The Law

Legal Spotlight

A look at the latest decisions impacting the industry.
By: | June 1, 2017 • 4 min read

Insurer Must Pay $13.5 Million

On Feb. 7, 2010, a gas blow operation was being performed at the Kleen Energy Systems power plant in Middletown, Conn.

As part of the operation, a large amount of natural gas was vented into areas where welding and other work was being performed. An explosion killed six workers and injured 50 others.

The injured workers and the estates of the deceased obtained a $13.5 million judgment against subcontractor Bluewater Energy Systems Inc., and the workers subsequently filed suit, seeking indemnity from National Union Fire Insurance Co., which had issued Bluewater a commercial umbrella insurance policy.

National Union denied coverage, saying the power plant project was insured under a contractor controlled insurance “wrap-up” program, and that the umbrella policy excluded coverage for “any liability arising out of any project insured under a ‘wrap-up’ or any similar rating plan,” according to court documents.

The workers said the term “wrap-up” was “ambiguous,” and the U.S. District Court for the District of Connecticut agreed.

In an opinion dated April 6, the court ruled the insurance company “had a duty to explain its definition [of wrap-up] to the insured so that the insured could understand the significant coverage limitation.”

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“Although insurance experts and attorneys may debate the contours of a ‘wrap-up or similar rating plan,’ the Court cannot find a reasonable layperson … would have understood and expected – based on the language of the contract – that liability was excluded … ,” the court ruled.

Scorecard: The insurance company must pay $13.5 million on the claim.

Takeaway: Because of the ambiguity related to the wrap-up program, the law requires a ruling most favorable to the insured.

Completion of Work at Center of Dispute

On June 1, 2011, Tarhonda Palmer was struck by a train at a railroad crossing in Adel, Ga., causing extensive injuries including severe burns and traumatic brain injury.

In a lawsuit she filed against Norfolk Southern Corp. on March 14, 2012, she said her ability to see the approaching train was impaired by overgrown vegetation and other factors. She later amended the lawsuit to include NaturChem Inc., which was contracted to apply herbicide and monitor the crossing.

NaturChem alerted Liberty Surplus Insurance Corp. of the claim and sought coverage. The insurance company agreed to pay 50 percent of the defense costs, under a reservation of rights.

In September 2014, Liberty filed suit in the U.S. District Court for the Middle District of Georgia and sought a ruling that would eliminate its coverage obligations.

The insurer argued that NaturChem had completed its herbicide application at the crossing 90 days prior to the accident and that the policy’s “completed work exclusion” applied. The court disagreed and dismissed the case in June 2016.

On appeal to the U.S. 11th Circuit Court of Appeals, Liberty lost its argument again. The court said the policy provided coverage for bodily injury that occurred “out of acts or omissions at the ‘job location.’” Because the work included maintenance and monitoring of the crossing, the work was not concluded, it ruled.

“To conclude otherwise would require the Court to read language into the Policy that does not exist,” according to the opinion issued April 4.

Scorecard: The insurance company must defend and indemnify NaturChem.

Takeaway: The court ruled the insurer was “requesting relief from the consequences of the inartfully drafted, yet plain, terms of its insurance policy.”

Court: Insured Missed Notification Deadline

On July 10, 2014, VHT Inc. sent a letter to Zillow, an online real estate marketplace, demanding that it remove VHT images from its site. The photos were only to be used for sales or marketing, according to VHT, but Zillow was also using them in connection with Zillow Digs, a home improvement and design application.

Zillow requested further information from VHT, but never removed the images. On July 8, 2015, VHT filed suit, claiming copyright infringement and liability.

Two days after receiving notice of the lawsuit, Zillow notified National Union Fire Insurance Co. of Pittsburgh, which had issued it a claims-made Specialty Risk Protector policy, to cover claims related to online media content.

National Union initially agreed to provide a defense under a reservation of rights, but later denied coverage because the claim was outside of the policy period. It should have been notified when the original letter was received instead of when the lawsuit was filed, it said.

A jury eventually ruled that Zillow should pay $8.3 million to VHT.

On Sept. 15, 2016, National Union sought a court ruling that it had no duty to defend or indemnify Zillow, and on April 13, 2017, the U.S. District Court for the Western District of Washington agreed.

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The court disagreed with Zillow’s argument that the lawsuit notification was a “separate and distinct claim” from VHT’s original letter. It ruled the two claims involved the “same relevant acts,” and that the policy required notification within 45 days after the end of the policy, which was July 19, 2014.

