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Unjust Enrichment Claim Upheld by Past New York Law

Unjust Enrichment Claim Upheld by Past New York Law

In the case of MCM Products USA, Inc. v. Aliusta Design, the court addressed the issue of whether a subcontractor could make an unjust enrichment claim against a property owner when the contract is between the general contractor (GC) and the subcontractors. This case occurred due to the GC’s insolvency and the resulting situation in which subcontractors were not paid for work that they did on the project. This led them to try to get paid through the owners of the property instead, who had paid the GC rather than the subcontractors.

How Did This Case Start?

It all started when MCM leased a space for their luggage and accessories store in Manhattan. They hired a general contractor and signed a $1.4 million contract to renovate the leased property in June 2014. This GC hired subcontractors to do the construction, but there was not a contractual relationship between MCM and any of the subcontractors that actually did the majority of the work.

On March 2015, the GC filed a mechanic’s lien against the property and some subcontractors did as well. The lease that MCM had signed with the landlord required that MCM discharge any mechanic’s liens against the property promptly. MCM filed a lawsuit in May 2015 seeking a judgment, declaring that they did not owe the subcontractors any money. Counterclaims for unjust enrichment were filed against MCM by several subcontractors, saying that the leased property unjustly benefitted from the work done for which payment was not made, and that MCM should be responsible for payment. MCM moved for dismissal of the counterclaims.

A Decision Came Down

When the court came to a decision, they dismissed the unjust enrichment counterclaims made by the subcontractors. The court followed previous case law to hold that a claim of unjust enrichment is not able to be supported simply because a company benefited from the work done by the subcontractor. If there is an express contract between a GC and subcontractor, the law is very clear that the owner is not liable, unless the owner has agreed to pay the subcontractor themselves. The consent of the owner to allow the subcontractor to work on the property is not enough. The owner has to take action that would show clear indication that they were going to pay the subcontractor themselves, rather than the GC doing so. The court did not address the validity of the mechanic’s liens in this decision at all.

Final Thoughts

To reach their decision, the court used existing New York law to bar the unjust enrichment case, simply because there was no evidence that the owner (MCM) had indicated any intention to pay the subcontractors. In some cases, however, a subcontractor could have a valid unjust enrichment claim if they can show that an owner had direct dealings with the subcontractor, even if there was not a contractual relationship. Included in this are situations in which the owner pays the subcontractor director or indicates that they will pay the subcontractor. This backed up existing law in New York. 

What is Product Liability Insurance?

What is Product Liability Insurance?

Businesses on the fence about product liability insurance need only to search the internet for information about product claims and recalls for clear evidence that this is a "must have" for protection from the various regulatory commissions that will seek remedies for consumers.

With online information at their fingertips, consumers have become liability-savvy when it comes to products they purchase. Law firms are ready and able to represent plaintiffs on a contingency basis and bombard consumers with promises of financial windfalls. When it comes to actions regarding product liability, businesses need to consider the following five points:

1. Frequency: Currently product recalls are average two per day. The frequency can be attributed to the regulatory authority given to organizations like the Product Safety Commission, the Food and Drug Administration, and the National Transportation Safety Administration. You should also include national law firms that have the resources to haunt manufacturers with class action suits

2. Oversight: Since governmental oversight of products and their distribution has increased standards that manufacturers must comply with, increased civil and criminal penalties are a risk that businesses must mitigate. The FDA not only regulates products in the marketplace, but now they have the power to regulate how food is grown, harvested, and even processed.

3. Human ErrorAs long as humans are involved in production, it is impossible to guarantee that errors won't happen. Even with the most stringent safety protocols, errors happen that can result in a consumer injury or even death. When it comes to food products, the damage is not always limited to a particular product. For example, if a particular brand of food is recalled, over-zealous retailers may pull the entire brand from the shelf resulting in a massive financial hit to the manufacturer and distributor who must credit the retailer for the returned product. The act of regaining lost shelf space in a large retailer may be impossible without available resources. In this circumstance, a product liability policy will be invaluable for the business to be able to come out on the other side of a recall.

4. The Cost of a Product Liability ActionAlthough every case is different and most cases eventually settle, the cost of a product liability action is likely to put an uninsured manufacturer or distributor out of business. Damages that are taken into consideration regarding a settlement are as follows:

  • Level of harm
  • Lost Wages and loss of future income
  • Pain and suffering
  • Punitive damages


5. Low Cost of MitigationWith any foreseeable risk, typically the most affordable method of mitigation is to transfer the risk to an insurance carrier. Even with the amount of settlements that have been paid historically, product liability insurance and product recall coverage remain an affordable means of financial protection. Knowing that just one action could result in financial devastation, it is incumbent upon business owners to transfer this risk to an insurer.

