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Tuesday, May 8, 2012
Pitt Dental School's Letter of Disinfection Problem
Attached is the letter Pitt Dental School sent my client (as referenced by Paul Van Osdol in his piece for WTAE TV) advising him that he had been exposed to dental instruments that had not been fully disinfected. We are suing the dental school in negligence for fair compensation and to find out how this happened and whether other people were exposed as well. See my prior post on this matter "Pitt Dental School Exposed Patient to Improperly Cleaned Instruments."
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Monday, May 7, 2012
Pitt Dental School Exposed Patient to Improperly Cleaned Instruments
We have filed a negligence complaint against the University of Pittsburgh's Dental School because Pitt Dental School had a duty to only use dental instruments on their patients that had been fully cleaned to their standards. Pitt Dental School failed to uphold this duty with Conroy. We are looking for answers for how this happened so that we can make sure it does not happen again to anyone else in the community. We are also seeking fair compensation only as the law allows for the ordeal Conroy has been put through.
Paul Van Osdol of WTAE news put a nice news piece together on this matter where Conroy was allowed to state his grievance to the community. I think Conroy did a tremendous job getting his message out. You can watch the full story at Pitt Dental School Accused of Negligence, Using Dirty Equipment or check out WTAE.com.
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Thursday, May 3, 2012
Negligence Per Se and Comparative Negligence in Pennsylvania
Picking up where I left off in my earlier post Negligence Per Se Not a Bar To Comparative Negligence...
In Barrie, the administratrix's son, a minor, died after a night of drinking alcohol with two friends. She filed a wrongful death and survival action against the Liquor Control Board, for negligence in selling liquor to a minor, and the purchaser for negligence in buying and furnishing alcohol to a minor. Her attorneys sought to establish that the defendants were negligent per se, which, in turn, obviated any inquiry into the decedent’s own negligence. Specifically, on appeal, the plaintiff argued that the trial court erred when it instructed the jury on the minor decedent's contributory negligence and in allowing evidence of the minor decedent's prior drinking episodes to be introduced.
The Plaintiff argued that the decedent's contributory or comparative negligence is irrelevant when a defendant has violated section 4-493(1) of the Liquor Code. The Plaintiff first raised this issue with a motion in limine prior to trial, to prevent the LCB from using contributory negligence as a defense. As had been the case law to date, plaintiff argued that section 4-493(1) created a special class of minors in need of protection from the effects of alcohol, and that by applying section 483 of the Restatement (Second) of Torts a minor could not as a matter of law be contributorily negligent by violating a statute enacted for the minor's benefit. This motion was denied and at the conclusion of the evidence a charge on comparative negligence was given to which plaintiffs counsel timely.
The applicable Restatement section is as follows:
"§ 483. Defense to Violation of Statute --HN2
"The plaintiffs contributory negligence bars his recovery for the negligence of the defendant consisting of the violation of a statute, unless the effect of the statute is to place the entire responsibility for such harm as has occurred upon the defendant." Restatement (Second) of Torts § 483.
In support of her argument the plaintiff relied on the same two cases listed in the current Jury Instructions Majors v. Brodhead Hotel and Schelin v. Goldberg. The plaintiff argued that Majors and Schelin controlled and plaintiff’s contributory negligence should not have been presented to the jury.
The LCB argued that plaintiff’s reliance on Majors and Schelin was misplaced in that those cases were decided prior to the enactment of the Comparative Negligence Act. The LCB further argues that application of section 483 was necessary when the law was such that even slight contributory negligence on the part of a minor plaintiff would be a complete bar to recovery, but that today, with the advent of comparative negligence, the harshness of the prior rule is alleviated and the need to apply section 483 removed.
The LCB suggested that instead, Congini v. Portersville Valve Co., 470 A.2d 515 (Pa. 1983) and Thomas v. Duquesne Light Co., 545 A. 2d 289 (Pa. 1988), both decided after enactment of the Comparative Negligence Act, should control. The Court in Barrie, agreed.
