitration.

The court found that as a self-insured entity, defendant was required to arbitrate to determine whether its driver was negligent, and therefore, a tortfeasor to determine whether plaintiff was entitled to reimbursement of PIP benefits.

10. Paladino v. Auletto Enterprises, Inc., New Jersey Appellate Division, Published Opinion

The traditional understanding with respect to the production of witness statements has been governed by the case of Pfender v. Torres. Pursuant to the reasoning in Pfender, it has generally been understood that statements obtained by insurance carriers or investigators prior to the assignment of defense counsel are discoverable. In Paladino v. Auletto Enterprises, Inc., that understanding may no longer apply, and statements of witnesses or insureds taken before a case is assigned to counsel may no longer automatically be produced in discovery.

In Paladino, the plaintiff fell on a staircase at a wedding reception at defendant’s catering facility. Plaintiff reported the accident to defendant immediately, and defendant prepared an investigation report and gave notice to its insurance carrier. The carrier retained an investigator and two weeks after the accident, the investigator inspected the facility, took photographs of the staircase, and obtained recorded oral statements from three of defendant’s employees.

Plaintiff subsequently filed a lawsuit against defendant alleging negligence. Defendant claimed that the statements obtained by its insurance carrier’s investigator were protected by work-product privilege. Plaintiff then filed a motion to compel production of the statements.

The trial court granted plaintiff’s motion, relying on Pfender v. Torres and reasoning that because the photographs and statements were obtained before litigation, the insurer may have had interest apart from protecting its insured’s rights.

Defendant sought leave to appeal the order compelling the production. The Appellate Division denied leave, but the Supreme Court granted leave to appeal and remanded the appeal back to the Appellate Division with direction to consider the case on its merits.

On remand, the Appellate Division referenced the case of Pfender v. Torres, in which plaintiff was injured at a gas station when the defendant, Torres, drove his employer’s car over plaintiff’s foot. After the accident, Torres gave two statements to an insurance investigator who acted as an agent for the insurer of Torres’s employer. The trial court denied plaintiff’s motion to compel the statements, on the grounds that they were protected from discovery by attorney-client privilege, and work-product doctrine.

At trial, the court directed defense counsel to produce the statements for an in camera review because of the inconsistency, which revealed that Torres’s statements were inconsistent with his trial testimony.

The Appellate Division in Pfender held that the statements to the investigator were not protected by the attorney-client privilege because no attorney was involved in taking the statements. Further, the statements were not privileged because the adjuster’s primary motive in taking the statements was to determine whether to provide a defense, and the statements were not secured for the purpose of potential litigation. With respect to the work product privilege, the Appellate Division held that Torres’s recorded statements were not privileged because the statements described details of the accident that were inconsistent with his trial testimony and plaintiff had no equivalent access to those inconsistent statements.

In the case of Medford v. Duggan, the Appellate Division reached the opposite conclusion. In Medford, a dog owned by Duggan had startled a horse that plaintiff was riding, causing the horse to throw the plaintiff off. After plaintiff sued Duggan, Duggan’s insurance carrier obtained statements from an eyewitness to the accident and the defendant. On appeal, the Appellate Division found that the statements were obtained in anticipation of litigation as they were taken almost immediately after defendant was served with the Complaint.

The court further found that because the defendant had been deposed, had a clear memory of the event, plaintiff was not entitled to discovery of the statement because plaintiff did not establish a substantial need for the documents and that she was unable, without undue hardship, to obtain the substantial equivalent of the statements by other means. In contrast, the Appellate Division allowed discovery of the witness’s statement because at her deposition, she lacked a memory of events. Therefore, in that case, the plaintiff had shown a substantial need and the inability to obtain the substantial equivalent of the statement given by the witness.

The court said that it did not see any conflict between Pfender and Medford, but found that they both should be understood to require a fact specific analysis in each case to determine whether statements may be protected by the work-product doctrine.

The court held that there was no presumptive rule that materials prepared or collected before litigation are not prepared in anticipation of litigation. Instead, as set forth in New Jersey Court Rule 4:10-2(c), there is a multi-part, fact-specific test to be followed. The first inquiry is whether the materials were prepared or collected in anticipation of litigation or trial by another party or that party’s representative. The party or representative can be an insurer or agent of the party.

If the statement was prepared in anticipation of litigation or trial, plaintiff must then show both a substantial need for the statement and that the substantial equivalent of the statement cannot be obtained by other means.

The court further noted some limitations on its rule. Limitations include that the protection of a statement will usually be lost if the person who gave the statement is later called to testify at trial. The court noted that where a fact witness testifies for an adverse party, the factual statement of that witness must be produced on demand for use in cross-examination as a potential tool for impeachment of credibility.

In the matter before it, the court held that the trial court simply concluded that Pfender stood for the proposition that statements given to investigators hired by an insurer before the commencement of litigation were not protected. The Appellate Division required the trial court on remand to analyze the witness statements under the standards that it set forth in the opinion.

11. G.A.H. v. K.G.G., New Jersey Supreme Court

Plaintiff filed suit against defendants, alleging that defendant “Arthur” was required to report that his co-worker “Kenneth” was engaged in an illegal sexual relationship with plaintiff and that their employer, Gem Ambulance, was vicariously liable for Arthur’s failure to report and that Gem negligently hired, trained, and supervised Arthur and/or Kenneth.

