Smith v. Rail Link (District Court of Wyoming 2011) (February 2011), aff’d (10th Cir. 2012)

The plaintiff injured her ankle while on the job and obtained workers' compensation benefits. She attempted to increase her recovery by filing a FELA claim against both her employer, a rail switching company, and a parent company. BatesCarey LLP successfully moved for summary judgment on the grounds that FELA did not apply to the rail switching company and that FELA did not apply to the parent company because it was not the claimant's employer. A Wyoming federal court agreed with BatesCarey LLP's positions and granted summary judgment in favor of BatesCarey LLP's client. The Tenth Circuit affirmed the trial court's decision and issued its first published decision addressing these issues.

In an unusual decision employing contorted contractual construction, an Indiana appellate court on August 28, 2012 explained that an insured that intentionally left 100,000 tons of sand on property it once leased, has caused a “personal injury” to the land and that this “personal injury” is covered by the insured’s general liability insurance. The concurring opinion found coverage was owed because the standard “occurrence” definition in the policy creates an ambiguity as to whether the policy requires the cause of the injuries to be “accidental.” or whether the policy requires that the injuries themselves to be “accidental.” While this decision may encourage policyholder counsel to use the “personal injury” coverage grant as a path to finding coverage for environmental property damage, the reasoning of the decision is likely to hold little precedential value outside the facts of the particular case and little sway for courts outside of Indiana.

Clark v. Union Pacific Railroad (E.D. Ark. 2012)

On June 1, 2012, after a three-day bench trial in the U.S. District Court for the Eastern District of Arkansas, a federal judge ruled that BatesCarey LLP's client, Gunderson Rail Services, did not owe contractual indemnity to Union Pacific Railroad for Union Pacific's 50% of liability in a multi-million suit under the Federal Employers Liability Act. Joseph P. Pozen tried the case for Gunderson.

One of the seminal no “loss” cases is Level 3 Communications, Inc. v. Federal Ins. Co., 272 F.3d 908 (7th Cir. 2001), penned by the esteemed jurist Judge Richard Posner. This past month, Judge Posner, writing for the Seventh Circuit, issued another no “loss” decision, finding in favor of the insurer. Ryerson Inc. v. Federal Ins. Co., --- F.3d ----, 2012 WL 1216282 (7th Cir. Apr. 12, 2012) (Illinois law).

We thought it was interesting to note three recent cases in three different jurisdictions, each of which concluded—on summary adjudication—that there is no coverage under a CGL policy for construction defect claims.

Lenex Steel Co. v. Rockhill Ins. Co. (Ill. Cir. Ct. 2012) 

The insured was obligated to pay a $1.2 million settlement of an underlying bodily injury claim. The insured and one of its primary insurers argued that "additional insured" coverage applied under the client's umbrella policy, and that the client was therefore obligated to contribute to the settlement. Adopting BatesCarey LLP's reasoning, an Illinois state court held that the client umbrella insurer had no obligation to contribute to the settlement because all primary coverage, including the insured's own primary coverage, was not exhausted. The court not only granted summary judgment, but at BatesCarey LLP's request it also sanctioned the insured and its counsel for pursuing a frivolous lawsuit by awarding the client its reasonable attorneys' fees and costs.

In many states, courts have found that the faulty workmanship of a construction contractor that damages the contractor’s own work is not an accident and, therefore, not an “occurrence.” General Sec. Indem. Co. of Arizona v. Mountain States Mut. Cas. Co., 205 P.3d 529 (Colo.Ct.App. 2009); Auto-Owners Ins. Co. v. Home Pride Companies, Inc., 268 Neb. 528, 684 N.W.2d 571 (Neb. 2004) (faulty workmanship, standing alone, is not covered under a standard CGL policy); Oak Crest Const. Co. v. Austin Mut. Ins. Co., 329 Or. 620, 998 P.2d 1254 (Or. 2000) (no occurrence where insured sought cost of correcting subcontractor's deficient work); Kvaerner Metals Div. of Kvaerner U.S., Inc. v. Commercial Union Ins. Co., 589 Pa. 317, 908 A.2d 888 (Pa. 2006).

Alfred Siegel v. Certain Underwriters at Lloyds (C.D. Cal. 2011)

A California federal court agreed with BatesCarey LLP's arguments that a declaratory judgment action filed by IndyMac Bancorp's bankruptcy trustee was "non-core" to the bankruptcy. Therefore the court found that judicial efficiency supported withdrawing the reference to the bankruptcy court. After the reference was withdrawn, the trustee voluntarily dismissed the action.

Kevin Fox v. Will County State’s Atty. (N.D. Ill. 2011)

BatesCarey LLP's client issued an excess policy to an insured county, which was sued, along with two sheriff deputies, for civil rights violations by a man falsely accused of murder. The primary insurer paid for the county's and deputies' defense, which resulted in an uncovered multi-million dollar punitive damage award. The insured's assignee argued that the excess insurer had failed in bad faith to accept a settlement offer and was required to pay the punitive damage award. BatesCarey LLP argued that the excess insurer did not control the defense and thus could not have breached any duty to settle. An Illinois federal court adopted BatesCarey LLP's reasoning on summary judgment and held that the excess insurer was not obligated to pay the punitive damage award.

Pacific Emp. Ins. Co. v. GLOBAL Reinsurance Corp. (E.D. Pa. 2011)

BatesCarey LLP obtained judgment for its reinsurer client by convincing a federal court that the "follow the fortunes" doctrine did not require the reinsurer to pay expenses in addition to the limits of liability on a facultative certificate. By moving for judgment on the pleadings, BatesCarey LLP foreclosed the cedent from taking any discovery and obtained victory immediately after the cedent filed its responsive pleading.