ANALYSIS OF APRIL 11, 2019 SUPREME COURT OPINION
(Posted April 11, 2019) If you’re playing semi-hooky today, sitting in your office while live-streaming The Masters, here’s a reason to break away for a few moments. The justices today decide a first-impression issue in Dominion Resources v. Alstom Power.
Tort lawyers know all about the collateral-source rule: Where the victim of a tort had protected herself by buying insurance, the tortfeasor doesn’t get to apply any insurance payments to reduce his liability for damages. That’s because the tortfeasor didn’t buy the insurance, and thus shouldn’t benefit from it. While this can result in a double recovery of sorts, the law chooses to err on the side of the victim instead of the Bad Guy.
On a few occasions, the Supreme Court has come close to deciding whether the doctrine applies in the contract milieu. In each of those instances, the court has decided the appeal on different grounds, leaving the ultimate question for another day. Today is that day.
The underlying dispute is complex, so I’ll give you the simplified version. Alstom did work at some of Dominion’s power plants. An accident at one of those plants killed three workers and injured two more. Dominion paid over $5 million to compensate the victims and incurred almost twice that in legal fees defending the claims.
The contract between Dominion and Alstom required the latter to purchase insurance, naming Dominion as an additional insured. Alstom did so, and Dominion separately bought an excess policy to cover itself.
After resolving the claims, Dominion collected from its excess carrier and then sued in a Connecticut federal court to recover the litigation expenses from Alstom. (The suit charged that Alstom had failed to defend Dominion in the tort suits and had bought the wrong kind of insurance.) Alstom responded by saying that Dominion couldn’t sue, because it had already been paid. Dominion replied that the collateral-source rule barred Alstom’s defense.
The Connecticut judge decided that it would be wise to ask the justices whether the rule applies in the world of contracts. The justices agreed to decide the certified question, and today they unanimously rule that it does.*
Yes, that was an asterisk. The Supreme Court finds that the same reason for the rule applies in contract as in tort. You shouldn’t be able to escape liability for your contract breaches merely because your victim has been cautious. But the court stops short of a full-throated endorsement of this principle. Instead, we have this language:
The same rationales supporting this Court’s long recognition of the collateral source rule in tort cases also support the rule’s application in certain breach-of-contract actions. Whether the rule applies to a given case, however, requires a case-specific determination of whether the parties’ expectations, in light of those rationales, support the rule’s application.
I added italics to highlight the key qualifier. The court decides that the doctrine can apply in some contract cases, but it declines to draw the boundaries. That’s for future trial judges to do. And that, in turn, means more work for trial lawyers, so who’s to complain?
In addition to this published opinion, the court also hands down three published orders:
In Brown v. Warden, the justices rule that the limitation-of-actions period for filing habeas corpus petitions does not violate the constitutional prohibition of suspension of that writ.
In Turner v. Commonwealth, the court affirms a conviction for failure to register as a sexually violent offender. Turner was convicted in another state of a nonviolent sexual crime. The Virginia statute requires frequent (every 90 days) registration by sexually violent offenders, in contrast with once a year by nonviolent offenders. But a quirk in the Virginia statute classifies all offenses for which the offender must register in the state of the crime, as violent. The justices note that there’s “no obvious explanation” for why the General Assembly chose to isolate offenses from elsewhere, but the court isn’t free to rewrite the act.
Finally, in Spear v. Omary, a divided court rules that when a litigant appeals a JDR judgment to circuit court, and then withdraws the appeal, that automatically remands the case to JDR, even if the withdrawal order doesn’t say so. Justice Kelsey, joined by Justice McClanahan, dissents, maintaining that some affirmative language evincing remand is necessary.