Skyline Perspective

If your business provides any product to consumers, your company needs product liability coverage. In some cases, this coverage may be available as part of the General Liability or Business Owners' policy, but is important for you to confirm this with your insurance professional and not make any assumptions. The premium for this coverage will typically be based on the type of product, the sales volume, and the part your company plays in providing the product to consumers.

For more information and details about Product Liability and Product Recall Coverage, contact an insurance professional at Skyline Risk Management(718) 267-6600 for free and confidential consultation.

FLSA and Employment Practices Liability Issues

FLSA and Employment Practices Liability Issues

Looking to the future, it's important for insurers to pay close attention to wages and hourly employment claims with Employment Practices Liability Insurance (EPLI) coverage. Claims falling under the Fair Labor Standards Act (FLSA) have continued to rise each year due to the complexity of the legislation. Many companies never even realize they're in violation of the law until it's too late.

What is FLSA?

The Fair Labor Standards Act, or FLSA, is a federal law that encompasses minimum wage, overtime pay standards, records keeping, and child labor regulations. These laws affect both full and part-time workers in private and public sectors.

Exemptions Revisions Create Confusion

Many companies conducted business by utilizing employee positions that would be considered exempt from FLSA. These positions were exemptions and often, highly useful to many corporations. Things have changed. Many positions that used to be exempt are now non-exempt. Furthermore, white-collar exemptions for supervisors and the like have been looked at and will be updated soon. This will lead to further confusion for insurers and companies – while leading to more litigation.

Off-the-Clock Confusion

Many lawsuits have resulted from companies being sued for not paying hourly employees properly. Many times companies do not realize they're in violation of FLSA in these cases. For instance, an employee sending work emails on his or her smartphone during a non-paid lunch break can be a violation. Sadly, intent is irrelevant with regards to the FLSA, and hourly wage violations can be an unforgivable mistake.

Common Claims

While discrimination claims can be incredibly difficult to prove, an hour and wage claim can be simple to win in court. With the FLSA, the savvy employee’s attorney can almost always find a violation in how a disgruntled employee was paid. Not only do these cases prove easier for the plaintiff to win, but there's also a hefty lawyer’s fee that comes automatic with such a claim.

Group Actions

Companies continue to take hits with the FLSA. A violation regarding hourly pay often will not only include one employee. Many times the violation will involve hundreds of employees. If this occurs, then a class action lawsuit will be on the table. Companies know nothing cheap comes when the words "class action" are thrown around.

Waiving Class Action Issues

Luckily, companies do have one trick in their toolbox. Class action waivers have recently been held up in the Supreme Court. This means a company can have an employee sign a class action waiver that prevents class-action lawsuits against the company regarding violations concerning hourly work and pay.  

How Insurers Can Lower the Risk

To ensure your clients do everything possible to avoid such claims and cases, an insurer can ask companies to proactively audit their policies and payment structures for hourly employees. Auditing the employee handbook and staying up-to-date on FLSA changes will help limit a client's vulnerability. Ultimately, an insurer can only educate a client on what they can do to protect their company. The rest is up to the businesses themselves.

If you have questions about FLSA and/or Employment Practices Liability Issues contact Skyline Risk Management, Inc., (718) 267-6600 to discuss your concerns. 

Directors & Officers are Targets for Lawsuits

Directors & Officers are Targets for Lawsuits

Any board member or company officer serving at a for-profit or non-profit company is at risk of being accused of wrongful misconduct when they are acting on behalf of the organization they represent. Directors & Officers Insurance (D&O) is the vehicle used to transfer this risk to an insurance company.

Most of these policies cover alleged wrongful acts that have taken place either before or during the policy period. Many policies that are purchased may or may not include coverage for "past acts", and for that reason, the applicant must pay close attention to the "retroactive date" listed on the policy. Since coverage is provided on a "claims made" basis rather than "occurrence" basis like other liability policies, a claim may be filed based on an alleged wrongful act that may have occurred several years before the current policy was purchased.