In Congini, the Supreme Court held that a social host was negligent per se in serving alcohol to a minor, but also held that a host could assert as a defense the minor's contributory negligence. In Congini rather than adopting the Liquor Code the Supreme Court applied the Crimes Code as setting the standard of conduct to be measured. Justice McDermott writing for the court stated:
"Our legislature has made a legislative judgment that persons under 21 years of age are incompetent to handle alcohol: Under section 6308 of the Crimes Code, 18 Pa. C. S. § 6308, a person 'less than 21 years of age' commits a summary offense if he 'attempts to purchase, purchases, consumes, possesses or transports any alcohol, liquor or malt or brewed beverages.' Furthermore, under section 306 of the Crimes Code, 18 Pa. C. S. § 306, an adult who furnishes liquor to a minor would be liable as an accomplice to the same extent as the offending minor." Congini at 161.
As a result, the Barrie Court was not persuaded that a minor plaintiff served in violation of the Liquor Code by a licensee should be excused from all responsibility for his own per se negligence when a minor plaintiff served by a social host in violation of the Crimes Code would be fully accountable for his per se negligence, based only on a fortuitous circumstance that the provider was licensed as opposed to non-licensed. Additionally, in Thomas a minor was injured after becoming intoxicated and falling from an electrical transmission tower. In an action brought by the minor's parents a default judgment was entered against the adult who purchased the beer for the minor and a compulsory non-suit was entered in favor of the beer distributor. The jury found that the causal negligence of the minor plaintiff was greater than 50 percent and verdicts in favor of the remaining defendants were entered. On appeal the Superior Court reversed, holding that the issue of whether or not liability could be imposed upon a licensee who sells alcohol to an adult under circumstances in which the licensee knew or should have known that the adult was purchasing the alcohol for use by minors presented an issue of fact which should have been submitted to the jury. The court further stated that:
"Upon retrial, the jury should be required to determine the causal negligence, if any, of all defendants, as well as that of the minor plaintiff, and then apportion the same among the parties. This will now include the negligence, if any, of the beer distributor. Recovery by the plaintiffs against all defendants will be precluded only if the minor plaintiffs negligence exceeds the combined negligence of all defendants." Thomas, supra.
Hence, the Thomas case is in accord with the decisions in Congini and more recently Matthews v. Konieczny, 527 A.2d 508 (Pa. 1987) that a minor's comparative negligence is for the jury.
There is still a little bit more to this story which I will tie up in an upcoming post.
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In Barrie, the administratrix's son, a minor, died after a night of drinking alcohol with two friends. She filed a wrongful death and survival action against the Liquor Control Board, for negligence in selling liquor to a minor, and the purchaser for negligence in buying and furnishing alcohol to a minor. Her attorneys sought to establish that the defendants were negligent per se, which, in turn, obviated any inquiry into the decedent’s own negligence. Specifically, on appeal, the plaintiff argued that the trial court erred when it instructed the jury on the minor decedent's contributory negligence and in allowing evidence of the minor decedent's prior drinking episodes to be introduced.
The Plaintiff argued that the decedent's contributory or comparative negligence is irrelevant when a defendant has violated section 4-493(1) of the Liquor Code. The Plaintiff first raised this issue with a motion in limine prior to trial, to prevent the LCB from using contributory negligence as a defense. As had been the case law to date, plaintiff argued that section 4-493(1) created a special class of minors in need of protection from the effects of alcohol, and that by applying section 483 of the Restatement (Second) of Torts a minor could not as a matter of law be contributorily negligent by violating a statute enacted for the minor's benefit. This motion was denied and at the conclusion of the evidence a charge on comparative negligence was given to which plaintiffs counsel timely.
The applicable Restatement section is as follows:
"§ 483. Defense to Violation of Statute --HN2
"The plaintiffs contributory negligence bars his recovery for the negligence of the defendant consisting of the violation of a statute, unless the effect of the statute is to place the entire responsibility for such harm as has occurred upon the defendant." Restatement (Second) of Torts § 483.
In support of her argument the plaintiff relied on the same two cases listed in the current Jury Instructions Majors v. Brodhead Hotel and Schelin v. Goldberg. The plaintiff argued that Majors and Schelin controlled and plaintiff’s contributory negligence should not have been presented to the jury.
