Searching over 5,500,000 cases.


searching
Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

Evanston Insurance Co. v. Sandersville Railroad Co.

United States District Court, M.D. Georgia, Macon Division

July 25, 2017

EVANSTON INSURANCE COMPANY, Plaintiff,
v.
SANDERSVILLE RAILROAD COMPANY, Defendant.

          ORDER

          MARC T. TREADWELL, JUDGE

         In this declaratory judgment action, Plaintiff Evanston Insurance Company[1]seeks to determine its obligations to its insured-Defendant Sandersville Railroad Company-in relation to a FELA claim brought by its employee, John Flowers. Previously, the Court determined that the pollution exclusion in Evanston's policy barred coverage for Flowers's claim. Doc. 43. Evanston has again moved for summary judgment, this time seeking declarations that (a) based on the allegations of Flowers's complaint, it owed no duty to defend Sandersville Railroad and (b) based on an obligation created by its reservation of rights letters, it is entitled to recover expenses incurred in its defense of Flowers's lawsuit on behalf of Sandersville Railroad. Doc. 44 at 1. The Court concludes that Evanston has not shown as a matter of law that it did not owe Sandersville Railroad a duty to defend. The Court further concludes that Evanston has not shown as a matter of law that its reservation of rights letters obligated Sandersville Railroad to repay the defense costs. Accordingly, Evanston's motion is DENIED.

         I. BACKGROUND

         Sandersville Railroad purchased a comprehensive general liability (CGL) policy from Evanston that provides coverage for FELA.[2] Doc. 43 at 2-3. The policy has a standard pollution exclusion. Id. at 2.

         On January 4, 2013, Flowers's attorney provided Sandersville Railroad with notice of a FELA claim, and on January 7, 2014, Flowers's attorney sent Sandersville Railroad a demand letter regarding the claim. Docs. 19-1 ¶ 16; 20-3 at 2; 23-2 ¶ 2. Sandersville Railroad notified Evanston of the claim, and Evanston sent a reservation of rights letter in April 2014. Doc. 20-3 at 2. In this letter, Evanston noted that Flowers was “making a claim for occupational illness from welding fume exposure during his employment at [Sandersville Railroad]”-namely that he had “contracted ‘welder's lung' disease from occupational exposure to welding fumes while welding railroad cars owned by Sandersville Railroad.” Id. at 2, 7. Evanston stated its position that the policy did not cover the claim because of the pollution exclusion and reserved its rights “as to whether the pollution exclusion applies to bar coverage for this claim, ” and “with respect to the investigation, settlement, and defense of the claim.” Id. As to the latter, Evanston stated that “[u]pon exhaustion of [Sandersville Railroad's] self-insured retention, [Evanston] will pay the reasonable costs of defense for [Sandersville Railroad's] chosen defense counsel, subject to a reservation of rights to withdraw from providing the defense upon a determination that there is no coverage[, ]” and subject to a reservation of “the right to reimbursement of costs paid if it establishes that it owes no coverage to [Sandersville Railroad].” Id. Evanston also reserved the right, should Flowers file suit, “to file a declaratory judgment action to obtain an adjudication that [Evanston] does not owe any defense or indemnity for the claims alleged.” Id. The letter concluded by stating that neither Evanston nor Sandersville Railroad waived any rights under the policy or the law. Id. at 8. Sandersville Railroad did not object to this letter. See Doc. 46-1 ¶¶ 9-10. The parties agree that the policy itself does not give Evanston the right to recover defense costs. Doc. 19-1 ¶ 48.

         On June 17, 2014, Flowers filed suit against Sandersville Railroad under FELA. Docs. 23-2 ¶ 9; 18-4; 20-4. In his complaint, Flowers alleged:

In early 2012, [he] developed shortness of breath and was diagnosed with advanced lung disease. He was advised to avoid further exposure to workplace toxins, including welding fumes. As a result, [he] lost wages and benefits . . . suffered reduced earning capacity . . . sustained mental and physical pain and suffering and . . . [incurred] medical bills and other costs associated with his care and treatment.

