Re-Pricing Subrogation Litigation For The Benefit of Clients


The  beauty of alternative fee arrangements are that they are alternative — the flexibility they provide make them useful in a number of contexts, and  in a number of different sizes (from the single assignment to a large block of work).   That flexibility can be applied to subrogation matters insurers often assign to outside counsel.

Traditionally, such assignments are handled on a simple contingency arrangement, or a flat fee basis.  Certain larger subrogation assignments can be assigned out by insurance company legal departments on an hourly basis as well.  Insurers are interested in other arrangements, however, which can increase their net recovery, which is a nice way of saying cut the costs of acquisition.  Outside subrogation lawyers are a large cost of acquisition.

Enter again the alternative fee option.  We recently quoted a monthly flat fee arrangement on a mid-size property subrogation claim.  There is an overall cap on the number of chargeable months (and therefore the maximum legal fee), and that cap number represents a sufficiently small percentage of the potential  subrogation recovery so as to be attractive to the insurer who was looking for a fee quote.

At first blush, the arrangement would seem to be less efficient than a contingency fee arrangement- it looks as if the outside law firm has an incentive to stretch out the duration of the subrogation case to maximize their fee.  But this suspicion ignores two patent realities: 1.) it is far better business to turn a subrogation case around in three months than three years, because it will lead to additional assignments; and 2.) insurance companies have so much subrogation work that they know the reasonable life span of any given subrogation matter, and therefore how their outside law firms compare to those norms.

Insurance company legal departments face cost pressures today like no other time.  Fee arrangements on subrogation cases which give insurers a means of increasing their net recovery, when compared to contingency, flat, and billable hour arrangements, will become increasingly attractive.  Lawyers and firms looking to keep the subrogation business they have, or to increase their market share, will have to offer something more than the traditional subrogation fee arrangements.

Coverage Practice Note: Enforcing The Employers’ Liability Exclusion in CGL Policies Against Claims of Temporary Employee Status – Part II



In Part I of this post, we described the challenge created by enforcement of the Employers’ Liability Exclusion in a CGL policy against a claim that the injured employee making a claim against the insured was a “temporary worker,” and therefore exempt by definition from the exclusion.  In Part II, we examine a game plan for successful enforcement of the exclusion.

The Law


While every jurisdiction has its nuances, there are some common elements to the applicable law of the temporary employee exception to the Employers’ Liability Exclusion.  The two most common areas of contention in the case law are the issues of control over the employees performance, and whether the putative temporary employee was “furnished” to the insured employer.

A majority of jurisdictions hold that unless a co-employer somehow is shown to have control over the decision to employ, or over  the parameters and/or the time, hours or compensation of  the putative temporary employee at the insured employer’s business, temporary employee status is not likely established.  See, e.g.,.  Empire Fire and Marine Ins. Co. v. Jones, 739 F. Supp. 2d 746 (M.D. PA. 2010); see also, Nautilus Ins. Co. v. Gardner, 2005 U.S. Dist. Lexis 4423 (E.D. Pa. 2005).

Was Employee Furnished?

By its express terms, the definition of temporary employee requires that the putative temporary employee be furnished in some way to the insured business owner:

“Temporary worker” means a person who [i]s furnished to you to substitute for a permanent “employee” on leave or to meet seasonal or short-term work load conditions.


Others seeking to avoid the Employers’ Liability Exclusion have argued that “furnished to” is a liberal and flexible concept, and can include  self-furnishing, or even a mere recommendation or endorsement by a co-employer to the insured business owner.   Both such arguments  have also been unsuccessful, however, in certain jurisdictions.  Empire Fire, supra Mendenhall, supra.

Let The Facts Fall Into Place

The facts more often than not will self-settle the case into the Employers’ Liability Exclusion — it is a broad one, and is designed to carve out a large space occupied by workers’ compensation insurance.  Moreover, the “temporary employee” definition is a narrow one, attempts to widen it notwithstanding.  Successful enforcement of this exclusion takes advantage of this exclusion/exception anatomy.