Scorecard: The insurer does not have to defend or indemnify Zillow for the $8.3 million jury award.

Takeaway: The court found no meaningful difference between the original letter and the litigation for coverage purposes.

Anne Freedman is managing editor of Risk & Insurance. She can be reached at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Risk Management

The Profession

Wawa’s Director of Risk Management knows that harnessing data and analytics will be key to surviving the rapid pace of change that heralds new risk exposures.
By: | July 27, 2017 • 5 min read

R&I: What was your first job?

My first job was at the age of 15 as a cashier at a bakery. My first professional job was at Amtrak in the finance department. I worked there while I was in college.

R&I: How did you come to work in risk management?

A position opened up in risk management at Wawa and I saw it as an opportunity to broaden my skills and have the ability to work across many departments at Wawa to better learn about the business.

R&I: What is the risk management community doing right?

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The advancements in analytics are a success for the industry and offer opportunities for the future. I also find value in the industry focus on emerging and specialty risks. There is more alignment with experts in different industries related to emerging and specialty risks to provide support and services to the insurance industry. As a result, the insurance industry can now look at risk mitigation more holistically and not just related to traditional risk transfer.

R&I: What could the risk management community be doing a better job of?

Developing the talent to grow with the industry in specialization and analytics, but to also carry on the personal connections and relationship building that is a large part of this industry.

Nancy Wilson, director, quality assurance, risk management and safety, Wawa Inc.

R&I: What was the best location and year for the RIMS conference and why?

I have had successes at all of the RIMS events I have attended. It is a great opportunity to spend time with our broker, carriers and other colleagues.

R&I: What’s been the biggest change in the risk management and insurance industry since you’ve been in it?

I think the biggest challenge facing most companies today is related to brand or reputational risk. With the ever-changing landscape of technology, globalization and social media, the risk exposure to an organization’s brand or reputation continues to grow.

R&I: What emerging commercial risk most concerns you?

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The changing consumer demands and new entrants into an industry are concerning. This is not necessarily something new but the frequency and speed to which it happens today does seem to be different. I think that is only going to continue. Companies need to be prepared to evolve with the times, and for me that means new risk exposures that we need to be prepared to mitigate.

R&I: Are you optimistic about the U.S. economy or pessimistic and why?

I try to be optimistic about most things. I think the economy ebbs and flows for many reasons and it is important to always keep an eye out for signs of change.

R&I: What have you accomplished that you are proudest of?

I am fortunate to have opportunities professionally that make me proud, but I have to answer this one personally. I have two children ages 12 and 9 and I am so proud of the people that they are today. They both are hardworking, fun and kind. Nothing gives me a better feeling than seeing them be successful. I look forward to more of that.

R&I: What is your favorite book or movie?

This is really hard as there are too many favorites. I do prefer books to movies, especially if there is a movie based on a book. I find the movie is never as good. I have multiple books going at once and usually bounce back and forth between fiction and non-fiction.

R&I: What’s the best restaurant you’ve ever eaten at?

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I have eaten at a lot of different restaurants in many major cities but I would have to pick Horn O’ Plenty in Bedford, PA. It is a farm to table restaurant in the middle of the state. The food is always fresh and tastes amazing and they make me feel like I am at home when I am there. My family and I eat there often during our trips out that way.

R&I: What is your favorite drink?

I do love a good cup of coffee (working at Wawa helps that). I also enjoy a good glass of wine (red preferably) on occasion.

R&I: What is the most unusual/interesting place you have ever visited?

Vacations aside, I do get an opportunity to travel for work and visit our food suppliers. The opportunities I have had to visit back to the farm level have been a very interesting learning experience. If it wasn’t for my role, I would have never been able to experience that.

R&I: What is the riskiest activity you ever engaged in?

My husband, kids and I recently did a boot-camp-type obstacle course up in the trees 24 feet in the air. Although I had a harness and helmet on, I really put my fear of heights to the test. At the end of the two hours, I did get the hang of it but am not sure I would do it again.

R&I: If the world has a modern hero, who is it and why?

The first people that come to mind are those who are serving our country and willing to sacrifice their own lives for our freedom.

R&I: What about this work do you find the most fulfilling or rewarding?

Every day is different and I have the opportunity to be involved in a lot of different work across the company.

R&I: What do your friends and family think you do?

My husband and children have a pretty good sense of what I do, but the rest of my family has no idea. They just know I work for Wawa and sometimes travel.




Katie Siegel is an associate editor at Risk & Insurance®. She can be reached at [email protected]