Union Pacific (Union) sought coverage under an additional insured provision that was part of a contract it had with Tri-State Traffic Control, Inc. (Tri-State). Union Pacific was sued by a man who was severely injured and whose wife and child were killed during a car/train accident. The accident occurred within a construction zone where Tri-State was working.

Union hired Tri-State to install and maintain traffic and traffic control devices along the railroad’s lines. As part of its written contract, Union required Tri-State to add Union as an additional insured on its insurance policies. Tri-State had secured both a CGL and a Commercial Umbrella policy from Ohio Casualty Insurance Company. The CGL included an amendment that extended its coverage to any entity that the named insured is contractually required to name as an additional insured. The requirement had to be in writing. The amendment required that the agreement had to be currently in effect or become effective during the CGL’s policy period. Further, the amendment stated that the agreement had to have been effective before any BI, PD or personal injury loss occurred.

The Ohio Casualty umbrella policy wording stated that it would act as excess over any valid, additional insured arrangement found in the primary CGL. The CGL policy had a $1,000,000 limit and the umbrella had a $2,000,000 limit. Both policies were in effect when a fatal accident occurred at a project involving Tri-State and Union.

While Tri-State was working at one site in Arkansas, a car carrying the Johnson family drove through a vehicle/railroad intersection where it was hit by a Union train. Mr. Johnson later sued, seeking compensation for his severe injuries and for the deaths to his wife and child. Union eventually settled the claim for 12.5 million dollars. Initially, Ohio Casualty contributed its combined policy limits of $3,000,000 as well as significant legal expenses. The insurer made the payment under a reservation of rights. After having a chance to fully investigate the loss, the insurer filed a motion seeking a summary judgment that would allow it to be reimbursed by Union for more than $3,000,000.

Ohio Casualty’s summary judgment request consisted of a claim that it neither owed payment nor a legal defense of Union. The railroad filed its own summary judgment request, seeking affirmation that the loss was covered. The insurer argued that their policy did not recognize Union as a valid additional insured. Union asserted that they had standing as an additional insured and were owed both coverage and a legal defense. The lower court ruled in favor of Ohio Casualty and the railroad appealed.

The appellate court took up the opposing arguments. The record showed that Tri-State and Union entered into a contract that, in writing, required Union to be named as an additional insured. However, that formal contract expired before the fatal accident and the amendment never specifically listed Union as an additional insured. Rather, it only referenced parties as being additional insureds when there was a contractual obligation to show them as insureds. Although, at the time of the loss, both the CGL and the umbrella policies were in force, the formal agreement had expired months earlier. Union asserted that, since they and Tri-State continued their working relationship after the actual contract ended, they preserved their additional insured status. Ohio Casualty argued that, once the written contract expired, Union lost its status as an additional insured under both policies.

Union’s portrayal of their work relationship was accurate. Both during and after the actual agreement, Tri-State was employed to install, maintain and repair traffic control devices along Union’s rail lines. Also, during various construction projects, Tri-State was responsible for putting up signage and making arrangements for the general public’s safety in the work zones. The court record included testimony by a safety expert that, at the site of the Johnson accident, the site supervision, warning signs and controls did not comply with safety standards. Union argued that the policy wording for both the CGL and, by extension, the umbrella only required a written agreement to have been in effect at the beginning of the policy period. In the railroad’s opinion, at the time of the accident, Tri-State was working on behalf of Union, Tri-State was responsible for overall safety at the project and Union should be recognized as an additional insured.

Ohio Casualty argued that their endorsement only extended additional insured status while the Tri-State-Union contract was in force, but ended when it expired. The insurer argued that, in order for additional insured status to apply, the two parties needed to renew, extend or create a new contract. The insurer also contended that, regardless the fact that Tri-State continued to perform the same duties after the contract expired, it was the contract wording and existence that granted additional insured status, but only during the life of the contract. Ohio Casualty also argued that the loss occurred at a railroad/road intersection and did not arise out of Tri-State’s work on behalf of Union.

The higher court disagreed with the insurer’s positions. In its opinion, a reading of the policy language can and should be read only to require that some agreement, at the time the policy was issued, existed to grant additional insured status to Union. The court reasoned that, if the insurer intended to require that a written agreement be in force prior to and at the time of an occurrence, it should have used specific wording. Next, as the railroad intersection where the accident occurred was part of the construction zone where Tri-State was performing work, the loss could be connected with Tri-State’s activities.

In light of its review, the higher court reversed the lower (district) court decision and remanded the case to be decided in favor of Union. The insurer was entitled to coverage of both the CGL, the umbrella and to a legal defense.

Ohio Casualty Insurance Company, Plaintiff and Appellee v. Union Pacific Railroad Company, Defendant and Appellant. USCTAP, 8th Cir. No. 05-3814. Filed December 4, 2006. 469 Federal Reporter, 3d Series.