In the example from Part I of this post, there are no doubt facts which might be used to make an argument that the injured employee was in fact temporary, entitling the employer to defense and indemnity under the CGL policy.  The employee, the argument goes, was hired to replace another employee going on leave, and was “furnished” by way of the co-employers recommendation to the insured employer.

But the applicability of the Employers’ Liability exclusion lies in what admissions have been made, and what admissions can be obtained.   The insured employer’s examination under oath was free of any indication of even the suggestion of temporary employment.  The injured employee himself testified he did not believe the insured employer needed permission from a co employer to hire the employee, and admitted the co employer had no right of control over his decision to either accept the offer of employment, or the means by which he performed his work for the insured employer.

If the factual situation looks  by overview like something which should be covered by workers’ compensation insurance,  there is a fair chance that the Employers’ Liability Exclusion of the CGL applies to relieve the CGL insurer of the duties of defense or indemnity of the insured employer.

For more information on successful enforcement of CGL and other policy terms provisions, and exclusions at reasonable, stable monthly subscription fees,  reach  me at or 717-731-4800.

Coverage Practice Note: Enforcing The Employers’ Liability Exclusion in CGL Policies Against Claims of Temporary Employee Status – Part I



Part I – The Problem

The scenario is not at all uncommon:  a worker  suffers injury at a worksite, and through  the vagaries and  vicissitudes of life, and  for manifold reasons, the business owner has a CGL policy but no applicable workmen’s compensation coverage.  The injured employee was fairly new, and has now filed suit against his (assumed) employer and another company also on the worksite.

This seems straightforward enough:  The applicable CGL policy contains a well-worn, well-known Employers’ Liability Exclusion which disclaims the duty to defend or indemnify the insured business owner for any claims arising out of injuries to employees.  It commonly reads:


            This insurance does not apply to:

d.         Employer’s Liability

                        “Bodily injury” sustained by:

1)        Any “employee” (other than a “residence employee”) as a result of his or her employment by the insured;


 This exclusion applies whether the insured may be held liable as an employer or in any other capacity and to any obligation to share damages with or repay someone else who must pay damages because of the injury.

The difficulty lies, sometimes, in the Definition of who is an “employee,” some of which commonly reads as follows:


“Employee” includes a “leased worker”. “Employee” does not include a “temporary worker”.


“Temporary worker” means a person who [i]s furnished to you to substitute for a permanent “employee” on leave or to meet seasonal or short-term work load conditions.

Rarely do the interests of injured employees and employers looking for protection converge.  But in seeking to avoid the Employers’ Liability Exclusion,  such rare common ground appears.  An injured employee wants a fund against which recovery can be made for his or her injuries.  An employer, who for one reason or another finds himself without workmens’ compensation coverage, needs protection from liability for the loss.  The CGL carrier is a convenient solution for everybody — except, of course, for  the CGL insurer, who has neither priced, nor underwritten, nor issued workmens’ compensation coverage for the insured business owner.

Square Peg, Round Hole, No Matter

Thusly, the elegant dance begins.  In examinations under oath, the insured business owner refers to the injured worker as an “employee,” and spoke of “hiring” him or her.  No mention is made of the employee being furnished by a co-employer, nor is  there any mention of the fact that the injured employee was actually brought on temporarily, or to substitute for another employer who was going on medical leave.

Several months later, however, the injured employee files suit for his injuries , and the insured business owner has received a reservation or rights letter f rom the CGL insurer, agreeing to provide a defense but reserving all rights to disclaim coverage  under the Employers’ Liability exclusion.  The landscape has changed — and the Employers’ Liability Exclusion now poses a grave problem for both the injured employee and the insured business owner.  The definition of “temporary worker” definition to the rescue…

The business owner, now represented,  now paints a murkier picture at his deposition in the coverage action compared to his recorded statement.  The injured employee did come on,  the business owner now testifies, several months before someone in the same position was to go off on medical leave.  The business owner got both  permission and a recommendation  to hire the worker from another contractor for whom the injured employee continued to do work while working for the insured business owner.

