COURT DECISIONS

Rough Notes, Mar 2005

Digested from case reports published in the North Eastern Reporter 2d, West Publishing Co., St. Paul, MN

Does oral agreement establish coverage for additional insured?

On January 6, 2000, Charles H. Nelson was injured while working on a construction project. Ferguson Steel Company was the general contractor on the job. Nelson was an employee of Steel Frame Erectors, Inc., a subcontractor. On the date Nelson was injured, Ferguson and Steel Frame were working on the project pursuant to an informal, unwritten agreement. Later that month, they signed a written agreement in which Steel Frame agreed to purchase and maintain insurance for the duration of the work, with Ferguson as an additional insured.

Steel Frame was a named insured under a Liberty Insurance Corporation commercial general liability policy issued to Duke-Weeks Realty Corporation. The policy contained an additional insured endorsement clause that identified an insured as: "[A]ny person or organization for whom you are performing operations when you and such person or organization have agreed in writing in a contract or agreement that such person or organization be added as an additional insured on your policy." When Nelson filed suit against Ferguson, Ferguson filed for declaratory judgment against Liberty, seeking coverage as an insured under the Duke-Weeks policy. The trial court found in favor of Ferguson; Liberty appealed.

Liberty argued that in order for Ferguson to be covered under the policy, Steel Frame's agreement with Ferguson had to be in writing. Ferguson argued that the oral agreement with Steel Frame was sufficient to establish coverage because the oral agreement was eventually reduced to writing and because it was common practice for Ferguson and Steel Frame to begin working on projects before there were written agreements.

The Court of Appeals of Indiana was not convinced by Ferguson's arguments. It was clear from the policy that Liberty would not insure a party without a dated written agreement in effect at the time of the claimed loss of injury. Even if it was common practice for Ferguson and Steel Frame to commence work before a contract was executed, there was no evidence that Liberty consented to extend coverage under those circumstances. To allow for the creation of coverage by reducing oral agreements to writing after loss had occurred would in effect make coverage retroactive despite the terms of the policy. Therefore, Ferguson was not an additional insured on Liberty's policy on the date Nelson was injured.

The decision of the trial court was reversed, and the case was remanded with instructions to grant judgment in favor of Liberty.

Liberty Insurance Corporation vs. Ferguson Steel Company, Inc.-No. 49A02-0402-CV-172-Court of Appeals of Indiana-July 27, 2004-812 North Eastern Reporter 2d 228.

Burned worker claims bodily injury coverage

In April 2000, Bruce Talbert was severely burned when someone began to operate a molding machine while Talbert was inside the machine, repairing it. Talbert filed a claim against his employer, Amcast, alleging that Amcast had required him to work on the machine without lockout/tagout protection, despite the danger involved. Amcast was insured by Continental Casualty Company for bodily injury claims that were not otherwise covered by workers compensation. Continental denied coverage for the Talbert claim, arguing that workplace intentional tort claims were not covered under the policy.

Talbert and Amcast eventually reached a settlement through mediation, and the court entered a $1,295,000 judgment in Talbert's favor. Amcast and an excess insurer paid $295,000 of this judgment.

As part of the settlement, Amcast assigned any of its claims against Continental to Talbert. In order to collect the remaining balance of the judgment, Talbert, as assignee, sued Continental. The trial court held that Continental's policy covered only "accidents," which could never result from an intentional tort. Talbert appealed.

The Ohio Court of Appeals disagreed with the lower court. It held that a "substantially certain" intentional tort as opposed to a "direct intent" intentional tort could constitute an "occurrence" under the Continental policy, even though "occurrence" was defined as an "accident," and an "accident" cannot result from intentional torts. The court noted that the policy purchased by Amcast was for the sole purpose of covering injuries to Amcast's employees arising out of their employment with Amcast that are not covered by workers compensation. In Ohio, the only injuries to workers in the course of employment that would not be covered by workers compensation are intentional torts. Therefore, to find that substantially certain intentional torts were not covered by the Continental policy would be to find that coverage under the policy was illusory.

The decision of the lower court was reversed and the case was remanded.

Talbert vs. Continental Casualty Company-No. 20187-Court of Appeals of Ohio, second District, Montgomery County-May 21, 2004-811 North Eastern Reporter 2d 1169.