Articles Posted by Insights

Expediting Your Loan – Insurance Proofs Demystified

Published on: July 8, 2016 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

You have a commitment from your Lender; certainly you should be able to close in one week, Right? Wrong. When closing a loan, there are many areas that can derail you from a timely closing. One area of particular concern and which often delays closing, is with respect to the Lender’s insurance requirements. To reduce discrepancies or issues leading up to closing, and to ensure that closing occurs as expeditiously as possible, it is important to understand the Lender’s insurance expectations and requirements at the outset; specifically, as set forth in the Lender’s commitment letter.

For commercial mortgage transactions, Lenders typically require a) property insurance on a “special form of loss” policy, previously referred to as an “all risk” policy, and b) commercial general liability insurance. For the property insurance, the lender will require the property to be insured at least in the amount of the loan and it will require a standard mortgage clause that names it as the mortgagee. Prudent lenders also typically require that the policy must be endorsed as “lender’s loss payable,” which gives the lender the right to receive the loss payment on a claim even if the insured has failed to comply with certain terms of the policy or because the loss was occasioned by the insured’s wrongful acts. The liability insurance policy should name the Lender as an additional insured and should waive all rights of subrogation against the mortgage lender. Often times, an insurance broker will claim that the lender has no insurable interest, and therefore cannot be added as an additional insured on the commercial general liability policy. The lender is concerned that if its borrower suffers an uninsured loss that is beyond its ability to absorb, the borrower’s continued viability is at stake. Furthermore, even though the likelihood of a claim against a mortgagee for injuries incurred at the mortgaged property is small, the lender wants to reduce its chance that its own insurance will be required to pay a claim that would be covered by the borrower’s required insurance. As an additional insured, the lender is entitled to the benefits of the policy but is not charged with the obligations of the named insured, moreover, the insurer cannot exercise subrogation rights against its own insured.

To prove you have the correct insurance in place, the Lender typically requires specific types of insurance proofs to be produced and approved prior to closing. In the past, certificates of insurance were provided to Lenders in the form of an ACORD 27 (for residential property) or ACORD 28 (for commercial property) as evidence of property insurance, and an ACORD 25, as evidence of commercial general liability insurance. In 2006, the ACORDs were revised to indicate that they do not grant any rights in coverage to the policy holder or to the mortgagee, additional insured, certificate holder, lender, etc. Essentially, these certificates are often prepared by insurance brokers as a summary of what coverage is purported to exist, but they do not prove that there is coverage under a particular policy and they do not grant coverage. This essentially makes these certificates or evidences of insurance ineffective in the risk management arena. They are merely for informational purposes only and their validity and accuracy cannot be verified without the underlying policy documents. As a result, many lenders now require, in addition to the ACORD forms, that as part of the normal due diligence process, a copy of the policy be produced and reviewed by the lender and the lender’s insurance advisor. In order to avoid delays, the ACORD forms and policy documents should be provided to the lender well in advance of closing so that the lender has sufficient time to process and review the insurance.

Department of Justice Hitches Environmental Crimes to Worker Safety Violations

Published on: July 7, 2016 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

THE FOURTH QUARTER OF 2015 saw two striking pronouncements on criminal prosecutions and civil actions against individuals. The first, referred to unofficially as the “Yates Memo,” came in the form of new guidance to the Department of Justice (DOJ) and all United States attorneys on individual accountability. The second came in the form of a memorandum of understanding (MOU) between the DOJ and the Department of Labor (DOL). The MOU was designed to bolster the environmental side of worker safety violations, by scrutinizing environmental records.

Armed with two new tools, prosecutors are now equipped to examine violations involving worker safety using criminal environmental statutes. Thus, if the government accuses a company of worker safety violations, the company may expect a close analysis of their environmental record. The MOU itself is the next logical step of the DOJ’s strengthening its enforcement cases involving worker safety violations under environmental statutes. With the new understanding between the DOJ and the DOL, civil division attorneys are to share information with criminal division attorneys. Moreover, the MOU requires that criminal division attorneys explain to a supervisor why they did not seek charges against an individual company wrongdoer.

What circumstances brought about the new push?

Mediation Offers Solutions For Any Stage of a Divorce

Published on: June 8, 2016 | by James McGlew, II

For many couples experiencing marital difficulties and facing the end of their relationship, divorce mediation can be an appropriate alternative to litigation. While mediation may not fit every situation, for couples who are prepared to address all of the issues related to their relationship, a mediator can often assist in achieving a resolution. In mediation there are no determinations as to who will be the “winner” and who will be the “loser” as the mediator has no interest in advocating the position of one party in favor of the other. A mediator’s role is to determine what common ground can be achieved between the parties.