The facts showed that Kenneth would park his Gem ambulance near plaintiff’s bus stop. However, no other Gem employee interacted with plaintiff. Kenneth would brag to co-workers, including Arthur, about his relationship although he never mentioned that plaintiff was below the age of consent. Kenneth’s abuse ended when plaintiff informed her mother about the relationship. Kenneth later plead guilty to criminal offenses. Plaintiff then filed a lawsuit against defendants.

The trial court granted summary judgment to defendants, ruling that Arthur had no duty to report Kenneth and had no basis to believe that he was in a sexual relationship with a minor, and thus there was no liability to attach to Gem.

The Appellate Division vacated summary judgment, ruling that common law did not necessarily preclude imposition of a duty to report and finding the record insufficient to conclude that Arthur did not know Kenneth was engaged in a sexual relationship with a minor.

On appeal, the New Jersey Supreme Court reversed the Appellate Division and agreed with the trial court that no reasonable fact finder would conclude that Arthur knew or had reason to know Kenneth was engaged in a sexual relationship with a minor. Because the lack of evidence of Arthur’s knowledge was determinative of the matter, the court declined to address the issue of whether a co-worker or employer had a duty to report knowledge of another co-worker’s or co-employee’s sexual relationship with a minor.

12. Vizzoni v. BMD, New Jersey Appellate Division – Published Opinion

The plaintiff, as executrix of the Estate of Judith Schrope, appealed from an order of the trial court granting summary judgment to the defendant. Defendant was a physician, and his patient, BMD, struck and killed Schrope with his vehicle while Schrope was riding a bicycle. Plaintiff alleged that defendant’s negligent prescribing of medication to BMD was the proximate cause of the accident.

At the scene, BMD admitted that she had taken medication for mild depression on the morning of the accident and had consumed a glass of wine the night before. The record did not show whether the police conducted a field sobriety test or blood test on BMD, but the accident report concluded that BMD was at fault for the accident for failing to move her vehicle to safely pass Schrope on the road.

Plaintiff filed a wrongful death suit against BMD. Plaintiff learned that BMD had been prescribed at least six psychiatric medications and that BMD had taken at least three of them the morning of the accident. Two medications were central nervous system stimulants and BMD could not recall if she had taken either or both of the stimulants on the day of the accident.

Plaintiff then filed suit against the defendant, alleging that he was negligent in his care of BMD by prescribing the medication to her. Defendant argued that he would have warned BMD against driving while taking the prescribed medication if BMD advised her that they made her feel drowsy or lightheaded. Defendant moved for summary judgment arguing that he owed no duty of care to Schrope because she was not a readily identifiable victim of his patient. In opposition to the motion, plaintiff submitted an expert report that concluded that BMD’s ability to drive was impaired by her use of medications and that defendant was negligent in prescribing the medications simply to treat BMD’s symptoms without first making an underlying mental health diagnosis. The court granted defendant’s motion.

On appeal, the Appellate Division affirmed the trial court order granting summary judgment to the defendant. The court found that plaintiff’s claim was attempting to assert a theory of social host or dram shop liability. However, the court ruled that such a theory would fail because plaintiff had failed to present sufficient evidence to establish that BMD was impaired at the time of the accident.

13. FK v. Integrity House, Inc., New Jersey Appellate Division - Published Opinion

The plaintiff appealed from an order of the trial court that granted summary judgment to defendant. Defendant was a tax exempt 501(c)3 organization that operated a residential drug treatment facility. Plaintiff was a resident of the facility and alleged that he suffered personal injuries when he slipped and fell on a wet staircase at the facility. Defendant asserted a defense pursuant to the Charitable Immunity Act.

Defendant moved for summary judgment. In support of its motion, defendant submitted its 2015 tax return. The trial court initially denied summary judgment, holding that defendant’s tax return failed to conclusively reveal the source of its approximate $250K in contributions or how they were utilized. After the close of discovery, defendant renewed its summary judgment motion, submitting certifications from its CEO and CFO stating that the defendant’s receipts from fundraising were used to further defendant’s charitable purposes. Plaintiff opposed that motion arguing that defendant failed to explain the sources of nearly $20 million in gross receipts.

The trial court granted the defendant’s motion, ruling that defendant was entitled to charitable immunity from plaintiff’s premises liability action. The court found that defendant was a non-profit organization, actively engaged in providing housing and counseling services to individuals, and that plaintiff was a beneficiary of these services.

On appeal, plaintiff argued that the private contributions that defendant received, amounting to 1.26% of its annual revenue, were too insignificant to qualify defendant for immunity.

The Appellate Division agreed and reversed summary judgment to defendant. The court found that if an entity asserted that it was organized for charitable purposes, a court was required to conduct a “source of funds assessment” to determine whether the entity was fulfilling its charitable purposes, since it was the source of funds that charitable immunity was intended to protect. The court noted that defendant had been deemed to be entitled to immunity in a case in 1993, with the trial court in that case ruling that it relied upon private contributions to run its drug rehabilitation center, and therefore lessened the government’s burden to provide those services.

However, in the present case, the court ruled that the defendant failed to prove its entitlement to immunity because it failed to submit evidence to substantiate the sources and uses of its private charitable funding and failed to prove that it derived a substantial amount of income from private contributions. ___________________________________________________________________________________ THIS CONCLUDES OUR NEWSLETTER. AS ALWAYS, WE EXTEND OUR THANKS FOR YOUR CONSIDERATION AND SUPPORT.