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Liberty Mutual liable for coverage in railroad crossing accident

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A completed work exclusion provision in a Liberty Mutual Holding Co. Inc. unit’s policy does not preclude coverage in connection with a railroad crossing accident, says a federal appeals court in upholding a lower court ruling.

The court is “not permitted to adopt Liberty’s strained and unnatural construction of the completed work exclusion,” said the 11th U.S. Circuit Court of Appeals in Atlanta in Tuesday’s ruling in Liberty Surplus Insurance Corp. vs. Norfolk Southern Railway Co.

Boston-based Liberty Surplus Insurance Corp., a Liberty Mutual unit, had insured Lexington, South Carolina-based NaturChem Inc., which had a “crossing maintenance agreement” with Norfolk, Virginia-based Norfolk Southern Railway that provided it would apply herbicide to each crossing at the railway’s Georgia division a minimum of twice a year, as well as monitor the crossings and perform required maintenance, according to the ruling.

In June 2011, a motorist was struck by an oncoming train at a crossing owned by a Norfolk Southern subsidiary and suffered severe injuries. She filed suit in 2012, charging the railway and its subsidiary, among other things, of having overgrown and improperly maintained vegetation at the crossing that impaired her ability to see an approaching train. NaturChem was added as a defendant in a 2013 amended complaint.

Under a reservation of rights, Liberty agreed to pay half the total cost of defending the defendants, but as "the litigation progressed, Liberty became aware of certain facts it believed eliminated coverage under the policy,” said the ruling.

In September 2014, it sought a declaratory judgment in U.S. District Court in Macon, Georgia, arguing in part that its completed work exclusion precluded coverage because its policy only covered injuries sustained while NaturChem was actively spraying herbicide or performing spot checks at the crossing. The District Court granted Norfolk Suffolk summary judgment, and Liberty appealed.

A unanimous three-judge panel upheld the lower court ruling, stating the policy’s completed work exclusion does not apply. 

“By its plain language, the Crossing Contract describes — as the District Court found — an ongoing and continuous maintenance and monitoring obligation, rather than a contract for a series of limited and discrete tasks, such as defoliation of vegetation,” said the ruling.

The court “is precluded from reading into the policy a ‘curious hidden meaning which nothing but the exigency of a hard case and the ingenuity of a trained and acute mind would discover,’” said the panel, in quoting an earlier case and affirming the lower court ruling.