The LCB argued that plaintiff’s reliance on Majors and Schelin was misplaced in that those cases were decided prior to the enactment of the Comparative Negligence Act. The LCB further argues that application of section 483 was necessary when the law was such that even slight contributory negligence on the part of a minor plaintiff would be a complete bar to recovery, but that today, with the advent of comparative negligence, the harshness of the prior rule is alleviated and the need to apply section 483 removed.
The LCB suggested that instead, Congini v. Portersville Valve Co., 470 A.2d 515 (Pa. 1983) and Thomas v. Duquesne Light Co., 545 A. 2d 289 (Pa. 1988), both decided after enactment of the Comparative Negligence Act, should control. The Court in Barrie, agreed.
In Congini, the Supreme Court held that a social host was negligent per se in serving alcohol to a minor, but also held that a host could assert as a defense the minor's contributory negligence. In Congini rather than adopting the Liquor Code the Supreme Court applied the Crimes Code as setting the standard of conduct to be measured. Justice McDermott writing for the court stated:
"Our legislature has made a legislative judgment that persons under 21 years of age are incompetent to handle alcohol: Under section 6308 of the Crimes Code, 18 Pa. C. S. § 6308, a person 'less than 21 years of age' commits a summary offense if he 'attempts to purchase, purchases, consumes, possesses or transports any alcohol, liquor or malt or brewed beverages.' Furthermore, under section 306 of the Crimes Code, 18 Pa. C. S. § 306, an adult who furnishes liquor to a minor would be liable as an accomplice to the same extent as the offending minor." Congini at 161.
As a result, the Barrie Court was not persuaded that a minor plaintiff served in violation of the Liquor Code by a licensee should be excused from all responsibility for his own per se negligence when a minor plaintiff served by a social host in violation of the Crimes Code would be fully accountable for his per se negligence, based only on a fortuitous circumstance that the provider was licensed as opposed to non-licensed. Additionally, in Thomas a minor was injured after becoming intoxicated and falling from an electrical transmission tower. In an action brought by the minor's parents a default judgment was entered against the adult who purchased the beer for the minor and a compulsory non-suit was entered in favor of the beer distributor. The jury found that the causal negligence of the minor plaintiff was greater than 50 percent and verdicts in favor of the remaining defendants were entered. On appeal the Superior Court reversed, holding that the issue of whether or not liability could be imposed upon a licensee who sells alcohol to an adult under circumstances in which the licensee knew or should have known that the adult was purchasing the alcohol for use by minors presented an issue of fact which should have been submitted to the jury. The court further stated that:
"Upon retrial, the jury should be required to determine the causal negligence, if any, of all defendants, as well as that of the minor plaintiff, and then apportion the same among the parties. This will now include the negligence, if any, of the beer distributor. Recovery by the plaintiffs against all defendants will be precluded only if the minor plaintiffs negligence exceeds the combined negligence of all defendants." Thomas, supra.
Hence, the Thomas case is in accord with the decisions in Congini and more recently Matthews v. Konieczny, 527 A.2d 508 (Pa. 1987) that a minor's comparative negligence is for the jury.
There is still a little bit more to this story which I will tie up in an upcoming post.
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Saturday, April 28, 2012
Representing Yourself at Pittsburgh Unemployment Compensation Hearings
Pittsburgh unemployment compensation appeal hearings can be a trying experience for Pittsburgh workers that have recently lost their job. Out of work individuals often face a tough decision before the appeal occurs. I am talking about the decision of whether to hire an attorney for the hearing. In many situations it is advisable to pay the money for expert representation. Especially when the extent of unemployment compensation benefits is significant.
There will, however, be many times when it might be worth saving your money and handling the hearing on your own. If you decide that the amount of money in contest is maybe not worth the outlay of cash necessary to bring an attorney along, there I want to give you a couple pointers to keep in mind to improve your chances.