Mediation can cover all divorce issues such as custody, parental time-sharing with respect to children, the amount and type of alimony, child support obligations, the disposition of the marital home, the division of pensions and other retirement benefits and the equitable distribution of marital assets.

Couples can avail themselves of mediation before either spouse files for divorce, while they are in the process of litigating their divorce and even after their divorce has been finalized. Some couples choose to take a step back and “pause” their divorce litigation and retain a mediator to assist in the process. Increasingly I see that divorced individuals are mediating the disputes that naturally arise in the years following their divorce. Ex-spouses will attempt to mediate such issues as responsibility for college costs for their children, the increase or decrease in alimony or child support based on a change in circumstances post-divorce, and the finalization of pension related issues.

New Jersey Land Use Law: Is Your Proposed Use Permitted?

Published on: May 25, 2016 | by Roger Mehner

Are you planning on starting or relocating a business? As part of your planning process you need to do a careful analysis of the local zoning ordinances governing your proposed location. The threshold question is whether the proposed use is permitted in the zone in which the property is located. There is often no simple answer to that question, and the answer will affect not only where the owner needs to file for the necessary approvals, but will greatly impact the time required to obtain approvals and the chances of success. Municipal ordinances vary widely in their definitions of permitted and excluded uses, and often do not contain clear definitions as to the permitted uses. Many times ordinances include blanket statements providing that uses not expressly permitted are deemed to be excluded. In addition, uses which did not exist when the ordinance was drafted can be a gray area.

There are several steps which should be taken at the outset to ensure the best opportunity to obtain the required approvals in an efficient and cost-effective way. The owner, his architect, engineer and attorney, should jointly do the following:

1. Review the applicable ordinance and all definitions.

OSHA: Additional Reporting Requirements On Employers

Published on: May 23, 2016 | by Lisa Gingeleskie

On May 11, OSHA promulgated a new regulation imposing additional reporting requirements on employers. All non-exempted employers are already require to report information on work related illnesses and injuries to OSHA on paper forms, however, the new rule requires that certain submissions now be made electronically.

The newly promulgated regulation establishes three different categories of employers and imposes different electronic reporting requirements on each. Those non-exempted employers with 250 or more employees at an establishment must electronically submit certain information from the three reporting forms established by OSHA: 1) Form 300 – Log of Work Related Injuries and Illnesses; 2) Form 300A – Summary of Work-Related Injuries and Illnesses; and 3) Form 301 – Injury and Illness Incident Report.

Non-exempted employers with more than 20 employees, but less than 250 employees at an establishment, and who are engaged in a business designated in Appendix to the new rule, are required to electronically file information from Form 300A. Employers in this category include, among others, construction and manufacturing industries and many retail operations, such as department and furniture stores.

DOL Issues Final Rules That Significantly Restrict The White Collar Exemptions To The FLSA’s Overtime Requirements

Published on: May 18, 2016 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

The federal Fair Labor Standards Act (FLSA) mandates that employees be paid one and one-half times their standard hourly rate of pay for all hours worked in excess of 40 hours in a given workweek. There are several exceptions to that overtime requirement, including an exemption for “white collar workers” – – those classified as Executive, Administrative and Professional employees. Pursuant to its rulemaking authority, the United States Department of Labor (DOL) adopted a two- part test that must be met before an employee can be properly categorized as Executive, Administrative and Professional employee exempt from overtime requirements. . Under the test, the employee must meet both a “duties test” and a “salary basis test” to satisfy one of the white collar exemptions. On May 16, 2016 the DOL finally issued long-anticipated new regulations that substantially increase the salary basis requirement to meet the white collar exemptions, resulting in many employees being stripped of their previously exempt status and now making them eligible for overtime compensation.

In the 1970s the DOL adopted regulations mandating that all Executive, Administrative and Professional employees had to earn a minimum of $455 per week, or $23,660, per year to satisfy the salary basis test for a white collar exemption, a salary level that remained untouched for decades. However, under the new regulations that will take effect on December 1, 2016, the salary basis test has been essentially doubled to $913 per week, or $47,476 per year. Regardless of whether the employee can satisfy the duties test for a white collar exemption, if the employee’s compensation falls below this increased salary basis, the exemption from overtime requirements is not met.

Another target of the new regulations is the Highly Compensated Employee exemption. Presently, certain highly-compensated employees were exempt from the overtime requirements so long as they were paid at least $100,000 and satisfied a less-stringent duties test. Under the new regulations, the minimum salary basis test for that exemption has been substantially increased to $134,004.

