United States District Court, M.D. Georgia, Macon Division
T. TREADWELL, JUDGE
declaratory judgment action, Plaintiff Evanston Insurance
Companyseeks 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.
Railroad purchased a comprehensive general liability (CGL)
policy from Evanston that provides coverage for
FELA. Doc. 43 at 2-3. The policy has a standard
pollution exclusion. Id. at 2.
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 ¶
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.
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).
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. Rather, on May 18, 2015, Evanston issued a
second reservation of rights letter. Docs. 20-5; 23-2 ¶
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.
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.
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.
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.
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.
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. 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.
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