A federal appeals court upheld a lesser court decision Thursday, ruling James River Insurance Co. must defend an Alabama fireworks company in litigation stemming from any sort of accident in which two workers were killed and a third severely injured.
James River decided to defend Owens Cross, Alabama-based Ultratec Special Effects Inc. and other defendants in underlying litigation filed regarding the the 2022 accident, subject to a reservation of rights, based on the ruling in James River Insurance Co. v. Ultratec Special Effects Inc. et al.
Ultratec Special Effects unit Ultratec HSV had obtained the James River policy, and both businesses plus an Ultratec Effects employee as well as an associated business are defendants in the underlying litigation.
A three-judge appeals court ruled an “Employer's Liability Exclusion,” which says coverage is excluded when workers are performing duties “related towards the conduct associated with a insured's business” was ambiguous.
“James River argues the exclusion unambiguously applies equally to any or all the insureds,” the ruling said.
“The Defendants respond that the Exclusion is ambiguous since the phrase 'any Insured' could also be interpreted to apply simply to the Employee's claims against their employer, Ultratec HSV,” but “not affect coverage for claims an Ultratec HSV employee brings against another insured who is not her employer.”
“Because Ultratec (Effects) has been sued by another insured's employees and not its own, the Defendants say, James River includes a duty to defend it within the underlying action.”
“The Exclusion is ambiguous under Alabama law because it is reasonably open to either interpretation,” the panel said. “We must construe the ambiguous provision in support of coverage,” it said, in affirming the ruling by the U.S. District Court in Birmingham.
The district court did not rule whether James River also offers a duty to indemnify, holding it was not ripe for adjudication until liability was determined in the underlying litigation.
Attorneys in the case didn't have comment or didn't react to a request for comment.
