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Travelers, Arch units need not defend construction firm

Posted On: May. 11, 2020 2:22 PM CST


Travelers Cos. Inc. and Arch Capital Group Ltd. units are not obligated to defend and indemnify a Louisiana construction company because the “intentional and malicious” behavior alleged in the underlying lawsuit was not an occurrence under their coverage, says a federal appeals court, in affirming a lower court ruling.

Alexandria, Louisiana-based Gilchrist Construction Co. LLC contracted with two individuals to remove dirt from their property for use in a nearby road construction project and to store debris-laden dirt and other materials on their property, according to Friday’s ruling by the 5th U.S. Circuit Court of Appeals in New Orleans in Gilchrist Construction Co. LLC v. Travelers Indemnity Co.; Arch Insurance Co.

Under the contract, Gilchrist agreed to “leave a clean, nicely shaped dirt pile to the (property owners’) satisfaction when all activities are complete,” according to the ruling.

After the project’s completion, the property owners filed suit against Gilchrist in Louisiana state court, alleging that Gilchrist “intentionally and maliciously buried rubble/debris in and around (their property) and underpaid them for the dirt it excavated.” The lawsuit charged the insurers with breach of contract and bad faith breach of contract.

After a jury awarded the property owners $5.6 million in damages, Gilchrist filed suit against Travelers Indemnity Co. and Arch Insurance Co. in U.S. District Court in Shreveport, Louisiana, charging them with breach of contract and seeking a judgment they had a duty to defend and indemnify it in the underlying action.

The district court ruled in the insurers’ favor, and was upheld by a unanimous three-judge appeals court panel. “The district court correctly concluded that neither insurer owes Gilchrist defense or indemnity with respect to the underlying action because none of the intentional and malicious behavior alleged therein was an accident and thus does not constitute an occurrence,” said the ruling.

“Louisiana jurisprudence holds ‘that an event is caused by an accident if (it is) unusual and unexpected from the viewpoint of the person to whom it happens,’” said the ruling.

“The acts alleged in the underlying action here are intentional and not accidental. They are not the sort of unexpected incident the policies cover,” said the ruling in affirming the lower court.

Gilchrist attorney David G. Jordan, a partner with Saxe Doernberger & Vita PC in Trumbull, Connecticut, said in a statement, “We are disappointed in the ruling. We believe that the facts of the underlying complaint alleged an ‘occurrence’ under the standard adopted by the Louisiana courts. 

Travelers’ attorney had no comment, while Arch’s attorneys did not respond to a request for comment.