First, scrutinize the Notice of Hearing you receive. Specifically, you need to understand the exact basis for why you were denied. The Notice of determination spells out the exact UC provision that is being relied upon to deny your benefits. When you figure that out you need to make that the focus of your argument. In my experience UC referees are good people but, due to the large volume of cases they have to handle, can get annoyed when claimants stray off topic. If you were denied benefits because the UC determined that you left work voluntarily then do not bother telling the judge about issues unrelated to that. Read the law that the UC relied on and figure out how you can prove that this was incorrect.
Second, try to determine whether anyone from your employer or the UC office is going to attend to oppose you. Often times your employer will not contest your application. In these situations you just need to provide your own credible testimony and evidence to overcome the reason for denial. In my experience when no one opposes benefits are granted the vast majority of time.
Third, REVIEW THE CLAIM FILE BEFORE THE HEARING! Get to the hearing office well before your hearing is scheduled. Then go into the check in area and request to review your file. The file contains all of the evidence upon which the determination was made. Often times this includes documents signed or attested to by people that will not be present at the hearing. If you see this and know that these people will not be present at the hearing then you can object to these documents admission during the hearing on the basis of HEARSAY. The referee will always exclude this evidence. This will only help your case as the referee can only make his determination based on what he hears during the hearing and what he reads in the claim file as of the close of the hearing.
As a dovetail to this, you can offer all of the evidence you want into the record if it is not going to be opposed. A dirty secret in this situation is that if the other side does not bring an attorney then they will not know to object to the documents you offer. All documents you offer into evidence will be admitted unless they are objected to. So offer everything in your favor if the other side does not have an attorney. And object on hearsay to everything the other side offers that you think is bad for your claim.
Lastly, be polite and courteous to the referee. As I mentioned these are good people that deal with endless hearings all day long. Often times their patience has been tried. If you are polite and courteous to them, chances are they will be the same way to you in their decision. Every little bit helps.
If you have any other questions about tips for these hearings, feel free to email me. I hope this helps you get the benefits you deserve!
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There will, however, be many times when it might be worth saving your money and handling the hearing on your own. If you decide that the amount of money in contest is maybe not worth the outlay of cash necessary to bring an attorney along, there I want to give you a couple pointers to keep in mind to improve your chances.
First, scrutinize the Notice of Hearing you receive. Specifically, you need to understand the exact basis for why you were denied. The Notice of determination spells out the exact UC provision that is being relied upon to deny your benefits. When you figure that out you need to make that the focus of your argument. In my experience UC referees are good people but, due to the large volume of cases they have to handle, can get annoyed when claimants stray off topic. If you were denied benefits because the UC determined that you left work voluntarily then do not bother telling the judge about issues unrelated to that. Read the law that the UC relied on and figure out how you can prove that this was incorrect.
Second, try to determine whether anyone from your employer or the UC office is going to attend to oppose you. Often times your employer will not contest your application. In these situations you just need to provide your own credible testimony and evidence to overcome the reason for denial. In my experience when no one opposes benefits are granted the vast majority of time.
Third, REVIEW THE CLAIM FILE BEFORE THE HEARING! Get to the hearing office well before your hearing is scheduled. Then go into the check in area and request to review your file. The file contains all of the evidence upon which the determination was made. Often times this includes documents signed or attested to by people that will not be present at the hearing. If you see this and know that these people will not be present at the hearing then you can object to these documents admission during the hearing on the basis of HEARSAY. The referee will always exclude this evidence. This will only help your case as the referee can only make his determination based on what he hears during the hearing and what he reads in the claim file as of the close of the hearing.
As a dovetail to this, you can offer all of the evidence you want into the record if it is not going to be opposed. A dirty secret in this situation is that if the other side does not bring an attorney then they will not know to object to the documents you offer. All documents you offer into evidence will be admitted unless they are objected to. So offer everything in your favor if the other side does not have an attorney. And object on hearsay to everything the other side offers that you think is bad for your claim.
Lastly, be polite and courteous to the referee. As I mentioned these are good people that deal with endless hearings all day long. Often times their patience has been tried. If you are polite and courteous to them, chances are they will be the same way to you in their decision. Every little bit helps.