For his part, the injured employee testified in much the same manner, although he admits that neither employer controlled his hours or performance at the other employer.  He also testifies he didn’t believe the insured business owner needed permission from the injured worker’s co-employer to hire him, even though the co-employer recommended the injured worker highly.

All eyes now  turn to the CGL insurer, and the insured business owner’s counsel tenders and re-tenders the  defense and indemnity of the insured business to the CGL insurer .  What is the CGL insurer to do?

We will answer that question in Part II of this post.





Dickie McCamey Lawyers Hold Summary Judgment For Harleysville On Appeal Of Breach of Contract and Bad Faith Case


HARRISBURG, September 13 – Dickie McCamey Attorneys C.J. Haddick and Christine Line won a victory for Harleysville Insurance in Pa. Superior Court yesterday, winning an affirmance of a summary judgment motion in a coverage and bad faith case originally filed against the company in Berks County.

In the case, insured Clyde Rogers made claims under both commercial and inland marine insurance policies issued by Harleysville covering a van Rogers used in his business.  After Rogers claimed the vehicle caught fire on January 25, 2012, and was a total loss, he sought reimbursement for the van, tools, and equipment allegedly destroyed inside the van.  Harleysville  paid Rogers a policy limit of $5,000.00 for unscheduled tools and equipment which Rogers accepted, and offered to pay $1,120.00 for the value of the van and $1,220.68 for rental of a substitute van, which Rogers did not accept.  Rogers thereafter filed suit against Harleysville in the Berks County Court of Common Pleas.

The Berks County Court of Common Pleas granted Harleysville’s Motion for Summary Judgment, finding that Harleysville’s remaining offers to pay for the actual cash value of the van, and for rental of a substitute van, were the only remaining obligations owed under either the commercial auto or inland marine policies.  Rogers appealed.

On appeal, a unanimous panel dismissed all of the arguments made on Rogers’ behalf seeking reversal of the judgment in favor of the insurer.  Pa. Superior Court Senior Judge William H. Platt found that nothing in either of the Harleysville polices was ambiguous, as Rogers contended.  Judge Platt also found there was no provision in the policies supporting Rogers’ claims for storage fees or loss of business income.

Based upon his review of the policy language and Harleysville’s position on payment of the claim, the Court found the Plaintiff’s bad faith claims without merit, and affirmed summary judgment on those claims as well.

Finally, Judge Platt ruled that the failure of Mr. Rogers’ lawyer to attend oral argument on Harleysville’s summary judgment motion despite receiving notice of the date of the argument from Harleysville’s lawyers was insufficient grounds to overturn the judgment in favor of Harleysville.

Clyde Rogers v. Harleysville Insurance, No. 289 MDA 2016, Filed September 13, 2016, Pa. Superior Court.


Dollarize The Benefit Of Alternative Fee Arrangements For Clients


In house legal departments are all under the imperative to spend legal expense dollars more efficiently.  At the same time, they may also be wary of trying new fee arrangements with outside firms, unsure of whether or not they will “win” the gamble.  It does not, however, have to be a gamble at all.

Good outside law firms should be feeding back data to their clients on how alternative fee arrangement’s are working.  Where positive, this feedback will only encourage the client to put the arrangement into wider usage.  Where negative, it should be the basis of renegotiation for the benefit of the client, to arrive at an arrangement which does what the outside law firm promised to do:  reduce legal expense.

