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Union Pacific Railroad Co. v. Colony National Insurance Co.

United States District Court, D. Nebraska

April 26, 2016

UNION PACIFIC RAILROAD COMPANY, Plaintiff,
v.
COLONY NATIONAL INSURANCE COMPANY; DEANGELO BROTHERS, INC.; and AMERICAN HOME ASSURANCE COMPANY, Defendants.

          MEMORANDUM AND ORDER

          LAURIE SMITH CAMP CHIEF UNITED STATES DISTRICT JUDGE.

         This matter is before the Court on the Cross-Motions for Partial Summary Judgment submitted by Plaintiff Union Pacific Railroad Company (“UP”) (Filing No. 104), Defendant Colony National Insurance Company (“Colony”) (Filing No. 100), Defendant American Home Assurance Company (“AHA”) (Filing No. 103), and Defendant DeAngelo Brothers, Inc. (“DBI”) (Filing No. 109).

         UP, Colony, and AHA seek a ruling on the scope of additional-insured coverage available to UP in connection with its settlement of claims resulting from a 2006 collision at a railroad crossing in Oklahoma. DBI supports the positions of Colony and AHA regarding the proper interpretation of a 2005 agreement (the “2005 Agreement”) between UP and DBI, but takes a neutral position regarding the scope of additional-insured coverage available to UP.

         For the reasons discussed below, UP's Motion will be denied; AHA's Motion and DBI's Motion will be granted; and Colony's Motion will be granted in part. The Defendants' liability to UP under the additional-insured coverage will be limited by the scope of the indemnity clause in the 2005 Agreement. UP will have the burden of proving by a preponderance of the evidence any liability it incurred as a result of the 2006 collision that UP would not have incurred but for the acts or omissions of DBI, arising out of DBI's performance or nonperformance of the 2005 Agreement. If UP meets that burden, AHA and Colony will have the burden of proving by a preponderance of the evidence any portion of such liability caused by UP itself; and AHA and Colony will not be responsible for that portion of such liability.

         FACTUAL AND PROCEDURAL HISTORY

         On or about January 1, 2005, UP and DBI entered into the 2005 Agreement, through which DBI agreed to maintain the vegetation at UP's railroad crossings. The 2005 Agreement contains a “GENERAL INDEMNITY” provision, which states:

[DBI] shall indemnify and hold harmless [UP] . . . against and from any and all liability . . . arising from or growing out of any injury to or death of any person . . . . The right to indemnity shall accrue when such injury [or] death . . . is associated with [DBI]'s Work performed under this Agreement . . . or any activity or omission arising out of performance or nonperformance of this Agreement. However, [DBI] shall not indemnify [UP] for any portion of the loss caused by [UP].

(Filing No. 14-1 at ECF 18 § 13.) Under the 2005 Agreement, DBI was to obtain insurance for itself and for UP as an additional insured. The 2005 Agreement states that the insurance was to be “with respect to liabilities arising out of [DBI]'s performance of Work on behalf of [UP] to the extent of the indemnity provisions herein.” (Id. at ECF 14 § 4.) The 2005 Agreement also contains a choice-of-law provision and a forum-selection clause. (Id. at ECF 16 § 6.) The choice-of-law provision states: “This Agreement shall be governed, construed, and enforced in accordance with the laws of the State of Nebraska.” (Id.) The forum-selection clause states: “Litigation arising out of or connected with this Agreement may be instituted and maintained in the courts of the State of Nebraska . . . .” (Id.)

         DBI obtained two insurance policies, one from AHA (the “AHA Policy”) and one from Colony (the “Colony Policy”). AHA was DBI's primary insurer. Colony was DBI's excess insurer. The AHA Policy provides additional insured coverage for “ANY RAILROAD . . . but only with respect to liability for ‘bodily injury' . . . caused, in whole or in part, by . . . [DBI's] acts or omissions; or . . . [t]he act or omissions of those acting on [DBI's] behalf . . . .” (Filing No. 102-2 at ECF 65.) The AHA Policy also states that AHA “shall have no duty to defend any additional insured, but, as a condition precedent to obtaining coverage under th[e] [AHA Policy], the additional insured shall cooperate fully with [AHA] and permit [AHA] to associate in the defense of any claim.” (Id.) The additional-insured endorsement in the AHA Policy provides that “this insurance shall not provide any coverage to any additional insured that is broader than that required in [DBI's] written contract with the additional insured.” (Id. at ECF 66.) The Colony Policy states:

Any additional insured under any policy of “underlying insurance” will automatically be insured under this insurance.
If coverage provided to an additional insured is required by a contract or agreement, the most we will pay on behalf of the additional insured is the amount of the insurance required by the contract, less any amounts payable by any “underlying insurance.” Additional insured coverage provided by this insurance will not be broader than coverage provided by the “underlying insurance”.

(Filing No. 102-3 at ECF 28.)

         In May 2006, while the 2005 Agreement, the AHA Policy, and the Colony Policy were in force, a UP train collided with an automobile at a railroad crossing in Oklahoma. The passengers of the automobile sustained injuries, and some ultimately died, as a result of the collision. The personal representative of one of the occupants of the automobile sued UP in an Oklahoma state court (the “Oklahoma Action”), alleging that UP engaged in eleven negligent acts or omissions, one of which was that UP “failed to clear its crossing and right-of way or property of brush, trees, other vegetation, debris and other visual obstructions and visual clutter which interfered with motorists' views of approaching trains.” (Filing No. 102-4 at ECF 3-4 ¶ 9.)

         On January 15, 2013, UP's counsel sent an email to Colony's counsel, representing that UP had an opportunity to settle the Oklahoma Action. UP's counsel requested that Colony advise if it would consent to UP's decision to enter into a written settlement agreement. (Filing No. 102-23. at ECF 3.) Colony advised that it would neither object nor consent to UP settling the Oklahoma Action because it did not know all the terms of the settlement and because it had been unable to assess UP's liability exposure with its limited access to UP's defense files. (Id. at ECF 2-3.) On January 23, 2013, UP settled the Oklahoma Action for a confidential amount that exceeded the coverage provided in both the AHA Policy and the Colony Policy. (Filing No. 108-1 at ECF 4-41.)

         On February 14, 2013, Colony filed a declaratory judgment action in the United States District Court for the Middle District of Pennsylvania, Case No. 3:13-cv-401-RDM (the “Pennsylvania Action”), naming DBI and UP as defendants, and seeking a determination of the parties' rights, duties, and obligations under the Colony Policy with respect to the settlement of the Oklahoma Action. (Filing No. 29-1 at ECF 2-20.)

         On March 13, 2013, UP filed the present action, asserting causes of action against DBI for contractual indemnity and/or contribution; against AHA, seeking a declaration of rights and obligations under the AHA Policy; against Colony, seeking a declaration of rights and obligations under the Colony Policy; and against both AHA and Colony for breach of contract, breach of fiduciary duty, breach of statutory duty, and bad faith ...


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