If you have any other questions about tips for these hearings, feel free to email me. I hope this helps you get the benefits you deserve!
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Friday, April 27, 2012
Negligence Per Se Not a Bar to Comparative Negligence
Applicability of Contributory and/or Comparative Negligence in Regards to Negligence Per Se.
The Pennsylvania Suggested Standard Civil Jury Instructions, in my opinion, are where all plaintiffs attorneys should start when beginning to formulate their case plan. I reference the Jury Instructions several times a week for my cases and my blog posts. The Instructions give you the law as it will likely be read to the jury. This is the language you need to understand and fit your case to. What is particularly helpful with the Jury Instructions is that they come with a detailed explanation of the case law behind each proposed instruction. Most of the time the case law provided is still good law. Sometimes, however, the case law is outdated. Such appears to be the case with the jury instruction (at least as of 2008) on Negligence Per Se.
Specifically, the supporting law to the Jury Instructions relies on Stehle v. Jaeger Automatic Machine Co., 74 A. 215, 216 (Pa. 1909)(minor protected by child labor law) and Majors v. Brodhead Hotel, 205 A.2d 873, 876 (Pa. 1965)(intoxicant protected by Liquor Code) for the contention that one is not barred by their own contributory negligence where the statute violated by the defendant was enacted to protect a class of persons deemed unable to exercise self-protective care. Reading this law it would seem that so long as the defendant violated a law (negligence per se) specifically designed to protect those “unable to protect themselves” the plaintiff could never be held accountable for their own contributing negligence.
This concept, however, appears to have been abrogated following Pennsylvania’a enactment of the Comparative Negligence Act. In fact, this argument was specifically shut down for this exact reasoning in Barrie v. Pennsylvania Liquor Control Bd., 1990 Pa. Dist. & Cnty. Dec. LEXIS 335, 9-12 (Pa. C.P. 1990)- an opinion of the Allegheny Court of Common Pleas following plaintiff's motion for post trial relief.
Because this is a long post, I will continue it in my next post.
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Wednesday, April 25, 2012
Using Negligence Per Se to Win Your Case
Negligence Per Se in Pittsburgh Personal Injury Law
In Pittsburgh, as is the case across Pennsylvania Courts, injured parties have to prove three legal points in a personal injury case: negligence, causation and damages. Pennsylvania court rooms can be a tough place for an injured person. In many cases, the plaintiff must first establish that the defendant was negligent, before even worrying about whether the negligence caused the harm complained of. Because the burden of proof is on the plaintiff, injured parties in Pennsylvania need to use all tools available to them. Many times in auto cases, negligent security cases, dram shop cases and assault and battery claims (to name a few) the defendant can be shown to have violated a law as a result of their actions. When this happens the concept of negligence per se comes into play and can strengthen a case.
Pennsylvania has adopted Section 286 of the Restatement of Torts Second. This Restatement provides: “The Court may adopt as the standard of conduct of a reasonable man the requirements of a legislative enactment … whose purpose is found to be
(a) exclusively or in part to protect a class of persons which includes the one whose interest is invaded, and
(b) to protect the particular interest which is invaded, and
(c) to protect that interest against the kind of harm which has resulted, and
(d) to protect that interest against the particular hazard from which the harm results.
Pennsylvania’s adoption of Section 286 has been affirmed in multiple decisions. See, e.g., Orner v. Mallick, 527 A.2d 521, 523 (Pa. 1987). See, also, Shamnoski v. PG Energy, 579 Pa. 652, 858 A.2d 589, 601-02 (Pa. 2004) (observing that statutes reflecting a legislative judgment that a failure to engage in certain specified conduct constitutes negligence, may provide the duty of care in finding negligence per se), citing Beaver Valley Power Co. v. National Engineering & Contracting Co., 883 F.2d 1210 (3d Cir. 1989); Young v. Pa. Dept. of Transp., 560 Pa. 373, 744 A.2d 1276, 1279 (Pa. 2000) (noting that negligence per se is not found where a statute does not provide specific guidance on the duty of care owed by a defendant); Jinks v. Currie, 324 Pa. 532, 188 A. 356, 358 (Pa. 1936) (finding negligence per se based on a motor vehicle statute positively prohibiting specific conduct, and describing prior case law on negligence per se interpreting similar statutes).