Here is an excerpt from a recent feedback report sent to a client on how a monthly flat fee subscription arrangement was working out for them.  It is a report in-house departments would all like to see, and should be demanding from their outside lawyers:

Dear _______ and ________, 

I thought you might like an update on how you were doing by using the monthly flat fee subscription arrangement  we piloted on some new assignments you have made.  I hope you will be pleased with the results: 

Case           Hourly                Flat                     Savings

A                 $4,621.00          $3,900.00         $821.00

B                  $5,587.00         $2,925.00          $2,662.00

C                  $2,554.00         $2,985.00         -$431.00

D                  $3,926.50         $2,925.00           $371.50


TOTAL       $16,058.50        $12,635.000       $3,423.50

SAVINGS         21.32%

What jumps out at me  is not so much the savings — although that is a good thing — but the leverage the arrangement could provide when scaled up.  In other words, the wider you put the fee arrangement into usage, the more money you are likely to save in legal expense, which is one of the key imperatives of claims and legal departments in this day and age.  Hypothetically, if this arrangement were applied to $200,000.00 in legal expense under the traditional hourly arrangement, you would cut this expense to $160,000.00, a savings of $40,000.00.

We wanted to make sure you knew that we were not merely making promises on the fee arrangements upon which we could not deliver.  It appears the arrangement is saving your department money, which is what any good outside law firm should be trying to do for you in this highly competitive environment.

We hope you are pleased, and we are happy to put the arrangement to wider use whenever you believe it is wise to do so.

 Thanks, as always, for your business. 


Share the news, good or bad, with in-house legal departments to help them to the job they have been charged to do:  handle the company’s legal matter faster, better, and more efficiently.  It can only help.

Why You Should File (And Win) Summary Judgment In (Almost) Every Bad Faith Case, Part II


In Part I of this post, we examined the reasons why motions for summary judgment should be filed and won more often  by insurers in bad faith litigation.  In Part II, we examine how to improve the odds which already start out in an insurer’s favor in the summary judgment arena.

You Had One Job

The first rule of filing and winning more summary judgments in bad faith litigation is to do what the summary judgment rules ask be done:  demonstrate that there is no genuine issue of material fact remaining for trial.  The operative word in that requirement is “demonstrate.”

Summary judgments are won and lost based upon the amount of sweat and toil the moving lawyer puts into the facts which will appear in the summary judgment motion and briefing.  The record in the case, most plainly discovery, has to be combed through to cull all documents, all testimony, all evidence which demonstrates that the insurer handled the claim in question reasonably.

We do not say that it must be shown the insurer handled the claim “correctly” here, because as discussed in the prior post, insurers have a right to be wrong, as long as they are not unreasonably wrong.  By all means, however, if you can demonstrate to the reviewing court that the insurer handled the claim both reasonably and correctly, that should be done. Reasonable and correct is always better than reasonable and incorrect, although either can win an insurer a summary judgment in a bad faith case.

The main jobs in developing the record for a summary judgment motion are specificity and thoroughness.  Every assertion made in support of the motion should be supported with some item from the record.

Be A Beast Of Burden

In Part I of this post, we reviewed the burden of proof in bad faith cases, often referred to as “clear and convincing evidence,” which favors insurers, and makes the job of a bad faith plaintiff an uphill battle.  It is a burden of proof which should be stressed throughout the summary judgment submissions because some  judges tend to forget that the burden applies at the summary judgment stage , and it does not hurt to remind those judges who do remember.

If the summary judgment opinion and ruling an insurer’s lawyer gets back following the motion mentions that the plaintiff’s burden at summary judgment  is one of clear and convincing evidence, then the insurer’s lawyer has done her job in sufficiently arguing it.  She has also increased the chances that summary judgment is going to be granted for her client.

Tell A Story, And Trace The Thought Process

In my practice, I defend professional liability actions of all kinds from time to time.  There is an important lesson in defending those cases which translates very nicely to summary judgment motions in bad faith cases:  telling a story, and tracing a thought process.

Since the focus of any bad faith case is the nature and quality of how the insurance claim at issue was handled, the successful insurers in summary judgment motions are the ones which walk the presiding judge through the claims handling process, demonstrating what was done, when it was done, why it was done, and how the insured’s interests were considered and not unfairly compromised.  If the presiding judge can understand the how and why of the claims handling process, the burden and proof and the case law will very likely carry the judge where insurers need him to go.  The judge is equipped  to see that while the insured may not have agreed with the claims outcome, the insurer came by that outcome honestly, sincerely, and reasonably.  And if an insurer can get a judge to go there, they will win summary judgment in their bad faith case.

