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A federal appeals court has reversed a lower court and held a Travelers Cos. Inc. unit is not obligated under an exclusion in its policy to indemnify a policyholder who operates an elevator service and maintenance business, who was sued by the injured employee of a firm with whom he had a contract.
Charles Herrera purchased a commercial general liability insurance policy from Northfield Insurance Co., a unit of New York-based Travelers, for his Kyle, Texas-based business, Austin Elevator Consultants LLC, according to Wednesday’s ruling by the 5th U.S. Circuit Court of Appeals in New Orleans in Northfield Insurance Co. v. Charles Herrera, doing business as Austin Elevator Consultants.
The policy included an exclusion for any person “contracted with your or with any insured for services,” according to the ruling.
During the policy period, Mr. Herrera entered into a contract with utility Austin Energy under which he would service, inspect and maintain elevators in the utility’s Sandhill Energy Center, according to the ruling.
In March 2014, an Austin Energy employee was injured on a Sandhill Energy elevator and sued Mr. Herrera in a Texas state court charging negligence.
Although Northfield defended Mr. Herrera in the state court litigation under a reservation of rights, it also filed suit in U.S. District Court in Austin seeking a declaratory judgment it has no duty to defend or indemnify Mr. Herrera.
The district court ruled in Mr. Herrera’s favor, holding the policy exclusion “unambiguously applied only to so-called downstream employees, i.e., to his subcontractors and their employees.”
That ruling was unanimously overturned by a three-judge appeals court panel in Wednesday’s ruling. The “plain language” of the policy’s exclusion “could reasonably be read to include both upstream and downstream contractors, and Northfield’s proffered interpretation is reasonable,” said the ruling, in reversing the lower court’s ruling and remanding the case for judgment in Northfield’s favor.
Cyber risks are second only to medical cost inflation as the top concern across business of all sizes and industries, according to a survey commissioned by Travelers Cos. Inc. issued Thursday.