Doc. 20-4 ¶ 5. Flowers alleged that Sandersville Railroad was negligent by failing to:

provide a reasonably safe place to work . . ., by failing to provide him proper personal protective equipment in the form of adequate breathing protection; by failing to adequately ventilate the areas where Mr. Flowers was required to weld; by failing to promulgate and implement proper procedures and safeguards for Mr. Flowers [sic] proper breathing protection; by failing to properly warn and train Mr. Flowers of the dangers and signs of occupational lung disorders, and by failing to provide proper supervision.

Id. ¶ 6. Flowers further alleged that Sandersville Railroad's negligence “posed an unreasonable risk of illness and injury” and “caused or contributed, in whole or in part, to Mr. Flowers' injuries and damages as . . . alleged.” Id. ¶ 7.

         When Flowers filed his complaint, Evanston did not, by supplement to its reservation of rights letter or otherwise, address whether, based on the allegations of the complaint, it owed Sandersville Railroad a duty to defend. See generally Doc. 23-2 ¶¶ 4-15 (outlining history of Evanston's reservation of rights).

         After Sandersville Railroad exhausted its self-insured retention in early 2015, it tendered the defense of the lawsuit to Evanston. Docs. 19-1 ¶¶ 44-45; 23-2 ¶ 13. Evanston did not, as Georgia law allows, seek a stay of Flowers's lawsuit so that it could seek declaratory relief determining whether its policy covered the Flowers claim or whether it was obligated to defend Sandersville Railroad.[3] Rather, on May 18, 2015, Evanston issued a second reservation of rights letter. Docs. 20-5; 23-2 ¶ 14.

         It is clear that Evanston's second letter was, subject to a very few changes, a “cut-and-paste” of the first. The letters each contained an introduction and four sections: Section I. Factual Background; Section II. Policy Details; Section III. Reservation of Rights; and Section IV. Conclusion. In its introduction and Section I. Factual Background, the second letter added to the first that it was “a supplemental bilateral reservation of rights with respect to coverage issues on this claim, ” noting the first letter was sent in April of 2014. Doc. 20-5 at 2. Otherwise, the second letter provided less factual background regarding Flowers's claim than the first. While the first letter provided a few sentences describing the claims made by Flowers's attorney in his initial demand letter on Flowers's behalf, this information was omitted, without replacement, in the second letter. Compare Doc. 20-3 at 2 with Doc. 20-5 at 2. Although the second letter stated that Evanston's adjuster had been “advised” that a lawsuit had been filed, the letter made no mention of Flowers's complaint or any particular allegation of the complaint. Doc. 20-5 at 2.

         Section II. Policy Details was identical, word-for-word, in the two letters, though it should not have been. Compare Doc. 20-3 at 3-6 with Doc. 20-5 at 3-6. Due to Evanston's cut-and-paste drafting, the second letter replicated coverage provision A.1.a. (1)-addressing defense obligations prior to the exhaustion of Sandersville Railroad's self-insured retention-from the first letter, instead of substituting the then-applicable coverage provision A.1.a. (2)-addressing defense obligations after the exhaustion of Sandersville Railroad's self-insured retention. Compare Doc. 20-3 at 3-6 with Doc. 20-5 at 3-6. See also generally Doc. 18-3 at 18 (relevant policy provision). Accordingly, the policy provision stating Evanston's defense obligations following the exhaustion of the self-insured retention was never mentioned in the letter.

