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Insurer not responsible for coal executive’s black lung liabilities: Court

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Insurer not responsible for coal executive’s black lung liabilities: Court

Liberty Mutual is not liable for claims potentially facing an executive for a coal company that did not have a black-lung endorsement on its workers compensation policy, a federal appeals court ruled.

Upholding a district court ruling, the 10th U.S. Court of Appeals in Denver ruled Monday in Liberty Mutual Fire Insurance Co. vs. Woolman, et al. that the insurer did not breach its duty to Dennis Woolman, former president of The Clemens Coal Company, which operated a surface coal mine in Pittsburg, Kansas, before filing for bankruptcy in 1997, by failing to include a black-lung endorsement, even though the firm’s previous coverage with another insurer included an endorsement.

In 2012, a former employee of the mine filed a claim with the U.S. Department of Labor for benefits under the Workers Compensation Act, and he was advised that Clemens was uninsured for black lung benefits on the last day of his employment in 1997 and that, without the coverage, Mr.  Woolman, could be held personally liable, the ruling states.

The Federal Coal Mine Health and Safety Act requires that coal mine operators carry a workers comp policy with an endorsement that ensures coverage of pneumoconiosis, or black lung. From Nov. 1, 1996, through Nov. 1, 1997, the coal company was covered for workers compensation through Liberty Mutual; however, the policy did not contain a black-lung endorsement and expressly excluded coverage for the disease. The policy was cancelled in 1997 due to nonpayment.

Mr. Woolman had delegated the responsibility to purchase the coverage to an outside consultant, the appeals court ruling says. The consultant purchased the coverage from a Liberty Mutual agent for $43,000 less than the price offered by competing insurers. The consultant presumed that the coverage was cheaper because it was not part of the Kansas assigned risk pool, the ruling says.

Liberty Mutual declined to defend Mr. Woolman or the coal company and sued for a declaration that the insurance policy did not cover black lung claims.

Mr. Woolman sued Liberty Mutual for breach of duty saying that because the black-lung endorsement was included in the mine’s previous coverage, provided by a unit of Hartford Financial Services Inc., he had expected that it would be included in the Liberty Mutual policy. A jury trial found in favor of Mr. Woolman and awarded him $18,000 in damages. However, the district court set aside the verdict and ruled in favor of Liberty Mutual.

On appeal, Mr. Woolman argued that the district court “ignored the contractual nature” of his claims against Liberty Mutual. The appeals court, however, found that mine failed to give Liberty Mutual directions that it needed coverage for black lung. Although it may have owed a duty to the coal company to “exercise care,” the court found that it owed a separate duty to Mr. Woolman in his personal capacity.