Insurer v. Insurer Disputes Should be Resolved by Mediation Rather Than Litigation
Barry Zalma
Jan 22, 2024
Read the full article at https://lnkd.in/gsGmB8HY, see the full video at https://lnkd.in/gXqr4hzR and at https://lnkd.in/gvgzk8MH, and at https://zalma.com/blog plus more than 4700 posts.
Post 4717
In an insurance coverage dispute that arose out of the tragic death of an employee on a construction site the Fifth Circuit was called upon to determine which insurer was obligated to deal with the claims of the family of the deceased employee because the insurers could not agree.
In Gemini Insurance Company v. Indemnity Insurance Company of North America, No. 23-20026, United States Court of Appeals, Fifth Circuit (January 12, 2024) the court dealt with the coverage disputes over which insurer is obligated to defend and or indemnify which person or entity.
BACKGROUND FACTS
ExxonMobil Corporation (“Exxon Mobil”) retained Bechtel Oil, Gas, and Chemicals, Inc. (“Bechtel”) as a general contractor to build a new hydrocarbon processing facility in Beaumont, Texas (the “Project”). As part of its contract with Bechtel, Exxon Mobil implemented an Owner Controlled Insurance Program (“OCIP”), which provided workers’ compensation and employers’ liability coverage to Bechtel and all of its subcontractors. Bechtel retained Echo Maintenance, L.L.C. (“Echo”) as a subcontractor to perform mechanical, structural, and piping work on the Project. Bechtel and Echo subsequently entered into a contract that incorporated the OCIP and required Echo to enroll in the program (the “Subcontract”). Both Bechtel and Echo were enrolled in the OCIP.
Indemnity’s Workers’ Compensation and Employers’ Liability Policies Issued Under The OCIP
Under the OCIP, Indemnity Insurance Company of North America (“Indemnity”) issued a workers’ compensation and employers’ liability insurance policy to Bechtel (“OCIP Policy”). Separately, Gemini Insurance Company (“Gemini”) issued a general commercial liability policy to Echo under which Bechtel was an additional insured.
Part Two the OCIP Policy sets forth the type of covered claim that Indemnity agreed to defend and indemnify Bechtel. The OCIP contained a VCEL Endorsement whose first provision explains that the endorsement “adds Voluntary Compensation Insurance to the policy,” and that the insurance applies to bodily injury by accident so long as it is “sustained by an employee included in the group of employees described in the Schedule” and “arise[s] out of and in the course of employment necessary or incidental to work in a state listed in the Schedule.”
Employers’ Liability Insurance
It defines “State of Employment” in relevant part as “Texas but only at the site indicated in the designated premises endorsement.”
Underlying Incident and Lawsuit
In December 2017, Ms. Espinoza was working as a pipefitter helper on the Project when she was struck by a piece of pipe and sustained fatal injuries. In response to the suit brought by her heirs, Bechtel sought coverage as an additional insured on the commercial general liability policy issued by Gemini to Echo and received a defense from Gemini under a reservation of rights.
Bechtel moved for summary judgment on the heirs suit because Exxon Mobil’s OCIP provided blanket workers’ compensation insurance and coverage to Bechtel and Echo, Intervenors’ sole remedy in accordance with Texas Labor Code was workers’ compensation benefits. The state court granted Bechtel’s motion for summary judgment.
DISCUSSION
The main issue was whether Ms. Espinoza was an “employee” of Bechtel within the terms of the OCIP policy. Reading the VCEL Endorsement together with Part Two, the Fifth Circuit concluded that the only reasonable interpretation was that the VCEL Endorsement expanded the definition of a Bechtel “employee.” The ordinary meaning of “employee” is someone who works in the service of another person (the employer) under an express or implied contract of hire, under which the employer has the right to control the details of work performance. The Fifth Circuit concluded that the VCEL Endorsement expanded the OCIP Policy’s definition of “employee” to include employees of Bechtel’s subcontractors, such as Ms. Espinoza.
THE DUTIES TO DEFEND AND INDEMNIFY
Duty to Defend
Ms. Espinoza was an employee of Echo, but also simultaneously working for Bechtel at the designated premises, thus satisfying the VCEL Endorsement. Ms. Espinoza was killed while working in the scope of her employment. The allegations, construed liberally, constitute a claim potentially within the OCIP policy. As a result Indemnity had a duty to defend Bechtel in the Underlying Litigation.
Duty to Indemnify
There is no dispute that Ms. Espinoza was an Echo employee, that Echo was a subcontractor of Bechtel, that Bechtel and Echo had a written contract, and that the work they performed was on a “designated premises” within the meaning of the OCIP Policy the workers’ compensation OCIP coverage applies. Bechtel “provided” workers’ compensation insurance to Echo when they executed the Subcontract. Accordingly, Indemnity has a duty to indemnify Bechtel as well.
