A federal appeals court has overturned a lower court decision and ruled in favor of Allied World National Assurance Co. in a litigation dispute with Old Republic General Insurance Co. stemming from a worker’s death by suffocation.
Tarrant Regional Water District in Fort Worth, Texas, hired Roanoke, Texas-based IPL Partners to work on a pipeline in Venus, Texas, according to Monday’s ruling by the 5th U.S. Circuit Court of Appeals in New Orleans in Allied World National Assurance Co. v. Old Republic General Insurance Corp; Oscar Renda Contracting, Inc.
Nabor Machuca-Mercado worked on the pipeline project as a laborer for Oscar Renda.
The water district agreed in its IPL contract to provide insurance for the project and both Old Republic and Allied World issued policies.
Old Republic issued a commercial general liability policy to the water district that covered up to $2 million per accident involving contractors including Oscar Renda. It also issued an employers’ liability policy directly to Oscar Renda that covered up to $1 million per accident.
Allied World issued an excess policy to the water district that provided $5 million in coverage excess of the CGL and employers’ liability policy.
In 2017, Mr. Machuca-Mercado disappeared from the pipeline worksite and was found minutes later buried up to his head in gravel, suffocated. The accident occurred after Oscar Renda dumped gravel on him, according to the complaint.
Mr. Machuca-Mercado’s children sued Oscar Renda for negligence in state court. The company tendered the lawsuit to Old Republic for defense and indemnity. Old Republic denied coverage under the CGL policy based on its employer liability exclusion but acknowledged the employers liability policy covered the lawsuit.
Allied World filed a declaratory judgment action against Old Republic in U.S. District Court in Fort Worth, Texas. The district court granted partial summary judgment to Old Republic because it concluded the CGL policy excludes coverage for the underlying lawsuit.
A three-judge appeals court panel reversed the lower court on appeal. “The narrow question on appeal is whether the district court correctly concluded that an exclusion to the CGL policy applies,” the decision said.
The CGL includes an exclusion for employer’s liability, but a “carveout sentence” says it does not apply to employee injuries caused by other employees, it said.
“Under our reading, this is an easy case,” the ruling said. The allegations in the complaint “make it plain that the underlying litigation involves a bodily injury to an employee that was caused by another employee,” it said, in reversing the lower court and remanding the case for further proceedings.
Attorneys in the case had no comment or did not respond to requests for comment.
In 2016, Oscar Renda was cited and faced $124,300 in proposed fines from federal workplace safety regulators for exposing workers to trench hazards.