Relocating Out of State With Children After Divorce

Published on: May 11, 2016 | by James McGlew, II

Over the years there have been evolving standards used in judicial determinations as to what grounds will be sufficient to permit a parent to relocate out-of-state with their child. Presently, New Jersey has two different standards to apply when these types of matters come before the court. A determination first needs to be made by the court as to whether the parents have a traditional custodial relationship or whether the parents have a shared custodial relationship.

When one parent is clearly the primary custodian of the children (traditional custodial relationship), that parent must satisfy a two-step standard. He or she must demonstrate that they have a good-faith reason for their request to relocate and that their relocation will not be detrimental to the child’s best interest. If the parent can satisfy the Court that they have met the standard, the Court will then examine several factors as to whether or not to permit the relocation.

If the parents have a shared custodial relationship with their child, then the right to relocate with the child from New Jersey requires an actual change in the custodial agreement between the two parents. If this is the case, the parent seeking to effectively change or modify the existing custodial relationship with the child has the threshold requirement to show that there is now a substantial change in circumstances and that the best interests of the child are served by a change in the existing custody agreement.

Employer’s Defense To Disability Discrimination Claim Doomed By Its Own Job Descriptions: Is It Time To Review And Update Your Job Descriptions?

Published on: May 10, 2016 | by Lindabury, McCormick, Estabrook & Cooper, P.C.

In light a recent decision of the New Jersey Superior Court, Appellate Division, in Sheridan v. Egg Harbor Township Board of Education, it certainly is.

The Facts: Barbara Sheridan, an obese individual, was employed for eight years as a custodian by Egg Harbor Township Board of Education (the “Board”). After observing Ms. Sheridan breathing heavily and turning red while performing her custodial job duties, her supervisor became concerned that she might be unable to climb ladders, would have trouble climbing stairs, and could injure herself or others while attempting to complete her job duties. In response to these concerns, the Board required Ms. Sheridan to undergo a fitness for duty examination (“FDE”) administered by an independent physician. In conducting the FDE, the physician relied upon a job description provided by the Board detailing the physical tasks required of all custodians in the district, including a requirement to lift and carry 75 pound objects a distance of 50 yards. Ms. Sheridan failed several portions of the FDE, prompting the Board to conclude that she was physically incapable of performing the duties of school custodian and terminated her employment. Ms. Sheridan filed suit alleging she was discriminated against because of her obesity in violation of the New Jersey Law Against Discrimination, N.J.S.A. 10:5-1 et seq. The trial court concluded that the Board was justified in relying upon the results of the FDE in reaching its termination decision and dismissed the case. Ms. Sheridan appealed.

The Appeals Court’s Decision: In reversing the favorable decision for the Board and sending the case back for trial, the Appellate Division concluded that while an FDE could provide a legitimate, non-discriminatory basis for the Board’s termination decision, the FDE had to be based upon a “fair and realistic” job description for the position in question. In this case, the court held that “reasonable jurors could conclude that the more strenuous exercise of lifting seventy-five pounds for fifty yards, as was tested in the FDE here, is not a fair or realistic physical expectation to have for a school custodian.” In addition, the Board’s principal witness testified that the only time she could recall custodians lifting 75 pounds was twice a year to lift paper deliveries, which were then loaded directly onto carts. Finally, while the Board pointed to concerns about Ms. Sheridan’s ability to climb ladders, the FDE did not assess her ability to do so. The Appellate Division reasoned that when an employer chooses to rely upon an FDE as a legitimate reason for terminating an employee, the job description used to conduct the FDE must accurately correspond to the day-to-day job duties and physical demands of the position, factors the court found lacking in this case. Moreover, the FDE must also assess the physical requirements relied upon by the employer as a basis for its termination decision.

New Jersey Appellate Court Clarifies Employers’ Limitations in Demanding Fitness-For-Duty Exams From Employees

Published on: April 25, 2016 | by Sergio D. Simões

In a recent published decision, the New Jersey Appellate Division clarified the circumstances under which an employer’s directive that an employee submit to a psychological for fitness-for-duty examination serves a “legitimate, job-related business purpose” as required under the Americans With Disabilities Act (ADA) and the EEOC’s Enforcement. The case, In re Paul Williams, Township of Lakewood, involved a Township of Lakewood truck driver who was sent for a psychological fitness-for-duty examination eight months after the Township received an anonymous letter from an alleged co-worker complaining that the employee was mentally unstable and a threat to other co-workers. Without the employee’s consent, the Township scheduled the psychological examination and a follow-up meeting, and threatened the employee that if he failed to attend both appointments he would be disciplined. The employee refused to comply, claiming that the examination was not job-related or a business necessity and thus was in violation of his rights under the ADA. Following a hearing, the Township terminated the employee.