Policy Expansion

While historically only directors and officers were covered under the D&O policy, today many policies are expanded to include upper-level managers and non-executive employees. Also, the company itself can be offered coverage. Claims can be brought by stakeholders, customers, consumer groups, competitors, suppliers and government regulatory groups.

Typical exclusions include fraud, illegal compensation, intentional acts, pending and prior litigation, accounting profits and ERISA claims. The D&O policy will always exclude coverage that should be provided by another type of policy such as General Liability and Fiduciary Liability. Insurers may also exclude other items based on the claims history of the applicant.


The exact definition of a claim can vary among policies and insurers. In fact, some companies and policies do not define it at all. In most cases, a claim includes any type of written demand that accuses an alleged wrongful act by a director or officer acting in their capacity of such and seeks monetary or non-monetary damages.

Fortunately, the D&O policy will reimburse the company for costs associated with legal defense, investigation, and negotiating a settlement of a covered claim. The reimbursement will include attorney's fees, court costs and fees for expert testimony provided for depositions or during a trial. There will always be wording in the policy for "reasonable defense costs" to protect the insurer from paying for excessive expense costs. The carrier will also require advance notice of expense costs and demand that consent is given in advance.

Who Should Be Covered

Anytime an individual is asked to serve as a board member or officer of any organization, whether a major corporation, a church, or the town’s Little League, the risk of being accused of a wrongful act presents itself and should be dealt with by requiring the organization to purchase the proper D&O policy to protect you from the costs of possible litigation.

For more information about Directors and Officers Liability Insurance, contact an insurance professional at Skyline Risk Management, Inc. (718) 267-6600 to address your concerns. 

Never Pay for Legal Fees Again?

Never Pay for Legal Fees Again?

Although Legal Insurance Plans (also known as Pre-Paid Legal Plans) have been around for quite some time now, employers haven't jumped on the bandwagon by offering them to employees as part of their benefits package. This may be due to many plans being marketed through Multi-Level Marketing groups rather than bona-fide benefit organizations. Typically benefit organizations have access to HR personnel because of their group health benefit relationships, and it is most likely difficult for an unknown person to get the attention of an HR manager at a large organization. When we talk about Legal Insurance Plans, there are many available, but most all of them contain the same common core of benefits.

Pre-Paid Access

Pre-Paid Plans are typically sold to help individuals offset the cost of anticipated legal expenses by paying a discounted fee in advance. The plans work very much like any normal insurance product since the fees paid in advance are spread among a large group that may or may not ever have the need to use them. In simple terms, a large fund of money is created in the present which is available to pay legal expenses for members in the future.

The basic service typically provides members with access to an attorney for legal advice and other preventative services over the telephone. The member may also receive the benefit of contract reviews, preparation of simple legal documents, and short letters signed by an attorney. If additional services are needed, the member is referred to an attorney's office.

Comprehensive Group Plans

The group plans which are typically offered by the employer, work much the same way as insurance and provide more core benefits than the Pre-Paid Access Plan. The employer or employee pays a monthly benefit into the plan which allows the member access to covered legal services if and when the need arises. Most plans will cover unlimited telephone consultations with the plan attorneys, document and contract review, preparation of wills and powers of attorney, and some simple traffic cases. As with most insurance products, a deductible or copayment may apply, so the member is encouraged to thoroughly review the plan's terms and conditions.

Discount Legal Plans

Many employers will give away the Discount Legal Plans to employees. These plans work similar to Discount Prescription Plans. The member obtains access to a group of participating attorneys who have agreed to charge pre-negotiated and discounted fees to the member.

Are They Worth It?

Certainly, employers understand that great benefit packages help retain employees. In fact, prospective employees typically consider their benefits packages almost as important as their compensation package. Knowing this, employers should make the following considerations:

  • Marketplace Competition  - Having a Legal Insurance Plan as part of the employer's benefits package is an inexpensive method of adding an arrow to your quiver of benefits.
  • Lost Work Hours - Virtually every employee will be affected one way or another because of a legal matter. Having access to attorneys can reduce time lost when employees must leave the office to handle legal matters.
  • Reduced Stress - Employees that experience stress resulting from even minor legal matters are typically less effective than non-stressed employees.
  • Positive Outcomes - Employees that have access to legal representation will achieve a more positive outcome when legal situations arise.

If you are considering to offer your employees some type of Legal Insurance Plan but haven't pulled the trigger yet, contact one of our insurance professionals at (718) 267-6600 or visit Skyline Risk Management, Inc. to get the information you need regarding employee benefits.