Contractual and Equitable Subrogation
Because the district court concluded that Indemnity did not have a duty to defend or indemnify Gemini, it never addressed the substance of Gemini’s subrogation arguments. The Fifth Circuit reversed the district court’s grant of Indemnity’s motion for summary judgment and remanded the case back to the district court with instructions to:
1 grant Gemini’s motion for summary judgment on Indemnity’s duties to defend and indemnify under the Policy, and
2 consider the subrogation issues in the first instance.
ZALMA OPINION
Insurance policies must be dealt with as an entirety, no matter how extensive or complex. Once the court determined that Ms. Espinoza was an employee it resolved the dispute and found that Indemnity owed defense and indemnity to the defendants. The insurer’s should not have engaged in this litigation but worked out a resolution to the benefit of the insureds with the assistance of a mediator knowledgeable about insurance issues. Failing to do so, after the expenditure of discovery, a summary judgment and an appeal the obvious resulted a case where only one party was happy and there existed a possibility that much would be saved by an agreement between equals.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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Notice of Claim Later than 60 Days After Expiration is Too Late
Post 5089
Injury at Massage Causes Suit Against Therapist
Read the full article at https://lnkd.in/gziRzFV8, see the full video at https://lnkd.in/gF4aYrQ2 and at https://lnkd.in/gqShuGs9, and at https://zalma.com/blog plus more than 5050 posts.
Hiscox Insurance Company (“Hiscox”) moved the USDC to Dismiss a suit for failure to state a claim because the insured reported its claim more than 60 days after expiration of the policy.
In Mluxe Williamsburg, LLC v. Hiscox Insurance Company, Inc., et al., No. 4:25-cv-00002, United States District Court, E.D. Missouri, Eastern Division (May 22, 2025) the trial court’s judgment was affirmed.
FACTUAL BACKGROUND
Plaintiff, the operator of a massage spa franchise, entered into a commercial insurance agreement with Hiscox that provided liability insurance coverage from July 25, 2019, to July 25, 2020. On or about June 03, 2019, a customer alleged that one of Plaintiff’s employees engaged in tortious ...
ZIFL – Volume 29, Issue 11
The Source for the Insurance Fraud Professional
Posted on June 2, 2025 by Barry Zalma
Post 5087
See the full video at and at
Read the full article and the full issue of ZIFL June 1, 2025 at https://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-06-01-2025.pdf
Zalma’s Insurance Fraud Letter – June 1, 2025
See the full video at https://lnkd.in/gw-Hgww9 and at https://lnkd.in/gF8QAq4d, and at https://zalma.com/blog plus more than 5050 posts.
ZIFL – Volume 29, Issue 11
The Source for the Insurance Fraud Professional
Read the full article and the full issue of ZIFL June 1, 2025 at https://lnkd.in/gTWZUnnF
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at ...
No Coverage if Home Vacant for More Than 60 Days
Failure to Respond To Counterclaim is an Admission of All Allegations
Post 5085
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In Nationwide Mutual Insurance Company v. Rebecca Massey, Civil Action No. 2:25-cv-00124, United States District Court, S.D. West Virginia, Charleston Division (May 22, 2025) Defendant Nationwide Mutual Insurance Company's (“Nationwide”) motion for Default Judgment against Plaintiff Rebecca Massey (“Plaintiff”) for failure to respond to a counterclaim and because the claim was excluded by the policy.
BACKGROUND
On February 26, 2022, Plaintiff's home was destroyed by a fire. At the time of this accident, Plaintiff had a home insurance policy with Nationwide. Plaintiff reported the fire loss to Nationwide, which refused to pay for the damages under the policy because the home had been vacant for more than 60 days.
Plaintiff filed suit ...
ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.
Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:
Health Care Fraud Trial Results in Murder for Hire of Witness
To Avoid Conviction for Insurance Fraud Defendants Murder Witness
In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...
Professional Health Care Services Exclusion Effective
Post 5073
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This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.
In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:
Insurance Coverage Dispute:
Travelers issued a Commercial General Liability ...
A Heads I Win, Tails You Lose Story
Post 5062
Posted on April 30, 2025 by Barry Zalma
"This is a Fictionalized True Crime Story of Insurance Fraud that explains why Insurance Fraud is a “Heads I Win, Tails You Lose” situation for Insurers. The story is designed to help everyone to Understand How Insurance Fraud in America is Costing Everyone who Buys Insurance Thousands of Dollars Every year and Why Insurance Fraud is Safer and More Profitable for the Perpetrators than any Other Crime."
Immigrant Criminals Attempt to Profit From Insurance Fraud
People who commit insurance fraud as a profession do so because it is easy. It requires no capital investment. The risk is low and the profits are high. The ease with which large amounts of money can be made from insurance fraud removes whatever moral hesitation might stop the perpetrator from committing the crime.
The temptation to do everything outside the law was the downfall of the brothers Karamazov. The brothers had escaped prison in the old Soviet Union by immigrating to the United...