The employee appealed to the Office of Administrative Law (“OAL”), which reinstated the employee to his former position because the evidence showed that: (1) the employee’s work performance was satisfactory; (2) the truth of the allegations in the anonymous letter could not be verified; and (3) the Township’s demand for a psychological fitness-for-duty exam was not related to his work performance or to any specific allegation of psychologically disruptive behavior. Following an additional appeal, the matter ultimately ended up before the New Jersey Appellate Division, which affirmed the OAL and held that, under the ADA, an employer cannot require an employee to undergo medical tests unless they are job-related and consistent with legitimate business necessity. Here, the Appellate Court faulted the Township for ordering the employee to undergo a psychiatric examination based solely upon information contained in an anonymous letter, precisely the kind of “innuendo and rumor that the EEOC has advised employers is insufficient to support a mandatory evaluation.” The Williams holding makes clear that employers must be careful and judicious in demanding that employees submit to fitness-for-duty examinations. Such examinations may only be required when the employer has a reasonable belief, either through direct observation or reliable information from credible sources, that the employee’s mental state or physical condition will either affect his or her ability to perform essential job functions or pose a direct threat to others. Employers must engage in a complete and objective assessment, untainted by general assumptions about the employee’s medical condition, prior to requiring the psychological examination.

In an era of increasing workplace violence, this decision places employers in a difficult position. However, employers who receive anonymous tips or other information suggesting that an employee is not mentally stable must resist knee-jerk reactions and secure the necessary observations and information that will justify requiring the employee to undergo an medical examination. Moreover, employers are encouraged to consult legal counsel for guidance on whether the examination will pass muster under the ADA.

New Jersey Appellate Division Clarifies Law on the Liability of Property Owners Whose Vegetation Encroaches on the Neighbor’s Property

Published on: April 20, 2016 | by John J. DeLaney, Jr.

Recently, the New Jersey Appellate Division, in the case of Scannavino v. Walsh (Docket No. A-0033-14T1), issued a fourteen page Opinion (Approved for Publication on April 14, 2016), setting forth the law on the liability of property owners whose trees/vegetation encroaches on the neighbor’s property. In that case, plaintiff alleged that defendants improperly allowed the roots of trees on their property to cause damage to a retaining wall between the parties’ properties. Because the defendants did not plant or preserve the trees, they were deemed a natural condition for which the defendants were not liable. The Opinion is very helpful in dealing with many situations involving encroaching trees/vegetation between neighbors.

There was a three day bench trial which gave the Appellate Division many facts from which to analyze the law on the subject, and most particularly the law on nuisance. The Appellate Division noted that when analyzing nuisance claims, involving vegetation and trees, New Jersey courts are guided by the principles set forth in the Restatement (Second) of Torts. The court recognized that the Restatement (Second) of Torts “draws a distinction between nuisances resulting from artificial and natural conditions. The former are actionable; the latter are not.” Thus, New Jersey courts have held that injury to an adjoining property caused by roots of a planted tree are actionable as nuisance. Similarly, a property owner will be liable for dangerous conditions caused by hanging branches or matter dropping from trees which are not deemed “natural”, when specifically planted for the purposes of the defendant land owner.

There are fine lines of liability, which require an analysis of the specific facts of each case. There is no liability for the natural growth of tree roots; instead it is the positive acts – the affirmative acts – of the property owner in the actual planting of the tree or vegetation, which imposes liability. For example, as set forth in the Restatement (Second) of Torts §840 and noted in the Walsh case, where a possessor of land or his predecessor has planted a number of eucalyptus trees near the boundary line of B’s land and the roots of the eucalyptus trees grow onto B’s land causing damage, the landowner is subject to the rule of liability for artificial conditions, since the eucalyptus trees are not a natural condition. In contrast, there is no strict liability in nuisance where a branch of the defendant’s tree falls onto the neighbor’s garage. Burke v. Briggs, 239 N.J. Super. 269, 275 (App. Div. 1990). But then, there are gray areas under the Restatement (Second) of Torts at §363 – which may permit liability for damages caused by a tree not planted by the possessor of land where the possessor has “preserved” the tree. Liability may be imposed because the preservation is some sort of affirmative act (e.g. fertilizing or maintenance to keep the tree alive) on the part of the defendant, and not simply its failure to act.