Like Peanut butter and Chocolate!
Like Strawberries & Cream!
Like Rum and Cokes at midnight on a hot summer night in the late 70’s when cute boys with collar length hair who smelled faintly of Brut were driving muscle cars with one hand, taking a long drag on a Salem with the other, and searching for their favorite Eagles or Head East song on the A.M. radio station while I was happy in the passenger seat wearing cut off jeans, MIA clogs, a sly smile, and adjusting my IQ accordingly – long before anyone had to care about mandatory helmet laws, child care tax deductions, dust mite allergies, colonoscopies or the failure of mortgage backed securities….sigh… (#too.much.information?)
LET’S LOOK AT TWO OF OUR FAVORITE THINGS:
RAILROADS & INSURANCE
Yes, Dear Readers, railroads and insurance can be a stimulating set of things when paired together. Trust me. It could equal money.
This case arises out of a derailment that occurred when a coal train jumped the track during a backward shove under a coal load-out chute. In Norfolk Southern Ry Co. v. National Union Fire Ins., 999 F. Supp. 906 (U.S. Dist. S.D. W. Va. 2014), the railroad sued its insurer for damages (and subrogation) as an additional insured under a policy that National Union provided to the coal load-out facility.
The insurer, National, filed for summary judgment. It argued that Norfolk Southern was not an additional insured under its policy; and even if it was, it would not be covered because the accident did not arise out of “your” work.
Rabid fans of this column know what to do next. We go to the policy language first and foremost. In it, the policy covers additional insureds who have “obligated you by written contract to provide insurance that is afforded by this policy, but only with respect to liability arising out of ‘Your Work,’ ‘Your Product’ and to property owned or used by you.”
The court found succinctly that the Lease Agreement between Norfolk Southern and the coal load-out operator required it to provide insurance for the Railroad as an additional insured. Thus, one of the conditional terms of coverage for an additional insured were met. Norfolk passed the first test, set out in red above.
The second test, set out in blue, is different. Norfolk would only be covered if the loss or liability arose out of “Your Work.” My avid, rabid, insurance fans know what this means. Anytime the words You or Your are capitalized in a policy it refers to the Named Insured, and not the additional insured. Here, the insurer is tying its loss coverage to the work of the policy holder, and not the work of the additional insured – Norfolk Southern.
Whether there is coverage on this condition is both fact and law driven. It is fact driven in that the court will need to look at the possible known causes of the derailment, and it is law driven in that case law tells us what “arising out of” really means.
Let’s dig into the case law first, as this will give us a road map for analyzing the facts. West Virginia law applies. In a case of first impression the court determined that “arising out of” as used in a CGL insurance policy means “incidental to” or “flowing from.” But it also means in West Virginia that the loss must be “foreseeably identifiable” with the named insured’s work. So now we have a third test – one that the court inferred within the policy language. I would highlight it for you in the policy language set out above, but the words are nowhere to be found.
The court then concluded that the derailment did relate to the policyholder’s load-out operations. “At the time of the derailment, Norfolk Southern was repositioning the train at (the policyholder’s) request for (the policyholder) to unload the coal. Therefore it is clear that the derailment arose out of Cobra’s work, or at the very least, arose out of operations performed on Cobra’s behalf.” Id., at 914.
Why am I bringing this to your attention Dear Readers? Well, any well-rounded insurance hound (that’s us folks) should be generally aware of how different courts interpret the exact same policy language in different jurisdictions. Here, the West Virginia court added a condition for coverage that is not set forth in the contract: that the loss be “foreseeably identifiable.” If this claim were brought in another jurisdiction, the additional insured would not have to prove this element. “Arising out of” is proof enough. Knowledge like this is valuable. It can dictate where a lawsuit should be filed in order for one party to obtain or deny coverage.
TAKE AWAY RULE
In West Virginia, unlike most all other states, an additional insured must prove that the loss “arose out of” or was “connected to” the work of the Named Insured, and it must also prove that the loss was foreseeable and identifiable. This is not required for coverage in other jurisdictions.
Knowing this information will assist a party in deciding where to file a declaratory judgment action on the policy. The burden of proof is greater on an additional insured in West Virginia.