Here is an example of how negligence per se could be established in a car crash case. The plaintiff is driving down the road. They come around a bend only to find another vehicle coming at them from the opposite direction in their lane. The other vehicle was trying to pass a car, crossed a double line to do so, and was unable to pass back into the correct lane before striking the plaintiff. There are laws in Pennsylvania that forbid passing on double lines and driving in the opposite lane.
In this scenario, the plaintiff can seek to hold the defendant negligent per se i.e. negligent as a matter of law for having violated two motor vehicle laws. The plaintiff can establish all four prongs of the negligence per se requirement. The law was designed to protect other drivers from the harm that would be expected from driving on the wrong side of the road and plaintiff most certainly incurred the exact type of harm contemplated.
Once these four points are established, the plaintiff can ask the court (never mind the jury) to find that the defendant was negligent as a matter of law. When the judge does this, the plaintiff has just moved a third of the way closer to winning their case.
I will discuss other aspects of negligence per se in future posts.
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In Pittsburgh, as is the case across Pennsylvania Courts, injured parties have to prove three legal points in a personal injury case: negligence, causation and damages. Pennsylvania court rooms can be a tough place for an injured person. In many cases, the plaintiff must first establish that the defendant was negligent, before even worrying about whether the negligence caused the harm complained of. Because the burden of proof is on the plaintiff, injured parties in Pennsylvania need to use all tools available to them. Many times in auto cases, negligent security cases, dram shop cases and assault and battery claims (to name a few) the defendant can be shown to have violated a law as a result of their actions. When this happens the concept of negligence per se comes into play and can strengthen a case.
Pennsylvania has adopted Section 286 of the Restatement of Torts Second. This Restatement provides: “The Court may adopt as the standard of conduct of a reasonable man the requirements of a legislative enactment … whose purpose is found to be
(a) exclusively or in part to protect a class of persons which includes the one whose interest is invaded, and
(b) to protect the particular interest which is invaded, and
(c) to protect that interest against the kind of harm which has resulted, and
(d) to protect that interest against the particular hazard from which the harm results.
Pennsylvania’s adoption of Section 286 has been affirmed in multiple decisions. See, e.g., Orner v. Mallick, 527 A.2d 521, 523 (Pa. 1987). See, also, Shamnoski v. PG Energy, 579 Pa. 652, 858 A.2d 589, 601-02 (Pa. 2004) (observing that statutes reflecting a legislative judgment that a failure to engage in certain specified conduct constitutes negligence, may provide the duty of care in finding negligence per se), citing Beaver Valley Power Co. v. National Engineering & Contracting Co., 883 F.2d 1210 (3d Cir. 1989); Young v. Pa. Dept. of Transp., 560 Pa. 373, 744 A.2d 1276, 1279 (Pa. 2000) (noting that negligence per se is not found where a statute does not provide specific guidance on the duty of care owed by a defendant); Jinks v. Currie, 324 Pa. 532, 188 A. 356, 358 (Pa. 1936) (finding negligence per se based on a motor vehicle statute positively prohibiting specific conduct, and describing prior case law on negligence per se interpreting similar statutes).
Here is an example of how negligence per se could be established in a car crash case. The plaintiff is driving down the road. They come around a bend only to find another vehicle coming at them from the opposite direction in their lane. The other vehicle was trying to pass a car, crossed a double line to do so, and was unable to pass back into the correct lane before striking the plaintiff. There are laws in Pennsylvania that forbid passing on double lines and driving in the opposite lane.
In this scenario, the plaintiff can seek to hold the defendant negligent per se i.e. negligent as a matter of law for having violated two motor vehicle laws. The plaintiff can establish all four prongs of the negligence per se requirement. The law was designed to protect other drivers from the harm that would be expected from driving on the wrong side of the road and plaintiff most certainly incurred the exact type of harm contemplated.
