In Hexagon Holdings Inc. v. Carlisle Syntec, Inc. No. 2017-175-Appeal, 2019 R.I. Lexis 14 (January 17, 2019), the Supreme Court of Rhode Island, discussing claims associated with allegedly defective construction, addressed issues involving intended beneficiaries to contracts and the application of the economic loss doctrine. The court held that, based on the evidence presented, the building owner, Hexagon Holdings, Inc. (Hexagon) was not an intended third-party beneficiary of the subcontract between the general contractor (A/Z Corporation) and the subcontractor, defendant McKenna Roofing and Construction, Inc. (McKenna). In addition, the court held that, in the context of this commercial construction contract, the economic loss doctrine applied and barred Hexagon’s negligence claims against McKenna. Continue reading
In Amica Mutual Ins. Co. v. BrassCraft Mfg., Co., 2018 U.S. Dist. LEXIS 88986 (D.R.I. May 29, 2018), the United States District Court for the District of Rhode Island addressed the question of whether the defendant was so unfairly prejudiced by the subrogating insurer’s spoliation of evidence that dismissal of the plaintiff’s case was the appropriate Rule 37(b)(2)(a)(i)-(vi) sanction. The court, focusing on the potential for undue prejudice to the defendant, granted the defendant’s motion to dismiss. Continue reading
In Nationwide Property & Cas. Ins. Co. v. D.F. Pepper Construction, Inc., — A.3d –, 2013 WL 313933 (R.I. Jan. 28, 2013), the Supreme Court of Rhode Island addressed the question of whether the anti-subrogation rule precluded Nationwide Property & Casualty Insurance Company (Nationwide) from pursuing a subrogation action against a corporation solely owned by its insured. Recognizing that the corporation owned by Nationwide’s insured is a separate and distinct legal entity from Nationwide’s insured, the court held that the anti-subrogation rule did not apply.
The dispute at issue in D.F. Pepper arose from events that occurred after a snow storm in February of 2009. On the date of the storm, Dean Pepper (Pepper) was driving a truck owned by his company, D.F. Pepper Construction, Inc. (DFP, Inc.). While driving the truck home, the truck slid off of the road and hit Pepper’s home. Nationwide insured Pepper’s home. Merchants Mutual Insurance Company (Merchants) insured the truck. Nationwide paid Pepper for the damage to his home and filed a subrogation action against DFP, Inc. Nationwide alleged that Pepper was negligent, that he was acting within the course and scope of his employment, and that DFP, Inc. was vicariously liable for Pepper’s conduct under both the doctrine of respondeat superior and state law.
Pursuant to G.L. § 31-3-6, “the owner of a vehicle may be vicariously liable for the conduct of someone who has consent to drive the vehicle if the underlying driver is in fact negligent.” DFP, Inc. acknowledged that Pepper had consent to drive the truck and, thus, the only issues for trial were the issues of negligence and damages. The trial justice found that Pepper was negligent when he drove the truck.
DFP, Inc. argued that Nationwide’s claims were barred by the anti-subrogation rule. The trial justice held that DFP, Inc. and Pepper are separate entities and, because there was no allegation that DFP, Inc. was a sham corporation, the anti-subrogation rule did not apply.
On appeal, DFP, Inc. argued that the court should apply the anti-subrogation rule because, if Nationwide was allowed to recover, then Merchants, as the insurer of the truck, would pay the claim and then exercise its right of subrogation against Pepper. The court refused to engage in speculation as to whether Merchants would, in fact, pursue Pepper. However, the court recognized that if Merchants chose to proceed against Pepper, Merchants may, itself, be attempting to subrogate against its own insured as Merchants’ policy defined the term “insureds” to include both DFP, Inc. and “[a]nyone else while using with [DFP, Inc’s] permission a covered ‘auto.’”
Ultimately, although the Supreme Court recognized that it has not yet embraced the anti-subrogation rule and that the question of whether the rule should be adopted would have to wait for another day, the Supreme Court agreed with the trial court’s analysis. As noted by the court, DFP, Inc. is a distinct legal entity from Nationwide’s insured, Pepper. Thus, the court held that even if it were to recognize the anti-subrogation rule, the rule would have no application to the facts and circumstances of the case at issue.
The analysis in D.F. Pepper highlights the fact that courts, in general, treat corporations as separate legal entities unless the circumstances of a case dictate that the corporate form is a sham or, stated another way, that the corporation is the alter-ego of its owner. As the analysis in D.F. Pepper shows, absent circumstances justifying ignoring the corporate form, an insured who is the sole owner of a corporation should be treated as a separate entity from the corporation for purposes of deciding whether the anti-subrogation rule will preclude the insurer from pursuing a subrogation claim.
For more information regarding this alert, please contact Ed Jaeger (215.864.6322 / firstname.lastname@example.org) or Bill Doerler (215.864.6383 / email@example.com).