         Section III. Reservation of Rights, as in the first letter, contained the following subsections: A. Applicable Policy; B. Pollution Exclusion; C. Investigation, Settlement and Defense of the Claim; D. Reimbursement of Defense Costs; E. Declaratory Judgment Action; and F. Other Insurance. Of these, A. Applicable Policy; C. Investigation, Settlement and Defense of the Claim; D. Reimbursement of Defense Costs; and F. Other Insurance were identical in the two letters. Compare Doc. 20-3 at 6-7 with Doc. 20-5 at 6-7. Evanston changed a few phrases of B. Pollution Exclusion in the second letter-“his attorney alleges” was replaced with “he alleges, ” “this claim is under investigation” was omitted, and “however” was omitted-otherwise it was identical to the first letter. Compare Doc. 20-3 at 6 with Doc. 20-5 at 6-7. Evanston omitted “if and when the claimant files a lawsuit against the insured” from E. Declaratory Judgment Action in the second letter, but otherwise it, too, was identical to the first letter. Compare Doc. 20-3 at 7 with Doc. 20-5 at 7. Evanston added to the second letter a subsection-G. Cooperation and Consent-describing the duties of Sandersville Railroad to inform and cooperate with Evanston in the defense of the suit, as well as reserving Evanston's rights “in respect to Sandersville Railroad's compliance with the conditions of the policy.” Compare Doc. 20-3 at 7-8 with Doc. 20-5 at 7-8. Lastly, Section IV. Conclusion was identical in the two letters. Compare Doc. 20-3 at 8 with Doc. 20-5 at 8.

         In short, the second letter, sent after the filing of Flowers's complaint and accordingly representing Evanston's first opportunity to address whether it owed Sandersville Railroad a duty to defend based on the allegations of Flowers's complaint, did not recognize this in any fashion, either by describing allegations of the complaint or explaining why they did not implicate a duty to defend by Evanston. Rather, all of the operative reservation or rights language and facts in the second letter mirrored the first letter, which, being sent before Flowers filed his complaint, could not address any duty to defend. As with the first letter, Sandersville Railroad did not object to the second letter. See Doc. 46-1 ¶¶ 9-10.

         On June 24, 2015, Evanston filed this declaratory judgment action seeking a determination that its policy did not provide coverage for Flowers's lawsuit and that it was entitled to recoup any defense costs paid in regard to the lawsuit. Doc. 1. Sandersville Railroad settled with Flowers with no contribution from Evanston on November 20, 2015. Doc. 19-1 ¶ 51. The parties thereafter filed cross motions for summary judgment in this action. Docs. 18; 20.

         The Court, in its September 28, 2016 Order (Doc. 43), granted Evanston's motion in part, ruling that Evanston had no duty to indemnify Sandersville Railroad and no further duty to defend against the action. Doc. 43 at 20. By the time the parties filed their cross-motions for summary judgment in this action, it was undisputed that Flowers claimed that he suffered from siderosis, or “welders' lung, ” and that his occupational lung disease was caused by exposure to welding fumes containing iron. Doc. 23-2 ¶ 1. But these facts were not alleged in Flowers's complaint. Doc. 23-2 ¶ 11 (Sandersville Railroad's response to Evanston's statement of material facts, clarifying this point); see generally Doc. 20-4. The Court ruled that “based on the summary judgment record, the pollution exclusion” in the policy excluded coverage for Flowers's lawsuit. Id. As the Court noted then: “The relevant facts . . . significantly, are not limited to the allegations of the Flowers complaint. Rather, the parties have put additional facts in the record to assist in the determination of whether Evanston's pollution exclusion excludes coverage for Flowers's claims.” Id. at 2 (emphasis added). The Court denied summary judgment on the parties' cross motions regarding Evanston's attempt to recoup its defense costs, noting that the parties failed to address whether Evanston had a duty to defend based on the allegations of Flowers's complaint.[4] Id. at 20-23. The Court stated that “[t]he parties may renew their motions for summary judgment on these issues by way of motions filed with briefs addressing these remaining issues.” Id. at 23.

         Evanston has now moved for summary judgment “[a]s to Count 1, ” that “Evanston owed no duty to defend Defendant Sandersville Railroad Company for Mr. John Larry Flowers' Complaint against Sandersville Railroad Company, ” and “[a]s to Count 3, ” that “Evanston is entitled to reimbursement from Defendant Sandersville ...


Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.