Once these four points are established, the plaintiff can ask the court (never mind the jury) to find that the defendant was negligent as a matter of law. When the judge does this, the plaintiff has just moved a third of the way closer to winning their case.
I will discuss other aspects of negligence per se in future posts.
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Sunday, April 22, 2012
Are Pennsylvania Personal Injury Settlements and Awards Taxable?
Question: Are Pennsylvania personal injury settlements and awards taxable?
Answer: It depends.
Pennsylvania personal injury settlements and awards that reimburse for lost wages are absolutely taxable.
The question of taxability gets trickier when the money was obtained for non-economic damages like pain and suffering, emotional distress, embarrassment and humiliation.
The Federal tax code, specifically I.R.C. § 61(a) states, taxpayers are liable for all gross income, which is defined as “all income from whatever source derived.” 26 U.S.C. § 61(a).
So first, what is income?
In the seminal tax case of Glenshaw Glass, the court defines “income” for tax purposes as “accessions to wealth, clearly realized, and over which the taxpayers have complete dominion.” 348 U.S. 426, 431 (1955). There exists a litany of cases wherein the SC has instructed that § 61 should be read broadly and extends to all economic gains not otherwise exempted. Additionally, treating § 61 to exclude all personal injuries would render the § 104(a)(2) exclusion for personal injuries or physical sickness meaningless. Standnyk v. C.I.R., 367 Fed.Appx. 586 (6th Cir. Ct. App. 2010).
Second, is any of that income obtained through a personal injury settlement or award excludable from taxes?
The Supreme Court has held that a taxpayer must meet two independent requirements before a lawsuit recovery may be excluded under § 104(a)(2). “First, the taxpayer must demonstrate that the underlying cause of action giving rise to the recovery is based upon tort or tort types rights; and second, the taxpayer must show that the damages were received on account of personal injuries or sickness.” Comm’r v. Schleier, 515 U.S. 323, 337 (1995).
In order to satisfy the second prong, the taxpayer must present “concrete evidence demonstrating the precise causal connection” between the taxpayer’s asserted personal injury and the settlement she received. Banks v. Comm’rBanks v. Comm’r,, 345 F.3d 373, 378-79 (6th Cir. 2003). See Sanford v. Comm'r, 95 T.C.M. (CCH) 1618 (2008) (settlement award for emotional distress relating to sexual harassment and discrimination claims is not excludable); Polone v. Comm'r, 86 T.C.M. (CCH) 698 (2003) (settlement award for defamation claim is not excludable), aff'd 505 F.3d 966 (9th Cir.2007); Venable v. Comm'r, 86 T.C.M. (CCH) 254 (2003) (settlement payment for mental anguish and loss of reputation relating to malicious prosecution claim is not excludable), aff'd 110 Fed.Appx. 421 (5th Cir.2004).
In Stadnyk, the court held that the tax court correctly noted that the damages sought by plaintiff against defendant were stated in terms of non-physical personal injuries (i.e., emotional distress, mortification, humiliation, mental anguish, and damage to reputation). Though, being emotional injuries, they are thus not excludable under § 104(a)(2).
In Murphy v. IRS, 493 F.3d 170 (U.S.App.D.C. 2007), the court noted that in 1996 Congress amended § 104(a) narrowing the exclusion amounts received on account of “personal physical injuries or physical sickness” from “personal injuries or sickness,” and explicitly provided that “emotional distress shall not be treated as a physical injury or physical sickness,” thus making clear that an award received on account of emotional distress is not excluded from gross income under § 104(a)(2). The lynchpin is whether a reading of § 61 is to include an award for damages from nonphysical harms.
The court concludes that “for the 1996 amendment of § 104(a) to “make sense,” gross income in § 61(a) must, and we therefore hold it does, include an award for nonphysical damages such as Murphy received, regardless of whether the award is an accession to wealth. The bottom line is that unless there is some direct link between the non-physical damages (pain and suffering, emotional distress, embarrassment and humiliation) and a physical injury that is part of the lawsuit, the non-wage loss proceeds from the settlement or award are not excludable under § 104(a)(2) and are subject to tax.
Another good link on this topic can be found at TaxAnalysts.com.
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