As we did in closing out Part I of this post, we close here by saying again:  summary judgments for insurers in bad faith litigation are fat pitches in which the odds favor the insurer.  If the motion and briefing process are executed with the above in mind, the chances of success are substantial.

For more information on how to file and win more summary judgments in coverage and bad faith cases, and to reduce your legal expense while doing it,  reach  me at or 717-731-4800.


BREAKING NEWS — Pa. Supreme Court To Consider Whether Ill Will Is Prerequisite To Establishing Bad Faith


HARRISBURG, Aug. 30 – The Pa. Supreme Court issued a ruling granting  appeal in a bad faith case to consider whether proof of ill will or motive is a prerequisite to establishing liability under the Pa. Bad Faith Statute, 42 Pa.C.S.A. §8371.

In Rancosky v. Wash. National Ins. Co. , 2016 Pa. LEXIS 1910 (Pa. Aug. 30, 2016), the state’s highest court ruled it will undertake limited review of a Pa. Superior Court ruling which granted a new trial to a bad faith plaintiff, an estate executor, after the trial court found for Washington National following a non-jury trial in a dispute over a cancer insurance policy.

The Supreme Court Order indicates it will review only the following issue:

“Whether this Court should ratify the requirements of Terletsky v. Prudential Property & Casualty Insurance Co., 649 A.2d 680 (Pa. Super. 1994), appeal denied, 659 A.2d 560 (Pa. 1995), for establishing insurer bad faith under 42 Pa.C.S. § 8371, and assuming the answer to be in the affirmative, whether the Superior Court erred in holding that Terletsky factor of a “motive of self-interest or ill-will” is merely a discretionary consideration rather than a mandatory prerequisite to proving bad faith?

While recognizing that the state legislature did not define bad faith, the Superior Court held that a statutory bad faith claim under Pennsylvania’s bad faith statute had two elements:  (1) the insurer did not have a reasonable basis for denying benefits under the policy, and (2) the insurer knew of or recklessly disregarded its lack of reasonable basis in denying the claim.  According to the Superior Court opinion, the trial court granted judgment to the insurer in part because the Plaintiff “failed to prove that Conseco [predecessor to Washington Mutual]  had a dishonest purpose” or a “motive of self-interest or ill-will.”

The Superior Court ruled it was sending the case back to the trial court for a new trial because the trial court’s finding that Plaintiff failed to prove the first element of the bad faith claim was in part premised upon  the Plaintiff’s failure to prove that the insurer in the case acted will ill will or a dishonest purpose.

The following passage from the Superior Court opinion, which could be seen as exalting form over substance, refers to an insurer’s ill will or dishonest purpose as  merely “probative.”  This aspect of the opinion could be what drew the Supreme Court’s attention:

We conclude that the trial court’s verdict is faulty based on its erroneous determination that Rancosky failed to establish the first prong of the test for bad faith because he failed to prove that Conseco had a dishonest purpose or a motive of self-interest or ill-will against LeAnn. As noted above, a dishonest purpose or a motive of self-interest or ill-will is probative of the second prong of the test for bad faith, rather than the first prong.. . .  The trial court could not have considered whether Conseco had a dishonest purpose or a motive of self-interest or ill-will unless it had first determined that Conseco lacked a reasonable basis for denying benefits to LeAnn under the Cancer Policy. However, because the trial court made no such determination, its consideration of a dishonest purpose or a motive of self-interest or ill-will was improper. Accordingly, we conclude that the trial court erred as a matter of law by using standards applicable to the second prong of the test for bad faith in its determination of whether Rancosky had satisfied the first prong of the test for bad faith.

Rancosky v. Wash. National Ins. Co. , 2016 Pa. LEXIS 1910 (Pa. Aug. 30, 2016)



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